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Volume 636, May 24 – May 25, 1943
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Volume 636, May 24 – May 25, 1943
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 636
May 24-25, 1943
- B -
Book Page
Badger and Sons Company, E. B.
See Procurement Division
Bank of America
Downey's (Senator, California) office--HMJr conversation
concerning Bank of America report for Smith Committee -
5/25/43
636
168
Business Conditions
Haas memorandum on situation, week ending May 22, 1943 -
5/24/43
62
- C -
China
Stabilization Board and Kung given Treasury program for
effecting remittances to Occupied China from United
States - 5/24/43
85
(See also Book 639, page 143 - 6/3/43)
International Monetary Cooperation: Adler reports on
meeting of financial experts - 5/24/43
90
(See also Book 640, page 286 - 6/10/43)
Economic report from Adler - 5/25/43
237
(See also Book 641, page 76 - 6/11/43)
- D -
Downey, Sheridan (Senator, California)
See Bank of America
- E -
Eccles, Marriner S.
See Financing, Government: War Savings Bonds
- F -
Financing, Government
War Savings Bonds:
Eccles' views, i.e., offering to commercial banks
should be only such part of total as could not
be placed with bona fide investors and investments
institutions reported in Goldsmith Letter -
5/25/43
192
Ford, Edsel
See Foreign Funds Control
Ford Motor Company
See Foreign Funds Control
Foreign Funds Control
Ford Motor Company: French subsidiary--Edsel Ford
relationship outlined for FDR - 5/25/43
213
a) FDR-HMJr talk described to Paul, Pehle and
White - 5/28/43: See Book 638, page 33
Regraded Unclassified
- G -
Book Page
Goldsmith (Ted) Letter
See Financing. Government: War Savings Bonds
- L -
Lend-Lease
Reports for week ending May 22, 1943, and period ending
April 30, 1943 - 5/25/43
636
226,229
United Kingdom: Aircraft despatched, week ending
May 18, 1943 - British Air Commission report -
5/24/43
83
Luxembourg. Grand Duchy of
Fiscal and monetary problems - report on - 5/25/43
232
- N -
New York City War Savings Staff
See Financing, Government: War Savings Bonds
(Organization Plans)
- P -
Procurement Division
Oil Refinery Equipment for Russia: Bribe solicitation
by representative of E. B. Badger and Sons Company
reported to Treasury - - 5/25/43
224
- R - -
Revenue Revision
Situation reviewed by Paul for HMJr in New York -
5/24/43
10
a) Conversations with Cooper
19,27,30.33
Conference: present: HMJr, Bell, Gaston, Paul, Sullivan,
White, Thompson, Gamble - 5/25/43
158
a) Byrnes-House Committee conference reported by
Paul
1) Byrnes to recommend to FDR that he accept
60-62 "across-the-board" forgiveness
2) 75% voted by House conferees - Doughton
siding with Republicans - 5/25/43
189
a) Explanation by Paul: See Book 637,
page 63
Conference; present: HMJr, Gaston, Paul, Blough, Surrey,
and Smith - 5/25/43
171
a) Memorandum for Senate Finance Committee from
FDR as prepared by Fred Smith
180
- S -
Smith, Fred
See Revenue Revision
Regraded Unclassified
- T -
Book Page
Taxation
See Revenue Revision
- U - -
U.S.S.R.
011 Refinery Equipment: See Procurement Division
- W -
Weiner, Joseph
Cox-HMJr conversation concerning availability for
Treasury - 5/25/43
636 165
1
May 24, 1943
11:00 A. M.
HMJr:
Good morning. I like being in New York
Daniel
Bell:
You do?
HMJr:
and talking to you fellows on the phone.
B:
(Laughs)
HMJr:
I don't have as much fun though as Mrs. McHugh
does, though.
B:
Oh, that was
HMJr:
She and Miss
B:
What - what fun 1s she having?
HMJr:
Macdonald, they're out every night.
B:
Oh, really?
HMJr:
They're practically worn out.
B:
Night clubs, I suppose.
HMJr:
I don't know. They don't tell me.
B:
(Laughs) Well....
HMJr:
They always say that I told them to see New York,
and they're carrying out my orders and New York's
a big place.
B:
And I suppose the only time you have any string
on them is between nine and four-thirty, anyhow.
HMJr:
That's about all.
B:
Yeah. Well, that ought to be right. I've got
Gaston, Sullivan and White.
HMJr:
Yeah. I was just talking with Schwarz and he says
we got a good play on that story on War Bonds -
financing.
B:
I haven't seen it. Sullivan and Gaston say, "Yes,"
you did.
HMJr:
It was on the radio, and it seemed to have worked
out very nicely.
Regraded Unclassified
2
- 2 -
B:
What was that, the pamphlet?
HMJr:
Yeah. Fred Smith will be down today
B:
I see.
HMJr:
....in Washington.
B:
Uh huh. Anything for him to do?
HMJr:
Well, he's got plenty to do for the first day.
B:
That's what I mean. You've told him what you want
him - nothing for us to give him or anything?
HMJr:
No, he's got enough for the one day, but what I do
want is the first time he has a breathing spell, I
want somebody to take him to school on expenditure
tax.
B:
All right.
HMJr:
Who'll be a good person to do that?
B:
?
HMJr:
What?
B:
Well, Roy Blough or Harry White's office. Either
one, I suppose.
HMJr:
Well, settle it
B:
There're - there are a number of memoranda around
on it, prepared by all the officers. He might read
them all.
HMJr:
Well, if you could sort of get it together for him
B:
Yeah.
HMJr:
then I'd like him to begin to study that.
....
B:
All right. I'll do that. What else?
HMJr:
I'll come down either late tonight or tomorrow morn-
ing, depending upon the weather.
B:
I see. Well, the weather looks a little overcast
here. It looks like we might have 8. shower. I don't
know what the ceiling 1s.
Regraded Unclassified
3
- 3 -
HMJr:
Does anybody want to ask me anything?
B:
Wait until I see. How is Mrs. Morgenthau? They
all want to know.
HMJr:
She's making steady progress.
B:
That's fine.
HMJr:
They say that the worst will be over after today.
B:
I suppose she still feels the effect of the
anaesthetic.
HMJr:
No.
B:
That hangs on for a week.
HMJr:
No.
B:
Really?
HMJr:
Oh, no.
B:
Gotten over it, huh?
HMJr:
Well, that was over after the first day.
B:
Well, that's fine.
HMJr:
They don't - the anaesthesia they use 1s so different.
They've got some kind of gas that they use.
B:
Yeah.
HMJr:
You don't feel it.
B:
I guess they have nothing. Everything is kind of
quiet here. I haven't heard from Paul
HMJr:
Just one minute. I - - just one minute.
B:
Yeah.
HMJr:
(Talks aside) Hello.
B:
Yes.
HMJr:
Hello.
B:
Yes.
Regraded Unclassified
4
- 4 -
HMJr:
It was - Harry Durning was outside.
B:
Uh huh. Paul 1s on the Hill, so I
HMJr:
I talked to him this morning.
B:
Oh, you did?
HMJr:
Yeah.
B:
I see. I don't know whether
HMJr:
It was - it was very unsatisfactory.
B:
Well, I
HMJr:
I don't know whether I could do any good if I was
down there or not.
B:
In the papers, it looks as though - - that everybody
is mad up there.
HMJr:
Yeah.
B:
Wait a minute. Harry said something here. (Talks
aside: What is it?) Oh, Harry said I might report
to you that - that matter on which there was some
disagreement between us and the Army.
HMJr:
Yeah.
B:
Well, we're having our way.
HMJr:
(Laughs)
B:
That's a good way to put it. (Laughs)
HMJr:
Just wonderful. Now, I have something for you.
B:
All right.
HMJr:
I have -- and Miss Chauncy can give you the original --
I have a letter -- if you make a note of this -- from
Marriner, asking could they have a copy of those
notes, do you see?
B:
Yes. I got that.
HMJr:
Well, I think the best way would be to tell him
that -- that meeting that took place in the chart
(Cont'd.)
Regraded Unclassified
5
- 5 -
HMJr:
room -- let's just destroy them, because
that's worrying them. You see?
B:
I think that's better. I think we all agree
to that.
HMJr:
What?
B:
I think we all agree to that. We discussed
it some Saturday and we think that if anything
1s done along that line, the copy destruction
is better than giving them a copy.
HMJr:
Well, I'd be willing to have you give the orders,
or I can give them in the morning.
B:
Yeah.
HMJr:
That's number one. Number two, in the letter
B:
Well, that - that doesn't have to be decided,
I mean, now.
HMJr:
Well, I'll tell you - I - I want to work up an
excuse for you to see him.
B:
For me to see Marriner?
HMJr:
Yeah.
B:
All right.
HMJr:
If you think - I have two letters from him and
the other one 1s, he wante to discuss - have an
opportunity to talk to you again before you
announce the appointment of the National Director
of Sales.
B:
Yeah.
HMJr:
Well, what I wanted was -- if - if the rest of
the people there thought well of it -- for you to
have an excuse to see Marriner and see if you could
find out a little bit how they feel, whether they've
weakened any, you see?
B:
Uh huh.
HMJr:
Which would - 80 that I'd know & little bit better,
how to handle myself.
B:
Yeah.
Regraded Unclassified
6
9 1 I
HMJr:
Now in my memorandum - in my conversation with
Ronald Ransom, you know, I said, "I'm - I'm
through arguing."
B:
Yes.
HMJr:
And I take it that they - they know that. You
see?
B:
Sure.
HMJr:
And I thought if you could have any excuse and
sort of - kind of try to pull him out B. little
bit, it might be helpful.
B:
Yeah. The only thing that I have had from Eccles
18 what I told you Saturday night
HMJr:
Yeah.
B:
that he had asked Allan Sproul not to break
off negotiations with you because they want it
kept open for further discussions down here.
HMJr:
Well, talk it over with the gang and whatever you
all decide is all right. If you think it's a sign
of weakness, I wouldn't do it. See?
B:
Yeah. Wait a minute. Herbert's got - (talks
aside) - Herb suggests that you might want to
consider really editing the transcript of that
record and destroying that part of it that's un-
pleasant and leaving the rest of it in the files....
HMJr:
Uh
B:
and letting Marriner go over the edited part.
HMJr:
After it's been edited.
B:
Yeah.
HMJr:
I think Herbert, as usual, is right.
B:
Yeah. I think maybe that's 8 good suggestion.
HMJr:
I'd leave out the George Harrison business.
B:
Yeah. I think that's what's hurting him. Then -
then they might still want a copy of it, and after
that I wouldn't think there'd be any harm
Regraded Unclassified
7
- 7 -
HMJr:
No.
B:
in giving them a copy.
HMJr:
Well, let me - you remember - I don't know whether
you'll remember, but I had a conversation with the
French Ambassador in which I called the French
Nation nothing but 8 bunch of chiselers
B:
Yeah.
HMJr:
and he got 80 excited, and then I threw the
stenographic notebook into the fire in July and
burned it.
B:
I see.
HMJr:
Everything was lovely after that. I think this
thing ought to be straightened out before I see
them Wednesday.
B:
All right.
HMJr:
See?
B:
Yeah.
HMJr:
So that that isn't a bone of contention.
B:
Well, I'll - I'll try and see Marriner today.
HMJr:
And you also might talk to him - what has he got
in mind about Gamble?
B:
Yeah. Well, I thought there that you'd probably
wanted it discussed with the Federal presidents
as to how they would get along with Gamble. I
don't know whether any of them have had any run-ine
with Gamble. There's a suspicion that they have,
and that - it's a question that maybe they wouldn't
get along with him.
HMJr:
Well, I don't know, but - but I - I thought you
might say to Marriner, "Well, the Secretary 1en't
here. He's referred those two letters to me with
power to act.' You see?
B:
Yeah.
HMJr:
How's that?
Regraded Unclassified
8
- 8 -
B:
Okay. Well, I'll see him sometime today
HMJr:
All right.
B:
if I can get to him.
HMJr:
But
B:
By the way, his secret meeting the other day was --
he told me -- was going downtown to do some
shopping.
HMJr:
(Laughs)
B:
He said they couldn't get him. They didn't know
where he had gone, and they didn't - apparently
he had gone from home or something and they didn't
know where he was. He told me that when he was
talking to me Saturday.
HMJr:
I sent for Gamble to come up to New York....
B:
I see.
HMJr:
to see the New York War Bond people, and see
whether he could find out if there was anything
going on that - without letting on that, you know,
that I was here or anything.
B:
I see. Well, he - he isn't going to see Allan?
HMJr:
No.
B:
Yeah.
HMJr:
No, no. He's just going to see the State War Bonds
people. They asked to see me, you know.
B:
Yeah.
HMJr:
And I thought that if he saw them he might, just
by chance, find out something.
B:
All right.
HMJr:
So that's about all I've done.
B:
Okay.
HMJr:
Now wait a minute. Let's see - I guess that's
about all. But Mrs. Morgenthau is making wonderful
progress.
Regraded Unclassified
9
- 9 -
B:
Well, that's grand. We're all glad to hear that.
HMJr:
Thank you.
B:
Good. All right. See you later.
HMJr:
If I could have Miss Carre, please.
B:
All right.
Operator: Hello.
10
May 24, 1943
MEMORANDUM FOR THE SECRETARY'S FILES:
On last Thursday's meeting of the conference committee,
it looked very much 8.8 if some compromise on a straight
across the board proposition, fixing the forgiveness on a
percentage of tax basis, would soon be reached in spite of
the President's letter. Mr. Greer felt at that time that
a 60% compromise would be reached, and I think within &
few percentage points, this was the view of most of those
attending the session. At the beginning of the session, I
gave the attached statement (Exhibit A) to Senator George,
Congressman Doughton ánd Cooper.
On Friday, the mood of the conference changed a great
deal. Senator Vandenberg made a statement that any measure
adopted by the conference committee should be such as to
seucre the support of the President and the Treasury. He
said that he was not talking in terms of a veto, but in terms
of active, cooperative support. He said that it would be
very calamitous for the country if any measure were adopted
which was followed by a blast from the White House or the
Treasury calling attention to class discrimination and the
favoring of the wealthy. This turned the discussion into
talk of what the President would accept and several members
of the conference, including Senator Clark and members
Disney, Knutson, and Jenkins, favored an attempt to discover
what the President would support. The letter of the President
was read at this conference and several statements were made,
notably by Vandenberg, Knutson, and Jenkins, that it was
inspired by the Treasury. Another group, led by Mr. Doughton,
thought the conference committee should make up its own
mind irrespective of the Executive.
Following this session, I came back to the Treasury
and discussed the situation with Dan Bell, telling him that
Ifeared that Senator George would attempt to get together
with the President and secure some agreement with him without
Regraded Unclassified
11
- 2 -
full understanding on the President's part of the real issue.
At this ime I talked with you on the telephone from your
office. Dan Bell and Herb Gaston were present and you authorized
me to take up the matter with Justice Byrnes.
I saw Justice Byrnes about 1:00 and told him and Ben
Cohen the situation. We both explained to him in detail the
distinction between employing the device of forgiving a
percentage of taxes and the House bill, making the point
that the latter accomplished a more equitable distribution of
forgiveness.
I then returned to the Treasury and Mr. Blough and I
went over the situation with Mr. Bell, who, in the meantime,
had communicated with Grace Tully with the suggestion that
he and I see the President just before the Cabinet meeting.
The President was behind schedule and Dan concluded that he
would mention it to the President at Cabinet meeting. This
he did.
At this conversation with the President, Mr. Bell
explained the situation to the President and also told him
that there was a strong movement to postpone any tax bill
until September. This seemed to shock the President as it
would necessitate greater borrowing and leave the inflation
front in jeopardy. Dan also told the President that Senator
George might seek an interview, and the President decided
that it might be better to him to see Senator George first
without making up his mind and then call us in afterward.
I then attended the Friday afternoon session of the
committee, and nothing more was there accomplished. The
session was interrupted by a phone call on the part of
Senator George who went out of the room for some time.
After he returned, he took Senator Walsh out with him and
remained for a period. Later, he took Chairman Doughton
out and remained for a period. It was obvious that something
had happened, which I later determined to be that he had
comminicated with Justice Byrnes and told him the deadlock
situation.
Regraded Unclassified
12
- 3 -
Apparently, following the last-mentioned telephone
call and about 5:15, Justice Byrnes saw the President
and explained to the President the distinctions between
the across the board plan (percentage of tax forgiveness)
and the House bill. The President decided that he was
in favor with the principle of the House bill with reasonable
variations. This decision Byrnes communicated to George
about 5:15 P+ m. on Friday.
At the beginning of the session on Saturday morning
all experts were excluded from the room. We waited around
until about 1:00 P. m. and the meeting broke up until
Monday morning at 10:00. The Democratic members of both
houses had 8. long session afterwards, continuing right on
after the other meeting. What went on at the meeting is
summarized in a telephone conversation between Mr. Cooper
and myself, copy of which is attached hereto. (Exhibit B)
From this telephone conversation it is obvious that the
Senate is holding out for about 75% straight across the
board, and is taking a fairly firm stand.
After this telephone conversation, I communicated with
Ben Cohen, Russell and Pritchard at Byrnes office. Mr.
Surrey and Mr. Blough attended this conference. After &
time, I returned to the office to call Cooper, whereupon
I had a conversation with him urging him to stick out against
straight across the board forgiveness. This he said he would
do as far as 60% is concerned, although he had mistakenly
agreed to commit himself on 50% on the basis of a very brief
conference with me before the morning session. I did not
tell him that the 50% would be agreeable as he seemed to
think.
After talking with Cooper, I returned to Byrnes office
where I had a further talk with Justice Byrnes, Ben Cohen,
Pritchard and Russell. At this conference I found Pritchard
and Russell urging upon Justice Byrnes that the President
should issue & statement as to what he would sign (the House
bill), his previous letter having covered the subject of
what he would not sign (the Senate bill). This argument was
based on a suggestion made by Mr. Surrey with the thought
that it would take a good deal of heat off the President
Regraded Unclassified
13
- 4 -
if he definitely announced that he would sign a bill voted
for by 8. large majority of one of the legislative bodies.
Justice Byrnes did not commit himself on this suggestion.
He was very tired and appeared generally to think that the
President should not issue any more statements. I was
then inclined to agree with Pritchard, Russell and Surrey
and urged upon Byrnes the arguments in favor of a statement.
On Sunday I had a late breakfast at Congressman Lyndon
Johnson's house following a telephone conversation with
Johnson late Saturday afternoon. Johnson said there was
nothing in the theory that the Republicans would drop the
whole Ruml matter in the event of a deadlock. He thought
that the Ruml-Carlson bill would be re-submitted to the
House and might pass this fourth time. I mentioned to him
the idea of a statement by the President that he would sign
the House bill, but Johnson opposed such a statement. James
Rowe of Justice attended this breakfast with me, and I
mentioned to him an idea by Ben Cohen of the evening before
(mentioned to you over the telephone this morning) that the
Treasury issue a statement that it would recommend acceptance
of the House bill. Rowe thought there should be no such
statement by the Treasury as the matter had come to be an
issue between the President and Congress.
The Committee met again at 10:00 on Monday in a short
session, following a meeting of the House conferees at 9:00
this morning. Apparently no progress was made, the Senate
conferees holding for a 75% across the board forgiveness
with 100% forgiveness of the tax up to $50.00. There is to
be another meeting of the Democratic members of the conference
at 4:30. What happened this morning is told in a memorandum
of a telephone conversation with Jere Cooper at 12:05 today.
(Exhibit C)
Regraded Unclassified
14
- 5 -
Monday afternoon, immediately after lunch at the office,
I went home. Shortly after arriving home I had a telephone
conversation with Mr. Cooper who reported the progress of the
situation. Later in the afternoon I learned that Justice
Byrnes was seeing the President that afternoon. I had a con-
versation with Mr. Cohen which confirmed this information and
then called Justice Byrnes. Justice Byrnes was on another
phone at the time and did not call me back as his secretary
had agreed. I thereupon called him about 5 o'clock and talked
with him in which conversation he gave me the impression that
he thought the situation was getting very uncomfortable for
him. He asked when the Secretary would return and said that
he thought the Secretary should get into the situation in the
morning upon his return to the city. (I had told him the
Secretary was coming down on the night train.)
I reported the situation to the Secretary about 7:30
in which conversation, incidentally, he cleared the TFR-500
signature matter. I then arranged with the Secretary to have
breakfast with him which I did on Tuesday morning. I told
him of my Byrnes conversation and he decided that he would do
nothing except call Senator George and Mr. Doughton and
register with them his return to town. I do not know whether
he got Mr. Doughton. I had reported to the Secretary the
evening before that Mr. Doughton and Mr. Cooper were meeting
in Justice Byrnes' office at 9 o'clock Tuesday morning. I
received no call from Justice Byrnes about this meeting and to
this moment have never discussed it with him. The Secretary
did, however, have a telephone conversation with Senator George
in my presence in which he told Senator George he was back in
town and ready to do anything he could.
The meeting between Justice Byrnes and Mr. Doughton was
reported to me over the telephone this morning by Mr. Cooper.
A copy of this telephone conversation is attached hereto.
(Exhibit D) Apparently Justice Byrnes was requested by Mr.
Doughton to go to 70 or 75 percent and to recommend this to
the President. Justice Byrnes apparently refused to go
higher than 62 1/2 percent.
Regraded Unclassified
15
- 6 -
At the meeting of the Democratic conferees Tuesday morning,
Senator Vandenberg offered a 75 percent forgiveness plan across
the board with a $100 credit at the bottom whi was voted
favorably by the Senate conferees but turned down by the House
conferees 4 - 3, the 4 adverse votes being Democratic. Jere
Cooper offered the Doughton plan which carried among the House
conferees 4 - 3, the Democrats voting for the plan and the Repub-
licans against it. The Senate then voted down the plan 6 - 0.
Then Mr. Cooper offered the House bill which had the same vote
among the House conferees. This was rejected by the Senate
conferees 6 - 0. The one Senate vote previously and the non-
voting Senator in this vote was Byrd. Doughton then offered a
60 percent plan with a $50 credit at the bottom. The vote on
this matter was 3 - 3, Disney being absent and Cooper having no
proxy for this vote. It was unnecessary to get Disney's proxy
as the Senate conferees voted down the motion 6 - 1. Byrd
again voted in favor of the plan in order to get a bill. A
telephone conversation reporting this voting is attached hereto.
(Exhibit E)
The Democratic members met at 2:30 Tuesday afternoon. I
had no information as to what happened at this conference.
However, at the full conference meeting at 3:30 (which was
apparently somewhat postponed) the conferees accepted the
Vandenberg 75 percent proposal with 100 percent abatement of
taxes up to $50. This was accomplished by persuading Doughton
to vote in the House conferees with the three Republicans.
Cooper, Dingell and Disney (the last mentioned by proxy to
Cooper) voted against the proposal. Apparently the Senate
conferees were unanimous.
Bro
Regraded Unclassified
Exhibit A.
17
May 21, 1943
In considering the effect of any doubling up in
payments on account of 1942 tax liabilities, two points
are of particular interest.
1. The doubling up will affect only taxpayers
who had taxable income in 1942. Persons who had no
taxable income in 1942 would not be affected by the
doubling up and would not pay any higher rates of tax,
regardless of how high their incomes might be after
1942. In the same way and in varying degrees, persons
whose incomes were higher after 1942 would be relatively
little affected by doubling up. Accordingly, the
spreading of part of 1942 taxes over subsequent years
should not be considered a substitute for increases in
tax rates in those years. Otherwise, on many incomes,
taxation for the next few years would be insufficient
for & wartime fiscal program and the burden would be
distributed capriciously.
2. The period of time over which uncancelled 1942
tax was spread should not be determined solely with
reference to the large incomes. Nearly one-half of the
taxpayers in 1942 had less than $100 tax liability and
three-fourths had less than $200. The spreading of a
fraction of these small taxes over a period of years
would not only result in unnecessary administrative
details, but might cause more hardship through possible
declines of income than the quick liquidation of the
liability. The largest incomes would, of course, require
longer periods, but these could be provided for through
extension of time by the Commissioner or by statutory
provision with reasonable interest rates.
Exhibit B.
19
Mr. Paul's conversation with Jere Cooper 3 p.m. May 22, 1943.
P: Can you tell me in a general way what happened?
C: We just got back from the conference.
P: Didn't George reveal what he heard from Byrnes?
C: You haven't talked to me, of course.
P: Of course not. We have to protect each other and you haven't
talked to me. I told you this morning that I thought the
President was with us. I understand that George and Byrnes
had a conversation yesterday and I understand the President
is for the Ways and Means or the House bill or any reasonable
variation of them. I wondered if George conveyed that to
the group.
C: Yes, in a general way, that's right. I will try to give you
the whole story and then you can give me all you know. After
you went out this morning there was more or less a general
discussion and Senator Walsh read a statement that he had
prepared about what had happened up to now and he emphasized
the point that the House conferees had not pushed the House
bill and went on to say about the Senate's position, etc. and
then Mr. Doughton came in and said the conference wasn't by
any means over and he had been expecting one of the minority
House conferees to advance that 8.S it was on their motion that
it was adopted in the House and talked on a little generally
along that line. I took up there and said there had never
been any thought any time for House conferees not to stand
by the House action and advance the House bill. As soon as
we met we took up the Senate amendment and we have been dis-
cussing that and variations of it. The result was I asked
Knutson right out if he expected to move that the House bill
be adopted. He said he didn't want to make the motion. I
moved that the House conferees insist on the House bill and
it resulted in the four Democrats - Doughton, Disney, Dingell
and myself - voting for the motion and the three Republicans
voting against it. They put the question to the Senate and
nobody voted for it at all. Byrd didn't vote either way.
The other 6 voted against it and that's what happened on that.
We went on and discussed the matter pro and con and finally
Regraded Unclassified
20
- 2 -
Vandenberg called on George to know if he had received
any information from the President. George said he had
not talked to the President and had not received any
direct information from him, but had talked to a high
ranking official and understood from him the President was
in favor of the graduation of any amount that was forgiven
and that was his position on it, and that he still stood
by what he stated in his letter to the two chairmen and
still of the opinion that there should be graduation of any
amount
P: In other words, he is for the Housé bill.
C: Any amount that could be agreed upon for forgiveness. Then
Walsh made a motion First, Vandenberg brought up the
question of some complete forgiveness in the low brackets.
P: I knew he did that.
C: (Missed here what Vandenberg's proposal was). After he talked
to you fellows he thought there ought to be forgiveness of
tax and then proposed that all taxpayers whose tax did not
exceed $50 be cancelled and above the $50 he favored 80%
forgiveness and there was some discussion along that line.
Finally Walsh made a motion that Vandenberg's idea of complete
forgiveness of taxpayers whose income did not exceed $50
be cancelled and for all others that the same amount as
contemplated under the Robertson plan of 76% be cancelled.
I raised the question about that and he said that his motion
yesterday was for 75% and this is just one point, 76%. He
said, I realize that but I am making that motion because the
House bill adopted 76%.
P: That was 76% aggregate.
C: Finally, the House conferees voted it down. Dingell didn't
understand it and voted for it. I got on him for it and told
him to watch me hereafter. The other 6 voted against it.
That's the trouble about John - he don't get it and he talks
too much and doesn't know where he is going.
P: John's a nice fellow but erratic.
C: I told him, from now on you stick right to me. I said I think
we are close enough friends and he said that's right.
Regraded Unclassified
21
- 3 -
We were there until one o'clock and we came out then
and adjourned until 10 o'clock Monday. The Democratic
conferees on both sides, Senate and House, went back in
George's office, all except Disney, he had an appointment
downtown. So it was George, Walsh, Byrd and Clark, and
Doughton, Dingell and myself, and we were there for some-
thing like an hour. And 80 then George told us all about
his conversation with Byrnes and called Byrnes by name and
he said he had talked to Byrnes and submitted the proposition
to him and it looked like we were up against the question of
the amount of forgiveness and the way it was to be forgiven.
Byrnes told him that the President still stood by his letter
and wouldn't approve a bill for complete forgiveness. As
to the question of the variation he didn't have final
definite word but would try to talk to him and talk to George
later. As a result he said he would talk to him later and
said the President still felt that graduation should apply.
P: By graduation you mean like something in the House bill or
the Ways and Means bill - you don't get 50 or 75% across
the board on the tax - That's what I get too. As I understand
it that distinction was explained very carefully to the
President and his position is the right way. I don't know
what he would do with straight across 50%. If he signed it.
he certainly would blast it.
C: I can bring you all down to date. George made it clear that
the information from Byrnes was that the President was opposed
to straight across the board and thought there should be
some differential. Doughton said he had talked to Byrnes
twice about it. First time he told him was when he told
George and Byrnes told him he would call him back again and
he did just before he went to conference this morning and
said the President still stood where he had and thought there
ought to be a differential, but, of course, he couldn't say
definitely until he knew what we were about to agree on how
he would finally stand on it. Anyhow, after those discussions
were out of the way then George said his personal opinion
was to put in something to make all those in the lower brackets
like Vandenberg suggested with $50 or less to pay and then
straight across the board for the rest and thought the President
might accept that. He thought that was the President's
opinion. I didn't take that as what the President said.
P: What you could do there is to take 8. low amount and have not
only that but have a maximum limitation of 19 percentage points.
Regraded Unclassified
22
- 4 -
C: You mean forgive all taxpayers whose tax does not exceed $50?
P: Forgive them 100% and forgive everybody 50% but not more
than 19 percentage points, as in the House bill.
C: Well, after we discussed those things, Walsh, Clark said they
were absolutely fixed and set in their opinion it had to be
straight across the board and not less than 75%. Byrd said
he favored 50% and straight across the board. George said
he favored the 75% straight across the board. Then they called
on us for an expression and Doughton said 50% was as much as
he would favor and he thought if we could agree to limit
the graduation he thought the Senators ought to agree to 50%.
He was pretty strong in his statement on that. Then they
called on me. I said I don't like the straight across the
board but I couldn't sign any conference report that forgave
over 50% of liability. Dingell said he felt that way about
it. Byrd got in and said we ought to get a bill - it was
rather serious for the country. While he favored 50%, in
order to get the bill he would be willing to go a little
further maybe. Finally, Doughton whispered something to
Dingell. He asked him if he would agree to 50% straight
across the board and I understood Dingell to agree and then
he went over and whispered to Clark to ask if he would agree
to 50% and Clark said he would not agree and Walsh said he
would not agree at all. Finally, it broke up without any
agreement or understanding. The Democratic members of both
the Senate and House conferees are to meet in George's office
at 9 o'clock Monday morning, but nothing is to be said about
that. So that's the situation up to now.
P: The old man is absolutely opposed to the House bill, isn't he?
C: Oh yes, he and Disney are opposed and all three of the
Republicans voted against it.
P: They voted for it in the House.
C: The only reason they voted for it was to get it to the
Senate thinking the Senate would improve it, and that now
the Senate had improved it and now they are for the Senate
bill. Dingell voted against the Robertson bill on final
passage - Disney did - and I am the only Democratic conferee
that voted for the bill. The three Republicans have
completely abandoned it for the Senate bill. There is no
chance for that.
Regraded Unclassified
23
-5-
P: No chance for the House bill. I should think the
Republicans would be glad to take it up.
C: No, they voted against it. There is no chance for the
House bill, apparently no chance at all. It looks to me
like, this is my best guess, that the Senators are going
to hold out for the 75% straight across the board and I
don't think the House conferees will go to that. I don't
think Doughton, Disney or Dingell or myself
P: I certainly hope you won't.
C: I have no intention and I don't intend to sign a conference
report if that's what it is. There is this situation
that ought to be borne in mind. I think the three Republican
House conferees are under definite instructions from
Joe Martin not to agree to anything but the Senate bill.
P: I don't think so, from what Knutson told me, but you may
be right.
C: Knutson told Disney - this is confidential too - Disney
told me and Doughton that Knutson told him yesterday
afternoon if you can get the Ways and Means Committee bill
it will pass the House. There will be 40 or 50 Republicans
voting for it - but we will never get the Senate conferees
to take that
P: If the Senate conferees are not going to take the House bill
or the Ways and Means bill, or any reasonable variation,
I think you ought to let the thing deadlock
C: That's my view of it.
P: Because either the 75 or 50 is going to bugger up the tax
bill - you are not going to get any tax bill that is
decent and certainly the President isn't going to sign it
and you are not going to accomplish anything. I would almost
rather see the Ruml plan voted by the House and they would
have the full responsibility of increased taxes the people
are going to have to pay.
C: I don't think the Senate conferees are going to accept any-
thing else.
P: Are they so sure of themselves?
Regraded Unclassified
24
-6-
C: Oh yes, they are backed by a two to one vote in the Senate
and they said in the Democratic conference awhile ago
they cannot pass a bill in the Senate with even 50% for-
giveness straight across the board. They say the lowest
thing they can pass in the Senate is 75% straight across
the board. I don't believe the Senate conferees are going
to ever agree to the Ways and Means Committee bill or to
the House bill. And it doesn't look at all like there is
any chance to get them to ever agree to 50% straight across
the board. It looks to me like the way the thing is now
it is going to have to break up without any agreement.
P: Unless Doughton gets Dingell to weaken on the 60%. You
don't think they will go for that?
C: The Senators said they won't but apparently Byrd is the
only one that would. Clark and Walsh said they would not.
I imagine George would altho he didn't express himself.
P: If George and Byrd would and the Republicans voted for it.
you would have it.
C: I don't think the Republicans will vote for it. Vandenberg
is holding out for 80% across the board. Walsh, Clark and
George for 75% and Byrd wants 50% straight across the board
and I think Byrd would go to 60%.
P: He might.
C: And I think Doughton and I belive Disney and Dingell would
go to 60. What do you think about 60?
P: I think it absolutely bitches the tax bill for the very
reason I have expressed. You've got to turn around after
giving the 60% - a man with an $8 million income you are
going to give him more than 500,000 forgiveness and you take
away the 60% you give the man in the lower brackets and
you don't take it away from the higher ones. It's going to
come home to roost.
C: Byrd said that Vandenberg was confident that the Senate
Regraded Unclassified
25
-7-
conferees realize there is more danger in the Ruml plan
than they had anticipated.
P: Taft told me he was for the House bill now. He called me
the day of the last House vote and said, I am for the House
bill and I don't think there is anything in between that
and the 100%.
C: Well, that's the situation. Suppose Doughton, Dingell and
Disney all three agree to go for 60%, that puts it right up
to me now.
P: 60% straight across the board? I don't think I would go
for that. I will think that over and call you.
C: I will be here for an hour or two yet.
P: My impression is that is just the kind of thing the President
doesn't want.
C: That's certainly what I don't want, but you see the spot I
am in. I stated this morning that 50% was as high as I would
go.
P: Even 50% is against the whole principle for which we know
now the President stands. I can't feel that you have any
protection against 8. blast then. If the President tries to
capitalize this thing I am not sure he won't veto it.
He certainly won't let it become law without giving it a
kick in the ass. He may let 50 go by but I don't think
he will be enough overjoyed
C: I may find myself in a spot any time now. When the Demorratic
conferees broke up over there, Dingell and I walked out and
Dingell got in his car, but Doughton stayed back to talk
to George and I don't know what may result from that, but
he may ask me later this afternoon and put it right up to me
as to whether I will go along on the 60% straight across the
board. You better call me back inside of an hour and let
me know.
26
Exhibit C.
27
Mr. Paul called Cong. Jere Cooper 12:05, May 24, 1943
Paul: You know what I want. Anything happen?
Cooper: No. Of course confidentially, see. The Democratic
conferees, both the Senate and House members, met at
9:00 in Senator George's office. We talked until the
full conference at 10:00, but we didn't get anywhere.
Just about along the same line as I told you Saturday
and then the full conference met at 10:00. We discussed
things generally and the Senate resubmitted their
proposal of forgiving 75% for everybody of the lesser
of two years of 1942 or 1943, and then for taxpayers
whose tax does not exceed $50.00 forgive them 100%.
We did not accept it so we agreed to adjourn till
10:00 in the morning.
Paul: Are there any plans afoot as to what will happen
before then?
Cooper: Doughton called & meeting of the House conferees.
We just got through. Three Republicans and Democrats.
We talked for about 1 hour. I finally just asked the
three Republicans: "Just want you to frankly state
whether you three Republicans are going to continue
to insist on the Carlson plan in conference and that
you will not agree to stand with us for the House bill".
They said that was true. They said they were going to
continue to insist on the Carlson plan and would not
join us in supporting the House bill. We broke up.
At 4:30 this P. M. the same group that met at 9:00 is
going to meet in the Committee Room in the Capitol for
one final effort to see if the Democrats on both sides
can get together.
Paul: Think anything will come of it?
Cooper: I don't know. I walked with Doughton from the
Senate and he said he had a side talk with Clark and
he talked more favorably. Doughton didn't give any
28
- 2 -
indication to me of what he thought. I haven't
thought at all that the Senate conferees would ever
agree to anything less then what they offered this
morning.
Paul: That was 75%?
Cooper: Straight forgiveness for everybody of the smaller
1942 or 1943. and then if the taxpayer's tax does
not exceed $50.00, forgive 100%.
Paul: Does that leave out the second windfall?
Cooper: That hasn't been discussed at all. What's the
Score?
Paul: I still feel just the same as Saturday.
Cooper: And you think we could not agree on 60% straight
across the board?
Paul: I don't see how we could agree consistent with the
President's letter on anything straight across the
board, but certainly we don't have to answer anything
below 60.
Cooper: My guess is Doughton may insist yet that we agree
60-65 straight across the Board with this $50.00
gadget. The effect of the gadget is simply this:
to restore the 1941 exemptions, because the $50.00
would mean that for single taxpayers if they have
$788 they would be let out. It substantially means
you just restore your 1941 exemptions and that does
not do the job as I see it.
Paul: I agree with you.
Cooper: The thing for me to do is still stand pat? All right.
I have insisted that I wouldn't under any circumstances
agree to more than 50%.
Paul: Stick to it, old boy.
29
Exhibit D
30
Mr. Paul's conversation with Jere Cooper, 10:13 a.m., May 25, 1943
P: I was in the Secretary's and wanted to come back to my office
to take your call.
C: Understand, I haven't talked to you. I just got out of the
conference with Byrnes. Doughton went over to the Senate
side to the conference there and I came on to my office to
talk to you. I have to go over right away. We discussed
everything about an hour. Byrnes said that rather than not
have a bill at all we better go to 60, and in any event not
more than 62 1/2 at top outside and not budge an inch over
that. Doughton wanted to go to 70 rather than miss a bill,
but Byrnes didn't think the President would take that at all
and thought it should be 60 or 62 1/2 at top limit. So
that's it.
P: Then I take it that Byrnes will recommend that to the President.
C: Yes, I think so.
P: Do you think the Senate will agree?
C: I doubt it, I don't much think so.
P: I hope not. I think the Secretary is going to see the President
later today. Now that your conference is over probably I
ought to stay down here and get something going at this end.
Do you think it is important for me to be up there waiting
outside.
C: I don't think so, the rest of your boys are there. What do
you think I ought to do.
P: I don't think you ought. to agree to it.
C: I don't want to, but old man Doughton is about to have a fit
and I think I will have to agree to that. It looks that way.
P: I don't think the President ought to agree, but Byrnes has
undoubtedly & good deal of influence. Whether we can counter-
act that I don't know. What is Doughton going to do, submit
Regraded Unclassified
31
this to the committee?
C: What we had in mind is, when I get over there I will move
again to adopt the Ways and Means Committee bill. They will
vote that down. Then I will move to adopt the Robertson bill
and they will vote that down. Then we will recess and the
Senate and House Democrats can have another conference either
this morning or early this afternoon.
P: I will have to talk to the Secretary and call you back.
C: I will be over there.
P: I can't break into that meeting. Can you step out and call
me - you will probably put it over until after lunch.
C: I will try if I can, but I don't know whether I can or not.
P: I want to see what the Secretary is going to do about the
Byrnes proposition.
C: Well, now, you haven't talked to me. I will try my best to
get in touch with you. I think I am going to have to go along
with the old man on that. That's the way it looks.
P: I can see your position.
C: He just told me "I will resign as Chairman and let you go
on and take it." See, those things.
P: The best I can say is for you to call me back whenever you
can get a chance and I will do what I can in the meantime.
C: If I get an opportunity I will do that.
Exhibit E
33
Mr. Paul's conversation with Jere Cooper, 11:40 a.m., May 25, 1943.
C: All right, Randolph.
P: I don't see anything for you to do.
C: This happened since I talked to you. I went over to the
conference and we finally met. Some were late. Vandenberg
submitted the same proposition again of forgiving 100% up
to $50 tax and 75% to everybody. Rather it's the other way
around - 75% forgiveness for everybody whose taxes does not
exceed $50. On the Senate windfall provision he didn't
specify anything definite but said to rewrite it and carry
the 25% unforgiven balance over two years. All the Senate
conferees voted for it and the three Republican House con-
ferees voted for it and the four Democrats voted against it.
That's the same thing he offered before. That put it up to
us, so I moved that we adopt the Ways and Means Committee
bill - the three Republican House conferees voted against
it and the four Democrats for it. All the Senate confer-
ees, except Byrd, voted against it. Byrd voted for it on
the theory he wanted to get a bill. They voted that down,
and I moved we adopt the House bill, the Robertson plan,
and it resulted in the same vote. All of that was turned
down.
P: The same vote by the Senators? This time Byrd was for it?
C: No, Byrd didn't vote, but all the rest voted against it
and the three Republican House conferees against it and the
four Democrats voted for it. Then after some discussion
Doughton brought up the 60% forgiveness and put that to &
vote - to forgive 60% to everybody and the taxpayers whose
tax did not exceed $100, 100% forgiveness and carry the
40% abatement over two years. The three Republican House
conferees voted against it and Doughton, Dingell and I
voted for it. Disney wasn't present and while I voted
him on the others I didn't vote him on this because he told
me when he left that he didn't want to go above 50. I
Regraded Unclassified
34
- 2 -
could have reached him by phone, but if the Senate voted
against it there was no point in going to that trouble.
All the Senators voted against it but Byrd and he voted
for it. After that there was considerable discussion that
we break up and that everybody had gone as far as they
could. The Senators said they couldn't go below 75 and we
said we couldn't go above 60. So that leaves the 15%
difference. They finally agreed to have one more meeting
at 3:30 this afternoon in the Ways and Means Committee Room
at the Capitol.
P: What's your judgment on that?
C: I don't believe there is any chance.
P: You don't think they will come down?
C: I don't think they will.
P: Is Disney out home?
C: Yes, he had to go on account of the flood. I've got to give
it some time myself. We adjourned to meet at 3:30. The
Senate Democrats - George, Walsh, Clark and Byrd - agreed
to come over at 2:30 to meet with the Democratic House
conferees. We will get in a huddle at 2:30 to see if we can
get any further and the full conference will meet at 3:30.
P: You think that will be the last meeting?
C: Yes.
P: I certainly am obliged to you in keeping me posted. What
about Byrnes' proposition - they won't come down to that?
C: I don't think they will come down any further and Byrnes
told them the President would veto it. Byrnes thought 62 1/2
would be the limit.
P: Byrnes didn't say he could deliver that 62 1/2, did he?
C: No, he said he could try. But that was the limit; if it
comes to that, will go that far but no further.
Regraded Unclassified
35
WALTER F. GEORGE, GA., CHAIRMAN
no L. WALSH. MASS.
ROBERT M. LAFOLLETTE, a wis.
MN W. BARKLEY, KY,
ARTHUR CAPPER, KANS.
CONNALLY. TEX.
ARTHUR M. VANDENBERG, MICH.
us W. BAILEY, N. c.
JAMES J. DAVIS, PA.
NETT CHAMP CLARK. MO.
HENRY CABOT LOOGE, m., MABE.
JOHN A. DANAMER, CONN.
United States Senate
BRY FLOOD BYRD, VA.
TER G. GERRY, a. .
ROBERT A. TAPT. OHIO
EPH F. GUFFEY, PA.
COMMITTEE ON FINANCE
ENTIRE M. BROWN, MICH.
YOR L HERRING. IOWA
WIN c. JOHNSON, COLO.
DASE L. RADCLIFFE. MD,
LIAM M. SMATHERS, NL de
CHRISTIE a. KENNEDY, CLERK
May 24, 1943
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Department of the Treasury
Washington, D.C.
My dear Mr. Secretary:
I very much appreciate your generous
note of May 19th commending my speech against
the Ruml-Carlson amendment.
I do hope that the Conference Committee
will agree on some bill which does not violate
the principle involved in forgiveness of taxes.
With kind personal regards, I am,
Sincerely yours,
rml.ec
Pogradod d
36
TREASURY DEPARTMENT
M
INTER OFFICE COMMUNICATION
DATE May 24, 1943
TO: Secretary Morgenthau
FROM: Mr. Waldman
Among the workers at 10 shipyards in Wilmington and Baltimore,
the greatest majority of the men I spoke with -- about 60 -- either
agreed with or spontaneously used the statement: "Roll back the
prices to May, 1942 or give us a wage increase." (I conducted these
interviews on May 18, 19 and 20.)
The 24 workers from four shipyards of the Bethlehem Steel
Company, who seemed to have more grievances than the workers at the
other shipyards, added to this statement... "No contract, no work --
if we don't get a new agreement with Bethlehem by June 23rd nobody
is going to find us trespassing on their property."
Among 9 out of 10 of the men and women with whom I spoke, the
first point discussed was "higher prices.
1. DELAWARE BAY SHIPBUILDING COMPANY, LEESBURG, NEW JERSEY (NAVY)
There are about 400 workers in this isolated plant and almost
all of them are drawn from farms in the vicinity. The main point of
discussion here had to do with the fact that "the management is
hostile to workers and the sanitary conditions at the plant are very
bad." As an example of the latter, there is no modern plumbing --
there is an outdoor pit -- with embedded metal containers and a log
slung across the top of it for "toilets". No removal of waste is
made for weeks at a time and the resultant condition is a menace to
health.
Regraded Unclassified
- 2 -
37
Also, the men said, there are no facilities at all for them to
wash and clean up. "It isn't only that we haven't got rest rooms
or wash basins, there isn't even anywhere decent that we can sit
down and eat our lunch."
These men also commented on the fact that wages at the Delaware
Bay Shipbuilding Company are not on a par with other yards in the
area and, more than that, skilled labor such as carpenters often is
put to work on pick and shovel jobs. "That's a hell of & way to
boost production," one man said.
2. THE AMERICAN CAR AND FOUNDRY COMPANY, WILMINGTON, DELAWARE
(NAVY AND MARITIME)
Aside from the comment on "high prices" the 8 men with whom I
spoke at this yard agreed that "we don't have much to kick about."
"Lately, the management has tried to meet us half way," said
one man. Others added such remarks as "every precaution is taken for
us and everything is fine. We haven't got & complaint": "The
foremen are fine at American Car and Foundry": "And the Payroll
Savings Plan works fine. Two weeks after your money is paid in you
get your Bonds and there are no mistakes on your payments." (A
number of the men here mentioned that this was a recent development.
There are about 100 women among the 1,100 workers in this yard
and one of the men commented on these women workers: "A lot of these
women are damn fine mechanics and they seem to adapt themselves and
learn quicker than men."
Until recently there was much resentment among the workers at
this yard on the question of vacations. This, however, has now been
settled to the satisfaction of the workers.
Regraded Unclassified
- 3 -
38
The most urgent question and worry now in the minds of these
men and women seems to be "what's going to happen to us after the
war when they don't need so many ships?"
As at almost every yard I visited the men with whom I spoke
commented on the lack of eating facilities, lockers and washing
facilities. Also, as at almost every yard I visited, the workers
said that for & long time they have been asking for more and decent
toilets. "The management has been telling us for six months they'll
do something. Sure... they've started work on some toilets for us,
but it doesn't look like they'll ever get finished. In the meanwhile,
there's this privvy on the place which is a menace."
3. DRAVO CORPORATION, WILMINGTON, DELAWARE (NAVY)
The 8 men from this yard with whom I spoke said that "the
management is out to clip us of every penny it can.
Sure, it does
it legally, by sticking to the letter and not the spirit of the
agreement."
Among the most important points stressed by these men is that
the 8,000 workers in this yard not only are over-charged in the
restaurant in the yard but that many of them have suffered food
poisoning as a result of eating there. In addition, they complain
that this restaurant will serve nothing to the night shift workers
but coffee and milk.
These men also charged that the yard is not getting the production
it should because of "poor planning on either the part of Navy or
Dravo or both." The men said that there are not enough tools on the
job for them. As another reason for laggard production, they said
Regraded Unclassified
- 4 -
39
that "500 men have been sent down by the Carolina Training School,
in Charlotte, North Carolina, and hired by the plant as skilled
workers, and these men don't know anything -- we have to break them
in and teach them from the ground up."
These men seem to think that not only is this school a racket
but that the company is tied up with it somehow. They said that this
school charges men $185 for a three week's course and a job at the
end of the course.
"This is damn queer," said one of the men, "because the Dravo
Corporation, or should I say the Navy, pays men 82 cents an hour on
the job here to learn exactly the same things for which this school
charges $185."
These men charged also that this school issues a prospectus
which promises "splendid housing conditions" at low cost to its
pupils when they get a job. "The fact is that there is a terrible
housing shortage in Wilmington. Lots of the men are sleeping in
'hot beds' -- which means that when one man gets out of bed and goes
to work another man gets in that bed."
From what these men said, the housing situation has B. great
bearing on the problem of absenteeism at the plant. Many of the
workers become discontented, and try to do everything possible to get
themselves fired so that they can be free to get another job where they
can be with their families.
Another factor which is hurting production, these men said is
inequality of pay for the same work. "We don't like it and lots of the
men feel so strongly about it that it isn't doing our work any good.
We have tried to get the management to do something about this and we
spoke with the Navy inspector about it and the Navy inspector says
Regraded Unclassified
- 5 -
40
he'll back us up but the management still says that the Navy won't
agree.
Another of the score of complaints that these men issued against
the management concern "wet-weather layoffs". "When it rains," one
man said, "they tell all us welders to quit and go home -- even when
there is work to be done that's under cover. And that doesn't help
production, either!"
As in almost every discussion, the conversation returned
repeatedly to higher prices, the cost of living and the OPA, of which
the unanimous comment was -- "It's a joke!" Said one man, "Labor
has kept its part of the stabilization agreement but the Administration
hasn't. Sure ... we understand that all the bills have to be paid
but we want equality of sacrifice -- from workers and management
...
and equally!"
"We don't like the way the Payroll Savings Plan works at
Dravo,' one man commented -- and another joined in: "You've got to
wait four to five months in order to get your Bonds, after you pay
for them. And, another thing, when the Bonds are issued, they are
dated months after they are paid for. In the beginning, it was easy
to sign men up in the Payroll Savings Plan -- but no more."
In the discussion of higher food prices, these men -- and the
men at the other yards, too -- spoke bitterly of the farmer in
connection with the lack of white potatoes. "The Administration
starts off by stabilizing wages, on a patriotic basis, and then the
management takes advantage of us. And now the farmers are holding
on to their potatoes even if they rot -- just so they can squeeze out
more money. I think that the Government should have authority over
Regraded Unclassified
- 6 -
41
farmers if it's going to have authority over wages."
"We've had more reason to strike now than ever during
peacetime," said another man. "But, we're going to do everything
possible to win the war, regardless of the kicking around we get.
But, after the war, we're going to do some kicking around!"
4. BETHLEHEM-HARLAN, WILMINGTON, DELAWARE (NAVY)
This 1s one of the very small Bethlehem yards, with only 400
workers, and now is engaged in turning out parts for ships. Until
recently this yard had been engaged in building invasion boats for
the Navy, with a working force of 3,000 men. "We lost that job,"
said one of the men with whom I spoke, "Because the management put
many more men than were needed on the job and the Navy didn't like it.
Labor management relations are now good ... they have improved
vastly in the past few months.
"We like the Payroll Savings Plan and we get good delivery on
our Bonds," said this man.
5. PUSEY-JONES, WILMINGTON, DELAWARE (MARITIME)
Aside from "higher prices for food," and the fact that they
don't get enough meat ration points, the men with whom I spoke,
from the Pusey and Jones Shipyard commented that relations with he
management were good and that the Payroll Savings Plan was working
out to their satisfaction on the delivery of Bonds.
Once again I was told that "labor has lived up to its part of
the stabilization agreement in Chicago but the Government has not.
Prices have not been kept in line."
Regraded Unclassified
- 7 -
42
It was the sentiment of the 5 men with whom I spoke that "the
cost of living has gone up 300% around here and the working men at
Pusey and Jones want either an increase in wages or a roll back of
the cost of living to May, 1942. We've got to eat to build ships.
And we would rather have prices rolled back than our wages boosted --
because, if we get a raise, they'll just up the prices beyond our
wage boost."
6. THE MARYLAND DRYDOCK COMPANY, BALTIMORE, MARYLAND
(NAVY AND MARITIME)
As was true at every shipyard, the men all were extremely
conscious of the fact that their union was negotiating a new agree-
ment and that the old agreement was up on June 23rd.
The 7 men with whom I spoke also commented on production. They
said that production at the Maryland Drydock Company was not up to
what it should be. They said that labor-management relations on
production were fair but that one of the reasons that production was
not as good as it should be was due to the fact that they had too
many men on the job. They said that there were 9,000 men at the
yard and that if the men who were not fitted for their jobs were
weeded out and the working force cut down to 7,000 they would have
better production.
"Another matter which is slowing up production is dissatisfacti
among the men with wage advancements. The only way you can get
wage advancements to the higher rates of pay is through the
grievance committee."
"The men at this yard are worried about what's going to happen
after the war especially the older men. Most of these older men,
because of their experience, and their ability to break in new
Regraded Unclassified
- 8 -
43
workers have been made supervisors -- which means that they are not
protected in their jobs under the terms of the contract for which
they fought before they were made supervisors. Naturally, a lot of
these older men have hesitated about accepting supervisory jobs
because of this. But, still, the union has advised them to take
these jobs, because the union feels that those men -- as supervisors --
are able to give added help to the war effort."
Regarding War Bonds, the men with whom I spoke said that over
half of the men in the yards are not buying Bonds and won't buy Bonds
through the Payroll Savings Plan -- because, they say, they can't
afford it. Once again the higher cost of living was mentioned and
also the fact that the housing situation in Baltimore is so bad that
many men are not able to bring up their families and thus have to
support two establishments. The men with whom I spoke also
commented on the fact that their union has asked the management to
give all new employees a Bond application card when the employee
first comes into the plant, but that the management has refused to
do this. These workers feel that the management is not cooperating
on Payroll Savings as much as it can and should. However, they did
say that they get their Bonds within a reasonable length of time
after they are paid for.
Along with the lack of housing, these men agreed that all of
the workers in the yard resented very much the increased cost of
living.
There is a restaurant for the men in the yard but, at this time,
the management wants to discontinue it and, instead, sell containers
of hot coffee, soup and sandwiches to the men, within the plant. The
men are objecting very strongly to this because, they say, under this
Regraded Unclassified
- 9 -
44
projected plan, the men would have nowhere to sit down. The
restaurant already has stopped serving during the breakfast period
because the management seems to think that the men use the
restaurant for loafing. The men object to this and say that it
is not right for the management to punish the many because of the
acts of a very few. (The Union has said that it would back up the
management in punishing this guilty minority.) One of the reasons
that the men feel so strongly about their restaurant situation is
that there is a new, brick, two-story restaurant within the yard
exclusively for office workers and executives.
As at the Dravo Plant in Wilmington, according to the workers,
the Maryland Drydock Company is extreme in classifying workers as
"absentees". One man said: "Even if a man has pneumonia -- and you
can get pneumonia working twelve hours a day for seven days a week --
they won't accept & doctor's excuse. Instead they call him an
absentee and use his 'absenteeism' as a reason for not giving him &
raise in pay." Another worker said: "Nost of us here think that
the whole problem of 'absenteeism' is the company's fault. Up until
about six months ago the management would lay you off for a week if
you were not at your job for several days in a row -- no matter what
the reason. The men resent this and now a number of them may be
overstepping the bounds because they feel that the management won't
dare to give them such lay-offs due to the alarming proportions of
'absenteeism' at the plant."
Another reason for absenteeism, one of the workers said, is
the transportation problem. The street car stop is half a mile away
from the shipyard. In the winter that is pretty bad. It isn't
only the walk but, in order to get to the plant, you've got to climb
Regraded Unclassified
- 10 -
45
over box cars and railroad tracks. Many employees are women and a
number of them have fallen and injured themselves in crossing over
those box cars. When the weather is bad this is a contributing
factor to absenteeism.
7. BETHLEHEM, SPARROWS POINT, MARYLAND (MARITIME)
As at the great majority of the Bethlehem Shipyards, the men
with whom I spoke commented bitterly on the treatment they are
getting from management. As at the Bethlehem, Hoboken, and
Bethlehem, Brooklyn yards, the men at the Sparrows Point Yard spoke
at great length on the fact that their work is done under conditions
of extremely poor ventilation. As a matter of fact, these men said
that the lack of "air blowers" on the job (there are only 150 air
blowers available for 8,000 men) is a major reason for absenteeism.
"When you know that you're going to have to work in the same hold
with a gang of paint sprayers and that you won't have any air blower
to take the fumes out of the hold, it's mighty easy to stay away
from work that day -- at least, that's the way a lot of men seem to
feel."
"It isn't only a matter of paint fumes -- you see, just as
likely as not, they will put four gangs of workers, welders, painters,
etc., into one hold at once. That hold is about 30 feet deep, 20
feet long and about 20 feet wide ... shaped like a slice of pie.
It's just a crowded jam and the fumes make you sick when you haven't
got any blowers to carry them off. All that makes for absenteeism
and hurts production. The work would go a lot faster if there was
some organization and planning on alloting the jobs in the holds to
Regraded Unclassified
- 11 -
46
the various gangs of workers. And it isn't getting any better in
this hot weather..."
Also, on the point of production, the men seem to think that the
management is not very much interested in any ideas the men might have
for speeding up production: "If one of us men in the yards has a
good idea and the management finally puts it into effect, almost
always, just about a week or two after this is done, the idea is
dropped.'
Eating facilities also came in for strong comment: "The
restaurant in the yard is absolutely lousy. It's the only place
where we can eat. The meat is rank and all the food is bad. It's
expensive -- a hot beef sandwich costs you 35 cents, and & lunch
plate of meat with two vegetables costs you 55 cents
The Maritime
Commission investigated conditions about six months ago and urged
that improvement be made but nothing has been done The men in the
yard have gotten to feel so strongly about the food that unless
something is done about it they're going to turn the damn lunch
wagon over."
These men mentioned, in connection with their food and other
problems, that "The big shots haven't got any eating problem or other
problems that we've got because they have a special dining room and
other special facilities -- like plenty of toilets and suction fans."
(Once again, as at most of the Bethlehem yards I have contacted, the
toilet problem was a very large issue. The men said there were only
20 seats for 3,500 workers at the Sparrows Point plant. They said
that due to this and due to a lack of sanitary precautions many men
have either gotten lice or various kidney ailments. The matter of
inadequate washing facilities also was brought up. It was stressed
Regraded Unclassified
- 12 -
47
that one locker room for 400 men has not got even a single wash
bowl. Once again these men connected their problems and grievances
with the problem of absenteeism.)
At this point one of the men said: "Maybe you won't think that
drinking water is so important on the job. But it 1s. You sweat
an awful lot when you work in a shipyard and you need drinking water,
and when it gets. hot you need ice water. The drinking water out at
Sparrows Point is full of rust -- it is so full of iron that you can't
drink it. And, four months ago, we asked the management for ice
water on the boats. We still haven't got it, and that means that,
in order to get ice water, you got to leave the boat on which you
are working and walk about four blocks. That takes a lot of time
away which otherwise might be speeding up production."
Another point which these men brought up as hurting production
has to do with transportation. The men said that because the
management would not go on r ecord as operating seven days a week --
in spite of the fact that it has been so operating and is so
operating the Baltimore Transit Company will not run its cars
down to the shipyard on Sunday. Instead, the cars stop about a
mile and a half away from the yard. "Whether it's right or wrong,
I don't know," one of the men said, "but a lot of the workers at
the yard feel that this is the management's fault and a lot of
the men stay home on Sundays instead of working. That's another
reason for absenteeism and lowered production."
As at every Bethlehem plant I visited the men were bitter about
the management's "relief plan" for which every worker has to pay from
$1.50 to $2.00 B. month and from which, they say, they get very little
if any benefit.
Regraded Unclassified
- 13 - -
48
"Safety" also was brought up by the men with whom I spoke.
"There are only three safety men for all the 8,000 employees at the
yard. Before a safety man does anything about an unsafe condition,
an accident has to happen first."
The men's attitude on "higher prices" was that "we're going to
wait and see whether the prices are rolled back by 10% by June 1.
What we want, and what we think is fair, is for prices to be rolled
back to the May, 1942 level. You can tell Secretary Morgenthau for
me that, not only will it fix things for us, but it will give us a
better chance to increase our Bond buying. If they stabilize food
prices the way wages have been stabilized, we could increase our Bond
allotments by at least 25%..."
"Speaking of War Bonds, we like the voluntary system and we
don't want the compulsory system."
A number of the men added such comments ast "I'm buying as many
Bonds as I can without putting hardship on my family." "We like
Payroll Savings but we don't like the way the plan operates at
Sparrows Point. It's too slow. At the start it took from six to
eight weeks before you got your Bonds, and even now it takes them
31 to 4 weeks before you get your Bonds." "A lot of the men have
reduced their allotments in the Payroll Savings Plan because of
these reasons."
"And there's another point I want to bring up about War Bonds,"
one of these men said. "A lot of us are on piece work, and that means
that our wages are very irregular. Instead of signing up for a fixed
amount every week which often means that some weeks we get about
dollar or so after our Bond deduction has been made -- we would
Regraded Unclassified
- 14 -
49
like to sign up for a percentage of our pay. In that way there
wouldn't be hardship on a man and his family if a man didn't get
a full week's work and, also, there would be a darn sight more of
us buying more Bonds with more money."
"We're buying War Bonds to help our Country and for savings.
If we didn't feel so strong about our Country, we would quit the
Payroll Savings Plan tomorrow -- because of the way the management
handles this thing It all adds up to loyalty to the Government
and to loyalty to myself as a man and as a citizen.
When I see
a soldier in the street I can feel that I'm contributing to that.
"But," added one of the group, "don't let the management
bring in any more high pressure artists like that guy Marino. All
he did was to shove Bonds down the throats of the men. He caused
more harm than good. The men just dropped back when he left --
and they are still sore about it."
At this yard, and at the other yards I visited on this trip,
I found a greater disposition than previously on the part of the
men to be not at all disturbed at the thought of cashing in War
Bonds. Especially among the men at the American Car and Foundry
Company, in Wilmington, the men seemed to think that it was quite
important to get their Bonds up to the 60-day mark so that they
could cash them in.
8. BETHLEHEM, KEY HIGHWAY, Baltimore, Maryland
(MARITIME)
The men with whom I spoke at this yard said that not only are
the men in this plant (9,675) dissatisfied with their treatment by
management but they are dissatisfied with their treatment by the
Regraded Unclassified
- 15 -
50
Government. "There is no cooperation by management with labor --
and the Government has not helped us by keeping food prices in line."
"The ventilation and air conditioning problem is bad, and
getting worse. Management just is taking advantage of labor's
promise not to strike."
"The management will not reclassify men in their jobs and
thereby give them the wage increases they deserve except under such
drastic action such as & slow down."
"You won't get anywhere with the men in the yard on War Bonds
unless the management changes its opposition attitude toward labor.
During the drive a year ago for War Bonds, the management would not
tell the workers the total amount in dollars of War Bonds being
bought by the men. The management now refuses the help of the
union in Bond Drives,"
"I was in the Army myself," said one of the men with whom I
spoke, "and I soldiered with a lot of the men who are in hospitals
around here -- wounded. I tried to get the management to let these
wounded soldiers come here and speak to us. I know it would help
Bond buying. But the management has refused."
"We can and we will tell you lots of things about this job, but
what it all adds up to is that we feel that management is against us.
We feel, too, that the Navy inspectors and representatives of the
Maritime Commission are working for the Bethlehem Steel Company more
than they are working for the Government. Our contract expires on
June 23rd, and unless we have a new contract with Bethlehem Steel
by that date we won't be trespassing on their property."
Regraded Unclassified
- 16 -
51
"I'd like to bring up the problem of health conditions," one
of the men said. "There's a new blacksmith shop which was built
by the Navy. All the windows are locked shut in that building.
In that building there are four furnaces and 12 forges. The heat
is terrific. There's no air in the place. If the windows are not
open by Monday we won't work in that shop."
Another man said: "There are seven men sick in my shop, due
to a lack of ventilation. But the assistant supervisor won't do
anything about it. He said that if the men lay off they'll be
penalized "to the best of the management's ability". Some men in
my shop are spitting blood."
Another man said: "In spite of the management's talk a bout
the problem of absenteeism, they still penalize a man who misses a
day by laying him off another day."
Another of the group said: "I want to tell you about the way
the management feels about improving sanitary conditions for the men.
First of all, there are not enough toilets, wash rooms or locker
rooms. Speak with the management about that and they will tell you
the war may be over anytime within a year and we don't feel
justified in spending the money'."
"Not only that," said one of the men. "The management doesn't
seem to care if the work is not going too fast on a war job for the
Government. And they will put 500 men on such a job when there is
need for only 100. That way they stand to make more money. But it
is different on a contract job, where the faster a job is done, and
the fewer men used, the more money they make. On such a contract
job they really speed the men up and, if they need 400 men, they'll
Regraded Unclassified
- 16 -
51
"I'd like to bring up the problem of health conditions," one
of the men said. "There's a new blacksmith shop which was built
by the Navy. All the windows are locked shut in that building.
In that building there are four furnaces and 12 forges. The heat
is terrific. There's no air in the place. If the windows are not
open by Monday we won't work in that shop."
Another man said: "There are seven men sick in my shop, due
to a lack of ventilation. But the assistant supervisor won't do
anything about it. He said that if the men lay off they'll be
penalized "to the best of the management's ability". Some men in
my shop are spitting blood."
Another man said: "In spite of the management's talk & bout
the problem of absenteeism, they still penalize a man who misses a
day by laying him off another day."
Another of the group said: "I want to tell you about the way
the management feels about improving sanitary conditions for the men.
First of all, there are not enough toilets, wash rooms or locker
rooms. Speak with the management about that and they will tell you
'the war may be over anytime within a year and we don't feel
justified in spending the money'."
"Not only that," said one of the men. "The management doesn't
seem to care if the work is not going too fast on a war job for the
Government. And they will put 500 men on such a job when there is
need for only 100. That way they stand to make more money. But it
is different on a contract job, where the faster a job is done, and
the fewer men used, the more money they make. On such a contract
job they really speed the men up and, if they need 400 men, they'll
Regraded Unclassified
- 17 -
52
put 100 on the job and drive them harder. Also, just as likely as
not, they will pull some men off a Government-War job and put these
men to work on B. private job ... still charging these men up to the
Government."
Once again, the problem of eating facilities was brought up.
"There is a truck restaurant in the yard, that's all. The food is
bad and the help is unsanitary. All they've got to eat is lunch
meat ... nothing with any vitamins ... and the meat many times is
moldy. Also, you're apt to find hair in your coffee and cockroaches
and worms in your soup."
"But," added one of the others, "there is & good lunch room in
the yard for the management."
85% of the men are buying Bonds on the Payroll Savings Plan,
and they now are getting their Bonds within two weeks after the
Bonds are paid for. The only complaint, regarding the way the
Payroll Savings Plan is handled at the Key Highway Shipyard, had to
do with the fact that the management will not accept any deduction
for a Bond except in even dollars. The men said that, as an example,
the management would not accept a deduction of $6.25 -- which makes
a Bond come out "even".
9. BETHLEHEM-FAIRFIELD, BALTIMORE, MARYLAND (MARITIME)
(This is the yard which surpassed the Kaiser record for Liberty Ships)
"For a time," said one of the group of men with whom I spoke,
"labor-management relations at this yard were quite good. But, when
the war situation started improving, labor-management relations
started worsening and they still are going down hill."
Regraded Unclassified
- 18 -
53
"The management is stalling around on everything of benefit
to the workers, taking advantage of labor's pledge not to strike.
As a matter of fact, the management seems to be trying to force us
into a strike before the contract negotiations are finished. I
guess that the management feels that if it can do this it will be
able to exert public opinion against us and use all that against us
in the contract negotiations."
One of the men said: "This yard leads the East Coast in
production, and a lot of the credit for this is due to the Victory
Production Committee -- which is a labor-management committee.
Lately, the management seems to be trying to discourage this
committee, in spite of the fact that our production in April was
three ships off schedule. As an example, right after we realized
we were falling behind schedule, there was a meeting of the Victory
Production Committee. At this meeting we discussed only one third
of the points that needed discussion in order to bring our production
up again. We should have met the next day in order to get all the
problems cleared up, but management postponed the meeting for a week.
The reason for this, I think, is that the management is trying to do
everything to de-emphasize the participation of labor in the pro-
duction effort of the yard.
"There is instance after instance of management's hostility to
labor. Men are laid off for the most flimsy reasons, and workers
are beaten up by the police force at the yard for no reason at all."
Once again I heard the thought expressed that the Bethlehem Steel
Company idea is that the war is practically over and they don't want
to do anything more on labor-management cooperation.
Regraded Unclassified
- 19 -
54
"As an example of the management's rejection of labor's
suggestions for increasing production, the management has so far
blocked and stopped a production drive called 'Ships for Invasion'.
This production drive would enlist the extra efforts of every worker
in the yard, calls for production rallies twice a week at lunch time
and for the formation of all the workers in the yard into production
teams. Not only would this plan speed up production but it would
raise the morale of the workers and educate them on the war effort
of this Country." (Attached is a copy of this "Ships for Invasion"
plan.)
"As a result of all this," said one of the men, "production
on the job is now in a bad state."
"Management's refusal to cooperate with labor also extends to
War Bond drives," added one of the men. "The initiative for previous
Bond drives had to come from the union and the union was the one
which proposed that the Payroll Savings Plan be set up in the yard.
As an example of management's attitude on War Bonds, the union
suggested that centrally-located Bond booths be put up in the yard
and that Bond rallies be held, but the management as yet has made
no answer to these suggestions. Only recently has the management
agreed to have prominent people at launchings in the yard, to aid
Bond sales. It all adds up to the fact that the management does
not want to be bothered."
"And it still takes an average of about six weeks before you
get your Bond through the Payroll Savings Plan. This is not as bad
as it was when we had to wait six months for our Bonds, but still it
is bad enough and this is one of the reasons that many men are leery
about signing up again."
Regraded Unclassified
- 20 -
55
"And how about new taxes and the mix-up on the pay-as-you-go
plan?" one of the men asked. "That also is affecting Bond sales."
10. LANCASTER IRON WORKS, PERRYVILLE, MARYLAND (MARITIME)
This is a small yard employing about 320 men and is quite
isolated. I spoke with only one man from this yard and, therefore,
was not able to get as rounded a reaction as I would have liked.
"There is no trouble at all with management," said this man
who was a union representative as well as one of the workers in this
yard. "The men are satisfied. They get a higher rate of pay than
other men in this area
outside of very minor problems, the men
are satisfied with their working conditions."
"The greatest majority of the men are refusing to buy Bonds
through the Payroll Savings Plan at the yard. They say that they
can get their Bonds more efficiently outside."
This was a strange comment in view of the fact that this man
said that the Payroll Savings Plan at this yard works perfectly and
the men get their Bonds immediately after the Bonds are paid for.
11. NEW YORK SHIPBUILDING YARD, CAMDEN, NEW JERSEY (NAVY)
In setting up the itinerary of this trip, at the national
office of the I. U. M. S. W. A., in Camden, New Jersey, I met one
of the workers (and union leaders) of the New York Shipbuilding
Company, with whom I had spoken on an earlier trip. This man said
that, since I had been there, a representative of the Treasury
Department had visited the Union and was trying to arrange with the
Regraded Unclassified
- 21 -
56
management to have the management become an issuing agent for
Bonds. This shipyard worker said that everything seems to be
progressing satisfactorily and, he promised, "when the company
becomes an issuing agent and delivery of Bonds is speeded up the
men will increase their Payroll Savings Deduction from an average
of approximately 8% to an average of more than 15%." This man
added that "relations are better than ever at the New York Ship-
building Yard... The management-labor committee which works on
ideas to speed production is doing a great job... Men with the
best ideas for aiding production win War Bonds and a trip down
the ways as the ships are launched. If
- 0 -
Regraded Unclassified
C
57
0
P
Y
REPORT ON THE PRODUCTION DRIVE
In reporting on 8. production drive, it is essential at
this time to review the purposes of the Labor-Management Committee.
When the War Production Board established such Committees,
they did so with the realization that all of America must unite
in the fight against the Axis - if we are to be victorious.
During the early months of the Victory Production Committee,
the unity between Labor and Management resulted in producing a
record above the level that we had hoped to reach.
But after a successful production drive the policy of
Management towards this Committee changed, not only at Bethlehem-
Fairfield, but also throughout the other Bethlehem Yards. This
policy reflected itself in moves to resist the efforts of Labor
to further and develop cooperation on production.
Today, our Country and her Allies have swept the Nazis from
North Africa. Within the next several weeks - the new stage of
the war will and must be unfurled - with the United Nations
striking from all fronts in a grand invasion of Europe.
Ships carrying cargoes of ammunition and equipment will
play a very important factor in this invasion. The loss of
practically three ships last month in our construction efforts
means that three less fullcargoes of supplies will reach our
men at the Front, in a crucial battle that may mean the difference
between Victory and defeat.
Regraded Unclassified
- 2 -
58
We, members of Labor on the Victory Production Committee
propose that Management place its partisan interests to one side,
and cooperate to the fullest extent in staging a Production Drive
that will carry us to higher production levels and fulfill our
responsibility to our Country in its time of need.
We propose: a Production Drive to build ships for the
invasion of Europe - this drive to be aptly entitled "Ships for
Invasion".
The initial stages of this drive shall be from May 19 to
July 4 - (which is the critical period of the War and ships
and more ships will be needed for invasion.)
That the Production Goal for this period be set by the
Victory Production Committee after a full discussion of the
problems facing the Yard that will impede our progress.
That the discussion include the number of ships scheduled
to be delivered and constructed.
That copy or copies of the Progress Report of the number of
feet welded, tons erected and rivets driven be furnished to Labor.
That a program be mapped out for Labor-Management Coopera-
tion to solve these production difficulties.
We further propose:
1 - That the drive be opened on May 20th, with an open
letter to be distributed to every worker in the Yard, setting
the goal and their necessary contribution to Victory.
2 - That at the same time Posters be erected in the Yard
dramatizing "Ships for Invasion" with direct relation to the
Production Goal that must be reached by July 4th.
Regraded Unclassified
- 3 -
59
3 - That bi-weekly lunch time production rallies be
conducted by the Union to raise the morale of the workers, to
speed up production, and to educate them on the War Effort of
their Country.
May 25th - Outline the Production Drive
"Ships for Invasion".
J. M. Willis - P. Fluvanis
Awards for best suggestion of month.
May 28th - America's Stake in the War
Report on the Drive
White and Negro Workers
May 31st - Soldiers of Production and the
Armed Forces
War Hero
Local Speaker
June 4th Women's Day show their contribution
to the War Effort
Women speakers - Men speakers
To further develop the education of the men and women and
to spur them on to greater efforts - we propose -
1 - That we obtain from the U.S.R.C. whenever possible the
progress and the actions of our ships in line of duty.
2 - That Pamphlets on the War - published by the OWI be
distributed as is being done in other plants.
3 - Regular statements of the day issued by the Victory
Production Committee - on the Bulletin Boards - every two days.
Regraded Unclassified
- 4 -
60
During this Drive Period of "Ships for Invasion" - a
suggestion drive should be developed so as to gather the
participation and the ideas of the workers.
The date for the drive should be from June 7 to June 21,
with additional rewards made such as choosing a sponsor for a.
vessel.
Most important in conducting any drive is the development
of sportsmanlike competition of groups of workers. This method
has been successfully used in Britain and the Soviet Union to
raise production levels.
The key to our country's efforts and the freedom loving
people of the World is the United Nations. In the spirit of such
unity we figure the following set-up.
1 - Divide the Yard into teams which will compete with each
other to reach the production goals set.
Teams proposed -
Yard 1 - Churchill Commandos
Yard 2 - Chang Kai Shek Squadron
Yard 3 - F. D. R. Battalion
Yard 4 - Stalin Brigadiers
Outfitting Piers - Production Yanks
Fabricating Shop - Colin Kelly Division
2 - Quotas for each yard from May 15 to July 4 will be
set for each team and placed on a percentage basis.
3 - On the large bulletin board show visual comparison of
I
teams as they fulfill their quotas.
Regraded Unclassified
61
- 5 -
4 - Get message of greetings from personalities involved
as encouragement to drive.
5 - Develop Production Commando Award for meritorious
production records established by the workers.
To build further the morale of workers - a new worker's
launching schedule should be developed. Picture of worker's
launchings should be given to labor so that we may build up the
importance of these launchings.
To win this war as quickly as possible is the main purpose
for this drive in building "Ships for Invasion".
Regraded Unclassified
62
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION CONFIDENTIAL
DATE May 24, 1943
TO
Secretary Morgenthau
Prepared by: Mr. Daggit Mr. Murphy and M1se Michener
FROM
21th
am
Subject: The Business Situation,
Week ending May 22, 1943.
Summary
Inflation control: Despite recent modification of WLB policies
paving the way for further wage increases, labor dissatis-
faction with this agency has become more pronounced and
serious strikes are in progress in several areas. At the
same time, criticism of OPA continues to mount, with labor
groups assailing the agency for failure to roll back prices
to a reasonable level, and retailers abpealing for relief
from ceilings already put into effect.
Living costs: The BLS index of living costs just released
for the month ended March 15 shows a further rise of 1.5
percent with an advance of 2.8 percent in retail food
prices leading the rise. The long-awaited revision, now
completed, makes virtually no change in the figures since
the first of the year, when the revision begins, desoite
repeated claims that the index has failed to reflect fully
the actual rise in living costs.
Commodity prices: Commodity prices advanced last week, and
the BLS index of 28 basic commodities was up 0.3 percent.
The all-commodity index rose slightly to a new beak in
the week ending May 15. During the year since the General
Maximum Price Regulation was issued, this index has shown
an increase of 5.4 percent, due almost entirely to the
rise in orices of farm products and foods.
Retail sales: Department store sales widened their gain over
last year's levels to le percent in the second week of May.
Some resurgence of scare buying may have followed Donald
Nelson's recent statement that rationing of clothing and
textiles 18 imminent unless all facilities of the textile
industry are used to the limit.
Gasoline shortage: The gasoline shortage in the Eastern
States, which has been aggravated by the break in the
Texas-Illinois pipeline, threatens to interfere with farm
operations owing to lack of fuel for tractors and other
purposes.
Regraded Unclassified
63
- 2 -
Anti-inflation controls under fire
In spite of recent re-vamping of policies designed to
quiet criticism, both the WLB and the OPA continue to be
subjected to & barrage of complaints that may force
further retreats in the struggle to clamp down on wage and
price increases. Although the recent directive restoring
greater latitude to the WLB in adjusting wage demands is
expected to pave the way for numerous wage increases, labor
unrest continues, Press reports this morning state that
40,000 workers are now on strike in the rubber industry, in
protest against a Labor Board wage ruling. A series of
strikes last week in the Detroit area was attributed in
part to discontent over the WLB, while scattered strikes
in the coal mines served as a reminder that the coal wage
controversy 18 still unsettled.
Meanwhile, the OPA 1s under heavy fire from many
quarters. Virtually at the same time that the United Auto-
mobile Workers Union was assailing the "do nothing" policies
of the OPA in a public advertisement, representatives of
small business were accusing the agency of "economic murder,"
Likewise, while the AFL was charging that the OPA has failed
to make a "sincere and effective attempt to roll prices back
to a reasonable level, " the National Association of Retail
Grocers was appealing to President Roosevelt for relief from
community food price ceilings put into effect by OPA at the
beginning of last week. Countering criticism of business
groups, OPA asserted last week that wholesalers and retailers
of foods enjoy the most favorable economic position on record.
In supporting its contention, OPA pointed out among other
facts that business failures are currently at the lowest
point in half a century.
Cost-of-living index revised
The long-awaited revision of the BLS cost-of-living
index, issued last week, merely made certain changes in the
construction of the index, and did not answer charges by
labor groups and others that the index has failed to reflect
the full extent of the rise in living costs. The revision
did not affect the level of the index for previous months,
and it is likely that the "modernization" of the index will
affect measurements of living costs significantly only over
a longer period of time. No mention was made of any change
in the method used to collect the data.
In the month ending March 15, the first month reported
since the revision was made, living costs advanced 1.5
percent, with the largest increases in retail food prices,
Regraded Unclassified
64
- 3 -
which were up 2.8 percent, and in clothing prices.
(See Chart 1.) Sharp price increases in fresh vegetables
and fruits were responsible for the rise in the cost of
food. To prevent a further rise in prices of fresh vege-
tables, temporary price ceilings were imposed on a number
of the more important vegetables near the end of February,
and it 18 of interest that last week the Acting Administrator
of OPA stated that dollar-and-cents retail ceilings would be
placed on certain "most-consumed" vegetables and fruits
early in June.
Details of changes in BLS index
The changes made in the construction of the cost-of-
living index are expected by the Bureau to improve its
accuracy in reflecting war-time changes in living costs.
The following changes were made:
(1) Seven foods were added to the index.
(2) The relative importance of 27 foods has been
reduced, in line with anticipated 1943 supplies
available to civilian consumers under rationing
restrictions,
(3) The weights given to 25 other foods in rela-
tively more plentiful supply wereincreased.
(4) Adjustments were made for changes in the volume
of food sold through chains and independent stores and
supermarkets.
(5) Five additional cities, in which food prices
have been available for some time, have been incorpo-
rated in the all-cities index.
(6) The relative importance of the cities included
in the index were changed to take account of the
changes in population because of war activities.
Criticism that the BLS cost-of-living index fails to
reflect rising prices adequately will doubtless continue,
notwithstanding that the revisions have improved the index.
Some of the oriticisms may be justified, for the index will
continue to have certain weaknesses. Deterioration of
quality, for example, cannot be fully recorded, Shortages of
certain items quoted in the index may force the purchase of
higher-priced goods. Finally, black market prices are
probably not measured by the index, although the Bureau has
indicated that the indexes are based on "actual selling prices,
regardless of OPA ceilings."
Regraded Unclassified
65
4
Commodity prices move higher
Commodity prices are again rising, apparently due to
increasing demand combined with evidences of indecision
over price control policies. Prices in the wholesale
markets moved higher last week, a movement attributed by
market commentators to strong demand and to unfavorable
crop prospects produced by the extensive floods in the
Middle West, but also probably in part because of pressure
being exerted on the price control program from labor, the
farm bloc, and food distributors. The BLS index of 28 basic
commodities showed the largest upward change since the first
week in March, although the rise was only 0.3 percent. The
prices of practically all of the uncontrolled commodities
rose somewhat, while large Government textile orders
pushed up wool top prices over 3 percent. (See Chart 2.)
After leveling out in April, the BLS all-commodity
index has again shown a rising tendency, and in the week
ending May 15 advanced slightly to a new peak since 1925.
(See Chart 3.) At 103.8, the index was 38.1 percent above
the pre-war level of August 1939. Industrial commodity
prices were steady, and increases in the prices of farm
products and foods were responsible for the latest advance
in the index.
Wholesale price movements under general price ceilings
The BLS all-commodity index has advanced 5.4 percent in
the year since the first comprehensive price control measure,
General Maximum Price Regulation, became effective. (The
regulation went into effect May 11, 1942.) This advance was
largely the result of increases in the prices of farm and
food products, while the average for all other commodities
showed a rise of but 1 percent during this period. The
farm products and food indexes registered gains of 21 and
12 percent, respectively. (See Chart 4.) Of the other
major groups, mostly industrial commodities, only two showed
noticeable changes: fuel and lighting materials increased
3.4 percent; and chemicals, 3.0 percent,
The relative stability in prices of industrial commodi-
ties, in comparison with the sharp rise in prices of farm
products and foods, reflects the fact that price ceilings
under GMPR were extended to practically all industrial
commodities, but did not cover a large proportion of farm
products and some foods. Some commodities not originally
covered by GMPR, however, have since been brought under
price control.
Regraded Unclassified
66
- 5 -
The success in stabilizing prices of industrial commodi-
ties was due not alone to the extensive use of price control,
but more fundamentally to measures used to control demand.
Throug h material allocations and production limitations, the
demand for most industrial commodities has been made to con-
form generally to supplies available. Until recently, little
effort has been made to control demand for farm products and
foods. Meat and canned food rationing will aid in balancing
demand with food supplies, and thus tend to stabilize prices,
It is very doubtful, of course, that the demand for farm
products and foods can ever be as effectively controlled as
can the demand for industrial commodities.
Stock market activity slackens
Although industrial stock prices rose slightly to a new
high last week, trading activity slackened noticeably for
the second consecutive week. At the close on Saturday,
industrial stock prices, as measured by the Dow-Jones averages,
were about 1 percent above week-earlier levels, while railroad
and utility stocks also showed small gains. (See Chart 5.)
Although stock prices have displayed a firm undertone in
recent weeks, little net advance has been made from the
levels prevailing in the early part of April just before
the hold-the-line order on wages and prices.
In the London market, industrial stock prices have been
able to make little headway on the upside since around mid-
January, when the long upswing in British stock prices seems
to have been largely halted. (See Chart 6.) By that time,
however, industrial stock prices in London had doubled from
the war-time low of June 26, 1940 and were 27 percent higher
than on the eve of the outbreak of war. In discussing this
rise, the January issue of the Bankers' Magazine (London)
makes the following pertinent comments:
"This enormous gain must, of course, be largely attributed
to the fact that for a long time previous to the commence-
ment of the war stocks had been steadily falling in antici-
pation of the possible event of war, while it must also be
borne in mind that since the declaration of war Government
financial restrictions have all been in favour of a rise
in existing securities. In the first place, there has been
the general policy of cheap money. In the second place,
there has been the ban on practically all new securities,
BO that scarcity of stock and cheapness of money have
played a large part in the general appreciation in market
values of Stock Exchange securities. In the third place,
the curtailment of ordinary expenditure through the system
of rationing has increased the volume of money available
in one form or another for investment. And, finally, the
Regraded Unclassified
67
D
weight of taxation, while it may have reduced spending
power, has been partly responsible for the great rise
in variable dividend stocks owing to the search by the
investor either for increased income or for capital
appreciation."
Price and food developments
Compulsory grade labeling of the 1943 pack of canned
fruits and vegetables was discarded by the OPA last week,
after claims were made by canners that grade labeling would
retard production. (Labor groups have strongly opposed the
discarding of grade labeling, since it would encourage the
selling of lower-grade goods at top-grade prices.) However,
an alternative method for protecting the housewife against
hidden price increases through upgrading was incorporated in
an order issued by OPA.
Under this order, canners must continue to grade their
1943 pack according to Agricultural Marketing Administration
grades, and canners and wholesalers must indicate on their
invoices the AMA grade of the product sold. Furthermore,
no producer can pack more than one grade of the same canned
fruit or vegetable under the same brand name without a dis-
tinguishing label to show that different grades are being
sold under the same brand name. This method will probably
present more difficulties in controlling prices than would
mandatory grade labeling, because the grade as such will not
be apparent to the consumer.
The establishment of a War Meat Board, to decide upon
the daily and weekly allocation and distribution of the
national meat supply among the Armed Forces, lend-lease and
civilians, was announced by the War Food Administration and
OPA last week. The Board will be located in Chicago, and
will consist not only of representatives of the Government
but also of the meat industry. The quarterly and yearly meat
requirements of the various consuming groups will continue to
be determined by the responsible authorities in Washington.
The devastating floods in several Midwestern states have
dealt a severe blow to crop prospects over an important area,
It has been estimated that more than 1 million acres of land
were submerged along the Mississippi, Illinois, and Wabash
Rivers, and some winter wheat and a substantial amount of the
oat crop in some states were washed out. The most serious
threat, moreover, will be the delay to corn planting, which
has already been held up by the late spring.
Regraded Unclassified
68
1- I I
Congress indicates opposition to subsidies
Congressional opposition to the use of subsidies was
manifested in the House last week by an amendment to the
$6,273,629,000 lend-lease supplemental appropriation bill
which would forbid the use of any of these funds for payment
of subsidies on agricultural products. The amendment was
adopted by a vote of 214 to 96. Of the total appropriation,
$4,452,623,000 was for shipments of food. In testimony on
the bill, the Lend-Lease Administrator revealed that lend-
lease shipments of food would be boosted from 6 percent of
our total output in 1942 to 10 percent in 1943.
Strong sentiment against subsidies also marked the House
hearings last week on the bill to extend the life and increase
the funds of the CCC. Moderate use of Government subsidies
was recommended by President Hutson of the CCC and by Food
Administrator Davis as beneficial to the national economy,
particularly in wartime. However, Davis stated that "general
reliance on subsidies as the chief implement to prevent infla-
tion is a dangerous delusion."
Attempting to overcome Congressional opposition to the
use of subsidies, Mr. Hutson said that practically all opera-
tions by the CCC potentially qualify as subsidy operations,
since whenever prices are supported above the market, whether
through loans or otherwise, losses may be incurred. For
instance, the 000 lost about $14,000,000 in the program
permitting cotton growers to redeem loans on 1934-35 cotton
at less than the loan price, and $8,500,000 was lost in
releasing 1937-38 corn to producers at less than loan prices.
Furthermore, the current oilseed processing program,
Mr. Hutson estimated, may result in a loss of $15,000,000;
the milk program, $2,500,000; and the cheese program,
6,000,000.
East Coast gasoline shortage critical
The critical shortage of gasoline in Eastern States,
which has necessitated a renewed ban on pleasure driving and
sharp restrictions on commercial transportation in the
shortage area, has been heightened by a break in the Texas-
Illinois pipeline as a result of flood conditions in Arkansas.
It is planned to get the oil moving through the pipeline
again within a week, but in the meantime oil movement to the
East Coast may be cut by 100,000 barrels a day or more.
In re-imposing the ban on pleasure driving, it was
revealed that thousands of farm tractors from Maine to
Virginia were threatened with & lack of fuel. Moreover, Petroleum
Regraded Unclassified
69
- 8 -
Administrator Ickes has indicated that further restrictions
on gasoline use will be necessary before the crisis in East
Coast gasoline supplies 16 over. Agricultural officials
are particularly apprehensive over the current gasoline
shortage in view of the threatened interference with farm
operations. In this connection, the Secretary of the New
York State Department of Agriculture asserted that the
gasoline supply for upstate farms would not last more than
2 days.
Department store sales above 1942 levels
After dropping below last year's levels in the week after
Easter, department store sales in the first week of May rose
12 percent above the corresponding week a year ago, and in
the week ended May 15 the gain widened to 16 percent.
(See Chart 7.) Some revival of scare buying of wearing
apparel seems to have been touched off by 8. recent statement
of Mr. Nelson of the WPB to the effect that rationing of
textiles and clothing 18 imminent unless all facilities of
the industry are used to the utmost. However, insufficient
time has elapsed to judge the importance of such scare buying
as may be under way.
While military buying and lend-lease requirements
inevitably cut deeply into the volume of textiles available
for civilians, maladjustment in the price structure of the
industry 1s also said to be an important factor in the
tightening supply situation. In this connection, price
adjustments are said to be a cardinal feature of a program
being worked out by the WPB Office of Civilian Requirements,
with the aim of avoiding rationing by providing such adjust-
ments in price ceilings as will assure utilization of mill
capacity to the fullest extent possible. Reports that mills
have been reducing production by cutting out third shifts
and overtime because of present low ceiling prices for
carded yarns are said to be under investigation.
Regraded Unclassified
COST OF LIVING AND SELECTED ITEMS
June 1939-100
1939
1940
1941
1942
1943
J
5
D
M
J
SONDJFMANJJASONOJFMAMJJASONDJFMAMS
PERCENT
PERCENT
145
145
140
140
135
135
130
130
Food
125
125
120
120
Clothing
115
Combined Index
115
110
110
105
105
100
100
Household Furnishings
Rent, Light,
and Miscellaneous
and Heat
95
95
J
$
D
M
J
$ o N o J F M A M J J A $ o N o J F M A M J J & $ o N D J F M A M J J
1939
1940
1941
1942
1943
Seuce B.L.S.
Office of the Secretary of the Transury
, 1 I 1 I
C-413-A1
Chart 1
RegradedUnclassified
MOVEMENT OF BASIC COMMODITY PRICES
1942
1943
PERCENT
PERCENT
August-1939-100
210
210
205
205
200
200
9 Uncontrolled Commodities
195
195
190
190
185
185
180
180
175
175
28 Commodities
170
170
165
165
160
160
19 Controlled Commodities
155
155
MAR.
MAY
JULY
SEPT
NOV.
JAN.
MAR.
MAY
1942
1943
PERCENTAGE CHANGE DEC. 6, 1941 TO MAY 14 AND MAY 21 1943
PERCENT
PERCENT
Floresed 742%
19 Controlled
9 Uncontrolled
Commodities
Commodities
+60
+60
+50
+50
71
Carn446x
Hoge 430%
+40
+40
Butter 35.31
+30
Lard ta ex
+30
Barley 2841
Steers 2745
Shellac an
(Lood IF IX
Print Cloth 782
Wheet 224x
+20
Sugar 60%
+20
Cotton as I
Cottonsed a 591
Wool Tope 191
Zine JI
+10
9.3 Change
+10
Mides. Sale
Ton, Rubber
Coffee Copper
St Scrap dom
o
St Scrapeup
o
Cocoo --
Tollow 4.12
Aurip 4.31
-10
-
-10
Dec. 6
May 14
May 21
Dec. 6
May 14
May 21
1941
1943
843
ISHI
1943
1943
20 - Controlled and # Uncontrelled provides fe - 26
Office of the Secretary of the Treasury
- of Paweish and -
P-244-48
Regraded Unclas
Chart
COMMODITY PRICES
1926=100
PER
PER
CENT
CENT
Weekly
106
106
104
104
102
102
100
100
889 Commodities, B.L.S.
98
98
96
96
94
94
92
92
90
90
28 Basic Commodities, B.L.S.
88
88
86
86
84
OCT
NOV
DEC
JAM
FEB
MAR
APR
MAY
JUNE
JULY
AUG
SEPT
OCT
NOV
DEC
JAN.
FEB
MAR
84
APR.
MAY
JUNE
1941
1942
1943
- of the Secury of - -
- # - - -
P-196-E
Chart 3
Regraded Unclass
Chart 4
73
WHOLESALE COMMODITY PRICES
Percentage Changes in Major Groups of B.L.S. All Commodity Index
Week Ended May 16, 1942 to Week Ended May 15, 1943
PER
CENT
FARM PRODUCTS
20
18
16
14
FOODS
12
10
8
6
ALL COMMODITIES
4
FUEL AND LIGHTING
CHEMICALS, ETC.
2
Misc. COMMODITIES
BUILDING MATERIAL
METALS AND METAL
o
PRODUCTS
TEXTILE PRODUCTS
HOUSEFURNISHINGS
HIDES AND LEATHER
PRODUCTS
-2
MAY 15
MAY 16
1943
1942
Office of the Secretary of the Treasury
P 260
Division of Research and Statistics
Regraded Unclassified
74
STOCK PRICES, DOW-JONES AVERAGES
Chart in
Workly hap
1942
Daily
1841
1943
-
I
I
and
AM
SEPT.
É
(
1
-
AMT
MPI,
-
-
APRIL
1943
-
-
14
at
-
-
.
AM
-
BILLARS
22
SUPTEMER
DE
-
-
30 Industrial Blooks
180
138
-
136
150
20 Industrial Stede
150
INC
140
the
DE
130
145
(40
126
120
140
11,00,
146
HE
⑈⑉⑉
14
135
-
1.85
100
x
10
130
00
a
a
(25
1,5
X
(4)
120
NO
:
#
30 - Treate
ao failmate
34
-
40
&
as
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.
-
.
30
34
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-
~~~~~~~~~~~~~~~~~~~~~~~~~
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a
se
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30
e
is
is
as
29
.
36
is Otilities
24
a
a
25
19 visities
a
g
#
20
-
19
_________________________
a
is
a
is
10
18
=
-
-
-
I
-
folms of Trading
BILLINES
WILLING
(secuse or MILY)
Volume of Traiding
- -
/
2
,
I
-
I
If
I
*
-
9
4
-
-
-
JAP
MPI,
any.
-
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-
ALT
SEPT.
I
1
14
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.
"
18
as
-
16
21
NO
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DI
&
at
4
=
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a
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#
$
.
12 - A
1941
1342
1943
-
APRIL
-
-
AMT
-
INSPECTION
1841
- - - - - . - inmory
1
I
INDUSTRIAL STOCK PRICES IN U.S. AND U.K.
August 1936 = 100
Weekly
(Average of Daily)
1943
1941
1942
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
AND
JULY
AUG.
SEPT.
OCT
NOV.
DEC.
JAM.
TT
I
TTT
PER
CENT
PER
CENT
110
110
105
105
100
100
95
95
90
90
U.K. 56 Industrial
Stocks
B.
85
80
80
75
75
70
70
&
&
U.S. 30 Industrial
Stocks (Dow-Jones)
60
60
55
55
50
so
JULY
AUG.
SEPT.
OCT.
NOV.
sec.
FCB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
FCB.
MAR.
APR.
MAY
JUNE
JAN.
1942
1943
1941
Office el the Secretary of the Treasury
FO - 150 -
- of Issued - -
Chart 6
Regraded Unclassifie
Chart 7
76
DEPARTMENT STORE SALES
1935-39-100, Unadjusted
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
PERCENT
T
PERCENT
Weekly
280
280
260
260
240
240
220
220
200
200
180
180
160
160
1943
1941
140
140
120
120
100
100
1942
80
80
60
60
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
Office of the Secretary of the Treasury
C-390-B
of - and Invoice
Regraded Unclassified
77
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
May 24, 1943
SECRET
MEMORANDUM TO THE SECRETARY:
Supplementing report to you of May 17, 1943,
the purchases against the African Program from
May 17, 1943, to May 23, 1943, totaled $2,408,300.55
or 8. total of purchases for the program thus far
of $35,438,958.27.
Attached is report giving status of shipping
against these purchases.
A. Walsh
Acting Director of Procurement
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
78
SHIPPING REPORT AS OF MAY 22, 1943
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Aluminum sulphate
14.5
Asbestos sheet packing
2
Boiler tubes
19
Bone glue
2.5
50.5
Books & booklets
2
Brass rods & sheets
29.7
31.35
12.8
88.7
Babbitt metal
53.85
Brick
129
40
Calcium carbide
414.05
340
1736.7
Cement
20
Cement, rubber
19.5
Chemicals
181.5
349.8
244.9
661.48
Coal cutters
12
Copper tubing
74.6
Corrugated boards
76.5
47.9
22
Clothing
2233.71
131.55
11
Copper sulphate
5697.75
47.5
Cotton thread
69.25
30
Cordage & twine
225
20
46.5
Drugs
6.5
Electrodes
13
3
Envelopes
11.5
15.18
Files, steel
15
15
Fullers earth
72
Gelatin
1
1
Glass, window
97.2
24.3
Glass lamp chimneys
17
Glycerine
12.75
Horse shoes & nails
125.9
61
30.03
10.75
Hosiery
26
5
6.5
2.5
Jute bags
175.4
986
raded Unclas
-2-
79
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Light bulbs
8.6
Lithopone
10.2
Lumnite
30
Mach. finished book paper
2
Matches
389.75
4.5
9.1
70.15
Newsprint
913
131
103
28
Nipples, bottles, eye cups
9
Paper products
10
270.4
341.4
501.97
Paper bags
190.6
54
Phonograph records
1000 Each
Paint pigments
15.5
3.5
42.7
1.6
Piece goods, textiles
7775.5
2687.77
2151.75
890.05
Pig iron
105
245
Pig tin
64
Powdered milk
119
Printers ink
.1
Raw sugar
1545
Refined sugar
4196.5
Sheet copper & rods
2.8
44.2
29.1
60
Shoe tacks
4
19.5
Spare parts for autos,
tractors & harvesters
256.1
314.2
39.6
639.29
Spark plugs
4.5
5
Storage batteries
51.7
9.15
11.3
Steel, pipe, bars, angles, wire
38
468
1683.2
1142.22
Shoes, boots & soling
247.25
93.75
17
4.5
Sulphur commercial flour
1481.2
2320
Tin plate
845
Tires, tubes & tape
240.75
36
57.7
346.54
Tools
3.5
8.5
204.3
379
Tooth brushes
.75
Tea
171.75
Regraded Unclassified
-3-
80
SECRET
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. À.
At Port
Waiting Vessels
To Port
Typewriter ribbons
.5
Wire nails
100.5
Wire rope
88.5
17
X-Ray films
1
14.5
Blasting caps
1.4
Transformers
6
Wire cloth
3
Padlocks
2.5
Totals
26,012.01
5,719.57
8,356.36
9,268.55
Regraded Unclassifie
81
May 24, 1943.
My dear Mr. Stattinius:
In the absence of the Secretary,
I an acknowledging your note of May 21,
which transmitted the personal and private
copy of the reportion the status of the
Soviet Aid Program, as of April 30.
You say be sure this material will be
hold in confidence and brought to Mr.
Norgenthau's attention innediately upon
his return to the office.
Sincerely yours,
(Signed) H. S. Klotz
a
1. S. nots,
Private Secretary.
Nemerable B. 2. Stettinius, Jr.,
Administrator, Office of Lond-Lease
Administration,
live-Pifteen 22nd Street, Northwest,
Vaskington, 3. c.
File in Diary
*Ble Report ret'd to Stettinius at his request
8/24/43
GEF/dbs
Regraded Unclassified
SECRET 82
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
E.R. Stettinius, Jr.
May 21, 1943
Administrator
The Honorable Henry Morgenthau,
Secretary of the Treasury,
Room 280, Treasury Department,
Washington, D. C.
Dear Mr. Secretary,
Attached hereto is your personal and
private copy of the report on the status of
the Soviet Aid Program, as of April 30, 1943.
Sincerely yours,
Ea
E. R. Stettinius, Jr.
Attachment
02WA SV VII 1 15
Oc
OFFICE
83
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
EASE QUOTE
FERENCE NO
With the compliments of British Air Commission
who enclose Statement No. 86 - Aircraft Despatched
- for week ended May 18, 1943.
The Honourable Henry "orgenthau, Jr.
Secretary of the Treasury
WASHINGTON, D. C.
May 24, 1943.
Regraded Unclassified
84
MOST SECRET
STATEMENT NO.86
Aircraft Despatched from the United States
Week Ended May 18th. 1943
TYPE
DESTINATION
ASSEMBLY
BY
BY FLIGHT DELIVERED
POINT
SEA
AIR FOR USE IN CANADA
CONSOLIDATED
Catalina IV
U.K.
U.K.
11
CURTISS
Seamew
Canada
Canada
4
Seamew (A)
U.K.
U.K.
7
Kittyhawk
Middle East
Port Sudan
35
DOUGLAS
Boston IIIA
U.K.
U.K.
1
Dakota III
M.E.
M.E.
1
Dakota III
U.K.
U.K.
1
Dakota III
W'Africa
W'Africa
2
Dakota III
India
India
1
FAIRCHILD
Cornell PT26
M.E.
Suez
5
LOCKHEED
Hudson IIIA (B)
U.K.
U.K.
3
Ventura
Australia
Sydney
10
GLENN MARTIN
Baltimore IIIA
M.E.
M.E.
3
Baltimore IV
M.E.
M.E.
12
NORTH AMERICAN
Mitchell II
U.K.
U.K.
2
Harvard
S'Africa
Capetown
7
Harvard
India
Bombay
3
VULTEE
Vengeance
India
Bombay
10
Total 77
37
4
(A) Exported during week ended May 11th.
(B) Including one erroneously reported exported week ended May 11th, Statement No.85
should be corrected to read two.
British Air Commission, Movements Division
May 22, 1943.
Regraded Unclassified
PARAPHRASE OF TELEGR/M sent
TO:
American Ambassy, Chungking, China
DATE: May 24, 1943, 7 p.m.
NO.: 658
This is a telegram from the Secretary of the
Treasury to ddler.
This refers to the Department's telegran no. 380 dated
the 20th of March end to your cable TF-102 dated the 28th
of March,
1. The following proposal prepared by the Treasury
Department for the tabilization Board and Dr. Kung's con-
sideration offers 8 program for effecting remittances to
occupied China from the the United States:
(a) The New York Agency of the Bank of China, or any
bank in the United States, including hawaii, which it
specifies, would be permitted to effect remittences,
including air mail and telegraphic transfers, through
the Bank of china, Thungring, to people in occupied
China.
(b) General License NO. 75 outlines the procedure in
accordance with which these remittances could be effect-
ed. Bach remittance would be reviewed in Chungking
under the responsibility of the Chinese Government to
determine blue desirability of the beneficieries to be
provided with funds and to ensure that no benefit
would be derived by the enemy 83 e result of such
remittences.
(c) The United States' censorship officials would re-
ceive information from the Treasury Department stating
that no instructions (other than those sent to the
Bank of China, Chungking, by the New York ency of the
Bank of Ohina, or some other bank named by that Agency)
directing persons in unoccupied China to send funds to
persons in occupied China should be allowed to go for-
ward to China from the United States. In appropriate
instances censorship officials should instead inform
senders of such instructions that for such transac-
tions they should contact the New York Agency of the
Bank of China, or some other satisfactory bank desig-
nated by the Bank of China. The New York Agency of the
Bank
Regraded Unclassified
86
- 2 -
Bank of China, or other banks of its choice, could
make remittances when these individuals requested it,
but it would have to be in the manner described above
in paragraphs (a) and (b). The Chinese Government
would thereby have control over these restrictions.
(d) The Honkong and Shanghai Banking Corporation of
New York is also being considered as a possible channel
for effecting remittances as specified in (a) and (b)
above. Please comment on the desirability of this.
2. It would be appreciated by the United States
Treasury if comments of the above proposals could be re-
ceived from Dr. Kung and the Stabilization Board.
3. The New York gency of the Bank of China has con-
tacted the Treasury in connection with remittances to areas
occupied in Kwangtung. It was suggested by the Bank of
China that an emendment be made to Treasury's Ceneral Ruling
No. 11 in order that remittances to areas occupied in
Kwangtung would be permitted. Treasury has informed the
Bank of China that E revision of General Ruling No. 11 will
not be considered at the present time and that if any arrange-
ments are made they would be informal and confidential in
nature.
HULL
Regraded Unclassified
87
RCC
Chungking via N.R.
This telegram must be
paraphrased before being
Dated May 24, 1943
communicated to anyone
other than a Governmental
Rec'd 3 p.m., 25th.
agency. (BR)
Secretary of State
Washington
767, May 24, 2 p.m.
FOR SECRETARY OF THE TREASURY FROM ADLER.
TF 124.
Your 447, April 6.
Ono. Cassels informs me that pecata sterling
rate 15 pecatas to the pound.
Two. Bank of China, Chungking, learned from
its branch office in Shouhing, Kwangtung, that there
are no official quotations for pecata against Chinese
dollars in Macao. Black market rates in Macao at ond of
April were pecatas 90 against Chineso dollars 1000. While
there were no quotations for pecatas against Nanking
Central Roserve Bank dollars even in the black market,
exchange market between Canton and Macao quoted rate of
Central Reserve Bank $1000 against Chinese dollars
2050. The Chinese silver dollar was quoted at par with
pocata in Macao.
Three.
Regraded Unclassified
88
-2-#767, May 24, 2 p.m., from Chungking via N.R.
Three. Assistant Commercial Attache informs
me that Japanese broadcast in English on April 21 claimed
that Japanése economic and political penetration in
Macao was increasing, that use of fapi in Macao was
doclining, and that circulation of Central Reserve Bank
notos was growing. It was also claimed that the latter
were becoming indispensable for important commercial
transactions.
ACHESON
LMS
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Chungking
Regraded Unclassified
TO:
Secretary of State, Washington
DATE:
May 24, 1943
NO.:
768
STRICTLY CONFIDENTIAL
(May)
Reference is made herewith to the Embassy's previous wire of March 22,
1943, no. 754.
1. Late on May 22 I had a conversation with Dr. Kung on various subjects.
During the course of our meeting, he described at some length but in vague
terms, the reasons including appreciation of the American loan which had
prompted the Chinese Government to devise the new special exchange regu-
lations. Although I did not obtain a very precise clarification of Article
Three of the regulations, Dr. Kung stated that it was a matter which
concerned his Ministry and the Central Bank and that there was no intention
to create any debt on the part of foreign governments. (Mr. K.K. Kwok,
general manager of the Central Bank of China, gave an officer of the Embassy
a more specific clarification. Mr. Kwok said that the foreign embassies
would definitely not (repeat not) incur any responsibilities whatsoever
under Article Three and that the article simply covers a matter of
mechanics between the Ministry and the Central Bank. He said that the
"settlement" referred to is to be only between the Ministry and the Bank
and that he had been somewhat surprised by the fact that the Foreign
Office had transmitted the text of the article to the Embassy.)
2. During my conversation with him, Dr. Kung made no reference to any
question relating to reverse Lend-Lease. Naturally, I did not mention the
subject. With respect to the special exchange regulations, I stated that
his active interest in the question of resolving our problems in connection
with the exchange situation vas appreciated by us and that vo were reporting
the matter to the Department.
ATCHESON
ehtoopy
5-29-43
90
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China
DATE: May 24, 1943, 4 p.m.
NO.: 769
This is a strictly confidential message, TF 123, for
the Secretary of the Treasury from Adler. No distribution
to other Departments is to be made.
Reference is made to Adler's TF 114 of April 29.
On May 21 Dr. Kung called another meeting of Financial
experts on the subject of international monetary coopera-
tion. As before, a realistic approach seemed to be the
consensus of opinion.
The Former Minister of Information Dr. Wang Shih Chieh
advocated China putting particular emphasis on the necessity
for special consideration being given interests of countries
which are undeveloped, This view was supported by & re-
presentative of the Bank of China, Mr. Tsuyee Pei. It was
also his opinion that China should favor a monetary plan
which would not exclude flexibility of exchange rates
because in the post-war period China's interests would
demand this flexibility. The fields of currency and inter-
national investment were covered in an ambitious alternative
scheme by the Vice-Minister of Finance, Mr. Y. C. Koo.
Mr. K, P. Chen talked for a long time on the need for going
into all the possibilities of increasing China's exports
after the war; unless her export trade had a sound foundation
on which to stand China's international currency position
would certainly be rather precarious. He said that speaking
from the point of view of & private businessman, he thought
it would be to China's advantage to relax foreign exchange
controls after the war, In expanding China's foreign trade
this measure would be indispensable. It was suggested by
the Secretary of the Stabilization Board, Dr. C. T. Ohi,
that definite instructions should be given to delegates to
negotiations which will take place in the near future re-
garding a few very important points which can be obtained
by negotiations and that they be allowed some leeway on the
less important points. He thought that China should ask for
only as much quota as would be required figured on the basis
of possible expansion of her foreign trade. That portion of
the American loan which would not have been used could be
put to good use to bring back international currency stability
during the period of adjustment which China would need. If
China
Regraded Unclassified
91
-2-
China announced here intentions with respect to foreign
business and foreign investments after the war now, it
would go a long way towards putting her in a good position
in the forthcoming negotiations. The ex-Minister of Com-
munications and Deputy Governor of the Central Bank urged
that China be the spokesman for the undeveloped countries;
her position, interests and international reputation require
that she do this.
In his comment on the discussion, Dr. Kung remarked
that it might not be easy for China to relax her foreign
exchange controls as soon as the war was over. She would
do all she could to expand her export trade, but the problems
in the way of this undertaking should be given their full
importance, On the subject of the undeveloped countries
he thought that both the United Kingdom and the United States
manifest idealistic trends which encourage measures conducive
to lasting peace, The people identified with these trends
would certainly support any special consideration for the
undeveloped countries. Therefore special consideration for
undeveloped countries should be urged by Chinas much as
possible.
NB. Wang Shih Chieh and Cahng Kiangau both enjoy
embarrassing the ins, being outs themselves, and the espousal
of the cause of the undeveloped countries by them should not
have too much importance attached to it, They very readily
support popular causes especially if no responsibility is
placed on them as a result of this support.
ATCHESON
Regraded Unclassified
OFFICE
SECRETARY OF TREASURY
92
1913 MAY AM II 55
NOT TO BE RE-TRANSMITTED
EASURY DEPARTMENT
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 169
Infermation received up to 7 a.m., 24th May, 1943.
1. NAVAL
Last night, 9 E-boats wore operating Southwest of the NEEDLES,
probably mine laying. Naval Albacores attacked and 2 E-boats were sunk and a
3rd possibly sunk. Clearance of an entrance channel at BIZERTA is proceeding
and there is now a passage 20 feet deep and 85 feet wido with berths for landing
craft. In 8 homoward convoy yesterday in Mid Atlantic, Swordfish Aircraft from
one of H.M. escort carriers attacked 2 U-boats, 1 of which was sunk, 1 Officer
and 10 men were picked up by one of H.M. Destroyers.
2. AIR OPERATIONS
WESTERN FRONT. 23rd. Escorted Venturas attacked the Coke Ovens
at ZEEBRUGGE. Escorted Whirlwind Bombers seriously damaged a 1,000 ton ship and
an armed trawler off the CHANNEL ISLANDS. 29 Focke Wulfs 190's in all attacked
BOURNEMOUTH, HASTINGS and BEXHILL. 3 were dostroyed. 23rd/24th. Aircraft des-
patched: DORTMUND - 826, (38 missing, 1 crashed in United Kingdom) Intruders - 20,
Leaflets FRANCE - 15 (1 missing) Anti Shipping - 4. Preliminary reports DORTHUND
indicate well concentrated attack in good visibility. About 20 enemy aircraft
operated in TYNE-TEES Area. Casualties by night fighters and Anti Aircraft 2, 0, 1,
SICILY. 21st. 92 Escorted Fortresses attacked sirfields at
SCIACCA and CASTELVETRANO, and at night Wellingtons dropped 91 tons of high
explosive on the Ferry Terminus at MESSINA, 22nd. 23 Escorted Portresses at-
tacked BORIZZO Airfield, In these operations, enemy casualties in the air -
14, 3, 6. Allied: 4, 0, 11.
SARDINIA. 21st. 94 Escorted Medium Bombers attacked airfields
at VILLACIDRO and DECILIOLANNU, at least 13 aircraft on the ground were set on
fire and at the latter place large petrol fires were started. Enemy Casualties
in the air: 12, 1, 6. Allied: 4, o, 2.
3. MILITARY
MEDITERRANEAN AREA. Defences of SARDINIA, SICILY, BALKANS
and DODECANESE are being steadily strengthened by the Germans. Strength in
BALKANS has boen increased by 1 division but personnel reinforcements to SARDINIA
or SICILY are so far only small.
4. HOME SECURITY -
EQUIRNEMOUTH. 23rd. A cinemp demolished, 2 large shops and
central hotel hit. One other hotel damaged, Cesualties 80 far reported 58
killed,
HASTINGS. Casualties so far reported 20 killed.
SUNDERLAND. 23rd/24th. Several fires all soon under control.
Residential damage and public services somewhat affected.
SOUTH SHIELDS. 16 persons killed.
Regraded Unclassified
93
May 25, 1943
9:20 a.m.
FINANCING - ORGANIZATION PLANS
Present: Mr. Bell
Mr. Gaston
Mr. Sullivan
Mr. White
Mr. Paul
Mr. Thompson
Mr. Gamble
H.M.JR: Did you see Mr. Eccles?
MR. BELL: I did, yes, sir.
H.M.JR: Do you want to report?
MR. BELL: Yes. I went over there yesterday afternoon
to see him, and I hadn't been there but 8. few minutes when
he told me he had seen the President yesterday.
John had previously told me that he and George
Harrison had seen the President, but George Harrison--
H.M.JR: He and George.
MR. SULLIVAN: I had seen it on the ticker.
MR. BELL: He said that he and George Harrison had
seen the President, but George Harrison was the Railway
Brotherhood, and they weren't together at all. They were
separate appointments.
H.M.JR: I thought you meant he had gone with George
Harrison, the banker, to tell him.
MR. BELL: That is what John thought.
Regraded Unclassified
94
- 2 -
MR. GASTON: I could have told you different. I knew
he was going to see George Harrison of the Brotherhoods.
MR. BELL: Anyway, he told me that he had seen the
President. I said, "I am sorry you did that, because I
was hoping you would wait to see whether or not we could
work this out."
He felt, as a Presidential appointee, he had to do it,
and the Presidents of the Federal Reserve Banks directed
him to see the President by a resolution last week. As
long as you had stated in the meeting that you had talked
with the President about these meetings coming up with the
presidents of the Federal Reserve and there would be this
attempt to take over Treasury functions, he felt it was his
duty to report to the President.
He said he did see the President, and he told him the
story and told him that there wasn't anything for him to
do. He wasn't asking him to do anything. He merely wanted
him to know before it got into the papers, and wanted him
to know the Federal Reserve side of the story in view of
the fact that you had said that you had reported to the
President previously.
Apparently the President forgot it, because he said
that he didn't remember you having reported it. The only
incident he remembered was the San Francisco incident. He
said that he remembered that report.
But he said that the President seemed a little disturbed
about it and told him that he hoped that the Treasury and
the Federal Reserve System would get together, because he
thought that the System ought to be in the financing.
I then discussed the question--
H.M.JR: Just like that? That is all?
MR. BELL: Yes.
H.M.JR: They ought to be in the financing?
Regraded Unclassified
95
- 3 -
MR. BELL: Yes. He said he thought that they ought
to be a part of the program, and he hoped that the Treasury
and the Federal Reserve would get together on it.
He said he told the President he didn't want him to
take any action, that he merely was reporting. He also
wanted to make it plain - he said that he wasn't continually
running to the President with troubles, because he hadn't
seen him since 8 year ago last March.
H.M.JR: I don't blame him for going to see the
President. I think I would have done the same thingif I
were in his shoes.
MR. BELL: He said that - he was quite fair with me -
he said, "I want you to tell the Secretary," and I hadn't
been there two minutes when he said this, "I want you to
tell the Secretary that I saw the President. I felt it
was my duty as 8. Presidential officer to report what had
transpired."
Then we discussed the question of the minutes. He
said that he had thought--
H.M.JR: I even told the President - I said, "When
we get into this fight I will need every weapon I can get.
One is the FDIC - and I can't do anything with Crowley.
You will have to handle Crowley for me." But anyway--
MR. BELL: On the minutes - he said that he had thought
about that quite 8 little before he wrote the letter. I
had talked to him on a previous day or two - I think it was
Monday - and told him not to write a letter, but talk to you
personally about a matter of that kind. There wasn't any
sense in exchanging correspondence on it, and he couldn't
get any place.
He said that he started to call you up, but he knew
you were going away and thought it would rush you. He
thought if he wrote a letter you could take your time -
there wasn't any hurry about it - and that was the reason
for the letter.
Regraded Unclassified
J6
- 4 -
He said he thought editing the minutes was a good
suggestion, but he didn't think it could be done properly
because he said after we started this conversation in the
afternoon that we always came back to this one subject.
And he didn't think you could properly edit the minutes
without tearing them up so badly that they wouldn't make
sense unless you had the full story.
He would like to suggest that you write him a letter
and say that everything after Robbins' statement is expunged
from the record. He thinks you probably want Robbins state-
ment in the record, that is, where you talked about Robbins.
H.M.JR: They want Robbins' thing on the record.
MR. BELL: He doesn't care if you eliminate the whole
afternoon session.
H.M.JR: Robbins didn't make his speech in the after-
noon, did he?
MR. BELL: No, the Secretary went in after lunch and
told them of Robbins' resignation, and he asked Robbins if
he wanted to make any statement. Robbins merely made a
short statement saying why he wanted the Secretary to do it.
MR. GASTON: And after that they presented their
alternative plan, and the Secretary said, "If you don't
mind I will have to talk this over with some of my own
people.' We then left the room and took their plan with us.
H.M.JR: The Robbins statement where he supported us
was made in the morning.
MR. BELL: That is right.
H.M.JR: I think if you want to eliminate the thing,
the thing to eliminate is from the time we left the room.
MR. BELL: That is what he suggested.
MR. GASTON: I think you might be able to pick up
some later material also.
Regraded Unclassified
J7
- 5 -
MR. BELL: He thinks that it would be much better if
you just eliminated everything after that, and he also
thinks that it would be a nice thing if we could start
Wednesday where we began Friday afternoon.
H.M.JR: Where was that?
MR. BELL: That is considering the two memoranda, and
eliminate everything in between. And he thinks if there is
any reference to what happened at that meeting on the
Harrison thing that it ought to be off the record.
H.M.JR: What I thought was - after all, you read my
conversation with Ronald Ransom, and I thought that where
I would start is simply this, "Look, gentlemen, I have
asked you to come here to assist the Treasury on their
Third War Loan. I would like to know whether you are
prepared to assist us."
MR. BELL: I think that would be all right.
H.M.JR: I told Ronald Ransom that I 8.0\ not going to
bargain with them.
I tell you, Dan, the longer this thing goes the more
bitter I am getting.
MR. BELL: I am afraid that is probably true on the
other side, and I am hoping it isn't true on either side.
H.M.JR: Well, I am, and I em convinced of two things:
One - I will let Gamble tell his own story - that these
fellows really want to take us over. Mr. Byrnes has taken
us over on the tax matter - and if you read Arthur Krock
this morning - he has a story - and as far as I am concerned
he can present the next tax bill. If the Federal Reserve
wants to take over the financing, that is wonderful. Then I
can go back to the farm; I am not going to stay here and look
after Foreign Funds. If I don't get the full support from
the President - I am not going to stand for any nonsense.
Gamble, tell them what these two bankers told you in
New York yesterday.
Regraded Unclassified
38
- 6 -
MR. GAMBLE: Well--
H.M.JR: Listen, Bell, I told them in no uncertain
terms that I am not - and you had better read my memorandum -
I am not going to bargain. I am not going to bargain tomorrow;
I am going to ask them to come in on my terms. I positively
will not bargain.
My conversation with Ronald was perfectly clean-cut,
wasn't it?
MR. BELL: Yes. I am merely reporting the conversation.
H.M.JR: I know, but I asked you to do it, and I am
glad to know what he said about the President and what the
President said to him, but also I don't know whether Ronald
had anybody taking it down. But he certainly knows where I
stand, and based on that they are coming.
Does Eccles know what I said to Ransom?
MR. BELL: That I don't know. I assume he does,
because they had a meeting all Saturday afternoon. I didn't
get Eccles until almost six o'clock. He said that he was in
& meeting discussing that very thing.
MR. GAMBLE: I called on these people.
H.M.JR: Tell them who.
MR. GAMBLE: I called on these people at the request
of the Secretary - Mr. Lew Pearson and Bayard Pope, and
talked to them.
H.M.JR: Tell them who they are.
MR. GAMBLE: Lew Pearson is a former New York banker.
He is chairman of the Manhattan committee. He took Lew
Douglas' place on the New York War Savings organization.
H.M.JR: President of either the Chemical or Irving
Trust Company.
Regraded Unclassified
39
- 7 -
MR. GAMBLE: Irving Trust Company, and Pope is the
executive vice-president of the Marine Midland, and he is
one of their top men. He is the chairman of the executive
committee of the New York War Savings Organization, and I
might say that both of them have recommended Federal Reserve
Bank participation on this program. They believe we would
be much better off with the System in the program, but they
had 8. reaction to it - this little fracas that has been going
on. It was interesting to the Secretary, and I think it
would be interesting to you.
They don't feel that Sproul wants to get out of this
program. You know, the suggestion has been made a couple
of times that one of the reasons Sproul has been difficult
to deal with on these two or three details was that perhaps
he didn't want to head up this program and be charged with
walking away from the Secretary, but really wanted to make
it difficult for the Secretary 80 the Secretary would walk
away from them on getting together in this program. But the
people in New York say that is not true. They think Sproul
is very much interested in this program, that he wants to
be identified with it, that he wants to head it up, and that
the points of friction are caused because Sproul believes
that under this plan of the Secretary's it will not be pos-
sible for him to have as much freedom working with the
bankers as he would like to have.
(The Secretary held a telephone conversation with
Senator George.)
MR. GAMBLE: They stated very emphatically that they
were satisfied in their own minds that Sproul's resistance
to this plan is a result of his feeling that bankers ought
to dominate this whole program, that it is very logically
a function for bankers that they should be raising all this
money in wartime, and they should have charge of the sale
of the securities; and that while he has some appreciation
for the wide-spread methods the Treasury has used and wants
to continue to use, they believe his sympathy for that pro-
gram has increased greatly and did increase greatly in this
last drive.
They think it is his opinion that it should be dominated
and supervised by the banking fraternity, and that he doesn't
Regraded Unclassified
100
- 8 -
feel he is going to have that freedom in this program of
the Secretary's, and consequently has picked two or three
little things he doesn't like about it.
Their reaction to Sproul and the bank, I think, was
very good. They said they think it would be a serious
mistake for us not to get together with the banks, and
they think that certainly in that particular section of the
country - in New York - that the Federal Reserve Bank ought
to maintain a very important position.
They say the job can be done without them, but they
believe it is up to us, if we can, to try to get Sproul to
see the light. They speak very highly - complimentary - of
him - all his people - the work they did in April, but they
say he just does not understand and was very stubborn about
it. he just doesn't feel that the retailers and the women
and the farmers and all of the industrial groups we have
in this program - - that they should be heading it up. It is
a banker operation pure and simple, and not 80 much Federal
Reserve Bank - in other words, it wasn't the desire on
Sproul's part to have the Federal Reserve Bank dominate
this picture, but a conviction that it is 8 job for all
the bankers in New York.
That was about the sum and substance of it.
H.M.JR: One thing, Ted, there are a hundred and eighty
industrial committees organized, War Bonds, and the Federal
Reserve didn't use one of them during this last drive - they
didn't use one of them.
MR. GASTON: Who organized them?
H.M.JR: The War Savings.
MR. BELL: Did they know about the controversy?
MR. GAMBLE: Yes, they knew about it, but they didn't
know all about it, not about the meeting that took place
here on Friday - they didn't know the details of that.
But they did know there was 8 controversy going on, and they
Regraded Unclassified
201
- 9 -
knew there was some resistance. They have that much infor-
mation.
MR. BELL: Pope is in favor of one organization.
MR. GAMBLE: They both are, and they both are in favor
of the Federal Reserve leadership.
MR. BELL: They want two sections, one on pay-roll--
MR. GAMBLE: The thing that--
H.M.JR: Here it is in writing, and I don't understand
it. I got 8 written memorandum from them which I will cir-
culate. (Copy of plan suggested by New York War Savings
Staff attached.)
MR. BELL: From whom?
H.M.JR: The New York War Savings Staff suggested:
"Organization: one head - one control in each district is
necessary for effective coordination. The Federal Reserve
Districts seem the most suitable units into which to divide
the country - and the president of each Federal Reserve
Bank the most appropriate chairman of each district. It is
suggested that under him the two organizations - War Savings
and Victory Fund, be kept separate because the War Savings
organization has the most experience and better understands
the job of widespread distribution, whereas the Victory
Fund group are the natural leaders in the financial field.
Many from the financial field would be a part of or at the
head of the solicitation of the most important special
commerce and industry groups of the War Savings organization.
"To eliminate the War Finance committees in each
district and to have the authority vertical from the Chair-
man of the district through the executives of the War Savings
organization and of the Victory Fund organization in all the
regions of activity, eliminates the confusion in each Federal
Reserve District of having regional War Finance Committee
representatives."
I don't understand that.
MR. GAMBLE: The regional--
Regraded Unclassified
102
- 10 -
H.M.JR: He wants one organization, but two--
MR. BELL: One head, but two lines, which, I think,
would still be confusing.
MR. GASTON: Instead of having a War Finance committee
and regional representatives, the regional representation -
local representation - would be through two separate
organizations.
MR. BELL: Two channels. That is what we have now.
MR. GAMBLE: It isn't exactly what we have. Another
way you could read this memorandum - and in this respect it
is the same as the Thomas and Robbins report - is that if
the so-called Victory Fund Drive or campaign committee is
a part of the single organization, then the procedure is
just the same in all.
MR. BELL: I know Pope would be - he came and talked
to me - he would be willing to eliminate all prior names -
War Savings Staff, Victory Fund Committee - and set up a
new head, but he thinks it ought to be subdivided.
MR. GAMBLE: There was nothing critical of the other
people, just that they didn't feel that--
H.M.JR: I still don't understand what he wants in the
field. How would he do it in the field?
MR. GAMBLE: This one thing that confused you was that
the Treasury War Finance Committee had regional supervisors
that were set up for the purpose of this drive to head up
the drive, and those people were not people who understood
actually what they had to work with. They only worked with
the committee that was set up for the drive, and they didn't
work with the two groups. It was confusing, and would con-
tinue to be confusing if you tried to work with two organiza-
tions, in my opinion.
MR. GASTON: You mean Perry Hall and the rest?
Regraded Unclassified
103
- 11 -
MR. GAMBLE: I wasn't thinking of Perry Hall, but
under Perry Hall, for example, they would have regional
or area managers who would supervise four or five counties,
and they would have direct contact with the Treasury War
Finance Committee in that county but no contact with the
War Savings organization as such.
H.M.JR: When I think of all that is going on for days
and days and days - wearing myself out on this sort of thing -
it is just outrageous.
One suggestion they made which you didn't mention -
he suggested - Pope - that if we don't get together that we
work through the clearing house associations. He says that
every large city has 8. clearing house association. He said
that they would be delighted and would have much more
influence with the Federal Reserve. You forgot that, and
that is a damned important suggestion.
He said, "You go to the president of the clearing
house association. Every bank is a member, and there is
your organization all set up for you.
Isn't that 8. good idea, Harry?
MR. WHITE: It is quite a novel one. Do the banks
in all the rural areas - not rural, but out away from the
big cities - belong to a clearing house organization, or
do they belong through 8 big bank? I am just not sure.
If it touches most, I think it is a good idea.
H.M.JR: You don't need that. Give me half a dozen
or a dozen big cities that have clearing associations, that
is all you need. And the so-called country banks will play
ball anyway.
MR. WHITE: I think that is true. They must, in any
case, have representation through one of the larger banks.
That is a very interesting suggestion if you want to release
the banks.
H.M.JR: There is an organization set up. Are you at
all familiar with the clearing house?
Regraded Unclassified
104
- 12 -
MR. BELL: Somewhat, yes.
H.M.JR: Is there any report in the library showing
how many cities have clearing houses?
MR. BELL: Delano could find out.
MR. GASTON: I think any city over a hundred thousand
has one.
MR. BELL: I expect it goes down to twenty-five -
where you have ten or fifteen banks you would have & clear-
ing association, I am pretty sure.
MR. GAMBLE: They made a point of the fact that in the
cities where the Federal Reserve Banks are located they have
an important clearing house association, and in every
instance have an outstanding banker as head of it.
(The Secretary held a telephone conversation with
Mr. Delano.)
MR. WHITE: I think they are a fairly loose organization
and one would have to take that into consideration.
H.M.JR: I don't think SO. They have a paid staff.
MR. WHITE: But the amount of contacts and business
they have with others is in a rather narrow front.
H.M.JR: Then they have a president, and they have
members.
MR. BELL: Just an exchange of checks each morning,
that is all.
H.M.JR: It makes just as much sense to say that they
should sell bonds or handle the banks as the Federal Reserve
should sell bonds.
MR. BELL: We deal through the clearing associations
on many of our depositary matters. We go into 8 town; and
if we want a bank to give us facilities at its Army post, we
Regraded Unclassified
405
- 13 -
go to the clearing house association and ask them if all
the banks can get together. We don't have any trouble -
one bank gets it, and the others are jealous. We have
done that in a number of cases.
H.M.JR: Couldn't you make them our fiscal agents?
MR. BELL: I don't think you have authority to do
that.
H.M.JR: I can make any national banks that-
MR. BELL: They are not national banks.
H.M.JR: Paul, would you study - somebody raised this
the other day - what the relationship is, the exact relation-
ship and the history of the fiscal agencies of the Federal
Reserve Banks, how it grew up, and so forth, and so on?
Put some good, bright lawyer on it.
MR. PAUL: I don't quite get the point.
H.M.JR: I mean, how it came into being, and all the
rest of the stuff, the fiscal agency relationship. Is
there anybody in your office who studies the banking end?
MR. PAUL: Tietjens.
H.M.JR: Would he be good on it?
MR. BELL: I think 80. I can help him out; I know
both sides of the story pretty well - fiscal agency
and depositary.
H.M.JR: What would you say Eccles' attitude was,
Bell?
MR. BELL: Eccles' attitude is that he would like
to get together, but he thinks if we can't get together
then you had better set up your own organization and they
will help in whatever way they can on bank financing or
advising on the types of issues, and even helping in the
field wherever they can. But I might go on to sales
director if you want me to.
Regraded Unclassified
406
- 14 -
H.M.JR: Yes.
MR. BELL: We got on the appointment of Ted as sales
director. He says that there is a feeling among the
presidents - and it was expressed that day at their meeting
when they nad the suspicion that Ted was going to be the
sales director - that a great deal of this trouble between
the War Savings, Victory Fund Committee, and the Federal
Reserve System has been brought about by Mr. Gamble, Mr.
Graves, and others in the War Savings Staff carrying tales
to you, and they feel this is just a perpetuation of that
organization. And if Mr. Gamble is going to be the sales
director, they think possibly you ought to accept the sug-
gestion of the Reserve System that they initiate the appoint-
ment of these sales directors in the field.
On the other hand, he thinks in view of the fact that
you haven't announced the appointment of Mr. Gamble that
you might appoint a sales director, such as Dr. Burgess, and
let Mr. Gamble be deputy for a while until he does become
more acquainted with the Federal presidents. Dr. Burgess
is well known and well liked. While he says he differs with
him on many occasions on principle, yet he has a high regard
for the fellow, and he certainly can't question nis integrity
whenever he has an opinion, 50 they all get along with him.
He thinks in that way he could ask every Federal Reserve
president to accept your memorandum without any change. He
may have & little difficulty with Allan Sproul, but he would
go to Allan and say, "Look here, it is time to forget all
of this, and we want you to go along and accept the Secretary'
program.'
H.M.JR: If I did what?
MR. BELL: If you would appoint some sales director
outside of the two organizations. He merely suggested Dr.
Burgess because he knows what a high regard you have for
him. He said he was not suggesting it because he wanted
Dr. Burgess, but you can suggest to him some other possibility.
He suggested him and suggested making Ted deputy for a period
Regraded Unclassified
407
- 15 -
of months until he becomes thoroughly acquainted with the
Federal presidents.
He thinks he can sell your memorandum without changing
& word in it if the sales director appears to the Federal
presidents to be neutral, not one that they will pick, but
to be neutral in the picture rather than partial towards the
War Savings.
H.M.JR: What do you think of that, Ted?
MR. GAMBLE: Well, I think the suggestion you made to
me yesterday is much better.
H.M.JR: Well, the suggestion - we are all talking
amongst ourselves - is the one that you (Bell) and I talked
about. Burgess - I can't say how helpful he has been - in
fact, take a man like Burgess and compare him with Leffingwell
who is always around wanting to be helpful. When we get
down he wouldn't help.
Now, while this is still in a mess - and it means
really, as Burgess said - and I advised him to come in in
New York - that he would have to fight the Federal Reserve.
He said that it would be most obnoxious to him, but he
said he would do it for me. The way to find out who your
friends are is when the thing is difficult.
He said it would not be necessary to get the President
to write him a letter to do it. He has 8 full grasp of this
picture, particularly on the industrial side.
"On the industrial side," he said, "it is ridiculous.
We are selling bonds for three weeks a year to groups -
you get people of the kind like Dubinsky and the AFL man,
Hillman - you get people like that sitting with you and
you can get somewhere. The industrial side of this thing -
reaching the workers - has been absolutely neglected."
He agreed that 8 fellow like Perry Hall just never
would understand it.
Regraded Unclassified
108
- 16 -
MR. GASTON: Who was this speaking?
H.M.JR: Randolph Burgess. He has a full grasp of
this thing. As I say, he said he would like to have
Dubinsky and Sidney Hillman working with him.
As I said, he said it would be very obnoxious to him.
Then the interesting thing was, Leffingwell said - it
is a terrible thing for & member of J. P. Morgan to say it -
he said that since Morgan died - back prior to '32 - there
is no leadership in the financial district. He said, "Every-
body is jealous. The banks compete, and, therefore, we have
to look to the Federal Reserve Bank, not Sproul, for leader-
ship."
So I said to Burgess - I didn't quote Leffingwell - I
said, "Look, Randolph, how would it seem if we got e National
City Bank man in? Wouldn't Winthrop Aldrich go along?
He said that he wouldn't cooperate. He said, "I am
chairman of the fund for Greater New York, raising funds
for the charities for New York, and I get full cooperation
from Winthrop Aldrich, and I would on this."
MR. BELL: I think 80.
H.M.JR: He said that the thing would not run that
way - I didn't quote Leffingwell, but Leffingwell said,
"Any one bank president couldn't get the others, but
Burgess said he could get it. I mean, he doesn't like it,
and he doesn't want the job.
Then the other thing - so you all get all the picture -
the thing which I didn't think of is that he said, "It would
more or less put me over Allan Sproul, which Sproul wouldn't
like.
I don't know how many of you know - you see, we play
politics here, but the Federal Reserve never does. Here
Randolph was in line to be first vice president, and the
Federal Reserve took Allan Sproul, who was considerably
down the line, and jumped him over the head of Randolph
Burgess because he was George Harrison's pet. Of course,
we do the politics here; they never do. (Laughter)
Regraded Unclassified
105
- 17 -
MR. GASTON: Randolph was first vice president, and he
was in line to be it, wasn't that it?
H.M.JR: No.
MR. BELL: Randolph Burgess was the first deputy, yes.
He was deputy governor and first in line, and then came
Allan second.
H.M.JR: But before George resigned, didn't he jump
Sproul over Burgess?
MR. BELL: Yes. Burgess wasn't a pet of George
Harrison's.
H.M.JR: But didn't he jump him?
MR. BELL: No, I don't think he jumped him, but I
think he put him into a position where he was contacting
the public more and working more on foreign stuff.
That is where George Harrison got his big boost; he
worked with Ben Strong on the foreign banks and got that
picture. That is the reason they made him governor over
Case.
H.M.JR: Well, Burgess said that Sproul undoubtedly
feels that I would pick Burgess just to make it uncomfortable
for Sproul.
I said I wasn't that smart, but it was a good idea.
MR. BELL: Eccles didn't think SO. He thought they
would get along.
MR. GASTON: The substance of that situation was that
Harrison groomed Sproul to be his successor; and Burgess
knew that and got out and took the job in the National City.
MR. BELL: Burgess didn't get out until quite a while
afterwards.
H.M.JR: As I say, to get the benefit of everybody's
advice - this goes back to a conversation you (Bell) and I
Regraded Unclassified
110
- 18 -
had just before I went up to the city. Do you mind if I
talk about you and the conversation we had?
MR. BELL: I don't think so; I don't know what you
mean.
H.M.JR: As long as I mentioned it to Gamble yesterday--
MR. BELL: Go ahead. I don't know what you are going
to say, but I haven't anything to hide.
H.M.JR: This is a result of a conversation that I
had with Burgess. I mean, Burgess was worried about Gamble,
and so - but what I was talking about was making you (Bell)
actually Under Secretary - not acting - and putting Eddie
Bartelt in as fiscal assistant, but getting & letter of
resignation from him when he went in - as he went in. The
minute he was sworn in I would ask him for his resignation,
which I would put in the safe, and then announce in this
setup that wedid this thing, so that you could devote your-
self more to the financing and that Mr. Gamble would be
your assistant.
Now, Burgess said that would sit all right with the
financial community, you see. He said that both from our
standpoint - he said, "Everybody is watching to see who
that person is going to be. And he said that if we did
that, that would sit much better with them.
So I wish everybody would get off the log and do a
little croaking.
MR. GAMBLE: I would like to say something about--
H.M.JR: This is the sort of thing that Robbins objected
to, my getting in 8 group and thinking out loud with you.
That was the thing - he said that he couldn't work that way,
to have a group around, and I would talk and talk and talk
until I would begin to see daylight. You have seen me do it.
That is the way I like to work. I like you fellows to tell
me - and I have seven heads instead of one.
MR. GAMBLE: I think you have--
Regraded Unclassified
111
- 19 -
H.M.JR: I may make Bell feel a little uncomfortable,
but it is only what you and I talked about. This was after
two hours with Burgess.
MR. GAMBLE: I think you have a great deal to be
concerned about, Mr. Secretary, with respect to a great
many people in this country, not alone the presidents of
the Federal Reserve Banks - and I think it would be a
mistake for you to select a banker of the prominence of
Burgess as a sąles director and then make this deal with the
Federal Reserve Banks. I don't think it would set well.
I think if you feel that you need to do that, it would
be much better to go outside of the banks and get somebody
like John Stevenson, the president of Penn Mutual - get
somebody beyond question on both sides of the fence, but
not 85 closely identified with the Federal Reserve Banks
and the banks as Burgess might be.
I think that in lieu of that, this suggestion you
have made about Mr. Bell is a very good one.
H.M.JR: Well, I have another suggestion which I
haven't told anybody about. Burgess liked this as an
out. I had & couple of hours with Burgess.
Supposing I simply do - have you all read my conver-
sation with Ransom? Has everybody in this room read it?
Who hasn't read it?
MR. WHITE: I haven't.
H.M.JR: Have you read it?
MR. THOMPSON: No, sir.
H.M.JR: Here is the original. You (Thompson) read
itfirst and then give it to Harry. That is the last word
on that. (Copy of telephone conversation with Ronald
Ransom handed to Mr. Thompson.)
04635155
This is another thing. If we get nowhere tomorrow -
in this memorandum you will see I say I am through bargaining;
Regraded Unclassified
112
- 20 -
I am going to stick by my guns. This is when nobody could
find Marriner Eccles. He was at a secret meeting buying
himself some undershirts. (Laughter)
MR. BELL: Buying something; I don't know what it was.
H.M.JR: I am going to show you all the cards I have.
If we don't get anywhere tomorrow - and I am through bar-
gaining. I don't have to bargain. I think that the Secretary
of the Treasury, whoever he is, doesn't have to bargain in
the middle of a war as to who to get to cooperate.
All right, we will continue as is; and we go out and
begin to strengthen our State organizations; get rid of the
weak sisters and strengthen them wherever they need strengthen-
ing. Then as we approach September we will say - or we can
say right away, "We will just follow the same performance
for the Third War Loan as we did for the Second. During
that three-week period the president of the Federal Reserve
Bank will be in charge. In between times we will run it
from here, we amateurs. But strengthen this thing all the
time.
Ted says there are sixteen States where he would like
to change the top fellows, so just go ahead as is.
When September comes - announce it now 80 they can get
ready, keep the old War Finance Committee going 80 they can
meet once a week with the president of the Federal Reserve
to do their planning. They have three months in which to
get ready for September. In the meantime we will go along
just as we are - stalemate - but we will be strengthening
our organization all the time.
MR. THOMPSON: That sounds good to me. That is the
best of what I have heard.
MR. GASTON: If we were forced to that, I would want
to get the promise of the Federal Reserve presidents - and
I think they would probably give it - that when the time
comes for 8. drive they will work more intimately and more
closely with our organization than they did in the other
drive.
Regraded Unclassified
113
- 21 -
MR. BELL: I think we would still have some confusion
and sniping that went on during the last drive.
H.M.JR: Sure.
MR. GAMBLE: You would have less, though, if you
followed Herbert's suggestion. That was partly our fault.
It wasn't wholly theirs.
MR. BELL: You might get less and less as you go along.
H.M.JR: But they would have three months, and I
would insist that they meet once a week, the so-called
War Savings group and the Victory Fund - once a week meet
with the president of the Federal Reserve Bank as a campaign
committee to get ready for the September drive.
MR. GAMBLE: I would like to alter that with one sug-
gestion, that is, that you not continue the two organizations
here in Washington.
H.M.JR: No, that is out; that is finished. If I did
this the authority would flow from me to Bell, to you
(Gamble).
MR. GAMBLE: That would work at this level certainly.
MR. BELL: As I have been thinking it over the last
week - it seems to me something like that or some separate
organization is what we really have to come to. I think
this difference has gotten to the point where even though
you get together there is going to continue to be some
suspicion throughout the operations, and I have been think-
ing that maybe what you really ought to do is go to a State
basis, strengthen your War Savings Staff along the lines
Ted has suggested, and really sell securities to the
individuals; keep it out of the Federal Reserve, except
for what help that they can give at the time that the big
drives are on when they will cooperate with you.
Regraded Unclassified
114
- 22 -
Now, the banks and maybe the big insurance companies
and financial institutions could be separated and let the
Federal handle those.
H.M.JR: You are saying the same as I did.
MR. BELL: I am saying the same thing in & little
different setup. There wouldn't be any top organization
in the Federal Reserve System the way I am suggesting. I
am merely trying to get their cooperation and help during
the drives just like you would get any other organization
to help.
MR. SULLIVAN: And not supervision.
MR. GASTON: Not supervision during the drive.
MR. BELL: That is right.
MR. PAUL: If you announced that plan, you would have
a pretty swell trading position with the Federal Reserve -
if you announced it to them.
MR. BELL: Yes, not announce it to the public until
you are definite.
MR. SULLIVAN: That is eliminating the Federal. That
is by-passing them altogether, Randolph.
MR. BELL: Except for the banks and the large financing.
MR. SULLIVAN: Not as something to bargain with the
Federal Reserve, but as a new plan.
MR. PAUL: It is a separate and distinct plan; but if
you were leaning very strongly that way, they would come
into line pretty fast.
H.M.JR: The difference between what you and I are
saying is when we come to the September drive I was saying
Regraded Unclassified
115
- 23 -
we go back to what we did in the Second Drive, and you
wouldn't do that.
MR. BELL: No, I would merely say, "There is 6, drive
on and we want your cooperation. We would like you to get
in behind and help the State administrators in your district
wherever they need it. If they need advice and counsel, we
hope you will be there, able and willing to render that
service or sit in on their advisory committees or whatever
they have in their district."
MR. GASTON: If you put them in that advisory relation,
why wouldn't it be better to form our own regional organiza-
tion with regional sales managers in each of the Federal
Reserve Districts who would be in closer contact for consul-
tation throughout with the presidents of the Federal Reserve
Banks?
MR. BELL: You could do that. The one thing I haven't
liked about the Federal Reserve regional districts and then
B. State setup is that it seems to me you are imposing one
organization on another, which is making the whole thing
rather expensive and 8. little bit cumbersome, to go through
50 many channels.
MR. GAMBLE: If you are thinking of ultimately getting
together, which I think we should do, the Secretary's plan
is much better, because it gives you an opportunity to work
with them. It gives them an opportunity to see how we are
thinking, and probably after the Third War Loan we would be
pretty well weathered.
MR. GASTON: Leaving them in actual charge just as
they were in these other drives?
MR. GAMBLE: That is right, and try to do all of the
changes in advance that we know are necessary. We could
even do some of it probably with the advice of these people.
Regraded Unclassified
116
- 24 -
H.M.JR: Well now, let's get down to brass tacks.
Supposing I take my suggestion for the minute and say,
"All right, we will go along from now to the 5th of
September" - what's-his-name made an interesting sug-
gestion - he suggested we have our drive from the 5th
of September to the 25th and then the last four days
have the bank drive.
MR. BELL: That is all right, except I would suggest
the 13th, because--
MR. SULLIVAN: Of course you have an income tax
payment in there, you know.
MR. BELL: We hope we will have withholding.
H.M.JR: Supposing I say, "All right, we do" - I
say for a moment - then we come to New York - would you
say for this drive, "Sproul, you can employ anybody you
want. If you want Perry Hall, O.K. - for the drive.
MR. SULLIVAN: You don't solve a problem that way,
Mr. Secretary. You are talking of the old ones coming
up under the new system.
H.M.JR: I mean, "For the drive, O.K., if you want
Perry Hall" - I am just sitting around here arguing.
MR. SULLIVAN: I don't think you solve it.
(The Secretary left the conference temporarily.)
Regraded Unclassified
117
- 25 -
H.M.JR: One thing I would like to say for the benefit
of the people and the machine, I mis-spoke myself when I
said I am getting bitter. I don't feel bitter. I am im-
patient, but this is nothing new; this is what has been
going on ever since I have been here. I am not bitter
about it. I mean, I am impatient but I don't - they seem
to think this is an opportunity to get hold of the best thing
financially that is going on. I don't blame them for making the
try, but there is no use of my getting bitter about it.
MR. GASTON: Eccles' proposition is some revision of the
general command which will sweeten the pill so that the Federal
Reserve Bank presidents will accept the idea of our, in
effect, selecting the organization throughout the Federal
Reserve Districts; that they can accept your offer if you do
something that is entirely outside the scope of either plan
that was discussed.
I think we ought to examine that and see whether it is
any good.
H.M.JR: Let me examine it, may I?
MR. GASTON: Yes.
H.M.JR: In the first place, let's say that we did it -
I am just going to be as honest - I was just as honest with
Burgess as I knew how to be, and I certainly will be with
you - supposing I put Burgess in here. I have had experience
with Burgess. It is one thing to have him in New York and
another thing to have him in the Treasury. I have had him
before. I had him here in '39 with Bailey and all of them.
There area lot of things Burgess and I don't agree on on
general policy, but let's say we took him in and Ted says"I
will play second," and so forth - Herbert, after my experience
we would have exactly the same conflict in every one of the
twelve districts as to personnel that I have had.
I swear to you people, I have never been more patient,
more quiet, more self-contained than I was in my two conver-
sations with Allan Sproul, nor did I ever plead more. The
Regraded Unclassified
118
- 26 -
last time I pleaded with anybody as hard as I did with him
was when I was trying to get somebody to take Bell's place
in the Budget Office and I pleaded with Tom Smith to come
in and be Director of the Budget.
MR. BELL: Harold?
H.M.JR: Tom K. Smith. I don't ever remember plead-
ing with anybody so for the sake of this country at war,
and 80 forth and so on. He was man enough to say to me,
"I want to say to you, Mr. Morgenthau, after reading the
memorandum of March first" - which I hope you have all
seen, which was not Mr. Eccles but was the expression of
the Open Market Committee - the Executive Committee of
the Open Market Committee - he said, "After reading that,
you had grounds for suspicion." He said it wasn't meant
that way, but he said, From your standpoint, I can see
that you had grounds and that you felt that this was
creeping up on you."
Now, at no time did he say to me that he would re-
sign. I understood he said it to somebody.
MR. BELL: That was in his memorandum that Ecoles
read to you the other day.
H.M.JR: He didn't get that far, did he?
MR. BELL: He read the memorandum to you.
H.M.JR: Not in full to me. All he read to me was
the various things I had said. You said afterwards he
must have been a stenographer.
MR. BELL: Yes. Well, he said in that, that he felt
strongly that the Federal Reserve System should be in this
picture as part of this financing program, helping out the
Treasury. He said, "If it comes down to personalities,
which it looks as though it is, I should like to take this
whole matter up with my Board of Directors and submit my
resignation 80 that someone else can go on in my place.
Regraded Unclassified
119
- 27 -
He said, "There are plenty of men in the Federal
Reserve District of New York that can take this place
and do it. It isn't confined to Allan Sproul."
H.M.JR: If his Board disagrees with him--
MR. BELL: He didn't say that. He said he. would sub-
mit his resignation.
H.M.JR: I was surprised. I asked Paul how they con-
duct a Board meeting of the Federal Reserve. He said
Faiml presides. Sproul is allowed to sit at the table, but
he is not 8. member of the Board. Fellows like house sit
up against the wall.
MR. PAUL: He may be some sort of an ex officio member.
H.M.JR: He says very little - he is very quiet. And
any idea that he dominates the Board is ridiculous. I
know I am kind of going around the lot, but let me just -
I will come back to you in a minute.
Walter Stewart said to me that I would have just as
much right to ask to appoint three directors of the
Federal Reserve bank in New York as our Fiscal Agent,
and it would be just as appropriate as it would for the
Federal Reserve Board to ask to have two men on my Policy
Committee. He went over the Board members of New York
and he said that there isn't a single man who is a direc-
tor of the Federal Reserve Bank of New York who is sympa-
thetic to the Treasury. He says, "You haven't got one,
and you are entitled to have somebody. I don't think you
should do it," he says.
This whole idea - first they want to put two men on
my Policy Committee, then they want to tell me I can't
have Gamble.
MR. GASTON: I don't know about this Policy Committee.
H.M.JR: Didn't you read the March first--
Regraded Unclassified
120
- 28 -
MR. GASTON: I guess I did.
MR. SULLIVAN: You read it.
H.M.JR: And, incidentally, I want to again say that
I checked right along with Walter Stewart and he has been
completely in my corner and completely approves everything
that I have done up to date.
Well, now, to come back. I am 8 little long-winded
today, but I will try as I go along to tell you everything
I have done.
Herbert, if I acceded it would sound like 8. nice way
out to put Burgess in second to Bell - me number one, Bell
number two, Burgess number three, and Gamble number four -
you would have the same for the next three months - instead
of getting ready to sell securities, they would be spending
this time arguing about the Perry Halls of America. Then
we go right up against the gun about the middle of August
and we get weak and we get frightened and say, "O.K., you
can have your Perry Hall."
MR. GASTON: Well, I am not arguing in favor of the
Burgess plan. I don't think it was a good one. I would
want to look at it and see what it involved, and an alter-
native that might reassure them - your alternative - the
first alternative.
H.M.JR: My alternative about Bell?
MR. GASTON: Yes, giving Bell more time by bringing
Eddie Bartelt to take a lot of the detail of the Fiscal
Service and then giving Dan more time to concentrate on
the financing and both promotional and the fiscal. That
might have some effect on them.
H.M.JR: Well, Burgess said as far as the financial
community is concerned, it would sit very well. Inciden-
tally, you (Gaston) made a very good impression with
Burgess - he liked you. But he said that would satisfy
the financial community.
Regraded Unclassified
121
- 29 -
MR. SULLIVAN: I am for Dan's plan.
H.M.JR: For Dan's plan?
MR. SULLIVAN: Yes.
H.M.JR: How do you understand Dan's plan?
MR. SULLIVAN: I understand Dan's plan to be set up
on State lines with the Federal Reserve coming in and
helping and not supervising. I think the thing has gone
too far, that there is too much feeling. I don't think
it is possible between now and the 5th of September to
work out any plan by which the Federal Reserve is going to
head this thing up that won't result in your having trouble
all the time.
Now, I think the fact that this is going to flow
through Dan will do more to reassure the financial com-
munity than any kind of a deal you can make with the
Federal Reserve.
MR. GASTON: That is, you would really combine two
plans. You would take the Secretary's suggestion to give
Dan more freedom to devote to the promotional end and
make him the real head of this financing thing, and then
you would have it organized on State lines.
Then, with respect to Federal Reserves, you would
probably have them take care of the ordinary offers between
drives which would be taken up by the banking system.
MR. SULLIVAN: That is right.
MR. GASTON: That only, and leave the corporations,
big and little, and the individuals, big and little, to the
organization set up under Dan.
MR. SULLIVAN: That is right. Now, I don't know what
is going on in the minds of these bankers around the country,
but speaking for myself - and probably knowing less about
Regraded Unclassified
122
- 30 -
this whole thing than anybody in the Treasury - I have
never been able to understand the disassociation of War
Bonds from the other financing operations of the Treasury.
Now, whether that has affected other people, I just don't
know.
H.M.JR: As I say, quoting people like Leffingwell,
this is going to be a tragedy. Well, a tragedy for whom?
For the Treasury? Do you think it would be 8. tragedy for
the Treasury?
MR. BELL: No, I wouldn't call it a tragedy. I think
it would probably be a shock to the financial community
to see the two pull apart. It would probably do the
Federal Reserve System more harm than it would the Treasury.
MR. SULLIVAN: What might become the tragedy would
be if we tried to heal this thing over superficially and
before the drive started, or during the drive, we found
that none of the problems had been solved and the drive
failed. And I don't think it is a question so much as to
who gets hurt, it is the whole country that gets hurt,
and the whole war effort.
MR. GASTON: We would be taking in this case one
of the alternative plans which Eccles originally promoted,
and which he indicated might be just as satisfactory. We
could announce the plan with full agreement, probably, with
the Federal Reserve Board and the Federal Reserve Bank
presidents.
The situation we are in right now is this, that we
considered alternative plans that had, on the face of them,
relatively small differences. It was a question of who
initiated the selection of the executive personnel, but
in both plans there was provision for consultation and
agreement as to personnel.
Now, the Secretary tries to explore what could be
done - we didn't come to any agreement - the Secretary
tries to explore what could be done under either or both
of those agreements in one particular district, the most
Regraded Unclassified
123
- 31 -
important, New York, and he comes to a situation where he
can't find a working basis under either plan.
In other words, taking the bank president's plan as
the one under consideration, Sproul proposes a man and
the Secretary says that man won't do, and then we are
stymied right there.
Sproul says, "I have got to have that man." Well,
their plan provided that no one was to be selected without
the approval of the Secretary of the Treasury. First,
then, he not only won't agree on that man, but he says
further, as to the general organization, "I don't know
that I am willing to go along if you have 8. certain man
as head of the national sales organization."
MR. SULLIVAN: Herb, the reason you are going to
have problems like that all along is because you have
one fundamental issue here. You have two organizations,
both of whom think they should run this show. That is
what your issue is here. The Federal Reserve thinks they
ought to run it.
MR. GASTON: Of course, that is underneath it. On
the face of it, those two plans were practically identical.
It was & matter of consultation - but it wasn't that. It
was the feeling on our side - and I think it has been
pretty well justified - that what we think they want is
not the appearance but the reality; that is, they want to
abolish existing organizations and create something new
that will be absolutely under the control of the Federal
Reserve Banks.
(The Secretary held a telephone conversation with
Mrs. Brady of the White House.)
MR SULLIVAN: I think if we take a separation here
we may be able to avoid a divorce.
H.M.JR: Of course, the thing that I don't like about
my suggestion is we will be squabbling all summer long.
Regraded Unclassified
124
- 32 -
Nothing makes me so unhappy as these kinds of talks
that I have. I mean, nothing upsets me so much. You
are constantly upset; you can't concentrate on anything
except this thing because, after all, this is number one.
Then we go up - we might go through September with fric-
tions, and all summer long we would be trying to adjust
things and we don't get anywhere.
This way, if we follow what Beil suggested, we go
ahead and get our own house in order, and there is plenty
to do.
MR. GAMBLE: That is right.
H.M.JR: And Gamble is on trial, so to speak, to put
this - I mean, you have told me you are going to do it -
you are going to have the guts to do it. You said, "There
are sixteen States," and so forth and so on - to go through
with it. (Gamble nodded yes.)
If, during the summer we strengthen our States, that
is a demonstration to the Federal Reserve - the best kind
of a demonstration. They may go around saying War Bonds
is just filled with politicians - that Internal Revenue,
and so forth and so on, are political organizations.
Then, if I get Bell right, we say, "When we come to
these drives we want your full cooperation, but we won't
hold you responsible." Is that right?
MR. BELL: That is right. "Get in behind here and
work just like any other organization."
MR. GASTON: The State managers and maybe two or three
come in and talk to the presidents of the Federal Reserve
Banks and say, "We have some trouble here, what can you do
to help us?"
H.M.JR: I don't know that we would have a regional
organization. I don't know whether you gentlemen know, there
are sixteen split States in the Federal Reserve Districts,
which makes it very difficult.
Regraded Unclassified
125
- 33 -
MR. SULLIVAN: That is why you had half of Tennessee
doing well and the other half not doing so well.
H.M.JR: It makes it very difficult.
MR. GASTON: Of course, you could make regions that
would consist of whole States, only, that would roughly
correspond to the Federal Reserve Districts.
MR. BELL: I wouldn't put anybody out there in charge
of any particular group of States, but I think it would
be well to have somebody from Washington traveling around
in a particular group of States closely approximating the
Federal Reserve District to see what is going on and see
how things are being run and getting the gossip and bring
it back to Washington for our benefit and improving the
organization.
MR. GASTON: We have a district down in Texas, Arkansas,
Oklahoma, Kansas, for instance, which doesn't coincide with
any Federal Reserve District at all, but for field purposes
it is more or less of a district. At least for women's
purposes, it is.
H.M.JR: What do you think, Norman? There is a lot
of palaver here this morning.
MR. THOMPSON: I liked your suggestion when you made
it. There has been so much discussion since, I am &
little confused.
MR. SULLIVAN: Now, are you talking about the combi-
nation of the two - the center of authority the Secretary out-
lined, and then the operations as Dan outlined them?
MR. THOMPSON: Yes, the Secretary's original--
MR. GASTON: The Secretary's alternative for letting
the Federal Reserve Banks run the drive as they did before -
I don't think it will work.
Regraded Unclassified
126
- 34 -
MR. GAMBLE: I will tell you one value in such an
arrangement. We don't know, Mr. Secretary, just how much
of & scrap we are going to have with the Federal Reserve,
even if we make a deal, until we go out into the field.
Under that arrangement you have suggested we would have
to do 8. lot of working with them between now and the drive
and we might - our minds may meet on all these problems
80 that by the drive time they would be completely con-
vinced this plan of yours would work.
H.M.JR: Where are you right now?
MR. GAMBLE: On your plan of having them supervise
the drives - the drives only. We would have 80 much work
to do with them between now and the time of the drives,
that we would have a pretty good idea whether we were
going to have twelve sessions like we had in New York.
If we were going to have that, it wouldn't make a
hell of & lot of difference what kind of a deal, and we
would know that without making a deal - know it on the
basis of making 8. deal with them to supervise the drive
for three months.
MR. SULLIVAN: What is the advantage over having them
come in and help?
MR. GAMBLE: If you are going to do it later, I
think the decision should be made once and for all that
the Federal Reserve are not going to have anything to do
with this program. I don't know whether you want to
make that decision. I think you will be marking time -
that sooner or later you will - you are going to get to-
gether. I would rather be working on 8. plan to find out
whether we are going to work together with them, which
your suggestion would permit, and I wouldn't be afraid
of that at all.
H.M.JR: Harry?
Regraded Unclassified
127
- 35 -
MR. WHITE: I was trying to look at the thing from a
distance because I am not familiar enough with the de-
tails to know what merits lie in the number of proposals.
But as I see the thing in the large, the Federal Reserve
System is a central bank with its branches, and the
function of 8. central bank and its branches everywhere is
to supply credit. Nowhere, to my knowledge, does the
central bank perform the functions of the raising of
money to finance a war. This is a Minister of Finance's
responsibility - it is the Treasury's responsibility.
As I see it, in those matters the Secretary of the
Treasury is the Commander in Chief. He has to run the
drive. He gets assistance wherever he feels the assis-
tance is most effective, and he gives the orders. The
Fiscal Agents are expected to obey those orders. That
is what a Fiscal Agent means; he is an agent. And it
seems to me that the conditions which the Federal Reserve
Board are setting up for their support is the most prepos-
terous thing I ever heard of, that they ought to carry out
your orders.
I think that a Minister of Finance - any Secretary
of the Treasury - would be less than wise if he didn't
consult and pay a good deal of weight to their advice.
I believe you have done that and that you would continue
to do 30,
I believe they ought to be eager to cooperate wherever
they can in helping to finance the war by advising you
and helping you in any way that you see fit; not in any
way that they see fit. Any assumption on the part of the
president of any Federal Reserve Bank to say, These are
the conditions under which I, as a Fiscal Agent, will
help" I think should entitle him to be dropped if that
power were possible - if not possible, forget it.
But as I look at the whole thing - the whole contro-
versy - it seems to me to be on the most absurd area that
I can imagine. I can see where there would be 8. contro-
versy in which you were doubting as to how the best way
to handle this advice of the presidents. You had the
advice of the Board and it was up to you to decide which
advice was the best.
Regraded Unclassified
128
- 36 -
There is room for differences of opinion; there is
room for long negotiations. But to have the negotiations
on the basis as to who is going to run the drive and under
what terms they are going to have it, I say that thing
makes no sense at all to me. It appears to me that one
of the things I would do would be first to make my position
clear with the President, because he has got to be behind
you, and he has got to be behind you, it would seem to me,
on your terms. From then on I would make whatever arrange-
ments seemed best to you to secure the success.
Now, what Dan suggests seems reasonable to me. I
don't feel enough confidence in the knowledge of the sub-
ject to comment very intelligently on it, but it seems to
me that the drive will continue, and you ask them for their
advice and their help, and if necessary, use clearing
associations. I think that the Federal Reserve Board and
the Federal Reserve Banks would be very, very much hurt if
they didn't fully cooperate. I think most of the cards
are in your hands. I don't think they have got any cards.
I would let them deal with the banks - savings organiza-
tions - deal with the mass of the people, and get their
assistance wherever it is necessary.
Now, just where is it necessary? I am not at all sure.
I don't know which organization is the best. But I certainly
would not approach it from any point of view other than what
I think is best to get those results. I would tell those
fellows exactly those positions after I had had it cleared
with the President. That is the way I feel, and after you
have the assurance he is backing you - I think that is essen-
tial - without that, I don't--
MR. GASTON: I am convinced, as a result of the discus-
sion here, and partly as a result of what Harry has said -
I am coming to that idea more and more that the Federal
Reserve Banks, even as Fiscal Agents of the Treasury, do
not belong in the picture of the promotion and active sale
to the public of Federal securities. I think their function
is different. I think it deals with the credit of the banks,
the balances of the banks, the reserves, and 30 on, and with
the physical distribution of the securities. I don't think
they have & place in the active promotion of the sale on
the purely theoretical ground.
Regraded Unclassified
128
- 37 -
MR. WHITE: As fiscal agents, they are employees
of the Treasury.
MR. GASTON: The plan outlined by Dan is the best
plan.
MR. WHITE: I am not very helpful on this because
I don't see the thing clearly, but--
H.M.JR: No. I will tell you where you are helpful,
Harry. You are helpful on this: Why should a central
bank become a sales agency for securities? After all,
after the Pecora investigation of '33 and '34 they said
the banks should not be salesmen of securities - that
that thing was settled. I mean, the Federal Reserve
Banks as such do not go out and sell any securities for
me. They ask the banks to do it. And after the Pecora
investigation and all the rest of the thing, they decided
it was not the proper function of banks as such to be
salesmen of securities. We went all through that thing.
MR. PAUL: That is a somewhat different proposition,
though.
H.M.JR: No, I don't think SO.
MR. PAUL: It seems to me it is because there they
were selling securities in which they were interested
through affiliates, whereas here it is the sale of the
securities for the Government.
H.M.JR: How do you know? Isn't it a way to inch
back into it?
MR. WHITE: I am firmly convinced there is more
than meets the eye in their maneuvering for position
because I always believe that when a thing is of little
importance people don't fight about it. People who
have an opportunity to think about B. thing and talk
about it among themselves, if it is of little importance
they will have it your way. If it is of major importance,
what is the major importance? I think it is a matter
Regraded Unclassified
130
- 38 -
they feel is far more significant, as to whether the
say is going to be here or somewhere else.
H.M.JR: Or Gamble. We are talking about getting
together or split on Perry Hall and Gamble.
MR. GAMBLE: I think these men should know, too,
that this director of sales is a misnomer. The job at
the Washington level is a job of planning and service
and of equipping these people to do their job in the
respective districts, not a job of riding herd on the
national sales organization. They are aware of that.
I have had a feeling all along that they are saying
through me that they don't want the Secretary of the
Treasury to be national sales director of this campaign,
because actually it is an organization under the Secretary
that is doing the job. And it has never called for a
glamour boy; it has never called for somebody to go out
with a name. In fact, a national figure, in my opinion,
would be a detriment to the program rather than a help
to it because it is a working job and is a working job
under the Secretary.
And I think they know that. I think that they are
saying when they say they don't want Gamble - in the
first place, they don't know whether they do or not.
MR. PAUL: Isn't the real plot back of all this -
isn't this one road by which they hope to get control
of what bonds will be sold, what kind of financing it
will be.
MR. BELL: I don't think so.
MR. WHITE: At one end you get the statement of
the Federal Reserve Board that it has control over the
credit - should have control over the credit situation
in the country - and on the other end, they know most
about financing when it is 8. real problem. When it is
an easy problem of customary financing, let the Treasury
Regraded Unclassified
131
- 39 -
do it. I think it accentuates their importance and
their significance, and I think they are quite aware
of that.
The statement that was repeated here that they
wouldn't go along with Ted Gamble - I don't know whether
I understood it, but the implication - I think it is the
most outrageous thing I ever heard. They can advise you
they think Ted Gamble such and such and such and that you
could do better. But whether you have Ted Gamble is a
matter wholly within your own jurisdiction and is none
of their business.
The responsibility of financing the war is yours
and not theirs.
MR. GAMBLE: I think you men ought to know, too,
that this bond organization is a pretty good, going
concern. It is something that has been rolling for two
years.
I am not now making a speech for the War Savings
organization. I am talking about everybody in it on
both sides of the fence, the Victory Fund and War Savings.
I am more particularly talking about people in every State
of the Union that have been interested in this program -
the newspaper people, the radio stations, all the media
opened up and put at the disposal of the Secretary of the
Treasury.
This is the biggest business in this country today,
and there is fascination to be attached to it and
fascination in being in a supervisory capacity where you
can't turn around but what you see something like this
War Bond game, which was one of the most colorful affairs
to take place in Washington since the war started. They
had Sir Archibald Wavell out there; they had Babe Ruth;
they had a list of Hollywood stars; they had the Secretary
of the Navy. It was a big affair - it was made a big
affair.
Regraded Unclassified
132
- 40 -
Those things are going on every day in this
country, and they are the indirect result of this
program that has been started by the Secretary.
Eugene Meyer didn't take it up with us before
he decided to do this thing. It was a self-starting
operation. We have encouraged that sort of thing,
and we have a contagion about this bond program in
this country today, and they like to get aboard.
I think you ought to know that.
H.M.JR: Was it a success last night?
MR. GAMBLE: Very successful.
MR. THOMPSON: It was grand.
MR. GAMBLE: Most colorful thing ever put on.
H.M.JR: Who managed that?
MR. GAMBLE: Eugene Meyer.
H.M.JR: Did you ever go over to see him?
MR. GAMBLE: No, I haven't.
H.M.JR: You know he sort of has a mark against
you that you haven't come over. I called up, and then
you don't go over.
MR. GAMBLE: You know why.
MR. PAUL: You will get 8. good lunch. (Laughter)
H.M.JR: You had better call him up and see if he
can't see you this afternoon.
MR. GAMBLE: All right. I have just kept myself
in readiness for you - Friday and Saturday.
H.M.JR: This would be 8. good time.
Regraded Unclassified
133
- 41 -
Paul, you haven't said anything.
MR. PAUL: I find it a little difficult to get
the precise issue. I am & good deal like Harry in my
lack of understanding of the details, and I am very
much like him in his feeling that the Federal Reserve
here has no business in the picture except in an advisory
capacity. They have no business suggesting who may be
your employees, that you have the responsibility, and I
find myself a little unable to determine the real plot
and what they are really after. I don't quite see it.
I know they are after taking away power and jurisdiction.
H.M.JR: Well, let's say I see the President and
the President says, "O.K., Henry, I am back of you",
which he will, and then should I go into the meeting
tomorrow and say, "Now, gentlemen, I want you to take
my memorandum of Friday or I won't play ball." Or should
I simply say, "After thinking this whole thing over" - I
mean, have them turn me down and say no - I mean, go
through the motions of saying, "Now, look, gentlemen, I
am asking you to accept my memorandum of Friday morning
where I said I will select the people and you can have
the veto" or simply say, "After thinking this thing over
very quietly I think we will just go ahead and organize
and ask you, as we will every other financial agency in
the United States, to cooperate with us."
MR. GASTON: You have selected one of the two
alternative plans proposed by Mr. Eccles some time ago -
the other of the two. You explored the possibilities of
working out something under the basis of either of these
two agreements, and you haven't been encouraged by the
prospects and it seems now best for you to go to the
other plan that was suggested by Mr. Eccles. "Here it
is; this is the plan, and we need your cooperation on
this and we need your advice and help."
MR. WHITE: I like what the Secretary said a little
better because I think his second statement seemed to
suggest - and I don't know all the background - it seemed
to suggest to me that in 8. sense, "Gentlemen, the fight
Regraded Unclassified
134
- 42 -
is over. We have considered this, and I think there
have been many suggestions but I think we will continue
in the way we are.
It would appear from that statement that nobody
wins, nobody loses - there is no issue - that whatever
has gone over the dam is gone, it is forgotten, and that
you are going to continue to finance the war and that
you expect and will welcome and hope that they will give
you every cooperation in the future as they have in the
past.
MR. GASTON: I think that is substantially--
MR. WHITE: It seems to make no issue - no loss or
gain.
H.M.JR: One way I take the leadership, saying that.
The other way I say, "All right, this is what I want.
You slapped me down, and I say, 'All right, having been
slapped down I do the other.
MR. SULLIVAN: But suppose they accept it, then you
are in worse trouble.
H.M.JR: That is the point.
MR. WHITE: Suppose they accept what?
MR. SULLIVAN: Suppose they take the Secretary's
first plan.
MR. WHITE: I think you forget both plans.
H.M.JR: The first plan would be - following this
conversation with Ronald Ransom I say, "All right,
gentlemen, I give you one more chance. Will you do it
my way? And my way is that I take the initiative in
each district, try to select these men in cooperation
with you, and you have the veto power." Then supposing
they say yes--
Regraded Unclassified
185
- 43 -
MR. WHITE: Either way I think it will be bad
because you have made an issue of something. They
either agree with you because you have forced them into
a position, or they disagree with you, in which case
there is more fat in the fire.
The reason your second alternative statement as
you phrased it & moment ago appealed to me is that it
eliminated all issues. It made no issue. It merely
said, "After all the thinking and all the discussion
maybe we had better contimue the way we are with your
full cooperation at that level." What can they fight
against - kick against?
H.M.JR: We are changing because when the September
drive comes we are asking for their full cooperation but
not turning it over to the Federal Reserve banks.
MR. WHITE: That is something that can be discussed
later.
MR. SULLIVAN: No, you will fight all summer that
way.
H.M.JR: No, I disagree with Gamble, if I understand
him. What Bell proposes as against mine is we simply say,
"Gentlemen, we have made our best effort to get together.
You want to do it your way. I would like to do it mine.
All right, all bets are off, and therefore I am simply
saying to you that we have gotten along for ten years and
we are going to go ahead and make our plan and we are
going to count on the Federal Reserve System, like all
other agencies in this country, to give us their full
cooperation when the drive comes in September. And when
it comes to selling the banks the securities, we are
going to count on you exclusively for that."
MR. GASTON: "And selling to the banks will not be
included in the drives, but we will look to you to do
that."
H.M.JR: Isn't that what you said?
Regraded Unclassified
136
- 44 -
MR. BELL: Yes, that is about what I said.
MR. WHITE: Yes.
MR. BELL: "And I make that suggestion after review-
ing all the background and what has gone on and the
suspicions and bitter feelings that have been engendered
here."
I hate to see it, frankly. I would like to see it
on some other basis of cooperation, but I am afraid that
if you do get together on some compromise basis there will
always remain underneath this current of unrest and ill
feeling of some kind and we won't get the best results.
That is my only reason for suggesting it.
MR. GASTON: This is your suggestion, and you hope to
have their hearty approval on it. They might, after you
have outlined that as your present plan, make some counter
suggestion. They might plead with you for the opportunity
to get in on a different basis. I don't know.
MR. BELL: I wouldn't be surprised if they would.
I think some of them feel very strongly that the Federal
Reserve System ought to be in on it.
MR. SULLIVAN: It isn't a decision you have to make
immediately - whether you want them in.
H.M.JR: Say that again.
MR. SULLIVAN: If they make a counter-proposal and,
as Dan says, they want to get back in in a more nearly
supervisory position, you don't have to make a decision
on that right away. You can go ahead with your own
organization, and then see what develops.
MR. BELL: I think if they are going to get in that
the time to make the decision is at the beginning. After
you once proceed with an organization it is going to be
pretty hard to change it before the next drive. We haven't
any too much time as it is to map a program for the drive,
and we want the organization behind us when we start in.
Regraded Unclassified
137
- 45 -
MR. WHITE: You can say it is an interesting
suggestion and you will think it over. You don't
have to give the decision at once.
MR. SULLIVAN: I meant right off this week.
H.M.JR: "I am asking you gentlemen, can I count
on your cooperation."
MR. WHITE: "Can the country count on your co-
operation?" They are not helping you, Mr. Secretary.
This is a war.
H.M.JR: I may say, "Can the President count on
your cooperation - the country?"
Now, we may find in places like Philadelphia the
fellow will say, "I want to stay behind. I want to talk
to you, Mr. Morgenthau. I want to get in on this thing."
If Philadelphia wants to get in, why not? What would you
say to that, Dan?
MR. BELL: Say it again.
H.M.JR: I mean supposing the fellow in Philadelphia
says, "Mr. Morgenthau, I want to get in on this thing. I
would like to run this for you in Philadelphia" - would
you let them do it, or would you simply say, "We can't do
it."
MR. THOMPSON: I think you would have to have
uniformity.
H.M.JR: I think we can just count on them.
MR. BELL: He couldn't come in as fiscal agent. He
would have to come in just like any other bank president
would come in.
H.M.JR: I think these fellows have far exceeded
their authority without going to their board. Wouldn't
Regraded Unclassified
138
- 46 -
you feel that way, sitting on a board? Supposing you
learned all of these things Sproul has been doing without
consulting the board in New York, how would you feel as a
board member there?
MR. PAUL: I think that is true. I think they should
put these up to the board. I don't think that would make
any difference.
MR. WHITE: It depends on who put it up to the board.
MR. BELL: I disagree with you because I don't think
the board of directors or the board of governors has one
thing to do with the fiscal agency function. That is in
the statute as a direction. I don't think they have a
thing to do with it. It is working for the Treasury of
the United States, not for any board or any board of
governors. They are not the stockholders.
H.M.JR: Then do I ask them as my fiscal agents to
give me their full cooperation to put these drives over?
MR. WHITE: I wouldn't rub it in at that point.
MR. BELL: No, I think all you have to do is say,
"All of you are fiscal agents of the United States, and
we need your help and we would like to have it. We want
your cooperation when these drives come up. I think
they will give it to you.
H.M.JR: What I said, Dan, was this - and this kind
of hurt - in my conversation with Sproul all Friday I
didn't say, "If you cooperate." I simply said, "when."
I kept saying "when we get this thing settled", "when we
do this thing together"; and after doing all of that and
my saying, "I am counting on every man, woman and child
from every walk of life" - and in face of that what it
amounted to when it got down was he said, "Whether you
take the initiative or whether I take the initiative I
want my man. And I sat there and took it. Who the hell
is he?
Regraded Unclassified
139
- 47 -
And when I asked him, Dan - I don't know how much
of this I am repeating - I said, "Now look, Sproul, when
the Federal Reserve System needed the money we Were pay-
ing and you were living off that for the last nine years,
or eight years." I said, "Did I ever use that? When
you fellows needed us did I ever ask you to do a single
thing? Did I ever play politics? Did I ever ask you to
appoint anybody?"
He thought a minute and he said, "No, not once."
I said, "What the hell are you fellows worrying
about? Isn't my record for the last nine years & damned
sight better than any promises of what I will do for the
next year and a half?" And I am not on trial.
When I asked Eccles if I ever tried to infringe on
him, the only thing he could think of was on the bank
holding companies when I wanted to throw it to the FDIC
instead of the Federal Reserve Board.
Their position is that I am on trial: One, because
Robbins and I decide on 8. very amicable basis that our
temperaments don't hitch; two, I decide that as an assistant
to Bell and me I want Gamble and they say no.
It has gotten to a pretty pass.
They want the Perry Halls. Look, Dan, you know what
you will be doing - you and Gamble and Gaston, because all
summer long you will be fussing at twelve Federal Reserve
districts. You will be sick. You won't be able to put
your mind on the important thing, and you will be trying
to straighten out the Perry Halls in each of the districts
and satisfying the Federal Reserve bank presidents and the
Federal Reserve Board here.
Now, why in the hell should you? When we can go and
get some very respectable people in each community to take
the leadership, why should you? Here is the head of the
Marine Midland - he is the head of the Marine Midland, now,
Regraded Unclassified
140
- 48 -
& State-wide banking organization in the State of New
York - and he will play ball. And Mr. Pearson, former
head of this bank - all bankers.
Well, I will talk to you again about it this after-
noon, but the way I feel right now - I am going to check
with Lauch. He won't talk in front of people, and I am
going to see him alone. The way I feel right now, I
think I am going to take the initiative tomorrow and say,
"Gentlemen, I have tried to do everything humanly pos-
sible, and if I can't do it in New York I can't do it
anywhere. Therefore, we will call all bets off. We will
go ahead during the summer increasing our pay-roll thing,
doing the various things that we have done.
"I am asking the Federal Reserve two things. I am
asking them to sell the bank securities to the banks,
and then as we go through the next drive I am going to
ask them for their cooperation.
"You people can say it to me now or you can say it
to me this afternoon or tomorrow, but I want this thing
settled this week. Do I get your cooperation, or don't
I?"
MR. BELL: You put the first statement on the basis
of your New York conferences, that you had conversations
with Mr. Sproul of New York, that you realized that was
the most difficult situation, and you haven't been able
to get together.
Of course I think some of the Federal presidents
feel that you and they could get together. Certainly I
know that is true of Hap Young.
H.M.JR: I can't get together in New York where we
have got to sell forty percent of the money. Is that
what it is?
MR. BELL: Between thirty and forty, yes.
Regraded Unclassified
141
- 49 -
MR. GASTON: Two plans were presented, and actually
neither one of them was feasible. As the conversations
in New York showed, if it is a matter of consultation
and agreement on the executive personnel, you can't come
to a satisfactory agreement in all districts. You can't
come to an agreement which will protect both of your
existing organizations.
There are two practical plans. One is the one that
we have now arrived at. The other plan is the plan of
making the presidents of the Federal Reserve banks the
heads of the sales organizations in the districts and
leaving to them completely the organizing of their own
machine, and scrap everything that We have had heretofore.
That is a plan that could be worked if we wanted to work
it.
MR. BELL: I think you might start this conversation
by saying that there were two plans submitted last Friday
to the meeting, one by the Treasury, which would give the
Treasury the initiative in making the appointments of the
sales managers in the Federal Reserve districts. The
other plan was by the Federal Reserve System, which would
give the Federal Reserve presidents the initiative, with
the veto power in the Secretary.
Then you subsequently had two conferences with Allan
Sproul to kind of test out these plans to see what could
be done, and you find that neither one will work. You
can't make the initiative, and Allan won't accept the
suggestions from you; and even when you veto his sug-
gestions he doesn't accept that.
You say that neither one of them will work and 50
we have to go to something else.
MR. GASTON: After mature considerations and after
discussions with Sproul and the others, the Secretary has
come to the conclusion that neither one is logical, that
there is & better way.
MR. BELL: "This is my suggestion."
Regraded Unclassified
142
- 50 -
H.M.JR: And did I try!
MR. GAMBLE: That is Eccles' suggestion originally.
H.M.JR: I won't call it Eccles' suggestion.
MR. BELL: Eccles' suggestion was to separate it
and keep the Federal Reserve out of the picture, but he
didn't suggest the cooperation.
I think that is important, to get them into the
picture in the cooperative line rather than the ad-
ministrative line.
MR. GASTON: It is the alternative plan.
MR. SULLIVAN: With the amendment they are actively
cooperating, which was not in the Eccles' memorandum.
H.M.JR: Well, we will let that simmer.
Paul, what happened--
MR. BELL: I want to say that Allan Sproul will not
be here tomorrow. You know he is flat on his back. He
has a severe cause of flu, and the doctor put him in bed.
He thinks he will have to be there for ten days or two
weeks.
H.M.JR: I didn't know that.
MR. BELL: Eccles thinks Allan has to go away for
many months. He is on the verge of a nervous breakdown.
He says he thinks he might have ulcers.
H.M.JR: I said to Allan, "What is the matter with
you? You are not acting natural." I mean he was gray, he
was grim.
So after he got up to go he said, "Both days I got
up out of bed." He says, "This made me sick."
Regraded Unclassified
143
- 51 -
MR. BELL: He has been troubled with this stomach
trouble, and I think they have found an ulcer.
MR. GASTON: I don't think he created the stomach
ulcers in this short time.
MR. BELL: He hasn't been well the last six months.
H.M.JR: I think that certainly has influenced his
judgment in this matter.
MR. BELL: It might have.
H.M.JR: The people that know him say he is a
very stubborn person. I swear I never worked so hard
on anything. And here is the Secretary of the Treasury
pleading with a bank president to do what he wants him
to do.
I am sorry he is sick.
Regraded Unclassified
144
Miss Chauncey:
Attached is suggested plan of New York
War Savings Staff, together with extra copies.
At the Secretary's direction, I have
delivered copies to Mr. Bell, Mr. Gaston, and
Mr. Gamble. He said others present at the
9:20 Financing meeting could have copies if
they wanted them - therefore, the extra copies.
M.C. Dennis
Regraded Unclassified
linght
145
PLAN FOR CONDUCT OF
THIRD WAR LOAN
gade
frim
AS SUGGESTED BY NEW YORK WAR SAVINGS STAFF
my
As to results, the following plan has as its
objective, -
lat -- the utmost investment of current income by individuals
and corporate entities in the longer U. S. Government
securities and -
2nd -- the investment of commercial bank and such inflationary
funds in an amount and on such terms as are suitable
and necessary to meet the balance of the Treasury's
requirements.
The first is a field from which a much greater sum
can be obtained with effective coverage; the second
is a field which must and will supply the balance needed.
The first is the important field - - it hits at the
roots of inflation - - it expresses to the individual his
part in the war - - it requires effort and education to
get the utmost in results.
The second is the most important field by far in
dollar volume, but requires comparatively little effot
or education to produce the required amount.
As to organization, the plan has as its objective -
1 -- the elimination of competion between organizations prepara-
tory to and during the offering campaigns:
2 -- that campaigns to the public be segregated from the offer-
inge to financial institutions, etc. and be directed solely
to individuals and to business and commercial corporations
and be conducted by the organisation most experienced in
wide-spread distribution - - that organization to be composed
of the most effective personnel from all existing treasury
activities, and -
3 --
the direction of all under one head in each district.
Obviously, the following plan within the principles
of the above objectives offers latitude for change in detail.
Regraded Unclassified
146
PLANS FOR THE NEXT WAR LOAN CAMPAIGN:
FIELD OF PROSPECTS:
The field to be divided into two groups; first, a group
consisting of all individuals, all business, commercial and
industrial corporations, all trust funds and such associations
as Unions, Colleges, Philanthropic Associations, etc.
Second group to consist of financial institutions, in-
cluding commercial banks, savings banks, insurance companies,
finance companies, savings and loan associations, investment
companies, investment dealers, brokers, etc.
PERIOD OF OFFERING:
The first group to be solicited in a campaign beginning
September 5th and running for three weeks,te September 26th.
The second group to be solicited during the period from
September 26th through September 30th.
SECURITIES TO BE OFFERED:
The group of individuals and corporations to be offered
the whole basket of securities, including tax notes, certificates,
medium length bonds, tap issue, and E, F and G War Bonds; all
but the tax notes and the certificates to count toward the goal
of that group. The tap or other bonds to be in denominations at
least as small as $100.00.
The same basket of securities, where eligible, to be offered
to the second group - the financial institutions - and all sales
of all securities to count toward their goal.
No subscriptions from the second group permitted during the
time of the first group's campaign.
QUOTAS OR GOALS:
National quotas or goals and district and local quotas or
goals to be set for the first group and sub-divided into groups
as to individuals and as to corporations.
Regraded Unclassified
-2-
Quotas or goals also set for the second group in accordance with
Treasury needs at the time and to represent the difference between #hat
is needed and what is raised by the first group, with special separate
treatment accorded the commercial banks; such second group or over-all
quotas not to be announced until the completion of the first group drive.
PREPARATION AND SOLICITATION:
The Campaign for the first group; - individuals and corporations,
to begin its organisation and preparation plans June 15th. These plans
to smbrace (a) house to house canvass; (b) organization by trades, commerce
and industry divisions, which would supplement and intensify regular pay-
roll savings plans; would solicit all corporations (from the big ones
down to those employing two people) and would relate the corporation
subscriptions to the employee group subscriptions, particularly that
portion of the latter which was in addition to regular payroll savings.
The trade or commerce and industry organization to have a "special names"
grouping of the bigger corporations and the wealthier individuals in each
trade to be covered by a. leadership group in each trade which would include
bankers and investment bankers.
Preparation for the solicitation of the second group, would require
the formation of small highly specialized committees, suitable to be
effective with the insurance companies, savings banks and other financial
institutions.
ADVERTISING AND PUBLICITY:
The first group - individuals and corporations- is the audience to which
advertising and publicity are directed; therefore this activity would be the
responsibility of the organization responsible for the solicitation of this
group. Before, and particularly during the three week period of solicitation
of the first group, regular advertising, including radio, motion pictures,
features, newspapers, etc., would be geared and planned to form an effective
background for house to house and trade canvassing.
ORGANIZATION:
The country to be divided into the twelve (12) Federal Reserve Districts,
with the President of each Federal Reserve Bank as Chairman. Under the
direction of the Chairman and directly responsible to him, the War Savings
Staff would have the responsibility and direction of the solicitation of
Regraded Unclassified
148
-3-
the first group, the Victory Fund Committee the responsibility and
direction of the solicitation of the second group. The War Finance
Committee as such would not exist in the Federal Reserve Districts.
The responsibility for the functioning of the War Savings Staff and
Victory Fund Committee would be vertical from the top through those
organizations. Where the War Sevings organization, on a Statewide basis,
are split into more than one Federal Reserve District, the Chairman in
charge of the State War Sevings or Victory Fund program reports respectively
to whatever Federal Reserve District President has jurisdiction over
different portions of his State.
Both the War Savings activities for the solicitation of the first
group and the Victory Fund activities for the solicitation of the second
group, are directly under the jurisdiction of the Chairman of their
District, but each group is coordinated with their respective organisations
in the Treasury Department in Washington, for the purpose, particularly
with respect to advertising and publicity, of most effectively doing those
things from Washington which can be most effectively done through national
organization.
The Chairman in each of the 12 Federal Reserve Districts would report
to the Chairman of the National Mar Finance Committee in Washington. The
latter would have on his Committee, as now, heads of the War Savings
Staff in Washington and the Victory Fund Committee and he would
report as now, directly to the Secretary or Under-Secretary of the
Treasury.
EXPENSES:
Special drive budgets should be provided the War Savings Staff and
Victory Fund Committee.
Regraded Unclassified
145
Supplemental Memorandum:
REASONS FOR THE FOREGOING PLAN:
Field of Prospects:
The financial institutions are divided into & separate
group because their large subscriptions so dominate the total
if included with the other subscriptions, that it makes the
individual subscriber feel he 18 too small a factor to be of
any worthwhile value. The Corporations are included with the
individuals be cause the same organization that solicits the
individual can for the first time reach the small corporation
and the corporate subscriber can be related to the individual
subscriber to stimulate both classes of buying.
Period of Offering:
September is suggested as the period for the campaign,
because it is better than the vacation month of August, and
October might be too late, and would in any event conflict with
the War Chest Campaign. We are not concerned with the fact
that September is a tax month. In August people are getting
ready for it; in October they are suffering from it and experience
indicates that & quarterly tax month makes little difference.
Three weeks is selected as the period of time needed to cover
the field of wide distribution, and four days a period of time
sufficicient to cover the special group of financial institutions.
The relationship of these two periods permits the withholding of
the large financial subscriptions until the individuals and the
corporations have done their jobs.
Securities to be Offered:
It 1e suggested that even tax notes and certificates be offered
to the wide distribution group because they, and particularly
corporations, should not be excluded from the opportunity to buy
such short issues if more suitable for them. On the other hand,
such sales are of comparatively little value to the Treasury as
permanent war financing, and therefore should not be included in
the quota set for buyers in this category. We would prefer to see
the bond and tap issues in denominations as low as $100.00 and
believe that to have such denomination available would very
considerably increase sales.
Regraded Unclassified
150
-2-
Quotas or Goals:
We realize the continued difficulties of establishing quotas and
goals, and yet, particularly in the field of individual buyers, it is
an incentive for which nothing can be substituted.
Preparations:
The dividing of the field of prospects into two groups, one of
which requires 8. long period of preparation for a wide-spread distribu-
tion and the upbuilding of a large organization, and the other of which,
composed of a few highly important financial institutions, the solicita-
tion of which requires a small organization of highly experienced
financial executives, results in an elimination of the duplicate
organizations now existing in many regions in the War Savings Staff
and the Victory Fund Committees. The infiltration of banking leader-
ship with industrial leadership to cover the bigger corporations and
wealthier individuals in each commerce and industry division of the
first group, is by experience the most effective may to get coverage
and results.
The solicitation of the second or financial group will require
in each community 80 small personnel of financial leaders as to
necessitate little, if any competition, with the distributing organ-
ization of the War Savings with its necessity to cover the whole
public.
Organization:
One head - one control in each District is necessary for effective
coordination. The Federal Reserve Districts seem the most suitable
units into which to divide the country - and the President of each
Federal Reserve Bank the most appropriate chairman of each District.
It is suggested that under him the two organizations - War Savings
and Victory Fund, be kept separate because the War Savings organization
has the most experience and better understands the job of wide-spread
distribution, - whereas the Victory Fund group are the natural leaders
in the financial field. Many from the financial field would be a
part of or at the head of the solicitation of the most important
special commerce and industry groups of the Mar Sevings organization.
Regraded Unclassified
151
-3-
To eliminate the War Finance committees in each district and to
have the authority vertical from the Chairman of the district through
the executives of the War Savings organization and of the Victory
Fund organization in all the regions of activity, eliminates the
confusion in each Federal Reserve District of having regional War
Finance Committee representatives.
Expenses:
Special budgets are necessary not only because of unusual
expenses attendant on greatly enlarged activity during the campaign
period, but because regulations affecting regular budget funds
restrict or preclude certain necessary expenditures. Rigid controls
should, of course, be instituted, but delaying procedures eliminated
to permit procurement of essential personnel and material at the
right place at the right time.
Regraded Unclassified
152
W. RANDOLPH BURGESS
55 WALL STREET
NEW YORK
PERSONAL
May 25, 1943.
Dear Henry:
Since our meetings I have been thinking a good deal about the
last proposal we discussed on Saturday, and I thought it might be helpful
to put this down on paper for, on reflection, it seems to me, it may offer
the best way out of the present difficulties.
The suggestion is that the next drive should, in each district,
be organized under the chairmanship of the Federal reserve president in
two divisions: a bank division which would do substantially what Perry
Hall's organization here has been doing through the banks, and second, a
home and workers' division which should work in the area of Nevil Ford's
group but do 8 considerably expanded and more thoroughgoing job of reach-
ing workers in their places of employment and conducting house-to-house
sales.
It seems to me that some such organization would be most effective
in conserving the present form and experience, and at the same time bringing
about & better messure of coordination. There would, of course, be some
overlapping in the bank's appeal to its customers and the other divisions'
appeal to employes and homes, but there is no way of dividing up the field
without some duplication, and this difficulty is largely encountered in
cities since in smaller communities the two divisions would in effect be
merged.
There should, of course, be B. small executive committee and staff
workers for general overhead problems and coordination.
I recognize that this does not go as far in streamlining the
organization as would be ideal if you were starting El brend new organization.
Regraded Unclassified
153
- 2 -
On the other hand it avoids & lot of emotional difficulties and loss of
momentum which accompanies sweeping changes. At any rate, I throw it in
the hopper for what it is worth.
Sincerely yours,
Randigh
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
WRB.H
Regraded Unclassified
154-
May 25, 1943
9:32 A. M.
Operator:
Go ahead.
HMJr:
Hello.
Sen. Walter
George:
Hello.
HMJr:
Henry talking.
G:
Yes, Henry. How are you, sir?
HMJr:
Okay. How are you, Walter?
G:
Tired, tired, tired. Too tired to hardly
wiggle.
HMJr:
(Laughs) Too tired to wiggle?
G:
Yes.
HMJr:
That's pretty tired.
G:
Yes, that's pretty tired, but that's right.
HMJr:
Well, I just wanted to let you know I was back.
G:
Well, I'm glad you're back. We have a - we're
struggling along here in the hopes of doing
something today, but I don't know whether we
can or not.
HMJr:
Well.....
G:
But it looks like we ought to get something
now BO that we can get in withholding
HMJr:
I see.
G:
collection at the source.
HMJr:
Yeah. Well, if I can be of any help, that's
what I'm here for.
G:
All right. We did speak yesterday about call-
ing you -- some of them did in the committee --
but someone said you were out of the - out of
the city.
Regraded Unclassified
155
- 2 -
HMJr:
Well, I've been up with Mrs. Morgenthau.
She had a very serious operation.
G:
Oh, I'm sorry to hear it. I hope she's
better.
HMJr:
She's getting along nicely.
G:
Well, that's good.
HMJr:
And I got back on the midnight tonight....
G:
Yeah.
HMJr:
....last night.
G:
Well, we'll call you, Henry. If.....
HMJr:
But that's where I've been.
G:
...anything develops that looks like that we can
work something out, we'll call you.
HMJr:
Yes. Thank you.
G:
All right.
HMJr:
Goodbye.
Regraded Unclassified
156
May 25, 1943
10:30 a.m.
HMJr:
Hello.
Operator:
I have Mrs. Brady. Miss Tully is not there.
HMJr:
All right. Hello.
Operator:
Go ahead.
Mrs.Kathryn
Brady:
Hello.
HMJr:
Henry Morgenthau.
B:
Yes, sir.
HMJr:
When am I going to see the President?
B:
Well, didn't Grace get any answer for you
yesterday?
HMJr:
If she did, she didn't pass it on.
3:
Uh huh. Well, maybe she didn't get any answer,
so I take it it won't be today, or at least
not for a bedside.
HMJr:
Well, not bedside this morning anyway.
B:
No, well
HMJr:
Well, the point - the thing I pointed out to
Grace was....
B:
She sent - I know - I know that she sent the
memorandum in to the President.
HMJr:
Will she be in shortly?
B:
Yes, she will.
HMJr:
And
B:
Are you in town?
HMJr:
I'm here at my desk....
B:
Un huh. All right. Suppose
Regraded Unclassified
157
- 2 -
HMJr:
and between now and 9:30 tomorrow morning
I pretty much got to see the President.
B:
Yes, sir.
HMJr:
See?
B:
Well, I'll call you 88 soon as I find out some-
thing.
HMJr:
Yeah, between now and 9:30 tomorrow.
3:
Yes, sir. I'll call you.
HMJr:
Okay.
B:
All right.
Regraded Unclassified
158
May 25, 1943
11:05 a.m.
TAXES
Present: Mr. Bell
Mr. Gaston
Mr. Paul
Mr. Sullivan
Mr. White
Mr. Thompson
Mr. Gamble
H.M.JR: Paul, what happened with Czar Byrnes?
(Laughter)
MR. PAUL: They had about an hour's conference,
at the end of which Byrnes decided to recommend to the
President that he accept sixty to sixty-two and a half
percent across the board forgiveness because otherwise
they wouldn't get a bill.
They are going to have a meeting this morning of
the conference committee--
H.M.JR: Just a minute, please.
(Discussion off the record.)
MR. PAUL: The Democrats on the conference committee
are going to have a meeting after the other full meeting.
H.M.JR: Start over again.
MR. PAUL: Doughton put very heavy pressure on
Byrnes, saying that we must have 8. bill, they couldn't
take the gaff if they didn't have a bill, and "We won't
get a bill unless you are prepared to go as high as
seventy percent or even seventy-five."
Byrnes said, "No, I won't advise the President to go
any higher than sixty, or, at the outside, sixty-two and &
half percent."
Regraded Unclassified
159
- 2 -
H.M.JR: Straight across the board?
MR. PAUL: Yes.
MR. GASTON: Percentage of tax liability.
MR. PAUL: That is right, except with one little
extra thing on it, that they will forgive the whole tax,
a hundred percent below fifty dollars.
MR. GASTON: Of tax.
MR. PAUL: Yes. They are going to have a meeting
of the Democrats after the other full conference com-
mittee meeting this morning, at which they will discuss
that.
I doubt very much, based on the information that
comes to me, whether the Senate side will accept sixty-
two and a half percent.
H.M.JR: Do they know whether the President will?
MR. PAUL: Yesterday afternoon, you see, Byrnes
told me that the President didn't like anything but the
House bill or the Ways and Means bill.
Now, I don't know whether Byrnes can change the
President, but he must think he can if he--
H.M.JR: Well, there is nothing for us to do except
sit, is there?
MR. PAUL: Well, if we are against the sixty to
sixty-two percent - it may be academic because the Senate
may not accept that, but if we are against that and want
to do anything about it we have got to see the President.
MR. GASTON: That is poor trading on the part of
Byrnes. If he wants to reduce the flat forgiveness I
don't know why he didn't say fifty.
Regraded Unclassified
160
- 3 -
H.M.JR: I am not going to do anything, Randolph.
I am going to sit. Byrnes sent word through Paul
yesterday that he hoped I would be here and I should
get in touch with the President at nine o'clock this
morning.
MR. PAUL: I don't think he said nine o'clock. He
didn't mention any hour.
H.M.JR: In order to get it back in our hands, either -
as George said, the committee may invite you (Paul) to
come up today - he would have yesterday if I had been
here.
MR. PAUL: That is just a gracious remark.
H.M.JR: Well, let's wait. I am going to sit. I
learned that. I learned that when I was first in Albany.
I can sit for days. I may get the breaks; I may not.
If Byrnes is successful and sells the President on
the sixty-two percent, then the President won't call. If
Byrnes is unsuccessful, he will call me. I am just going
to sit.
MR. WHITE: The President knows all the arguments
you have. He seems to understand it thoroughly. The
decision is his.
If Byrnes is going to recommend it, I think - and
if the President wants to take it - I think you may as
well stay out.
If the President is in doubt then he will call on
you, and that is different. But if the President has
made up his mind to take it and use Byrnes' recommendation
as the peg on which to hang his hat, you don't do any-
thing - you don't do any good by going--
MR. PAUL: I would rather have Byrnes advise the
President to take such a ridiculous settlement than do
it myself.
Regraded Unclassified
161
- 4 -
H.M.JR: Let's just sit.
If necessary, Paul, go up to the house and get a
good book, if you are restless.
MR. PAUL: I wouldn't even recommend it to the
President.
H.M.JR: All right, that is all the more reason -
let's just sit. If you are restless, go up to the
house and get a good book.
I will talk with you fellows again this afternoon.
Regraded Unclassified
162
May 25, 1943
12:44 P. M.
HMJr:
Hello.
Operator:
Miss Tully.
HMJr:
Hello.
Operator:
Go ahead.
Grace
Tully:
Hello.
HMJr:
Grace?
T:
Yes, Mr. Secretary. Are you back?
HMJr:
(Laughs) Am I back!
T:
(Laughs)
HMJr:
Now don't give me that.
T:
Well, I tried to get FitzGerald last night.
I didn't get to the President. You see, he
was with the Prime Minister, and they had
these conferences and I didn't get to him un-
til late. I called the office and FitzGerald
wasn't there.
HMJr:
Yeah.
T:
And the President read the memorandum I - We
gave him the memorandum about the Federal Re-
serve and what-not and he said, "Well, Henry'll
be here tomorrow and I'll talk to him," meaning,
I think, he's going to call you, and I don't know -
he's pretty Jammed up and it may not be that he
can make it, but he will talk to you on the tele-
phone, anyway.
HMJr:
Well, that wouldn't be very good. The Prime
Minister has asked me to come over and see him
at five
T:
Uh huh.
HMJr:
which I am. Well, is he busy all night?
T:
Huh?
HMJr:
Is he going to be busy all evening?
Regraded Unclassified
163
- 2 -
T:
Is he - the Boss, you mean?
HMJr:
Yeah.
T:
I don't know what - what's on for this -
he's - he's been busy every night for the
last couple of weeks. (Laughs) I assume
tonight will be no different.
HMJr:
Well, this is
T:
And he's got Liberia coming tomorrow, you see?
HMJr:
.... this 18 pretty important for - not only for
me, for everybody.
T:
Uh huh. Well, I couldn't get anything definite,
because I don't know whether he knew whether he
was going to have any free time.
HMJr:
When are you going to see him again?
T:
Probably not until after the press this afternoon,
from the schedule, I would say. That would be
probably about four - four-fifteen, twenty, or
thirty.
HMJr:
I see. You're not going to see him before?
T:
Not before press, no. They're having a luncheon
at the house, and he won't be over and then he has
two appointments after luncheon, and then there's -
that will be almost time for the press to come in
and I don't expect to see him until after press.
It - it just might happen that I could get in, but
I doubt it.
HMJr:
He's all tied up after lunch?
T:
He is, yes, uh huh.
HMJr:
Not very helpful.
T:
No. I can't do anything about it though. (Laughe)
I wish I could, but....
HMJr:
Hmm.
T:
there are times when I can't. However, I'll
HMJr:
And how about tomorrow morning, bedside?
Regraded Unclassified
164
- 3 -
T:
No, I put it all down there and the President
said, "I'll talk to Henry when he gets here
tomorrow."
HMJr:
Well, have another try at it.
T:
All right. Fine. I will.
HMJr:
Because I'- I very seldom say it's important,
but this one 1s.
T:
Uh huh. All right. Fine. I'll tell him, Mr.
Secretary. How 1e Mrs. Morgenthau today?
HMJr:
She had a. bad night....
T:
Aw!
HMJr:
....but she's making progress.
T:
Good.
HMJr:
Yeah.
T:
That's fine.
HMJr:
Right.
T:
All right, Mr. Secretary, I'll call you later.
HMrr:
Thank you.
T:
Goodbye.
Regraded Unclassified
165
May 25, 1943
12:55 P. M.
HMJr:
Hello.
Operator:
Mr. Cox.
HMJr:
Hello.
Oscar
Cox:
Hello, Mr. Secretary.
HMJr:
Hello, Oscar. They said you called me a couple
of days ago?
0:
Yes, sir. It wasn't of major significance, but
this fellow, Joe Weiner, who is head of Civilian
Supply in W.P.B.
HMJr:
Yeah.
C:
is available now that he's going to quit up
there.
HMJr:
I see.
C:
He's a very, very able citizen
HMJr:
Uh huh.
C:
and I didn't know whether you wanted to
possibly consider him for something in the Trea-
sury or not.
HMJr:
Well, I'll talk to my people about it.
O:
Yeah. The - the one field in which I think you
might be interested in going in, whether you con-
sider him or not
HMJr:
Yeah.
C:
in which I think if you do consider him, he'd
be useful -- 18 there's a great deal of surplus
property
HMJr:
Yeah.
C:
that the Army and Navy and 80 forth have under
order
HMJr:
Yeah.
Regraded Unclassified
166
- 2 -
C:
that's now available for disposition
HMJr:
Yeah.
C:
....
and it would seem to me logically to fit into
the Treasury more than certainly in the Army and
Navy, because they know nothing about the domestic
economy
HMJr:
Yeah.
C:
and it's already reached an enormous quantity
at this juncture.
HMJr:
Surplus property?
C:
Yeah. I mean they've got aluminum ingots and they've
got forgings and they've got machine tools
HMJr:
What's - what's going to happen to that?
C:
Well, they're just getting rid of them now, but you
know from your old experience in the trade-in stuff
and the sales that when you reverse the stuff
HMJr:
Yeah.
C:
for getting it into the civilian economy, they
don't quite know the field.
HMJr:
Yeah.
C:
And it's an economic problem of the first water
HMJr:
Well
C:
and on this whole demobilization thing, it'll
be more important -- I think the only advantage that
you're getting in it now 18 educational.
HMJr:
Yeah. Well, they'll most likely create a new agency -
and lose out on it and let them handle it.
C:
I think that's a mistake, don't you?
HMJr:
I don't know enough - - I haven't thought about it,
Oscar.
C:
Yeah. But Joe has really B first-rate mind.
Regraded Unclassified
167
- 3 -
HMJr:
Well, I'm glad you called me, and I'll give it
careful consideration.
C:
All right. Thank you.
HMJr:
Goodbye.
C:
Goodbye.
Regraded Unclassified
168L
May 25, 1943
1:53 P. M.
HMJr:
.....
talk to him or her.
Operator:
All right.
HMJr:
Hello. Hello.
Operator:
Miss Gerling 1s on the line.
HMJr:
Miss Sterling?
Operator:
Gerling. G-e-r-l-1-n-g.
HMJr:
Okay. Hello.
Miss
Gerling:
Yes, Mr. Morgenthau.
HMJr:
Miss Gerling? How do you do?
G:
How do you do, sir?
HMJr:
I have this request from Senator Downey to return
to him this report on the Bank of America.
G:
Yes. Uh huh.
HMJr:
Now naturally we want to send it back.
G:
Uh huh.
HMJr:
Mr. Bell informs me that the Senator Was think-
ing of turning it over to the so-called Smith
Committee.
G:
Yes, sir.
HMJr:
Well, I don't think that would do anybody any
particular good, including the Bank of America.
G:
Uh huh.
HMJr:
And before he does that I -- if he has that
really in mind -- I wish you'd give me 8. chance
to talk to him.
Regraded Unclassified
169
- 2 -
G:
Well, the Senator didn't have that in mind at
all. He hasn't been back here. What happened
was the Smith Committee called us - 8 Mr. Ford,
and he said that a Mr. Birdsell of the Bank of
America had been talking to him and that Mr.
Birdsell wanted the booklet sent to the Smith
Committee. Mr. Birdsell, I believe, 1s the
Vice President of the Bank of America
HMJr:
Yeah.
G:
and they wanted to know if we had any objec-
tion to, their securing it from the Treasury. Well,
we didn't. But if you don't believe it should be
turned over to them, why, of course, I'm sure the
Senator wouldn't want to go against your wishes on
that.
HMJr:
Well, I think it would do a lot of harm for every-
body.
G:
Uh huh.
HMJr:
Because, I mean it's going to mean washing the
dirty linen of the Bank of America before the whole
public
G:
Uh huh.
HMJr:
and as far as we in the Treasury are concerned
with the Bank of America, right now we're at peace.
G:
Uh huh.
HMJr:
So why not leave 1t that way?
G:
Well, the Vice President of the Bank of America
had been the one that originally, I believe, in-
stigated the request for it to be turned over to
the Smith Committee. Why, I don't know.
HMJr:
Birdsell?
G:
They Just asked -- Birdsell, yes, that's it -
they had Just asked us, 86 & matter of formality,
if we had any objection to them securing this
HMJr:
Yeah.
G:
and we could see none that we knew of. We
said, "No."
Regraded Unclassified
170
- 3 -
HMJr:
Oh.
G:
But if you believe that it shouldn't be turned
over to them, why, of course, we'll just tell the
Smith Committee we believe that - that it's a
matter for Senator Downey to decide, and that
we'll talk to him about it when he comes back.
HMJr:
Right. Well....
G:
He's flying back. He'll arrive in Washington to-
morrow night.
HMJr:
Well, in the meantime, I'll send it up to you.
G:
All right. You'll send it to our office.
HMJr:
Right.
G:
All right. Thank you 80 much, Mr. Morgenthau.
HMJr:
Goodbye.
Regraded Unclassified
171
May 25, 1943
3:10 p.m.
TAXES
Present: Mr. Gaston
Mr. Paul
Mr. Blough
Mr. Surrey
Mr. Smith
H.M.JR: Read this out loud.
MR. SMITH: This is essentially the same as we
had this morning except I have switched it around from
being a personal letter to a memorandum.
MR. PAUL: I went over this this morning.
H.M.JR: Was it your idea?
MR. PAUL: It is very much like the idea I men-
tioned to you of taking the heat off the President.
H.M.JR: Then he is for it. (Laughter)
I just talked to the President on the Federal
Reserve business, and he is going to see me through.
I tried to give him a little sketch on this. He
says, "The people don't want any letters. They want
action.
But I haven't read this. Let's hear it.
(Memorandum to the Senate Finance Committee read
by Mr. Smith, copy attached.)
H.M.JR: That is much too long. It is twice too
long - three times too long.
Regraded Unclassified
172
- 2 -
MR. SMITH: But the one thing--
H.M.JR: In the mood he is in - I just talked to
him - I didn't know it was a letter, but I had an idea
what a letter should be, and he said, "This is no time
for letters. The people aren't interested in letters.
What they want is to see a bill get through."
MR. PAUL: The President said that?
H.M.JR: Yes, just now - just two minutes ago. "We
want to get a bill.
He said, "They have been arguing with me and trying
to get me to do this and that. I don't want to write
any letter."
He is tired. He told me he was tired. He has had
ten days of arguing with Churchill, and the man is
exhausted. There wouldn't be any chance.
What do you think, Herbert?
MR. GASTON: I am in doubt about the issuance of
a letter at this juncture as it applies to the pay-as-
you-go issué. In any event if the letter should be
written - if anything should be issued for publication,
I think it should more clearly distinguish between the
two problems: The one the pay-as-you-go thing, and the
other the need for additional taxes and the basis on
which additional taxes must be levied.
Of course this letter as it stands would convey
the impression that the President was confused on those
two subjects.
We have an immediate situation confronting us with
respect to pay-as-you-go, and then we have another
situation confronting us with respect to additional
taxes.
H.M.JR: I think this, Fred I think you made a
stab at it. The President won't do it. He is in no
Regraded Unclassified
173
- 3 -
mood to do it. I think this - what I would like you
(Blough) to do, because I have other things for Smith -
Blough, I don't know how hectic you are, but you might
be working on something and then I will have Smith kind
of blow a little life into it.
MR. GASTON: There is a great deal of nice material
there that could be used.
H.M.JR: What I was thinking, supposing they should
decide they want to invite me up for a statement, why
not let's have one.
MR. BLOUGH: This doesn't fit into this bill, but
this might fit into the tax bill - it does. You see,
this isn't a tax bill we are talking about now.
H.M.JR: This is Smith just trying to do something
extra.
MR. BLOUGH: This is a very good idea in connection
with the opening of the new bill.
H.M.JR: You take it.
MR. BLOUGH: It might very well make a Presidential
radio speech.
H.M.JR: The President is not interested in taxes.
(Laughter)
MR. GASTON: If you more clearly recognize the tax
situation and talk about pay-as-you-go to the general
tax structure, and then you go into a discussion of the
tremendous importance of--
MR. PAUL: I don't want to address myself to that
letter, but that letter has a lot of good material in
it and a lot of inaccurate statements and a lot of
general items.
MR. SMITH: That is likely. I am writing it to
be read. (Laughter)
Regraded Unclassified
174
- 4 -
MR. PAUL: I mean statements which would do harm - -
that sense of inaccuracy. I don't care about minor
inaccuracies.
But there is a problem where I am very a phase
of the problem where I am very sympathetic with Smith's
idea, and that is to take the heat off the President in
the event of a deadlock, which is, I think, according to
the latest report I got only a few minutes ago, very apt
to be the case.
The best information I have is that the bill will
go back - - will be deadlocked at the three-thirty meeting
today. Then it will be sent back to the House and to the
Senate, and the President will be blamed because We have
no pay-as-you-go.
Now, he has been reasonable. He has been willing
to take any bill that was passed by an overwhelming
majority of the House. True, he doesn't want the Senate
bill, but he isn't such an unreasonable man. He was
willing to take one of the two bills passed by one of
the two houses. What he said in his other letter was
what he wouldn't sign; he didn't say what he would sign.
MR. SMITH: All the people know is that somehow or
other Mr. Morgenthau and Mr. Roosevelt have just posi-
tively refused to give the people the kind of a bill that
the people want.
MR. PAUL: Because that is what the papers tell them.
H.M. You see, your statement again is inaccurate -
they think it is Mr. Roosevelt and Mr. Paul who won't give
them the kind of bill they want. (Laughter)
MR. GASTON: You mean Mr. Byrnes. (Laughter)
H.M.JR: I accept that - Mr. Roosevelt and Mr.
Byrnes. (Laughter)
Have you read Arthur Krock today?
Regraded Unclassified
175
- 5 -
MR. GASTON: Yes. I thought that except for a
little bit of injustice to the Treasury and an un-
fortunate illustration, the general tenor of his column
was all right.
H.M.JR: Have you read Arthur Krock?
MR. SMITH: Yes, I read it.
H.M.JR: They say the only people in the United
States that read Arthur Krock is the Cabinet. (Laughter)
All right, you people keep thinking about it.
Don't be discouraged.
MR. SMITH: I am not discouraged.
H.M.JR: You can't get all the hits - when you get
up to bat you can't make a home run every time.
MR. PAUL: You ought to work on a draft of 8. veto
message which I have on my desk.
MR. SMITH: I just would like to see the Treasury
take the initiative.
MR. PAUL: Breathe some life into that. I breathed
a little.
H.M.JR: That is all right.
MR. GASTON: We might think about two things. One
is a statement for Secretary Morgenthau in his conference
on Thursday morning - - a rather impatient statement about
why don't they do something and "Here is what they ought
to do." The other is a statement by the President for
his conference on Friday morning. He is occupied by
Churchill and the aftermath of that today. One of those
two press conferences might give them a shot.
H.M.JR: Well, of course, I will tell you what I
would like to say. It will just take 8. minute. I think
Regraded Unclassified
176
- 6 -
that for me - I mean they have had me cooped up here.
I think especially this deadlock - it is about high
time that I expressed my own views - the views of my
associates here in the Treasury - on the need of more
money.
MR. PAUL: Right there--
H.M.JR: The need of the pay-as-you-go, but first
additional money.
I don't know where I read this thing - somewhere -
that if they don't get this thing I have to borrow
seventy-five billion dollars.
MR. PAUL: That was said between the President and
Bell.
H.M.JR: Well, I read it somewhere. Have just been
catching up.
I think there should be some place, and Roy should
start working on it rather than go up - I mean - anyway,
he ought to start to put down the facts, a statement for
me on why the country needs this additional sixteen
billion dollars - a powerful statement, inflation, and
so forth and so on.
MR. PAUL: There I want to get clear on something.
I agree with you that it might be very advisable to have
such a statement, but I think we do have to clear up the
question of whether that sixteen billion doesn't have to
be related to--
H.M.JR: Bell has related his thing - you mean to
savings?
MR. PAUL: Not only to the compulsory savings
situation, but also sixteen billion was a fiscal year
figure.
H.M.JR: That is & detail.
Regraded Unclassified
177
- 7 -
MR. PAUL: No, it is very important.
H.M.JR: I am not going to bother with that. The
point that I am getting at is I sit here, and time goes
on and I don't say anything. I am supposed to be the
Secretary of the Treasury, and I think if these fellows
keep fooling - I don't care whether it is eight or sixteen
or twenty billion, but something should be said by me.
MR. PAUL: That is very important because of this
additional reason, that Congress is about to go into a
vacation - about to recess for about a month and a half
or two months.
MR. BLOUGH: You held your hand before for two
reasons, as I understand it. One was the bond drive,
which you didn't want to mix up with it. The second was
that you thought if you just held your breath & day or two
longer they would get this pay-as-you-go out of the way
and then you would have a clear track.
H.M.JR: No, neither of your reasons is right.
MR. BLOUGH: Then I don't know of any other reasons.
H.M.JR: No. I had a reason. Mr. Doughton asked
us to advise them and not tell them.
MR. PAUL: That is right.
H.M.JR: And Paul and I have been hewing to hat
line, with the present result, that we have been doing
this since last December.
MR. PAUL: That is right, and he hasn't produced.
H.M.JR: And he hasn't produced. I don't know what
the right time is, but it isn't too far off where the
Secretary of the Treasury could get up and say what we
need in the way of a fiscal policy, and so forth and so
on - not pull any punches.
MR. SMITH: That is all I am after. I just want
you to take the initiative.
Regraded Unclassified
178
- 8 -
H.M.JR: The President will never do it. He doesn't
like to do it. He will get all mixed up with the Director
of the Budget, and everything else.
I think the thing is for me to say it - not today,
but you can't write those things overnight. I think the
thing should be in the works, Roy, see, and you get the
thing in the works and Fred Smith will put the sex appeal
in it. (Laughter)
MR. BLOUGH: There are 8 lot of things in the works.
We can draw them together very close.
MR. PAUL: We have had that in the works for some
time. We would be incompetent if we hadn't.
MR. BLOUGH: What sort of an occasion would you want
this for?
H.M.JR: I will get the occasion. Gaston has got
letters here to me--
MR. BLOUGH: You have in mind a public address?
H.M.JR: This fellow (Smith) will arrange that. He
will put me on with Jack Benny or somebody. (Laughter)
MR. PAUL: Make it a beautiful woman. (Laughter)
MR. BLOUGH: Is it a fifteen-minute radio speech or--
H.M.JR: Give him (Smith) the facts, don't worry.
When we went out on the "We the People" they kept cutting,
cutting, cutting. I mean, you give the facts and they
will take care of it.
MR. GASTON: The Minnesota Bankers Association,
June 17 - as much time as you want.
H.M.JR: We have all the invitations to speak.
MR. GASTON: I am going to get 8. call today on
that, probably.
Regraded Unclassified
179
- 9 -
H.M.JR: When these fellows get through, I will do
speeches with you.
Will you start something?
MR. BLOUGH: Absolutely.
H.M.JR: There is no use trying to talk to the
President. He won't do anything.
Regraded Unclassified
Return to Hm. In file
180
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 25. 1943
TO
Secretary Morgenthau
FROM
Fred Smith
When you told me the other day that the President had been asked
to indicate what kind of & tax bill he would sign, it seemed to me that
here was a wonderful opportunity to present your tax philosophy and to
again create the impression that you and the President know exactly what
you want and why.
I - not familiar enough with politics and protocol to know whether
it would be advisable for the President to reply directly to the Senator.
If 80, I believe we could trump his Ace by throwing a formula at him which
could not be too harshly criticised, but would put the opposition on the
defensive in any bill which did not meet with the President's stated formula.
In other words, if the President lists basic considerations, and a bill is
drawn up which does not meet them, then the sponsors of the bill will have
to prove their case, not the President nor you.
Attached is a letter of the type which the President might sign, and
which I believe would be well received by the public at large. I don't
see how it can be severely criticised except in a "fussy" and not very
effective way - and it certainly lays the groundwork for a bill which
would be acceptable to the Treasury. It would also give us a springboard
for criticising any bill that did not meet with the Treasury's philosophy.
I believe that such a letter, made public, would breed a great deal
of confidence in the tax program, and I an sure this is very desirable.
Regraded Unclassified
181
À MEMORANDUM
TO THE SENATE
FINANCE COMMITTEE
Because I did not favor the tax bill recently approved by the
Senate, I have been asked for B. definition of the kind of a tax bill
which I would approve, sign, and support. I should like to give
that definition - and tell you why the Treasury Department and I
feel the way we do about the whole subject of taxes in war time.
Of course, it does not lie within the province of the President
to design a tax bill; that is up to the Senate, to the House, and to
the Treasury Department. As President, I do, however, have obligations
in the matter. Any bill that I approve must be, above all, fair. It
must also be sufficiently comprehensive to raise a substantial part
of the revenue required to finance the war. Finally, it must be simple
enough to put into effect at once so that we can pay for the war now,
when we need fighting equipment, and when we have money.
As you know, we will have 145 billion dollars in income this
year. That means 145 billions in wages, salaries, and profits which
will be available to the American people for their living expenses
and to supply the 100-billion-dollar-cost of the war during 1943.
Through taxes and War Bonds we must keep getting more and more
of this money. We must not waste a day, for 45 billions of the
necessary 100 billions must still be raised before the end of this
year. If we plan taxes right, and if the people continue to buy War
Bonds, getting this money should not, however, prove too great a
hardship on anyone, because our national income is 3 times what it
was & few scant years ago, and we have far fewer places to spend it,
and fewer things to buy, than we had then. In these times of greatly
curtailed civilian production, I think the American people can pay
a great part of the war expenses, and still live as well as it is
possible to live during this most crucial period of the Total War.
I have been asked what, specifically, I would like and approve
in a tax bill, and what Mr. Morgenthau could enthusiastically support.
I want to give you as direct an answer as I can.
First: I am heartily in favor of the "pay as you 808 idea.
Our Treasury Department proposed this in 1941 with my support, and
neither Mr. Morgenthan nor I have wavered an inch from this point
of view. I believe ve will never find & better time to make this
necessary change in tax policy. By all means, provision for this
should be included in any tax arrangement that is offered to the
people.
Regraded Unclassified
182
- 2 -
Second: I favor abatement of a portion of our back taxes, so
long as the abatement is reasonably equitable, If any inequality
of sacrifice becomes necessary, as & practical matter, I think ve
should favor those who have only their modest earnings to fall back
on. I say this not because we should penalize the rich, or the
able, or the talented, but because the presently rich, and able, and
talented will probably be better able to recoup their financial
positions after the war -- just as they did after the last war, just
as they always have since this country was net up on the principle
that & man's rewards should be limited only by his energy and effort
and talents.
Perhaps such people can never again become very, very rich, but
I believe that that is as it should be -- and I think it 1e & situs-
tion that will be shared in our new world by all the people of all
the civilised nations.
But to get back to abatement: It seems to ne that any abatement
should be based on the tax brackets that go stright across the boards,
and affect all who pay taxes. This probably will mean the complete
forgiveness of smaller taxes, but again I feel that this will not
result in too great a sacrifice on the part of those whose privilege
it is to have high salaries or incomes, I sincerely believe that any
injustices this may cause will be unlikely to bring real hardship to
anyone -- and in the final analysis hardship can be our only guide.
If it is true that this penalizes incentive, then we must say that
for the duration we cannot afford to recognize any incentive but an
American's passionate desire for victory and his hunger for peace.
Money incentive is perhaps a victim of conversion to war, like the
family car, the refrigerator, and costume jewelry. I believe that this
is understood by most men of good will, regardless of their present or
past incomes.
Third: I believe that a good part of current taxes should be
deducted from salaries, wages, and profits at their source. The with-
holding principle is one that the American people will accept willingly
and will be grateful for when they become accustomed to it.
Fourth: I recognize fully how difficult it is to levy severe
taxes equitably in times like these: but I will not sign a tax bill
which is obviously or unnecessarily inequitable.
In our tax thinking we must assume that everyone realizes that the
war has changed our entire way of life for the duration:
that men and women who are making higher wages than normally
recognize they met forego most of the benefits these
higher vages in other times would bring to them;
that business proprietors must pour out in higher taxes and
War Bonds much of their profits which ordinarily would go
Regraded Unclassified
183
- 3 -
into expenses and reconditioning and strengthening the
structures of their corporations;
that farmers know they are in the service of the war no
less than business men or wage earners, and their incomes,
even though they may be larger than normal, can not be
used entirely as the farmer may wish;
that the business man realises this is not the time to
take his savings from a lifetime of high wages or profits,
and retire. All of the men who have carried on this
nation's commerce, all of their brains, are necessary in
this total war. Now is simply not the time for an easy
life, or for growing old gracefully and securely, and our
tax bill, in my estimation, need not consider this a factor.
This may seem harsh; but the fact is that all the people who
have so long made plans for "when their ship comes in", all
who may richly deserve the added bounty which they now have,
can not forget that this is war - a deadly, earnest war in
which even partial defeat at the hands of our enemies means
the end of everything. The dollars of these people who may
be temporarily disappointed will go & long way toward bring-
ing victory, and toward holding together our country and our
way of life after the smoke and sound of battle is gone. I
think the American people know that.
I think, therefore, that the tax bill can be severe - very
severe -- 80 long as it is fair, and as equitable as possible, and
simple enough 60 that complicated problems of administration will
not postpone its effectiveness.
Fifth: We must not lose sight of the fact that some family
incomes have been seriously curtailed by the war, and millions of
white collar workers are receiving pre-Pearl Harbor wages and sal-
aries though their living expenses have risen. We expect to be
able to curb these expenses, to keep them from encroaching more
upon these people, and all people. But under any circumstances,
ve can not, as a nation, afford to tax these or any other people
beyond their limit to pay. They. in turn, must remember that the
war robe people of most good things, and when they see their savings
diminishing, let them realize that they, too, owe their plight
directly to Mr. Hitler.
Let me summarise. I will willingly approve a tax bill, and the
Treasury Department will enthusiastically support it, only if it is
drawn up with provisions that take into consideration these facts:
1. That "pay as you go" is not only desirable, but is the most
practical way of paying taxes.
Regraded Unclassified
184
- 4 -
2. That any abatement plan must be as equitable as possible
and must be shared in by all who pay taxes. We must recognise that
our only guide in levying the kind of taxes the war requires is the
hardship factor; and those who have more money must give up more
money, if the only alternative is hardship on any of us.
3. That taxes should at least partially be withheld at source.
4. That any bill drawn up can be severe, 80 long as it is fair
and simple enough to be put into immediate effect.
5. That any bill must be as equitable as possible and especially
must not penalize those whose moderate incomes have not risen since
the war, or whose family incomes have decreased because of the war.
On the basis of these considerations, I believe a practical, fair
tax bill can be drawn up that will meet not only with my approval and
that of Mr. Morgenthau, but also with the approval of the vast majority
of the American people.
I believe the Doughton Bill, passed in the House, is such a bill,
and it is my fervent hope that a bill of that sort will be adopted
immediately by both Houses of Congress, for our time grows short, and
the war rapidly grows more severe and costly. We have no time to lose.
F. D. R.
Regraded Unclassified
185
May 25, 1943
3:44 P. M.
HMJr:
Hello.
Operator:
Mr. Eccles.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Marriner
Eccles:
Hello.
HMJr:
Marriner?
E:
Yes, Henry.
HMJr:
I am sorry to hear that what' s-his-name in
New York 16 sick - Sproul.
E:
Well, I am too. He apparently 1s pretty 111.
HMJr:
Oh.
E:
He - - I called Monday.
HMJr:
Yeah.
E:
His office reported that he was home in bed
running a very high temperature
HMJr:
I see.
E:
and that the doctors had ordered him to
stay there and that he wasn't able to see or to
talk to anyone.
HMJr:
I see.
E:
So he's - he's apparently in - in pretty bad
shape. He was sick - he's been sick for two
or three weeks. He's had - he's had some
stomach trouble
HMJr:
I see.
E:
and the strain and everything apparently
upset it and his resistance, so I understand,
(Cont'd.)
Regraded Unclassified
186
- 2 -
E:
(Cont'd.)
is very low and he took on this very bad
case of the flu, 80 that's where it is.
So he 1sn't - he won't be here tomorrow.
HMJr:
Well, that's too bad. I'd like to Bee you
a half an hour before the others.
E:
All right.
HMJr:
Now I don't know whether you want to come at
9:30 or postpone the other meeting. Which
would you prefer to do?
6:
Well, it might - - Young and what' s-his-name
won't be in until that eight-forty or fifty
train. It - it may be 8.8 well to meet later.
HMJr:
Well....
E:
If those trains happen to be late, which they
are nowadays, they just - they just wouldn't
be there.
HMJr:
Well, would you rather come at ten then?
E:
Yes, ten or ten-thirty, and - and then possibly
let those fellows be subject to call
HMJr:
Well
E:
after they got in.
HMJr:
All right, let'
e
E:
You see, Young 18 coming in from Chicago. We
called Young, and his train doesn't get in, I
think, until about 8:50 if it's on time.
HMJr:
Well, let's say if - - would it be convenient for
you, say, to come over at 10:30?
E:
That would be fine.
HMJr:
And then we could have the others
E:
Subject to call
HMJr:
Right.
5
....after they got in.
Regraded Unclassified
- 3 -
187
HMJr:
Right.
E:
Is that okay?
HMJr:
That would be fine.
E:
Are you in town?
HMJr:
I'm in - I've - - I've been here since this
morning.
E:
Well, I'll - I'll come over then at - at
10:30 and advise the others that - that this
thing will be subject to call. There's only
four of them coming. I asked Young, Fleming,
Leach and Williams..
HMJr:
Right.
E:
....and, of course, Sproul.
HMJr:
Right.
E:
But there will only be the four in here.
HMJr:
And the Board, I take it.
E:
The Board will all be here. What's-his-name -
Evans is a delegate down to this Food Confer-
ence.
HMJr:
I see.
E:
He was going down tomorrow
HMJr:
Yeah.
E:
and I suggested that he - if he could, to
stay over
HMJr:
Yeah.
E:
8.8 I thought that this was important enough
for him
HMJr:
Yeah.
is
to be here.
HMJr:
Yeah.
Regraded Unclassified
188
- 4 -
E:
So the Board will all be there.
HMJr:
Good. Well, then let's say - I'll look
forward to seeing you at 10:30.
E:
Yes. Okay.
HMJr:
Thank you.
E:
All right. Goodbye.
Regraded Unclassified
1894
May 25, 1943
6:01 P. M.
Randolph
Paul:
Did you?
HMJr:
I had no news.
P:
Well, I just had a conversation about five
minutes ago
HMJr:
Yes.
P:
....it was - it was just one minute ago, in
fact -- that - that there's a - a bill has
been voted out of the Conference Committee
75%.
HMJr:
I see.
P:
The way it happened was that Doughton desert-
ed the Democrats and went with the Republicans.
HMJr:
Well, I'll be damned.
P:
So the vote in the House conferees was four to
three
HMJr:
Yeah.
P:
three Republicans and Doughton, four - and
Cooper and Dingell and Disney stuck out against
it.
HMJr:
Who did?
P:
Cooper and Dingell..
HMJr:
Yes.
P:
of Michigan and Disney.
HMJr:
I'll be damned.
P:
And - BO that'll bring the 75% issue up and then,
of course, the next question is the veto or no -
to veto or not to veto.
HMJr:
Yeah.
P:
To be or not to be.
HMJr:
And what did - what did the "Great Czar" Byrnes -
what did he tell them this morning?
Regraded Unclassified
190
- 2 -
P:
Well, he told them 621 - he - he told them
this morning that the President would veto any-
thing like that; that he would advise the Presi-
dent to veto; that the ultimate he'd go to was
60 or 621%. But it seems to me - of course,
that Was R. private conference and - but that 1s
a - you - you can't justify vetoing 75% and - and
and not vetoing 621% - I mean the whole point 1s
that either one of them has got the wrong principle
of distribution of forgiveness, and that's the
only ground on which you can stand.
HMJr:
Well, we'll talk about that tomorrow.
P:
Yeah. Well, you call me. I beg your pardon.
Did you have something in mind?
HMJr:
What are you begging my pardon for? I had to
P:
Well, I interrupted you. I - you
HMJr:
No.
P:
I wondered if you had something to say.
HMJr:
I - I was calling you up for news.
P:
Oh, you were? Well, I thought you wanted to tell
me something.
HMJr:
No, I want to listen.
P:
Well, you've listened to the very latest dope.
HMJr:
And when - that'll come before the House tomorrow?
P:
No, it'll - it'll come up on Thursday for the rep.. -
Conference Report to be signed.
HMJr:
I see.
F:
And - and you - of course, you know where I got
my information.
HMJr:
Yeah.
P:
And that member is not going to eign 1t. He's - in
fact, he just asked me to write him a speech for
Friday on the floor.
HMJr:
I see. Okay. Well, we'll have plenty of time to
talk about it tomorrow.
Regraded Unclassified
191
- 3 -
P:
Yeah. All right. That's the - you got the
latest.
HMJr:
Thank you.
Regraded Unclassified
192
May 25, 1943
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Gaston
Chick Schwarz learned through George Bryant,
who has taken Gene Duffield's place as head of the
Washington bureau of the Wall Street Journal, that
the single sentence appearing in the column of
miscellaneous notes of the Wall Street Journal last
Friday, to the effect that Chairman Eccles thought
it would be a good thing if one of the bond drives
should be 8. failure, was based on a conversation
between Eccles and several reporters for different
newspapers, including both the Wall Street Journal
and the Journal of Commerce, following the hearings
on Thursday before the House Banking and Currency
Committee on the propriety of the use of Government
securities as a reserve against Federal Reserve notes.
Mike Flynn was the Journal reporter present. He said
that Eccles had expressed the belief that a very high
goal should be established for bond drives and that
it might be a good idea if one of the drives should
fail to reach the goal so that the country might be
awakened to the urgent need for funds to finance the
war.
The original submission of the Journal's bureau
here for the column consisted of several sentences
expressing this full idea, but it was trimmed on the
desk to leave but the one sentence. This one sentence
was in the mail edition but was dropped out in later
editions.
I am attaching 8. copy of Ted Goldsmith's weekly
letter giving his version of the same interview.
us.
Regraded Unclassified
194
THE GOLDSMITH WASHINGTON SERVICE
Devoted Exclusively to
UNITED STATES GOVERNMENT SECURITIES
NATIONAL PRESS BUILDING
TELEPHONE NATIONAL MM
WASHINGTON, D, C.
BULLETIN NO. 161
ISSUED EVERY OTHER WEEK AT the THE YEAR
MAY 12, 1948
A POST MORTEM ON THE TREASURY'S SECOND VICTORY
FUND DRIVE
A POST MORTEM ON THE TREASURY'S SECOND VICTORY FUND DRIVE
At a press conference on May 10 Under Secretary of the Treasury Daniel W. Bell gave out detailed
figures on the results of the Second Victory Loan drive which we are publishing in full at the end of this
Bulletin. An article in the May Federal Reserve Bulletin, made public last Friday, contains a good
deal of statistical information on the results of the last drive not heretofore available.
At his press conference Under Secretary Daniel W. Bell stated that the next or third Victory Loan
drive would not come "earlier than next September." But. Mr. Bell did not wish to imply that the next
Treasury drive might not come later than September.
Mr. Bell definitely stated that there would be an interim open market financing operation between
now and the next drive. It is believed this open market financing is likely to be announced in July.
Mr. Bell made it clear that $629 million 1½% Treasury notes maturing on June 15, 1943, $450 million
3%% Treasury bonds called for payment on June 15, 1943 and $324 million 11/3% Reconstruction Finance
Corporation notes due July 15, 1943 would be paid off in eash on maturity.
Under Secretary Bell was asked whether the Treasury would separate commercial bank financing
from the next War Loan drive for bona fide investors, and he replied that the Treasury had considered
this plan in connection with the first War Loan drive last December, again before the second War Loan
drive in April and that the Treasury would consider the separation of commercial bank financing again.
But no definite decision on the timing and the nature of the next Victory Fund drive has been reached
yet. Treasury officials point out that the separation of commercial bank financing is not a simple decision
to make particularly if securities eligible for commercial bank purchase continue to be offered in these
general drives.
It is known that the Treasury will seriously consider confining the next War Loan campaign to 21/4's
and 21/1/8 neither of which would be eligible for commercial bank purchase for a period of years. If this
suggestion is adopted it would also leave out of the next general Victory Loan drive corporations with
temporarily idle funds.
Many bankers feel that one-year certificates have no place in a War Loan campaign. They point out
that $3100 million of the $13,500 million total sold to non-banking sources in the recent drive consisted
of 1/1% certificates. It is known that the Treasury considered closing the books on the 7/6'm during the
drive but decided not to change the rules during the campaign.
The Treasury will not only consider the separation of commercial bank financing from the next
Victory Fund drive but also the separation from the next drive of the sale of short-term Treasury
securities to industrial corporations.
ECCLES ON BANK FINANCING
cial banking system in the proper role of under-
It is known that Mr. Eccles thought the Treas-
writers. He is known to think that it might be
ury should have fixed 8 high goal for the financing
better to have a near failure on a Victory Loan
and to have announced in advance that only such
drive in order to allow the public to realize the
part of the total which could not be placed with
substantial amount of the War deficit that is now
bona fide investors and investment institutions
being financed through the inflationary commer-
would then later be offered to the commercial
cial bank route. Mr. Eccles believes that the best
banks. He believes this would place the commer-
method of controlling the sale of Government secu-
COPYRIGHT, 1043. THED R. GOLDSMITH
Regraded Unclassified
194
THE GOLDSMITH WASHINGTON SERVICE
Devoted Exclusively to
UNITED STATES GOVERNMENT SECURITIES
NATIONAL PRESS BUILDING
TELEPHONE NATIONAL 8600
WASHINGTON, D.C.
BULLETIN NO. 161
ISSUED EVERY OTHER WEEK AT 150 THE YEAR
MAY 12, 1948
A POST MORTEM ON THE TREASURY'S SECOND VICTORY
FUND DRIVE
A POST MORTEM ON THE TREASURY'S SECOND VICTORY FUND DRIVE
Al a press conference on May 10 Under Secretary of the Treasury Daniel W. Bell gave out detailed
figures on the results of the Second Victory Loan drive which we are publishing in full at the end of this
Bulletin. An article in the May Federal Reserve Bulletin, made public last Friday, contains a good
deal of statistical information on the results of the last drive not heretofore available,
At his press conference Under Secretary Daniel W. Bell stated that the next or third Victory Loan
drive would not come "earlier than next September." But Mr. Bell did not wish to imply that the next
Treasury drive might not come later than September.
Mr. Bell definitely stated that there would be an interim open market financing operation between
now and the next drive. It is believed this open market financing is likely to be announced in July.
Mr. Bell made it clear that $629 million 11/2% Treasury notes maturing on June 15, 1943, $450 million
3%% Treasury bonds called for payment on June 15, 1943 and $324 million 1½% Reconstruction Finance
Corporation notes due July 15, 1943 would be paid off in cash on maturity.
Under Secretary Bell was asked whether the Treasury would separate commercial bank financing
from the next War Loan drive for bona fide investors, and he replied that the Treasury had considered
this plan in connection with the first War Loan drive last December, again before the second War Loan
drive in April and that the Treasury would consider the separation of commercial bank financing again.
But no definite decision on the timing and the nature of the next Victory Fund drive has been reached
yet. Treasury officials point out that the separation of commercial bank financing is not a simple decision
to make particularly if securities eligible for commercial bank purchase continue to be offered in these
general drives.
It is known that the Treasury will seriously consider confining the next War Loan campaign to 2½'s
and 2½'s neither of which would be eligible for commercial bank purchase for a period of years. If this
suggestion is adopted it would also leave out of the next general Victory Loan drive corporations with
temporarily idle funds.
Many bankers feel that one-year certificates have no place in a War Loan campaign. They point out
that $3100 million of the $13,500 million total sold to non-banking sources in the recent drive consisted
of %% certificates. It is known that the Treasury considered closing the books on the 1/2"B during the
drive but decided not to change the rules during the campaign.
The Treasury will not only consider the separation of commercial bank financing from the next
Victory Fund drive but also the separation from the next drive of the sale of short-term Treasury
securities to industrial corporations.
ECCLES ON BANK FINANCING
cial banking system in the proper role of under-
It is known that Mr. Eccles thought the Treas-
writers. He is known to think that it might be
ury should have fixed a high goal for the financing
better to have a near failure on a Victory Loan
and to have announced in advance that only such
drive in order to allow the public to realize the
part of the total which could not be placed with
substantial amount of the War deficit that is now
bona fide investors and investment institutions
being financed through the inflationary commer-
would then later be offered to the commercial
cial bank route. Mr. Eccles believes that the best
banks. He believes this would place the commer-
method of controlling the sale of Government secu-
COPYRIGHT, 1643. THEO. n. DOLDEMITH
Regraded Unclassified
2
The Goldsmith Washington Service
The Goldsmith Washington Service
3
rities to cummercial banks Le via the control of
have included the seven-eighths certificates in the
That was all part of the program. That was
civilian purchase, this volume of sales to the
escess reserves. He thinks that excess reserves
public drive.
agreed to several weeks before the drive started,
public can be reached or surpassed. Personal and
must now be allowed to decline to sharply lower
In setting up the quota of 813 billion that was
because there was a Int of educational work to
business savings will be on a large scale and
levels if Government security prices are to be kept
arrived at by a digest of various opinions. Some
be done.
Government security offerings will be the only
from rising too rapidly and the pattern of interest
farge-scale new outlet for investment funds.
rates la to be maintained. At a bearing DEL May
thought billion $12 billion and some thought $18
FEDERAL RESERVE BULLETIN
10 before the House Banking and Currency Com-
"Treasury estimates indicate that in the last
mittle, in reply to questions by Congressman
The Federal Reserve Bulletin, which in pub-
six months of 1942 individuals invested in Gov.
Mr. Patman: That does not answer the ques-
Wright Patman of Texas, Mr. Eccles made the
tion, Mr. Eccles. The fact is that the figure they
Ished monthly and sent to all member banks and
ernment securities about 47 per cent of their
following remarks pertinent to this question:
set Was reached and it was oversubscribed outside
can be obtained by anybody else for $2.00 per
personal savings remaining after payments for
Mr. Patmon: One other question about this
the commercial banks. Since it was oversub-
annum, frequently contains very pertinent infor-
life Insurance, reduction in debt, and Increase in
bond drive. We were told by Mr. Morgenthau, if
scribed outside the commercial banks, why should
mation written by experts. Earlier in this Bulle-
savings bank deposits. This proportion Increased
tin we referred to an article in the May Federal
to more than the on per cent goal set for the first
not before this committee, before the Ways and
they create 85 billion more through the commer-
Means Committee, that he expected to obtain about
clal banks?
Reserve Bulletin on the results of the War Loan
four months of 1943, and the Treasury's tentative
drive. It contains some information not else-
program calls for increases to 65 in the second
$15 billion in this second War Bond drive, and
Mr. Eceles: They had already created $2 billion
that If necessary, he expected to get $5 billion
where made available. It probably deserves care-
four months and to 75 por cent in the last four
through the commercial banks the day the drive
ful reading by all those interested in Treasury
months of the year. Under this schedule individ-
of that from commercial banks. Of course, he
opened. They net up a quota of 813 billion to be
unle will add to thele holdings in 1943 about 25
looks with disfavor upon the commercia) banks'
financing.
raised during a period of 3 weeks. Eight billion
billion dollars, including Suvings Bonds and tax
creating the money to pay the cont of the war.
of that was to be gotten outside of the commercial
Here are a few of the things which the research
botes.
You do and 1 do, and everyone else does, because
banks, Then $5 billion was to be gotten from the
people in the Federal Reserve Board apparently
It in highly inflationary.
think are important, in considering the results of
"The Treasury similarly has estimated that
commercial banks during this 3 weeks' period.
the April War Loan drive.
corporations, other than banks and insurance com-
Since this War loan drive was so successful and
It was $200 million a week in Treasury bills.
panies, invested in Government securities 72 per
people who had money to buy brands actually pur-
We have been increasing the bill offering períodi-
"The largest percentage increases compared
cont of their newly available accumulations in the
chased $13 billion or more, why did they then
cally. In other words, the 90-day bills have à
with the December drive were in sales to corpora-
last six months of 1942. In the first four months
permit the commercial banks to purchase $5 bil-
roll-over overy If weeks, and we have been step-
tions, other than insurance companies, and to
of the current year they increased this proportion
lion more when It Was not nécessary?
ping them up so that each week there has been
individuals. Increased response by individuals to
substantially, and the Treasury program calls for
$200 million of new money that we got every
the latest drive is encouraging, but even more
further increases. reaching 86 per cent in the
Mr. I was opposed to including the
week besides refunding or rolling over the amount
progress in this direction is necessary if enough
last four months of the year. For the year as a
commercial banks la this financing.
that was maturing. The Treasury Included, for
corrent income is to be diverted into the war
whole corporations are expected to add about 13
Mr. Palmen: Well, it looked to me like it Was
the purpose of the drive, all of the bills that were
effort."
billion dollars to their holdings of Government
unnecessary.
sold during the month of April, just as they
included all of the War Savings bonds for the
"It la expected that an increasing proportion of
securities.
Mr. Eccles: Let me will you the WAY the thing
entire month.
the needed funds will be raised from nonbanking
"These purchases of Government securities by
was handled. Before the drive was commenced
investors, particularly from individuals. Part
individuals and businesses, added to about 5 bill-
Mr. Potman: Yes, I understand that.
we had to net up a quota for nonbanks, and it
will be obtained through continuing sales of Sav-
Ilon dollars expected from insurance companies
was folt that 88 billion was a conservative
Mr. Ecelen: Now, $200 million each week for
ings Bonds and tax notes and by a limited amount
and mutual savinga banke and more than 4 billion
amount
the 4 weeks was $800 million that it WAS contem-
of Anancing in the market between drives. The
from Government investment accounts, would
plated would be taken largely by the commercial
larger part, however, is expected to be raised
total 48 billion dollare from nonbanking sources
Mr. Patman: Was a maximum, Mr. Morgen-
thau said.
banks because they are the market for Treasury
through special large-scale drives similar to that
in the calendar year, leaving 22 billion to be
bills, They then figured $2 billion of 76% certifi-
in April.
bought by commercial banks. For the purpose of
combating inflation, an well as for obtaining #
Mr. Reclea: We felt It was the minimum that
cates would be offered to the banka on the opening
"With 25 billion dollars of additional securities
wide distribution of the public debt. every effort
could be gotten. I certainly did not think it was
day of the drive, and the books would be left open
nold in the first four months of this year, it is
should be made not only to achieve but to surpase
the maximum. I felt It was the minimum, and 1
for 2 or a days-2 days, I think It Was.
estimated that commercial banks increased their
this groal."
think that the Reserve people generally felt that
88 billion was the minimum that could be gotten
The banks subscribed for over $9 billion. They
holdings by about 10 billion dollars, lucluding
allotments of 2 per cent bonds to be paid for in
outside the commercial banks at that time. 1
were allotted in full up to $100,000. The balance
May. Holdings of Federal Reserve Banks in-
ROBBINS RESIGNATION
know some of Un falt that even $10 billion would
was prorated. and it figured an 18 percent allot-
ment on their subscriptions. The Treasury al-
creased slightly In the period. Bank purchases.
We reported in Bulletin No. 150 dated April 24.
be a safe amount to put in a quota and to exclude
lotted $2,100 million approximately.
therefore, absorbed about 40 per cent of the
1943 that W. M. Robbins. fairly newly appointed
commercial banks, but the Treasury suid that
Increase in the public debt in the first third of
Chairman of the War Finance Committee (the
they needed thirteen or fourteen billion or they
Mr. Patman: At 2 percent?
1948, compared with about half of the increase in
purpose of which was to coordinate the squabhles
would have to have another drive too soon.
Mr. Recles: No, at seven-eighths. They an-
the last four months of 1942. It is the aim of the
between the Victory Fund Committees and the
I fell that they should get their money outside
nounced before the drive opened that they would
financing program that bank purchases in the
War Savings Staff) was getting disgusted and
of the commercial banks and decide what they
future constitute much less than 40 per cent of
get from the banks approximately $5 billion; that
was about to resign. Secretary Morgenthau an-
should get from the commercial banks after they
the total.
they would get $2 billion in certificates the first 3
nounced last Monday with regret that Mr. Robbins
found out what they could gret from the public,
days of the drive: that they would get $2 billion
"To achieve this aim it will be necessary to sell
had resigned. All those interested are hopeful
and get what was then needed from the commer-
in 2 percent bonds the last 3 days of the drive;
to nonhanking investors sbout twice as much as
that the Inexcusable and purely bureaucratic con-
cial banks in the Interim between the public drives
by making available to the banks what was known
and that the banks would not be permitted to
In 1942. With the rapid growth of national In-
troversy between the War Savings Staff of the
as short-term bank paper largely, I would not
subscribe for any other securities and in any
come, growing out of expanding war activities,
Treasury Department and the largely volunteer
and the diminishing supply of goods available for
workers of the Victory Fund Committee will be
greater amount.
SECRETARY OF THE TREASURY
195
May 25, 1943
4
The Goldsmith Washington Service
smoothed out before the next War Loan drive
But the minute they put foot on American will
CHAIRMAN
takes place.
they found it impossible to buy even a bag of
PRESIDENT ne 1. : ....
ETHIOPIAN PROBLEMS
peanuts with their gold. The State and Treasury
The three Ethiopian delegates to the United
Departments spent a couple of embarrassing days
to consummate the purchase of this gold for burial
Nations Food Conference now being held at Hot
in Fort Knox, Kentucky. A lot of water has gone
Springs are pretty much disillusioned about the
over the dam since many of us were imbued with
EXECUTI MARAGER
value of gold. Someone told me that they had
the philosophy of the old-fashioned "gold stand-
considerable trouble In scraping up $40,000.- In
ard" and the horse-and-buggy days. Anyway, the
gold to cover their expenses to this country. They
Ethlopian delegates apparently discovered on their
had no trouble in buying airplane transportation
arrival in the United States of America that gold
from Ethiopia to the United States with this gold.
lan't what it used to be.
ASSISTANT EXECUTIVE MANAGER
ASSISTANT EXECUTIVE MANAGER
ANALYSIS OF SUBSCRIPTIONS TO SECURITIES OFFERED DURING SECOND WAR LOAN
BY CLASSES OF INVESTORS AND BY ISSUES
Class of Investors
Amount of subscriptions-In millions of dollars
bote
Tax
PVS
2%
. DEPUTY MANAGERS
Berrice
Serie
é
Somde
Invoice
SE
E
and
Ária C
Total
3.000-2
cortificates
Bills
1. Nonbanking investors:
(a) Individuals, partnerships, and
personal trust accounta
1,474
425
132
540
472
246
-
(b) Insurance companies
3,290
-
I
1,682
708
123
-
(e) Savings banks
2,408
-
-
I
550
539
10E
-
(d) Eleemosynary institutions
1,195
-
1
I
36
41
41
-
(c) State and local governments
117
OHIO
PENNSYLVANIA
KENTUCKY
WEST VIRGINIA
-
-
-
181
82
241
I
(f) Other corporations and associations
003
-
342
1,520
504
789
1,988
-
5,038
(in) Subtotal-all nonbanking investors
1,473
067
1,653
11. Banking sources (allotments only)
8,392
2,626
2,738
-
12,580
-
-
-
-
III. Other sources:
2,110
2,138
800
5,048
(n) Dealers and brokers
2 AREAS
1 AREA
I
-
-
-
(b) U. 8. Government agrinties and trust funds
189
355
-
M44
a AREAS
1 AREA
-
-
-
369
to
is
I
09)
IV. Total-all investors
1,472
647
1,682
3,761
4,935
5,244
800
18,033
Office of the Berretary if the Train, at Besinb and Statistics,
MAY 10, NO.
Note: Net Increase Classifications in amount are intelling prelimizary dirring and - minis from will, are partix entimated. Farm are and 4a not add la totals.
Exchaing the amounts distributed M for distribution to nationality These have - among the approvation
2 AREA IRNER
1. AREA CHAYOMAN
Investor risases.
4 AREA CHAIRMEN
# AREA CHAIRMAN
COMPARISON OF THE SUBSCRIPTIONS TO SECURITIES OFFERED DURING SECOND WAR LOAN WITH THE
GOALS SET FOR THESE SUBSCRIPTIONS BY MAJOR CLASSES OF INVESTORS AND BY
FEDERAL RESERVE DISTRICTS
I AREA MANAGERS
1 AREA MANAGER
Amounts in millions of dollars
4 AREA MANAGERS
: AREA MANAGER
Nonbanking Inventors
Percent of gol
Individuals,
partneration
Pubtotal for
accomplished
and
all
and personal
Banking
Other
United
I
firesd total
Hab-
las
DISTRICT
liste
eng-
error
5%
Fale
Illine
Guil
intig-
Allat-
time
tions
acrip-
Gost
the
time
Gral
Individuals,
partnerships
I
accurate
Goal
Corporations
I
I
Grand -
I
S.A COUNTIES
5 COUNT IES
!
88 COUNTIES
19 COUNTIES
Coal
Borton
166
200
BSS
600
New York
1,099
800
-
TAT
800
I
4,119
I
|
-
-
2,400
83 156 137
-
Philadelphia
4,856
3,000
Executive and Assistant Executive Managers to be appointed by Chairman, subject to
202
-
150
I
I
444
-
I
325
I
123
172
162
I
Cleveland
645
475
804
-
250
I
I
668
200
I
I
-
135
137
1M
-
972
approval of Secretary of the Treasury.
Richmond
050
195
I
150
I
I
393
-
I
I
122
223
177
-
200
688
Deputy Managers to be appointed by Secretary of the Treasury after consultation with
Atlanta
350
I
230
129
I
211
-
-
125
-
-
130
197
168
1
Chienge
448
250
495
I
400
I
1,210
I
-
650
I
-
189
169
170
-
and approval by the Chairman.
8L Louis
1,705
105
1,050
-
100
I
251
-
I
150
I
-
124
186
102
I
Minneapolis
406
Area Chairmen to be appointed by Chairman after consultation and approval by
250
126
-
75
I
170
I
155
167
162
-
-
100
-
I
Kansas City
291
175
163
1
100
I
175
I
-
125
-
-
168
170
169
-
Secretary of the Treasury.
Dallas
338
235
140
I
75
I
-
181
125
-
-
-
163
140
100
-
Notice of all appointments to be issued by the Chairman except those in County
333
San Francisco in
200
I
575
-
502
/
-
400
-
-
199
146
167
-
Unallocated
R35
2
675
I
I
-
I
-
-
I
121
126
184
-
I
I
Total
29
I
3,290
2,500
6,048
9,283
5,000
ass
rganizations. Area Chairmen to appoint County Chairmen and to notify them of appointment.
5,500
-
12,550
6,012
-
-
8,000
5,048
5,000
935
-
18,583
13,000
142
105
15T
147
Co-Chairmen to be appointed by Area Chairmen with notice of appointment from Area
Nate: if the Everytary are of the Treasury, Division et Breank and Statiation,
MAY no 1941.
Copsists Investies. of 11, 5. Generalment unliminary Approve and and - trait fatire has are and parti) the retimated Flayres of desiers sure rounded and and do - sei distributed - - all extracted to value be -
Chairmen. Area to have full responsibility within their respective areas.
This letter is capyrighted and prepared for the confidential information of own clients.
which should include Deputy Manager for each full State or part of State within of War Federal
Deputy Chairmen Managers and staffs wherever located to be on Treasury Department payroll,
Copying are quotation from then without specific permission is prohibited.
Savings Bonds and Stamps, both to the general public and through payroll savings plans.
Reserve District, with a responsibility for the continuous promotion and sales
May 25, 1943
196
Clearing House Associations
#
---
Reserve Cities
---
Clearing House Examination Cities
Deposits as of
Population
12-31-42
(in thousands of Dollars)
Aberdeen,
South Dakota
$ 15,525
17,015
Abilene,
Texas
22,800
26,612
Akron,
Ohio
139,278
244,800
Alameda,
California
1,577
36,256
Albany,
Georgia
11,429
19,055
Albany,
New York
473,493
130,577
Albert Lea,
Minnesota
5,047
12,200
Alexandria,
Virginia
22,376
33,523
Allentown,
Pennsylvania
53,222
96,904
Alliance,
Ohio
19,599
22,400
Altoona,
Pennsylvania
19,535
80,214
Amarillo,
Texas
44,729
51,700
Ames,
Iowa
6,829
12,555
Anderson,
Indiana
18,679
41,572
Anniston,
Alabama
19,701
25,523
Arkansas City,
Kansas
4,847
12,752
Ardmore,
Oklahoma
6,761
16,886
Asheville,
North Carolina
7,976
51,310
#Atlanta,
Georgia
356,797
302,288
Atlantic City,
New Jersey
20,468
64,094
Auburn,
New York
37,877
35,753
Augusta,
Georgia
28,872
65,919
Aurora,
Illinois
23,467
47,170
Austin,
Texas
59,423
88,000
Bakersfield,
California
Not available
29,252
*Baltimore,
Maryland
1,014,540
859,100
Bangor,
Maine
56,117
29,822
Bartlesville,
Oklahoma
16,943
16,267
Battle Creek,
Michigan
23,626
43,453
Bay City,
Michigan
29,375
47,956
Regraded Unclassified
197
-2-
Deposits as of
Population
12-31-42
Beaumont,
Texas
$
51,998
59,000
Bellingham,
Washington
6,464
30,000
Beloit,
Wisconsin
17,116
25,300
Berkeley,
California
Not Available
85,500
Bethlehem,
Pennsylvania
32,122
58,500
Billings,
Montana
23,613
23,260
#Birmingham,
Alabama
203,114
267,500
Bismarck,
North Dakota
8,087
15,500
Bloomington,
Illinois
27,933
32,800
Boise,
Idaho
106,049
26,100
*Boston,
Massachusetts
2,692.397
771,000
Bowling Green,
Kentucky
8,481
14,500
#Bridgeport,
Connecticut
227,348
147,100
Bristol,
Tenn - Virginia
14,277
~
14,000
Tenn
(
9,768
Va.
Brunswick,
Georgia
9,152
15,000
#Buffalo,
New York
702,424
576,000
Butler,
Pennsylvania
29,745
24,500
Cambridge,
Massachusetts
141,675
111,000
Camden,
Arkansas
5,022
9,000
Canton,
Ohio
74,796
108,400
Carthage,
Missouri
5,574
10,500
Casper,
Wyoming
14,082
18,000
*Cedar Rapids,
Iowa
73,202
62,100
Champaign,
Illinois
20,207
23,300
Charles City,
Iowa
4,731
8,700
Charleston,
South Carolina
148,734
71,000
Charleston,
West Virginia
95,924
68,000
#Charlotte,
North Carolina
194,421
100,899
Chattanooga,
Tennessee
129,900
128,000
Chester,
Pennsylvania
38,781
60,000
Cheyenne,
Wyoming
25,789
22,400
*Chicago,
Illinois
5,719,419
3,400,000
*Cincinnati,
Ohio
639,577
455,000
*Cleveland,
Ohio
1,321,255
878,000
Clinton,
Iowa
14,936
26,200
Colorado Springs, Colorado
36,736
36,700
Columbia,
Missouri
10,929
18,400
Columbia,
South Carolina
12,290
62,300
Columbus,
Georgia
37,666
53,800
*#Columbus,
Ohio
263,456
306,000
Regraded Unclassified
198
-3-
Deposits as of
Population
12-31-42
Concord,
New Hampshire
48,990
27,000
Corsicana,
Texas
11,181
15,000
Council Bluffs,
Iowa
16,983
41,500
Cumberland,
Maryland
24,601
40,000
#Dallas,
Texas
523,001
295,000
Danville,
Illinois
19,359
37,000
Danville,
Virginia
22,922
33,000
Dayton,
Ohio
127,400
211,000
Denver,
Colorado
337,270
322,000
Derby,
Connecticut
16,794
10,000
*Des Moines,
Iowa
184,254
160,000
*Detroit,
Michigan
1,877,370
1,620,000
Dodge City,
Kansas
6,010
8,500
*Dothan,
Alabama
16,097
17,000
DuBois,
Pennsylvania
10,409
12,000
»Dubuque,
Iowa
23,840
44,000
#Duluth,
Minnesota
100,042
101,000
Durham,
North Carolina
50,716
60,000
East St.Louis,
Illinois
27,583
76,000
Elkhart,
Indiana
18,913
33,400
*El Paso,
Texas
70,919
96,900
Elyria,
Ohio
19,994
25,100
Emporia,
Kansas
7,721
13,100
Enid,
Oklahoma
15,255
28,000
Erie,
Pennsylvania
79,875
117,000
Eugene,
Oregon
19,124
21,000
Evanston,
Illinois
38,989
65,000
Evansville,
Indiana
102,481
97,000
Fall River,
Massachusetts
85,029
115,000
Fargo,
North Dakota
27,064
32,500
Fergus Falls,
Minnesota
5,993
11,000
Fort Dodge,
Iowa
11,354
23,000
Fort Wayne,
Indiana
97,200
118,000
#Fort Worth,
Texas
223,489
178,000
Frederick,
Maryland
22,117
15,900
Fremont,
Nebraska
9,003
12,000
Gainesville,
Georgia
5,299
10,200
*Galveston,
Texas
67,215
61,000
Gastonia,
North Carolina
11,042
21,300
Glendale,
California
4,915
82,500
Regraded Unclassified
199
-4-
Deposits as of
Population
12-31-42
Grand Forks,
North Dakota
10,516
20,200
Grand Island,
Nebraska
13,512
19,000
*Grand Rapids,
Michigan
97,068
164,000
Great Falls,
Montana
35,315
30,000
Greeley,
Colorado
10,641
16,000
Green Bay,
Wisconsin
28,016
46,000
Greensboro,
North Carolina
44,816
60,000
Greenville,
Mississippi
8,751
21,000
Greenville,
South Carolina
21,106
35,000
Greenwich,
Connecticut
34,506
6,000
Griffin,
Georgia
5,162
13,000
Guthrie,
Oklahoma
4,823
10,000
Hagerstown,
Maryland
20,177
32,000
Hamilton,
Ohio
31,145
50,500
Hannibal,
Missouri,
8,334
20,800
Harrisburg,
Pennsylvania
73,424
84,000
Hartford,
Connecticut
496,800
166,000
Hattiesburg,
Mississippi
17,820
21,000
Hazelton,
Pennsylvania
37,530
38,000
*Helena,
Montana
30,539
15,056
Hibbing,
Minnesota
7,960
16,000
Hollywood,
California
6,206
(included in LosAngeles
Holyoke,
Massachusetts
64,063
54,000
Hot Springs,
Arkansas
8,108
21,000
*Houston,
Texas
528,902
384,000
Huntington,
West Virginia
28,757
79,000
Huron,
South Dakota
2,247
11,000
#Hutchinson,
Kansas
21,358
30,000
Independence,
Missouri
7,544
16,000
#Indianapolis,
Indiana
476,293
386,000
Jackson,
Michigan
30,950
50,000
Jackson,
Mississippi
65,979
62,000
*Jacksonville,
Florida
221,517
173,000
Jamestown,
New York
48,800
43,000
Janesville,
Wisconsin
15,446
23,000
Joplin,
Missouri
18,463
37,000
Kane,
Pennsylvania
2,873
6,100
*Kansas City,
Kansas
72,033
121,000
*Kansas City,
Missouri
746,362
400,000
#Knoxville,
Tennessee
83,816
111,500
Regraded Unclassified
200
-5-
Deposits as of
Population
12-31-42
LaCrosse,
Wisconsin
$
18,999
43,000
Lafayette
Indiana
27,111
29,000
Lancaster,
Ohio
9,200
21,000
Lancaster,
Pennsylvania
50,037
61,000
Lansing,
Michigan
121,644
79,000
Laramie,
Wyoming
6,913
10,000
Lawrence,
Kansas
10,120
14,000
Lebanon,
Pennsylvania
20,783
27,200
Lewistown,
Maine
42,466
39,000
Lexington,
Kentucky
42,596
49,000
Liberal,
Kansas
4,200
4,400
*Lincoln,
Nebraska
87,063
82,000
*Little Rock,
Arkansas
107,239
88,000
Long Beach,
California
116,847
164,000
Lorain,
Ohio
11,627
44,000
*#Los Angeles,
California
1,480.942
1,500,000
#Louisville,
Kentucky
369,100
319,000
Lowell,
Massachusetts
70,285
101,000
Lynchburg,
Virginia
28,553
45,000
Lynn,
Massachusetts
91,750
98,000
Macomb,
Illinois
7,054
8,800
Macon,
Georgia
19,651
58,000
Madison,
Wisconsin
55,453
67,000
Manchester,
New Hampshire
81,790
78,000
Manhattan,
Kansas
7,118
11,700
Manitowoc,
Wisconsin
16,820
24,000
Mankato,
Minnesota
14,539
16,000
#Mansfield,
Ohio
26,563
37,000
Marietta,-
Ohio
12,509
14,000
Marionette,
Wisconsin
7,664
14,000
Marion,
Ohio
13,749
31,000
Martinsburg,
West Virginia
8,731
15,000
Mason City
Iowa
17,658
27,000
Meadville,
Pennsylvania
16,005
19,000
*Memphis,
Tennessee
330,160
293,000
Meriden,
Connecticut
31,940
40,000
Meridian,
Mississippi
19,960
35,000
Mexico,
Missouri
4,454
9,000
Miami,
Florida
104,873
172,000
Michigan City,
Indiana
12,816
26,000
Regraded Unclassified
201
-6-
Deposits as of
Population
12-31-42
Milledgeville,
Georgia
$
3,882
6,800
*Milwaukee,
Wisconsin
572,164
588,000
#Minneapolis,
Minnesota
675,480
492,000
Minot,
North Dakota
10,775
16,500
Mobile,
Alabama
138,394
78,700
Modesto,
California
Not Available
16,200
Montclair,
New Jersey
54,446
40,000
#Montgomery,
Alabama
54,753
78,000
Mount Carmel,
Pennsylvania
7,977
18,000
Muncie,
Indiana
37,123
50,000
Muskegon,
Michigan
37,297
48,000
Muskogee,
Oklahoma
23,867
32,000
Nashua,
New Hampshire
24,996
32,000
Nashville,
Tennessee
242,895
167,000
Nebraska City,
Nebraska
3,966
7,300
Neenah,
Wisconsin
10,857
10,700
New Albany,
Indiana
9,440
25,000
New Albany,
Mississippi
3,428
3,600
#Newark,
New Jersey
672,303
430,000
Newark,
Ohio
17,898
31,000
New Bedford,
Massachusetts
94,647
110,000
Newburgh,
New York
39,827
31,900
Newcastle,
Pennsylvania
27,795
47,000
New Haven,
Connecticut
226,347
160,000
New Kensington,
Pennsylvania
12,927
24,000
New London,
Connecticut
50,240
31,000
#Newnan,
Georgia
5,149
7,100
New Orleans,
Louisiana
460,729
495,000
Newport,
Rhode Island
39,322
30,500
Newport News,
Virginia
32,373
37,000
New Rochelle,
New York
34,670
58,000
+New York
New York
27,903,455
7,450,000
Niagara Falls,
New York
50,801
78,000
Norfolk, (incl. Portsmouth, Va.
163,907
{ ( 144,000 Norfolk
( 50,745 Portsm.
Norristown,
Pennsylvania
28,840
38,000
Northern New Jersey
Clearing House, New York,N.Y.
438,949
526,098
Norwalk,
Connecticut
21,650
40,000
Oakland,
California
91,240
302,000
#Ogden,
Utah
62,214
43,600
Regraded Unclassified
-7-
202
Deposits as of
Population
12-31-42
Oil City,
Pennsylvania $
24,363
20,000
»Oklahoma City,
Oklahoma
175,482
200,000
#Omaha,
Nebraska
265,656
224,000
Orange,
New Jersey
29,497
36,000
Oshkosh,
Wisconsin
20,454
40,000
Palestine,
Texas
4,969
12,000
Paris,
Texas
10,030
19,000
Parsons,
Kansas
7,158
14,000
Pasadena,
California
40,933
81,900
Passaic,
New Jersey
65,078
61,000
Paterson,
New Jérsey
145,354
140,000
Pensacola,
Florida
24,805
37,000
*Peoria,
Illinois
84,460
105,000
Peru,
Indiana
7,757
12,400
Petersburg,
Virginia
11,461
30,000
Philadelphia,
Pennsylvania
2,913,006
1,900,000
Phillipsburg,
New Jersey
9,684
18,000
Phoenix,
Arizona
127,013
65,000
Pine Bluff,
Arkansas
30,839
21,000
Pittsburg,
Kansas
9,473
17,500
*Pittsburgh,
Pennsylvania
1,609,693
672,000
Pittston,
Pennsylvania
15,474
18,000
Portland,
Maine
108,521
74,000
*Portland,
Oregon
565,063
305,000
Portsmouth,
Ohio
14,713
40,000
Pottstown,
Pennsylvania
16,338
20,000
Pottsville,
Pennsylvania
24,205
25,000
Poughkeepsie,
New York
57,632
40,000
Providence,
Rhode Island
560,488
254,000
*Pueblo,
Colorado
38,319
52,000
Quincy
Illinois
21,805
40,000
Racine,
Wisconsin
39,280
67,000
Raleigh,
North Carolina
810
47,000
Reading,
Pennsylvania
69,663
111,000
Red Wing,
Minnesota
5,553
10,000
*#Richmond,
Virginia
340,176
193,000
Roanoke,
Virginia
59,190
70,000
Rochester,
Minnesota
13,922
26,000
Rochester,
New York
433,146
325,000
Rockford,
Illinois
59,066
85,000
Regraded Unclassified
-8-
203
Deposits as of
Population
12-31-42
Rocky Mount,
North Carolina
$
15,005
26,000
Rome,
Georgia
12,119
26,000
Sacramento,
California
67,319
105,000
St. Cloud,
Minnesota
7,422
24,000
*St. Joseph,
Missouri
60,875
76,000
#St. Louis,
Missouri
1,145,737
816,000
#*St. Paul,
Minnesota
316,394
288,000
Salinas,
California
31,142
11,500
Salisbury,
North Carolina
1,991
19,000
#Salt Lake City,
Utah
186,902
150,000
#San Angelo,
Texas
20,234
26,000
*San Antonio,
Texas
206,433
254,000
San Diego,
California
98,683
203,000
Sandusky,
Ohio
17,826
25,000
#San Francisco
California
4,474,361
635,000
San Jose,
California
15,918
68,500
#San Pedro,
California
2,546
(included
in Los
Angeles)
Santa Barbara,
California
16,282
35,000
Santa Cruz,
California
9,154
17,000
Santa Monica,
California
4,203
53,500
Santa Rosa,
California
6,475
12,700
**Savannah,
Georgia
240,267
96,000
Scranton,
Pennsylvania
103,750
140,000
*Seattle,
Washington
811,561
368,000
Sedalia,
Missouri
7,205
20,000
Shamokin,
Pennsylvania
12,463
19,000
Sharon,
Pennsylvania
21,724
26,000
Sheboygan,
Wisconsin
37,599
41,000
Shenandoah,
Pennsylvania
7,207
20,000
Shreveport,
Louisiana
109,453
98,000
*Sioux City,
Iowa
62,399
82,000
Sioux Falls,
South Dakota
43,741
41,000
South Bend,
Indiana
54,286
101,000
South St. Paul,
Minnesota
17,366
11,900
*Spokane,
Washington
71,816
122,000
Springfield,
Illinois
43,329
75,000
Springfield,
Massachusetts
215,022
150,000
Springfield,
Missouri,
30,585
61,000
Springfield,
Ohio
37,379
71,000
#Stamford,
Connecticut
63,928
47,000
Regraded Unclassified
204
-9-
Deposits as of
Population
12-31-42
Steubenville,
Ohio
$
24,100
38,000
Stockton,
California
not available
55,000
Superior,
Wisconsin
14,281
35,000
Syracuse,
New York
244,043
206,000
Tacoma
Washington
92,000
109,000
Tampa,
Florida
78,850
109,000
Terre Haute,
Indiana
51,000
63,000
Texarkana
Texas
30,700
{ 11,000 Ark
17,019 Texas
*Toledo,
Ohio
216,800
282,000
#Topeka,
Kansas
56,700
68,000
Trenton,
New Jersey
156,000
125,000
#Tucson,
Arizona
17,000
37,000
*Tulsa,
Oklahoma
177,000
142,000
Utica,
New York
99,600
100,000
Valdosta,
Georgia
3,410
16,000
Vernon,
Texas
7,900
10,000
Vicksburg,
Mississippi
15,100
25,000
Virginia,
Minnesota
6,700
12,200
*Waco,
Texas
36,700
56,000
Warren,
Pennsylvania
21,000
15,000
Washington, D.C.
604,600
664,000
Waterbury,
Connecticut
93,000
100,000
Watertown,
Wisconsin
6,200
11,000
Watsonville,
California
7,500
9,000
Wheeling,
West Virginia
52,100
61,000
Whittier,
California
6,200
16,000
Wichita,
Kansas
154,000
115,000
#Wichita Falls,
Texas
44,000
45,000
Wilkes-Barre,
Pennsylvania
66,000
86,000
Williamsport,
Pennsylvania
27,100
44,000
#Wilmington,
California
Not Available
(Incld
in
Los
Angeles)
Wilmington,
Delaware
274,000
112,000
Wilmington,
North Carolina
23,000
33,000
Winona,
Minnesota
12,290
22,500
Winston-Salem,
North Carolina
180,100
80,000
Winter Haven,
Florida
6,300
7,000
Worcester,
Massachusetts
256,800
194,000
Yakima,
Washington
4,700
27,000
Yankton,
South Dakota
5,000
7,000
York,
Pennsylvania
70,100
57,000
Youngstown,
Ohio
87,000
168,000
Respectfully submitted,
Preston Delano
Regraded Unclassified
205
MAY 25 1943
Dear Mr. Head:
I have your letter of May 18, 1943,
submitting your resignation as Chairman of the
Treasury War Finance Committee for the St. Louis
Federal Reserve District.
I believe I understand why you have sub-
mitted this resignation and I hope you won't mind
if I hold its acceptance in aboyance for & few days
until I determine the basis for the organization to
handle subsequent War Loan Drives.
I want to thank you for your untiring
efforts in connection with the Second Mar Loan
Drive and the successful way in which you handled
the whole matter. It was a pleasure to work with
you and I hope that we can continue in other drives.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. Walter W. Head
President
General American Life Insurance Company
St. Louis, Missouri.
DWB:ew
File in Diary
Regraded Unclassified
1002-
206
Lord Baltimore Hotel
Baltimore
May 18, 1943.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Secretary:
Inasmuch as I am the only chairman of a
District War Finance Committee who is not connected,
in any way, with B. Federal Reserve Bank, and believ-
ing that in organizing for the Third War Loan Drive
you should, without the slightest degree of embarrass-
ment to yourself or anyone else, be free to appoint
the person who, taking into consideration all factors
involved, can and will produce the best results for
the Treasury Department, I herewith tender to you my
resignation as Chairman of the United States Treasury
War Finance Committee, Eighth Federal Reserve District.
I am grateful to you for having given me
the opportunity to work with you in this most important
and most worthy cause. It is very much appreciated.
With best wishes, I am
walter Yours very sincerely, where
WALTER W. HEAD
P. S. Yesterday I came over here from
Washington, which accounts for
stationery used.
BUSICK = a
MANAGING DIRECTOR
Regraded Unclassified
207
May 25, 1943
Copies to:
Mr. D. W. Bell
Mr. Gaston
Mr. Gamble
Mr. Buffington
INVESTMENT BANKERS:ASSOCIATION OFAMERICA
208
GOVERNORS
PRESIDENT
GOVERNORS
DUDLEY F BAKER
DENVER
JAY N WHIPPLE
CHICAGO
DONALD LMILEOD
TORONTO
WILLIAM BATNE
BOSTON
PAT G.MORRIS
CHICAGO
SEATTLE
VICE PRESIDENTS
FREDERIC - BLANCHETT
FREDERIC P.MULLING
PITTSBURGH
JOHN € BLUNT.
CHICAGO
ARTHUR ALLYN
CHICAGO
MATHAND MURCH
CLEVELAND
WILLIAM - BRAND
MILWAUKEE
ALBERT T.ARMITAGE
BOSTON
ALBERT H.BCRDON
NEW YORK
AUGUSTUS w. PHELPS
NEW YORK
EAROL c. BUCKNER
NEW ORLEANS
JOHN CLIFFORD FOLGER WASHINGTON
EDWARD HOPKINSON,JI PHILADELPHIA
A E. PONTING
SAN FRANCISCO
HAGOOD CLARSE
ATLANTA
WILLIAM J. PRICE,3
BALTIMORE
JULIEN - COLLINS
CHICAGO
EXECUTIVE SECRETARY & TREASURER
JAMES F. QUIGO
ST. LOUIS
FAIRMAN a. DICK
NEW YORK
ALDEN H.LITTLE
CHICAGO
ROBERT o. HOWE
PHILADELPHIA
RUSH a. DICASON
CHARLOTTE
WILLIAM o. BRILLMAN
DALLAS
HENRY H. EOLY
NEW YORK
FIELD SECRETARY
EDUCATIONAL DIRECTOR
F. KENNETH STEPHENSON
NEW YORK
PARRELL
KANSAS CITY
ARTHUR 0.DAVIS
CHICAGO
DAVID DILLMAN
CHICAGO
PERCY H STEWART
NEW YORK
JOHN 3. FLEER
CLEVELAND
R McLEAN STEWART
NEW YORK
LLOYE a. BILMOUR
NEW YORK
MUNICIPAL SECRETARY
SECRETARY
WINTHROP €. SULLIVAN
CHICAGO
ARNOLD GRUNIGEN.JI SAN FRANCISCO
DUDLEY SMITH
CHICAGO
ROBERT STEVENSON,30 CHICAGO
JOSEPH WALKER..IN
BOSTON
WILLIAM H.T. HACKETT
BOSTON
7. JOHNSON WARD
PHILADELPHIA
JOHN o HARRISON
NEW YORK
ASSISTANT SECRETARY
PHILIP K.WATSON
DETROIT
GEORGE ENJONES
LOS ANDELES
MARY R.UNCOLN
CHICAGO
ELHER L.WILLIAMS
LAILONS
ST.LOUIS
MINNEAPOLIS
ROBERT N. WILLIAMS
JOHN .LOOMIS
CHICAGO
SPOKANE
STANLEY O.MERIE
CINCINNATI
HARRY a. WYETH,JR.
LOS ANDELES
OFFICE OF THE PRESIDENT
135 SOUTH LASALLE STREET
CHICAGO
May 19, 1943
The Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Weshington, D, C.
Dear Mr. Vorgenthau:
Your letter thanking me 98 presi-
dent of the Investment Bankers Association
of America for the cooperation and help of
its members in the Second War Loan Drive
is much appreciated.
T can assure you that it will be
the duty and privilege of this group to
continue their enthusiastic assistance and
support under any plan which is evolved
for the sale of Government securities,
Sincerely vours,
gay n. whipple.
Regraded Unclassified
209
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 25, 1943.
TO
Secretary Morgenthau
FROM
Mr. Schwarz
Initial mailing of the booklet, "The Story of
America's Greatest War Loan, " amounted to 93,448
copies and requests for additional copies are now
being received. The number of such requests is not
yet more than 2,000, but the Federal Reserve dis-
tricts and War Savings Staff field offices expect to
ask for more when their original supply is exhausted.
Attached is a table showing where the first copies
went.
OWI is rounding up some of the comments and news
broadcasts on the booklet and will send them on to
us. So far they have received from New York this
transcript of Tro Harper's broadcast at 9:30 A. M.
yesterday over WOR:
"The average American worker has done a good
job buying War Bonds but Treasury Secretary Morgenthau
says he has to buy more if he is going to avoid some
kind of compulsory savings program.
"Secretary Morgenthau declared Americans proved
they are not going to sit around waiting for compul-
sory savings when they oversubscribed the recent War
Bond drive by five and a half billions of dollars but
he points out that seven-eighths of the current income
is in the hands of people making five thousand a year
or less.
"He says it is up to them to use their idle
funds to help finance the war."
Regraded Unclassified
210
Mailings of "The Story of America's Greatest War Loan"
---
Federal Reserve:
Boston
3,000
New York
1,800
Philadelphia
3,500
Cleveland
15,000
Richmond
2,500
Atlanta
2,900
Chicago
4,000
St. Louis
5,500
Minneapolis
6,000
Kansas City
3,000
Dallas
2,500
San Francisco
4,500
54,200
War Savings Staff (field)
12,852
National organizations
8,466
Weekly newspapers
7,521
Publishers, editors and
radio commentators
4,000
Radio stations
1,800
Daily newspapers
1,559
Treasury officers
800
Foreign language papers
800
Labor press
600
Motion pictures and special events
450
Farm press
250
Negro press
150
93,448
Regraded Unclassified
211
TOM CONNALLY, TEX., CHAIRMAN
MALTER F. GEORGE. GA.
HIRAM w. JOHNSON, CALIF.
ROBERT F. WASHER. N. Y.
ANTHUR CAPPER, KANS.
OFF a THOMAS, UTAH
ROBERT M. LA FOLLETTE, JR., WIS.
DERICK VAN HUTE, NO.
ARTHUR H. VANDENBERG, MICH.
E. MURRAY, MONT,
WALLACE H. WHITE, JR., MAINE
HENRIK SHIPSTEAD. MINN.
United States Senate
CLAUDE PEPPER. FLA.
neodoms FRANCIS GREEN, n. L
GERALD P. NYE, N. DAR.
ALBEN W. BARKLEY. KY.
COMMITTEE ON FOREIGN RELATIONS
RESERT a. REYNOLDS, N. c.
- F. curret. PA.
May 25, 1943
BUY M. BILLETTE. IOWA
BENETT CHAMP CLARK, MO.
CARTER GLASS, VA.
- LEX. OKLA.
AMEX M. TUNNELL. DEL
ROLAND YOUNG, CLERN
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
Allow me to thank you most cordially for your
generous note of the 19th with respect to By efforts
in the Senate against the Ruml plan. I am immensely
pleased to have your approval and commendation.
Sincerely,
Jmn amount
TC/1dh
Regraded Unclassified
212
May 25, 1943
TO:
MR. PAUL
FROM:
THE SECRETARY
Please compliment Foreign Funds on digging
up this Ford material.
Have you looked into the files of any other
companies, like General Electric or General Motors,
to see if there is similar correspondence?
Finished. Per Paul 6/1/13 -
Regraded Unclassified
213L
STRICTLY CONFIDENTIAL
May 25, 1943
My dear Mr. President:
I am sending you herewith 8. one page memorandum
and 8. brief summary of amazing and shocking corres-
pondence between Edsel Ford and Mr. Dollfuss, Managing
Director of the Ford interests in France.
As late as July 17, 1942, after the French
company had been bombed on June 6, 1942, Mr. Edsel
Ford wrote as follows to Mr. Dollfuss:
"I have shown your letter to
my father and Mr. Sorenson and
they both join me in sending best
wishes for you and your staff,
and the hope that you will con-
tinue to carry on the good work
that you are doing." "
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Envelope marked "Strictly Confidential"
The President,
and "For Attention: Miss Tully"
The White House.
Delivered by SSAgent 5:07 5/26/43
File in Diary
P.S. (in Secretary's handwriting) This letter was dictated
before Edsel Ford died.
Regraded Unclassified
214
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE MAY 25 1943
TO
Secretary Morgenthau
FROM
Randolph Paul
A short time ago a brief investigation was made of the
files of the Ford Motor Company of Dearborn, Michigan, in
order to determine the extent of its relationship and its
control over its French subsidiary. Since the investiga-
tive report is rather lengthy, I have attached hereto a sum-
mary thereof which discloses that from the fall of France to
July 1942 -- the date of the last letter in the files from
Ford of France to Ford of America: (1) the business of the
Ford subsidiaries in France substantially increased; (2)
their production was solely for the benefit of Germany and
the countries under its occupation; (3) the Germans have
"shown clearly their wish to protect the Ford interests"
because of the attitude of strict neutrality maintained-by
Henry and Edsel Ford; and (4) the increased activity of
the French Ford subsidiaries on behalf of the Germans re-
ceived the commendation of the Ford family in America.
I am sure you will want to read the attached report.
We propose to submit informally copies of the investigative
report to Military Intelligence, Office of Naval Intelli-
gence, Federal Bureau of Investigation and other similar
investigative agencies.
If you are in agreement, please 80 Rd indicate below.
Attachment.
Approved thrumthant
Regraded Unclassified
215
MEMORANDUM
The Ford Motor Company of Dearborn, Michigan, has operated
subsidiaries in France since 1925. Prior to the war, the opera-
tion was not a profitable one. The Ford Motor Company of Dearborn
was constantly called upon to lend money to these subsidiaries and
to make further capital contributions. The French subsidiaries
declared only one dividend in the period from 1929 to 1940.
Beginning shortly before the outbreak of war in 1939, the
subsidiaries in France cooperated with the French Government in
manufacturing army trucks and gun parts and did all the preliminary
work, including the installation of new machine tools and the
building of a new plant for the manufacture of airplane engines.
At the time of the fall of France, these subsidiaries were
operating three plants, all in areas which were immediately occu-
pied by the Germans. The plants suffered no material damage and
the German authorities immediately appointed two Commissars to
operate the plants. Both men were German citizens and long-time
executives of the Ford subsidiary in Germany. One of these men
was the son of the Chairman of the Board of the Ford Company of
Germany, Doctor Heinrich F. Albert. It will be recalled that Dr.
Albert was the key man of the German Espionage Organization in the
United States during the first World War. It was from him that
the brief case was seized by 8. Secret Service agent on a New York
elevated train in 8. famous international incident in July 1915.
The two German Commissars received Maurice Dollfuss, the
Managing Director of the Ford subsidiaries in France, with courtesy
and introduced him to the German military authorities.
On July 19, 1940, Mr. Dollfuss wrote to Mr. Edsel Ford. Mr.
Dollfuss comments as follows on a visit paid him by a German
Colonel to whom he was introduced by the two Commissars:
IF
.I had with him a long and very satisfactory talk."
Mr. Dollfuss stated further:
"We are working within a common scheme and I can
confirm to you that we shall have the best protection
that can be obtained for a purely French concern; and
furthermore, we will benefit from the main fact of be-
ing a member of the Ford family which entitles us to
Regraded Unclassified
216
- 2 -
better treatment from our German colleagues, who have
shown clearly their wish to protect the Ford interest
as much as they can.
"The damage for us is hence thus smaller than in
any other company
After stating that the condition of the three companies is good
and the profits for May, in his own words "brilliant," he con-
tinued:
"We cannot, of course, know the results for June
and July, although we have delivered considerable quan-
tities of spare parts to the German authorities, which
were paid for with requisition bonds, which have an
official value, Furthermore, we have delivered quite a
number of trucks and passenger cars to the same German
authorities from which we received bonds of the same
type.'
Mr. Dollfuss discussed the difficulty he faced in taking care of
3,000 employees and then stated that "the good graces of the
authorities" enabled the company to requisition & school to pro-
vide housing for employees and enabled the company, also, to sup-
ply the employees with food.
There is no indication that Mr. Edsel Ford replied to this let
ter: however, Mr. Sorenson, to whom B. copy of the letter was sent,
stated in a reply dated August 19, 1940:
"We are pleased to learn from your letter of July
18, which we received and read very carefully, that
our organization is going along, and the victors are
so tolerant in their treatment. It looks as though we
might still carry on in spite of all the difficulties."
August 31, 1940, Mr. Dollfuss informed Mr. Edsel Ford that
production had reached twelve trucks a day, would reach fifteen
trucks a day within a week, and within three weeks would reach
twenty trucks a day, which was better than -
If
our less fortunate French competitors are
doing. The reason is that our trucks are in very
Regraded Unclassified
217
- 3 -
large demand by the German authorities and I believe
that as long as the war goes on and at least for some
period of time all that we shall produce will be taken
by the German authorities."
He indicated that the German authorities were receiving the entire
production. He stated further:
If
.in order to safeguard our interests - and I
am here talking in a very broad way - I have been to
Berlin and have seen General Von Schell himself, who
is the highest executive responsible for the motor in-
dustry, both from the military and the civilian points
of view.
"I will satisfy myself by telling you that my
interview with him has been by all means satisfactory,
and that the attitude you have taken together with
your father of strict neutrality has been an invalu-
able asset for the protection of your companies in
Europe." (Underscoring supplied)
Mr. Dollfuss added 8 note in long-hand in the margin opposite this
paragraph:
"I was the first Frenchman to go to Berlin."
Immediately a fter this visit the German authorities reinstated
Mr. Dollfuss as Managing Director of the French subsidiaries of the
Ford Motor Company at Dearborn, subject only to the slight control
represented by 8. visit from one of the executives of the Ford Motor
Company of Germany once every three weeks.
Spetember 12, 1940, Mr. Dollfuss wrote to Mr. Edsel Ford and
stated that up to the first of August the Ford companies had made
a profit of 1,600,000 francs. He recognized that their cash po-
sition was very weak in dollars -
.but, as you know, our gold standard has been
replaced by another standard which - in my opinion - is
a draft on the future not only in France and Europe but,
maybe, in the world."
In this letter Mr. Dollfuss also stated that he had worked out a
Regraded Unclassified
218
- 4 -
plan for shipping machinery not needed in the French plants to the
Belgian and Netherlands plants for the purpose of manufacturing
parts to be distributed amongst all of the Ford factories in
Europe.
In & short acknowledgment of these letters on November 12,
1940, Mr. Sorenson stated:
.We all realize that you are carefully guiding
our business in the unusual situation that it is now."
October 31, 1940, Mr. Edsel Ford replied to the letters men-
tioned above congratulating Mr. Dollfuss on the fact that his
trading resulte had been profitable and stated:
"I think that this is a remarkable achievement in
view of the difficulties that are present at this time.
"I also appreciate your great effort to keep the
organizations intact and desire to produce something.
Raw materials must be very hard to find. You are do-
ing a fine job in cooperating with the other companies
in the allocation of raw materials for the various
Ford companies."
In reply to a cable informing him of the date on which com-
plate installation was expected in 8 new plant Mr. Ford replied
by a cable of October 10, 1940:
"DELIGHTED TO HEAR YOU ARE MAKING PROGRESS. YOUR LET-
TERS MOST INTERESTING. FULLY REALIZE THE GREAT HANDI-
CAP YOU ARE WORKING UNDER. HOPE YOU AND FAMILY ARE
WELL, REGARDS. EDSEL FORD."
In a letter of October 11, 1940, to Mr. Edsel Ford, Mr.
Dollfuss seemed quite pleased by the fact that the Ford business
was equal to what it had been before the war, whereas the busi-
ness of Renault and Citroen was only 20 percent of what it had
been before the war. He stated:
"Naturally the advantages that we have are be-
cause we belong to the Ford family, advantages which
we cannot overestimate under the present circumstances."
Regraded Unclassified
219
- 5 -
In this letter he also stated that the Ford enterprises in France
were working for the Ford Company of Germany in the tool depart-
ment.
November 27, 1940, Mr. Dollfuss wrote to Mr. Edsel Ford, and
pointed out once more the favorable position of Ford compared with
other French firms and emphasized that profits were substantial.
He explained in this letter that the two men from the German sub-
sidiary became Commissars because of a plan they presented to the
German authorities to create a European Ford organization under
the leadership of the German company. However, when military
operations ceased, Mr. Dollfuss was able to arrange through General
Von Schell to have the French enterprise continue on a completely
independent basis. He stated:
"At this stage I would like to outline the importance
attached by high officials to respect the desires and main-
tain the good will of 'Ford' - and by 'Ford' I mean your
father, yourself, and the Ford Motor Company, Dearborn.
"What the future organization of the Ford companies
should be in Europe after Europe is remade - or main-
tained - is a matter for 'Ford' to decide, and not for
Dr. Albert or Mr. Schmidt. Anything done actually to
force 8 decision would be both premature and risky -
your interests must be defended by yourself, and not by
disinterested parties.
"Were you today to approve of B. Ford organization
different from what it was, would be equivalent to tak-
ing a position which would separate you of the neutral
attitude - an attitude which you have been able to safe-
guard so successfully.
"Even in the case of a completely victorious German
peace, the rights of the shareholders will be protected;
this because it is one of the basis of the Nazi theory,
and in France, it is the theory upon which the future
organization of this country is to be founded; in conse-
quence, the rights of shareholders are intangible and
your right of control will remain. Therefore there is no
reason for you to give away one of those rights today.
"After the above considerations, and if we admit the
possibility of 8. German victory, in my opinion, we cer-
Regraded Unclassified
220
- 6 -
tainly must:
(a) Maintain the independence of the French
company and eventually that of the British
company;
(b) Have a company or organization somewhat
similar to the Guernsey company - evidently
comprising representatives from every coun-
try, all the more so that by then the United
States of Europe will be contemplated, and
each state will have to be represented there.
In that company you should have independent
men of your own choice, and not satellites
placed there to protect Cologne's interest."
This letter was not mailed to Dearborn, but was carried by Mr. G. A.
Lesto, an employee of the French Ford subsidiary who came to Dear-
born arriving early in January 1941. Immediately after his arrival
on January 6, 1941, Mr. Edsel Ford cabled Mr. Dollfuss, noting the
arrival of Mr. Lesto:
"APPRECIATE YOUR EFFORTS TO CONTINUE DEVELOPMENT FORD
INTERESTS FRANCE. HOPE IT UNNECESSARY TO CHANGE STATUS
OF COMPANY CONTROL."
On January 20, 1941, Mr. Edsel Ford wrote to Mr. Dollfuss
stating that Mr. Lesto had arrived and that he had an interesting
conversation with him. The letter continued:
"It is gratifying to learn of the efforts you have
made to continue the Ford manufacturing program which
began prior to hostilities and especially to know that
you have been able to get the cooperation of various
interested parties and to make some progress towards
the completion of this program since the Armistice."
In addition to the letters from Mr. Dollfuss, Mr. Lesto brought
with him to Dearborn 8. letter of November 28, 1940 to Mr. Edsel
Ford signed by J. C. Charpentier, a Director of the French subsid-
iary. In the main this is a personal letter, but the writer extols
the manner in which Mr. Dollfuss has conquered great difficulties
and says of the French Ford Company:
Regraded Unclassified
221
- 7 -
"I feel that you have got there a child worthy of your-
self.
Mr. Edsel Ford replied on January 29, 1941:
"I am very appreciative of your direct personal
word regarding the reopening of our plant in Paris and
the slow return to something like a normal manufacturing
operation. I am quite sure that this has been done under
the utmost difficulties and with much hard work.
"We are very proud of the record that you and your
associates have made in building the company up to its
first great position under such circumstances.
On January 29, 1941, Mr. Edsel Ford wrote to Mr. Dollfuss
stating that he agrees with Mr. Dollfuss as to the status of the
European companies and in addition:
"I am gratified to hear of the financial results
as of October 31, 1940, of the Matford Company which
seems to me an excellent showing considering the cir-
cumstances under which you are operating."
In reading this statement by Mr. Ford it should be borne in mind
that he was referring to the financial statement as of October 31,
1940, which shows a debit balance of 26,128,000 francs in the
account of the German authorities. In a letter accompanying this
statement the accountant explained that while this debit balance
was unusually large, the German army was paying regularly and the
total business SO far had amounted to 34,000,000 francs.
The correspondence in the spring of 1941 is not particularly
significant. On June 9, 1941, Mr. Dollfuss informed Mr. Edsel
Ford that the French Government ahd asked him to supervise the
Hispano-Suiza Works in Paris making certain parts for aviation
motors. He declined since he did not have the time to spare.
In a letter of August 6, 1941, Mr. Dollfuss stated that pro-
duction had reached 1,000 units per month, which is considerably
in excess of the pre-Armistice level. The letter also states that
they are now delivering trucks to civilians for the first time.
Regraded Unclassified
222
- 8 -
Mr. Edsel Ford replied to this letter as well as an inter-
vening one of August 21, 1941, by & letter of October 16, 1941,
as follows:
"It is encouraging to hear that you are going along
in spite of the terrific handicaps. I heartily approve
of your fight to keep salaries and wages up to our
standards, as there is no other way to keep the morale
and working spirit of employees at a high pitch."
October 13, 1941, Mr. Dollfuss wrote to Mr. Edsel Ford com-
plaining bitterly of the difficulties which he believed had been
placed in his way by "those who should really be supporting us."
He said that he finds it easier to deal with the authorities
themselves." He also said that he had just been called personally
to Berlin to see General Von Schell.
Mr. Edsel Ford replied on November 14, 1941:
"I am also glad to hear that the difficulties in con-
nection with this consolidation have been overcome and I
also fully understand where the difficulties have arisen."
On December 5, 1941, Mr. Dollfuss wrote Mr. Edsel Ford and
Mr. Henry Ford II notifying them that they had been elected
Directors of the new company which was a merger of the former Ford
subsidiaries.
January 28, 1942, Mr. Dollfuss wrote to Mr. Edsel Ford that
production continues at the same rate and is distributed between
the French and the German authorities. He also said that this
production rate was the highest of all the French manufacturers.
A letter of February 11, 1942, from Mr. Dollfuss to Mr. Edsel
Ford gives 1941 net profit as 58,000,000 francs.
Early in March the largest Ford plant in France was severely
bombed by the R.A.F. and the slight amount of correspondence between
France and the Ford Motor Company of Dearborn within the next few
months was concerned primarily with this matter. The plant was
bombed four times by June 6, 1942, which was reported in full by a
letter of June 6, 1942, from Mr. Dollfuss to Mr. Edsel Ford.
Regraded Unclassified
223
- 9 -
Mr. Edsel Ford replied by a letter of July 17, 1942, the final
paragraph of which is as follows:
"I have shown your letter to my father and Mr.
Sorenson and they both join me in sending best wishes
for you and your staff, and the hope that you will con-
tinue to carry on the good work that you are doing."
(Underscoring supplied)
The letter of July 17, 1942, was the last letter from Dearborn in
the file.
On August 15, 1942, Mr. Dollfuss wrote to Mr. Edsel Ford
stating that production had been resumed at the same rate and that
production had been dispersed among various plants.
No reply was made to this letter from Dearborn.
The last communication from Mr. Dollfuss was the transmission
of information by the Department of State that the French company
had received from the Government of France an indemnity in the
amount of 38,000,000 francs for damages incurred in the bombings.
Regraded Unclassified
224
May 25, 1943
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Gaston
Joe O'Connell and Assistant General Counsel Lynch
came in yesterday with Thurman Hill, Chief Counsel of
Procurement, to tell me of their uneasiness about reports
that 8. man named Curtis, a representative of E. B. Badger
& Sons Company, contracting agent for the procurement
division in the matter of obtaining oil refinery equip-
ment for Russia, has been soliciting bribes.
The matter first came to the attention of the
procurement division through a call from a Department
of Justice agent in Chicago, who later wrote a letter on
the same subject. The man who wrote the letter appears
to represent the War Frauds Division of the Department of
Justice, but the original report seems to have come from
F.B.I. An officer of the Mack Truck Company in Chicago
reported to the Department of Justice agent that Curtis
had made him a proposition under which the price of
material to be sold by the Mack Truck Company to Procure-
ment through Badger would be increased by 5% and the 5%
would be split three ways, a part going to the Mack Truck
salesman, a part to Curtis, who made the proposition, and
another part to a high officer of E. B. Badger & Sons
Company.
A representative of the Department of Justice
representing, it is believed, the War Frauds Division
later called at Procurement and Justice has been asked
to go ahead with the investigation. If the investigation
by Justice should be prolonged and directed only toward
criminal prosecution, it will leave us in an embarrassing
situation. If the story is true, we might even want to
void the contract with Badger. I arranged to have Elmer
Irey talk with Clif Mack and I plan to talk to him myself
tomorrow, Wednesday, when he returns from New York.
Regraded Unclassified
225
- 2 -
While we naturally don't want to interfere with
a criminal prosecution, it appears equally certain
that we don't want to wait for a bad scandal to
develop before taking some administrative action.
You will probably want to assign someone else to
carry this through as it seems to be of urgent im-
portance. Maybe John Sullivan could take it on.
No
m Sellion
Refored Santay to M.r. direction
m the
Regraded Unclassified
226
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
SECRET
May 25, 1943
MEMORANDUM TO THE SECRETARY:
There is submitted herewith the operating report
of Lend-Lease purchases for the week ended May 22, 1943.
The Russians have assigned a high priority to the
refinery equipment and are arranging to lift from port
areas approximately 15,000 tons of this material the
first two weeks in June. The steel requirement for
the United Kingdom for the third quarter will be
approximately 650,000 tons. To date specifications
have been received on 285,000 tons which are being
placed under contract.
Joshna Clifton E. Mack
Director of Procurement
FORVICTORY
BUY
WHITED
STATES
BONDS
ARB
STAMPS
(37861)
Regraded Unclassified
227
SECRET
LEND-LEASE
TREASURY DEPARTMENT, PROCUREMENT DIVISION
STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND
DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS
AS OF MAY 22, 1943
(In Millions of Dollars)
Administrative
Miscellaneous &
Total
U.K.
Russia
China
Expenses
Undistributed
Allocations
$3089.8
$1595.7
$1121.9
$103.4
$6.1
$262.7
(3084.9)
(1595.7)
(1117.1)
(103.4)
(6.1)
(262.6)
Purchase Authoriza-
$2644.3
$1462.8
$1027.9
$40.4
-
$113.2
tions (Requisitions)
(2594.6)
(1433.5)
(1005.7)
(42.1)
-
(113.3)
Requisitions Cleared
$2524.9
$1407.9
$968.9
$39.8
-
$108.3
for Purchase
(2505.3)
(1388.1)
(966.6)
(41.5)
-
(109.1)
Obligations
$2443.5
$1374.4
$942.0
$39.5
$5.7
$81.9
(Purchases)
(2395.4)
(1359.4)
(908.4)
(41.3)
(5.6)
(80.7)
Deliveries to Foreign
$1062.0
$ 770.2
$262.1
$18.0
-
$11.7
Governments at U. S.
(1049.3)
(765.2)
(254.9)
(17.6)
-
(11.6)
Ports*
*Deliveries to foreign governments at U. S. Ports do not include the
tonnage that is either in storage, "in-transit" storage, or in the
port area for which actual receipts have not been received from the
foreign governments.
Note: Figures in parentheses are those shown on report of May 15, 1943.
Regraded Unclassifie
SECRET
EXPLANATION OF DIFFERENCE
The reductions in the China column result
from transfers of material in storage to the
War Department.
228
Regraded Unclassified
5/20-13229
REPORT TO CONGRESS ON
LEND-LEASE OPERATIONS
For the Period Ended April 30, 1943
REPORT TO CONGRESS ON
LEND-LEASE OPERATIONS
For the Period Ended April 30, 1943
"The President from time to time, but not less frequently than once
every ninety days, shall transmit to the Congress a report of operations
under this Act except such information as he deems incompatible with
the public interest to disclose."
[From Section 5, subsection b of "An Act to Promote the Defense of
the United States" (Public Law No. 11, 77th Congress, 1st Session).]
Regraded Unclassified
CONTENTS
Chapter
Page
President's Letter of Transmittal
5
1. The Lend-Lease Program to Date
7
2. Lend-Lease in the Theaters of War
16
3. Special Activities
33
Appendix
I. Lend-Lease Act
37
II. Amounts of Lend-Lease Aid Authorized
41
III. Status of Nations
42
3
Regraded Unclassified
PRESIDENT'S LETTER OF TRANSMITTAL
To THE CONGRESS OF THE UNITED STATES OF AMERICA:
As I transmit to the 78th Congress a Report of Operations
under the Lend-Lease Act from March 11, 1943 to April 30,
1943, the last members of the once vaunted Afrika Korps and
their Italian allies are streaming into prison camps. The
peoples of Tunis and Bizerte are hailing their liberation-and
Italians among them are as enthusiastic as any for their
deliverance.
An entire continent-the continent of Africa-has now been
cleared of the enemy. Its people have been freed from Nazi
and Fascist rule. In Africa we have dealt a blow which is
sorely felt in Berlin and Rome and Tokyo; and we have
brought hope to millions still to be liberated. Liberation of
Africa is a forerunner of the future.
In the coming battles for Germany and Japan, we shall need
the full support and the full resources of the peoples of the
newly liberated areas. This is a military and political neces-
sity of the first order. Their fields can produce food not only
for their own people, but for the United Nations' forces.
Their factories and mines can supply not only themselves, but
our armies as well.
The peoples in liberated areas are enlisting in support of the
United Nations' cause. Their support will reflect itself in
active cooperation at the proper time by millions still to be
liberated. They appreciate, as only those who lost freedom
can appreciate, the compelling necessity for overthrowing
tyranny.
5
Regraded Unclassified
Our lend-lease operations in North and West Africa-the
first of the liberated areas-have demonstrated how a freed
people can aid in the defeat of the Axis. In this victory, our
military operations have been backed up by the friendly sup-
port of the peoples behind the lines. We also were aided by
the new French armies. They were equipped with lend-lease
Chapter I
weapons. They were and are an important part of the United
Nations' fighting forces. Aid has also been given us and the
other United Nations by the liberated peoples of French Africa
THE LEND-LEASE PROGRAM TO DATE
in the production and shipment of strategic and critical
materials for our war production program.
As we progress to victory, the United Nations have brought
The streams of war weapons flowing from the United States
and are bringing food for the starving and medicine for the sick
to the battle fronts mingle with streams from many other
in the areas which we set free. Our promises are being fulfilled
United Nations sources. War supplies flow from the centers
in deeds. Our integrity is enlisting the peoples and resources
of war production of each of the United Nations to the battle-
of these areas as effective fighting partners in the common fight
fronts. The supplies may be used by the fighting forces of
against Axis aggression and tyranny.
the country which produces them, by the forces of the United
While Axis prisoners have streamed into captivity at the end
States, or by the forces of one of the other United Nations.
of our campaign of liberation in North Africa, lend-lease has
The Soviet and British fighting forces are principally equipped
shipped greater and greater quantities of war matériel into
from the output of their own factories and farms. Great
the battle areas-and into the other countries allied with us.
Britain is an arsenal of finished munitions, second only to the
In my lend-lease report to the Congress on September 11,
United States, and Canada, India, and Australia are important
1941, I stated that "it is our task to turn the workshops of
war production centers. The Soviet Union is an arsenal of
our industry into mighty forges of war-to out-build the
the first magnitude. In addition to weapons and battle
aggressors in every category of modern arms."
equipment sent the fighting fronts, the United Nations provide
Today, we are out-building the aggressors in every category
great quantities of the essential raw materials, such as copper,
of modern arms. And we are delivering them in the amounts
nickel and tin, mica and tungsten, wool and rope fiber for the
necessary to build up the striking power for offensives that
production of war supplies in the United Nations arsenals.
will end only in Berlin and Tokyo.
Lend-lease supplies from the United States fill critical
As lend-lease moves ahead in its third year, our armed
deficiencies. They are sent in order to attain the maximum
forces, our supplies, and the combined efforts of the United
possible United Nations production of the tools of war, and
Nations are driving ahead to complete victory over the enemy.
to bring the greatest possible weight of men and materials to
bear against the Axis, in accordance with the time table and
FRANKLIN D. ROOSEVELT.
geography of United Nations strategy. That strategy is to
THE WHITE HOUSE
win unconditional surrender and to win it as quickly as
May 25, 1943.
possible-in Rome and Berlin and Tokyo.
7
6
Total Aid
TOTAL LEND-LEASE AID
Lend-lease aid furnished by the United States from March
Thousands of Dollars
11, 1941, to April 30, 1943, totalled $11,102,000,000. Of this
amount $9,214,000,000 represents the value of goods trans-
ferred to our allies and $1,888,000,000, the value of services
Cumulative
rendered. Lend-lease expenditures have been approximately
April
March
Mar. 1941
1943
1943
through Apr.
12 percent of our total war spending to date.
1943
LEND-LEASE EXPENDITURES AND
Goods Transferred
$720,103
$663,275
$9,214,238
TOTAL WAR COST TO DATE
Services Rendered
62,851
24,450
1,888,234
Total Lend-Lease Aid
782,954
687,725
11,102,472
LEND-LEASE
EXPENDITURES
12%
Table 1
1943 (figures for April exports are not yet available) was
$7,105,000,000. This does not include the value of certain
lend-leased planes which were flight-delivered and ships
OTHER WAR
which were lend-leased and sailed to their destinations under
EXPENDITURES
88%
their own power. The dollar value of these amounted to
approximately $700,000,000 additional.
The difference between the dollar value of lend-lease trans-
fers and lend-lease exports is due principally to (1) goods
transferred to lend-lease countries and used in the United
States, such as trainer planes used in the training in this
Munitions have been 46 percent of total lend-lease aid;
country of pilots of other United Nations, and (2) goods
industrial materials and equipment for our allies' war pro-
which have been transferred, but not yet exported.
duction 22 percent; agricultural products 15 percent; and
The total of goods transferred and services rendered is the
shipping and other services 17 percent.
best measure of the over-all amount of lend-lease aid. How-
The dollar value of lend-lease aid in March 1943 was
ever, in view of the global nature of the war, the name of the
$688,000,000 and in April was $783,000,000. Table 1 shows
government to which goods are transferred does not necessarily
the dollar value of lend-lease transfers and services.
indicate the battle front on which the goods will be used;
for example, guns transferred to the United Kingdom may be
Lend-Lease Exports
used by New Zealand troops fighting in North Africa. Hence
Most lend-lease goods transferred to foreign governments
in considering aid by countries, the export figures give a better
have been sent overseas to the fighting fronts. The dollar
picture of the part played by lend-lease in the various fronts
value of lend-lease exports from March 11, 1941, to April 1,
of the war than do the figures on transfers.
8
9
Table 2 shows the monthly totals of lend-lease exports by
LEND-LEASE EXPORTS-MONTHLY
country. Exports in March reached a new high, totalling
Millions of Dollars
$712,000,000, more than twice as much as in the corresponding
month a year ago and 20 percent more than in the previous
China,
high month.
Africa
India,
United
U.S.S.R.
and
Aus-
Other
Total
Kingdom
Middle
tralia,
TOTAL LEND-LEASE AID
East
New
Zealand
$11.1 BILLION TO APRIL 30, 1943
BILLIONS OF DOLLARS
o
2
3
4
5
1941
Mar
1
1
MUNITIONS
Apr
1
1
4
6
May
9
5
1
1
16
Jun
26
6
1
2
35
INDUSTRIAL
ITEMS
Jul
49
19
1
3
72
Aug
46
14
5
2
67
AGRICULTURAL
Sep
74
7
2
2
85
PRODUCTS
Oct
141
12
12
1
166
Nov
107
1
11
18
2
139
Dec
119
21
12
2
154
SHIPPING
AND SERVICES
1942
Jan
103
15
24
19
13
174
Feb
78
55
26
21
12
192
Mar
138
96
25
46
7
312
Apr
128
160
45
55
15
403
As shown in Table 3, nearly half of all lend-lease exports
May
134
70
37
46
7
294
have been munitions. We have sent over a billion dollars'
Jun
183
109
35
35
12
374
worth of guns and ammunition and bombs. We have sent
Jul
155
103
62
57
20
397
many thousands of planes, including nearly $900,000,000 worth
Aug
146
148
55
56
17
422
Sep
208
96
69
67
13
453
sent aboard ship and many others flown direct by air. We
Oct
218
113
97
83
26
537
have sent over $600,000,000 of military motor vehicles, and
Nov
181
185
90
55
13
524
over $500,000,000 of tanks.
Dec
195
164
110
97
20
586
For the arsenals of the other United Nations we have sent
1943
more than $1,950,000,000 of machinery and tools, steel,
Jan
174
153
90
72
15
504
Feb
205
167
35
48
25
480
armor plate, aluminum, copper, chemicals, and other materials
Mar
298
187
104
66
57
712
for use in making more guns, planes, tanks, and ships with
which to fight our common enemies.
TOTAL
EXPORTS
3,116
1,822
1,000
875
292
7,105
We have shipped more than $1,600,000,000 worth of agri-
cultural products. Most of this has been food shipped
principally to Russia, for the Soviet Army, and to Great Britain,
Table 2
for the British armed forces and those on the production front
11
10
LEND-LEASE EXPORTS-CUMULATIVE-MARCH 1941
the means of livelihood in any territory occupied by the United
THROUGH MARCH 31, 1943
Nations, if it is humanly within our power to make the
Millions of Dollars
necessary supplies available to them."
United King-
dom
U.S.S.R.
Africa and
Middle East
China, India,
Australia
New Zealand
WHERE LEND-LEASE GOODS HAVE GONE
JANUARY MARCH 1943
Other
Total
INDUSTRIAL
ASRICULTURAL
MUNITIONS
PRODUCTS
PRODUCTS
MUNITIONS
UNITED KINGDOM
Ordnance
148
60
93
78
36
415
Ammunition
265
220
186
145
42
858
U.S.S.R.
Aircraft
199
327
135
139
87
887
Tanks
104
180
133
117
19
553
AFRICA AND
MIDDLE EAST
Motor Vehicles
94
229
148
113
23
607
CHINA, INDIA,
Watercraft
71
25
15
7
14
132
AUSTRALIA AND
NEW ZEALAND
Total
881
1,041
710
599
221
3,452
OTHER
INDUSTRIAL ITEMS
o
100
200
300
400
500
800
700
Machinery
191
122
61
50
6
430
MILLIONS
OF
DOLLARS
Metals
334
235
94
104
12
779
Petroleum Products
261
11
35
43
5
355
Other
185
97
56
42
27
407
Lend-Lease by Our Allies
Total
971
465
246
239
50
1,971
AGRICULTURAL
The program of lend-lease aid by the United States is being
PRODUCTS
matched by other United Nations to the extent of their avail-
Foodstuffs
1,033
283
40
24
19
1,399
able resources, in aid which they render to each other and by
Other
231
33
4
13
2
283
lend-lease aid in reverse which they render to the United
Total
1,264
316
44
37
21
1,682
States without payment by us.
TOTAL EXPORTS
3,116
1,822
1,000
875
292
7,105
Although no over-all estimated dollar total for such aid is
yet available, the following partial figures indicate the magni-
The above data do nor include the value of certain lend-leased planes, which were flight-
delivered, and ships, which were lend-leased and sailed to their destinations under their own
tude of mutual aid by our allies and their reverse lend-lease
power.
aid to us:
Table 3
(1) The Chancellor of the Exchequer has estimated that up
to the first of this year Great Britain had sent to the Soviet
who are supplying the fighting lines. We have also sent food
Union on a lend-lease basis munitions costing $680,000,000.
or the people of Algeria and Morocco and now for Tunisia.
These included 3,000 tanks and 2,500 aircraft. In addition
Lend-lease food is going into the liberated areas in the wake of
the British have provided shipping and convoy services on the
advancing United Nations forces as an essential element of
Arctic route to Russia, have sent hundreds of thousands of tons
military operations and in fulfillment of the President's state-
of other supplies to the Soviet and have provided much of the
ment of our policy that "No one will go hungry or without
equipment for the forces of the governments in exile.
12
13
(2) From June 1, 1942 to April 1 of this year the United
lation their assistance to us represents a much greater share of
Kingdom provided as reverse lend-lease a large quantity of
their war effort than does our assistance to them.
equipment and supplies needed by the American forces sta-
Our forces are also receiving reciprocal aid from the Soviet
tioned there, totalling more than 1,360,000 ship tons. This is
Union, China, the Union of South Africa, India, and others
exclusive of construction materials used in building installations
of the United Nations to the extent that our needs can be
for American forces which totalled an additional 2,170,000
supplied by these nations.
tons. The United Kingdom government has estimated that
the cost of construction of airfields, barracks and other facil-
ities for our forces in the United Kingdom will exceed
$600,000,000. These figures do not include large quantities
of supplies provided by the British as reverse lend-lease to
American forces in North Africa, India, Egypt, Iran, Iraq,
Palestine, Iceland, and many other parts of the world. Nor
do they include the value of many services, such as the trans-
portation of American forces. A large proportion of American
troops are carried in British ships as reverse lend-lease without
payment by us, and a majority of the ships on the convoys to
North Africa have been British.
(3) Canada has provided without payment $1,000,000,000
worth of military supplies for the fighting forces of the United
Kingdom, Russia, Australia, and New Zealand and is now
launching a mutual-aid program for a second billion dollars'
worth. In proportion to population, a billion dollars' worth
of aid from Canada is the equivalent of $12,000,000,000 of
aid from the United States.
(4) The Australian government has estimated that its ex-
penditures for reverse lend-lease to United States forces in the
South and Southwest Pacific theaters will total $196,000,000
by the end of the current fiscal year, June 30, 1943. This is 10
ercent of Australia's total war budget for the period. Last
year Australia provided most of the food for our forces there,
and this year the Australian reverse lend-lease program calls for
many times the amount supplied last year. The New Zealand
government has estimated the cost of reciprocal aid to United
States forces at $31,825,000 up to February 28, 1943, and the
estimate'for thefiscal year ending March 31, 1944, is $65,000,000.
Australia has a population of only 7,000,000 and New
Zealand of only 1,650,000 persons. In proportion to popu-
15
24
Item
March 11, 1941,
April 1, 1942,
to April 1, 1942
to April 1, 1943
Ordnance
$44,532,000
$234,138,000
Aircraft
5,583,000
129,842,000
Chapter 2
Tanks
41,112,000
92,431,000
Motor Vehicles
29,030,000
118,614,000
Watercraft
6,138,000
8,268,000
Industrial Products
36,968,000
209,612,000
Agricultural Products
6,383,000
37,130,000
LEND-LEASE IN THE THEATERS OF WAR
TOTAL
169,746,000
830,035,000
As the United Nations move forward against the Axis
In the past six months alone lend-lease exports to Africa
Powers with ever-growing strength, material aid by us and by
and the Middle East totalled $525,000,000, mostly munitions.
our allies plays an increasingly vital role in the united strat-
In addition some lend-lease equipment supplied by the United
egy of war supply. American soldiers on foreign soil are
States and used by the British First Army was sent on from the
equipped, fed, clothed, and supplied to a significant extent
United Kingdom. Thousands of lend-lease planes and tens of
with the growing quantities of reverse lend-lease aid we are re-
thousands of lend-lease trucks with the British First and Eighth
ceiving from our allies. Arms, food, industrial materials, and
Armies have played an important part in the smashing defeat
other war supplies flow from the United States and other
of Von Arnim's forces in Tunisia. The French forces under
United Nations to those fronts from which the most damag-
General Giraud and the Fighting French under General LeClerc
ing blows can be struck at our common enemies.
have been largely equipped through lend-lease.
The British have provided our forces with many essential
supplies and services ranging from Spitfires for some of our
AFRICA AND MIDDLE EAST
fighter squadrons to medical supplies and most of the coal for
In Africa we have dealt the Axis a blow which will lead to
the operation of railroads bringing troops and equipment up to
further blows that will prove mortal.
the front. Most of the British troops have fought with
Lend-lease shipments to Africa and the Middle East, 'not
British equipment and most of the American troops with
including certain lend-lease planes flown away and lend-lease
American equipment, but both have been strengthened by
ships sailed away, totalled $1,000,000,000 from March 11,
equipment furnished by the other and aided by the very
1941, to April 1, 1943. Cash purchase shipments to this
effective participation of French forces in the final offensive,
area totalled an additional $635,000,000 during the period.
fighting with lend-lease weapons supplied from the United
One-sixth of lend-lease shipments to Africa and the Middle
States.
East were sent in the first 12 months of lend-lease and five-
sixths in the past 12 months. The following table shows the
Civilian Supply in Liberated Areas
break-down of lend-lease exports to the area by categories for
Since the invasion last November, lend-lease has had a
the periods ending April 1, 1942, and April 1, 1943.
double job. In addition to the military equipment we have
16
17
sent to the United Nations forces there, we have supplied food,
and for export to the other United Nations as well as vital raw
clothing, medicines, and other necessities of life for the civilian
materials for export. Supplies sent now to North Africa will
population behind the lines. These had a value of $32,205,000
be repaid manyfold in terms of future United Nations supply
up to April 1 and have been essential to the success of our
from that area.
military operations, Lend-Lease food and medicines are now
being distributed to the people of war-torn Tunisia. The
LEND-LEASE EXPORTS OF PLANES AND TANKS
British have also sent large quantities of such supplies. We
IN RELATION TO PRODUCTION
have also sent materials and equipment to aid in restoring the
FIRST QUARTER OF 1943
production of strategic and critical raw materials.
LEND-LEASE
Even though the grasp of the Axis on North Africa has now
EXPORTS
AVAILABLE FOR U.S. ARMED FORCES
been broken, lend-lease supplies to that area are of continuing
BOMBERS
importance to the United Nations war effort. We must con-
PURSUIT
tinue to supply munitions and war equipment to the armies of
PLANES
our French allies in North Africa so that they may be properly
TRAINER
PLANES
trained and equipped to play their part in the invasions to
MEDIUM
come. We must continue, moreover, to supply the essential
TANKS
civilian needs of North Africa as a military and political
LIGHT
necessity. The area is capable of producing large amounts of
TANKS
foodstuffs for the armies of the United Nations fighting in the
EACH SYMBOL REPRESENTS 10% OF JANUARY-MARCH PRODUCTION
European theater-foodstuffs which in 1941 provided more
than 300,000 tons of fruits and vegetables, 200,000 tons of
More planes and tanks were exported under lend-lease in the Eirst quarter of 1943 than in
the average quarter of 1942. However, the proportion of our total production that was
cereals and other large quantities of food for Vichy France and
exported was less than in 1942.
the Nazis. Before the liberation of North Africa, large
amounts of phosphates for fertilizer (North Africa has the
In the invasions to come, lend-lease supplies will have a
two-fold task: to furnish aid to the invading forces of the
only large European source) and other materials vitally needed
for farm and munitions production went to the Nazis. It can
United Nations, and to aid the peoples of the liberated areas,
Lend-lease will continue to furnish greater and greater amounts
contribute such critical raw materials as manganese, cobalt,
and phosphate to the war production of the United Nations.
of war supplies to the United Nations armies. Lend-lease
Cobalt is of particular importance to the United States as a
supplies will also be needed to assist the people of newly
steel alloy for the production of high-speed cutting tools used
liberated areas to help themselves and the United Nations
in the construction of aviation engines, in the manufacture of
through restoring the production of their farms, factories,
and mines.
magnets and for the production of shells and naval armaments,
This area was so completely stripped by the Nazis of food
Middle East
and production equipment that we must send food and other
essential civilian supplies until local production can be re-
To the Middle East lend-lease has sent industrial materials
stored. When these immediate needs have been met, North
and equipment for assembly plants, repair depots, for building
Africa can produce food both for the inhabitants themselves
roads and railroads, pipe lines and gasoline refineries, air-
19
18
fields and other facilities needed for American and Allied forces
shipments to all areas went to the Soviet Union. We have
and to aid in the transport of supplies to Russia by way of the
sent more munitions to date to the Soviet than to the United
Persian Gulf area.
Kingdom, although shipments to Russia did not start until
Through the Middle East Supply Center we are helping to
many months after they began going to Great Britain.
provide, both on a cash and a lend-lease basis, supplies needed
Shipments to Russia of military equipment have included
to prevent a break-down of the civilian economy of Iraq,
thousands of planes, many tens of thousands of trucks, jeeps,
Iran, Egypt, and other countries of the region, although
and other military motor vehicles, hundreds of thousands of
most such requirements have been met by the British Common-
miles of field telephone wire, several million pair of army
wealth. Lend-lease munitions and materials needed for war
boots, and large amounts of other military supplies. Lend-
production and transportation are also going to Turkey from
lease shipments have also included hundreds of thousands of
the United States along with British munitions.
tons of armor plate, steel, aluminum, copper, zinc, TNT, and
chemicals for the production in Russia of planes, tanks, and
THE SOVIET UNION
bombs; electric furnaces, presses, forging hammers, and various
Lend-lease shipments to the Soviet Union to April 1, 1943,
types of machine tools for Soviet arms factories; electric power
totaled $1,822,000,000, not including many hundreds of planes
generating equipment for Soviet war industries and quantities
ferried by air. The lend-lease program for the Soviet Union
of rails and other supplies for railroads and communications.
was not begun until October 1941 and nine-tenths of the total
American forces are not fighting or training on Russian soil
but the Soviet Union is providing American ships in Russian
exports to the U. S. S. R. were in the last twelve months, as
the following table shows:
ports with emergency fuel, food, medical aid, repairs, and
other supplies as lend-lease in reverse.
Item
October, 1941,
April 1, 1942,
Food for the Soviet Army.
to April 1, 1942
to April 1, 1943
More than 1,000,000 tons of food were shipped to Russia up
Ordnance
$14,002,000
$266,093,000
to April 30. More than half of this was sent in the past six
Aircraft
52,636,000
Tanks
274,991,000
months and 40 percent of all Soviet shipments made in March
33,221,000
Motor Vehicles
146,599,000
Watercraft
14,724,000
214,643,000
were foodstuffs. Food this year has a shipping priority on a
Industrial Products
24,921,000
par with planes and trucks on the ships leaving for Russia.
35,479,000
Agricultural Products
428,775,000
12,159,000
304,035,000
These shipments are necessary in order to maintain the
rations of the Soviet Army. The Nazis have held and ravished
TOTAL
162,221,000
1,660,057,000
Russia's best agricultural region-the Ukraine-for two suc-
cessive growing seasons. The consequent shortages of flour
Lend-lease shipments to the Soviet Union up to April 1,
and sugar, of proteins and of fats, have become increasingly
1943, totaled 3,500,000 gross tons. In terms of tonnage,
serious. The Soviet is making heroic efforts to restore food
shipments were more than one-third again as large in the first
production in areas liberated from the Nazis and to raise more
three months of 1943 as in the preceding three months, and
food in newly developed regions behind the Urals and far in
more than twice the total shipped in the first three months of
the interior of Siberia. To aid these efforts, we have sent
last year, In the last three months 30 percent of lend-lease
10,000 rons of seeds.
21
20
Aid by Britain.
LEND-LEASE FOOD EXPORTS
Large quantities of military equipment have been sent to the
PERCENTAGE OF OUR SUPPLY EXPORTED
Soviet Union by the United Kingdom, including many sup-
JANUARY - MARCH 1943
plies produced in Canada. British shipments of planes and
tanks have matched our own. The British have also sent hun-
LEND-LEASE
AVAILABLE FOR U.S. ARMED FORCES
dreds of thousands of tons of other supplies to Russia, among
EXPORTS
AND CIVILIANS
them more than 50,000 tons of crude rubber.
ALL MEATS
C
The major part of the job of convoying supplies for Russia
over the dangerous Arctic route has been borne by the British
ALL MILK
PRODUCTS
8888888886
Navy and the R. A.F. On the southern or Persian Gulf route
the British have aided us in developing transportation facilities
BUTTER
through Iran. At the head of the Persian Gulf new docks and
lighters, warehouses, assembly depots, and other facilities
CHEESE
have enormously multiplied the capacity of once primitive
and sleepy ports. Fighter planes and short-range bombers are
EGGS
MAA
M
unloaded, assembled, tested and flown straight to Russia from
MA
MAA
new airplane assembly plants. The Trans-Iranian railroad,
FISH (FROZEN
now operated by the United States Army in the south and by
AND CANNED)
the Red Army in the North and using American and British
locomotives and freight cars, is carrying to the Russians each
CANNED FRUITS,
VEGETABLES
Q
o
month many times the amount of supplies that could be sent
over it a year ago. And thousands of American trucks are also
DRIED FRUITS
OD
où
où
of
taking supplies across Iran on roads that were caravan trails
a few months back.
DRIED BEANS
AND PEAS
UNITED KINGDOM
EACH SYMBOL REPRESENTS 10% OF SUPPLY
Lend-lease shipments to the United Kingdom totalled
The food-supply data used in arriving at the above ratios represent one-fourth of the sup-
$3,116,000,000 from March 11, 1941, to April 1, 1943. Ship-
Ny for the year 1942,
ments of essential supplies to the United Kingdom that were
Principal food shipments have been of wheat and flour, sugar,
purchased for cash totalled $1,400,000,000 in the same period.
canned meats, protein-rich dried peas and beans, lard and
In the last three months lend-lease shipments to the United
vegetable oils including margarine and small amounts of
Kingdom were 40 percent of lend-lease exports to all areas.
butter, Most of the lend-lease shipments of dehydrated
Of the lend-lease supplies sent to the United Kingdom one-
vegetables go to the Soviet Union. Shipping food in this form
third was shipped in the first year of lend-lease and two-thirds
saves vital shipping space on the long routes to Russia.
in the second year, as shown by the following table.
23
22
materials both domestically produced and imported from other
Item
March 11, 1941,
April 1, 1942,
to April 1, 1942
to April 1, 1943
parts of the British Commonwealth. The war output of British
industry is indispensable to supplying United Nations forces.
The British have depended upon us for critical types of
Ordnance
$51,368,000
$361,220,000
Aircraft
38,151,000
machine tools and other production equipment and we have
160,569,000
Tanks
15,412,000
88,533,000
been able to supply these needs, partly because of the early
Motor Vehicles
29,059,000
64,626,000
Watercraft
expansion of American machine tool production capacity stim-
6,055,000
65,492,000
Industrial Products
276,147,000
695,203,000
ulated by British cash orders placed in 1939 and 1940, before
Agricultural Products
470,041,000
794,717,000
the Lend-Lease Act was passed.
TOTAL
Enormous quantities of gasoline and oil are consumed in the
886,233,000
2,230,360,000
great RAF and American raids on Essen, Dusseldorf, Cologne,
Duisburg and other centers of Nazi war production, and by
Bombs, guns, and ammunition make up more than half of
British and allied naval units and convoys operating from the
lend-lease munitions sent to Britain. Although we have sent a
British Isles. Lend-lease shipments of petroleum products
substantial number of planes under lend-lease to the United
have been essential in continuing the air offensive in Europe,
Kingdom, a much greater quantity has gone to the Soviet
and in the continued battle against German submarines and
Union. This is partly because British factories are producing
air and surface raiders on the Atlantic
such great quantities of four-engine bombers and fighters for
the air offensive against Axis Europe and partly because the
Food Shipments
British have paid and are still paying in cash for large numbers
of planes under contracts entered into prior to the passage of
Lend-lease food shipments to the United Kingdom have
the Lend-Lease Act. The tanks and tracks which have gone
made up a vital 10 percent of Britain's food supply. Without
to the British Isles represent less than one-fifth of lend-lease
these shipments it would not have been possible to provide
shipments of these articles.
sufficient food to the British people to sustain their intensive
war effort. Despite lend-lease food shipments, however,
Supplies for British Arsenals.
British per capita food consumption is generally below the
level of our own. Lend-lease food shipments to the United
The most important categories of industrial supplies sent to
Kingdom this year have been continuing at about the same
Britain have been raw materials, machinery, tools, and other
level as last year.
equipment for British munitions production together with
Almost all lend-lease food is shipped either to the United
petroleum for the RAF and the British Navy.
Kingdom or to the Soviet Union and lend-lease food shipments
We have sent quantities of steel and chemicals and smaller
to all areas last year were less than six percent of total United
amounts of other industrial materials for British production
States supply. This year, because of increasing Russian
of bombers and the blockbuster bombs, which have been rain-
shortages and the needs of liberated areas in Europe, lend-lease
ing on German munitions and railroad centers, and for the
shipments are expected to increase. How much food we send
building of tanks and transports and destroyers. Our ship-
will depend, of course, upon how much we produce, for the
ments have supplemented much larger quantities of industrial
needs of United States armed forces and American civilians
24
25
must of course be met. Elsewhere in this report a chart shows
the quantities of food shipped to all areas under lend-lease in
Sea transport of United States Army personnel
relation to our supply.
and freight, rail and motor transport within the
United Kingdom.
Reverse Lend-Lease
Repair and servicing of American ships in British
ports not only in the United Kingdom but elsewhere
American forces in the British Isles are receiving almost all
in the Empire.
the supplies and services that can be provided on the spot as
All official mail, telephone, and telegraph and
reverse lend-lease, without payment by us. Such aid is
other communications; light, heat, water, and other
furnished through local supply officers at hundreds of airfields,
public utility services.
camps and bases throughout the British Isles. The following
British civilian labor directly employed by United
table shows the estimated quantities, in ship tons provided
States forces and paid by the British varying in
to the various services of the United States Army in the United
number from 12,000 to 25,000 each week.
Kingdom from June 1, 1942, to April 1, 1943.
Maintenance and servicing of Red Cross centers
for United States forces.
Articles and Equipment:
In ship tons
All expenses for printing newspapers for the United
Engineer Corps
States Army, in the European theatre.
249,471
Quartermaster Corps
All available British supplies for United States
731,301
Signal Corps
Army Commissary stores (canteens). (The United
7,371
Ordnance Department
States Army sells these supplies for cash to American
115,716
Transportation Corps
troops and retains the proceeds.)
3,757
Medical Corps
85,983
Air Force
The British also have provided American forces with con-
139,541
Miscellaneous Supplies
siderable quantities of food from their own limited stocks and
29,541
this year expect to furnish several hundred thousand additional
Total
pounds of food, principally the kinds that can be grown in
1,362,681
quantity on British soil. The spirit in which this reverse
Construction materials totaled another 2,177,384 tons.
lend-lease is provided is illustrated by the setting aside of
much-needed farm land for the production of sweet corn for
Literally thousands of different types of items have been
American troops. Corn is not generally eaten by the British
provided-from barbed wire to kitchen ranges; from artillery
and incendiary bombs to locomotives; from parachutes to tele-
people.
In the first 3 months of 1943 they furnished our forces with
phone switchboards; from concrete mixers to Nissen huts;
from Spitfires to soft drinks; from antitank mines to underwear
16,251,000 pounds of enriched wheat flour, 5,435,000 pounds
and socks.
of potatoes, 4,920,000 pounds of bread, 7,274,000 pounds of
In addition to these supplies and to facilities turned over
sugar, and 3,500,000 pounds of vegetables as well as many
other foodstuffs.
without charge to United States forces, the British have pro-
vided many services as reverse lend-lease, such as:
Quantities and statistics do not fully measure the value of
reverse lend-lease aid. Recreational facilities including base-
26
27
ball fields and equipment and musical instruments have been
provided for our troops. The best hotels have been made
available so that our forces can take their leave at the sea-
shore. The value of these services to the morale and health
of our troops is incalculable.
CHINA, INDIA, AUSTRALIA AND NEW ZEALAND
WHERE LEND-LEASE PLANES AND TANKS HAVE GONE
EACH SYMBOL REPRESENTS PLANES OR TANKS VALUED AT $ 25,000,000
Total lend-lease exports to this area from March 11, 1941,
to April 1, 1943, have been $875,000,000. As shown by the
The plane figures do not include the value of certain lend-leased planes which were flight delivered.
following table about one-eighth of these shipments were
made in the period ending April 1, 1942, and seven-eighths
in the period ending April 1, 1943:
Item
March 11, 1941
April 1, 1942
to April 1, 1942
to April 1, 1943
Ordnance
$29,137,000
$194,346,000
Aircraft
37,277,000
101,801,000
Tanks
4,416,000
112,405,000
Motor Vehicles
31,161,000
81,559,000
Watercraft
68,000
6,369,000
Industrial Products
32,276,000
207,493,000
Agricultural Products
4,197,000
32,786,000
TOTAL
138,532,000
736,759,000
More than two-thirds of the supplies shipped to this area
have been munitions for United Nations forces in India, China,
and Burma and for Australian and New Zealand forces fighting
beside the Americans in New Guinea, the Solomons and other
parts of the Southwest and South Pacific theaters.
China
Of the lend-lease supplies shipped to China, some got in over
the Burma Road before the Japanese cut that route, others have
reached their destinations by other means and still others are
stockpiled ready for delivery. These have included critical
tools and raw materials to keep in operation Chinese arsenals,
28
29
and spare parts to keep trucks rolling over the difficult but
vital roads in the interior. New land routes are being devel-
Australia is manufacturing many items of uniform equip-
oped to increase lend-lease shipments into China, and the re-
ment for our forces and both Australia and New Zealand are
opening of the Burma Road is among the strategic objectives
expanding their canning and dehydrating facilities in order
of our forces. For their part the Chinese are providing some
to provide more field rations for our troops. Lend-lease
of the equipment for the growing U. S. Air Forces in China
equipment from the United States is helping to make this
as lend-lease in reverse.
possible. Australia is also producing some types of muni-
tions for United States forces with the aid of lend-lease ma-
India
chinery and materials from the United States. Australia and
New Zealand have provided our forces with airfields, ware-
Lend-lease munitions have been helping to build up the strik-
houses, repair shops and barracks as reverse lend-lease.
ing power of General Wavell's forces in India, although most
American planes, tanks, and ships are repaired in Australian
of the equipment and supplies for these forces have been pro-
and New Zealand shops and shipyards.
vided by the United Kingdom or from India's own substantial
Rubber tire requirements of American forces are now largely
war production. Lend-lease machine tools, steel and other
being met by Australian factories on a reverse lend-lease basis.
materials and equipment are aiding in increasing the Indian
More than 320,000 items of recreational equipment covering
output of munitions, in building airfields, and speeding the
everything from baseballs and bats to chess-sets and horse-
flow of supplies through Indian ports and on Indian railroads.
shoes have been included in the reverse lend-lease program.
American forces in India have received reverse lend-lease
A number of hospitals, including the newest and finest in
aid on a substantial scale. Accommodations of various types
Australia, have been turned over to the United States Army
have been made available, in addition to the construction of
for its exclusive use.
airfields, hospitals and other facilities for our troops. We
New Zealand had spent $22,000,000 up to February 28, 1943,
have received in India millions of gallons of aviation and truck
on a continuing program of construction of hospitals, camps,
gasoline, and great quantities of lubricating oil, together with
warehouses and other capital projects for the use of American
utilities, services and items of uniform equipment adapted to
forces.
tropical climates. We also have received small arms and
OTHER AREAS
ammunition, engineers' stores and other equipment for our
troops under reverse lend-lease.
Lend-lease shipments to other areas totaled $292,000,000 up
to April 1, 1943. This figure included supplies shipped to
Australia and New Zealand
Canada totalling $184,000,000. Canada does not receive
lend-lease aid from the United States. She buys munitions
Australian armored units have fought through New Guinea
and other supplies from us and we buy other types of muni-
jungles beside our troops, in tanks provided by the United
tions and materials from her for cash. However, some lend-
States under lend-lease. In turn, most of the food needed by
lease supplies are exported to Canada for the use of other
our forces has been provided by Australia and New Zealand
United Nations' forces in training there. We have, for
under lend-lease in reverse. Severe civilian shortages of a
example, sent more than 1,000 trainer planes to Canada for
number of foods have resulted in both countries but the
British R. A. F., Norwegian, Polish and other student pilot
reciprocal aid program has been maintained and is being
units. Other lend-lease exports to Canada consist of supplies
greatly expanded this year.
sent for transshipment, principally partially fabricated mu-
30
31
nitions items on which production is completed in Canadian
plants. The finished products are then sent on from Canada
to the United Kingdom, Russia, the Middle East or the Far
East, and thus do not appear in the records of United States
exports to these areas.
The balance of lend-lease exports to areas other than the
Chapter 3
four major war zones have gone to Latin America, principally
Brazil, to Central America and the Caribbean area.
The following table shows the total of shipments to other
SPECIAL ACTIVITIES
areas by category:
FOOD DEHYDRATION AND COMPRESSION
Items
March 11, 1941,
April 1, 1942,
One of the most striking developments in the field of war
to April 1, 1942
to April 1, 1943
supply has been the advancement in the art of dehydrating and
compressing foods. Dehydration reduces weight by removing
Ordnance
$17,631,000
water; compression reduces bulk by removing air. The
$60,758,000
Aircraft
18,773,000
savings in shipping space which result from eliminating large
Tanks
66,775,000
1,514,000
17,273,000
overseas shipments of "cargoes of air and water" as part of
Motor Vehicles
1,456,000
Watercraft
21,698,000
every food shipment can do much to win the battle of trans-
317,000
Industrial Products
14,042,000
portation. The accompanying chart illustrates the savings
8,328,000
Agricultural Products
41,103,000
of space which can be achieved by dehydration and compres-
7,354,000
14,177,000
sion of eggs.
TOTAL
55,373,000
235,826,000
HOW SHIPPING SPACE IS SAVED
BY DEHYDRATING AND COMPRESSING FOODSTUFFS
SHELL EGGS
FROZEN EGGS
DEHYDRATED EGGS
ONE SHIPLOAD OF COMPRESSED
DEHYORATED EGGS IS THE
COMPRESSED
EQUIVALENT OF 11½ SHIPLOADS
DEHYDR. EGGS
OF SHELL EGGS
32
33
Of the two processes, dehydration was the first to be utilized
As a factor in combatting the battle of shipping, food
extensively. During the past six or eight months, various
dehydration and compression have great promise. The
branches of the Government have increasingly turned their
same number of ship arrivals overseas will mean larger food
attention to food compression and since March the work of all
deliveries. But the advantages of the processes do not end
the various agencies has been unified and coordinated and a
there. Reduction in the bulk and weight of food shipments
comprehensive plan developed to improve the compression
means savings of critical materials in packing. It means
process and widen its use.
savings in truck, rail, and storage space.
Equally important, the processes substantially reduce perish-
ability of food and will therefore add much needed flexibility
MEAT CONSUMPTION AND EXPORTS
to the food supply program. Storage will be facilitated.
The time and distance factors in food delivery will be mini-
CIVILIAN CONSUMPTION
LEND-LEASE
mized. The lives and health of United Nations fighting forces
U.S. ARMED FORCES
OTHER EXPORTS
will benefit, both from the standpoint of improvement in
BILLIONS OF FOUNDS DRESSED WEIGHT
preservation of their food supply and from the standpoint
o
5
10
15
20
25
of relief on their overtaxed systems of military transport.
1935-39
In all its stages, lend-lease has given full support to the
1941
dehydration and compression program, both through contri-
bution of ideas and through provision of funds to develop
1942
facilities. Orders to fill lend-lease requirements have lent
1943'
considerable impetus to the expansion of facilities by the
processors. Recently, lend-lease has made arrangements with
the War Department which should encourage private financing
"Estimated
of dehydration and compression facilities,
INTERCHANGE OF INVENTIONS
Large quantities of dried eggs and dried milk and smaller
quantities of other dehydrated foods have already been shipped
Under the Lend-Lease Act and supplemental international
under lend-lease. Through March 31 of this year 216,000 tons
mutual-aid agreements, the United States has encouraged the
of dehydrated food had been shipped overseas. Early in
complete interchange for war use of inventions, industrial
April lend-lease made an experimental shipment of compressed
processes, and technical information. The weight of our
dehydrated eggs which represented additional savings in
industrial ingenuity has been thrown into the United Nations'
shipping space.
pool of war production. The Axis can be crushed only by
The lend-lease program for the coming year contemplates
cooperation of the United Nations on all fronts. Scientific
sending overseas several hundred thousand tons of dehydrated
"know how" is one of the most important factors in defeating
and compressed foods. Application of dehydration and com-
the Axis, and that knowledge must be shared if we are to
pression to other foods, such as fruit juice, meats, fish, vege-
achieve early victory.
tables, and other foods of high nutritive value, is fast reaching
Great Britian, since the fall of 1940, has afforded the United
the stage where sizeable overseas shipments can be expected.
States royalty-free use in our war production of many impor-
34
55
tant military and industrial inventions, and has given us
much needed technical information. Early British battle
experience thus conveyed to this country at a time when
we were taking our first steps toward total preparedness
and were relatively inexperienced in the ways of modern war,
has contributed immeasurably to the effectiveness of the tanks,
APPENDICES
airplanes, and other weapons which we now produce.
Similarly, the U.S. S. R. has furnished us valuable technical
military information. We are also receiving the benefits of its
research in synthetic rubber manufacture and the extraction
of rubber from rubber-bearing plants at a time when military
Appendix I
reverses have cut off our supply of crude rubber.
LEND-LEASE ACT
The procedure for interchange of inventions under lend-
lease and reverse lend-lease between this country and Great
Further to promote the defense of the United States, and for other pur-
Britain was formalized on August 24, 1942. Pursuant to
poses
Be it enacted by the Senate and House of Representatives of the United States of
the agreement and with full protection to its citizens, each
America in Congress assembled, That this Act may be cited as "An Act to
government procures from its nationals at its own expense and
Promote the Defense of the United States."
makes available to the other government for war purposes
Section 2.
patented and unpatented inventions, processes and information
As used in this Act-
requested by the other government. Centralization in the
(a) The term "defense article" means-
two governments of these functions of making requests for
(1) Any weapon, munition, aircraft, vessel, or boat;
procuring and interchanging patent rights and technical
(2) Any machinery, facility, tool, material, or supply necessary for
information has been of great practical value in saving time
the manufacture, production, processing, repair, servicing, or opera-
tion of any article described in this subsection;
and making possible a well-coordinated technical program.
(3) Any component material or part of or equipment for any article
The development of procedures and policies for further facili-
described in this subsection;
tating interchange under the agreement is the responsibility
(4) Any agricultural, industrial or other commodity or article for
defense.
of a Joint Committee which meets in Washington and makes
Such term "defense article" includes any article described in this subsection
recommendations concerning problems which arise in the
manufactured or procured pursuant to section 3, or to which the United
administration of the agreement.
States or any foreign government has or hereafter acquires title, possession,
or control.
(b) The term "defense information" means any plan, specification,
design, prototype, or information pertaining to any defense article.
Section 3.
(a) Notwithstanding the provisions of any other law, the President may,
from time to time, when he deems it in the interest of national defense,
authorize the Secretary of War, the Secretary of the Navy, or the head of
any other department or agency of the Government-
(1) To manufacture in arsenals, factories, and shipyards under their
jurisdiction, or otherwise procure, to the extent to which funds are
30
37
made available therefor, or contracts are authorized from time to
(c) Nothing in this Act shall be construed to authorize or to permit the
time by the Congress, or both, any defense article for the government
authorization of the entry of any American vessel into a combat area in
of any country whose defense the President deems vital to the defense
violation of section 3 of the Neurrality Act of 1939.
of the United States.
(2) To sell, transfer title to, exchange, lease, lend, or otherwise dis-
Section 4.
pose of, to any such government any defense article, but no defense
All contracts or agreements made for the disposition of any defense
article not manufactured or procured under paragraph (1) shall in any
way be disposed of under this paragraph, except after consultation with
article or defense information pursuant to section 3 shall contain a clause
the Chief of Staff of the Army or the Chief of Naval Operations of the
by which the foreign government undertakes that it will not, without
the consent of the President, transfer title to or possession of such defense
Navy, or both. The value of defense articles disposed of in any way
article or defense information by gift, sale, or otherwise, or permit its use
under authority of this paragraph, and procured from funds heretofore
appropriated, shall not exceed $1,300,000,000. The value of such de-
by anyone not an officer, employee, or agent of such foreign government.
fense articles shall be determined by the head of the department or
Section 5.
agency concerned or such other department, agency, or officer as shall
be designated in the manner provided in the rules and regulations issued
(a) The Secretary of War, the Secretary of the Navy, or the head of any
hereunder. Defense articles procured from funds hereafter appropriated
other department or agency of the Government involved shall, when any
such defense article or defense information is exported, immediately inform
to any department or agency of the Government, other than from funds
authorized to be appropriated under this Act, shall not be disposed of
the department or agency designated by the President to administer section
6 of the Act of July 2, 1940 (54 Stat. 714), of the quantities, character,
in any way under authority of this paragraph except to the extent
value, terms of disposition, and destination of the article and information
hereafter authorized by the Congress in the Acts appropriating such
funds or otherwise.
so exported.
(3) To test, inspect, prove, repair, outfit, recondition, or otherwise to
(b) The President from time to time, but not less frequently than once
place in good working order, to the extent to which funds are made
every ninety days, shall transmit to the Congress a report of operations
under this Act except such information as he deems incompatible with the
available therefor, or contracts are authorized from time to time by the
Congress or both, any defense article for any such government, or to
public interest to disclose. Reports provided for under this subsection
shall be transmitted to the Secretary of the Senate or the Clerk of the House
procure any or all such services by private contract.
of Representatives, as the case may be, if the Senate or the House of
(4) To communicate to any such government any defense informa-
tion, pertaining to any defense article furnished to such government
Representatives, as the case may be, is not in session.
under paragraph (2) of this subsection.
Section 6.
(5) To release for export any defense article disposed of in any way
under this subsection to any such government.
(a) There is hereby authorized to be appropriated from time to time, out
of any money in the Treasury not otherwise appropriated, such amounts as
(b) The terms and conditions upon which any such foreign government
may be necessary to carry out the provisions and accomplish the purposes
receives any aid authorized under subsection (a) shall be those which the
of this Act.
Presidenc deems satisfactory, and the benefit to the United States may be
(b) All money and all property which is converted into money received
payment or repayment in kind or property, or any other direct or indirect
under section 3 from any government shall, with the approval of the Direc-
benefit which the President deems satisfactory.
tor of the Budget, revert to the respective appropriation or appropriations
(c) After June 30, 1943, or after the passage of a concurrent resolution by
out of which funds were expended with respect to the defense article or
the two Houses before June 30, 1943, which declares that the powers con-
defense information for which such consideration is received, and shall be
ferred by or pursuant to subsection (a) are no longer necessary to promote
available for expenditure for the purpose for which such expended funds
the defense of the United States, neither the President nor the head of any
were appropriated by law, during the fiscal year in which such funds are
department or agency shall exercise any of the powers conferred by or
received and the ensuing fiscal year; but in no event shall any funds so
pursuant to subsection (a); except that until July 1, 1946, any of such powers
received be available for expenditure after June 30, 1946.
may be exercised to the extent necessary to carry out a contract or agree-
ment with such 2 foreign government made before July 1, 1943, or before
Section 7.
the passage of such concurrent resolution, whichever is the earlier.
The Secretary of War, the Secretary of the Navy, and the head of the
(d) Nothing in this Act shall be construed to authorize or to permit the
department or agency shall in all contracts or agreements for the disposition
authorization of convoying vessels by naval vessels of the United Seates.
of any defense article or defense information fully protect the rights of all
39
35
citizens of the United States who have patent rights in and to any such
article or information which is hereby authorized to be disposed of and the
payments collected for royalties on such patents shall be paid to the owner
and holders of such patents.
Section 8.
The Secretaries of War and of the Navy are hereby authorized to purchase
or otherwise acquire arms, ammunition, and implements of war produced
within the jurisdiction of any country to which section 3 is applicable,
Appendix II
whenever the President deems such purchase or acquisition to be necessary
in the interests of the defense of the United States.
Section 9.
AMOUNTS OF LEND-LEASE AID AUTHORIZED
The President may, from time to time, promulgate such rules and regula-
tions as may be necessary and proper to carry out any of the provisions of
The amount of lend-lease aid that may be provided under the various
acts is summarized as follows:
this Act; and he may exercise any power or authority conferred on him by
this Act through such department, agency, or officer as he shall direct.
Lend-Lease Appropriations to the President
Section 10.
First Lend-Lease Appropriation
$7,000,000,000
Nothing in this Act shall be construed to change existing law relating
Second Lend-Lease Appropriation
5,985,000,000
to the use of the land and naval forces of the United States, except insofar
Third Lend-Lease Appropriation (Fifth Supp. 1942)
5,425,000,000
as such use relates to the manufacture, procurement, and repair of defense
arricles, the communication of information and other noncombatant
Total
18,410,000,000
purposes enumerated in this Act.
Section 11.
Transfers Authorized From Other Appropriations
If any provision of this Act or the application of such provision to any
War Department-Third Supplemental, 1942
$2,000,000,000
circumstance shall be held invalid, the validity of the remainder of the
War Department-Fourth Supplemental, 1942
4,000,000,000
Act and the applicability of such provision to other circumstances shall
War Department-Fifth Supplemental, 1942
11,250,000,000
not be affected thereby.
War Department-Sixth Supplemental, 1942
2,220,000,000
APPROVED, MARCH 11, 1941.
War Department-Military Appropriation Act, 1943
12,700,000,000
Navy Department-Second Supplemental, 1943
3,000,000,000
Departments other than War-Third Supplemental, 1942.
800,000,000
On March 11, 1943, after affirmative votes of 407-6 in the House of
Total
35,970,000,000
Representatives and 82-0 in the Senate, the President signed the act
extending the Lend-Lease Act for 1 year.
Nora-In addition to the foregoing, Congress has with certain limitations authorized the
leasing of ships of the Navy and merchant ships conseructed with funds appropriated to the
Maritime Commission without any numerical limitation as to the dollar value or the number
of such ships which may be so leased. (See for example, Public Law 1, 78th Congress, approved
February 19, 1943, and Public Law 11, 78ch Congress, approved March 18, 1943.)
so
41
Declared
Lend-Lease
Reciprocal
United
Country
Eligible for
Agreement
Lend-Lease
Nations
Lend-Lease Aid
Signed
Agreement
Declaration
Signed
Signed
Appendix III
Netherlands
Aug. 21, 1941
July 8, 1942
Jan. I, 1942
New Zealand
Nov. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. 1, 1942
STATUS OF NATIONS
Nicaragua
May 6, 1941
Oct. 16, 1941
Jan. I, 1942
Norway
June 4, 1941
July 11, 1942
Jan. I, 1942
Lend-Lease Countries and United Nations
Panama
May 6, 1941
Jan. I, 1942
Paraguay
May 6, 1941
Sept. 20, 1941
Peru
May 6, 1941
Mar. II, 1942
Dates of Signing of Agreements
Philippines
June 10, 1942
Poland
Aug. 28, 1941
July I, 1942
Jan. 1, 1942
Saudi Arabia
Feb. 18, 1943
Declared
Lend-Lease
Reciprocal
United
South Africa
Nov. 11, 1941
Jan. I, 1942
Lend-Lease
Nations
Country
Eligible for
Agreement
Turkey
Nov. 7. 1941
Agreement
Declaration
Lend-Lease Aid
Signed
United Kingdom
Mar. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. I, 1942
Signed
Signed
United States
Jan. I, 1942
U.S.S.R
Nov. 7, 1941
June 11, 1942
Jan. 1, 1942
Uruguay
May 6, 1941
Jan. 13, 1942
Argentina
May 6, 1941
Venezuela
May 6, 1941
Mar. 18, 1942
Australia
Nov. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. I, 1942
Yugoslavia
Nov. 11, 1941
July 24, 1942
Jan. 1, 1942
Belgium
June 13, 1941
June 16, 1942
Jan. 30, 1943
Jan. I, 1942
Bolivia
May 6, 1941
Dec. 6, 1941
Brazil
May 6, 1941
Mar. 3, 1942
Feb. 6, 1943
Canada
Nov. 11, 1941
Jan. 1, 1942
Chile
May 6, 1941
Mar. 2, 1943
China
May 6, 1941
June 2, 1942
Jan. I, 1942
Colombia
May 6, 1941
Mar. 17, 1942
Costa Rica
May 6, 1941
Jan. 16, 1942
Jan. 1, 1942
Cuba
May 6, 1941
Nov. 7, 1941
Jan. 1, 1942
Czechoslovakia
Jan. 5, 1942
July 11, 1942
Jan. I, 1942
Dominican Rep
May 6, 1941
Aug. 2, 1941
Jan. I, 1942
Ecuador
May 6, 1941
Apr. 6, 1942
Egypt
Nov. 11, 1941
El Salvador
May 6, 1941
Feb. 2, 1942
Jan. 1, 1942
Ethiopia
Dec. 7. 1942
Oct. 9, 1942
Fighting France
Nov. 11, 1941
Sept. 3, 1942
Greece
Mar. 11, 1941
July 10, 1942
Jan. 1, 1942
Guatemala
May 6, 1941
Nov. 16, 1942
Jan. 1, 1942
Haiti
May 6, 1941
Sept. 16, 1941
Jan. 1, 1942
Honduras
May 6, 1941
Feb. 28, 1942
Jan. I, 1942
Iceland
July 1, 1941
Nov. 21, 1941
India
Nov. 11, 1941
Jan. 1, 1942
Iran
Mar. 10, 1942
Iraq
May 1, 1942
Jan. 16, 1943
Liberia
Mar. 10, 1942
Luxembourg
Jan. I, 1942
Mexico
May 6, 1941
Mar. 18, 1943
June 5, 1942
526738-43
8.1. 8. GOVERNMENT PRINTING affice, 1943
42
as
230
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
May 25, 1943
TO
FROM Frances McCathran
CONTROVERSIAL ISSUES BEFORE CONGRESS
1. Tax: Pay-As-You-Go - Tax conferees from the House and Senate,
apparently still deadlocked, meet this morning for the fifth
day for what is again scheduled to be the last time. If
they are still unable to reconcile their sharply divergent
viewpoints, House Republicans are expected to ask the House
to vote again on accepting the Senate-approved Ruml Plan.
Reported plans of the conferees to meet with the President
to determine which of the tax proposals he would accept,
apparently have not been carried out. Latest compromise
proposal, said to be sponsored by Senate conferees, would
abate the 1942 tax for all taxpayers earning less than $2,000
and require all those earning above that figure to pay only
25% of the 1942 liability over a period of two years, mean-
while making payments on their 1943 tax currently. House
conferees, however, are reportedly not in sympathy with for-
giving an equal percentage for the very wealthy. This issue,
namely, whether all income brackets should receive an equal
percentage of abatement, and also the question of how much
abatement should be permitted in order to enact pay-as-you-
go taxation, are reportedly the chief coints of controversy
between the conferees. A meeting late yesterday afternoon
between House and Senate Democrats apparently was unable
to reconcile differences within the party, and the joint
conference itself, as observed before, appears hopelessly
deadlocked.
2. Reciprocal Trade Agreements - Highlight of Senate debate
yesterday on the extension of the Reciprocal Trade Agree-
ments program was an argument between Senators George and
Vandenberg over whether to retain the Senate Finance Commit-
tee amendment providing that such agreements may be terminated,
on six months notice within six months after the war ends,
by the President or a joint resolution of Congress. Senator
George opposed the amendment as equivalent to a threat to
our allies that at the conclusion of the war the United States
Regraded Unclassified
231
will again enact high tariff barriers. Vandenberg, however,
urged retention of the amendment on the grounds that Con-
gressional authority to terminate the agreements after the
war would permit American reoresentatives to go to the
peace tables as "free agents."
3. Poll Tax - By a vote of 268 to 110 the House voted yester-
day to accept a discharge petition releasing its Rules
Committee of further consideration of anti-poll tax legis-
lation. Southern representatives, chief supporters of the
ooll tax, hurled recriminations yesterday at the New Deal,
Republicans and the Communist party as the sponsors of a
political move which they claim will interfere in state
rights. Opponents of the poll tax, however, claim it is a
discriminatory device aimed chiefly at southern negroes.
Today's discussion, which is limited, is expected to be one
of the bitterest of this session of Congress.
4. Anti-Administration Rumors - Yesterday on the floor of the
House, Representative Dewey Short said that "sinister
rumors" circulating in Washington that somebody is trying
to play politics with the conduct of the war, should be
spiked, if false, and, if true, accordingly dealt with.
Short contended he had heard rumors that certain high com-
mand officers on the domestic front may be shelved because
they will not be rubber stamps for the Rasputin of the
White House."
Regraded Unclassified
232
MAY 25 1943
Excellency:
This is to acknowledge receipt of your letter of
May 17, 1943 and the provisional report on fiscal and
monstary problems in Lummburg which you enclosed.
Thank you for the information that you have sent.
It would be appreciated if, in the event that you obtain
additional appropriate information, you would forward it
to no.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
His Emellency, Pierre Dupong,
The Minister of Finance,
Orand Dushy of Luxemburg,
809 Sun Life Building,
Montreal, Canada
Photo file in Diary
WHT:Dri
5/22/43
Regraded Unclassified
GOUVERNEMENT DU GRAND-DUCHE DE LUXEMBOURG
CABINET DU MINISTRE D'ÉTAT
PRÉSIDENT DU GOUVERNEMENT
MONTREAL
QUE.
May the Seventeenth
1
9
4
3
Mr. Secretary of the Treasury:
In compliance with the
request contained in your letter of April 16th, to give
you material and information regarding fiscal and mone-
tary problems in my country, I take pleasure in enclosing
herewith a provisional report on the matters in question.
In the event that I secure
more appropriate information, I shall not fail to forward
it to you.
Very sincerely yours,
Pion Depay
Pierre Dupong
J. Morgenthau, Esq.,
Secretary of the Treasury,
WASHINGTON, D. C.
Regraded Unclassified
Translation
Belgium and Luxembourg
MONETARY SITUATION BEFORE AND AFTER THE INVASION
A. Before the invasion the monetary circulation was characterized
by the peculiarity that it was constituted of Belgian and Luxembourg
monetary units both of which were legal tender in the country.
There existed between Belgium and Luxembourg a monetary union, by
the terms of which, the central issuing authority of Belgium, respec-
tively the Belgium Government, was responsible for seeing to the needs
of the monetary circulation of Luxembourg by means of Belgian monetary
units. However, there was a restriction - the Grand-Duchy had reserved
the right to issue a limited amount of its own monetary units. Moreover,
a private issuing Luxembourg bank enjoyed the privilege of issuing
limited money.
At the time of the invasion the monetary circulation in the Grand-
Duchy was as follows:
Monetary units of the State
of Luxembourg
- Luxembourg francs - 131 millions
Monetary units of the Banque
Internationale
- Luxembourg francs - 6 1/4 millions
(private bank) at Luxembourg
Belgian monetary units
- Belgian francs
- 830 willions
A total of about 1000 million Belgian francs or 800 million Luxes-
bourg france.
As Belgium and Luxembourg form a unit from the monetary and economic
point of view, it is possible to indicate only approximately the circu-
lation of Belgian monetary units.
The Lucembourg franc was the official money of accounts and was worth
1 1/4 of the Belgian franc.
B. At the time of the invasion of Luxembourg, the German troops
brought their own money. These were not Reichemark, but notes
"Reichskreditkassenscheine" which bore no signature and which were
printed as needed by the army. These notes were declared legal tender
currency in the interior of the country. They were not legal tender
currency in Germany. Their rate was fixed at ten Laxembourg france to
one mark.
On May 25, 1940 a German credit bank was opened at Luxembourg.
This establishment was followed by the opening of similar banks in
Regraded Unclassified
Division of Monetary
Research
- 2 -
Belgium at Brussels, Liege, "Namur", Ghart, Antwerp and "Charleroi";
the one in Brussels was a clearing house between Belgium and Luxembourg.
at the ваше time exchange control patterned after the German system was
introduced in Laxembourg.
The same rate 1 to 10, fixed for the Luxembourg franc, was also
Clased for the Belgian franc. Upon insistence from the Lamembourg
Administrative Commission, the rate of the Luxembourg franc was reduced
to 1 to 8 at the beginning of June; the rate for the Belgian frane
remained at 1 to 10.
After the arrival of a Gualeiter, or a deputy Fuhrer, as chief of
& German civil administration at Luxembourg, the rate of exchange was
changed for the third time and reraised to 1 to 10. At the same time
the rate of the Belgian franc was placed at 1 to 12). The banking rate
before the war was 1 RM to 9.60 Luxembourg france.
This parity was assigned by a decree of the Gauleiter dated
August 25, 1940. This same decree introduced the Reichsmark as legal
money along with other legal means of payment.
In pursuance of a decree of the Gauleiter dated August 27, 1940
all moneys in gold or silver, gold (dult) and foreign currencies had
to be sold to designated banking establishments. Other foreign means
of payment, claims in foreign and native currency against foreigners,
Germen and foreign as well as other assets and exchange had to be
declared at the Reichkreditkasse at Luxembourg.
The introduction of reichsmarks as legal money did not yet however
abolish the Luxembourg and Belgian monetary circulation. The people of
Incombourg hastened at first to change the notes issued by the army of
occupation against the Reichemark. As for Luxembourg notes they were
withdrawn as far as possible from circulation and were hoarded.
The circulation of 4 different moneys (Reichsmarks, Reichskredit-
rassmachiene, Belgian and Laxembourg francs) lasted until February
1941. By decree of February 15, 1941, the Gauleiter tied Luxembourg
completely to the German monetary system and decreed that from the first
of March, the Reichsmark would be the only legal money of the country.
The Belgian notes and German notes had to be changed within a certain
time: the Luxembourg notes were simply declared valueless after March 1.
The rate of exchange remained at the rate of August 25, 1940.
It is difficult, for lack of specific information, to evaluate the
total of Reichsmarks circulating at present in the territory of the
Grand-Ducky of Luxembourg. The general increase in expenditures, salaries,
Regraded Unclassified
236
Division of Monetary
Research
- 3 -
and prices and the adjustment to the German high level prices, leads
as to suppose that the nominal value of the notes in circulation must
greatly surpass the volume in circulation before the invasion.
C. Fiscal Regime. The Luxembourg fiscal regime has been pro-
gressively replaced by the German fiscal regime.
D. It is too early to make a decision on the rate of exchange
to be established between the dollar and the franc. The factors which
must determine the rate still change every day.
Translated by E. F. Mikulich
Division of Monetary Research
Regraded Unclassified
237
Regraded Unclassified
PARAPHRAFE 1 VELSORAM RECEIVED
FROM: American Ambassy, Chungking, China
DATE: May 25. 1943, 10 a.m.
NO.: 773
This is a strictly confidential ressuge, T-125,
transmitting the weekly sconomic report from -.. Adler
for the Becretary of the Treasury.
SECTION I
1. Regarding prices:
(A) The following are Chungking indices:
wholessle:
March
April
January February
(revised)
Food
6320
General
8360
Retail:
Food
5810
5960
5400
6060
General
7650
7750
7320
7780
It is clear from the above indiose that official
price quotations instead of actual market prices are fre-
quently used in compiling them and that the upward course
of prices is not accurately reflected by them. For example
the course of market prices for March cannot be reconsiled
with the slump in the retail index for the saze month.
(B) Prices in the largest cities have swiftly cought
up to those in Chungking, while as late as the end of 1942
they all were legging behind except Kunming. Kunning's
prices are between 75 and 100% higher then in the capitol,
and these in Chengtu, Loyand and Awelling are a little
higher than those in Chungking. Lanchow end Eweiyong are
the only in ortant cities having prices below the Chungking
level and the spread has been reduced even here. The rapid
increase of prices in the bie cities, which was also helped
by the operation of price control, proves beyond a doubt
that inflation has now spread to all the important commor-
oial centers. It is unfortunate that there is not enough
reliable information soncerning the extent to which the
countryside has been penotrated by inflation.
(c) cince
238
Regraded Unclassified
- 2 -
(c) ince the first of May the price of rice has
risen over 50 persont in Changking. The increase is partly
due to the season, according to the Ministry of Food. Same
other cousel factors are runers that rice allowances to
Government employees are going to be sbollshed or curtailed
by the Central Government, the feet that in rice exporting
areas in Bunen fighting is going on, and that the Central
Government is being pressed by Szeehuen landlords and
militarists to reduce compulsory food purchases and land
tax.
2. In March at $40,422,000,000 the emount of legal
tender in sirculation was 6 percent more then in February.
Chinese legal tender which was imported into Kunming by
air has the following face value: $2$10,097,000,000 for
March; 022,921,000,000 for April.
3. Up to April 24 the total sales of U.D. dollar
booked certificates amounted to CN$726,000,000.
4. The oversold position of the Contral Bank in
April was 1120,000 and U.S. $1,644,000.
5. The United totes dollar sold at the rate of 59
to 19 Indian rupees and to 15.50 sures rupees in the Kunsing
blook market on May 15.
SECTION II
1. Then the failure of the price control became too
evident to ignore any longer, in the second work of spril,
it was drestically revised. only eight essential commodities
were made subject to price collage. Merchents associations
in conjunction with city government will agree on prices on
other cesentials which previously had Goilings imposed while
non-essential commodition will have their prices regulated.
the words "Agresment" and "Regulation" 0002 to be comourlages
for control relaxation. Schemes for retioning for which
plans were being made have either been out down very drasti-
sally or abandoned altogother. Centrol relaxation similar
to this has been put in effect in other leading cities and
smaller cities havin the intention to set up controls have
Given the idea up. This relaxation Come only after cousi-
derable damage had been done, but Itwas very welcome.
2. Because the have taken possession of the
salt producing in south eastorn provinces there is a
salt shortage in Kwangtung, Jukien, Kwongsi, Chekiang,
Siongai and Human. Due to this shortage and to lack of
adequate
239
- 3 -
adoquate transportation facilities & retioning program
was started on April 15 by which each person in the first
your provinces mentioned was to receive one catty per month
and each person in the last two provinces was to receive
twelve ounces per month.
3. Credit policy of the Government. AS the end of
Surch the Ministry of Finance ordered commercial, district
and provincial banks to refer all leans over CN$50,000
und Government banks to refer all of between CN050,000 and
1,000,000 to the Loan Supervising Committee which operates
under the supervision of Covernment bank inspectors since
April 1. It wes assounced last week, however, that Covern-
ment banks had received orders to invest in and loss to in-
dustry CH$2,000,000,000. These orders which apparently con-
tradiet sooh other indicate that the policy of the Government
is to expend the activities of Government banks, while it
curteils those of private banks.
40 A free gold market will be established in the near
future with the approval of the Ministry of Finance, it was
learned from a reliable course. CH86,000 per ounse is
approximately the black market price in Chungking for gold.
It is expected that the price of gold will be only about
CN04.500 as 6 result of free buying and selling. It is
estimated that the Centrel Covernment in China has between
45 and 60 thousand okness of gold at its disposel.
TCHXSON
Regraded Unclassified
SECRETARY OFFICE OF TREASURY
1043 MAY AM 11 46
NOT TO BE RE-TRANSMITTED
EASURY DEPARTMENT
COPY NO. 13
BRITISH LOST SECRET
U.S. SECRET
OPTEL NO. 171
Information received up to 7 c.m., 25th may, 1943.
1. NAVAL
One of H.M. Submarines torpodoed a 4,000 ton ship off Eastorn
SICILY on 16th.
2. AIR OPERATIONS
WESTERN FRONT. 23rd. During the attack on HASTINGS and
BOURNEMOUTH, 5 F.W. 190's were shot down in all.
3.
DORTMUND. 23rd/24th. 712 Aircraft droppod 2042 tons of bombs
including 11 8,000 pound and 313 4,000 H.E. The Attack took 63 minutes and is
the heaviest single raid yet carried out. Weather favourable, no cloud, good
visibility apart from ground hazo until later whon dense smoke hindered ob-
servation of results. Marker bombs woll placed and bombing well concontrated
around them. Vory large & rea of concontrated fires with smoke to 14,000 fect.
One particularly heavy explosion reported. Ground defences appeared to be
overwholmed.
24th. 29 oscorted Beaufighters attacked with torpodoes an
enomy convoy off the Dutch Coast. Results word unobserved. One Beaufighter
missing.
SICILY. 23rd/24th. A naval Albacoro made two hits with bombs
on a 10,000 ton tanker off CATANIA.
3. HOME SECURITY
Fatal casualties now reported 23rd, BOURNEMOUTH - 93, including
36 Service. 23rd/24th. Sunderland - 48.
Regraded Unclassified