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Volume 808, January 8 – January 10, 1945
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Volume 808, January 8 – January 10, 1945
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 808
January 8-10, 1945
Regraded Unclassified
- A -
Book Page
American Enterprise Associates, Inc. (All-Negro concern,
Cleveland, Ohio)
See Post-War Planning: Surplus Property. Disposal of
Automotive Parts
See Post-War Planning: Surplus Property. Disposal of
- B -
Bond Market, Government
See Financing, Government
Bretton Woods Conference
See Post-War Planning
Business Conditions
Hans memorandum on situation, week ending January 6, 1945 -
1/8/45
808
96
- C -
Citations. etc.
See Treasury Department
Congressional Record
References to HMJr and Treasury to be checked by Office of
General Counsel - 1/9/45
189
a) Congresswoman Jessie Summer and Congressman
Robert Hale criticise Morgenthau Plan Lynch
memorandum - - 1/10/45
358
(See also Book 809. page 27)
Currency. Circulation of
Large-denomination bills ways to prevent hoarding:
See Tax Evasion
- E -
Inskildabank
See Foreign Funds Control: Sweden
- , -
Financing. Government
Conference: present: HMJr, Eccles, Sproul, D.W. Bell,
Haas, Lindow, and Tickton - 1/10/45
263-A
a) Agenda
253
Conference; present: HMJr, D.W. Bell, Haas, Currie,
Tickton, and Lindow - 1/10/45
254
a) Problems relating to Government bond market -
Hass memorandum
272
Regraded Unclassified
- 1- - (Continued)
Book Page
Financing, Government (Continued)
War Savings Bonds
"These Are Your Bonds : Reading copy of HMJr's part -
1/10/45
808
346
6th War Loan Drive
Final report as press release discussed by Treasury
group - 1/8/45
67
Security market and banking developments connected
with 6th War Loan - Hass memorandum - 1/8/45
109
Foreign Funds Control
Sweden: Enskildabank (Marcus Wallenberg) cloaking of
German assets and loot brought to attention of State
Department - 1/8/45
48
a) State Department promises to convey information
to Legation in Stockholm - 1/18/45:
See Book 810, page 309
Formosa
See Occupied Territories
FORTUNE Magasine
See Morgenthau, Henry, Jr.
France
See Lend-Lease
- G -
Germany
See Post-War Planning
Government Bond Market
See Financing, Government
Greece
British request for two American advisers (one for
finance and one for supply) discussed in Treasury-State
correspondence 1/9/45
237
- H -
Hale, Robert (Congressman, Maine)
See Congressional Record (criticism of Morgenthau Plan)
- I -
Italy
See also Book 805
Technical Mission: Press release when mission leaves U.S.
suggested in Stettinius letter - 1/10/45
360
a) Luigi Podesta's presence on mission resented by
anti-Fascist press - 1/15/45: See Book 809. page 375
- J -
JOS 1067
See Post-War Planning: Germany
Regraded Unclassified
- K -
Book
Page
Kent, Frank R. (Baltimore Sun)
See Tax Evasion
- L -
Lend-Lease
France
State Department draft of agreement discussed by HMJr.
DuBois, and Glasser - 1/9/45
808
204
a) Hopkins opposed to aid
206
Stettinius asked to confirm fact that "French
Lend-Lease document which was before FDR last
September is now dead" - 1/10/45
357
American Ambassador, Paris (Caffery), reports
conversation with De Gaulle: hopes for international
organization to govern Rhine regions: not interested
in annexing German territory - 1/13/45:
See Book 809, page 226
Foreign Economic Administration (Crowley) memorandum
for FDR on French Lend-Lease Agreement: copy sent to
Treasury by Cox - 1/19/45: Book 811. page 147
a) FDR "did not want to go through with it" - HMJr
reports: Book 811. page 204
b) Glasser and HMJr discuss Crowley's attempt to
get HMJr to sign quickly at Cabinet - 1/20/45:
Book 811. pages 207,213
Byrnes: "No Lend-Lease agreement to be entered into
with French unless American area commander agrees":
Book 811. page 209
State Department (Clayton) asks Treasury approval of
letter to Monnet: first determination - how much of
French gold and dollars to be used in payment?:
Book 811, page 267
a) Grew reply indicates State Department agreement
to Treasury view: Munitions and non-munitions
Lend-Lease should rest on same principles as
those to Great Britain - 1/22/45: Book 811, page 335
b) HMJr, in his reply. outlines next steps - 1/23/45:
Book 811, page 396
1) Copy to Crowley: Book 812. page 162
U.S.S.R.
Exports to, during four months ending October 1944 -
1/8/45
129
Availability of cargo for January 1945 - 1/10/45
367
United Kingdom
For "take-over" arrangements see United Kingdom
Gold and dollar holdings as of November 30, 1944 -
1/9/45
241
- X -
Money in Circulation
Large-denomination bills - ways to prevent hoarding:
See Tax Evasion
Regraded Unclassified
- M - (Continued)
Book Page
Montgomery, Ward & Company, Inc.
War Department-Treasury correspondence concerning
special deposit account with Treasurer of U.S. through
facilities of Federal Reserve Banks - 1/9/45
808
169
Morgenthau, Heary, Jr.
FORTUNE Magazine: Series of articles about persons "close"
to FDR discussed with HMJr - 1/10/45
344
a) Charles J. V. Murphy (FORTUNE) described by
Gaston - - 1/11/45: See Book 809, page 13
- I -
Negroes
See Post-War Planning: Surplus Property, Disposal of
(American Enterprise Associates, Inc.)
- 0 -
Occupied Territories
Formosa: 10# rate discussed by HMJr and Treasury group -
1/9/45
200
a) Grew's letter acknowledging Treasury's withdrawal
of objections to 10# rate "in view of the political
considerations involved" - 1/10/45
369
b) Treasury reaffirms "no further objections to rate" -
1/16/45: See Book 810, page 31
Office of Price Administration
See Tax Evasion
- P -
Packard Company
See United Kingdom
Passes, Treasury
See Treasury Department
Podesta. Luigi
See Italy
Post-War Planning
Bretton Woods Conference: Conference: present: HMJr.
Senator Wagner, Congressmen Spence and Wolcott, Vinson,
Acheson, White, O'Connell, Luxford, and Bernstein -
1/8/45
62
a) Legislation discussed
Germany
War Department reports on Treasury suggested changes in
JOS 1067 - 1/8/45
124
a) McCloy-HMJr conversation - 1/9/45
190
1) Conversation reported to White
195
Memorandum taken to White House for meeting with FDR
and Stettinius - - 1/10/45
278,297
Regraded Unclassified
- P - (Continued)
Book
Page
Post-War Planning (Continued)
Surplus Property, Disposal of
American Enterprise Associates, Inc. (All-Negro concern,
Cleveland, Ohio): Contracts let them and their
financial difficulties discussed in Pehle memorandum -
1/10/45
808
355
Automotive Parts: Three possible prospects for the
sale of - 1/9/45
230
- S -
Speeches by HMJr
"These Are Your Bonds": Reading copy of HMJr's part -
1/10/45
346
Stabilisation Fund
Earnings and expenses, November and December, 1944 -
9/9/45
235
Summer. Jessie (Congresswoman, Illinois)
See Congressional Record (criticism of Morgenthau Plan)
Surplus Property. Disposal of
See Post-War Planning
- T -
Tax Evasion
Large-denomination bills - ways to prevent hoarding as
means of tax evasion
Discussed by HMJr and Treasury group - 1/8/45
3
Discussed by HMJr and Treasury group (Irey included) -
1/9/45
161
a) United States News article, etc., read by HMJr
b) Viner asked to come down to discuss - 1/9/45
172
Discussed by HMJr and Treasury group (Currie and Irey
also present) - 1/10/45
221
a) O'Connell memorandum entitled "Suggested
Currency Program for U.S." discussed
1) Actual memorandum
338
White, DuBois, and Luxford advise against action at
this time - 1/12/45: See Book 809, page 133
Office of Price Administration report on large-
denomination bills in black market operations -
1/12/45: Book 809, page 135
United States News article: "Over-Supply of Currency
Symptom of Lawbreaking" - 1/5/45: Book 809. page 138
Kent's column in Baltimore Sun: "Tax Evaders and
Hoarding" - 1/7/45: Book 802. page 141
Conference of Treasury group: Currie and Viner present -
1/13/45: Book 809, page 166
a) Foreign currency problem discussed: Book 809, page 168
b) Banks to be advised against re-issuing large bills -
Luxford suggestion: Book 809, page 170
c) Currie opposition voiced: Book 809, page 170
Regraded Unclassified
- T - - (Continued)
Book
Page
"These Are Your Bonds"
See Speeches by HMJr
Treasury Department
War-time restrictions on building passes to be lifted -
1/8/45
808
1
Citations and awards listed for FDR - 1/8/45
117
a) Returned to HMJr without comment - 1/10/45
351
Treasury Representatives Abroad
Travel allowance discussed by HMJr and C.S. Bell -
1/8/45
59
- U -
U.S.S.R.
See Lend-Lease
United Kingdom
Packard Company: Certain British-owned plant facilities
sold to company for $200,000; additional future sale
equal to $1.3 million - Treasury-United Kingdom Treasury
Delegation correspondence - 1/8/45
130
a) Brand (United Kingdom Treasury Delegation) reply
242
"Take-outs" of British-owned capital facilities equalling
$38 million discussed in War Department-Treasury
correspondence - 1/8/45
132
a) Up-to-date resume' of "take-over" arrangements
137
b) War Department promises investigation of British-
owned capital facilities - 1/12/45: See Book 809.
page 44
c) War Department reply: "Other arrangements for cash
settlement not advisable until British have formally
refused to provide these facilities to War Department
under reciprocal aid - 1/25/45: Book 812. page 234
(Lima Locomotive Works
(Savage Arms Corporation
(Tennessee Powder Company
Progress report on negotiations by War Department -
1/11/45: Book 809, page 42
United States News
See Tax Evasion
- v -
Viner, Jacob
See Tax Evasion: Large-denomination bills - ways to prevent
hoarding
- W -
Wallemberg, Marcus
See Foreign Funds Control: Sweden
War Department
See Post-War Planning: Germany
War Savings Bonds
See Financing, Government
Regraded Unclassified
1
January 8, 1945
9:30 a.m.
GROUP
Present: Mr. D. W. Bell
Mr. Gaston
Mr. O'Connell
Mr. White
Mr. Luxford
Mr. C. S. Bell
Mr. Pehle
Mr. DuBois
Mr. Haas
Mr. Blough
Mr. Coyne
Mrs. Klotz
H.M.JR: While I am waiting--Charlie, on these
badges.
MR. C.S. BELL: You want to discontinue showing
passes as they come in and out?
MRS. KLOTZ: He means Treasury passes we use to
come in and out.
H.M.JR: They would not be needed except after office
hours.
MR. LUXFORD: We have always had passes of one form
or another.
MR. GASTON: Just if you are called on to show them--
just for identification.
MR. O'CONNELL: You need them in other buildings.
Army and Navy have them.
MR. C.S. BELL: It facilitates things.
H.M.JR: My suggestion was to put Treasury back to
where it was pre-Pearl Harbor with respect to coming
Regraded Unclassified
2
-2-
in and out of Treasury. If you have a Treasury pass--
if I wanted to know about War Bonds I just walk in and
nobody asks me.
MR. COYNE: We want the public, Mr. Secretary.
H.M.JR: I see. I don't know the significance of
the Treasury pass. The people can still have them if
they want to come in after 5:30.
M.t. C.S. BELL: Yes, sir. It serves a good purpose
then.
H.M.JR: But visitors can come and go.
MR. C.S. BELL: Visitors and our own employees
during working hours.
H.M.JR: Let Bauck 80 back to Secret Service.
Now, the principal thing I wanted to talk about
this morning, and this is extra confidential--I warned
Danny Bell and Mr. Joe O'Connell who almost took my
head off last night.
MR. O'CONNELL: That was the third call I had
yesterday. There is another Joe O'Connell in Silver
Spring. The first one was six o'clock yesterday
morning. I was quite prepared for a wrong number.
H.M.JR: I called up Joe 0' 'Connell and he said,
"Huh?" I said, "This is your boss", and he said, "Yes." If
I said, "What's the matter with you, Joe?" lie said,
"You know". I said, "I better call you back." He
said, "You better not." (Laughter)
MR. O'CONNELL: It wasn't quite that bad.
MR. LUXFORD: Didn't you get any wine for Christmas
from the Soviet Embassy?
MR. O'CONNELL: No.
MR. LUXFORD: You better check up on the other Joe
O'Connell then.
Regraded Unclassified
-3-
H.M.JR: Poor Mrs. O'Connell.
MR. GASTON: You say that is not quite accurate?
MR. O'CONNELL: Not quite, but substantially correct.
I was confident it was the wrong number. I am not used
to having the Secretary call up and say, "Hello, Joe,
this is your boss.' I was completely prepared for the
call being for someone else.
H.M.JR: "Is this the Secretary of the Treasury?"
He could hardly believe it. Anyway--
MRS. KLOTZ: When did you get back?
H.M.JR: We took the six-thirty train. It never left
the station until seven.
MRS. KLOTZ: We took that train last night.
H.M.JR: It didn't lost any time after it left there,
but if anybody wants to see a good show, Mrs. Morgenthau
and I went to see I think it's "Sing Out Sweet Land.
If anybody likes American ballads, it is very beautiful.
Well, I wanted to do something about the money in
circulation, and I would like to do it this week. The
reason I want to do it this week is that I think the Ameri-
can public is taking various moves the President has made
with good grace, such as horse racing, this about 4-F's,
and so forth. If we say to the American public, "If you
have been hoarding any large denomination bills, if you
would declare them under income tax before the fifteenth
of January, you will save yourself a lot of trouble." I
should like to do it this week in order to get the benefit
of it in the fourth quarterly payment, so that they can
still declare them. Give them a report on their income
tax, but give them a reasonable time to turn their money
in.
Anybody who has been hoarding money--through use of
the press or radio, as far as income tax is concerned--
would certainly know about it if we announce it, and if
Regraded Unclassified
4
he subsequently finds he has a lot of money he didn't
declare, it is just his hard luck, and nobody is going
to feel sorry for him. If a man is hoarding five
thousand or fifty thousand dollars in cash and keeps
from recording it and claims he didn't hear it over the
radio, it is just his bad luck.
Now, my thought is that we should only have twenty
dollar bills in circulation. That is ample for anybody.
No one can carry very many of those in his pocket without
having to show a bulge. I called up Chester Bowles last
night and talked to him in strictest confidence. He said
it would be a great help to him to have examples, saying
how they do it, and I just don't want to sit in this chair
feeling I an missing a beat on the inflation front. I
am also looking forward to your Seventh War Loan Drive.
LCL. LUXFORD: There are going to be some juicy taxes,
too.
H.M.JR: There are if we do it this week. No, it's
got to be not later than the eleventh, and I don't see
why-we are not going to confiscate the money. I don't
care how long we give them to turn the money in, but
this suggestion of Bell's to wait until we print some
new money to take the place of the old--that works too
slowly.
MR. DuBOIS: There has been a considerable amount
of work done--
MR. O'CONNELL: We talked about it a number of times.
Frankly, until you mentioned it now, I hadn't thought it
was either possible or desirable to attempt to tie the
declaration on turning in of the currency to an income
tax payment or income tax date, because there is no neces-
sary connection between hoarding of the given amount of
money and an income tax liability.
I might have ten thousand dollars in one hundred
dollar bills, and I might or might not have underpaid
any income tax. Certainly, my income does not necessarily
involve that amount of money.
Regraded Unclassified
5
- 5 -
H.M.JR: I was told that the black market operators
who are making the profits keep their money in cash and
don't report it.
MR. O'CONNELL: There is no question about that.
H.M.JR: Now, a friend of mine went into a jewelry
store looking for jewelry for his daughter. He saw a
pretty piece and said, "How much is this?" The man
said, "Thirty-five thousand dollars." He said, "Nobody
is going to buy that.' He said, "You would be surprised
how many people would buy that.
Now, certainly, nobody who is legitimately reporting
his income tax is going to say he can buy thirty-five
thousand dollars worth of jewelry.
MR. GASTON: There is evidence in the ads you read
in the papers--the high-priced stuff they are advertising.
MR. D. BELL: You find that in your fur trade. They
tell me you can go down here and buy a fur coat and pick
your price, your own price within reason of their price,
and eliminate the tax and everything.
MR. DuBOIS: We have been working on a program for
several months involving calling in all United States dollars
all over the world. That has various functions in addition
to the black market. The first is the problem of the
black market. The second is tax evasion. The third,
which is a related function, is the fact that there is
considerable evidence that the Axis underground may be
hoarding big United States dollar bills which would be
another function of driving those out of their hands.
So, we have been working on it, and I think Joe is pretty
familiar with it, and I think you have seen it, Mr. Bell.
MR. D.W.BELL: I have been working with Mr. Haas.
MR. DuBOIS: It is a comprehensive program of calling
in all over the world all United States dollar bills
above twenty dollars.
Regraded Unclassified
- 6 -
MR. LUXFORD: There is a need for speed if you are
really trying to get at the tax evader.
H.M.JR: You will have to do it this week if you
are going to have the people get the benefit of the
1944 profits because they can still put in a revised
return on the fifteenth.
MR. LUXFORD: If you are going to get a tax evader,
he will have to identify himself when he pays the bills.
H.M.JR: Well, he wouldn't if he declared it as a
profit and then turned in the bills between now and--
MR. LUXFORD: That's all right.
H.M.JR:
the fifteenth, but if he comes in after
the fifteenth--I am just thinking now--I don't think
you will make him identify them if he turned them in
between now and the fifteenth, but if after the fifteenth
he comes in with a bunch of bills, then, if we have a legal
right to, he would have to say where he got them and why.
My own feeling is that as of today, I would like to
say anybody can turn this stuff in on or before the fif-
teenth if he declares them on his income tax. After the
fifteenth we are going to make him say why.
MR. LUXFORD: That is the best way to get currency
in.
MR. GASTON: I don't know that I understand what you
mean by turning in on income tax. Supposing a man has a
large amount of large bills in his storage box. How would
he report those for income tax? Suppose it doesn't represent
income just money saved?
H.M.JR: He can say SO.
MR. GASTON: Is it your expectation that he will
declare--the mere fact that he has to turn those in will
cause him to declare additional income he hasn't heretofore
Regraded Unclassified
- 7 -
declared?
H.M.JR: Supposing I am a black market operator
and I, during 1944, have made ten thousand dollars,
and the ten thousand dollar profit I have got is all
in big bills, but I haven't shown them on my income tax?
(Mr. Pehle enters conference.)
MR. GASTON: Shown the profit?
H.M.JR: I haven't shown the profit. The Secretary
of the Treasury announces that if anybody will turn in
these bills and will show that he has declared this profit
on his income tax between now and the fifteenth, fine.
If after the fifteenth he wants to come in with a lot of
bills, he has to give & bill of particulars as to why
he had them. If they are legitimate, all right. If
they are legitimate, fine. If we have the legal authority
to make him say, "I have had them for five years for
this reason, or "My business requires me to carry a lot
of money, or for any one of a thousand perfectly proper
reasons--
(Mr. Haas enters conference.)
MR. O'CONNELL: The program the way we attempted to
work it out a couple weeks ago--and we had done some
preliminary work on it--it was our thought that there
would be no difficulty at all in requiring anybody who
has bills larger than twenty dollars to turn them in on
a certain day, and at that time we could reasonably
expect them to give us general information, their name
and address and other things of that sort, and at that
time we would be obligated to give them other currency
in its place. It would afford leads for purposes of
income tax cases as well as almost anything else, but
I have & little difficulty in seeing how you can tie
the large bills SO quickly to the proposition of owing
that amount of money in income tax or requiring them in
some fashion or other by the fifteenth to file an im-
mediate return which would indicate that these large
Regraded Unclassified
R
- S -
bills represented some profit that they would not
otherwise declare.
H.M.JR: I would say that anybody who brings in
2. lot of bills after the fifteenth, we are going to
ask him, "Does this represent legitimate profit, or
does it represent black market profit?" He is going
to have to square it with his income tax after the
fifteenth.
(Mr. White enters conference)
MR. O'CONNELL: Well, you turn it in before the
fifteenth--I don't quite get what happens in that
situation.
H.M.JR: We would just know if he turns it in
before the fifteenth. It is a loophole; We are willing
to let him do it.
M. LUXFORD: If he turns it in before the fifteenth,
you won't make him file a report on it. It gives him an
opportunity to file it with his tax return, and that is
the end of it.
E.M.JR: We won't know whether he did include it
in his tax return 07 whether he didn't, but We know he
has turned in the money.
MR. GASTON: That would mean giving people who
are cheating on their income tax returns a large in-
ducement to them to turn the money in immediately. Then
you would get the money, but no taxes out of it. People
who haven't been cheating could take their time.
MR. LUXFORD: You would get the taxes if they would
turn them in.
MR. GASTON: I don't see it.
MR. LUXFORD: You turn it into the bank. It is easy
to trace an asset they didn't have before.
Regraded Unclassified
-9-
MR. BLOUGH: Suppose they come in and change it
for twenty dollar bills?
MR. GASTON: You are not going to make any record.
he may be a black market operator having fifty-seven
thousand dollars in one hundred dollar bills and gets
twenties for it, and that ends it.
H.M.JR: We could do it another way if you want to.
We can send a telegram out to every bank in the country
that anybody that comes in with a lot of bills, please
make a record of it; how many brought in, how many
exchanged, and please turn that over to the bank examiners.
MR. BLOUGH: It seems to me there is your real thing.
If you can legally require a person to explain a one
hundred dollar bill and say who he is, that is your
solution and I wouldn't make any leeway for the fifteenth.
MR. GASTON: I think that is, no doubt, the essential
Teature if you are going to get any information to lead
to income tax evasion.
MR. LUXFORD: You are still giving them tax con-
cessions because they can always include all of that
they haven't previously declared in this declaration,
SO they won't be prosecuted for taxes.
MR. GASTON: The only thing I can see in connection
with taxes is to get information about currency being
held by people. That is one lead so you can investigate
their income.
MR. LUXFORD: Suppose a man is holding out ten
thousand dollars and he wasn't going to declare it.
Now, what you are going to do is force him to identify
that he held ten thousand dollars, but you have given
him almost until January 15 to amend his return. So
he is still protected against--
MR. GASTON: So what?
Regraded Unclassified
10
- 10 -
MR. LUXFORD: That's exactly what we want, isn't
it? It is an inducement to M.... to get it in before the
15th.
MR. CASTON: Isn't that what we want?
MR. LUXFORD: Yes, I am all in favor of it.
MR. GASTON: You mean without accounting for it?
MR. LUXFORD: lie can account for it, but he still
has a leeway to declare it.
MR. BLOUGH: The point is well taken. If you can
get this machinery set up and get all set and get the
decision around the Government that it is the thing to
do and 60 anead with it--if you can get that done in
time for 8 fellow who is scared thereby to do it by the
15th, well and good, but the amount of penalties involved
and conditions under which penalties would be imposed
are not a major concern.
MR. GASTON: We were talking about income tax. ITy
only point was if you give the man 8 period to turn the
oney in during which you won't require him to identify
himself and the money, there is an open violation for
anybody concealing income to get rid of it while people
who are not concealing income would have no incucement
to turn it in but--
H.F.JR: You give him 8. receipt.
MR. PEHLE: By the 15th of January, Mr. Secretary?
H.M.JR: Yes.
MR. GASTON: I still think that the thing has
dangers.
MR. PEHLE: This is 8 program I have been in favor
of for a long time, though I would be 8 little worried
about tying it so completely in with taxes to start with.
Regraded Unclassified
"1
-11-
H.M.JR: No, no!
MR. GASTON: I think there is another thing we
have to look at.
H.M.JR: Let's find out how we can do it and then
give it--
MR. D.W. BELL: Give it a lot of thought.
H.M.JR: If they wait until the 15th, this is a
good week to do it. You will never have a better
week.
MR. LUXFORD: One of the difficulties you are
going to run into--I am fully in accord with it--
but I want you to remember it because you have the
problem of enforcing this for years to come. You
have several million men in the Army. They will all
come back. You will have this proposition when they
return. They will say, "we didn't know about this.
We had these bills on hand." You have an enforcement
problem. How to tell when a man is lying or not
lying is going to be extremely difficult. I have
thought about it and I just want to mention it to
you.
H.M.JR: Well, listen. They found some soldiers
averaging six thousand dollars apiece on them--two
hundred soldiers.
MR. LUXFORD: You are not going to be able to
really affect the soldiers at this time.
H.M.JR: No, but I would say I would allow any
soldier to come back with a hundred dollar bill on
him.
MR. LUXFORD: Here is what happens--
MR. PEHLE: Any soldier that comes back and says,
"I was out of the country and I had five thousand
dollars in my safe deposit box." You can't do a damm
Regraded Unclassified
12
-12-
thing. You will be taking affidavits for the next
one hundred and fifty years.
H.M.JR: That's all right.
MR. LUXFORD: This is going to be like the
gold program. The enforcement of it will require
that kind of an operation and we are still enforcing
the gold issue. I do want to mention to you that is
what we are in for.
H.M.JR: That wasn't bad.
MI. GASTON: One point hasn't been brought up
and that is what the effect is going to be on the
value of United States money and obligations. I
think that end of it--I don't claim to be able to
form any judgment on that, but I think it is some-
thing we want to look at very carefully.
H.M.JR: Now look Herbert, Bell has been talking
that way for two years now.
MR. D.W. BELL: That's right and I will still
worry about it.
H.M.JR: I am willing to take full responsibility
as long as I know 1 am standing on legally firm ground.
As long as the procedure is worked out carefully and
the publicity is ample, and as long as before 1 do it
I contact the Hill and make sure that the Congress,
both Democrats and Republicans are with me-but in the
meantime--because after all I am not being pressed by
anybody here--the group--by Mr. Acheson. The Under
Secretary of the Treasury didn't want the President
to change the price of gold--didn't want them to buy
and sell gold. We got a bear by the tail. Currency
went up five hundred million dollars last year. It
is getting steadily worse.
You have this black market thing and some day
Jimmy Byrnes or somebody can come out and say,
"Morgenthau isn't carrying out his responsibility,"
Regraded Unclassified
13
- 13 -
and issue me 8 directive. I am not going to wait for
somebody to tell me what to do to carry out my respon-
sibility. And in carrying it there is 8 certain amount
of risk involved. I 81.. willing to take it provided the
whole thing is very, very carefully worked out so it
will go smoothly like when we called in all the gold.
Now, at that time, as I remember it, there was a minimum
of irritation, except for the people--
MR. LUXFORD: We learned 8 lot there, too.
H.M.JR: You have all that experience.
MR. LUXFORD: That is right.
MR. BLOUGH: There will be much less irritation
this time, because that time people lost what they
thought was possible profit. Here they are not going
to lose anything except convenience unless they are
illegitimate operators.
MR. WHITE: With adequate publicity--everyone
knows the soundness of the dollar, and I don't think
there is the slightest possibility that it will have
any underscored effect on the credit of the Government
or its bonds or money, providing there is an adequate
explanation, which has notning to do with the credit
of the United States Government at all, or so inter-
preted. So I think that aspect of it again, if
provided with adequate publicity, can be ignored.
MR. BLOUGH: One really important thing is there
must be--whenever 8 person brings 8 large bill, he
must be able to get little ones.
MR. LUXFORD: Let's examine that. You can do
it that way if you want to. Or you can, if you want
Regraded Unclassified
14
- 14 -
to, tell him, "You can't take out so much right now."
MR. PEHLE: I would be very worried about that,
and I think, Mr. Secretary, that you ought to let them
have 8 minimum period where there are no questions
asked, even though you don't get the information you
want.
H.M.JR: That's where I started first, and where
I started first was this, that you say to the American
public on the 10th or 11th, t at with the income tax
due on the 15th that we hope that if anybody has been
hoarding money for one reason or snother, or he has
made money--put it this way--those who have made money
during 1944 and have overlooked anything, they can file
an amended return for the whole year, can't they?
MR. O'CONNELL: Yes.
H.M.JR: Not just the fourth quarter. And anybody
that brings in this money may not have to--anyway the
thing is, there would be no questions asked. They will
know about the income tax. Anything that comes in
between now and the 15th, there will be no questions
asked. That was my first proposal.
MR. PEALE: I think you ought to do that.
H.M.JR: That was my first proposal. After the
15th everybody is going to have to explain, provided
we have a legal right to ask them to explain. They will
have to file a bill of particulars.
MR. PEHLE: My suggestion would be to give 8. little
more time. It is a big administrative job, and secondly,
the first thing to ask for is their names.
Regraded Unclassified
15
-15-
H.M.JR: Then you lose the whole business of addi-
tional revenue for 1944. Le can't file an amended return
after the 15th.
MR. O'CONNELL: It will cost you some more money.
MR. GASTON: No returns are filed until the 15th
of March. This is an amended estimate of income for
1944.
MR. O'CONNELL: Amended return.
MR. GASTON: Amended estimate.
MR. BLOUGH: You can file a final return if you
want to, 02 an amended estimate if you want to. I don't
think there is any connection, except what psychological
connection you can develop between this and the income
tax, because the people who turn their bills in before
the 15th are the ones you are not going to catch under
the income tax, and the people who turn bills in later
are the ones you will have leads on to follow up.
H.M.JR: But Roy, if you say that anybody who turns
in any between now and the 15th, fine and dandy. I
don't say that everybody who had made five, ten, or twenty-
five thousand in the black market is going to rush this
money in, and he may or may not amend his return.
MR. GASTON: Why should he amend his return?
H.M.JR: He may or may not, but Luxford, I think you
ought to take-whenever a man turns in more than five thousand
Regraded Unclassified
r-2
76
- 16 -
or one thousand dollars you ought to make him report his
name. Why? Because the public is going to think we left
too many loopholes if you are going to allow black-marketeers
to turn in bills. I don't like it.
MR. LUXFORD: They are going to think you are leaving
loopholes. They are going to resent it.
MR. PENLE: Mr. Secretary, the currency has always
been something that moved around freely. If the Treasury,
after the ration stamp liasco which Mr. Bowles got himself
into, says, "Tie are going to cail in all the money and you
have to account for what you have, if they will say, "The
next thing you will be calling in ten-dollar bills and you
will have to account for what you have." It will have 8
bed, adverse effect. If you first let people turn in what
they--say if you tie that in with income tax after people
have had a reasonable chance to turn them in, I think we
have 8 good chance to get a bad public reaction.
MR. LUXFORD: Mr. Secretary, you are going to have
an outery with this program. You are going to get an outery
from the people whose feet you are pinching, and they are
going to use every device to fan it, but I think the bulk
of the American people would like to see these boys catch
it right on the chin.
H.V.JR: Look, did the horse racing--did the book-
makers squeal? Did anybody? To show the by-product, I
understand somebody spent fifty thousand dollars on a night
club in Miami, and after this thing came up he closed in
three days because he had no customers.
MR. PEHLE: Do you ink that is comparable to this?
H.M.JR: No, I am just answering him--that fellow--
on black market profiteers who have the currency. If that
fellow is going to squawk, nobody is going to listen.
MR. PEHLE: That is not the fellow we are worried 8 bout.
I mean, we are worried about the point of view of complain-
ing. The person we have to worry about is the conservative
fellow who is worried about Government controls on monetary
Regraded Unclassified
r-3
17
- 17 -
changes--all that group--you are going to stir them all up.
It is one thing if you are going to give them enough time
to turn in currency without questions being asked--
MR. O'CONNELL: I don't understand that.
MR. PEALE: If I have & one-hundred-dollar bill, I
think I have a right to go to & bank and turn it in without
giving anybody my name. That is none of their business.
MR. LUXFORD: We are not talking about one-hundred-
dollar bills, we are talking about--
MR. D. W. BELL: What are you going to do about the
fellow who brings in a one-hundred-doller bill five times?
MR. BLOUGH: Or the fellow who wanders from bank to
bank?
MR. D. W. BELL: Or the hoarding of one hundred dollar
bills.
MR. GASTON: What are we trying to do, stop hoarding?
And will they not hoard twenties as much as one hundreds
and one thousands?
E. JR: May I hear from Mr. O'Connell? Mr. O'Connell
only speaks loudly on the phone.
MR. O'CONNELL: Well, I have only a couple of reservat-
ions about the program. I think it is desirable, but I
have very definite reservations about the desirability of
trying to tie it so closely to income tax payment. And that
brings me to the second point, that I don't think it is
either possible or necessary to have it done by the 15th
of January. It seems to me the way we have been thinking
of it there are a number of mechanical difficulties involved,
requiring all the people who have fifties, one hundreds,
or larger to turn them in on & certain day without any
advance publicity. You will announce on 8 certain day--
you indicate to the banks a day or so in advance, effective
on that day, anybody who has 8 one-hundred-dollar bill or
larger can't use it except to take it into 8 bank and get
Regraded Unclassified
r-4
18
- 18 -
some twenties for it, and you give them a period of two
weeks, possibly. I am thinking only of the domestic program,
although it is a world-wide program, too. Big American
currency is scattered all over the world, and the mechanical
difficulties in getting that tied into the picture--at least
they exist, and I don't know how substantial they are. Give
them a period of two weeks to turn in their money, and I
can't believe anybody who has a legitimate right to them
would object to giving his name when he turned in the one-
hundred-dollar bills.
H. JR: May I interrupt you? I think if Mr. Hoover
would tell us the size of the bills that these two saboteurs
had and they turned out to be big-denomination bills, that is a
thing we could use--
MR. LUXFORD: The saboteurs that came in had large
bills?
MR. DuBOIS: We have checked on that, Mr. Secretary.
Charlie Shaeffer has checked; most of them are tens, he said.
MR. PENLE: What were the first group?
MR. DuBOIS: The first group had some large and some
small.
MR. PEHLE: They had trouble changing them. Most of
them are new ten dollar bills in this last group.
H. JR: Anyway, Joe wasn't finished.
MR. O'CONNELL: It seems to me that we ought to get
together and attempt to work out something, but I honestly
cannot see the connection--the - necessary connection--between
this program and the 15th of January. I don't see how they
work together.
H.M.JR: I will put it this way: I just thought, frankly,
if I gave you fellows all & deadline I could force you
into the thing, but if I gave you the 15th of March you
might argue me out of it, so that is why.
Regraded Unclassified
r-5
- 19 -
MR. PEHLE: I think it would be a mistake.
H.N.JR: Let's go back and examine it on that score,
John. If Joe is finished, George comes next.
MR. HAAS: I am going on & littie different angle,
out it is very closely related. I саmе in this morning
quite worried about the outlook for our borrowing program.
I think if we look back to the beginning of it, we couldn't
have hoped to have done as well as you have done in the pro-
gram, and I think there is a tendency when things go along
easy of taking everything for granted. On our Treasury
borrowing program we are confronted with this Federal Reserve
ratio. People are beginning to worry about that, and
something will have to be done with reg rd to it before the
Seventh War Loan. We don't want the thing so we have a
pistol to our heads.
H.M.JR: May I interrupt you? This is in the room
here. I had a thorough check by my doctor in New York, and
he gave me a clean bill of health. I was thinking of the
other fellow having heart trouble, but I don't know how long
I was--I had a thorough check, and I thought you people might
like to know. He couldn't find anything
MR. WHITE: It means you shouldn't have any more
headaches.
H.M.JR: Yes. That takes something other than 8 doctor.
MR. D. W. BELL: That takes a columnist.
MR. HAAS: On this, Mr. Secretary, I think we are
much too complacent around here. The whole thing can fall
down like a stack of cards even if it is going fine. Some-
thing has to be done on a Federal Reserve basis, some
legislation connected with your having Bretton Woods
legislation, and we have a very vital concern;if they do
it, we are stuck.
H.M.JR: What?
Regraded Unclassified
r-6
20
- 20 -
MR. HAAS: If they don't either get some legislation
there changing legal requirements for Federal Reserve
ratios or you and Eccles make up your minds you are going
to issue Federal Reserve Bank notes--and if you are, they
should be done quickly. If you are going to ask for
legislation, I think what should be done--it is tied up
with the Bretton Woods legisiation, thich should come
first. I think the Federal Reserve thing has a number one
priority. I don't know anything about this other currency
thing.
H.N.JR: You tell that to White.
MR. BLOUGH: It is in the Budget.
H.W.JR: Just one second, I didn't see the President's
reference to Bretton Woods in the State of the Nation speech.
MIL MITE: At least it was in.
MR. GASTON: It was on four or five typewritten lines
in the last draft they showed us.
H.N.JR: Herbert, I would like to hold you responsible
for taking the President's Message 85 it came over to us
in the irst draft if you still have it.
MR. GASTON: No, we sent it back.
H.M.JR: Can you do this? Can you indicate in the
final draft those parts that were Treasury suggestions?
MR. GASTON: Yes, I can do that, and I can show you
what was left out, too, John and I together can.
H.M.JR: They were given to me in memo form, using
the body of the message. The Bretton Woods thing lost
out.
MR. DuBOIS: I was going to mention that a couple of
commentators Saturday night called attention to the fact
that the President had for the first time made it clear that
Regraded Unclassified
31
- 21 -
the Federal Government had an obligation to make these
rights come true.
H.M.JR: What was that?
MR. DuBOIS: They called attention to the fact t.at
the President had for the first time made it clear that
the Federal Government had an obligation to see that
these rights became realities.
MR. GASTON: I don't think it is the first time,
but I am glad they said SO.
MR. HAAS: I came in this morning with the idea of
trying to write a sentence on this thing because I think
we are too complacent, and there is something now dis-
turbing the picture, and I don't know anything about the
currency. This currency thing is something that if it
came from the outside I think you should oppose it. The
essence of currency is that it is something negotiable,
and it shouldn't be confused with income tax evasion.
Do income tax evasion directly. People complain about
registered bonds. They want something more negotiable.
Currency isn't going to be strictly negotiable.
H.F.JR: Why don't they want their bonds registered?
MR. HAAS: That is the point; I think currency should
at least be left free.
H.M.JR: Why don't they want their name on the Govern-
ment records?
MR. D. W. BELL: They may have some good reason, I
don't know.
MR. HAAS: You have to finance the war; that is my
point. The other thing is not so important.
H.M.JR: When I started out, in the first speech I made
in Congress I said, "I don't want any blood millionaires."
This thing that you are talking about--how would you go
about it?
Regraded Unclassified
22
- 22 -
MR. HAAS: I have been thinking about it. You are
going to get criticism on tax evasion from professional
people, high-grade professional people, and not only
bootleggers. And I think if you could find some of those,
you would scare a lot of them.
MR. LUXFORD: This is the way to find them.
MR. HAAS: Look at the price you pay for that. It
is too risky.
MR. D. W. BELL: About thirty days ago I asked Norman
Cann if he could get some of these income tax evaders'
currency and some black market currency, and see if he
couldn't set an example, and he said he would look into
it and see what he could do. Every time previously when
we have prosecuted a big gambler or somebody we knew who
was evading taxes we have had 8. sort of avalanche of
others coming along for a month or SO.
H.M.JR: Well, I can see the argument that you shouldn't
tie it in with income tax if you feel currency is something
that should move freely. I am willing to take that into
consideration, but I certainly tnink that when we put
this program in and the people come to the banks with their
money, that the banks certainly should ask their names.
MR. PEHLE: Even initial them?
MR. LUXFORD: There is an answer to avoid a man's
going from bank to bank and delivering hundred dollar
bills. The Belgians did it. They required at the time
they delivered bills, number fifteen ration stamp. That
is the way the Belgians did it, which kept 8 man from
peddling bills to banks--when he came in he could turn
all the bills in he wanted to, but he had to deliver
the ration stamp. That was the end.
H.M.JR: That was all the bills he could deliver in
that name.
Regraded Unclassified
-23-
MR. BLOUGH: It comes down to this. That was an
extremely serious situation. If this is sufficiently
serious to stand the public repercussions on it, you
can do that, but only if it is sufficiently serious.
If the gain is sufficiently great--what you want is
between one hundreds and twenties. I don't think between
five hundred dollar bills and one hundred dollar bills
you are really going to have enough to turn the trick with
the black market operations.
The other thing is a register of what monies people
have, and that seems to me to be a pretty serious question.
H.M.JR: In the New York Times the business index
has been falling off, see? It has passed its peak, and
notwithstanding that, the currency keeps going up. Where
is it going?
MR. BLOUGH: There is hoarding.
MR. PEHLE: It need not be combined with getting
names in the first instance. Some people refused to
answer simple questions which the Census asked, questions
anybody should have been glad to answer. They said, "It
is an invasion of the rights," and SO forth. We have gone
quite a bit further during the war, but I feel that if we
say everybody who turns in currency has to tell why they
are turning it in, and you get the over-zealous banker--
H.M.JR: Let's do this: Supposing we don't ask? How
about the criticism of the fact that we don't ask?
MR. PEHLE: I wouldn't worry two minutes about that.
MR. WHITE: The program is worth extremely little,
and I agree with Roy and with Joe, that we have to ask
or the program isn't worth much. And 1 think what will
help make up your mind is if you see ahead of time the
kind of publicity and the kind of statement you will be
able to make and will be able to judge how convincing
that is. I think if it is reasonably convincing, that
the honest man will have no objection. The fellow who
has something to hide, with the exception of the cranks--
Regraded Unclassified
-24-
you can be sure that any time they are asked anything--
they will be overwhelmed by the general public opinion.
That will be in favor of it if you can make a good case,
and you can judge how good a case you can make to the
man in the street by seeing ahead of time the kind of
statement you will issue in defense of your action, so
I would like to see this group come up and submit it to
you and see what it looks like.
H.M.JR: 1 would do this in two steps. I would do
this step, and then announce at the same time that within
six months we are going to get out entirely new currency--
which will replace all outstanding currency. And within
six months we will have new currency. That is what Bell
wants to do.
Mic. GASTON: That raises the question of why you are
calling it in now.
MR. HAAS: They say the same thing on bonds.
MR. BLOUGH: It undermines your strongest reason for
doing this, the one you can sell best to the American
public, and that is the foreign hoarding of these and
enemy use of them. If you are going to call in all your
currency in six months, that argument will be taken away
from you.
MR. WHITE: Unless you can have a strong black market
reason in addition to the foreign reason, I don't think
you had better try it. Unless you can get an explanation
that is convincing on domestic reasons as well as foreign,
you had better leave it alone.
MR. D.W. BELL: One, foreign; two, black market;
and three, income tax evasion.
MR. WHITE: The last two tied in together--
MR. O'CONNELL: They are pretty good reasons. How
effectively they can be presented as a group, as Harry says,
will have a great deal to do with whether the thing will be
worth taking a chance on. It isn't a very bad public
relations problem at all. At least I had not thought
so, and still don't.
Regraded Unclassified
25
- 25 -
H.M.JR: As you feel now, how would you advise me to
proceed?
MR. O'CONNELL: I would say we ought to have enough
time to work out a program, and it would be essentially a
program you had announced, effective on Monday, the day
the announcement is made. You would have made arrange-
ments with the banks in advance SO they would be prepared
for anything bigger than a twenty-dollar bill, which would
not be good for anything except to be turned into the bank
to get currency which is legal tender. And at the time
the man turns in the money he has to give his name and
address. You can give him a period of ten days or two
weeks to turn his money in, and after that there is 8
pretty strong presumption that money coming in after
that will be illegally acquired.
MR. GASTON: Why shouldn't they turn in--if you give
them ten days notice, why shouldn't & man turn in what is
illegally acquired during the ten days?
MR. LUXFORD: We will have his name.
MR. GASTON: You are going to require his name from
the time you make your announcement?
MR. LUXFORD: That is right.
MR. GASTON: From the time you make your announcement
you are going to require the names of everybody bringing
in & bill. That is the only way you are going to accomplish
anything.
MR. O'CONNELL: That is the only way you can do it,
as long as you are going to prevent hoarding.
MR. LUXFORD: Do you have the technical, legal authority
to do this? It seems to me it should be signed by the
President. Under Section 5B he delegated to you all powers
except those given to APC, but this is SO completely remote
from what he was intending to give you; probably he should
sign it.
Regraded Unclassified
r-12
20
- 26 -
MR. HAAS: Why wouldn't all the money be in the dealers'
and brokers' hands? If I had it, I would put it in
negotiable bonds or anything if you would give me any time
at all.
MR. PEHLE: Dealers won't take it after the announce-
ment.
MR. BLOUGH: Take away the legal tender.
MR. WHITE: They are satisfied with it; it is legally
possible.
MR. O'CONNELL: No longer--
MR. HAAS: You have honest people worrying about the
debt now.
MR. LUXFORD: Require the delivery as a hoarding
measure. The statute expressly states we are against hoard-
ing.
MR. WHITE: You had better be very, very sure of those
grounds, though. there are E thousand monetary lawyers
who will question that. You have got to be sure beyond
any question 01 a doubt.
MR. LUXFORD: It can ne a hoarding measure in so many
words.
MR. WHITE: I am not the judge, but the legal tender
aspect of currency has been a matter which has been a bone
of contention for one hundred years.
MR. HAAS: I think we sit in the room here and don't
know what is really going on in people's minds outside. I
think you need public opinion on this question.
H.M.JR: Should we try it out some place?
MR. D. W. BELL: We could make a survey. Likert
asked some people some questions, but he didn't make 8
very intensive survey.
Regraded Unclassified
r-13
- 27 -
H.M.JR: I was going to bring in some of the bankers
beforehand. You can't do an awful lot of testing, you
know.
MR. HAAS: You can't do any.
MR. LUXFORD: I wouldn't go out.
MR. HAAS: I think it is the biggest decision you
have made since I have been in the Treasury.
MR. PEHLE: 110, no.
H.M.JR: Let's face this thing as & moral and ethical
issue. I am convinced, and I will have the evidence this
afternoon from Mr. Bowles. He is going to send it over.
If I am wrong, we will drop the thing. If he says he can
show me where there are all kinds of people operating in
the black market and making all kinds of money, and they
are doing it through using large denomination currency--
now, if I am wrong and my program is wrong, that is some-
thing else. I am sitting here in the middle of a war,
and I ani not doing anything about it, and it is my respon-
sibility. I don't like it.
Now, criticism! I will always be criticized as long
as I am Secretary of the Treasury. I may get 8 good
press when I am under the daisies because I an under the
daisies, but for no other reason. But there is a way of
doing it SO that one hundred and thirty-four million may
like it. I have a responsibility. I mean, it is just the
same thing as when I came in here. I was here 2 little
while during the bootlegging days, and I made the statement
that either I would lick bootlegging or I would go home,
and some people said that was a damn fool statement to make
because you can't lick it. Well, we did lick it.
Well, if my premise is correct--if my premise is
wrong and there isn't all of this illegal transaction
and illegal profiteering--but if it is right, you don't
have to ask anybody; it is up to the Treasury to do some-
thing about it before somebody orders me to do something
about it.
Regraded Unclassified
r-14
28
- 28 -
MR. HASS: What if after you do it, Mr. Secretary--
I think a bootlegger can operate without large bills
just as well, but it is more convenient with large bills.
H.M.JR: That doesn't prove it is the same thing as
saying--well, we stopped opium from coming in, and they
found some other narcotic. That doesn't mean we shouldn't
stop opium from coming in.
MR. HAAS: It is important if you pay 8 big price
for it.
H. JR: My God, look at the people we went up
against when we wanted to put & watch on the various
steamers that came in and out of San Francisco. We found
we had to go to Shanghai and put a watch there. Look at
the powerful interests we went up against on that.
MR. HAAS: This is entirely different. Your whole
borrowing program--
H.M.JR: I am not convinced. Let's hear from Coyne.
VR. COYNE: I am very much concerned bout this, Mr.
Secretary, and, frenkly, I agree with Mr. Hass that it
would have reverberations on your bond program that would
amaze you. Mr. Bowles red point cancellation has been
tied up with the Treasury. It has been tied up in a
thousand places throughout the country with this argument.
The newspapers have been in touch with me, "If the Govern-
ment will cancel red points, why shouldn't Mr. Morgenthau
cancel bonds?" This red point cancellation has come home
to roost with us in a way that is extremely important.
Every bad news story comes through on you whether it
originated here or not. The United Press ran an article
about the Treasury's redemption procedure backfiring, and
a bank did one hundred redemptions a day in Chicago, and
it immediately jumped to seven hundred. I an afraid
any suggestion of the abridgment of privileges of currency
will come to roost with eighty-five million honest guys
who will assume it is just E. step towarda sort of freezing
which will make his Government securities less valuable.
Regraded Unclassified
r-15
29
- 29 -
I have 8 suggestion. Your analogy was a good one,
but when we moved into the bootlegging field, we made
the big head-on approach through our investigative agency.
You have here in the Treasury the best law-enforcement
group in the world--and no apologies to Mr. Hoover--and it
is all under Mr. Irey. And if you offer Mr. Bowles the
complete use of the Treasury investigative agency, that
would be the direct head-on approach to this problem.
The black marketeers can operate with twenty-dollar
bills just as well, if less conveniently, but they are
a type of group not particularly concerned whether they
keep money in safety deposit boxes or under the bed; they
function, and the thing that would be lost would be the
degree of confidence you built up through this bond program,
the spread of which justifies imagination, and I am afraid
from our own specialized point of view that you would be
risking an awful lot.
H.M.JR: I sent for you particularly so that you
could be here.
MR. COYNE: And I could give you a dozen examples
of things done by other people, and you, Dan, on the bond
program. Mr. Roger Babson says when F and G bonds come
down in price common stocks will probably go up.
Rickenbacker says probably we should cancel the national
debt, and you and I get mail from all over the country
indicating that is possibly a reasonable possibility.
Some crackpot makes & statement about lending bonds, and
the redemption lines throughout the South are swollen by
colored folks, "Someone dun tole us the Government is
going to burn dem up.
You are the most vulnerable man down here. Anything
anybody says, whether in Government or not, is your worry,
because it immediately has repercussions on your job.
MR. D. W. BELL: I agree with that one hundred per-
cent.
MR. PEHLE: I do, too.
Regraded Unclassified
r-16
20
-30-
MR. LUXFORD: There are two phases to what has been
said here, one on the black market you are looking at
the future and the past. I say a program of this character
would be very powerful in uncovering black market operators
already having the money. They can't get rid of that.
They may find new devices in the future; if they are going
to cash what they have now, they will have to come forward.
You will uncover many of them. You cannot even start to
do this by sending out a bunch of investigators. What are
the evidences. the leads they are going to use? This
is going to give you an enforcement device which will
make it possible for your investigators to uncover some
of this, but you are not giving them any leads. This
will give them a powerful lead.
MR. COYNE: You have a gang under Elmer Irey that
can go out tomorrow and round up cases--examples of black
market operations, take them into Federal Court in a
professional way that would give you all the examples
of punitive action that are needed.
H.M.JR: Because of the pressure that comes to me,
whyhaven't the Treasury people gone into the black market
thing on tax evasion grounds? What are they waiting for?
MR. COYNE: They have to agree.
H.M.JR: That's E damned good reason! Why haven't
they done it?
I mean, Here is Gaston who has Irey under him, and
Joe, who has Internal Revenue, and there is a lot of tax
evasion with the black market operators, lots of evasions
and lots of other things, too, and the investigative
force we have is working as effectively as it can.
Regraded Unclassified
21
-31-
MR. GASTON: They are spread out pretty thin. I
talked to Irey about this very thing several months ago.
I think that Irey is trying to make some cases. They
haven't made them yet, but the idea was if we could
make some just 8 few cases and get them widely discussed,
that it would be very helpful. They haven't come through
yet. They have been working on it for some time.
H.M.JR: That takes care of your argument.
MR. COYNE: No, sir, it doesn't. I don't think
your Treasury Law Enforcement Agnecies have moved into
OPA territory. The OPA has set up a bunch of young
lawyers with no experience, but I think. if Chester
Bowles and the Secretary would sit down and pitch to
Elmer Irey and his gang a broadside challenge, you
would be amazed.
MR. GASTON: We have had very extensive negotiations
on that very point with OPA, they have ambitions to build
up their own organization. They are jealous of our help.
We have constantly offered the help of Secret Service
and a great many of the important cases have been made
by the Secret Service but they don't like to have us
make the cases. They don't give us details, and we have
given them a good deal of help. They want to have their
own organization and we haven't the men to handle this
thing. It is bigger than all the investigative work
we are doing. We have helped them what we could.
MR. WHITE: Isn't it a separate problem? You have to
go ahead with the agencies you have, but what has that to
do with other criticism? It needs to be evaluated and
needs to be examined. This action is likely to result
in a serious setback in your ability to sell bonds, as
George has pointed out, and Mr. Coynes' point, and
that needs to be carefully evaluated. It seems you
have always had criticism and you have sold bonds, and
you always will have criticism, and you will sell bonds,
and the connection between making people turn in fifty
and one-hundred dollar bills doesn't touch nine hundred
and ninety-nine out of one thousand people. A man who
carries one hundred dollar bills around is a rare bird,
Regraded Unclassified
32
-32-
unless he is dishonest, and if you can get the public
with you, I think there will be very little public
sympathy for the man who makes a fuss.
H.M.JR: You would be surprised.
MR. WHITE: Whether you can make a good case publicly--
H.M.JR: You go in the saloons of Norfolk and you
will see plenty one hundred dollar bills.
MR. LUXFORD: Public relations--
H.M.JR: Let's leave it this way. I would like
Mr. Bell and Mr. O'Connell and anybody else they want
to call on, to help them to work out a good plan for
me, see? Mr. Gaston on the public relations--I don't
want to wait too long. At least let's have a plan that
you think is a workable plan, on the assumption I want
to do it, see?
MR. D.W. BELL: Yes.
H.M.JR: And we will wait until this afternoon,
until the Bowles stuff comes in, and keep talking about
it for the next day or two. I would like to put it
high up on the priority list in the Treasury, the plan,
and I am going to keep talking about this until it is
settled. You can have a plan--something for the
soldiers--we will be asked about that. You can have
something about enemy aliens and a whole lot of stuff,
but 1 want a plan. So 1 am going to ask Gaston and
Joe and Herbert now to work on this thing and submit
a plan to me very, very promptly.
MR. GASTON: The purpose being to break the black
market, affect the black market situation.
H.M.JR: No, no, no! We don't give the reasons.
I just want a plan to call in all the bills over twenty
dollars. A plan. Now, that doesn't have anything to
do with the reasons.
Regraded Unclassified
33
-33-
MR. GASTON: You will have to know what you are
doing it for won't you? I understood you to say your
main idea is to do something on the black market front.
H.M.JR: And the money in the hands of the enemy.
Dollars in the hands of the enemy.
MR. GASTON: I am not thinking about public ex-
planations but what we really want to achieve.
H.M.JR: The thing that is bothering me mainly is
the black market. That is the main thing.
MR. GASTON: Yes, yes.
H.M.JR: Those of you that listen to this, please,
if you feel you have to discuss it with any of your
assistants, I caution you. Now, I know White has to
be on the Hill at eleven o'clock.
MR. WHITE: And you can assign somebody else to
get up a kind of statement of justification. I think
that will be a separate task.
H.M.JR: That's Gaston. I don't know of anybody
who has any business other than this, to go around the
room.
MR. C.S. BELL: I have a few little things, but I
can hold them over.
H.M.JR: You can stay behind because I don't want
to tie up all these people. Dan?
MR. D.W. BELL: "I had two or three things 1 wanted
to comment on. They are not terribly important. We
had quite a little trouble with the Montgomery Ward
money. They have contended that the Army has no authority
whatever to use their funds or to endorse their checks,
and we undertook to designate a bank in Chicago, The
Continental Bank, which was designated by the Army
before we designated it, to accept those checks with the
endorsement of the Army.
H.M.JR: What checks?
Regraded Unclassified
24
-34-
MR. D.W. BELL: Coming in to Montgomery Ward for
payment of goods, and at first Continental refused to do
it saying they weren't sure they would be liable and they
wanted an agreement of indemnity. We don't know if the
Government has authority to give it. They would have to
rely on the Government protecting them in case they were
sued. We got up a letter for the Secretary of War's
signature which went as far as it could legally, and they
accepted that and went along, Fut in other cities they
have done nothing, in Portland, San Francisco, Detroit,
and I believe in New York the banks will not accept the
checks. I don't know if I blame them a lot. We have
worked out a procedure. An Army officer deposits all
of the money in the Treasury, in the Federal Reserve
Bank as fiscal agent, for credit to & particular Army
officer designated by the Army, and then he will draw
that out of the Treasury in lump-sums and put it in
the bank to pay the bills of Montgomery Ward, and that
has worked.
They are very happy about the solution, and I
think they will even change in Chicago and go to the
last solution that we have given them, but it has been
a headache.
H.M.JR: With the treasurer?
Mr. D.W. BELL: Yes, sir. But the banks have been
scared to death to touch it and don't want to get in
between Montgomery Ward and the Government.
Mil. GASTON: They have probably had a warning not
to accept it.
MR. D.W. BELL: They have been publicly warned by
Montgomery Ward people. You asked me Friday how much
we had sold of postal savings and FDIC bonds. Seven
million, seven of twenty million.
H.M.JR: How much?
MR. D.W. BELL: Seven million--seven.
H.M.JR: Which bonds?
MR. D.W. BELL: Several issues.
Regraded Unclassified
5
35
-35-
H.M.JR: Exemptible?
MR. D.W. BELL: Tax exempt. Seven million, seven,
out of twenty million dollars. There is one other thing
I would like to mention on the depository system. It
looks as though politics might get into the picture a
little. we have had a lot of pressure, not 30 much
pressure, but a gentleman wrote in--
H.M.JR: I am worried about Harry and his appointment.
MR. WHITE: You wanted these.
(Hands Secretary letter to Secretary Stettinius
from Secretary Morgenthau dated January 8, 1945; also
letter to Secretary Morgenthau from Mr. McCloy dated
December 30, 1944. Mr. White leaves conference)
H.M.JR: Right.
MR. D.W. BELL: We had a letter from Mr. Barnes of
the White House about designating a bank as a depository
in northern New York and there is a depository there
already. It has been there since 1901, and we wrote the
usual letter that we didn't designate depositories where
they aren't absolutely essential and this depository
had been performing functions officially all these years;
and we didn't care to change, and that there wasn't enough
business there to justify two depositories. And we got
a letter back from the Democratic Chairman up there saying
he wasn't interested in how long this other depository
had been functioning for the Treasury and how efficiently
they were doing business--what he wanted was the designation
of the other depository cancelled and this other bank
iven the designation. That is over here for reply and
I don't know how much we are going to hear about it
but it is the first step.
H.M.JR: Is that a county?
MR. D.W. BELL: I think it is a county. It is a
rather sharp letter through Barnes.
H.M.JR: I would like to sit with Herbert and you
and take a little time to do it today or tomorrow.
Regraded Unclassified
6
36
-36-
MR. D.W. BELL: We will draft a reply within the
next day or two.
Guffey is on our neck for an additional bank at
Johnstown which you probably will hear about. It just
isn't justified. He spoke to me about it and I will
have to turn him down and he will probably come to
you. That is all I have.
H.M.JR: John?
MR. PEHLE: Late Saturday we had the latest flurry
on dry cell batteries. We sold them the second time for
five and one-half cents to wholesalers and six and one-
half cents to retailers, which price was fixed by OPA.
The New York office called up and wanted to know
whether Sears and Roebuck were entitled to wholesale
prices. We talked to OPA and didn't get much out of
them, although their inclination was to say, "No."
Since the retail selling price to the consumer is
ten cents for ever body, the way OPA fixed it, they
said if they had fixed a lower selling price for
Sears Roebuck and Company and that type of concern,
maybe we should sell it to them at something a little
better than retail price.
H.M.JR: Why wouldn't Sears and noebuck be whole-
salers?
MR. PEHLE: They are not. Sometimes they give
wholesale prices because of pressure, but they perform
a retail function rather than wholesale. They are big
retailers. They don't take any credit obligation with
regard to retailers. They don't divide stock to sell
to a lot of individual people. They don't perform
many wholesale functions, although many times they get
wholesale prices through pressure.
H.M.JR: That must be coming up all the time.
It can't be an isolated case.
Regraded Unclassified
7
-37-
37
MR. PEHLE: It is something we are going to have to
make.
MR. GASTON: They are entitled to pay & retail price
when they want to pay a bonus for the stuff and then they
claim the wholesale price when they want to get the lower.
MR. PEHLE: We did not give Sears and Roebuck the
wholesale price. There may be some repercussion.
H.M.JR: General Wood may call me?
MR. PEHLE: He may. Maybe Army will call you about
Montgomery Ward, but there is no problem about selling
what we are selling. There is a great shortage and we
are going to go into the thing further, and OPA is
going to go in it.
Mr. O'CONNELL: John, do you have anything to
do with Federal Trade Commission price discrimination
bills? It would be worth taking a look at because
they undoubtedly have had the same problems.
MR. PEHLE: It varies in different commodities, too.
H.M.JR: On this thing, the way you solved this thing
for Montgomery Ward. I wish you would write a letter for
my signature to -r. Stimson. 1 would like to inform him
about what we have done.
MR. D.W. BELL: ne has been in on it. He signed the
letters to the company.
H.M.JR: Does he know we worked this out?
MR. D.W. BELL: Yes.
H.M.JR: I would just like to see if I can get a
"thank you" out of him.
MR. D.W. BELL: I think you will get it without
asking for it.
Regraded Unclassified
38
-38
H.M.JR: I wrote a letter on China and he doesn't
even ask me to go on and doesn't say, "Thank you. We
saved them at least one hundred or two hundred million
dollars. Anyway, I would like to say, "We have been
able to work this thing out. I hope you are satisfied."
Mic. D.W. BELL: Yes, I will do it but I don't like
to. I think it is sort of asking for a "Thank you",
when I think you probably will get it.
H.M.JR: You write it and then we will talk, and I
bet ten to one we don't get a "Thank you" out of him.
M. D.W. BELL: we have several thank you letters
from the Army, not from him, but from others.
H.M.JR: You have to get it from the first one.
When you come in you bring that in will you?
MR. D.W. BELL: Yes.
MR. PEHLE: Nothing else.
MR. BLOUGH: Beardsley loaml has published his book,
the last third of which is on taxes. It is just an
elaboration on his well known tax programs. I don't
know about the other two-thirds yet. I haven't read
it.
MRS. KLOTZ: He reads backwards.
H.M.JR: Herbert, they made quite a issue at my
last press conference, wanting a press this Monday.
Do you think I better have it?
Mr.. GASTON: I think SO.
H.M.JR: I think you better be here, Roy.
MR. BLOUGH: What time is it?
H.M.JR: Four o'clock.
MR. GASTON: I think the principal reason for holding
press conferences fairly regularly is when you don't
have them it makes it SO exceptional--when you hold one it
puts you on the spot.
Regraded Unclassified
- 39 -
H.M.JR: I will have something I can tell them, but
I hope to be able to tell them about this today on Bretton
Woods.
MR. GASTON: It would be desirable to have one or two
things to force on them.
E.
JR: Tell them about the currency.
MR. GASTON: You will get a reaction.
MR. BLOUGH: They will probably ask you about the
Budget. It will be out by that time, won't it?
MR. D. W. BELL: No, I think not; it comes out tomorrow,
I think. I believe it is tomorrow.
MR. BLOUGH: They may have it. They will have it
today at noon. There is & seminar. I thought the seminar
was Saturday.
H.M.JR: You be here, too, Dan.
MR. D. W. BELL: I read it in one statement.
H.N.JR: Are you through, Roy?
MR. BLOUGH: Yes, anything else can wait.
MR. LUXFORD: A week ago we spoke to you about the
status of Marcus Wallenberg and his bank in Sweden to work
out means to stop German assets from going to Sweden and
you suggested at that time we draft 8 letter to Stettinius
from you asking them to consider this cable. I have the
letter here. I might mention some of the men in Harry's
shop, including Harry, were a little doubtful whether you
should raise the matter at this high level. I personally
think you should. (Hands Secretary letter to Secretary
Stettinius from Secretary Morgenthau, dated December 30,
1944.)
H.M.JR: I think we should.
Regraded Unclassified
-40-
H.M.JR: How long is the letter?
MR. LUXFORD: Short enough.
H.M.JR: That's short enough, isn't it?
MR. LUXFORD: I think SO.
H.M.JR: A little bit on the direct side.
M. LUXFORD: Do you want me to soften it up?
H.M.JR: Yes, Let it back to me by two o'clock.
Mr. DuBOIS: Mr. Kramer of this business group was
in to see John and Luxford the other day. his main
problem was whether or not he should get Charles Wilson
to head it up.
H.M.JR: Is this the Hoffman group?
MR. DuBOIS: No. This is the other group that
came down to see you about two weeks ago.
H.L.JR: Big business and little business.
MR. DuBOIS: His main problem seemed to be whether
he should--
H.M.JR: Will Charles Wilson be acceptable to me?
Is that the question?
MR. DuBOIS: He wasn't particularly acceptable to
us, but if he is acceptable to you--
H.M.JR: ne would be all right with me.
Regraded Unclassified
:1
-41-
MR. DuBOIS: It would seem to some of us we could
do better than Charles Wilson.
H.M.JR: 1 wouldn't call him little business.
MR. LUXFORD: Aramer had doubts in his own mind.
lie pointed that out.
H.M.JR: I will give you a name--I don't know how
big or little--the President of the Federal Reserve
Bank of Boston.
MR. D.W. BELL: Flanders.
H.M.JR: What is his function?
MR. D.W. HELL: He has a machine tool company in a
little town in Vermont. It is a small business.
MR. GASTON: Ralph Flanders. Formerly a prominent
President of the Association of Manufacturers, Chairman
of the Board, or something of the kind?
H.M.J.: No, no, no! This man--
MR. D.W. BELL: I don't know. ne has been prominent
in the public eye for a number of years.
H.M.JR: He goes back to Tugwell's days. If he is
the man I think he is in this little machine tool company,
he and Dennison and a whole group--is that the fellow?
MR. D.W. BELL: I think that is the fellow you had
in mind. he is on the Vinson Committee. he represented
it.
H.M.JR: Look into him.
Mr. D.W. BELL: He has a very good good reputation.
MR. O'CONNELL: Wasn't he in CED?
MR. D.W. BELL: With the statistical group in CED.
Regraded Unclassified
12
-42-
Mr. O'CONNELL: Committee for Economic Development.
H.M.JR: If he is the man 1 think he is, he has
been good for twelve years. He has a small machine
tool company up there?
MR. D.W. BELL: Yes, some place in Vermont. I
could find out.
H.M.JR: I remember he goes back to the small
group advising Tugwell, which he and Dennison--
MR. D.W. BELL: I don't remember but 1 think you
are probably right.
H.M.JR: What else, Joe?
MR. DuBOIS: if you have some time this week, I
would like a group of us to talk about where we are
going on this German problem.
H.M.JR: All right.
MR. HAAS: There is a man named Commander Ince. Is
he a friend of yours?
H.M.JR: Yes.
MR. HAAS: He called me up and said he was and he
wanted to know if we could help him out on economics
of apples and 1 said--
H.M.JR: Oh, oh!
MR. HAAS: And I said all I did was eat them, but
I wanted to check and see who he was.
H.M.JR: ne is all right. He was kind of interested
at one time in growing some apples, and I said you had a
lot of statistics for him. He is quite all right. Lie is
in the Navy. He said he went into the Department of
Agriculture and asked whether he should or shouldn't
buy an orchard, and they gave him a bulletin on how
Regraded Unclassified
:3
-43-
to prune a tree. He is interested, possibly--he is
an awfully nice fellow, and if there is any of this
stuff you have been checking for me--you know, the
number of trees planted and all that kind of stuff--
MR. HAAS: Oh, yes.
H.M.JR: ne is in the Ordnance Section 01' Navy--
a thoroughly nice fellow, but his problem is he may
want to buy an orchard and all he can get is a bulletin
on pruning. He just had a second eight pound baby, SO
he is all right. (Laughter)
MR. HAAS: The other thing is in connection with
borrowing, and can we have a chance to talk with you
about it?
H.M.JR: Somebody says "a friend of mine," and I
know immediately you are all suspicious. It is
wonderful!
MR. HAAS: I wonder if you could have & meeting
with us before you see the Federal Reserve group, on
the problems in connection with borrowing.
H.M.JR: Get Bell to see me.
MR. D.W. BELL: Huh?
H.M.JR: I don't have much this week.
Mr. COYNE: I talked to Director Gamble yesterday
at 1:30 Los Angeles time, and he had just finished
breakfast. He said to send his regards to you and to
tell you he was relaxing nicely.
H.M.JR: Did he call you or did you call him?
MR. COYNE: I called him.
H.M.JR: Are you and Mr. Gamble going to have letters
ready to the State Chairmen?
MR. COYNE: I sent your letter addressed to Ted,
and sent to all State Chairmen first the context of
Regraded Unclassified
-44-
it by wire and secondly a reproduction of it so they
could send it out to their people.
H.M.JR: I would like a letter to go out over my
own signature telling this to them and their organization
and volunteers in the field--how much I appreciate their
efforts. I want one 1 could sign myself. I would like
to get it this afternoon.
MR. COYNE: We will have it for you.
H.M.JR: I am glad Ted is fine. Don't bother him
now, let him alone.
Mr. COYNE: I had two or three matters he wanted
ne to call him on.
M.M.JR: how about the figures on what the States
have done. have those gone to the various States?
Mr. COYNE: They are leaving today. You can have
them this afternoon if you want them for your conference.
The wire services are interested in specific state
accomplishments.
H.M.JR: You will be here five minutes before four.
Let's release it.
MR. COYNE: Yes, sir.
H.V.JR: If I am going to have press conferences--
if you people think up ideas--Mr. Gaston, make them
positive. Just don't go putting me on the spot. So
if anybody has any thou hts--Friday afternoon and
Thursday mornings. Let's have ample copies for every-
body huh?
MR. COYNE: Right.
MR. 0' CONNELL: Do you have any objection to my
talking to the Commissioner about the vacancy over there?
I told him before I learned from Herbert that his
candidate was not acceptable to you--I told him he
was not acceptable to me, although not at fault with
anybody else. I also talked to Cann on the West Coast.
Regraded Unclassified
15
75
-45-
Herbert mentioned it to you and he is quite interested--
he is very definitely interested in coming back to
Washington but he said if we were interested, he would
move ahead his plan about coming to Washington. I
would like to suggest he come.
H.M.JR: If you please.
MR. O'CONNELL: I would like to disclose that to
the Commissioner.
H.M.JR: Absolutely. I agree. I was rather
disturbed over the memorandum Trey gave me over the
week end. I don't know why he went into such terrific
discussions about what the Commission has done and
Cann has done.
M. O'CONNELL: In connection with that particular
case?
H.M.JR: Yes. I don't know why he put it all down.
Mrs. KLOTZ: Isn't it what you wanted?
H.M.JR: I wanted? No, I didn't ask him. No,
he gave me stuff I didn't ask for.
MRS. KLOTZ: He did it in two different reports,
one personally to you and the other for the record.
H.M.JR: There is nothing personal. I am going
to send it. Did you see it Herbert?
MR. GASTON: I saw it yesterday.
H.M.JR: What was your reaction?
MR. GASTON: It is something you ought to know.
Maybe it might have been better verbally.
H.M.JR: Well, it is done now. What am I going
to do with it? Have you seen it?
MR. O'CONNELL: No, I haven't heard anything about
that case. My understanding was the Bureau and the
rest of us were to keep clear of that.
Regraded Unclassified
-46-
H.M.JR: One formal report, fine, that is all
right, but it is the other stuff. Well, if I had
had a chance to talk to him first, and if I wanted
it in writing, it would have been something else.
See, herbert?
Mic. GASTON: The President was supposed to have
made the short beginning of this War Bond film in
connection with the State of the Union film the
other night. I suppose we can check today whether
he dià or not.
MR. COYNE: I checked yesterday. lie did it and
did it very well. There was one retake on it, but
they said it was entirely all right.
MR. GASTON: And the boys would like to have you
do yours sometime this week, and we could present a
sample to you and draft it at your convenience.
H.M.JR: 1 would like to see what the President
said, and + would like to know a little more about it.
So if you and Coyne would ask for an appointment, I
will go over it with you.
Fine. I am sorry to have kept you SO long but
it was worth-while and 1 would like Charles Bell to
stay.
Regraded Unclassified
47
January 8, 1945
Dear Ed:
May I congratulate you on
your forthright statement answering
Senator Wheeler.
Sincerely yours,
(Signed) Henry
The Honorable Edward R.
Stettinius, Jr.,
Secretary of State,
Washington, D.C.
Regraded Unclassifier
48
JAN 8 1945
Dear Ed:
I an worried about the reports we receive
indicating that our Legation in Stockholm is working
with Marcus Wallenberg, head of Knskildabank, on
measures to stop Swedish interests from cloaking
German assets and loot. I de not think we can trust
Wallenberg but my boys tell me that some of your non
are opposed to sending the attached cable to Stockholm
about him.
I think we should send the cable and I
would like to sit down and discuss the matter with
you and your men if you are not in accord.
Sincerely,
(Signed) Henry
The Honorable
Secretary of State
Washington, Do C.
AFL:ee 1/8/45
Regraded Unclassified
49
PROPOSED CABLE TO SWEDEN
"In view of rather persistent evidence of close
connection of Wallenberg and Enskildabank with German
financial and industrial matters, and prevalent sus-
picions of their collaboration and/or connivance in
facilitating major German capital operations in Sweden,
it would appear highly inappropriate and inadvisable for
us to seek their cooperation or accept their advice in
SAFEHAVEN matters. Reference your 4942 of December 2,
8 p.m. Their readiness to lend assistance should be
scrutinized in the light of their past activities."
Regraded Unclassified
not to be sent.
SUM ARY OF ACTIVITIES OF WALLENBERG
AND ENSKILDA BANK
I As late as 1943, Enskilda Bank made substantial loans to the
German-controlled Norsk-Hydro (the central figure in the old
nitrogen cartel) without receiving any collateral, relying on
the strength of the German control over other Norwegian in-
dustries to obtain repayment.
II Within the past two months there has been sent to the State
Department from the Legation in Stockholm top secret dispatch
covering certain Enskilda Banz negotiations with the Germans
regarding the purchase by- the Germans 01 & Swedish plant in
Hamburg, payment for which was to be ...L.C.e in German cold. In
this connection a Legation officer SEV. a note in the handwriting
of Jacob Wallenberg-wnich contained the comment that if German
gold was to be used the price would have to be nigher in antici-
pation of future complications from the Allies. (This cable
hae not been sent to Treasury und this incident should not be
used at this stage unless absolutely necessary
III Enskilda Bank was the cloak for the German interest in American
Bosch. This stock has been vested by the APC despite the fact
that Marcus Wallenberg testified that acquisition 01 the con-
trolling block of the American Bosch stoc was a bona ride pur-
chase.
IV Enskilda Bank participated in a scheme with the Swiss Bank
Corporation to conceal the German Schering interests in
Schering, New Jersey.
V Enskilda Bank acted for German interests in their attempt to
conceal the ownership of the stock of Thorer and nolle nder, Inc.,
New York City, wholesale dealers in skins.
VI Enskilda Bank was the record owner as 01 may 1040 01 20 percent
of the stock of the German-controlled Dutch bank, N. V. Hollandsche
Koopmansbank.
VII The Anskilda Bank is not nignly re, arded or trusted in certain
Swedish circles, including i. portant (Medish Government officials.
This distrust is due not only to dislike of the Anskilda bank's
banking methods but also to the suspicion by these officials
that the Enskilda Bank is involved deeply in Germany.
Regraded Unclassified-
VIII The belief, apparently held by our Legation in Sweden, that
Marcus Wallenberg is-strongly pro-Allied is unrealistic and
constitutes a failure to see through the practice commonly
resorted to by large financial interests of wooing both sides
as long as the ultimate outcome of the war is in doubt. The
following facts should be considered in this connection:
À. While Marcus wallenberg was apparently sympathetic with
the Allied cause, Jacob Wellenberg, his brother and
partner in the Enskilda Bank, was known to be sympathetic
to and working with the Germans.
B. Magnussen informs us that one of the Wallenbergs was
the author of the Swedish-German Trading Agreement.
C. Jacob Wallenberg is a member of the Permanent Joint
Swedish-German Trading Commission and Marcus Wailenberg
is a member of the Joint Standing Commission created
by the Anglo-Swedish Trading Agreement.
D. Marcus Wallenberg came to the United States in 1940
and attempted to repurchase on behalf of German interests
an American-held block of German securities.
IX Enskilda Bank has been repeatedly connected with large
black market operations in various foreign currencies,
including dollars reported to have been dumped by the Germans.
X Marcus wallenberg participated in the creation of the voting
trust whereby voting control of SKF Industries was conveyed
to William L. Batt as trustee.
A. The Wallenberg Holding Company owns 2₈ percent of the
common stock of SKF Industries in Philadelphia. It is
the second largest minority holder.
B. Jacob Wallenberg is the director of Swedish SKF and
represents the Wallenberg interest.
In 1940 when Marcus Wallenberg was in the United States
he indicated great concern about the possibility that the
Regraded Unclassified
United States might block Swedish assets. In this connection
he indicated to Mr. Cochran that if the United States does
block Swedish assets, Wailenberg's concerns will endeavor
to operate in this hemisphere through a Panamanian corpora-
tion which they already have and also through a New York
buying and selling corporation.
Regraded Unclassified
FOR via FILES
X THE SAVERAVE BEFORE 3 DECREASE 22, 1944
PARTICIPARY Measrs. "aker, Custage, Bubin and Crassveller - State:
Mr. Homer - FRAI Mesore. Ficher, Servis and 7015 - Treasury.
follow-up to Brotton "oods of Petcher 2
Treasury presented for consideration drofts of two proposed notes
to the neutral governments as follow-ups to the Breiton Voods note of October
2. -no note vas addressed to oveden, while the other vas addressed to the
remaining neutrals. -iscussion centered principally around the Swedish note
laaseuch as the current -vedlsh was trade negotiations in -endon had feaused
attention 20 >većen. For purposes of background, the following developments
had securred within the 2008 week'
(1) The had been naked so include, - - part of the var
trade agreement, - (seeral declaration of willingness to
implement Resolution VI: and
12, in A reply to our London request, we had refused
permission for the yan negotiatore in London to discuss
with the Wader suscifie afahaven desiderata, issuunch
no notther y 4 nor State - precared to press for their
acceptance " a prorequisite to conclusion of the was trade
agreement. No suggested, insteac, e. direct approach to the
swedtsh Revernment by means of our proposed note.
Inasmuch no the VAT trade agreement, containing the general
declaration regarding Resolution VI, had not yet been signed by the avedish
Dovernment, the group felt that 11 would be inoprertune to present 10 the
wediah Government at this time a note such " proposed by Trensury. 18
-As tentatively agreed, bowever, that the Treasury note or something
comparable to 11 should be utilized immediately after the trade agreement
10 signed. Treasury then suggested the urgency of submitting A follow-up
note to the other neutral governments, none of which had yet given MAY
positive indication thes they intend so take cognitance of and implement
the objectives of Resolution VI. 75A vas in general agreement vish - reasury's
procesed note, withough 11 wished to sucress several modifications. state.
however, in the person of Mr. Aubio, opposed our note on the grounds that:
II. presentation of notes, porticularly one : general is
substance 5.8 ours, 1. not 10 effective technique, Inno-
such " the noutral goverments would have no difficulty
in oveding A direct and forthright regly;
(9) If notes AT# to he usilized, they should be tailored to the
needs end circumstances relevent to each individual govern-
ment; and
Regraded Unclassified
(3) instead of presenting noses, we should utilive Bargaining
specrtunities, such 19 war trade megotiations and other
pressure media, to attain our objectives.
Ye expressed our agreement in principle with Mr. Rubin's views but contended
that:
()) Although Treasury favors the then if taxing advantage of
apecific bargataing opportumities to accomplish certain
objectives, we had found from experience that other agencies
vere too often unprepared in ureas such op ortunlise to
the full: as say rate. ve 120 always prepared so consider
this approach.
(2, 'reasury's progress note has the advantage of assing for A
realy. e feature which vas 1.ektag in the other 2 note:
Furthersore, ND evenivo reply would be relatively difficult,
Insemuch as our note 1. specific visit regard to the questions
to be anavered.
18) Presentation of our provided note vould he the legical result
of the notirals' failure to eet on the crober 2 note.
14; Treventation of our note vould 10 no vay rejudice any further
approach we may visit 10 sake to the neutrala: in fact, 11
would give 08 a stronger basis for arguing in future negotialions
with the neubrale that they had 1950 ret on affirmative notice
concerning the requisite neans for inclementing 'enolution V1,
Netwithstanding our arguments, neither LA nor was prepared
to voice any final decisions on our procesed nctoo, but expressed a. desire
to consider the matter further. They also thought it would be destrable to
avait word from stockholm AR to whether the trede agreement, including the
Seculution VI declaration, had been signed, incomuch :s the relative recort
might contain - valuable information which would be helpful in our
to the other noutrals. It 1, procesed to rates this matter again at the
carliest opportune moment.
Vivision of Amenensibility far Sallection of cafehaxes information
In Airgram A-1273, -etcher 19, our London -mbressy had sugressed that
is should serve no the coordination center for infobever matters in Europe.
As reported in Mr. Fisher's agrerandus of - acember 18, the afeheven agencing
had agreed, with certain winor reservations. 10 London's suggestion, --
subsequently received nnother - 2-10838. receiver 7. 1944, from
reising the question of "division of reconsibility' between the Neitish -aá
ourselves regarding the colloction of infohaven information, -ad referring to
the feeling of XX. that "the V.Y. would have orinary remonsibility in the
Regraded Unclassified
Resimphere while the risish norhaps should have primary responsibility
in she uronean "emisphere. DA arrangement similar to that which has existed for
biscollating." No indicated 10 my memorandum of Recember 13, 11 had been agreed
10 advise sados that ve were strong ) op:osed to any such division of responsibil-
11y. la regly "crood U:SD by You and state VAS opposed by Treasury on the grounds
that 11 WAB 100 veak and <14 not indicate either elearly or forcefully enough
sur dist-ste for the succested division of responsibility. " submitted a
substitute druft reply which expressed categorical opposition so ANY civision
or resconsibility aloog hesispheric lines. After some discussion, a compromise
realy was acroad upon (Copy 1s ettached no >>hibit 4,, Before giving final
clearance, however, resoury insisted that, NA Y/A and state vers
admint about including to thi- realy certain views concerning London's destantion
AS coordination center for the instern (raised in -1273,, State should
oregare a detailed regly we -1273. " contended that such a reply is necessary
in order to -- available - - A watter of record, for present and future reference,
our Deversment's views concerning the accos, functions. responsibilition, ate., of
the Hender Ambury in its caracity 18 coordination center. State agreed to draft
the necessary realy 10 ~1273 had to 1. corporate 6 reference thereto in the
attached early to oneon.
calionbors and the arellin Reak
acent 103 Atches reasived from Eveden have consistently referred to
close relations terveen -toeaholm Location rad Nr. Morous 'allembarg. head
of the natida have have indicated that is being
consulted by the egation -m verious afahaven matters and shat he is being
heleful to the agatton. /r. laws, appareally from first hand experience,
101 1:00 had the mosting -na", because of their past activities.
... 001 to he trusted and he suggested that the following enbia be doe asched
:- REBEACT to the Legation:
"in view of rather versictent evidence of cless commetion of
and askildabank -18 Terman financial and industrial
ontters, ALLE rev int of their and/or
consirence in Indiliting major Terman copital operations in Seeden,
" vouid sp are highly tamps reviewe and Indivisable for or so seek
their edoperation or their advice in ord 2.72 nature. deference
your 4943 of member 2. e 0.0. Sheir readingss to lend nonistance should
be scruttaired la the 112ht of their past netivities."
he progred cable every A rather violent resetion from each of the date
TX resentatives who falt that, avt only vould " be impossible to 101 aay
net. anrown the airthent of late, but that there is no ovidence
of recent date :stuce 1.42, to support the statements Made therein. 17. Paker
distanded the -reasury ned previously been consulted vish respect to the
merilda DRAR had 11 hid been agreed at that Line shot there vas no real are
the Bank. Furtheruore, Fr. Baker stated that 11 had been determined
shot since 1947 -alleaberg has been actively on the allied side sad has given
donsiderable notistance to the -111ed CAUSO. is reply to - direct question
concerning A study made by ru, it. "mer stated that he didn't believe that
Regraded Unclassified
- 4 -
there exists sufficient evidence to support the statements contained in the
proposed cable. 4 a result. ve agreed to withdraw the proposed enble, at
least for the time being.
nel Mr. Schwidt
Mrs. :- Shvarts
Nr. "isher
Nr. Hoskoville
Mr. Gilbert
Mr. Hartvis
Mr. -lses
B17eig:fb 12/26/44
Regraded Unclassified
Exhibit A
Reply to London's 10838, December 7, 1944
Reference your 10838, December 7. 1944. We are now in the process
of compiling an inventory of German-controlled or owned firms in Argentina.
If the British wish to await completion of our inventory, ve will be pleased
to make a copy available to them, and we will welcome any suggestions for
additions, deletions or amendments which they may wish to make.
1n view of our vital and direct interest in preventing Germany from
building up its post war economic and military potential, ve do not believe
it desirable to divide between the British and ourselves "primary responsibility"
in the Enstern and Western hemispheres. Our direct interest will lend us to
participate fully in gathering of information in all countries. However, ve
agree that London should be the primary point of cont ct between the British
and the U.S. for the Eastern Hemisphere. (Det ils and comments will follow on
your A-1273, October 19, 1944). We are, of course, in favor of n. full exchange
of information with the British both in London and in the fild. Also. we are
arranging for information gethered by our missions in the Eastern Hemisphere
being sent to London as well AB Washington. The possible establishment of
"spheres of influence" in this project, however, is not (repent not) regarded
favorably here.
Regraded Uncla
58
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 8, 1945
TO
Secretary Morgenthau
FROM
Charles Bell pace
The following items were cleared immediately following
the nine-thirty staff meeting on January 8:
(1) The Secretary approved the promotion of Isadore G.
Alk to the position of Chief Counsel of Foreign Funds Con-
trol and signed a letter to Mr. Alk.
(2) The Secretary was informed that the House
Appropriations Committee would commence Treasury hearings
on January 15 at 10:00 a.m. and that Mr. Schoeneman was
preparing the usual annual message of the Secretary on the
budget. It was further indicated that Mr. Schoeneman was
including a reference to the Treasury Department's attitude
on cash awards to employees, which would be followed by
legislation later.
(3) The Secretary signed a letter complimenting
James J. Saxon on his work abroad and indicated that he
would like to hand the letter to Mr. Saxon with a ceremony
upon Mr. Saxon's return.
(4) The Secretary signed a deferment for Robert J.
Graham, Bureau of the Mint machinist.
(5) The Secretary authorized me to approve Robert J.
Widmann's promotion in the Procurement Division.
(6) The Secretary indicated that he would like to
hand Mr. George Landick a letter on his retirement after
forty years of service.
(7) The Secretary indicated that he wished all
telegrams not Treasury business dispatched by him to be
paid for from his personal account.
Regraded Unclassified
59
- 2 -
(8) The Secretary signed an order authorizing
Thomas J. Lynch, Assistant General Counsel, to be Acting
General Counsel in the absence of Joe O'Connell.
(9) The Secretary indicated approval of what had
been done with respect to & chauffeur for Governor Lehman.
(10) The Secretary requested further information
respecting the request of Mr. McReynolds to have his secretary
put on the Internal Revenue pay roll.
(11) The Secretary indicated approval of a policy
of having wives accompany husbands on European missions and
instructed me to cancel Under Secretary Hanes' order of 1938
prohibiting this. The Secretary further instructed me to
give Treasury personnel the most liberal travel allowance
consistent with the travel allowance given by the State
Department to its employees, which schedule was prepared
jointly by the State Department and the Bureau of the Budget.
The Secretary indicated that any assignment in excess of
six months could be regarded as a permanent assignment,
but when told that the State Department regarded any assignment
in excess of & year as a permanent assignment, he instructed
me again to pattern our regulations after the State Depart-
ment procedure. The Secretary does not want Treasury
personnel to ship automobiles to Europe at this time.
Travel abroad was cleared for Matthew J. Marks, Oscar
Banzer, and John S. Nicoll of Foreign Funds Control, and
for Charles D. Glendinning of Monetary Research.
oki
thin
Regraded Unclassified
60
OFFICE OF
TREASURY DEPARTMENT
WASHINGTON
THE THE
January 8, 1945
ORDER
In the absence of the General Counsel for the Treasury
Department, Mr. Thomas J. Lynch, Assistant General Counsel,
is hereby designated to serve as Acting General Counsel.
Secretary of the Treasury.
FORDEFENSE
Regraded Unclassified
61
January 8, 1945
11:18 a.m.
HMJr:
Hello.
John
Pehle:
Yes, sir.
HMJr:
John.
P:
Yeah.
HMJr:
It has been recommended that a man by the name
of Isadore Alk -- A-1-k -- become General Counsel
of Foreign Funds.
P:
Yes, sir.
HMJr:
Do you think well of that?
P:
Yeah, very much.
HMJr:
You do?
P:
He's a very reliable and trust-worthy man with a
lot of experience.
HMJr:
Fine.
P:
He's a good man, Mr. Secretary.
HMJr:
Thank you.
P:
Right.
Regraded Unclassified
62
Memorandum of a Meeting
January 8, 1945
Present:
The Secretary
Senator Wagner, Congressmen Spence and Wolcott
Judge Winson and Mr. Acheson
Messrs. White, O'Connell, Luxford and Bernstein
At luncheon, the Secretary said that the Treasury had been
holding off on the Bretton Woods program until after the elec-
tion because he wanted to retain the non-partisan character of
the Bretton Woods agreements. The entire delegation had worked
as a team at the Conference without partisan consideration, and
he hoped that this same spirit would prevail in Congress. The
Congressional delegates were in agreement with this policy and
thought the question could be kept non-partisan in the Congress.
Senator Wa ner said that Senator Tobey had authorized him to
say he is wholeheartedly for the program.
There was a discussion of the nature of the legislation
that would be needed. Congressman Wolcott thought the best way
would be to have a Joint Resolution authorizing the President to
sign the agreements on behalf of the United States. The Secretary
asked for the opinion of the Congressional delegates on the need
for an appropriation bill as well as a bill authorizing the sign-
ing of the agreements and the a propriation of money for them.
Mr. Luxford explained that the exchange stabilization fund had
enough money to make the initial payments to the Fund and the
Bank and that the Secretary of the Treasury could be directed in
the legislation to use the exchange stabilization fund for this
purpose. The additional funds that might be needed later could
be authorized through the issue of securities under the Second
Liberty Loan Act.
It was the opinion of Congressmen Spence and Wolcott that
an appropriation bill would be preferable. The Appropriations
Committee could not feel then that they were being side-tracked.
The Secretary said that he wanted it done in whatever way
Congress preferred, even if it meant more work. He added that
any payment out of our stabilization fund in connection with the
Fund and the ank would, of course, be done only on the direction
of legislation passed by Congress. This is what he told Congress
he intended to do when he appeared before them when our stabil-
ization fund was extended and he would stand by that promise.
The Secretary asked Senator Wagner whether the bill should
be introduced soon. The Senator said that he expected long hearings.
Regraded Unclassified
63
- 2 -
Many people will have opinions they want to express and it
will pro ably take some time to hear all of them. The Secretary
mentioned that he had had a meeting with representatives of the
bankers and that he was hopeful that they would not be in out-
right opposition.
The Secretary inquired whether it would be desirable to
have a message from the President on the Bretton Woods program.
There was general a greement that such a message would be desir-
able. Congressman Wolcott thought that it would be especially
helpful in getting the attention of the public and in securing
public support. Mr. Acheson mentioned that the State Department
was thinking of recommending to the President a general message
dealing with foreign economic policy. The general view was that
the message should not be accompanied by specific legislation,
but that the legislation should be drawn in Congress.
After further discussion it was agreed that one bill should
be prepared for both the Fund and the Bank. The Secretary said
he would have the Treasury representatives talk over the matter
with Mr. Acheson. In a few days the Treasury people would be
ready to help the four Congressional delegates in connection with
the legislation.
At the conclusion of the meeting the Secretary asked whether
an announcement should be made of this meeting. It was agreed the t
the Secretary should inform the press at his conference in the
afternoon that the Congressional delegates at the Bretton Woods
Conference had met with him and some delegates on further steps
that should be taken on the Bretton Woods program and that the
Congressional delegates would soon begin to draft a bill.
Emp
Regraded Unclassified
64
January 8, 1945
2:42 p.m.
HMJr:
Hello.
Grace
Tully:
Hello, Mr. Secretary. How are you today?
HMJr:
Oh, on the line.
T:
Well, that's good.
HMJr:
And you?
T:
Pretty well, thank you.
HMJr:
Grace, late Friday we sent you over a letter
to the President -- I did -- suggesting that
he see Stettinius and myself
T:
Yes.
HMJr:
in regard to a committee.
T:
Yes.
HMJr:
I've asked him to let -- you know -- to read it.
T:
Uh huh.
HMJr:
Now -- then, also, that the President see us.
T:
Yes.
HMJr:
Now, I know we ve only got a couple of days this
week to see him in.
T:
Yes. Well, I gave him the letter, Mr. Secretary.
I haven't heard anything about the appointment
yet, but let me remind him of it.
HMJr:
Well, if you could, and tell him that this is
fairly urgent and couldn't he see us tomorrow.
T:
Yes. All right, fine, I'll ask him this afternoon
if he can do it and I'll let you know.
HMJr:
Try your best.
T:
Yes, sir, I will.
Regraded Unclassified
- 2 -
65
HMJr:
I hear that the champagne is in his closet.
T:
Yes, sir.
HMJr:
Well, nobody could find it.
T:
What?
HMJr:
You remember about the apples -- he took those
up once in his closet, too.
T:
No, not the apples -- didn't go in his closet.
HMJr:
Yes, they did, or under his bed.
T:
Well, maybe, up in his bedroom, yes. They took
them up in his bedroom so he could enjoy some
of them and could see them and know that they
had arrived.
HMJr:
Yeah.
T:
But We always -- we always take that special
stuff, you see, and put it over in his special
closet.
HMJr:
He's like a squirrel.
T:
Huh?
HMJr:
He's like a squirrel.
T:
Yes, that's right. (Laughs)
HMJr:
All right.
T:
All right. Bye, Mr. Secretary.
HMJr:
You know what happened New Year's night -- both
he and Mrs. Roosevelt said they were going to have
Morgenthau champagne, but they had last year's
champagne..
T:
Uh huh.
HMJr:
.... which we sent them a year ago.
T:
Yes.
Regraded Unclassified
- 3 -
66
HMJr:
Well, anyway, cheerio.
T:
All right, fine, Mr. Secretary. Bye.
Regraded Unclassified
67
January 8, 1945
3:55 p.m.
PRE-PRESS
Present: Mr. D. W. Bell
Mr. Gaston
Mr. Shaeffer
Mr. Blough
Mr. Coyne
Mr. Little
Mrs. Klotz
Miss Chauncey
H.M.JR: Charlie, it is up to you entirely. And
then they can send this out (indicating attachment A).
MR. SHAEFFER: As soon as they get back--this is
the form they have, the same thing, yes, sir.
H.M.JR: I see. All right.
MR. COYNE: In response to any questions about the
States, this is the one--
H.M.JR: Have they seen this (indicating attachment B)?
MR. COYNE: No. I thought they might address some
questions to you. That is not a hand-out.
H.M.JR: Oh, all right.
And this is the final finish?
MR. BELL: This winds it up, yes, so far as figures
are concerned.
H.M.JR: What else would there be besides figures?
MR. BELL: That is all. This would be the last
statement on it. I don't think we have ever given this
Regraded Unclassified
68
- 2 -
out before in detail. We have given it to the State
Chairmen.
MR. COYNE: Yes, in response to specific inquiries.
H.M.JR: One thing, Dan, if you would make a note--
I think you have overlooked it. I am writing a letter to
the fifty odd State Chairmen thanking them, and I have
written & letter to Gamble. Now, I would like to write &
letter to the fellow at the other end who has done the
manual work, who has gotten out the bonds and done the
mailing. I don't know--
MR. BELL: You mean the Federal Reserve Banks?
H.M.JR: Hall and all those people, the head on the
manual end--Treasury people.
MR. BELL: Bureau of Printing and Engraving, Public
Debt Service, the Chicago office, each of the twelve
Federal Reserve Banks, and the fourteen thousand commercial
banks have done the issuing.
H.M.JR: Well, maybe I have to do this moving picture
thing, but if you don't mind, when I am through after
press I will send Coyne in to see you, and you fellows
work out who, besides those I have already thanked, should
get & thank-you from me.
MR. BELL: Do you want to discuss something that
might come up on the Budget?
H.M.JR: It's like what they say when you take an
examination, "Never study the night before.
MR. GASTON: It is a pretty good rule.
MR. BELL: I never believed in that.
H.M.JR: Harry White found out something that nobody
else knows; Senator Radcliffe is a Ph. D. in history.
He got it in 1901. He is Doctor Radcliffe-- got it in
1901 from Johns Hopkins.
Regraded Unclassified
69
- 3 -
MR. BELL: How did he make out?
H.M.JR: And he taught school.
there.
MR. BELL: There are lots of school teachers up
H.M.JR: He ended up as a United States Senator.
That's not bad.
Regraded Unclassified
A.
FINAL REPORT
Sales of Securities in the Sixth War Loan,
by Classes of Investors and by Issues
(In millions of dollars)
Savings bonds
Savings
7/8% cer-
(at issue price)
1-1/4%
25
tificates
2-1/2%
Class of investor
Total
notes,
of indebt-
Treasury
Treasury
Treasury
Series
series
notes,
bonds,
bonds,
Series 1
0
edness,
1 and G
12/1/45
9/15/47
12/15/52-54
3/15/66-71
Individuals, partnerships, and
personal trust accounts
5,882
2,868
522
146
339
210
1,295
502
Corporations and other
investors:
Insurance companies
3,196
-
6
1
150
98
1,339
1,603
Savings banks
2,314
-
1
.
46
133
2,018
116
Corporations and
associations
8,007
-
161
2,239
3,244
807
1,332
222
Building & loan and
savings & loan
associations
564
-
10
3
27
46
423
56
Dealers and brokers,
317
-
.
.
64
54
181
18
Federal agencies and
federal trust funds
42
-
1
-
11
4
18
8
State and local
governments
1,299
-
18
40
524
198
333
186
Total for corporations and
other investors
15.739
-
197
2,283
4,066
1,340
5,644
2,209
Total sales
21,621
2,868
719
2,429
4,405
1,550
6,939
2,711
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
Less than $500,000.
70
Regraded Unclassified
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States
(Dollar figures are in millions)
Total
Individuals, partnerships,
Corporations and
Series E savings bonds
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Quota
Sales
ofquota
Quota
Sales
of quota
Quota
Sales
of quota
accom-
accom-
Quota
Sales
of quota
accom-
accon-
plished
plished
plished
plished
Alabama
97
140
145
59
64
108
38
76
201
30
40
134
Arizona
25
37
149
15
19
125
10
19
185
8
11
136
Arkansas
F
64
144
28
37
131
16
27
168
17
20
118
(Northern
California
385
491
128
173
180
104
212
311
147
102
111
109
Southern
451
595
132
202
225
111
249
371
149
115
124
108
Colorado
74
96
129
37
47
126
37
49
132
19
22
114
Connecticut
375
622
166
91
87
95
284
536
189
51
52
101
Delaware
48
58
122
15
18
122
33
40
122
6
6
105
Dist. of Columbi
94
141
150
46
54
117
48
87
182
30
35
116
Florida
127
161
127
71
70
99
56
91
163
31
37
118
Georgia
130
161
124
74
67
90
56
95
169
34
41
121
Idaho
23
34
148
14
19
138
9
15
161
9
12
131
Illinois
1,034
1,532
148
351
400
114
683
1,133
166
174
194
111
Indiana
239
365
152
120
132
110
119
232
195
68
75
110
Iowa
178
323
182
98
143
146
80
181
226
53
72
136
Kancas
98
143
145
63
76
121
35
66
190
38
44
115
Kentucky
104
161
154
55
68
124
49
92
188
27
28
102
Louisiana
110
146
133
56
59
106
54
87
161
31
32
105
Haine
53
76
143
27
25
92
26
51
195
12
14
116
Maryland
210
417
198
106
141
133
104
9LZ
265
41
39
94
Massachusetts
706
1,021
145
173
175
101
533
846
159
87
92
106
Michigan
472
635
134
228
250
110
244
385
158
141
148
105
Minnesota
215
399
186
103
125
121
112
274
245
55
62
113
Mississippi
47
74
158
30
43
144
17
31
183
18
24
134
Missouri
9LZ
423
153
118
139
118
158
283
179
63
68
108
Montana
32
50
157
17
26
154
15
24
161
10
16
160
Nebraska
94
133
142
52
54
104
42
79
188
31
35
113
Nevada
11
14
128
6
8
138
5
6
115
3
&
117
New Hampshire
33
73
221
12
13
111
21
60
284
7
8
119
New Jersey
567
975
172
181
231
127
386
745
193
94
101
108
(Continued on following page)
Regraded Unclassified
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States (Cont'd)
(Dollar figures are in millions)
Individuals, partnerships,
Corporations and
Series I savings bonds
Total
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
accom-
accon-
accom-
accom-
plished
plished
plished
plished
New Mexico
15
21
139
9
11
123
6
10
164
5
7
149
New York
4,226
6,673
158
800
1,010
126
3,426
5,664
165
295
335
114
North Carolina
121
248
205
61
95
155
60
154
256
34
42
124
North Dekota
29
47
162
18
28
155
11
19
173
11
20
181
Ohio
713
1,050
147
288
302
105
425
748
176
151
167
110
Oklahoma
90
138
153
49
74
150
41
64
156
29
39
133
Oregon
107
157
147
62
63
101
45
95
210
34
41
120
Pennsylvania
938
1,299
138
370
422
114
568
876
154
180
204
113
Rhode Island
79
148
188
36
29
80
43
119
278
15
16
104
South Carolina
49
79
162
25
34
138
24
45
188
16
21
132
South Dakota
29
47
162
19
24
126
10
23
230
11
15
134
Tennessee
117
220
188
61
74
122
56
146
261
30
36
120
Texas
414
592
143
225
272
121
189
320
169
105
126
120
Utah
34
56
165
18
23
126
16
34
210
12
14
115
Vermont
24
41
169
9
8
95
15
32
214
5
5
100
Virginia
136
248
182
69
99
143
67
149
222
38
52
137
Washington
177
335
189
88
106
120
89
229
258
53
65
123
West Virginia
69
144
209
39
68
175
30
76
254
21
23
111
Wisconsin
253
387
153
107
125
117
146
261
179
55
66
120
Vyoming
11
18
164
6
9
119
155
5
9
175
3
6
213
Alaska
3
3
139
2
2
142
1
1
133
1
2
154
Canal Zone
-
2
2
.
-
-
-
-
-
-
1
-
Hawaii
20
42
211
11
16
143
9
26
294
10
14
142
Puerto Rico
7
31
437
6
5
94
1
25
2,498
14
3
80
Virgin Islands
.
.
.
-
-
-
-
-
-
-
-
-
Unallocated
-
33
=
-
-14
-
-
47
-
-
-18
-
Total sales
14,000
21,621
154
5,000
5,882
118
9,000
15,739
175
2,500
2,868
115
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
Note: Figures have been rounded and do not necessarily add to totals. Percentages have been
computed on unrounded figures.
Less than $500.000.
72
Regraded Unclassified
B
RANKINGS OF THE STATES IN THE SIXTH WAR LOAN
AS MEASURED BY PERCENT OF QUOTAS ACCOMPLISHED
Overall Quota
Quota for Individuals
Series E Quota
1. Puerto Rico
437%
1. West Virginia
175%
1. Wyoming
213%
2. New Hampshire
221
2. North Carolina
155
2. North Dakota
181
3. Hawaii
211
3. Wyoming
155
3. Montana
160
4. West Virginia
209
4. North Dakota
155
4. Alaska
154
5. North Carolina
205
5. Montana
154
5. New Mexico
149
6. Maryland
198
6. Oklahoma
150
6. Hawaii
142
7. Washington
189
7. Iowa
146
7. Virginia
137
8. Tennessee
188
8. Mississippi
144
8. Arizona
136
9. Rhode Island
188
9. Virginia
143
9. Iowa
136
10. Minnesota
186
10. Hawaii
143
10. South Dakota
134
11. Virginia
182
11. Alaska
142
11. Alabama
134
12. Iowa
182
12. Idaho
138
12. Mississippi
134
13. New Jersey
172
13. Nevada
138
13.
Oklahoma
133
14. Vermont
169
14. South Carolina
138
14. South Carolina
132
15. Connecticut
166
15. Maryland
133
15. Idaho
131
16. Utah
165
16. Arkansas
131
16. North Carolina
124
17. Wyoming
164
17. New Jersey
127
17.
Washington
123
18. South Carolina
162
18. New York
126
18.
Georgia
121
19. North Dakota
162
19.
Colorado
126
19.
Texas
120
20. South Dakota
162
20. South Dakota
126
20. Tennessee
120
21. Mississippi
158
21. Utah
126
21.
Wisconsin
120
22. New York
158
22. Arizona
125
22.
Oregon
120
23. Montana
157
23. Kentucky
124
23. New Hampshire
119
24. Kentucky
154
24. New Mexico
123
24. Florida
118
25. Missouri
153
25. Delaware
122
25. Arkansas
118
26. Oklahoma
153
26. Tennessee
122
26. Nevada
117
27. Wisconsin
153
27. Minnesota
121
27. Dist. of Col.
116
28. Indiana
152
28. Texas
121
28. Maine
116
29. Dist. of Col.
150
29. Kansas
181
29. Utah
115
30. Arisona
149
30. Washington
120
30. Kansas
115
31. Illinois
148
31. Missouri
118
31.
Colorado
114
32. Idaho
148
32. Wisconsin
117
32. New York
114
33. Ohio
147
33. Dist. of Col.
117
33. Nebraska
11
34. Oregon
147
34. Pennsylvania
114
34. Pennsylvania
"
35. Kansas
145
35. Illinois
114
35. Minnesota
17
36. Massachusetts
145
36. So. California
111
36.
Illinois
3
Regraded Unclassified
B
RANKINGS OF THE STATES IN THE SIXTH WAR LOAN
AS MEASURED BY PERCENT OF QUOTAS ACCOMPLISHED
Overall Quota
Quota for Individuals
Series E Quota
1. Puerto Rico
437%
1. West Virginia
175%
1. Wyoming
213%
2. New Hampshire
221
2. North Carolina
155
2. North Dakota
181
3. Hawaii
211
3. Wyoming
155
3. Montana
160
4. West Virginia
209
4. North Dakota
155
4. Alaska
154
5. North Carolina
205
5. Montana
154
5. New Mexico
149
6. Maryland
198
6. Oklahoma
150
6. Hawaii
142
7. Washington
189
7. Iowa
146
7. Virginia
137
8. Tennessee
188
8. Mississippi
144
8. Arizona
136
9. Rhode Island
188
9. Virginia
143
9. Iowa
136
10. Minnesota
186
10. Hawaii
143
10. South Dakota
134
11. Virginia
182
11. Alaska
142
11. Alabama
134
12. Iowa
182
12. Idaho
138
12. Mississippi
134
13. New Jersey
172
13. Nevada
138
13.
Oklahoma
133
14. Vermont
169
14. South Carolina
138
14. South Carolina
132
15. Connecticut
166
15. Maryland
133
15. Idaho
131
16. Utah
165
16. Arkansas
131
16. North Carolina
124
17. Wyoming
164
17. New Jersey
127
17. Washington
123
18. South Carolina
162
18. New York
126
18.
Georgia
121
19. North Dakota
162
19. Colorado
126
19. Texas
120
20. South Dakota
162
20. South Dakota
126
20. Tennessee
120
21. Mississippi
158
21. Utah
126
21. Wisconsin
120
22. New York
158
22. Arizona
125
22. Oregon
120
23. Montana
157
23. Kentucky
124
23. New Hampshire
119
24. Kentucky
154
24. New Mexico
123
24. Florida
118
25. Missouri
153
25. Delaware
122
25. Arkansas
118
26. Oklahoma
153
26. Tennessee
122
26. Novada
117
27. Wisconsin
153
27. Minnesota
121
27. Dist. of Col.
116
28. Indiana
152
28. Texas
121
28. Maine
116
29. Dist. of Col.
150
29. Kansas
121
29. Utah
115
30. Arisona
149
30. Washington
120
so. Kansas
115
31. Illinois
148
31. Missouri
118
31. Colorado
114
32. Idaho
148
32. Wisconsin
117
32. New York
114
33. Ohio
147
33. Dist. of Col.
117
33. Nobraska
113
34. Oregon
147
34. Pennsylvania
114
34. Pennsylvania
115
35. Kansas
145
35. Illinois
114
35.
Minnesota
113
36.
Massachusetts
145
36. 80. California
111
36.
Illinois
111
Regraded Unclassified
-2-
Overall Quota
Quota for Individuals
Series E Quota
37. Alabama
145%
37. New Hampshire
111%
37. West Virginia
111%
38. Arkansas
144
38. Indiana
110
38.
Ohio
110
39. Texas
143
39. Michigan
110
39. Indiana
110
40. Maine
143
40. Alabama
108
40. No. California
109
41. Nebraska
142
41. Louisiana
106
41. Missouri
108
42, New Mexico
139
42. Ohio
105
42. New Jersey
108
43. Alaska
139
43. Nebraska
104
43. So. California
108
44. Pennsylvania
138
44. No. California
104
44. Massachusetts
106
45. Michigan
134
45. Massachusetts
101
45.
Michigan
105
46. Louisiana
133
46. Oregon
101
46. Delaware
105
47. So. California
132
47.
Florida
99
47. Louisiana
105
48. Colorado
129
48.
Connecticut
95
48.
Rhode Island
104
49. Novada
128
49.
Vermont
95
49. Kentucky
102
50. No. California
128
50.
Puerto Rico
94
50. Connecticut
101
51. Florida
127
51.
Maine
92
51.
Vermont
100
52. Georgia
124
52.
Georgia
90
52. Maryland
94
53. Delaware
122
53. Rhode Island
80
53.
Puerto Rico
80
Regraded Unclassified
75
Uses at press
conference
1/8/45
RANKINGS OF THE STATES IN THE SIXTH WAR LOAN
AS MEASURED BY PERCENT OF QUOTAS ACCOMPLISHED
Overall Quota
Quota for Individuals
Series E Quota
1. Puerto Rico
437%
1. West Virginia
175%
1. Wyoming
213%
2. New Hampshire
221
2. North Carolina
155
2. North Dakota
181
3. Hawaii
211
3. Wyoming
155
3. Montana
160
4. West Virginia
209
4. North Dakota
155
4. Alaska
154
5. North Carolina
205
5. Montana
154
5. New Mexico
149
6. Maryland
198
6. Oklahoma
150
6. Hawaii
142
7. Washington
189
7. Iowa
146
7. Virginia
137
8. Tennessee
188
8. Mississippi
144
8. Arizona
136
9. Rhode Island
188
9. Virginia
143
9. Iowa
136
10. Minnesota
186
10. Hawaii
143
10. South Dakota
134
11. Virginia
182
11. Alaska
142
11. Alabama
134
12. Iowa
182
12. Idaho
138
12. Mississippi
134
13. New Jersey
172
13. Nevada
138
13. Oklahoma
133
14. Vermont
169
14. South Carolina
138
14. South Carolina
132
15. Connecticut
166
15. Maryland
133
15. Idaho
131
16. Utah
165
16. Arkansas
131
16. North Carolina
124
17. Wyoming
164
17. New Jersey
127
17. Washington
123
18. South Carolina
162
18. New York
126
18. Georgia
121
19. North Dakota
162
19. Colorado
126
19. Texas
120
20. South Dakota
162
20. South Dakota
126
20. Tennessee
120
21. Mississippi
158
21. Utah
126
21. Wisconsin
120
22. New York
158
22. Arizona
125
22. Oregon
120
23. Montana
157
23. Kentucky
124
23. New Hampshire
119
24. Kentucky
154
24. New Mexico
123
24. Florida
118
25. Missouri
153
25. Delaware
122
25. Arkansas
118
26. Oklahoma
153
26. Tennessee
122
26. Nevada
117
27. Wisconsin
153
27. Minnesota
121
27. Dist. of Col.
116
28. Indiana
152
28. Texas
121
28. Maine
116
29. Dist. of Col.
150
29. Kansas
121
29. Utah
115
30. Arizona
149
30. Washington
120
30. Kansas
115
31. Illinois
148
31. Missouri
118
31. Colorado
114
32. Idaho
148
32. Wisconsin
117
32. New York
114
33. Ohio
147
33. Dist. of Col.
117
33. Nebraska
113
34. Oregon
147
34. Pennsylvania
114
34. Pennsylvania
113
35. Kansas
145
35. Illinois
114
35. Minnesota
113
36. Massachusetts
145
36. So. California
111
36. Illinois
111
Regraded Unclassified
76
-2-
Overall Quota
Quota for Individuals
Series E Quota
37. Alabama
145%
37. New Hampshire
111%
37. West Virginia
111%
38. Arkansas
144
38. Indiana
110
38. Ohio
110
39. Texas
143
39. Michigan
110
39. Indiana
110
40. Maine
143
40. Alabama
108
40. No. California
109
41. Nebraska
142
41. Louisiana
106
41. Missouri
108
42. New Mexico
139
42. Ohio
105
42. New Jersey
108
43. Alaska
139
43. Nebraska
104
43. So. California
108
44. Pennsylvania
138
44. No. California
104
44. Massachusetts
106
45. Michigan
134
45. Massachusetts
101
45. Michigan
105
46. Louisiana
133
46. Oregon
101
46. Delaware
105
47. So. California
132
47. Florida
99
47. Louisiana
105
48. Colorado
129
48. Connecticut
95
48. Rhode Island
104
49. Nevada
128
49. Vermont
95
49. Kentucky
102
50. No. California
128
50. Puerto Rico
94
50. Connecticut
101
51. Florida
127
51. Maine
92
51. Vermont
100
52. Georgia
124
52. Georgia
90
52. Maryland
94
53. Delaware
122
53. Rhode Island
80
53. Puerto Rico
80
Regraded Unclassified
FINAL REPORT
Sales of Securities in the Sixth War Loan,
by Classes of Investors and by Issues
(In millions of dollars)
Savings bonds
(at issue price)
Savings
7/8% cer-
1-1/4%
2%
tificates
2-1/2%
Class of investor
Total
notes,
of indebt-
Treasury
Treasury
Treasury
Series
series
notes,
bonds,
bonds,
Series I
7 and G
0
edness,
12/1/45
9/15/47
12/15/52-54
3/15/66-71
Individuals, partnerships, and
personal trust accounts
5,882
2,868
522
146
339
210
1,295
502
Corporations and other
investors:
Insurance companies
3,196
-
6
1
150
/ 98
1,339
1,603
Savings banks
2,314
-
1
.
46
133
2,018
116
Corporations and
associations
8,007
-
161
2,239
3,244
807
1,332
222
Building & loan and
savings & loan
associations
564
-
10
3
27
46
423
56
Dealers and brokers
317
-
-
.
64
54
181
18
Federal agencies and
federal trust funds
42
-
1
.
11
4
18
8
State and local
governments
1,299
-
18
40
524
198
333.
186
Total for corporations and
other investors
15.739
-
197
2,283
4,066
1,340
5,644
2,209
Total sales
21,621
2,868
719
2,429
4,405
1,550
6,939
2,711
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
. Less than $500,000.
Regraded Unclassified
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States
(Dollar figures are in millions)
Total
Individuals, partnerships,
Corporations and
Series I savings bonds
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Sales
of quota
Quota
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
accom-
accon-
accon-
accom-
plished
plished
plished
plished
Alabama
97
140
145
59
64
108
38
76
201
30
40
134
Arizona
25
37
149
15
19
125
10
19
185
8
11
136
Arkansas
44
64
144
28
37
131
16
27
168
17
20
118
(Northern
California
385
491
128
173
180
104
212
311
147
102
111
109
(Southern
451
595
132
202
225
111
249
371
149
115
124
108
Colorado
74
96
129
37
47
126
37
49
132
19
22
114
Connecticut
375
622
166
91
El
95
284
536
189
51
52
101
Delaware
48
58
122
15
18
122
33
40
122
6
6
105
Dist. of Columbi
94
141
150
46
54
117
48
87
182
30
35
116
Florida
127
161
127
71
70
99
56
91
163
31
37
118
Georgia
130
161
124
74
67
90
56
95
169
34
41
121
Idaho
23
34
148
14
19
138
9
15
161
9
12
131
Illinoi
1,034
1,532
148
351
400
114
683
1,133
166
174
194
111
Indiana
239
365
152
120
132
110
119
232
195
68
75
110
Iowa
178
323
182
98
143
146
80
181
226
53
72
136
Kansas
98
143
145
63
76
121
35
66
190
38
44
115
Kentucky
104
161
154
55
68
124
49
92
188
27
28
102
Louisiona
110
146
133
56
59
106
54
87
161
31
32
105
Maine
53
76
143
27
25
92
26
51
195
12
14
116
Maryland
210
417
198
106
141
133
104
276
265
41
39
94
Massachusetts
706
1,021
145
173
175
101
533
846
159
87
92
106
Michigan
472
635
134
228
250
110
244
385
158
141
148
105
Minnesota
215
399
186
103
125
121
112
274
245
55
62
113
Mississippi
47
74
158
30
43
144
17
31
183
18
24
134
Missouri
9L2
423
153
118
139
118
158
283
179
63
68
108
Montana
32
50
157
17
26
154
15
24
161
10
16
160
Nebraska
94
133
142
52
54
104
42
79
188
31
35
113
Novada
11
14
128
6
8
138
5
6
115
3
4
117
New Hampshire
33
73
221
12
13
111
21
60
284
7
8
119
New Jersey
567
975
172
181
231
127
386
745
193
94
101
108
(Continued on following page)
78
Regraded Unclassifie
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States (Cont'd)
(Dollar figures are in millions)
Total
Individuals, partnerships,
Corporations and
Series I sevings bonds
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
accon-
accom-
accom-
accon-
plished
plished
plished
plished
New Mexico
15
21
139
9
11
123
6
10
164
5
7
149
New York
4,226
6,673
158
800
1,010
126
3,426
5,664
165
295
335
114
North Carolina
121
248
205
61
95
155
60
154
256
34
&
124
North Dekota
29
47
162
18
28
155
11
19
173
11
20
181
Ohio
713
1,050
147
288
302
105
425
748
176
151
167
110
Oklahoma
90
138
153
49
74
150
41
64
156
29
39
133
Oregon
107
157
147
62
63
101
45
95
210
34
41
120
Pennsylvania
938
1,299
138
370
422
114
568
876
154
180
204
113
Rhode Island
79
148
188
36
29
80
43
119
278
15
16
104
South Carolina
49
79
162
25
34
138
24
45
188
16
21
132
South Dakota
29
47
162
19
24
126
10
23
230
11
15
134
Tennessee
117
220
188
61
74
122
56
146
261
30
36
120
Texas
414
592
143
225
272
121
189
320
169
105
126
120
Utah
34
56
165
18
23
126
16
34
210
12
14
115
Vermont
24
41
169
9
8
95
15
32
214
5
5
100
Virginia
136
248
182
69
99
143
67
149
222
38
52
137
Washington
177
335
189
88
106
120
89
229
258
53
65
123
West Virginia
69
144
209
39
68
175
30
76
254
21
23
111
Wisconsin
253
387
153
107
125
117
146
261
179
55
66
120
Wyoming
11
18
164
6
9
115
155
5
9
175
3
6
213
Alaska
3
3
139
2
2
142
1
1
133
1
2
154
Canal Zone
-
2
2
.
-
-
-
-
1
-
1
-
Hawaii
20
42
211
11
16
143
9
26
294
10
14
142
Puerto Rico
7
31
437
6
5
94
1
25
2,498
4
3
80
Virgin Islands
.
.
.
-
-
-
-
-
-
-
-
-
Unallocated
-
33
-
-
-14
-
-
47
-
-
-18
-
Total sales
14,000
21,621
154
5,000
5,882
118
9,000
15,739
175
2,500
2,868
115
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
Note: Figures have been rounded and do not necessarily add to totals. Percentages have been
computed on unrounded figures.
Lass than $500.000.
Regraded Unclassified
FINAL REPORT
Sales of Securities in the Sixth War Loan,
by Classes of Investors and by Issues
(In millions of dollars)
Savings bonds
(at issue price)
Savings
7/8% cer-
1-1/4%
2%
2-1/2%
tificates
Class of investor
Total
notes,
Treasury
Treasury
of indebt-
Treasury
Series
series
notes,
bonds,
bonds,
Series I
1 and G
o
edness,
12/1/45
9/15/47
12/15/52-54
3/15/66-71
Individuals, partnerships, and
personal trust accounts
5,882
2,868
522
146
339
210
1,295
502
Corporations and other
investors:
Insurance companies
3,196
-
6
1
150
98
1,339
1,603
Savings banks
2,314
1
*
-
46
133
2,018
116
Corporations and
associations
8,007
-
161
2,239
3,244
807
1,332
222
Building & loan and
savings & loan
associations
564
-
10
3
27
46
423
56
Dealers and brokers
317
-
.
.
64
54
181
18
Federal agencies and
federal trust funds
42
-
1
e
11
4
18
8
State and local
02
governments
1,299
-
18
40
524
198
333
186
Total for corporations and
other investors
15,739
-
197
2,283
4,066
1,340
5,644
2,209
Total sales
21,621
2,868
719
2,429
4,405
1,550
6,939
2,711
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
Less than $500,000.
Regraded Unclassified
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States
(Dollar figures are in millions)
Total
Individuals, partnerships,
Corporations and
Series I savings bonds
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Quota
Sales
ofquota
Quota
Sales
of quota
Quota
Sales
of quota
accom-
accom-
Quota
Sales
of quota
accom-
accom-
plished
plished
plished
plished
Alabama
97
140
145
59
64
108
38
76
201
30
40
134
Arizona
25
37
149
15
19
125
10
19
185
8
11
136
Arkansas
44
64
144
28
37
131
16
27
168
17
20
118
(Northern
California
385
491
128
173
180
104
212
311
147
102
111
109
Southern
451
595
132
202
225
111
249
371
149
115
124
105
Colorado
74
96
129
37
47
126
37
49
132
19
22
114
Connecticut
375
622
166
91
87
95
284
536
189
51
52
101
Delaware
48
58
122
15
18
122
33
40
122
6
6
105
Dist. of Columbi
94
141
150
46
54
117
48
87
182
30
35
116
Florida
127
161
127
71
70
99
56
91
163
31
37
118
Georgia
130
161
124
74
67
90
56
95
169
34
41
121
Idaho
23
34
148
14
19
138
9
15
161
9
12
131
Illinois
1,034
1,532
148
351
400
114
683
1,133
166
174
194
111
Indiana
239
365
152
120
132
110
119
232
195
68
75
110
Iowa
178
323
182
98
143
146
80
181
226
53
72
136
Xansas
98
143
145
63
76
121
35
66
190
38
44
115
Kentucky
104
161
154
55
68
124
49
92
188
be
28
102
Louisiana
110
146
133
56
59
106
54
87
161
31
32
105
Maine
53
76
143
27
25
92
26
51
195
12
14
116
51
Maryland
210
417
198
106
141
133
104
9LZ
265
41
39
94
Massachusetts
706
1,021
145
173
175
101
533
846
159
87
92
106
Michigan
472
635
134
228
250
110
244
385
158
141
148
105
Minnesota
215
399
186
103
125
121
112
274
245
55
62
113
Mississippi
47
74
158
30
43
144
17
31
183
18
24
134
Missouri
276
423
153
118
139
118
158
283
179
63
68
108
Montana
32
50
157
17
26
154
15
24
161
10
16
160
Nebraska
94
133
142
52
54
104
42
79
188
31
35
113
Nevada
11
14
128
6
8
138
5
6
115
3
4
117
New Hampshire
33
73
221
12
13
111
21
60
284
7
8
119
New Jersey
567
975
172
181
231
127
386
745
193
94
101
108
(Continued on following page)
Regraded Unclassified
FINAL REPORT
Comparison of Quotas and Sales of Securities in the Sixth War Loan, by States (Cont'd)
(Dollar figures are in millions)
Total
Individuals, partnerships,
Corporations and
Series I savings bonds
and personal trust accounts
other investors
(at issue price)
State
Percent
Percent
Percent
Percent
Quota
Sales
of quota
Quota
Sales
of quota
Quota
Sales
of quota
accom-
accom-
Quota
Sales
of quota
accom-
accom-
plished
plished
plished
plished
New Mexice
15
21
139
9
11
123
6
10
164
5
7
149
New York
4,226
6.673
158
800
1,010
126
3,426
5,664
165
295
335
114
North Carolina
121
248
205
61
95
155
60
154
256
34
42
124
North Dekota
29
47
162
18
28
155
11
19
173
11
20
181
Ohio
713
1,050
147
288
302
105
425
748
176
151
167
110
Oklahoma
90
138
153
49
74
150
41
64
156
29
39
133
Oregon
107
157
147
62
63
101
45
95
210
34
41
120
Pennsylvania
938
1,299
138
370
422
114
568
876
154
180
204
113
Rhode Island
79
148
188
36
29
80
43
119
278
15
16
104
South Carolina
49
79
162
25
34
138
24
45
188
16
21
132
South Dakota
29
47
162
19
24
126
10
23
230
11
15
134
Tennessee
117
220
188
61
74
122
56
146
261
30
36
120
Texas
414
592
143
225
272
121
189
320
169
105
126
120
Utah
34
56
165
18
23
126
16
34
210
12
14
115
Vermont
24
41
169
9
8
95
15
32
214
5
5
100
Virginia
136
248
182
69
99
143
67
149
222
38
29
52
137
Washington
177
335
189
88
106
120
89
229
258
53
65
123
West Virginia
69
144
209
39
68
175
30
76
254
21
23
111
Visconsin
253
387
153
107
125
117
146
261
179
55
66
120
Wyoming
11
18
164
6
9
155
5
9
175
3
6
213
Alaska
3
3
139
2
2
142
1
1
133
1
2
154
Canal Zone
-
2
-
-
2
-
.
,
-
-
1
-
Hawaii
20
42
211
11
16
143
9
26
294
10
14
142
Puarto Rico
7
31
437
6
5
94
1
25
2,498
4
3
80
Virgin Islands
-
.
-
-
-
-
-
I
.
-
-
Unallocated
-
33
-
-
-14
-
-
47
-
-
-18
-
Total sales
14,000
21,621
154
5,000
5.882
118
9.000
15,739
175
2,500
2,868
115
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 6, 1945.
Note: Figures have been rounded and do not necessarily add to totals. Percentages have been
computed on unrounded figures.
Less than $500,000.
Regraded Unclassified
House
January 8, 1945.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
I attach a mimeographed copy of the President's
message on the state of the Union as issued by the White
House on Saturday. This I have marked to indicate our
contributions.
At the bottom of page 13 of the message appears our
Insert A just as written and submitted.
On page 14 the second paragraph is & revision of
our Insert B, which as we submitted it read: "The
Federal Government must assume responsibility for seeing
to it that these rights become realities." Since Mr.
Blough and I saw the message on Friday morning the para-
graph has been changed to read: "The Federal Government
must see to it that these rights become realities - with
the help of States, muncipalities, business, labor and
agriculture. Note that the primary change is from
"must assume the responsibility for seeing to it" to
"must see to it" and the added words, which indicate that
the responsibility is one which the Federal Government
shares with local governments and with private enterprise
in general, has the effect of softening materially our
original statement.
In the 8th paragraph on page 14, just below the
middle of the page, the words "for new small enterprises"
have been added. In the first draft this paragraph read:
"During the war we have guaranteed investment in enter-
prise essential to the war effort. We should adopt similar
devices in peacetime to secure opportunities for productive
business expansion for which finance would otherwise be
unavailable.' In the draft we saw at the White House on
Friday the second sentence had been modified by substituting
"We whould also take appropriate measures in peacetime" for
the words "We should adopt similar devices in peacetime".
This softening of the original language made our Insert C,
which appears as the next succeeding two paragraphs in the
Regraded Unclassified
- 2 -
message, much more important. However, in the message
as finally released the third paragraph of our Insert C
was omitted. This was the paragraph about Bretton Woods,
which read as follows: "We must expand our foreign Trade.
Important progress to this end was achieved at the Bretton
Woods Conference last year. The adoption by Congress of
the Bretton Woods Agreements will be proposed by me at an
early date."
On page 15 of the message as released the third,
fourth and fifth paragraphs are our Insert F, except for
two slight changes which Mr. Blough and I made Friday
morning and except for the fact that the final sentence
of our proposed insert was dropped and did not appear in
any draft. The sentence was unimportant. It read:
"Broad markets are needed to sustain high production and
employment and so long as consumption is taxed heavily
we cannot attain our fullest employment and business
opportunities. This merely reinforced the statement in
the preceding sentence and was evidently regarded as-un-
necessary.
VP
Regraded Unclassified
HOLD FOR RELEASE
HOLD FOR RELEASE
HOLD FOR RELEASE
January 6, 1945
CONFIDENTIAL: To be held in STRICT CONFIDENCE and no
portion, synopais or intimation to be given out or pub-
lished until the READING of the President's Message has
begun in either the Senate or House of Representatives.
Extremo care must therefore be exercised to avoid proma-
ture publication.
STEPHEN EARLY
Secretary to the President
TO THE CONGRESS OF THE UNITED STATES:
In considering the state of the Union, the war, end
the peace that is to follow, are naturally uppermost in the minds
of all of us.
This var must be vaged -- it 10 being vaged -- with
the greatest and most persistent intensity. Everything ve are
and have 1a at stake. Everything we are and have will be given.
American men, fighting far from home, have already won victories
which the world vill never forget.
We have no question of the ultimate victory. We have
no question of the cost. Our losses vill be heavy.
We and our Allies vill go on fighting together to
ultimato total victory.
We have seen B. year marked, on the whole, by substantial
progress toward victory, even though the year ended with a set-back
for our erms, when the Germans launched a ferocious counter-attack
into Luxembourg and Belgium with the obvious objective of cutting
our line in the center.
Our mon have fought with indoscribable and unforgettable
gallantry under most difficult conditions, and our German enemies
have sustained considerable loases while failing to obtain their
objectives.
The high tido of this German effort was reached two days
after Christmas. Since then we have reassumed the offensive,
rescued the isolated garrieon at Bastogne, and forced a Gorman with-
draval along the whole line of the salient. The spood with which
ve recovered from this savage attack was largely possible because
vo have one Supremo Commander in complete control of all the Alliod
armice in Franco. Genoral Eisenhower has faced this period of trial
with admirable calm and resolution and with stondily increasing
succose. Ho has my complete confidence.
Further dosperate attempte may vell be mado to broak our
lince, to slow our progress. Wo must never make the mistake of
assuming that the Germans are beaton until the last Nazi has sur-
rendored.
And I would express another most serious warning against
the poisonous effects of enemy propaganda.
The wodge that the Corrana attempted to drivo in Western
Europe vas less dangerous in actual terms of wirming the var than
the wedges which they are continually attempting to drive between
ourselves and our Allies.
(OVER)
Regraded Unclassified
- 2 -
Every little rumor which 1e intended to weaken our faith
in our Allies 10 like an actual enemy agent in our midst -- seeking
to sabotage our var effort. There are, here and there, evil and
baseless rumore against the Russians -- rumors against the British --
rumors against our own American commanders in the field.
When you examine these rumors closely, you vill observe
that every one of them boars the same trademark -- "Made in Germany."
We must resist this divisive propaganda -- ve must de-
stroy it -- with the same strength and the same dotermination that
our fighting men are displaying 88 they resist and destroy the
panzer divisions.
In Europo, we shall resume the attack and -- despite
tomporary sotbacks here or there -- NO shall continue the attack
relentlessly until Commy is completoly defeated.
It 18 appropriate at tola time to review the basic
strategy which has guised 09 the bugh three years of var, and which
will load, avuntually. to total victory.
The tremendous offort of the first years of this war was
directed toward the concontration of men and supplies in the various
theatres of action at the pointe where they could hurt our enemies
most.
It vae an effort -- in the language of the military
mon -- of deployment of our forces. Many battles -- essential
battles -- were fought; many victories -- vital victorios -- were
won. But those battlon and thèse victories vore fought and von to
hold back the attacking enemy, and to put us in positions from
which we and our Allies could deliver the final, decisive blows.
In the beginning, our most important military taek vas
to prevent our enemies -- the strongest and most violently aggres-
sivo powere that over have threatened civilization -- from winning
decisive victories. But oven while wo wore conducting defensive,
delaying actions, ve were looking forward to the time when wo could
wrest the initiative from our chemies and place our superior re-
sources of men and matorials into direct competition with them.
It was plain then that the dofoat of oither enomy would
require the massing of overwholming forces -- ground, son and air --
in positions from which wo and our Allies could strike directly
against the enemy homelands, and destroy the Nazi and Japanese var
machines.
In the case of Japan, ve had to await the completion of
extensivo proliminary operations operations dosigned to establish
secure supply lines through the Japanese outer-zone defenses. This
called for overwholming BOB power and air power -- supported by
ground forces strategically employed against isolated outpost gar-
risons.
Always -- from the very day we were attacked -- it was
right militarily ae well as morally to reject the arguments of
those shortaightod poople who would have had ue throw Britain and
Russia to the Naxi welves and concentrato against the Japanese.
Such poople unred that ve fight 5. purely defensive var against
Japan while allowing the domination of all the rest of the world
by Nazism and Fascians.
In the European theatre, the necessary bases for the
massing of ground and air power against Germany vero already avail-
able in Great Britain, In the Moditerrancen area vo could begin
ground operations against major elements of the German Army as
repidly as vo could put troops in the field, first in North Africa
and then in Italy.
Regraded Unclassified
- 3 -
Therefore, our decision Ved nade to concentrato the
bulk of our ground and air forces against Cormany until her utter
dofont. That docision vas based on all those factors; and it VAI
also based on the realization that, of our tvo enemies, Germany
would be more able to digest quickly her conquents, the more able
quickly to convert the manpower and resources of her conquered
territory into a war potontial.
We had in Europe two active and indomitable Allies --
Britain and the Soviet Union -- and there vere also the heroic
resistance movements in the occupied countries, constantly on-
gaging and harrassing the Cormane.
We cannot forget how Britain held the line, alone, in
1940 and 1941; and at the name time, despite ferocious bombard-
ment from the air, built up a tremendous armaments industry which
enabled hor to take the offensive at El Alamoin in 1942.
We cannot forget the heroio defense of Mosoov and
Leningred and Stalingrad, or the tromendous Russian offensives
of 1943 and 1944 which destroyed formidable Corman armies.
Nor can vo forget how, for more than seven long years,
the Chincee people have been sustaining the barbarous attacks
of the Japanese and containing large enemy forces on the vast
aroas of the Asiatic mainland.
In the future ve must never forgot the lesson that vo
have learned -- that we must have friends who vill work with us
in peace as they have fought at our side in var.
As a result of the combined effort of the Allied forces,
great military victories were achieved in 1944: the liberation
of France, Belgium, Grooce and parte of the Netherlands, Norway,
Poland, Yugoslavia and Crechoslovakia; the surrender of Rumania
and Bulgaria; the invasion of Cermany itself and Hungary; the
steady march through the Pacific Islanda to the Philippines, Gunm
and Saipan; and the beginnings of a mighty air offensive against
the Japanese Islanda.
Now, as this seventy-ninth Congress meeta, ve have
reached the most oritical phase of the war.
The greatest victory of the last year vas, of course,
the successful breach on June 6, 1944, of the German "impregnable"
sea wall of Europe and the victorious sweep of the Allied forces
through France and Belgium and Luxembourg -- almost to the Rhine
itself.
The cross channel invasion of the Allied armies was
the greateet emphibious operation in the bistory of the world.
It overshadowed all other operations in this or any other var in
ite immensity. Its success is a tribute to the fighting courage
of the soldiers who stormed the beaches -- to the sailors and
merchant seamon who put the soldiers ashore and kept them sup-
pliod -- and to the military and naval leaders who achieved a
real mirecle of planning and execution, And it is also a tribute
to the ability of two nations, Britain and Americe, to plan to-
gether, and work together, and fight together in perfect coopora-
tion and perfect harmony.
This cross channel invasion vás followed in August by
n second great emphibious operation, landing troops in Southern
France. In this, the same cooperation and the enmo harmony
existed between the Amorican, French and other Allied forces based
in North Africa and Italy,
The succose of the two invasions 18 & tribute also to
the ability of many non and women to maintain silence, when 8 fev
caroless vordo would have imperilled the lives of hundrede of
thousands, and would have joopardized the whole vast undertakings.
(OVER)
Regraded Unclassified
These two great operations voro made possible by suc-
coss in the Battle of the Atlantic.
Without this success over German submarines, ve could
not have built up our invasion forces or air forces in Great
Britain, nor could we have kept a steady stream of supplies
flowing to them after they hed lended in France.
The Karia, however, my succeed in improving their
submarines and their crews. They have recently increased their
U-boat activity. The Battle of the Atlantic -- like all campaigns
in this var demande eternal vigilance. But the British, Canadian
and other Allied Navios, together with our own, are constantly on
the alort.
The tremendous operations in Western Europe have over-
shadoved in the public mind the loss spectacular but vitally 1b-
portant Italian front. Ite place in the strategic conduct of
the war in Europe has been obscured, and -- by some people, un-
fortunately -- underrated.
It ie important that any misconception on that score be
corrected -- now.
What the Allied forces in Italy are doing is & well-
considered part in our strategy in Europe, nov aimed at only one
objective -- the total defeat of the Germans. Those valiant
forces in Italy are continuing to keep a substantial portion of
the German Army under constant pressure -- including acme twenty
first-line German divisions and the necessary supply and trans-
port and replacement troops -- all of which our enemies need 80
badly elsewhore.
Over very difficult torrain and through adverse weather
conditions, our Fifth Army and the British Eighth Army -- reinforced
by units from other United Nations, including a brave and well-
equipped unit of the Brazilian Army -- have, in the past year,
pushed north through bloody Caseino and the Anzio beachhoad, and
through Rome until now they occupy heights overlooking the valley
of the Po.
The greatest tribute which can be paid to the courage
and fighting ability of these splendid soldiere in Italy 18 to
point out that although their strength is about equal to that of
the Germans they oppose, the Allies have been continuously on the
offensive.
That pressure, that offensive, by our troops in Italy
will continue.
The American people -- and every soldier nov fighting
in the Apennines -- should remember that the Italian front has
not lost any of the importance which it had in the days when it
vas the only Allied front in Europe.
In the Pacific during the past year, ve have conducted
the fastest-moving offensive in the history of modern varfare. We
have driven the enemy back more than 3,000 miles across the Central
Pacific.
A year ago, our conquest of Tarava was & little more than
& month old.
A year ago, Ve vore preparing for our invasion of
Kwajalein, the second of our great stridos across the Central
Pacific to the Philippines.
A year ago, General MacArthur vae still fighting in New
Guinee almost 1500 miles from hia present position in the Philippine
Islanda.
Regraded Unclassified
5 -
We nov have firmly established basee in the Mariana
Islands from which our Superfortressos bomb Tokyo itself -- and
vill continue to blast Japan in ever-increasing numbers.
Japanoso forces in the Philippines have boen cut in
two, There 1e still hard fighting ahoad -- costly fighting.
But the Liberation of the Philippines will mean that Japan has
boon largely cut off from her conquest in the East Indies.
The landing of our troops on Leyte vas the largest
emphibious operation thus for conducted in the Pacific.
Moreover, these landings drev the Japanese floot into
the first great coa battle which Japan has risked in almost two
years. Not since the night engagements around Guadalcanal in
November-December, 1942, had our Navy been able to come to gripa
with major unite of the Japanese fleet. We had brushed against
their floot in the first battle of the Philippine Sea in June,
1944, but not until last October were ve able really to engago
& major portion of the Japanese navy in actual combat. The naval
engagement which reged for three days vas the heaviest blow ever
struck against Japanese con power.
As the result of that battle, much of what is left of
the Japanese fleet has boan driven behind the screen of islands
that separates the Yollow Sea, the China Soa, and the Sea of
Japan from the Pacific.
Our Navy looks forward to any opportunity which the
lords of the Japanese Navy will give us to fight them again.
The people of this nation have 5 right to be proud of
the courage and fighting ability of the men in the armed forces --
on all fronte. They also have è right to be proud of American
Inadership which has guided their sona into battle.
The history of the generalship of this war has been A
history of teamwork and cooperation, of skill and daring. Lot
me give you one example out of last year's operations in the
Pecific.
Last September Admiral Halsoy led American Naval task
forces into Philippine waters and north to the East China Soa,
and struck heavy blows at Japanese air and 608 pover.
At that time, It vas our plan to approach the Philippines
by further stages, taking islande which ve may call A, C and 2.
However, Admiral Halsey reported that a direct attack on Loyto
appeared feasible. When General MacArthur received the reporte
from Admiral Haleey's task forces, he also concluded that it
might be possible to attack the Japanese in the Philippines
directly -- by-passing islande A, C and E.
Admiral Nimitz thereupon offered to make available to
General MacArthur several divisions which had been scheduled to
take the intermediate objectives. These discussions, conducted
at gréat distances, all took place in one day.
General MacArthur immediately informed the Joint Chiefe
of Staff here in Washington that he. vas prepared to initiate plans
for an attack on Leyte in October. Approval of the change in plan
vas given on the samo day.
Thus, within the apace of twenty-four hours, B major
change of plans vae accomplished which involved Army and Navy
forces from two different theaters of operations -- a change
which hastened the liberation of the Philippines and the final
day of victory -- & change which saved lives which would have
been expended in the capture of islands which are nov neutralized
far behind our lines.
Regraded Unclassified
6
Our over-all strategy has not. neglected the important
task of rendering all possible aid to China. Despite almost in-
superable difficulties, wo increased this aid during 1944. At
present our aid to China must be accomplished by air transport --
there is no other way. By the and of 1944, the Air Transport
Command was carrying into China a tonnage of supplies three times
as great as that delivered & year ago, and much more, each month,
than the Burma road ever delivered at its peak,
Despite the loss of important bases in China, the tonnage
delivered by air transport has enabled General Chennault's Four-
teenth Air Force, which includes many Chinese flyers, to wage an
offective and aggressive campaign against the Japanese. In 1944,
aircraft of the Fourteenth Air Force flow more than 35,000 sorties
against the Japanese and sank enormous tonnage of enemy shipping,
greatly diminishing the usefulness of the China Sea lanes.
British, Dominion and Chinese forces together with our
own have not only held the line in Burma against determined Japanese
attacks but have gained bases of considerable importance to the sup-
ply line into China.
The Burma campaigns have involved incredible hardship,
and have demanded exceptional fortitude and dotermination. The
officers and men who have served with so much devotion in these
far distant jungles and mountains deserve high honor from their
countrymen,
In all of the far-flung operations of our own armed
forces -- on land, and sea and in the air -- the final job,
the toughest job, has been performed by the average, easy-
going, hard-fighting young American who carries the weight of
battle on his own shoulders.
It is to him that WU and all futuro gunerations of
Americans must pay grateful tribute.
But - it is of small satisfaction to him to know that
monuments will be raised to him in the future. He wants, be
needs, and he is entitled to insist upon, our full and active
support -- now,
Although unprecedented production figures have made
possible our victories, we shall have to increase our goals even
more in certain items.
Poak doliveries of supplies were made to the War Depart-
ment in December 1943. Due in part to cut-backs, we have not
produced as much since then. Deliveries of Army supplies were
down by 15 percent by July 1944, before the upward trend was once
more resumed.
Because of increased demands from overseas, the Army
Service Forces in the month of October, 1944, had to increase
its estimate of required production by 10 percent. But in Novem-
ber, one month later, the requirements for 1945 had to be increased
another 10 parcent, sending the production goal well above anything
we have yet attained, Our armed forces in combat have steadily
increased their expenditure of modium and heavy artillery ammuni-
tion. As we continue the decisive phases of this war, the munitions
that we expend will mount day by day.
In October, 1944, while some wore saying the war in
Europe was over, the Army was shipping more zen to Europe than
in any previous month of the war.
Regraded Unclassified
- 7 -
One of the most urgent immediate requirements of the
armed forces is more nurses. Last April the Army requirement
for nurses was set at 50,000. Actual strength in nurses was
then 40,000. Since that time the Army has tried to raise the
additional 10,000. Active recruiting has been carried on, but
the net gain in eight months has been only 2,000. There are
now 42,000 nurses in the Army.
Recent estimates have increased the total number
needed to 60,000. That means that 18,000 more nurses must
be obtained for the Army alone and the Navy now requires 2,000
additional nurses.
The present shortage of Army nurses is reflected in
undue strain on the existing force. More than a thousand nurses
are now hospitalized, and part of this is due to overwork. The
shortage is also indicated by the fact that eleven Army hospital
units have been sont oversoas without their complement of nurses,
At Army hospitals in the United States there is only one nurso
to twenty-six beds, instead of the recommended one to fifteen
bede.
It is tragic that the gallant women who have volun-
teered for service as nurses should be 00 overworked. It is
tragic that our wounded man should over want for the best possible
nursing care.
The inability to get the needod nurses for the
Army is not due to any shortage of nurses. 280,000 regis-
tered nurses are now practicing in this country, It has
been estimated by the War Manpower Commission that 27,000
additional nurses could be made svailable to the armed
forces without interfering too seriously with the needa
of the civilian population for nurses,
Since volunteering has not produced the :ber of
nurses required, I urge that the Selective Service Act be
amended to provide for the induction of nurses into the armed
forces, The need is too pressing to await the outcome of
further efforts at recruiting,
The care and treatment given to our wounded and
sick soldiers have been the best known to medical science.
Those standards must be maintained at all costs. We cannot
tolorate a lowering of them by fuilure to provide adequate
nursing for the brave mon who stand despurately in need of
it.
In the continuing progress of this war WU have con-
stant need for now types of weapons. For we cannot afford to
fight the war of today or tomorrow with the weapons of yester-
day. For example, the American Army now has developed a new
tank with a gun more powerful than any yet. mounted on & fast-
moving vehicle. The Army will need many thousands of these
new tanks in 1945.
Almost overy month finds some new development
in electronics which must be put into production in order
to maintain our technical superiority -- and in order to
save lives, No have to work every day to keep ahead of
the enemy in radar, On D-Day, in Franco, with our superior
now equipment, we located and then put out of operation
every warning set which the Germans had along the French
coast.
If we do not keep constantly ahead of our enemies
in the development of new weapons, WU pay for our backward-
ness with the life's blood of our sons,
The only way to neet these increased needs for
now weapons and more of thom in for every American engaged
in war work to stay on his war job -- for additional American
civilians, men and women, not engaged in essential work, to
(OVER)
Regraded Unclassified
- 8 -
go out and got a var job. Workers who are released because
their production is cut back should get another job where
production 1a boing increased. This is no time to quit or
change to less essential jobs.
There 10 an old and true saying that the Lord hates
a quittor. And this nation must pay for all those who leave
their casential Jobs -- or all those who lay down on their
essontial jobe for non-essential reasons. And -- again --
that payment must be made with the life's blood of our sons.
Many critical production programs with sharply rising
needs are nov seriously hampered by manpower shortages. The
most important army needs Are artillery, ammunition, cotton duck,
bombe, tires, tanks, heavy trucke and even B-29's. In each of
thoso vital programs, present production 18 behind requiremento.
Navy production of bombardment ammunition is hampered
by mempower abortages; 80 1e production for its huge rocket pro-
gram. Labor abortagos have also delayed its cruiser and carrier
programs, and production of certain types of aircraft.
There 1e critical noed for more repair workers and re-
pair parts; this look delays the return of damaged fighting ships
to their places in the fleot, and prevente ships nov in the fight-
ing line from getting needed overhauling.
The pool of young men under 26 classified as 1-A 16
almost depleted. Increased replacements for the armed forces
will take men now deferred who are at vork in MIT intentry. The
armed forces must have an servence of a steady flow of yours mon
for replacements. Moeting this permount need will be difficult,
and vill also make it progressively more difficult to attain the
1945 production goals,
Last year, after much consideration, I recommended that
the Congress adopt A national service act ne the most efficient
and democratic vay of insuring full production for our var require-
ments. This recommendation vas not adopted.
I now again call upon the Congress to ennet this messure
for the total mobilization of all our human resources for the
prosecution of the var. I urgo that this be done at the carliest
possible moment.
It is not too late in the var, In fact, bitter ex-
perience bee shown that in this kind of mechanized warfare where
nov weapons are constantly being created by our enemiee and by
ourselves, the closer ve come to the end of the var, the more
pressing becomes the need for sustained var production with which
to deliver the final blow to the enemy.
There are three basic arguments for & National Service
Law.
First -- it would assure that ve have the right numbers
of vorkers in the right places at the right times,
Second - it would provide supreme proof to all our
fighting non that wo are giving them what they are entitled to,
which 10 nothing less than our total effort.
And --third -- it would be the final, unoquivocal
answer to the hopea of the Nazia and the Japanese that ve may
become half-hearted about this var and that they can got, from
us a negotiated peace.
National Service legialation would make it possible to
put ourselves in a position to assure certain and speedy action
in meeting our manpower noeds.
Regraded Unclassified
- 9 -
It would be used only to the extent absolutely required
by military necessities. In fact, experience in Great Britain
and in other nations at war indicates that use of the compulsory
powers of national service is necessary only in rare instances.
This proposed legislation would provide against loss of
retirement and seniority rights and benefits. It. would not mean
reduction in wages.
In adopting such legislation, it is not necessary to
discard the voluntary and cooperative processes which have pro-
vailed up to this time. This cooperation has alroady produced
great results. The contribution of our workers to the war
effort has been boyond measure. Wa must build on the founda-
tions that have already bean laid and supplement the measures
now in operation, in order to guarantee the production that may
be necessary in the critical pariod that lies ahoad,
At the present timo we are using the inadequate tools
at hand to do the beat WO can by such expedients ns manpower
cailings, and the uso of priority and other powers, to induce
mon and women to shift from non-essential to essential war jobs.
1. um in receipt of a joint letter from the Secretary
of War and the Secretary of the Navy, dated January 3, 1945,
which says:
"With the experience of three years of
war and aftor the most thorough consideration,
wo are convinced that it is now necessary to
carry out the statement made by the Congress in
the joint resolutions declaring that a state of
war oxisted with Japan and Germany: that its
bring the conflict to a successful conclusion,
all of the resources of the country are hereby
plodgod by the Congress of the United States.
"In our considered judgment, which is
supported by General Marshall and Admiral King,
this requires total mobilization of our manpower
by the passage of a national war service law.
The armed forces need this legislation to hasten
the day of final victory, and to Reep to a mini-
mun the cost in lives,
"National war service, the recognition
by law of the duty of every citizen to do his or
her part in winning the war, will give complete
assurance that the need for war equipment will be
filled. In the coming year we must incrèase the
output of many weapons and supplies on short
notice. Otherwise we shall not keep our pro-
duction abreast of the swiftly changing needs
of war. At the same time it will be nocus-
sary to draw progressively many non now engaged
in war production to surve with the armed
forces, and their places in war production must
be filled prosptly. These developments will
require the addition of hundreds of thousands
to those already working in war industry. No
do not believe that these needs can be met of-
fectively under present mothods.
"The record cado by management and
labor in war industry has boen a notable testi-
any to the resourcefulness and power of America.
The needs are 60 great, nevertheless, that in
cany instances we have been forced to recall
soldiers and sallors from nilitary duty to do
work of a civilian character in war production,
because of the urgeney of the need for equipment
and because of inability to recruit civilian
labor."
(OVER)
Regraded Unclassifie
- 10 -
Pending action by the Congress on the broader aspects
of national service, I recommend that the Congress immediately
enact legislation which will be effective in using the services
of the 4,000,000 non now classified as 4-F in whatever capacity
if best for the war effort,
In the field of foreign policy, we propose to stand
together with the United Nations not for the war alone but for
the victory for which the war is fought.
It is not only a common danger which unites us but a
common hope. Ours is an association not of governments but of
peoples - and the peoples' hope is peace. Hero, as in England;
in England, A3 in Russia; in Russia, as in China; in France, and
through the continent of Burope, and throughout. the world; whorever
men love freedom, the hope and purpose of the people are for peace --
B peace that is durable and secure,
It will not be easy to create this peoples' peace.
We delude ourselves if we believe that the surrender of the
armies of our enemies will make the peace we long for. The
unconditional surronder of the armies of our enemies is the
first and necessary stop -- but the first step only.
We have seen already, in areas liberated from the
Nazi and the Feacist tyranny, what problems peace will bring.
And WO delude ourselves if we attempt to believe wishfully
that all these problems can be solved overnight.
The firm foundation can be built -- and it will be
built, But the continuance and assurance of A living peace
must, in the long run, be the work of the people themselves.
We ourselves, like all peoples who have gone through
the difficult processes of liberation and adjustment, know of
our own experience how great the difficulties can be. We know
that they are not difficulties peculiar to any continent or any
nation: Our own Revolutionary War left behind it, in the words
of une American historian, "an oddy of lawlessness and disregard
of human'life." There wore separatist movements of one kind or
another in Vermont, Pennsylvania, Virginia, Tennessee, Kontucky
and Maine. There were insurrections, open or threatened, in
Massachusetts and New Hampshire, These difficulties we worked
out for ourselves as the peoples of the liberated arens of Europe,
faced with complex problems of adjustment, will work out their
difficulties for themselves,
Peace can be made and kept only by the united determina-
tion of free and peace-loving peoples who are willing to work
together - willing to help one another -- willing to respect
and tolerate and try to understand une another's opinions and
feelings.
The nearer WU come to vanquishing our enemies the more
we inevitably become conscious of differences among the victors.
We must not let those differences divide us and blind
us to our moro important commun and continuing interests in
winning the war and building the puace.
International cooperation on which enduring peace must
be based is not a one way street,
Nations like individuals do not always see alike or
think alike, and international cooperation and progress are not
helped by any nation assuming that it has a monopoly of wisdom
or of virtus,
Regraded Unclassified
In the future world, the misuse of power, as implied
in the term "power-politios", must not be a controlling factor
in international relations. That is the heart of the principles
to which ve have subscribed. We cannot deny that pover ie a
factor in world politice any more than ve can deny its existence
as a factor in national politics. But in 5 democratic world,
as in a democratic nation, power must be linked with responsibility,
and obliged to defend and justify itself within the fremovork of the
general good.
Perfectioniem, no less than isolationism or imperialiam
or power politics may obstruct the pathe to international pesso.
Let us not forget that the retreat to isolationism a quarter of &
century ago vas started not by a direct attack against international
cooperation, but against the alloged imperfections of the peace.
In our disillusionment after the last var, ve proferred
international anarchy to international cooperation with nations
which did not ace and think exactly as ve did. We gave up the
hope of gradually ambieving a better peace because ve had not
the courage to fulfil our responsibilities in an admittedly
imporfect world,
We must not lot that happen again, or we shall follow
the same tragie road again the road to a third world var,
We can fulfil our responsibilities for maintaining
the security of our own country only by exercising our power and
our influence to achieve the principles in which ve believe and
for which ve have fought.
In August, 1941, Prine Ministor Churchill and I agroed
to the principles of the Atlantic Charter, those being later
incorporated into the Declaration by United Natione of January
1, 1942. At that time certain isolationists protosted vigor-
ously against our right to proclaim the principles -- and
against the very principles themselves, Today, many of the eamo
people are protesting against the possibility of violation of the
same principles.
It is true that the statement of principles in the
Atlantic Charter does not provide rules of easy application to
each and every one of this var-torn world's tangled situations,
But it 18 a good and a useful thing -- it 1e an essential thing --
to have principlee toward which we can aim.
And ve shall not hesitate to use our influence -- and
to use it now -- to secure 80 for as 16 humanly possible the
fulfilment of the principles of the Atlantic Chartor. We have
not ahrunk from the military responsibilities brought on by this
var. We cannot and vill not shrink from the political responsi-
bilities which follow in the wake of battle,
I do not vish to give the impression that all mistakes
can be avoided and that many disappointmente are not insvitable
in the making of pesce, But ve must not this time lose the hope
of establishing an international order which will be capable of
maintaining peace and realizing through the years more perfect
justice between nations.
To de this vo must be on our guard not to exploit and
cxaggorate the differences between us and our Allies, particularly
with reference to the peoples who have been liberated from fasciat
tyranny. That ie not the vay to socure a better settlement of
thoso differences or to socure international machinery which can
rectify mistakes which may be made.
I should not be frank if I did not admit concern about
many aituations -- the Grook and Polish for example, Drt those
situations are not as easy or as simple to doal with 84 some
spokesmen, whose sincerity I do not quostion, would have us be-
liovo. We have obligations, not necessarily logal, to the egiled
governments, to the underground leaders and to our major Allies
who came much nearer the abadove than ve did.
Regraded Unclassified
12 +
No and our Allies have declared that it is our purpose
to respect the right of all peoples to choose the form of govern-
ment under which they will live and to 886 sovereign rights
and self-government restored to those who have been forcibly
deprived of them. But with internal dispension, with many
citizens of liberated countries still prisoners of war or
forced to labor in Germany, it is difficult to guess the kind
of self-government the people really want.
During the interim period, until conditions permit a
genuine expression of the people's will, we and our Alltes have
e duty, which we cannot ignore, to use our influence to the end
that no temporary or provisional authorities in the liberated
countries block the eventual exercise of the peoples' right
freely to choose the government and institutions under which,
on free neo, they are to live.
It is only too easy for all of us to retionalize whot
we went to believe, end to consider those leaders we like
responsible end those WII dislike irresponsible. And our task
is not helped by stubborn partisenship, however, understandable,
on the part of opposed internal factions.
It is our purpose to help the peace-loving peoples of
Europe to live together as good neighbors, to recognize their
common interesta and not to nurse their traditional grievances
against one enother.
But wo must not permit the many specific end immediate
problems of adjustment connected with tho liberation of Europe
to delay the establishment of permanent machinery for the main-
tenance of peace. Under the threat of a common danger, the
United Nutions joined together in war to preserve their indo-
pendence and their froedom. They must now join together to
make secure the indeperidence and freedom of all pende-loving
states, 80 thet never again shell tyrenny be able to divide
and conquer.
International peace and well-being, like notional
peace and well-being, require constant alertness, continuing
cooperation, and organized effort.
International peace and well-hoing, like national
peace and well-being, can be secured only through institutions
capeble of life and growth.
Many of the problems of the peace are upon us even
now while the conclusion of the war is still before us. The
atmosphere of friendship and mutual understanding end detormine-
tion to find A common ground of common understanding, which sur-
3
rounded the conversations et Dumbarton Oaks, gives us reason se
hope that future discussions will succeed in developing the demo-
cretic end fully integrated world security system toward which
these preperetory converbations were directed.
We and the other United Nations are going forward, with
vigor and resolution, in our afforts to create such B. system by
providing for it strong and flexible institutions of joint end
cooperetive action.
The aroused conscience of humanity will not permit
failure in this supreme endeavor.
I
We believe that the extraordinary advances in the meens
of inter-communication between peoples over the past generation
offer eL proctical method of advancing the mutual understanding
upon which peace end the institutions of peice must rest, and
it 10 our policy and purpose to use these greet technological
achievements for the common advantage of the world,
We support the greatest possible freedom of trade end
commerce,
Regraded Unclassified
- 13 -
We Americans have always believed in freedom of oppor-
tunity, and equality of opportunity remains one of the principal
objectives of our national life, That we believe in for indi-
viduals, we believe in also for nations. We are opposed to re-
strictions, whether by public act or private arrangement, which
distort and impair commerce, transit and trade.
We have house-cleaning of our own to do in this regard.
But it 15 our hope, not only in the interest of our own prosperity
but in the interest of the prosperity of the world, that trade and
commerce and access to materials and markets may be freer after
this war than ever before in the history of the world.
One of the most heartening evento of the year in the
international field has been the renaissance of the French people
and the return of the French nation to the ranks of the United
Nations. Far from having been crushed by the terror of Nazi domi-
nation, the French people have emerged with stronger faith than
ever in the destiny of their country and in the soundnoss of the
democratic ideals to which the French nation has traditionally
contributed so greatly.
During her liberation, france has given proof of her
unceasing determination to right the Germans, continuing the
heroic efforts of the resistance Croups under the occupation and
of all those Frenchmen throughout the world who refused to
surrender after the disaster of 1940.
Today, French armies are again on the German frontier,
and are again fighting shoulder to shoulder with our sons.
Since our landings in Africa, we have placed in French
hands all the arms and material of war which our resources and
the military situation permitted. And I am glad to say that
we are ow about to equip large new French forcus with the most
modern weapons for combat duty.
In addition to the contribution which France can make
to our common victory, her liberation likewise means that her
great influence will again be available in meeting the problems
of peace.
lu fully recognise France's vital interest in a last-
ing solution of the German problem and the contribution which
she can malte in achieving international security. Hor formal
adherence to the Declaration by United Nations a few days ago
and the proposal at. the Dumbarton Oaks discussions, whereby
France would receive one of the five permanent seats in the pro-
posed Security Council, demonstrate the extent to which France
has resuned her proper position of strength and leadership.
I an clear in By own mind that, as an ressential factor
in the maintenance of peace in the future, we must have universal
military training after this war, and I shall send a special mes-
sage to the Congress on this subject.
An enduring poace cannot be achieved without a strong
America - strong in the social and economic sense as woll as in
the military senso.
In the State of the Union Message last year, I set
forth what I considered to be an American economic 8111 of Rights.
may
I said then, and I say now, that these economic truths
represent a second bill of rights under which a new basis of so-
curity and prosperity can be ostablished for all -- regardless of
station, race or creed.
(OVER)
Regraded Unclassified
- 14 -
Of these rights the most fundament al, and one on which
the fulfilment of the others in large degree depends, is the
"right to a useful and reminerative job in 1,he industries or shope
or farms or mines of the nation." In turn, others of the economic
wax
rights of Anerican citizenship such as the right to a decent home,
to a good education, to good medical care, to social security, to
reasonable farm income, will, if fulfilled, rake major contribu-
tions to achieving adequate levels of OF Aoymint.
our
atx Red newl will and
The Federal Government must 208 to it that these rights
become realitics - with the help of States, mun icipalities,
business, labor and agriculture.
We have had full employm nt during the We have
had it because the Government has Jeen ready to buy all the no-
terials of war which the country 2011. produce - and this has
amounted to approximately half our present produc *ive capacity.
After the war we must maints in full emp Loyment with
Government performing its peacetime Anctions. This mea. 75 that
we must achieve a level of demand and purchasing lower by \rivate
consumers - farmers, businessmen, wor:ers, profe ssional mor.".
housewives - which is sufficiently high to replace wartime
Government demands; and it means also that we must greatly
increase our export trade above the pre-war level.
Our policy is, of course, to rely as much as possible
on private enterprise to provide jobs. But the American people
will not accept mass uncoployment or more makeshift work.
There will be need for the work of everyone willing: and able
to work - and that means close to 60 million jobs.
Full employment means not only jobs -- but productive
Jobs. Americans do not regard jobs that pay substandard wages
as productive jobs.
We must make suro that private enterpriso works as it
is supposed to work -- on the basis of initiative and vigorous
competition, without the stifling presence of monopol ios and
cartols.
During the war WO have guaranteed investment in entor-
mad
prise essential to the war offort. No should also ta ce appro-
priate neasures in peacetime to secure opportunities form
small enterprises/ for productive business expansion for
which finance would otherwise be unavailable.
This necessary expansion of our peacetimo productive
capacity will require now facilities, new plants and new equip-
nent.
It will require large outlays of money which should be
raised through normal investment channels. But while privato
5
capital should finance this expansion program, the Government
should recognize its responsibility for sharing part of any'
special or abnormal risk of loss attached to such financing.
with
Our full-employment program requiros the extensive
development of our natural resources and other useful public
works. The undeveloped resources of this continent are still
vast. Our river-watershod projects will add new and fertilo
territorios to the United Statos. The TVA, which was con-
structed at a cost of 750 million dollars - the cost of waging
this war for less than four days -- was a bargain. We have
similar opportunities in our other great river basins. By
harnessing the resources of those river basins, as we have in
the Tennessee Valley, we shall provide the same kind of stimulus
to enterpriso as was provided by the Louisiana Purchase and the
new discoveries in the West during the 19th century.
If we are to avail ourselves fully of the benefits of
civil aviation, and if we are to use the automobiles we can pro-
duce, it will be necessary to construct thousands of airports
and to overhaul our entire national highway system.
Regraded Unclassified
15 -
The provision of & Acent home for every family is a
national necessity, if this country 10 to be worthy of its
greatness -- and that task vill itself create great employment
opportunities. Most of our cities need extensive rebuilding.
Much of our farm plant is in 8 state of disrepair. To make &
frontal attack on the problems of housing and urban reconstruc-
tion vill require thoroughgoing cooperation between industry and
labor, and the Federal, State and local governments.
An expanded social security program, and adequate health
and education programs must play essential roles in & program
designed to support individual productivity and mass purchasing
power, I shall communicato further with the Congress on these
subjects at a later date.
our
The millions of productive Jobs that a program of this
your
instal
nature could bring are Jobs in private enterprise. They are
Jobe based on the expanded demand for the output of our economy
for consumption and invostment. Through & program of this
w
V
character ve can maintain a national incomo high enough to pro-
vide for an orderly rotirement of the public debt along with
reasonable tax reduction.
Our present tax eystem geared primarily to var require-
mente must be revised for peacotime BO as to encourage privato
domand.
While no general revision of the tax structure can be
repe
made until the var ende on all fronts, the Congress should be
prepared to provide tax modifications at the end of the var in
find
Europe, designed to encourage capital to invest in new enter-
prises and to provide jobs. Ae an integral part of this pro-
gren to maintain high employment, we must, after the var 1e
over, reduce or eliminate taxes which bear too beavily on con-
sumption.
The var will leave deep disturbances in the world
economy, in our national economy, in many communities, in many
families, and in many individuals. It will require determined
effort and responsible action of all of us to find our way back
to peacetime, and to help others to find their way back to
peacetime -- a peacotino that holde the values of the past and
the promiso of the future.
If ve attack our problems with determination we shall
succeed. And we must succeed. For freedom and poace cannot
exist without security.
During the past year the American people, in el national
election, reaseerted their democratic faith.
In the course of that campaign, various references vere
made to "strife" between this Administration and the Congress,
with the implication, if not the direct assertion, that this Ad-
ministration and the Congress could never work together harmoni-
oualy in the service of the Nation.
It cannot be donied that there have been disagreements
betwoen the Legislative and Executive Branches -- an thore have
been disagreemento during the past century and a balf.
I think VO all realize too that there are some people
in this Capital City whose taok 16 in large part to stir up die-
sension, and to magnify normal healthy dieagreements so that they
appear to be irrecencilable conflicte.
But -- I think that the overall record in this respect
is oloquent: the Government of the United States of America --
all branches of it -- has & good record of achievement in thie
var.
The Congress, the Executive, and the Judiciary have
worked together for the common good.
Regraded Unclassified (OVER)
- 16 -
I myself want to tell you, the Members of the Senate
and of the House of Representatives, how happy I am in our rela-
tionships and friendships. I have not yet had the pleasure of
meeting some of the now members in each House, but I hope that
opportunity will offer itself in the near future.
We have a great many problems ahead of us and we must
approach them with realism and courage.
This new year of 1945 can be the greatest year of
achievement in human history.
1945 can 800 the final ending of the Nazi-Fascist
reign of terror in Europe.
1945 can see the closing in of the forces of rotribu-
tion about the conter of the malignant power of imperialistic
Japan,
Most important of all -- 1945 can and must see the
substantial beginning of the organization of world peace. This
organization must be the fulfilment of the promise for which
men have fought and died in this war. It must be the justifi-
cation of all the sacrifices that have been made -- of all the
dreadful misery that this world has endured.
We Americans of today, together with our Allies, are
making history -- and I hope it will be better history than ever
has been made before.
We pray that we may be worthy of the unlimited oppor-
tunities that God has given us.
FRANKLIN D. ROOSEVELT
THE WHITE HOUSE
January 6, 1945
Regraded Unclassified
23
THE WHITE HOUSE
WASHINGTON
January 8, 1945
Dear Henry:
Thank you for calling my attention
to the editorial in the Washington Post
of January 5 and for sending me a copy
of the joint statement given out by Senator
George and Congressman Doughton, which I had
not seen. It is very nice.
Affectionately,
ER
34
ELYICTORY
TREASURY DEPARTMENT
BUY
STATES
WAR
WASHINGTON 25
ARE
January 8, 1945
My dear Mr. Secretary:
I an inclosing a copy of the note of thanks
I sent the President.
I want to take this opportunity to tell you
again how much I appreciate your driving through
on this. It was not pleasant for you. I am glad
you think enough of me to have wanted to do it
notwithstanding.
Sincerely,
Harry D White
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
55
January 8, 1945
My dear Mr. President:
I want to thank you for the high honor
you have conferred on me in nominating me
Assistant Secretary of the Treasury. It is
needless to say that I will do everything
within my power to justify your confidence
in me.
Respectfully,
(sgd) HARRY D. WHITE
The President,
The White House.
1/8/45
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE January 8, 1945
TO
FROM
Mr. BA Haas
Secretary Margenthau
Subject:
The Business Situation,
Week ending January 6, 1945.
Summary
Steel supplies: Increased military demands, in the face of
manpower shortages and adverse operating conditions, may
make necessary a cut in steel allocations for certain
civilian goods programs in the second quarter of 1945. A
sustained heavy demand for steel is expected during the
first half of this year, but it 18 estimated that a
moderate increase in experienced manpower would enable
the mills to meet all critical programs on schedule.
National income: Income payments declined less than seasonally
in November and the annual rate rose to a new high of
$159.8 billions from $158.2 billions in the previous
month. Salaries and wages in the distributive and
service industries rose to a new high for the year in
November, while cash income from farm marketings showed
a less than sessonal decline.
Stock market: The Dow-Jones average of 65 stocks showed a
further rise of about 1 percent last week, with the
industrial and railroad stock averages advancing to new
highs since 1939 and 1937, respectively. Industrial
stock prices in London strengthened moderately and rose
to A new high since last August.
Commodity prices: With the outlook for a longer war in Europe
foreshadowing increasing stress on the price stabilization
program, commodity prices moved higher last week. The Dow-
Jones futures index and the BLS spot index of 28 basic
commodities reached new wartime highs. Similarly, the BLS
general index of wholesale prices in the week ended
December 30 advanced to a new peak.
Price control problems increasing: Among factors likely to
increase the difficulty of price control in 1945 are:
(1) tightening of civilian supplies, (2) greater pro-
pensity for spending, (3) disappearance of lower-priced
goods, and (4) higher wage rates and pressure for further
wage increases. Five major control problems facing the
OPA were outlined by Mr. Bowles last week.
Regraded Unclassified
2 . I
Steel industry faces renewed pressure
as military needs rise
Reflecting the pronounced shift in the industrial
outlook in recent weeks, it now appears that the steel
industry will operate under considerably more pressure
in coming months than was earlier expected. New orders
are reported to have increased noticeably in December,
and the rising demand for steel for shells may make it
necessary to cut allocations for certain civilian goods
programs in the second quarter of 1945. Moreover, in
the opinion of the WPB Chairman, "the steel situation for
the first quarter of 1945 is as bad as it has ever been
since the start of the war."
Although preliminary estimates indicate that total
steel ingot production in 1944 exceeded all previous
records, the tonnage produced in the latter half of the
year fell below the corresponding period of 1943. How-
ever, in response to heavy recent demands, steel
operations in the latter half of December held up much
better than in the previous year, and in the week
beginning December 17 operations were maintained above
year-earlier levels for the first time since last June.
Likewise, the drop in the operating rate in the Christmas
holiday week was noticeably less than a year earlier.
(See Chart 1, upper section.)
Steel operations last week were scheduled to rise
3.7 points to 95.8 percent of capacity, but heavy snowfall
and adverse weather conditions in northern steel centers
cut heavily into operating schedules. Steel operations
in the Buffalo district around the middle of last week
were reported to be down to only 46.5 percent of capacity
as a result of a severe storm which crippled transportation
facilities in the area,
Heavy inroads on coal and iron ore stocks forecast
Steel operations in the Youngstown district also dropped
sharply last week as a result of an acute fuel shortage arising
largely from recent severe weather. Snow and cold in the
area in recent weeks have reduced coal shipments, and
stocks on hand have been insufficient for the emergency.
At the same time, Youngstown steel plants were reported to
be encountering shortages of natural gas and fuel 011. In
connection with the fuel shortages at some steel plants,
it should be noted that the Solid Fuels Administrator
recently warned coal-consuming industries that they will
Regraded Unclassified
98
- 3 -
have to dip heavily into stock piles during the winter.
Moreover, all consumers have been told that they will have
to conserve supplies of coal and take whatever usable
fuel 18 made available.
Consumption of bituminous coal in December, on the
basis of preliminary figures, was nearly 12 million tons
greater than the 46 million ton production, and stocks on
hand at the beginning of 1945 were equivalent to about
30 days' supply, as compared with 41 days' supply a month
earlier.
In addition to a tight fuel supply situation, the
steel industry also may be confronted with an unusually low
stock of iron ore before the 1945 shipping season gets under
way. Within the past few days WPB officials estimated that
mill stockpiles of iron ore would be down to 16 million tons
by April 1, 1945, as compared with 21 million tons a year
earlier. By May 1, 1945, stockpiles are expected to be
down to only 7 million tons. The Great Lakes ore shipping
season in 1944 closed on November 28, which was the earliest
closing date since 1919. As a result, iron ore shipments
during 1944 were only 81.2 million tons as compared with
84. 4 million tons in 1943 and 93.0 millions in 1942.
Manpower shortage dominant factor in tight steel situation
Although unusually severe weather conditions have hampered
operations recently and some materials shortages may occur in
coming months, the manpower shortage 18 the dominant factor
in the tightening steel supply situation. Officials of the
WPB Steel Division last week indicated that, despite the
sustained demand now expected for steel in the first half
of 1945, even a moderate increase in experienced manpower
would enable the mills to meet all critical programs on
schedule.
Meanwhile, conflicting reports are heard as to the
effect of recent "work or fight" draft pronouncements, and
a wide diversity of opinion exists over methods of remedying
the shortage of manpower. Some labor sources continue to
take exception to reports of manpower shortages, but the
WMC reports that from 90,000 to 100,000 additional workers
are needed in critical industries now, and the total is
expected to rise to 300,000 during the next few months.
As of January 1, the WMC classified 4 more areas as
acute labor shortage areas, thus raising the total to 72
as compared to 68 on December 1. The new additions to the
Regraded Unclassified
22
4 -
acute labor shortage classification are Minneapolis-St. Paul,
Minnesota; Morristown, New Jersey; Patterson, New Jersey;
and Borger, Texas. All of the areas mentioned are reported
to be definitely behind schedule in the production of vitally
important war materials.
Annual rate of income payments continues to rise
Due largely to the usual October to November drop in
interest and dividend disbursements, total income payments
in November fell below month-earlier levels but the decline
was less than seasonal. As a consequence the annual rate
of income payments in November rose to a new high of
$159.8 billions as compared with $158.2 billions in
October. (See Chart 2.)
Under the stimulus of the heavy seasonal expansion
in retail trade, payments for wages and salaries in the
distributive and service industries rose in November to a
new high for the year, while Government payments for
salaries and wages (including military pay) showed a
further small rise to a new peak. Cash income from farm
marketings in November declined less than seasonally, with
the adjusted index of cash receipts for the month rising
about 2 percent. Preliminary estimates indicate that
cash income from farm marketings in the first 11 months
of 1944 were about 6 percent above the corresponding
period in 1943.
Reference to Chart 2 will disclose that all major
income components, except interest and dividend payments
and payments for salaries and wages in the manufacturing
industries, were higher in November than a year earlier.
The decline in the manufacturing group reflected a drop
of 10 percent in factory employment in the past 12 months
as a result of the manpower shortage and cut-backs in
some lines of war work. The declines mentioned, however,
were much more than offset by increased disbursements for
military pay, as well as increases in cash farm income,
and in salaries and wages of workers in trade and the
service industries. Consequently, income payments in
November were 8 percent above the November 1943 level.
Stock prices at new high
Stock prices continued to forge ahead to new highs
last week, but considerable irregularity developed near
the end of the period. The Dow-Jones average of 65 stocks
at the close on Saturday was about 1 percent higher than a
Regraded Unclassified
- 5 -
week earlier. Moreover, the Dow-Jones average of
industrial stocks during the week reached the highest
level since 1939, while the railroad average pushed
up to a new high since 1937. (See Chart 3.)
Heavy buying of railroad stocks continued to feature
trading during the week, but numerous previously lagging
industrial stocks came in for increased attention,
presumably on lengthening war prospects. On the other
hand, utility stocks continued to move in a narrow
range and actually showed a small net loss for the week.
Trading continued active, with transactions on the
New York Exchange on Wednesday attaining the highest
level since last July. Meanwhile, industrial stock
prices in London strengthened moderately and at the
close of the week stood at a new high since last August.
Commodity price indexes touch new highs
With commodity prices rising moderately last week,
the Dow-Jones futures index, Moody's spot index, and the
BLS index of 28 basic commodities all reached new war-
44me highs. Except for a period of very narrow movement
in the last half of December, futures prices have shown
a gradual rise since the beginning of November. (See
Chart 4.) Following the 0.8 percent advance last week,
the Dow-Jones futures index 1s now 3.0 percent above
the level of November 1. The BLS basic commodity index
was up 0.3 percent, making a net gain in the past two
months of 1.3 percent. (See Chart 5.)
Grain prices showed noticeable increases last week,
due in part to Government buying. Corn prices rose more
than 5 percent, rye and oats (1tems not included in the
basic commodity index) more than 2 percent, and wheat,
a little over 1 percent. Cotton moved somewhat higher
for the sixth consecutive week. Although steer prices
advanced, hog prices dipped slightly below ceiling levels.
The BLS general index of wholesale prices in the week
ended December 30 rose 0.1 percent to a new wartime high.
(Refer to Chart 5.) At 104.7 percent of the 1926 average,
the index is 1.7 percent higher than a year ago and is
39.6 percent above the pre-war August 1939 average. The
recent rise in the index has been due largely to increases
in the prices of farm products, with higher prices for
livestock and livestock products largely responsible for
the latest advance. Of interest, however, has been a
marked increase in the price of quicksilver in recent months.
Regraded Unclassified
101
- 6 -
Following the cessation of the Government's production-
encouragement buying program in January a year ago, the
quicksilver price declined from $192 per flask to a low
of $97 a few months ago. Since then, with a renewed
military interest and production falling behind demand,
the price has risen $53 a flask to around $150.
Longer war in Europe will increase pressure on
price stabilization program
The prospect of a more prolonged war in Europe than
had been previously expected foreshadows greater stress
on the price stabilization program. Strengthening of
commodity prices in recent weeks has already carried the
various price indexes to new wartime highs. Steel scrap
prices, which early last fall showed noticeable weakness
in anticipation of the end of the war in Europe, are now
back to ceiling levels. Whereas in earlier months com-
pensating increases and decreases in commodity prices
had tended to stabilize the price indexes, recently
there appears to have been a general upward movement
in the prices of commodities that have been below ceiling
levels.
Pressure for higher prices is likely to come from
several sources: (1) a tightening of civilian supplies,
due to increased war requirements, at a time when
consumers' incomes continue at record levels, (2) a
propensity for consumers to spend more, as indicated by
the record levels of retail trade in recent months,
(3) continued upgrading and disappearance of lower-
priced goods, (4) efforts to increase. inventories,
which had been allowed to decline somewhat in antici-
pation of the war ending in Europe, (5) pressure for
wage increases, and (6) upward revisions in prices and
wages to stimulate production of certain critical items.
As an example of this last factor, the WLB recently
granted pay increases averaging 10 cents an hour above
minimum bracket rates to workers in certified foundries
and forge shops, where manpower is particularly needed.
Moreover, according to press reports, blanket wage in-
creases for certain textile mills are under consideration
as a means of stimulating the production of cotton duck,
an item vitally needed to make tents for the Army.
Steel prices to be raised
The steel industry will be given permission to raise
prices for certain products, Stabilization Director Vinson
Regraded Unclassified
102
- 7 -
disclosed recently in announcing approval of wage adjustments
granted by the WLB to steel workers. The increases will be
granted only on products upon which steel mills are sustaining
losses, no general price increase for steel being contemplated.
It was indicated that these increases were necessary,
irrespective of the increase in wages, and that the wage
increase would not require any further net rise in the
general level of iron and steel prices. The OPA is
reported to be making a new cost survey of steel products,
and the higher steel prices are expected to be announced
piece-meal beginning around February 1.
While technically the Little Steel wage formula was
not broken in making the wage adjustments to steel workers,
the concessions granted are expected to foreshadow demands
by other labor groups for wage increases. Representatives
of railroad non-operating unions are scheduled to meet
this week in Chicago with representatives of the railroad
companies regarding vacation concessions.
Another significant price development was the
announcement by Price Administrator Bowles last week
that the OPA would survey crude oil producing costs to
determine whether ceiling prices were adequate. The
survey is the result of a request by the Small Business
Committee of the House and by various oil producers. The
OPA in recent months has been granting ceiling adjustments
to individual producers.
Price Administrator warns of problems facing OPA
Warning of rising inflationary pressure, Price Admin-
istrator Bowles indicated at a meeting of the American
Management Association last week that a new ceiling price
system on clothing would be instituted within 30 days. In
contrast to a slight decline in food prices and practically
no change in rents, clothing prices have risen 8 percent
in the past 12 months. While no details of the OPA's
clothing program were given, it will be undertaken in
conjunction with the WPB, and it apparently involves the
allocation of yardage to clothing manufacturers who agree
to produce desired garments within specific price ranges.
A plan to channel available supplies of cotton textile
yardage into the manufacture of low and medium price
garments most in need was announced by the WPB last week.
In addition to the control of clothing prices, Price
Administrator Bowles outlined four other major problems
Regraded Unclassified
133
- OR -
confronting the OPA: (1) food rationing, (2) livestock
ceilings, (3) the partial absorption of cost increases
by the distributive trade, and (4) reconversion pricing
to hold prices at 1942 levels. Mr. Bowles commented
that the OPA has felt for some time that price ceilings
on live cattle were inevitable, and that prompt action
would be taken in applying ceilings if the Stabilization
Director should authorize such a move.
The absorption of part of production cost increases
by wholesalers and retailers may become a more important
factor in the reconversion period than during the war.
The OPA has indicated that increased manufacturing costs
of pianos, rifles, and shotguns, items which have recently
gone back into production, are to be spread largely
among the distributors.
Regraded Unclassifie
Chart 1
STEEL INGOT PRODUCTION
PERCENT
PERCENT
Percent of Capacity
1945
1943
1942
100
100
1944
90
90
80
80
1940.
70
70
60
60
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
NET TONS
NET TONS
Millions
Millions
Tonnage
8
8
1944
1943
7
7
1942
6
6
1940
5
5
4
4
3
3
JAN
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT
OCT.
NOV.
DEC.
Source: American Iron and Steel Institute
Office of the Secretary of the Treasury
Diviser of and Statements
C-532
Regraded Unclassified
Chart 2
NATIONAL INCOME PAYMENTS AND COMPONENTS
1939
1940
1941
1942
1943
1944
1945
DOLLARS
DOLLARS
Billions
Annual Rate. by months
Billions
170
170
160
160
150
150
140
140
130
130
120
120
110
110
100
100
90
90
80
80
70
70
A o D F A J A o D F A J A o D F A J A o D F A J AODFAJAODFAJAO D
1939
1940
1941
1942
1943
1944
1945
Dollar Totals for Selected Components. Nov. 1943 and Nov. 1944
DOLLARS
DOLLARS
Billions
Billions
4.5
4.5
Nov. 1943
Nov. 1944
4.0
4.0
3.5
3.5
3.0
3.0
2,5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
o
0
Distributive
Commodity Pro-
Government
Net Income
Dividende
Other Income
and Service
duction Industries
Including
of Proprietors
and
Payments
Industries
(Chiefly Mfg.)
Militory
(Includes Forms)
Interest
Solories and Woges
Source: Department of Commerce
Office of the Secretary of the Travely
Prim . - and Seles
C-485-8
Regraded Unclassified
Chart 3
STOCK PRICES, DOW-JONES AVERAGES
Daily
1944
1945
JUNE
JULY
AUG.
SEPT.
OCT
NOV.
DEC.
JAN
.
11
il
25
2
9
is
23
30
.
13
to
E7
3
ID
17
24
I
.
90
es
es
I
12
.
=
$
9
IF
24
7
I
El
26
DOLLARS
DOLLARS
155
155
30 Industrial Stocks
150
150
145
145
140
140
135
50
130
46
125
46
20 Railroads
44
44
42
42
40
40
38
38
36
36
28
28
15 Utilities
26
26
24
24
22
22
20
20
SHARES
Volume of Trading
SHARES
Millions
Millions
2
2.
I
I
o
o
4
=
-
E
I
9
15
23
30
6
a
to
ET
3
ID
=
24
I
#
is
22
=
5
If
#
=
3
9
IT
24
7
HI
IS
se
JUNE
JULY
AUG.
SEPT
OCT
NOV
DEC.
JAN.
1944
1945
- all - becomery - The Transmiry
- - -
P-144-L-2
Regraded Unclassified
COMMODITY PRICE INDEXES IN U.S.
1944
1945
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
FEB.
PERCENT
PERCENT
(Moody)
Daily
(Dow-Jones)
270
104
267
103
264
102
261
101
258
IOO
Moody's Index
255
in U.S.
December 31. 1931=100
99
252
98
249
97
246
96
243
95
240
94
Commodity Futures
237
(Dow-Jones)
1924-26-100
93
234
92
231
91
228
90
225
-
B
IS
22
29
6
13
20
ET
3
10
17
24
-
a
IN
22
29
5
12
19
26
2
9
89
16.
23
30
7
14
21
28
4
II
18
25
E
9
IS
23
30
6
13
20
27
3
10
17
24
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
FEB.
1944
1945
Office of - Sectery of The Treasury
- of - - -
P-148-M
Chart 4
Regraded Unclassified
WHOLESALE COMMODITY PRICES
1943
1944
PERCENT
PERCENT
WEEKLY
1926=100
106
106
105
105
104
104
889 Commodities. B.L.S.
103
103
102
102
28 Basic Commodities. B.L.S.
101
101
100
100
JUNE
AUG
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC
1943
1944
SELECTED BASIC COMMODITIES
Percentage Change April 9, 1943 to Dec.29 and Jan.5, 1945
PERCENT
+80
Rosin 660%
+60
+40
Borley 31.1%
Theet 183%
Care 139%
+20
Burlep 75%
Coffee 3.3%
Mool Type 27%
Print Claim 2.5%
Corronseed Oil 11%
Sugar 03%
0
Zine -0.2%
Steers -23%
Flexseed -32%
Wege 64%
Better 10.9%
-
20
Apr. 9,
Dec.29,
Jen. 5,
1943 (Held the Line Order)
1944
1945
Office of the Secretary of the intery
P-282-A
Income el - and -
Regraded Unelassified
9
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE JAN 8 1945
TO
FROM
Mr. Haas
Secretary for Morgenthau
Subject Security Market and Banking Developments Connected
With the Sixth War Loan
I. Prices of Government Securities During and
Since the Sixth War Loan
Prices of taxable Government securities declined slightly
during the period of the Sixth War Loan drive except in the
case of the longest-term bonds, which showed some improvement.
Medium- and long-term partially tax-exempt securities, how-
ever, scored marked gains ranging up to 19/32 during the
drive period.
Since the close of the formal drive on December 16,
short-term taxable issues have shown little change, while
the longer-term issues have improved. Advances have been
most pronounced in the case of the long-term restricted
issues which have risen 14/32 on average. Prices of medium-
and long-term partially tax-exempt bonds continued to advance
sharply and the longer-term issues are now quoted as much
as 29/32 above their levels immediately preceding the open-
ing of the Sixth War Loan.
Since the first of the year, yields of certificates
of indebtedness have declined moderately. For example, as
of January 6, a three-month maturity yielded 0.62 percent
as compared with 0.71 percent on December 30, and with a
"pattern" rate of 0.46 percent.
The four issues of marketable securities offered during
the Sixth War Loan were quoted for the first time on Decem-
ber 18. The following table shows the closing bid quotations
on that day and on January 6, 1945.
Regraded Unclassified
110
Secretary Morgenthau - 2
:
Closing bid quotations
:
:
December 18
:
January
6
7/8% Certificate due
December 1, 1945
0.83%
0.79%
1-1/4% Note due Septem-
ber 15, 1947
100-7/32
100-17/64
2%
Bond due December 15,
1952-54
100-9/32
100-27/64
2-1/2% Bond due March 15,
1966-71
100-5/32
100-19/32
II. The Problem of Maintaining Bank Reserves
Between the Sixth and Seventh War Loans;
the Role of Treasury Bills
Excess reserves of member banks totaled $1,274 millions
on January 3, the most recent report date (Chart I). During
the month of December 1944, excess reserves averaged $1,333
millions, due principally to the fact that subscriptions to
the Sixth War Loan securities resulted in an increase of war
loan deposits, against which reserves are not required to be
held, and a decrease in private deposits, against which re-
serves must be held. The effect of these War Loan trans-
actions has appeared not only in the increase of excess
reserves, but also in an increase of commercial bank holdings
of Treasury bills and a reduction in member bank borrowing
from the Federal Reserve Banks. Treasury bills held by
weekly reporting member banks on December 27, amounted to
$2,428 millions, an increase of about $800 millions from the
most recent low on November 22. Member bank borrowing, which
reached a high of $593 millions on November 29, had declined
to $153 millions on December 27, and to $30 millions on
January 3.
In the coming months, between now and the Seventh War
Loan, the trend will be in the opposite direction from that
of the past month. The expenditure by the Treasury of funds
in the war loan accounts will result in a reduction of these
accounts and a corresponding increase of private deposits
requiring reserves. In addition, if the increase of money in
circulation continues at its present rate -- and there ap-
pears no reason to expect that it will not -- it will be
necessary to provide an average of about $100 millions weekly
Regraded Unclassified
111
Secretary Morgenthau - 3
of additional member bank reserves if this increase of cur-
rency is not to result in a reduction of excess reserves.
The banks have two principal means of replenishing their
reserves in the face of a drain such as may be expected to
occur during the next few months: they may sell earning
assets (principally Government securities), or they may
borrow. The banks hesitate to borrow if they can avoid it.
From the point of view of the Government security market,
moreover, borrowing is undesirable inasmuch as 8. bank which
1s in debt to the Federal Reserve 18 likely to be a seller
rather than a buyer of Government securities. A large volume
of member bank indebtedness, therefore, tends to have a
dampening effect on the Government security market. As the
borrowing rate at the Federal Reserve against the security of
short-term Governments is 1/2 of 1 percent, the securities
which banks are most likely to consider it worth their while
to sell, rather than borrow to meet temporary reserve defi-
ciencies, are Treasury bills, for which the buying rate 1s
posted at 3/8 of 1 percent, and ordinarily the shortest
certificates of indebtedness (although the recent rise in the
pattern of rates has tended to make it unprofitable to sell
certificates rather than to borrow against them).
The ideal medium for providing additional member bank re-
serves 18, therefore, the Treasury bill; but as of December 27,
the supply of such bills available to the banking system for
use to replenish reserves had fallen to quite a low level. At
that time, Federal Reserve Banks held approximately 70 percent
of the outstanding volume of Treasury bills; weekly reporting
member banks held about 15 percent; and the other 15 percent
was held by non-weekly reporting banks and by nonbank investors.
In terms of dollar amount, the volume of bills not already in
the hands of the Federal Reserve Banks was about $5 billions,
and, as the Federal Reserve Bank of New York, in its weekly
confidential letter on open market operations, has pointed out,
some banks have no bills at all and are forced to liquidate or
borrow against certificates.
The need for additional reserves during the first half
of 1945 will put additional pressure on the already limited
supply of Treasury bills and will tend to have a depressing
influence on the market for Government securities. It might
be well, therefore, to consider increasing the supply of
Treasury bills by enlarging the weekly offerings at an early
date, so that banks will not have to sell other Government
securities or to borrow to replenish their reserves.
Regraded Unclassified
112
Secretary Morgenthau - 4
III. Federal Reserve Ratio Starts Downward Again
The ratio of the reserves of Federal Reserve Banks to
combined deposit and note liabilities experienced & check
in its downward movement during the Sixth War Loan. Last
Wednesday, it stood at 49.4 percent, as compared with 49.9
percent at its high during the Loan. The same factors which
will tend to produce a reduction in member bank excess re-
serves will operate during the next six months to reduce
this reserve ratio still further. As we have indicated in
previous memoranda, some action will be necessary with
respect to the ratio in the very near future. The question
should be definitely settled before the next War Loan.
According to reports in the press, the Board of Governors
intends to ask Congress to lower the minimum ratio.
IV. Nonbank Funds in Sixth War Loan About $12 Billions
On the basis of preliminary estimates, it appears that
of the $21.6 billions raised during the Sixth War Loan, about
$12.4 billions will have been provided, during the two months
of the dalvé, by nonbank investors, while the remainder,
$9.2 billions, will represent indirect financing by commercial
and Federal Reserve Banks through purchases of Government
securities already outstanding and through loans on securi-
ties to enable nonbank investors to subscribe to Sixth War
Loan securities.
Total funds raised during the Sixth War Loan will be
more than in any of the preceding five loans. Chart II com-
pares the results of the Third, Fourth, and Fifth Loans with
the estimated results of the Sixth Loan and the approximate
distribution of the funds raised, by source. (The First and
Second Loans were conducted under terms somewhat different
from the later ones and are, therefore, not comparable with
them.) It will be noted that, for the four drives shown in
the chart, funds raised from nonbank sources were largest
during the Third War Loan. The Fourth Loan showed the smallest
nonbank participation; the last two loans have been almost
identical with respect to funds raised from nonbank investors.
Variation in the amount 80 raised from one loan to another
has not been great. In the Sixth Loan, banks purchased
$0.6 billion more of Government securities than they did in
the Fifth, and loans in connection with the drive were about
$0.2 billion greater.
Regraded Unclassified
Secretary Morgenthau - 5
V. Canadian Treasury Bill Rate at New Low
The average interest rate on the December 15 issue of
Canadian 3-month Treasury bills reached an all-time low of
0.372 percent. (The all-time low prior to the war was
0.465 percent.) At this rate, for the first time since
3-month Treasury bills were introduced into Canadian Govern-
ment finance late in 1934, their yield was slightly lower
than the rate on 3-month Treasury bills in this country.
The 0.372 percent average rate also was obtained in the
succeeding offering of bills, dated December 29.
The first wartime offering of Treasury bills in Canada,
on September 15, 1939, was issued at an average rate of
0.846 percent, sharply higher than the rate on the previous
issue. On the next issue, two weeks later, the wartime high
of 0.925 percent was paid. Since then the rate has declined
continuously with only minor setbacks.
Attachments
Regraded Unclassified
114
CHART I
MEMBER BANK EXCESS RESERVES
1943
1944
1945
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
AUG
OCT.
DEG
FEB.
APR.
JUNE
DOLLARS
DOLLARS
Billions
Billions
2.8
2.8
2.4
2.4
2.0
2.0
All Member Banks
1.6
1.6
1.2
1.2
.8
.8
.4
.4
o
o
.8
.8
.4
.4
New York City Banks
o
o
-.4
-.4
.4
.4
Chicago Banks
o
o
-.4
DEC.
FEB.
APR.
JUNE
AUG.
-.4
OCT.
DEC.
FEB
APR.
JUNE
AUG.
OCT.
DEC.
FEB.
APR.
JUNE
1942
1943
1944
1945
Office of The Secretary of the Transury
- of - - -
F-251-C
115
THE SECRETARY OF THE NAVY
Phologht
WASHINGTON
to good
January 8, 1945
Dear Henry:
Thank you for your letter of January 5
mentioning the Navy's work on the Sixth War Loan
campaign, especially the Chicago exhibition. We
are pleased that we could be helpful. If in the
future we can lend a hand, please let us know.
Sincerely,
James I'm Forrestal
Hon. Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D. C.
JAN 8 1945
My dear Mr. President:
I have a memorandum from Vice Admiral Wilson Brown
indicating that you desire information on all types of
citations and awards issued by the Treasury Department
to civilians, individuals and groups, who have rendered
outstanding service.
No significant use has been made of citations or
awards by this Department except in connection with our
War Bond program, and here we have found such recognition
to be an Important factor in stimulating the efforts of
the millions of volunteer workers throughout the country.
As you know, the success of the bond drives depends
finally upon the enthusiastic cooperation of these workers,
both as individuals and groups. It has been my feeling
from the inauguration of the program that the Treasury's
appreciation should be conveyed to persons who have
achieved outstanding results or contributed in an unusual
measure, whether they are movie stars or school children,
and for this reason various types of appropriate certifi-
cates and citations have been adopted. I am convinced
that this method of recognition has done much toward
sustaining the interest of our volunteers, and that any
curtailment would affect future drives adversely.
At the outbreak of the war many patriotic citizens
made donations of cash and property to the Government of
the United States, and in response to these, I had
prepared a citation covering such donations.
Another recognition document which might be mentioned
would be the type of letter which I have been signing and
giving to retiring Treasury employees who have had an out-
standing career in the Federal service. While not specifi-
cally requested in Admiral Brown's memorandum, you might
Regraded Unclassified
- 2 -
be Interested to know that in addition to the above, the
Department has in contemplation an expanded program of
meritorious within-grade promotions, which are provided
for by law, and also the inauguration of a system of cash
awards for outstanding employee suggestions which would
require appropriate legislation.
A portfolio containing the several types of citations
in use by this Department la being submitted with this
letter.
Faithfully yours,
(Signed) Benry morgeninal. Jr.
The President
The White House
CSB:
1-5-44
Regraded Unclassified
THE WHITE HOUSE
WASHINGTON
December 20, 1944.
MEMORANDUM
To:
The Secretary of the Treasury.
Subject: Awards to Civilians.
1. The Secretary of the Navy has asked the
President to authorize the Secretary of the Navy
to issue awards to civilian employees of the Navy
for distinguished service and states that the
Treasury and War Departments have similer awards
for their employees.
2. The President views with concern any tendency
of any of the Axecutive departments to issue commendation
to civilians for war work except those that have been
specifically approved by him. He, therefore, requests
to be informed what awards to civilians are issued by
the Treasury Department and also to be informed what
civilians are eligible for such awards. I will be very
much obliged if you will send the desired information
to me in order that I may resubmit the Treasury, War
and Navy practices to the President.
W.Term WILSON BROWN,
Vice Admiral, U.S.N.,
D
Navel Aide to the President.
Copy to:
SecNav
Regraded Unclassified
JAN 8 1941
Dear Mr. Collins:
I understand that you are the author
of the "Home-Pront Victory" editorial which
appeared in the Herald Tribune, December 18th.
I want to express my sincere personal thanks
to you, as well as the appreciation of the
Treasury, for such excellent support of our
War Bond program.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Edward H. Collins
Associate Financial Mitor
New York Herald Tribune
New York, N. Y.
SGLieb
6M
Regraded Unclassified
121
NEW YORK
Herald Tribune
230 WEST 41st STREET, NEW YORK
January 2, 1945.
The Hon. Henry Morgenthau Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
I take the liberty of
replying to your good letter of January 1
addressed to Mr. Reid, who is at present
absent from the office.
It was good of you to
take the trouble to cite so generously
our editorial, "Home Front Victory" and
the work of the newspaper in general.
The author of the edi-
torial was Edward H. Collins, our asso-
ciate financial editor.
Sincerely yours,
Wilbur Forrest
Assistant Editor
Coyne 6
(
122
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 8, 1945
TO
Mr. Gaston
FROM
Secretary Morgenthau
Fate
1/19/45
The Macon News of December 29th carried a
remarkable editorial entitled "The Doubters of
Democracy". I am reliably informed that this was
written by Harry S. Strozier, contributing editor.
I wonder if there is any way of our finding
out anything about this man, with the idea of possibly
bringing him to Washington.
TO: Secretary Morgenthau
FROM: Mr. Gaston
Harry S. Strozier is a prominent attorney at law of
Macon and is counsel for the Macon News and Macon Telegraph.
I think it unlikely that we have any inducements for him.
AM
Unclassified
Memorandam
from the Desk of
123
MRS. FRANKLIN D. ROOSEVELT
Harry 8. Stogier
contributing Edition
The Macon news
Editaine
"7a Doubters of Democracy M
Dec. 29.19kk
TREASURY DEPARTMENT
124
INTER OFFICE COMMUNICATION
DATE Jan. 8, 1945
TO
Secretary Morgenthau
FROM
Mr. White
HDW
3:15
Mr. McCloy telephoned me late Saturday
afternoon saying that though he had written a
letter to you stating that he was able to
accept only two of the suggested changes in
JCS 1067 made in your letter to him, he sub-
sequently was able to get all of the changes
you suggested accepted and asked me to tell
"you
W
you to ignore his letter.
This s me day's 519..
Regraded Unclassified
SECRET
WAR DEPARTMENT
July to white 1/6/95
OFFICE OF THE ASSISTANT SECRETARY
WASHINGTON, D.C.
5 January 1945
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
Thank you for your very prompt action in furnishing comments
on the revised JCS 1067.
I am affirmatively urging the adoption of changes 3 and 4.
I have no objection to the first two proposed changes but feel
that whether they should be made is a matter in which the views
of the State Department should be given very great weight. I
have sent all your proposals to the State and Navy Departments
for study, but have not yet received any indication of their views.
The second group of changes (1.e. No. 2 on your list), BC-
cording to very rough and tentative estimates here, would involve
the detention of a large number of additional people, possibly
rising as high as 100,000 additional persons. This obvioualy may
create practical difficulties of a serious nature. Mr. Glasser of
your office has been told of this estimate, go that he might check
this with his advisers.
Needless to say, any draft now prepared will be the subject
of detailed scrutiny in the European Advisory Commission by the
representatives of the four governments. I think we must expect
many suggestions for changes from the other governments, but this
revised paper gives our people substantially the principles worked
out in September as & basis of their negotiations, if it is approved.
Sincerely yours,
John J. McCloy
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
SECRET
Regraded Unclassified
126
JAN 4 1945
Dear Mr. McCloy:
There is attached Treasury coments on
JOS 1067 Revised. In accordance with your request
to keep the comments down to a minimum in order to
expedite the clearance of the document within the
U. S. Government, we have only included those
points which - have considered to be of major
significance.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Mr. John J. MoCley,
Assistant Secretary of War.
HGshgb
1/3/45
Regraded Unclassified
January 2, 1945
HOMORANDUM
Treasury Comments on JCS 1067 Revised
These comments are restricted to the most important points,
in conformity with the request of the War Department to expedite
the clearance of the document within the U. S. Government.
1. On page 2 of the political directive there has been deleted
the sentence, It may generally be assumed in the absence of evidence
to the contrary that any person holding such positions are Nazia or
Nasi sympathizers".
Without this sentence, the burden of proof is placed on the
military, and it is likely that the procedure will be administra-
tively ineffective in performance.
2. The internment of Nazi officials is limited to officers of
very high rank under (8), (h) and (1) on page 2 of the political
directive.
(a) The officials of the police only above that of captain
are to be interned. We consider that the captains
should be included.
(b) The officers of SA holding rank of sturmbannfuhrer or
higher are included. They should 50 down at least two
grades lower to include all of the officers of the com-
missioned rank.
(c) The leading officials of all ministeries and other
high political officials are carried down to the grade
of landrate and oberburgermeister. They should take
the mayors of all cities of 100,000 and over and also
take the political officials of the next grade below
the landrate in the rural regions.
3. On page 8 of the financial directive there has been added
the following sentence: "Subject to the agreed policies of the Con-
trol Council other taxes may be collected through such agencies as
you may determine and the taxes no collected will be held or dis-
posed of for such purposes as may be determined by you".
We suggest the addition of the following phrase after the
words Control Council, "and without assuming responsibility for
German fiscal affairs".
Regraded Unclassified
125
- 2 -
4. In the economic directive on page 1 there is the follow-
ing sentence: "Except for the purposes specified above you will
take no steps (1) looking towards the economic rehabilitation of
Germany or the general restoration of German export trade.....".
It is our view that there should be a prohibi tion of export
trade during the period which this directive is presumed to cover.
Therefore it is suggested that there be added a point (g) under 1
on page 1 to the effect that export trade other than restitution
and making surpluses available to liberated areas be prohibited
during the immediate period of military operation. The phrase
"or the general restoration of German export trade' may then be
deleted.
HG:gp 1/3/45
Regraded Unclassified
220
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
January 8, 1945
TO
Secretary Morgenthau
For information.
FROM
Mr. White HDW
Subject: Lend-Lease Exports to Russia
1. During the four months ending October, 1944 United States
Lend-Lease exports to Russia totalled approximately $1,169
million as compared with about $1,106 million during the
four months ending June, 1944. In the month of October lend-
lease exports to Russia totalled about 255 million.
2. Among the principal non-military items sent during the four
months ending October, 1944 were:
Motor trucks (all sizes) ($71 million)
Steam locomotives ($52 million)
Canned meat, excluding chicken ($25 million)
Linse ed oil ($22 million)
Wool cloth and dress goods (830 million)
Forging machinery and parts (14 million)
3. Among the munitions sent during the four months ending
October 1944 were:
818 M4A2 medium tanks
86 B25 2 eng. medium ombers
153 A20 2 eng. light bombers
399 P39 1 eng. pursuit f1 hters
484 P63 1 eng. pursuit fighters
15 P40 1 eng. pursuit f1 inters
49 P47 1 eng. pursuit 1'1 hters
55 DC3, C47 2 eng. medium transports
1,379 Unarmored scout cars
32 Medium armored cars
182 20 MM. Oerl anti-aircraft naval guns
4.
Shipments to Eastern Russia, presumably on Russian boats via
Vladivostok or some other Siberian port, accounted for about
$611 million of the total of approximately $1,169 million
exported during the four months under review.
Regraded Unclassified
Regraded Unclassified
Dear Mr. Brand,
This is to inform you that the Treasury has decided
to allow the claim of your Government for the are of 8200
thousand representing the proceeds of the sale to the Packard
Company of certain British-owned plant facilities being operated
by that company in U.S. war production.
It is my understanding that this sale was consumerated 1020
months ago but, as you are aware, the proceeds have been held
in suspense at our request pending a decision as to their disposi-
tion. I assume that this letter will now emable you to make the
necessary arrangements to have the proceeds paid to the appro-
priate British Government agency.
The war ejartment recently informed us that the Packard
Company is now offering to purchase from your Government, in
addition to the plant facilities mentioned above, machinery and
equipment valued at approximately 81.3 million. le are informed med
that the lar Department is willing to assotion the sale with the
usual understanding that the use of the machinery and equipment
will be reserved for the U.S. Government as long as the war Report-
ment deems it necessary. This is to advise you the the Treasury
Department raises no objection to this proposed sale nor to the
payment of the dollar proceeds to the British Government.
Very truly yours,
(Signed H. Morgenthau, Jo.
Secretary of the Treasury.
Mr. H. H. Brand,
United Kingdom Treasury Delegation,
Box 680,
Benjamin Franklin Station,
Washington, D.C.
12/28/44
UK-001
UNITED KINGDOM TREASURY DELEGATION
BOX 680
BENJAMIN FRANKLIN STATION
WASHINGTON, D.C.
REFERENCE
TELEPHONE EXECUTIVE 2020
19th December, 1944
Dear Dr. White,
I have to acknowledge the receipt of your letter
of the 15th December in which you were good enough to set
out the position which has been reached, as a result of
discussions between the Treasury Department and the War
Department, concerning certain of the claims which were
discussed at the meeting with Lord Keynes in your office
on the 27th November and concerning which Lee sent you
further details on the 1st December.
I shall bring your letter to the notice of the
U.K. Treasury and to those British Missions in Washington
who are concerned with the claims in question. In the
meantime, I should like to express appreciation of the
action which the Treasury Department have taken to facilitate
settlement of the first three of the claims referred to in
your letter. We note that you will be writing to us further
in regard to the claim in respect of the Packard Motor Company
($200,000) and in regard to other outstanding items which
were discussed at the meeting on the 27th November.
Yours sincerely,
RMB
R. H. Brand.
Dr. H.D. White,
Ass't to the Secretary,
U. S. Treasury,
Washington, L. C.
Regraded Unclassified
JAN 8 1945
Dear Judge Patterson:
I an writing you with respect to the British claim for #38
million for "take-outs" of British-owed capital facilities by
the U.S. Government agreed upon ore than to: years ago but never
completed. The item is discussed under Section 10, 11 on page 42
of the original British document on "Lend-Lease Requirements for
the First Year of stage IT" and I an enclosing for your information
a further remorandum on the subject (CCLL-U.S. No. 56) sent to the
American Committee by the British on November 22. I - also on-
closing copy of a memorandum recently prepared in the Treasury
giving the principal facts in the long history of these transactions,
as shown by our records.
Decause the take-over by the United States of suitable British
production facilities was originally undertaken at the specific
direction of the President and because the Treasury and other United
States authorities have repeatedly promised the ritish that the
particular facilities now in question (see enclosed British semoren-
dum) would in fact be taken over, I an anxious the our consitment
in this respect be fulfilled.
= should appreciate 16, unerefore, if you would investigate
the present status e of the provised transactions with a view to
completing then AO originally contemplated. The last time, accord-
ing to our records, that these take-ovors were being actively con-
sidered, the arrangement seems to have been that the Var Department
would purchase the ordnance facilition directly while the purchase
of the air facilities would be financed in part by the Reconstruction
Finance Corporation (or Defense Plant Corporation). I hope you will
find it possible to re-effect these or BOW substitute arrangements
with the Reconstruction Finance Corporation in order that ovaluation
and other preparatory stops can be undertaken and the transactions
pressed to & conclusion.
Then you have made an investigation I should be grateful if
you would advise me of the steps it is proposed to take and of the
valuation placed upon the properties involved.
Very truly yours,
(Signed) H. Morgenthau, Jr.
secretary of the Treasury.
Honorable Robert Patterson,
Under Secretary of var,
NC:rl
Pentagon Building,
2/28/44
Arlington, Virginia.
Regraded Unclassified
December 14, 1944
MEMORASTRUM FOR THE FILES
Subject: Take-Outs of Capital Facilities - 838 million.
1. Mr. Livingston of Defense Plant Corporation stated orally & few days
ago that:
a. At the time these take-outs were last being activaly considered,
the Defense Plant Corporation, by arrangement with the ver De-
partment, had contemplated participating only in the Wright
Aeronautical and Packard transactions and in these only up to
50 percent, the War Department paying the other half.
b. It was understood that the War Department was to have reimbursed
the Defense Plant Corporation for all funds Bo advanced.
c. The facilities of the five non-air companies were to have been
taken over directly by the war Department.
d. However, on Harch 16, 1944 Col. Hammond of Mr. Patterson's office
wrote the Defense Plant Corporation telling it to drop evaluation
proceedings on the two air companies and cease all negotiations
looking toward take-over. The inference is that the Var Depart-
ment is no longer interested in taking over ther the two air
company facilities or those of the five non-air firms.
2. Following are the highlights of the take-ovar proposal as shown by
our files,
a. On January 23, 1941 the President apparently wrote to Mr. Jones
urging him to acquire for the U.S. dovernment production facilities
certified by the Far epartment as necessary to the national
defense. (Ye do not have a copy of the letter but there are numerous
references to it in the file.)
b. On March 10, 1941 at lunchson the President handed Secretary
Morgenthau a note asking him, in view of the "general financial
picture" to "hurry up the RFC" about taking over British facili-
ties. The Secretary sent copies of the nove to Mr. Jones and
war Department on March 11.
0. In March the War Department certified to the Hesonstruction Finance
Corporation the British-owed facilities of the Tennessee Powder
Company and four machine gun plants. These were subsequently taken
over. The har Department later re-parchased from Defense Plant
Corporation the Tennessee Powder facilities but the Defense Plant
Corporation still ome the four machine gun plants.
Regraded Unclassified
Division of Monetary
Research
- 2 -
Regraded Unclassified
d. On June 3, 1941 the President wrote Mr. Jones again directing
him to take over British-owed facilities certified by the ar
and Navy Departments. On the bace date the Ear Department wrote
Mr. Jones certifying for take-over the facilities of 11 companies,
including the seven now listed by the British and stating that
the Mar Department would "seek appropriations to purchase the
above facilities on the basis of cost to the RFC."
0. For a long time nothing happened beyond repeated telephone 6 alls
and other efforts by Treasury and War Departments to get the
Reconstruction Finance Corporation to act. The Resonstruction
Finance Corporation gave various reasons for the delay including
difficulty of identifying the British properties and difficulty
of negotiating rent to be paid Defense Plant Corporation by the
companies (apparently the British were charging no rent) but the
principal reason seemed to ve that the Defense Plant Corporation
wanted the Par Department to pay the Defense Plant Corporation
2/5 of the purchase price at the time of take-over and to give
positive assurance that the remainder would be paid out of future
appropriations. The Mar Department FEE apparently reluctant to
promise this.
f. On March 20, 1942 Secretary Horgenthau wrote Mr. Jones stating
that he understood the Mar Department had agreed to repurchase
facilities taken over by the RPC and asking for information on
how matters stood. (No reply to this letter appears in our files.)
8. On June 26, 1942, dr. licks of Treasury called Mr. Klagsburn of
Defense Plant Corporation by telephone (there 2010 many such
callo during this period) and was told rapid progress had been made
in the past month and also that Tefense Plant Corporation was going
to purchase only the three air facilities (Curtise-Wright, Packards
and General Motors) and New Jerney Powder Company while the Ray
Department was going to purchase the remaining ordnance plants
directly. This não confirmed in a letter to ur. Illeks from
Lt. (now Major) F. H. Otto of Mr. Patterson's office on June 4,
1942 and again on September 18, 1942.
h. On September 28, 1942, in a letter on the subject of dollar
relief to the British banded to Sir Frederick Phillips by the
Secretary, the eleven companies originally certified by the
Mar Department to PFC for take-over were listed M "Transactions
Agreed upon but not yet completed". The value it we thought
these facilities might yield (cost was about 478 million) was
Division of lionetary
Research
- 3 -
given as approximately 850 willion. I can find no direct
evidence in our file that any of these transactions were
completed but since the British say they have received
$32 million of the original 150 million and since they now
list only seven companies instead of eleven, it is presumed
that four were taken over (Todd Shipbuilding, General Motors,
New Jersey Powder and Remington Ame.)
1. On October 8, 1942 the Secretary wrote Mr. Jones in connection with
the status 0' the 40 loan to the British and stated in passing
that "the Pritish dollar position has improved steadily over the
past year and the prospects are favorable for the future. Largely
for this reason I think it unlikely that the Pritish Government
will avail iteelf of the remainder of the loan." A statement of
the British gold and dollar position was enclosed.
J. From this point on U.S. authorities were concemed mainly with
reducing or limiting British dollar holdings rat er than with
efforts to august them. Thus it may be assumed that both the
NFC and the Far Department felt that one of the stated reasons
behind the President's original directive to take over these
plants was no longer operative and, accordingly, allowed the
project to lapse.
k. A year later, in October 1943, the subject W/O brought to light
again by an investigation of war contrasts and related matters
initiated by the Congressional Naval Affairs Committee. The
Committee asked the far Department and others why the take-over
of British facilities had been paid for in eash instead of
crediting the facilities to reciprocal aid and asked about future
policy in this respect. On October 13, 1943 Brigadier-General
Boykin Fright of the General Staff Corps, International Aid
Division, wrote a memorandum to Dean Acheson and Mr. Knollenberg
stating that both be and the Under coretary of Mar strongly felt
that any remaining take-overs should continue to be paid for in
eash as theretofere. General wright cited the President's original
directive in this comestion. Also it was pointed out that the
Reciprocal A1d Igrement specifically excluded such aid "within
the territory of the U.S." Mr. Asheson and others felt the same
way principally because - were then about to inform the British
that to were removing from Land-Lease all capital goods having
substantial post-mar value. Since the British-suned facilities
also rell in the category of capital goods, it was felt w
could not reasonably ask that they be given to us M resiprocal
aid.
There was no indication at this time or later, however, whether
the War Department or the RFC still intended actually completing
the take-over transactions referred w.
Regraded Unclassified
Division of Monetary
Research
- 4 -
1. This brings us to the alleged letter of March 16, 1944 from
the Mar Department to the Defense Plant Corporation implying
that there 10 no longer any intention of completing the trans-
fers.
INterl 12/28/44
Regraded Unclassified
CCLL
TOP SECRET
U.S. No. 56
The following data are an endeavour to bring up to date the
figures on the Take-Over arrangements.
1. The total British capital investment in the United States in-
cluding so-called Extraordinary Charges, was approximately 8252
millions. After deducting certain costs which are clearly increcover-
able, e.g., development, rental, training of personnel, etc., and also
the facilities which under the terms of the contracts, were to because
the property of the suppliers, N are left with a figure of the British
Equity of approximately $184 millions.
2. In 1941 the U.S. Government, with a view to helping the British
dollar position, undertock to take over certain capital facilities.
This was separate from their taking us out of our liabilities under
the production contracts themselves. The original value of the faci-
lities which were to have been taken over under this arrangement was
$136 millions, comprising $42 millions under Air contracts and 194
millions under Non-Air contructs.
3. Facilities originally costing $90 willions ($9 millions Air and
$81 millions Non-Air) were 1n fact transferred to the U.S. Government
Departments. The proceeds actually realized were $85 millions (27
millions Air and $78 millions Non-Air).
4. This left 846 millions of facilities ($32 millions Air and $14
millions Non-Air) which were not transferred to U.S. Government repart-
ments at the time when the U.S. Government suspended the Take-Over
arrangements. There were seven plants lefts-
Air
Wright Aeronautical
$12.5 millions
Packards
19
#
Non-Air
Western Cartridge
6.5 -
Pressed Steel
2
"
Lim Locomotive
& "
Pullman Standard
2.1 .
Republic Steel
2.75 of
$45.65 millions - say
846 willions.
5. Quite recently, the B.A.C. have been selling a part of their
familities at Packards and it is stated that the first cost of the
equipment and buildings sold is approximately 87.7 millions. It
will be seen that the above leaves almost emotly 838 millions moold.
Regraded Unclassified
JAN 8 1945
Dear Mr. Stimson:
This is in reply to your letter of
January 2, 1945 regarding U. S. Army
obligations insurred in China.
As soon as I have received the neces-
eary information from you I will begin
negotiations with the proper Chinese auth-
orities with respect to the settlement of
U. 8. Army obligations incurred in China
during the last quarter of 1944.
Sincerely yours,
(Signool X JA.
Secretary of the Treasury.
The Honorable
Henry L. Stimson,
Secretary of War.
ISF/efs
1/6/45
out Witto5323
Regraded Unclassified
DEPARTMENT
OUTGOING
DIVISION OF
OF
COMMUNICATIONS
STATE
TELEGRAM
AND RECORDS
OF
STATE
RS
1945 JAN 10 AM 10-34 January 8, 1.45
This telegrom must be
persphraced before being
14 p.m.
communicated to anyone
other than a Government
Agency. (SECIME 0)
ALIEMBASSY,
-
mub
OHUNGKING.
40
FOR ADLER FROM THE SECRETARY OF THE TREASURY
1. The Chinese Government is strongly urging m
to give permission to export on commercial vessels large
quantities of gold to China to the extent of $80 million
worth of gold bars and $100 million of gold takens. with
the arrangements which they are prepared to malre with the
shipping companies it would be comparatively simple for
the Chinese to export another 3100 million or more of
Gold in the very near future.
2. In view of the current situation in China and
of the need of the Chinese for conserving their foreign
exchange resources for postmar needs, I have thus far
not given my permission to the above requests.
3. I want you to discuss this matter thoroughly
with General Hurley and inform no as quickly as possible
of his views.
STETTINIUS
FMA:GL:ja
1/6/45
(GL)
Regraded Unclassified
RS
Distribution of true
January 8, 1945
reading only by special
arrangement. (SECRET W)
Midnight
AMEMBASSY
LONDON
176
the cable below for Mann is WRB 34.
Please deliver following message to Jef Rens,
International Labour Office, Parliament Street,
London, from Susanne LaFollette of Labor League:
QUOTE After conference with Dekook are asking
American Government authorities and National War Fund
to authorise Finst as trustee Labor Fund for Belgium
to use money behind Axis lines if necessary please
ask Mr. Spaak to secure Belgian Government approval
of this also of alternative use in Belgium as proposed
originally by Dekock. UNQUOTE
STETTINIUS
(GHW)
WRB:14/V:KG
BC
WE
SWP
1/8/45
Regraded Unclassified
ISI
KAS
Distribution of true
January 8, 1945
reading only by special
arrangement. (SECRET w)
Midnight
AMEMBASSY
LONDON
177
The following for Hann is WRB 35.
Newspaper PM of January 4 under heading of Reuter
article dated January 4, Headquarters 21st British Army
Group, summarizes 12 page report issued by British army
authorities describing the German prison camp at Breedonok
Libreendonsk during the occupation of Belgium. According
to the newspaper article the report is accompanied with a
volume of photographs.
Please forward a copy of this report by air mail,
together with photographs if possible.
STETTINIUS
(GHW)
STETTINIUS
WRB:MIV:KO
BC
WE
1/8/45
Regraded Unclassified
112
EK-1032
PLAIN
Lidbon
Dated January 8, 1945
Rec'd 11:55 a.m., 9th
Secretary of State,
Washington.
42, Eighth.
WRB 289. JDC 150. FOR LEAVITT FROM PILPEL
R
Resnik advises authorisation received accept
Italian and American currencies which Fort Osnego
refugees deposited Italy against your payments to
them at Fort Oswego. Resnik estimates 81 million
lire available Italy this connection.
NORWEB
JT
Regraded Unclassified
EMBASSY OF THE
UNITED STATES OF AMERICA
RESTRICTED
No. 3819
Madrid, Spain, January 8, 1945.
Subject: Transmitting Report on Evacuation of Stateless
Refugees from Spain to North Africa
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to enclose, as of possible interest
1/
to the Department, a copy of a report on the evacuation of
stateless refugees from Spain to North Africa which has been
prepared by Mr. David BLICKENSTAFF, director of the Represen-
tation in Spain of American Relief Organizations, for Mr. Ned
Campbell, representative in North Africa of the United Nations
Relief and Rehabilitation Administration, as a basis of dis-
cussion of plans for the possible evacuation of additional
numbers of such refugees to Philipeville and other UNRRA camps
in the Mediterranean area.
Respectfully yours,
/s/ Carlton J. H. Hayes
Carlton J. H. Hayes
Enclosure:
Report, as stated
File No. 320
NWB/Jf
Original to Department
(for Osalid machine)
Copy to Embassy, Lisbon
Regraded Unclassified
COPY
Enclosure to despatch No. 3819 dated January 8, 1945 from Carlton J. H.
Hayes, American Ambassador, at Madrid, Spain on subject of Evacuation of
Stateless Refugees from Spain to North Africa.
*****
Report to Ned Campbell, UNERA, North Africa. from David Blickenstaff. Madrid
EVACUATION OF STATELESS REFUGEES TO NORTH AFRICA
History
After it had been decided in the Spring of 1943 to evacuate stateless
and other unprotected refugees from Spain to the camp at Fedhala in North
Africa, an arrangement was made dividing the responsibility of this
operation between the British and American Governments through their
embassies in Madrid. The American Government was to assemble and transport
the refugees in Spain to the port of embarkation, and the British Govern-
ment was to provide transportation by sea to North Africa.
In a meeting held on January 31, 1944, between representatives of
the British and American Embassies, the French Diplomatic Mission, Mr.
Beckelman (representing the UNPRA), and myself, it was decided that
this office handle the applications made by refugees for admission to
the camp, distribute these applications to the screening authorities,
advise the refugees concerning the acceptance or rejection of their
applications and negotiate with the Spanish authorities the release of the
refugees from camp and their exit from Spain. The American Ambassador
asked this office to also carry out for the American Embassy its functions
of assembling and transporting to the part of embarkation the refugees
accepted for entry into the camp.
In this may, three groups of refugees left for the North African
Refugee Center:
May 4 - 36 refugees
June 21 - 573 refugees
July 1 - 21 refugees
Total 630 refugees
Need of Outlet to North Africa
In my opinion an outlet to North Africa for stateless and other
unprotected refugees is still urgently necessary though the numbers of
refugees to whom such an opportunity is attractive has been greatly
reduced by the three convoys to Fedhala and by expeditions to Palestine
and Canada organised by this office during 1944. There nevertheless
remain In Spain roughly one thousand refugees who receive financial
Regraded Unclassified
- 2 -
assistance from American relief organizations. These are almost entirely
refugees who are either legally or practically stateless. For some of
them solutions will perhaps be found when return to France and other parts
of liberated Europe become possible. For others, however, return to
pre-1939 places of residence is impossible and they will become 8. part
of the "hard core" of the post-war stateless refugee problem. I assume
that the UNRRA or the Intergovernmental Committee is working on some
solution to this more or less permanent problem and will make representations
in this direction to the United Nations Governments when the plans for
the post-war world are being drawn. It seems logical therefore that this
group of refugees now in Spain should come as soon as possible under the
authority and control of some such organization as the UNRRA.
There are, furthermore, many cases where the transfer to an UNRRA
camp is, for humanitarian reasons, urgently desirable. In this category
are many stateless and unprotected foreigners some of them resident for
many years in Spain who, because of their participation on the Republican
side during the Spanish civil mr, are personae non grate with the present
Spanish Government. Life for such persons in Spain is extremely difficult
because of the impossibility to obtaining legal employment. Many of them
are detained in work camps and prisons release from which being authorised
only when immediate departure from Spain can be assured. The conditions
of such internment leave much to be desired and the future for such
refugees must appear completely hopeless.
Number of Refugees to be Evacuated
Of the one thousand refugees remaining in Spain on the rolls of
private American relief organizations it would be difficult to estimate
the number that could be evacuated to an UNRRA camp. The following factors
must be taken into consideration in making any estimate:
1.- Refugees look upon evacuation to a camp as only a last alternative,
something to be avoided if possible. The number of those willing to accept
evacuation to a camp increases or decreases as the events of the war cause
hopes of return to liberated Europe to rise and fall in the minds of the
refugees. The policies that will be followed by the national authorities,
especially French and Belgian, will of course determine to a large extent
how sany refugees will look to an UNRRA camp as a solution to their
problem. The French authorities in Madrid have recently been accepting
applications for French visas. This has raised the hopes of BODA refugees
that they will soon be able to return to France where many of them had
been living for BOBO years before the beginning of the war in 1939.
2.0 The number of refugees who will apply for entry into an UNERA
camp is affected by the policy of the private relief organisations now
supporting them in Spain. Increasing needs elsewhere may cause these
organisations to try to decrease their obligations in Spain. This will
Regraded Unclassified
- 3 -
force some refugees to accept evacuation to & camp and will encourage
others to do 80 by shaking the sense of security that they have developed
during their stay in Spain with all expenses paid. If financial assistance
were at present completely withdrawn, almost all the refugees now being
assisted would be obliged to apply for evacuation to a camp. Till now
none of the committees represented by this office has intimated that
economic pressure should be used to oblige refugees to make such a decision.
3.- Experience has shown that a rather high percentage of applications
for admission to the camp in North Africa are rejected. The North African
screening authorities have dealt with our application lists as follows:
List
Date
No. of
Number
Number
Percentage of
No,
applicants
accepted
rejected
rejections
1 Feb. 28
485
368
117
24%
2 Mar. 20
475
410
65
14%
3 Mar. 31
46
25
21
46%
4
Apr. 19
20
17
3
15%
5 May 2
47
19
28
60%
6 May 15
D
18
23
56%
7
June 16
93
60
33
35%
8
July 15
60
34
26
43%
9 July 25
4
4
-
-
10 Aug. 22
44
2C
24
55%
11
Ost. 5
25
2
23
92%
Totals:
1,340
977
363
12
Nov. 2
10
)
13
Nov. 4
20 )
Report from screening authorities
14 Nov. 15
13
)
not yet received. 57 applications
15
Nov. 22
6 )
pending.
16
Nov. 16
8
)
Total:
1,397
Thus, out of a total of 1,340 applicants, 977 or 73% were accepted.
(Note: Discounting lists 1 and 2 of Feb. 28 and March 30, which
represent the applications screened for the three convoys that have so
far left for North Africa, the percentage of rejections on applications
screened after the three departures comes to 45%1)
Furthermore, during the preparation of the three convoys sent to
Fedhala, there were many refugees who withdrew after their applications
had been accepted. These three convoys, totalling 630 refugees, represented
960 applications of which 778 accepted. The 182 refugees who did not leave
though their applications were accepted, withdrew from the convoy for the
following reasons:
Regraded Unclassified
- 4 -
Release from camp or prison or exit fise refused
by Spanish authorities
24%
Emigrated to other countries, or evacuated by
their diplomatic mission
23%
Remained in Spain with family member unable to
leave for North Africa for health reasons or
lack of exit permit.
16%
Health and miscellaneous,
22%
Applications withdrawn - no explanation given ...
15%
At the present time the situation of applications, acceptances and
rejections stands as follows:
1.- Number of refugees now in Spain whose appli-
cations are accepted
322
2.- Number of refugees now in Spain whose appli-
cations are rejected
311
3.- Number of refugees now in Spain whose appli-
cations are pending with the N.A. screening
authorities.
57
4.- Estimated number of accepted applicants who
would be immediately ready to leave for N.A. . 150
The Practical Problem
In order that these 150 refugees, and succeeding groups of refugees,
be evacuated to North Africa, it is necessary that some competent
authority (the UNRRA) undertake to obtain two things:
1.- That instructions be sent to the French authorities in
Madrid for accepted applicants to be given documents that will
permit then to disembark in North Africa.
2.- That permission be obtained from the competent military
authorities to accept small groups (3 - 5 persons) of accepted,
properly documented refugees on occasional ships leaving
Gibraltar for North African ports; or that a ship be sent to
some Spanish part especially to embark this first group of 150,
and thereafter whenever a group of, say, fifty accepted appli-
cants can be assembled.
Regraded Unclassified
- 5 -
Ne are prepared in this office to handle for the UNRRA the mechanies
of preparing the refugees for evacuation, obtaining the necessary permits
from the Spanish Government and arranging for transportation to the part
of embarkation.
With regard to No. 2 above, I would very much prefer the first
suggestion. It is much more useful to have the possibility of evacuating,
say, ten refugees every two or three weeks, than fifty refugees every
three or four months. A great deal could be done for many refugees if
we could intervene at the Spanish police on their behalf with the
possibility of giving assurance of imediate evacuation.
There has been, in recent weeks, an increasing tendency on the part
of the Spanich authorities to intern foreigners who are thought to be
dangerous or unfriendly to the present regime and to maintain in concentration
camps refugees who should ordinarily have been released upon our assumption
of financial responsibility for them.
For these refugees especially evacuation to an UNRRA camp is urgently
desirable, for two reasons:
1.- Internment in Spein is, at best, under conditions that are sub-
standard, and in company with interned Spanish criminals and Nasi Gestapo
and military personnel.
2.- No progress toward finding an eventual solution to the cases
of these internees can be made while they are in Spanish camps and prisons.
Contrary to what their situation would be in an UNRRA camp, they are not,
in Spain, the subjects of efforts on the part of the interning authorities,
to find a solution to the "displaced persons problem". Internment in
Spain 1a "time lost" - under conditions of moral and physical suffering.
/jf
Regraded Unclassified
AIRGRAM
FROM
Bern
Dated January 8, 1945
Rec'd January 17, 6 p.n.
CONFIDENTIAL
Secretary of State,
Washington.
A-39, January 8, 5:30 p.m.
American Interests - Hungary
Your telegram 3789 November 7, 1944
Swise note January 5 stated Swiss Legation Budapest
reports Sandor and Inre FRIEDMAIN already deported with
other Jews to Hungarian provinces, and unable obtain addi-
tional information concerning them as communications with
Nyirmada interrupted.
HUDDLE
Regraded Unclassified
CABLE TO HUDDLE AND MeCLELLAND, HERN, SWITZERLAND
Regraded Unclassified
I
In view of well-known German practice of exterminating Jews surviving
in any area previous to its evacuation, Department and WRB consider it
necessary once more to draw attention of Swiss and Intercross authorities
to the danger faced by the Jewish survivors in German-controlled territory.
Accordingly, it will be appreciated if you will visit Swiss Foreign
Minister and President of Intercross, and urge that continued efforts be
made from now on to keep the surviving victims of Nami persecution alive
during the coming stages of hostilities in Europe. You should specifically
mention in this connection the three largest concentrations of Jews in Axis
territory known to exist, vis. Lods with 60,000 to 80,000 inmates, Theresien-
stadt with 40,000 to 60,000 inmates, and camps near Vienna with 18,000
inmates, and you should also mention any other localities or regions where
Jews are believed by you to survive.
In your conferences with Swiss Foreign Minister and Intercross President
it should be made clear that this Government considers that frequent and
extended visits of Swiss Consuls and Intercross delegates to places and
regions where Jews are concentrated constitute one of the most effective
means of preventing their further extermination. This method proved its
efficacy in Budapest where, thanks to the presence of Swiss and Intercross
personnel, many lives appear to have been saved.
Furthermore, you should emphasise to Foreign Minister and Intercross
President the mounting evidence of confusion among local German officials
and their increasing accessibility to psychological pressure seeking to
dissuade them from executing extermination policies ordered by central
German authorities, and urge that full advantage be taken of this state of
mind in the interest of saving lives, through unofficial as well as official
channels.
More particularly, in view of Gernan consent to permit Intercrose in-
spection and care for Hungarian Jews engaged in forced labor in Germany and
German-oscupied territory (enclosure 1 to your despatch 10132 of December 6),
please request immediate and continuing Intercross action to safeguard lives
of this largest group of Jews surviving under German rule.
Please endeavor to make clear to Swiss and Intercross that the activities
suggested above should not be limited to ons-time acts of intercession, but
should be actively pursued as long as the danger continues.
Please advise Department and WRB of Swiss and Intercross reaction.
The following from WRB for MoClelland,
It would be helpful if you inquired at frequent intervals what specific
action Swiss and Intercross are taking to carry out the above suggestions.
- 2 -
In view of the situation as outlined above and in view of your
recent reports indicating effectiveness of publicity and other forms of
psychological pressure upon German officials, you are requested to make
special efforts through all channels available to you to increase such
pressure with a view to safeguarding the lives of the surviving victims
of Nazi persecution.
THIS IS WRB BERN CABLE NO. 356.
11:30 a.m.
January 8, 1945
Regraded Unclassified
RS
Distribution of true
January 8, 1945
reading only by special
arrangement. (SECRET W)
9 p.m.
AMLEGATION
BERN
121
The cable below for McClelland is WRB 353.
This refers to our No. 4403 of December 30
(WRB 341), transmitting pessage from American
Christian Committee for Refugees for Adolf Freudenberg,
Geneva. First sentence of quoted message should read:
QUOTE Remitting $10,000 from non-church sources
directly to Cimade Paris owing exchange regulations
preventing transfer via Switzerland. UNQUOTE
STETTINIUS
(GHW)
WRB:10AV:NO
WE
SWP
1/8/45
Regraded Unclassified
181-904
Ankara
Distribution of true
reading only by special
Dated January 8, 1945
arrangement. (SECRET W)
Rec'd 9:38 p.m.
Secretary of State
Washington
38, January 8, 1 p.m.
FROM KATZKI TO PEHLE WRB, ANKARA'S NO. 3
The second and final contigent of Starasagora
detainees (REEMBS 2438, December 30 Ankara's 207
and 31 January 6 No. 2) numbering 259 persons
proceeding to Palestine from Rumania arrived in
Istanbul by railroad on January 6. For your inform-
ation, the group comprised mainly Polish nationals
who succeeded in escaping to Rumania and who had been
in that country for some time. The emigrants
were admitted to Turkey in transit as a result of
Anbassador Steinhardt's prompt intervention with
the British Ambassador in Ankara, under the
circumstances and conditions previously reported.
After the complicated technical formalities,
and the necessary Palestine entry and other transit
visas have been secured, the emigrants will proceed
to Palestine by railroad. It is planned that they
depart during the week of January 7.
STEINHARDT
JM
Regraded Unclassified
154
NOT TO BE RE-TRANSMITTED
COPY NO, 4
SECRET
OPTEL No. 9
Information received up to 10 n.m., 8th January,
1945.
NAVAL
1.
HOME WATERS. 2 Norwegian manned M.T.B's. attacked
escorted convoy 60 miles north of Bergen sinking one 9,000 ton
ship, torpedoing one of 5,000 tons and damaging minesweeper.
One of H.M. Destroyer mined yesterday has reached port,
MILITARY
2.
WESTERN FRONT.
Southern Sector. Enemy bridgehead north of Stras-
bourg considerably reduced, while in Bitche area U.S. forces
made progress against strong resistance in reducing salient
south of town, Further north U.S, forces have crossed River
Sure south of Wiltz and have cleared Goesdorf and Dahl.
Southern flank Ardennes salient. Enemy activity
continues against eastern flank of Bastogne bulge while west of
E
town U.S. forces made gains north of Bastogne-St. Hubert road
and have reached Tillet,
Northern flank Ardennes salient. Allied forees
made excellent progress, capturing Grimbiemont and Marcouray
while further east they are up to and over the road between
Viesalm and Samree elong considerable portion its length,
Enemy has thus lost northern maintenance route, Some activity
over the Maas north of Tilburg.
3.
ITALY. Heavy falls rain and snow whole front. No
change in forward positions.
4.
GREECE. During 6th British troops pursuing ELAS
forces N.E. of capital met only small isolated enemy detach-
ments and forward elements having passed Eleusis are now 5 miles
from Thebes. S.E. of Athens our forward troops have advanced
10 miles towards Lavrion.
5.
BURMA. Budalin on railway 20 miles North Monywa
has been captured. Our troops also closing in on Shwebo.
6.
EASTERN FRONT. Russians report further gains
Budapest and advances north of Danube, but state Esztergon on
Danube N.W. of Budapest abandoned by them.
AIR
7.
WESTERN FRONT. Night 6th7th. 785 aircraft (10
missing) Hanau 486 (1653 tons) through cloud; Neuss 147 (678
tons); and 49 laid sea mines. Day 7th, 1014 escorted U.S.
heavy bombers attacked targets Westery Germany, including 14
road and rail centres (2370 tons) and 4 rail bridges (267 tons).
There was thick cloud over targets so bombing by Pathfinder
technique, 7 bombers and 5 fighters outstanding but 4 bombers
and 3 fighters believed safe. SHAEF (Air) due bad weather
entire battle front only 17 sorties flown.
8.
MEDITERRANEAN. Day 7th. Adverse weather severely
restricted operations, but fighters and fighter bombers flew
164 sorties against targets N.W. Italy while at Genoa aircraft
carrier ROMA was set on fire and 5,000 ton ship hit at Imperia.
9.
BURMA. Day 5th. 40 Mitchells (1 missing) and 67
fighters attacked airfields and other targets Central Burma,
HOME SECURITY
10.
ROCKETS. Day 7th. 6 incidents reported,
7th/8th. 1 incident occurred,
Regraded Unclassified
January 9, 1945
10:30 a.m.
FINANCING
Present: Mr. D. W. Bell
MR. BELL: This is the letter to go to the war
Department. (Hands Secretary letter dated January
9 to Secretary Stimson)
H.M.JR: That was a nice party last night.
MR. BELL: I thought it was nice, yes. I enjoyed it.
H.N.JR: It is ell right. (Signs letter) Won't
that go out?
MR. BELL: Yes. See, we had & good excuse there
for writing him. We are sending him copies of what We
are--
R.M.JR: I want to talk to you about something else.
MR. BELL: There are two things I want. the first
is, you are going to have a conference tomorrow with
Eccles and Sproul at eleven o'clock. I thought maybe
you would want to have & preliminary. Maybe we can do
it today or, say, tomorrow morning, and save you B
little time.
H.N.JR: I have an appointment with Roswell Magill
at ten-thirty, but I could see you fellows at nine-thirty.
MR. BELL: O.K.
H.M.JR: Whando you want me to see.
MR. BELL: Haas' gang and myself- Haas and myself.
Regraded Unclassified
- 2 -
Of the twenty million dollar orders to solve tax
exempt securities that we have given the Federal, they
have sold twelve, and they are still booming. I would
like to go on with that and give another ten of each one
of them when they exhaust this one, which will probably
be there for you to approve.
H..JR: What are you selling?
MR. HELL: Re are selling different kinds. I can't
tell you the individual issues, but we are selling in
the area from '48 to '53, and they are selling, well, I
guess up to fifty-five or sixty. They are selling all
the way from one hundred three to one hundred twelve.
H.M.JR: These are tax-exempts?
MR. BELL: Yes, the market is very strong, really
too strong.
H.M.JR: You gave them how much authority?
MR. BELL: Ten million each, Postal Savings and
FDIC.
H.N.JR: How much more?
MR. BELL: Give them ten more on each when they
exhaust that. On the two's the market is very strong--
those two's that came out of the drive. Yesterday closed
at fourteen, and we thought that they ought to stay around
nine or ten to be in line, but Bob says they are very
strong. he started selling these; he has sixty million,
and I have one hundred million.
H.M.JR: What did he do?
MR. BELL: lie sold five million yesterday of taxable
two's in the drive. Now he says that he would do it either
way, but would like to see us sell some of the one hundred
million, and we can go on the basis of sixty to one hundred,
or we can sell just our own lot in order to give him an
order to sell ten million, but if he sells five, we would
Regraded Unclassified
- 3 -
take sixty to one hundred, whatever it is. Well, he
has sixty million in two's, and we have one hundred
million in two's, so if he sold five million, e would
probably take three million, and we would take two's
like we always do.
U.M.JR: Who does the one hundred million belong to?
MR. BELL: Fifty to the FDIC, and fifty to Postal
Savings. We place them with special two's, and when the
drive comes next time--we bought these especially to
sell, and got this little premium on funds.
H.M.JR: The market is going haywire.
VR. BELL: I wish they had gone & little harder on
seven-eights--more on that end--and not 30 strong here,
but the banks are going out after these two's. They
have more confidence in the curve. The trouble is
stabilizing the curve. The more confidence they have
the further they will go--and leave the other end of the
market alone.
H.M.JR: All right.
MR. BULL: Could we -ive them an order on the two's
without allowing--
H.M.JR: Yes, I would 20 alon with him, say, for
twenty million.
MR. BELL: He won't sell that many.
H.M.M. If he sells, see, it is three as to two.
MR. BELL: Well, it is three as to five.
II.M.JR: Three as to five?
MR. BELL: Yes, that would be about the percentage
out of five million. We take three and they take two;
that is right. You are right in your statement.
Regraded Unclassified
158
- 4 -
H.M.JR: I think I was right, wasn't I?
MR. BELL: Yes.
H.M.JR: If we multiply three times fifteen as to
ten, that would be twenty-five million. If he would
sell twenty-five million, we would take fifteen, so I
authorize you to take fifteen million.
MR. BELL: That is plenty.
H.M.JR: So if he sells twenty-five million of the
two's in the last issue, we get fifteen, and he takes
ten.
MR. BELL: That is all right; he won't take that.
H.M.JR: I would like to keep my head on the thing.
MR. BELL: That is all I have.
H.M.JR: What was this committee I appointed on
cash yesterday, you and who else?
MP. BELL: You appointed Gaston, O'Connell, and
me to sort of look after it. We are going to fix our
own rate if we don't get one.
Regraded Unclassified
SECRET
JAN 9 1945
The Henorable,
The Secretary of War.
My dear Hr. Secretary:
Reference is stude to the discussions between representatives of
the Nar Department and the Treasury and the suggestion by the Treasury
that collections of your special representative, operating certain
plants and facilities of Montgomery Ward and Company, Inc., be depos-
ited in a special deposit account with the Treasurer of the United
States through the facilities of the Federal Reserve Banks. In this
connection and in compliance with the request contained in your letter
of January 6, 1945, a special deposit account has been established with
the Treasurer of the United States for your special representative
under the following title:
"Major Frederick W. Reese, F.D., Special Representative of
the Secretary of har, Custodian, The Mar Department operat-
ing certain pleats and facilities of Montgomery Ward and
Company, Inc."
This account has been assigned Symbol 896-010.
Copies of letters addressed to the following listed Federal
Reserve Banks relative to the acceptance of deposits for credit in the
account have been furnished Major General George J. Richards of your
Department.
Federal Reserve Bank of New York
Federal Reserve Bank of Chicago
Federal Reserve Bank of Minneapolis
Federal Reserve Bank of Kansas City
Federal Reserve Bank of Ban Prancisco
Should you desire to use the facilities of other Federal Reserve Banks
and Branches, please advise this Department and the necessary action
will be taken.
The Treasury is pleased to offer its facilities in connection with
this matter.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Becretary of the Treasury.
HARabon (me 1/8/45
Regraded Unclassified
war department
WASHINGTON
JAN 6 1945
- decretary did the Treasury.
-8AP 5.
parsan to executive 'rier 0. 9500 of December 27,
the President has directed the Decretary of war to
the Unitiate preseasion of certain Blants, facilities,
properties (real and personal), and assets of ontgomery
nr: ans 30., Inc. ( ereinafter referred to as the Company)
- to opérate, or to arrange The the operation at, the
Demany in any :ander that is deemed essentia) For the
or secution of the war and do : necessary
Chereto.
A portion of assets of the Company which are currently
into the har Department mana, : ent now in charge
vin we needed for operations. It is requested that arrange-
-enta be made to establish a special deposit account with
the Treasurer of the United states for my special representa-
tive under the following title:
IF ajor rederick de meese, special Repres-
entative of the Secretary of Mar, Custodian,
The and Department Representative operating
certain plants and facilities of `ontgomery
..ard and Company, Inc.,"
and to develop a suitable pr cedure for the collection through
Federal Reserve Janks of incoming bills of exchange (checks,
drafts, and money orders, etc.,) payable to Vontgomery Ward
a Company, Inc., and for the deposit of the proceeds of such
checks in that account.
Sincerely yours,
Therey L Winson
Secretary of har.
Regraded Unclassified
161
January 0, 1945
10:40 a.m.
CURRENCY
Present: Mr. D. W. Bell
Mr. Gaston
Mr. O'Connell
Mr. Haas
Mr. Luxford
Mr. DuBois
Mr. Irey
Mrs. Klotz
H.M.JR: Yesterday morning when I talked to you
people about this question of money, I had not seen this
article which was circulated. I had not seen Robey's
article. I really think somebody around the Treasury
ought to collect these things besides myself. There is
an article in the January 5 United States News completely
devoted to this. There are a lot of people interested.
(Reading article from United States News) "Over-
sunnly of Currency: Symptom of Lawbreaking. Use of
huge cash excess for tax evasion and black market deals. "
Here is this pictograph. So we are being shoved on this
thing. I was afraid we would wake un some morning and
find somebody saying, "Why the hell doesn't the Treasury
do something about it?"
Here they have tax evasion. It says, "Tax rates at
their wartime levels offer & great incentive to evasion.
In this evasion, currency is a big help. Transactions in
cash are difficult to trace. That isone big reason why
there now are 40,000,000 $100 bills circulating or in
hiding, or more than twice asmany as were in use only two
years ago. Other signs of tax evasion are numerous, too,
to pay for goods and services in currency, rather than by
check, although by no means are all such demands related
to tax evasions.
Regraded Unclassified
152
- 2 -
We might be the spearhead of this and push everybody
else. I am looking down; I am not looking up.
MR. BELL: You can look up. Kent says, "Not the
least of the problems for which the Treasury is not too
well equipped to handle are those created by the almost
incredible amount of money which has come to be in cir-
culation. No one 80 far has adequately explained it.
Mr. Ralph Robey, one of the most eminent authorities in
the country, asserts that SO far as the general expansion
is concerned there is almost unanimous agreement among
students of finance on the reasons:"
MR. GASTON: That article is like all of Kent's
articles, rewrites of somebody else's. That is entirely
a rewrite of Ralph Robey's article.
H.N.JR: This one in the paper here, "The National
Week, is no rewrite, "Tax Evasion and Black Tarket Deals.
Would Irey be of any assistance if he sat in on 8.
conference like this?
MR. GASTON: He might, yes. I think he would.
MR. LUXFORD: Mr. Schmidt might be of help too on the
foreign angle.
H.M.JR: I don't want to get it too big; you boys
know enough about that. I mean, I don't want to get hit
over the head on this thing.
MR. HAAS: We have to work out some way to cut down
the criticism of the Treasury. Isn't it somewhat like a
crime, people stealing money from the Treasury? The police
say you didn't have this cash control--
H.M.JR: Don't let's be smart about this.
MR. HAAS: I wasn't trying to be smart.
H.M.JR: There now are forty million one hundred
dollar bills in circulation.
Regraded Unclassified
163
- 3 -
MR. BELL: Four billion dollars.
MR. GASTON: V ouldn't it be a good idea for
George to make 8 graph of circulation, going right back
to 1933 and show that curve upward?
H.M.JR: They have one.
MR. BELL: We have one, too.
MR. GASTON: It has been pretty steady from the
bank holiday on.
MR. DuBOIS: There are lots of twenties in circulation,
too.
MR. BELL: Eight million.
MR. GASTON: This is just from '39. It started in
'33.
MR. BELL: There is a total of four billion in one
hundred dollar bills, and anything over one hundred only
amounts to a billion and a half dollars.
MR. HAAS: Isn't the problem this, Mr. Secretary:
If we are running these deficits, then we are putting
money out, and somebody is getting the surplus. Then it
is a question of whether these people want to hold money
in the form of bonds or checking accounts. Now, a great
many people want to hold it in cash or checking accounts,
and it is not alarming. I think you have to have a large
volume because, because you have large deficits, and I
don't think that is generally understood.
MR. GASTON: Interest rates are very, very low, and--
MR. HAAS: I think the common people, with the uncertainty
around as the Likert study in Louisville showed, the argu-
ments on cash--they don't know whether they are going to
lose their jobs, and cash is something they feel they
don't have to worry about.
Regraded Unclassified
154
- 4 -
MR. DuBOIS: You have a good precedent in the case
of Great Britain. In Great Britain the highest note is
five pounds, and even that, the five-pound note, doesn't
circulate freely.
MR. HAAS: They did this in Great Britain. They
stopped issuance of large bills, and the increase in cir-
culation dropped down.
(Mr. Irey enters the conference.)
MR. GASTON: Are they issuing ten-pound notes?
MR. DuBOIS: I don't think SO.
MR. LUXFORD: Mr. Secretary, do you remember Mr.
Oliphant was interested in this proposal back in '35, '36,
and '37? He worked on it. At that time he was interested
in gangsters and tax-evasion. There is a file on it.
H.M.JR: No, I don't remember.
Well, Bell says there has been nothing done since we
met yesterday, but--
MR. O'CONNELL: That is not quite right.
H.M.JR: He is talking for himself.
MR. O'CONNELL: I talked to Herbert and the boys who
had been working over the week end, and they hoped to
have a document for you and Herbert and the rest to look
at tomorrow.
H.M.JR: What lines are they--
MR. O'CONNELL: They are working along lines you
mentioned yesterday. Without attempting to go into detail
as to the reasons or justification for it, we tried to
see if we couldn't outline the mechanical arrangements
necessary for a plan under which we would call in currency
above the denominations of twenties, and that really just
Regraded Unclassified
165
- 5 -
goes & step beyond the terms that had been prepared, 88
you say, some months back, and I had hoped we would have
something by tomorrow for you people to look at, so we
are not really at fault.
MR. BELL: I intended to call a meeting, but yesterday
was just a bad day because of the party last night.
MR. GASTON: Where was that?
H.M.JR: Irey, if you read that, you will get the
gist of the enforcement idea. If you have anything--
Gaston said you did. I still say I know my Washington.
I know these articles. You get two or three warnings. I
didn't see any of these articles when I brought this thing
up. I still think that we ought to move.
Now, when will you have something?
MR. O'CONNELL: Tomorrow.
H.M.JR: Along what line?
MR. O'CONNELL: Along the lines of the outline of
an operation which would involve calling in all bills
above twenty dollars, and that will be at least the outline
of the basis for it and the way in which it can be done.
I didn't understand we were going to try until we had
talked together further to decide whether or not it would
be done. You asked us yesterday to prepare an outline of
what mechanically would have to be done to put it into
effect.
H.M.JR: Will you be ready?
MR. O'CONNELL: Tomorrow?
H.M.JR: Three o'clock.
MR. O'CONNELL: All right.
H.M.JR: This same group. If White is here, he can
come in.
Regraded Unclassified
156
- 6 -
Well, there is no use talking today. I think I am
going to get Viner down here. Jake is talking about
excess reserves, and so forth.
MR. GASTON: I think that would be a good idea.
H.M.JR: Jacob Viner is 8. University of Chicago
official.
MR. HAAS: Stewart--probably he isn't here.
H.M.JR: I think we need some body to concentrate
on this thing.
MR. HAAS: Warren is here today. He is Stewart's
right-hand man. I didn't feel free to discuss this with
him.
H.E.JR: Discuss it with him, but caution him, and
you might tell him, "Will you please explain this to
Walter Stewart?" I would like to get Stewart's reaction.
Do you know how Walter Stewart is?
MR. HAAS: I haven't heard.
H.M.JR: Ask Warren.
MR. BELL: The last I heard he was feeling pretty
good, but the doctor still wouldn't let him take on any
extra duties.
H.M.JR: I don't think he wants to.
MR. BELL: I don't think he wants any heavy job.
H.M.JR: No, I don't think SO.
Do you have any suggestion?
MR. IREY: I have nothin on this, Mr. Secretary.
When this fellow Robey wrote this story he came in to see
me to get information, but--
Regraded Unclassified
167
- 7 -
H.M.JR: Somebody suggested yesterday that the way
to do this was to 70 out and get some good examples of
people evading tax laws through using large bills. Have
any of our law-enforcement people run into this thing at
all?
MR. IREY: There may be something in the black market
phase of it; they may have run across something involving
large bills. I know they have run across great amounts of
cash being handled back and forth.
H.M.JR: Could you have a discreet talk with
Berkshire?
MR. IREY: Davis and Woolf have been working together
on this thing from both alcohol tax and income tax angles.
MR. GASTON: You put a little special group on it,
didn't you, Elmer?
MR. IREY: Yes.
MR. LUXFORD: If you will check your newspaper files,
you will find that almost every time a large gangster or
political boss dies, you will find in his estate he has
a huge amount of cash. I remember Bill Thompson in
Chicago. You will find it just always runs together.
H.M.JR: Anyway, we will have another meeting tomorrow
at three. You have all got nothing to do. Evidently, there
is a lot going on on this thing.
MR. DuBOIS: There have been a number of articles
before, Mr. Secretary.
MR. LUXFORD: Sylvia Porter has been boosting for
this a long while.
H.M.JR: Can I have that back, Elmer?
Regraded Unclassified
168
0
- 8 -
MR. IREY: Yes. (Hands Secretary United States News.)
H.M.JR: All right, we will meet again at three
tomorrow.
MR. BELL: O.K.
H.M.JR: Possibly you can have 8 trial run in your
own office.
MR. BELL: If we could do something this evening--
I am pretty well tied up tomorrow morning.
MR. O'CONNELL: I will try to get the boys to be
prepared by the end of the day.
MR. BELL: Four-thirty today.
MR. O'CONNELL: Have it as late as possible. I
have to go to the Bureau, but I will be back at four-
thirty.
Regraded Unclassified
169
INTERNAL REVENUE
January 0, 1945
BRETTON WOODS
11:05 a.m.
WAR FINANCE FILM
Present: Mr. Gaston
Mr. O'Connell
Mrs. Klotz
MR. O'CONNELL: On this man Bazelon, who was suggested
by Jim Patton and several others for Assistant Commissioner,
my view about him is--and Herbert agrees, as stated in that
memorandum--we should be able to do much better than
Mr. Bazelon. He has been a perennial candidate for Assistant
Commissioner for some years, and the last time he was a
candidate, I think Hannegan was Commissioner, and Hannegan
at that time was very much thumbs-down on him, although
now he is a reluctant sponsor of it. He has the support
of Mayor Kelly and Senator Lucas of Illinois. lie is a
Chicago lawyer.
After talking to Herb, and after Herb talked to
you, I called Ralph Reed, who used to be a special
assistant or technical adviser to the Commissioner out
in California. He is quite interested.
I have an appointment to talk about the general
situation with the Commissioner at eleven o'clock. He is
coming into the office--probably coming in now. I was
going to go over what I had done and call Reed about your
judgment, that we all seem to share, that Berkshire would
not do, and I was hopeful you would let us proceed and get
a man of the caliber of Reed. Anybody would agree he
would be head and shoulders above Bazelon.
H.M.JR: Is that for the Assistant Commissioner in
Washington?
MR. O'CONNELL: Yes.
Regraded Unclassified
- 2 -
H.M:JR: I thought it was somebody for Chicago.
MR. O'CONNELL: We put Campbell in.
MR. GASTON: He was Carter Harrison's assistant.
MR. O'CONNELL: This is Assistant.
H.M.JR: Was Campbell good?
MR. GASTON: One of the best in the country. He is
also the brother of the man who was Democratic candidate
for Governor, and he is very well liked in political
circles in Illinois.
Don't you know about Campbell? I wrote a note to
you about Campbell. That is one you didn't read, I see.
It didn't get to you, or something.
H.M.JR: Just for fun, check.
MR. GASTON: I will check and see. That was my
impression.
MR. O'CONNELL: That man Bazelon came in to see me
with Jim Patton and Randolph Paul.
H.M.JR: What do I do with that memo?
MR. O'CONNELL: Nothing. I think you signed a letter
to--accompanying this was a letter to Patton, some non-
committal letter saying--
H.M.JR: Will you (Klotz) check?
MR. O'CONNELL: I wrote a reply which went with the
memo just saying, "It was good to have your recommendations,
and so forth. I don't think this is anything like Mr.
Patton--I know Randolph was very careful not to say much
of anything endorsing this fellow, but he did bring Patton
in to see me. Patton has used this fellow on 8. couple of
tax cases. He is a competent tax lawyer. You can ask him
any question, and he readily answers.
Regraded Unclassified
171
- 3 -
H.M.JR: What else?
MR. O'CONNELL: This other thing is a memo which was
written to you the day I was ill and signed in my name in
connection with reprints of the article you wrote on
Bretton Woods.
(The Secretary holds a telephone conversation with
Mr. Viner, as follows:)
Regraded Unclassified
January 9, 1945
172
11:05 a.m.
HMJr:
Hello. Hello.
Jacob
Viner:
Hello.
HMJr:
Jake Viner.
V:
Yes, sir.
HMJr:
How are you?
V:
Happy New Year.
HMJr:
Happy New Year. How's your family?
V:
Fine.
HMJr:
Good.
V:
How are your boys?
HMJr:
They're all right, thank you.
V:
Where are they?
HMJr:
Well, one is with the Third Army in France and
the other one is in the Pacific.
V:
Uh huh.
HMJr:
How about your boy?
V:
Well, Arthur came back from the Mediterranean.
He's on the Atlantic Coast run from New York to
Cuba.
HMJr:
Oh. Well, that's good.
V:
Yeah.
HMJr:
That's good. Jake, could you come down here a
couple of days and help us?
V:
What -- what's the problem?
HMJr:
Well, one, they're worrying about excess reserves..
V:
Uh huh.
Regraded Unclassified
173
- 2 -
HMJr:
....
again -- it's chronic.
V:
Yeah.
HMJr:
And the reserve requirements.
V:
Yeah.
HMJr:
And the other one is super-confidential. It's
this whole question of the amount of big bills
outstanding.
V:
Oh, yes. Well, when would you want me?
HMJr:
As usual, the sooner, the better.
V:
You mean you have no special day, so I can --
whenever I can arrange
....
HMJr:
Well, I'd like, if possible, this week.
V:
This week?
HMJr:
Yeah.
V:
Well, I'll come then as soon as I can arrange
transportation.
HMJr:
Well, we can arrange it if you'll send
....
V :
You can? Well, then -- you want me for two
days?
HMJr:
Well, that's -- I don't know -- at least two
days, I'd say.
V:
Thursday and Friday be all right?
HMJr:
Thursday and Friday would be fine.
V:
Is Saturday any use to you?
HMJr:
Pardon?
V:
Is Saturday any use to you?
HMJr:
Yes.
V:
Is Sunday any use to you?
Regraded Unclassified
- 3 -
174
HMJr:
No.
V:
Well, then, supposing I try -- I make it Thursday,
Friday and Saturday.
HMJr:
Thursday, Friday and Saturday. Now, you'd like
....
V:
I'd like a roomette.
HMJr:
A roomette on Wednesday?
V:
On Wednesday on the Capitol Limited. That -- that
runs on time. The Pennsylvania doesn't run on
time.
HMJr:
No. You'd like a roomette on Wednesday on the
Capitol Limited
....
V:
Yeah.
HMJr:
And you want to return on the same train Saturday
night?
V:
Saturday night and Hotel Hay-Adams, if possible.
HMJr:
Hotel Hay-Adamsif possible.
V:
Yes. Tell them it is for me; that will help
because they usually go out of their way.
HMJr:
Anything special you want for breakfast?
V:
What do I want for breakfast?
HMJr:
(Laughs)
V:
Grape nuts.
HMJr:
(Laughs) We like to please down here.
V:
I know you do.
HMJr:
(Laughs)
V:
Well, I'll be there if you provide me with the
transportation.
HMJr:
I'll
Regraded Unclassified
- 4 -
175
V:
It's your own idea about the transportation.
HMJr:
I'll take care of everything.
V:
All right. Fine. I'll be glad to come.
HMJr:
.... including the Grape nuts.
V:
Yeah. That's Thursday, Friday and Saturday.
HMJr:
That's right.
V:
All right.
HMJr:
Remember me to your wife.
V:
I'll do that, thank you.
HMJr:
Good bye.
Regraded Unclassified
171.
- 4 -
MR. O'CONNELL: I had no more difficulty about the
legal propriety of printing the article you signed.
H.M.JR: Isn't there something about publishing--
circularizing--
MR. O'CONNELL: You are thinking of the frank. That
presents a little different question.
H.M.JR: propaganda--who pays for it.
MR. O'CONNELL: We are at least entitled to pay for
sending any documents on Bretton Woods. The fact that
you signed it doesn't change the character at all.
MR. GASTON: No, I don't think SO. Then we can get
requests, I should think, from officers of the organiza-
tions to take care of the franking.
MR. O'CONNELL: Franking presents & peculiar problem.
You can't send special t. pes of material through the mail
under franking, except on request of someone, and that came
up in connection with Bretton Woods material which we
sent to Columbia's Political Science Department. They
mailed them out with our frank, and that violated two
statutes. You can't let any private firm or corporation
use the frank, and, two, Government agencies may not frank
material of this type, except on request. Now, that really
means to be on the safe side you should not mail copies of
this without postage, except on request, but I could buy
postage under the Stabilization Fund, and that is what
I have said here.
MRS. KLOTZ: That is what Bernstein says.
H.M.JR: Furnish the blanks to Luxford, and let
Luxford handle it. And tell him that when they mail
them out they should be sure they live up to the statutes
of the law. He knows what it is.
MR. GASTON: How many are you getting?
H.M.JR: Three thousand.
Regraded Unclassified
177
- 5 -
MR. GASTON: And how many of Harry's do you think?
H.M.JR: I suggest that you get three thousand of
Harry's, too.
MRS. KLOTZ: Three thousand of each.
MR. GASTON: I thought they ought to have at least
five thousand of each. My original suggestion was ten.
MRS. KLOTZ: Five thousand instead of three.
H.M.JR: You people aren't ready to talk about these
requests from Harriman? There was a letter from Hannegan.
MR. GASTON: That is Pehle on Procurement.
MR. O'CONNELL: Is there any reason why I can't go
ahead and make the recommendation for Larry Lesser as
Chief Counsel in Procurement?
H.M.JR: No.
MR. O'CONNELL: I would like to make that recommendation;
I have him as Acting Chief Counsel in my office, and I said
I would make that recommendation.
H.M.JR: Pehle would be delighted. Let it come from
Charlie Bell.
MR. O'CONNELL: Sure.
(Mr. O'Connell leaves the conference.)
MR. GASTON: I have dictated a memo for you on
this film. Gamble's idea was not to have you read all
the stuff about the advantages and how much they are worth
each year, but he was going to have you read a small opening
paragraph, and they would animate that stuff with a com-
mentator reading. Then you would close with just SO much
stuff saying that the--
H.M.JR: Nobody could dream that, could they?
Regraded Unclassified
178
- 6 -
MR. GASTON: Not unless they were told, and I wesn't
told.
H.M.JR: I suggested that.
MR. GASTON: Yes, you did.
H.M.JR: Well, when do you want me to do this?
Mr. GASTON: Well, they would like to have it as
soon as possible, and I think they can arrange it nearly
any day.
H.M.JR: I could do it. Where no I go, over to the
White House? Or would they do it here?
MR. GASTON: I think Mr. Engels man's idea was to
do it across the hall in the chart room.
H.N.JR: Let's set it up for four o'clock tomorrow,
Wednesday.
MR. GASTON: We will do that.
H.N.JR: And if I could have that thing to take home
with me I could memorize it.
MR. GASTON: I will send it when it is ready.
Regraded Unclassified
179
January 9, 1945
11:23 a.m.
HMJr:
Okay, Grace.
Grace
Tully:
Good.
HMJr:
What are the chances of the President's seeing
Stettinius and myself?
T:
Well, it just looks like -- I can't -- he's got
the leaders this morning and he's starting over
here at 12:15 and goes right up until luncheon
time. He's got press this afternoon.
HMJr:
Well, I understand that -- I didn't get this
direct but I understand that Stettinius 1s
leaving for a week's vacation tomorrow.
T:
Oh, really?
HMJr:
So, if he was going to 88° us, I think he ought
to see us in the morning.
T:
Uh huh. Well, all right, let's make it in the
morning. This looks like a pretty crowded day
80 you would have a very little time.
HMJr:
Yeah. Well, this Assistant of Stettinius' who
comes over and posts me on foreign affairs said
he was leaving at noon tomorrow.
T:
I see. Well, all right, let's find out if we
can't make it in the morning then.
HMJr:
Will you do that?
T:
Right, sir, I will.
HMJr:
Thank you. And did the President ever read my
memorandum on the Russian financing?
T:
No, I don't really know, Mr. Secretary.
HMJr:
Well, I wrote him a letter which -- sending him
a proposal on how to finance post-war Russia.
T:
Yes.
HMJr:
You might take a look.
Regraded Unclassified
- 2 -
180
T:
All right. Fine.
HMJr:
Thank you.
T:
You -- he already has a copy of it?
HMJr:
Yes, he has.
T:
All right. Fine.
HMJr:
Thank you.
T:
All right, Mr. Secretary. Bye.
Regraded Unclassified
181
January 9, 1945
2:17 p.m.
HMJr:
Hello.
Secretary
Stettinius: Hello, Henry.
HMJr:
How are you?
S:
Good, sir. How are you today?
HMJr:
Okay. Ed
S:
Yeah.
HMJr:
....
when is a good chance or opportunity for
you to let me make that presentment about how
we feel about the future treatment of Germany?
8:
Well, Henry, any time at your convenience. I've
got to go to New York tomorrow afternoon
HMJr:
Yes.
S:
Tomorrow noon -- to make a movie
HMJr:
Yes.
S:
on Thursday and Friday on our international
organization.
HMJr:
Yeah.
S:
And then after that, my movements are uncertain
HMJr:
Oh.
S:
for reasons that you know
HMJr:
Yeah.
S:
or that you can guess.
HMJr:
Yeah.
S:
Now, why don't you -- I hate -- I'd like like the
devil to be here, but I think it's awfully important
to get on with it.
HMJr:
Yes.
Regraded Unclassified
182
- 2 -
S:
Would - how would you feel about coming over and
doing it and let Joe Grew preside and do it this
week? Or would you rather take a chance on next
week and my being here?
HMJr:
No, the whole object is to do it in your presence.
S:
Yeah.
HMJr:
So I'll take a chance on your coming back.
S:
Well, now -- then I will leave it -- put the res-
ponsibility on me, then, to communicate with you....
HMJr:
I'll do that.
S:
....
early -- early next week.
HMJr:
Will you do that?
S:
I'll do it.
HMJr:
Now -- yeah -- now, I don't -- no, the whole thing
that I've got in mind -- I want a chance to do it
with you there, and you surrounded by whomever you
want.
S:
All right, Henry. Now, I will, I will be in touch
with you
HMJr:
All right.
S:
....
early next week.
HMJr:
I'll adapt myself to you.
S:
All right, old boy.
HMJr:
Now ....
S:
It will probably be the -- around the 16th -- Monday
or Tuesday of next week that I'll be in touch with
you.
HMJr:
Now -- right -- now, I -- Yost told me that you were
going away tomorrow
S:
Yeah.
Regraded Unclassified
183
- 3 -
HMJr:
And so I asked Miss Tully whether she wouldn't
try her best to get you and me in tomorrow
morning
S:
Yes.
HMJr:
on this committee business.
S:
Yes.
HMJr:
And then, in view of the information that Yost
gave me about this cable from Harriman and
Molotov on the future economics of -- of Russia
S:
Yes.
HMJr:
....
which is right down the alley of that memoran-
dum I sent the President.
S:
Right.
HMJr:
If we get to see him, I'd like to raise that
also.
S:
Right.
HMJr:
And I'm telling it to you now to make sure that's
agreeable to you.
S:
Entirely agreeable, Henry.
HMJr:
Particularly in view of Harriman's cable.
S:
Right.
HMJr:
Because, you remember, in my letter to the President
I said I thought that was bothering him.
S:
Right.
HMJr:
And so if we get in, it will be just those two
matters I have in mind.
S:
All right, Henry, I'll be prepared on both.
HMJr:
And may I again continue to compliment Yost? And
what he gives me, I don't pass on unless I first
ask him whether I can pass it on.
Regraded Unclassified
- 4 -
184
S:
Yeah. That's terribly important so we can have
a complete -- I mean, it's just as if you and I
were talking
....
HMJr:
Well ....
S:
....
when he talks to you.
HMJr:
....
I'm not going to pass anything on unless I
ask him first. Now, I asked him whether I could
show White that stuff on the Argentine.
S:
Yes.
HMJr:
And he said, "Yes".
S:
Yes.
HMJr:
And it will be just White and nobody else.
S:
That's fine, Henry.
HMJr:
But I will not pass anything on to anybody unless
I first consult him and give him a chance to consult
you.
S:
I understand.
HMJr:
But he is exceptionally good.
S:
Thank you, sir.
HMJr:
Right.
S:
All right, old boy.
Regraded Unclassified
185
Two attachments ma rked "Eyes Only"
in HM,Jr's handwriting
Gave sealed envelop to Mrs. Shanahan
with message from the Secy that when Dr. White
is well enough to read, she should send him the
envelop, but nobody else is to see it.
January 9, 1945
TO:
Dr. White
FROM:
Secretary Morgenthau
Dear narry:
Ar. Yost has given me the two enclosed
highly confidential documents. I don't want anybody
to see these except yourself. After you have read
them please bring them in personally to me. I would
like to discuss this with you. Done
Regraded Unclassified
187
January 9, 1945
2:32 p.m.
HMJr:
I'm talking at you but what I'm saying is
meant for him.
Tom
Lynch:
Yes.
HMJr:
Now, I was told Saturday afternoon that Senator
Wheeler said some very uncomplimentary things
about me.
L:
Uh huh.
HMJr:
About four times a year I ask that "blankety-blank"
Legislative Section from the General Counsel's
office to watch for things on the Hill which are
said about me or about the Treasury.
L:
Uh huh.
HMJr:
Now, when something is said about me, it's a
question how we should answer it.
L:
Yes.
HMJr:
And it's just inexcusable. They know that. When
Joe gete back, please tell him. I don't want to
always be complaining but they should read the
Congressional Record.
L:
Uh huh.
HMJr:
And now -- after all, here Wheeler went on the air
Saturday night and said something about Stettinius
and bingo, right back comes Stettinius.
L:
Uh huh.
HMJr:
He says that I want to slay the German people and
nobody brings it to my attention until a friend
calls me from outside.
L:
Huh. Well, I'll -- I'll
HMJr:
So we've got to do something.
L:
Yes. Yes. Well, I'll bring it to Joe's attention,
and in the meantime, I'll certainly get right on
this, too.
Regraded Unclassified
198
- 2 -
HMJr:
And find out who's reading the Congressional
Record and what the hell do they do after they've
read it.
L:
Yes. Yes, I will, sir.
HMJr:
I mean, I do - as I say, I'm telling you this --
everything I say is meant for Joe.
L:
Well, that's -- it should be meant for me, too,
because I'm responsible for it -- I mean, under
Joe.
HMJr:
All right.
L:
I mean, I feel I should find out, too, about this.
Thank you.
HMJr:
I look to you people to look after the good name
of Morgenthau on the Hill.
L:
Yes.
HMJr:
And the Treasury. Or vice versa.
L:
Yes, sir.
HMJr:
All right.
L:
Fine. Thank you.
Regraded Unclassified
139
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Date JAN 9 - 1945
TO
Secretary Morgenthau
FROM
Mr. O'Connell
I regret that Senator Wheeler's reference
to you on the Senate Floor on Saturday,
January 6 (Congressional Record, page 87)
was not brought to your attention.
To avoid the possibility of other lapses,
I have directed that the Record be double-
checked by two people and a summary report
be given to me as early as possible each
morning covering, in addition to legislative
action, any references to officials of this
Department or the Department itself.
ggo's
Regraded Unclassified
190
January 9, 1945
2:37 p.m.
Operator:
Mr. McCloy.
HMJr:
Hello.
John J.
McCloy:
Hello.
HMJr:
How are you?
M:
How are you? Fine.
HMJr:
Good. Jack, in regards to your letter of
January 5th -- just to make sure I'm correct,
do I understand now that all of our suggestions
have been accepted?
M:
Yes. The letter that I sent to you, I sent
preparatory to my meeting.
HMJr:
Yeah.
M:
When I got to the meeting I found I could get
more than I thought I could get.
HMJr:
Would you mind writing me another letter so that
we can have it for our written record?
M:
Okay.
HMJr:
Is that asking too much?
M:
No. No.
HMJr:
Just
M:
Now, there's one thing more that's come up
....
HMJr:
Yes.
M:
....
on the financial directive.
HMJr:
Yes.
M:
Bernstein, when he came back
....
HMJr:
Yes.
M:
although we had passed this new 1067 with
your people
Regraded Unclassified
- 2 -
HMJr:
Yes.
M:
before Bernstein had come back -- when he
got here, he wanted to change it again. I have --
I don't know whether I can change it in relation --
in respect to all the things that he wants now to
change it. I may have to go back to the original
1067 as it was agreed with Harry White and all the
rest around the table with the State Department --
and get that over, then subsequently out in an
amendment because I have this other element which
is an agreement with the Joint Chiefs of Staffe,
that I shall not change 1067 in substance beyond
where it was originally when they passed it as a
joint directive. Now, Bernstein may went to --
it may be desirable to change it, but I may not
be able to accomolish all of his changes for that
reason until some later date.
HMJr:
Well, without trying to let Bernstein down in any
way, I'm just not up to the minute on this.
M:
Yeah.
HMJr:
Now, he may have been talking with our men about
it.
M:
Yeah.
HMJr:
And I'll have to ask them because, frankly, I don't
know.
M:
Well, there's that -- I've got to play -- keep three
balls in the air. In the first place, I don't know
whether you know or not, but I've had cuite a battle
on the side with 1067 -- with the State Department to
keep it on -- there been a good many efforts to
scrap it.
HMJr:
Well, it's just a little hear-say, but I did bring
that up on the dinner or luncheon that Stettinius
gave us.
M:
Yes.
HMJr:
This whole business of having a three-sided triangle
and
M:
Yeah.
Regraded Unclassified
- 3 -
HMJr:
....
only two sides are working
...
M:
Yeah.
HMJr:
....
Treasury and War -- I don't know whether you
heard about it.
M:
No, I didn't hear about that.
HMJr:
And that a three-sided triangle should work all
three ways.
M:
Yes.
HMJr:
And Matthews was present.
M:
Yes.
HMJr:
Stettinius said that he did want us informed.
M:
Yes.
HMJr:
And that we should be kept informed.
M:
Yes. Well, that's right.
HMJr:
And that -- and he subsequently told me that he
asked the President whether it was all right to
keep us informed and the President said, "Yes".
M:
Yes.
HMJr:
So I think from now on things will go much better.
M:
Well, I think that he 1s keeping you completely
informed. On the other hand, there has been
....
HMJr:
I know.
M:
this by-play; and it's not only here but also
in London.
HMJr:
Well, you keep me informed.
M:
I'll keep you informed.
HMJr:
I say, you have always.
M:
Good. Well, I
....
Regraded Unclassified
- 4 -
HMJr:
But I'd have to ask them, and somebody over there
would sit on it.
M:
Yeah.
HMJr:
And Stettinius was asking for full cooperation.
M:
Yes.
HMJr:
So I said, "Well, I don't like to pick on Matthews,
but let me give you a good example.'
M:
Yeah.
HMJr:
And I said, "And this 1s the best example I know. H
M:
Yes.
HMJr:
And both Stettinius and Grew said, "Well, from now
on that won't happen
Il
M:
Yeah.
HMJr:
If
anymore. If So I think that we'll get much
better cooperation.
M:
Yeah. Yeah.
HMJr:
But this other thing that you bring up, as I say,
it must be something else, but I just wanted to be
sure that we understood each other
M:
Yeah.
HMJr:
and if you didn't mind writing me a covering
letter
M:
No.
HMJr:
and then we'll have it all right and I'll make
inquiries just what Bernstein is pushing for.
M:
Yeah. All right. And I don't mean to call him off,
but I may not be able to get at this stage of the
game
HMJr:
Yes.
M:
by reason of my relations with the -- because
I'm not going through the Joint Chiefs of Staff
again at this stage -- you see?
Regraded Unclassified
- 5 -
HMJr:
Don't you like to do that?
M:
Well, I don't want to go through them every
HMJr:
No.
M:
time I turn. I had their basic approval
originally. Then I began to Bee that there were
some people down there that apparently had been
touched, who wanted to sort of change their minds.
HMJr:
Yes.
M:
And I said, "Well, I don't want to send it down
there again until we make something which 18 really
a change in it."
HMJr:
Right.
M:
Now, I'm going to make them stand by their
original agreement to 1t.
HMJr:
Yes.
M:
I don't want them to review what they did before.
So I -- and I talked it over with Marshall and he
said, "You go right ahead on that basis," but I
do have a representation out for them that I am
not changing it substantially. You see? So I
can't follow possibly all that Bernstein would like
to have done at this stage, although I may be able
to do it later.
HMJr:
We'll look into it again
M:
Okay.
HMJr:
....
and as far as -- I can only say I've got
a hundred percent cooperation on this 1067 from
you.
M:
Well, okay.
HMJr:
I'm m very much pleased.
M:
All right.
HMJr:
Bye.
Regraded Unclassified
TREASURY DEPARTMENT Diasen & Ductors
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
January 9, 1945.
TO
FROM Mrs. Shanahan
I discussed with Mr. White over the phone the subject
of your conversation with Mr. McCloy, regarding JCS 1067.
Mr. White wanted you to know that he, Mr. Glasser and
Mr. DuBois discussed the changes thoroughly with Colonel
Bernstein, and Mr. DuBois represented the Treasury Department
at discussions in the War Department with Colonel Bernstein.
The suggested changes arose out of Colonel Bernstein's
lengthy discussions with the people over in London who are
going to try to interpret some of the statements in a way
which we do not like. The people over there are ready to
go further than we thought they would go and the changes
are entirely satisfactory to us. Mr. White told Colonel
Bernstein if he could get the changes easily (they are
mostly technical) he could tell them that we were behind
them, but if he had the slightest trouble to let us know.
Mr. White said Colonel Bernstein went over the changes with
Mr. DuBois and Mr. Glasser prior to discussions at the War
Department and assumed that Colonel Bernstein confined him-
self to changes discussed with us; he said we would be
behind them if he could get them easily. If he could not
get them easily, he was to let us know.
Mr. Glasser and Mr. DuBois are informed on this matter
in case you wish to talk to either of them.
Regraded Unclassified
198
January 9, 1945
2:50 p.m.
RATE FOR FORMOSA
LOAN TO RUSSIA
Present: Mr. D. W. Bell
Mr. Luxford
Mr. DuBois
Mr. Glasser
Miss Gold
Mrs. Klotz
E.M.JR: 1 tell you what I am going to do. I haven't
time to assimilate this; I have been putting it off. Have
you done the basic work on this?
Was GOLD: Some of it.
H.M.JR: And you? Who else?
MR. GLASSER: I was only involved once, but Luxford
and DuBois played a part in it last spring, almost a
year ago.
H.M.J.: Are they in on this? Maybe I ought to say
what are they not in on. Maybe we ought to ask them to
come in.
H.M.JR: 1 don't get this business.
MRS. KLOTZ: Did you say something to me?
H.M.JR: I said that I have to argue about this a
little bit. I can't do this thing in split seconds.
(Mr. Luxford enters the conference)
H.M.JR: From now on when I hold conferences I am
going to say, "Let's include Luxford and DuBois unless
they don't want in on it." Were you in on this summary
Regraded Unclassified
197
-2-
of suggestions for the provision of ten billion dollars
to be loaned to USSR?
MR. LUXFORD: That is right.
H.M.JR: how much?
MA. LUXFORD: I have worked along with it.
R.M.JR: Recently?
MR. LUXFOND: Recently. I revised it before narry nad it.
H.M.JR: Is this a memo for Harry?
MR. GLASSER: That is one we just did. I don't know
whether you were in on this.
(Hands Mr. Luxford Memo on "Can't the USSA Service A
Ten Billion Dollar Loan?")
That is the longer one harry did.
DR. LUXFORD: No, this is a memo to the President.
H.M.JR: No.
MR. GLASSER: This is the memo. (Hands Luxford memo
to the President on "Ten Billion Dollar Credit to the USSR")
Mit. LUXFORD: But I revised that, and he has it on his
desk now, a revision of it.
H.M.JR: The point is, chances are it may come up
tomorrow morning.
(Mr. DuBois enters the conference.)
H.M.JR: Are you (DuBois) working on the long-term
loan to Aussia?
MR. DuBOIS: Yes.
H.N.JR: How much--
MR. LUXFORD: All of us worked together for a long
while.
Regraded Unclassified
- 3 -
MR. DuBOIS: Previously I worked for some time on it.
MR. LUXFORD: This has been revised.
H.M.JR: You may change your mind so you are not in
on this. I will hit this tonight at eight-thirty.
Are you all right?
MR. GLASSER: All right.
H.M.JR: Supposing we do it. If I can concentrate
on this thing for an hour, I can really get it into my
blood stream.
MR. LUXFORD: Right.
H.M.JR: I an pretty busy tomorrow morning. I am
afraid--
MR. LUXFORD: The only thing I put in the last memo
to the President on this which you might want to consider
was that while we should carry on negotiations now with
the USSR, probably the matter should not be raised before
Congress until after we get Bretton Woods through, but
the only significant point added--
H.M.JR: He should have something he can take with
him on his trip just the way he did on the London thing.
The English--did you work on that?
MRSS
GOLD: Yes.
H.N.JR: You did?
MR. GLASSER: Yes, I dià some.
H.M.JR: Anybody else?
MR. GLASSER: No.
MR. LUXFORD: Casaday came in.
Regraded Unclassified
-4-
E.M.JR: lie is not here now.
Mr. GLASSER: Yes.
H.M.JR: what is he on, Aussia, now? He was on
English.
Is eight-thirty a good or had time? If the four
of you wouldn't mind, I would only keep you an hour.
But I have just got to get this thing in.
MR. LUXFORD: Here, or at your home?
H.M.JR: Yes, at home. Who else is in on the rate
for Japan?
MR. GLASSER: Luxford has done a little on that, but
Mr. Bell, Harry and I--
H.M.JR: All right. Are you in on that?
MRSS GOLD: No, Mr. Secretary.
H.M.JR: Are you in on it?
MR. DuBOIS: No.
MR. LUXFORD: If you want me in on it--Glasser knows
we are in agreement on any views on it.
H.M.Jr: I will see the four of you. Please do your
best to have it condensed and simple, not something for
now, but something the President can have. For instance,
when Churchill started to talk about Lend-Lease, Professor
Lindeman handed him a memo which I saw, giving him all
the arguments. He had that in his lap, you see, to read.
Write something that the President could have if he wants
to bring it up, or if Stalin brings it up, in that kind
of form.
MR. LUXFORD: we had added to the end of Harry's sug-
gestion just to work out with Stettinius a statement. If
you wish, Stettinius and you can work this out further, the
Regraded Unclassified
270
-5-
thought being the memo will ultimately get to him, anyway,
and it is better to have the window dressing in there.
H.M.JR: That is unimportant. I talked to Stettinius
this afternoon, and he said, "I will see the President,
and 1 am going to bring it up, especially--" I can't say
now--he had a good reason, a favorable reason.
MR. LUXFORD: I am sure.
H.M.JR: 1 will see you then.
(Mr. D. W. Bell enters the conference)
H.M.JR: You had better tell her how to get to the
house, will you?
MR. FLASSER: Yes, sir.
(Mr. Luxford, Mr. Dubois, Mirs.# Gold leave conference)
H.M.JR: This is on your letter.
Mr. BELL: On me?
H.M.JR: Your letter of Jenuary 6 to Mr. Grew on the
ten-cent rate for Formosa, which means nothing in my young
life. I will flip a coin with you.
sm. BELL: well, that is about the way most of us
feel about it, 1 think, except that the technical boys
felt on economic grounds that the ten-cent rate was not
justified over at the conference Saturday morning. Over
at the conference in Mr. Grew's office on Saturday Harry
took the position that you had taken previously, that if
the State Department wanted to set B ten-cent rate on
political grounds and assume the responsibility, that would
be all right with the Treasury. Harold feels that this is
a military rate, whatever you call it; whether it is economic
or political, it is still a military rate, and that letter
is all right. It does put the responsibility right back
on the State Department, and I think that is in line with
the policy you set with Germany. Wasn't it Germany? Yes.
Regraded Unclassified
201
-6-
MR. GLASSER: It is along the line we took in Italy,
too.
MR. BELL: They accepted our rate in Italy.
MR. GLASSER: That is true.
MR. BELL: We fixed the rate in Italy, and in France
we had a little--when we insisted on seventy-five, State
wanted fifty, but we set it at seventy-five, and then the
President came along and said he would like to separate
it.
Regraded Unclassified
Summary of Suggested Provisions for the $10 billion
Loan to the U.S.S.R.
Suggested financial provisions of the loan
1. The interest on the loan may be low, perhaps 2% because
an important part of the repayment to the U.S. would be the agree-
ment by the U.S.S.R. that the U.S. will have the right to purchase
each year up to a pre-agreed upon maximum of strategic commodities
at reasonable prices. This guarantee of a long-term source of
important strategic materials would be at least as valuable to the
U.S. as the interest payments.
2. Such a loan should be granted for 8 period of about 35 years,
with a rate of amortization scheduled to extinguish the debt in that
time.
3. A possible schedule of repayment for a loan of this
character is appended.
It will be noted that the schedule calls for annual payments,
including interest and amortization, of $250 million by the 7th
year rising to $500 million for the 15th to 25th years, and to the
maximum of $600 million a year from the 26th year on.
Method of servicing the loan
There are three principal methods by which the U.S.S.R. would
be able to service the loan over the next 35 years:
(1) The U.S.S.R. would agree in the loan contract to enter
into a trade agreement or an export agreement every year or once
every three years in which she will undertake to sell in the
United States agreed upon minimum quantities of specified commo-
dities in short supply in the United States at reasonable prices.
The specific commodities and quantities which it would be desirable
to include will shift considerably during the next 35 years because
of technological and other reasons. At the present time, however,
it would be possible to prepare a list of commodities which will
probably be in short supply in the United States during the first few
years after the war. As an example, such a preliminary annual list
would be:
Regraded Unclassified
- 2 -
Metals and metallic ores
$35,000,000
Timber and wood products
85,000,000
Petroleum
15,000,000
Furs
30,000,000
Hides and skins
10,000,000
Oils and oilcake
7,000,000
Other industrial raw materials
18,000,000
Total
$200,000,000
A few years after the end of this war our needs of industrial raw
materials, particularly of metallic ores, petroleum, and timber
will probably increase greatly from year to year.
(2) The U.S.S.R. would acquire dollars from her net trade
balance with other countries of the world and from her non-
strategic exports to the United States. The U.S.S.R. is favorably
situated with reference to other important areas of the world and
she will probably be able to maintain a favorable balance of trade
with those areas where she could acquire gold or free foreign
exchange for payment to the United States. In addition, the
U.S.S.R. may be able to acquire large dollar income from tourist
travel.
(3) Russia has a stock of gold estimated at $2 billion now
and is reported to be able to produce from $150 to $250 million
per year. Her gold resources can be used to pay her obligations
to the United States to the extent that she does not acquire
dollars from other sources for that purpose. Russia's gold is
additional security that she will be able to meet her obligations
in servicing the $10 billion loan.
(4) The proportion of the dollars needed to service the debt
which would derive from the three principal sources mentioned above
would be determined in the negotiations.
HG:hgb
1/9/45
Regraded Unclassified
204
January 9, 1945
3:55 p.m.
FRENCH LEND LEASE AGREEMENT
Present: Mr. DuBois
Mr. Glasser
Mrs. Klotz
H.M.JR: Come on, get to talking.
MR. GLASSER: State Department presented us with a
new draft of the French Lend-Lease agreement.
H.M.JR: Before you start, will you please draft a
letter from me which I want to go over tomorrow morning
to Stettinius saying, "It is my understanding that you
told me the other day that this Lend-Lease agreement
which was submitted to the President at Quebec is now
dead."
Can you describe it? We have it here; we have the
whole thing here, but he told me that it was dead. Now,
I want to get it in writing that it is dead. Well--
MR. DuBOIS: The reason we were smiling is, they--
MR. GLASSER: This is dated January 5, and they
submitted a Lend-Lease proposal--a proposed agreement
which is very much the same as the one that you killed
at Quebec.
H.M.JR: I haven't seen White's minutes of what took
place, but take it from me, my memory is pretty good on
most things. I said, "What about thething that was sub-
mitted at Quebec?" Stettinius said that was dead, killed.
Now, what I would like to write him is a letter
simply saying this memo--describe it--which was submitted
to the President with the an proval of Mr. Hull, Mr. Hopkins,
and Mr. Crowley--if you can't get it, Mrs. Klotz will let
Regraded Unclassified
206
- 2 -
you see it. I understand that is dead, but I want to
know if that is dead before we start on a new one.
MR. GLASSER: That memo as & memo is dead. But they
have 8 new draft which puts them back in pretty much the
same place.
H.M.JR: I all. not going to do 8 thing until we get
this other letter over.
Now, because I have to do Russia tonight, as you
know, I can't--if you had told me this was something quite
new, I would have gone into it with you, but if this is
one of these things you have to take page by page and see
which is which, and all that business, no.
MR. GLASSER: Something happened, however, at the
meeting in State on Saturday which is new. Oscar Cox
suggested that instead of having this kind of an agreement
that we go to the type of agreement we had with the British
and Russians. And Harry picked that up at he meeting and
said we would like to consider that. That would be 8 new
type of suggestion for France. And that is the one they
wanted us to consider.
H.M.JR: Now, in order to conserve my energy for
everything else, you fellows fix up a letter which you
can bring out to the house tonight. You are coming,
eren't you?
MR. GLASSER: Yes.
H.M.JR: I will sign that tonight, and we will get
it over to Stettinius the first thing in the morning. And
this thing that you put in this letter, "But before I start
considering anything new, I want to know, is this the
one which we hereby describe which I saw at Quebec? Is
that dead, as you said it was when I was at the Bla ir
House?"
MR. GLASSER: That was last Thursday.
H.M. JR: Last Thursday at the Blair House Mr. Stettinius
said, "This is dead." "I want to know from you, was my
Regraded Unclassified
206
- 3 -
understanding correct, before I consider anything new."
MR. DuBOIS: You want us to recite the fact that he
told you?
H.M.JR: At the ir House he said that it was a
dead issue, and now I got the point you fellows want to
get off-what the heck! We will get around to it. We
will do it this week.
MR. DuBOIS: Of course, don't misunderstand me; I
have a lot of doubts myself as to whether we should do
this.
H. .JR: Now look, DuBois, I try to concentrate on
one thing at a time. The only other thing I can do today
yet is soak up this Russian business, and that is enough
for anybody.
MR. GLASSER: I don't think there is any great urgency
on this; it has been kicking around a long time. It has
been around three weeks or more, but it didn't get a round
to the Treasury until last week.
H.M.JR: I will get to it, but I think that if that
is the case--I mean, if you people have doubts and go
into this thing--
(Discussion off the record)
H.M.JR: Hopkins said, "Morgenthau has no business
butting in on this French thing. And he said just what
I said, "As long as the French have. two or two and & half
billion dollars, why not let them spend it." He was sore
as hell. I have to sit around and talk about it.
MR. DuBOIS: I generally share what I gather your
views are.
H.M.JR: He tells me they still owe us money for
Lend-Lease in North Africa that hasn't been cleared up.
Regraded Unclassified
237
- 4 -
MR. GLASSER: They paid fifty million dollars.
H.M.JR: I know.
I have invited Currie to sit in on two very impor-
tant matters I am doing now, and he is delighted. He
will be here the next couple of days all the time. I
simply want to ask his advice on this; he has nothing to
do, so he is going to start in tomorrow and give me all
this time. He got & very raw deal over there. So he is
going to start in tomorrow morning as a fiscal adviser to
me. So I have him and Jake Viner coming in. And the other
thing, we'll let that cook. O.K.?
MR. GLASSER: Sure.
MR. DuBOIS: Can I just mention that gathering from
what you said--
H.M.JR: You (Glasser) keep after me on this French
thing. I mean, I will get at it the next day or two,
but not tomorrow. What is tomorrow, Wednesday?
MR. GLASSER: Yes.
H.M.JR: We will get at it, not tomorrow, but maybe
Thursday.
MR. DuBOIS: I postponed the discussion on the German
thing because I thought Harry would be here to give his
side of the thing, but I would like, if possible, to speak
to you about the merits of it before you see the President
if it is likely that this may be the last chance you will
have to see him.
H.M.JR: No, I am sorry; I don't think you are going
to be able to.
MR. DuBOIS: I had originally drawn that memo up
as something you would give the President.
H.M.JR: I read the memo. The only way I would
know that you--you can be at the house at quarter of
Regraded Unclassified
208
- 5 -
nine tomorrow and ride down with me. You can get a
Treasury car to get you.
MR. DuBOIS: I can get there, sure.
H.M.JR: Tomorrow. All right, fine.
Regraded Unclassified
House.
Finished
209
January 9, 1945.
Memorandum
TO:
Secretary Morgenthau
FROM: Mr. Gaston
I am resubmitting material for your part in the film
"These are Your Bonds. Ralph Engelsman had not fully ex-
plained their ideas to us when we talked to you yesterday.
The plan is that you are to deliver only the opening and
closing of the material we showed you yesterday. The central
part, containing the detailed account of the advantages of
the E Bond, is to be animated and the comment is to be scored
on by a commentator. We have made slight changes in the
closing part, which is your second speech.
They have dropped their plan of using Marshall and
King and instead will show some news shots of Admirals and
Generals in action. The list of speakers will be: (1)
the President; (2) William Green; (3) Phil Murray; (4)
Eric Johnston; (5) The Secretary of the Treasury. Following
this there will be shots of five workers, one of them & negro,
each one of whom will say in a few words what he plans to do
with his War Bonds. A soldier and a sailor will do the same.
The introduction before the President's speech will begin
with a showing of the American flag, then the Treasury flag,
an E Bond, and a shot of the Treasury Building. The Treasury
Building will be the last thing shown, to play on a note of
stability.
Mr
Regraded Unclassified
210
SECRETARY MORGENTHAU: (Opening)
I think all of us have a better idea now what War
Bonds mean to the winning of the war and to our security
in the future. But there are a few other things that
you should know about your War Bonds.
The War Bonds you buy -- E Bonds -- were especially
designed for your protection. They are an obligation
of the Government and are guaranteed by the full faith
and credit of the Government in the same way as the
dollar bill in your pocket. They are like cash, but
additional
with special privileges.
(Here Commentator takes over, with animation. )
Regraded Unclassified
211
SECRETARY MORGENTHAU: (Closing)
As Secretary of the Treasury, I can assure pledge you
that the Government will stand back of this bond
and fulfill every provision of it. It will be paid
precisely and exactly according to the terms under which
it was issued.
keep
You have only to hold on to your bonds to receive
the maximum return, for they are designed to favor
those who hold them the longest.
Plan to hold them to maturity!
(End)
Regraded Unclassified
January 9, 1945.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
I am resubmitting material for your part in the film
"These are Your Bonds. Ralph Engelsman had not fully ex-
plained their ideas to us when we talked to you yesterday.
The plan is that you are to deliver only the opening and
closing of the material we showed you yesterday. The central
part, containing the detailed account of the advantages of
the E Bond, is to be animated and the comment is to be scored
on by a commentator. We have made slight changes in the
closing part, which is your second speech.
They have dropped their plan of using Marshall and
King and instead will show some news shots of Admirals and
Generals in action. The list of speakers will be: (1)
the President; (2) William Green; (3) Phil Murray; (4)
Eric Johnston; (5) The Secretary of the Treasury. Following
this there will be shots of five workers, one of them 8. negro,
each one of whom will say in a few words what he plans to do
with his War Bonds. A soldier and a sailor will do the same.
The introduction before the President's speech will begin
with a showing of the American flag, then the Treasury flag,
an E Bond, and a shot of the Treasury Building. The Treasury
Building will be the last thing shown, to play on a note of
stability.
Regraded Unclassified
210
SECRETARY MORGENTHAU:
(Opening)
I think all of us have a better idea now what War
Bonds mean to the winning of the war and to our security
in the future. But there are a few other things that
you should know about your War Bonds.
The War Bonds you buy -- E Bonds -- were especially
designed for your protection. They are an obligation
of the Government and are guaranteed by the full faith
and credit of the Government in the same way as the
dollar bill in your pocket. They are like cash, but
additional
with special privileges.
(Here Commentator takes over, with animation.)
Regraded Unclassified
214
Animation - Scored by Commentator.
COMMENTATOR: Privileges -
Here are some of them:
1. Each E Bond is owned individually in your
name. It's yours! It's worthless to anyone else.
If it's lost or stolen you can get another one.
2. You can name someone in the family to
own it with you -- a co-owner -- which means that
you both own the bond like a joint savings account.
3. You can name someone as beneficiary the
way you do on your life insurance policy. This
means that if you die, whoever you name as bene-
ficiary will get the money.
4. After sixty days, the E Bond is always
redeemable in cash. And after one year it is
worth more than you put into it. The longer you
Regraded Unclassified
215
hold the bond, the more it increases in value.
For example: When you pay $75 for a $100 bond,
this is what happens.
The 2nd year it's worth $76.50
The 4th year it's worth $80.00
The 6th year it's worth $84.00
The 8th year it's worth $92.00
At the end of 10 years it's worth $100.00.
(End of animation with commentator.)
Regraded Unclassified
218
SECRETARY MORGENTHAU: (Closing)
As Secretary of the Treasury, I can assure you
that the Government will stand back of this bond
and fulfill every provision of it. It will be paid
precisely and exactly according to the terms under which
it was issued.
You have only to hold on to your bonds to receive
the maximum return, for they are designed to favor
those who hold them the longest.
Plan to hold them to maturity!
(End)
Regraded Unclassified
217
January 9, 1945.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
I am resubmitting material for your part in the film
"These are Your Bonds. Ralph Engelsman had not fully ex-
plained their ideas to us when we talked to you yesterday.
The plan is that you are to deliver only the opening and
closing of the material we showed you yesterday. The central
part, containing the detailed account of the advantages of
the E Bond, is to be animated and the comment is to be scored
on by & commentator. We have made slight changes in the
closing part, which is your second speech.
They have dropped their plan of using Marshall and
King and instead will show some news shots of Admirals and
Generals in action. The list of speakers will be: (1)
the President; (2) William Green; (3) Phil Murray; (4)
Eric Johnston; (5) The Secretary of the Treasury. Following
this there will be shots of five workers, one of them a negro,
each one of whom will say in a few words what he plans to do
with his War Bonds. A soldier and a sailor will do the same.
The introduction before the President's speech will begin
with a showing of the American flag, then the Treasury flag,
an E Bond, and a shot of the Treasury Building. The Treasury
Building will be the last thing shown, to play on a note of
stability.
Regraded Unclassified
218
SECRETARY MORGENTHAU: (Opening)
I think all of us have a better idea now what War
Bonds mean to the winning of the war and to our security
in the future. But there are a few other things that
you should know about your War Bonds.
The War Bonds you buy -- E Bonds -- were especially
designed for your protection. They are an obligation
of the Government and are guaranteed by the full faith
and credit of the Government in the same way as the
dollar bill in your pocket. They are like cash, but
with special privileges.
(Here Commentator takes over, with animation.)
Regraded Unclassified
219
Animation - Scored by Commentator.
COMMENTATOR: Privileges -
Here are some of them:
1. Each E Bond is owned individually in your
name. It's yours! It's worthless to anyone else.
If it's lost or stolen you can get another one.
2. You can name someone in the family to
own it with you -- a co-owner -- which means that
you both own the bond like a joint savings account.
3. You can name someone as beneficiary the
way you do on your life insurance policy. This
means that if you die, whoever you name as bene-
ficiary will get the money.
4. After sixty days, the E Bond is always
redeemable in cash. And after one year it is
worth more than you put into it. The longer you
Regraded Unclassified
220
hold the bond, the more it increases in value.
For example: When you pay $75 for a $100 bond,
this is what happens.
The 2nd year it's worth $76.50
The 4th year it's worth $80.00
The 6th year it's worth $84.00
The 8th year it's worth $92.00
At the end of 10 years it's worth $100.00.
(End of animation with commentator.)
Regraded Unclassified
221
SECRETARY MORGENTHAU: (Closing)
As Secretary of the Treasury, I can assure you
that the Government will stand back of this bond
and fulfill every provision of it. It will be paid
precisely and exactly according to the terms under which
it was issued.
You have only to hold on to your bonds to receive
the maximum return, for they are designed to favor
those who hold them the longest.
Plan to hold them to maturity!
(End)
Regraded Unclassified
the
These-
SCRIPPS-HOWARD NEWSPAPERS
G.B. PARKER
EDITOR or came
1013 ST.N.W.
WASHINGTON,D. C.
January 9, 1945.
Dear Mr. Secretary:
Far be it from me to argue with you
in behalf of editorial flippancy - this in reply to
yours of January 5.
But--and I hope you won't think I'm
being smart-alecky when I say-it has been my observa-
tion over many years that cheapness, irresponsibility,
loose talk and flippancy are usually attributed to the
thing a reader doesn't like; and that sanity, sincerity
and deep wisdom are the characterizations of the same
article by the reader who agrees.
That is just human nature working, in a
world where controversy plays so large a part.
However, I appreciate your very frank
though friendly reaction, and am passing it on to the
author of the piece to which you object; also the en-
closure from The Washington Post.
Thanks for your invitation to come and
see you and for saying you enjoy talking with me. I say
the same as to talking with you.
Sincerely,
175.5amm
G. B. Parker
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
THE
SEAL
CODE
CLAIMS
THE COMMANDANT OF THE UNITED STATES COAST GUARD
799
WASHINGTON
9. January, 1945
Dear Mr. Morgenthau:
I appreciate your writing me in regard to the
participation of Coast Guard personnel in the last War
Bond Drive. Our personnel take pride in your recognition
of whatever efforts they have been able to put forth and,
I am sure, will be eager for the next opportunity.
Sincerely yours,
R. R. WAESCHE
Vice Admiral, USCG
Hon. Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
224
Copy of letters sent to Chairmen
of State War Finance Committees.
Regraded Unclassified
225
25
January 9, 1945
Dear Mr. Isbey:
It has given me one of the greatest moments
of satisfaction and pride of my eleven years in
the Treasury to be able to announce the very great
success of the Sixth War Loan, with its mark of 21
billions when we asked for 14 and all national
quotas exceeded.
The pride I felt was in the accomplishment of
our war finance organization, particularly in the
work of the state chairmen and the magnificent army
of volunteers who are serving under them.
I am writing to convey again my thanks and my
admiration to you as State Chairman and all who have
worked with you for another good job superbly done.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Frank N. Isbey, Chairman
War Finance Committee
600 Union Guardian Building
Detroit 26, Michigan
HEG:tgd
Regraded Unclassified
Draft letter to all State Chairmen.
Dear Mr.
:
It has given me one of the greatest moments
of satisfaction and pride of my eleven years in the
Treasury to be able to announce the very great
success of the Sixth War Loan, with its mark of 21
billions when we asked for 14 and all national
quotas exceeded.
The pride I felt was in the accomplishment of
our war finance organization, particularly in the
work of the state chairmen and the magnificent army
of volunteers who are serving under them.
I am writing to convey again my thanks and my
admiration to you as State Chairman and all who have
worked with you for another good job superbly done.
Sincerely,
Secretary of the Treasury
Regraded Unclassified
227
JAN 9 1945
My dear Colonel Chester:
I wish to express my sincere appreciation
for the wholehearted cooperation you have given our
War Finance Division in the Sixth and previous War
Loan Drives.
Army Air Force personnel and facilities
which you made available during the Sixth War Loan
contributed in large measure to the success which
was achieved nationally.
It is my hope that during future Drives we
may count upon the same staunch cooperation which
you have given in the past.
Sincerely,
(Signed) H. Morgenthau, Jr.
Lt. Colonel Stanford Chester
Special Events Branch
Army Air Forces Headquarters
War Department
Room 4-D-1083 - The Pentagon
Washington, D. C.
SCO1Vgb
January 5, 1945
Regraded Unclassified
228
JAN 9 1945
My dear Mr. Edwards:
I wish to express to you my keen appreciation
for the fine contribution which you and the cast of
Truth or Consequences have made to the Treasury
program throughout the War Bond Campaigns.
Your visits to states from coast to coast have
been of great help to our War Finance Chairmen and
have contributed substantially to their success in
reaching or exceeding their E Bond quotas in five
War Loans.
I hope that we may continue to count upon your
support in future drives.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Ralph Edwards
Truth or Consequences
654 Madison Avenue
New York, New York
Regraded Unclassified
229
THE SECRETARY OF THE TREASURY
WASHINGTON
My dear Mr. Edwards:
I wish to express Jine to you my keen appre-
keen
ciation for the splendid contribution which you
and the cast of Truth or Consequences have made to
the Treasury program throughout the War Bond Cam-
paigns.
great halh work
Your visits to states from coast to
coast have been of immessurable aid to our War
in
Finance Chairmen, enabling them to reachy or exceed
their E Bond quotas in five War Loans.
I appreciate inmensely your unfailing
contributed outdantially Their to
"
cooperation with our almo and effort and hope
that we may continue to count upon your shounch
in
support in future drives.
Sincerely,
Mr. Ralph Edwards
Truth or Consequences
654 Madison Avenue
New York, New York
FORVICTORY
BUY
ENITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
230
January 9, 1945
Memorandum To: Mr. R. C. Duncan
From: L. W. Moran
Director, Automotive Div.
There are three possible prospects for the sale of
automotive surplus parts:
1. Vehicle manufacturers
2. Original producers of parts
3. Distributors and dealers
The vehicle manufacturers could absorb most of the
parts where the quantities involved are not excessive.
These manufacturers do not have space to store excessive
amounts of surplus parts and in dealing with them most
of the items would have to be shipped as needed. They
usually work on a production schedule which anticipates
at the maximum a week's supply of parts. Therefore,
they would most likely be able to absorb only those
items of surplus which they require on their present
production. In addition they would use a reasonable
amount for the replacement market.
The original producers furnish most of the parts
going into the production of the vehicle. It is esti-
mated that about 71 per cent or the parts are supplied
from this source. A number of these parts were also
supplied by sub-contractors to the vehicle manufacturers.
These could be considered in the same category as the
original producers. Some manufacturers, considered as
producers, make parts for the replacement market only.
This group of producers would undoubtedly absorb a
greater quantity of the fast-moving items, such as,
engine parts, bearings, gears, clutches, etc. However,
Regraded Unclassified
- 2 -
they would not absorb very many of the slower-moving
bulky items, such as, chassis parts, brackets, supports,
frames, hangers, and sheet metal parts, such as, cabs,
bodies, fenders, etc.
The distributors and dealers in the main have no
facilities for reprocessing the parts packed for export.
Most of these parts were so processed, which involved
water proofing by special greases and special wrapping
in order to protect the parts under all conditions. Our
contact with this trade leads us to believe that they
prefer purchasing the parts from their regular sources
in saleable condition. They would find it very diffi-
cult to inspect the parts at the various locations where
it is declared surplus. Likewise, they feel that it
would not pay them to make trips for these inspections
to buy in the quantities which they could afford. They
would rather have the manufacturers buy in larger quan-
tities and allow them to pick-up the amounts they need
when they need it. There may be some cases where certain
large distributors in this class would think otherwise.
This level of trade may De able to absorb the smaller
quantities of parts declared in various camps, posts,
and stations as well as some of the smaller amounts in
the major locations.
The major locations of parts surpluses are as fol-
lows:
Letterkenny Ordnance Depot, Chambersburg, Pa.
Rossford Ordnance Depot, Toledo, Ohio
Atlanta Ordnance Depot, Atlanta, Ga.
Mount Rainier Ordnance Depot, Tacoma, Wash.
Ogden Ordnance Depot, Ogden, Utah
Red River Ordnance Depot, Texarkana, Texas
Fort Wayne Ordnance Depot, Detroit, Mich.
Stockton Ordnance Depot, Stockton, Calif.
Rock Island Ordnance Depot, Rock Island, Ill.
Benicia Ordnance Depot, Benicia, Calif.
Regraded Unclassified
- 3 -
In addition there are about thirty back-up points,
which are large warehouses servicing these major loca-
tions. Also, it is estimated there are over one-thousand
posts, camps, and stations which warehouse stocks of
parts.
Need for Parts on Present Production
Some of these surplus parts could undoubtedly be
used in the present production. We are making efforts to
advise the various manufacturers of the types of parts we
have available, so that this can be accomplished.
A large percentage of the parts declared surplus,
particularly at Fort Crook Ordnance Depot, Omaha, Nebr.
and Bluegrass Ordnance Depot, Richmond, Kentucky, are
for vehicles 1939 and older. We have been making efforts
to dispose of these parts and they are at the present time
appearing in our Surplus Reporter. We should be able to
judge the possibility of moving these parts very quickly.
Percentage of Military Parts
We estimate that better than 60 to 65 per cent of
the parts now declared surplus are peculiar to military
vehicles. The only value in these parts will be when and
if these military vehicles are declared surplus and sold
to the public.
Impact on Industry
In view of the large percentage of parts peculiar to
military vehicles ano of the need for service on vehicles
operating at present, we feel that all parts declared sur-
plus to date could be absorbed without any impact on the
industry. This may and probably will change as the
volume of parts declared surplus increases.
Regraded Unclassified
4
Disposition
Since the original policy on the distribution of
these parts was to return them to the vehicle manufac-
turers, every effort has been made to accomplish that
end. Numerous converences have been held with the vari-
ous manufacturers and efforts were made to arrive at a
contract that was mutually satisfactory as the manufac-
turers have always felt that they should have a contract
in order to buy surplus parts.
First, a contract was prepared by our Legal depart-
ment and presented to the manufacturers, Ford, Chrysler,
and General Motors, as the bulk of the parts would be
for vehicles of their production. This contract was
studied by the three companies and found to be unsatis-
factory. Then they presented contracts of their own for
our acceptance. We made a study of the contracts pre-
sented by the three manufacturers and endeavored to make
one which would be satisfactory to the companies and to
us. We felt that we stretched as far as possible in
order to reach an agreement which would allow us to be-
gin the movement of surplus parts. We then presented
this contract to the same manufacturers which they again
found unsatisfactory and presented us with another con-
tract of their own in which they asked for provisions
which were less acceptable than the original. We have
supplied lists of the various parts to the manufacturers
and received replies advising us that they would not
consider buying without a contract.
During this time the original manufacturers' repre-
sentatives have presented their case and we are inclined
to believe that a greater volume of material can be moved
more quickly to them than through the vehicle manufac-
turers. We have hesitated to pursue this too strongly
because the return in dollars to the Government would
necessarily be less if we sell to this level of trade.
However, it may be more desirable to do this and move
the surplus more quickly and in greater quantities so that
Regraded Unclassified
5 I 1
the economy may have the benefit of the material at the
time it is most needed.
In the meantime, in order to attempt to move some of
this material we have decided to make a test by listing
some of these new items in the Surplus Reporter, which is
going out to the general mailing list. In this way we
will be aole to gain some knowledge of what the various
types of trade will be willing to buy and on what basis.
We feel that the small amounts, which will be sold in
this way, can have no great effect on our permanent policy
and leaves us free to move anyway we find most desirable.
The parts disposal problem is one of our most impor-
tant and most difficult problems. We feel many of the
difficulties are now being removed as a result of the
change in the system of reporting declarations according
to the plan which we worked out with the Army. However,
the shortage of experienced parts men continues, and we
have been making and shall continue to make every effort
to secure qualified men to help in this job.
C
0
P
Y
Regraded Unclassified
215
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 9, 1945
TO
Secretary Morgenthau
For information.
FROM Mr. White HDW
This is a comparative statement of the earnings and expenses
of the Stabilization Fund for the months of November and December,
1944.
Earnings
November
December
Interest earned on investments
+77-
40,179.71
$
41,576.05
Profits on handling charges on gold
85,434.09
133,544.95
Profits on other gold and exchange
transactions
4,000,000.00
2,000,000.00
Miscellaneous profits
10.21
12.78
Total
$4,125,624.01
$2,175,133.78
Expenses
Salaries
32,245.66
$ 28,547.63
Travel
1,949.65
631.69
Subsistence
1,119.16
2,564.18
Telephone & Telegraph
1,252.67
1,564.72
Stationery
259.87
45.87
All other
1,600.51
769.59
Total
$ 38,427.52
$ 34,123.68
Net earnings
$4,087,196.49
2,141,010.10
This report was completed from figures supplied by Mr. O'Daniel.
Regraded Unclassified
236
2011
Treasury Department
Division of Monetary Research
Date
January 9, 1945
19
From:
Mrs. McHugh
To:
L. Shanahan
The Secretary sent Mr. White a memorandum,
dated January 8, inquiring who is looking after
American banks in Paris while Saxon is here.
Mr. White wanted the Secretary advised that
Hoffman is in charge and has a number of people
under him and the matter is being taken care of
for the time being.
Regraded Unclassified
Treasury Department
237
Division of Monetary Research
Date 1-9-45
19
To:
Mr. Shaeffer - Room 4408
From:
Mr. Taylor - Room 3202
For your confidential information.
Appended herewith an exchange of
correspondence between State and Treas-
ury concerning a British request that
two American advisers, one for Finance
and one for Supply, should be appointed
for Greece. You will note that the
American advisers are attached in the
first instance, to the Embassy of the
U.S. at Athens.
DEPARTMENT OF STATE
Washington
In rep ly refer to
FMA
November 9, 1944
My dear Mr. Secretary:
Reference is made to an aide memodre from the British Enbassy dated
November 2, 1944, & copy of which 18 attached, expressing the hope that
the United States Government will be prepared to appoint certain civilian
advisers to Lieutenant General Scoble in Greece as counterparts to the
advisers the British Government intends to appoint. Among these would
be a Financial Adviser.
In view of the chaotic monetary conditions currently prevailing in
Greece, the Department believes the designation of a Financial Adviser
by the United States Treasury Department would be advisable. A recent
commication from the American Ambassador recommends that the Govern-
ment take such action and that a United States Treasury representative
be attached to the Embassy and assigned by the Embassy to the proposed
committee of advisers to Lieutenant General Scobie.
The Department would appreciate an indication of whether the
Treasury would be prepared to malce such an assignment. The Department
believes it would be desirable for the officer in question to proceed
to Greece as soon as possible.
Sincerely yours,
For the Secretary of State:
- 0. Howland Shaw
Assistant Secretary
Enclosure:
From British Embassy,
November 2, 1944.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
- 2 -
with reference to carlier conversations with the Department
of State as to the responsibility for civil affairs supplies during
the military period, the Embassy has now received further information
which is believed to be of interest to the Department.
2. It appears likely to the British authorities concerned that the
military phase in Greece may be of considerable duration. During
that time the maintenance of Creek economy will be a military responsi-
bility and will devolve on Lieutenant-General Scobie, Officer Command-
ing British Forces in Gresce. The immediate problems to be faced,
however, particularly in the field of finance, will necessitate
expert advice from the competent civilian authorities together with
close liaison with Creek Government. These questions are of an order
for which Military liaison (Greece) are hardly equipped to handle.
3. It is accordingly proposed to appoint Mr. Cacoía as principal
Civil Adviser to Lisutenant-General Scobie and Mr. MacMillan's repre-
sentatives in Athens. In addition it will be necessary to appoint a
Financial Adviser and Supply Adviser. These officials would advise
Lieutenant-General Scobie on all matters of policy in connection with
the discharge of his duties relating to supply, rehabilitation, etc.
and would also be responsible for all contacts with the Greek Govern-
ment Departments on matters of economic policy.
4. It is hoped that the United States Government will be prepared to
appoint advisors on a parallel basis. The Embassy would therefore be
glad to know whether the State Department would wish to make the
appointments suggested.
BRITISH EMBASSY
2nd November, 1944
Regraded Unclassified
November 28, 1944
Dear Mr. Shaws
Reference 1a made to your letter of November 9, 1944 in
regard to assigning a United States Treasury representative
to be attached to the United States Embasay in Greece.
This is to advise you that on November 27, 1944 we for-
warded a cable to the State Department for despatch to United
States Embassy in London instructing Itr. William H. Taylor
and Mr. Gardner Patteruon, who are now with the Office of the
United States Treasury Representative in London, to proceed to
Athens as soon as their affairs permit in order to establish an
Office of United States Treasury Representative to be attached
to the United States Babassy in Athens. It 10 expected that
Mr. Patterson will remain in Athens as the United States Treasury
representative and that Mr. Taylor will return to London as soon
as affairs in Creece permit.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
ltr. G. Howland Shaw
Assistant Secretary of State
State Department
Washington 25, D. C.
WMT:ers 11/27/44
Initialled by HDW, WAST, Ho
Mailed by Secy's office; 00 Tomlinson
Regraded Unclassified
UNITED KINGDOM TREASURY DELEGATION
BOX ...
BENJAMIN FRANKLIN STATION
WASHINGTON, D.C.
ПЕРКЛЕНОЕ 4-A
TELEPHONE EXECUTIVE 2020
9th January, 1945
Dear Dr. White,
I am writing to advise you of the figures for our
gold and dollar holdings in million dollars at 30th November
1944. They were as follows:
Gold
1726
Less gold liabilities
330
Net gold
1396
Official dollar balances
528
Less dollar, liabilities
180
Net dollars
348
Net Gold and Dollars
1744
Yours R.H.Nam sincerely,
R. H. Brand.
Dr. H. White,
United States Treasury,
Washington, D. C.
Regraded Unclassified
UK-801
copy to What 212
UNITED KINGDOM TREASURY DELEGATION
1/9/45-
BOX 680
BENJAMIN FRANKLIN STATION
WASHINGTON, D.C.
REFERENCE
January 9, 1945.
TELEPHONE EXECUTIVE 2020
Dear Mr. Morgenthau:
I write to acknowledge receipt of your letter of
the 8th of January in which you state that the U.S. Treasury
now agrees that the sum of $200 thousand, representing the
proceeds of sale to the Packard Company of certain British-
owned plant facilities, may DE paid over by the company to
the appropriate United Kingdom Government Agency. This
decision is much appreciated. I am asking the British Air
Commission to make the necessary arrangements with the company.
1 note that the U.S. Treasury also raises no objection
to the proposed accitional sale to the Packard Company of machinery
and equipment to the estimated value of 61.3 million, nor to the
payment of the proceeds of this additional sale to the United Kingdom
Government.
1 am very much obliged for this information.
Yours sincerely,
Raina
R.H. brand.
The Honourable Henry morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
Regraded Unclassifie
00-1028
PLAIN
London
Dated January 9, 1945
Rec'd 11:45 a.m.
Secretary of State,
Washington.
278, Ninth
TO PEHLE FROM MANN
Please deliver the following message from Joseph
Schwarts to Moses Isavitt of the JDC.
Have arranged with UNRRA to make available to us on
temporary basis for service in France Benjamin Glassberg,
Cecilia Rasovsky, George Rooby and possibly one other
staff member. Their salaries will continue to be paid
by UNRRA since their service with us 1a considered
essential training for their future UNRRA assignments and
We will pay their living and travel expenses from time
they enter our service. They will be kept available for
UNRRA and will be released on two week's notice. UNRRA
will arrange their travel to Paris and We expect them
arrive there shortly. Classberg is already in France.
Have also arranged for temporary release to us of Jacob
Trobe who will be sent to assist Passman in the Balken
area with the understanding that be may send reports on
situation directly to UNRRA. This not to be considered
as substitution for Fishsehn but as additional assistant
to Passman who agrees. Trobs now arranging his visas and
- look forward to his early departure. Please advise
status Fishsohn's departure since it urgently important
he proceed Istanbul sconest.
WINANT
JT
Regraded Unclassified
DRAFT OF CABLE TO AMERICAN LEGATION, TANGIER.
Please inform Renee Reichman, 25 Rue Moliers, Tangier, that
Vead Hahatzala Emergency Committee has been licensed by Treasury
Department to pay Jacob S. Cohen, New York City, $6,000 for account
of Aaron S. Cohen, Calle Tetuan 17, Tangier, against which payment
Aaron S. Cohen is to ray the local currency equivalent to Renee Reichman
for purchase of food packages for Jewish refugees in camps in Cmechoslovakia
and in Hungary. In this connection, reference iw made to Department's
telegrams No. 38 of March 30 and No. 125 of September 2, 1944, concerning
similar transactions.
3:15 p.m.
January 9, 1945
Regraded Unclassified
BCO
Distribution of true
January 9, 1945
reading only by special
arrangement. (SECRET W)
6 p.m.
AMLEGATION
STOCKHOLM
49
The cable below is WRB 203.
Reference your 5234 of December 22. Appreciate Swedish
readiness to reconsider matter of submission in Berlin names
of persons in Germany and German-occupied countries other
than Hungary, as follow-up of original Swedish step. As
stated in Department's 2537 of December 16, we agree that
names of persons known to be still in Hungary need not be
transmitted to Germany, but since it appears that most Jews
on the lists with addresses in Hungary may have been deported
to other Gernan-cccupied areas, their inclusion would be
appreciated.
In reply to Hellstedt's inquiry, you may inform him that
Swiss Government has also been asked to communicate lists in
question to German authorities, and has suggested a comrete
procedure for doing so, based on Swiss part in handling
exchanges of civilians between United States and Germany.
We are considering this suggestion and are hopeful of early
agreement.
STETTINIUS
(OH w)
STETTINIUS
NCE
WE
SE
SWP
1/3/45
Regraded Unclassified
DCG
Distribution of true
January 9, 1945
reading only by special
arrangement. (SECRET 17)
8 p.m.
AMLEGATION
STOCKHOLM
51
The cable below is WRA 284.
Reference your No. 5167 of December 18, 1944.
Please advise Evensen and Tranmael that American Relief
for Norway plans to make remittances of $50,000 each on
January 15 and March 1, 1945, for operations under license
No. W-2152.
STETTINIUS
(GII)
WRB:MMV:KG
NOE
SWP
WT
RDC
1/8/45
Regraded Unclassified
EAK-1092
Stockholm
Distribution of true
reading only by special
Dated January 9, 1945
arrangement. (SECRET 17)
Rec'd 2:36 p.m.
Secretary of State,
Washington.
100, January 9, 3 p.m.
TO MOSES LEAVITT, JOINT DISTRIBUTION COMPITTEE,
270 MADISON AVENUE, NEW YORK, LAURA MARGOLIS, JOINT
DISTRIBUTION CONMITTEE, STOCKHOLM, SENDS FOLLOWING
MESSAGE. THIS IB OUR NO. 120 FOR WAR REFUGKE BOARD
"For your information wish to report that Rabbi
Hersog Palestine cabled to King here in December
ssking that Yeshivah and Rabbi Nical groups Shanghai
be given Swedish protection passports and Swaden
send ship to evacuate them. Hersog also asked
professor Ehrenpreis' help. Ehrenpreis asked Foreign
Office request their consul Shanghai make complete
investigation situation, which was done. Full contents
this investigation sent to Lisbon and having no copy
here will ask they forward. Report clearly indicates
no greater emergency this group than all others and
stating no evacuation from Japanese territory possible.
Have personally received cable from Joseph Bitker our
conmittee asking everything possible be done to check
interference Rabb1 Nical groups. Knowing situation
as I do must state that continued interference behalf
Rabbi Nical groups regarding their people in Japanese
territory will endanger security all refugees. This
extremely serious and Vaadhatsala has no right en-
danger lives 20,000 persons while trying to help their
group, especially since evacuation complete in-
possibility. Bitkers reports clearly indicated all
groups receiving equal treatment.
JOHNSON
JK
Regraded Unclassified
DCG
Distribution of true
January 9, 1945
reading only by special
arrangement. (SECRET W)
5 p.m.
AMLEGATION
BERN
127
The following for Huddle and McClelland is WRB 356.
In view of well-known ferman practice of exterminating Jows
surviving in any area previous to its evacuation, Department and
WRB consider it necessary once more to draw attention of Swine
and Intercross authorities to the danger faced by the Jewish sur-
vivors in German-controlled territory.
Accordingly, it will be appreciated if you will visit newly
appointed Swiss Foreign Minister and President of Intercross, and
urge that continued efforts be made from now on to keep the surviving
victims of Nasi persecution alive during the coming stages of
hostilities in Europe. You should specifically mention in this
connection the three largest concentrations of Jews in Axis territory
known to exist, vis. Lods with 60,000 to 80,000 inmates, Theresienstadt
with 40,000 to 60,000 inmates, and camps near Vienna with 18,000
inmates, and you should also nention any other localities or regions
where Jews are believed by you to survive.
In your conferences with Swiss Foreign Minister and Intercross
President it should be made clear that this Government considers
that frequent and extended visits of Swiss Consuls and Intercross
delegates to places and regions where Jews are concentrated con-
stitute one of the most effective means of preventing their further
extermination. This method proved its efficacy in Budapest
where, thanks to the presence of Swiss and Intercross person-
nel, many lives appear to have been saved.
Furthermore, you should emphasize to Foreign Minister and
Intercross President the mounting evidence of confusion smong
local German officials and their increasing accessibility to
psychological pressure seeking to dissuade them from executing
extermination policies ordered by certain German authorities,
and urge that full advantage be taken of this state of mind in
the interest of saving lives, through unofficial as well as
official channels.
More particularly,
Regraded Unclassified
-2- #127, January 9, 1945, 5 p.m. to Bern.
More particularly, in view of German consent to permit
Intercross inspection and care for Hungarian Jews engaged in
forced labor in Germany and Gernan-occupied territory
(enclosure 1 to your despatch 10132 of December 6), please
request immediate and continuing Intercross action to safe-
guard lives of this largest group of Jews surviving under
German rule.
Please endeavor to make clear to Swiss and Intercross
that the activities suggested above should bu actively pur-
sued as long as the danger continues.
Please advise Department and WRB of Swiss and Intercross
peaction.
The following from WRB for NoClalland:
It would be helpful if you inquired at frequent intervals
what specific action Swiss and Intercross are taking to carry
out the above suggestions.
In view of the situation as outlined above and in view of
your recent reports indicating effectiveness of publicity and
other forms of psychological pressure upon German officials,
you are requested to make special efforts through all channels
available to you to increase such pressure with a view to safe-
guarding the lives of the surviving victims of Nasi persecution.
STETTINIUS
(CHW)
Regraded Unclassified
JMP-1220
Ankara
Distribution of true
reading only be special
Dated January 9, 1945
arrangement. (SECRET W)
Rec'd 9:02 p.m.
Secretary of State
Washington
46, January 9, 3 p.o.
FROM KATZKI TO PEHLE WRB ANKARA'S NO. 4.
The two contingents of enigrants from Rumania
(REEMBS 31 January 6 and 38 January 8 Ankara's Nos.
2 and 3) comprising 626 persons, corrected count,
who had been detained at Starazagora, departed from
Istanbul for Pulestine as one group on January 7.
The Turkish authorities provided a special train
for this purpose in accordance with Anbassador
Steinhardt's general agreement with the Turldsh
Foreign Office regarding railroad facilities, which
has now been terminated by the Turks as a result of
the withdrawal of British approval.
It should be noted that the special train was
made available by the Turk Government at Anbassador
Steinhardt's personal request despite the railroads
difficult seasonal transportation problems.
STEINHARDT
JUS
Regraded Unclassified
NOT TO PE RE-TRANSMITTED
COPY NO.
SECRET
OPTEL No. 11
Information received up to 10 a A,, 9th January,
1945.
NAVAL
1.
NORTHERN W.TERS. Convoy of 37 ships has arrived in
N. Russia.
MILITARY
2,
WESTERN FRONT. 7th. French Army Front, Enemy
forces advancing northwards from Colmar pocket forced our troops
to evacuate Rheinau, Neunkirch and Witternheim. Fighting con-
tinues north of these towns,
U.S. 7th Army, Enemy penetration north of Stras-
bourg being contained and number villages now recaptured.
Wingen continues to be cleared despite stiff resistance and
some progress now made to north of town,
Southern Flank Ardennes salient. No progress
Bastogne sector. but Flamierge N.W. of town captured 7th/8th.
Northern Bank Ardennes salient. Continued pres-
sure by our forcev despite appalling weather including snow.
From W. to E. Hargimont, Dochamps, Regne, Sarte have
been captured, while road from Laroche to Vilesalm appears
controlled by us throughout whole length though heavy fighting
continued afternoon 8th about Samree.
3.
GREECE, British forces advancing N.W. from Eleusis
reached gorge short of Erithrai (south of Thebes), where resist-
ance stiffened and heavy casualties were inflicted on enemy.
4.
EASTERN PRONT, 8th. Russians captured further 130
block houses Budapest, To W. and N.W. of city large forces
German infantry and tanks repulsed.
5.
BURM, British forces reported 4 miles N.E.Shwebo.
AIR
6.
WESTERN FRONT. Night 7th/8th. Bomber Command air-
craft 816 despatched Munich 653 (14 missing) - 2176 tons
(attack in two waves, first through broken cloud and accurate,
second through thick cloud and scattered), Hanover, Nuremburg
and Hanau 84 (1 missing! and bomber support 79 (1 missing).
8th. 595 escorted U.S. heavy bombers (27 out-
standing 14 believed safe) dropped 1391 tons communication
centres behind enemy salient, thick cloud over all targets.
SHAEF (Air): weather prevented almost all operations. Beau-
fighters attacked and hit two ships (2500 and 1200 tons),
large tug and barge off S.W. Norway.
HOME SECURITY
7.
Up to 7 a.m. ROCKETS. 8th, Incidents occuring 9.
Night 8th/9th, Three incidents.
Regraded Unclassified
January 10, 1945
9:03 a.m.
HMJr:
Hello.
Operator:
Mr. Yost.
HMJr:
Hello.
Charles
Yost:
Good morning.
HMJr:
How are you?
Y:
Very well.
HMJr:
Mr. Yost, those two paraphrase cables
Y:
Yes. They are coming over to you in just a
few minutes. They were very long and it took
most of yesterday to paraphrase them.
HMJr:
Oh.
Y:
But we'll have them over to you within half
an hour.
HMJr:
Well, the reason I was pressing was that I
think Mr. Stettinius and I are going to see the
President this morning. Hello?
Y:
Yes.
HMJr:
And the one that -- from Harriman was the one
I'd like to take along.
Y:
Good. I'm sorry they've been delayed but they'll
be there in just a few minutes.
HMJr:
Do you think you could get them here before ten
o'clock?
Y:
Yes, I'm sure we can. They're all ready now --
it's just a case of getting them over there.
HMJr:
Thank you so much.
Y:
All right.
Regraded Unclassified
AGENDA
LEETING IN SECRETARY'S OFFICE
January 10, 1945
1. Certificate pattern of rates
2. Increase in Treasury bills
3. Federal Reserve Ratio
4. Changes in pattern of rates unofficially
suggested by Chairman Eccles
Regraded Unclassified
253-A
Memorandum to Files
January 23, 1945
Meeting in the Secretary's Office on January 10, 1945.
Present: Mr. Eccles, Mr. Sproul, Mr. D. V. Bell,
Mr. Haas, Mr. Lindow, Mr. Tickton
The Secretary opened the meeting by saying that there were three
or four items on the agenda for discussion. He asked Mr. Bell to take
these up one by one.
(1) Increase in short-term certificate rates
Mr. Bell pointed out that the yield on three-month certificates had
increased from 0.46 percent on September 1 last year to around 0.70 percent
in December, and that it had since decreased to 0.60 percent. He said that
the Treasury W&O concerned about this change in the pattern of rates and
would like to see the three-month certificate yield continue to decrease
until it reached approximately the September 1 level.
The Federal Reserve representatives took the position that they had
never accepted a curve between the 3/8 percent point for three-month bills
and the 7/8 percent point for one-year certificates. What they had agreed
to, they said, was the rate at which the securities of these two maturities
could be sold by the Treasury. They argued that in September there had
been such a large supply of certificates sold in the market that the rate
just went up. Moreover, there would have been more bank financing in the
drive, they said, if they had tried to keep the short-term certificate rate
down. Mr. Sproul said he felt that the place to approach the problem of
preventing abuses of the pattern of rates is in the 2 percent area and he
implied that the thing to do was to stop issuing 2 percent bonds available
after drives for commercial bank acquisition. Mr. Sproul also contended
that the change in certificate rates had not resulted in making 2 percent
bonds more attractive, from the point of view of profitability, in the
Sixth War Loan. Mr. Bell, however, said that the change had pushed investors
farther out along the curve of interest rates by increasing confidence in
the 2 percent area as compared with the certificate area.
(2) Possible increase in Treasury bills
Mr. Bell explained that the Treasury was considering the possibility
of increasing the Treasury bill issue by about $200 millions per week, mostly
for the purpose of helping the reserve situstion, and at the same time pro-
viding the most suitable securities for the Federal Reserve System to acquire.
Mr. Eccles said that bills should be increased only as the need for
reserves increases. They should be used only in connection with their
reserve function and should not be used primarily for the purpose of pro-
viding the Treasury with funds. Mr. Eccles indicated that some additional
Regraded Unclassified
253-B
2
bills should probably be issued before the next war loan drive.
Mr. Sproul said that the Federal Reserve would have to acquire about
$3 billions in securities in the next few months, and that he supposed
some of these would be bills. He indicated that he still did not like the
present arrangement for handling maturing bills and that he wented a pro-
cedure worked out for refunding them directly with the Treasury. Mr. Ecles
said that something should be worked out on this before we increased bills.
Mr. Ecoles suggested that an arrangement be worked out by whichthe
Federal Reserve would earn 1/4 of 1 percent on bills instead of 3/8 percent,
but said that this matter was of minor importance. In discussing bills he
said that the 3/8 rate was no longer a market rate and that the bill market
outside of the Federal Reserve is gone.
(3) Federal Reserve ratio
Mr. Bell explained that it was probably desirable to settle the matter
of what should be done about the Federal Reserve ratio as soon as possible
80 that this problem would not carry over to the period just before the
Seventh War Loan. Mr. Eccles said that it was the unanimous opinion of the
Board and the Federal Reserve Presidents that legislation be requested
reducing the minimum required ratio. Mr. Sproul indicated that a reduction
to 25 percent was what he had in mind. Mr. Eccles said that they also
planned to ask for an extension of the Glass-Steagal Act providing for
Government securities to be held as collateral behind Federal Reserve notes.
This Act expires on June 30, 1945. and it is imperative that it be extended.
The Secretary said that the legislation should be kept simple in order to
evoid controversy. The Federal Reserve representatives said they thought
they might undertake to get the legislation by April 1, and there was some
discussion as to whether Bretton Woods should take precedence.
(4) Changes in the longer-term pattern of rates
Mr. Bell remarked that Mr. Eccles' December 16 memonandum had discussed
the possibility of lowering the 2 percent bond rate to 1-3/4 percent and of
reducing the 7/8 percent certificate rate to 3/4 percent. Mr. Eccles said
that bank earnings were going up steadily and that it was important to
reexamine the rates on securities being acquired by banks. He said that
banks were becoming more interested in longer-term issues and this W3.2
inteneifying the problem and raising interest costs to the Treasury. He
referred several times to the proposals in his memorandum.
...
In Mr. Bell's office after the meeting in the Secretary's office, it
was agreed that further meetings on a technical level should be held on
January 16.
Prepared by Mr. Lindow and Mr. Tickton.
wf
565
Regraded Unclassified
January 10, 1945
9:45 a.m.
FINANCIN,
Present: Mr. D. ... Bell
Mr. Haas
Mr. Currie
Mr. Tickton
Mr. Lindow
Mrs. Klotz
H.M.JR: Go ahead.
MA. PELL: Geor e has a memorandum prepared, Er. Secretary,
which I think you mi ht read to start with.
H.V.J.: You read it out loud, George.
M. HAAS: (Reading Memorandum to Secretary Morgenthau
from Mr. Haas, dated January 10, 1945, attached)
"Subject: Problems Relating to the Government Bond
Market.
"There are a number of problems relating to the lovern-
ment bond market which should be given early attention.
These concern mainly (1) the breach of the certificate
pattern of rates, (2) a series of other changes in the
pattern of rates suggested unofficially by Chairman Eccles,
(8) the question of issuing more Treasury Hills, and (4)
the problem of the declining Federal Reserve ratio.
"1. Certificate pattern of rates.
"The breach in the certificate pattern of rates has
been partially restored since your letter to Chairman Eccles
on this matter. The yield on three-month certificates is
calculated from our curve at 0.60 percent for the market
close last night as compared with 0.68 percent on
December 22, the day you sent your letter to Chairman accles.
This compares with 0.46 percent last September 1, before
the weakness was permitted to develop. All of the recovery
Regraded Unclassified
-2-
has occurred since December 29, although the Federal
meserve System has not purchased any certificates since
that date.
H.M.JR: It has recovered?
MR. MAAS: It has recovered. The yield has ¿one down
from 0.68 to 0.60, 8 points. You see it was at 0.48 before
it went off but the recovery has taken place of its own
accord. The Federal has not bought anything--
Mit. LINDOW: That's right.
MR. HAAS: Maybe Sylvia Porter said they were ood
birds and Dan put a lot of money in the market.
M. BELL: me piled up our balances during the Drive
and tax payment period in December and we didn't make
big calls on the banks, and at the year end our one
billion and one-quarter was reduced to three hundred
and fifty million. We put eight or nine hundred million
dollars in the market in that period and now we are
beginning to get calls on the hanks. In order to meet
those calls we will have to sell Government securities
and the securities will largely be certificates.
H.M.JR: This process which you followed wasn't
in order to force down the rates?
M. BELL: It was a question of relievin_ the banking
situation over the year end and not making big calls durin_
the first tax-payment period.
R.M.JR: Leave it SO that the Federal Reserve can
say, "We knew that would happen."
Mit. HAAS: Not much has happened yet.
MR. LINDOW: That is a recovery of a little better
than one-third of the loss, 30 there is still quite a way
to go to get back to September 1, which is the base we
took.
Regraded Unclassified
-3-
MR. CURRIE: Was 0.68 the peak?
Was. LINDOW: No, the peak was about 0.70, which
occurred around the twenty-ninth.
(Mrs. Klotz enters conference temporarily)
Miss HAAS: Shall 1 continue, Mr. Secretary? "It. is
important that the breach in the certificate pattern of
rates be completely restored within the course of the
next few weeks.
"2. Other changes in pattern rates suggested by
Chairman Eccles.
"The unofficial proposals to make certain changes in
the pattern of rates were outlined in a memorandum from
the Chairman dated December 16, 1944. The gist of this
memorandum is that the pattern of rates be changed as
follows: (1) Increase the bill rate from 3/8 to 1/2
percent--'
H.M.JR: Who is suggesting that?
MR. HAAS: Chairman Accles' unofficial memorandum
he sent over today.
H.M.JR: That's what he wants?
M. HAAS: Yes, sir.
MR. BELL: lie was putting this up for consideration
and discussion.
H.M.JR: Three-eighths to one-half?
MR. BELL: But there are other things that 60 with it.
Mr. RAAS: He wants to lengthen the bills to--
Regraded Unclassified
-4-
MILL LINDOW: four, five or six months, whatever is
necessary. That doesn't amount to anything when you
lengthen them because if the posted rate is there, it is
the same as one-days money anyway SO you really don't
get anything by lengthening them.
MR. HAAS: The second proposal in the memorandum,
11
decrease the certificate rate from 7/8 to 3/4 percent,
and (3) decrease the 8-10 year bond rate from 2 percent
to about 1-3/4 percent.
II.M.JR: These are all Accles' su gestions?
Mic. HAAS: All Ecoles', unofficially, sir. Now, our
comment on that, "We recommend that the increase in the
bill rate not be adopted, because of the possibility of
its being interpreted as a further weakening in the pattern
of rates and in the Government's ability to hold the line
on interest rates--the outstanding achievement of all the
wartime controls. The decrease in the certificate rate
and the 8-10 year bond rate are worthy of serious considera-
tion, but action alon such lines should be taken very
carefully. We favor lowerin 01 rates as much as possible
in order to bolster confidence in the financin, program
and to decrease interest costs to the Government. The
market is partly prepared for this, since many people
believe e are likely to follow the British in the
lowering of interest rates.
"3. Treasury bills.
"The weekly offering of Treasury bills should be
increased to raise at least $200 millions of new money
per week--not for the purpose of increasing the working
balance but rather to strengthen the short end of the
pattern of rates. An increase in the bill offering
would improve the reserve and quasi-reserve position
of commercial banks, and would provide the most suitable
vehicle for the billions of Federal Reserve acquisitions
which will be necessary before the Seventh War Loan.
Regraded Unclassified
"4. Federal Reserve Ratio.
"The Federal Reserve ratio 1.88 49.4 percent last
Wednesday, and may be expected to decline steadily until
the Seventh War Loan. The legal minimum is between 35
and 40 percent, depending on the composition of Federal
Reserve liabilities. The problem of what to do about
the ratio snould be discussed at once with Federal
Reserve officials with the view of seeking new legislation
lowering the required ratio, which the President seid in
his Budget message he intends to request soon. this
matter has been discussed frequently in financial circles
end some action is expected relatively soon. Nevertheless,
there may be some criticism when action is finally taken,
and every effort should be ande to handle this matter
quietly and expeditiously."
TR. RULL: There is one thing about Eccles' proposals--
I ciscussed the with nin informally and toln his we would
be zled to go over then and consider the and discuss them
with hi.. lie wrote then in the form. of a me, oranou. end
put the before the last meeting of the--I think the
President's conference--which is composed 01 all members
of the Open erket and the LO mittees, and they took no
action on them except to say they V.C 10 like to study them.
I think tast at the first meeting & grest Enj people tere
against these propossla, so the, are quite unovicial ene
:'V2 not in RD, way been acted upon by the Committee or
the Board, and they are really his personal EG. jestions.
I don't knov. that vie can take the st this point too
seriously.
H.S.JR: What ha pens if there isn't , change in the
length?
FR. PAAS: Oh, then 1.e have the alternative. You
could issue Federal Reserve Bank notes ano take care of
the situation tist vie,, but it is retler--since this
issuance nov in connection vith saving of paper--when
PAE that?
". December 19, 1943.
Regraded Unclassified
Mr. HAAS: In 1943 we got a lot of criticism and
you will probably have criticism now. "1 think we are
sort of stuck, the President said in the budget Messa e
and he was going to recommend asking for legislation.
H.M.JR: Who got him to put that in?
MR. HAAS: Eccles. Federal Reserve.
BELL: we tried to get it out and we weren't
successful.
Wills HAAS: Dan got half of it out.
Vic. BELL: Yes, they said in the Message he was
going to recommend lowering the necessary ratio and
further controls over bank reserves and 1 thought it
would jar the bankers to death. They had no idea
Federal meserve was going to come out for further
control on bankers and I thought when it did, it should
be understood.
Vilue HAAS: This should be done in advance of all
real crises. It should be out of the way before the
Seventh War Loan, and it is the same committees, Banking
and Currency.
11.M.JR: Let me usk you a question. All this talk
about excess reserves while the war is on and while we
are spending the money for munitions is really meaningless
isn't it? It only becomes important when we begin to
go into--well, a period of a couple of years after--
MR. CURRIE: Yes, I should say the immediate period
after VE-Day or VJ-Day--if we would remove controls too
rapidly under certain conditions, I think there may be
some danger, but there may be some danger, although it's
pretty remote.
H.M.JR: As long as we are in this position, these
controls really mean less because the whole thing is
artificial anyway.
Regraded Unclassified
-7-
M. CU.U.IE: I think the real si nificance of excess
reserves now is how you want to use them to play on the
interest rate structure. It doesn't have anything to do
with inflation at all.
H.M.JR: As far as inflation is concerned, the little
thought that I have given to it in the last month or so,
I can't get the conception that it nas any effect on
inilation.
have CURRIE: I don't think it has.
H.M.JR: At the level of the man or woman who _oes
in to buy something. 18 that right?
Kr. CURRIE: That's my view, yes.
H.M.JR: That's yours isn't it?
B
MR. BILL: Yes, but I don't know if you are talking
about controls over bankers or the ratio. There is a
psychological effect on Cold ratio--
M.M.Jh: I am talking about control, to answer your
question. I am talking about control of bank reserves.
MR. CURRIE: That's what I thought you meant.
kin. FELL: That's right.
MR. CURRIE: In the Banking Act of 1935 I proposed
this reserve ratio, but it was considered unnecessary
at the time.
MR. BELL: We really don't need any reserve ratio
at all. We should have gold behind all liabilities and
it shouldn't be required to be a certain percentage
of anything. You will find a lot of opposition on
eliminating it altogether, because they think it ought
to be a check on operations.
(Mrs. Klotz leaves conference)
Regraded Unclassified
BELL: ".e are the only ones, I think, that Leve
the percentage ratio.
H.M.JR: Did .ou tell the President you were 60ing
to work with us?
R. CURREN: I ciun't have an opportunity to. I
will.
(r. Currie leaves the conference.)
H...JR: That I 5 proping for is this, if it's
correct. That has no effect right now on bond reserves.
I mean, can't we look forward to the kind of control we
need after the war is over, rather than somet inc right
nov?
HAAS: As the thing is, the reason LG need it
now is this: You have B deficit, saj, of & certain fig-
ure. You can sell so much outside of the banks, and the
balance has to be sold to the banks. The banks can't
buy it unless the reserves are given to the banks.
H. Jic: They can't buy it? Are they bought up?
176. RAAS: They only have & little over & billion.
MR. LINDOW: Even that billion is probably not
usable. The banks like that much of E: cushion.
H.M.JR: You mean they can't buy any more Government
securities?
MR. LINDOW: Not unless Federal keeps buying and
Federal has to buy about nine billion 8 year for that
purpose so long as the drain on reserves is what it
has been in recent months--in the last couple of years.
R.P.JR: How long can this machinery keep up without
breaking down?
LR. HAAS: It doesn't have to break down at all unless
you intend to do something.
Regraded Unclassified
-8-
H.N.J.: I an beginning to understand that either they
have to lower the reserves or get more reserves through the
Federal Reserve Bank. Why don't you put it simply so a
farmer could understand it?
MR. HAAS: I thought you did understand it, L.P. Secretary.
MA. BELL: They issued a public statement they are
committed to the policy of furnishing to the market all
reserves to finance this war and it's just a question of
how much you need out there. They feel sometimes it
ought to be a little tighter than others.
h.M.JR: How much would you lower them?
HARS: They are talking about twenty-five percent.
M...JR: What are they now?
MR. MAAS: Twenty-five percent.
mh. LINDOW: I think we have gotten the two subjects
mixed in the last couple of minutes, mr. Secretary. The
statement I made about the Federal Reserve Bank related
to member bank reserves. I think that is what you were
referring to when you talked to Mr. Currie. Now, this
last section of the memorandum which Mr. Haas read referred
to the reserves of the Federal Reserve system itself, and
that is the one which needs to be done hecause--
H./.Jk: Where?
Mr. LINDOW: The legal minimum is between thirty-five
and forty percent as set by law. A week ago the rate was
forty-nine percent.
H.M.JR: Why do we have to lower that?
MR. LINDOW: They could get out of the problem by
issuing Federal Reserve Bank notes which require no
reserve. At present, Treasury issues Federal neserve
notes which require forty percent gold reserve.
Regraded Unclassified
-10-
H.K.JR: If they issue Federal Reserve Bank notes,
some of these people will holler fi t money.
M. HAAS: That's right. I mean, that's the deal.
Mr. LINDOW: I think they will holler anyway, as far
às that goes.
M.. BELL: AS you finance through the banks, we
increase bank deposits, and that increases the reserve
requirements and thereby increases the member bank
deposits with the Federal meserve bank. That, in turn,
increases the requirements. to put up cold or someone
will offer money against those deposits, and as you
increase, your ratio goes down to between forty and
thirty-eight.
H.M.JK: Let me get this thing. Supposing the
Federal neserve--why do they need a loan for reserve?
MR. LINDOW: They are faced with this problem in
order to buy nine billion.
M. TICKTON: They would have to stop somotime
next fall and wouldn't be able to buy any more.
MR. BELL: June 30.
H.N.JR: Why can't they buy any more?
M... LINDOW: Unless they use Federal Reserve Bank
note device instead of Federal Reserve notes.
H.M.JR: What is the internal picture?
MR. LINDOW: The reason they buy this nine billion
is to take care of both member bank reserves due to in-
creased deposits and the currency outflow, which is five
billion a year. Now if in that five billion the Federal
Meserve were to issue Federal Reserve Bank notes rather
than Federal meserve notes, they could avoid any further
drain on their gold reserve for that purpose. They could
even back up and substitute rederal neserve Bank notes for
Regraded Unclassified
-11-
Federal Reserves notes now outstanding and improve the
ratio. They have apparently decided they don't like that
solution because they got the President to put this thing
in the Budget message. If that solution is discarded,
then you have to CO up against the problem that once they
get down to around forty percent they just can't do any
more for the market.
H.M.JR: Why are you fellows against having them
go to Congress?
MR. LINDOW: I don't think we are against it.
N.. TICKTON: They ought to 20 right away.
LINDOW: Something ought to be done soon.
H.M.J.: aren't they willing to do it right away?
NA. BELL: I think they are willing to 60 pretty
soon. That's a subject that should be discussed. It
doesn't necessarily have to be discussed here today.
C.M.JR: Why not?
M... LINDOW: I think it ou ht to be settled. It
may take weeks up there to get settled on the Hill.
HAAS: The Secretary would be in an awful stew
if the war loan came up and people started worrying
about that.
MR. BELL: 1 think it ou ht to be done before the
Seventh War Loan and before Bretton Woods. Bretton
Woods affects your gold, you know.
Mr. TICKTON: It's going to cause a discussion.
H.M.J.: I don't see why the two things are related.
Mill BELL: You are going to take a lot of gold out
of the Bretton Woods proposal and that immediately reduces
your ratio, SO you are going to have to do something about
Fretton Woods.
Regraded Unclassified
-12-
You talk to Harry white about doing something
before Bretton Woods.
BELL: Bretton Woods is liable to be 2 long drawn
out argument.
H.R.JR: I don't think SO,
IS. BELL: You don't?
I.M.JA: No. me have support on the Republican side--
I 60n't think it is .oing to take very long--they were
talking about it a couple of weeks ago in the house.
...... FELL: A couple of weeks in the House and mayne
8 week or 30 on the Floor, and two weeks in the benate--
six weeks 80 by-that means way into March.
LINDOW: I think the way this thing should be
viewed, Mr. Secretary--everything is in pretty good shape
now but it is pretty easy to get the apple cart upset, and
these changes in the pattern which have occurred are 3
discouraging element and 1 don't think we ought to give
the market or the financial community a chance to start
getting worried. If we let this thing 2° very long, they
are going to _et worried.
HARS: I think it is past due and it would have
been better if we had done it six months or a year ago.
H.M.JR: That doesn't help anything, you know.
state hAAS: I just mentioned that to show the urgency
at the moment.
Make LINDOW: I think we would have recommended it last
summer if it hadn't been for the political situation and
election coming up.
IN. HAAS: That's why we didn't.
H.M.JR: I think v.e definitely ought to bring it up.
Regraded Unclassified
- 13 -
MR. BELL: Today?
H.M.JR: Today, sure.
MR. BELL: I think they have discussed it among
themselves and they have agreed, I assume, in view of
the Budret Message, it ought to be legislation and not
Federal Reserve Bank notes. It can't be Federal Reserve
Bank notes without roing to two Committees in Congress
and explaining it to them, because last year we said
We had no objection to passing a bill which would repeal
that section of the law authorizing them to issue Federal
Reserve Ban} notes. Eccles said the same thing and it
went throu the Senate and was pigeonholed in the House
Committee. Stea all didn't bring it out.
In view of that action I think we have to explain
to the committee these two devices, one by legislation,
and the other by Federal Reserve Bank notes. If they
would rather 70 the Federal Reserve Bank note route, I
think that is tantamount to n vote of confidence from the
two committees that would authorize us to TO ahead and
tell U.S. they had no bjection, and I think we ourlit to
say that publicly, which would take some of the edge
off the criticism we would get outside of Congress.
10. MAAS: I think, Mr. Secretary, through legis-
lation--I think there is a possibility the Federal
may want to include some banking reform legislation
along with legislation for reserve ratio. That would
be unfortunate and it should be handled like the debt
limit, alone. That way it would go through Congress
quickly. There would be no other item. It should not
be mixed with banking reform.
M.W.JR: What?
MR. HAAS: They may not. But they mix other things
with it. You get all kinds of adverse discussions in
the Government bond market and everything else.
Regraded Unclassified
- 14 -
12. BELL: It seems to me the main item this morning
for discussion is this certificate raté on this bill
program, and George has in here a sentence that is impor-
tant, that the breach in the certificate pattern of rates be
completely restored within the course of the next few weeks.
I think that there would be uite an argument about that as
to whether it should be completely restored, and if we
could met something out of them, there would be a continued
improvement in that. Until they get down and get sub-
stantially the loss back, I wouldn't nut it right on the
line, I lon't think. And the other bill program-there
will be a lot of argument on that. They will say the
increase on reserves, as a result of selling bills, will
20 into the two percent market, which is already very
strong.
Now, if you want a two percent strong market with
a view to later reducing your 3-10 year period from two
percent to one and three-quarters, why maybe it's a good
thing to--
H.N.JR: I am satisfied with two percent. What the
hell! I'd be satisfied if We could go on as we are.
M. MAS: So an I.
MR. BELL: I am too. Before the next drive We ourht
to give consideration to issuing something other than two
percent bonds. One and three-quarters, and put it a little
below the line.
M.K.JR: I am more than willing to start this discussion
this morning and keep in contact with it, but I just don't
have the patience to get into three or four discussions.
I mean, you will have to bear the brunt of that. I can't
TO into this long-winded thing where he tries to wear me
down. (Laughter)
MR. BELL: I think he wears you and everybody else
down. The last time I talked to him over the telephone
at five-thirty, he hung up at six-thirty in the evening.
(The Secretary leaves conference temporarily)
Regraded Unclassified
-15-
H.M.MR: lave you got it all settled?
R. BELL: I think we ought to have 2 little more
pointed arenda on our desks to follow the rate. Then
we will have quite a bit of comment to make on the
contents of your letter. Sproul said it had some
implications in it that had to be straightened out
for the record.
J.: I have your word. have you -ot the record
80 in case--
MR. BELL: We didn't have much time to "O over the
record, but you remember last year you asked Menry
Murphy to TO over the record?
Where is Henry : Were you sick or were
you on vacation?
MR. TICKTON: I was traveling for & couple of days.
A SAAS: Re 728 lookin over the Sixth War Loan.
38LL: Maybe you will remember it now.
We have a lot of references to the record and
Jidn't have time last night to PO into it. That is
the most important thing anyway. That is when the
decisions were made and it has been pretty well kept.
KKM: The only thing I thought, if it would be
agreeable to you, at three o'clock group on Monday I would
kind of like to have--who is the man who does the surveys
with us--I would like to have him here.
M. HAAS: Is he in town? Re is going to do a Job
in Europe. I don't know if he is here.
MR. LINDON: Likert? Cartwright is his acsistant.
Regraded Unclassified
269
-16-
H.M.JR: Is he any good in--
Mr. LINDOW: He does the War Loan work.
H.M.JR: I would like one or the other here and
ask him maybe to go out tonight and ask some questions.
I would like to have that done by Monday.
MR. LINDOW: There are some aspects of that which
were covered in the Louisville Survey which they did
for US.
MR. BELL: They did a little. It was not exten-
sive.
H.M.JR: Will you ask either Likert or Cartwright
to be here, either one or the other?
MR. HAAS: At three o'clock.
H.M.JR: And tell them they are going to get an
order from me, maybe tomorrow, to go make some spot
checks. It won't be necessary to go very far. Maybe a
couple of good, bright girls, George--
MR. HAAS: Yes, sir.
H.M.JR: It's going to be like the Buffalo one. I
am going to meet with them myself, actually.
MR. HAAS: He can tell you his experience with the
Louisville job, too, while he is over here.
MR. LINDOW: I thought that was quite revealing as
to what went on in peoples' minds.
H.M.JR: What?
MR. LINDOW: The Louisville survey. The most important
thing they found was that there was an underlying fear of the
future, unemployment, banks might go busted--people have lost
Regraded Unclassified
270
-17-
money in them before--and the fear of Government bonds
being frozen, something like that, and person after
person expressed this fear, never saying he himself
had it, but that other people he knew had it.
H.M.JR: I don't want to function that way. I
want to function differently. I have to keep this
a Treasury secret, but I would like to say, supposing
the Government said you couldn't have anything but a
twenty-dollar bill, you had to turn them all in? How
would you feel?
MR. HAAS: And give your name.
H.M.JR: And give your name. Yes. That's what I
mean.
MR. LINDOW: I see.
H.M.JR: Go to a fellow in a restaurant down in
Norfolk and dish out one hundred dollar bills and say
to the fellow, "Bill, how would you feel if you were
told such and such a date you couldn't have any more
and you had to turn them all in and give your name?"
MR. HAAS: That's the problem.
MR. BELL: It's not keeping it, secret. You said
you wanted to keep it a secret. Isn't that starting
to give away what you have in mind? Will that be
discussed?
H.M.JR: You go down in saloons or some other place
like that--that level--they are not going to suspect
anything. A fellow sits around and talks with him. I
am going to make this suggestion to Elmer that in the
underworld, see, they talk to a couple of these people.
They are not going to ask the bank to do it, my God!
They right away walk out and what can you do at that
level?
MR. HAAS: You would have to caution Cartwright
very carefully on it.
Regraded Unclassified
271
-18-
MR. TICKTON: You wouldn't want it reported as
a Government survey. That would fix it up!
H.M.JR: Let me talk to Elmer and see if he can't
do it. Keep it in the Treasury. Before you send for
him--
Elmer isn't on this. It always takes him so damm
long to get here. Isn't he--
MR. BELL: Isn't he around the corner?
MR. TICKTON: First floor.
H.M.JR: Where is Elmer Irey? What floor is he on?
I'll talk to him alone.
You hold up on that. I will let you know.
MR. HAAS: Yes.
H.M.JR: I think I know what he--well, we are
having a meeting at eleven.
MR. BELL: Eleven, with Eccles.
Regraded Unclassified
TREASURY DEPARTMENT
272
INTER OFFICE COMMUNICATION
DATE JAN 10 1945
TO
Secretary Morgenthau
FROM
Mr. Haas AA
Subject: Problems Relating to the Government Bond Market
There are a number of problems relating to the Govern-
ment bond market which should be given early attention. These
concern mainly (1) the breach of the certificate pattern of
rates, (2) a series of other changes in the pattern of rates
suggested unofficially by Chairman Eccles, (3) the question
of issuing more Treasury bills, and (4) the problem of the
declining Federal Reserve ratio.
1. Certificate pattern of rates
The breach in the certificate pattern of rates has been
partially restored since your letter to Chairman Eccles on
this matter. The yield on three-month certificates is calcu-
lated from our curve at 0.60 percent for the market close last
night as compared with 0.68 percent on December 22, the day you
sent your letter to Chairman Eccles. This compares with 0.46
percent last September 1, before the weakness was permitted to
develop. All of the recovery has occurred since December 29,
although the Federal Reserve System has not purchased any
certificates since that date. It is important that the breach
in the certificate pattern of rates be completely restored
within the course of the next few weeks.
2. Other changes in pattern rates suggested by Chairman Eccles
The unofficial proposals to make certain changes in the
pattern of rates were outlined in a memorandum from the Chairman
dated December 16, 1944. The gist of this memorandum is that
the pattern of rates be changed as follows: (1) Increase the
bill rate from 3/8 to 1/2 percent with some increase in maturity,
(2) decrease the certificate rate from 7/8 to 3/4 percent, and
(3) decrease the 8-10 year bond rate from 2 percent to about
1-3/4 percent. We recommend that the increase in the bill rate
not be adopted, because of the possibility of its being inter-
preted as a further weakening in the pattern of rates and in
the Government's ability to hold the line on interest rates --
the outstanding achievement of all the wartime controls. The
decrease in the certificate rate and the 8-10 year bond rate
Regraded Unclassified
273
Secretary Morgenthau - 2
are worthy of serious consideration, but action along such
lines should be taken very carefully. We favor lowering of
rates as much as possible in order to bolster confidence in
the financing program and to decrease interest costs to the
Government. The market 1s partly prepared for this, since
many people believe we are likely to follow the British in
the lowering of interest rates.
3. Treasury bills
The weekly offering of Treasury bills should be increased
to raise at least $200 millions of new money per week -- not
for the purpose of increasing the working balance but rather
to strengthen the short end of the pattern of rates. An
increase in the bill offering would improve the reserve and
quasi-reserve position of commercial banks, and would provide
the most suitable vehicle for the billions of Federal Reserve
acquisitions which will be necessary before the Seventh War
Loan.
4. Federal Reserve Ratio
The Federal Reserve ratio was 49.4 percent last Wednesday,
and may be expected to decline steadily until the Seventh War
Loan. The legal minimum is between 35 and 40 percent depend-
ing on the composition of Federal Reserve liabilities. The
problem of what to do about the ratio should be discussed at
once with Federal Reserve officials with the view of seeking
new legislation lowering the required ratio, which the President
said in his Budget message he intends to request soon. This
matter has been discussed frequently in financial circles and
some action 1s expected relatively soon. Nevertheless, there
may be some criticism when action is finally taken, and every
effort should be made to handle this matter quietly and
expeditiously.
Regraded Unclassified
273
Secretary Morgenthau - 2
are worthy of serious consideration, but action along such
lines should be taken very carefully. We favor lowering of
rates as much as possible in order to bolster confidence in
the financing program and to decrease interest costs to the
Government. The market is partly prepared for this, since
many people believe we are likely to follow the British in
the lowering of interest rates.
3. Treasury bills
The weekly offering of Treasury bills should be increased
to raise at least $200 millions of new money per week -- not
for the purpose of increasing the working balance but rather
to strengthen the short end of the pattern of rates. An
increase in the bill offering would improve the reserve and
quasi-reserve position of commercial banks, and would provide
the most suitable vehicle for the billions of Federal Reserve
acquisitions which will be necessary before the Seventh War
Loan.
4. Federal Reserve Ratio
The Federal Reserve ratio was 49.4 percent last Wednesday,
and may be expected to decline steadily until the Seventh War
Loan. The legal minimum 18 between 35 and 40 percent depend-
ing on the composition of Federal Reserve liabilities. The
problem of what to do about the ratio should be discussed at
once with Federal Reserve officials with the view of seeking
new legislation lowering the required ratio, which the President
said in his Budget message he intends to request soon. This
matter has been discussed frequently in financial circles and
some action is expected relatively soon. Nevertheless, there
may be some criticism when action 18 finally taken, and every
effort should be made to handle this matter quietly and
expeditiously.
Regraded Unclassified
CHA
I
SOURCES OF FUNDS BORROWED DURING WAR LOANS
Third to Sixth Loans
DOLLARS
DOLLARS
Billions
Billions
22
22
20
20
18
7.6
18
Bank Purchases of
7.0
3.5
Government Securities
16
16
Bonk Loans in
4.5
14
1.7
14
Connection with Drives
1.4
1.6
12
is
12
IO
10
8
8
Nonbank
13.1
6
Participation
12.2
12.4
11.3
6
4
4
2
2
o
o
3rd
4th
5th
6th
WAR LOANS
Office of the Secretary of the Treasury
Devision , - - Statements
B-535
Regraded Unclassified
275
January 10, 1945
10:26 a.m.
Operator:
He'll be right on.
General
Watson:
Hello.
HMJr:
Yes.
W:
Say ....
HMJr:
Yes.
W:
the President says he might squeeze you in
for fifteen minutes.
HMJr:
Yes.
W:
But that's all.
HMJr:
That's ....
W:
Now, if that will do you any good.
HMJr:
That will do me a lot of good.
W:
Well, that's what he said. You have to understand
that that's all it's going to be.
HMJr:
That's all right.
W:
All right. Shall I tell Ed Stettinius?
HMJr:
Yeah, but you haven't told me what time.
W:
Well, what time -- we've got you down at 12:20
and there's somebody coming in after that -- at
twelve -- twelve, forty -- but you'll have --
trying to get you -- yeah -- all right, make it
12:20.
HMJr:
You can't make it any earlier?
W:
No, he's got -- he's tied up with medals of honor
and everything else.
HMJr:
I see.
W:
He's got 8. hell of a day. He's going away
Thursday night, you know.
Regraded Unclassified
275
- 2 -
HMJr:
I know.
W:
That's the reason he's so crowded.
HMJr:
12:20.
W:
Yeah. Tomorrow he's having a two-hour session
with Hannegan.
HMJr:
What?
W:
He's having a two-hour session tomorrow. That's
the reason he couldn't do anything tomorrow.
HMJr:
12:10 -- you ....
W:
12:20.
HMJr:
You let Stettinius know.
W:
I'll tell him right now.
HMJr:
Right.
W:
I'd make it 12:25 myself. Well, that's all right.
HMJr:
Well, tell Roberta to keep me posted.
W:
All right. I'd come -- I'd be here at 12:20 and
wait around about five minutes. Then I might get
you in earlier.
HMJr:
Yeah.
W:
That's better.
HMJr:
Right.
W:
All right, 12:20 and I'll tell Ed.
HMJr:
Thank you.
W:
And I'll put you both on the record.
HMJr:
Right.
W:
I'll tell you it's just the God-damndest thing
you ever saw.
Regraded Unclassified
277
- 3 -
HMJr:
What?
W:
It's the God-damndest thing you ever saw the way
people are crowding in now. That's the reason I
had difficulty.
HMJr:
Yes.
W:
But I got you in.
HMJr:
Well, you don't -- that's other people than me.
W:
No, no, not you.
HMJr:
No.
W:
Well, you're okay.
HMJr:
Yes.
W:
He said he didn't know what you're talking about
but anything you wanted would be all right.
(Laughs) I told him I didn't either.
HMJr:
All right.
W:
12:20.
HMJr:
Thank you.
W:
Good. Thank you.
Regraded Unclassified
5
HM Jr took these documents to the
278
White House for meeting with the
President and Stettinius on 1/10/45 - 12:20
pm
279
1. Letter to the President on Foreign Financial
Policy Board dated January 5th, together with
enclosures.
1A. Memorandum to the President dated January 10th
on Foreign Financial Policy
2. Memorandum for the President on $10 billion
reconstruction credit for the U.S.S.R.
3. Memorandum for the President on Germany.
Regraded Unclassified
280
January 5. 1945
My dear Mr. President:
I am sending you, enclosed herewith, a
memorandum on a Foreign Financial Policy Board,
and also a proposed Executive Order.
Ed Stettinius and I would like to have an
opportunity to discuss this with you at an early
date. This does not mean that Ed and I are
having any fundamental differences; on the con-
trary, we have gotten off to a grand start to-
gether. However, it 1s our belief that nobody
but yourself can settle this question because,
quite frankly, we do not know just what you have
in your mind.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
The President,
The White House.
Regraded Unclassified
MEMORANDOM
RE: ESTABLISHMENT Of A FOREIGN
FINANCIAL POLICY BOARD
1. The President subjested to the Secretary of
State, on August 21, the possibility of establishing a
ForeignFinancial rolicy Doard. The Secretary of State,
on September 26, raised certain doubts with respect to
this proposal, stressing the functions of the Executive
Committee on Economic Foreign Policy. The Secretary of
State indicated, however, that there might be a need for
an interdepartmental committee to coordinate, within the
general framework of foreign economic policy, foreign
financial activities and indicated that he would be ₆lad
to ask the Executive Committee on Economic Foreign Policy
to explore the matter and prepare a plan for coordination
of our foreign financial operations.
2. The Executive Committee on Economic Foreign
Policy has now submitted a plan proposing the creation
of & Financial Section of that Committee which would be
on an equal level with the General Section of the Committee,
both Sections having the power to make recommendations to
the President. It is provided that the Executive Secretary
of the Executive Committee should be the secretary of the
Financial Section as well as the General Section, and the
Executive Committee Secretariat should serve the Financial
Section 8.8 well as the General Section.
3. This proposal submitted by the Executive Committee
on Foreign Economic Policy has a great deal of merit. In
view of the fundamental importance of the issues with which
both the economic and financial committees will be dealing
and in order that those committees may carry as much weight
with governmental authorities as possible, it is suggested
that both committees be formally established at a Cabinet
level. The Secretary of State would chairman the committee
on foreign economic matters and the Secretary of the Treasury
would chairman the committee on foreign financial matters.
both Cabinet committees would, of course, have appropriate
technical sub-committees.
Regraded Unclassified
-2-
4. As a further measure to augment the prestige
of the proposed Committee, it is suggested that it be
established pursuant to Executive Order.
5. it is also suggested that both committees have
separate secretariats although close liaison could be
maintained between the two secretariats. both secretariats
would exchange documents and each could Lave a representative
at all of the meetings of the other's committee.
6. The Executive Committee on Economic Foreign Policy
has suggested that the Financial Section of that Committee
should represent the Treasury Department, the Department of
State, the Reconstruction Finance Corporation, the Foreign
Economic Administration, and the export-Import bank. The
Committee also suggests that there should be an observer
from the Dureau of the sudget and that representatives of
the board of Governors of the rederal Reserve System, the
Office of Economic Stabilization, the Surplus Prope rty
Board, the Securities Exchange Commission, and other
agencies be invited to participate when subjects of
particular interest to them are under consideration. The
Treasury Department agrees with these suggestions.
7. The Secretary of State, through his chairmanship
of the foreign economic committee and nis representation on
the foreign financial committee, would be in position to
coordinate the activities of ooth committees as well as to
see to it that the decisions of dota committees conform to
the foreign policy of the United States as formulated by
the State Department.
Regraded Unclassified
283
EXECUTIVE ORDER
ESTABLISHING A FOREIGN ECONOMIC AND
FINANCIAL POLICY BOARD
By virtue of the authority vested in me, as
President of the United States, by the Constitution and
statutes of the United States, and in order to provide for
the more effective coordination of the functions and
activities of the Government in relation to foreign economic
and financial problems, it is hereby ordered as follows:
1. There is hereby established the Foreign Economic
and Financial Policy Board (hereinafter referred to as the
Board), to be composed of a Committee on Economic Foreign
Policy (hereinafter referred to as the Economic Committee),
and a Committee on Financial Foreign Policy (hereinafter
referred to as the Financial Committee). It shall be the
function of the Board, acting through these Committees and
subject to the direction and control of the President:
(a) To develop unified programs and to
establish policies with respect to the economic
and financial relationships between this
Government and foreign governments.
(b) To arrange for the unification and
coordination of the activities of this
Government relating to foreign economic and
financial affairs.
Regraded Unclassified
284
- 2 -
(c) To report to the President at
frequent intervals concerning its activities
and to make such recommendations to him as the
Board may deem appropriate.
All action of the Board shall be in conformity with the
foreign policy of the United States as determined by the
Secretary of State.
2. The Board shall discharge its responsibilities
through the Economic Committee and the Financial Committee.
Each Committee shall be coordinate in rank and each shall
have the full power to speak for the Board within their
respective spheres of activity.
(a) The Economic Committee shall consist
of the Secretary of State, the Secretary of the
Treasury, the Secretary of Agriculture, the
Secretary of Commerce, the Secretary of Labor,
the Chairman of the United States Tariff
Commission, and the Administrator of the Foreign
Economic Administration. The Chairman of the
Committee shall be the Secretary of State.
(b) The Financial Committee shall consist
of the Secretary of State, the Secretary of the
Treasury, the Administrator of the Foreign
Economic Administration, the Chairman of the
Reconstruction Finance Corporation, and the
President of the Export-Import Bank. The
Regraded Unclassified
285
- 3 -
Chairman of the Committee shall be the Secretary
of the Treasury.
The Bureau of the Budget shall have an observer on each
Committee. The Chairman of each Committee shall request
the heads of other departments and agencies of the
Government to be represented in the Committee's deliberations
whenever matters specially affecting such departments or
agencies are under consideration. Each member of each
Committee may designate an alternate from among the officials
of his Department or Agency and such alternate may act for
such members in all matters relating to the Board.
3. The respective jurisdiction of the two
Committees shall be determined by the Chairmen of the
Committees acting jointly. The Chairmen shall consult
together from time to time with B. view to allocating
functions among the two Committees and to coordinating
their activities. In the event that the Chairmen are of
the opinion that any particular problem should be
considered by both Committees, they may decide to hold
joint meetings.
4. The Chairman of each Committee shall appoint
a Secretary to the Committee and such staff as may be
necessary. The Secretary of each Committee or his
representative shall be entitled to attend all meetings
of the other Committee and shall be responsible for
keeping the membership of his Committee fully acquainted
with the work of the other Committee.
Regraded Unclassified
- 4 -
5. It shall be the duty of all agencies and
departments to supply or obtain for each committee such
information and to extend to each committee such assistance
and facilities as the committee may require in carrying out
the provisions of this order. Nothing contained in this
order shall remove the responsibility or authority of each
executive department or agency for carrying out its own
functions and operations but such functions and operations
shall be carried out in accordance with the over-all
foreign financial policies formulated by the Board through
its respective Committees.
6. All prior executive orders and instructions
insofar as they are in conflict herewith are amended
accordingly.
Regraded Unclassified
287
THE WHITE HOUSE
WASHINGTON
December 9, 1944.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
I have resurrected the enclosed.
Perhaps you will now have a talk with
Stettinius about it. Please return
enclosures for my files.
F. D. R.
O.K.
F.D.R.
DEPARTMENT OF STATE
WASHINGTON
September 26, 1944
MEMORANDUM FOR THE PRESIDENT
Reference 1s made to your memorandum of August 21,
1944 in which you asked my views on the establishment
of a Foreign Financial Policy Board.
If such a Board were to have responsibility for
actually formulating foreign policy in the financial
field, I believe that its establishment would be incon-
sistent with the terms of reference of the already
existing Executive Committee on Economic Foreign Policy.
This Committee was established in accordance with your
letter of April 5, 1944, Il to examine problems and
developments affecting the economic foreign policy of
the United States and to formulate recommendations in
regard thereto for the consideration of the Secretary
of State, and, in appropriate cases, of the President.
a
During the six months of its existence, the
Executive Committee has made gratifying progress in the
development of EL coordinated program of foreign economic
policy. In view of its broad perspective of international
economic affairs, the Committee 18, I think, especially
competent to perform the function of coordinating the
financial policy of this Government with other closely
interrelated aspects of economic foreign policy. I do
not believe, therefore, that the establishment of a
separate Foreign Financial Policy Board is necessary or
desirable. In fact, the establishment of such a board
would have the effect of splitting off financial policy
from the remainder of the foreign economic field of which
it is an integral part, with serious results to our whole
program.
There may, however, be considerations pointing to
the need for an interdepartmental committee to coordinate,
within the general framework of foreign economic policy,
foreign
Regraded Unclassified
289
- 2 -
foreign financial activities such as those carried on
by the Export-Import Bank, the Reconstruction Finance
Corporation, the Surplus War Property Administration
and agencies of the Government dealing with the Stabili-
zation Fund, Foreign Funds Control, Lend-Lease opera-
tions and financial problems of the liberated areas.
Such a committee might, also within the framework of
foreign economic policy, assume responsibility for the
preparation of detailed directives for the guidance of
United States representatives on such proposed inter-
national bodies as the International Monetary Fund and
the International Bank for Reconstruction and Develop-
ment. It is important however that, if such a committee
18 established, every precaution should be taken to
avoid artificially separating the formulation of
financial policy from that of foreign economic policy in
general. It was for the purpose of achieving this unity
that you established the Executive Committee on Economic
Foreign Policy and provided in your letter of April 5
that major interdepartmental committees concerned with
foreign economic affairs should be geared into the
Executive Committee.
If you 80 desire, I should be glad to ask the
Executive Committee on Economic Foreign Policy to
explore this matter and prepare a plan for coordination
of our foreign financial operations.
CH
Regraded Unclassified
THE SECRETARY OF THE TREASURY
WASHINGTON
October 6, 1944
My dear Mr. President:
Mr. Hull's memorandum of September 26th,
which I am returning, seems to reflect a com-
plete misunderstanding of what I proposed,
namely, the creation of a Foreign Financial
Policy Committee.
I would like to suggest postponement of
discussion on this important matter until
after your re-election.
Yours sincerely,
Henry
The President,
The White House.
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
January 10, 1945.
MEMORANDUM FOR THE PRESIDENT
The role which the Treasury Department has traditionally
occupied in the field of foreign financial policy is frequently
overlooked. This fact is clearly brought out by the following
illustrations:
1. The Liberty Loan Act of 1917 authorized the
Secretary of the Treasury, with the approval of the President,
to enter into arrangements for the extension of credit to
foreign governments. Under this Act the Treasury Department
made war and reconstruction loans of approximately nine and
one-half billion dollars.
2. When President ilson attended the Peace Conference
In Paris he requested Secretary of Treasury Glass to send a
representative in whom you have the utmost confidence # # #
to represent you in these important matters." In response
Secretary Glass recommended kr. Norman H. Davis who was then
representing the Treasury in Europe. Albert Strauss and
T. W. Lamont later joined the Treasury Commission and while
they worked for the President they were able to express the
Treasury viewpoint on all financial (and apparently economic)
matters which arose at the Peace Conference.
3. In February 1922 Congress authorised the establish-
ment of the World War Foreign Debt Commission consisting
specifically of the Secretary of the Treasury, as Chairman,
and four (later seven) other members to be appointed by the
President with the advice and consent of the Senate. The
Act authorized the Commission, subject to Presidential
approval (and subsequently Congressional approval), to
refund or convert, and to extend the time of payment of any
obligation of any foreign government to the United States
Regraded Unclassified
- 2 -
arising out of World War I. Under this legislation
agreements were entered into with thirteen different foreign
governments.
4. As a matter of fact our files indicate that the
financial relations between the United States and foreign
governments during and after the first World War were
conducted by the Secretary of the Treasury, with the
President's approval. For this purpose the Secretary of the
Treasury dealt directly with representatives of foreign
governments and had special financial representatives in
Europe for such purposes. At that time it was not even
customary for the Secretary of the Treasury to clear such
matters with the State Department.
5. Under this Administration Congress enacted the
Gold Reserve Act of 1934 and established a two billion dollar
stabilization fund to be operated by the Secretary of the
Treasury with the approval of the President. Pursuant to
this legislation, the Treasury has entered into stabilization
agreements with Russia, Brazil, China, Cuba, Ecuador, Iceland,
Liberia, and Mexico. Under this legislation and with your
approval, the Treasury also negotiated the Tripartite Monetary
Accord between the United States, Great Britsin and France.
Subsequently the Netherlands, Belgium and Switzerland adhored
to this Accord.
6. To carry out the provisions of the Silver Purchase
Act, the Treasury negotiated agreements with Canada and
Mexico for the purchase of their silver production at the
Treasury's buying price for silver. All operations under
these agreements are conducted by the Treasury through the
Federal Reserve Bank of New York as its fiscal agent.
7. The Hyde Park Declaration of April 20, 1941 which
was the basis for our war time financial relations with Canada
grow out of exploratory discussions between the Treasury
Department and the Canadian authorities. Since that date
there have been constant discussions between the Treasury
and Canadian representatives on the subject of Canadian
dollar balances. When the Hyde Park Agreement was modified
in 1944 the discussions were conducted in the Treasury
Department between the Canadian Minister of Finance and the
Secretary of the Treasury.
Regraded Unclassified
- 3 -
8. You designated the Secretary of Treasury as
Chairman of the American group conducting the recent
discussions with the British over Phase II Lend Lease
requirements. During these discussions the Secretary of
the Treasury also served as Chairman of all joint meetings
with the British.
9. The Treasury has played a leading role in our
financial relations with China. Thus in February of 1942
Congress authorized the Secretary of the Treasury, with
your approval, to extend a $500,000,000 loan to China and
we negotiated the loan. More recently, the Treasury has
just concluded & financial agreement with the Chinese
Government for the settlement of all War Department
obligations up to September 30, 1944.
10. The Treasury from the very beginning has led all
discussions in this Government and with foreign governments
leading to the formulation of the Bretton Woods Agreements.
You appointed the Secretary of the Treasury as Chairman of
the United States Delegation and he was subsequently elected
President of the Conference at Bretton Woods at which 44
nations were represented.
1/10/45
Regraded Unclassified
Jan 10, 1945
MEMORANDUM FOR THE PRESIDENT
A $10 Billion Reconstruction Credit for the U.S.S.R.
I suggest consideration be given to a financial arrangement
with the U.S.S.R. to provide her with $10 billion credits for
the purchase of reconstruction goods in the U.S., with provision
for repayment to us chiefly in strategic raw materials in short
supply in the U.S.
1. The interest rate could be 2%, amortized over a period
of 35 years. A schedule of repayments is attached.
2. The Russians have more than adequate means to assure
full repayment. There are three principal sources from which
she can obtain the necessary amount of dollars.
(a) Selling to us strategic raw materials which are in
short supply in the U.S. becuase of our depleted
natural resources. (See attached memorandum)
(b) Russia will be able to develop substantial dollar
assets from tourist trade, exports of non-strategic
items to the U.S., and from a favorable balance of
trade with the rest of the world.
(c) Russia has a stock of gold estimated at $2 billion
now and is reported to be able to produce from $150
to $250 million per year. These gold resources can
be used to pay her obligations to the United States
to the extent that her other dollar sources are not
adequate.
3. An important feature of this proposal is that we will
be conserving our depleted natural resources by drawing on
Russia's huge reserves for current needs of industrial raw
materials in short supply here. We would be able to obtain e
provision in the financial agreement whereby we could call upon
Russia for whatever raw materials we need without giving a
commitment on our part to buy.
4. This credit to Russia would be a major step in your
program to provide 60 million jobs in the post-war period.
hdw;hg;afl;jed;agirl 1/10/45
Regraded Unclassified
Conservation of U.S. Natural Resources and Imports from the U.S.S.R.
The U.S. has had to draw heavily on domestic raw material
reserves during the war to meet peak production requirements.
The following table prepared from some recent confidential re-
ports for the Under Secretary of Interior discloses the depleted
natural resources of the United States, and emphasizes the need
for conservation measures.
Reserve Domestic Supplies
On Basis of our
On Basis of our
1939 Domestic
Current Consumption
Consumption
1943
Petroleum
16 years If supply
13 years " supply
Manganese
9
3
Tungsten
23
M
"
3
"
H
17
n
IT
8
R
-
Zine
"
11
=
Lead
7
If
6
Chrome
No record
Less than 1 year's
supply
Mercury
3 years supply
We could safeguard and conserve our strategic material re-
serves in post-war years which are now at minimum levels, by
importing from abroad to meet ordinary annual production require-
ments. The U.S.S.R. has tremendous reserves of many materials
which the U.S. will urgently require after the war. A reconstruc-
tion loan to the U.S.S.R. will give us the means whereby we can
conserve our own natural resources for the next two generations,
by utilizing Russian reserves. The U.S.S.R. could provide sub-
stantial quantities of strategic raw materials for an annual basis
within five years after the close of the war as indicated in the
fellowing table.
Metals and metallic ores
$80,000,000
(Manganese, Tungsten, graphite,
mica, chrome, mercury, iron ore,
platinum, copper)
Timber and wood products
45,000,000
Petroloum
50,000,000
Oils and oilcake
10,000,000
Other industrial raw materials
15,000,000
Total
$200,000,000
Regraded Unclassified
Repayment Schedule for Advance of $10 Billion
Credit for 35 Years at 2 Percent 1/
(Millions of Dollars)
Scheduled
Annual
Annual Scheduled
Unpaid Balance
Year
Expenditure
Interest
Repayment
At End of Year
1
1,000
20
o
1,020
2
2,500
70
o
3,590
3
3,000
132
0
6;722
4
2,500
184
100
9,307
5
1,000
206
150
10,513
B
210
200
10,523
T
210
250
10,484
8
210
300
10,393
9
208
350
10,251
10
205
400
10,056
11
201
400
9,857
12
197
400
9,655
13
193
400
9,448
14
189
400
9,237
15
185
500
8,922
16
178
500
8,601
17
172
500
8,273
18
165
500
7,938
19
159
500
7,597
20
152
500
7,249
21
145
500
6,894
22
138
500
6,532
23
131
500
6,162
24
123
500
5,785
25
116
600
5,301
26
106
600
4,807
27
96
600
4,303
28
86
600
3,789
29
76
600
3,265
30
65
600
2,730
81
55
600
2,185
32
44
600
1,629
33
33
600
1,061
34
21
600
483
35
10
492
4,691
14,842
This schedule is a basis for negotiation.
Regraded Unclassified
Hayr game to Miss
COPY
Twelly. 1/13/45
January 10, 1945.
MEMORANDUM FOR THE PRESIDENT
During the last few months we have buen giving
further study to the problem of what to do with
Germany after her defeat.
We are more convinced than ever that if we really
mean to deprive Germany of the ability to make war
again within 2. few years it is absolutely essential
that she be deprived of her chemical, metallurgical
and electrical industries. We don't think that this
alone will guarantee peace, but that it is one of the
steps we must take now.
We base this conclusion on the following premises,
which seem to us unassailable:
(1) The German people have the will to try it
again.
(2) Programs for democracy, re-education and
kindness cannot destroy this will within
any brief time.
(3) Heavy industry is the core of Germany's war-
making potential.
Nearly all Americans grant the first point. A few,
such as Dorothy Thompson, appear to disagree with the
second; but all that we know and have learned recently--
our experience with war prisoners, for instance--seems
to argue against them. As to the third, America's own
accomplishments in four years seem to us 8. shining lesson
of what an equally versatile people can do. Our industry
was converted from the world's greatest peacetime producer
in 1940 to the world's greatest producer of military
weapons in 1944, The Germans are versatile. Leave them
the necessary heavy industry to build on and they can work
as fast and as effectively 8.8 we.
Regraded Unclassified
- 2 -
The more I think of this problem, and the more I
hear and read discussions of it, the clearer it seems
to me that the real motive of most of those who oppose
a weak Germany is not any actual disagreement on these
three points. On the contrary, it is simply an ex-
pression of fear of Russia and communism. It is the
twenty-year-old idea of a "bulwark against Bolshevism"--
which was one of the factors that brought this present
war down on us.
Because the people who hold this view are unwilling
(for reasons which, no doubt, they regard as statesman-
like) to come out in the open and lay the real issue on
the table, all sorts of smoke screens are thrown up to
support the proposition that Cermany must be rebuilt.
Examples are:
(a) The fallacy that Europe needs 8. strong
industrial Germany.
(b) The contention that recurring reparations
(which would require immediate reconstruction
of the German economy) are necessary so that
Germany may be made to pay for the destruction
she has caused.
(c) The naive belief that the removal or de-
struction of all German war materials and
the German armament industry would in itself
prevent Germany from waging another war.
(a) The illogical assumption that a "soft" peace
would facilitate the growth of democracy in
Germany.
(e) The fallacy that making Germany a predominantly
agricultural country, with light industries
but no heavy industries, would mean starving
Germans.
Regraded Unclassified
- 3 -
We can submit to you studies which in our opinion
will domonstrate that these propositions and others
leading to the same conclusions are false.
This thing needs to be dragged out into the open.
I feel so deeply about it that I speak strongly. If
we don't face it I am just an sure as I can be that
we are going to let & lot of hollow and hypocritical
propagands load NO into recreating a strong Germany
and making 8 foe of Russia. 1 shudder for the sake of
our children to think of what will follow.
There is nothing that I can think of that can do
more at this moment to ongender trust OP distrust be-
tween the United States and Russia than the position
this Government takes on the German problem.
/s/ H. Morgenthau, Jr.
Secretary of the Treasury.
1/10/45
The President did not read Mr.
Luxford's memo of 1/10/45 on Foreign
Financial Policy.
Regraded Unclassified
301
January 10, 1945
Present:
Mr. Bell
Mr. Luxford
Mr. Dubois
Mr. Gaston
Mrs. Klotz
HM, Jr: What I want to say is this: 1 can't
overemphasize the secretiveness of this and the only
people in this room I want to know about it are White
and O'Connell; nobody else.
Now, I sat outside of tne President's door for
one hour waiting to see him and I showed Stettinius
this program that I had for tnis over-all committee,
and ne glanced at it and I gave nim a set of it.
I believe; 1 am not sure. So ne said, "NOW, look,
henry, he said, what I have in mind is a Cabinet
committee composed of tne Secretary of State, Secre-
tary of the Treasury, Commerce and Interior, which
will deal with all economic matters and, he said,
before this committee will be brought any thing to do
with finance. ne said, 1 give you an example. Do
you know that Ickes nas made or is about to make a
$50,000,000 loan to Mexico on oil? I said no. he
said, You should. ne said, Do you know about financing
Saudi Arabia? I said no. lie said, You should. He
said, "The biggest thing in this town is the Russian
Lend-Lease on military matters and you know nothing
about it and, he said, you should. And, he said,
there are all these things going on which you don't
know anything about which have to do with money. ne
said Ickes is all over the lot and nobody knows what
Regraded Unclassified
302
-2-
ne is doing and ne's making promises of finance to o ther
Governments. ne said, My idea is to bring everything
before tnis committee and they will set the policy and
then we will make a recommendation to the President.
Then he said, AS to FEA -- and he wants secrecy and
of course that's why 1 nave got to emphasize the secrecy
because he's been sworn SO to secrecy for Crowley's sake.
1 will tell everything. wallace is going to be Decretary
of Commerce and FEA is to go to Commerce, lock, stock a nd
barrel. Now, he said, if ou will wait a little bit on
tnis thing we can do it all at one time and wait for the
new set-up; otherwise we nave got to put Crowley on the
Board. Then he said to me, he said, Crowley yesterday
called me up and pleaded with me to keep this Treasury
executive order from going through and he had a copy of
it. Well, I was dumbfounded. Did we furnish Crowley
with a copy of it?
Mr. Luxford: No.
HM, Jr: ne said Crowley had a copy of it.
Mr. Luxford: State had a copy of it.
nm, Jr: Are you sure?
Mr. Luxford: The only way I can be sure is toask
narry White.
(not, Jr placed a call for Mrs. Shanahan in Dr.
White's office.)
Mrs. Klotz: It's terribly important. It's the
same thing as the German thing.
nd, Jr: Yes. I was dumbfounded. Did we send
it to State or to the President?
Mr. Luxford: We handed it to Stettinius.
HM, Jr: And I personally gave one to Wallace and I
don't think Wallace would give it to Crowley.
Regraded Unclassified
303
-3-
Mr. Luxford: 1 expect they distributed it to
their committee -- this economic committee they have
got.
nM, Jr: Now we sat there and I listened and I
could not help but tnink -- oh, yes. 1 said, Now
look, now about -- are you going to set up a separate
finance section in the State Department? he said,
Absolutely not. ne said, There are people who want
it, but we won't do it. And somewhere during the
conversation ne said, 1 am SO blad you brought to my
attention the criticism of Pete Collado. he said,
I want you to have Treasury attaches all over the world
just the way you ao now. 1 said, If it's a matter of a
loan between governments? ne said, That would be your
job, but, ne said, we have got to know the overall
picture. I am going to try to get the President to
tell you what he has in his mind. The last time I
saw him he tried to leave me with the impression he
did not know. So sitting there I said, I will give
you an answer. I said, I think it sounds fair.
Mr. Luxford: wallace-morgentnau-ickes is pretty
hard to complain about.
HM, Jr: Well, the examples he gave me were SO good.
(Mrs. Shanahan entered the conference and said,
"As far as I know and as far as our records snow, we
did not send a copy to Mr. Crowley".
Mr. Luxford: Would the President give it to Byrnes?
If he did, in that case I think Dyrnes would give a copy
to Crowley.
noi, Jr: On, sure! Anyway, we will go ahead.
Anyway, I agreed to it.
00 we went in and saw the President and Stettinius
made this proposal. ne asked me and I said, Mr. Presi-
dent, this goes back to the time -- I refreshed his
memory -- that he sent me this thing, his memorandum
of December 9 to me, and 1 then - - Stettinius wanted
Regraded Unclassified
-4-
me to do the taking. I said he should make the pro-
posal, which he did, and the President looked at me
and wanted to know if it was all right. I said, It's
all right with me just as long as I understand that we
work the way we have as before, but the question of the
overall policy be decided by this board. I also, if
I remember right, I also said, The State Department
does not need to set up a separate finance section.
I said, Mr. President, I am good enough to be financial
advisor to you; I think I am good enough to be financial
advisor to the Secretary of State. I told that to
Stettinius outside. They both agreed. I don't see
why the State Department needs another financial advisor.
They have the Treasury Department, to which Stettinius
agreed.
The President said, There are a lot of things all
over the lot. Everybody is going to want to borrow
some money and there will only be so much to go around.
I think there should be such a Board.
Then, to bring you people up to date, Stettinius
has just called me and he said -- now this is the part
which is so hard to understand. de said, Now look,
Henry, the conversation we had in the outside office,
well, forget about that; we won't tell anybody that
and we will tell just the one we had with the President.
I said, Well, I don't understand, Ed. Oh, previous to
that he told me he had just got finished talking with
Acheson and Clayton and I don't understand that. I
guess I am awfully dumb. he said, We will only tell
them about the one we had with the President and we
will tell them what a hard time you had convincing me.
I said, Ed, don't kid me. What the hell are you talk-
ing about? tie said, You know how difficult a time you
had getting me to give me.
Mr. Gaston: he doesn't want to let them think
that he gave way easily.
Regraded Unclassified
-5-
HM,Jr: Well, he didn't. ne made a compromise
offer. I said, Well, you made a compromise offer
which I accepted readily. he said, That's right, but
just remember I didn't give in easily.
Mr. Bell: Protecting himself with his own people.
Mr. Gaston: There was no talk in the President's
office of abandoning the idea of a financial section
in State?
hM,Jr: Yes, that was all cleared. I discussed it
outside and inside - no finance section in the State De-
partment.
Mr. Gaston: There would be this four-man international
committee. That covers the main proposition discussed out-
side. What eise outside that wasn't agreed to? I suppose
what ne's getting at, all there is to it since there was
nothing else important, is that he aoes not want it ad-
mitted that he agreed readily with you outside, but he
wants the record to stand that in the presence of the
President you were able to force him into that decision.
Evidently Clayton and Acheson don't like it.
Mr. Luxford: This would not be Acheson's proposal.
Mr. Gaston: But you and the President made him
take it.
Mr. Du Bois: Either that or else he's trying to
make the Secretary feel that it's not such a wonderful
thing for you from your standpoint.
HM,Jr: That's what I told Mrs. Klotz -- super-
salesman making me feel good.
(Phone conversation with Mr. Stettinius)
I told that to Mrs. Klotz. I think he wants me
to feel that this is a wonderful bargain.
Regraded Unclassified
-6-
Mr. Luxford: More than that, supposing his men
really did not like it, it means they are going to
try to undercut from the beginning.
HM,Jr: Anyway, I said two or three times, I said,
Ed, I am going to repeat myself, do I understand that
what you have in your mind is that the Treasury will
function as before except that on overall policies we
will sit down -- four Cabinet members -- and discuss it
and decide before we go to the President? ne said,
That's right. And that you will not have a finance
section or financial advisor in the State Department.
Yes. Yes. I said, Well, I am going to count on you
on that.
Mr. Du Bois: And Stettinius is to be chairman?
HM, Jr: he did not mention it outside. As soon
as we went in to see the President he said, I think
Stettinius should be chairman.
Mr. Bell: That's logical.
Mr. Gaston: Unless otherwise stated it would always
be the case.
Mr. Du bois: With those other three -- not SO good.
HM, Jr: But put yourself in my place. The thing
sounds ressonable. ne gave examples, very good examples,
of things I know nothing about.
(Phone conversation with Mr. Stettinius)-
Mr. Gaston: When you know the worst you can quit
worrying. But on this other thing, I think it's just
Stettinius preserving his stature before his men. "I am
not really B. boy; I am quite a fellow!"
Mr. Luxford: The board they had loaded was Export-
Import, which was Pierson, and they had two or three other
stooges of State. It would have been a three-to-one Board
Regraded Unclassified
-7-
against you. This will be three-to-one against State.
HM, Jr: That's right. That's what they told him.
God, Ed, you have got Wallace, Ickes and Morgenthau
stacked against you! That's what they told him. They
will all work against you!
Mr. Luxford: And the committee they proposed had
three of their stooges.
Mr. Gaston: The fact that he proposed it he's
covering it up.
HM, Jr: I am beginning to feel better. I cameover
feeling kind of low. But the minute they saw him and
they pointed that out to him -- but I swear, boys, I
don't know what you would have done. It's a reasonable
proposal.
Mr. Bell: I would have done it.
Mr. Luxford: The line between economic and financial
policy is one we create for jurisdictional but when is it
economic or when is it financial you can't define it.
hm,Jr: What would you have done?
Mr. Gaston: Grao it.
Mr. Luxford: With that committee I would grab it.
Mr. Du Bois: I assume that it was very clear that
you only accepted it on that particular committee.
HM, Jr: The best part is coming. Then I said to
the President, We want to formalize this -- anyway it
was said to the President, We want to formalize this
through an Executive Order. ne said, O. K. Stettinius
said, how will we do this? No, he said, Can you keep
after the President on this SO that he won't -- he said,
I am not quite he quite understood what we wanted. he
said, have you any way of keeping after the President to
Regraded Unclassified
308
-8-
make sure he does this? Are you going away for the
weekend with him? I said, No. he said, Why don't
we draw up an Executive Order and then you and I walk
over there so he doesn't give it to anybody. He said,
Don't let Oscar Cox or Crowley see it. ne said, Oscar
Cox is all over the place. I love nim. I am devoted
to him, but when he worked for me he was all right.
Now he called me. he's appointed Acheson and Clayton
to deal with anybody I designate to work up an Executive
Order on this thing. See? Now, who would that normally
go to, Dan?
Mr. Bell: O'Connell for an Executive Order.
Mr. Gaston: Yes. I don't see why these boys could
not get a draft and take it up with Joe.
HM, Jr: And harry. Should 1 tell Acheson -- Mrs.
Klotz, if I don't hear from Acheson by tomorrow, I will
call him and tell him this will be handled by O'Connell
and White. out it is going to be formalized. But to
show you he was worried, the President did not recognize
it, and he is worried furthermore on this whole Commerce
thing. ne's very unsure of himself that FEA will go
under Commerce. he wants it.
Mr. Gaston: It's the logical thing.
n, Jr: He's very worried. ne's very unsure of his
position with the President on it.
How did I do, boys?
Mr. Gaston: I think Stettinius did wonderfully by us!
Mr. Bell: Yes.
Mr. Gaston: Volunteering that committee!
Mr. Du Bois: I am still looking for the nigger in
the wood pile!
309
-9-
Mr. bell: ne's thought this out himself.
nm, Jr: Do you know what i nonestly think? I think
he thought about it as he was sitting there.
Mrs. Klotz: That's right and that's why he feels
that he gave in too quickly.
HM,Jr: I said, HOW can you swing your Department,
and he said, I can swing it. ne did not say he dis-
cussed it with anybody. ne goes right back and sends
for Clayton and Acheson.
Mrs. Klotz: Didn't he say when he came back he
spoke to Clayton and Acneson?
nm, Jr: That's right. And then he said, right
after that, he said after ne talked to them "I gave in
too easily".
mr. Gaston: This is all very interesting. It
means this. Stettinius is a little unsure. ne's a
little timid. ne would like some outside support
against his own Department. ne would like some out-
side help and guidance. ne's really looking to you.
Ar. Luxford: You know ne naa one meeting where
he got his ears knocked off.
HM,Jr: You mean at lunch?
Mr. Luxford: he had a lunch with Ickes, Fortas
and the top staff of Interior the da, before you rid
and I understand he had a not session.
HM, Jr: ne was mad with Ickes for being all over
the lot.
Mrs. Klotz: 1 think he wants awfully hard to be
friendly.
nM, Jr: I beg of you people, please, please, to
Regraded Unclassified
-10-
keep this secret. I am being completely frank.
If there are any leaks it will be a complete reflection
on me.
On the Russian proposal, I tried to show it to
him. ne wanted to read it. Stettinius wouldn't let
him read it. he tried to read the cable. ne had
not read it, which you people have not seen, which is
super-duper confidential, which will be on exhibit in
Mrs. Klotz' room. I have only read part of it myself.
And the President said, Well, after all, we are not
having any finance people with us and I will just tell
them we can't do anything until we get back to Washington.
Well, Stettinius said, you are not going on something
like that. So anyway, ne said, 1 think it's very im-
portant that we hold this back and don't give them a ny
promises of finance until we get what we want.
In my phone conversation I said, I respectfully
differ with you and the President on this. 1 think
the first thing is to let them know there is a carrot
and let them have it. Stettinius said, Well, you
don't know. 1 won't 60 all through it. I said,
I think you are absolutely wrong, Ed.
The President does not want to ao anything.
so at lunch I gave Leahy the works on this and
I have told Leahy that ooth the President and Stettinius
were wrong and that if they wanted to get the Russians
to do something they should say it the first thing.
Do it nice. Do it nice. I said, Don't drive such
a hard bargain that when you come through it does not
taste good.
Stettinius said that I don't know. I said,
You are wrong; I have dealt with the Russians.
Regraded Unclassified
311
0
-11-
to show you -- I only read half; I nave to read it.
All this stuff you boys just nave to keep your mouth
shut.
(Reading): "It was made very clear by Molotov that
great importance was placed by the Soviet Government on
a large postwar credit as a basis for the development of
relations between the United States and the Soviet Union.
An implication that development of our friendly relations
would be dependent upon a generous credit was sensed by
me from tnis statement. 11
This is harriman. (Continued to read): "It appears
probable that the prospects of a meeting were kept in mind
in the timing of the delivery of this note. Therefore,
it is interpreted by me to indicate tnat the Russians
would expect a discussion on this subject if there is a
meeting.
And on the face of that, Stettinius says we won't
bring it up at the meeting.
ar. Dubois: Did the resident agree with him?
HM, Jr: Yes. ne said he would tell them there was
no one on his mission who could discuss it -- no financial
people.
Mr. Du bois: It just amazes me how fundamental de-
cisions can be made by the President on snap judgment.
hM,Jr: The only way to deal with the nussians is
open and aboveboard.
Mrs. Klotz: Mr. Morgenthau went through this at
Bretton Woods.
Mr. Luxford: Dean Acheson was the fellow who kept
saying "haggle".
Regraded Unclassified
312
-12-
HM, Jr: I decided before 1 went over not to give
him the German thing. The President was very tired
today and I am awfully glad I did not. We will put
this in the Friday pouch. It will be much better.
He will be at Hyde Park.
Then he turns to Stettinius and gave him my
memo. "Oh, yes, If Stettinius said, oh yes. I am
fixing you a gold lettered book reference" The
President said, "1 will give you all my notes SO you
can index everything I am taking on the trip. You
can have everything but my detective stories. So
ar. Luxford: Sorry about Russia.
HM, Jr: That is not lost. You read my conversa-
tion with him. I shook it.
Mrs. Klotz: It wasn't only the words, but the
tone you used and you said you were absolutely going
to go up against him boldly.
Mr. Du bois: Was a copy left with the President
of the Russian note?
HM, Jr: ne was going to read it if Stettinius
would leave him alone, but Stettinius was trying to
get three other things. he gave the whole thing to
Stettinius. I said, If you are going to furnish
him with that, give me my copy of the cable back.
I have to work on Stettinius.
Regraded Unclassified
313
January 10, 1945
2:30 D.M.
HMJr:
Hello.
Operator:
Mr. Stettinius. Go ahead.
HMJr:
Hello.
Secretary
Stettinius:
Sorry to have disturbed you at lunch.
HMJr:
I just came up.
S:
I've had my talk with Mr. Acheson and Mr.
Clayton
HMJr:
Yes.
S:
and they'll be in touch with you.
HMJr:
Good.
S:
And then you can assign one of your men and
they'll assign someone to get on with this
thing.
HMJr:
Good.
S:
I think that -- I did not get into great detail
as to our preliminary conversation. I've told
them that this -- after discussion, that this
was a matter that the President made un his mind
as to how to do it.
HMJr:
Yeah.
S:
You understand?
HMJr:
No, I don't think I quite do. You're talking
about
S:
Well, what I -- what I'm saying is that I think
that your -- the private preliminary talk that
you and I had
HMJr:
Yes.
S:
before we went in to the President
Regraded Unclassified
314
- 2 -
0
HMJr:
Yes.
S:
had just better be our talk, and that --
in other words, when I came forward -- when I
came forward with this proposal of a compromise
position
HMJr:
Yes.
S:
I think that that best be -- that you and
I only know about -- you and I be the only ones
to know about that.
HMJr:
Oh. Now, I'm not -- now, wait -- after all, the
one that we talked with the President -- it's based
on that one that We want an Executive Order, don't
we?
S:
That's correct -- that's exactly it -- that's what
we -- yeah -- the one the President approved and
the one I suggested is the one we're going to
write the Executive Order about.
HMJr:
Now, what is the one you're suggesting that people
do not know about?
S:
What I'm suggesting is that the other -- that they
don't know about -- is the fact that -- that I gave
in to you too easily.
HMJr:
You gave in to me?
S:
Yeah.
HMJr:
What the hell are you talking about?
S:
Of course, I did.
HMJr:
What are you talking about?
S:
You had a -- you had a big plan -- remember?
HMJr:
Yeah.
S:
And I presented -- I presented a compromise
position to you.
HMJr:
Which I gave in to readily.
Regraded Unclassified
315
- 3 -
S:
(Laughs) That's correct, Henry.
HMJr:
Isn't that right?
S:
That's right.
HMJr:
What are you trying to do, kid me?
S:
Just trying to kid you.
HMJr:
Oh.
S:
I did. I was very successful.
HMJr:
Yes, you were.
S:
All right, old boy.
HMJr:
Now, listen -- now, wait a minute. You've got
to give me two minutes.
S:
Go ahead.
HMJr:
Because this I feel very, very strongly about
and I didn't want to -- I didn't have a chance
to get an argument -- but with all due respect to
the President and you, I think you are a hundred
percent wrong on the approach to Russia. And I
think that the carrot should be out before their
nose when you first get there and let them know
that there's going to be financial aid for them
while they're at war and financial aid for them
when the war is over.
S:
Henry, I don't think you'd feel that way if you
knew all the -- if you had all the chips before
you.
HMJr:
Well, I -- I
....
S:
I don't think you'd feel that way.
HMJr:
Well, I -- I -- I've been through very difficult
negotiations with the Russians myself.
S:
Yeah.
HMJr:
At Bretton Woods. Extremely difficult.
Regraded Unclassified
315
- 4 -
S:
Yeah.
HMJr:
You can ask Dean about it.
S:
Yeah.
HMJr:
And I'm just going to be so bold as to set myself
up against the President and you.
S:
Okay, boy.
HMJr:
Only within the family.
S:
Right. Well, listen, I'll give that some thought.
HMJr:
And he didn't have a chance to read my memorandum
and you didn't.
S:
Nope.
HMJr:
But this idea of what the President said, "Now,
we'll -- there's nobody here from Finance -- nobody
here from the Treasury -- I'll wait until I get
back to Washington," as you say, "we'll hold back. "
I say, with all due respect, I disagree with both
of you.
S:
All right, Henry. Well, let me give that some
study and we'll talk about it next week.
HMJr:
All right.
S:
All right, old boy.
HMJr:
Thank you.
S:
Thank you.
Regraded Unclassified
317
January 10, 1945
2:59 p.m.
HMJr:
Hello.
Operator:
Secretary Stettinius.
HMJr:
Ed.
Secretary
Stettinius: Yes, sir.
HMJr:
I've checked all over my office. We did not
furnish Crowley with a copy of that Executive
Order. Now
S:
How did he know about it?
HMJr:
Well, if you can find out how he got a copy,
maybe then. we'll know, also, how he got a copy
of that Quebec stuff. I've checked all over
and he was not furnished with a copy.
S:
Uh huh. Well
HMJr:
Now, he was furnished with a copy of everything
that I did at Quebec by somebody.
S:
Well, I'll ask him. I mean, I'll just boldly
ask him.
HMJr:
That's the simplest way.
S:
And refer to the fact that he had told me about
his knowledge of this Executive Order that you
had up, and -- and just ask him how he knew
about it.
HMJr:
I wish you would because I'm terribly worried.
S:
I will. I can't do it today.
HMJr:
No, that's all right.
S:
But I will, Henry, and I promise to do it.
HMJr:
Well, does that mean you've got to wait a week?
S:
Well, it's got to wait until I get back from New
York Monday or Tuesday unless I phone him from
New York because I've got to fly in five minutes.
Regraded Unclassified
318
- 2 I.
HMJr:
Well, do it as soon as you can.
S:
I will, Henry.
HMJr:
Because I'm terribly worried.
S:
All right, old boy.
HMJr:
Thank you.
Regraded Unclassified
319
j
January 10, 1945
3:02 P.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Secretary
Stettinius:
Henry.
HMJr:
Yes.
S:
I have the answer.
HMJr:
Yes.
S:
Under date of January the 8th
....
HMJr:
Yes.
S:
the President sent a memorandum to the
Secretary of State and the Honorable Leo Crowley
"For recommendation. F.D.R."
HMJr:
You mean he sent it to him?
S:
Yes, sir.
HMJr:
You know the
....
S:
I have it before me.
HMJr:
You know Lucky Strike says, "The best tunes of
all come from Carnegie Hall. II
S:
(Laughs)
HMJr:
So I ought to say the best leaks of all come
from the White House.
S:
Well, here she 1s.
HMJr:
All right.
S:
And the original -- the original of your stuff
HMJr:
Yes.
S:
of -- you sent on January the 5th was sent
to me for recommendation.
Regraded Unclassified
320
- 2 -
HMJr:
Yes.
S:
And the whole -- I have the whole thing right
before me here now just as you sent it to the
President.
HMJr:
And I sent it to you myself.
S:
You sent it to me yourself. The President sent
it to me and simultaneously -- the time -- the
President sent -- he sent it to Crowley, too.
HMJr:
I see.
S:
It must have been copied and sent to him.
HMJr:
Well, I'll quit worrying.
S:
Now, okay, boy.
HMJr:
Well, that's fast work.
S:
Thank you, sir.
HMJr:
Thank you.
S:
Righto.
Regraded Unclassified
321
January 10, 1945
3:30 p.m.
CURRENCY
Present: Mr. Gaston
Mr. Irey
Mr. Friedman
Mr. DuBois
Mr. Haas
Mr. Lindow
Mr. Luxford
Mr. Currie
Mr. D. W. Bell
Mrs. Klotz
(Mr. Friedman reading a memorandum to Secretary
Morgenthau from Mr. O'Connell, dated January 10, 1945,
entitled "Suggested Currency Program for United States")
"This memorandum projects for consideration the
proposed technique by which the withdrawal from circu-
lation of all U. D. currency of the denomination of
$50 and higher can be accomplished. Also it refers
briefly to the legal basis for proceeding by executive
action.
"1. The Suggested Technique.
"The President issues an Executive Order providing
the following:
"(a) All transactions in U. S. Currency in the
denomination of $50 or higher are prohibited
from the date of the issuance of the Order
except as authorized by the Secretary of the
Treasury.
"(b) Within 15 days of the date of the Order all
persons within the United States may deposit
such currency in designated depositories and
receive at their option a bank credit or an
equivalent amount of small denomination
currency.
Regraded Unclassified
222
-2-
At the time of making the deposit all persons
will be required to furnish their name, address,
declaration of ownership or interest and
satisfactory identification. In addition,
they should be required to indicate their
relationship to the currency deposited by
furnishing a specified ration book stamp
by signing their name and address to the
currency deposited.
"(c)
After 15 days have elapsed it shall be un-
lawful for any person subject to the juris-
diction of the United States to own or possess
such currency, except as authorized by the
Secretary of the Treasury. (The currency
remains valid, i.e., for purposes of
redemption, etc., but the continued
possession subjects the holder to penalties.
H.M.JR: What?
MR. FRIEDMAN:
II
to penalties."
(Reading)
"(d)
All persons who have safety deposit boxes in
banks within the United States will be given
a full 60 days in which to remove currency
from such boxes for the purpose of depositing
such currency in accordance with this program
upon satisfactory proof that the safety deposit
box involved has not been opened since the
date of the Order and that its opening was
witnessed by an authorized person.
"(e)
The interest of persons in the armed forces
of the United States will be protected by
the issuance of special regulations by the
Secretary of the Treasury permitting such
persons to exchange their holdings of such
currency in accordance with arrangements
made with the Army and Navy finance officers;
and by permitting all such persons to file a
short form declaration of their currency
holdings in the United States.
Regraded Unclassified
223
-3-
"(f) With respect to all persons outside the United
States other than those in the U. S. armed
forces depositories will be established which
will be authorized to accept against receipt
deposits of such currency. Under existing
regulations we already require the deposit in
special accounts of all currency imported into
the United States from abroad. The proposed
program permits such deposits to be made in
designated foreign depositories and places
a limitation upon the period during which such
deposits will be received.
"(E) The Secretary of the Treasury is authorized
also to issue special regulations exempting
from this Order such high denomination currency
as may be held or used as collectors items.
"2. Legal Basis.
"The President has ample power under Section 5(b) of
the Trading with the enemy Act to take the suggested
measures both in this country and abroad.
"The legal basis for the program in this country is
even stronger than that upon which we successfully defended
the forced delivery of gold certificates and gold coins
in 1933 and 1934. The gold program itself is ample
precedent for the program we are now considering. In
addition, the powers of the President have now been sub-
stantially increased by amendments of Section 5(b). The
President's very broad powers under Section 5(b) to con-
trol foreign property leave no room for doubt as to the
legality of requiring the deposit of currency in foreign
countries.
"It is to be emphasized that the suggested domestic
and foreign programs are SO interrelated that one cannot
be really effective without the other. If we require
the delivery of currency in the United States alone,
obviously foreign holders of United States currency could
evade the United States controls by shipping such currency
Regraded Unclassified
224
-4-
here after our censorship has been lifted. Conversely,
if we require only delivery of currency abroad, currency
held within the United States could always be smuggled
abroad and hoarded outside the United States."
That's it.
H.M.JR: All those in favor signify by saying "Aye."
Motion carried. (Laughter)
Well Lauch, you have heard everybody else in the room.
Since you are coming in fresh, do you want to give us a
horseback or a barroom opinion?
MR. CURRIE: I take it, Mr. Secretary, that the real
purpose of this would be in connection with law enforcement--
in connection with illegal transactions?
H.M.JR: Black market.
MR. CURRIE: It has nothing to do with inflation.
That's not under consideration or drain on reserves of
the banks.
H.M.JR: Not drain on reserves of the banks. I would
say inflation, black market, evasion of taxes, and any
aliens possessing money, or spies.
MR. BELL: You mean threat of inflation through
spending because of hoarding? That is not inflation--
it is deflation. But the spending of that money--
MR. CURRIE: Couldn't people still take out large
amounts of small demonination currency?
MR. GASTON: I don't personally think it would have
any effect on the amount of money outstanding.
Mk. CURRIE: I was thinking in connection with
illegal transactions. Couldn't you still take out small
bills instead of large ones?
Regraded Unclassified
225
-5-
MR. GASTON: The idea is that you would catch them
this time but you would get a lot of cases and--
MR. BELL: It would be more inconvenient for them.
MR. CURRIE: You just catch the ones who have not
reported up to now, but not thereafter.
MR. GASTON: No, except it might throw a scare into
them, and give leads that you could work on and prevent
them from repeating the offense.
H.M.JR: I think--is that Gaston? Giving this the
worst aspect?
MR. GASTON: Quite the contrary. I was arguing on
the other side. That is not my position. I was not in
favor of it. In fairness to the other position, I was
trying to explain what that is.
R.M. JR: When you want to argue for me, I'll do the
arguing, please. (Laughter) Do you mind letting me do
the arguing?
MR. GASTON: I think you will do better.
H.M.JR: I think so, too. (Laughter) God!
MR. BELL: That's really funny.
H.M.JR: Herbert gets SO excited. Where were we when
Herbert was trying to put in a cross for me?
MR. CURRIE: I was trying to think it through from
the law enforcement point of view. It's going to cause
consternation--lead to the destruction of an enormous
amount of money. In many cases it would be better to
hide money indefinitely rather than risk the penalties
of having to account for how they got the money. It's
going to bring enormous outcries--screams from inspired
sources. You will have to be prepared to take terrific chances,
Regraded Unclassified
326
-6-
but on the other hand, as Herbert says, you will catch
a lot of unreported income and mainly I suppose it would
be an income tax collection device, wouldn't it?
H.M.JR: We couldn't know. We just don't know.
MR. DuBOIS: It is important in the foreign field.
MR. CURRIE: The question of Germans, for example,
having dollar bills, and there is a lot of evidence that
the German Underground have been using dollar bills--I
think myself it would be justifiable on the basis of simply
the foreign field.
MIL. LUXFORD: Figures show that from a half billion
to almost two billion was held in Europe before the war,
and a very substantial part of that was in denominations
of over fifty dollars. We have had all kinds of reports
as to the Germans attempting to get their hands on this
currency as much as they could. Once you get into the
post-war period--if you are thinking in terms of an
effective German Underground--there is no medium like the
United States dollar bill to finance it.
MR. CURRIE: I know. That is also true in the case
of the Japanese. They have been acquiring some.
MR. LUXFORD: They caught some in Shanghai.
MR. CURRIE: They also smuggled some, I know. My
horseback opinion for what it's worth, and I don't think
it's a lot, would be to react favorably to it, but I would
like to study it more--all the various angles, before I
finally commit myself.
MR. GASTON: I convinced you, huh?
MR. CURRIE: You convinced me.
MR. DuBOIS: Now, let me take your side.
Regraded Unclassified
327
-7-
MR. GASTON: If you do it effectively, Joe. (Laughter)
MR. LUXFORD: In all seriousness, we were discussing
it at lunch--some of the problems coming up incident to
this program--and there are some nasty ones--if you have
a minute I would like to discuss them.
We were discussing means of making this program
effective, as Joe Friedman indicated to you; we were
talking about requiring persons delivering notes to
banks to give their names and addresses. We were
also talking about requiring them to turn over a ration
coupon so they can't have twenty people delivering notes,
SO they won't come in large bunches, and that really is
an extremely difficult problem.
How are you going to make a man say he has ten
thousand dollars or one hundred thousand dollars in
black market bills, and deliver that in a way that en-
forcement officers are going to be able to detect them.
We said make him deliver ration coupons, to which
Mr. Gaston very quickly answered, "Yes, and everyone in
his gang will take in his share! You will not have in
most cases a conspicious bulk by one man delivering bills,
if he can invent any other way to do it.
Now, we have suggested requiring the man also to write
his name and address on the bill, and since a lot of people
might be willing to deliver the bills, if that were the end
of it, if they were going to go down in writing on it, they
might refrain from it. It's an exceedingly difficult problem
and requires the highest degree of intelligence on the part
of enforcement officers to make anything out of it.
MR. DuBOIS: Insofar as catching people today--
MR. LUXFORD: And you have to keep in mind, too,
that this program, at least to some extent, as to some
substantial statement, must be sold to catch tax
violaters and the black marketeers. The foreign thing is
Regraded Unclassified
220
-8-
pretty good, but if you have to deliver results, you have
to catch some of these men, or they are going to say it
was a fiasco.
H.M.JR: Of course, there is this other school that
nobody here is representing, on what Pehle said. He was
in favor of giving two weeks' grace and let everybody
turn their money in, no questions asked, in order to get
the money in. To say first-
MR. GASTON: I couldn't see what the object was.
MR. CURRIE: I don't see what you would accomplish
by that.
H.M.JR: It's a school of thought he advanced and
I am advancing it in his absence.
MR. IREY: We have a volunteer disclosure policy in
the Bureau, and if it could be known generally that persons
who want to disclose income would not be prosecuted about
the same time this order goes out, that might induce a
lot of filing of returns and payment of taxes.
H.M.JR: I want to do it before the fifteenth in
order to catch the 1944 business. Haas is "agin" it.
MR. LINDOW: I am afraid it is going to have re-
percussions throughout economy and the bond program. I
think this OPA ration stamp job has done a lot of harm,
and if this comes on top of it, people may say, "The
next thing is going to be the freezing of bonds." I
don't think there would be much gain in it. When England
cut out large denominations there was a temporary drop
in the outflow of currency, and then it proceeded on
as before, you could hardly tell the difference between
the year before and the year after it happened, so there
isn't going to be any net final effect on the outflow
of currency, I don't believe; and while I don't know
anything about this law enforcement aspect, whether you
can catch anybody, I would be all for that part of it
if it could be worked out. I suspect there will be an
Regraded Unclassified
320
-9-
awful lot of finagling in that aspect.
H.M.JR: Well--I have an in between, middle-of-the-
road suggestion. I mean I am throwing these things out,
getting very little encouragement from anybody. Supposing
we said after X-Day we just won't issue anything above a
twenty dollar bill, and it would only be a question of time
before these things will come straight. I mean, just say
that as of tomorrow we will stop issuing anything above a
twenty dollar bill? A twenty dollar bill would be the
highest denomination. Just say that.
MR. DuBOIS: That would be much better.
Mit. BELL: That doesn't get you anything except you
quit issuing higher denominations.
H.M.JR: It gets us this, they become scarce and
can't be used in the black market, and are hard to get.
You just stop. I mean, this great rise in hundred and
five hundred and thousand dollar bills stops.
MR. BELL: It's all in the hundreds. The biggest
increase--
H.M.JR: We'll stop issuing it.
MR. DuBOIS: Better than that, it seems to me, if
you are going to take that position, is what John Pehle
suggested; at least it accomplishes a real function in
the foreign field which I think is a very important
aspect of this. Under his program at least you would
solve that problem, and at the same time you wouldn't
have these serious repercussions. what you say goes
even further than what John Pehle suggested in the way
of giving people long periods of time as grace periods.
Yours is an indefinite grace period in a sense, and I don't
quite see what you would accomplish by that. At least
what Pehle said accomplishes a purpose in the foreign
field. In my own feelings, you can accomplish both,
and the OPA thing I don't think is a good analogy at all.
Regraded Unclassified
300
-10-
Innocent people were hurt. Now here that isn't involved
at all. In the first place even those who aren't innocent
can immediately get other currency for what they turn in.
Of course they kicked on OPA and they had a right to. This
doesn't involve anything--
Mr. LINDOW: I agree that the analogy is not close, but
bear in mind we have had a major problem in War Bond
programs on the public's psychology of bonds being frozen.
The Likert Survey showed an increase in people being
worried about the future of bonds. The War Bond people,
judging from actual comment I have received from them,
have already run into some increase in public apathy
because of the OPA deal.
M. FRIEDMAN: That was a dirty trick and all the
more reason to worry about what the Government might do
in some other field. War Bonds--it seems probable that
there would be similar repercussions here, perhaps more
widely spread. Therefore, I would say 1 doubt the advan-
tages of this deal would outweigh the possible dis-
advantages.
MR. DuBOIS: The thing that's difficult for me to see
is why there should be repercussions if it is done the right
way and presented to the public the right way.
H.M.JR: Listen, I called in all the gold backs.
MR. GASTON: Gold certificates.
MR. BELL: You had directions from Congress to do
that, both gold and gold certificates, and you had a
President that had just been elected by a great land-
slide. The country expected him to do something and
had all the confidence in the world that he would do
it.
The situation today is entirely different and gold
certificates are not comparable to currency at the present
time.
Regraded Unclassified
332
-12-
H.M.JR: I. am so brash as to say that if I decide
to do it and took the time, I am not going to worry
about the public. I am confident the public will be
with me. Sure, some people will holler. The people
who are going to holler aren't going to get support
from newspapers.
MR. LUXFORD: The public will be with you the day
you can point to somebody who has turned in a hoard.
MR. GASTON: That isn't the danger--danger of
criticism. That isn't the danger, that you may incur
the perils of this thing and be praised by everybody.
The danger is people running away from currency.
H.M.JR: My dear Herbert, you say they are going
to run away from currency. What are they going to do?
MR. GASTON: Spend it for anything they can buy
with it--pay double for it. They would buy anything
to get currency out of their hands.
MR. BELL: Fur coats and diamonds and everything
else.
H.M.JR: If they go in with a lot of hundred dollar
bills, aren't the department stores going to cooperate
with us?
MR. GASTON: They are going to sell anything they
want to buy--
H.M.JR: And take one hundred dollar bills?
MR. GASTON: I don't see that that has anything to
do with it.
H.M.JR: W hat are they going to use for it?
MR. GASTON: Any kind of currency.
Regraded Unclassified
333
-13-
H.M.JR: Wait a minute. A man has ten one hundred
dollar bills and we announce this thing. He has his
choice of turning them in or going to a department store
and buying a fur coat. The department store isn't going
to take ten one hundred dollar bills.
MR. GASTON: Of course he will go to the bank and
change the money, but he is scared of the value of his
money SO he is going to start spending it with ten or
five dollar bills, whatever it is. That's the danger.
MR. DuBOIS: Why is he scared?
H.M.JR: That's what I want to find out. I don't
know.
MR. GASTON: lie is scared because we are starting
to monkey with currency, and he doesn't know what it is
going to lead to. First we are calling in big bills--
true, we are giving small bills, but we are up to some-
thing. He has always had complete faith in currency,
that's always good, but now there is a question in his
mind. People make all sorts of foolish interpretations.
There is a question in his mind about what they are up
to. It may mean repudiation, and he gets excited, and
he goes and starts to spend that money, get it into
physical things.
H.M.JR: I maintain I don't know, and I don't know.
MR. BELL: That's just a basket we are all in. We
don't know. The only thing we are trying to do is say
that in taking this action, you are taking some risk
along with it.
H.M.JR: It all gets back now to that, and I wanted
this man to send some people out--two - different sets--
one to find out, to talk to a few people, ask them a
few questions, see how they would react; and the other
group to find out in the underworld what they are doing
with money.
Regraded Unclassified
334
-14-
MR. GASTON: As to the latter question, we can vive
you a pretty good report now. They know pretty well
what they are doing. Dwight Avis got a lot of information
in connection with black markets. He can write a report.
Irey is working on it right now.
To start questioning people in the underworld would
have to be done by an agency. You would start a rumor--
you might as well publish the fact that you are going to
call in big bills.
H.M.JR: Suppose you start with one agent?
MR. IREY: Avis has probably more information in
his files right now than we can gather together in days
and days.
H.M.JR: As to how they would react if we took the
one hundred dollar bills?
MR. IREY: It is just an impression we would get.
H.M.JR: How could it possibly be in his files, Elmer?
MR. IREY: When the banks started to make records
of the numbers, they were supposed to do it on bills of
five hundred and one thousand dollar denominations. As
soon as it got quickly noised around, in many instances
they brought in five hundred dollar bills and one thousand
dollar bills and started dealing in twenty dollar bills in
their black market manipulations.
H.M.JR: You think it would get around?
MR. IREY: I am sure it would get around. There is
more stuff that gets around in the underworld faster than
any other line of activity--I think Walter Winchell would
be on the radio two days after we started with it--
H.M.JR: What are his connections?
MR. IREY: His connections with the underworld are
vast.
Regraded Unclassified
325
-15-
H.M.JR: Well, I'll tell you what I will do. We
can have Avis give me--
MR. IREY: De is going to have something for me
tomorrow morning.
H.M.JR: What time?
MR. IREY: He is working on it right now.
H.M.JR: Will you bring him over here? Irey, Gaston
and Avis at eleven tomorrow, huh?
MR. IREY: Fine.
MR. GASTON: lie has a lot of good stories.
H.M.JR: A-v-i-s?
MR. IREY: Yes.
MR. GASTON: They are using currency by the basket-
full.
H.M.JR: Well, I am still of the opinion I would
like to do it. I still think if 1 don't do it--no one
has talked about it, but if I don't do it, the criticism
is going to be far greater. I think the criticism of me
is going to be far greater if I don't do it than if I
do.
MR. GASTON: Well, if you were to do it and start
a panic--a money panic--there is no question about which
way the bulk of the criticism would go. Nobody knows
that that will occur.
MR. BELL: That's right.
MR. GASTON: It is one of those things that is
awfully delicate to monkey with.
Regraded Unclassified
235
-16-
MR. LUXFORD: Do you think it might occur?
MR. GASTON: I think there is a serious chance it
might occur, in view of how they have reacted on some
of these bond rumors.
MR. CURRIE: You will have to accomplish this in
this two week interval of making everybody receiving
a large denomination bill to give information about
from whom he received it, and SO forth. Otherwise,
everybody would get rid of their money.
MR. GASTON: The order would be issued, and it is
nontransferable from the time he receives the order.
The only thing he can do with it is to take it to a
bank.
MR. CURRIE: The other thing bothering me is the
foreign thing. How do you discriminate between the
people who have come to this money legitimately and
can't turn it in?
Mit. FRIEDMAN: You do it the same way we do it in
this country. Currency is sent in here voluntarily by
mail and put in the Federal Reserve Bank, and they sit
on it until proved contrary. In this case we extend
it. They deposit the money against a receipt. It
comes over here and we examine it, and the burden of
proof would be on them.
MR. CURRIE: I see. It doesn't mean you would
outlay any of this money?
MR. FRIEDMAN: No, none of this money outlaid.
MR. HAAS: Some of these stories I think can be
counteracted greatly by an increase in currency. I
think that can be done irrespective of what decision
you make on this. There is a great deal of misinformation
out. That's why 1 had some charts made out.
Regraded Unclassified
337
-17-
H.M.JR: The easiest thing is to sit back and do
nothing, but that's not me. Well, let me meet with
Avis. Let's meet with him tomorrow. Do you care to
come in Bell?
MR. BELL: Yes. Aleven.
MR. GASTON: How about Henry Anderson? ne doesn't
know much about it.
MR. IREY: He couldn't add a whole lotto it.
H.M.JR: And 1 wish if you have a few minutes, if
you and Mr. Currie had a few minutes, bring in what we
have on Eccles.
MR. BELL: I will right away if you care to.
H.M.JR: I am down, but I am not licked. You can
take it on tomorrow. You can wait now in your investiga-
tion until eleven tomorrow.
MR. IREY: We will be getting the memo up.
H.M.JR: O.K.
Regraded Unclassified
January 10, 1945
Secretary Morgenthau
Mr. O'Connell
Re: Suggested Currency Program for
- United States.
This memorandum projects for consideration the
proposed technique by which the withdrawal from circu-
lation of all U. S. currency of the denomination of
$50 and higher can be accomplished. Also it refers
briefly to the legal basis for proceeding by executive
action.
1. The Suggested Technique.
The President issues an Executive Order providing
the following:
(a) All transactions in U. S. currency in the
denomination of $50 or higher are prohibited
from the date of the issuance of the Order
except as authorized by the Secretary of the
Treasury.
(b) Within 15 days of the date of the Order all
persons within the United States may deposit
such currency in designated depositories and
receive at their option a bank credit or an
equivalent amount of small denomination
currency.
At the time of making the deposit all persons
will be required to furnish their name, address,
declaration of ownership or interest and satis-
factory identification. In addition, they should
be required to indicate their relationship to
the currency deposited by furnishing a specified
ration book stamp or by signing their name and
address to the currency deposited.
Regraded Unclassified
- 2 -
(o) After 15 days have elapsed it shall be unlawful
for any person subject to the jurisdiction of
the United States to own or possess such currency,
except as authorized by the Secretary of the
Treasury. (The currency remains valid, i.e.,
for purposes of redemption, etc., but the continued
possession subjects the holder to penalties.)
(a) All persons who have safety deposit boxes in
banks within the United States will be given 8.
full 60 days in which to remove currency from
such boxes for the purpose of depositing such
currency in accordance with this program upon
satisfactory proof that the safety deposit box
involved has not been opened since thedate of
the Order and that its opening was witnessed by
an authorized person.
(e) The interest of persons in the armed forces of
the United States will be protected by the issu-
ance of special regulations by the Secretary of
the Treasury permitting such persons to exchange
their holdings of such currency in accordance
with arrangements made with the Army and Navy
finance officers; and by permitting all such
persons to file & short form declaration of
their currency holdings in the United States.
(f) With respect to all persons outside the United
States other than those in the U. S. armed forces
depositories will be established which will be
authorized to accept against receipt deposits of
such currency. Under existing regulations we
already require the deposit in special accounts
of all currency imported into the United States
from abroad. The proposed program permits such
deposits to be made in designated foreign deposi-
tories and places a limitation upon the period
during which such deposits will be received.
(g) The Secretary of the Treasury is authorized also
to issue special regulations exempting from this
Order such high denomination currency as may be
held or used as collectors items.
Regraded Unclassified
- 3 -
2. Legal Basis.
The President has ample power under Section 5(b) of
the Trading with the enemy Act to take the suggested
measures both in this country and abroad.
The legal basis for the program in this country is
even stronger than that upon which we successfully defended
the forced delivery of gold certificates and gold coins
in 1933 and 1934. The gold program itself is ample
precedent for the program we are now considering. In
addition, the powers of the President have now been sub-
stantially increased by amendments of Section 5(b). The
President's very broad powers under Section 5(b) to con-
trol foreign property leave no room for doubt as to the
legality of requiring the deposit of currency in foreign
countries.
It is to be emphasized that the suggested domestic
and foreign programs are 80 interrelated that one cannot
be really effective without the other. If we require
the delivery of currency in the United States alone,
obviously foreign holders of United States currency could
evade the United States controls by shipping such currency
here after our censorship has been lifted. Conversely,
if we require only delivery of currency abroad, currency
held within the United States could always be smuggled
abroad and hoarded outside the United States.
Attached is a draft of an executive order which
indicates in some detail the technique to be employed.
Attachment.
EEMINSKOFF:iej
1/10/45
Regraded Unclassified
January 10, 1945
341
4:52 p.m.
HMJr:
Hello.
Operator:
Dean Acheson, State Department, calling you.
HMJr:
Yes.
Operator:
Go ahead.
HMJr:
Hello.
Dean
Acheson:
Henry.
HMJr:
The name is Henry.
A:
(Laughs) Dean Acheson. I have finally got Ed's
signature on this paper about the legislative
program of the Cabinet Committee just as he was
rushing for the train.
HMJr:
Yes.
A:
And I will send it right over to you
HMJr:
Right.
A:
....
with a note asking, if you approve it, if
you would sign it and get it to the President.
HMJr:
Right.
A:
You can do that much quicker and better than I
can. If there's anything about it you don't like
HMJr:
Flatterer.
A:
No, I shouldn't -- there's nothing flattering
about that. I just know that.
HMJr:
Flatterer.
A:
No, I -- I -- well, anyway, I'll send it over to
you.
HMJr:
You send it over.
A:
Now, we've also gotten a rough draft here of -- of
a message on the whole economic business, playing
up the bank and fund
Regraded Unclassified
312
- 2 -
HMJr:
Yeah.
A:
May I send you two copies of that?
HMJr:
If you please.
A:
And they haven't been approved by anyone here.
They were just gotten up by someone for me.
HMJr:
Yes.
A:
And I think it's a little -- a little on the pallid
side but perhaps somebody can put more "spiff"
into it.
HMJr:
Right. Anything else?
A:
No, those two things. Ed spoke to me about your
talk this morning.
HMJr:
Yes.
A:
I'm going to get together with whomever he wants
me to work with and try to
....
HMJr:
Well ....
A:
.... get up an order. One thing that wasn't clear
to me about this is that I should suppose -- have
supposed that the President would want at the same
time and would have done whatever he's going to do
about F.E.A.
HMJr:
Well, what I think was this: the two things -- I
think this is correct -- will not be coterminous --
is that correct?
A:
Yes. Yeah.
HMJr:
What?
A:
Yes.
HMJr:
I think the thought was that we get him, so to speak,
to approve this and put it in a pigeon-hole
....
A:
I see.
HMJr:
pending the other.
Regraded Unclassified
343
- 3 -
A:
Oh, I see. Well, I didn't understand that.
HMJr:
No.
A:
Because I thought it would be very -- puzzle
everybody if this came out first, and they'd say,
"Well, what
If
HMJr:
No, no.
A:
" happened to the other thing?"
HMJr:
No, no. This would be approved and pigeon-holed
pending the other.
A:
Yes.
HMJr:
And I think that's the idea. Now, the people
that will handle it at my end will be White and
Joe O'Connell.
A:
All right.
HMJr:
Those two.
A:
Uh huh.
HMJr:
If that's agreeable.
A:
Fine.
HMJr:
Anything else?
A:
No, sir, I think that's ....
HMJr:
I'm sorry we couldn't come Friday night but we're
going to Halifax'.
A:
Alice told me that you were. I'm sorry but we'll
work on it again.
HMJr:
If you would.
A:
Fine, Henry.
HMJr:
Thank you.
A:
Good bye.
Regraded Unclassified
TO:
344
miss Chauncey
Miss Hession, mr.
Hm Jr. saw
murphy. and
Shaeffer. Jan 11, 45
ar.9 30 am
From: Mr. FitsGerald
3.5
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
FROM Mr. Shaeffer
CR.
January 10, 1945
FORTUNE magazine is doing an article on the various
persons "close" to President Roosevelt. Miss Hession is
doing the research, while a fellow named Murphy is writing
the piece.
Already interviewed, or to be interviewed, are
Messrs. Early, Leahy, Douglas, Hopkins, Daniels, Stettinius,
Wallace, Rosenman, Byrnes, and Ann Boettiger.
As the story would not be complete without yourself,
these writers would like a thirty-minute conference at
your convenience. There only engagement for the balance of
this week is at 3:30 PM today.
Regraded Unclassified
346
Reading copy of the Secretary's part
in the film "These Are Your bonds".
SECRETARY MORGENTHAU:
(opening)
I think all of us have a better idea now what
War Bonds mean to the winning of the war and to our
security in the future. But there are a few other
things that you should know about your War Bonds.
The War Bonds you buy -- E Bonds -- were
especially designed for your protection. They are
an obligation of the Government and are guaranteed by
the full faith and credit of the Government in the
same way as the dollar bill in your pocket. They
are like cash, but with additional privileges.
(Here Commentator takes over, with animation.)
Regraded Unclassified
219
SECRETARY MORGENTHAU:
(Closing)
As Secretary of the Treasury, I pledge you
that the Government will stand back of this bond
and fulfill every provision of it. It will be paid
precisely and exactly according to the terms under
which it was issued.
You have to keep your bonds to receive the
maximum return, for they are designed to favor those
who hold them the longest.
Plan to hold them to maturity!
Regraded Unclassified
10
219
Animation - Scored by Commentator.
COMMENTATOR: Privileges -
Here are some of them:
1. Each E Bond is owned individually in your
name. It's yours! It's worthless to anyone else.
If it's lost or stolen you can get another one.
2. You can name someone in the family to
own it with you -- a co-owner -- which means that
you both own the bond like a joint savings account.
3. You can name someone as beneficiary the
way you do on your life insurance policy. This
means that if you die, whoever you name as bene-
ficiary will get the money.
4. After sixty days, the E Bond is always
redeemable in cash. And after one year it is
worth more than you put into it. The longer you
Regraded Unclassified
350
hold the bond, the more it increases in value.
For example: When you pay $75 for a $100 bond,
this is what happens.
The 2nd year it's worth $76.50
The 4th year it's worth $80.00
The 6th year it's worth $84.00
The 8th year it's worth $92.00
At the end of 10 years it's worth $100.00.
(End of animation with commentator.)
Regraded Unclassified
9:30 =
THE WHITE HOUSE
WASHINGTON
January 10, 1945.
MEMORANDUM FOR:
THE SECRETARY OF THE TREASURY.
The President looked through the samples
of the Treasury Department citations and returned
them to me without comment. I, therefore, return
them to you with my thanks for the full and
complete information you have given the President.
W.W.Dram WILSON BROWN,
Vice Admiral, U.S.N.,
Naval Aide to the President.
JAN 8 1945
My dear Mr. President:
I have a memorandum from Vice Admiral Wilson Brown
indicating that you desire information on all types of
citations and awards issued by the Treasury Department
to civilians, individuals and groups, who have rendered
outstanding service.
No significant use has been made of citations or
awards by this Department except in connection with our
War Bond program, and here we have found such recognition
to be an important factor in stimulating the efforts of
the millions of volunteer workers throu hout the country.
Às you know, the success of the bond drives depends
finally upon the enthusiastic cooperation of these workers,
both as individuals and groups. It has been my feeling
from the Inauguration of the program that the Treasury's
appreciation should be conveyed to persons who have
achieved outstanding results or contributed in an unusual
measure, whether they are movie stars or school children,
and for this reason various types of appropriate cortifi-
cates and citations have been adopted. I am convinced
that this method of recognition has done much toward
sustaining the Interest of our volunteers, and that any
curtailment would uifect future drives adversely.
At the outbreak of the war many patriotic citizens
made donations of cash and property to the Government of
the United States, and in response to these, I had
prepared a citation covering such donations.
Another recognition document which might be mentioned
would be the type of letter which I have been signing and
giving to retiring Treasury employees who have had an out-
standing career in the Federal service. While not specifi-
cally requested in Admiral Brown's memorandum, you might
Regraded Unclassified
- 2 -
be interested to know that in addition to the above, the
Department has in contemplation an expanded program of
meritorious within-grade promotions, which are provided
for by law, and also the inauguration of & system of cash
awards for outstanding employee suggestions which would
require appropriate legislation.
A portfolio containing the several types of citations
in use by this Department is being submitted with this
letter.
Faithfully yours,
Henry Gr.
The President
The White House
1-5-44
Regraded Unclassified
THE WHITE HOUSE
WASHINGTON
December 20, 1944.
MEMORANDUM
To:
The Secretary of the Treasury.
Subject: Awards to Civilians.
1. The Secretary of the Navy has asked the
President to authorize the Secretary of the Navy
to issue awards to civilian employees of the Navy
for distinguished service ano states that the
Treasury and War Departments have similar awards
for their employees.
2. The President views with concern any tendency
of any of the Executive departments to issue commendation
to civilians for war work except those that have been
specifically approved by him. He, therefore, requests
to be informed what awards to civilians are issued by
the Treasury Department and also to be informed what
civilians are eligible for such swaros. I will be very
much obliged if you will send the desired information
to me in order that I may resubmit the Treasury, war
and Navy practices to the President.
W.Tarm WILLON BROWN,
Vice Admiral, U.S.N.,
Navel Aice to the President.
Copy to:
SecNav
Regraded Unclassified
House 5
OFFICE
OF
FORVICTORY
TREASURY DEPARTMENT
BUY
UNITED
STATES
WAR
WASHINGTON 25
BONDS
AND
THE
SECRETARY
STAMPS
January 10, 1945
To:
Secretary Morgenthau
From: J. W. Pehle
For your information:
The all-Negro concern which I mentioned to you is
the American Enterprise Associates, Inc., a Cleveland
concern organized by a group of Negroes, employing
approximately 100 Negro workers, and engaged in the
wholesale production of garments. It is said to be
the only textile firm in the United States owned, oper-
ated and controlled by Negroes. This concern was first
brought to the Procurement Division's attention by Mr.
A. G. Thurman, Chief Counsel of the Senate Small Business
Committee.
We have awarded this company two Lend Lease contracts
in the amount of $5,000 and $86,000. The $5,000 contract
was performed satisfactorily.
Under the $86,000 contract, the company was in need
of funds and requested an advance payment of approximately
$25,600, which was made. However, the company has been
unable to obtain the necessary material to make the shirts
required under this contract and there have been no
deliveries.
Regraded Unclassified
256
- 2 -
I find that the company is in serious financial
difficulties, not only with the Treasury, but with
private creditors, as well. As a matter of fact, a
telegram which I sent to them last Saturday was re-
turned since the premises have been padlocked by
court order filed by the landlord who has not been
paid his rent.
Nevertheless, we are cooperating with the Smaller
War Plants Corporation to see if it is willing to make
this concern a loan to tide them over their difficulties.
Jusine
Regraded Unclassified
357
CONFIDENTIAL
JAN 10 1945
Dear Ed:
The other day when we were having lunch at
the Blair House you mentioned to me that the French
lend-lease document which was before the President
at Quebec last September is now dead.
I would appreciate your confirmation of my
understanding in this matter, so that I will be
in a better position to review the pending propo-
sals for aid to France.
Sincerely,
(Signed) Henry
Secretary of the Treasury
The Honorable
The Secretary of State
HGsJKDs 1/10/45
Regraded Unclassified
Jan. 10, 1945
Secretary Morgenthau
Mr. Lynch ini TJL
Yesterday in an address to the House on the subject
of the unconditional surrender policy, which she de-
scribed as "an anachronism", Miss Jessie Summer of Illl-
nois made the following statement:
"Recently we saw German resistance
stiffen because of the revelation of the
Morgenthau plan. But the American people
have not been told that the reason was be-
cause it seemed to confirm the devillsh
Nazi dogma which says that unconditional
surrender means the shattering of Germany
into Communistic revolutionary chaos with
middle-class people being killed or carried
off into Russian slavery. Germans are see-
Ing neighboring countries liberated only to
fall Into the hands of Stalin through in-
ternal revolution. They know that Stalin's
aray killed or carried Into slavery worse
than death, great numbers of anti-Nazi Poles
and Lithuanians. They know that they, the
German people themselves - the hated enemy -
need expect & fate no better and probably
worse.
"If Mr. Churchill and President Roose-
velt intend to impose upon the German people
a fate less harsh than chaos, death, and
slavery worse than death, they owe it to our
gallant fighting men to spare our servicemen
needless suffering by saying so plainly, un-
equivocally, and reliably. Can they? Un-
fortunately, President Roosevelt and Mr.
Churchill, to say nothing of Stalin, have
not kept to the high moral level of trust-
worthiness as did Woodrow Wilson. Their
evasive dealings with Polish and Yugoslavian
agreements and the Atlantic Charter have
greatly discredited them. Therefore, the
task is perhaps the most difficult, though,
perhaps, also the most important they have
yet undertaken." (Congressional Record,
January 9, 1945, page 151)
The above quotation gives B. summary of Miss Summer's
diatribe against the policy of unconditional surrender.
The Record also includes in the Appendix a speech
on foreign policy given by Representative Robert Hale,
at Portland, Maine, on January 2, 1945, in which the
following statement appears:
"In any case an essential of any peace
terms would soen to be to make possible some
sort of an economy under which the German
people can live. There will be no German
economy left after the war. It would ob-
viously be more humane to send 80,000,000
men, women, and children to the firing squed
or the Vernichtungslager than to have them
starve to death over the years. The sugges-
tion of Secretary Morgenthau to destroy all
German Industry would have left no assurance
of any economic future for Germany.
(Page A82)
DJS:rge
Regraded Unclassified
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, O.C. 25
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
FMA
Dear Henry:
(Book 805, Page
Thank you for your letter of December 23 regarding
the Italian Technical Mission. I think the line of
action which you propose to take 1s entirely in harmony
with our views. We have some suggestions as to the
language of the statement you plan to give the Mission.
I enclose a suggested redraft of the statement which
has already been made available informally to your Depart-
ment. Before handing the statement to the Italians, I
believe we should show it to the British for their infor-
mation and comments, but not for clearance.
The Department 18 preparing a statement on other
points which have been discussed with the Mission
during its visit. It occurs to me that at the conclu-
sion of the discussions, we might incorporate the text
of your statement, with any elaboration which you may
consider desirable in the light of further discussions,
in a single text. I have instructed the officers of
the Department concerned to consult with your Depart-
ment regarding the text of a press release to be issued
when the Mission leaves the United States.
Sincerely yours,
E
Enclosure:
Redraft of statement.
The Honorable
Henry Morgenthau, Jr.,
FORVICTORY
Secretary of the Treasury.
BUY
UNITED
STATES
SAVINGS
BONDS
ARD
STAMPS
Regraded Unclassified
DRAFT
The U.S. Government has given sympathetic con-
sideration to the explanations and proposals of the
Italian Financial Mission and expresses its desire to
take such steps as may be appropriate and feasible to
restore to Italy responsibility and authority for its
financial administration at the earliest possible moment.
1. The U.S. Government views with sympathy the
desire of the Italian Government to have transferred to
it the issuing authority for Allied military lire. The
U.S. Government is discussing the matter with the United
Kingdom Government with a view to reaching an agreed
position on the terms and conditions under which such a
transfer might take place. It 1s suggested that the
Italian Government also communicate its views on this
subject to the United Kingdom overnment.
2. The United States Government is prepared to
enter into an agreement with the Italian Government to
formalize the existing financial arrangements between
the two Governments arising out of the participation of
American forces in military operations in Italy.
3. The United States Government will take steps
directed to provide the Italian Government with all
information available concerning transactions which
affect
Regraded Unclassified
-2-
affect the financial relations between the two govern-
ments.
4. The United States Government will assist the
Italian Government in its efforts to mobilize to the
maximum extent the foreign exchange assets of Italy
with the objective of permitting Italy to assume the
greatest amount of responsibility for the rehabilitation
and reconstmuction of Italy.
It 1s understood that the United States Govern-
ment must act in concert with the Government of the
United Kingdom and the other interested United Nations
in carrying out these steps and that the interests of
these other governments must be fully considered,
Regraded Unclassified
363
January 10, 1945
My dear Admiral Leahy:
I am sending you herewith a very confidential
document pertaining to Russia, which I gave to
the President today.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Admiral William D. Leahy,
Chief of Staff to the
Commander-in-Chief of the U.S. Army and Navy,
The White House,
Washington, D.C.
Regraded Unclassified
January 10, 1915.
MEMORANDUM FOR THE PRESID NT
A $10 Billion Reconstruction Credit for the U. S. S. R.
I suggest consideration be given to a financial arrangement
with the U.S.S.R. to provide her with $10 billion credits for the
purchase of reconstruction goods in the U.S., wi th provision for
repayment to us chiefly in strategic raw materials in short supply
in the U.S.
1. The interest rate could be 2%, amortized over e. period of
35 years. A schedule of repaymen to is attached.
2. The Russians have more than adequate means to assure full
repayment. There are three principal sources from which she can
obtain the necessary amount of dollars.
(a) Selling to us strategic raw materials which are in
short supply in the U.S. because of our depleted
natural resources. (See attached memor andum)
(b) Russia will be able to develop substantial dollar
assets from tourist trade, exports of non-strategic
items to the U.S., and from a favorable balance of
trade with the rest of the world,
(c) Russia has B. stock of gold estimated at $2 billion
now and is reported to be able to produce from $150
to $250 million per year. These gold resources can
be used to pay her obligations to the United States
to the extent that her other dollar sources are not
adequate.
3. An important feature of this proposal is that we will
be conserving our depleted natural resources by drawing on Russia's
huge reserves for current needs of industrial raw materials in
short supply here. We would be able to obtain a provision in the
financial agreement whereby we could call upon Russia for what-
ever raw materials we need without giving a commitment on our
part to buy.
4. This credit to Russia would be a major 8 tep in your
program to provide 60 million jobs in the post-war period.
HDW:HGYAFL: May JED: SG;rl
BY
10 FILE COPY
Regraded Unclassified
Conservation of U.S. Natural Resources and Imports from the U.S.S.R
The U.S. has had to draw heavily on domestic raw material
reserves during the war to meet peak production requirements.
The following table prepared from some recent confidential re-
ports for the Under Secretary of Interior discloses the depleted
natural resources of the United States, and emphasizes the need
for conservation measures.
Reserve Domestic Supplies
On Basis of our
On Basis of our
1939 Dome atie
Current Consumption
Consumption
1943
Petroleum
16 years supply
13 years supply
Manganese
9
If
is
3
15
11
Tungsten
23
If
"
X
-
"
Zine
17
#
II
8
n
If
Lead
7
B
-
6
n
=
Chrome
No record
Less than 1
year's supply
Mercury
3 years supply
We could safeguard and conserve our strategic material re-
serves in post-war years which are now at minimum levels, by
importing from abroad to meet ordinary annual production require-
ments. The U.S.S.R. has tremendous reserves of many materials
which the U.S. will urgently require after the war. A reconstruc-
tion loan to the U.S.S.R. will give us the means whereby we can
conserve our own natural resources for the next two generations,
by utilizing Russian reserves. The U.S.S.R. could provide sub-
stantial quantities of strategic raw materials for an annual basis
within five years after the close of the war as indicated in the
following table.
Metals and metallic ores
$80,000,000
(Manganese, Tungsten, graphite,
mica, chrome, mercury, iron ore,
platinum, copper)
Timber and wood products
45,000,000
Petroleum
50,000,000
011s and oilcake
10,000,000
Other industrial raw materials
15,000,000
Total
$200,000,000
FILE COPY
Regraded Unclassified
Repayment Schedule for Advance of $10 Hillion
Credit for 35 Years at 2 Percent
(Millions of Dollars)
Scheduled
Annual
Annual Scheduled
Unpaid Balance
Year
Expenditure
Interest
Repayment
At End of Year
1
1,000
20
0
1,020
2
2,500
70
0
3,590
3
3,000
132
0
6,722
4
2,500
184
100
9,307
5
1,000
206
150
10,518
6
210
200
10,523
7
210
250
10,484
8
210
300
10,393
9
208
350
10,251
10
205
400
10,056
11
201
400
9,857
12
197
400
9,655
13
193
400
9,448
14
189
400
9,237
15
185
500
8,922
16
178
500
8,601
.7
172
500
8,258
18
165
500
7,938
19
159
500
7,597
20
152
500
7,249
21
145
500
6,894
22
138
500
6,532
23
131
500
6,162
24
123
500
5,785
25
116
600
5,301
26
106
600
4,807
27
96
600
4,308
28
86
600
3,789
29
76
600
3,265
30
65
600
2,730
31
55
600
2,185
32
44
600
1,629
33
33
600
1,061
34
21
600
2,088
35
10
492
4,691
14,842
This schedule is & basis for negotiation
FILE COPY
Regraded Unclassified
JAN 10 1945
My dear Mr. President:
There is attached a report of Lend-Lease
purchases mnde by the Treasury "rocurement Divi-
sion for the Soviet government, indicating the
availability of cargo for January.
The inventory of material in storage as
of January 1, 1945, was 155,039 tons or 57,280
tons more than the December 1st inventory.
Faithfully yours,
(Signed) H. Morgenthau, Jr.
The President
The White House
WFBrennan:hsc
(1/8/45)
Regraded Unclassified
TREASURY DEPARTMENT - U. S. S. R.
MATERIALS AVAILABLE FROM STORAGE AND PRODUCTION DURING JANUARY, 1945
(IN 2000 LB. TONS)
PRIORITY CARGOES
FOR PORT AREAS
STORAGE
PRODUCTION
SPECIFIED TO DATE
COMMODITY
JANUARY 1, 1945
DURING JANUARY
TOTAL AVAILABLE
FOR JANUARY
AGRICULTURAL MACHINERY AND
IMPLEMENTS
105
4,317
4,422
4,405
ALUMINUM
62
287
349
336
BEARINGS
26
543
569
560
BRASS AND BRONZE
2,672
3,397
6,069
6,104
CHEMICALS
3,315
4,997
8,312
8,074
CLOTHING AND TEXTILES
7,903
7,903
280
CONSTRUCTION MACHINERY
3,833
3,833
COPPER IN VARIOUS FORMS
15,099
1,009
16,108
9,682
FERRO-ALLOYS
60
187
247
230
GRAPHITT PRODUCTS
19
19
HAND AND CUTTING TOOLS
5,929
5,929
5,608
INDUSTRIAL MACHINERY
31,875
8,935
40,810
40,797*
MEDICAL SUPPLIES
72
72
NICKEL AND HICKYL PRODUCTS
510
510
459
NON-FERROUS METAIS - OTHER
30
1,079
1,109
1,120
FAPER AND PAPER PRODUCTS
393
5,331
5,729
274
PLASTICS
612
612
RUNDER
316
3,817
4,133
4,256
STREET, ALLOY AND SPECIAL
9,028
11,964
20,992
15,646
STEL, CARBON
29,743
57,234
86,977
STERL, PIPE AND TUBING
19,753
15,384
5,896
21,280
STUL, RAILS
21,280
43,729
25,685
69,414
TIN PLATT
25,760
2,566
7,138
9,704
10,080
TOTAL
155,039
160,063
315,102
174,704
*
In addition, all available tonnage applicable to the Oil Refinery Program is classed as priority cargo
for prompt shipment to ports.
Regraded Unclassified
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D. c.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
January 10. 1945
FMA
My dear Mr. Secretary:
I have received your letter of January 9 with
further reference to the military exchange rates
to be established in certain areas of the Pacific.
In my letter of January 6 to Mr. Bell, I indi-
cated that the Department feels that a ten cent rate
should be established initially in Formosa for both
economic and political reasons. Economic and politi-
oal considerations are closely intertwined in matters
of this kind, and I do not think it is possible to
consider one apart from the other. This Department,
in view of the importance it attaches to the political
aspects of the problem, is prepared to accept
responsibility for the decision. As I understand the
discussions we have had regarding the subject with
your Department, although your conclusions with
respect to the economic factors differ from ours,
you are prepared to withdraw your objections to a
ten cent rate in view of the political considerations
involved.
Sincerely yours,
Under Secretary 2.9mg
The Honorable
Henry Morgenthau, Jr.,
RQ
VICTORY
Secretary of the Treasury.
BUY
UNITED
STATES
games
BONDS
AND
STAMPS
Regraded Unclassified
DEPARTMENT
OUTGOING
DIVISION OF
OF
COMMUNICATIONS
TELEGRAM
STATE
AND RECORDS
Junuary 10, 1045
DEPARTMENT OF STATE
AMEMBABSY,
JAN 13 1945
DIVISION OF
CHUNGKING, (CHINA).
COMMUNICATIONS & RECORDS
49, Tenth
FOR ADLER FROM MR, WHITE
Please deliver the following message to Dr. Soong:
QUOTE Thank you for your New Year's greetings. We
are all hoping that during the coming year it will be
found possible to take effective measures to cope with
China's grave economic and financial problems. I know
that you will do all possible to help effect such
neasures.
QUOTE With best wishes for the New Year. END QUOTE
STETTINIUS
(GL)
CA
FMA:PN0Gsruk
1/8/45
Regraded Unclassified
EAK-1444
Distribution of true
London
reading only by special
arrangement. (SECRET #)
Dated January 10, 1945
Rec'd 4:50 p.m.
Secretary of State,
Washington.
323, January 10, 6 p.m.
FOR DEPARTMENT AND PENTE FROM MANN
intergovernmental Committee advised by Foreign
Office on January 2 (REEMBS 11461, December 27)
that British doyernment has no objection to ICC
plans for expenditures in Hungary, Italy and Rumania
and in case of latter two no objection to the
acquisition of lira and lei in Switzerland. IGC
was told to use all precautions to 886 that neither
enemy nor enemy collaborators benefitted.
Regarding Rumanian project Foreign Office
suggested that if it were possible in order to avoid
adsunderstanding "the project should be taken note
of in sone appropriate manner by the Allied Control
Commission in Runania". If so, willingness expressed
to send suitable instructions to British representatives
on Commission. It was also indicated to Sir Herbert
Inersan that since he intended to discuss Rumanian
matters generally with the Soviet representatives
of the IGC at an early date he night care to give
sone indication of proposed operation in order to
remove in advance "any difficulties which the Soviet
Government night feel disposed to make".
I have discussed matter with Joseph Schwarts
who says JDC has outstanding licenses which would
permit it to effect for IGC transactions in question.
ICC will give no instructions to JDC until it has
received United States Government's approval. Sir
Herbert Baerson in view urgency situation again re-
quests an expression of United States Government's
views concerning IGC proposal.
WINANT
RB
Regraded Unclassified
JP-1687
PLAIN
London
Dated January 10, 1945
Rec'd 10:54 a.m., 11th
Secretary of State,
Washington.
364, Tenth
FOR PEHLE FROM MANN
Please deliver the following message from Joseph
Schwarts to Moses Leavitt of JDC.
Have been discussing with Caech Government relief
requirements Jewish and general populations liberated
parts Caschoslovakia especially Carpathian region lately
10,000 our protoces in urgent need. Caech Government
have asked whether it will be possible for us to forward
supplies from Tehran or Palestine via Istanbul and Rumania.
Tie have indicated that we would be ready appropriate
approximately $100,000 purchase supplies for Csechoslovakia
provided Caech Government would arrange for transportation
through Turkey and Rumania but we have pointed out that
requirements are beyond resources of private agencies
and that if supplies in larger quantities are available
Caech Government should males necessary funds available
for purchases which we would make. Passman will upon
his return investigate amounts available for purchases
and will advise both us and Caech Government which is
anxious to help. Important you authorise us proceed
with purchases budget $100,000 our account.
WINANT
WSB
NPL
Regraded Unclassified
373
NOT TO BE RE-TRANSMITTED
4
COPY NO.
SECRET
OPTEL No. 12
Information received up to 10 a.m., 10th January,
1945.-
NAVAL
1.
HOME WATERS. 9th. Norwegian M.T.B.'s sank 8,000
ton ship off Sogneficrd; also probably sank minesweeper and
damaged trawler.
2.
mediterranean, 9th. French Submarine Chaser was
sunk with all hands, probably by U-boat, off Tangier.
MILITARY
3.
WESTERN FRONT. In south enemy has kept up pressure
astride Rhine-Rhone Canal and has advanced some 3 miles north-
wards towards Strasbourg.
On Northern flank of Ardennes salient attack on
enemy has made further good progross despite deep snow and
slippery roads.
On extreme western flank of attack general move
forward about 3,000 yards from previous positions east of
Rochefort and south of Marche.
In Centre Allied troops occupied Cielle and Samree
and have strong forces south of main Vielsalm-St, Hubert road.
In East U.S. troops advanced to within 4,000 yards
of Bovigny.
4.
GREECE. British tanks entered Thebes midday 8th.
Other Allied troops reached Chalcis and area of Levadia.
5.
BURMA. Arakan, Our troops now in area of Ponnagyun.
Savage Island, West Boronga Island and middle Boronga Island
all reported clear of Japanese.
Central Burma. Shwebo entered and railway station
undamaged. Further north 2 villages 20 miles south of Tagaung
occupied.
AIR
6.
WESTERN FRONT. 9th. Bad weather prevented opera-
tions except small number of sorties flown by SHAEF (Air)
mainly over southern sector. Mosquitoes set on fire 6,000
ton and damaged two 1500 and 2000 ton ships and a whaler in
Lervik. In Sognefiord Beaufighters sank 3,000 and 1,000 ton
ships.
7.
MEDITERRANEAN. 8th. 309 escorted U.S. heavies
(6 missing) dropped 629 tons by Pathfinder technique on rail-
way centres Austria including 347 tons Linz.
HOME SECURITY
8,
ROCKETS. 9th. 3 rockets reported.
Night 9th/10th. 3 rocket incidents.
Regraded Unclassified