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Volume 327 - Part 1, October 31, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 327: Part 1
Answers to Willkie Speeches
Campaign of 1940
1
COPY
THE WHITE HOUSE
Washington
November 9, 1939.
FOR THE SECRETARY OF THE TREASURY:
the obstacles to the proper equipment
cry for national defense is the disparity
rate of production of airplane motors
the airplanes themselves. This must be
1
as soon as possible.
hereby directed to work out a policy
ion allowance by which the abnormal
n plant expansion that will be required
ane motors manufacturers will be ab-
the life of the contracts or during the
riod.
further directed to consult with the
committees of the Congress for the pur-
sing a permanent program whereby the
hus created will become a permanent
national defense.
(Initialed) F. D. R.
COPY
2
December 1, 1939.
MEMORANDUM FOR THE PRESIDENT:
The Treasury has been considering for some
time the possibility of assisting the Army and Navy
in the establishment of additional facilities in
private industries to expedite the national defense
program with special reference to your memorandum to
me of November 9, 1939, copy of which 1s attached.
We have concluded that:
1. So far as J1gs, dies, tools and factory
machinery of specialized and restricted use
are concerned the Treasury is today able to
execute closing agreements definitely assur-
1ng the contractor that he will be able to
write off against the particular contract or
as a deduction for the particular income tax
year all such facilities as are consumed or
obsolete -- just as any other manufacturer may.
2. The problem of obsolescence on new
factory buildings and standard equipment pre-
sents a different problem, one which under the
present state of the law and in view of the
hearings before and reports of the Couzens
Committee and the Nye Committee, we do not
believe we can solve. Since the greater part
of "additional facilities" seems to consist of
new construction and standard equipment it
would appear that the real assistance we can
give to the Army and Navy under the present law
is so slight that no further dependence should
be placed upon it.
3
- 2 -
Hence, it is clear that congressional action
1s required, and that only the Congress can solve
this problem. Any action, however, in bringing
this problem to the attention of the appropriate
congressional committees ought to be initiated by
the War and Navy Departments since it is a part of
the national defense program. Of course, I shall
be happy to cooperate.
(Signed) H. Morgenthau, Jr.
4
PRESS CONFERENCE
December 4, 1939.
(Present: John L. Sullivan, Assistant to Commissioner
Internal Revenue and Mr. Eugene Duffield.)
H.M.Jr.:
This, gentlemen, is the first publicity on the first
contract that the Internal Revenue have ever closed
under the Vinson-Trammell Act and through the coopera-
tion of the Colt's Fire Arms Manufacturing Company and
the War Department. I am very happy to be able to make
the terms of this closing agreement public, and from
now on any closing agreement that we enter into with
any contractor, as part of the agreement we will stipu-
late that we can make this agreement public.
Now, the underlying idea is I feel very strongly that
no contractor should be permitted to make one penny
more profit than was intended by Congress when they
passed the Vinson-Tramell Act.
Q:
Is this one of those educational orders?
A:
No. This is not. This is a regular order. of the War
Department and this is the first time since the Vinson-
Trammell Act was passed that there has been any closing
agreement on the part of Internal Revenue and we are
making it public and from now on all the closing agree-
ments we enter into will be made public.
5
- 2 -
Regraded Ucl
Q:
Does this include an arrangement or concession under
the Revenue Act?
Mr. Sullivan: There are some provisions that are applicable under
the report filed under the Vinson-Trammell Act and the
return filed under the Income Tax Law.
Qt
In other words, there is a depreciation allowance made
under the Revenue Act so I suppose in this particular
case, as in many others, Colt will have to build new
equipment or new plants. Is that all?
As
Yes. You see, when the reports are filed under the
Vinson-Tramell Act they have to be associated with the
income tax returns for the similar period of time and
some provisions are available for use on both the report
under the Vinson-Trammell Act and the return under the
income tax report.
Q:
Isn't it generally true that the depreciation factor is
the principal subject of the closing agreements?
At
I think that is a fair statement.
Q:
It is a setting up of depreciation, generally speaking.
A:
No, although in this closing agreement the depreciation
is taken on equipment which is of no further useful value
after the contract is completed and the same type of
depreciation would be allowable to private industry for
machinery that was purchased for one contract and then
abandoned.
- 3 -
6
Q:
That's part of the general revenue law, isn't it?
A:
Yes.
H.M.Jr.:
To make it perfectly clear, we are certainly not going
to give advantages to anybody who is making munitions
rather than peacetime materials. If it were left to ne,
I would give the peacetime manufacturer a break over the
war manufacturer.
Q:
To make it clear, how does this work out in general?
You said it was a depreciation factor. As I understand it,
in some of these wartime contracts a company has to build
a plant that is good only for the time it takes to turn
out the order. Then it is scrapped.
A:
Yes, but he is out of luck as far as we are concerned on
that.
This is the only contract that has been entered into by
either the Army or the Navy in which the Treasury has
entered into a closing agreement. There is no other
contract; this is the only one.
Mr.
Sullivan: That's right and there is no plant involved in this case.
Q:
It's just the equipment?
A:
That's right.
H.M.Jr.:
Jigs, dies, fixtures and gauges.
Q:
Would you make some comment on the statement by Senator
Borah regarding the December 15th payment of Finland of
the War Debt. I asked you last week and you said you had
no comment. But it's coming from Congressional sources now.
7
- 4 -
At
I still have no comment.
Q:
Is there any study being made of that question?
A:
Yes.
Q:
Have you had requests aside from Congressional sources?
A:
I can't go beyond that.
Q:
But there is a study being made of the question.
A:
There is a study.
Q=
Returning to this, if I may, as to this additional
standard machinery discussed on page 2 for which a
depreciation allowance of 10 percent a year is specified,
I wonder if we could ask Mr. Sullivan how that 10 percent
compares with what they would ordinarily be allowed.
Mr. Sullivant You understand a closing agreement is entered into by the
Bureau on the basis of information that is furnished to
us by the contractor, a certain part of which is subse-
quently certified to by the War Department or the Navy
Department. This closing agreement gives to the Colt
Company nothing to which they would not have been entitled
by operation of law or closing agreement; in other words,
if at the end of this particular contract there is no
further work for this particular equipment they then
would be entitled to everything they are getting under
the closing agreement even though they had no closing
agreement.
Q:
What is the benefit of the agreement?
8
- 5
Regraded Ucla
At
The benefit of the agreement to the manufacturer, the
contractor, is that in advance and before making his
bid to the War Department or the Navy Department he
knows that if the facts he represents in his petition
for a closing agreement are true and correct, the tax
situation will be the one that is outlined in the closing.
agreement and in the event of a change in Administration
in the Bureau or in the Treasury ....
H.M.Jr.:
**** or in the Government ****
Mr. Sullivan: .... or in the Government, that closing agreement is bind-
ing upon the succeeding Commissioner and the succeeding
Secretary of the Treasury.
H.M.Jr.:
May I add one thing? In this case Colt's have to invest
considerable money and before they invest in jiga and
dies it is perfectly normal that they would like to know
where they stand, and it's only in the last year or two
that any corporation can come down here and get a closing
agreement in advance. That's something which was in-
augurated while Mr. Herman Oliphant was alive.
Q=
Mr. Secretary, I think it all comes down to the fact that
some of us have written stories that we should not have
about some policy in the Army or Navy or Treasury, either
policy or proposed policy, to encourage manufacturers of
certain materials wanted by the Government to invest in
plants or equipment or something by assuring them of a
- 6 -
9
more rapid depreciation allowance than would otherwise
be permitted. Is there such a policy, or does this
have anything to do with it?
H.M.Jr.:
We are as much to blame as anybody and we wanted manu-
facturers to know that this method was available and
therefore, a month or so ago
....
Mr. Duffield: September ....
H.M.Jr.:
.... you gave out a statement. Now some people, I think,
interpreted that as a bid for a way, possibly, to get
around the Vinson-Trammell Act. That was not the intention
and on account of that erroneous belief having grown up,
we felt that the easiest way to overcome that was simply
as each contract is entered into to make it public and
everybody can understand it and if there is any criticism
it will only be on the one contract and not on any subse-
quent ones. Because if the criticism is fair, we will
naturally listen and I want again to emphasize that the
Colt people have shown a fine spirit in this thing and
I hope you will give them a little hand on it.
Q:
Just to go over it again then the assumption that the
availability of these agreements, the assumption that
that meant & more liberal depreciation allowance would
be granted was erroneous.
At
Correct.
- 7
10
Q:
In other words, before and now you are offering them
nothing more than you did previously except here you
have a procedure where they can tell in advance what
it's going to be.
A:
A great many of these contracts entail considerable
investment on the part of the manufacturer and it is
only fair to him that he should know in advance what
the attitude of his Government is going to be towards
depreciation and we simply say to Mr. Colt or Mr. Smith,
'if you are going to enter into a contract involving
the outlay of equipment, if you will come in, we will
sit down with you and tell you just what we will or
won't do.' Now in the case of a munitions contract we
ask either the Army or the Navy to certify to us what,
in their opinion, the depreciation will be. We don't
rely just on our own judgment.
Q:
In other words, all the stories of tax concessions to
war-order manufacturers are out?
At
Completely. If it rested with me as to whether a fellow
would get a break because he had a minitions contract I
am afraid he would fare rather badly.
Q:
Mr. Secretary, is the Colt Company's contract with the
War Department one that has been closed already?
A:
This contract is signed, sealed and delivered, finished,
and I had the officers of the Colt Company come down
11
- 8 -
today and asked their permission to do this because I
don't think it was fair to them-without their permission-
and they cheerfully gave their permission.
Q=
How about the contract with the War Department?
At
That's finished; the War Department gave their permission
to do this publicity.
Q:
Could you give us any indication as to the amount of the
contract or the amount of the investment Colt will have
to make?
A:
No, that is their business.
Q:
To emphasize the importance of what little concession
you are giving them here, if you didn't tell them in
advance what the depreciation would be then after the
contract was fulfilled the burden would be on them to
come in and prove ---
Mr. Sullivan: That is right and if there were a succeeding commissioner
or Secretary of the Treasury they might be obliged to go
under litigation to establish that right.
H.M.Jr.:
And the normal thing would be for the mamifacturer to
hesitate to enter into a contract where he is manufacturing
a new line.
Q:
But could any manufacturer just-say he geta a private
contract involving new investment-is this procedure
also open to him to come down here and enter & closing
agreement?
12
- 9 -
A:
Yes.
Q:
This is just the same-any manufacturer who-no matter
who-? In other words, if Colt had a contract with some
private company there wouldn't be a closing agreement?
A:
Supposing Colt decided to go into the business of manu-
facturing electric razors and he never made them but it
did cost him several hundred thousand dollars to put in
new machinery and let's say he had a contract with a
mail order house to sell five, ten or fifty thousand of
these razors. Now before he wanted to put in several
hundred thousand dollars worth of machinery, although he
had the order in sight he would come down and say now I
have got a chance to make an electric razor; I have never
made them before. I want to make this investment in jigs
and dies. What can I be expected to write off?
Mr. Sullivan:
It is based on their representation of what they expect--
in other words, if they represented to us that the equip-
ment was only to last three years and if at the end of
three years we say they were wrong and we have acted on
their representation solely, we could then void the closing
agreement.
Q:
It seems to me there might be some little difference in an
order of that kind where the business might become very
successful and go on indefinitely and in a war order which
is definitely of a limited character, unless it is to be
assumed that we are going on always buying arms from Colt.
Regraded Uclassified
13
- 10 -
Mr. Duffield: There is a difference-that there is a profit limits act
involved in these things.
Q:
What is that?
Mr.
Sullivan: On this particular order it is twelve per cent - ten per
cent on boats and twelve per cent on army and navy
equipment.
H.M.Jr.:
This doesn't mean we pass an okay on every contract because
last week we turned down a big one; we just couldn't go
along.
Q=
Under that '38 law you can have closing agreements on
other than depreciation allowances, can't you?
Mr.
Sullivan:
Yes, yes. Many phases of tax liability may properly be
made the subject of a closing agreement.
Q=
Is that '38 this past - ?
Mr. Sullivan:
Yes.
Q=
Mr. Secretary, can you tell us what this contract covers?
Mr. Sullivan:
No.
H.M.Jr.:
No.
Q:
Is that different? I know the Procurement Division and
others make public, every now and then, make public
contracts for airplanes and plane parts, etc. I realize
the Treasury is backing into this in a different way.
H.M.Jr.:
This is a contract between the War Department and Colt.
Q:
Is it a war secret so we can't learn?
14
- 11 -
A:
I wouldn't want to say anything other than it is War
Department's business.
Q:
I might have misunderstood you, I thought you said ten
per cent on boats, or did you say bolts?
Mr.
Sullivan: The question was asked what percentage of profit was
it on Vinson-Trammell?
Q:
Ten per cent on what?
You said it was twelve percent in this case. Colts
doesn't build airplanes, or could it be - - ?
H.M.Jr.:
What shall we do? Play twenty questions? He's had three.
Q:
When the War Department, or Navy Department as the case
may be, makes their estimate as to what the depreciation
allowance may be - - - ?
Mr.
Sullivan: They certify the necessity of additional facilities and
the degree of depreciation they expect will occur under
the life of the contract.
Q=
And that is based under the company's estimates?
Mr. Sullivan: No, when representations are made to us by the company
and we base our closing agreement on the representations
made to us by the company provided they are in line with
the certification by the Navy Department.
Q:
If they don't run along, do you take the Navy Department's
figures?
Mr. Sullivan: We have never had to.
Regraded Uclassified
15
- 12 -
Q:
This raises a question, it seems to me there was some-
thing that the War Department was going to be kindly
disposed to munitions manufacturers. Adding that up,
wouldn't it mean that the War Department would certify
to an extremely short life for equipment of this kind,
giving a considerable concession in that respect?
H.M.Jr.:
I think the answer is if we felt the certification of
the Army or Navy was unreasonable we wouldn't accept it.
Q:
What I am trying to get at is you want the impression
to get out very definitely that there is nothing being
given in this closing agreement that would not be given
in an ordinary peace-time contract.
A:
Definitely, or anybody else. There is nothing-I am
trying to use the words get over-there is nothing in
any of these contracts that can't stand the light of
publicity.
Q:
Although that factor would indicate the War Department
might be disposed to speed up depreciation?
At
The final responsibility is the Treasury's and we have
to be satisfied whatever the War Department or Navy
certify is reasonable and comes within the spirit of
the intent of Congress. If it doesn't come within the
intent of Congress we wouldn't accept it and, as I said
last week, we turned down a big contract which had been
certified.
16
- 13 -
&
Was it DuPonts? There were some stories about DuPont.
War Department, Mr. Secretary?
A:
I am not going to say.
Q:
Can you say, Mr. Secretary, for what period this contract
runs?
A:
I don't know, but I just answered the question that we
don't take everything they give us; we turned one down.
Q:
Which had been certified by the War Department?
At
Which had been certified by one of the two departments.
Q:
Mr. Secretary, was this a proposed closing agreement
that you turned down? You said you turned down a
contract.
A:
This was a certification which one of the two departments
made to us.
Q:
Of similar nature to this?
A:
Along the same lines.
&
For a closing agreement?
A:
For a closing agreement and we were not satisfied and we
turned it down.
Q:
Mr. Secretary, can I return to ask some peacetime
questions now?
At
Yes.
Q:
Has Mr. Crowley notified you that he is going to resign
from the FDIC?
17
- 14 -
Regraded Ucla
A:
I go off the record and Gene can tell me-lir. Crosley
wrote no a very nice letter in which he said before be
did anything he would like to talk to me about it. Is
that on the record or off the record?
Mr. Duffield: Since he doesn't owe any responsibility to you -
Q:
He's over at the White House now.
H.M.Jr.:
And he was over here Saturday, 80 I don't know whother
that is important or not, is it?
Mr. Duffield: It isn't important because, after all, he doesn't have to
resign to you.
H.M.Jr.:
I had a very nice letter from Mr. Crowley about his
proposed new work.
Q:
In the event he does resign and the President doesn't
immediately name his successor, Mr. Delano would te the
official head over there.
A:
That's what the paper said; I don't know.
Q:
Wilcox or somebody looked it up in the law.
A:
It must be so.
Q:
Our legal department.
At
Gene will look it up.
Qz
Getting back to this contract, do you know whether
Colt manufactures machine guns or not? (Laughter)
A:
All right; what else?
Q:
Water pistols.
Q:
Thank you, Mr. Secretary.
18
Mr. Foley
September 5, 1940.
Mr. Kades
On September 15, 1939 a press release was issued
by the Treasury Department (Press Service No. 18-79)
which announced that the Secretary had informed the
Secretary of War and the Acting Secretary of the Navy
of nis willingness to negotiate closing agreements with
contractors who enlarged their facilities in order to
meet army and navy needs under which the Treasury at
the time the contract was signed would agree "on the
basis or the facts in each particular case to allow a
fixed percentage of reasonable cost to be charged when
the profits were computed under the Vinson-Trammel Act."
On September 15, 1939 you designated me a member
or the Departmental Committee for the administration of
the profit-limiting provisions or the Vinson-Trammel Act
and the National Defense Act, and thereafter I attended
numerous conferences in the Bureau of Internal Revenue
and in the Treasury Department concerning the enforce-
ment or the Acts.
On the morning of November 24 I attended a con-
ference in Under Secretary Hanes' office at which you
and Mr. Sullivan were also present. During the con-
ference which concerned requests from several aircraft
companies for closing agreements Mr. Hanes exhibited
a photostat copy of a memorandum from the President to
the Secretary or the Treasury dated November 9, 1939
which directed the Secretary "to work out a policy or
depreciation allowance by which the abnormal invest-
ment in plant expansion that will be required of the
airplane motors manufacturers will be absorbed over
the life of the contracts or during the emergency
period" and in which the Secretary was "further di-
rected to consult with the appropriate committees of
the Congress for the purpose of devising a permanent
program whereby the facilities thus created will become
Regraded Uclassified
19
- 2 -
8 permanent part of the national defenge." At
that conference Mr. Hanes requested Mr. Sullivan,
who was then Acting Commissioner of Internal Revenue
to indicate the extent to which closing agreements
might be used to expedite the erection of additional
plants to further our own national defense program
and to make additional equipment available to foreign
governments.
During the afternoon or November 24 1 attended
at conference in Mr. Sullivan's office in the Bureau
of Internal Revenue at which there were also present
Nr. Laughlin Currie, Administrative Assistant to the
resident, who attended as an observer, and Messrs.
Burrus, Reiling and Appel or the Internal Revenue
Bureau.
On November 25, 1939 a memorandum was submitted
by Mr. Sullivan to Mr. Hanes which stated that the
problem involved in the President's memorandum might
be more effectively approached by revised regulations
relating to obsolescence than by any attempt to expand
the functions of a closing agreement because "under
the present state or the law the Internal Revenue
Bureau cannot give to a taxpayer in a closing agree-
ment any right or privilege he would not enjoy
eventually as a matter of law."
on the morning or November 28, 1939 I attended
another conference in Mr. Hanes' office at which
Mr. Sullivan and Mr. Wenchel were present. Mr. Hanes
said that he thought the memorandum of November 25
was "a fine statement", that he did not think we
should enter into any closing agreement allowing
munitions makers depreciation and obsolescence deduc-
tions "without the approval in each specific case of
the President" and that in SO far as the Vinson-
Trammel Act was concerned we might "clarify the
regulati ons relating to obsolescence".
Mr. Hanes asked Mr. Sullivan to bring everything
he had on Consolidated Aircraft to 8 meeting the
following day to be held at the office or the Secretary,
and In this connection he said that he understood that
Regraded Uclassified
20
n 1 I
Consolidated had not been able to obtain funds to
l'inance plant expansion.
At the conference in the Secretary's office on
November 29, 1939 the Secretary asked that the problem
01 assisting the Army ano Navy in the establishment
OI additional facilities in private inqustries to
expedite the national defense problem be reconsidered
anew.
On November 30, 1939 Mr. Hanes submitted to the
Secretary a memorandum concluding that Congressional
action was required and that Congress could solve the
problem by:
"1. A direct appropriation to the Army and to
the Navy for the construction or procurement
or all types 01 additional facilities to lena
or to lease to the private industry, or by
"2. A statute authorizing the Treasury Depart-
ment to permit special deductions to well
defined classes of manufacturers by definite
standard and procedure outlined in the statute,"
The memorandum ended with an example of such a statute
which closely approximates the proposed amortization
deduction in the Excess Profits Tax bill now pending
before the Congress.
On December 1, 1939 the Secretary took a memo-
randum for the President which was prepared by
Mr. Sullivan and myself, and which you approved, to
the Cabinet meeting which stated that the Treasury
nao considered the problem or plant expansion for
national derense and had decided that "only the
Congress can solve this problem". The memorandum also
recommended that any such action "ought to be initiated
by the War and Navy Departments since it is a part or
the national defense program, and stated that the
Secretary would be "happy to cooperate". For your
Regraded Uclassified
21
4 -
information a copy of this memorandum 1s attached.
I was told that the President read the memorancum
aloud at the Cabinet meeting.
on December 2 I prepared a memorandum develop-
ing in detail the scope of the Treasury's authority
to assist in the program for national defense by
exercising powers conferred upon It by the Inter nal
Revenue laws and summarized the applicable laws and
regulations in respect of (a) closing agreements;
(b) obsolescence allowances, and (c) remedies of tax-
payers.
On December 11 I prepared drafts of identical
letters to the Secretary or War and to the Secretary
of the Navy which stated that as a result or the
recent conference between the Secretary or the
Treasury, the Secretary or War and the Secretary of
the Navy, it had occurred to the Secretary of the
Treasury that it might be helpful to outline the
scope of the Treasury's authority to assist in the
national defense program, and accordingly the Secretary
was sending to the War Department and the Navy Depart-
ment a memorandum from his General Counsel summarizing
the applicable laws and regulations. To each of these
letters was attached a mimeographed copy or the memo-
randum or December 2 which nao been slightly revised
and redated December 12, 1939.
on the same day you submitted to the Secretary 8.
draft of a memorandum for the President which attached
a copy or the letter to the Secretaries or War and
Navy and also mimeographed copies of your memorandum.
In this draft of memorandum for the signature or the
Secretary it 1s stated that the only real solution or
the problem facing the war and Navy Departments 1s;
"(1) By erecting plants similar to the
'shadow factories' in Great Britain and
leasing such plants to private industry
and by expanding existing Navy Yard and
Arsenal facilities; or
Regraded Uclassified
5 -
'(2) By constructing or financing the
construction of such plants as part of
a Federal Public Works program under
the Federal Works Agency."
On December 20, 1939 Dr. Viner prepared a very
lengthy memorandum in which he stated that your draft
or memorandum to the President and draft of letters
to the Secretaries 01 War and Navy Departments should
be redrafted.
on June 19, 1940 Dr. Viner's memoranoum was re-
celved in the General Counsel's office.
On June 20 you addressed a memoranum to the
Secretary in which you stated that your memorandum or
December 12 was simply intended to discuss and explain
the Treasury's present powers and that this had been
done accurately from a legal standpoint and you con-
cluded:
"Dr. Viner's unwillingness to accept,
as an economist, my interpretation of the
law and regulations merely reflects his pre-
deliction as an economist that the law and
regulations, not my interpretation of them,
are wrong. In other words, Dr. Viner's
memoranoum fails to distinguish between what
is the law and what ne would like it to be."
Regraded Uclassified
White
Sept. 9,1940 23
Outline for Speech on Financial Program for Preparedness
1. The financial magnitude of the defense program.
2. How to finance this program.
Our alternatives, guns versus butter, or guns and butter.
a. Curtailing of the government expenditures. This means curtail-
ing consumption and financing the defense program out of a
national income of more or less the same level as the present.
b. Draconian tax measures to raise revenue for meeting all addi-
tional expenditures.
C. Increasing defense expenditures without curtailing other
essential expenditures, and increasing taxes to meet the entire
carrying cost of the increased defense expenditures.
3. Why is (c) the best available course?
a. Our situation different from that of other countries,
b. Our debt structure is in an excellent condition.
C. We can have a rising national income in terms both of defense
and non-defense goods and services.
d. with a higher national income our tax receipts will increase,
and appropriate new taxes imposed.
e. Our debt burden. Our price and currency situation. No danger
of inflation.
4. Our fiscal policy will be democratic
a. The burden of sacrifice must be equitable. We must defend
democracy by strengthening internal security.
Regraded Uclassified
24
- 2 -
b. No under-privileged groups will be called upon to make further
sacrifices. No groups already hard hit by the war will be
further penalized.
C. The distribution of sacrifice will be equitable both as between
different sectors of the population, and as between the
present and the future.
d. Our borrowings will be at as low a rate as possible and the
privilege of tax-exemption will be abolished.
e. We shall avoid excessive dislocations of our economy and
where they cannot be avoided keep them to a minimum. We have
not forgotten the lessons of the last war.
5. Our democratic fiscal policy will strengthen democracy at home and
contribute to the program of invulnerability to attacks from a broad.
25
ODRUFF VALENTINE CO.
BOWLING GREEN 9-0798
50 PINE STREET
0799
NEW YORK, N. Y.
SPECIAL BULLETIN
Oct. 12, 1940
LATEST ELECTION QUOTATIONS:
Roosevelt to be re-elected 2 to 1
New York Roosevelt 6 to 5
New York Mead for Senator 9 to 5
New Jersey Roosevelt 13 to 10
New Jersey Edison for Gov 6 to 5
Penn Willkie 6 to 5
Ill Roosevelt 6 to 5
Iowa Roosevelt 7 to 5
Wisc Willkie 7 to 5
Mass & Conn Willkie 7 to 5
Calif Roosevelt 9 to 5
C. WOODRUFF VALENTINE CO.
All prices subject to change without notice.
October 13,1940
26
1939
July 14, 1939
Conference with Navy Department rep-
resentatives to work out method to
step up armor production of three steel
companies to meet Navy's battleship
building program.
July 17, 1939
Second conference with Navy Department
representatives.
July 17, 1939
Lunch with the President. Attached
is memorandum to President that Treas-
ury is doing everything possible to
help Navy accomplish its purposes.
July 26, 1939
HM, Jr saw the President. Asked for
clearance on "Policy and Purpose of
Act". "It is hereby declared that
it is the policy and purpose of Cong-
ress that through this Act the com-
petitive system of private enterprise
for profit shall be maintained and en-
couraged and that wherever practicable
no loan or expenditure shall be made
under this Act for any work, project,
or undertaking in a field now adequately
supplied by existing competitive private
enterprise or by existing non-competi-
tive enterprise at reasonable prices."
President said all right to give to
Barkley if necessary.
Sept. 11, 1939
HM,Jr reported to the President what
the Treasury had done to help the Navy
and 18 now working with Army on Allison
engines. HM, Jr expects to announce
publicly what he has done for Navy.
Sept. 18, 1939
Told the President he had been misin-
formed by Edison and that he, HM, Jr
had therefore misinformed the President,
namely, that Navy had come to an under-
standing with the armament people.
- 2 -
27
Sept. 18, 1939
Press release by Treasury announcing
formula to facilitate operations
under Army or Navy contracts which
are subject to Vinson-Trammell Act.
October 3, 1939
Lunch with the President. Let the
President read Hanes' letter to HM Jr
and President remarked, "All that
Hanes says is don't let's put on any
extra taxes until we have a war. I
don't want any war, but I do want to
tax the people who are making excess
profits." The President then read
HM Jr's letter to Hanes and likes it.
HM Jr said he was fearful if he gave
the letter to Hanes that some of his
conservative friends would hear about
it and "we had better hold our fire.
November 9, 1939
Hanes' memo to President in which the
latter directed HM Jr to work out a
policy of depreciation allowance by
which the abnormal investment in plant
expansion required by airplane manu-
facturers would be absorbed over the
life of the contracts or during the
emergency period.
Attached also is Hanes' memo to the
files of his conference with Mr. Louis
Johnson, Mr. Noble, Admiral Stark,
Admiral Towers and Admiral Furlong,
Colonels Byrnes, Rutherford and
Schultz, General Arnold, and Mr. Green
of State Dept.
November 9, 1939
Conference with the President between
HM Jr and Hanes. President signed
attached memorandum of instructions
to work out policy of depreciation al-
lowance with airplane manufacturers
in order to induce them to increase
their production by 6000 motors per
year.
November 9, 1939
Press conference - HM Jr said in con-
nection with Mead's new bill for loans
to small business-men, "That doesn't
take care of the fellow that has an
order and wants to add to his plant
and wants a loan of from 5 to 10 yrs.
That's the great trouble because he
can't add to a plant and write it
off and pay it back in five years
unless he makes exorbitant profits."
November 20, 1939
Fress conference - HM Jr said,
"Nobody in the Treasury has brought
me any tax program in the Treasury
this fall, beginning with Mr. Hanes
and going all down the line."
Regraded Uclassified
28
-3-
November 29, 1939
HM,Jr's letter to Senator Tobey
assuring him that closing agreement
procedure referred to in Treasury's
press release does not give him any
right or privilege he would not enjoy
eventually as a mattero of law.
November 29, 1939
Conference in HM,Jr's office of Treas-
ury tax officials to discuss the
November 9 memorandum initialed by
the President. HM,Jr disturbed as
a result of the discussion on Treas-
ury's closing agreement policy and
Hanes said, "You are perfectly safe
on what you agreed to." Attached
is Sullivan's memo to Mr. Hanes of
11/25. Draft of 11/30 not approved
by HM, Jr
November 30, 1939
Memorandum presented to President at
Cabinet by HM, Jr and read out loud
by President. Conclusions of the
memorandum are "So far as Jigs, dies,
tools # # are concerned, the Treasury
is today able to execute closing
agreement. Problem of obsolescence
1s a different problem and Treasury
does not believe it can solve it.
Recommends Congressional action which
should be initiated by War and Navy
Departments.
December 4, 1939
Copies of the memorandum referred to
11/30 were sent to Secretaries of
War and Navy.
December 4, 1939
Treasury announced closing agreement
with Colt Patent Fire Arms Manufactur-
ing Company. At his press conference
HM,Jr said "To make it perfectly clear,
we are certainly not goin to give ad-
vantages to anybody who is making mu-
nitions rather than peacetime materials.
If it were left to me, I would give the
peacetime manufacturer a break over the
war manufacturer".
29
-4-
December 6, 1939
Conference in HM,Jr's office with
Treas tax experts, Edison, McLaine,
Admiral Furlong and Capt. Kraus,
Mr. Speer to disclose closing agree-
ment with Electric Boat Company,
and Consolidated Aircraft.
December 6, 1939
Memorandum to President advising of
above conference and suggested methods
to solve the problem facing the War
and Navy Departments and closes with
the statement, "It is my considered
opinion that 1t would be far better
to spend millions for defense than
to use the tax laws to subsidize
private munitions makes.
makers
December 7, 1939
Meeting of Foley, Currie, Kadesand
Sullivan to acquaint HM, with
what went on in the conferences with
Navy.
December 7, 1939
Memorandum outlining the discussions
at the Bureau of Internal Revenue with
Navy representatives and Major Fleet
of Consolidated.
December 9, 1940
Woodring acknowledged receipt of HM,Jr's
letter of December 4 forwarding a copy
of HM, Jr's memo to President of De-
cember 1 and says "The matter will
receive further consideration of the
War Department and I shall be glad
to consult with you again should it
appear necessary".
December 20, 1939
Viner's memorandum "Allowances for
'Extraordinary' Obsolescence".
1940
May 20, 1940
HM,Jr's sends memorandum to the
President for his signature, ad-
dressed to the Secretary of War,
advising the latter that Treasury
will be glad to cooperate in prep-
aration of a revision of Vinson-
Trammell Act.
30
-5-
Mayx20x1940
May 21, 1940
HM,Jr's memo to Pres inclosing Treas-
ury's objections to HR 9822, A Bill
to Expedite Nayal Ship Building and
For Other Purposes. Legislation is
"unnecessary, undesirable and defin-
itely objectionable".
May 21 1940
Foley's memorandum to HM, Jr which
says the Bill would "effectively
sabotage the provision of the Vinson-
Trammell Act insofar as Treasury con-
trol is concerned.
September 19, 1940
Sullivan's memorandum giving the
history of the memorandum prepared
by Hanes on November 9, 1939 and
subsequent developments.
October 13,1940
31
EXCERPTS FROM PRESS CONFERENCES
November 9, 1939
In connection with Senator Mead's new
bill for loans to small businessmen,
HM, Jr said, "That doesn't take care
of the fellow that has an order and
wants to add to his plant and wants a
loan of from five to ten years. That
18 the great trouble because he can't
add to a plant and write it off and
pay it back in five years unless he
makes exorbitant profits."
November 20, 1939
"Nobody in the Treasury has brought
me any tax program in the Treasury
this fall, beginning with Mr. Hanes
and going on down the line."
December 4, 1939
"To make it perfectly clear, we are
certainly not going to give advantages
to anybody who 18 making munitions
rather than peacetime materials. If
it were left to me, I would give the
peacetime manufacturer a break over
the war manufacturer."
February 1, 1940
On question of plant expansion, HM, Jr
said, "They have had a session with
Mr. Sullivan and Mr. Sullivan has ex-
plained to them what we can or cannot
do for them and they never knew that
before. ## If
February 5, 1940
"And the interesting thing to me as
Secretary of the Treasury 18 that in
all three instances, Martin, Curtiss,
and Pratt Whitney, they went ahead
without asking the Treasury Department
anything, perfectly satisfied that the
Treasury would give them a fair ruling
on their plant expansion. I am also
very much impressed with the fact that
when there 18 business the American
business man does go ahead, does expand,
provided he's got the orders."
32
-2-
February 8, 1940
"The way I feel about profits, whether
domestic or foreign, on munitions orders,
I think the man 18 entitled to a reason-
able profit but not an excessive profit
and I think the Vinson-Trammell Act 18
excellent and I would like to see it
carried out. In other words, we have
no discretionary power 80 far as profits
go, but I am absolutely opposed to ex-
cessive profits out of the manufacture
of munitions of war."
"As I said some months ago, we certainly
aren't going to give the manufacturer of
munitions who has a. contract with the Army
or Navy a more favorable ruling on depre-
ciation than we would a manufacturer who
is working making rubber boots."
February 26, 1940
"What I told you gentlemen I am glad to
repeat again. Any taxes levied by
Congress and which the Treasury adminaters
on American manufacturers will not be
administered any differently, certainly,
for a man manufacturing munitions of war
than a man manufacturing peacetime. Now
we won't be any more lenient or *****
stiffer. He gets exactly the same kind
of treatment #### ** No, and the
American manufacturers whom I actually
visited, the head or general manager, I
asked them the particular question
whether the tax laws were impeding him
in his program of production of airplanes
or engines and not in a single case did
they tell me the airplane tax laws were
impeding them."
33
Sunday, October 13, 1940
3:45 p. m.
Present:
Mr. Sullivan
Mr. Gaston
Mr. Foley
Mr. Helvering
Mr. Kades
Mr. Bell
Mr. Currie
Mr. Lowell Mellett
Mrs. Klotz
HM Jr: I just got through talking with the Presi-
dent and I said that I was a fire horse; I smelled
smoke. He said, "You know, I am an honorary fireman."
So I said, "I am a volunteer fireman."
I said to my wife the chances are the President
is going to give me a statement which, like castor oil,
I will not like but I will have to swallow. He said,
"Now, Henry, things are going so nicely. Now no mud
throwing, and I have even got Harold Ickes pulling his
punches. He said, "Just take it easy now and we will
let Sullivan or Foley make it." I said, "I want to
make it." He said, "No, no. Things are going too nice-
ly. Let somebody else do it. You write out 300 hundred
words and read it to me over the phone at six o'clock,
but just take it easy."
So I guess the Ohio trip was good. I said, "Well,
you're running for office. I'm just down here to be
helpful." Oh, incidentally, the most important thing
which he said was, "What is it all about?" And I said,
"Hanes has been telling four columnists, and now he
has a fifth columnist to say it publicly that he went
to see you some time in December about permitting corpora-
tions to write off profits and you said okay. The
34
- 2 -
President said, "I never said such a thing. I told him
to ahead and make a study." He said, "I remember it
very well." So I guess neither he nor Mr. Mellett
read it in the papers today.
Sullivan, go ahead. You made this whole study
or Kades did. What's the story?
Sullivan: In November we had a conference with
Mr. Hanes, Mr. Foley and Mr. Kades, and Foley and I were
there with him. He showed us 8. photostatic copy ...
HM Jr: Who did?
Sullivan: Mr. Hanes - the President had initialled.
Foley: That was the November 9th memo.
Sullivan: That's right, dated November 9th. And
that directed you as Secretary to try to work out a
policy of depreciation allowances by which this abnormal
investment could be written off over the life of the
contracts or during the emergency period; and at that
time Mr. Hanes asked us to furnish him with a memorandum
indicating how far we could go to effectuate that through
closing agreements. He still had the idea at that
time that there was something magic about closing
agreements, and you could bestow immunities on a tax-
payer through a closing agreement that you could not
bring about by ordinary operations of the tax law.
After that conference, Mr. Kades, Mr. Currie,
Mr. Burrus, Mr. Appel and Mr. Ryland and I went over in
the Internal Revenue Bureau, and we drafted 8. memorandum
which we submitted to Mr. Hanes. And in that memo we
said that we did not think that there should be any
attempt to expand the function of 8. closing agreement,
and the only possible approach was by revising our
regulations on obsolescence.
Then on the 28th of November, Mr. Hanes had a
conference which was attended by Mr. Kades, Mr.
Wenchel and myself, approved the memorandum we had
prepared and suggested that we might try to clarify
35
- 3 -
the regulations relating to obsolescence insofar as
they affected the contracts under the Vinson-Trammel
Act. And then he asked me to bring over everything
I had on Consolidated Aircraft contract the following
day at a meeting to be held with you. I think you
had been away and had just gotten back.
Bell: That's right. You left about the tenth.
Sullivan: I think that meeting was the 29th, and
at that time 8. new memo was submitted to you in which
it was suggested that there only two ways to solve
the problem: (1) By having the Congress directly
appropriate to the Army and Navy funds for constructing
new facilities, and the other was a statute similar to
the one just enacted authorizing the Treasury Depart-
ment to grant special amortization. And you disapproved
the latter part of that memo, and then Mr. Kades and I
drew 8. new one which was approved by Mr. Foley, and I
think on the first of December you took that over to
the Cabinet meeting and submitted it over there. After
that Mr. Kades prepared a memo developing in some detail,
for the benefit of the War and Navy Departments, the
procedure and just how far we could go. And those
were forwarded to the Secretary of War and the Secre-
tary of the Navy.
Foley: No, no. That was what you gave Jake
Viner, and Jake criticized it, and I never knew Jake's
criticisms until the following June when you gave me,
out of your files, the criticisms and I replied to the
memo. But in the meantime the letters to the Secretaries
of War and Navy were held up, and that memo never went
out of the Treasury.
Sullivan: That's news to me. I thought that had
gone.
Foley: No, that did not go.
HM Jr: All right.
36
- 4 -
"On December 11," (reading from Sullivan's memo
dated September 19th)
In this thing here that Drew Pearson and Allen -
let me see. What does Willkie say?
(At this point Miss Chauncey left the room
and when she returned Mr. Gaston was reading
from his first draft.)
HM Jr: I think it is a very good statement.
Gaston: But could be cut down.
HM Jr: Have you read it?
Mellett: Yes. It's a good statement. It's 700
or 800 words. Were you going to insist on making the
statement yourself?
HM Jr: I want to make it. That kind of statement
can only be made by me. It's a personal attack. The
President had not read it but when I called up the
President, he said, "You want to throw mud. I have even
got Harold Ickes pulling his punches." He said, "Henry,
things are going too well. I want either Foley or
Sullivan to make a statement." Then he said, If you
are going to call him a liar, take 8 long paragraph to
do it but not more than 300 words." What do you think
of it?
Currie: I think it's very good. Same comment
as the others - too long. If you could shorten it and
work in the other thought that this has not delayed
defense.
Mellett: There hasn't been any delay.
Currie: I think we can include that within three
months $8,000,000,000 in contracts were awarded, which
is unprecedented in this country or any other
country; that within 21 days back in July we gave out
B. contract for powder making, and it was 7 months
37
- 5 -
after we were in the World War before we made any
powder contracts. Knudsen on the radio said he could
not ask for better cooperation between the Government
and the White House.
HM Jr: This is November - I think in November,
1939, whatever appropriations that they had passed, I
think most of them were let, but I don't know what they
were. Any way of finding out?
Bell: I am getting some figures upstairs as
to what the obligations were. We discussed it in there
and Foley thought our record was good enough to make a
statement. I have got Colonel Burns in my office
and Commander Riggs at home waiting for me. They have
nothing with them and they would have to go back to the
Department if we want the kind of contracts.
HM Jr: No. What the obligations were.
Bell: That's involved in the obligation but that
is not all the obligation, obligations for pay rolls and
things of that kind.
HM Jr: What is the most honest figure to use
as of November 1st?
Bell: I should think you could take obligations
of that kind, that were the monthly amount that would
ordinarily run, you could say there was no delay.
HM Jr: But you could not get a percentage of
what the total obligations were on
...
Bell: Probably could. Colonel Burns said there
wasn't any delay. There may have been some delay in
some airplane contracts, but the thing was so nebulous,
he couldn't really make much out of it on the charge of
delay.
HM Jr: The figure I want is percentage of con-
tracts let November I for the fiscal year.
38
- 6 -
Bell: The only things our figures would show
are total appropriations available and obligations in-
curred up to November 1.
HM Jr: Yes. Take a look at it.
(Mr. Bell left the office.)
Foley: There is one thing that Willkie makes
a point of, and that is tying the special treatment for
amortization and the repeal of the Vinson-Trammel Act
up with the cumbersome excess profits tax, and you have
Knudsen's testimony if you want to use it.
(Mr. Foley read the testimony of Mr. Knudsen
and Congressman Treadway's questioning of
him.)
HM Jr: Well, I think it has been the unwritten
policy not to drag any of these defense fellows into
these controversies.
Gaston: That's right.
HM Jr: That all would be good for rebuttal. I
think this is all right if it could be edited down. I
thought that whole part about Hanes could be left out.
Gaston: Yes.
Sullivan: We didn't even give the name of the
company at the press conference.
Gaston: Yes, we did. I got it out of the press
notes.
Helvering: We asked their consent before we
made it public.
39
- 7 -
HM Jr: How will you fellows work - you want
to work in Gaston's office?
Mellett: If you leave it to me, it will be less
than 300 words.
(Mr. Mellett and Mr. Gaston left the Secretary's
office to revise the draft.)
Helvering: The basic principle was you were
not jumping out to give special privileges to these
fellows to get them to do defense work; undue privilege.
HM Jr; Terribly funny for me. I was afraid the
President would go so far and I would have to gulp, put
my name to what he wanted me to say. After all, I told
my wife, "Whatever he wants me to say, I will say it
no matter how personal or vitupertive it is." "Oh,
just take it easy." I thought he would use it to open
up the whole tax question. In talking with him he said,
"I have signed the tax bill. That's over. Don't let's
open it up again." Gee, you never know, do you?
Foley: I had it figured out the other way. I
thought you were mad; I thought you were the fellow who
wanted to throw the stuff.
HM Jr: That's the point. I do want to throw it.
The President said, "You want to throw mud." The
President said, "I don't want you to do it." I said,
"You're the fellow who is running for office."
Sullivan: It's apparent they waited until the
President signed the tax bill. They threw in the line,
"This must have been necessary because the President
approved the bill.
HM Jr: I got myself all worked up since 8:15
this morning to go to town.
I think just the same Sullivan and Foley's people
should brief this thing - make a lawyers' brief out
of this because I think they will come back at us, don't
you?
40
- 8 -
Currie: I don't know if Lowell works in the
point of supporting the Overton amendment. He is very
definitely on the defense there, and I think he will
leave it alone.
HM Jr: When he went at Cordell Hull on the
trade treaty, Cordell Hull hit him on the chin and he
has left Cordell alone.
This is a little different from what you (Helver-
ing) were asking me to do two days ago. I am terribly
disappointed.
I still think that beginning tomorrow
Foley: We will do it.
HM Jr: Let me ask you (Currie) something. After
the President signed this memo of Hanes, do you remember
just when you were brought into the thing - when did
he begin to worry about you?
Currie: Just a few days after. You were in
Arizona, and I think he was a little uneasy, and he said,
"The Secretary is away. I wish you would look into
this depreciation thing for me." He didn't mention
Hanes' memo or any other memo. I only found that out
when I came over here.
Foley: Our records show when you first came
over.
Currie: I have no authority for it but I assumed
since you were away and Johnny had cooked this up with
Louis Johnson, he just wanted me to find out what it was
all about.
Foley: He thought there was an awful lack of
appreciation of our problems. He thought if we could
explain obsolescence and depreciation and operation of
Vinson-Trammell, and how the thing applies to & parti-
cular contract it would be very, very helpful.
41
- 9 -
And it was with that in mine that we developed those
memoranda that never went out. That was Lauch's con-
clusion.
Currie: I think it would strengthen your posi-
tion because you have already explained to the Army and
Navy all the available
Foley: Your record is fine. What Lauch is
suggesting is over and above what ordinarily you would
do
Currie: And I think you could have made & stronger
case for yourself if you had not said "slight relief
under existing laws.'
HM Jr: You mean I minimized?
Currie: Yes. He threw it over on the question
of legislation.
HM Jr: Of course, the thing I would love would
be to get Willkie in 8. position where he would say he
is pleading profits for munitions makers.
Foley: Yes. He said armament.
HM Jr: If we could get him in 8. position of
pleading special privilege for munition makers. What is
his position on the draft?
Foley: He was okay in drafting men - said the
draft was the only democratic form of recruiting an
army because you had to take over all classes, but he
said he was against drafting plants - that the govern-
ment just didn't have any business to operate these
plants.
Currie: That it was Sovietism.
Foley: He was for drafting man power but not
industries, and as soon as he said that he realized he
had slipped badly, and he tried to extricate himself
42
- 10 -
from the mudhole. And he said he had been misunder-
stood and tried to clarify what he had said, and he
said under certain circumstances he thought it was
all right but those circumstances should be ...
HM Jr: Do you suppose anybody we could get, if
we showed them the documents, any columnist who has
a fairly wide circulation, would print something?
Foley: I think Bob Allen would.
HM Jr: But they ran one.
Foley: I don't think they ever had the whole
story.
HM Jr: I was thinking about Dorothy Thompson.
She has talked 8. lot about this, and she has been wrong
all the time. She has been on the tax thing two or
three times and she has been consistently wrong.
Foley: She said nothing in her column would
throw any slurs or mud against Mr. Willkie. I don't
know whether she wants to get into 8. controversy.
HM Jr: How many people take Pearson and Allen?
Foley: About 250. They have a bigger circula-
tion than Alsop and Kintner. They cover about 105
now.
HM Jr: I think they would take it especially in
view of the fact that
...
Foley: I know how Drew feels on this thing
and Bob feels the same way. They might be much more
willing to be militant and nasty than any of the other
columnists. They get personal.
HM Jr: Especially if they were imposed upon in
the other column.
43
- 11 -
Foley: I think Drew would like to go to town
on Johnny's betrayal.
HM Jr: Inasmuch as Johnny sold them & bill of
goods, I think they would like to come back. But re-
member - it's Willkie who is running for President;
Johnny is just running for Secretary of the Treasury.
Currie: I think you ought to make your reply
8. double-barrel one, not only that you protected the
taxpayers' interest, but you did not delay the defense
program.
Foley: You recommended legislation.
Currie: The actual record is pretty good.
HM Jr: You think that should be in the state-
ment? I wonder if those boys have that.
Foley: Chuck points out everything we are empha-
sizing is good for the latter part of 1939 and the entire
year now of 1940 but what he is trying to do is to go
back before that and tie in with Admiral Furlong's memor-
andum.
Currie: The speed of this program is such as we
have never had before. None of the great countries have
had it and it's ridiculous to talk about retarding
the national defense program.
HM Jr: We are trying to be both fair and also
that the program has been speeded. Of course, the best
illustration is one sentence. In the last World War
we never got a Liberty motor in the air and now they
are turning out
...
Foley: 83 or 85 Allisons
...
HM Jr:
...
8 or 10 a day.
Kades: What I had in mind is to give them a pos-
sible opening to say that it was not until you were ready
to recommend amortization reduction that the program was
speeded up. But all the figures that Lauch will use is
after that.
44
- 12 -
Currie: Oh, no.
Kades: But compared with 8 billion they look
like peanuts.
HM Jr: It's all relevant.
Sullivan: That's right and it's very difficult
for the man in the street to put himself back in the at-
mosphere that prevailed fifteen months ago.
Currie: Don't mention figures. Just say all
the figures authorized by Congress are obligated as
rapidly as they became available.
HM Jr: I will walk back and remind them of
your idea.
(The Secretary returned to the office with
Mr. Gaston and Mr. Mellett and read the
second draft. Before he started to read
it Mr. Bell also returned.)
Bell: The War Department on October 31, 1939,
had incurred obligations aggregating 45% of the money
available at that time. Now the monthly appropriation
would be 33-1/3%.
HM Jr: No good.
Bell: The Navy had 40% of its obligations
...
HM Jr: No good - forget it. (Laughter)
Bell: I have talked to Colonel Burns. He said
there was absolutely no delay in 1939. As far as the
War Department is concerned you can forget it, but the
only delay came after they got their big appropriations
September 9.
HM Jr: Of this year?
45
- 13 -
Bell: Of this year. If they had had the Vinson-
Trammell and the amortization thing straightened out
the chances are they would have had all airplane con-
tracts and facilities contracts concluded by the end
of September. They have the whole 18,000 airplanes
under contract at the present time and they will have
the facilities contracts completed within a week or
ten days. That's the only delay that has accrued on
the whole situation. They had a little delay on the
first 4,000 planes in July and August, but when they
hit upon a clause in the contracts to protect con-
tractors against both the Vinson-Trammell and the
amortization; in other words, they put in a provision
that if these bills did not go through the contractors
could cancel. After they got those clauses they had
no trouble whatever.
HM Jr: That's something you may want to use
later.
Currie: Dan, is that the total military and
naval appropriation?
Bell: Yes.
Currie: That would be low, you see, Mr. Secre-
tary; if you are confined to new aircraft it might be
8. lot better.
HM Jr: We haven't got it.
Schwarz: Reference might be made to the trips
you made last winter. At every place you stopped you
were told they had no complaints.
HM Jr: No, you can't do it in three hundred
words. The thing I hope they come back at me is the
whole contract business which would give me a chance to
explain the difference between war purchasing now, particu-
larly allied purchasing, as against when J. P. Morgan
used to do it. If he attacks me he might say I gave so
much time to allies but our own contracts suffered. If
46
- 14 -
I could show directly between the English Government, no
commissions, no this, no that. If he comes after me,
we have 8. beautiful story on that compared to the
previous one.
Schwarz: That would make votes because that's
something the public can understand.
HM Jr: But in view of the way the President feels
I don't think we ought to take the offensive because he
does not want us to. On that I bow to him every time.
If he has just come back from Pennsylvania and Ohio and
said everything is lovely, what's the use? And given
this, he can carry Kansas!
Helvering: I said with proper work we might be
able to. They told us four years ago we could not and
we did.
Currie: You know, Dan, if you had that separate
figure pulled over for aviation, there might be an op-
portunity worked in at your press conference.
Bell: We can get that. Colonel Burns offered
to go to his office to get the figures which have been
submitted to the White House every Friday.
HM Jr: No, let the White House. No, this is 8.
highly technical thing which Hanes started with Louis
Johnson when Louis Johnson promised these fellows they
could always get 12%. They wanted to make good on it
with the airplane manufacturers.
Sullivan: They were guaranteed that under the law.
Foley: Get more than that.
HM Jr: I think what I actually said at that
press conference is perfect. Be sure to have for me
tomorrow for my four o'clock press conference the whole
verbatim of what I said. "What did you say?" "Well,
here, gentlemen, is the mimeographed copy of what I said.)
(Mr. Gaston returned with & draft.)
47
- 15 -
HM Jr: What's the matter with that?
Mellett: It's all right. It might convey the
feeling that you're sitting here being righteous as Hell,
quarreling with the industrialists. You might be right,
but maybe this is the time you ought to be more reason-
able.
HM Jr: What do you think, Guy?
Helvering: I like that statement very much but I
think' you will have to fudge a little on the President's
300 words.
Gaston: You can take that paragraph and slip it
into the short draft.
Mellett: I think the simple, unbothered statement
is probably the better policy, little less bothered by
Willkie.
HM Jr: Of course, that's more in the tone of what
the President wants - no mud slinging. Which do you
like?
Currie: I think if you could narrow the two,
it would be even better because the actual charge against
you is you slowed up the defense program.
Gaston: I like the second statement better - the
short one.
Mellett: I still like the short statement better.
I think the Tonger one would be fine language in a speech.
HM Jr: Of course, I like the longer one but time
is short.
Helvering: It could be used to advantage if he
keeps it up.
HM Jr: Of course, I can ad lib at four o'clock to-
morrow. In order to be perfectly fair with the boys, if
you had this documented, the whole business, anybody can
48
- 16 -
see the whole story.
Mellett: At your press conference tomorrow?
HM Jr: Yes. Say, "If anybody is interested in
the background of this, it has been documented. Here it
is." Rather than give it to one person.
Mellett: Planning to give this tonight for tomorrow
morning's papers? You might give the afternoon papers
something by having your press conference in the morning.
You will have given the morning papers stories two days
in succession.
HM Jr: Depending upon how they run it, maybe Chick
can give them something tomorrow morning.
Schwarz: This statement tonight will prompt further
interest.
HM Jr: What do you think, Lowell, of having the
whole thing put together by Sullivan and Foley and then
say to any newspaper man, Here it is."
Foley: Let's see what happens, Mr. Secretary.
If we are going to do that, I would be inclined just to
take the files, just to show them the stuff in the files
rather than summarize it for them because I think you
Sullivan: I would vote against either way be-
cause no matter how you start off, you start off with
the November 9 memorandum and you can't make it public
because there is the President, on November 9, recommend-
ing something be done which was finally done late in
September or October, 1940, special amortization. Now,
why wasn't it done in less than 11 months?
HM Jr: The answer is very simple.
Sullivan: The answer is simple that the situation
has entirely changed, but you have to explain something.
49
- 17 -
HM Jr: He didn't want to give them something
special on top of the Vinson-Trammell. When it was
brought to his attention, he was told only half the
story.
Sullivan: Why didn't he repeal the Vinson-
Trammell?
HM Jr: Because he was trying to put through the
excess profits tax.
Sullivan: I think you get into 8. discussion
that doesn't get you anywhere.
HM Jr: Well, don't think that Hanes - he has that
memo. What do you think, Lowell?
Mellett: I wouldn't encourage any more discussion
of it than you can help.
HM Jr: Hanes thinks he has something. My position
is that when Hanes went to see the President he only
told him half the story, and no sooner had the President
signed it than he saw he had made 8. mistake.
Foley: I would be inclined to wait and see what
develops, and I would rather operate on them
if we are going to do it through Pearson and Allen or
someother column.
HM Jr: Doesn't that make the boys sore?
Schwarz: Let's see what further use Hanes might
make of that situation. You put the President on the
spot if you say he made a mistake by approving it.
HM Jr: Would you object to giving it to Pearson
and Allen.
50
- 18 -
Schwarz: I would rather see how much interest
the others show. Pearson and Allen have something they
want to correct because they were taken.
HM Jr: That would be the excuse.
Gaston: And Hanes is not running for President.
HM Jr: But this story, Johnson has used it and it
keeps repeating and repeating itself.
Sullivan: Any story that goes out of here naming
Hanes will carry more weight than any columnist could do.
Schwarz: It's very likely that coupling Mr. Willkie
on the conscription thing, he may not like the material
Mr. Hanes gave him and won't take any more.
(At this point HM Jr called the usher at the
White House and got the information that the
President was talking long distance to Frank-
lin D. Roosevelt, Jr.)
HM Jr: He is talking to his son and then he wants
to read the statement, so it will be a couple of minutes.
Mellett: I don't like to see the Treasury in a
position where it has to take a column to explain. The
explanation might be perfectly convincing to anybody who
reads it and knows something about the subject, but it
took the Treasury a column to explain something Mr.
Willkie said.
HM Jr: If you don't mind, if the President okays
this, etc., then I will see what kind of B. press we get
tomorrow and I will get in touch with you fellows tomor-
row. I think I will just sit here and wait.
His two minutes may be twenty-five.
51
Sunday, October 13, 1940
Upon HM,Jr's arrival at his office from the
Farm, he telephoned the President at 4:10 p.m. in
regard to answering Mr. Willkie's criticism of the
Treasury.
The President said: "You must not throw any
mud. Things are going too nicely. And have Foley
say it." I said, "It would not be Foley. It would
be Sullivan," and the President said, "That would be
all right. He said, "I have even got Ickes pulling
his punches." He said, "Things are going too nicely.'
He said, "Take at least a paragraph to spell out 1-1-e."
I said, "I smell smoke. I am an old fire-
horse," and he said, "I am an honorary fireman" and
I said, "I am a volunteer one".
To sum up, he evidently does not want me to
get into a rumpus with Willkie. I would have bet
5 to 1 the statement he would ask me to make would
be 80 strong that I would be fearful and worried
about making it.
October 13, 1940
First draft
STATEMENT BY SECRETARY MORGENTHAU
52
In a public address at Albany, N.Y., Saturday evening the Republican
candidate for President sought to convey the impression that the
Treasury Department had delayed the defense program by failing to show
sufficient liberality toward holders or applicants for arms contracts. in its
application of the tax laws.
playing upon and attempting to distory the plain meaning of
He used the old device of distret an isolated statement I made to
a group of reporters at a press conference in my office on December 4, 1939.
In so doing he revealed
his own attitude, which evidently is that
defense
it is not suffácient to assure contractors
for defense materials of fair and reasonable profits, but that their co-operation
ought to be bought by extortionately high profits and concessions outside the
law.
I am frank to confess that that is not my attitude, that it never has
been and never will be. I have continuously stood for a contract policy and
a tax policy that will be fair to all participants in the
defense
program, workers as well as manufacturers. I am against concessions to con-
tractors so great as to constitute an attempt to buy their patriotism, just
as I am against relaxing the safeguards this administration has thrown about
doing that
the workert on the
pretext that this policy will speed the defense
program, which I do not believe.
The statement which Mr. Willkie correctly attributed to me
and the question which elicited it are:thess
"Question: In other words, all the stories of tax concessions to war
order manufacturers are out?"
Regraded Uclassified
(2)
53
"Answer: Completely. If it rested with me as to whether & fellow would
get a'break' because he had & munitions contract I am afraid he would fare
rather badly."
doubt
Now I think there can't be any of the meaning of that in the
light of the question. A 'break' means a special concession, a favor that the
ordinary citizen and the ordinary contractor doesn't get. I am against all
special favors in the application of the tax laws and I expect to contime
to be. I know that such special favors to rich and powerful taxpayers
have been granted in the past, but they have not been granted by this Admin-
intration and while I am in my present office I will guarantee that they will
not be granted. I have an obligation to the people of the United States to
apply the tax laws without'breaks'for anybody, rich or poor, and a mandate
from the Pres&dent to the Bace effect;and I intend to be faithful to both
trusts.
We get many applications for special favors, in thederafting of the
tax laws as well as their application. There is one point of view which is
that tax law and tax policy dught to be guided by the recommendations of
thosiwho come to the Treasury Department and to the Congress and express
***** their wishes most Incidly and most intelligibly and most forcibly.
Too often that point of view beguiles those in reuponsible mith positions.
I have always hald the view that while we should listen patiently and assay
they value of all suggestions, we as representatives of the people have an
obligation that we van't abdicate. Somebody must represent the voiceless
mass of the people; and If the President, and 1 Secretary of the Treasury,
and the Senators and Representatives of the people don't do it, who will?
(3)
54
If Mr. Willkie had available an adequate report of my press conference
of December 4, 1939, he evidently read it too hastily to learn the subject
of discussion. The subject was the announcement that the Treasury had entered
into a closing agreement with the Colts Firearms Company with respect to their
taxability under a contract entered into with time one of the Refense
Departments of the Government. The purpose of that closing agreement was
to give forehand assuagnce to this company 60 that their contract with the
government would return them a reasonable profit and would not be subject
to uncertainty with respect to taxes. The amount of profit they stood to
malce WAS not in my hands. My job was to relieve them of tax feare, and to
do it under existing law.
My object in revealing the facts about this closing agreement was IN-
two#fold. It was, first, to let all defense contract bidders know that they
would have the same opportunity to clear up tax doubts; and, second, to let
The
the people of the United States know that we were not dealing in dark in these
matters, and particularly to assure them that we were not granting any unlawful
"breaks" or concessions to defense contractors.
When I came into office the Treasury the law did not permit us to give
any such prior assurance of tax liability as was represented in this closing
agreement. The law which made it possible was a product of this Administration,
and particularly of the genius of the late Herman Oliphant, general counsel
of the Treasury until his death in January, 1939.
From the start XX we have continuously given to defense contractors all
and the fair and general application of our regulations
the assurance that the law permit us to give them. I do not believe that any
bidder or any contractor has at any time faced the risk of lose because of
(4)
55
the Treasury's attitude toward taxes. Notwithstanding this wo did, however,
give our assent and support to & change in the law which would give greater
flexibility in applying amortization provisions, so that all possible taxis
uncertainties might be removed/
I have not limited my activity with respect to the defense program to
matters of taxation and I am perfectly willing that both my record and my
with respect to defense
of his norriates.
attitude should be compared to those of Mr. Willkie or any
I have
hot been interested in seeking partisan advantage out of it and I deplore
the effect of statements which seek to substitute controversy for action and
to raise doubts which cannot but have a harmful effect at this time when we
nuck so much need unity to increase production and improve our defenses
as rapidly as possible against the day when we may need them.
decemberapt
56
STATEMENT BY SECRETARY MORGENTHAU
October13, 1940
An address
* statement Saturday evening by the Revublican candidate for the
charges that u Registment less delayed
Presidency accusts me of delaying the defense program through refusal
assertion
to make tax concessions. The address is consistent with a recent
statement by the same candidate which revealed that he was willing that
young men should be conscripted to serve their country but unwilling
her not tea delayed.
if hi any sustance is Wesns
that laggard industry should be so conscripted when necessary.
The short answer is that the defense program is not being delayed
and
Never in our history has any Pational effort moved forward so fast, as
can very readily be seen by an emamination of the schedule of defense
appropriations and contracts. Money onm not be spent mill # to appro-
pristed.)
consect
The candidate quotes a statement by me that I did not favor any
special tax concessions or "breaks" in favor of munitions Thatisatsolutely contractors.
Tax
n
I have never favored any tax"breaks" for anybody dutside the law. Savors
have been granted to big corporations in the past, but not by this Admin-
istration. The Treasury favored a change in the law which would give
greater flexibility in writing off emer ency investment and that change
has been enacted in the law. That is very different from giving favors
n disposition
outside the law, which we have no osel right to do.
munitions
I recognize an obligation to serve not merely bidders on n government
contracts and other big taxpayers who can and express themselves
former forcably, but also the millions who can not speak with so clear &
voice.
I am not interested in seeking partisan advantage out of the
defense program and I deplore the effect of statements that to serve to
political
substitute controversy for unity of action that we need build our
defe SEE swiftly.
October 13, 1940
Third Draft
57
STATEMENT BY SECRETARY MORGENTHAU
An address Saturday evening by the Republican candidate
for the Presidency charges that the Treasury Department has
delayed the defense program through refusal to make tax con-
cessions. The assertion is consistent with B. recent state-
ment by the same candidate which revealed that he was willing
that young men should be conscripted to serve their country
but unwilling that industry should be so conscripted, if in
any instance it became necessary.
The short answer is that the defense program is, not
I hasmot leen delayed
being delayed Never in our history has any national effort
moved forward so fast, as can very readily be seen by an ex-.
amination of the schedule of defense appropriations and con-
tracts.
The candidate quotes a statement by me that I did not
favor any special tax concessions or "breaks" in favor of
munitions contractors. That is absolutely correct. I have
never favored any tax "breaks" for anybody outside the law.
Tax favors have been granted to big corporations in the past,
but not by this Administration. The Treasury favored a change
in the law which would give greater flexibility in writing
off emergency investment and that change has been enacted
into law. That is very. different from giving favors outside
the law, which we have no right or disposition to do.
58
- 2 -
I recognize an obligation to serve not merely bidders on
munitions contracts and other big taxpayers who can express
themselves forcibly, but also the millions who cannot speak
with so clear 8. voice.
I am not interested in seeking partisan advantage out
of the defense program and I deplore the effect of statements
that serve to substitute political controversy for unity of
action.
October 13, 1940
Final Draft-
STATEMENT BY SECRETARY MORGENTHAU
59
An address Saturday evening by the Republican candidate for the
Presidency charges that the Treasury Department has delayed the
defense program through refusal to make tax concessions. The as-
sertion is consistent with B recent statement by the same candidate
which revealed that he was willing that young men should be con-
scripted to serve their country but unwilling that industry should
be so conscripted, if in any instance it became necessary.
The short answer is that the defense program is not being de-
layed and has not been delayed. Never in our history has any national
effort moved forward so fast, as can very readily be seen by an ex-
amination of the schedule of defense appropriations and contracts.
The candidate quotes 8. statement by me that I did not favor any
special tax concessions or "breaks" in favor of munitions contrac-
tors. That is absolutely correct. I have never favored any tax
"breaks" for anybody outside the law. Tax favors have been granted
to big corporations in the past, but not by this Administration.
The Treasury favored & change in the law which would give greater
flexibility in writing off emergency investment and that change
has been enacted into law. That is very different from giving
favors outside the law, which we have no right or disposition to do.
I recognize an obligation to serve not merely bidders on muni-
tions contracts and other big taxpayers who can express themselves
forcibly, but also the millions who cannot speak with so clear a
voice.
- 2 e
60
I am not interested in seeking partisan advantage out of the
defense program and I deplore the effect of statements that serve to
substitute political controversy for unity of action.
61
Sunday, October 13, 1940
6:10 p.m.
As soon as HM, had finished his reply to
Mr. Willkie, he sent a draft of the statement over
to the President to read and the President called
HM, Jr at 6:10 p.m., and the following is a record
of their conversation:
President: The point of the matter, as I
remember it, is that as a result of doing nothing
at that time in the way of legislation, the Navy
did get all of their contracts let immediately in
spite of Admiral Furlong pointing out that the Navy
had to have help from private manufacturers. What
he was talking about was that if we engaged in a
war or had a bigger program in 1938, they would have
to build special plants. Actually they didn't have
to build. They had plenty of space to carry out
contracts in accordance with appropriations. Every-
body knew there was no necessity of changing the law
at that time, because special plants were not called
for. That ran along until January, 1940.
At that time, between the Army and Navy, all
private plant production capacity was picking up and
didn't meet the needs of the new program. That
didn't occur until July, 1940. Thereupon, as soon
as we found new plants would have to be built, in
July we asked Congress for it and it took Congress
three months to do it.
HM,Jr: Do you want me to work that in? I am
personally not familiar with it and I would like to
talk to my group about it. If my group should de-
cide not to use that suggestion, do you mind?
President: No, only use it if they think well
of it.
...
The President suggested that the following be
inserted in the third paragraph after the sentence
reading "Tax favors have been granted to big corporations
Regraded Uclassified
62
-2-
"in the past, but not by this Administration":
As soon as it became obvious that
the appropriations by the Congress
would be 80 large as to call for ad-
ditional plants, the Treasury immed-
iately recommended a change in the
law. That recommendation was in
July 1940 and no delay prior to that
time existed. This change enacted
last week will give," et cetera.
The other addition which the President sug-
gested was inserting the words "and has not delayed"
after the first sentence in the second paragraph 80
the sentence would read: "The short answer is that
the defense program is not being delayed and has not
been delayed."
The group decided not to use the President's
first suggestion.
The statement as released to the press is at-
tached.
TREASURY DEPARTMENT
Washington
63
FOR IMMEDIATE RELEASE
Press Service
Sunday, October 13, 1940.
No, 22-33
The following 'statement was made today by Secretary Morgenthau:
An address Saturday evening by the Republican candidate
for the Presidency charges that the Treasury Department has
delayed the defense program through refusal to make tax
concessions. The assertion is consistent with a recent
statement by the same candidate which revealed that he
was willing that young men should be conscripted to serve
their country but unwilling that industry should be so
conscripted, if in any instance it became necessary.
The short answer is that the defense program is not
being delayed and has not been delayed. Never in our
history has any national effort moved forward so fast,
as can very readily be seen by an examination of the
schedule of defense appropriations and contracts.
The candidate quotes a statement by me that I did
not favor any special tax concessions or "breaks" in
favor of munitions contractors. That is absolutely
correct. I have never favored any tax "breaks" for
anybody outside the law. Tax favors have been granted
to big corporations in the past, but not by this
Administration, The Treasury favored a change in the
law which would give greater flexibility in writing
off emergency investment and that change has been
enacted into law. That is very different from giving
favors outside the law, which we have no right or
disposition to do,
64
- 2 -
I recognize an obligation to serve not merely
bidders on munitions contracts and other big tax-
payers who can express themselves forcibly, but also
the millions who cannot speak with so clear a voice,
I am not interested in seeking partisan advantage
out of the defense program and I deplore the effect
of statements that serve to substitute political
controversy for unity of action.
-o00-
65
October 17, 1940.
MEMORANDUM
TO:
Secretary Morgenthau
FROM:
Mr. Schwarz
@
October 13, 1940 -- On an 11 P.M. broadcast over Station
WMAL, the news announcer stated:
"Back in Washington, Secretary Morgenthau of the Treasury
says that the national defense program is not being de-
layed and has never been delayed. Thus Mr. Morgenthau's
answer to Wendell L. Willkie."
October 14, 1940 -- Several of the morning broadcasters
made the same statement or read the opening paragraphs of the
news service dispatches.
66
SEE
October 14, 1940
12:22 p.m.
James
Forrestal:
You got down here earlier than you thought
you would.
H.M.Jr:
I got down yesterday. I left the country
at 2 yesterday.
F:
Did you?
H.M.Jr:
I never know from day to day what I'm going
to do. I left there at 2. I had to come
back. I wanted to answer Willkie.
F:
Oh, yeah, yeah. That was a good answer I
thought.
H.M.Jr:
Did you see my answer?
F:
Yeah, it was a very - you punctured just in
that one sentence - I thought it was very
effective when you said that you didn't
favor any special concessions or breaks.
H.M.Jr:
You know, one of the things I wish you and Knox
would look into some time - Foley and Sullivan
can tell you all about it - and that is, in
this speech of Willkie's, he refers to
Admiral Furlong and we had lots of trouble
with that fellow.
F:
Well, I'm just talking about that fellow
right now as a matter of fact.
H.M.Jr:
And the President asked me to answer him.
I told the President last night, I said, I
can't answer him because I haven't got the
facts and I said I think that's up to the
Navy. But Furlong - I never liked the way
he acted with these contractors particularly
with the armor-plate fellows.
F:
Well, I don't want to pre-judge anybody, but
frankly my fingers my fingers are somewhat
crossed.
Regraded Uclassified
67
Sug
- 2 -
H.M.Jr:
Well, I just thought I'd tell you for what
it's worth.
F:
Well, I just agree with that all right.
H.M.Jr:
Tell me, when are you going to go out and
see some of these plants?
F:
Well, Bob Patterson and I - he has to be in
Schenectady tomorrow and I'm going to meet
him in Hartford and cover the United in the
Hartford plant and also in Stratford, the
new plant, and then I'm going to come down
- we're going to take a look at Grumman and
Republic and
.....
H.M.Jr:
Do you want the English to join you on any
of this?
F:
Well, I was just going to talk to you - I'm
making a study now of what stuff is being
done in each of these plants to see how much
the British are getting. I think most of
theirs 1s at Curtiss in Buffalo but they have
got some, I think, at United. After I get a
look at what the division of production is
as between Army, Navy and British, then we'll
determine whether to have one of their fellows
or not. Is Baker here now, Henry?
H.M.Jr:
Baker - I don't know, but if you want any
of the British, would you let either me or
Philip Young know?
F:
Yeah. Now who do you want to go from your
shop?
H.M.Jr:
Well, I don't know - Philip Young or whoever
he designates.
F:
Foley and Buckley make a good team.
H.M.Jr:
Yeah, it's all right but just, if you don't
mind - I mean, Philip Young is the boy who
I pin on big - 18 assistant nurse to the
English.
F:
Yeah.
68
IIII
- 3 -
H.M.Jr:
Bo anything on that - he watches that
particular thing.
F:
0. K., fine.
H.M.Jr:
I call him my assistant nurse.
F:
Right. That was a great speech of the
President's Sunday night.
H.M.Jr:
Wonderful.
F:
Yeah. When he got those denunciations off
I said, boy, that puts Mr. Willkie in the
back row all right.
H.M.Jr:
I kidded him yesterday about his bouquet he
handed to the Italians.
F:
Yeah.
H.M.Jr:
You got that didn't you?
F:
Oh, sure and also the Bernard O'Higgins .....
H.M.Jr:
Oh, yeah. (Laughs).
F:
(Laughs). Wonderful. 0. K., Henry.
H.M.Jr:
Thank you.
F:
Good-bye.
69
ass
October 14, 1940
Dear Steve:
I am inclosing herewith a clipping
from the front page of this merning's
New York Times. I would appreciate It
if you would bring this to the President's
attention this morning.
Yours sincerely,
Mr. Stephen Harly,
Secretary to the President,
The White House,
Washington, D.C.
clifiping and Hmijis
answer to Wilskies
statement on delay in
defense attached program
Regraded Uclassified
70
October 14, 1940
Dear Steve:
I an inclosing herewith a clipping
from the front page of this merning's
New York Times. I would appreciate it
if you would bring this to the President's
attention this morning.
Yours sincerely,
Mr. Stephen Early
Secretary to the President,
The White House,
Weshington, D.C.
TREASURY DENIES
DELAYING DEFENSE
New York Times
October 14, 1940
Morgenthau Criticizes Willkie
as Willing 'to Conscript
Youth but Not Industry
71
Special to Tax NEW Toax TIMES,
WASHINGTON, Oct. 13-Secre-
tary Morgenthau issued a state-
ment tonight denying Wendell L.
Willkie's assertion on Saturday
that the Treasury Department had
delayed the defense program
through refusal to make tax conces-
alons.
The Secretary deplored "the et-
Hanes Replies to Morgenthau
fact of statements that serve to sub-
On reading Mr. Morgenthau's
stitute political controversy for
statement last night, John W.
unity of action."
Hanes, member of the national
Secretary Morgenthau's state-
committee of the Democrate for
ment was as follows:
Willkie organization, and former
"An address Saturday evening by
Under-Secretary of the Treasury,
the Republican candidate for the
said:
Presidency charges that the Treas-
"The statement by Mr. Morgen-
ury Department has delayed the de-
thau that the Treasury in no way
fense program through refusal to
has delayed the amendment of the
make tax concessions. The neser-
tax laws affecting amortization of
tion is consistent with a recent
plant expansion for defense pur-
statement by the same candidate
poses does not conform with my
which revealed that he was willing
experience in attempting to achieve
that young men should be con-
this same result many months ago
acripted to serve their country but
while Under-Secretary of the Treas-
ury,
unwilling that industry should be
read Mr. Willkie's recited of
60 conscripted, if in any instance it
the
easons for this delay and (hey
became necessary.
absolutely true and correct.
Opposes Any "Tat Favors'
are The Treasury is at this moment
haggling over small details and the
"The short answer is that the de-
Army and Navy as well as the In-
fense program is not being delayed
dustrial community are still in a
and has not been delayed. Never in
quandary as to what the final rul-
our history has any national effort
Ings will be affecting amortization
moved forward so fast, as can very
schedules. "Mr. Morgenthau's attempt to
readily be seen by an examination
put Mr. Willkie in the position of
of the schedule of deferse appro-
being willing to conseript men and
priations and contracts.
not property la equally inconsistent
"The candidate quotes a state-
with the record."
ment by me that I did not favor
any special tax concessions or
'breaks' in favor of munitions con-
tractors. That is absolutely cor-
rect. I have never favored any tax
'breaks' for anybody outside the
law. Tax favors have been granted
to big corporations in the past, but
not by this Administration.
"The Treasury favored a change
in the law which would give
greater flexibility in writing off
emergency investment, and that
change,has been enacted into law.
That is very different from giving
favors outside the law, which we
have no right or disposition to do.
"I recognize an obligation to
serve not merely bidders on muni-
tions contracts and other big tax-
payers who can express themselves
foreibly, but also the millions who
cannot speak with so clear a voice.
"I am not interested in seeking
partisan advantage out of the de-
fense program and I deplore the ef-
fect of statements that serve to sub-
stitute political cobtroversy for
unity of sction."
TREASURY DEPARTMENT
Washington
72
FOR IMMEDIATE RELEASE
Press Service
Sunday, October 13, 1940.
No. 22-33
The following statement was made today by Secretary Norgenthau:
An address Saturday evening by the Republican candidate
for the Presidency charges that the Treasury Department has
delayed the defense program through refusal to make tax
concessions. The assertion is consistent with a recent
statement by the same candidate which revealed that be
was willing that young men should be conscripted to serve
their country but unwilling that industry should be so
conscripted, if in any instance it became necessary.
The short answer is that the defense program is not
being delayed and has not been delayed. Never in our
history has any national effort moved forward so fast,
(15) can very readily be seen by an examination of the
schedule of defense appropriations and contracts.
The candidate quotes A statement by me that I did
not favor any special tax concessions or "breaks" in
favor of munitions contractors. That is absolutely
correct. I have never favored any tax "breaks" for
anybody outside the law. Tax favors have been granted
to big corporations in the past, but not by this
Administration, The Treasury favored a change in the
law which would give greater flexibility in writing
off emergency investment and that change has boen
enacted into low. That is very different from giving
favora outside the law, which we have no right or
sipposition to do.
Regraded Uclassified
73
#
- 2 -
I recognize an obligation to serve not merely
bidders on munitions contracts and other big tax-
payers who can express themselves forcibly, but also
the millions who cannot speak with so clear a voice,
I am not interested in seeking partisan advantage
out of the defense program and I deplore the effect
of statements that serve to substitute political
controversy for unity of action.
-o0o-
74
See Press Conference of 10/14/40
Mrs. McDuffie was campaigning and this 75
material was prepared for her by Mr.
Gaston and sent over to her at the White
House by Mrs. Klotz on October 16th.
76
mouths
20-10-09.
10115
- nines ⑉ complet today with the defense of
issues of muster - - to all of w that just the physical
dafence of - soils althrogh that has because tervifically
important. also the defense of our right to live as free
- one - to etasate w children . that they on Improve
their emition is the community and la the Nation cooseding to
shour chilities. Defense of - - this to every person
- live is this great country.
the Administration honded w w truly groat President,
Freshlin Balane Reservelt, has - strengthening at improving
the defeness of mories too monthly edglate years. It has net -
with injurying the physical defenses alene, although is
has boom doing that continuely for all that time; but it has been
delays everything yearible to mine America strong in may other ways.
Today muster's copacity w realet or assents upon -
territory at - - rights to immessly greater then 19 was eight
yours up. 9 - strenger because 19 have both / machinery w
- at w distribute me, botter copunization of or
commin bob capacially 95 - strenger because the rights
the 1 eduction I 1 1 1 1 t r !
facilities too education have both Inpreved, - people have born
hope et 1 seguirted - staille and - strength ter twice.
77
(a)
The people of America have - to a - approciation of
the value of democracy. They have - to that - approciation
B an a I s islan I I b
governments, and, as the other hand, by seeding that a democratic
form of (STernment can be efficient to care for its people. Be
striking has been the comparism that eppressed people from all the
world look with lenging as our happy my of life in America.
They have sent their treasure here for u to Imop and these the
could get here have come to - in great markers-all that - was
able to adult.
The country was in the midet of a terrible depression eight
years ago and great - have been spent to recore M from that
depression and to bring about this great strengthening of - no
sources,
Some people in the heat of 8 political campaign más state-
nanto that are based on a RAPTOW, blind view and are not based as
a real understanding of the fests. Resease they ⑉ that the Federal
Covernment has been spending nose than it has been validos in taxes
from the people of because they ⑉ a increase in the Dational
they
cobon ange that w have been losing ground. They de not stop to
realise that the Federal budget is not a masure of the goins and
losses of the people and that the introase in the National dobt
my be a investment from which in truth great gains are already
being received. Tet the figures tell that very story. just as 10
is also told by the improvements in public assots, in buildings
78
(s)
at roads and parks which we ⑉ everywhere and especially by
the faces of - and - and children everywhere to when work
and happiness have been brought.
The public debt figures of the United States show that about
twenty billions of dollars has been invested in this way in the
last seven and one-kelf years. This increase is shown on the books
of the Treasury. But the books of enother department of the Govern-
name, the Department of Commerce, show that the gain in wealth
produced last year is this country over that produced in 1932 was
twenty-sight and one-half billions.
It is already evident that there will be a gain of several
more billions this year. If one should accumulate all the gains
made since 1958 they would run in dellars to the elmost incredible
- of more than 8 hundred billions.
But of course no one oan count the guins that have been made
in happier living by putting to work many millions of people who
were unexployed, by raising the wages and standards of living of
the employed, by furnishing new facilities for education, by adding
to the opportunities for the education of the peorest, by improving
the health conditions of our country, by building now homes and
streets and parks. The faces end the spirite of men tell what these
things have meant in earlehing our Nation. They also tell what they
have meant in devotion to democracy and belief in democracy as the
best way of life.
Regraded Uclassified
79
(4)
Nome of you who know about these things can be in any doubt
that w are far strenger, far more united, for better fitted in every
my to meet any kind of menage from without or from within than -
wase back in those black days of 1931 and 1938.
Other Nations have gone down in ruin but we are strong and
united and able to hold our goins.
We are miking the greatest progress that the country has 0102
made at any time in the improvement of our military defenses. the
are able to do this because we are strong and united. No should not
be able to do it otherwise. A disantisfied and divided people could
act are itself swiftly as this country is being armed today under
the leadership of our vise and far-seeing President.
the are able to do it also because the President has made our
Nation financially and materially strong. The Nation has intreased
assets which far over-match its debt. And that dobt, too, is not
oved to any outsiders or any other Nation. It is owed to our ⑉
people, who prise their ownership of 10 as a share in America. They
are not disturbed. the Nation pays to them interest rates so low
that the cost of earrying the debt is scareely more than was the
cost twenty years age of carrying a debt that was about 18 billions
of dollars less in amount.
Americans have no doubt of the future of America. America is
richly able not only to provide its - defenses but to pay for them.
Because of what the Receivelt Administration has lane to enrich America
11 is for better able to do 00 then is has been at any time is the past.
Regraded Uclassified
80
(8)
I - very much impressed w what the President said as
this subject in a speech made in the - of 1980. 1st no give
you too quotations.
"Before we can think straight as a Nation we have to
consider, in addition to the old kind, a new kind of
Government balance check-s long range balance sheet
which shows survival values for our poyulation and for
our democratic way of living. balanced against what
- have paid for them."
And at another point in that address:
The only real capital of a Nation is its natural resources
and its human beings. So leag as - take care of both and
mine the must of both of them, - shall survive as a
streng Nation, a successful Nation and a progressive Nation."
The Muinistration whose great President apoise these great
werds has taken care of both-its resources and its people. It has
strengthened both. I have faith that w can not be n stupid and
m blind as to lot that good and faithful certent @.
Regraded Uclassified
81
October 15, 1940
GRORSTANK
s. s. Foley, Jr.
Here is the editorial in the st. Louis
Post-Dispatch, of October 13, favoring the no-
election of President Receevelt. I spoke to you
about this last evening and you said you would
like to ⑉ it.
(Initialed) E.H. F., Jr.
Attachment
10/15
Regraded Uclassified
OCTOBER
1940
DISPATCH
For Mr. Roosevelt's Re-election
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F
83
REPUBLICAN NATIONAL COMMITTEE
Publicity Division
718 Jeokson Placo, If. 9.
Weshington, D. 0,
Toxt of the address of Thomas E. Doway, District Attorney of New York County,
05 Saginos, Michigan, Mednosday evening October 16, 1940 wes 68 follows:
MR. CHAIRMAN AND FRIENDS IN MICHIGAN:
It is # groat pleasure to come home to Michigan to address this meeting dedi-
ented to the election of Governor Dickinson, Senator Vendenberg and Wendell Willkie.
The people of Michigan are fortunate in the achievements of their Governor.
de administration inherited a thirty million dollar deficit from the previous
Ocvernor, a Democret. But really Michigan 10 pretty lucky; with two years of a
little New Deal, you only had a thirty million dollar deficit. That's abt of money,
but it is not El very high price to pay to learn by contrast how good a Republican
administration can be.
In twenty short months of Republican administration, your budget 18 balanced,
Schools and welfare have received edditional millions of dollars of benefits, new
hundreds of thousunds of elderly citizens have been assisted by the State: the
equipment of State hospitals has been greetly expanded. And all this without now
taxes. These things were done by a. Republican administration. or course you will
re-elect your Governor and your Senior Senator.
A speech by me urging you to re-elect Arthur Vandenberg is as unnecessary as El
nominating speech at the Democratic National Convention. He led the fight against
New Deal spondthrift fentasies, such es the Florida ship cenal end the attempt to
hurnoss the tides et Passemsquoddy, It was ho who was largely responsible for saving
the working poople of this country from paying an increase of 50 percent for their
social security. Michigan will keep in the Senato that strong and able servant of
the nation, Arthur Vundenborg.
Millions of people ell over the world are now engeged in a doath struggle to
determine whether they and their children shell be free or shall live under the iron
yoke of EL dictetor. On this very day in every community throughout our own country
millions of young san are registering for military treining. We are contributing
billions of dollars In texes and increasing billions of dollars of debt to rearn this
ontion and to preserve its froedom from foreign aggrossion. How shell we preserve
tot freedom at Nome?
First let to say I cm sure that no Londer of public life in the United States
soday would admit, even to himrolf, BL desire to be n dictator, I am sure also that
no leador in public life desires to bring to the United States e system of totalitar-
Regraded Uclassified
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Doway speech at Saginaw
4
ian government. Yot every time B totalitarion mothod 1a used, there follows, B.5
night the day, e totalitarian result, Tonight I want to examine with you methods
which the New Deal hes employed I want to ank you to consider with ne whether
those methods are the way to keep Americe free. They full into six classes,
First: Spreading discord among the people in the name of national unity.
This technique has been universally employed by non on the merch to power, It
is as simple as sin. They pick & stall section of the people BB the object of their
abuse and persecution. It may be a recial group or it may be an economic group.
But the method remains the came. And, what le more, the result is always the same.
That 1a the means by which men are induced to suspect, then distrust, then to hate
their neighbors. A religious group is induced to district, then to hate enother
religious group. Employees are induced to distrust, then to hate their employers,
Labor is encouraged to bloody strife -- to the great loss of employee and employer
alike. Labor peace is discouraged by those whose duty it is to bring that posce.
Then, when the power of the centrel government becomes great enough, labor unions
are abolished and the workers of a nution are driven to forced labor by their master,
the State,
Suspicion and distrust followed by internal strife - end all under the pretense
of achieving national unity. This is the first dark and elippery road to totaliter-
innism. That road must be closed in America. The Republican Perty will close that
road, It will keep America free.
Second: Making the people permanently dependent upon their government.
In 1933 the New Dool came to power, pledged to restore jobs to the unemployed.
Mr. Roosevelt, upon taking office, said "our greatost primary task is to put people
to work." Of all his failures, this has been the greatest. It has been the fullost
cup of human sufforing, It still remains the bitter fact that there has been en
average of ten million people unemployed right through this Administration.
It has continued so long that Harry Hopkins, ex-Secretary of Conmerce, even say
our unemployment is permanent. I agree with Harry Hopkins to this extent: Our un-
employment is just as permanent as the New Deel -- and no more. Only an administra-
tion deliberately devoting its efforts to cleas hatred end shackling business enter-
prise could keep ten million Americano unemployed.
The Republican Party challenges the New Deal theory of permanent unemployment,
It holds that unemployment is a netional evil which can end must be cured. It be-
lieves that sovernment-fostered unemployment opens the second slippery road to total!
terianism. The Republican Party intends to close that roed, It will keep America
free,
Regraded Uclassified
Dewey speech at Saginew
&
85
Third: Contempt for the nublic word.
The repudiation of solemn pledges destroys faith in any system.
In 1932 the New Deal platform solemnly pledged that a sound currency "would be
proserved et all hezerds". Yet it took this country off the gold standard six weeks
after it took office,
In his first campaign for the Presidency, Mr. Roosevelt asserted that "nc re-
sponsible government would sell securities payable In gold if it know the gold stanó
ard was in denger". Two months after he took office be sold 500 million dollars of
gold certificates to the people of the United States. Yet just five days later the
President announced that that promise would not be honored.
In 1932 and again in 1936, the New Deal pletform pledged a belanced budget,
Those promises have boon worthlass to the extent of 20 billion dollars -- a oum larg
enough to have armed the United States against all possible aggressors.
Each time he took office, Franklin Roosevelt swore to support the Constitution
of the United States. Yet, in 1935, he wrote to a Congrossional committee: "I
hope your committee will not permit doubte as to constitutionality, however reason-
able, to block the suggested logislation,"
The New Deal has distorted the meening of words to conceal its failures from th
poople. Government debt is no longer B. debt. It is called en "investment". To the
New Dealers the things you and I learned at our mother's kneo are mero "mythology"
and our traditions are "folkways".
The deliberate abuse of words and promises to confuse the people is the third
elippery road to totalitarianism -- a road that is being stoudily greased with gover:
munt monay for propagande. Only the Republican Perty can block that road, Only the
Republican Party con keep America free.
Fourth: The attempt to subjoct all brenches of government to the executive will
The totelitarian technique has no system of checks and balences -- it bes no
use for independent logislatures or courts.
The courts for one hundred and fifty years have boon the guardiens of our liber
ties, I need not remind you of the Now Doel offort to pook end control the Supreme
Court of the United States. Thet WILD the most ruthloss attempt evor made to bond ou
courts to serve the executive and not the people.
I need not remind you of the attempts to degrade the Congress of the United
States to the position of a rubber stemp. I need not remind you how Mr. Roosevelt
tried last June to send Congress home even though the major portion of the national
defense program had not yet even been proposed, Did Mr. Roosevelt believe he could
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Dewey speech at Saginaw
pess the necessary logislation and a propriations himself? In any event, Congress
stoyed -- it stayed out of 0 sonse of duty and did the job. We still have 8 Congress
in the United States. May it always be filled with nen of courage and character,
Every attempt to reduce the Congross or the courte to B position of servitude
18 enother slippery road to totalitarianiam, Will the New Deal Party close that
road? Cen that New Deal Party koop America free?
Fifth: The phitical execution of all rivals and critics.
In the history of the world men live and die, but only principles survive,
Those who believe in crinciples make curtein that there shall be successors to carry
on those principles. Those who believe only in power make cortain that there shall
be no leaders either to succeed them or to interfere with their continuance in power.
Let us look at what hes been hepponing in the last few years. There was a
worthy end distinguished potential successor to the President within the Democratic
Party -- the Vice-President of the United States, John Nance Garner, In 1932 he
made possible the nomination of Franklin Roosevelt for Prosident, But in 1940, when
his own legitimate aspirations wore endorsed by millions of Americans, what happened?
His political death warrant WES secretly signed. Inspired news stories undermined
his aspirations. Mr. Roosevelt himself, 88 a candidate for e third term, ran
against his own Vice-Presidont in primary clections, The power of government, the
nower of patronage, the power of the party machine were used to strike down that
possible successor.
There was another major figure in the President's party, another open aspirant
for the nomination, Re hold en important position in the President's official
family. He, too, won e great following, And against him, the same process was
begun. A now instrument, the totalitarian process of government by charecter
sssessination, was brought to bear. A pretended income tax investigation was
started. Treasury agents wore sont throughout the United States, making Insinuating
inquiries -- inquiries as to his income which led people to the suspicion that the
government had something on him. Thus were destroyed the legitimate embitions of
Paul V. McNutt. They were destruyed by an inexcusable, 4 contemptible abuso of power,
The investigation schieved its effective and at the Democretic National
Convention. There Paul MoNutt bowed before the voice of concentrated powor. with
tears struening down his face, he stood on the pletform and renounced the logitimato
sepiration of every boy born in America, No edministration which stoops to such
things is entitled to the namo "Domocretic". Nor is it entitled to office in A free
rénublic.
There wore still other party leaders whose names wore out Regraded their Uclassified
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Day at Suginew
+6-
friends -- the only first-ronk, full-zized Democruts In the Cabinot of the United
States -- Cordell Full and James Farley, But their booms didn't last long, The
flood patio of poisonous insimuetion Were again opened up. From the White Rouso
- Wis shipper that noithor would do, They too, were shunted acido, For no one
world rise to succood the "Indisponsable" mon,
To the United Stetos Sonate wore many loyal Democrate who would have made ex-
as Ilans Prosidential cendidates. But honoring their ooth of office, they found it
r.lways to agree with the schomon of the White House palaco guard. They,
too, were undermined and grodually dectroyed. And of those gront mon in the Senate
non- WILE 1.ft to challongo the Now Deal's self-anointed,
"het hts happened to the others who dered to oh llongo or to criticize? Let's
look st. that focel point of the monumental mishandling of national finance, the
Treatry Department. There whe Dean Acheson, Under-Secretary; Luwie Douglas, Dir-
dotor or the Budget; Professor Spregue, Financial Advisor; Thomas Jefferson Coolidge,
Inder-Secrytory: John Hanes, Under-Secretary; Roswell McGill, Under-Secrutery; Cerl
Thoup, Assistant Secretary, and J.F.T. O'Connor, Comptroller of the Currency. One
after (nother they found that no intolligont men could tolerate in silence the
destructive tendling of the finences of this country. One after enother their tenure
In rublic office wes rede impossible, Having retired, they wore more honored in
crivete Ilf then thoso who stayud.
In other fiolds there wea the Assistant Secretary of War who WOB secrificed to
: vistical coup - Louis Johnson: There were Major Genoral Regood of the United
- t.s Army, William E. Humphrey of the Fodoral Trado Commission and Arthur Morgen,
Children of the T.V.A. In succession, each was sontenced to administrative donth
B. anual he dured to criticizo somo one of the fentastic follies of this adminis-
tration.
The purge or those who dare to dibagree is on alien institution. The political
execution of those who differ with or might succeed the leader is the deadliest of
all the slippery roads to totaliterianism. It 12 the most bateful road of all, The
New Desl Party ovened up that road. The people will close it at the polls in November
Sixth: The creation of e regimented political party.
Recell -- if you can bear the recollection -- the convention that met in Chicago
three months ago. There WAE the inevitable climax of the studied attempts of soven
DIA one-helf years to transform the Democratic Party into en instrument of power for
Now Doulers only, At Chicago the job was done,
There is no longer B Democratic Party. It died in Chicago. Its swen song was
rung by the superintendent of sewers in the cellar.
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Dewey speech at Saginaw
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The killed the Democratic Party end who are its successors? Who owne the New
Deal Party of today? There can be only one onswer, It is in the absolute grasp of
the dictators of Jersey City, Chicago, Kanses City, Termany Hall, Albany and the
Bronx. These are the nen who now own what wes once the Democratic Party, One of
them is Chairman and another is Vice-Chairman of the Democratic National Committee.
For eight years these machines have been nourished and developed by New Deal
patronage and government money. Now they are in a position to move openly on Weah-
ington. That is the sinister thing that happened in Chicago in July, The third
term means their bid for total power in the Federal Government itself.
Their growing arrogance is already apparent. Since that convention in Chicago,
WU have seen the importation of another alien device, the burning of books. We have
seen the culture of another notion destroyed in huge public bonfires. Here we see
public voting records destroyed in private bonfires. We see not our culture, but
the free frunchise of free Americans brazenly burned by the dictator of Jersey City.
A boss-ridden, regimented national party is the sixth slippery road to totall-
terionism. There is only one free party to vote for in November. That party -- the
Republican Party -- will close that road,
Let me repeat, I do not believe that any man in public life in America desires
to be a dictator. But these are the methods which produce dictatorship. If an
administration is permitted to perpetuate itself in office by such tactics as I have
described tonight, the freedom of the American people is at an end.
The Republican Party was born of a crisis in the history of human freedom,' It
was born to make slaves free, It will live to keep men free,
While there is still time, we can, we must turn away from this trend toward
totalitarienism. No one van can stop this trend. Only the people themselves can
stop it. This they will do in November through the Republican Party - through the
election of Mendell Willkie and Charles McNary.
<+00000==
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FOR RELEASE TO MORNING PAPERS OCTOBER 17, 1940.
"ON HAND AND ON ORDER"
ADDRESS BY HONORABLE JAMES F. BYRNES OVER THE RED NETWORK OF THE NATIONAL
BROADCASTING COMPANY AT 7:15 P. M. EASTERN STANDARD TIME AND AT 11:15 P.M.
EASTERN STANDARD TIME ON OCTOBER 16th, 1940.
In e speech at Philadelphia a few days ago, the presidential candi-
date of the Republican party charged that President Roosevelt attempted
to deceive the people of the United Statos when, on May 27, 1940, in ad-
vising the nation as to our airplanes, tanks and other materiel, he used
the phrase "on hand and on order." Mr. Willkie ridicaled that phrase
and demanded to know its meaning.
In his spooch, the President simply used the language of a report
furnished by the officers of our Army. In doscribing the status of its
ships, the Navy uses the phrase, "built end building". In reporting as
to ito oquipment, the Army uses the phrase, "On hand and on order."
President Hoover frequently used the phrase "on hand und on order,"
just as other Presidents have done. Mr. Willkie WELS a Democrat during
the Boover Administration. I would have been nahamed had ho, et that
time, charged President Hoover with doccit and misreprosentation because
of using the phrase "on hand und on order."
Years ago the army devised that phrase BO that a complete picture
of its matoriel could be given. "On hand" informs the nation of motoriel
on bond today, and "on order" tells the nation what is to be delivered by
manufacturers who have boon awarded contracts.
An administration that has nothing "on order" is doing nothing about
national defense.
In that same speech at Philodelphia, Mr. Willkie anid: "I happen
to know o large manufacturing company in Michigan. It has orders for
many hundreds of tanks. Those were included, I assume, among the 'ghost'
tanks 'on order' that the Third Term Condidate spoke about. But this
particular manufecturer has not yot built the building in which those ghost
tanka are to be munufactured."
That WAB an inexcusable misropreaentation.
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90
The only manufacturer in Michigan having ordors for tanks is the
Chryaler Corporation. Mr. Willkie know that the appropriation for the
purchase of tanks WELD not made available by Congress until July. Yet be
tolû you that these tanke wore included among thooo to which the President
reforred last May.
The fact 18, the contract W&B signed August 15. Building tanks is
B. gew activity for Chrysler Corporation, so n. new type of plant had to be
designed. Six wecks later, on the day Mr. Willkio spoke, the building was
under construction and needed machinery WGB on order. Mr. Willkio was un-
fair to the President, to the army and to the Chrysler Corporation.
American factories are now turning out five completed tanks each day.
Production is increasing each month. Wondell Willkio may call then Whost
tanks Adolph Hitler will not ridicule them.
At Buffalo lost night, Mr. Willkie assorted that the Administration
deluyed the emortization plan which, be soid, would have cleared the tracks
for manufacture of guna, tenks, planes und minitions.
American manufacturers did not wait for enactment of this legislation.
They signed contracts with the Army and Navy totaling eight billion dollars.
Speaking of this tax provision, Mr. Willkie said: "I favored it, too.
So for 0,5 I.Know, every sensible man favored it."
Lot me toll you that when the Sonate voted on this bill, only one
Republican Senntor voted for it. I want you to know that it ia not I but
Mr. Willkie who adys there in only ono sensible Republican in the Senate.
The Republican candidate told the people that all but a few hundred
of our airplanes are obsoleto. You know that this ie untrue. What would
not Britain give today for the thousands of planes we have which Mr. Willkio
calla obsolete? The Defense Commission tells you that American factorios
will this month turn out 959 planes. They are superior to those which dot
the skies over Burope. Production is increasing daily and our designero
have profited from Europo's experience.
Mr. Willkie say 01 "Think what a difference it would have nnde to
the democracies of the world if the airplane production of 1940 had been nt-
tained in 1959."
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I agree. Had the party of Mr. Willkie's adoption refrained from
delaying and blocking repeal of the arms embargo in March, 1939, air-
plane factories built in 1940 would have been erected in the summer of
1939. And today we would be producing planes at the rate of 2,000 per
month instead of 950 per month.
In a spooch et Clovaland, Mr. Willkie said: "The fact is that
the largost forco WD could put into the field today completely oquipped,
la 75,000." That is untrue. We have more than 75,000 mon completely
equipped in our possessions, Hownii, Panama and the Philippines. We have,
in all, in the regular army on of yosterday 352,156; in the National Guard
we have 203,000, making a total of 555,158 men. -
Speaking in New York, the Republican candidate doolared the army
looked rifles. That is untrue. The United Statos army hne on hand op-
proximately two million Enfield and Springfield rifles - which any military
expert will toll you are splendid weapons. The Infantry constitutes not
more than 40 percent of c. modern army. Therefore, wo now have rifles
sufficient for en army of five or six million non.
We now are manufacturing the now Garand rifle. The Army does not
discloso the number on hand, but states that by the and of this month WO
will be producing six hundred per day, and production is increasing every
month. These and other new effective weapons are OR hand; others are on
order; and American labor is working throe shifts a day to manufacture
them.
Yesterday, in Rochester, Mr. Willkie charged "pitiful inefficiency
in failing to provide housing for the first lot of now soldiors with regis-
trotion coming tomorrow." Ho said it would take six months to house the
first 400,000 mon.
The Solective Service Law was approved September 16th. Plans
for housing were already prepared and construction immedintely started.
General Marshell advises mo that instend of boing delayed, it is proceeding
surprisingly woll. The Army did not plan to enil any trainoes before
November 16th, and only 30,000 them. The incronse in recruiting in the
Regular Army and National Guard will reduce the number of trainess then
to be colled. Housing will be ready. The Chief of Staff states that on
January 1st. he expects to have in Army uniforms 850,000 man, who will be
comfortably housed.
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The result, if not the purpose, of Mr. Willkie's misleading state-
mont on the eve of Registration Day WELD to strike foor into the hearts of
American Mothers.
Mr. Willkie WELD guilty of more deception when he soid that "in
1936 we spent only nine porcent of our money on defense, the lowost per-
contage in modern history." His figures are wrong. It was ten and one-
half percent.
Be wanted you to bolieve that in 1936, Congress reduced the annual
expenditures for defense when the foot is, WC invested that year two hundred
million dollare more thru in the provious your.
Instend of giving you the amount, be gave you the percentage of
total expenditures and he selected 1936 of all years because that was
the year in which 70 paid the Four Billion Dollars Bonus to veterans.
Naturally, payment of that bonus mndo total expenditures so large that
the percentage for national defense soumed smull, Was that fair to the
Administration, - was it fair to you?
What about the navy? In 1933, when President Roosevelt assumed
office, we had dropped bolow Great Britain and Japan - evon below France -
in the number of fighting ships. Wo had only 101.
Mr. Roosevelt had served for eight years 08 Assistent Secretary
of the Navy. de knew the nevy's needs and began immediately to rebuild our
first line of defense.
Ao o result, we have on hand today 358 modern fighting ships.
Prior to September 9, 1940, we had 130 ndditional ships on order. These
130 ships - destroyers, submarines, cruisers and battleships - are from
5 wooks to 6 months shoad of contract dates.
On September 9, within five hours after the President approved
a bill appropriating money to build 200 additional combatant neval vessels,
contracts for these ships wore signed. They are now on order, and skilled
Amorican workers are laboring twenty-four hours a day to put them on the soa.
This is registration day. Sixteen million young Americans have
registered for military training. These mon are on order, - not for war, but
for peace. Wendell Willkie will not lough at these millions of men on order.
Regraded Uclassified
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Nor will Adolph Hitler laugh. Because they are on order, there probably
will be many other anti-Roosevelt rullios at Brunner Pass before the Aris
powers dare turn their covetous 8020 toward the Western Hemisphere.
Do not be frightened by Mr. Willkie. Admiral Stark, Chief of
Operations, advises you that today the Navy 18 stronger and the morale
higher than ever in its history.
General Murshall, Chief of Staff, advises you that the Regular Army
is vastly increased; that the best equipment and most modern weapons are
under production not only for the Regular Army but for the trainees rogis-
terod today.
Mr. Knudsen and Mr. Stottinius of the Defense Commission advise you
that instead of being bogged down, production is progrossing; and they are
receiving wholehearted cooperation from the White House, from Congress,
and from industry.
Mr. Knudson and Mr. Stottinius are not candidates for office.
General Morshall and Admiral Stork are neither Republicons nor Democrats.
They are just Americans. I as natisfied that you will accept the testi-
mony of these gentlemen in preference to the statements of Wondoll Willkie,
who questions the veracity of your President; criticizes your army and navy;
and reflects upon the cooperation of American manufecturers.
I have no fear that Wondell Willkie can deceive the American people.
I do foar that he may decoive the Aria Powers, who believing us defensoloss,
may do something to jespordize the penco of this homisphero. And I fear
he may cause South America to believe it is unsafe to rely upon us.
No man on earth has facud reality with clearer vision or with higher
determination than has Franklin D. Roosevelt. His actions, not his words,
are what alarm the dictators. His noves to fortify the country ho loves
fill the dictotors with apprehension that their plans for dominating the
world will yot miscarry, and inspire them to form alliances to bluff us into
abandoning the heroic British.
It is on the strength and sound judgment of President Roosevelt
that America relies, at least for that period of respite which will onable
08 to fortify ourselves completely against A danger which, only a fow short
Regraded Uclassified
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- 6 -
months ago, lay beyond the horizon.
Hore is my final word. Let only those speak against President
Roosevelt who saw more clearly than he did, who counseled more wisely than
he did, while this storm was gathering.
Apply that test to the voice of criticiam, and you will hear no word
spoken by any man in America - - certainly you will not hear the voice of Wendell
L. Willkie.
95
October 16, 1940
4:20 p.m.
H.M.Jr:
Hello.
Operator:
Secretary Knox.
H.M.Jr:
Hello, Frank.
Frank
Knox:
Hello, Henry.
H.M.Jr:
I wonder if you could help me or have somebody
help me. Willkie has made the statement now
twice that on April 13, 1938 Admiral Furlong
asked for certain things to do with amorti-
zation, you see. It's in his statement - his
speech of yesterday. Hello?
K:
Of April 13, 1938 Furlong did what?
H.M.Jr:
Well, he said the head of the Ordnance asked
for - oh, it's in connection with special
amortization.
K:
Asked for special amortization law?
H.M.Jr:
Yes. Now it's just a matter of a record,
you see. Hello?
K:
Yeah.
H.M.Jr:
He's said it twice and then he comes along
in this statement - I'm looking at the New
York Times, I've got it before me - he says,
in January '39, four months after Munich,
the Secretary of the Navy wrote to the Secretary
of the Treasury asking early action.
K:
February, when?
H.M.Jr:
January '39. Now, my records show that I
got no communication from the Secretary of
the Navy.
K:
The Secretary of the Navy wrote asking for
expedition on this law?
H.M.Jr:
Yeah. And I have no - I don't know what
Furlong did onApril
.....
96
- 2 -
K:
Well, I can find out.
H.M.Jr:
And if you could send it over - Foley's
going to work on this tonight for me.
K:
All right. I'll get - do you want me to
call Foley?
H.M.Jr:
If you could get the thing to Foley so that
he could work on it for me tonight - he'll
be here all evening.
K:
All right, Henry. I've got it. Now, you
want that correct statement, if there was
one, by Furlong on April 13, 1938 on the
amortization law and in January where the
Secretary of the Navy wrote to you.
H.M.Jr:
That's right. And, incidentally, the President
is all worked up about this.
K:
He 1s, eh?
H.M.Jr:
Yeah.
K:
All right. I'll get the dope and give it to
Foley.
H.M.Jr:
Thank you 80 much.
97
October 16, 1940
4:20 p.m.
Present:
Mr. Foley
Mr. Gaston
Mr. Schwarz
Mrs. Klotz
HM,Jr: You may be interested to know that
the President has known about this all day and there
is nothing the President has been so upset about as
this and he wanted me to have a special press con-
ference. If we had had it this morning, I would
have had it at nine o'clock.
Mr. Schwarz: But it was in the clippings.
HM,Jr: But I had about 100. I can't go
through these clippings. I have told you 100
times and you have all these people up there. As
far as I am concerned, they might as well be in
London. Here's an important statement comes along
and I only hear about it by accident at 3 o'clock.
It's inexcusable.
Mr. Schwarz: I agree it is.
HM,Jr: And here the President of the United
States all day long has been wanting some one to
answer this, Gaston says, and here I am with no-
body to help me and I should think somebody up there
should have said, "Here, Schwarz. Shouldn't some-
body answer this?" This is the last time. I am
going to answer it so you stick around and Foley will
be here and have something at 8:30 and here's the
President of the United States waiting for someone
to come to his help and I find myself in a position
because the Press Section is doing something else
and does not read what Willkie says about the Secre-
retary of the Treasury ....
Mr. Schwarz: I am responsible. My people
muffed on me.
98
-2-
HM,Jr: No! You muffed! That's your
responsibility. Don't tell me all the time it's
somebody else! My God! Don't you ever read
a newspaper yourself?
Mr. Schwarz: I read them all morning.
HM,Jr: Then you must read them with blinders.
I am not going to burn myself up. I don't know
what you do, but certainly you wouldn't think there
1s & campaign going on. Don't tell me it's somebody
else, because I have gone down on my knees and asked
you to get somebody. It's the last time it will
happen. I am going to get somebody who will do the
things I want them to do. For Mr. Gaston to come
back and say the President has been upset about this
all day long and here I sit in complete ignorance and
I could have had something out.
What do you think, to give this thing a fresh
angle. Just to repeat what we did before isn't go-
ing to help. How could we do this thing fresh? I
think this thing of getting in the vote would be a
good thing. If Sulliven was only here instead of
lying up there in New Hampshire!
Mr. Gaston: Jimmie Byrnes, I understand, is
going to use the vote thing tonight.
HM,Jr: As I understand it, Sullivan is away.
Tarleau is away. Is Blough here?
Mr. Foley: Tarleau is in Nashville at a con-
ference of some kind. I don't know where Blough 18.
I don't think those fellows have anything we don't
have. I don't think John has anything. We can do
this Job.
HM,Jr: Well, I am going to look to you and
Herbert. That's all.
Mr. Gaston: There are certain points in de-
fense -- detail of getting it, and then the medium
99
-3-
we will use.
Mr. Foley: It may be helpful to talk to
Furlong on this.
HM,Jr: I would not hesitate to ask anybody.
I wouldn't hesitate to send for the so-and-so.
Mr. Foley: If I need him I can send for him?
HM,Jr: They go home at 4:30. You had better
call him up, if he hasn't gone home already.
Mr. Foley: Knox ought to be able to find him.
I don't think we came into this thing at all, Mr. Sec-
retary, until 1939.
HM,Jr: The thing started at the meeting when
Hanes went over to Louie Johnson's office, end then
got the President to sign the memorandum. Supposing
I give this thing out. That's a reflection on the
President. When I asked the President he said, "I
remember that very well. I Just told Hanes to look
into 1t, "but he did not; he signed a memorandum di-
recting me to speed up airplanes.
I came back in the strongest language. If I
was running for office I could go on the road tomorrow
and write this thing up, but that darn memorandum that
Hanes wrote and which the President signed is the thing
that sticks in my crop. This succession of memos of
mine, they are all right.
Mr. Foley: What Hanes suggested you told the
President was a thing you could not do within the
law. You would have to have the law changed. Now,
from November, 1939, to October, 1940, is e long time.
HM,Jr: I think the answer -- this is the point.
we did not make, but that silly story about the boy
and the spinach -- tell that story.
Mr. Foley: A little fellow did not want to
eat his spinach. His mother said, "This is very good
100
for you. Make you strong, make your eyes sparkle.
Eat your spinach. There are hundreds of little
boye starving and would love to have that spinach.
He said, "Where?". She said, "Right here in the
block there are hundreds and hundreds of little boys
who just love to eat their spinach. I don't see why
you don't eat your spinach." He said, "Name one.
HM,Jr: The point 18, I think if we could come
back and say, "All right, Mr. Willkie. This is the
second time. Name one. Let's get down to facts.
Who was held up? Give us the facts.' Now, that
puts a new tone on it. "All right, Mr. Willkie,
Give me time and I will think about these.
"You have said all this stuff."
Mr. Foley: You know all this, but maybe it
would be helpful if you took home a four page memo
that I have that gives the history of the thing from
November, 1939, down to date and then it will refresh
your recollection.
HM,Jr: But I think the thing to do
Mr. Foley: The thing John was reading from
was an excerpt from a longer memorandum that Kades
prepared.
HM,Jr: I think the thing to do 1s do this:
thing and get this so-and-so Furlong over by yourself.
But take this attitude: Mr. Willkie, what you are
doing is picking over the garbage pail. Where would
we have been? We would have been somewhere. The
thing we were waiting on 18 if we could get the thing --
but I question, I don't think the President's record
1s any good where the President asked for money and
the Republicans voted h1m down. The only other thing
would be how they voted on the tax bill and how they
voted on any appropriation bill this session. But
his record on asking for money from Congress, I think
in every case he got it unless the President vetoed
it. Let Larry Bernard -- if you turn him loose on
that. I would tumhim loose on the voting record
and "0. K. In 1938 who was held up? What appropri-
ation wasn't spent? Supposing Admiral Furlong did
say so and 80. Bo what? What did it hold up?" I
think if we could come back at Willkie. "Name the
company, Mr. Willkie."
101
-5-
Mr. Gaston: Might ask him to name his
client.
HM,Jr: Better yet, "name your client" if
we want to get dirty. "Name your client".
Mr. Gaston: Also, you are sitting in a
|ifferent chair. You are not representing a
group of munitions manufacturers. You are rep-
resenting the people of the United States and have
been.
HM,Jr: That's a good point. Don't forget
that Furlong was representing munitions manufacturers
and not the people.
Mr. Foley: He's still in the Navy, though.
HM,Jr: Listen, if we are going to do this
thing and protect the President -- I an all right
on it. Seriously.
Mr. Foley: You have a good record.
HM,Jr: My record is 100 percent, but it's
the blankety-blank memorandum that the President
signed. And Hanes knows that. He has a copy of
it. But, I mean, if we step on somebody's toes, like
Admiral Furlong -- I did it once in a letter to the
President -- it's just too bad. Somebody has got to
be hurt.
Did Mrs. Klotz hear what Steve Early said?
Mrs. Klotz: Yes.
HM,Jr: Well, tell it to Schwarz.
Mr. Gaston: Well, he said the President had
been stewing about this thing since he talked to him
at 7:30 this morning and he said at the President's
direction he had written something unusual. He had
written a directive to the Army and Navy asking what
102
-6-
the transactions were that Willkie talked about
and he was going to use those commts to put out
a red hot White House statement. He said Jimmie
Byrnes would deal with the botes, but he said specif-
ically, as far as our thing was concerned, he had not
done anything and he said "help yourself" and he said
"the way the President was feeling now the stronger
you go the better # and he did not think statements
were very much good. He thought there ought to be
quick action on following anything of this kind up.
I asked him if he did not think there was a little
too much defense and not enough attacking and he said
that was true, but there were some of these things we
had to say something about and the campaign had been.
damn lagged. There 1s no real, positive attack and
he thinks it's definitely a swing starting the other
way, largely because the campaign has not been ener-
getic. He said the way the President feels now, he
would leap with joy if the Secretary would get out
and take an active part in the campaign, such as mak-
ing a speech. It's very different
.....
HM,Jr: Very different from Sunday!
o0o-o0o
10-18'40
Miss Chauncey 103
This was
brought over
at
morning.
Mr. foley brought
ihes back l think
you should have
have copy
N. Ord. 6
104
IN REPLY ADDRESS
REAU OF ORDNANCE NAVY DEPARTMENT
NAVY DEPARTMENT
AND REFER TO No.
(AB)
BUREAU OF ORDNANCE
WASHINGTON, D.C.
17 October 1940
Memorandum for Secretary Morgenthau:
SUBJECT:
Building Up the Naval Defense of the United States.
1. What was done in building up the naval defense of this
country during recent Presidential Administrations will be seen from
the following:
During the Coolidge Administration, 1925-1929,
there were eight ships commissioned.
During the Hoover Administration, 1929-1933, not
a single Naval vessel was authorized. Ten cruisers
and three submarines which had been previously auth-
orized were finally completed during the Hoover Ad-
ministration but no new vessels were authorized to
be added to the Fleet.
During the Roosevelt Administration, Mr. Roosevelt
began immediately to build up the Navy and in his
first term of office, 1933-1937, 41 new vessels were
commissioned and added to the Navy.
In his second Administration, 1937 to V October 1940,
95 fighting vessels have been added to the Fleet.
1. R. FURLONG,
Rear Admiral, U.S.N.,
Chief of the Bureau of Ordnance.
105
October 17, 1940
8:30 a.m.
RE REPLY TO WILLKIE'S SPEECH OF OCTOBER 15
Present:
Mr. Foley
Mr. Greenbaum
Mr. Cairns
Mr. Kades
Mr. Gaston
Mr. Duffield
Mrs. Klotz
Mr. Schwarz
H.M.Jr:
Are you ready to start reading? Thanks
for coming, Eddie.
Greenbaum:
I am glad to come.
H.M.Jr:
"Mr. Willkie in his Buffalo speech of October 15
has again charged that the Treasury Department
has delayed the defense program.
"What Mr. Willkie, or the person who wrote
the speech, has done is to confuse the facts
and to withhold -" I am going to leave a
little of that out. Yell, Eddie, if you want
to.
Foley:
He has already done that.
H.M.Jr:
"What Mr. Willkie has done is to confuse the
facts and to withhold part of the record. He
has mixed up the act which limits profits on
Navy contracts with the income tax amortization
problem which was raised in discussions batween
the Advisory Commission on National Defense and
representatives of the Treasury Department in
June, 1940."
Foley:
Now, Eddie thinks this whole next paragraph
1s much too involved, and I agree with him,
Regraded Uclassifie
106
- 2 -
where we are trying to explain the difference.
Maybe we had better stop right there and go
into it --
Greenbaum: Here is my thought, that this 1e like a reply
brief to court.
H.M.Jr:
That 1s what I asked him to prepare.
Greenbaum: It is & good thing to have it, because it
has the facts, but the way I would approach
this, "Mr. Willkie has flunked his course in
Government. Naturally, it couldn't be
expected with no preparation he could do
this. He completely confuses between two
rather elementary things, which 16 to be
expected under the stress, and we are sure
if Mr. Willkie had time to cram and do the
thing he could pass his finals at mid-year
on his elementary course," some approach
like that.
(Mr. Cairns and Mr. Kades entered the
conference.)
Greenbaum: Hello, Huntington.
(Mr. Schwarz entered the conference.)
H.M.Jr:
This 1s Mr. Schwarz.
Greenbaum: How do you do.
Schwarz:
Glad to see you.
H.M.Jr:
You got it, didn't you?
Reporter: Yes.
H.M.Jr:
That 1s the way to start it.
Greenbaum: That 18 the approach I would have on it.
Then you would put that in the second sentence
on the second paragraph here, that he has
mixed up the act. That explains why he has
107
- 3 -
flunked it, and then nothing else on the
first page and shoot right into the second.
H.M.Jr:
Let me just read what he has here a minute.
"I - Mr. Willkie asserts that Admiral Furlong,
head of the Bureau of Ordnance of the Navy
Department, asked on April 13, 1938, for the
income tax amortization provisions enacted by
the second Revenue Act of 1940. Admiral Furlong
made no such request. On April 13, 1938, the
Admiral addressed a memorandum to the Judge
Advocate General of the Navy, suggesting that
representatives of the Navy Department confer
informally with the Treasury with the view to
a formulation of a method to be followed in
handling depreciation allowances under the
Vinson-Trammell Act. That suggestion, of
course, had no connection with the income tax
amortization provisions enacted by the second
Revenue Act of 1940 or with the problems
resolved in that Act."
Does he say that they do?
Foley:
Sure. He says, "On April 13, 1938, Admiral Furlong,
head of the Navy's Bureau of Ordnance, asked
for a -"
Schwarz:
If
more or less consistent income tax
amortization."
Foley:
That 1s right.
Greenbaum: Yes, that 18 what he says.
H.M.Jr:
The suggestion I made was to do it - take a
paragraph of Willkie's statement and then
answer it.
Foley:
What we have done 18 that, Mr. Secretary, but
it isn't susceptible of quoting what he said,
because he says, "it" and you have to define
what "it" 1s. It 1s all mixed up, it is all
sort of overlapped.
H.M.Jr:
You couldn't do it?
108
- 4 -
Foley:
No, you can't take that thing out.
H.M.Jr:
"Mr. Willkie asserts that 21 years elapsed
before the amortization problem was disposed
of. As & matter of record, the problem was
disposed of by the Treasury Department in
February, 1939 - one month after receipt by
the Treasury Department of the Navy Department's
letter of January, 1939, referred to by
Mr. Willkie, in which early action was re-
quested."
You have no evidence to prove that? You just
make the statement?
Foley:
Well, we have got the letters that are in the
file.
H.M.Jr:
I see.
Klotz:
That 1s the feeling it leaves us.
H.M.Jr:
.
one month after receipt by the Treasury
Department of the Navy Department's letter of
January, 1939, referred to by Mr. Willkie, in
which early action was requested."
What did we do?
Foley:
We --
Kades:
There was a ruling agreed upon permitting them
to charge it. It was on plant expansion. I
don't think we published the ruling until
later. This is the date that he says we -
actually we didn't publish the income tax
ruling until the following May or June.
H.M.Jr:
By not publishing it, didn't it go into effect?
Kades:
Well, the Navy knew about it. I don't know
of anything we can actually point to.
H.M.Jr:
Then I wouldn't say this. Don't have me in
that position, because he will look up the
records and say we didn't publish it until June,
109
- 5 -
80 it couldn't have been effective if we didn't
have a publication of it.
Kades:
Shall we put the exact date of the ruling in
there or a ruling which had been agreed upon
earlier was published?
H.M.Jr:
No, I would Just - whatever the thing - - whatever
day it became effective, whatever day it became
effective. I don't know what day that ruling
became effective.
Kades:
Huntington, what did you think for February,
1939, here? That was the ruling he had reference
to, wesn't it, the ruling that capital outlay
1s to be charged as cost under the Vinson-
Trammell Act?
Cairns:
Yes, it was.
H.M.Jr:
What?
Cairns:
That was a publication of the ruling.
H.M.Jr:
When?
Cairns:
In February.
H.M.Jr:
Then it is all right.
Kades:
Did we actually publish it in February, 1939?
Cairns:
So Oscar tells me. The letter dated February 24
does that.
H.M.Jr:
What do you mean?
Cairns:
That 1s a letter from Hanes to the Secretary
of the Navy.
Foley:
That is the reply to Furlong's letter.
H.M.Jr:
Then that 18 a simple way. I would say it
this way. What 1s the date of that?
Cairns:
February 24, 1939.
110
- 6 -
H.K.Jr:
I would say on February 24, 1939, Mr. Hanes
wrote as follows.
Kades:
I think - because actually, there was 8. delay
in the publication of the ruling.
Cairns:
Oscar said it was published then.
H.M.Jr:
I mean --
Cairns:
I think your point 1s a good one.
Kades:
So do I.
H.M.Jr:
I would simply say that --
Greenbaum: There 1s a confusion there, Mr. Secretary,
in that it shows action was taken in February,
1939, on a letter from Navy dated January, 1939,
but the Admiral's suggestion of April, '38,
in spite of the fact it was long ago, & year
ago last February, nevertheless that is quite
a period to wait, from April, 1938.
Cairns:
But the letter - the April 13 letter was a
Navy communication inside the Navy. It didn't
come over to us. Willkie said it came to us.
Greenbaum: Well, it is all the Administration. It ought
to be worded differently. You can't say --
Cairns:
Except that Willkie says the Navy 1s all right
and the Army is all right and Hanes is all right.
Greenbaum: We don't want to put ourselves in the position
of showing the Navy delayed it a year.
Cairns:
They had to study the question and later on
they brought us into informal conferences.
Greenbaum: May I suggest wording that paragraph, instead
of this manner, something like this: "The
Navy gave prompt consideration to Admiral Furlong's
suggestion, and on January -" whatever date it
is --
Cairns:
January 13.
111
- 7 -
Greenbaum:
#
1939, made its recommendation to the
Treasury Department. Within B. month; namely,
on February -- blank.
Cairns:
24, 1939.
Greenbaum: You can't say within a month then. "The
Treasury gave this immediate consideration
and study and on February 24, 1939, agreed
with the Navy and the matter was disposed
of in that manner," or something like that.
Cairns:
Yes. That requires a slight amendment because
the Navy had taken it up with us informally
before January.
Greenbaum: Oh, I see.
Cairns:
And the formal request came over in January.
Greenbaum:
"Made a formal and final recommendation,"
something like that.
Cairns:
The words were, "immediate consideration."
Greenbaum:
That is right. I didn't know that. You will
have to change that accordingly.
H.M.Jr:
Well, this leaves me very confused. In this
thing where he starts in talking about "1t",
he 1s constantly referring to the amortization
under the Vinson-Trammell, isn't he?
Foley:
That 1s what he is referring to, but he means
to be talking about income tax amortization
on the income tax bill.
(Mr. Duffield entered the conference.)
H.M.Jr:
Hello. He (Greenbaum) is a friend of yours.
He 1s a friend of yours in disguise.
You didn't go to bed at all, did you?
Duffield:
Oh yes, a little bit.
H.M.Jr:
I just wondered. You see, he wants to set
112
- Da. -
me right.
For Duffield's benefit, I would like to go over
the record once again, you see. I wonder if we
couldn't say something - "We appreciate Mr. Willkie
wanting to go over the record." Before I say
anything, I want to - I think I know what
Mr. Willkie has in mind by constantly referring
to "1t", but I am not sure. "What I think he has
in mind is & proposal for the amortization plan
under the Vinson-Trammell Act, and that has not
yet been changed because the Vinson-Trammell Act
was just dropped off the books. What he 18
doing 16, he 18 tilting with a phantom." It
doesn't exist. Isn't that the whole point?
Here he is talking - - all of this is the amortization
under the Vinson-Trammell.
Foley:
He doesn't mean it to be amortization under the
Vinson-Trammell. He means it to be income tax
amortization, which didn't come up and wasn't
dealt with until we had a conference with the
Advisory Commission in June, 1940.
H.M.Jr:
We don't say that, you see.
Foley:
A little later on we do.
H.M.Jr:
Well, I think this is the point right here.
Cairns:
The "1t", Mr. Secretary, I think, 1e clear.
The President just last Wednesday signed a new
tax bill. That bill had in the provision -
that 1s what he says - that the Secretary now
says he favors. I favor it too. The Navy
asked for it. That is the amortization under
the second --
Foley:
Which isn't correct.
H.M.Jr:
Isn't there a way, with all this talent around
here, of driving that point home, that he
doesn't know what he 18 talking about?
Foley:
In "I" there, we say Admiral Furlong made no
such request. "Mr. Willkie asserts that
113
- 9 -
Admiral Furlong --"
H.M.Jr:
But you don't get the point over that Willkie
is confused. He has got the two things con-
fused.
Foley:
We say he has mixed up the act which limits
profits with the income tax amortization problem.
Greenbaum: That is what I meant, Mr. Secretary, start off
with the tone that he has flunked his mid-years.
He confuses the elementary functions of this
thing because in his Government course he hasn't
had time to study and he doesn't know and he has
got these things mixed up. I think you could
do it in a kidding, nice way, and say he 1a
pretty good considering he has never had any
preparation in this and you can't expect him
to pass this examination, some tone like that,
and then you can say - this second sentence in
the paragraph would come after that and that
would explain that hehas mixed up the Vinson-
Trammell with the new amortization provision
in the second act of 1940, and that gives you
the opening of shooting right into the other.
After all, no one is going to read beyond the
first two paragraphs.
H.M.Jr:
Couldn't you just simply say this: "I am very
glad to take & few minutes to explain to
Mr. Willkie just what happened, because - and
Mr. 'Willkie --"
Greenbaum: He can't be expected to know.
H.M.Jr:
If
can't be expected to know because we
feel that if he had, these questions wouldn't
have come up, and Mr. Willkie, you have confused
what Admiral Furlong was talking about with
amortization under the Vinson-Trammell Act
and what I said I was in favor of was amortization
under the income tax law."
Foley:
Well, Admiral Furlong was talking about this
Vinson-Trammell Act thing.
H.M.Jr:
Yes, but the thing I said I was in favor of -
114
- 10 -
now, what I want to get over, if we can, is
simply this, that the position that the Treasury
took about amortization was that the amortization
should not be treated alone and that until we
had both, took off the Vinson-Trammell anª
on the excess profite tax, that we just aidn't
want to treat it alone, because that would have
given the munitions manufacturers an undue
profit and the thing that I want to get in at
this time is that what we have been trying to
do here right straight along 1e to take profiteering
out of war. Out of this thing, I just wonder if
we can't get this thing on a sort of informal
basis. If you just get over the fact that what
Admiral Furlong asked for was amortization - it
was, wasn't it, under the Vinson-Trammell?
Right?
Foley:
Right.
H.M.Jr:
And he didn't get it, did he?
Kades:
Yes, he got it.
Foley:
Yes, he got it.
Cairns:
Yes, he got it.
H.M.Jr:
You did give it to him?
Cairns:
I would use the word, Mr. Secretary, if I may
suggest it "cost" under the Vinson-Trammell,
because you have to use amortization under the
income tax. Then you get two separate words,
a method of treating cost, cost allowances,
and then you would say amortization in the
income tax.
Foley:
You Bee, it 1s a very technical subject that
he has artistically confused, two things that
are very, very different to separate, because --
H.M.Jr:
There must be enough artistry around here to
separate them.
Cairns:
I think those two words, "cost allowances for
115
- 11 -
the Vinson-Trammell Act," and "amortization for
the income tax" can be used.
B.M.Jr:
It 1sn't clear to me yet. I can't use it.
Have you (Greenbaum) got any suggestions?
Greenbaum: If you think it would be helpful, I can go in
Mrs. Klotz' room and dictate two paragraphs
just BO you would have copies and indicate
where they should be considered AB possibilities.
(Mr. Greenbaum left the conference.)
Kades:
I was suggesting to Ed, Mr. Secretary, that
perhaps if we went over informally what actually
happened that then we would be able to redraft
this along the lines that you had in mind.
H.M.Jr:
Well, what did happen?
Kades:
Admiral Furlong said in his letter to the Judge
Advocate General, "I an having & lot of trouble
with armor plate manufacturers because they won't
expand their plants unless the Treasury permite
costs of those plant expansions to be charged
as costs in computing profits under the Vinson-
Trammell Act. What can we do about 1t?" And
the Judge Advocate General, after dickering
back and forth with Admiral Furlong and the
Bureau of Internal Revenue, said, "We will take
it up formally with the Treasury," which they
did the following January, after Admiral Furlong's
letter. We replied and said, "When the manu-
facturer expands his plant solely for the purpose
of making armor plate for the Navy or anything
else, we will permit the cost of that plant to
be charged as B. cost under the Vinson-Trammell
Act if he has no further use for it at the end
of the contract." Theoretically the problem was
then settled.
The difficulty came later when the Navy wanted
us to permit plants to be charged as cost which
we felt would be useful later on, 8.8 for example
the Electric Boat plant and the Consolidated
plant, where we thought the plant wasn't necessary
116
- 12 -
only for that contract.
Then the Navy went down on the Hill and asked
for legislation which would permit the Navy to
determine when a plant was useful only for the
particular contract and in June of this year
that legislation was enacted.
H.M.Jr:
In June?
Kades:
In June. Now, none of that has anything to
do with the income tax amortization at all.
No manufacturer ever complained to Admiral
Furlong about the treatment he was getting
under the income tax laws. What he wanted
was this 12% profit on aircraft --
H.M.Jr:
Who?
Kades:
Manufacturer. What he wanted was this 12%
profit on aircraft and 10% on vessels plus
his plant, and we said, "You can have it 80
long as the plant 1s useful only to perform
this particular contract." There W&B no
issue between us and the Navy as far as the
theory went. The only issue was in the appli-
cation of that theory to particular cases,
the best case being Electric Boat where Mr. Sutphin
argued with you, sir, that it was like a tool,
that he was going to throw the plant away after
he built the 23 torpedo boats, which we knew
wasn't true.
H.M.Jr:
Just thinking out loud, I think we ought to go
back to - was it '34 when we closed the loophole
on amortization?
Foley:
It was later than that.
H.M.Jr:
When was it?
Kades:
It was right around there.
H.M.Jr:
And I have heard the figure that at that time
we figured we were losing around 700 million
dollars a year. Somebody who knows this stuff -
117
- 13 -
I mean, just let's say for a moment my figures
are roughly right. I think - if you are going
to go back, say, "One of the greatest loopholes
which this Administration plugged was the one of
amortization which was costing the country some-
thing like 700 million dollars a year. Now, that
was done in the Revenue Act of '34." Now then,
I take it some of the armor plate people tried
to break down this Revenue Act of '34 and get
certain privileges which they had prior to 1934
and which had been taken away from them. Now,
18 that correct?
Kades:
The faots are these, sir.
Foley:
Partially correct.
Kades:
In January, 1934, the Ways and Means Subcommittee
reported a recommendation to the Full Committee
that there be a slash in all depreciation allow-
ances of a flat 25% and you, as Acting Secretary
of the Treasury, wrote a letter in which you said
that that would be very confusing as a way to
solve the depreciation problem, that you would
handle it administratively, and on the basis of
your letter the Ways and Means Committee decided
not to recommend the flat 25% decrease in de-
preciation on allowances. In accordance with
your letter, you published a Treasury decision
which stated that the burden of proof henceforth
would be on the taxpayer and that he would have
to show that his property was absolutely obsolescent
and being worn out at the rate that he claimed,
rather than the burden being on the Bureau, which
it had been under Mellon's administration.
That ended the depreciation problem as far as
the income tax was concerned right up until this
past June, but between that time and June this
problem of costs under the Vinson-Trammell Act
arose.
Now, as far as you know, Mr. Secretary, the
armor plate manufacturers have never complained
about the depreciation that they got for purposes
of income tax but they felt that when they put
118
- 14 -
$6,000,000 of their money into new plants that
unless they were permitted to charge that
$6,000,000 as a cost under the Vinson-Trammell
Act, their profits would be 80 low that it
wouldn't be worthwhile for them to take contracts
with the Navy. They preferred to take contracts
with the Army, which wasn't under the Vinson-
Trammell Act, or the British or the French.
Foley:
Where they could make unlimited profits.
H.M.Jr:
Now we are getting somewhere. I think we are
getting - I don't think anybody 1s going to read
it and I think it is going to be tit for tat,
but if you can get down to the thing of what
was motivating these things.
Foley:
More profits.
H.M.Jr:
I made the statement that I might say, "Take
the profits out of war," and they said, "No,
don't say that, say, 'take profiteering out
of war:'' If you can just for the moment -
I mean, this thing here, all this business -
I don't think anybody is going to read my
answer, but if we can come back and show that
we have steadily tried to make it as uninteresting
and as unprofitable from the standpoint of un-
reasonable profits for the munition makers 60
that they won't encourage us into going into
war. Now, if we can only have that thing run
through this statement, I can get that into the
papers, can I not?
Duffield:
Yes. I think that a telling point on the same
line 1s that you want here in Washington an
Administration which will see that the big fellows
aren't getting rich during the year that a lot
of us may be serving at a loss.
H.M.Jr:
That is right.
(Telephone conversation with Mr. Lowell Mellett
follows:)
119
October 17, 1940
2:10 p.m.
H.M.Jr:
Hello.
Lowell
Mellett:
Hello, Henry.
H.M.Jr:
Hello, Lowell.
M:
I am having a devil of a time rounding
anyone up. Ickes 16 leaving at 8:30 for
St. Louis. He could come to an early dinner -
couldn't stay.
H.M.Jr:
Well, that's no use.
M:
Jackson and Frank Walker are both going out
to dinner at Pa Watson's tonight with their
wives.
H.M.Jr:
I see.
M:
Now we probably could get Pa to call that off -
tell him it's the President's orders. (Laughs).
And I could get Charley Michelson down here.
Well, he'd get in on a plane about 8 o'clook -
probably get out to the house by 8:30.
H.M.Jr:
With or without his dinner?
M:
Yes. Well, he'd probably eat on the plane.
H.M.Jr:
Well, why don't we - are you asking me for
suggestions?
M:
Well, I'm telling you the situation at the
moment.
H.M.Jr:
Well, why not do this. Who's going out to
Watson's for dinner?
M:
Bob Jackson and Frank Walker.
H.M.Jr:
Well, why not let them have their dinner
and come to the house right after dinner?-
M:
Leave their families where they are - leave
Pa to entertain them, huh?
120
- 2 -
H.M.Jr:
Yeah.
M:
Well, might be able to manage that, I don't
know. Their dinner 1e at 7:30.
H.M.Jr:
Well, they could be at the house at 9.
M:
Which means probably 8 o'clock and they'd
do well to get there by 9, but still it
could be done.
H.M.Jr:
Well, if it's all that trouble in the evening,
we can meet at the office at 9 in the morning
or meet at the house then they wouldn't know
about the meeting.
M:
Of course the evening meeting is a lot better -
I don't think we could keep Charley. Charley
would expect to go back on a night plane. Be
useful to have him here because he'd have the
program of what they've got.
H.M.Jr:
I think we ought to have the meeting, see?
M:
Well, now, I can put it up to Bob and Walker
to come over immediately after dinner from .....
H.M.Jr:
I would because - what time did you say
Michelson gets in?
M:
His plane will get in at OR o'clock.
H.M.Jr:
Well, he'd be at the house at 8:30.
M:
He'd be getting out a little before they did.
H.M.Jr:
Yeah. I would tell them. Supposing they
could sit down promptly at 7:30 - they could
be st the house at 9.
M:
Uh-huh. All right, have everybody come out
after dinner then?
H.M.Jr:
No, I'd like - I'm delighted - - Mellett for
dinner?
M:
Well, you can get me - (laughs) - if that'll
help any. For the rest we could get Ickes
121
- 3 -
for a little talk and let him dash away -
get whatever ideas he might have and also
about how available he may be.
H.M.Jr:
What time would that be?
M:
Well, they'd have to have it early for him
because he's catching an 8:30 train.
H.M.Jr:
No, that's no use.
M:
Be 7 o'clock or something like that.
H.M.Jr:
No, that's no use.
M:
Uh-huh. It might be, Henry, how'd this be -
to suggest 9 o'clock and let everybody come
after dinner.
H.M.Jr:
I think that would be better. I tell you,
frankly, .....
M:
It would give me time to do things I've got
to do too.
H.M.Jr:
..... Well, Mrs. Morgenthau is going back
on the 9 o'clock plane and that's why, you
know, it makes it a little extra difficult
but, I mean, if we could do it for everybody -
you know.
M:
Yes, everybody at the same time.
H.M.Jr:
Why not let's say 9 o'clock at the house?
M:
Well, now, I'll call Bob and Walker again
and if that works - see, if we get those
two, yourself and Charley - that'll give -
you've got B. useful group if you don't get
anybody else.
H.M.Jr:
That's right.
M:
Another possibility might be Biddla and Carmody
that I mentioned.
H.M.Jr:
You know, I think you ought to ask Hull.
122
- 4 -
M:
Hull?
H.M.Jr:
Yeah, Cordell Hull.
M:
For some reason - Steve mentioned him and
eliminated him.
H.M.Jr:
He did?
M:
I'll try again.
H.M.Jr:
Well, no, if he has, they may have some
.....
M:
I've forgotten what it was, but I think they've
got all the arrangements for him they can
make and that he can do - he's good for about
one speech 8. month you know anyhow.
H.M.Jr:
I see. Well, I didn't know. I know they had
him over there yesterday talking about speeches
because Steve told me so, 80 maybe they feel
they've taken care of him.
M:
When Steve mentioned Welles he just left him
the way he eliminated Hull. I've forgotten
what the reason was but I think it was that
they've got him all fixed for all he can do.
H.M.Jr:
I see. Are they going to have Welles come?
M:
Well, no. I mentioned Welles to you this
morning and you rather
.....
H.M.Jr:
Well, I don't care - did Steve say.
M:
Well, I worked on - started immediately on
Jackson and Frank Walker.
H.M.Jr:
And you're evidently going to leave out Jones?
M:
Oh, and I didn't mention Jones. I'll try
Jesse Jones too. I haven't tried him yet.
H.M.Jr:
You spoke of Carmody.
M:
Yes, and I haven't tried either one of those
because I thought Jackson was the first bet,
end he didn't get back to town until 1 of clock.
H.M.Jr:
That's right.
123
- 5 -
M:
And I had to talk with Walker - - I thought
he'd be useful and found his situation and
then I rang for Jackson. I just now got
Jackson and that's his fix.
H.M.Jr:
Something I wanted to suggest - - who else 1s
around? (Pause). I notice you didn't
suggest that McNutt should come for supper.
M:
Well, McNutt is out in the Middle West.
H.M.Jr:
(Laughs).
M:
He's talking at Rock Island tonight, I think,
or tomorrow night.
H.M.Jr:
What's happened to your senss of humor?
M:
Well, - (laughs) - I would suggest McNutt,
by golly if he were here. He's been out on
the road and ought to know something and he
made & darn good speech last night, Henry,
in Kansas City.
H.M.Jr:
Did he?
M:
Yeah. I heard a whole string of them last
night and he was the best of the bunch.
H.M.Jr:
Is that right?
M:
Yeah.
H.M.Jr:
Well, I'll leave it to you - somebody, you
at least and Michelson will show up at 9 o'clock
and as many more as you've got lined up.
M:
Right-o.
H.M.Jr:
How's that?
M:
Right-o.
H.M.Jr:
I'll have the whiskey on ice.
M:
Right-o.
124
- 15 -
(Mr. Greenbaum returned to the conference.)
H.M.Jr:
Gene, let's hear what you have to say.
Duffield:
Well, I was just telling Ed that although I
think a detailed answer such --
H.M.Jr:
Just & moment, Gene, let's see what he has.
Greenbaum:
I have dictated three suggested inserts and
explained to Mrs. Klotz where they should go,
and there are copies being made of that and
I have tried to abbreviate and make it a little
more informal and I think that is about all I
can do.
(Mr. Gaston entered the conference.)
H.M.Jr:
I suggest those be discussed.
Duffield:
I think that kind of an introduction to this
routine reply is perhaps the best you can do
with this and I think you ought to do it even
though you know in advance that it may not
get a lot of attention. Then I think the really
important reply 1s not to attempt to refute
this point by point, but the speech you want
to make saying that this whole philosophy
which Mr. Willkie has propounded here is one
which you consider a dangerous one and that
in a period when a lot of people are being
called to serve their country at & loss, this
is no time to talk about breaks for our munitions
makers, but the whole issue here is one of
whether you want a government in which there
are breake for that group or one which keeps
always in mind the interests of all the
people.
Schwarz:
I think that is important.
Duffield:
I think you will put it right back in his lap.
He is on the defense then.
H.M.Jr:
That is what I want to do.
Greenbaum:
I want to conour in that and add the suggestion
that we consider the possibility of someone other
than you, Mr. Secretary, making that reply, because
125
- 16 -
I think that what he 18 trying to do 1s to
get into a personal controversy there and it
looks as If you have something to apologize
for or explain.
I think you could get easily the material you
have available - 8. much more effective reply
coming from the 11ps of another person instead
of allowing him to place you in the position of
being the defendant or having to apologize for
anything. The two possible persons that I thought
of were, one, Owen D. Young, because he hasn't
been in the situation at all and that is some-
thing that I think would be of tremendous impor-
tance, if he would say something in a dignified
way on this, and it would be respected in every
possible way and it couldn't possibly be confused
with anybody who would defend any of the things
Mr. Willkie claims you are guilty of.
The other possibility, which 18 second choice,
would be William Allen White, who 18 the out-
standing person as far as aid to the Allies and
speeding up things are concerned. It may well
be that he wouldn't want to mess up with any poli-
tical things. Maybe neither of those would be
available, but Herbert Gaston might think of other
people, but I do want to emphasize that it may not
be the best thing of allowing you to admit that
you have anything to explain to him.
H.M.Jr:
No, I agree with you on that and I don't think I
have anything to explain, but on the other hand,
there are B. lot of thinga we have done here in the
interest of keeping the profiteering out of war,
and we can take an affirmative side and boast
about it.
Duffield:
Mr. Gaston suggested last night that you could
say that you have been tentatively engaged in this
political campaign but you have got a big job to
do and Mr. Willkie has challenged you here on a
challenge that is right to the roots of the issue.
Gaston:
Really, Willkie's speech this morning was Just
one speech that ories to be made and that 18
"Bread for Votes," "Bread or a Stone." It 18
Just 8. swell one.
H.M.Jr:
What do you mean?
126
- 17 -
Gaston:
"What do you want, bread or promises?" Remember
"The full dinner pail," and what came out of
that, or the fact of what 18 going on now.
It 18 a cinch to promise Jobs now because the
jobs are being added by thousands, by millions
every day. We have gone up to a national income
right now for this year at the rate of over
75 billions against 40 billions back in 1932,
and you can trace performance on the part of
this Administration, promises that weren't ful-
filled on the part of other Administrations.
Talk about the hollow arrogance, effrontery of
this promise now to make jobs, when Jobs have
been made and are being made.
H.M.Jr:
Well, that 1s for the President to do. That
is something for him.
Gaston:
of course, the other thing we were talking
about last night --
Greenbaum:
I have to go now.
H.M.Jr:
Thanks, Eddie. See you later, maybe.
Greenbaum:
Yes.
H.M.Jr:
Got a car downstairs?
Klotz:
I will get one.
H.M.Jr:
McKay will do it. Goodbye, and thank you
ever 80 much.
(Mr. Greenbaum left the conference)
Well, we have got an hour and a quarter to
go. I don't know what I will say at 10:30.
Schwarz:
Mr. Secretary, I think we can still give some
attack, in order not to be on the defensive,
something along these lines, "In B. year in
which many young Americans will be serving
at a loss, the Republican candidate for Presi-
denoy 18 still pleading for undue profits on
munitions." In order to press this point,
we can say, "Mr. Willkie had confused the
facts." I think it can be simply stated that
127
- 18 -
he 18 talking about - he is combining two
things that have no relationship.
H.M.Jr:
These lawyers ought to be able to separate
those two things. Do you think you would
take this statement, Gene, the way it 1s
written or not?
Duffield:
This introduction this morning? I think
perhaps that can be improved. I think it
1s a good thing to have this thing, and
then if you make any speech, all you need
to say 18, "Mr. Willkie doesn't know what
he 18 talking about. He has got things oon-
fused here and I don't want to go into the
details, but it has all been answered and
I have already put it out," and then in
any radio speech you can concentrate on
that.
Gaston:
You can't do much, in my opinion, to put
over a political speech in a press conference.
You can only deal with questions that come
up, and it seems to me that the situation 18
that you are amazed that Willkie should boldly
repeat in this other speech misstatements that
he made in the prior speech. Evidently, his
advisers just don't know what they are talking
about, either that or they are grossly deceiving
him. You say he doesn't know anything about
it, He must just not knew anything about it
and evidently his advisers don't know anything
about it either. They pretended to cite from
the record.
Now, these things are all available. Anything
can go and get them. Here 18 this document
here, and it shows that this thing that he
talked about that happened in 138 and '39 had
nothing to do with the amortization for income
tax purposes, nothing to do with it at all.
We settled that issue back in February 1939,
and here 18 a Treasury decision. Have you
got that Treasury decision? Who has it?
Kades:
I have a copy of it.
Regraded Uclassified
128
- 19 -
Foley:
Here Admiral Furlong talks in 1938 in this
memorandum about amortization under Vinson-
Trammell Act.
Gaston:
The only thing is that Mr. Willkie seems to
be advocating for a group of private con-
tractors. of course, you are in a different
position. You have to see that the people
of the United States, the taxpayers, are not
robbed in any deals over which you have juris-
diction.
Foley:
I think if you try, Mr. Secretary, to answer
this thing paragraph by paragraph, you have
got a very defensive statement that isn't
effective at all, because the subject 18 com-
plicated and it has confused two things.
H.M.Jr:
Well, he has done it well, Ed.
Foley:
Yes, he has done it well, and it 16 hard to
separate it without being on the defensive.
H.M.Jr:
Well, supposing we are on the defensive but
give him an attack in the first line? We
have got to explain this thing.
Gaston:
When you are talking about a written state-
ment, that 1s all right.
H.M.Jr:
Well, we have got to give them a written
statement. I couldn't memorize this thing
and I wouldn't want to do it without a
written statement. I don't want to do it.
It is too important. I wouldn't have it
without a written statement.
Kades:
It seems to me, Mr. Secretary, that the
suggestion you made that Willkie 18 confused
and that you want to give him a little class-
room lecture on what the two different prob-
lems involved are, is an approach which we
could very easily work this into. Do you
disagree with that?
Gaston:
For press conference purposes? That would
be all right.
Regraded Uclassified
129
- 20 -
Sohwarz:
Then instead of being on the defensive, you
could be talking down to him.
Kades:
That wouldn't have the defensive vice he 18
talking about, Just what you yourself dic-
tated a little earlier seems to me to be the
way to approach it.
H.M.Jr:
"Mr. Willkie in his Buffalo speech of October
15 has again charged that the Treasury Depart-
ment has delayed the defense program. In
spite of Mr. Willkie's apparent desire to
study government problems in the heat of the
campaign, it 18 to be expected he would not
be able to do any more than get 8 smattering
of knowledge during this hectic study period.
In this instance, he has mixed up the Act
which limits profite on Navy contracts with
the income tax amortization problem which
arose out of the necessity for B. vastly en-
larged rearmament program. He thinks that
the Vinson-Trammell Act, which was the Act
limiting profits on Navy contracts, 1e the
same 88 the amortization relief recommended
by the Advisory Commission to the Defense
Council and representatives of the Treasury
Department of June, 1940. He has flunked
his preliminary exemination which he might
be able to Dass with sufficient preparation.
The problem that he mentions 88 having arisen
in 1938 was speedily solved by the Treasury
Department to the complete satisfaction of
the Navy 8 year ago last February.
"Let us examine Mr. Willkie's charges and
compare them with the record.
"1, Mr. Willkie asserts that Admiral Furlong,
head of the Bureeu of Ordnance of the Navy
Department, asked, on April 13, 1938, for
the income tax amortization provisions enacted
by the Second Revenue Act of 1940. That 18
not the fact. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate
General of the Nevy, suggesting that repre-
sentatives of the Navy Department confer in-
formally with the Treasury with a view to
the formulation of a method to be followed in
handling depreciation allowances under the
Vinson-Trammell Act. That suggestion, of
Regraded Uclassified
130
- 21 -
course, was quite a different matter than
the income tax emortization provisions,
with which Mr. Willkie confuses it.
"Mr. Willkie's assertion that two and & half
years elapsed before the amortization problem
was disposed of 18 100% wrong. The problem
which he confuses with the present one was
disposed of in February, 1939. That was
just one month after the Treasury Department
received the Navy Department's letter referred
to by Mr. Willkie."
And I think if you would Just sort of document
that, "which will be found on page 106." Give
the reference. It 18 found on page 106 of the
Navy Appropriation Bill of 1940. I like some
documentation. Don't you think 80? I would
just give something that anybody can read,
It isn't that he has got some secret informa-
tion.
"Mr. Willkie asserts that in the middle of 1939,
John W. Hanes, then Under Secretary of the
Treasury, drafted e plan for amortization at
the request of the War and Navy Departments.
If any such plan was drafted by Mr. Hanes, it
is not in the files of the Treasury Department
and 16 unknown to any of its officers and em-
ployees. Certainly he didn't talk to me about
it. Furthermore, our files do not contain any
record of such a request from the War and Navy
Departments."
Would you say, "Mr. Willkie asserts that --'
We couldn't put in there, "Mr. Willkie must
have been misinformed, because if any such
plan was drafted --" just keep referring -
"Mr. Willkie must have been misinformed"?
Cairna:
Yes.
Foley:
Yes.
H.M.Jr:
And, "Mr. Willkie must have been misinformed,
because if any such plan was drafted by
Mr. Hanes, it 18 not in the files of the
131
- 22 -
Treasury Department and 18 unknown to any
of the officers and employees. Certainly
he didn't talk to me about it."
Well, do you want to put it - "But maybe
he did to Mr. Willkie"?
Duffield:
That is disturbing to me, because Johnny
was certainly talking that around here. I
don't know who. he did talk it to, but gee
whiz, the newspaper men were streaming in
to me and this was a hot tip they had, that
we were going to give them income tax treat-
ment Just like the Vinson-Trammell.
Foley:
No, Gene, it was the closing agreement on
Vinson-Trammell, but not on income tax.
Duffield:
No, subsequently he was telling them we
were going to do the same thing for them
on income.
Gaston:
In November and December of 1939, he was
talking to letter writers and newspaper men
about the special amortization provisions
that we were going to give.
H.M.Jr:
Are you sure that Hanes didn't have such a
plan?
Kades:
I will get an extract.
Foley:
There 1s nothing in his records that he left
behind. There is nothing in the stuff of
yours that we read that shows that he ever
had such a plan.
H.M.Jr:
Did you check with the Bureau of Internal
Revenue?
Foley:
No.
Duffield:
John Sullivan might have it.
Klotz:
He wrote you a letter.
Foley:
That was on war profits. There was a very
good reply to that letter that we have never
sent.
132
- 23 -
H.M.Jr:
But --
Foley:
We got those letters.
H.M.Jr:
Did he cover this --
Foley:
No, this letter was written in September,
1939, after you came back from Europe, and
he was talking about taxation plans in con-
nection with financing preparation for war,
and war.
Klotz:
You wrote a beautiful reply.
Foley:
Yes, the reply was a beautiful reply and
apparently wasn't signed, never was given
to him, but his letter to you was a reveal-
ing document. It shows his philosophy.
H.M.Jr:
You never had seen it until last night?
Foley:
No, I never saw it.
H.M.Jr:
But you are sure - if I say, "Mr. Willkie
must have been misinformed,' there 18 nothing
in the files?
Duffield:
If he had it, he probably would have taken
it with him.
Schwarz:
No such plan W&8 ever presented. Maybe he
talked about it, but he still didn't present
it.
H.M.Jr:
If the plan exists, that is the important
part. Are you fellows convinced it doesn't?
Foley:
Sure.
Klotz:
Were all the official files searched, I mean
the files that are upstairs?
Foley:
No, I don't think the files upstairs were
searched. The only thing we looked at was
your (Secretary's) stuff last night.
133
- 24 -
Cairns:
If there is any doubt about it, I would
out out the whole paragraph.
H.M.Jr:
I would much rather out it out, because if
he heard it around, and Johnny can produce
a plan, it would make me look silly.
Gaston:
I remember one time in his office Johnny
told me that we ought to do something
about this amortization and that his idea
was that we would let them amortize freely
over the life of the contract, but then
the Government would own the facilities
after they are amortized, and that surprised
me a good deal, and then & few days later
he showed me Just a couple of sentences
providing for rapid amortization, but with-
out that Government-ownership feature, and
I asked him about it and he said, "Oh, that
would be taken care of."
H.M.Jr:
Well now, could I just run through this
part here?
Klotz:
That is on page three and comes down to here.
H.M.Jr:
"Mr. Willkie quotes the statement that I
made to a newspaper man on December 4, 1939,
in which I said, 'If it rested with me as
to whether & fellow would get a break be-
fore he had a munitions contract, I am
afraid he would fare rather badly.' I was,
of course, referring to the Vinson-Trammell
Act. My statement was prompted by publicity
given in connection with the closing agree-
ment with a certain manufacturing company."
I will tell you what let's do. Let's get
this typed all successively and get the
thing started.
Klotz:
Wasn't there something you wanted to quote
in the very beginning, from this book? You
wanted to make a reference to that.
H.M.Jr:
Yes.
134
- 25 -
Cairns:
Should I come in with it?
Klotz:
Yes, will you please?
H.M.Jr:
Do you like this introduction now? "Mr. Willkie
in his Buffalo speech of October 15 charges
that the Treasury Department has delayed the
defense program. In spite of Mr. Willkie's
apparent desire to study governmental problems
in the heat of 8. campaign, it 1s to be expected
naturally that he will not be able to do any
more than get a smattering of knowledge during
this hectic study period. In this instance,
he has mixed up the Act which limits profits
on Navy contracts with the income tax amortiza-
tion problem which rose out of the necessity
for a vastly enlarged rearmament program,"
and so forth.
What do you think of that?
Gaston:
I don't like it.
H.M.Jr:
How about you?
Duffield:
I think it lacks a certain amount of punch that
it ought to have. It isn't quite kidding enough,
if that 18 what you went.
H.M.Jr:
How would you do it, Gene?
Duffield:
I was looking at this one. I liked this one
better.
H.M.Jr:
Which one?
Duffield:
The first one.
H.M.Jr:
You mean that paragraph --
Duffield:
The first paragraph.
H.M.Jr:
And out out the second one?
Gaston:
Out out this one, "the person who wrote the
speech."
135
- 26 -
H.M.Jr:
Well, what Greenbaum has done will be
all right, won't it? We will take another
look at it.
Foley:
This is the memorandum that Johnny diotated
from the files on the 9th of November after
he talked with Louie Johnson. He said, "I
suggested that the problem seemed to me to
be relatively simple because in the last
analysis the motor manufacturers would not
increase their investments in plant accounts
for machinery for war purposes without having
some assurance that the investment could be
written off completely through depreciation
during the life of the contract or during
the emergency period. I therefore suggested
to Assistant Secretary Johnson that the first
step would be to have the President authorize
the Treasury to conclude closing agreements
with these manufacturers on the best basis
possible."
Now, that is the only plan where he ever had
closing agreements, and he talks about the
life of the contract, which was the Vinson-
Trammell thing.
And then on the 29th of November, in your
office - and this was after we told him that
we didn't have the authority to do this -
he says, "Now, the Vinson-Trammell situation
creats a whale of 8. lot more complications
and where we are dealing with a contractor
under the Vinson-Trammell Act, then I let
the lawyers speak here, but I am scared to
death of that one, because it seems to me
that you have Just got to be awfully cautious
how you sign closing agreements on something
that 18, in my opinion, circumventing the
Vinson-Trammell Act, and especially in
view of the fact that we have got this
record before us here of the Nye Munitions
Committee. If we weren't circumventing it,
I think we would be on a lot safer ground
to take this thing before the Congress and
get statutory authority to do this thing
before you do it on the Vinson-Trammell Act
Regraded Uclassified
136
- 27 -
or advise the President to do it on the
Vinson-Trammell Act. Then we would be
acting, even if we had statutory authority -
I don't think we have that authority, but
I would like them to talk on that, because
that is a legal question I am not capable
of talking about."
H.M.Jr:
This 18 written for his own benefit?
Foley:
Yes, this was written for his own benefit.
No, this W&B on the ticker - the conference
report.
Kades:
This proves he had no plan at that time
at all.
Foley:
That 1s right, he had no plan.
"On the morning of November 9, the President
signed a memorandum, copy of which is attached,
which I prepared and brought to him, author-
izing the Treasury to proceed along the lines
I suggested above. We used the closing agree-
ment and can give the manufacturers the best
basis possible."
Gaston:
I think this is all right. I have added
one sentence there.
Foley:
He says the Secretary doesn't have the au-
thority, and that was later.
H.M.Jr:
You say Mr. Willkie has done --
Gaston:
It 18 pure ignorance that has led him to
make a series of utterly false statements.
H.M.Jr:
That 18 all right. That has got punch to
it. I like that. "I prefer to believe that
it 18 pure ignorance that has led him to
make a series of utterly false statements."
Gaston:
And you don't have to state the alternative.
H.M.Jr:
I think that is all right. That 18 strong
enough. What do you think, Gene?
137
- 28 -
Duffield:
I like it.
H.M.Jr:
Too strong?
Duffield:
No. This 1s different from an ordinary
official Treasury thing.
H.M.Jr:
Now, weit a second. The only part of the
paragraph, you see, I want to - Greenbaum,
I think, out out a part of that. What I
am doing in this thing, I am leaving out
this paragraph about the act limiting. That
1s what I told him, that we were just doing
that over.
Foley:
Here are the dates on this, Mr. Secretary.
January 13, 1939, Navy letter requesting
formulation of cost allowance method. That
is the first time it oame to us formally.
Now, between April, 1938, the date of
Admiral Furlong's informal memorandum which
was addressed to the Judge Advocate General
of the Navy, which didn't get out of the
Department until January 13, 1939, this matter
never was formally presented to the Treasury.
There 1s a delay in there, but that 18 the
Navy's fault, that 18 not our fault. On
January 13, 1939, they formally asked us
to form a cost allowance method. On the
30th of January, we outlined what could be
done and said if it was satisfactory to the
Navy, we would publish a ruling. On the
11th of February, the Navy wrote back and
said that our proposal was entirely satis-
factory. On the 24th of February we said
that we would publish a ruling and then the
ruling was published, but the exchange of
letters did the trick.
H.M.Jr:
As a matter of fact, didn't Hanes sign some
of those?
Foley:
Yes, he signed both letters as Acting Secre-
tary. Lahey signed them as Acting Secretary
of the Navy.
H.M.Jr:
There is no need of bringing that out.
Regraded Uclassified
138
- 29 -
Duffield:
No.
Schwarz:
It is purely coincidental.
Duffield:
I think that 1s the sort of brief chronology
you want.
H.M.Jr:
But not all the rest of this?
Duffield:
I don't know whether - certainly that ought
to be in.
H.M.Jr:
I think so.
Duffield:
So that all you need to say 18 that on January -
in January, 1939, the matter was first brought
to the attention of the Treasury Department.
H.M.Jr:
Just one, two, three, four. I wonder if that
couldn't fit in somewhere the way we are
writing it?
Foley:
Yes, that goes in there.
Cairns:
I think it is already in there.
H.M.Jr:
But it isn't in that form.
Cairns:
There is an answer to that.
H.M.Jr:
What 1s the answer?
Cairns:
The answer is that from April to January we
were discussing it.
Foley:
But the thing wasn't formally before us.
Duffield:
I think all you say about that 18 that in
January, 1939, the request was first formally
presented to the Treasury.
H.M.Jr:
I think that 18 the answer.
Foley
We are not going to quote an interdepartmental
memorandum from the Chief of Ordnance to the
Judge Advocate General that was never sent
outside the Department.
139
- 30 -
Schwarz:
It is in the hearing.
Kades:
There 18 nothing to tie us into that, though,
Chick.
Cairns:
He says that came to us on that day, and it
didn't.
Foley:
That 1s right. He says - he doesn't say to
whom Furlong's memorandum was addressed. He
says it was sent to the Treasury. It wasn't,
at all.
H.M.Jr:
I think that that 18 perfectly safe, because
it will take him another two or three days
to have another comeback if he wants to come
back again. I think the thing was formally -
Just the way you have it. Isn't there some
place that would fit in?
Foley:
That would go in on page two. "Mr. Willkie
asserts that Admiral Furlong, head of the
Bureau of Ordnance of the Navy Department,
asked on April 13, 1938, for the income tax
amortization provisions enacted by the
Second Revenue Act of 1940. That is not the
fact. On April 13, 1938, the Admiral addressed
a memorandum to the Judge Advocate General --
Interoffice.
Duffield:
No, leave out all of that.
Foley:
All right.
H.M.Jr:
Leave it out?
Duffield:
Leave out what he is starting to read now.
I think the quicker you get into this one,
two, three, the better.
Kades:
You just say this 18 what happened.
Duffield:
This is what happened.
Cairns:
But Willkie 18 not talking about this matter.
Foley:
He 18 talking --
140
- 31 -
Cairns:
That 18 our point. All this chronology
relates to Vinson-Trammell.
Foley:
You have got to get that in there.
H.M.Jr:
How can we get that over?
Foley:
We say that has no connection with the in-
come tax amortization - or with the problems
involved in that act. These are the facts.
And then put this chronology in there.
H.M.Jr:
Do you think so, Gene?
Duffield:
Well, I think all you need in advance of
that 18 a statement that says Mr. Willkie
has mixed this up with Vinson-Trammell and
the other.
Cairns:
That 18 what Eddie dictated. That 1s his
first paragraph.
H.M.Jr:
You couldn't get in the chronology this
way. "Mr. Willkie keeps referring to a
letter - or keeps referring to Admiral
Furlong." And then I could say, "Now, you
and I know that had to do with Vinson-Trammell,
but let's see how the Treasury handles the
business when it does get a memorandum from
the Navy, and this 18 what happened in this
particular case." Would you say something
like that?
Foley:
Sure, you could.
Cairns:
You have got a year to explain, from April
to April.
Foley:
No, you don't have to explain it. It wasn't
formally before us.
Cairns:
But it was in the Administration.
H.M.Jr:
Well, he has no records. Hanes wasn't Under
Secretary of the Navy. How does the thing
141
- 32 -
happen when it Was brought to us formally?
It was brought to us formally in January
and before the end of February we had cleared
it up to everybody's satisfaction.
Kades:
He refers to the fact, Huntington, that it
was brought to us in January, and it seems
to me it 18 a good answer for us to say we
disposed of it immediately.
Duffield:
We disposed of it in February.
Schwarz:
He makes a direct misstatement. And then
what happens? Nothing happens.
Foley:
Don't you have to explain that he 18 talking
about something entirely different? I think
you want to show what he 18 talking about.
Klotz:
These are the three things that Mr. Greenbaum
dictated.
Cairns:
Do you have that insert for page two?
Klotz:
Yes.
Foley:
Where 18 Eddie?
Klotz:
He has gone.
H.M.Jr:
Now, this is the way it sounds. Do you want
to listen?
"Mr. Willkie in his Buffalo speech --" and
BO forth. "What Mr. Willkie or persons who
wrote his speech have done --'
Gaston:
I don't think you want that.
H.M.Jr:
That was out. I left that out once. "What
Mr. Willkie hac done 16 to confuse the facts
and to withhold part of the record. I pre-
fer to believe that it 18 pure ignorance
that has led him to make a series of utterly
false statements. He has mixed up the Act
142
- 33 -
which limits profits on Navy contracts
with the income tax amortization problem
which was raised in discussions between
the Advisory Commission on National Defense
and representatives of the Treasury Depart-
ment in June, 1940.
"Let's examine Mr. Willkie's charges:
"1. Mr. Willkie asserts that Admiral Fur-
long, head of the Bureau of Ordnance of
the Navy Department, asked, on April 13,
1938, for the income tax amortization pro-
visions enacted by the Second Revenue Act
of 1940. That 18 not the fact. On April 13,
1938, the Admiral addressed a memorandum to
the Judge Advocate General of the Navy,
suggesting that representatives of the Navy
Department confer informally with the Treasury
with a view to the formulation of a method
to be followed in handling depreciation
allowances under --"
Well, I think this starts off all right.
Anybody want to change this page?
Schwarz:
I suggest "limited" profits, rather than
"limits" because --
H.M.Jr:
Where 1s that? ":...which limite profits..."?
Schwarz:
"....which limited profits..."
H.M.Jr:
"He has mixed up the Act which limited profits
on Navy contracts...." I think this 18 going
to go. Are you (Klotz) just letting the one
girl do it?
Klotz:
Well, because there are 80 many parts. She
18 almost finished with the second page.
H.M.Jr:
This 18 now the one I am working on. I am
working from this. This 18 what I am work-
ing from.
Here 18 page two. Do you want to listen,
gentlement
143
- 34 -
# method to be followed in handling
depreciation allowances under the Vinson-
Trammell Act. That suggestion, of course,
was quite a different matter than the in-
come tax amortization provisions with which
Mr. Willkie confuses it. The entire story,
including the correspondence referred to
by Mr. Willkie 1s set forth as a matter of
public record in hearings before the sub-
committee -- and BO forth and 80 on.
I think it 18 good to get that in. It 18
no secret. In other words, it has been
known for a long time. I like that.
"Mr. Willkie's assertion that two and a half
years elapsed before the amortization problem
was disposed of 18 100% wrong. The problem
which he confuses with the present one was
disposed of in February, 1939. That was just
one month after the Treasury Department re-
ceived the Navy Department's letter referred
to by Mr. Willkie."
That 18 wrong.
Foley:
Here 18 the way we changed that. "Mr. Willkie's
assertion 1s 100% wrong. The problem of com-
puting costs under the Vinson-Trammell Act,
which he confuses with the tax amortization
problem, was disposed of in February, 1939.
The matter was formally brought to the atten-
tion of the Treasury Department on January 13,
1939, and on February 11, 1939, the Treasury
was advised by the Acting Secretary of the
Navy that the Treasury's proposal was entirely
satisfactory. That was just one month after
the Treasury received the Navy Department's
letter referred to by Mr. Willkie."
H.M.Jr:
You say it too often, the same thing. You
say it over and over again. Can't you make
that a little bit --
Foley:
All right, you don't want to say that was
one month after?
Regraded Uclassified
144
- 35 -
H.M.Jr:
No, you say it twice. Let Gene take it.
You say it too often.
Duffield:
Then it would read, "Mr. Willkie's assertion
that two and a half years," et cetera, et
cetera, "18 100% wrong. The problem of com-
puting costs under the Vinson-Trammell Act,
which he confuses with the income tax amor-
tization problem, was disposed of in February,
1939. That was just one month after the
Treasury Department received the Navy Depart-
ment's letter referred to by Mr. Willkie."
That last sentence: "That was Just one month
after the Treasury Department received the
Navy Department's -- first formal request.
H.M.Jr:
Yes.
Kades:
Then you will leave out the chronology of
the letters?
Foley:
Yes.
Duffield:
Well, you can do either one. It seems to
me you can just say that here 18 what happened,
and put it one, two, three --
Foley:
That makes it longer.
Duffield:
Yes, that does.
H.M.Jr:
No, I don't think the public is BO much in-
terested in the fact that we - it 18 the
fact that we acted one month after we heard
it. Do you want to dictate it fresh?
Duffield:
All right.
Klotz:
There may be other --
H.M.Jr:
Well, that 18 all right. How have you got
it now?
Duffield:
"Mr. Willkie's assertion that two and a half
years elapsed before the amortization problem
145
- 36 -
was disposed of 1s 100% wrong. The problem
of computing costs under the Vinson-Trammell
Act, which he confuses with the income tax
amortization problem, was disposed of in
February, 1939. That was just one month after
the Treasury Department received the Navy's
first formal request for handling this problem."
H.M.Jr:
Handling this problem?
Duffield:
No, that is not good.
H.M.Jr:
For consideration of this problem.
Kades:
"After the Navy formally brought this problem
to the Treasury's attention." We didn't know
it existed before that.
H.M.Jr:
How was that last sentence?
Duffield:
"That was Just one month after the Treasury
Department received the Navy's first formal
request for handling this problem."
H.M.Jr:
For consideration of it.
Foley:
For consideration of this problem.
Duffield:
Yes, consideration.
H.M.Jr:
Go over there and diotate that to her (Miss
Chauncey). Get this started to be mimeo-
graphed, will you?
Now, I will read on here.
"Mr. Willkie quotes a statement that I made
to a newspaper man on December 4, 1939, in
which I said, "If it rested with me as to
whether a fellow would get a break before
he had a munitions contract, I am afraid.
he would fare rather badly.' My statement
was prompted by publicity given __N
Now, do you think I should say this here?
146
- 37 -
Foley:
No, that doesn't sound very good.
H.M.Jr:
No, I don't think 60.
Klotz:
That 18 Mr. Greenbaum's.
H.M.Jr:
I know it is. I don't see why we can't go
right to this. I tell you what you do,
Miss Chauncey. What you have there will be
page two, so we can get it up to the mimeo-
graph room.
Chauncey:
Paragraph two?
H.M.Jr:
Page two. This, plus what Duffield wrote,
18 page two.
Cairne:
Let me make a change here.
H.M.Jr:
Now, couldn't we go --
Foley:
You dealt with that on Sunday.
H.M.Jr:
"I recommended the repeal of the Vinson-
Trammell Act and the substitution of the
Excess-Profits Tax BO that profits be taken
out of wer and all be treated alike."
Do you like that? I don't like that.
Couldn't we start it by simply saying it
this way: "The question of income tax
amortization has been settled, and now we
will take up the chronological story of
the Vinson-Trammell Act," something like
that? "Now, let's take up the question
of the income - story on the income tax.
amortization. That matter was first taken
up in July - July 10, 1940, at the White
House."
Duffield:
I like that, because that draws a clean
line between them.
H.M.Jr:
Let's Just --
Klotz:
He has got it.
147
- 38 -
H.M.Jr:
Let's do it again.
"I now have disposed of the question of the
chronological order --
Duffield:
The question of --
H.M.Jr:
"I now have disposed of the question of what
the Treasury actually did in connection with
the treatment of cost allowances under the
Vinson-Trammell Act. Now, let's consider
what really happened in connection with amor-
tization under the income tax. This matter
was first taken up on July 10, 1940, at the
White House."
Cairns:
First brought to public attention.
H.M.Jr:
"Was first considered by the Treasury."
Cairns:
In June, 1940.
Foley:
That is right.
Cairne:
And was the subject of the press release by --
H.M.Jr:
Just simply say, "was first considered by the
Treasury in June, 1940."
Did I start the first sentence with "I"?
Klotz:
Yes.
H.M.Jr:
Let's start it, "Having now disposed of --
and BO forth.
Well now, he comes back and says, "Why didn't
you do it long before that?"
Gaston:
I don't think that is quite accurate, that
it wasn't considered. There certainly was
conversation around here.
Foley:
Well, that 18 the date that Congress selected,
the 10th of June, because that was the first
time that they had given it formal consider-
ation.
148
- 39 -
Gaston:
of course, Mr. Willkie said it took two and
a half years to get action. Of course, he
18 basing that on this prior record which we
have already shown.
Foley:
Which dealt only with the Vinson-Trammell
Act and not with this. I don't see how he
can show that we gave any formal consider-
ation earlier than June, 1940.
Cairns:
Except that Gene remembers he talked about
it in November, and I think that is correct,
in November, 1939.
Foley:
What did he talk about? He only talked
about the closing agreements.
H.M.Jr:
I have got a thought here. He can come back
and say, "Well, why didn't you consider this
a long time ago?" Why not end the statement
there and say, "This disposes of the question
of the cost allowances under the Vinson-
Trammell Act," and that is the thing that he
has been - and not say anything about the other
thing at all, just say that disposes of that?
Mr. Willkie has been all mixed up. All right.
"What happened under Vinson-Trammell cost
allowances? This 18 what happened."
Gaston:
If you are going to say anything about the
other, the only thing you can say 18 that
it wasn't brought forward until July, 1940,
because it wasn't needed until that time.
It was only at that time that the enlarged
appropriations made it necessary to consider
some new treatment and it was promptly
handled.
H.M.Jr:
Just a second, Herbert. I learned about
this yesterday. It is all jammed up. I
just would stop there. Mr. Willkie 1s all
mixed up on the Vinson-Trammell Act.
"Now, gentlemen, this is what happened on
the Vinson-Trammell -- and then if he
149
- 40 -
comes back on the Vinson-Trammell --
Foley:
Then you could say in general terms, "When
the need arose for special treatment, the
matter was handled promptly and the bill
signed by the President."
H.M.Jr:
No, I would stop right there.
Schwerz:
He says all sensible people favor the am-
ortization.
Foley:
Jimmy Byrnes nailed him on that. He showed
him there was only one sensible Republican.
All the other Republicans voted against it.
H.M.Jr:
You have got my --
Foley:
Yes, we have got the speech, too.
H.M.Jr:
"That suggestion, of course, was quite a
different matter than the income tax amor-
tization provisions with which Mr. Willkie
confuses it.
"That was just one month after the Treasury
Department received the Navy's first formal
request for consideration of this problem."
Gaston:
That 18 the end.
H.M.Jr:
Yes, period. Then if he comes back on the
other thing, okay, it is another story, but
I have tried to clean up the confusion in
his mind on the Vinson-Trammell, what did or
what didn't happen, and the thing was - this
makes sense to me. It was brought to our
attention in January, and in February of '39
we cleared it up, and instead of being a two
and a half year delay, this was a one month
delay.
Cairns:
Everything that you say there takes care of
it. There is nothing new in this last
paragraph we are working on, really. It is
all contained in paragraph three.
150
- 41 -
Gaston:
Unless you want to go into the whole record
of the progress of the program, whether it
was or wasn't needed before.
H.M.Jr:
Well, that 18 another story. Let him come
back at me again, and then we get into the
whole question of profits of war and every-
thing else.
Gaston:
Yes. And that 18 purely defensive. This is
nailing him on & gross misstatement, but when
you begin to defend your record for delay in
this amortization, that 18 defensive.
H.M.Jr:
"Mr. Willkie's assertion that two and a half
years elapsed before the amortization problem
was disposed of 18 100% wrong. The problem
of computing costs under the Vinson-Trammell
Act, which he confuses with the tax amortiza-
tion problem, was disposed of in February,
1939. That was just one month after the
Treasury Department received the Navy's first
formal request for consideration of this
problem."
I think it 16 all right. Then all the rest
of this stuff - well, let's see what he says.
Duffield:
If they ask you at the press conference about
the income tax, you can say merely that that
1e another story which didn't begin until a
year later.
H.M.Jr:
Let me just say, "Well, this is what happened.
When we decided that we were going to have
a second income tax bill, at that time we
took the matter up in connection with - when
we decided we would have a second tax bill
this year, that was taken up for the first
time in consideration of what should go into
the second tax bill."
151
- 42 -
Then you can say, "Mr. Willkie says that every
sensible man was in favor of what we did in
that bill, but the record shows that only one
Republican Senator voted for the bill."
That has been worked pretty hard already,
Ed. Of course, the fact is that they weren't
voting against the amortization but the excess
profits.
.Jr:
That 18 perfect, isn't it, Herbert?
Yes.
Jr:
"I - Mr. Willkie asserts that Admiral Furlong,
head of the Bureau of Ordnance of the Navy
Department, asked on April 13, 1938, for the
income tax amortization provisions enacted by
the second Revenue Act of 1940, That 1e not
the fact. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate
General of the Navy, suggesting that representatives
of the Navy Department confer informally with the
Treasury with a view to the formulation of a
method to be followed in handling depreciation
allowances under the Vinson-Trammell Act. That
suggestion, of course, was quite a different
matter from the income tax amortization provisions
with which Mr. Willkie confuses it. The entire
story, including the correspondence referred to
by Mr. Willkie, 1s set forth as a matter of
public record in hearings before the subcommittee "
in other words, he hasn't got anything anybody
else hasn't got. Now, "Mr. Willkie's assertion -
this 1s a rebuttal - "that 21 years elapsed before
the amortization problem was disposed of 1s 100%
wrong. The problem of computing costs under the
Vinson-Trammell Act, which he confuses with the
tax amortization problem, was disposed of in
February, 1939. That was Just one month after
the Treasury Department " I wonder if you
couldn't say it was disposed of just one month -
was disposed of in February, 1939, just one
month - it is all right. Is that strong enough?
It is stronger the way it 18, I think.
152
- 43 -
H.M.Jr:
I am satisfied with this. Are you?
Klotz:
Yes.
H.M.Jr:
I think that is a good statement.
Gaston:
An aide memoire.
H.M.Jr:
Aren't you, Ed?
Foley:
It 1s all right.
H.M.Jr:
Chick?
Schwarz:
It answers one particular charge, and that 18
about all your reader can grasp at one time.
H.M.Jr:
Yes, but this - this one we have got a good
answer for.
Schwarz:
That 1s right, a very good answer.
H.M.Jr:
How about you?
Cairns:
I am satisfied. I would prepare myself for
one question. Where you referred to June, 1940,
why didn't you do this before?
H.M.Jr:
Well, Ed 1s going to sit in here with me.
Kades:
Another question which might be asked, Mr. Secretary,
is how did the Treasury dispose of the problem in
February, 1940, and the answer 1s by agreeing
to publish a ruling requested by the Navy Depart-
ment concerning the computation of costs incurred
in plant expansion.
H.M.Jr:
Have you got that ruling?
Kadee:
Yes, sir.
H.M.Jr:
For God's sake, give it to us.
Duffield:
If they ask you how it was disposed of, you can
just show them the ruling.
153
- 44 -
Cairns:
The letter settled the problem.
H.M.Jr:
Have you got the letter?
Foley:
The letters are here.
Cairns:
Here it 18.
H.M.Jr:
My letter to them?
Klotz:
Yes.
Cairns:
This letter signed by Hanes. The letter
settled the problem.
Foley:
And this 18 the ruling and that 18 dated after,
you see.
H.M.Jr:
All right. The letter settled it. This is the
letter here?
Foley:
Yes. You want to mark it?
H.M.Jr:
Now, what else are they going to ask me? This
1s good.
Duffield:
I can't think of anything else that I would ask.
Cairns:
If they ask you anything about Johnny Hanes,
tell them to read the story of Alcibiades. I
told my wife the story this morning. Alcibiades,
you know, was an official in Athens and Athens
did something he didn't like, 80 he went out
and tried to destroy it. I told Florence the
story and she said, "Why, he 1s Alcibiades."
H.M.Jr:
My knowledge of Greek mythology is as good as
yours. The last thing my wife said when I left,
this thing about Pythias and Damon, 80 I said,
"Read the story, and maybe they have a stool
pigeon and if you can get the Greek name for
stool pigeon --"
Klotz:
That 1s very good.
H.M.Jr:
But his name 1s what?
154
- 45 -
Cairns:
Alcibiades.
H.M.Jr:
Okay.
155
MISCELLANEOUS.
SECTION a OF THE VINSON ACT (48 STAT., 503), AS
AMENDED BY ACT OF JUNE 25. 1936 (49 STAT., 1926),
AND BY ACT OF APRIL3, 1939 (PUBLIC, No. 18, SEVENTY-
SIXTH CONGRESS).
1030-24-9875
L.T.3289
Providure in maneetion with determining the allowance for
of special facilities as part of the cost of performing a
contract IIT subrontract subject to the provisions of section X of the
Vineon Act of March 27. 1934 (48 Stat., 503), as amended by the
Act of June 25, 1536 (40 Stal., 1926), and as further amended by
the Ad of April 3, 1939 (Public, No. 18, Seventy-sixth Congress),
The regulations issued under section 3 of the Vinson Act contain n.
general provision for the allowance of recurring charges with respect
to/proporty used for manufacturing purposes under a contract or sub-
contract coming within the scope of such section. (Article 8(c)5(D)
of the regulations in Treasury Decision 4723, C, B. 1937-1, 519.)
This provision is sufficiently broad to permit proper allowance for
depreciation and obsolescence of such property. The determination
of an allowance under such provision will be made by the Commis-
sionire of Internal Revenue pursuant to his duty of determining the
correct amount of excess profit liability on contracts and subeontracts,
roming within the scope of section 3 of the Vinson Act. (Article
ID of the regulations, Treasury Decision 4723, supra.)
With respect to special facilities, inasmuch as it is not reasonably
certain mail II Navy contract is completed or otherwise terminated
whether such special facilities necessarily acquired to perform it will
in- used in performing other contracts or works, the determination of
1 proper allowance under section 3 of the Vinson Act for obsolescence
(nther than normal and in addition to ordinary exhaustion and gen-
eral wear and tear of such facilities in connection with a particular
contract) must await the completion or other termination of the con-
tract and he Insed upon relevant conditions then extant. (I. T. 2861,
C.B. XIV-1, 550 (1935).) If upon the completion of a contract or
subject to the provisions of section 3 of the Vinson Act,
the Commissioner of Internal Revenue determines that additional
and/or special facilities were necessarily required in the performance
of the particular contract or subcontract, that such facilities are not
then being used in connection with any other operations, and that
there is too prospective further use for such facilities either for Gov-
effinent motracts or for any other operations, then-
(1) If the Commissioner determines that such facilities were used
solely in the performance of the particular contract or subcontract,
(13)
14
their entire and reasonable cost, less salvage value, will be generally
necepted as part of the cost of performing the particular contract or
subcontract; or
(2) If the Commissioner determines that such facilities were not
used solely in performance of the particular contract or subcontract,
allowances for exhaustion, wear and tear, and obsolescence shall be
made in accordance with is reasonably consistent plan, on a basis
which will return to the contracting party the reasonable cost of such
facilities at the end of their expected economic term of usefulness,
and shall be included ns IL part of the indirect factory expense al-
locable to all operations in connection with which such facilities are
used. The part of the cost, if any, remaining after deducting such
allowances and the salvage value of such facilities will be generally
accepted as IL part of the cost of performing the particular contract
or subcontract.
MISCELLANEOUS.
1939-24-9876
D. 230 (Rev.)
LAWS AND REGULATIONS GOVERNING THE RECOGNITION OF AGENTS, ATTORNEYS, AND
OTHER PERSONS REPRESENTING CLAIMANTS BEFORE THE TREASURY DEPARTMENT
AND OFFICES THERSOF.
[1930 Amendment. Department Circular No. 230 of 1936 (revised), Committee en
Enrollment and Diabarment.)
WASHINGTON, May 11, 1939.
Section 3 of Department Circular No. 230 (revised) of October 1,
1936, is revised to read as follows:
Sex, 10.3. Quelifications for enrollment.-(a) Persons of the following classes
who are found, upon consideration of their applications, to possess the qualifi-
cations required by these regulations may be admitted to practice before the
Treasury Department as attorneys or agents respectively :
1. Attorneys at law who have been admitted to practice before the courts of
the States, Territories, or District of Columbia, in which they maintain offices,
and who are lawfully engaged in the active practice of their profession.
2 Certified public accountants who have duly qualified to practice as certified
public accountants in their own names, under the laws and regulations of the
States, Territories, or District of Columbia, In which they maintala offices, and
who are lawfully engaged in active practice as certified public accountants.
Applicants who are employed by corporations on a full-time basts and who
do not maintain offices apart from such employment with their services avail-
able to the general public will not be considered to be In active practice within
the meaning of the term as used above.
Applicants for enrollment to practice before the Treasury Department are
required by statute to "show that they are of good character and In good re-
pute, possessed of the necessary qualifications to enable them to render such
claimants valuable service, and otherwise competent to advise and assist such
claimants In the presentation of their cases." (Title 5, section 261, United
States Code.) The burden la upon applicants to establish clearly their right
to enrollment by showing that they possess (1) a good character and reputation,
(2) an adequate education, and (3) a knowledge of the laws and regulations
relating to tax matters and other subjects which they expect to handle before the
Department and of the rules and regulations governing practice before the
Department.
Good character and good reputation are not identical requirements. The
former la determined by the applicant's actual qualities: the latter depends
upon the opinion entertained of the applicant by those who have had the oppor-
tunity of knowing him In the community in which he resides or in which be
practices his profession. It follows that evidence of any act or omlasion which
C
156
0
Draft No. 1
P
October 16, 1940
Y
Mr. Willkie in his Buffalo speech of October 15 has
again charged that the Treasury Department has delayed the
defense program.
What Mr. Willkie, or the person who wrote the speech,
has done 18 to confuse the faots and to withhold part of the
record. He has mixed up the Act which limits profits on
Navy contracts with the income tax amortization problem which
was raised in discussions between the Advisory Commission on
National Defense and representatives of the Treasury Depart-
ment in June, 1940.
The Act limiting profits on naval contracts, otherwise
known as the Vinson-Trammell Act, provided that manufacturers
of naval vessels had to pay back to the Treasury any profits
which they made in excess of 10% of the contract price with
the Navy. The Navy Department in 1938 urged that more costs
be allowed manufacturers in computing profits under this
Act than had previously been allowed. This problem was
speedily solved by the Treasury Department to the satis-
faction of the Navy. Much later, in June, 1940, the general
amortization problem was raised under the income tax law by
manufacturers and by the Advisory Commission which came into
being on May 29, 1940. This problem, after extended con-
sideration by Congress, was disposed of by the Second Revenue
Act of 1940.
Let's examine Mr. Willkie's charges:
157
- 2 -
1. Mr. Willkie asserts that Admiral Furlong, head of the
Bureau of Ordnance of the Navy Department, asked, on April 13,
1938, for the income tax amortization provisions enacted by
the Second Revenue Act of 1940. Admiral Furlong made no such
request. On April 13, 1938, the Admiral addressed a memoran-
dum to the Judge Advocate General of the Navy, suggesting
that representatives of the Navy Department confer informally
with the Treasury with a view to the formulation of a method
to be followed in handling depreciation allowances under the
Vinson-Trammell Act. That suggestion, of course, had no
connection with the income tax amortization provisions enacted
by the Second Revenue Act of 1940 or with the problems resolved
in that act.
Mr. Willkie asserts that two and one-half years elapsed
before the amortization problem was di sposed of. As a matter
of record, the problem was disposed of by the Treasury Depart-
ment in February, 1939 -- one month after receipt by the
Treasury Department of the Navy Department's letter of January,
1939, referred to by Mr. Willkie, in which early action was
requested.
2. Mr. Willkie asserts that in the middle of 1939, John
W. Hanes, then Under Secretary of the Treasury, drafted a
plan for amortization at the request of the War and Navy
Departments. If any such plan was drafted by Mr. Hanes,
158
- 3 -
it 18 not in the files of the Treasury Department and 18
unknown to any of its officers and employees. Certainly
he didn't talk to me about it. Furthermore, our files
do not contain any record of such a request from the War
and Navy Departments.
3. Mr. Willkie states that on December 4, 1939, a news-
paper man asked me "As I understand it, in some of these
war-time contracts a company has to build a plant that 16
good only for the time it takes to turn out the order. Then
it 18 scrapped."
He quotes me as replying "Yes, but he 18 out of
luck as far as we are concerned on that. If it rested with
me as to whether a fellow would get a break because he had
a munitions contract I am afraid he would fare rather badly."
On the basis of these quotations he alleges that I did
not favor the amortization provision enacted by the Second
Revenue Act of 1940.
As a matter of record, my statements were made with
respect to the Vinson-Trammell Act and were prompted by
publicity given in connection with the closing agreement
with the Colt's Patent Firearm Manufacturing Company, stip-
ulating how certain items would be handled in computing a
company's profit on a War Department contract which was
subject to the profit limiting provisions of the Vinson-
Trammell Act.
159
- 4 -
My statements quoted by Mr. Willkie were intended to
emphasize my policy which I have always followed that muni-
tions manufacturers should not be favored or given special
considerations not available to other taxpayers. I recom-
mended the repeal of the Vinson-Trammell Act and the sub-
stitution of the Excess Profits Tax BO that profits be taken
out of war and all be treated alike.
4. Mr. Willkie asks why it took two and one-half years
to get action on the matter of income tax amortization. This
is incorrect. It didn't take two and one-half years. The
truth 18 that on July 10, 1940, the White House issued a
statement that it had been agreed that the Excess Profits
Tax Bill would incorporate a provision for amortization over
a five-year period of additional facilities certified as
immediately necessary for national defense purposes by the
Army and Navy and Advisory Commission and also that the
Excess Profits Tax Bill would be substituted for the profit-
limiting provisions of the Vinson-Trammell Act. Legislation
complying with the President's recommendation was enacted
into law on October 8, 1940.
Second Draft.
October 17, 1940
160
A - PAGE I -
Mr. Willkie in his Buffalo speech of October 15th
charges that the Treasury Department has delayed the defense
program. In spite of Mr. Willkie's apparent desire to study
governmental problems in the heat of & campaign, it is to
be expected naturally that he will not be able to do any
more than get B. smattering of knowledge during this heotic
study period. In this instance, he has mixed up the act
which limits profits on navy contracts with the income tax
amortization problem which arose out of the necessity for
8 vastly enlarged rearmament program. He thinks that the
Vinson-Trammell Act, which was the Act limiting profits on
navy contracts, is the same as the amortization relief recom-
mended by the Advisory Commission to the Defense Council and
representatives of the Treasury Department in June, 1940.
He has flunked his preliminary examination which he might
be able to pass with sufficient preparation. The problem
that he mentions as having arisen in 1938 was speedily
solved by the Treasury Department to the complete satisfaction
of the Navy a year ago last February.
Let us examine Mr. Willkie's charges and compare
them with the record.
1. Mr. Willkie asserts that Admiral Furlong, head
of the Bureau of Ordnance of the Navy Department, asked,
on April 13, 1938, for the income tax amortization provisions
Regraded Uclassified
161
- 2 -
enacted by the Second Revenue Act of 1940. That is not the
fact. On April 13, 1938, the Admiral addressed 8 memorandum
to the Judge Advocate General of the Navy, suggesting that
representatives of the Navy Department confer informally with
the Treasury with a view to the formulation of a method to be
followed in handling- depreciation allowances under the Vinson-
Trammell Act. That suggestion, of course, was quite a different
matter than the income tax amortization provisions, with which
Mr. Willkie confuses it.
B. Mr. Willkie's assertion that 2t years elapsed before
the amortization problem was disposed of is 100% wrong. The
problem which he confuses with the present one was disposed
of in February, 1939. That was just one month after the
Treasury Department received the Navy Department's letter
referred to by Mr. Willkie.
C. Mr. Willkie quotes & statement that I made to a
newspaper man on December 4, 1939, in which I said, "If
it rested with me as to whether a fellow would get a break
before he had 8. munitions contract I am afraid he would feel
rather badly." I was, of course, referring to the Vinson-
Trammell Act. My statement was prompted by publicity given
in connection with the closing agreement with a certain
manufacturing company.
162
- 3 -
I recommended the repeal of the Vinson-Trammell Act
and the substitution of the Excess Profits Tax 80 that profits
be taken out of war and all be treated alike.
Mr. Willkie asks why it took two and one-half
years to get action on the matter of income tax amortization.
The truth is that on July 10, 1940, the White House issued a
statement that it had been agreed that the Excess Profits Tax
Bill would incorporate a provision for amortization over a
five-year period of additional facilities certified as immediately
necessary for national defense purposes by the Army and Navy and
Advisory Commission and also that the Excess Profits Tax Bill
would be substituted for the profit-limiting provisions of the
Vinson-Trammell Act. Legislation complying with the President's
recommendation was enacted into law on October 8, 1940.
Third Draft.
163
October 17, 1940
Mr. Willkie in his Buffalo speech of October 15
has again charged that the Treasury Department has delayed
the defense program.
What Mr. Willkie, or the person who wrote the speech,
has done is to confuse the facts and to withhold part of
the record. I prefer to believe that it is pure ignorance
that has led him to make a series of utterly false state-
ments. He has mixed up the Act which limits profits on
Navy contracts with the income tax amortization problem
which was raised in discussions between the Advisory
Commission on National Defense and representatives of the
Treasury Department in June, 1940.
Let's examine Mr. Willkie's charges:
1. Mr. Willkie asserts that Admiral Furlong,
head of the Bureau of Ordnance of the Navy Department, asked,
on April 13, 1938, for the income tax amortization provisions
enacted by the Second Revenue Act of 1940. That 18 not the
fact. On April 13, 1938, the Admiral addressed & memorandum
to the Judge Advocate General of the Navy, suggesting that
representatives of the Navy Department confer informally
with the Treasury with & view to the formulation of a method
to be followed in handling depreciation allowances under the
Vinson-Trammell Act. That suggestion, of course, was quite
a different matter than the income tax amortization provi-
sions with which Mr. Willkie confuses it. The entire story,
164
- 2 -
including the correspondence referred to by Mr. Willkie,
18 set forth as a matter of public record in hearings before
the subcommittee of the Committee on Appropriations, United
States Senate, 76th Congress, First Session, on H.R. 6149,
Navy Department Appropriation Bill for 1940.
Mr. Willkie's assertion that 21 years elapsed
before the amortization problem was disposed of 1s 100%
wrong. The problem which he confuses with the present one
was disposed of in February, 1939. That was Just one month
after the Treasury Department received the Navy Department's
letter referred to by Mr. Willkie.
Mr. Willkie quotes a statement that I made to a
newspaper man on December 4, 1939, in which I said, "If
it rested with me as to whether a fellow would get &
break before he had a munitions contract I am afraid he would
feel rather badly." I was, of course, referring to the
Vinson-Trammell Act. My statement was prompted by publicity
given in connection with the closing agreement with a certain
manufacturing company.
I recommended the repeal of the Vinson-Trammell
Act and the substitution of the Excess Profits Tax so that
profits can be taken out of war and all be treated alike.
Mr. Willkie asks why it took 2th years to get action
on the matter of income tax amortization. The truth is that
Regraded Uclassified
165
- 3 -
on July 10, 1940, the White House issued a statement that
it had been agreed that the Excess Profits Tax Bill would
incorporate a provision for amortization over a five-year
period of additional facilities certified as immediately
necessary for national defense purposes by the Army and
Navy and Advisory Commission and also that the Excess
Profits Tax Bill would be substituted for the profit-limiting
provisions of the Vinson-Trammell Act. Legislation comply-
ing with the President's recommendation was enacted into
law on October 8, 1940.
166
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Press Service
Thursday, October 17, 1940.
No. 22-41
Secretary Morgenthau today issued the following statement;
Mr. Willkie in his Buffalo speech of October 15 has
again charged that the Treasury Department has delayed the
defense program.
What Mr. Willkie has done 1s to confuse the facts and
to withhold part of the record. I prefer to believe that
it 1s pure ignorance that has led him to make a series of
utterly false statements. He has mixed up the Act which
limited profite on Navy contracts with the income tax
amortization problem which was raised in di scussions be-
tween the Advisory Commission on National Defense and
representatives of the Treasury Department in June, 1940.
Let's examine Mr. Willkie's charges:
1. Mr. Willkie asserts that Admiral Furlong, head
of the Bureau of Ordnanoe of the Navy Department, asked
on April 13, 1938, for the income tax amortization
provisions enacted by the Second Revenue Act of 1940.
That 1s not the fact. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate General of
the Navy, suggesting that representatives of the Navy
Department confer informally with the Treasury with a
view to the formulation of a method to be followed in
handling depreciation allowances under the Vinson-Trammell Act.
Regraded Uclassified
167
- 2 -
That suggestion, of course, was quite a different matter
from the income tax amortization provisions with which M
Mr. Willkie confuses it. The entire story, including the
correspondence referred to by Mr. Willkie, is set forth as
a matter of public record in hearings before the Subcommittee
of the Committee on Appropriations, United States Senate,
76th Congress, First Session, on H. R. 6149, Navy Department
Appropriation Bill for 1940, P. 106 et seq.
Mr. Willkie's assertion that two and one half years
elapsed before the amortization problem was disposed of
is 100% wrong. The problem of computing costs under the
Vinson-Trammell Act, which he confuses with the tax
amortization problem, WSS disposed of in February, 1939,
That was just one month after the Treasury Department re-
ceived the Navy's first formal request for consideration
of this problem.
-000-
168
THE NEW YORK TIMES, WEDNESDAY, OCTOBER 16, 1940.
Text of Willkie's Talk Charging Delay in Defense Moves
By THE Associa Cod Pres.
BUFFALO, Oct, -Pollowing
when the Secretary of the Treas-
Yet in June the Chird-term can-
any now tella us that be favored
didate had told Congress that it
- Le as They to be 6. danger as
inthuatey. more production, more
is The propored lest of the
is, Usat makes it unanimous,
a help."
should go home because theire
goods flowing to commerce, more
by Wendell L. Will/cie in The new
The question I saked, "and that
Those of ONEC people who are out
was nothing for it to do.
jobs Ne people, as # danger,
Municipal Auditorium contgat:
I am mill saking, is why didn't
of work do not regard bulldars
And an It was not until last
I dany that to the production of
Tomorrow the young mao of
we get that provision until last
Wednesday, two and a half years
of industrial plants that expiry
goods, of John of commarce,
Wednesday
move Jube M 8 danger,
our hallop will go to register for
after the Navy first called Atten-
Chere la any danger.
On April 13, 1986, Admiral Fur-
Those all our people eño are in
ties to the need, that the Presi-
In such production line the pres-
compulsory solitary anrive.
long, head of the Navy's Bureau
busines and engaged la the buy-
dent finally signed this bill with
not security and the entire future
Later this evaolog I plan to
of Ordnance, asked for 11. We
log and selling of goods do DAS 16-
this necessary provision.
of our people.
talk directly over the radio to
do not need To K° Into the tech-
gard more Industrial plants de-
Everybody in sight now exys he
Restrictions Imposed upon that
these young oven. The whole BB-
bleal details. Everybody is agreed.
signed to furnish more goods AP
was for this provision,
production by the New Deal must
Lion hM . vital obligation to theme
New, that THE two and A half
a danger,
be removed.
young mve, and I aux going to
years ago,
Beason for Delay Is Asked
Those of our people who are eb-
Untertainties of governmental
tall: here about that obligation.
The Nevy was on the job. What
saged In the various professions
Bo I am saking why LE tack two
polley and administrative action
Our obligation la two-fold,
bappened? Nothing.
that serve the producers and trad-
that smother enterprise must be
and a half years after the Navy's
Pleat, we must ace to n. that
In January, 1030, four months
are of the country. with as law-
removed,
our government. when IS calls our
after Munleh, the Secretary of the
request to get action on this mat-
yers and doctors, no not regard
That la the task we have and
Navy wrote to the Secretary of
Let, so vital to national defense.
more industrial plants producing
young men into the Army. pro-
purselves, and that is the task we
Pidem Them with the finest equip-
the Treasury asking early action.
Yesterday the Recestary of the
more goods as & danger,
shall accomplish, to the end that
Then what happened?
Treasury told the press that the
The farmers of our nation, who
et DE that any armed Torce pus-
the of peace and dome-
OFFICER anywhere to the world.
Why, nothing happened.
President has appotated a com-
must seil their products to others
the security shall once again live
This must be done in fullest
More months passed.
mittes or tour men to courdinate
of our people. do nat regard more
In this land.
quantity and with the utmost
In the middle of 1930, John W.
and speed up production of air-
speed.
Hanes, Under-Secretary of the
planes for defense purposes,
Becondly, we - to T: that
Treasury, drafted a plan for It at
The need for this was obvious
them young when their pe-
viod of military service le over.
Departments. the request et the War and Navy
five months ago, when the Presi-
dent neked for 50,000 planes.
whall have the opportunity that le
Nothing happened.
Why did that take five months!
their right, the opportunity Les a
More months passed.
This morning I pointed out that,
good jub, to a chance to USED .
with conscription effective to:
Secretary's Words Quoted
Bving. to marry, and 2001 aboad.
morrow, the Army has announced
This must have in common
On Dec. 4, 1939, three months
It can'house only 400,000 men and
with
ther young men and NO-
after the outbreak of war In En-
that It will take them - year to
provide adequate housing for
ment wing up 10 the country.
supe, a newspaper men put 8
1,200,000 men.
Thom two objectives are the
question to the Secretary of the
I need not dwell upon the neces-
overwhelming Issues of this cam-
Treasury, Tie asked:
city of adequate housing for our
paign, defense and jobs.
The present Administration has,
"As I understand is, in some of
men in the Winter time. You all
and $ failing down in the fulfill-
these war-time contracts a com-
know 11, and you all know the
pany has to build a plant that is
possibilities of sickness and in-
ment of thom obligations. IL has
bad . free hand and it has falled.
good only for the time It taken to
Buensa that are Involved.
Durn nut the order. Then It La
No reason le supplied why, with
Having failed, IL seeks to divert-
attention from its failure by talk-
scrapped."
an ample supply of building ma-
terial and skilled men available
the about orties and by manufac-
And here la what Secretary
Ing It does this
Morgenthau replied. I am quot-
in the country, so much as A year
in the hope of getting a continue-
log his esset words:
from now should be consumed.
us of power,
"Yes, but be la out of luck as
In the Fall of 1839, after the In-
far OF we are concerned on that"
vasion of countries in Europe had
Tabet Saturday night le Albany
The Secretary then added this
commenced, the War Department
I gave some education examples of
submitted its estimales of Its 18-
how the New Deal. and in partie-
statement, and again I em quot-
sential needs, The President out
Ular lia Bacoviary of the Treasury,
log his exact words:
have obstructed our defense at-
"If It. rested with me as la
more than $500,000,000 from the
forta.
whether a fellow would get a
War Department's request.
break because he had a munitions
The procurement of tools, cloth-
Title Anow WHA Morgenthag
contract I am afraid he would
ing and essential medical supplies
was delayed. The air pilot train-
Apparantly T louched A sensi-
fare rather belly."
ing program was cut. Among
tive spot, Becretary Morgenthau
Now I leave 1: to you Dors
other things, work on govern-
has responded with a defensive
that look as though the Secretary
ment arrenals was prevented.
statement: & Erise to say that
of the Treasury "favored a change
We now find ourselves in A de-
the Treasury Department has not
in the law which would give
facielente evadition and subjected
delayed the dafence program. And
greater flaxibility in writing off
to unnecessary and prolonged de-
here is his story, He eaye-I and
emergency investment?
laya. Why? Because this Admin-
quoting from bite statement:
That was back la December,
latration la Incompetent to get
The Treasury favored a change
1030.
things done.
in the law which would give
What happened then? Noth-
A wise Administration In the
greatar flexibility In written off
Ing.
first place would have listened
*mergency lavestment, and that
We come to July 10, 1940. The
with respect to the men in the de-
change bas been enaload Into
President called 5 White House
partments and while profession
tax:
conference and a statement was
was that of arms. IN would have
I am happy to have This assur-
lasued waying that It had been
delagated authority to others and
once from the Secretary of the
Unanimously agreed to provide
held them responsible for the n-
asury.
for this necessary change in the
sult.
BP TOTAL to prove the point
tax laws.
But oven today the National De
that
making.
What happened? Nothing.
fense Advisory Commission has
Pug benefit I would like to
On Aug. 27, 1040, about cos
neither authority nor a chairman,
go
=
be record once again, I
year after the outbreak of the
"Searcity" Doctrine Assailed
(&IDE III 38 important.
European War, the President told
The President just last Wedness-
the press that be was prevented
Underlying there immediate
day signed the DAT Tax BILL That
from throwing our defense efforts
causes of dalay, procrastination
we had in If the provision that
Into grea,by & delay on the part
and failure la the inability of the
the Secretary new says he Is-
of Congress in peesing three
New Deal to recogniss that our
measures. One - a $4,000,000,-
defense depende upon the ame
vorad.
I favored N, Inc. 30 Par as I
000 appripration bill. Another was
thing that our precetima security
the Conscription Bill
depende on, That is to may upon
know, every sensible -- Invored
IL There to go dispute about "
And great what the third was.
II mum be a good provision be
It was the provision to spand up
production. The New Deal Tutal never under-
case the Departments of Was
that - Leve been talk-
stood how to produce, of the use
and the Navy assed for H. The
toge shout,
of production of goods.
to after all Une dalays In the
33 bas presched searchy and de
National Defance Advisory Com-
administration the third-term
feet from the beginning.
miller alced the 16.
We
that Congress pareed
exendidate pur the Idame on Con-
Kight years ago the third-tarm
exodidate told us that I'm mare
" am
President signed R. it
must M
4. good thing Ba
group. This was at the and of August-
builder of more indostrial plants
Regraded Uclassified
169
Draft #1
Regraded Ucl
October 16, 1940
Mr. Willkie in his Buffalo speech of October 15 has again charged
that the Treasury Department has delayed the defense program.
What Mr. Willkie, for the person who wrote the speech has done is to
confuse the facts and to withhold part of the record. He has mixed up
the Act which limits profits on Navy contractswith the income tax an-
ortization problem which was raised in discussions between the Advisory
Commission on National Defense and representatives of the Treasury Department
in June, 1940.
The Act limiting profits on naval contracts, otherwise known as
the Vinson-Trummell Act, provided that manufacturers of naval vessels
had to pay back to the Treasury any profits which they made in excess of
10% of the contract price with the Navy. The Navy Department in 1938
urged that more costs be allowed manufacturers in computing profits under
this Act than had previously been allowed. This problem was speedily solved
by the Treasury Department to the satisfaction of the Navy. Much later, in
June, 1940, the general amortisation problem was raised under the income
tax law by manufacturers and by the Advisory Commission which came into
being on May 29, 1940. This problem, after extended consideration by
Congress, was disposed of by the Second Revenue Act of 1940.
Let's examine Mr. Willkie's chargest
170
Regraded Uc
- 2 -
1. Mr. Willkie asserts that Admiral Furlong, head of the Bureau
of Ordnance of the Navy Department, asked, on April 13, 1938, for the
income tax amortization provisions enacted by the Second Revenue Act of
1940- Admiral Furlong made no such request. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate General of the Navy, suggesting
that representatives of the Navy Department confer informally with the
Treasury with a. view to the formulation of a method to be followed in handling
depreciation allowances under the Vinson-Trammell Act. That suggestion, of
course, had no connection with the income tax amortization provisions enacted
by the Second Revenue Act of 1940 or with the problems resolved in that act.
Mr. Willide asserts that two and one-half years elapsed before the
amortisation problem was disposed of. As a matter of record, the problem was
disposed of by the Treasury Department in February, 1939 - one month after
receipt by the Treasury Department of the Navy Department's letter of January,
1939, referred to by Mr. Willkie, in which early action was requested.
2. Mr. Willkie asserts that in the middle of 1939, John W. Hanes,
then Under Secretary of the Treasury, drafted a plan for amortixation.at the
request of the War and Navy Departments. If any such plan was drafted by
Mr. Hanes, it is not in the files of the Treasury Department and is unknown
to any of its of ficers and employees. Certainly he didn't talk to no about
it. Furthermore, our files do not contain any record of such & request from
the War and Navy Departments.
171
- 3 -
3. Mr. Willide states that on December 4, 1939, 8. newspaper man
asked no "As I understand it, in some of these war-time contracts 8.
company has to build a plant that is good only for the time it takes to
turn out the order. Then it is scrapped."
He quotes me as replying "Yes, but he is out of luck as far 8.6 we are
concerned on that. It if rested with me as to whether a fellow would get
a break because he had a munitions contract I am afraid he would fare rather
badly."
On the basis of these quotations he alleges that I did not favor the
amortization provision enacted by the Second Revenue Act of 1940.
As a matter of record, my statements were made with respect to the
Vinson-Trammell Act and were prompted by publicity given in connection with the
closing agreement with the Colt's Patent Firearm Manufacturing Company, stip-
ulating how certain items would be handled in computing a company's profit on
& Mar Department contract which was subject to the profit limiting provisions
of the Vinson-Trammoll Act.
My statements quoted by Mr. Willide were intended to emphasize By
policy which I have always followed that minitions manufacturers should not
be favored or given special considerations not available to other taxpayers.
I recommended the repeal of the Vinson-Tramell Act and the substitution
of the Excess Profits Tax so that profits be taken out of war and all be
treated alike.
4- Mr. Willkie asks why it took two and one-half years to get action
on the matter of income tax amortisation. This is incorrect. It didn't
172
- 4 -
take two and one-half years. The truth is that on July 10, 1940, the
White House issued a statement that it had been agreed that the Excess
Profits Tax Bill would incorporate a provision for amortization over a
five-year period of additional facilities certified as immediately neces-
sary for national defense purposes by the Army and Navy and Advisory
Commission and also that the Excess Profits Tax Bill would be substituted
for the profit-limiting provisions of the Vinson-Trammell Act. Legisla-
tion complying with the President's recommendation was enacted into law
on October 8, 1940.
October 17, 1940
or
Braft # 2
A - PAGE I
173
Mr. Willkie in his Buffalo speech of October 15th
charges that the Treasury Department has delayed the defense
program. In spite of Mr. Willkie's apparent desire to study
governmental problems in the heat of 8. campaign, it is to
be expected naturally that he will not be able to do any
more than get a smattering of knowledge during this hectic
study period. In this instance, he has mixed up the act
which limits profits on navy contracts with the income tax
amortization problem which arose out of the necessity for
8. vastly enlarged rearmament program. He thinks that the
Vinson-Trammell Act, which was the Act limiting profits on
navy contracts, is the same as the amortization relief recom-
mended by the Advisory Commission to the Defense Council and
representatives of the Treasury Department in June, 1940.
He has flunked his preliminary examination which he might
be able to pass with sufficient preparation. The problem
that he mentions as having arisen in 1938 was speedily
solved by the Treasury Department to the complete satisfac-
tion of the Navy 8. year ago last February.
Let us examine Mr. Willkie's charges and compare
them with the record.
-2-
174
1. lbr. Willkie asserts that Admiral Furlong, head of the Bureau
of Ordnance of the Navy Department, asked, on April 13, 1938, for the
income tax amortization provisions enacted by the Second Revenue Act of
That w not the fact-
1940. Admiral Furlong made de such request. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate General of the Navy, suggesting
that representatives of the Navy Department confer informally with the
Treasury with a view to the formulation of a method to be followed in handling
depreciation allowances under the Vinson-Trammell Act. That suggestion, of
som quite a different matter the
course, had no connection the income tax amortization provisions, enacted
with which Im. William coffees it
by the Second Revenue Act of 1940 or with the problems resolved in that not.
Mr. Willkie's assertion that 21 years elapsed
B
before the amortization problem was disposed of is 100%
wrong. The problem which he confuses with the present one
was disposed of in February, 1939. That was just one month
after the Treasury Department received the Navy Department's
letter referred to by Mr. Willkie.
3- -
C
Mr. Willkie quotes a statement that I made to a
newspaper man on December 4, 1939, in which I said, "If
175
it rested with me as to whether a fellow would get &
break before he had & munitions contract I am afraid he would
fare rather badly." I was, of course, referring to the
Vinson-Trammell Act. My statement was prompted by pub-
licity given in connection with the closing agreement
with & certain manufacturing company.
I-recom-
or given speciale
mended the repeal of the Vinson-Trammell Act and the substitution of the Excess
Profits Tax so that profits be taken out of war and all be treated alike.
4. 4. Mr. Willkie asks why it took two and one-half years to get action
on the matter of income tax amortisation. This is incerrect. It didu't
- 4 -
176
take two and one half years. The truth is that on July 10, 1940, the
White House issued & statement that it had been agreed that the Excess
Profits Tax Bill would incorporate a provision for amortization over a
five-year period of additional facilities certified as immediately neces-
sary for national defense purposes by the Army and Navy and Advisory
Commission and also that the Excess Profits Tax Bill would be substituted
for the profit-limiting provisions of the Vinson-Trammell Act. Legisla-
tion complying with the President's recommendation was enacted into law
on October 8, 1940.
October 17, 1940
Third Draft 177
Mr. Willkie in his Buffalo speech of October 15
has again charged that the Treasury Department has delayed
the defense program.
What Mr. Willkie, or the person who wrote the speech,
has done is to confuse the facts and to withhold part of
the record. I prefer to believe that it is pure ignorance
that has led him to make a series of utterly false state-
ments. He has mixed up the Act which limits profits on
Navy contracts with the income tax amortization problem
which was raised in discussions between the Advisory
Commission on National Defense and representatives of the
Treasury Department in June, 1940.
Let's examine Mr. Willkie's charges:
1. Mr. Willkie asserts that Admiral Furlong,
head of the Bureau of Ordnance of the Navy Department, asked,
on April 13, 1938, for the income tax amortization provisions
enacted by the Second Revenue Act of 1940. That is not the
fact. On April 13, 1938, the Admiral addressed a memorandum
to the Judge Advocate General of the Navy, suggesting that
representatives of the Navy Department confer informally
with the Treasury with a view to the formulation of a method
to be followed in handling depreciation allowances under the
178
- 2 -
Vinson-Trammell Act. That suggestion, of course, was quite
a different matter than the income tax amortization provi-
sions with which Mr. Willkie confuses it. The entire story,
including the correspondence referred to by Mr. Willkie,
is set forth as a matter of public record in hearings before
the subcommittee of the Committee on Appropriations, United
States Senate, 76th Congress, First Session, on H.R. 6149,
Navy Department Appropriation Bill for 1940.
Mr. Willkie's assertion that 21 years elapsed
before the amortization problem was disposed of is 100%
wrong. The problem which he confuses with the present one
was disposed of in February, 1939. That was just one month
after the Treasury Department received the Navy Department's
letter referred to by Mr. Willkie.
Mr. Willkie quotes a statement that I made to a
newspaper man on December 4, 1939, in which I said, "If
it rested with me as to whether a fellow would get a
break before he had a munitions contract I am afraid he would
fare rather badly." I was, of course, referring to the
Vinson-Trammell Act. My statement was prompted by publicity
given in connection with the closing agreement with a certain
manufacturing company.
179
- 3 -
I recommended the repeal of the Vinson-Trammell
Act and the substitution of the Excess Profits Tax so
that profits can be taken out of war and all be treated
alike.
Mr. Willkie asks why it took 21 years to get action
on the matter of income tax amortization. The truth is that
on July 10, 1940, the White House issued B. statement that
it had been agreed that the Excess Profits Tax Bill would
incorporate a provision for amortization over 8. five-year
period of additional facilities certified as immediately
necessary for national defense purposes by the Army and
Navy and Advisory Commission and also that the Excess
Profits Tax Bill would be substituted for the profit-limiting
provisions of the Vinson-Trammell Act. Legislation comply-
ing with the President's recommendation was enacted into
law on October 8, 1940.
Regraded Uclassified
October 17, 1940
Final Draft-
180
Mr. Willkie in his Buffalo speech of October 15 has
again charged that the Treasury Department has delayed the
defense program.
What Mr. Willkie has done is to confuse the facts and
to withhold part of the record. I prefer to believe that
it is pure ignorance that has led him to make a series of
utterly false statements. He has mixed up the Act which
limited profits on Navy contracts with the income tax
amortization problem which was raised in discussions be-
tween the Advisory Commission on National Defense and
representatives of the Treasury Department in June, 1940.
Let's examine Mr. Willkie's charges:
1. Mr. Willkie asserts that Admiral Furlong, head
of the Bureau of Ordnance of the Navy Department, asked,
on April 13, 1938, for the income tax amortization
provisions enacted by the Second Revenue Act of 1940.
That is not the fact. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate General of
the Navy, suggesting that representatives of the Navy
Department confer informally with the Treasury with a
view to the formulation of 8. method to be followed in
handling depreciation allowances under the
181
- 2 -
Vinson-Trammell Act. That suggestion, of course, was quite
a different matter from the income tax amortization pro-
visions with which Mr. Willkie confuses it. The entire story,
including the correspondence referred to by Mr. Willkie,
is set forth as a matter of public record in hearings be-
fore the Subcommittee of the Committee on Appropriations,
United States Senate, 76th Congress, First Session, on
H. R. 6149, Navy Department Appropriation Bill for 1940,
p. 106 et seq.
Mr. Willkie's assertion that two and one half
years elapsed before the amortization problem was disposed
of is 100% wrong. The problem of computing costs under
the Vinson-Trammell Act, which he confuses with the tax
amortization problem, was disposed of in February, 1939.
That was just one month after the Treasury Department re-
ceived the Navy's first formal request for consideration
of this problem.
182
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Press Service
Thursday, October 17, 1940.
No. 22-41
Secretary Morgenthau today issued the following statement:
Mr. Willkie in his Buffalo speech of October 15 has
again charged that the Treasury Department has delayed the
defense program.
What Mr. Willkie has done is to confuse the facts and
to withhold part of the record. I prefer to believe that
it is pure ignorance that has led him to make a series of
utterly false statements. He has mixed up the Act which
limited profits on Navy contracts with the income tax
amortization problem which was raised in discussions be-
tween the Advisory Commission on National Defense and
representatives of the Treasury Department in June, 1940.
Let's examine Mr. Willkie's charges:
1, Mr. Willkie asserts that Admiral Furlong, head
of the Bureau of Ordnance of the Navy Department, asked,
on April 13, 1938, for the income tax amortization
provisions enacted by the Second Revenue Act of 1940.
That is not the fact. On April 13, 1938, the Admiral
addressed a memorandum to the Judge Advocate General of
the Navy, suggesting that representatives of the Navy
Department confer informally with the Treasury with a
view to the formulation of a method to be followed in
handling depreciation allowances under the
4,
183
- 2 -
Vinson-Trammell Act. That suggestion, of course, was quite
a different matter from the income tax amortization pro-
visions with which Mr. Willkie confuses it. The entire
story, including the correspondence referred to by Mr.
Willkie, is set forth as a matter of public record in
hearings before the Subcommittee of the Committee on
Appropriations, United States Senate, 76th Congress,
First Session, on H. R. 6149, Navy Department Appro-
priation Bill for 1940, p. 106 et seq.
Mr. Willkie's assertion that two and one half years
elapsed before the amortization problem was disposed of
is 100% wrong. The problem of computing costs under
the Vinson-Trammell Act, which he confuses with the tax
amortization problem, was disposed of in February, 1939.
That was just one month after the Treasury Department re-
ceived the Navy's first formal request for consideration
of this problem.
--000-
184
See Press Conference of October 17,1940
185
October 17, 1940
9:05 a.m.
H.M.Jr:
Hello.
Operator:
Lowell Mellett.
H.M.Jr:
Hello.
Lowell
Mellett:
Hello, Henry.
H.M.Jr:
Good morning.
M:
Say, Steve was telling me about your conver-
sation yesterday afternoon.
H.M.Jr:
Yes.
M:
I tried to get you last night but apparently
you had gone to the movies. Are you free to
talk now?
H.M.Jr:
Yeah, I can talk. Hello?
M:
Yes.
H.M.Jr:
I can also listen. What's on your mind?
M:
You were talking to Steve yesterday afternoon
and I wanted to talk with you about that.
H.M.Jr:
Well, the suggestion that I made to Steve
was that the President get some of the people
that he wants to talk together at the White
House tonight and then tell us what he wants.
M:
Yeah.
H.M.Jr:
But he evidently doesn't want to do that
and Steve said he was too busy and that he
was going to turn the whole thing over to
you.
M:
Well, do you want to try to round the people
up tonight?
H.M.Jr:
What's that?
186
- 2 -
M:
Do tonight? you want to try to round some people up
H.M.Jr:
Well, I said I'd be delighted and that my
house was at your disposal.
M:
Well, now, have you got any ideas of who
might be worth getting in?
H.M.Jr:
Yes. I think you ought to have Ickes, I
think you ought to have Bob Jackson
.....
M:
Yeah.
H.M.Jr:
I don't know what they're doing up in
New York BO I don't know what would be in
conflict - who's running the speakers'
bureau or what up there. Whoever the fellow
is, I think he ought to come down. He spoke
about bringing Charley Michelson down.
M:
Yeah.
H.M.Jr:
But people of that nature.
M:
Yeah. I'll see what I can get my fingers on.
I don't know about getting anybody down from
up there - how tied up they may be - may be
difficult. Now who else would you think of
here? How about Arnold and Biddle was suggested
also.
H.M.Jr:
I think they'd be fine.
M:
Do you think Sumner Welles?
H.M.Jr:
No, I don't think 80.
M:
John Carmody?
H.M.Jr:
Yes, he'd be good.
M:
Jesse Jones?
H.M.Jr:
Yes.
M:
Should have an interesting evening.
187
- 3 -
H.M.Jr:
What?
M:
Got those two, we ought to have an interesting
evening.
H.M.Jr:
That's right.
M:
Well, I'll see if I can do anything with
that during the day and talk with you later.
H.M.Jr:
Yes, and we'll be glad to have them for
supper at the house.
M:
Well, I'll see how things shape up and try
to know something before noon.
H.M.Jr:
And let me know because I can order a couple
of hot dogs.
M:
Right-o.
H.M.Jr:
All right.
188
October 17, 1940
11:27 a.m.
H.M.Jr:
Hello.
Sydney
Hillman:
Yes, sir. Hillman.
H.M.Jr:
Hello, Hillman.
H:
Good morning. My second thought 18 just
as comforting as my second.
H.M.Jr:
I see.
H:
My judgment is that discussing war is a bad
thing in a way - question of taking the profits
out - question is whether it is or not. You
know, it's controversal.
H.M.Jr:
I see.
H:
I think, you know, if you take the proposition
of what our whole tax
.....
H.M.Jr:
Our whole what?
H:
Our way of taxing - of giving security and
saving our system. See?
H.M.Jr:
I Bee.
H:
I mean - that that is the best insurance
that what happened abroad may not happen here -
I wouldn't say cannot - may not happen here
to follow it. In other words, we are giving
people a stake in the system as is.
H.M.Jr:
I see.
H:
Now, if anyone will work for you on this thing,
I will be very glad to give him as much time -
half an hour or an hour - and I think it is the
appeal which can go both to the labor groups
and the business community. Of course, it is
more necessary for the business community
because the labor vote he has.
H.M.Jr:
I see.
189
- 2 -
H:
No difficulty with the labor vote.
H.M.Jr:
No difficulty.
H:
Oh, no. He has that.
H.M.Jr:
He's got that.
H:
Oh, yes.
H.M.Jr:
Well, if I decide to talk and I have something,
I'll take you up and I'll show it to you.
H:
Well, anytime you want me on this thing, it
will be good - I'll be very glad if I can in
any way be of help.
H.M.Jr:
Thank you. I know you do. Much obliged.
H:
Because I think that this thing - - that what we
have done safeguards our system, gives every
man a stake in what we have, and I think that
that is in the national unity that ought to
come and our program is for national unity,
not for the extremes of one end or the other
end.
H.M.Jr:
Right. Well, thank you 80 much.
H:
You're welcome. Good-bye.
190
October 17, 1940
2:58 p.m.
H.M.Jr:
Hello.
Hull's
Secretary:
He's coming right on, sir.
H.M.Jr:
(Pause). Hello.
Operator:
He'll be right on.
H.M.Jr:
(Pause). Hello, Cordell.
Cordell
Hull:
Yes, sir. I'm sorry I missed you.
H.M.Jr:
Two things - one, I got a call this morning
from the Russian Embassy and the Ambassador
asked to see me and he sort of hinted that he
would kind of like to see me alone. See?
H:
Yeah.
H.M.Jr:
And I wanted to ask your advice.
H:
Well, I think that's all right if he wants to
see you.
H.M.Jr:
Well, would you do it if you were me?
H:
It's all right.
H.M.Jr:
Is it all right?
H:
So far as I know. I'd like to - I don't think
that there's anything that Welles - you know,
I haven't been in on that is the reason I'm
a little hesitant. Let me say a word to Welles
just to keep the thing clear.
H.M.Jr:
Would you do that?
H:
If you'll hold .....
H.M.Jr:
Want me to hold on?
H:
Just a second. (Pause). Hello, Henry."
191
- 2 -
H.M.Jr:
Hello.
H:
Why Sumner agrees entirely with that idea
about your seeing him.
H.M.Jr:
That that's all right.
H:
Yes.
H.M.Jr:
Well, I tell you, I'll listen - - I've got
nothing to say to him - and as soon as he
leaves I'll give you a ring.
H:
Yes, all right.
H.M.Jr:
Now have you got another minute?
H:
Go right ahead.
H.M.Jr:
The President, through Steve Early, has asked
me to make a political speech and what I was
thinking about that I might say, and I wondered
how it hit you, was to tell the story of what
we've done in the last two years to take the
profit out of war and how we're handled these
various purchasing missions differently than
they were handled 25 years ago.
H:
Yes, yes.
H.M.Jr:
I wondered if that - I mean, trying to get over
to the people that for the last two years we've
done everything to discourage the munitions
makers and that sort of thing on the profit
motive.
H:
Yes.
H.M.Jr:
Now, nobody has ever said that or has ever told
what we've done.
H:
Now that strikes me as all right but I tell
you what I would do - I would pass that to the
President because that's a pretty big question
and I'd pass it with him if I was you - about
taking the profit out of war. I'm sure he'll
have the same idea - at least, I think he will.
Regraded Uclassified
192
- 3 -
H.M.Jr:
But how does it hit you personally?
H:
I think it's all right myself, but of course
I've always stood for that general idea.
H.M.Jr:
But you're not enthusiastic about my saying
it - I mean
.....
H:
Well, I was just studying to see whether
there's anything that would be any more
appealing to the public. I don't know that
there is at first blush, because that would
show that you'd been handling this matter
in all these different ways that are more or
less new and effective and at the same time
keeping down excessive profits .....
H.M.Jr:
That's - excessive profits.
H:
..... on war, yes.
H.M.Jr:
To make it as uninteresting as possible to go
to war.
H:
I'd call it excessive profits.
H.M.Jr:
Excessive profits.
H:
Or war profits which means profits over and
above reasonable profits.
H.M.Jr:
That's right.
H:
That looks like it'd be all right.
H.M.Jr:
Well, thank you.
H:
Yeah.
10/18/40
193
Memorandum
To: The Secretary
Fromt Mr. Schwars
&
00
The following references to your statement issued
at press conference yesterday were made on the radio last
night:
Walter Compton - WOL 6:30
Treasury Secretary Morgenthau accused Wendell Willkie
of making a series of utterly false statements. Morgenthau
said he preferred to believe that the Republican candidate
made the statements because of pure ignorance. Mr. Willkie's
assertion that 2 1/2 years elapsed before the disposition
of the amortization problem was disposed of is 100 percent
wrong and he had confused it with the earlier cost accounting
problem which was disposed of in February 1939.
News WOL - 10:30
Secretary Stimson and Secretary Morgenthau also struck
at the criticism made by Mr. Willkie. Treasury Secretary
Morgenthau charged the Republican candidate with making
false statements and saying that Treasury allowed 2 1/2 years
to elapse before disposing of the amortization problem.
WMAL - Lowell Thomas - 6:45 no report
WOL - Fulton Lewis - 7:00 no report
WOL - Wythe Williams - 8:00 no report
WJSV - News 8:55 - no report
WOL - Gabriel Heatter - 9:00 no report
WOL - News - 9:15 - no report
WMAL - John Gardiner - 11:00 no report
WOL - News - 12:00 no report
WJSV - News - 12:00 - no report
Doaradod
194
October 19, 1940
My dear Mr. President:
I thought you would be inter-
ested in the enclosed elipping from
today's New York Times which carries
ay statement refuting the miestate-
monts note by willkie at Buffule №
cently.
Yours sincerely,
The President,
The White House.
195
October 20, 1940
Providents É I *
I thought you would be inter-
ested in the enclosed elipping from
today's New York Time which carvies
4 statement refuting the nisatate-
sints note by Villkie at Deffale no
cently.
-
The President,
The White Rense.
196
October 10, 1940
My dear Mr. President:
I thought you would be inter-
ested in the enalosed clipping from
today's How York Time which carries
my statement refuting the minutato-
ments mile w willkie at Buffalo ye-
cently.
Yours sincerely,
The President,
The white House.
197
NEW YORK TIMES
OCT 1 8 1940
WILLKIE DISPUTED
BY MORGENTHAU
Secretary Charges Candidate
Confuses Two Separate
Issues in Defense Talk
DENIES TWO-YEAR DELAY
Question Was Settled to Satis-
faction of Navy in Month, He
Says in a Statement
Special se THE New Your Times.
WASHINGTON, Oct. 17-Secre-
tary Morgenthan taxed Wendell L.
Willkie today with making "a series
of utterly false statements" that
the Treasury had delayed the de-
tense program.
The candidate's address at Buffa-
la Tuesday night confused the 1938
Vincent-Trammell act limiting prof-
its on Navy contracts with income
tax amortization problem in plant
expansion which arose in June,
1940, the Secretary said.
"What Mr. Willkie has done,'
with which Mr. Willkie confuses It.
Mr. Morgenthan's prepared state-
The entire story, including the cor-
ment added, "In to confuse the facts
respondence referred to by Mr.
and to withhold part of the record.
Willkis, is est forth as a matter of
I prefer to believe that It is pure ig-
public record in sarings before the
norance that has let him to make
subcommittee of the committee on
& series of utterly false statements.
Appropriations, United States Ben-
He has mixed up the act which Ilm-
ate, Seventy-mixth Congress, first
Ited profits on Navy contracts with
seasion, on HR 6149, Navy Depart-
the income tax amortization prob-
ment Appropriation Bill for 1940, P
lem which was raised in discussions
106 et.seq.
between the Advisory Commission
"Mr. Willkie's aspertion that two
on National Defense and represent-
and one-half years elapsed before
atives of the Treasury Department
the amortization problem was dia-
in June, 1940.
posed of is 100 per cent wrong. The
"Let's examine Mr. Willkie's
problem of computing costs under
charges:
the Vinson-Trammell Act, which he
"Mr. Willkie asserts that Admiral
confuses with the tax amortisation
Furlong. head of the Bureau of
problem, was disposed of In Feb-
Ordnance or the Navy Department,
asked, on April 13, 1938, for the
ruary, 1939.
income tax amortisation provisions
"That was just one month after
enacted by the Second Revenue Act
the Treasury Department received
of 1940.
the Navy's first formal request for
"That is not the fact. On April
consideration of this problem."
13, 1938, the Admiral addressed a
In response to questions, Mr. Mor-
memorandum to the Judge Advo-
genthau said that be had Issued the
cate General of the Navy, suggest-
statement on his own responsibil-
Ing that representatives of the
ity, without consultation with the
Navy Department confer informally
Democratic National Committee.
with the Treasury with a view to
Edward. J. Foley of the Treas-
the formulation of a method to be
ury's general counsel's office, sup-
followed In handling depreciation
ported Mr. Morganthan's thesis
allowances under the Vinson-Tram-
that while other problems of com-
mell act.
puting costs under the Vinson-
"That suggestion. of course, was
Trammell not aross later, those
quite & different matter from the
raised by Admiral Furlong were
income tax amortization provisions
solved to the Navy Department's
apparent satisfaction at the time.
Regraded
198
RE RADIO ADDRESS
October 18, 1940
9:00 a.m.
Present:
Mr. Gaston
Mr. Duffield
Mr. Foley
Mr. Cairns
Mr. Kades
Mrs Klotz
H.M.Jr:
You know, I think some of these fellows
have been trying to kind of scare us. The
New York Daily News is up three points to-
day, 541.
Gaston:
New York State?
H.M.Jr:
For the State.
Foley:
Is that the second day?
H.M.Jr:
Second day. It is not so bad, is it?
Foley:
What I liked are the high percentages of
Manhattan and the Bronx. They run way up
to 80% in Manhattan. Of course, when it
gets up to Syracuse, it may be 20 the other
way.
Gaston:
They may be scared about Tammany and Man-
hattan, but the percentage that has been
shown is good.
H.M.Jr:
Well, out of this I didn't get exactly what
I want, but I have got an idea. Who are
you going to delegate to do this thing, to
put it together? Who is going to make notes
of things that I want? I want to look to
somebody.
Foley:
Huntington.
H.M.Jr:
Whoever you say.
199
- 2 -
Foley:
Here is another one, Mr. Secretary. Maybe
you might read that. These are the things
that are pointed out in the report that
are not being observed as a war preventive
or Congressional action being taken.
And there is this one thing, too, and that is,
a committee was not authorized to make a study
of the causes for entry of the United States
into the war, and consequently did not do SO.
If it had been so authorized, it would have
been begun with the study of the propaganda
tactics of belligerent nations in this country.
H.M.Jr:
Out of this, I got this idea, to make it much
broader than what I originally started with.
I think we ought to point out - I mean the
steps, the messages, whatever the President
has taken, for instance, under the Neutrality
Act of 1939, I mean the various things. Then
the question of the various steps he took on
defining the war zones for American ships.
Foley:
Ship control?
H.M.Jr:
No, I am thinking of things which would have
likely gotten us into war. One of the things
is American ships.
Cairns:
You mean the exercise of discretionary power
given him by the Neutrality Act?
H.M.Jr:
And what he did about it.
Gaston:
Combat zones is one.
H.M.Jr:
What was his foresight in seeing the things
that might make incidents which might bring
us into war.
Foley:
I said the ship control, because we kept
Regraded Uclassified
200
- 3 -
American flagships from going into English
waters or going into the war zone.
H.M.Jr:
That is right. Well then, it says here on
page 3, "has prohibited the exportation from
the United States, except under license, of
any plans, specifications and other documents
containing descriptive or technical informa-
tion of any kind setting forth the design or
construction of aircraft or aircraft engines. in
I was just thinking - Merle is doing the other
thing. I will have that by 10:00 o'clock,
the financial end. I was just thinking from
this I get this idea: we won't think about
the Nye report, and if we criticize what was
done under Woodrow Wilson, that isn't so good,
it is a boomerang, 80 supposing we take the
neutrality steps that the President took in
order to make the - to avoid instances - I
mean, he was foresighted in all of these things
80 we couldn't be dragged in. That you could
do very easily and list those things by head-
ings, couldn't you?
Cairns:
Oh, yes.
Gaston:
Yes. That is putting the regulation of policies
in the hands of the Government.
H.M.Jr:
No, I am thinking a little bit more than that.
Cairns:
I think I have your point.
H.M.Jr:
I don't have to repeat it over.
Cairns:
No.
H.M.Jr:
All right. And then you see with the financial
thing, you could take a look at the thing
201
- 4 -
Merle brings in and on the financial front
to try to avoid the mistakes, he insisted
that the Commission be set up as & direct
governmental commission in order that we
might be able to get reporting. The money
was all put in the Federal Reserve Banks so
we were able to tell how much they bought
each week so it wouldn't be in conflict with
our own production and wouldn't be piling up
on the same orders and prices and all that
sort of thing, you see.
And then the other thing - I mean that I
will have. And then unfortunately Harry
isn't here. The other front, which I think
is a. terribly important one, was April '38
or '39 when he cracked down on prices the
first time.
Foley:
Yes, that is right, and we could get in there,
too, the controls we have to prevent infla-
tion.
H.M.Jr:
Now, who is making a note? Is somebody
making notes?
Foley:
Huntington.
H.M.Jr:
The first time, it was '38 or '39 when he
cracked down on prices. And then the fact
that the cost of living has stayed stable.
Foley:
Harry told me he had a paper on that. He
prepared a speech for you or something.
H.M.Jr:
It wasn't what I wanted. Just let me talk
on for a minute or two. I will have the
things we did to keep the various purchasing
missions from getting in our way and the
control We have over them. Then what he
has done on prices, the cost of living,
202
- 5 -
increased purchasing power, both for the
farmer and the consumer and the laboring
man, which must be tremendous. None of
this stuff has been done, as far as I know.
That would be part of it, wouldn't it?
Duffield:
No doubt about it.
H.M.Jr:
Now, we have got the various neutrality steps
he has taken, the steps he has taken on hand-
ling the financial missions through the
Treasury, and then the first thing he did
where he demonstrated it was in September '39
when he released 700,000 tons of sugar, and
the first indication there was a run-up.
He released that 700,000 and that was & rap
across the knuckles to let the food specu-
lators know that he wasn't going to stand
for it. Isn't that enough for one thing,
those three things?
Duffield:
That is quite a. lot.
H.M.Jr:
Get it into 1800 words.
Now, what is the comeback on that that Willkie
might have? I mean, just attack those three
fronts which all have to do with keeping this
country on & normal basis. And then during
this period and while we have been doing all
of this, the Federal Reserve index of pro-
duction has gone from 90 up to 125, and we
have still kept the country on a level basis.
I mean, while this has been going on, our
production has gone from 90 to - my figure
is a little rough, but I mean the period
and still we have been able to keep the
cost of living down. I haven't seen anybody
talk about that, have you?
Duffield:
No.
203
- 6 -
H.M.Jr:
Then you can talk about the two sections
he set up in National Defense, one under
Miss Elliott, and the other under Leon
Henderson, just to watch these things. I
realize I am going a little bit further,
but I am just thinking out loud. I am try-
ing to think of things that happened. I
don't think We need that Nye fellow.
Foley:
All right.
H.M.Jr:
What do you think, Gene?
Duffield:
I was trying to think of any criticism I
might make and I can't think of any. He
certainly can't criticize the amendment and
the Neutrality Act, because he has endorsed
that policy.
H.M.Jr:
You see, I have always thought that one of
the most magnificent things the President
did was the way he has kept the cost of
living down in this thing, and then we want
to show what has happened in other countries
in the last 12 months on the cost of living.
If we do, we will have all those figures.
England, for instance, the cost of living
has gone up a third. In Germany, it is going
up very much. Did you make a note of that,
Huntington? Harry has all those figures.
We can still talk about it today. I don't
know whether we could do it a month from now
or not.
Herbert, what do you think? Does this speech
still worry you?
Gaston:
No, it looks a little clearer to me now.
H.M.Jr:
Well, I get it from this memorandum. Well,
204
- 7 -
I think if that can be done - and Merle is
going to have the other thing at 10:00.
Don't you think there is enough there?
Cairns:
Yes.
H.M.Jr:
What do you think?
Duffield:
I think by all means. You said 1800 words,
did you?
H.M.Jr:
Well, that is 15 minutes.
Duffield:
You will really have to pack it in.
H.M.Jr:
Last night they offered me 15 minutes ahead
of the President next week in Philadelphia.
My God, I don't want to go on ahead of the
President! It would be terrible. Don't
you think so, Herbert?
Gaston:
Yes, I think it is terrible, and also 15
minutes ahead of the President in New York.
H.M.Jr:
Yes, either spot.
Gaston:
No good.
H.M.Jr:
I think that is a terrible spot for me. Well,
what I had hoped to do was to have some kind
of an outline to show him in Cabinet, and ask
him if this would interest him. Have you
got a little time, Gene, to go back with the
boys and just --
Duffield:
I have until 1:30.
H.M.Jr:
Wonderful. As soon as I take a look at what
Merle has, I will shoot it back, but I am
making it - does the thought flow consistently
enough there?
205
- 8 -
Gaston:
Is the general idea of safeguarding us against
entry into war?
H.M.Jr:
No.
Gaston:
Safeguarding us and protecting us against the
effects of war?
H.M.Jr:
No.
Foley:
Steps taken by the Administration?
H.M.Jr:
The idea is that we have done everything possi-
ble to be kept from being dragged in.
Gaston:
Well, it is safeguarding us against war. It
is two things, it is how We will safeguard
ourselves against being dragged into war, and
how we will safeguard the economy from the
shocks of war elsewhere.
H.M.Jr:
That is right; you have got it, Herbert. But
if Huntington and Chick and Gene aren't busy
for a couple of hours, if they could go some-
where and see what they could do. I don't
want a speech, I want more of an outline, and
I don't think anybody has attempted it.
Duffield:
I haven't seen it.
Gaston:
I think it is all right.
Duffield:
Are you going to leave out altogether any
reference to - I don't like to call it a
reply to Mr. Willkie, but a rebuttal to him
on this --
H.M.Jr:
Tax?
Duffield:
No.
206
- 9 -
H.M.Jr:
No, I will wait until Johnny Hanes gives
him something else to say, because I realize
that this is very distasteful to you to an-
swer these Hanes things.
Duffield:
I hate them.
H.M.Jr:
Hate him or --
Duffield:
Well, it is like Mr. Willkie says, "It."
H.M.Jr:
No, I think that might be interesting. The
great Mr. Michelson was worried last night
if I talk about taking profiteering out of
war that I might offend some business men.
Foley:
They wouldn't make contributions.
H.M.Jr:
When I said I want to talk, he said that is
all right, I will talk to LaSalle Street. I
said, "I don't want to talk to LaSalle Street
and I won't talk to LaSalle Street."
Gaston:
He says we have got these fellows that are
greasy behind the ears. We have got to
get the other fellows.
H.M.Jr:
You can get what Harry has. He may be in-
terested. He was awfully sick yesterday.
Cairns:
Probably somebody in his shop will have it.
H.M.Jr:
Oh yes, definitely. Go to it, and I will
tell you what we will do. Let's say that
we will meet again at 11:30. How is that?
Cairns:
Fine.
H.M.Jr:
That gives me & good idea, but I don't think
you need that Nye fellow.
207
October 18, 1940
Secretary Morgenthau
2. H. Foley, Jr.
Re: Practices considered w the Special
Committee on Investigation of the
Menitions Industry as having tended
to encourage the participation of the
United States in the World Har in 1917.
The Rye Committee's Report (sea. Rep. No. 944, Then Gong.,
let Seas.) is divided into seven parts. is examination of the
findings and recomendations in the Report has been más with the
and in view of accortaining what practices the Eye Committee ⑉
sidered to have tended to bring about American participation in the
world for is 1917. Consideration has likevice been given to the
stops taken w the present administration which would tend to prevent
similar practices from bringing about participation in the present
world conflist.
Part I of the Report
No relevant findings or recomendations.
Part II of the Morth
This part dealt with wr-tine taxation and price centrol.
It dealt with what stops should be taken w the Federal Government
in case me should come and suggested certain Constitutional and-
ments to be adopted which would emable the Ocveranent to handle such
Regraded Uclassified
208
- 2 -
situations in time of or mm expeditionsly. n finlings #
recomentations were unde relative to the instant injury.
Be findings or recommendations appeared which dealt with
practices which tended to bring about (avolvement is the World Mr.
Recever, findings vare mis with respect to other activities which
18 was said tended to disrupt years and statility many matters.
(1) It me pointed at (at pages 3 and w that various
multions and exement manfactupers is the Valid States sold large
quantities of maitions and armante to foreign governments. is
w delag. various unethical practices, ná as without and tater-
forence in the political situation in foreign mations, took place.
Section 12 of the Sentrality Act of 1939. which was or
ried over from the Sentrality Ast of 1935 and the Nontrality Ast of
1937, operation to centrol to ⑉ extent, at least, ná activities
is that experis of area, amerition, and implemento of or cannot
be más without securing licenses therefor from the State Department.
Purther authority has boom gives to the President to curtail the
exports of additory equipment or mailtens w section 6 of the Act
of July 2, 1940 (Public, Be. 703. 76th Congress).
Part m points at that the rounment of Company is
violation of treaty obligations we attel is part w certain American
Regraded Uclassified
209
3 -
aircraft companion which - licenses be - companies for the
of airplane englase. Is is also petatet out (as pr 12)
that certain aviation companies licensed Japan for the use of air
plane materials in
Acting personal to esetten 6 of the Ast of Catober 2. 1940
(Fublic. No. 703. 76th Dengrees). the President, in Proclemation
No. 2423. bas prohibited the expertation free the United States,
except under license, of any plane, specifications, and other dest-
sente sentaining decoriptive or tochnical information of un kind
cetting forth the design or construction of airents or aireraft
englase.
This part consists of reports ⑉ the for Department's
Industrial Mobilization Mile and emtains M material relevent to
the present question.
(2) the Consitton found that the absence of legislation
forbidding the fleating of long-term lesse w belligerents, and the
absence of legislation controlling the granting of shart-term credits
to belligerents, w their mationale, would result is as unheal thy
stimilation of business chich wald to dependent upon the continuation
of belligarest enters and belligerent credite, and oldeh would congret
Regraded Uclassified
210
- 4 -
the financial discount market sat would allow the development of
an important financial interest is the fate of use (Tomp of bel-
ligerents. the Consittee pointed out that the Johnson Act was in-
adoquate for the situation eface 11 only operated upon countries that
had defenlted to the United States and are net oven cover the poll-
tical subdivisions or nationals of defenlting nations. the Committee
recommended that the fleating of lease by belligerents and political
subdivisions, central basks, or nationals be prekibited. and that
the President be experered to provent the extension of credit to
belligerents or to belligerent nationals is of a six-months'
murity and in exsess of anounts which could be paid for within
the fixed saturity.
this me all adequately taken care of w section 1 of
the Neutrality ser of 1939.
(2) the Connittee found that the uncertain status of
areed morehant vessels in neutral porte resulted in a situation
dangerens to the yease and security of the United States in the events
of a was between mriting powers.
Section 11 of the Neutrality we at 1939 expersed the
President to forbid the use of our parte to areet merchant vessale
altogather and to designed to met that danger.
211
- 5 -
(3) the Committee stated that the absense of legislation
forbidding the travel of Anerican citizens through was senee - chips
of belligerent nations which wase carrying contraband senttiess of
var and the sinking of such ships - a min essas for the instility
of the United States to relateda 190 mentral policy in 1917 and
could be expected to again because ask a come is a fature var.
Section , and section 5 of the Nectrality Ast of 1939
w proventing American citizens from travellag as belligerent vessale
and through contat sease should adequately meet this situation.
(4) the Committee found that during the Verid Var ships
engaged is the unitiens traffic was apparatily aided w belliger-
out ships improporly flying the American flue.
Section 24 of the Noutrality Act of 1939 w forbiliting the
use of the Anerican flag to vessele of foreign registry and deaying
the use of the parts of the United Makes to yearsle violating that
prevision asste the problem and carries out the Counittee's
(5) Vaile the matter dis not hear upon the practices tending
to involve the United States in the my is 1917. the Committee found
that the sale of are to various constries under various circumstances
tended to disrupt international relations and w often is violation
of treaty provisions.
Regraded Uclassified
212
- 6 -
20 to submitted that the licensing previsions is esotion
12 of the Nechrality Act of 1939 have brought this situation under
centrol.
(6) 10 10 interesting to note that the Committee suggeste
that is cortain circumstances where naterials my be used for either
hostile or peaceful activities, the United States should, before yes-
nitting expertation, require accurances from the foreign government
that they will be used only too pesseful purposes. The United States
has used exactly that procedure in several instances since the w
glasing of the present var where vessele have bost sold to belligerent
nations.
(7) It night be added that the Eye Committee advecated a
complete enbargo of area, ammunitions, at implements of var as a
mothod of avoiding involvement is fature was. That system was is
effect under the Neutrality Act of 1937 for a period of two menths
during the present var. It vas fully considered and disensed w the
Congress which determined that such an caberge vse not is the best
interests of the security and yease of the United Mates.
(8) The Committee found that is the abouto of specific
noutrality legislation the dengrees and public are not always fully
and premptly informed concerning important changes is neutrality
policy 47 the causes of cash changes and the Consitee recommended
that the Congress should be accurately and prosptly informed w the
213
- 7 -
Insentive of the - and purpose for any changes is activality
policy.
the coveral neutrality este est 9a continuens offerio of
the Chief Incentive to keep the Gengrase el the people of the United
States fully informed on the reasons for and the changes is the
neutrality policy of the Valted States neet the situation which
the Condition wated improved.
Part VI of the Resert
this Part dools with the elequesy of legislation existing
of the time of the report. June 6, 1936.
(1) The Connittee feat that losse to belligerents militated
against acutrality, one prefermily affected public opinion and the
foreign policy of the United States. both lease caused a substantial
var been and on the United States a financial state in the will
which más 19 impossible to conduct a foreign policy consistent with
complete nectrolity. the Senditive recommended that the 10ss and
credit previcions of the - to the Neutrality Act of 1935. Joint
Res. of Naturary 29. 1936, mg stat. 1152, be retained "in make a my
as to provent the extension of large credite to belligerents is the
form of acceptances and to prevent the flotation of leng-term boads
W foreign nonhelligerents, the proceeds of which lease can be diverted
to belligerent moon."
Regraded Uclassified
214
- 4 -
The loan and credit provisions referred to have been retained
in the Neutrality set of 1939 and strengthened to the extent that the
provision in the carlier Act for ordinary commercial credits and short-
time obligations in aid of legal transactions and of a character -
tomarily used in normal peace-time commercial transactions was eliminated.
(2) The Committee recomended that section 5 of the Trading
with the have sor, 40 State 411, as enended (U.S.C. title 12, see,
950), be enended to define the word "energency" to include 4 major no
in which the United States is nectral,
The Committee's recommendation appears to have been prompted
by a desire to make explicit the power which the President has already
determined was conferred upon his by that Act. Remples of the
President's interpretation of Femergency® to include sush foreign major
var are found in the various Orders of the President freesing credits
in this country of mationals of foreign nations.
(3) the Rye Consittee found indications of use by the Havy
Department of shipbuilders M lobbyists for its interests and found that
the shipbuilders had used secret influence to bring about the failure of
disarment efforts, to encourage the building of armanate, and to
create var scares. On the basis of that and other testiness, the
Regraded Uclassified
215
- 9 -
Consittee expersed the visu that there Val clear and definite 4mpar
is allowing chipbuilders and similar intereste to be is 6 class
position of influence to such an important instrument of national
policy as the Serv and in allowing them to remain in a position where
10 10 to their financial interest so confuse yublic opinion between
the needs of the country for a purely defencive Barry and their -
continuing useds for profite. is consequence of these findings, the
Consittee majority resensented nationalisation of sentions and affice
meal plants.
Although there has been M estmal mationalization of sub
plants, contion 9 of the Selective Training and Service Ast of 1940
(Public, So. 703. 7602 Gengross) provided for the taking of procession
of such plants If they refuse 90 give proference to the orders of the
United States or to name/acture the kind, quality, or quality of
arms or committes or any accessary supplies or equipment which are
ordered or to fornish - articles at a reasonable price.
216
12/13/00
FROM: MR, GASTON'S OFFICE
TO: The Secretary
(Speech 1)
THE NATION'S DEFENSIVE STREVGTH
Partisan demagogues broadcast to world our
defenses are weak and preparation preparation
slow, It's a lie.
I've been too busy to think of polticas but,
since I know about this matter, I feel obliged
to answer.
I have been seeing the figures. New funds for
havy and any before crisis. Fight to permit
cash and carry delayed by Republicans, finally
won. British-French orders multiplied our
airplane plant; got other new industries going.
With collapse invaded countries Pres. becan
greatly enlarged program. Details letting
orders, letters of intention, retooling
plants, building new plants. Treasury hired
airplane and engine experts tefore advisory
commission set up. Co-ordination with Britash
orders to increase production. Tax questions
ironed out. Fair contracts; profiteering barred.
Tew Deal program has strengthened America
for defense. Railroads, airlines, factories,
roads in better shape through loans and made
work. People stronger, happier, healthier
for relief programs. Others promise; we perform.
Increase in debt no obstacle to financing:
quite the other way. Great increase National
wealth, national income enables us to finance
with ease. We haven't been throwing our
wealth away for scraps of baner; we've been
discontent alleviated; people,
strengthening ourselves internally Social
ready for whatever may come.
Regraded Uclassified
217
October 18, 1940
11:30 a.m.
RE RADIO ADDRESS
Present: Mr. Foley
Mr. Cairns
Mr. Duffield
Mr. Haas
Mrs. Klotz
Mr. Gaston
H.M.Jr:
George, have you got your stuff?
Haas:
Yes, I have got what you asked for this morning.
H.M.Jr:
It 1s political, George. Are you afraid of it?
Haas:
No, I am used to it.
H.M.Jr:
This is a good crowd we have got around here.
I think this is marvelous.
Duffield: I think the first page is good.
H.M.Jr:
The first page?
Duffield:
I haven't got beyond that.
H.M.Jr:
The first page is marvelous. That is the
part he has worked on.
Cairns:
The subsequent pages, Mr. Secretary, are being
condensed.
H.M.Jr:
The funds control?
Cairns:
No, 1, 2, and 3.
H.M.Jr:
You are going to try and do it all on one page?
218
- 2 -
Cairns:
No, condensed. we can't do that. From there on it is being
H.M.Jr:
Foreign funds controls, "Chile For New Industries."
That doesn't come under Foreign Funds Control.
Cairns:
No, I don't think that comes under Foreign Funds.
Duffield:
As a matter of fact, these last two pages are
being recapped under two broad headings, Protection
of our Economy Against Shocks From Abroad and
Against the Repercussions of the Defense Program.
H.M.Jr:
I think that is swell.
Klotz:
I think Bo, too.
H.M.Jr:
Now, I want to get George's. Have you got those
figures, George?
Haas:
Yes.
H.M.Jr:
What have you got? I think this 1s swell.
Haas:
I don't think you will be 80 pleased with these
things.
H.M.Jr:
The only way is to keep exploring, that 18 all.
Haas:
The September figures won't be out until the
25th, but they tell me for these particular ones
which I picked out, they will give them to me
tomorrow. They gave me some preliminary --
H.M.Jr:
Increase in iron and steel is minus. That 1s
wonderful. From December, 1939, to August, 1940,
they have got the same number of employees in
the iron and steel.
Haas:
That was a big bulge when the war was declared.
H.M.Jr:
I don't think we will use that one.
Haas:
I am taking it at the time the war broke out
in Europe and a year later and a year before,
and you get much nicer looking figures.
219
- 3 -
H.M.Jr:
Is that the way you have got it?
Heas:
I have really gone into it now.
H.M.Jr:
This is August, 1939?
Haas:
That 1s right. Really what I would like to give
you there 1s September, and I will be able to do
that tomorrow, September, 1939, September, '40.
H.M.Jr:
Shipbuilding is up 48, you say. Machine tools
1s up 70%. Aluminum is 21. Explosives 1s up
50%. That 1s as between September and September?
Haas:
The time the war broke out and then a year later.
Foley:
Employment?
H.M.Jr:
Yes.
Duffield: There are two figures out in the Federal Reserve
Bulletin added since last September, if I re-
member correctly.
H.M.Jr:
Why not use it that way, that 18 much better.
Why break it down this way?
Duffield: I thought you wanted perhaps general and some
illustration of what has happened.
H.M.Jr:
I think 80. You can say that in two million -
let's take a look at your summaries. In explosives,
in the past year it has gone up 50%, aluminum 21,
machine tools 70%, and 80 forth and 80 on. Ship-
building 48%. They haven't been used like that,
have they?
Duffield: No, I haven't seen them.
H.M.Jr:
I haven't seen them. I think that would be good,
George. Tomorrow would be all right.
Now, how can we get this, you see, so I can get
this thing over - I can have it at five minutes
of two? What are you going to do, change this
thing?
Regraded Uclassified
220
- 4 -
Cairns:
We will have it in about two minutes.
Haas:
I have got one suggestion which I think 18 1m-
portant and it is left out, as I glanced through
there. One of the things I think the Administration
has done, which 1s very important, as the Dictators
are fighting wars now, they break down the inside
first. I think the whole reforms that the President
has put in is the most useful armament that this
country has got.
Duffield: No doubt about it.
H.M.Jr:
How can we use it?
Duffield: I think as this thing will be set up when it 1s
revised that it will fit a little better.
Cairns:
Yes, I think 80.
H.M.Jr:
Well now, here 1e what I was thinking, you see.
Mr. Raymond Gram Swing has offered to come up to
the country for a half a day, but he isn't sufficiently
familiar that he could make this - use this. He
will have to have references. For instance, let's
say the proclamation of German neutrality, he will
need a reference.
Cairns:
Oh, I will fill that in.
Duffield:
We tried to boil this down 80 it would be as short
as possible.
H.M.Jr:
Would you have this thing in the bean 80 if he
asks you you could have everything he asked for?
Cairns:
Yes. I can get it in a special folder for you.
H.M.Jr:
But I mean if you wanted to - I was just thinking
of possibly having you come up Sunday if he was
coming. Are you busy? Got something on your mind?
Foley:
He has got a broadcast.
H.M.Jr:
What are you broadcasting?
221
- 5 -
Cairns:
On Sunday at 3:30.
Foley:
He broadcasts on a national hookup every Sunday.
Didn't you see his picture in the Times this
week?
H.M.Jr:
No.
Duffield: It says he is an expert in 15 languages.
H.M.Jr:
Every Sunday? Under what auspices?
Cairns:
It 1s for the adult education.
H.M.Jr:
How much time do they give you?
Cairns:
Half an hour.
H.M.Jr:
What do I need Raymond Gran Swing for? When do
you write your broadcast?
Cairns:
It 1a not written.
H.M.Jr:
What do you do?
Cairns:
Three of us sit down and discuss it.
H.M.Jr:
Do you do it ad lib?
Cairns:
Yes.
H.M.Jr:
Then you don't have to prepare for it?
Cairns:
No. I have already read the book.
H.M.Jr:
Then I was just thinking in this way. Supposing
you got in touch with Mr. Swing. He is through
at one o'clock Saturday, and maybe you could spend
Saturday afternoon with him and read this stuff to
him and then come back on the midnight. What would
you think?
Foley:
You do your broadcasting where, New York, don't
you?
Cairns:
This one is going to be from Washington, but I can
222
- 6 -
switch it to New York or I can come back at
midnight. That is a small matter.
H.M.Jr:
He has a broadcast which he does at 1:15
Saturday. He said from that time until Monday
morning he was at my disposal, 80 if you could
meet him --
Cairns:
Saturday afternoon.
H.M.Jr:
Saturday afternoon and spend Saturday afternoon
with him, then when he came up Sunday he would
have the thing pretty well lined up for us, but
he will want references and all that sort of
stuff.
Cairns:
I have them all.
Foley:
He can have all the material down and can go to
New York and sit down with him.
H.M.Jr:
That is what I want him to do. I want him to
go to New York and sit down with Raymond Gram Swing
and feed him all this stuff, you see.
Klotz:
You don't want to do that Saturday afternoon.
H.M.Jr:
I want him to, and then Swing will come up and see
me Sunday.
(Mr. Gaston entered the conference.)
Klotz:
Oh, I thought you wanted the two of them.
H.M.Jr:
No, I want the two of them to work together
wherever he works. I think he takes the train
and lives up at Westport. He may want you to
go up to Westport.
Cairns:
I will get in touch with him right away.
H.M.Jr:
I will give you his telephone number. His
telephone number 18 Longaore 5-1843.
Cairns:
Is that a Manhattan number?
223
- 7 -
H.M.Jr:
New York City. Then if you want to do that,
maybe you would want to broadcast from New York.
I will leave that to you, but 16 this a hardship
to go up there?
Cairns:
Not a bit.
H.M.Jr:
I think he had better do it, don't you?
Foley:
Sure, yes.
H.M.Jr:
Is that all right with you?
Foley:
, Absolutely.
H.M.Jr:
If you could do that, you see, and then when you
speak to Mr. Swing, tell him I am definitely
counting on him coming to the farm.
Cairns:
Any particular time?
H.M.Jr:
Well, if he could get there at ten o'clock, say.
Cairns:
That 18 a.m.?
H.M.Jr:
Yes. Tell him we are on Route 52 and we are 10
miles east of Beacon.
Cairns:
Ten miles east of Beacon?
H.M.Jr:
On Route 52, and when he gets to Wiccoppee, he
can inquire for the place.
Gaston:
Turn right at Wiccoppee.
H.M.Jr:
Yes.
Klotz:
They will direct him there.
H.M.Jr:
It is on 52 ten miles east of Beacon and 5 miles
west of Stormville.
If ten is too early for him, he can phone me. I
can make it eleven. I will be ready at ten, but
if that 1s too early, tell him to let me know
224
- 8 -
what time is convenient. I guess that is pretty
early. Why not tell him --
Foley:
He will have to drive up there.
H.M.Jr:
Well, he is going to Westport. That gives us two
hours before lunch if we make it at eleven o'clock.
But the suggestion I make 1s to let Huntington go
up there and see this man and then give him this
material with the supporting data.
Gaston:
What shall we do about the other man?
H.M.Jr:
Who?
Gaston:
Chase.
H.M.Jr:
I would forget about him. I don't see how you
could get 8. better writer for radio than Raymond
Gram Swing, do you?
Cairns:
No.
H.M.Jr:
Do you think you can get a better writer? Well,
I mean, he certainly is adequate.
Gaston:
Yes, he is plenty good.
H.M.Jr:
And as long as he volunteered to do this
You know what 1s going to happen, don't you?
Foley:
Yes, he 1s going to take it away from you.
H.M.Jr:
Sure. This is good.
Klotz:
Well, that is nothing new.
H.M.Jr:
No.
Foley:
You had better put it on Treasury stationery.
They will think it came from the State Department.
H.M.Jr:
Nothing as good as this ever came out of the
State Department, unless you (Cairns) object to
that statement.
- 9 -
225
Cairne:
Not a bit.
H.M.Jr:
Let me just read this. Now, this 1e the supporting--
Cairns:
No, that is the redraft of those three pages.
H.M.Jr:
Let me just take a look. I am quite excited about
this. Let Herbert see this.
Gaston:
I have got one. It looks like more than 15
minutes to me.
Foley:
It is easier to start out with it big and then
cut it down.
H.M.Jr:
Would you keep it to 15? That has always been my
policy. I think 80.
Gaston:
Get Swing's judgment on it as to whether this is
a 15 minute or half hour talk. He may say right
away it 1s a half hour talk.
Cairns:
Swing has Just written a piece that covers a
large part of this.
H.M.Jr:
A book on this? Has he?
Cairns:
He wrote an introduction to a history of the
first year of the war.
H.M.Jr:
Of this war?
Cairns:
Yes. I have got a copy of the book.
H.M.Jr:
That makes him all the more --
Cairns:
He has it at his fingertips. The only thing he
doesn't have, and that will have to be cleared
with you, is that statement that Pittman made in
the State Department and that you read one day
down in your lower office and you told me, "That
1s the corner I am in."
H.M.Jr:
You will have to refresh my memory.
Cairns:
When the Neutrality Act was first passed and the
226
- 10 -
Treasury was given the job of enforcing it,
the business interests of the country descended
upon us like a ton of bricks to find loopholes
in it. Pittman said the business interests must
bend their policy to the peace policy of this
Government. He made that statement in the State
Department in the office of Judge Moore, and I
wrote it down and showed it to you and you said
at the time, "That 1s where I stand." The peace
policy of this Government 1s going to prevail
and not the business interests. Now, we don't
have to attribute that to Pittman.
H.M.Jr:
Well, there 1a just this much about it. These
boys now like Charlie Michelson and all those,
they would react, "Why bring that 1n?"
Cairns:
Well, that appears on the first page.
Gaston:
We can bring it in and butter up business a little
bit by telling how loyally they assented to that
policy.
Cairns:
It 1a Just a question of, Have you enforced
neutrality or haven't you?
H.M.Jr:
Why not leave it in? Let's put it there and let
the President strike it out.
Klotz:
That is right.
Duffield:
That 1s right.
H.M.Jr:
Let's put it in. This is a perfectly swell job. I
am simply delighted. I am going to take this to
Cabinet with me and tell him to put it in his
pocket and that this 18 what I propose, does he
want me to do it. That 1s what I want to know.
I don't want to talk unless he wants me to. It
is a lot of work.
Foley:
Huntington might need somebody from Harry's
shop on the Economics. That was prepared there,
you nee.
H.M.Jr:
All right.
227
- 11 -
Klotz:
He won't let you do it, if you give him that.
H.M.Jr:
Do you think he will take it himself? It will
be a darned good speech whoever gives it.
Cairns:
It ought to be given.
H.M.Jr:
Right. I am very enthusiastic. You know, it 18
all just silly taking weeks to prepare a speech.
How long have we been on this? When did we first
start to talk about this?
Foley:
You are not through yet.
Klotz:
Who said that?
Gaston:
It isn't a speech yet.
Klotz:
Did you say that? That 1s wonderful.
H.M.Jr:
That 1s all right.
Gaston:
But this 18 the best start. This is a really good
outline of a speech.
H.M.Jr:
You, Gene, I am ever BO much obliged to you.
Duffield:
It is all right. If there is anything I can do
any time, let me know.
H.M.Jr:
We will be back at you.
Cairns:
It has his master touch in it.
H.M.Jr:
Gene is good. Just think, Gene, this afternoon you
have to run back to all this humdrum stuff.
Duffield: Yes.
Deaft /
228
$ Protection of the 1
& No increasing cost of living despire extraordinary increase
is production.
B Appointment of Hiss Elliott.
0 Centinuous check on cast of living.
D Genferences with materials producers.
1 Appointment of Menderson.
1 Conferences with industry.
6 Watching of mall price rises.
H Betting up of stock piles, rubber, tim, manganese.
I Releasing of 700,000 tome of sugar.
II Coordination of foreign purchasing to avere impeding domestic defense.
YII Coordination of governmental purchases so avoid unfortunate competition
of last was,
IV Centering foreign finencial niesions in the Treasury.
A American supervision of their disbursements,
$ American supervision of liquidation of foreign-ovesd securities.
1
Maintenance of price stability at balance.
A Despite drastic shifts in foreign markets one in denestic prodnetion.
B Agricultural priese maintained despire loss of European markets.
vi Inprovement in Government credit despite under present financial burden
a Government because of defense.
A Bend markets stable without pagaing as abroad.
9 Lower's interest gates in history.
VII Protection of American dollar.
A More the safest currency is the world despite capital
and goid than from over such as 20 other - has ever boom subjected 100
229
- a
VIII Pareign fuls emtrel,
1 Proventing chaetic withdrawals we disruption of internal
1 Development of new markets in Latin America.
0 Productive leans.
D Branil for steel.
$ Chile for new industrice.
, Connercial leans to assure that American exporters and American
producers get paid during temporary difficulties.
6 Breader Export-Import Bank program.
IX
Protecting our neighbors against economic aggreesion.
& Teekling extreerdinary problem of surpluses is Latin-American
countries.
B Uniting then - counce economic program.
0 Prevening application of "Divide and Genquer* policy in this
henisphere.
D Developing BAW markets for United States.
I Strengthening the financial eyesems in meighboring countries.
I
Increase of civiliem production.
& Continued expension of housing.
to Non-durable goods increasing.
0 Protestion of mp rates.
D Appointment of Hilms.
I defeguarding wage structure through protestion of collective
I
7 Proventing increases is hours.
II
Prevention of expessive speculation.
s Naintence of - controls.
B Busees profite tax to keep profits at reasonable level.
Regraded Uclassified
n # .
230
III Making maney quickly available for defense,
A Defense policies to take the risks out of private investment.
B Speedy adjustment of tax policy.
0 RFO leans where private capital is not available or will net
do the job,
Regraded Uclassified
231
I that tax Date to Befegued Against Mare
A The Noutrality Asta of 2935, 1936, 193%
to realy proctices that were popularly regarded -
having brought us isto the mp is 1917 and to curtail
practices which night result in international dis-
I
B Sectrulity Act of 1939.
Rigid enforcement of this Act. Pittman's statements
Business prestices must conform with the peace policy
of the Government,
c Now the President used his discretionary poser to provent
involvement.
20 Preslamation of general neutrality.
2. Closing of various combat 02000 to American shipping.
30 of Americans free Europe.
4a Control of the international trade in munitions.
so Conference of Foreign Ministers of American Republics.
as Declaration of Penama defining neutrality
seas around Nestern Headsphore,
be Resolution w the warlous regablics to take
stops which would preserve the neutrality
of the Festern Hendsphere,
D Melding Amount strong.
1. Strengthening of defense forces including conceription.
20 Export centrol of unitions and other strategic materials.
30 Amquisition of Atlantic because
40 Good neighber policy.
Regraded Uclassified
232
Protection of the Economy Against Shocks of War:
A Protection against shocks from abroad.
1. Coordination of foreign purchasing to avoid impeding
domestic defence.
2. Centering foreign financial missions in the Treasury.
American supervision of foreign disbursements.
Supervision of liquidation of foreign-owned
securities. Protection of American dollar.
Despite capital and gold flows, such B.S no
other economy has ever been subjected to.
3. Foreign funds control to prevent chaotic withdrawals
and disruption of internal markets.
4. Protection of our neighbors against economic aggression.
Production loans to Brazil and Chile.
Commercial loans to assure payment to American
producers.
Broader program to prevent the application of the
divide and conquer policy in this hemisphere
and to guard against other dangers of huge
surpluses.
B Protection against disruption from domestic defense program.
1. No increase in cost of living despite large increase
in production. Maintenance of price stability and
balance.
Appointment of Elliot and Henderson.
Continuous check on cost of living.
Conferences with raw material producers.
Setting up of stock piles, tin, rubber, manganese.
Releasing sugar.
Agricultural prices maintained.
2. Improvement in Government credit despite the enormous
financial burden resulting from defense.
Bond markets stable with no pegging.
Lowest interest rates in history.
3. Coordination of Governmental purchases to avoid
unfortunate competition in the last war.
4. Prevention of excessive speculation.
Maintenance of SEC controls.
Excess profits tax to keep profits reasonable.
233
- 2 -
B (Continued)
5. Increase of civilian production.
Continued expansion of housing and non-durable goods.
6. Safeguarding the wage earner.
Wage rates maintained and increased.
Appointment of Hillman.
Maintenance of collective bargaining.
Prevention of unnecessary increases in hours.
7. Making money quickly available for defense.
Defense policies to take the risks out of private
investment.
Speedy adjustment of tax policy.
RFC loans where private capital is not available or
will not do the job.
234
TREASURY department
INTER OFFICE COMMUNICATION
DATE October 18, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The following paragraphs summarise arrangements made by the Treasury Department
with the view to the uafeguarding of American interests during the var,
FINANCES
Shortly after the war broke out in 1939 the Treasury proposed to and arranged
with the Chancellor of the British Exchequer and the Minister of Finance of France
for their respective Governments to open special accounts through their Central Banks
with the Federal Reserve Bank of New York. Such accounts have been used exclusively
for var purchases in the United States. Officials of the British and French
Governments or Central Banks came to the United States with authority to operate such
accounts. It was agreed that the Secretary of the Treasury should have personal and
confidential access to these accounts, the Federal Reserve Bank being authorised by
the depositing Governments to provide the Secretary with full transcripts of their
Accounts. The Secretary thus knows the exact total and movement of funds in the
accounts, including the identity of payees. The Federal Reserve Bank of New York
charges no commission for carrying these accounts. The foreign officials operating
the accounts have authority to sign: they avoid loss of time and expense that would
otherwise be involved in cabling; and they are available to this Government and to
American business concerns for consultation. With the cooperation of the State
Department, the Treasury has in recent years improved its facilities for obtaining
financial information abroad, and enjoye cordial relations with foreign financial
authorities visiting or stationed in this country. From its several sources the
Department has an increasingly comprehensive understanding of the financial and aco-
nomic situation abroad, including particularly the resources of countries in the var
sone which are purchasing here.
SECURITIES
do a result of suggestions made by the Treasury, working in conjunction with the
Securities and Exchange Commission, the Chancellor of the British Exchequer sent to
the United States last Autumn a British security expert to manage the sale in this
country of dollar securities to which the British Government had taken title. This
representative continues to dispose of officially owned securities, carefully avoiding
any operations which might adversely affect our market, soliciting such professional
advice as may be desired, and keeping the Treasury currently informed of his transac-
tions. The New York branch of a Canadian bank serves as the depositary for such
securities.
235
- 2 -
PURCHASES
Upon the Treasury's recommendation, the President set up in November 1939 an in-
formal committee to be the exclusive lisison body of this Government dealing with
the representatives of foreign Governments interested in the purchase of war materials
in the United States. Representatives of the Treasury. War and Navy Departments con-
stitute this committee, which reports to the President through one of his Administra-
tive Assistants. The three primary purposes of this committee were to study and
advise on the availability of the desired articles; to arrange prierities; and to
coordinate purchases in such B menner as to reduce price upsets that might result from
disorganized and competitive purchasing. It has been the Treasury's policy to en-
courage the sending to this country of qualified purchasing commissions to represent
Governments buying war materials. Such commissions can deal directly with American
suppliers and also coordinate their efforts with those of our own Government.
NATIONAL DEFENSE
As the national defense program of the United States developed, together with
the increasing demands of the British Empire for aras, ammunition, and materials of
var, it became evident that increasing attention must be given to integrating British
purchases with those of the United States. To this end the Treasury, through its
representative on the President's Liaison Committee, has worked continuously with the
british Purchasing Commission with the following general objectives: The establishment
of a system of preliminary clearance on orders to be placed so that they could be
considered and acted upon in conjunction with Army and Havy purchases of the same
items or from the same suppliers: the institution of a eyetem, through the Misory
Commission to the Council of National Defense, of investigating alternative sources
of supply so as to avoid concentrating British orders in large suppliers who were
already over-loaded; the development with representatives of the British Purchasing
Commission of long-range programs for various products to assist the Advisory
Commission to the Council of National Defense and the Aray and Navy in determining
production bottlenecks which would have to be remedied through additional plant
empansion: the institution of standardisation conferences intended to concentrate
United States and British orders on products of identical design 80 that additional
capacity created by the British for their orders would be useful to the United States
in case of emergency.
STATISTICS
Continuous contact is maintained by the Treasury Department with the statistical
staff of the British Purchasing Commission. Information is obtained periodically from
the Commission regarding purchases in the United States by the British Empire
Governments. Weekly statements are received covering in dollar volume the itemised
purchases by the British Empire Governments through the Commission the itemised not pur-
chases made by these Governments with the knowledge of the Commission but
through its facilities. and inquiries made by the Commission or with its knowledge
for future purchases. Similar statements are received showing. by itemized contracts,
the dollar volume of deliveries made with respect to orders placed by Great Britain
through the Commission. The date with respect to contracts for and deliveries of
airplanes and airplane parts are specially detailed and useful in connection with
Regraded Uclassified
-3- - -
236
the American defense program. Each week there is a report showing commitments by
British Empire Governments for capital expenditures in the United States and for
extraordinary charges designed to expedite deliveries from American companies. A
monthly statement shows the amount of British payments made to date, the value of
orders to date, and the residual amount of balances due, together with the estimated
schedule of future payments.
.....
While arrangements with the British Government are principally discussed in the
foregoing paragraphs, it should be explained that a practically analogous plan was
followed with the French Government when it was actively purchasing on our market.
Arrangements with countries buying less importantly here have been concluded or are
being developed which follow the above general lines insofar as these are adaptable
to the individual cases. The Treasury is constantly striving to benefit from
experience, including that of the last war, in providing materials to foreign coun-
tries, and in achieving our own defense program.
B.M.R.
237
October 18, 1940
HM, Jr gave the President draft #1 at Cabinet
today.
Deagh I
238
10-18-40
I Protection of the -
A So increasing cost of living despite extreertinary increase
is production.
3 Appointment et Wise Millett.
0 Continuous check - cost of living.
D Conformence with materials produsers.
R Appointment of Manderson.
, Conformers wash intertry.
0 Watching of small price vises.
I Botting up of stock yiles, rubber, tim, manganess.
I Releasing of 700,000 teas of sugar.
II Corrdination of foreign purchasing to aroid impeding domestic defense.
III Coordination of governmental purchases to avoid unfortunate competition
of last was.
IV Contering foreign financial missions in the Treasury.
A American supervision of their disbursements.
a American supervision of liquidation of foreign-owned securities.
1 of price stability at balance.
& Boopite drawkie shifts in foreign markets end is demosite production.
3 Agricultural prices unintained despite less of European markets.
VI Expresement to deverment credit despite under present financial burden
on Government because of defense.
A Best maketa stable without pagging as abroad.
3 Levert interest rates is history.
VII Protection of American dollar.
& More the actost currency in the world deopite subjected capital
el - that flows - más all w other - has over been $
Regraded Uclassified
239
VIII Foreign funds centrol,
1 Proventing chaetic withdrawals und disruption of internal
markets,
10 Development of sew markets in Latin America.
0 Productive leans.
D Brasil for steel.
2 Chile for new industries.
7 Connercial Lease to - that American exportere and Americans
producers get paid during temperary difficulties.
0 Broader Export-Import Bank progrem.
IX
Protesting our neighbers against esemonic aggression.
A Taskling extraordinary problem of surpluses in Lutin-American
countries.
B Uniting them a - economic program.
0 Prevening application of "Divide and Conquer" policy in this
hemisphere.
3 Developing now markets for United States.
$ Strengthming the financial systems is neighboring countries.
X
Increase of civilien production.
A Gentinued expension of bouning.
B Non-durable geots increasing.
o Protection of unge rates.
D Appointment of Hillans.
3 defeguarding wage structure through protection of collective
I
7 Preventing increases is hours.
H
Prevention of empossive speculation.
A Naintenance of and controls.
B Impose profits tax w keep profits at reasonable 100mls
Regraded Uclassified
- , -
240
XII Making may quickly available for defense,
A Befonce policies to take the ricks out of private investment.
B Specty offortment of tax policy.
0 INC leans where private capital to not available OF will not
4a the job,
redd
Draft ma2-
10/18/yr 241
siz
I What Tas Done to Safeguard Against War,
A The Neutrality Acts of 1935, 1936, 1937.
To remedy practices that were popularly regarded as
having brought us into the war in 1917 and to curtail
practices which might result in international dis-
turbances.
B Neutrality Act of 1939.
Rigid enforcement of this Act. Pittman's statement:
Business practices must conform with the peace policy
of the Government.
C How the President used his discretionary power to prevent
involvement.
1. Proclamation of general neutrality.
2. Closing of various combat areas to American shipping.
3. Evacuation of Americans from Europe.
4. Control of the international trade in minitions.
5. Conference of Foreign Ministers of American Republics.
a. Declaration of Paname defining neutrality
zone around Western Hemisphere.
b. Resolution by the various republics to take
steps which would preserve the neutrality
of the Western Hemisphere.
D Making America strong.
1. Strengthening of defense forces including conscription.
2. Export control of munitions and other strategic materials.
3. Acquisition of Atlantic bases.
4. Good neighbor policy.
242
Protection of the Economy Against Shooks of War:
A Protection against shocks from abroad.
1. Coordination of foreign purchasing to avoid impeding
domestic defense.
2. Centering foreign financial missions in the Treasury.
American supervision of foreign disbursements.
Supervision of liquidation of foreign-owned securities.
Protection of American dollar.
Despite capital and gold flows, such as no other
economy has ever been subjected to.
3. Foreign funds control to prevent chaotic withdrawals and
disruption of internal markets.
4. Protection of our neighbors against economic aggression.
Production loans to Brazil and Chile.
Commercial loans to assure payment to American producers.
Broader program to prevent the application of the divide
and conquer policy in this hemisphere and to guard
against other dangers of huge surpluses.
B Protection against disruption from domestic defense program.
1. No increase in cost of living despite large increase in
production. Maintenance of price stability and balance.
Appointment of Elliot and Henderson.
Continuous check on cost of living.
Conferences with raw material producers.
Setting up of stock piles, tin, rubber, manganese.
Releasing sugar.
Agricultural prices maintained.
2. Improvement in Government credit despite the enormous financial
burden resulting from defense.
Bond markets stable with no pegging.
Lowest interest rates in history.
3. Coordination of Governmentel purchases to avoid unfortunate
competition in the last war.
4. Prevention of excessive speculation.
Maintenance of SEC controls.
Excess profits tax to keep profits reasonable.
- 2 -
243
B (Continued)
5. Increase of civilian production.
Continued expansion of housing and non-durable goods.
6. Safeguarding the wage earner.
Wage rates maintained and increased.
Appointment of Hillman.
Maintenance of collective bargaining.
Prevention of unnecessary increases in hours.
7. Making money quickly available for defense.
Defense policies to take the risks out of private investment.
Speedy adjustment of tax policy.
RFC loans where private capital is not available or will not
do the job.
Draft #II
10-18-40
I What See Done to Safeguard Against Name
244
A the Neutrality Acts of 1935, 1936, 1937.
to ready practices that were popularly regarded us
having brought w into the mp in 1917 and to curtail
practices turbaness, which night result in international dis-
3 Neutrolity Act of 1939.
Rigid enforcement of this date Pittman's statements
Business practices mut confore with the peace policy
of the Government,
c How the President used his discretionary power to provent
involvement,
20 Preelamation of general neutrality.
2. Closing of various combet areas to American shipping.
30 Evecuation of Americans from Europe.
40 Control of the international trade is munitions.
50 Conference of Foreign Ministers of American Republics.
be Declaration of Pensun defining neutrality
some around Restern Hemisphere.
be Resolution w the various republics to take
stops which would preserve the neutrulity
of the Nestern Honisphere,
D Making America strong.
do Strengthening of defense forces including conscription.
20 Export control of munitions and other strategic materials.
" Asquisition of Atlantic boxes.
s Good neighbor policy.
Dirt #2
Protection of the Becausey Against Shocks of Wars
245
A Protection against sheeks from abroad.
1. Coordination of foreign purchasing to avoid impeding
domestic defense.
2. Centering foreign financial missions in the Treasury.
American supervision of foreign disbursements.
Supervision of liquidation of foreign-owed securities.
Protection of American dollar.
Despite capital and gold flows, such as no other
escasey has over boen subjected to,
3. Foreign funds control to provent chaotic withdrewals and
disruption of internal markets,
4. Protestion of our neighbors against economic aggression.
Production leans to Brasil and Chile.
Commercial locas to assure payment to American producers.
Breader program to prevent the application of the divide
and conquer policy is this hemisphere and to guard
against other dangere of huge surpluses.
B Protection against disruption from domestic defense program.
2. No increase in cost of living despite large increase is
production. Maintenance of price stability and balance.
Appointment of Miliet and Benderson.
Continuous check on cost of living.
Conferences with material producers.
Setting up of stock piles, tin, rubber, manganess.
Releasing sugar.
Agricultural prices maintained.
2. Improvement is Government credit despite the emornous financial
burden resulting from defense.
Bond markets stable with no pagging.
Lewest interest rates is history.
3. Coordination of Governmental purchases to avoid unfortunate
competition in the last war.
4a Prevention of expensive speculation.
Maintenance of see controls.
Income profits tax no keep profite reasonable.
Regraded Uclassified
246
- a -
5 (Continued)
50 Increase of civilian production.
Continued expansion of housing and non-furable goods.
60 Refuguarding the wage carner.
Wage rates maintained end increased.
Appointment of Hillman.
Naintenance of collective bargaining.
Prevention of unnecessary increases in hours.
7. Making maney quickly available for defense.
Defense policies to take the risks out of private investment.
Specify adjustment of tax policy.
BFO leans where private capital 10 not available OF will not
4b the M.
Regraded Uclassified
10/21/40
247
1 what The Done to infeguard Against War.
n The Neutrality Acts of 1938, 1936, 1937.
to rematy practices that vere popularly
regarded as having brought us into the
was in 1917 and to ourtail practices
which night result in international dis-
turbances.
3 Neutrality Act of 1039.
Rigid enforcement of this Act. Pittman's
statement: Business practices must con-
form with the peace policy of the Govern-
ment.
c How the President used his discretionary power
to provent involvement.
1. Proclemation of general neutrality.
2. Closing of various combat areas to
American shipping.
3. Evacuation of Americans from Durope.
4. Control of the international trade in
munitions.
5. Conference of Foreign Ministers of
American Republics.
a. Declaration of Panama defining
neutrality sone around Western
Hendsphere.
be Resolution by the various republics
to take steps which would preserve
the neutrality of the Western Heade-
phere.
D Making America strong.
1. Strengthening of defense forces including
conseription.
2. Expert control of munitions and other
strategic materials.
S. Acquisition of Atlantic bases.
4. dood neighber policy.
248
Protection of the Economy Against Shocks of War:
A Protection against shocks from abroad.
1. Coordination of foreign purchasing to avoid
impeding domestic defense.
2. Treasury. Centering foreign financial missions in the
American supervision of foreign disbureements.
Supervision securities. of liquidation of foreign-owned
Protection of American dollar.
Despite capital and gold flows, such as
no other economy has ever been subjected to.
3. Foreign funds control to prevent chaotic with-
drawnls and disruption of internal markets.
4. Protection of our neighbors against economic
aggression.
Production loans to Brasil and Chile.
Commercial loans to assure payment to
American producers.
Broader program to prevent the application
of the divide and conquer policy in this
headsphere and to guard against other dangers
of huge surpluses.
B
Protection against disruption from domestic defense program
1. No increase in cost of living despite large in-
crease in production. Maintenance of price
stability and balance.
Appointment of Elliot and Henderson.
Continuous check on cost of living.
Conferences with you material producers.
Setting up of stock piles, tin, rubber, manganess.
Releasing
Agricultural prices maintained.
2. Improvement in Government credit despite the
financial burden resulting from defense.
Bond markets stable with no pagging.
Lowest interest rates in history.
3. Coordination of Governmental purchases to avoid
unfortunate competition in the last var.
Regraded Uclassified
249
B (Continued)
4. Prevention of excessive speculation.
Maintenance of SEC controls.
Excess profits tax to keep profite reasonable.
5. Increase of civilian production.
Continued expansion of housing and non-durable
goods.
6. Safeguarding the vage earner.
Wage rates maintained and increased.
Appointment of Hillman.
Maintenance of collective bargaining.
Prevention of unnecessary increases in hours.
7. Making money quickly available for defense.
Defense policies to take the risks out of
private investment.
Speedy ad,justment of tax policy.
RFC loans where private capital is not available
or will not do the job.
more
10/4/40
250
1 that Tax Done to Bafeguard Against War.
A The Neutrality Acts of 1935, 1936, 1937.
To remoty practices that were popularly
regarded as having brought us into the
war in 1917 and to curtail practices
which might result in international dis-
turbaness.
3 Neutrality Act of 1959.
Rigid enforcement of this Act. Pittman's
statement: Business practices must con-
form with the peace policy of the Govern-
ment.
o How the President used his discretionary power
to provent involvement.
1. Proclamation of general neutrality.
2. Closing of various combet arens to
American shipping.
3. Evacuation of Americans from Europe.
4. Control of the international trade in
munitions.
5. Conference of Foreign Ministers of
American Republics.
a. Declaration of Panama defining
neutrality none around Western
Hemisphere.
b. Resolution by the various republies
to take steps which would preserve
the neutrality of the Western Heade-
phoro.
D Making insurin strong.
1. strengthening of defense forces including
conseription.
2. Emport control of munitions and other
strategic materials.
3. Asquisition of Atlantic baces.
4. food neighbor policy.
Regraded Uclassified
251
Protection of the Economy Against Shooks of war:
A
Protection against shocks from abroad.
1. Coordination of foreign purchasing to avoid
impeding domestic defense.
2. Treasury. Centering foreign financial missions in the
American supervision of foreign disbursements.
Supervision securities. of liquidation of foreign-owned
Protection of American dollar.
Despite capital and gold flows, such as
no other economy has over been subjected to.
3. Foreign funds control to prevent chactic with-
drawals and disruption of internal markets.
4. Protection of our neighbors against economic
aggression.
Production leans to Brasil and Chile.
Commercial loans to assure payment to
American producers.
Broader program to provent the application
of the divide and conquer policy in this
hemisphere and to guard against other dangers
of huge surpluses.
B
Protection against disruption from domestic defense program
1. No increase in cost of living despite large in-
crease in production. Maintenance of price
stability and balance.
Appointment of Elliot and Henderson.
Continuous check on oost of living.
Conferences with raw material producers.
Setting up of stock piles, tin, rubber, manganees.
Releasing sugar.
Agricultural prices maintained.
2. Improvement in Government credit despite the
enermous financial burden resulting from defense.
Bond markets stable with no pagging.
Lowest interest rates in history.
3. Coordination of Governmental purchases to avoid
unfortunate competition in the last var.
Regraded Uclassified
252
$ (dentinued)
4. Prevention of exerceive speculation.
Maintenance of sec controls.
Excess profits as to keep profits reasonsble.
5. Increase of civilian production.
Continued goods. expansion of housing and non-darable
6. Safeguarding the vage carner.
Mage rates maintained and increased.
Appointment of Willman.
*4 intenance of collective bargaining.
Prevention of increases in hours.
7. Making money quickly available for defense.
Defense policies to take the risks out of
private investment.
Speedy adjustment of tax policy.
TOPO leans where private capital is not available
or will not de the job.
Draft,
253
October 19, 1940
MEMORANDUM FOR THE SECRETARY:
I am enclosing Mr. Swing's draft of the speech based on
a longer draft submitted to him.
You may wish to change the phrase "remain non-belligerent"
on page 1 six lines from the bottom to "stay out". The isolationist
senators may seize on the phrase if it is not changed.
On page 8 you may wish to emphasize that the additional
jobs which are spoken of are jobs in private industry and are
not relief work.
Huntington Carno
254
In a world in chaos, a free people must have two aims, to safeguard
itself from war, 30 long as its own freedom is not at stake, and to protect
its economic life from the shocks of war.
No people, through its democratic processes, has ever made a more sin-
cere effort than the United States in the last seven years to safeguard
itself from war. It has understood that a price had to be paid for this,
and it willingly and consciously sacrificed some of its rights at sea, its
rights of travel, and some of its rights to do business with warring countries,
Before the war in Europe broke out, in September 1939, these were efforts
made in the abstract, efforts to keep us out of some future war. When the
war came, we had to adjust ourselves not to an abstract war, but to a. grim
and real and expanding one in which our own interests as a free people are
bound to be affected even though we are determined to remain non-belligerent.
But first it needs to be borns in mind that we are at peace today after
making real sacrifices for peace, which the Administration has led in
recommending and which the Congress with all deliberation has voted to make.
To the sacrifices in neutral rights and foreign commerce were added the burden
of a gigantic program of national defense. We have introduced the peace
- 2 -
255
time draft. And at the same time We have greatly strengthened our
political and economic ties with our neighbors in Latin America, whose
safety is part of our own safety. We have increased our security by
leasing from Great Britain the bases from which our coast and the Panama
Canal can be defended, We have widened our responsibilities for the
defense of the Western Hemisphere. Without losing any of our fervent will
to peace, we have understood we must express our might in the terms, not
only of freedom and high standards of life, but in military, air and naval
power. It has taken foresight, courage and leadership to see these aims,
to maintain peace at the cost of sacrifice, to preserve freedom at all cost,
our own
to keep/spiritual and economic standards high, and yet to know the meaning
of the conflagrations that light our horizons. We know that Franklin
Roosevelt has shown this leadership, and I believe the American people will
ask him next week to continue his great service, so that these sims shall
be realized without interruption and without any slackening of effort.
I want to speak in some detail about the phase of the government's
activities with which I an most familiar. I believe that no other govern-
ment in history has made an effort comparable with ours and schieved a
- 3 -
256
comparable success in insulating the economic life of its people against
the shocks of war. I say that advisedly. Thousands upon thousands of
hours have gone into conceiving and applying the policies designed to
avert economic disorganization. With the outbreak of war, the first
job on the economic front was to 8 afeguard industry and agriculture from
its shock. I want to mention some of the measures put into effect at the
Treasury. We haven't talked much about them. We did not advertise that
extraordinary steps were being taken. But if we had failed, our failure
would have been brought to your attention all too painfully.
One of the problems the President worried about was foreign buying in
our domestic markets. Foreign countries might have bought up goods needed
for our own defense, they might have carried on operations in a way that
prevented our knowing just what they were buying. Some foreign purchases
would not help build up our productive capacity for our own defense. We
have taken measures to protect our own interests. We have made sure that
foreign buyers have not bought what we must keep for ourselves. Foreign
purchasing has been centralized so that we know what is being done. And we
have succeeded in planning so that whatever productive capacity is increased
Regraded Uclassified
257
is in our own service, as well' as that of a foreign purchaser. All such
measures were taken too late during the First World War. They are not
steps normally taken by nations at peace. And I believe we have shown
more foresight, even, than any country at war.
We have watched carefully the disbursements of foreign governments in
this country. We set up machinery to check the hasty liquidation of securities.
We have experienced no panicky selling, no disorganization of markets. Real
values of securities have been saved from outside attack, and we have avoided
incalculable and disastrous loss to large numbers of investors. Before the
war, this country received an inflow of foreign capital and gold never
before equalled anywhere at any time in history. We accepted the capital
and we bought the gold, we gave it refuge from predatory seizure abroad.
We did it without disturbing our exchange rate. The dollar kept its steady
value, which it needed if our foreign trade was to be steady and to grow.
Our steadiness and economic strength were reflected in increased trade. Te
found new markets for American goods, new jobs were made.
One of the fruits of this policy was that the Treasury, by instituting
control over foreign funds, was able to safeguard billions of dollars that
belonged to countries which the aggressor nations would have plundered
- 5 -
258
and used against us. If they had come into possession of those funds,
had
they would have/ a tremendous leverage over us. They could hurt us with
the very money to which we had given asylum. The control we exercise over
this money, exercised by license system in foreign exchange transactions,
was not improvised on the spur of the moment. The invasions of European
lands have not been heralded. They were executed as surprise measures. But
the Treasury was able to act as promptly, because the peril had been fore-
seen and the devices had been designed which our own safety required.
Then came the problem of maintaining our peace-time economy without upsetting
it with the vast expense for defense. In the campaign, a great deal of
criticism has been offered of what has and has not been done. Let us look
at the facts. In the first year of the war, our production as measured by
the Federal Reserve Board index, went up about twenty percent. This is a
large increase in production for any country at any time of peace and it is
still climbing. The danger here is that the benefits of an increased pro-
duction and employment should be undermined by an increase in prices. But
while production has gone up twenty points, the cost of living, according to
the Bureau of Labor Statistics has gone up one and B. half points, from
sighty-four to eighty-five point five. That is not the work of natural
Regraded Uclassified
- 6 -
259
forces. That 18 the regulation of forces for the general good. Production
and employment have improved, but the whole price structure has been main-
tained stable and in balance. In this same time, the wholesale price index
rose only four points. Such a rise would have been considered normal for
Mr.
an increase in production only half as great./ Leon Henderson and the
agencies of the government are watching every price move, calling on
industrialists to explain increases which seem questionable and giving them
full publicity in instances which have warranted it.
At the same time the government, through Mr. Stettinius, is protecting
the prices of strategic raw materials, like tin, rubber and manganese.
They are doing this by laying in ample stocks in a way that does not over-
stimulate the market, and produce the fever of rising prices. That will
save you from extortion later on in the completion of your defense program.
Let me give on example of how the government can work. At the outbreak
of the war, an unwise and fantastic price speculation in sugar was begun.
Before it went too far the government released seven hundred thousand tons
of sugar which it held. That stopped the rocketing of prices, brought the
market to its senses, and prevented an inventory accumulation.
- 7 -
260
Now to come to the contentious subject of providing capital for the
defense program. Our record shows that in a remarkably short time funda-
mentally sound policies were established. Private enterprise is doing the
work of providing new capital wherever it is willing to do that work. The
Defense Commission, the Treasury and other agencies, have agreed on a
program which removes the risks from that investment. While Congress was
discussing the necessary legislation, the Treasury used its administrative
powers to the full to reduce the risk and enable the Army and the Navy to
make private contracts that would tempt private capital. Let me repeat what
I have said in the past: This Administration does not intend to make of
war industries a happy hunting ground for profiteers and speculators.
Profits from armaments are not to be sacrosanet. They are not to be tax-
free. But American business is patriotic, it already is demonstrating its
patriotism in cooperating in the defense program. The great body of American
business will not criticize, and certainly the American people as a whole
will not criticize, a policy that prevents profiteering, and its attendant
demoralisation.
In the last month a good deal has been said about jobs. We have been
Regraded Uclassified
- 8 -
261
told that the government hasn't "created" any jobs. This is a scandalous
statement, and millions of Americans know from their own experience how
false it is. From nineteen thirty three to the middle of nineteen/thirty- forty
rime, the number of industrial jobs in the United States rose from around
twenty-six and a. half millions to thirty-six millions. I don't know what is
meant by "creating" jobs, unless it is to put a man to work who hasn't been
able to find work. Nearly ten million people who were not working seven
forty
years ago were working during the summer of From the
August of last year, a month before the outbreak of the war, till this
August, employment rose by nearly two million, and the estimate of new jobs
in nineteen fortyone is another two million.
The defense program is an enormously costly undertaking. During the
first four months of this fiscal year more than blank billion dollars worth
of contracts were cleared, a record for any country. If we believed the
opposition critics, we would have to believe that such a vast economic burden
would wreck the credit of the country. You have heard it said over and over
again that the government is on the way to bakruptcy. But what are the facts?
During the last seven years our tax structure has been greatly strengthened,
Regraded Uclassified
- 9 -
262
Its capacity to yield revenue has been increased. The equity of our tax
system has been improved. We have indeed borrowed large suns for public
works, relief, and aid to agriculture, but we have come through the great
battle against depression with credit unimpaired. If the last seven years
have added over twenty billions to the public debt, it was not money thrown
away. The real wealth of the country was increased. We saved our productive
system. No one knows better than I that it is serious to go into debt, but
we achieved what no other country has dons, we combined recovery and reform,
we safeguarded and strengthened democracy in this country. If we continue
to safeguard and strengthen it we may have saved it for the world.
263
NEW YORK mirror
DAILY AND SUNDAY
t,
235 EAST 4517 STREET
MURRAY HILL 2-1000
October 20,1940
Dear Mr.Morgenthau:
Mr. Winchell wanted me to let you know
why he did not use the material given me by your
secretary and later confirmed by you via telegram.
He did not want to cut any of it and
as it was it was too long to include in the broadcast.
sincerely,
Rose Begman
for Walter Winchell
TIGHTRANS
gz I M9 ES
1998A347 VO
CELICE
264
Getober n, 1940
- M. Sadage
I mat $ theat you for the help you
- Seturday afternown. Mr. Caline has
Fills told as of the interest you took in the subscr
at the effert you devoted to 11. I used not
tell you how 1 I value your contribution to
1 I I : I I s
10 use refreshing to ⑉ you then you
were in Vashington. I hope you will give no
the pleasure of seeling you when you are here
again.
Sincerely years,
(Signed) H. Morgenshau, JI
Indep I I in
1460 Breadeny
See Tart, - York
isc
Regraded Uclassified
265
Catabor m, 2010
I á
I - to then you for the help you
Fills - = egain.
as Submittey afterness. M. Cairee has
H you has - I value contribution to
at of the interest you took In the natter
offert you to as. I missi not
I 1 1 =
20 use refreshing to ⑉ you then you
to Techington. hope will give -
4 0 I i E I E $
years, Blaswelly
(Signed) E Morgenthau, Jr.
I I ] in
2440 Needway
Bew Sot, the Healt
266
October 21, 1940
Dear Mr. Swing:
I want to thank you for the help you
gave se Saturday afternoon. Mr. Caires bas
told se of the interest you took in the matter
and the effort you devoted to it. I need not
tell you her much I value your contribution to
the cause 10 both have st heart.
It was refreshing to ⑉ you when you
were in Washington. I hope you will give se
the pleasure of seeing you when you are here
again.
Sincerely yours,
(Signed) H. Morgemshau, JI.
Mr. Paymond Gram Suing
1440 Broadway
Sew York, New York
Regraded Uclassified
267
Detains n, 1900
- - Goings
to
19 1 FELE]
mill s - instructions
f
I (
(Signed) H. Morgesthau, Jr.
I I ] in
1440
----
FRIM
268
MR. GASTON'S DRAFT 10/21/40
Draft 1 - National Defense
10-21-40
269
What I have to say to you tonight is political. It is political
in the sense that the government of the United States is a political
matter. It is political in the sense that every four years the people
of the United States have to consider whether the policies that have
been in effect in their government for the four year period that is
nearing an end and the service of those persons who have been executing
those policies should be continued; and now we are on the verge of
making that decision.
You should not have to make 80 great a decision without a full
report on important matters at this time from those whom you chose
four years ago to serve you, even though you have been getting reports
from time to time as the work progressed. Nor should you have to
make this important decision without hearing fully and listening
attentively to those who propose to change policies and to change the
officers who execute policies. You should listen, and I hope you have
listened, with especial and concentrated attention to opposing candidates;
for after all you do know something about those who have been in
270
- 2 -
office, and you may know very little about the opposition except what
they may tell you of what they propose to do. That may be little or
it may be much, but at least it is material upon which you must base
judgment.
Of those matters as to which you are entitled to a fair report
none is more crucial than the subject of National defense. I propose
to tell you as simply and frankly as I can what we have done to meet
the developing menace of attack upon us and upon the system of self-
government that has made us great as a Nation and great as a people
and that we value more than life itself.
This report is the more necessary because, I am sorry to say,
there has been lately an attempt to make what should be a united, non-
partisan National effort the subject of partisan controversy. I regard
this as unfortunate. For reasons that none of you can fail to understand
I had hoped that we might keep our defense program as far removed as
possible from campaign controversy. For controversy does not promote
unity of effort and I had hoped that we might present a united front
Regraded Uclassified
271
- 3 -
to the world.
About the existence of a menace to our freedom there is very
little argument today. For seven years we have watched the increase of
the power and the aggressive spirit of governments that deny the
"
validity of everything we hold vital to human progress. We have seen
those governments extend their power by intimidation and by bloodshed
over weaker countries, one by one. Appeasement did not slake their
appetite for conquest, but only strengthened their lust to extend
their system. We heard them say "Give us this and we will be satisfied"
and we saw them take it time after time and move on to new aggressions;
so that we saw that their promises were only an instrument of policy,
meant to be disregarded.
Knowing that a world in flames would surely hold the greatest
peril for us we began to strengthen our defenses. Relying, as we
always have relied and must continue to rely, on the navy as our first
line of defense, we built a stronger navy. We reorganized our army
and gave intensive study to the best means for putting it on a war
basis when the need should arise.
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Early last year when the illusory peace of Munich had been
followed by the cynical seizure of all of Czecho-Slovakia, we foresaw
the possibility and even the genuine probability that a great struggle
which would engulf all Europe would soon follow. We - and by this
word "wen I mean the responsible leaders of this Administration -
were not able to persuade all with whom we had to deal of the imminence
of the danger. Some in high places told us they had better information
than the official representatives of the Government were able to
gather.
I advocated all the steps possible to protect us from being
involved and to insulate us as far as possible from the shock of
war; but I approved the plea of Secretary Hull that we repeal the total
embargo on the sale of arms to belligerents. Why did I do this?
Because I saw, what all the world should have seen, that the
aggressors were arming swiftly, far more swiftly and aggressively
than those who might have to resist them. The assurance of American
arms to the non-aggressors then would have been a powerful argument
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and instrument for peace. That argument was not made. We did not
repeal the arms embargo then. And why did we not repeal it? I
may as well be frank: Because a stubborn opposition that was not
awake to the danger in which the world - including us - then stood
would not permit its repeal. They ridiculed the danger and opposed
acts to meet it.
But the great Nations were still nominally at peace and we were
able to help the non-aggressors to prepare. Britain and France saw
menacing them the greatest air fleet ever assembled, greater than the
military air fleets of all other nations put together. They came to
us with a plea for military planes. They had the money to pay for
them. We helped them to get them. The facilities of American airplane
and airplane engine plants were greatly expanded as the result of the
orders they placed. This was done without interfering in the slightest
degree with production for our own military and commercial needs.
Whole new plants were built. American airplane capacity - particularly
military plane capacity - was multiplied. If this had not been done,
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American aircraft capacity today would have been far, far behind
what it is today. These foreign contracts not only built up plants
and tooling, but they also developed quantity production and created
a great body of skilled labor.
In the diplomatic field we were not idle at this time. We
did not sell any country down the river at this or any time. We did
not sell democracy down the river. But we were active, so far as it
was possible for us to be active with any promise of effect. We were
active for peace. We reasoned with the heads of nations and implored
them to work for peace. We implored them to respect the rights of
other nations and to submit their differences and their demands to
frank negotiation. We pleaded as America has always pleaded, for
respect for international obligations.
Though the skies looked black, we never up to the moment
when the catastrophe actually came relinquished our efforts or gave
up hope. I use the great name of America here in the broadest sense.
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We counseled continuously with the other nations of the western
hemisphere and their voice was one with ours. This was so because
it has been our policy, as it has been theirs, over the last eight
years, to strengthen our mutual ties of friendship. The friendship
of the Americas has ceased to be a platitude and has become a reality
which I can tell you sincerely is one of the strongest elements in
our position today.
We did not succeed because we dealt with forces so besotted
with the doctrine of force and so exultant at the gains it had made
that they were immune to reason. The great war we had feared broke
out in September of last year, after Germany had seized upon the most
shallow of pretexts to invade and destroy Poland.
I called the Congress into special session and at my request
the embargo on the sale of arms and instruments of war was repealed.
To have adopted any other course would have been to favor the Nations
that had intended war and had built up their arsenals for attack.
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At the same time, with provisions that the sale of arms should be on
a cash and carry basis, that Americans should not travel to belligerent
countries or into danger zones, and that American ships should not go
into combat areas, we did everything possible to save the United States
from becoming involved.
In my budget message of January, 1940, I asked for greatly in-
creased appropriations for the National defense, a total of nearly
two billions of dollars. We proposed to add to a navy then the equal
of any in the world and to add to the facilities for training and
expanding our army. But a few months later Norway and Denmark had
been overrun and on May 10 came the invasion of Holland and Belgium.
Four Nations that had sought by every means in their control to live
at peace with their powerful neighbors had been everrun and it had
become crystal clear that not peaceful intent or peaceful policy or
international agreement or world opinion - that nothing except the
power to resist could protect any Nation from aggression.
We saw the development of arms that could strike across the
277
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seas. We saw the malignancy of a system of government - - government
by force - which is the open foe of our own drmocratic system. We
should have been false to our country if we had not drawn the necessary
conclusion.
We resolved to arm to meet any menace known to the world. We
knew that we had the resources of men and materials to do it. We began
rapidly expanding our plans, our detailed plans for defense. We did
not ask for a great blank check to be spent as rapidly as conditions
would permit. In a special message to the Congress on May 16 I asked
for an additional $1,182,000,000 to be spent according to a concrete
plan and as the plans were evolved I approved further requests for the
Army and the Navy. On May 31 in another special message I asked for
an additional $1,277,000,000.
The heroic retreat through Dunkirk and the collapse of France
only made the lesson to us clearer. Britain had become the last
stronghold of free government on the continent of Europe. To meet
her urgent need we sold to her arms, ammunition and ships which we
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could replace, and we went forward with redoubled vigor with our own
preparations. The experts of the Army and the Navy, with a swiftness
and a sure grasp of the complexities of the latest methods of warfare
revealed in the European struggle that is, I think, without parallel
in military history, translated into a concrete balanced program the
requirements for the greatest peacetime expansion of defensive material
we have ever been called upon to make. Thus I was able to send a.
special message to the Congress on July 10 calling for defense appro-
priations in the amount of $4,800,000,000 to round out the program,
except in the single matter of the immediate training of a citizen army.
It is useful, I think, to recite this history if for the sole
reason that it tends to inspire confidence in the capacity of a
Democratic government to act, and to act decisively and without hysteria
in a great emergency. I don't believe, and I don't think you believe,
that it furnishes any basis for the assertions of partisan extremists,
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at one time that we have been hysterical because we foresaw peril
and counseled haste, and at another quite contradictorily that there
hasn't been haste enough.
But there is more to the history of these efforts. It is the
story of the suppression of partisanship in the interest of the defense
of America, of the voluntary and priceless service of the leaders
of industry and workers alike the story of the unity that democracy
can command in an emergency. It is a story that fills me with pride
and gratitude as I tell it; pride in America and gratitude to Americans.
Quite early this year we began calling key men in American
industrial life to Washington for consultations on defense. At the
time of the invasion of the low countries many were spending a large
part of their time here and some who were important figures in crucial
industries had established themselves in offices here and were giving
their full time to defense problems without recompense.
On May 29 the Advisory Commission to the Council of National
Defense was created. It included, as you know, the then Chairman
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of the Board of the United States Steel Corporation, the President of
General Motors Corporation, the President of one of the great American
railroads, the Burlington Lines, the Dean of Women of the University
of North Carolina, the President of a great labor union, the Amalgamated
Clothing Workers of America; a member of the Board of Governors of the
Federal Reserve System and one of the Commissioners of the Securities
and Exchange Commission. Of the seven members of the Commission only
two were from the Government service; five were from the outside,
three were industrial leaders, one a leader of labor and one an edu-
cational leader.
What is not so well known is that these seven have called to
their help in Washington some two hundred other persons who are giving
their full time to the service of their government without pay. It
would be unfair to give you the names of any of these patriotic
Americans and the industries and institutions they represent without
giving them all to you, which I simply haven't the time to do. Their
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names constitute an honor roll of American trade, American industry,
American labor, the American bar and American education. It is an
honor roll in a double sense, for here are men and women who represent
the very core of American industry and all the essential activities
of American life.
They were summoned to Washington with the simple word "You are
needed" - and they came without question or delay. They and those
who selected them were chosen without thought of political partisanship
and their service has been on a basis of pure patriotism. They were
chosen only as men and women who had the knowledge and the ability to
help in pushing forward the defense program; and that they are doing
in a way that is certain to bring new credit to American ingenuity,
American drive and American technical knowledge, qualities in which
we do not take second place to any people in the world.
As a part of the program of National defense I sent to the
Congress on June 20 of this year the names of two men to fill vacancies
in the positions of Secretary of War and Secretary of the Navy. For
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the first of these two vital positions in our defense planning I named
Henry L. Stimson, who was Secretary of War in the Cabinet of President
Taft and Secretary of State in the Cabinet of President Hoover and
had been a Colonel of Field Artillery in the last great war. For the
second I named Frank Knox, a highly successful newspaper executive
whose record included service as a volunteer cavalryman in the war
against Spain, service as an officer in the field in 1917 and 1918,
and his candidacy on the Republican ticket for the Vice Presidency of
the United States in 1936.
I chose these two men for their knowledge and ability to handle
these great and responsible posts at a peculiarly critical time. I
chose them because they had the vision to see the need of a great
defense and had the will to push it through. I chose them also because
I knew them to be unselfishly devoted to the Nation's interests.
Finally, I chose them because they were Republicans. The reason for
that last consideration was very simple. It was not due to any thought
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of dividing responsibility or shifting responsibility for our defense
effort. It was much less subtle than that. It was to unite responsi-
bility and to unite effort. I wanted our defense program to be, not
a partisan effort and a partisan responsibility, but a great National
effort which should unite all Americans of all kinds of political belief,
which should unite patriotic Americans of all walks of life.
It has united them. A Nation united is behind our defense
program. Don't let any misguided partisanship mislead you on that.
I would be more scornful of those who tell you that the defense program
has been bogged down in needless delays if I thought any possible
aggressor who might attack us was being deceived. But I know they are
not being deceived. They know better. They know that no Nation has
ever moved more swiftly to build an impregnable defense. They know
that here a democracy is vindicating its ability to defend itself.
The evidence is in the willingness with which the Congress has
voted appropriations running into many billions. The evidence is in
the quick and ready response of leaders in all walks of American life
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when we called upon them to render volunteer service. The evidence
is in the speed and absence of haggling with which American manufacturers
have shown their willingness to expand and tool their plants in antici-
pation of orders and to trust their Government to see that they get
a. square deal. The evidence is in the eagerness of workers to be
trained and to share in the war effort. The evidence is in the
alacrity with which young men -- millions of them -- have offered
themselves for training for military service on their country's call.
I do not intend to confuse you with figures on the defense
program, but some of the salient facts are these: The Congress has
voted actual appropriations for the fiscal years 1940 and 1941 in an
anount of more than ten billions of dollars. To these are added
authorizations to enter into contracts which bring the total of
expenditures now authorized to more than 19 billions of dollars. The
work of the experts of the Army and the Navy in enlarging and bringing
up to the latest design and requirements their plans for ships, guns,
285
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tanks, ammunition, buildings, clothing and all the manifold other
items that will be needed in the well-rounded plan for complete
defense, and the work of the experts of the advisory commission in
seeking out and providing for the facilities to manufacture these
things has made it possible up to date to award contracts in the amount
of more than eight and a half billions of dollars. These contracts are
not based on guesses about possible production. They are contracts
awarded to the most experienced and successful of American manufacturers
with the approval and on the recommendation of the greatest industrial
geniuses this country or any country in the world possesses.
But these figures show only a part of our effort. We are
accumulating materials, we are training skilled workers and we have
acquired new outlying naval bases to protect our coasts and the Panama
Canal.
A divided Nation, a discontented Nation, a weak Nation could
not do these things. We are not divided, but united. We are not weak,
but strong.
286
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Let me run the risk of being accused of partisanship by saying
not only that we are strong, but that we are much stronger because of
the policies we have pursued in the last seven and a half years. We
have improved and added to our laterial resources. We have strengthened
our financial system. We have built many thousands of miles of good
roads. We have improved our rail transportation systems and built a
reat air transport industry. We have made great improvements in
healthful living conditions. We have kept men at work enlarging their
skills and teaching them new skills. We have enabled them to work
under fairer conditions and with better security for the future. We
have fed the country. We have increased farm income. We have brought
our industrial production to the highest level it has ever attained.
By all these things we have added to our material wealth and
strength and we have built up a factor of strength in improved morale,
in the betterment of our human resources, that is surely not less
important.
America is united. America is strong for the defense of the
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287
- 19 -
land and for the defense of American ideals for human progress.
-000-
288
Mr. Cairns' draft. 10/22/40
289
I want to speak to you tonight about a problem which
I believe is more important to every individual American than any
other problem which has arisen in the United States during the
present Administration. I want to talk to you about keeping out
of the wars that are raging today in Europe and in Asia.
War for the United States would be a catastrophe for
every man, woman, and child in this country. It would mean the
killing and maiming of our finest young men, the disruption of the
lives of their dependents, the disorganization of our whole economic
structure, hysteria in which all the liberties and rights we have
sought to build up for one hundred and fifty years would be en-
dangered, and an aftermath which none can foretell. We who lived
through the days of 1917 know something about this, and we know,
too, that if the United States enters this war the days of 1917
will not only be repeated, but probably will be worse.
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290
- 2 -
I want the people to know that this administration feels
today and has felt since it first took office that war for the
United States would be an unmitigated calamity and evil, and must
be prevented even at the price of painful sacrifice.
There are those who during the present campaign have
sought to plant in the minds of the people the idea that the Democratic
Party is a war party and that day by day the Administration has sought
to bring the United States closer to the raging storms in Europe and
Asia. I am sure that the people know that that accusation is false.
Tonight I want, as briefly as possible, to show how false it is.
After the war feeling of 1917 had receded and after the
disillusionment which followed Versailles, a search for the factors
and forces which carried America into that war was begun. This
Administration determined that if it were possible by legislation
and by Executive action to prevent those same factors from lead-
ing the nation into a new war, there would be no repetition of 1917.
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- 3 -
There was disagreement, of course, on what forces had been respon-
sible; but the Administration decided to err, if at all, on the side
of safety. It determined to disocurage all practices which reasonably
could be supposed to have led us to war in 1917.
With those principles in mind, the Congress passed and I
approved the Neutrality Act of 1935. That, let me remind you, was
five years ago.
Prior to 1917, there was no prohibition against American
citizens traveling on vessels that flew the flag of belligerents, and
in those years American citizens did travel on vessels belonging to
the warring powers. I need not recall to you the feeling which swept
this country after the "Lusitania", the "Arabic", and the "Sussex"
had been sunk on the high seas with the loss of the lives of American
citizens. This Administration determined that if that led us to war
in 1917, it would not happen again. Accordingly, in the Neutrality
Act of 1935 it was written into law that the President could take steps
to prohibit, under severe penalty, American citizens from traveling on
vessels belonging to belligerent nations.
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- 4 -
Before 1917, American vessels regularly engaged in the
munitions trade with the warring powers. This, of course, was in
accordance with their absolute rights under international law. But
you and I know that, as the warring nations became more and more
desperate, American vessels were sunk with the loss of American lives
and American property. In the Neutrality Act of 1935, it was pro-
vided that American vessels could not engage in the munitions trade
with foreign belligerents. Even though it meant further sacrifices
on our part, this Administration was determined to stay at peace.
There was talk, too, during the twenties and the thirties
that by becoming an arsenal of that belligerent power which con-
trolled the seas, we had automatically become involved in the war
of 1917. It was realized by the Administration that the trade in arms
is a matter which so vitally affects our foreign relations that the
Government cannot afford to remain in ignorance of its ramifications.
Therefore, it was provided in the Neutrality Act of 1935 that all
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293
persons engaged in the munitions and armaments trade must register
with the Secretary of State, and before any arms or munitions could
be exported from the United States a license for such export had to
be secured.
After the enactment of the Neutrality Act of 1935, this
Administration did not rest on its oars. Much had been made of
the fact that the huge loans by American citizens to the Allies
prior to the World War gave the United States & stake in the outcome
of the war. It was alleged that the sale of Allied bonds by certain
powerful American financial concerns, acting as agents for the
belligerent nations, gave those financial concerns such an
interest in the outcome of the war that they willingly used all
their immense power to bring the United States to the aid of the
Allies. With the firm resolve that no pocketbook interest should
influence the peace policy of the American people, we enacted
294
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the 1936 Neutrality amendments which effectively precluded belligerent
countries from obtaining credits here which might give any class or
group of our citizens a financial interest in the outcome of the war.
In the Neutrality Act of 1937, the provisions that I have.
discussed above were strengthened and re-enacted. Furthermore, it
was decided to surrender another right in the hope that by so doing
there would be less likelihood of involvement in war if it came.
During the World War many nations, in order to defend their merchant
vessels against submarine attack, armed those vessels. The result
of such arming was that merchant vessels were often attacked without
warning. In the Neutrality Act of 1937, the United States served
notice on the world that American vessels would not be armed. There
could be, therefore, no excuse, 80 far as American vessels were
concerned, for any nation to fail to observe the orderly practices
of visit and search prescribed by international law.
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- 7 -
All of you know that when war came at last in the fall
of 1939, I immediately called a special session of the Congress in
order that any final steps that could be taken to prevent our in-
volvement in war should be taken then. In the Neutrality Act of
1939, which resulted from the deliberations of the Congress at
that special session, the United States, in order to prevent in-
volvement, made the greatest sacrifices of its rights under inter-
national law that any nation has ever made for such a purpose.
The salutary provisions of former neutrality acts, about
which I have already spoken, were continued. As a result of new
legislation, there is no American property on the high seas bound
for hostile territory. We sought in this way to avoid any incidents
in which American property would be destroyed. We made it unlawful
for American vessels to carry cargo or passengers to hostile terri-
tory. We wanted no American vessels sunk and no American lives lost.
296
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To put it in plain English, if the European belligerents would
keep the war in their own backyard, we would stay away.
All this we willingly and gladly did in the interests of
peace.
We dealt also in the 1939 Neutrality Act with another source
of danger. During the World War it was the practice of the vessels
of many foreign nations to fly the American flag with the hope that
by this deception they would secure immunity from attack. The re-
sult of that practice was, of course, that the desperate belligerents
failed to give immunity to vessels flying the American fleg even when
they were American vessels. In the Neutrality Act of 1939, it was
enacted into law that any foreign vessel which flew the American flag
was to be denied the use of the ports and territorial waters of the
United States for three months. May I add, that in the only case
where misuse of the American flag during the present war has come
to our attention, we have not hesitated to apply that sanction.
297
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The Administration has rigidly enforced all the
provisions of our neutrality laws. I know that the strict ap-
plication of the neutrality laws has often worked hardships on
American business men and American traders; but we were determined
not to depart from the peace policy of the Administration. If
there were hardships, we expected American business men to bear
them patriotically in the interest of avoiding involvement in war.
The Executive branch of your Government has not hesitated
to use the discretionary power vested in it to prevent involvement.
Immediately after the outbreak of hostilities in Europe in the fall
of 1939, I issued a Proclamation in which I called upon all nation-
als of the United States to observe the duties of a neutral under
our statutes and treaties and under international law. As other
nations have become involved in the European conflict, I have again
and again reiterated that demand.
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Acting pursuant to the authority given to me in the
Neutrality Act of 1939, I have from time to time roped off large
areas of the high seas as combat areas through which American vessels
and citizens cannot travel even on their way to another neutral nation.
In so doing, I tried again to err, if at all, on the side of safety.
Wherever I felt that there was a possibility that hostile action
might result, I sought to include that place in a combat area. This
meant giving up trade with the whole European continent save Portugal
and a part of Spain. I acted in the belief that it was better to
sacrifice trade with most of Europe than to risk involvement in the
war.
The outbreak of the war in Europe found thousands of
American citizens in belligerent countries. If this Government
could prevent it, we wanted no American citizens to be caught
between the fires of the belligerents or to be the victims
299
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of total war. Accordingly, we set ourselves to the task of bring-
ing all Americans out of the war zone who wanted to come. In the
first six weeks of war, we succeeded in repatriating 80,000 Americans.
We were fully aware that the steps we had taken to insulate
ourselves from the European war depended in large measure for success
upon the cooperation of the other American powers. Those nations,
was
too, realized that insulation from the seafingration required the
cooperation of their neighbors. Therefore, it WEB possible in the
fall of 1939 for the foreign ministers of the various American
Republics to meet together in the Republic of Panama with the end
in view of effecting solidarity of the Western Hemisphere in a
resolve to keep the war from our shores. As the result of that
meeting, there was issued the Declaration of Panama in which we
American Republics asked the European belligerents to keep the war
from our front doors. We defined a neutrality zone in which we
300
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urged the belligerents not to engage in hostilities. We hoped that
the belligerents might be willing to accord the American Republics
a small portion of the sea in which to carry on their peaceful
pursuits. I am sorry to say some of the belligerents have not re-
spected our request, but it cannot be said that we did not make the
attempt.
Furthermore, at the Panama meeting, resolutions were
adopted outlining steps to be taken to preserve neutrality. I can
assure you that this Administration has conscientiously abided by
those resolutions.
Nevertheless, I knew that in spite of all the measures
we had taken to protect ourselves from a foreign conflict, much
more remained to be done. There were loose in the world certain
forces which could be met and kept from our shores only if we, as
a nation, were strong enough to make attack or aggression against us
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unprofitable. The fate of the peace-loving people of Norway,
Denmark, Finland, and Holland was final proof, if any were needed,
that it was not enough to sacrifice rights. It became evident that
if we were effectively to protect ourselves from war, we had to
make ourselves 80 strong that no nation or group of nations would
entertain the idea of making war upon us. It was not only necessary
that we stay away from the war, it was also necessary that we in-
sure that others would not bring the war to us.
This Administration realized that to make ourselves strong
would require further sacrifices, and we did not hesitate to make them.
Even at the beginning of the Administration, when the dark cloud
of the depression was over all the land, and when we were beset on
all sides by demands to save American business and American labor
from complete collapse, we sought to improve our defense position
and to make available larger sums than before to the improvement
302
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of our armed forces. Subsequently, we enacted legislation to
conserve our resources of tin, helium, and other strategic materials,
which are necessary to any nation which is strong in its defense.
There has been criticism of the manner in which the Administration
acted to acquire certain bases in the Atlantic, from which our naval
and military forces could better defend you and me from attack. May
I say that the importance of making America safe from war is so
great to me that I would willingly have used much stronger methods
if necessary to acquire that safety for the American people.
Very recently many of you have had impressed upon you
another sacrifice that we must make to save America from war. You
have had to register for the conscription of a citizen army. The
time that you will have to spend in training and in learning the
arts of war will be a. great hardship to many of you. None of you
have a. greater distaste than I have for peace-time conscription.
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None of you have a stronger dislike for militarily minded nations. I
do not wish to 888 this country saddled with a military caste. One
thing, however, I know - so long as the present aggressive forces
are loose in the world, our citizenry, if it is to be safe and if it
is to keep war from our shores, will accept the duties of soldiers
and free men.
Finally, I want to emphasize that your Government has sought
to put its own house in order. We have tried to act toward other
nations as a good neighbor. No aggressor nation can point to us and
say - we do only what you also do. This has helped to make us
strong, for it has brought about the solidarity of the Western
Hemisphere and & confidence on the part of our neighbors that we
are their friend and protector.
As I have told you before, I hate war. I want every
citizen of the United States to know the steps and measures his
304
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Government has taken to make certain that we do not go to the war
and that the war is not brought to us.
What we have done has been done for peace and only for
peace. If I can prevent it, there will be no cross-marked graves,
no shattered boys, no Gold Star mothers in the United States. When
I lay down my office, I want to be able to say to every American,
"There is no blood on my hands." I give you my solemn pledge that,
except in self-defense, the United States, through my Administration,
will not go to war.
305
October 22, 1940
The Secretary sent Mr. Stephen Early an exact
copy of this material today.
306
October 22, 1940.
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Schwarz
Attached is the text of the Willkie speech last night
in Milwaukee.
The factory outside Chicago referred to is that of the
Electro-Motive Corporation, a division of General Motors,
whose recent president, William S. Knudsen, is now a member
of the National Defense Advisory Commission and devoting
his full time to the defense program.
One of the first big rail systems to introduce the
Diesel locomotive into actual operation was the Chicago,
Burlington and Quincy Railroad, whose president, Ralph Budd,
also is a member of the Advisory Commission and is devoting
most of his time to the defense program.
Another pioneer in the use of Diesel streamliners was
the Union Pacific Railroad, whose chairman, W. Averill Harriman,
is assisting Mr. Stettinius in the industrial materials
division of the Commission.
THE NEW YORK TIMES, TUESDAY, OCTOBER 22, 1940.
307
Text of Willkie Address in Milwaukee
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net products that you and I name
Onles with revolution to their
Anditorism todght
meat-this in forms of
use They do not paint the stand-
I am delighted to be fine lonight
work, of jobs. of American anter-
nearte
and nf living or make America.
prise 1 want to tell you the
strong Before they
Warns of Mate Control
Miltrauke and Wisconsin are
kind of work I stand for and the
become part of TIME life a. comple
The and of this presse of de
known this muntry
kind of future 1 stand for. I
cated process must Chike place-a
struction is ⑉ clear that none iss
the that of pro-
want you in understand that only
process called capital investment
mistake The destruction of
gramivelsm. particularly in the
. society buils upon the inde-
Lat che Diustrate this premise
private enterprise will deliver us
bread Hald of endial waitere
pendence of the individual can
with a. single development. Use
Insta by into the hands of
half nur drin toward . totall-
that
Today. as you hnow. is Young
the Mais
iarian state
pull the new streamliners across
P=publican Day. The Young The
Please understand me. LAI me
Da are n/w undertaking . great
the enstinant en fast and No
autitions are - body of young
(spect-1 do not ay that the New W
defense program This program
cheaply.
B/B and women who believe in
Deal has deliberately worked 16.
le three or faur years isin in gas-
This new kind of locomtive took
the future of America They are
word that end. I An nai MAY that
ting started, but new al lessi we
seven years to develop. and then
determind upon the establishment
is has deliverately destroyed pri-
have the Our Congram has
two more years was required to
Vale Initiative 80 .. to establish
of sertain principles by which
made available about I'ivelve bile
build factoriam to manufecture If.
Date socialism (6) ADDITION
THE may share in that future
Time dollare this year Orders are
The company had to part on many
But I do any that, and
, want to Chank the young Re-
beginning to enma nut nf Wesh-
millions of dollars before H could
imparsantinly, Inls has have the
too the work they have
logton. And business men know
will . single For
effect of Die New Deal's blied
in this campaign. Their Other
that more ordera ACH shead.
easyly eins years there enuid he
margy has been of YES -
na income and for several years
policies. I my that If thrise poll-
tanna ID this Young
Connects "Bevival" and Drive
after Chal there would be no
des are continued we shall come
M that and
publicans of America, I way to
You may presently hear The
profit
applicament of this Administration
(To the up millions of dollars for
It is should for the New Tran) in
temight, Keep going Wish
begin. to boser ahout the grest
eight or tan years la a. rinky thing
my, as " has said. that America
your help. 1 prodici victimy en
la mature and the future permits
Kw. 5. We're and Usem em the
Insuress revival that Chey have
la dn. in entive to guaren-
Fis.
les that company against total
of Due grown
called, Production will Inevitably
in henor of Towns Republican
indrease. unemployment will in-
However, the company towns the
There is to much to ha Anna 10
Dio, 1. went to address by yes
YHE nt loss in neder in have
Amerina that nn one 188 describe
avitably decline.
marks tonight to mil the young
I thank God for that The
chance at anma future time le
IL all.
We must Initial new homes for
men and women of America
greated purpose I have today in
make A profit.
our people and modernize the 454
There are about (wenty million
that the American people should
Cities New Fartory Troject
home We must bring sinctricity
of
diwnen the - of 16 and
em hack to work.
a.
have nal nad - -
fut elop and think how This new
And of course, If la vary desin
in all the havess in the United
this for you and far ma That the
Males, We INVOICE pvs electrical
Time. 20ml Mires miditidos of you
work la belog created
is is being created by manay
com ha Inhm in this particular
applicable ro those homes Ww
where four million-are em-
FIAM 130 seres of vacant land out-
must provide contral healing
played
spent by the government, Taken
side Chicago were converted ista
We TITURE bring almennditioning
India - the Jasun
our of the pockets of Che people
. factory. Three throught new
within the reach of of
nr added to the mounting national
jobs ware presiné na the apoi,
our proper
The American Touth Commis-
deht.
paceptly published . study of
and about 18,000 where were best
The constant improvement of
These are not the forces of pri-
the youth of one of our States,
afitial. Faster pail achedules
the automobile valla You more and
vale enterprise at work These
They found that 40 per cent of
achieved De IDeas incomntives
better roads, great Dridges,
aya the forces of public indebind-
anys travelére valuable time. And
valed bignways amt high-spand
there between sixteen and wenty
new You and I sen bulying our-
the connomies of operation save
arterita. The airplans is will in
gara of 48P had nettber joins KIIP
selves n. higger Arms. . Figger
and la TM that emply days.
the reilrnada money.
lie Infancy, with unlimited oppor-
Havy and a Weger air form That
That is what the In America cell
tuntly aboad
Amount all of these young people
makes trusiness 100% better, not
(sVé honestly tried io find john
program. The benefit of nna la
Rays Public Must Rule Fuldre
actually - are going inin dabl
would make them projed and
the benefit of All
In the fining of chemistry --
at the esma time
But few companies have dared
cappy in become independent IA
When the defense program la
have vasi new opportunities per
help support their parents. of
to risk any such sum to 184 last
Used for the products of the
we may have a Vigger In-
mast Important of all in look
wight years. The la that
new, chemper and Intime
dustrial ayetam bal 11 will have
an much arbitrary power is ene
forward to assting up humes and
materials for the clothes we wear
hears huilt upon the inserurs
exilirated in Washington that the
and the That - live 10
mising families of their own
foundation of . blease dans
Because they can't do this,
government la sitie fu, change the
That La the and of America 1
The Islnd of enterprise that makes
entire sennimio wante, and all the
many of Chem benome hopeless
want That is the America of
America really strong is private
and synical: L have aren Chara
ground rules, overoight The in-
higher wages, of greater con-
enterprisk) that LA. when you buy
vastor Cherafore nament product
sumption, and of apportanity for
La the course of my compaign
from me and 1 buy from you
une of two years shesil, let alone
every individual in the land
se disillusioned
That bind nf enterprise does not
eight or tan And when investors
And I any M you with the ge-
that thair minds are ao jonger
normally result HN debt. " normal-
cannos prodict, espiral will not
must We shall never
open in argument. They
Ameries and the future of
ly results IP profits and growth.
(lnw.
get (hat kind of America if we
38114 nn Employment
That is what 11 mean when Ve
expect the government-any -
Anuries
Instal on actting enterprise 1144
eroment- give n. in us. If --
Devision of thale hiller experi-
Let one Dever hear the No-
We don't mean to set enterprise
want that kind of America we
- 1 think il le true that the
Dealare point with pride to - DUAS-
Type 10 hurt persite. We shall con
must @V out and huild it for INF
net tame el auf day is clearer
pass revival hand -- IDE creation
tinue to regulate enterpries.
golves.
and (inst (a the soung penple
of the huge was michine shart -
than in any other group of AMF
United Support for Enterprise
Let na nee MAY that "
are mulliting LAD me never hear
huild is. We have the Inventive
This this basio
them boass that they have reduced
But Enterprise must be tree 10
genius/ 11 have the industrial
1 described a lew signts
unemployment by the ascrifice
prodict. " cannot exactly predict
whole: we SAVA the men and the
NEW at Bertngfield, 11).
that hundrede n°t thousands of
the market, but 15 must abso-
money In aplie of the discour-
is the issue of whother we in
young men have mede in paining
insualy be able to eliminate the
agements of the past eiven and
exerice non live ta freedom-can
the Army.
siale of mind of the government
. half years, we atill have the
IVé by freedomer whether --
These are not anhlevements en
from its exiculations. It must
enterprise and the courses to do
eliver ourselves and our
the yoad in progress. Unode are
know Chal. in general, the gove
that joh
... into the hands of the
terrible dollar that we must par-
arnment be triendly to enterprise,
And I my to you young mm
If Se the issue OF whether
form. Only distators make the
that the government wants pri-
and whinen of America. This in
# not America shall ambrace
handl that they have "solved"
vate anterprise to guarand. waite
their domestic emenatio problems
is is make john, Wa/11# и lo If
your job: It cannot be done with-
surve or State capital-
en you You must be part of 11.
am, nr munimustam, or what-
10 that way. EL le the ultimate
vesi, Le take risha, Le make fast.
- your may choose in will it.
or United for people to Tide is
youth bas all Lice qualities we
boset of the mill powerful since,
and to build a better world for
need fnr this job. Youth is ans-
These are merely different names
Where are the days, my fellow
and adventurous THUTH
THE the serve thing absolute and
Americane. when we could hourt
people to live 18.
crittrery power In the bands of
of was great ability 14 create
That la not the kind of world
is impaction? of delay. Youth le
wealth and apportunity through
that -- are building today Our
jealous of its rights yes, and of
the government.
I 1 4 I
HAVE said and il - De
the aris of Where are the
given industrial plant is wearing
class every day-10al
and It IN hannming matticient.
he yoay: If service activity
poid adventures the adventures
of sapital and the advantures of
Our machinery. so visal to the
More than anything in the
in this straggie the third term
cannidate represents one side,
the nued? Where are the new
earning power of lalour, la geta
world inday the American perryce
and Wandell Willsie represents
Industries? Where is the NUISINE
ung older Ten years egn. in
desire peach, The young men who
the where wide:
Imagreation that DAYF us (De outh
1930. only 45 per cent of BUT
will - be called En serve to the
Paints in National that Rive
mobile the seisphone and the
metal-working machinery WAF
Army desire peace.
redin-all within (ine 11/04 of many
mark then leg years ald. Today
Yes there is use our, and only
of us here? will you he surporied
2 per vent of IL is more than two
one way, by which we can have
1 cannot say de not ***D
pasce. and that is in
whete to imply that my opponent
in learn that -- have that jmagh
your old
Sectorialy aimited et State
The resson that -- have thus
sirma, We must become strong
is
nation mill?
and Em Your America. I do know
negionted our machinery. which
not alone in armse. DUT in nur
1 wander haw many of pm real-
le - Important be Use worker. Le
lives and in mir work We must
train personal conversations with
tax that in the lest decule our
tachnological progress M heart
harries have hean un-
become strong In the arta of
Jaw Desters that many respon-
able to predint what sudden curo
passe-the are of industry and of
date men IN the New Deal party
faster than ever before in listory
have work en end in mind.
American septied acience has an
a noutile government might take
the presit of happiness
restant them. " is Street - clear
These a/e the aria of
1. know that every inster MA.
- now all-tione high.
- that. 11 18 just M as
Tv become Arms 16 them -
Boonie policy of the New Deal is
Rare 9/A Presione Wall Capital
most be free.
purntive in that direction. There
has been an and/ore concentra-
I cannot hegin la describe le
that to mir of effiniency and Hi
I therefore sall upon you. young
nf power. There has been
you the Inventions that line Lite in
will to make TIPE of the
mm and within of America jun
our the new prod-
ow discovering of entence your
MA. pia or in auf send for -
en andless concentration of (be
unle that are just waiting for new
find 13ve fundamental - of
Anm. In nas stand, to that Inc.
dulles and responsibilities of gove
argument. And there has an
espital in be released A survey
unemployment. You find there
time your hope for the part that
endines Increase in the debt That
last year ase - products
the causes af - discouragement.
your en ordently dealys
dell' will M a. insil con (*) and
and procession in LOT Industrial
Regraded.Uclassified