Volume 441, September 15 – September 17, 1941

DIARY Book 441 September 15 - 17, 1941 Regraded Unclassified - A - Book Page Appointments and Resignations Assistants to the Secretary: White's recommendations - 0/16/41 441 183 - B - Budget, Bureau of Non-defense Spending) Sample plans for cutting to be presented to Senate Finance Committee by Bureau of Budget - 10/15/41 2 Jusiness Conditions Haae memorandum on situation for week ending September 13, 1941 40 - C - Currency, United States International movements analyzed by Federal Reserve Ban: of New York - 9/17/01 336 - D - Defense Savings Honde See Financing, Government M , ( Economic Defense Board See War Conditions Export Control See War Conditions - F - Farbenindustrie, I. C. See War Conditions: Foreign Funds Control Financing, Government Non-defense Spending: Sample plans for cutting to be presented to Senate Finance Committee by Eureau of Budget - 10/15/41 8 Defense A1d Appropriation (supplacental): Summary and breakdown of that portion for Procurement Division - 0/15/41 196,198 Defense Savings Bonds: "Retallers-for-Defense Week" - resume' of programs - 3/15/11 37 Defense Savings Bonds, Series & Sales for May, June, July, and August, by States - 9/16/41 190 Regraded Unclassified - G - Book Page General Aniline and Film Corporation See War Conditions: Foreign Funds Control General Dyestuffs Corporation See War Conditions: Foreign Funds Control Germany See War Conditions - L - Lever Act (August 10, 1917) Foley report - 9/17/41 441 309 - M - Murray, Thomas E. Appraisal of by New York Times staff - 9/17/41 307 - 0 - Oil See War Conditions: Export Control - R - Refugees See War Conditions Revenue Revision Estimated revenue effect of 1941 bill as agreed upon in conference - 9/15/41 17 Rosenwald, William See War Conditions: Refugees - S - Seattle, Washington Investigation discussed by HMJr, Irey, and Frank - 9/16/41 132 a) Boettiger-HMJr conversation - 9/16/41 138 - I- Taxation See Revenue Revision Regraded Unclassified - U - Book Page Unemployment Relief Work Projects Administration report for week ending September 3, 1941 441 51 United Kingdom See War Conditions: Military Planning - W - War Conditions Airplanes: Shipments to United Kingdom and overseas commands - British Air Commission report - 9/15/41 56 Shipments to the British, by air and sea - Kamarck report - 9/17/41 332 China: Stabilization Board: Difficulties reviewed in Fox letter to Cochran - 9/17/41 351 a) Exchange Control Commission: Final draft of principles of organization 353 Economic Defense Board: Office of Export Control placed under Economic Defense Board - 9/17/41 300 Stimson-HMJr conversation on membership of Board - 9/18/41: See Book 442, page 43 a) Japan: Stimson asks HMJr "to stand shoulder-to-shoulder and not give an inch" b) Meeting - 9/19/41: Book 442, page 223 Exchange market resume' - 9/15/41, etc 80,231,368 Export Control: Exporte of petroleum products, scrap iron. and scrap steel from United States to Japan, Russia, Spain, and Great Britain, week ending September 13, 1941 65 a) Ickes and HMJr discuss report - 9/16/41 95,289 Office of Export Control placed under Economic Defense Board - 9/17/41 300 Foreign Funds Control: Central American and Caribbean area: Representatives of Foley's office and State Department to assist American missione - 9/15/41 18 General Aniline and Film Corporation General Dysetuffs Corporation (I. G. Farbenindustrie) Application for sale of 1,500,000 shares discussed in memorandum to Hopkins and from Hopkins to HMJr - 9/17/41 303 Germany: Reichsbank mail - Federal Reserve Bank of New York reports on - 9/15/41 71 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Lend-Lease: Second report - 9/16/41 441 197 Military Planning: Reports from London transmitted by Campbell - 9/15/41, 9/17/41 82,369 War Department bulletins: German General Staff School report - 9/15/41 86 German strategical picture of Smolensk and Kiev - 9/17/41 372 Purchasing Mission: Federal Reserve Bank of New York statement showing dollar disbursements, week ending September 3, 1941 57 Vesting order sales - 9/15/41 63,64 Refugees: Rosenwald (William) invites HMJr to meeting with Rosenman, Dubinsky, Shroder, etc. - 9/17/41 279 Security Markets (High-Grade): Current Developments: Haas memorandum - 9/17/41 319 Work Projects Administration See Unemployment Relief Regraded Unclassified C 1 0 P Y THE PRESIDENT or BROWN UNIVERSITY September 15. 1941 The Honorable Henry Morgenthsu, Jr. Secretary of the Treasury Washington, D. C. Dear Mr. Secretary: In response to your letter of September 11, I em henny to say that on the very day it was received the Advisory and Erecutive Committee of the Corporation of Brown University granted permission for Professor Brown to undertake the work in the Treasury Department. We are glad to be eble to cooperate in the matter. May I take this occasion to thank you for the strong leadership you have given toward the curtailment of non-defense expenditures during the present crisis. Sincerely yours, 151 Henry M. Wriston Henry M. Wriston President Copy:mew 9/20/41 Regraded Unclassified 2 BUDGET DIRECTOR SMITH WILL TRANSMIT TO THE SENATE FINANCE COMMITTEE TODAY SAMPLE PLANS FOR CUTTING NON-DIDELOST OVERNMENT SPENDING $1,000,000.000 TO $2,000,000.000 000.000 IN THIS FISCAL TEAK, BUT THE ODDS ARE 100-TO-1 AGAINST ANY SUCH ECONOMIES. THE SAMPLE BUDGETS HAVE BEEN PREPARED IN RESPONSE TO A COMMITTEE RESOLUTION CALLING FOR SUBMISSION OF THREE TENTATIVE BUDGETS DESIGNED, RESPECTIVELY, TO REDUCE NON-DEFENSE SPENDING BY $1,000,000,000, $1,500,000,000 AND $2,000,000,000. IT IS UNDERSTOOD THAT THE BUDGET BUREAU'S SAMPLE REVISIONS INCLUDE DEEP CUTS IN NATIONAL YOUTH ADMINISTRATION, CCC AND WORK RELIEF Dear APPROPRIATIONS, 10/15--EC847A Dau. ask H. Syuthe the let what me have 1/m. a a coly Regraded Unclassified and job 3 MEMORANDUM FOR THE SECRETARY. September 15, 1941. So far as I remember, no public address made by the Secretary has called forth 86 many letters of comment as the recent Boston speech on the subject of inflation. A number of postal cards and letters simply request copies of the speech; others make comments that obviously are suggested by the speech, but do not allude to it in any way. These two types of letters have not been abstracted, but the count together, 98 of this morning, Monday, September 15th, is 48. All other letters have been abstracted end the abstracts are attached. You will note the small proportion of "sour notes" to those giving high praise to the speech. Regraded Unclassified 4 Lugene Neyer, Cable from London. Congratulations. Your expressions carried here loday-stick to them. Franklin Hyde, Pierre, South Dekote. (Telegram) Hearty congratulations on your courage and sound common sense expressed recently regarding commodity prices. We are satisfied with present prices and would rather have Government etocks of cotton and wheat sold now then to let B ruinous inflation get started. However, action of markets today indicate positive action will have to be taken end speech making is not enough to dampen speculative spirit. Regards. L. S. Rowe, Director General, Pan American Union. Permit me to congratulate you on your admirable eddress of last evening. I em certain that what you said will have far-reaching influence on public oninion. 8. C. Leffingwell, Erlowest, Lake George, N. Y. I thought your Boston speech was fine: sound, realistic, courageous as always. I hope you will continue to insist on the realities of inflation control and to resist the effort of the bankers to get higher interest rates by increasing reserve recuirements. Increasing the Treasury's difficulties and interest costs won't touch the inflation problem under war conditions. It will only moke the Job of winning the war e bit harder. William Fellowes Morgan, Jr., Commissioner, Department of Markets, New York, 8. Y. The editorial in this morning's New York Herald-Tribune on your Boston speech coincides 80 completely with my views on the farm problem that I take the liberty of extending to you my congratulations. As Commissioner of Public Markets of this City for the past seven and e half years, I have had en excellent opportunity to study the form problem from the consumer end distribution ends. I have maintained that the ferm problem will never be solved molely on the farm, but must be attacked in the big distributing and consuming centers like New York If you are interested in my views on this troublesome problem, I will gladly send you what I have written on the subject. Samuel Harden Church, President, The Carnegie Institute, Pittsburgh, Penna. I have just finished reading in the New York Times of yesterday your address on inflation, delivered in Boston on the preceding evening, and it leaves me with very enxious thoughts on what is going to happen on the currency question to the American people. There is one point in the address which leaves me in something of B. fog, and after complimenting you on your courage in making the speech may I drew your attention to the point that has confused me. (If prices will still go up, not because the goods have been consumed, but because they are stored under lock end key, is not the Secretary the custodian of the key to open the werehouses?) Robert L. Douglass, Collector of Internal Revenue, Reno, Nevada. I enjoyed your speech very much. Thought the Journal's erticle might be of interest to you. Regraded Unclassified 8 5 George H. Oleason, Chicago, Illinois. I liked very much your speech lest evening before the Boston Adv. club but it would have been much more timely 1f it came et the time of the passage of the Lease-Lend act, before the Government started making purchases of food products for England. Now that the press quotes England BB having enough food for twelve months I think that if Washington would publicly announce at least a temporary withdrawal from the food market that prices would materially go down end also bring out some of these atorage stocks you spoke about. Jos. Goldberg, New York, N. Y. Referring to your illuminating address before the Boston Advertising Club in the City of Boston Tuesday evening, September 9th. The writer ie in the retail field and arrived home too late to get the whole of your discourse. I mention this, for you may have covered in sub- stance what I have in mind in the shadow though I do believe that your subject WAS on inflation. (Gives ideas on current conditions.) T. J. Donnelly. Hackensack, N. J. Your broadcast, last evening, wes well received by the writer and a group of friends. Except for that portion dealing with higher income taxes your entire plan received hearty endorsement. Most of this group were insurance agents (emall business men). We were particu- larly impressed with your "hope" that the Security program may be extended, etc. This statement, general though it was, gave us a ray of hope that Social Security may be broadened to include the so-called business men notwithstanding the fect that their living depends on commission or profits rather then salary. Y. J. Hurley, Chicago, 111. I would appreciate it very much if you would kindly send me the complete text of the address which you gave on September 9 before the Advertising Club of Boston, Massachusetts. Anticipating your courtesy in this regard, I am. Mrs. Lilien Allmen, Seattle, Washington. It was grand to read this morning that the Government is going to stop this profiteering on food. Mrs. Stephen D. Knox, Le Grange, Ill. God's richeet blessings on you, end our nation, and our God chosen President in this hour, and always. His and Mr. Churchill's Eight Points for the world, and your Five Points on helting inflation, makes a thinking person know how very fortunate we Americans are. T. J. Byerly, President, State Planters Bank, Walnut Cove, N. C. I read with deep concern, excerpts from your Boston speech. 1 agree with some of your remarks concerning inflation, and some of your remarks I dieagree with you Farm products are not up much, certainly not in line with the workmen. How can any one pay high taxes and have B. savings account? Why don't the U. 5. Government well ell the cotton while it is up? By selling this cotton, it would stabilise the price. (Other comments on loans, bonde, railroads, etc.) Wages for the unskilled and skilled workmen are TOO HIGH now,- any kind of e "Hod Carrier" can get one dollar per hour or more for his work. Regraded Unclassified 6 William H. Brennan, Chicago, Ill. There is not the slighest doubt in my mind about your being on the right track in trying to prevent & run-away period of wild inflation. In my business as A Bank Investment Adviser, I have printed down at the bottom of each letterhead, the following words: "The Time To Act Is Before, Not After, It Happens!" It seems to me you used e very similar phrase, about acting before, not after, in trying to stop inflation before it is quite too late. Thus, I cannot help but agree completely that steps, every step, should be taken - NOW, TODAY, - to pre- vent en ern of skyrocketing prices and values, the disastrous results of which are not understood or appreciated by one out of A hundred Americans today. T. 1. Stoner, Des Moines, Iowa. At the outset, I want to compliment you on the frank and businesslike speech you made before the Advertising Club in Boaton last night. I am writing you this letter especially with reference to e. reissuing of some U. S. Savings Bonds that were lesued in error. (Describes exasperating case) Mrs. H. W. Trolender, Denver, Colo. We heard your radio address of September 9th and want to comment on the most comprehensive and sensible summing up of the present unnecessary price situation we have heard. The people in our neighborhood are very much perturbed and they want to see something done to end the rising price trend. F. A. Keck, West Fermington, Ohio. 1 wish to commend you for your stand on inflation. Inflation is B. danger and ought to be prevented at all costs. : think too that the Government should dispose of its surpluses. The high cost of food is worrying multitudes of people. A Nebraska Farmer. Your speech at Boston very good but you do not expect us to believe it when the Administration buys up the butter and lard and keeps the price up then puts them on the surplus list. Also you do not see e fair and impartial referee in labor disputes with Madam Perkins. It is all for a labor. D. J. Murphy, Regional Agricultural Credit Corporation of Minneapolie, Minn. Mrs. Murphy and I were tuned in on your broadcest Tuesday evening. We en- joyed it very much and can endorse every word you said. With all good wishes for your health and happiness, I am. Thomas Graham, Louisville, Kentucky. I read in the Courier-Journal today of your speech on September 9th before the Advertising Club of Boston. I wes so interested in the excerpts from your speech, that if possible I would like to have a copy of the full spesch, if one is available. The thoughts expressed should be sent to everybody in Governmental circles all over the country. It is time we all faced the realities of the situation, and I think you are to be congratulated for the stand you have taken in very important national matters. Regraded Unclassified 7 V, E. Bann, Texarkana, Arkansas. I was very much interested in hearing the radio broadcast of your address before the Advertising Club at Boston last night. If the address has been or vill be reprinted, I would like to obtain 300 copies, and would appreciate information as to where they may be secured. C. L. Matthews, St. Louis, Missouri. In this morning's paper, I have read your plea for inflation controls, and it obcurs to me that you might be interested in an article which I have written for the September issue of MATTHEWS MATTERS on this subject and which will go out to a mailing list, something over 12,000 names, next Monday. I wish to congratulate you on your splendid efforts to stop the foolish extravagance of Congress and to warn them of the strong possibility of disastrous inflation, if they don't take proper steps to prevent it. Harold S. Mayer, New Orleans, La. I enjoyed your talk very much from Boston lest night. I presume that you have copies of this telk. If you could spare me fifty (50) copies, I would appreciate it very much. If I am ssking too many, send me 8.8 many 88 you can. Thanks. D. Maynard Thomas, Utica, New York. I have read with the greatest interest and profit your very able address dealing with the matter of inflation which you made for the Advertising Club of Boston. I am pleased that the New York Timee printed your address in full and I am sure that it will be read by many thoughtful business men who are interested in this most important sub- ject. Permit me to say, Secretary Morgenthau, that I consider this address one of the clearest and ablest expressions of the matter of inflation and its relation to business that I have ever been privileged to read. You have not lost any of the facts end you have shown in a very clear end nane way just what we must do to svoid inflation and also what is being done. May I congratulate you upon your address and may I also say that the American people are fortunate in having a man of your stature 88 Secretary of the Treasury at this critical time in the Nation's history. An old son of R. gun of a Tory. Attached from N. Y. Herald contains the only sane suggestion that has come from a member of the Administration in eight years. Common sense may yet prevail and the Supreme Court regain dignity. J. X. McDonald, Commissioner of Agriculture, Austin, Tex. (Telegram) Your suggestion that Government stocks of cotton and wheat be thrown on the market to prevent higher prices does the farmer a rank injustice. You have sug- gested nothing to prevent higher wages for industrial workers who produce the things the farmer must buy. The cents per pound a fermer receives for his cotton equals the cents per hour a farmer receives for growing cotton. The minimum wage fixed by the Federal Labor Board for unskilled industrial workers is 344 per hour. The average price of cotton for the 10-year period 1920-1930 wes 20.31. I submit that no Government cotton should be sold at R price below 22# per pound 7/8 middling basis and no Government wheat for less than $1.60 per bushel for No. 1 red winter whest. Regraded Unclassified - 5 - Andrew N. Hildebrand, South Bend, Indians. We have inflation nov and it will be followed by the greatest penic in history of U. S. A. Too much taxes now may start a runsvay deflation. J. C. Jorden, Colfax, Indiana. As B small dirt farmer, who had more than his Quota of wheat this year and vas compelled to hold it off of the market or pay 5 penalty of 49# a bushel, I am writing you to ask if you were quoted correctly by the Indianapolis Star, from your speech at Boston when you said "Permit the entry of Canadian wheat in larger volume." (Quotes prices, criticizes Government control policies.) Harry Sellers, New York, N. Y. Is it any wonder that millions and millions of dollars in currency are finding the way into strong boxes for lack of faith in the Administration's disregard of the capital of the middle class citizenship, with taxes end more taxes against the corporation and private income taxes, while labor demands, and gets increased veges, and no opposi- tion from the Government. H. L. Wood, New Orleans, La. I have claimed for over three years that the President was skillfully heading us into a war in which we should have no part. I etill say the same. I think now it is only a little way off. I listened to your radio address last night and to stop inflation you want to tax us plenty more, have us spend less, save more, to invest in defense bonds and stamps. Thomas E. Pugh, Kearney, Nebraska. Why are 60 afraid of inflation? Are you afraid that the International Banker's will lose the power to loan the Government money? And losing the power of the central bank, the Reserve Board from controlling the money and credit of the earth. We had better have the United States own the banks of this nation and regulate the value thereof as the Constitution provides. If we don't do that we are going into another war for the International Banker's. Harry Terry. Vicksburg, Mich. You do not seem to be satisfied to allow Harold Ickes to have B. corner on brainless ideas. You certainly have put his oil and gas shortage to shame when you suggest allowing more Canadian wheat to come into this country in order to halt inflation. Have you not heard that our farmers are being fined for raising too much wheat? Let's have a shortage of propagenda and a surplus of common sense or ve will all 80 nuts before we can vote you "brain trusters" out of office in 1944. Robert N. Carson, Davenport, Iowa. We know that International Bankers are behind the war hysteria being created to get the U. S. into the war. President Roosevelt has time and again stated: "We have nothing to fear but fear itself." Re end his followers are engaged in promoting fear, Writer present at Centennial in Philadelphia in 1876 when Americanism was at its peak. Unsigned. Father Coughlin, please note, Baw this five years ago. Be knew more about this country than anyone in Weshington. All he ever said in coming true. You see things when too late. He was years shend of you. Regraded Unclassified 9 5 Philip Lant, Richmond Hill, N. Y. I get a big laugh out of some of you visa men in the new deal. When I went to school I read that Benedict was E traitor. Now I find out he was only All con man. He sold England something they never got. Today our would be Lords are paying the same for the tea that WAB thrown in the Boston harbor. Wife died In February of this year, can I deduct funeral expenses from my income tax return? (Proteste payment of $35 an ounce for gold.) Harry Scott Holland, Beloit, Wisconsin. You have built up en inflationary condition. The New Deal has loaded our banks and insurance companies with Government bonds, and have kept this up for 8 years. The popular cry is defense, which in my humble opinion is the proverbial herring being dragged across the rotten trail left by approximately 845 billions of debt. The so- called Administration in Washington would have had to meet the $45 or $50 . billion debt situation created by them anyway, but the war has been n wonder- ful alibi. & Loyal Citizen, Brooklyn, N. T. Read your article in the Times regarding inflation. Thank God you are not going to let prices go up. Minor E. Sutter, Pase Christian, Miss. I All writing this letter to voice my praise of your firm, courageous stand against the rapacious gentlemen that constitute the so-called "Farm Bloc". To millions of American citizens who are avere of the frightful danger of inflation that overhange the nation, you have become our hope that this catastrophe can be avoided. We are encouraged in this hope by the belief that you are B. patriot rather than a politician; sn American rather than B Democrat; e wise, just man rather than B. theorist and B. reformer at any price. May time prove us right in our faith in you, and may God help you in your fight for America! Martin Monti, St. Louis, Mo. (Encloses headline "Morgenthau warns U. S. must curb inflation.") Is not the enclosed statement an admission that the New Deal is an absolute failure, financially, economically and internationally! What is the loss on our purchases of foreign gold the past 8 years. and what are we going to do with the gold we now havel Mrs. Frances H. Ott, Los Angeles, Calif. I heard your speech on infletion Sept. 9th, and approve. The cause of inflation is the constantly increasing of the too-high industrial wages. The demand of these workers, most of them aliens, many of them ex-convicts, 1# a menace to the country. There 18 so much talk of putting e ceiling on prices. Why not on veges? Rudolph 3. Reichert, President, Ann Arbor Sevings and Commercial Bank, Ann Arbor, Mich. I read with & great deal of interest your statements contained in an address before the Advertising Club of Boston. I want to compliment you upon advocating that business and labor place upon itself a ceiling on wages and profite. I think if this can be voluntarily done, it would be 6. great asset to keeping a balanced economy and I think that in cases of emergency, the government should even be empowered, along with its taxing power, to place n ceiling on wages and profits in order to keep a balanced economy. With it we should also have forced savings and control of consumer credit. Otherwise, it is obvious that during an expension program or war economy, inflation can take FOOD to the detriment of our whole society and dislodge and upset a sound Regraded Unclassified 10 sconomic program. (Also praises Defense Bond campaign and 106Jr's. stand on texation.) Clinton Logan, Albertville, Ala. I take the liberty of addressing you on the subject of Federal Raw Cotton Stocks because of your public utterances in which I heartily concur. Indications are now for 8. cotton crop which will total less than domestic consumption; freezing of Government owned cotton would appear unqise, under the circumstances, but, wholesale "dumping" should not be considered. An orderly distribution of E portion of the Federal cotton giving small dealers and consumers an equal chance with their larger and more powerful competitors would doubtless prove a satisfactory solution, if it can be done without disturbing price levels to the detriment of the producer. (Outlines his idea and past experience.) Perhaps it would not be anies to recall that when you were in the Department of Agriculture, during the early thirties, I made an application to your department and our mutual friend, Mr. Sidney Wolff of New York, telephoned you in my behalf. Mrs. Wolff is an old friend of Texas days. J. E. Ball, Secretary, Associated Tile Contractors, Los Angeles, Calif. We have read with a great deal of interest your remarks before the advertising group of Boston, pertaining to inflation. We enclose & copy of our monthly bulletin, T.A.B., which 10 distributed to approximately one thousand sub- contractors in the tile business, and we direct your attention to the subject of "Eigher Wages". We feel sure that it will serve AS a means of creating better cooperation, which you have so rightfully stated 1e 90 vital to our country's safety. We can assure you that AS an industry we are making every effort to publicize and bring into practice such methode and ideas for the benefit and welfare of our national existence. E. R. Hubbard, San Francisco, Calif. I have been watching for some time with increasing interest the efforts of the representatives of the Government to check rising prices, thereby hoping to minimise inflation. It goes without argument to say that this is extremely advisable at this time. It appears to the writer that smething must be done immediately in the way of establish- inc local representatives with authority to assist in controlling prices. Otherwise, we shall soon be dashing wildly in the direction of inflation which must entail all of the disasters that naturally must finally follow. Frederick A. Thompson, Black River Falls, Wisconsin. (Summarizes price rises, etc.) Now as we have our Armies trained, 80 after Hitler. Don't let him tell our beloved President of our U.S.A. he 18 a liar, as I heard over my radio yesterday. H. &. Clark, The Cramer-Krasselt Co. (Advertising), Milwaukee, Wis. On Sept. 9th you delivered an address before the Boston Advertising Club, which was broadcast over the Columbia Network. The Massey-Harris Co. of Racine, W1s., manufacturers of farm implements, our client, would like permission to re- produce the address in whole or in part, and we would like to receive your authorization to do so. Regraded Unclassified 11 - B - Professor Irving Fisher, New Haven, Conn. You can acarcely realise how much entisfaction I got from reading your Boaton address. I think this is the first time that anyone except F.D.R. of Cabinet rank has given this subject the attention it deserves. After a lifetime of effort, I was beginning to feel the characteristic disappointment of impatient and aging idealists at the maager results of big movements. John L. Lukantiel, Chicago, Ill. Your recent talk on inflation and its possible controls was very interesting; first because of your calmness and depth of delivery, which clearly indicated your sincerity: second, because indirectly and not expressed, it tended to show you fully understood, but did not care to express your genuine feelings of what is going on; and third, your appeal to the masses for cooperation, which proved you knew the question and only method of control was peychological. In my mind the question is nearly 100% psychological and can only be handled in that way. It is in By mind quite simple to get close to 100% support of all our good Americans, provided you have B. cause which can honestly and sincerely be explained to use and based on sentiment expressed all around me, at home and elsewhere, this cause can only be self defense of our nation and preperation for the worst conceivable coalition of European Powers, excluding some. Roy G. Blakey, University of Minnesota, Minnespolis. Last night we heard over the radio your very courageous and forthright address on inflation before the Boston Advertising Club. We think this section of the country, in fact, per- haps every section, needs & similar presentation of such facts. We fear that most of our verious groups are thinking too much of their own special class interests and too little of the common good and are not awake to the serious- ness of the emergency before us, both for defense and for post defense (or for post war). John J. Taggart, Denver, Colo. Last evening I listened to your talk on infla- tion and would like to tell you what & lift I got from it. To me it vas the most reasoned, temperate and understandable expression yet given by a public official. My hope is that public opinion will force Congress to pass legisla- tion to put such 8. plan into effect. Daniel Ten Dusen, Lumber Products and Building Materials, Corning, N. Y. I read in the paper a short time ago that you advised if we did not curtail expenditures, it certainly would cause inflation. I was very glad to see this article, but could not help but think that if you and hundreds of others in authority in Washington had thought of this several years ago, ve would not be in this shape today. William H. Ponder, Confectionery & Fountain Supplies, Baltimore, Md. I was interested in your Boston speech but feel the responsibility for inflation rests with President Roosevelt, Vice President Wallace and yourself more than with Congress. The situation is certainly very serious and seems to result to A good extent from uncontrolled spending and borrowing for unnecessary purposes: the tremendous number of strikes with almost invariable wage increases and con- stantly recurring ideas for increasing the farmers' income. Regraded Unclassified - 9 - 12 Anonymous Postal Card - Your remarks about "inflation" noted by De and by the public at large, no doubt. The insqualities which the ten-year Roosevelt de- pression in securities produce are more apparent now than ever, with mounting living costs and shrinking net worth of many millions of people in the middle brackets. Pen Peterson, Los Angeles, Calif. If you are an honest man (honest with your- self) instead of presching about inflation, you will get your big bose, FDR, to stop laborers' wage demands now. You can't stop prices without it. What ve need is a few men with courage to talk and act with FDR. Chas. A. Bultin, Seattle, Wash. We will appreciate to receive B copy of your informing and constructive address on "Combating Inflation". R. S. Stephenson, The Union Central Life Insurance Co., San Francisco, Celif. Please perdon my informality, but I can't resist telling you how much I enjoyed your speech. Anyone with any sense st all can now answer the alibi, "How about inflation?" by saying, "Did you hear Mr. Morgenthau on that subject!". If there are any extra copies, I'd greatly appreciate one. Mrs. Elizabeth Kinney, Yarnell Heights, Arisona. Why should you ask for in- flation - haven't we enough to pay out now, and let me tell you, we are getting mighty tired of sending this money to England. Let them take care of themselves. .... This ie not our war - no one did anything to us, We are paying double prices for everything. You make it much harder for the working people. Let me tell you right now, the laboring man is worth every cent he gets. Elias Lustic, Adam Hat Stores, New York City. After hearing your inspiring speech in Boston on the necessity of owning U. S. Defense Bonds and Stamps, Adam Hate is resolved, ns an organization, to dedicate its energy and resources to further the patriotic ideal led by you. Harry B. Fischer, New York City. I have read with a great deal of interest your address given in Boston last night before the Advertising Club, together with the newspaper comments thereon. May I take the liberty of expressing my opinion? The conclusions reached are no doubt correct. You state that "ry hope and belief is that no group among us, whether farmers, working men, or business men, shall be tempted by the illusion of selfish gain inallowing prices to rise unchecked". I wish to emphasize that the individual farmer, working man or business man is faced with immediate requirements which unfortunately in practice must and do take B. direction often counter to the best interests of these indi- viduals as e whole. J. S. Turley, Anchol Coal Company, St. Louis, Mo. The writer has just read an item in our St. Louis papers of 8. talk you made regarding inflation. While I am not fully advised just what is meant by inflation, nor am I fully advised how far or how near we are to inflation, but if paying 45# a pound for pork chope and 394 a dozen for eggs end like prices for food and necessities of life is midst. inflation, I take it that it is not far off, or around the corner, but in our Regraded Unclassified - 10 - 13 Rev. Charles Elray. Portland, Oregon. Have just listened with great interest to your splendid address from Washington. Subject - "Inflation". (Expresses his ideas on the subject.) How I wish you success I How I appreciated your splendid address. Henry P. Benson, Boston, Mass, One of your chief worries these days must be the probable inflation arising from the higher prices of commodities and labor. It seems to me that the effort to put ceilings on manufactured products is useless unless ceilings are also put on labor and raw materials which make up the cont of production. Government cotton should be put on the market gradu- ally in an orderly manner and the people informed of the details. If eighteen or twenty cent cotton prevails, the acreage planted in the next crop will be uncontrollable. Frank H. Meloon, Boston News Bureau, Boston, Mass. I thought you might like to have my editorial approving what you said here in Boston. I hope the columnists who say its advice will not be followed -- meaning the advice of your address -- will etend confounded very soon. Frod Lazamus, Jr., Columbus, Ohio. I heard, with 8. great deal of interest and pleasure, your radio speech regarding inflation. To me it seemed the most coursgeous and direct handling of the subject that has been attempted by any member of the Administration. I trust that you will be successful in accomplish- ing your recommendations. If our retail group can be at all helpful in so doing, I trust that you will call upon us. L. M. Dill, Demarest, N. J. Your New England speech on the dangers of inflation echoes my sentiments. It was # delightful speech. How about more of them. They Are surely needed. Mies Gertrude Hor, and R. J. Horn, Alton, 111. We wish to express our hearty approval of your doctrine, AS vas made public yesterday, namely: That in order to avoid inflation, the people should spend less, save more, that the working men who are receiving good vages should not clamor for higher wages, that in order to keep down the public debt, the people should be willing to pay more taxes. This letter is in appreciation for your efforts to keep the financial condition of our Government in 88 stable B. condition as possible during these trying times. Mrs. S. Katherine Maddux, Chicago, 111. I just happened to get the rebroadcast of your talk on inflation. It was an excellent talk, phrased for the under- standing of most people and one that brought home to each of us our own close relation to inflation and what we can do to help the Federal Government in controlling it. It is possible that I shall wish to use excerpts from the talk in A forthcoming issue of THE ZONTIAN as 1 believe that the more than 150 Zonta Clubs in the U. S. can be of real help in controlling this menace. J₂ A. Sorensen, Springfield, 111. I just read synopsis of your address before the Advertising Club of Boston and found it interesting. (Ideas follow) Regraded Unclassified 14 11 1 1 Leland F. Marsh, Scranton, Pa. I read with a good deal of interest your news release regarding the public to spend less and save more to seve danger of inflation. Don't you think that the U. S. Government, whom you represent, should practice what you preach? For illustration: The City of Scranton has lost in population, since 1930, over 15,000 people. There are over 8. thousand homes vacant, not including spartments and flate. People are and have been moving from Scranton by the hundreds due to our not having defense plants and the coal mines playing out in this region, but despite all of this, the U. 8. Government is going ahead with B. Housing Project costing one and a quarter million dollars. The taxpayers of this region fought this project. but to no avail. George M. Craig, Port Arthur, Tex. I became much interested in reading your speech made in Boston yesterday until I read down to where you said, "It is bad banking. in the long run, for Any banker to exploit the present demand for funds by seeing to charge unressonable interest rates". When I read this, I lost interest in all you said, for if your other etatements were BO out of line as this one, it destroyed all the advice you gave. It is known by all borrowers and lenders that there has never been a time in the memory of man when interest rates were lower and loans harder to get than the present. We are buying Treasury paper yielding from one-half of one per cent to one per cent in order to keep our money working, and yet we have over half of our deposite idle. You should know this 18 true of all banks. Richard 5. Robie, Cambridge, Mass. I read with a great deal of interest your talk on inflation given before the Advertising Club of Boston yesterday. I think it one of the most straightforward talks on the consequences of inflation that I have heard. If your talk is reprinted I wild appreciate, if possible, receiving two hundred copiee which we will have distributed to the employees of our company. (U-Dryvit Auto Rental Co.) Deniel Bloomfield, Director, Boston Conference on Distribution. I want to tell you how much I enjoyed listening to your excellent speech last night. It was n direct and instructive meanage which, I am sure, will do much good. (This covers correspondence received up to and including the first mail on Mondey morning, September 15th.) Regraded Unclassified 15 -12 - (Commente Received After the First Mail on Monday, September 15th) Abram I. Elkus, New York City. My heartiest felicitations on your recent address before the Boston Advisory Club on the perils of inflation. It VAS E notable address, well worthy of you and unlike many addresses it conteins many constructive suggestions. It hits upon the key for the best control of inflation by using surplus commodities and encouraging unlimited crop production. You correctly advocate the use of these surpluses and farm products. You delivered a. noteworthy address. It was couregeous and I congratulate you upon it. Your mother and father must indeed be proud of you. Paul T. Beardeley, Sloan, Iowa. This morning's press reports you advocate importation of one-half billion bushels of Canadian wheat to break the domestic wheat price. Such e statement, accredited to you, is unbelievable. (Gives ideas and figures in support of his views.) We must produce at a profit price to maintain our capital economy, and to provide a large base of national income from which sufficient federal revenues can be collected. Mrs. A. Harvey, Englewood, N. J. It has been heartening to read that there is at lesst one member of the Cabinet who has a sane attitude toward the matter of releasing some of the stores we have been piling up, and of course keeping from the consumer. Cotton is one of the things the ordinary house- wife finds it most difficult to purchase, perticularly when her income is low. I note by your address before the Boston Advertising Club that it is now seven million bales. I am writing Secretary Wickard to ask him if there is no way whereby B person could get some cotton goods at a reasonable price. I now pay twenty-five cente B. pair for very chesp cotton stockings at Woolworth's chain store. It all seems highly ridiculous. I truet your influence may prevail, and that B. saner policy may be adopted. Robert B. Burton, Barrington, R. I. It gave me great pleasure to read in the Rerald-Tribune a report of your address at Boston this week, in which you stated your views on the advisability of releasing the stored stocks of cotton, grain, etc., held by our Government. I am much gratified to see that st least one of our high Administration officials has the courage to handle this subject without gloves, end to state his views with clearness of thought. Mr. Secretary, you "hit the nail on the head". end I trust that you have driven B wedge which will result in doing just what you recommend. I fully appreciate, Mr. Secretary, your clearness in thoughts from time to time 80 expressed, and your quantity of common sense exhibited. Honorable John J. Cochran, House of Representatives. I AM enclosing - very nice editorial published in the St. Louis Post-Dimpatch of September 11th, relative to your speech at Boston, which I thought you would like to read. Regraded Unclassified 16 - 13 - James H. Sheppard, Grand Rapids, Mich. Having written you two or three days ago a letter in which I was compelled to differ with your conclusions regarding the impact of taxes upon the ability of benevolent and charitable institutions to sustain themselves, it 18 e pleasure to tell you how much I enjoyed reading the admirable speech of Mr. Morgenthau before the Boston Advertising Club. All of the measures advocated by Mr. Morgenthau should meet with the complete approval of all those who are aware of the necessity of combating an inflationary rise in prices. Mr. Morgenthau did not claim that the measures which he advocated would alone be sufficient, and I think he was right in this. Both economic and financial means must be taken. Mr. Morgenthau is particularly to be thanked for bringing out into the open the question of the agricultural surpluses. It is certainly an insane policy to try to combat a rise in the cost of living without feeding these surpluses into the market, and the attitude of some agricultural members of Congress in this respect is completely indefensible. (Letter to Mr. Kuhn - 8. previous "protester".) Regraded Unclassified Confiduation until 3PM Sept 15ᵗʰ 17 friinated revenue effect 1/ of the Revenue Bill of 1941 (H.R. 5417) 44 aprel upon in Conference September 11, 1941 (in oillions of dollare) : Estimated increase (+) or 1. Estimated 1 decrease (-) over I Increase or 1 yield of I decrease (-) : Rouse Bill a Senate Bill I one yield of il : & present les Income texas: Corporation: Normal tax + 26.8 + 7.8 493.3 Surtex + 118.4 - 2.1 763.1 Excess profits for - 86.0 - 18.3 1,112.3 Total corporation income taxes + 59.2 - 12.6 1,382.1 Individual + 279.8 - 4.1 1,144.6 Total Incose taxe + 339.0 - 16.7 2,526.7 Miscelluneous internal revenue: Capital stock tax 0 + 38.4 22.3 Estate tax + 5.7 0 141.6 Gift tex o 0 16.0 Total it 5.7 + 38.4 6.66t insufacturers' and estailers' excise knamel Distilled spirite + -7 + 5.0 123.0 Wines + 5.4 - 4.0 10.4 Presenger automobiles, perts and secrsmories o o 72.2 Autombile trucks, busses end treilers o o 16.1 Tires not tubes o o 44.6 2) Befrigerators, refrigerating apporatus and air-conditioners o o 16.6 Matches 0 o 8.2 2/ Playing curds o o 1.0 Rudie receiving ente and parts 0 o 9.4 Phonographs and phonograph records o o 4.5 Musical instruments o o 3.6 Sporting goods o + & 8.5 Lussage o o 4.5 Electric, ges, and oil appliances + 19.2 o 31.8 Photographic apperitus - .1 o 9.9 Electric signs o o 2.7 Business und storn muchines o o 13.0 Rubber articles o 0 21.3 Weshing acchines o - 5.3 .4 Option] equipment o o -3 Soft drinks - 22.6 o o Electric light bulbs + 4.0 - 4.0 4.0 Jewelry, etc. - 1.5 + 16.6 52.7 Fure o o 20.7 Toilet preporations o 0 19.7 Total manufacturers' and retailers' excise thres + 3,1 + 8.6 499.1 Miscellansous taxes: Admissions + 2.4 + 16.2 62.4 Cobarets, roof gardens, etc. o o 2.0 Club dues o 0 2.6 Safe deposit bozue 0 0 1.7 Telephone, telegraph, rodio and cable funilities, lensed wires, etc. - 1.7 + .6 24.9 Telephone bill + 8.7 - 34-9 52.3 Transportation of persons - 1.0 o 35.5 Use of sotor vehicles nad boots o o 160.2 Bowling alleys and billierd and pool tables - .7 0 1.3 Coin-operated emissement and gening devices - 4.3 0 4.6 Radio trandensting - 12.5 o o Outdoor advertining - 1.7 o 0 Total miscellaneous taxes - 10.8 18.1 347-7 Total vacise and miscellaneous taxes - 9.5 546.8 - 7.7 Total misc-llaneous internal revenue. - 2.0 + 28.9 1,026.7 Total + 337.0 + 12.2 3,553.4 Treasury Department, Division of Research and Sististics. Suptember II, 1941. Tentative. All estimates show full year effect. Estimates for corporation end individual income taxes end the gift the are based ou levels of incose estimated for colonder your 1941; all other estimates BTP besed on income levels estionted for fincal year 1942, 3/ Excluding nonrecurring floor stocks toxes -- distilled spirits $38.0 aillions: wines $2.1 aillions: tires end tubes $6.7 millions: natches $.7 sillion. Regraded Unclassified 18 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE September 15, 1941 TO Secretary Morgenthau FROM Mr. Foley At the suggestion of the State Department, Josiah DuBois of my office, and John Hooker of the State Department have left for countries in the Central American and Caribbean area to assist the American Missions at those places in working out a satisfactory program, in connection with the black list and freezing control. It is expected that the job will take from two to three months. In these countries certain firms, whose names appear on the black list, occupy an important place in the economic life of such countries. The problem arises as to how to deal effectively with the operation of such firms so as not to disrupt the national economy. Costa Rica and Guatemala had already submitted, through our Legations, certain proposals for dealing with this problem and our Legation in Haiti advises that Haiti has recently enacted a law freezing the assets of the firms on the black list. I believe that DuBois and Hooker can do a worthwhile job in assisting the Missions and through them perhaps the local governments in working out a satisfactory program to deal with this situation. 9.11.7 L Regraded Unclassified TREASURY DEPARTMENT 19 INTER-OFFICE COMMUNICATION DATE TO Secretary Morgenthau September 15, 1941 FROM E. H. Foley, Jr. Attached is a reply which I wrote to Vice-President Wallace at the direction of the Foreign Funds Control Committee with r egard to the application of the Standard Oil Company of New Jersey to sell its properties in Hungary to Germany for about $24,000,000. The Standard Oil people had written to the Vice-President about the matter. EN7L. Attachment Regraded Unclassified 20 0 0 SEP 15 1941 ? T My dear Mr. Vice President: Reference is made to your letter of August 22, 1941, to the Honorable Summer Welles, Under Secretary of State, enclosing a letter from Mr. Orville Harden of the Standard 011 Company of New Jersey, which was referred to me as Chairma of the Interdepartmental Committee on Foreign Funde Control. The Foreign Funds Control Committee, consisting of representatives of State, Treasury and Justice Departments, gave careful consideration to the application of the Standard 011 Company of New Jersey for a license under Executive Order No. 8389, as amended, involving the transfer of the ownership of a Managarian corporation (MACET) in return for $5,500,000 in currency, a promissory note of I. G. Furbenindustrie for $5,000,000, and 1. $13,500,000 in gold, to be delivered in Lisbon, Portugal, In view of all the facts and circumstances, 11 vse found that the approval of the application would not have been in accordance with the policy of this Government in administering Executive Order No. 8389, as amendad. Accordingly, the applica- tion vas denied, A tentative draft of a. confidential memorandum of the basic policy in cases of this type has been prepared bat has not been made public and 18 enclosed for your own confidential information. Sincerely yours, (Signed) 1, H, Foley, Jr. Acting Secretary of the Treasury. The Vice President, United States Senate. Inclosure, Withiard - 9/15/41 Regraded Unclassified 21 Mr. Vice President: This is B draft of a proposed letter which you may wish to use in replying to Mr. Harden, Dear Sir: Reference is made to your letter of August 19, 1941, enclosing a copy of a memorandum concerning B. proposed transaction disposing of your oil producing property in Rungary and a copy of your application to the Treasury Department for a license for that transac- tion. The proposed transaction was again carefully exemined in the light of your memorandum by the Foreign Funds Control Committee, consisting of representatives of State, Treasury and Justice Departments, which has jurisdiction of such problems. The Committee, after this reconsideration, came to the conclusion that in view of all the facts and circumetances the approval of the application would not be in accordance with the policy of the Government in administering Executive Order No. 8389, as amended. Sincerely yours, Vice President of the United States. Mr. Orville Harden, Standard Oil Company, Hockefeller Center, New York City. 9/14/41 Regraded Unclassified COPY 22 STRICTLY CONFIDENTIAL A TENTATIVE DRAFT OF POLICY WITH RESPECT TO THE SALE OF AMERICAN-OWNED PROPERTY IN gerrany, ITALY, OR COUNTRIES OCCUPIED BY THEM. 1. For the guidance of Foreign Funds Control, the State, Treasury and Justice Departments have approved the principle that Americen-owned property in Germany or German-controlled countries should not be sold for payment out of accounts blocked in the United States be- Ionging to nationals of Germany or the occupied countries. This principle WEB adopted for several reasons. It was felt that such sales would result in the disposal of blocked assets in favor of particular investors or creditors in the United States, who would thus enjoy E preferred status with respect to such blocked assets to the detriment of other claimants. The policy of first come, first served, with respect to the disposition of such assets, would not be desirable; but this is not a true first come, first served, situation. Due to its rigid control over the owners of the blocked essets the German Government would be effectively dictating which interests in the United States should be paid In full and which interests should receive partial mayment, or no payment et all. With respect to the use of blocked assets d' occupied countries in these transactions, there is always the possibility of duress, vith the result that the blocked assets which Foreign Funds Control seeks Regraded Unclassified 23 - 2 - to protect would be used to facilitate German acquisition of ownership of European industries or properties under B cloak of legality. It was felt also that even in cases in which the initiative appeared to come from groups in occupied countries who were apparently acting in their own interests and free from duress, the proposed transactions might nevertheless be on behalf of German interests and inimical to the interests of the United States. Usually the physical evidences of title are located in this country and the proposed transaction contemplates the removal of these physical evidences to some other country where they will no longer be readily amenable to our control. 2. When the parties interested in purchasing American holdings in Germany and the occupied countries became aware that Foreign Funds Control would not permit such purchases out of blocked accounts in the United States, they turned to the use of gold or other assets looted from occupied countries end held physically outside of the United States. Illustrative of this development was a proposal that German interests purchase American properties in Europe for gold which was to be delivered in Lisbon, It seemed clear that this proposal represented an attempt by the Germans to use assets for which, under existing conditions, they hed little other use, to acquire "clean" title to American-owned property in Germany and the occupied countries. This proposal also involved an Regraded Unclassified 24 - 3 - attempt to obtain American support for a breach of the British blockade, through the transportation of the gold to this country. It would, more- over, have involved the purchase by the United States Government of gold the title to which vas not "clean". Even though the gold offered in any particular transaction may have been acquired in normal commercial channels, it must always be borne in mind that transactions involving such gold are inextricably intertwined with transactions involving other assets acquired by conquest or duress. 3. More recently proposals to acquire American-owned properties in Germany or occupied countries have turned from the use of gold to the use of the currencies or foreign exchange of neutral countries, both European and South American. As in the case of gold, the Germans have been attempting to use looted assets which otherwise have little present value to them. The probable origin of these assets is indicated by the fact that it was in the late summer and early autumn of 1940 that the Germans suddenly initiated large-scale purchases of American holdings. In one instance American sellers of properties in Germany have indicated that their proposals were suggested to the Germans prior to the fall of France and were rejected by the Germans at that time-presumably because of the German shortage of foreign exchange-whereas the Germans on their own initiative recently reopened negotiations on this transaction. Regraded Unclassified 25 - 4 - 4. Most recently--after it had been indicated that Foreign Funds Control would reject the use of blocked dollar assets, gold, or foreign exchange held openly in German names for the purchase of American- owned property in Germany and the occupied countries-the Germans have apparently begun to use as go-betweens the financial institutions of neutral countries, allegedly acting on their own behalf. In one transac- tion for which approval was recently denied, certain interests in a neutral country would have acquired majority ownership of important in- dustrial properties in German-occupied territory. In spite of the fact, confirmed by the applicants themselves, that the German Government was in complete control of the properties, these interests were willing to make loans and purchase securities to an amount which seemed out of all proportion to past earnings and probable economic gains from mere owner- ship of the property in question. The suspicion was, therefore, deemed to be well founded that the interests which out forward the proposal, either on their own initiative or in collusion with German interests, contemplated the subsequent disposal of the assets to German interests, It was thought unwise that Foreign Funds Control should permit actions through a neutral cloak which would not be permitted if they were under- taken openly on German account. 5. The same principles which apply to Germany and German- occupied countries should, of course, be applied to Italy end Italian- Regraded Unclassified 26 - 5 - occupied countries. The application of these principles to other Aris countries will depend on the extent to which these countries follow the German and Italian models in economic affairs. It is believed that the principles set forth in this memorandum represent a logical interpretation of the provisions of Executive Order No. 8389, as amended. Any other interpretation would result in a dis- crimination between American owners of assets under Axis control, the delegation to the Axis Governments of the power to make discriminatory concessions to favored American interests, and the use of American com- mercial channels in disposing of looted property. September 15, 1941. Regraded Unclassified 27 OF STATE August 28, 1941 By dear Mr. Foley: Emaleard you what Find a copy of a letter sent to Visa Suesidenty Heary a Wallace transmitting & information from Orville Harden, Vice President of the Hundard 011 Company of New Jersey. I understand that the setion of the Department of the Treasury, referred to is Mr. Hardon's letter, was based upon the recommenda- tione of the Interdepartmental Committee on Foreign Funds Control. I mg therefore, transmitting to you the letter Tran Vice President Mallace, together with its enclosures, in order that the Interdepartmental Committee on Foreign to Centrol my reply. vice President Wallace has been advised of this reference. 301790 - Sincerely yours z Exclesure: Choretary Pree Vice President Wallace, August 22, 1941, with endorsures. thard 1. Foley, 35., Esquire, Chairman, Interdepartmental Commissee on Foreign Funde Control, Treasury Department, Nashington, D. o. Regraded Unclassified August 22, 1941 the problem besed m Regraded Unclassified 6y seem Let we THE far profess wid The 1 be THE - 10 M own any and YOUR so Se will - as 4SP Treasurys PA 15 M 0622 of * M attomor MA Alwhar, Avenue secis the " 07 Think YES - Ge point 1 ME return D Rep THE (a) In PAR OF United for the preparing 200 - She the 20346 Mark 554 all Relivered to Listop in 90 gaint st the 1618 whall De vitals date la Lorgely this 47 is ⑉14 DON without authority 12 required of - HIGHT - skall 95 asking to to 0.50 - why N Sugaryň wf additional Anternation which 18 147 scale voir yours) Devills Hard (R) Regraded Unclassified 80 smell age the 16 as no of insured 40 telephone whather n was our provided reperty 10 this property returnt is 1940 1,035,000 carrols offy 1: emae by - Corporation (NECOT) was to it tare 11.00 ex: the the - Theotric Cangany, corporation, valvistary of STANDARD 012 Company (No secure) with a Atter referring the mather 10 the state Department, " 1026 1444 9a world be willing: Le - the qualition vita time, and they visial they world rest 15 100 York for the purpose. main Dr. 1 27408-106 n Rie de Janeire 100 was unable to ner & visa 4 91013 the Unking 11, use Yice President of our (sempary vost 19 ALe for the purpose ml and projoss1 would be made. The last offer froe the 1.06 Forbenin/uptrics Milmi from --- 11 Mill, succptable, was to buy all of the shares :----- by HADRT and "a 007 tar 127, arobably rostly Goran coin 16 be taken by us in Lisbon, Periods the goi. :- be purchased by 169. TYCE the Reichasenk, and 10 --- 41 visate Germany. 122158 SWISS FRANCE - CENTRAL or CURREN JTES The and Swite Tapes are held by large Swellsh Setter The Ceptral --- South Merican currencias -:11 be 01 deposit in banks 10 goveral countries. UNIVERSITY 2071 or 1,0. PASSO INDUSTRIES one. Total promissory note will be guyable In 0.5. Collars three mustas after the at at the vir a no with thei Ave payment of the instructs: will be by Incomel represented by the incrion befunce and Mill of the 1.0. 01:3 be essed the fore(cing represents a total -: class promptly. Xe understand that the Treasury yela followed in Personal but " Words sold is in Tom by firmat 12/ is the fain : - by 126 intied States 10 principion visial is . from the trittes Regraded Unclassified the offer runsized 10 16g wy Department was date di on Se seasived main True Xr. THERE AS line dell to Destric Del Montion you 3.005. of would net he It No. class byt magnetion Property followin Detwan Comination over Bongars 124 W bakes my Gerenny if ass when coused 86 1/5 reads the will, the BE the basis of profesing 410 at% over the choriose Mar, at AT the Claim work BATE wolnsively 11.30 the cruht of the was With in would - ask be is position 6 bests our 66 free 4am stockber dan 15 " M(Monit to ENERGY be rumbeed seen ord Lease - 16 cames say yours ost security anything ** - 34 10 the bywererg the proples a adar, inf 401 damsany all 42 apt *Bob neaded, that To or ⑉ the to the extent of -batever are my Se su - the projecty. file proin visa Regraded Unclassified TTEA ACRY DEPART # AT a YOU 32 0% PLICATION FO A LICENSE TO ENGAGE IN À PORTIGN RECEARCE TRANSACTION, OF - PAYMENT, EXPORT OR ( (THDRAWAL FROM THE UNITED STATES OR THE EARMARKING, OF COLD of SILVER COLN ON BULLION OR CURRENCY, OR THE TRANSFER, WITHDRAWAL 08 EXPORTATION OF, or DEALING B. EVIDENCES OF INDESTEUNDS OR EVIDENCES OF OWNERSHIP OF PROPERTY be executed and filed in triplicate with the Federal Reserve Bank for the district or with the Generation or ummissioner of the territory or possession of the United States is which the applicant resides or has N/A principe lace of business or principal office or agency. If the applicant has DO legal residence or principal place el principal office or agency in a Federal Reserve district or such territory or possession the application net with the Federal Reserve Bank of New York.) n Washington, D.C. COPY 1 In accordance with Executive Order No. 6560 of January 15, 1934, as amended, relative to transactions in foreig collange, transfers of credit, and the export of coin and currency, and the regulations insult thereunder. the under pigned hereby applies for a license to execute the transaction described below: A The name of the applicant is the applicant's residence or principal parce or bullical COMPANY (Insurporated ta Delavare) so Rockefellyr. Plass - Testr in and the citizenship* of the applicant is United Hoter of I The applicant has since 1881 been engaged in the business of PETRULEUR ! 1 I I C. The applicant desires a license in order to: (State in detail the nature, purpose and amount of the transaction, and the name Address, nationality® and extent of interest of every party, including the applicant, involved or interested - se transaction.) In the case of 5 corporation give country of incorporation, countries to which corporation is doing - and also predow citizenship of stockbolders sell and transfer to I. G. Purbenindustrie A. 0., Frankfurt - Male, Gerumy, all hares issued by Magyar Amerikai Clajipari R.T., a Respertion entity, Delepart, limgery, used 100% by European Gas & Electric Co. The present maker of dare Lasued and mit- tanding is 17,857 having a par value of 1,000 pangess cooh. a stock divident was athorised at the General Meeting held May 1, 1941 to increase the capitalization to 5,000 shares but government approval 1s required for the Impress end - have not been aformed whether this has been obtained. accept in payment for the above shares the followings OLD, nostly German coin 13,500,000 Delivery to be taken by us in Lisbon, Portugal; the gold to be purchased I. G. from the Reichsbank, Berlin, and to - from within Cermany, KROWOR, SWISS FRANCS and/or CENTRAL or SOUTH AMERICAN CURRENTED 8 6,800,00 Swedish and Swine funds are held by large Beedish and Bwins banks. Central and South American surrencies will be of deposit is benker averal countries. RY NOTE OF I. G. FANSENINDUSTRIE 5,000,000.00 promissory note will be payable in U.S. dollars with interest three . after the end of the war and will resite that due payment of the himant will be guaranteed by collateral represented by the Amriew Luga and assets of the I. G. Parbeniadustrie. side) Applicant's No DUPLICATE MONGARIA Regraded Unclassified BEY Invoice odil the gald to the v.s. Treasury, sail the foreign currensise for 33 v.s. dollars and callest U.S. dollars for the premissory note with interest after the and of w. a w dispece of the relative collateral to satisfy the sole. Regraded Unclassified II. represents and warrants the party other than those mentio: in item C above has any or indirect, in the transactions for which * license applied for herein. If there any exemptions, note them below applicant represents and earrants that all the facts herein stated are correct and true and that be does have knowledge of any material facts in connection with such application which are not fully and accurately Earth herein. (Attach hereto schedules of any additional material information.) The applicant represente and warrants that be has complied, and agrees that be will comply, in all nispecta, the Executive Order No. 6540 of January 15, 1954, as amended, and the regulations issued thereander, any and the chereto, has been and filed that, or with is respect to the made CAB & I By 1 1 - Instature Treasurer i County of not (Haton COPY I, box / depose and say that I am the applicant in the above application for license, or the Assistant Treasurer I I 2 of EUROPEAN W & COMPANY which is the applicant in the above application for line (This of that - 1 - If appliount duly authorised to other the to min application on behalf of the applicant; that I have knowledge of the facts as set forth in cald - and know the same to be true and accurate; and 4a not have knowledge of any esterial facts is connection with such application which are not fully and - forth hereia. 1. I I Y I The Dost S. J, (Allbind) food and sworn so infore - 1948 (Notarial Self) (the administries - Rebert Peterson) - expires RECOMMENDATION OF FEDERAL RESERVE BANK - OF THE TREASURY: dure application in forwarded $ the Securety of the við the recommendation that a license should - the following - Remarks: BASE Vess N - - - - form the Preductional I under the Gold Reserve A - - 5 my 3 - the Treasury Depart- D.C. Regraded Unclassified 35 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE September 15,1941 TO Secretary Morgenthau FROM Mr. White Subject: Summary of Developments concerning the Economic Defense Board Unfinished Business 1. A disoussion of the policy to be followed vie-a-via Japan, raised by the Vice President as the first problem con- fronting the Board, is awaiting the outcome of the current negotiations with Japan. 2. The Vice President stated at the third meeting, Aug- ust 27, that he would appoint a committee to secure priority for the shipment of goods for Latin America. 3. After the presentation of 8. preliminary report, State and Agriculture were asked at the second meeting, August 20, to study further the question of preclusive buying of French African oils. 4. Negotiations are under way in Brazil to eliminate the Italian air line to South America by denying it the use of Bra- zilian airport facilities. Next Meeting The Economic Defense Board will consider at the next meeting B. report on the coffee situation prepared jointly by State and Agriculture. The memorandum states that prices of coffee rose rapidly from November 1940 to August 2, 1941. At that time, to prevent further increases, the United States im- port quota was raised by 20 percent. Since August 2, there has been no further price rise but the Interdepartmental Coffee Committee 1s continuing to watch the situation. Regraded Unclassified Division of Monetary 36 - 2 Research Material Received from the Economic Defense Board 1, "The Proposed Purchase of Peanuts, Palm Kernels, and their Products, from French Africa," (memorandum presented by Assistant Secretary of State Acheson at meeting, August 20, 1940). No definite recommendation is made. The trend of argument indicates that no action should be taken until more information 18 available. (a) French West Africa is an important peanut, palm kernel and palm oil producer, producing 500,000 tons of pea- nuts, 65,000 tons of palm kernels, and 15,000 tone of palm oil a year. (b) Peanut oil 18 being used to fuel French submarines at Dakar. (e) The U.S. could use & large part of the peanut produc- tion. The demand for palm kernels and palm oil 18 not known. (d) Weygand suggests the U.S. take some peanut oil in place of North African olive oil. He also suggests the U.S. furnish the fuel oil necessary to transport peanut oil for North African consumption, thus releasing more olive oil for the U.S. 2. "Interim Report on the Program for the Acquisition of Strategic and Critical Materials" (memorandum presented by Assis- tant Secretary of State Acheson at meeting, August 20, 1941) (a) Very little progress has been made in the creation of stock piles because most of the materials bought have been going into consumption. (b) Instances of pure preclusive buying are few. However, since the Axis needs many of the same materials we do, there is incidental preclusive effect in most of the purchasing. (o) We have made an agreement with Brazil and one with Mex- ico guaranteeing the purchase of specified strategic commodities. (d) Negotiations are under way for the purchase of the en- tire Colombian platinum production, the entire tungeten output of Portugal, the 1942 Turkish output of chrome, rubber and tin from Thailand, rubber from Indo China, zino from Spain, and cork from North Africa. Regraded Unclassified DEFENSE SAVINGS STAFF 37 REPORT OF RADIO ACTIVITY RELATIVE TO "RETAILERS FOR DEFEESE WEEK" September 15, 1941. & series of three interviews, two five-minute and one ten-minute, was mailed to 863 radio stations for broadcasting during "Retailers For Defense Week". The etations were asked to invite prominent local retailers to their studios and broadcast the interviews pertaining to the sale of Defense Stamps and the part being played by the retailers of America in the National Defense Program. A series of forty-five one-minute spot announcements, for use on September 12 through 20, was sent to all radio stations, Accompanying these were sets of sixteen twenty-five-word announcements and shorter spot announcements. Station WINX in Washington covered the opening day of "Retailers For Defense Week" with a broadcast from the National Airport at 10:30 A.M., September 15, upon the arrival of the twenty Powers Models from New York City. Later there was a broadcast from the Mayflower Hotel at 12:00 o'clock noon when Donald M. Nelson, Executive Director of the Supply Priority and Allocations Board, Director of Priorities for Office of Production Management, and Honorary Chairman of "Retailers For Defense Week", sold the first Defense Stamp to Mrs. Roosevelt. The broadcast carried Mr. Nelson's speech and his appointment of the Powers Modele as sales captains at 12:30 P. M. Brown and Williamson Tobacco Corporation distributed for use during "Retailers For Defense Week" 30,000 posters all over the United States to be placed in windows of retail stores in connection with one of their products. Adam Hat Stores, Inc., through both radio and full color advertisements in seventeen leading Sunday newspapers is urging all its customers to buy Defense Savings Stamps at the 158 Adam Bat Stores. Regraded Unclassified - 2 - 38 Telegrams were sent to leading radio sponsors on September 10 urging them to include plugs on Defense Stamps in the commercial material on radio shows during "Retailers For Defense Week". As 8. result, the following sponsors are carrying special "Retailers For Defense Week" announcements on their programs: SPONSORS PROGRAMS Adam Hat Stores Fight Broadcasts American Oil Company Edwin C. Hill The Anacin Company Easy Aces Our Gal Sunday Front Page Farrell America The Free Bayer Company Young Widder Brown Bristol-Myers District Attorney Brown and Williamson College Humor Uncle Walter's Doghouse Plantation Party Wings of Destiny Paul Sullivan Carnation Milk Company Contented Program Colgate-Palmolive-Peet Company Stepmother Woman of Courage Myrt and Marge Ellen Randolph Bess Johnson City Desk E. I. du Pont de Nemours & Co. Cavalcade of America Emerson Drug Company Vox Pop Eversharp Company Take It Or Leave It General Electric "Hour of Charm" General Mills Arnold Grimm's Daughter Hymns of All Churches Mystery Man Light of the World Kathleen Norris Valiant Lady Betty Crocker Lone Ranger Jack Armstrong Gillette Safety Razor Company Louis-Nova Fight Gunther Beer Company "Quiz of Two Cities" Edna Wallace Hopper Romance of Helen Trent The Andrew Jergen Company Walter Winchell The Thin Man Kraft Cheese Corporation Kraft Music Hall "The Great Gildersleeve" (More) 39 - 3 - SPONSORS PROGRAMS Lever Brothers Aunt Jenny Big Town Meet Mr. Meek Big Sister Grand Central Station Uncle Jim's Question Bee Hollywood Premiere Lux Radio Theatre Lewis-Howe medicine Company "Treasure Chest" Philip Morris "Johnny Presents" Crime Doctor Great Plays Miles Laboratories Quiz Kids National Barn Dance Modern Food Process Moylan Sisters Nutual Broadcasting System "America Preferred" "The Great Gunns" National Broadcasting Company "For America We Sing" Pacific Coast Borax Company "Death Valley Days" Phillips Company "Lorenzo Jones" Procter and Gamble Knickerbocker Playhouse Against the Storm Life Can Be Beautiful The Guiding Light Truth and Consequences Ha Perkins The Goldberge Portia Faces Life Lone Journey Vic and Sade The O'Neills The Quaker Oats Company "That Brewster Boy" RCA Manufacturing Company "Music You Want When You Want It" Standard Brands Chase and Sanborn Hour What's My Name One Man's Family Texas Company Treasury Hour "Millions for Defense" Williamson Candy Company "Famous Jury Trials" Wa. Wrigley, Jr., Inc. Gene Autry's "Melody Ranch" Ben Bernie's "Just Entertainment" Dear Mom Scattergood Baines The following programs are under the direction of the Treasury Department: Treasury Hour - "Millions for Defense" "For America We Sing" "America Preferred" Regraded Unclassified TREASURY DEPARTMENT 40 INTER OFFICE COMMUNICATION CONFIDENTIAL DATE September 15, 1941 TO FROM Mr. Hans Subject: The Business Situation, Secretary M Morgenthau Week ending September 13, 1941 Summary (1) Industrial production in August showed no more than a seasonal increase over July, and will probably increase no more than seasonally in September, according to preliminary information from the Federal Reserve Board. Thus the seasonally-adjuste FRB index in August and probably Sentember will hold steady at the July figure of 161 (revised). (2) The advance in commodity prices shows no slackening. The BLS all-commodity index continues to rise at a rate of nearly 2 points a month, closely similar to the average in- crease in 1916. (It has risen 10 points in the last 6 months.) Prices of basic commodities, particularly foodstuffs, advanced strongly during the past week. (3) The cost of living rose 0.6 percent further during August, according to the Conference Board index, which com- pares with a gain of 0.5 percent in July. The August index of 89.4 (1923 - 100) 1s 4.7 percent higher than in August last year, and 6.4 percent higher than the pre-war level of August 1939. (4) The cost of constructing a standard house in St. Louis increased 2.5 percent further in August to $7,317, as compared with $7,142 in July. The cost 18 now 22 percent higher than in July 1940. Lumber prices have been steadily advancing in recent weeks. (5) Weekly business indexes, seasonally adjusted, con- tinued to sag in the first week of September. The New York Times index for that week declined 1.2 points to 129.3, while Barron's index was 0.2 lower at 136,9. Regraded Unclassified - 2 - 41 Industrial production reflects material shortages While production in such industries as machinery, air- craft, railroad equipment, and shipbuilding increased further during August, the effect of priorities and material shortages in curtailing production in certain other industries caused the seasonally-adjusted FRB index for August to hold at the July level of 161 (revised downward 1 point). Near-capacity operations in many industries were also an important factor in preventing further increases in output. Considerable declines in rubber consumption and silk de- liveries occurred during August, owing to ourtailment programs. Furniture production, running at an exceptionally high rate, increased less than seasonally, while the production of iron and steel, non-ferrous metals, lumber, stone, clay and glass products showed little change from previous high levels. The same influences are tending to prevent & more than seasonal increase in production during September, leading the Federal Reserve Board to expect that the adjusted FRB index for September will likewiee hold at the 161 level. The FRB index has been revised somewhat to increase the coverage of defense industries, and it 18 believed that the index now includes practically all defense work. The index has also been improved by certain changes in seasonal adjust- ments. The new index in recent months has averaged about 3 points higher than the old index, but in July both were at the same level (161). Commodity prices continue to rise No slackening in the commodity price advance was apparent last week. The BLS all-commodity index in the first week of September rose to 91.0 from 90.6 in the previous week, with the largest increases in prices of cattle feed, woolen goods, grains, cotton goods, meats and dairy products, in respective order. The all-commodity index 1s rising steadily at an average rate of nearly 2 points & month, and has gained 10+ pointe in the past six months. A continuation of the rise at this rate would carry the index to 112 by this time next year, which would be the highest since January 1921 when the index stood at 114.0. The average rate of rise in the all-commodity index during 1916 was 2.0 points a month, with prices at approximately the same level as this year. Regraded Unclassified - 3 - 42 Basic commodity prices higher Prices of basic commodities show no indication of a nearby slackening in the general commodity price advance. On the contrary, the rise in prices of these sensitive materials has been accelerated in recent weeks, especially in the case of domestic commodities. (See Chart 1.) This seems particularly significant in view of the fact that fully one-third of the commodities in the domestic group (6 out of 17) are under Government price control and have held at unchanged prices. The combined index of 28 basic commodities has risen 8 percent since the middle of August. Pressure on ceiling prices is sufficiently strong in a number of commodities 8.9 to indicate that ceiling levels may have to be raised to avoid unfavorable repercussions on the defense program. In the case of tin, Singapore prices have risen (reportedly under heavy Russian buying) to a point where dealers in this country have been forced to curtail buying owing to lack of B. sufficient margin under the present ceiling price. In the case of burlap, a similar price rise has occurred in Calcutta owing to heavy British sandbag orders, which has reportedly eliminated any profit in importing at present ceiling prices. Two price ceilings have already been raised (on certain cotton textiles and on Southern pine lumber) and recent advances in raw cotton prices have created an urgent pressure for a second upward revision in the ceiling prices on cotton goods. Anticipatory buying a factor in prices Various powerful factors, of course, underly the con- tinuing rise in commodity prices. Some evidence of the extent to which anticipatory buying may be a factor came to light this week, when publication of cottonseed oil consumption figures showed the lowest consumption for any August since 1931. The decline of 29 percent from the consumption in July was attrib- uted in part to previous over-stocking of shortening by the large consumers and distributors when prices were rising rapidly. A continuing inflationary influence has been the rapid expansion of credit in the form of bank loans for commercial uses, a large part of which are used directly for the purchase of goods and materials. Loans by weekly reporting member banks for commercial, industrial, and agricultural purposes in the first week of September (see Chart 2) showed a gain of $1,845,000,000, or 38.6 percent, over the corresponding week Regraded Unclassified 43 of last year. An increase of $28,000,000 occurred in the latest week. A large proportion of this expansion, of course, represents loans for defense uses. Cost of living up 0.6 percent in August The Conference Board cost of living index rose 0,6 per- cent in August as compared with 0.5 percent in July, with food costs showing the largest advance. The August index of 89.4 (1923 = 100) 18 4.7 percent higher than in August last year, and 6.4 percent higher than the pre-war level in August 1939. The index of food costs has risen 12.8 percent since August 1940. Building costs advance further The cost of constructing a standard 6-room frame house in St. Louis showed a further advance of 2.5 percent in August, rising to $7,317 from $7, 142 in the previous month. (See Chart 3.) The cost of materials and general costs ad- vanced sharply during the month, but labor costs remained unchanged. The total advance over the $6,004 cost of con- structing this same house in July 1940 amounts to 22 percent, with labor coste 24 percent higher, materials 21 percent higher, and general costs 20 percent higher. Details of the changes in costs for materials, labor, and overhead (see Chart 4) show the particularly sharp ad- vances in costs of certain types of materials during the past month. The price of lumber, furthermore, has been rising steadily during August and early September, according to BLS price indexes, six successive weekly advances during that period carrying the index 6.4 percent higher than at the end of July. Ceiling prices have been placed on certain types of lumber, the most recent being those announced last week for Douglas fir, to become effective October 1. Steel industry engaged with priorities problems Steel mills continue to be occupied with supplying data to the OPM required in connection with the new priori- ties regulations, made effective at the beginning of this month. Steel trade reports indicate a growing belief that the application of priorities will reveal that the proportion of steel output needed for defense uses is considerably less than had been thought. The filing of priority forms 18 Regraded Unclassified - 5 - 44 having the effect of wiping considerable duplicate tonnage off the books, and the existence of some large inventories has been revealed. The correcting of these situations will result in a more equitable distribution of steel for civilian uses. The shortage in steel scrap continues to trouble steel producers. One plant at Buffalo has had to shut down and another has tapered off operations due to lack of scrap. Looking further shead, steel executives are concerned over the fact that the shortage of scrap 18 likely to become ac- centuated when winter weather sets in and normal scrap collec- tion activities are hampered. A new potential threat to high level steel operations has just developed as & result of the strike scheduled for today in "captive" (steel company owned) coal mines. CIO officials have called upon approximately 38,000 soft coal minere in 6 States to go on strike today at captive mines of 7 steel companies, including the country's three largest producers. While this strike may not have any immediate repercussions on steel operations, a prolonged tie-up in the mines could have serious consequences. The strike is reported to have been called solely for the purpose of obtaining & union shop. Steel operations scheduled for the current week are reduced to 96.1 percent of capacity a.B compared with 96.9 per- cent last week. The moderate decline in operations appears to have been due in part to furnace repairs in the Pittsburgh district. All pig iron producers have now received their September shipping schedules, after examination and revision by OPM, and according to the Iron Age practically all of the material 18 slated for shipment to consumers carrying a defense rating. Pig iron production last month rose slightly to a new record high. The operating rate for the industry increased to 97.5 percent of capacity from 97.1 percent in July, and the number of furnaces in blast on September 1 was 213 as compared with 211 & month earlier. New orders sharply lower Our weekly index of new orders, an revised by data re- cently received, shows & continuation of the pronounced de- cline that has been in progress since late July. (See Chart 5.) In the first week of September all groups were Regraded Unclassified 45 - 6 - lower, doubtless reflecting the Labor Day holiday. While the substantial decline in the index 1s partly due to sea- sonal influences, the index may also be showing some influ- ence of the shortage of materials for civilian goods, and of the sold-up condition in industry generally. Weekly business indexes lower Weekly adjusted indexes of business activity in the first week of September were lower than in the previous week. The New York Times index declined 1.2 points to 129.3, with downturns in all components except electric power production and cotton mill production, which advanced. Barron's weekly index was 0.2 lower at 136.9. Regraded Unclassified The rt 1 46 MOVEMENT OF BASIC COMMODITY PRICES Domestic and Imported AUGUST 1939-100 PER PER PER PE# CENT Weekly Average CENT CENT Daily CENI 165 165 150 150 // Imported 160 Commodities 160 140 140 // Imported 155 155 Commodities (30 130 17 Domestic 150 150 Commodities 120 (20 145 17 Domestic 145 Commodities 110 110 140 140 100 135 135 100 D J F M A M J J A S o 26 2. 9 is 23 30 4 13 20 27 4 " 5 25 - M J. -) 4. 5 o N 1941 JULY AUG SEPT. OCT. 1940 1941 Percentage Change for Individual Commodities. August 1940 Low to September 5. and to September 12.1941 PER PER Cottonssed Oil /67.9% CENT GENT 17 Domestic Commodities Il Imported Commodities Tollow 157.12 +150 +150 -125 1175 Lard 1/6.0% Shellee 11033 Nogs 87.9% Coffee 10282 -00 Catton BEAT *100 Carno 9832 Wheat 73.8% Print Cloth 6932 176 Burley 659% *75 Buntap 7291 Reain 62.3% Wbat 56.02 Butter 38.7% weres 53#: Lood 212X -50 Flooseed 44.11 Corn 17.5% Zinc 1512 Sugar 379 Steem 138% -25 *28 5./A 2/01 Cupper 1183 Rubber 182: Steel Scrap dom 87% 7in 302 Steel Scrop wvp 278 o o Aug 1940 Sept.5 Sept 12 Aug 1940 Sept 5 Sept 12 Low Low Regraded Unclassified COMMERCIAL LOANS AND INDUSTRIAL MATERIALS PRICES 1939 1940 1941 1942 S N J M M J S N J M M J 5 N J. E DOLLARS PER BILLIONS CENT (LOANS) (PRICES) 6.4 220 6.0 200 5.6 180 COMMERCIAL LOANS WEEKLY REPORTING MEMBER BANKS (BILLIONS OF DOLLARS) 5.2 160 4.8 140 16 RAW INDUSTRIAL MATERIALS AUG. 1939 = 100 4.4 120 Regraded Unclassified 4.0 $ N d M J $ N 100 M J M M J $ N J M 1939 1940 1941 1942 . COMMERCIAL, INDUSTRIAL, AGRICULTURAL LOANS AND OPEN MARKET PAPER 47 Chart 2 Office of the Secretary of the Treasury These of - - State C - 283 - a CONSTRUCTION COSTS OF STANDARD 6-ROOM FRAME HOUSE, 6T. LOUIS JULY 1940 - 100 1540 1941 J A s , - F 1942 # PLACENT - M - di A $ o N D J F M A & J PERCENT Total Cost 10 130 125 125 120 120 115 115 110 110 105 105 100 100 95 4 A 5 o le D J F M A M J J A $ 95 o N D J F M A M J 1940 1941 1942 PERCENT PERCENT Components 135 135 130 130 125 125 LABOR 120 120 GENERAL 115 115 110 110 MATCHIALS 105 105 100 100 55 95 J. & $ e N D J. F V + y J - A $ o " D al F M A M J 1940 1941 154. INCLUDES GENERAL CONTRACTORS' PROFIT, SUR-CINTRACTONS SVERHEAD 1% PROFITS, AND INSURANCE. SALES TAX, etc. 48 Chart - - --- ⑈ - Deasury - - - Regraded-Unclassified CHANGES IN COST OF CONSTRUCTION OF STANDARD 6-ROOM FRAME HOUSE, ST. LOUIS Percentage Change, July 1941 and August 1941 over July 1940 PER CERT ITEM AND PERICHT CHARGE COST Materials JULY 1940 TO Aus. 1941 Aue, 1941 50 Luwace 54.7% $574 8 FINISHED LUMBER 29.8% 845 30 @INDOWS, Doors, ETC. 21.7%.. 609 PAINT, HARDWARE AND 20 ELECTRIC MATERIALS 14.8%.. 441 MASONRY AND TILE MATERIALS 9.1% 669 10 HEATING AND PLUMSING 6.3% 554 o MATERIALS $3,774 -10 JULY 1940 JULY 1941 Aus. 1941 50 UNFINISAED Lumaca 39.2% $220 Labor 40 FINISHED LUMIER 29.00 275 RIRDOWS, Doors, ETC. 29.3.. 252 30 PAINT, HARDWARE AND ELECTRIC MATERIALS 27.5%.. 292 20 MASOURY AND TILE MATERIALS 20.1% 736 HEATING AND PLUMBING 13.12.. 339 10 LABOR $2,108 o ANY 1940 JULY 1941 Aug. 1941 30 INSURANCE General SALES TAX, ETC.* 22.31 $400 20 GENERAL CONTRACTORS' PROFIT 21.9% 629 SUBCONTRACTORS OVERHEAD AND PROFITS 15.3% 406 10 GENERAL $1,435 o JULY 1940 JULY 1941 Aug. 1941 TOTAL COST, Aus. 1941. $7,317 TOTAL COST, JULY 1940. $6,004 INCREASE $1,313 MISSOURI SALES TAX (Now 2 PER CENT ON MATERIALS, OLD AGE AND UNEMPLOYMENT TAX (FEDERAL AND STATE). LIABILITY AND EMPLOYEES COMPENSATION INSURANCE, FINE AND TORNADO INSURANCE, COMPLETION HOND. PERCERT 21.9 SOURCE: REAL ESTATE ANALYST. - of the Secretary 48 the Transary 49 Chart - - - - Regraded Unclassified INDEXES OF NEW ORDERS Combined Indes of New Orders and Selected Componente 1939 1940 IDAY . e . = à , - - a - A PERCENTAGE - - . a POINTS PLACENTABL PRINTS 250 200 260 290 ITD 270 260 260 250 250 240 240 230 230 220 220 210 210 Total index 1936 100 200 20 150 190 180 180 170 170 160 (60 150 150 146 140 180 1,30 120 120 110 110 100 100 to w se DD Total ascluding Steet et Textiles a 70 70 B 8 8 50 E 40 Btas) Orders X 30 > 20 10 Textile Orders # 0 D & o E A # 1535 1940 50 : Chart 5 CONFIDENTIAL Regraded Unclassifi 51 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE September 15, 1941 TO Secretary Morgenthau FROM Mr. Haas JOH - Work Projects Administration employment declined from 1,045,000 to 1,043,000 persons during the week ended September 3, 1941. Attachments. Regraded Unclassified 52 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending Number of Workers 1941 (In thousands) February 5 1,892 February 12 1,893 February 19 1,885 February 26 1,867 March 5 1,806 March 12 1,764 March 19 1,736 March 26 1,708 April 2 1,662 April 9 1,634 April 16 1,607 April 23 1,586 April 30 1,560 May 7 1,519 I May 14 1,497 May 21 1,474 May 28 1,464 June 4 1,442 June 11 1,423 June 18 1,410 June 25 1,368 July 2 1,172 July 9 1,030 July 16 1,016 July 23 1,025 July 30 1,036 August 6 1,041 August 13 1,042 August 20 1,043 August 27 1,045 September 3 1,043 Source: Work Projects Administration. 53 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers 1939 (In thousands) January 2,986 February 3,043 March 2,980 April 2,751 May 2,600 June 2,551 July 2,200 August 1,842 September 1,790 October 1,902 November 2,024 December 2,152 1940 January 2,266 February 2,324 March 2,288 April 2,092 May 1,926 June 1,665 July 1,701 August 1,691 September 1,704 October 1,779 November 1,821 December 1,878 1941 January 1,895 February 1,867 March 1,708 April 1,560 May 1,464 June 1,368 July 1,036 August 1,045 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. WORK PROJECTS ADNINISTRATION 54 Humber of Vorkers Employed United States Monthly W.P.A. Exployment Weekly U.P.A. Seployment 1931 1937 1930 1930 é 1940 MAR. MT JULY ACT. 1941 BILLIONS MILLIONS MIL JAM. MR. 1942 WILLIONS SEX JULY 101 No. or or or willing WORKERS was Its - or 2.7 was 2.7 2.6 3.2 3.2 2.6 2.5 2.5 2.4 2,0 2.8 2.4 2.3 23 2.2 2.2 2.4 2.4 2.1 2.1 2.0 No 2.0 2.0 1.9 1.9 1.0 1.8 IVÉ 1.6 1.7 1.7 1.0 14 1.5 HR 1.2 12 1.4 1.4 143 1.3 .9 -0 1,2 14 1.1 1.1 of 14 1.0 1.0 = .9 0 0 = a # a . . MAR, MAY JULY SEPT. NOV. MAR. MAY JULY TOT: NOV. . in MI; 1935 1936 1937 1930 1939 1940 1941 é 1940 1941 1942 associa MCBC PROJECTS ADMINISTRATION Office el the Service of the Trainery - al - - - 2-211-C Regraded Unclassified \23 55 MEMORANDUM FROM British Supply Council in N.A. TO Mrs. Henrietta Klotz Compliments ofE.N.Gray Regraded Unclassified 56 STATEMENT 32. AIRCREFT SHIPPED TO U. Y, AND OVERSEAS COMMANDS. DESTINATION ASSEMBLY POINT BY SFA BY AIR YEEK ENDED VEEK ENDED AUGUST 23, 1941. SEPTEMBER 13,1941. HELL Aircobra U. K. U. K. 17 - CAS Boston III U.Y. U. K. 5 - Mussion III U.K. U. K. - 29 (via Gander) TOTALS 22 29 rittch Air Commission, aptemier 15, 1941. Regraded Unclassified For Miss Chauncey 57 September 15. 1941. CONFIDENTIAL Dear Mr. Encire: Permit ⑉ to acknowledge for the Secretary the receipt of year letter of September 11, 1941. enclosing your compilation for the week ended September 3. 1941, showing dollar disbursements out of the British Rapire and French assounts at the Federal Reserve Bank of New York and the needs by which these expenditures were financed. Faithfully yours, B. Merle Cochran, Technical Assistant to the Secretary. L. V. Enche, Bequire, Vise President, Federal Reserve Bank of New York, New York, New York. HMC:dm:9/15/41 Regraded Unclassified 0 o ? Y 58 FEDERAL RESERVE BANK OF NEW YORK September 11, 1941. CONFIDENTIAL Dear Mr. Secretary: Attention Mr. H. Merle Cochran I am enclosing our compilation for the week ended September 3. 1941, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours, /s/ L. W. Knoke, L. W. Knoke, Vice President. Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosure Copy:wec:9-15-41 Regraded Unclassified (In Millions of Dollars) Yook Inted Sept. UPFR BANK OF ENGLAND (SRITISE OUTERNMENT) BANK OF FRANCE 013175 CRIDITE DEBITS Proceedo of Net Incr, Not Insr. Dov't Salee of (+) or cirrit Prodeede (+) or Total Expendi- Other Total Securities Other Deor. (-) Total Expendi- Other Total of Cold Other Imor. (-) PERIOD Debite tures(a) Debite Credita Gold Official in Belance Debita tures (4) Debite Credits Sale e Credits in Balance First year of war 1,793.2 605.6 1,187.6 $1,828.2 1,356.1 52.0 420.1 + 35,0 B66.3(e) 416.6 (g) $49.7 (1,095.3(e) 900.2 195.1(e) +289.0 1940 dug. 29 Dot. 2 516.8 244,3 72.5 308.9 271.5 5.0 31,4 - 7.9 8.6 4.4 12 1.3 - f.3 - 7.3 Oct, 3- 30 196.7 167.8 28.9 198.5 160.5 6.0 32,0 + 1.8 0,5 0.5 0.2 0.5 I 0.5 , Det, 31 Nov, 27 241,0 201.1 39,9 259.5 210.0 18.0 31.5 . 18,5 0.8 0.1 0,7 0,7 I 0,7 - O.1 Nov. 28 - Dec. 31 234,6 -206,6 27,6 198.0 111.4 25.0 60.6 - 36.6 2.1 - 2.1 0,8 100 0.8 - 1.5 Words through Dec. 2,782.3 1,485.6 1,356.72 ,793.1 2,109.5 108,0 575.6 * 10.8 878.3 481.4 456.9 1,098.4 900,2 198.2 +220.1 1241 Jan. 2 - 89 197.4 16E.7 34.7 259.9 176.2 52.0 31.7 + 62.5 1.7 - 1.7 0.5 - 0.8 - I.2 Jane 30 Pob. 26 164.6 137.8 26,8 101.4 26.6 26.0 48.8 - 63.2 0.2 - 0.2 0.2 - 0.2 , 190, 87 Agr. 2. 229.7 157.5 38.1 237.9 103.7 72.0 62,2 + 6.2 0.7 - 0.7 1.6 / 1:6 - 0.9 Apr. 3- a 4pr. 30 126.0 101.9 24.1 210.9 125.6 15,0 78,3 + 92,9 0,9 - 0,9 0.9 - 0.9 - May 1- May 28 122.6 90.6 38,0 91.0 6.3 32.0 52.7 - 31.6 0,4 - 0,4 0,8 13 0.8 + 0,4 May 29 July 2 140.5 113,8 26.7 105.1 1.9 11.0 92.2 - 35.4 21,5 - 21,5 0.9 - 0,9 - 20.6 July 3- July 30 101.4 75.6 28.3 61.5 - 6.0 55.5 = 39-9 0.5 - 0.5 0.3 M 0.3 - 0.2 July 31 - AUG. 27 131.7 92.2 33.5 143.2 - 4.0 145.2 + 17.5 I.D * 1.0 0.5 1 10.5 - 0.5 Regard MAI of (0/09/40-8/27/41) Aug. BB Oct. 1 Gate 2 - Oct, 29 Dos, 30 Dec, 3 Des. 1- 31 W.SK ENTED: Aug. 13 36.2 21,8 14.4 15.3 - - 15.3 - 20.9 0.2 - 0.2 0.2 - 0.2 - 20 26.0 16.5 9.5 12.1 - 2,0 10,1 - 139 0,1 - 0.1 0,1 - 0,1 - 27 36.5 22.5 14,0 5.2 - - 5,2 - 3.3 - - - - , - - Sept. 3 34.5 29,9 4.6 2.0 - 2.0 J.O(S) - 25.5 - , - 0.1 I 0.1 +0,1 Weekly Expenditures since Outbreak of Mar Transfers from British Purchasing Commission to Bank of Canada for French Account See footantes os eise) Prénce (through Tube 19 ,1940) $19.6 million Ingland (through June 19,1940) 27.5 million Feak ended Sept. 3, 1941 . million Incland (since June 19,1940) 45.5 million Cumulation from July 6,1940 162.7 million + No monthly breakdown año tabulations prior to April 23, 1941. Regraded Unclassified name are SERVICE (a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control, and Ministry of Shipping. (b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the proceeds of official British sales of American securities, including those effected through direct nagitiation. In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the 0 early months of the war, elthough the receipt of the proceeds at this Bank cannot be ident ified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private british liquidation of our securities through December, 1940 amounted to $334 million. (a) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks, presemably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, 1959 apparently represent the acquisition of proceeds of exporte from the sterling area and other currently accruing dollar receipts. (a) Includes payments for account of French Air Commission and French Purchasing Commission. (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following dity. (i) Includes $1.5 million transferred from New York accounts of British authorized banks. Regraded Unclassified or CANADIAN AND AUSTRILIAN ADDOUNTS 10 Millions of Dollars) Week Ended Sept. 30 1941. Confidential BANK OF GANADA BANK OF ADSISALIA DEBITS CREDITS DEBITS CREDITS Transfers Transfers from Official Transfers to Proceeds British A/C Net Incr. to Proceeds Net Inor. Total Official Other Total of Other (+) or Total Official Other Total of Other (+) or Debits British Debits Credits Gold For Own For French Credite Deor. (-) Debite British Debits Credits Gold Credite Deor. (-) PERIOD A/C Sales A/C A/O in Belance A/C Sales in Balance First year of war (8/29/39-8/86/40)* 323.0 16.6 306.4 504.7 412,7 20,9 38,7 32.4 +181.7 31.2 3.9 27.3 36,1 30.0 6.1 + 4,9 1940 Aug. X - Oat. a 44.3 44.3 45.9 16.4 I 27.3 0.2 - 0.4 8.7 2.5 6.2 8.0 6.9 1.5 - 0.7 - Out, 1- 30 26,7 1 26,7 28,6 14.0 - 14,3 0,3 - 1,9 10.1 7.5 2.6 7,9 6,5 1.4 - 2,2 04% 31- Not, 27 35.8 - 35,2 69,6 49.2 1 16,7 3.7 * 34.4 3,1 0.6 2.5 3.6 2.1 1.5 + 0,5 Roy, 26 - Dec. 31 48,0 - 46.0 60.6 42.5 - 13.7 4.4 . 12,6 4,8 - 4.8 6,8 4,8 2.0 + 2,0 Be Im. 477.2 16.6 460.6 707.4 534.6 20.9 110.7 41.0 +230.2 57.9 14,5 43.4 62,4 50.1 12,5 + 4,5 1941 Jan. 8 - 29 33.7 - 33.7 33.9 16.9 - 15.0 Z.O + 0.2 4.8 . 4.8 6.8 5.1 1.7 + 2.0 July 30 - 25 31.1 - 31.1 24,3 14.3 . 6.8 3.2 - 6,8 5,0 1.7 3.3 3.2 0,6 2,6 - 1,8 Job. H - Apr. 2 50.9 # 60.9 46,0 23.1 - 19,1 3,8 - 14,9 5,8 0,8 5.0 13.7 12.5 1.8 - 7,9 Apr. 3- Apr. 30 34,9 - 38,9 35,9 12,5 - 10,5 12,9 + 1.0 2.8 . 2,8 5,9 4.6 2.3 + 3.1 May 1- May 20 39.2 - 39.2 25.6 15.8 - 0.5 9.3 - 13.7 5,4 - 5.4 4,9 4.1 0.8 - 0,5 17 29 July 2 45.2 - 43,3 48,2 16.3 - - 31,9 + 5.0 10.1 . 10.1 5.8 4.5 1.3 - 4,3 July 3- July DO 30.6 - 30,6 21.8 15.2 - , 6.6 - 8.9 6.4 - 6.4 6.3 4,8 1,5 - 0,1 July $1 - Aug- 27 32.5 - 32.5 23.6 10.0 it - 10.2 - 8.9 5.2 - 5.2 0.3 6.6 LI + 31 - of war (77/48/6-07/68/9) we- se Cet. 1 Getz 8 - Oct, 29 Oct, 10- Does 3 Dec. +- 51 VISA ENDED: aug- 13 10,4 10.4 6.9 2.9 3-4 - 0.6 - 3.5 0.3 - 0.3 0.4 - 0.4 - + 0.1 20 8.5 6,5 9.9 300 - - 6.9 + 1.4 0.2 - 0,2 7.0 Dea 0.6 - + 6.8 10,2 19.2 2.9 Lá - - 27 L4 - 1.3 2.1 - 2.1 0+7 0.2 0,5 # - 24 2.6 2.6 26.7 Oct - - 26.6(n) +24,1 0.9 - 0.9 1 - - - 0.2 Sapte 3 - workly Average of Total Debits 3ince Outbreak of Mr Through Sept. 3. 1941 I To4 million - For monthly breakdown see tabulations prior to April 25, 1941. Regraded Unclassified 0.74 EMESEP $: PM (s) Reflacts receipt d' 024 millips in epenection with payment by R.7, the from Aleminum Company of Canada. STX EWIND: Uffice of In 1. TECHNICAL FANT or - Dir 2 TO THE St: ARY 646 I 042° sa 1 y be X goys at - 7.12 EN your 2 - 1732 80 1 a 5 of << 45"S and K" es , - - 30 28 and e" 3 0°2 0" your 2 - 20% P) 779 2" No. ⑈⑈ SA - you $ ec- & 18% (2) 76 TS'2 47% 109° to - SP 27 E 25 0'8 1"9 3% 1080 = - sa ≈ 20 37's TRU ra i/6 2"J 118 1°0 Eir 1 Test 102°F 2241 was 11'0 100% 20 JO's to MI DR (*) 2 194° 27 48° n e 20" 7314 TYPO E G so 2°C SEP 27 - 4 58 X': 5. eare 4-5 te's 24'1 0'e i.j 7% 0% 042 2 - 20 FBC + the It's IN 10'S pt - $ 447 ⑆6 one 6% 2 THE (0\30\26- PF 40% 263°0 Te's ⑈ 25'4 1974 31 payment of 17% not BRINDON no 170000 CLARGE 8 Leuse 16572 VP BL/STOP así into or 612 ord; of Inter OTHER C or YOU 9 or Do eventure yas TOP VCO. FLIVATE Characey TREASURY DEPARTMENT 63 INTER-OFFICE COMMUNICATION DATE September 15, 1941. TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order ffective February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Sold Shares Sold of Bonds Sold Bonds Sold Sent. 8 1,100 31,341 N11 N11 a 1,479 34,825 1,000 791 10 480 24,454 6,500 3.703 11 Nil Nil 10,000 5,810 12 1,682 59.985 5,000 3,221 13 100 2,752 Nil Nil 4,841 153,357 22,500 13,525 Salee from Feb.22,1940 to Sept.6,1941 9,799,115-1/2 280,085,089 45,045,216 37,024,581 Total Feb,22,1940 to Sent,13,1941 9,803,956-1/2 280,238,446 45,067,716 37,038,106 nme Regraded Unclassified TREASURY DEPARTMENT 64 INTER-OFFICE COMMUNICATION DATE September 15, 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 19401 $ Proceeds of $ Proceeds of Shares sold Bonds Sold Total Sent- to 31,341 Nil 31,341 a 34,825 791 35,616 10 24,454 3,703 28,157 11 Nil 5,810 5,810 12 59,985 3,221 63,206 13 2,752 Nil 2,752 153,357 13,525 166,882 files from Feb.22,1940 to Sept.6,1941 280,085,089 37,024,581 317,109,670 Total Feb,22,1940 to Sent,13,1941 280,238,446 37,038,106 317,276,552 317,276,552 proceeds of non-vested securities sold Sept.1,1941 to Sept.6,1941 300,000 $ proceeds of non-vested securities sold Sept.1,1939 to Aug.30,1941 232,600,000 : proceeds of non-vested securities sold Sept.1,1939 to Sept.6,1941 232,900,000 232,900,000 GRAND TOTAL 550,176,552 n Units sold from Aug.18,1941 to Sept.13,1941 for $ 42 9 Sheres Stock Dividend sold from Aug.18,1941 to Sept,6,1941 for $101 2 Shares Stock Dividend sold on Sept.8,1941 for 22 11 Shares Stock Dividend sold from Aug.18,1941 to Sept,13,1941 for $123 55,457 Rights sold from July 24,1941 to Sent.6,1941 for $102,445 40 Rights sold on Sept.10,1941 49 La Rights sold on Sept.12,1941 Le 55,537 Rights sold from July 24,1941 to Sept,13,19L1 for 3102,543 BMP Regraded Unclassified EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN 65 AS SHOWN BY DEPARTURE PERMITS GRANTED Week ended September 13, 1941 : JAPAN : RUSSIA I SPAIN : : GREAT BRITAIN : : : PETROLEUM PRODUCTS Fuel and Gas 011 (including Diesel 011) I 85,000 Bbls. - 354,000 Bbls. Crude - Blended or California High Octane Crude* - - - I All Other Crude - -- - I Gasoline - Gasoline A** -- -- -- 177,000 Bbls. Gasoline B* -- 75,000 Bbls. : 266,000 Bbls. All Other Gasoline -- -- - - Lubricating 011 - Aviation Lubricating 011*** -- - - 63,705 Bbls. All Other Lubricating 011 -- -- - - Tetraethyl Lead*** -- - -- - "Boosters", such as Iso- Octane, Iso-Hexane, or Iso-Pentane I - -- -- SCRAP IRON AND SCRAP STREET Number 1 Heavy Melting Scrap -- -- -- -- All Other Scrap - : -- -- Office of the Secretary of the Treasury, Division of Research and Statistics. September 15. 1941. Source: Office of Merchant Ship Control, Treasury Department. . Any material from which by commercial distillation there can be separated more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon mixture - President's regulations of July 26, 1940. ** Aviation Gasoline. ... As defined in the President's regulations of July 26, 1940. Regraded Unclassified COPY 66 DEPARTMENT OF STATE WASHINGTON In reply refer to September 15, 1941, EA 861.24/614 My dear Mr. Secretary: At the request of Ambassador Winant, there is enclosed herewith for your information a copy of telegram No. 4240, dated September 12, 1941, from London, in regard to an editorial which appeared in the September 12 issuo of the London TIMES on inter- Ally credits. Sincerely yours, /s/ Herbert Feis Herbert Feis Adviser on International Economic Affairs Inclosure: From Embassy, London, No. 4240, September 12, 1941. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Regraded Unclassified 0 0 P 67 Y KD PLAIN London Dated September 12, 1941 Rec'd. 11:45 8.71. Secretary of State, Washington. 4240, Twelfth. The statement of the Prime Minister in Parliament yesterday that fighter planes had al- ready been sent to Russia and the Chancellor of the Exchequer's recent statement at Edinburgh that no financial limit would be placed on the help in munitions and materials going to Russia were taken as the occasion for e. leading editorial in today's TIMES on inter-Ally credits in which it is urged that "It is regrettable when this principle (of Lease-Lend) was adopted by the United States in supplying our needs, it was not applied by the British Government in supplying the needs of our own allies." The editorial emphasises that the case of Russia 1s exceptional because she will be able to pay with goods exchanged for the bulk of what she will receive, and because she had a favor- able trade balance with the United Kingdom before Regraded Unclassified -2- 68 the war. But the announcement of credits to Russia, coming on the top of similar arrangements in the case of some of the smaller countries who will have export balances insufficient to pay principle or even interest on the credits accumulating "gives now substance to the apprehension that we have still to learn the lessons of the last war." Taking the case of Greece, "whose heroic resistance gave time to reassure the position in the Middle East", the editorial says: "surely the other partners in the struggle owe more to her in money for the lives she has sacrificed or the devastation she has suffered. There 1s equally no question of sending her a bill for the lives and materials lost in helping to de- fend her territory. Why should a money debt be marked up against her for the munitions we were able to send her for her own forces to use?" Asserting that the credits to the smaller allies are in fact a mere matter of bookkeeping, the editorial describes them, nevertheless, as "mis- leading and dangerous as well as useless", and says- "Subsidies would certainly be better than credits, but it would be better still to keep money out of Regraded Unclassified -3- 69 the picture altegether and to lend or give the actual things." After pointing out that recon- struction in Europe will need supplies in great quantities, the editorial concludes as follows: "unless some far-sighted application of the Lease- Lend principle is devised in time these countries will have to borrow money in large sums, which their creditors will expect to be repaid in money, across the exchanges. They will be driven to strive desperately for active balances of trade by ex- porting all they can, even if they have to sub- sidize their exports, and by cutting down their imports to the minimum. By their competition with one another they will drive down the prices they receive for the goods they export, and by cutting down their imports they will cause widespread un- employment among their customers and thus destroy their own markets. This is what happened after 1918. It will happen all over again unless in the meantime we can learn to think less in terms of money and more in terms of real goods and services, and to indulge less in international competition and more in international cooperation for the common good. The sacrifices for which this will call will Regraded Unclassified 70 not be nearly so great as may appear on the surface. It must not be forgotten that a very large proportion of the loans made to foreign countries have resulted in loss for the investor through partial or complete default, and this has been especially true of the loans made after the end of the last war. Even from the business point of view it may prove more profitable in the long run to put valuable potential customers on their feet, without exacting a return, than it would be to load them with monetary obligations which they will ultimately be forced to repudiate, and which in fact they will not be able to discharge without ruining themselves and their neighbors." Please send copy to Treasury and Hopkins. WINANT. MG Copy:bj:hbr:9-15-41. 10 THE LECTIVE any BEG 12 By 71 C 0 P Y September 15, 1941. TO Mr. H. Merle Cochran FROM L. W. Knoke For your information, I am enclosing copy of a memorandum prepared for our own files, which describes the procedure we are following on instructions from the Reichsbank, Berlin, in dispatching mail to it. Regraded Unclassified 72 TO: Files Date - September 15, 1941. FROM: L. W. Knoke Subject - Reichsbank Mail. By cable dated February 6, 1940, the Reichabank instructed us as follows: "Please send in the future your air mail destined for us in a manner you think suitable to Banco Germanico de la America del Sud Mexico in case that American mail will be subject furthermore to English or French control". In response to our request for clarification of such instructions the Reichsbank cabled on February 10, 1940: "Please send all air all intended for as affective immediately to Banco Germanico de la America del Sud Mexico for remailing". Until March 16, 1940, we complied with these instructions by placing all communications to the Reichsbank in unaddressed, sealed envelopes and trans- mitting such envelopes to Banco Germanico at Mexico City for remailing to the Reichsbank. On March 16, 1940, we received a cable from the Reichsbank re- questing us thereafter to send their air mail via the North Atlantic-Asores route, which we did until August 31, 1940. By cable dated August 31, 1940. the Reichsbank again instructed us to send mail destined for them to Banco Germanico, which we did until the publication by the Treasury Department of "The Proclaimed List of Certain Blocked Nationals" containing the name of Banco Germanico. Since that time all of our Reichsbank mail has been held up pending our determination of the effect of such publication. Since the Reichsbank account WEB quite dormant no mail of importance accumulated until after we were authorized by the Treasury to open a free account in the name of the Reichsbank, Advices. statements and incidental letters relating to such account have now accumulated and should be mailed, The transactions in such account consist mainly of collections in the form of drafts drawn on the Secretary of State or on the Treasurer of the United States by United States Regraded Unclassified 9/15/41 73 - 2 - Foreign Service Officers, and deposits by United States newspaper and broad- casting companies, under specific and general licenses, for eventual payment by the Reichsbank to representatives of such companies in Germany to cover living expenses and salaries. Each of our statements is transmitted with a letter from our Auditing Department requesting confirmation of the balance shown on such statement. Accordingly, since the fact that Banco Germanico is on the "Proclaimed List" does not appear to prohibit us from sending to them Reichsbank mail which we could properly send directly to the Reichsbank, and since, except for the Reichsbank's instructions, we could properly send mail of this character directly to the Reichsbank, we propose again to transmit our Reichsbank mail, including that which we have accumulated, to Banco Germanico in the manner described above. Copy:mew:wec:9-18-41 Regraded Unclassified 74 September 15. 1941 Dr. Peis Mr. Cochron will you kisdly cand the following sablegram: "American General, Hong Long. For Fex free Treasury. Received today your meage through Spagent. Sunghai, regarding year plans. Since year departure from Manila and return to long Keag w had had nothing direct from you en the operations of the Stabilization Beard emergt 354, September 12, 11 a.m., from Hang Zong the sale of dollar cheeks w United States efficials, which matter is having our consideration. Leakhart and Nicholson have reported upon norket developments at Shoughai following institution of the plans which your Deard decided upon at Beng Keng after consultation with bashers. Hocange also received free Asrens at Sunghai recommending against proposed modifi- entions of General Licenses 58, 59 ml 61 pending fair trial of BIV arrangements and cyportunity to Improve thereen. Considering developments since you spoke with as from Menile, please sable promptly your observations es effectivences of the system now is operation and your procent recommendations including my revisions of the plan which was discussed with you. British have been receiving reports from Hall-Patch. Ye hope you are discussing the problems with Regraded Unclassified 75 - # - his and will give us the benefit of your eptator after 1 dismonisms. Please 0011 Aurone to - so his request that w so enthorised I I I s the personal s 8 1 1111 = w October 3 clipper. Aurone reports Smith veridag with his at Shoughai. #shjeeb to approval w Supre we are conting Season and Anterson from Mails - Heag These no relieve Assens ml Address. - vill then be - I 1 Here feiled to - up of year questions - - think could be - penting a verbing out of arreagemento - under joint discussion? is n, please - so here - hopes to Leave within - fee days for China. Zeither is Unchington have not yet received regis free Senden to their report of the plan which w valultted to yes. Consequently as representations have yes been made w either Brittish w curselves to chinese efficials have on Stabilization ml Backenge Centrel plane." m10:dm:9/15/41 Regraded Unclassified TELEGRAM SENT 76 TK GRAY SEptember 15, 1941 10 p.m. American Consul, Hong Kong, via N. R. 277. FOR FOX FROM TREASURY. Received today your message through Spagent, Shunghai, regarding your plans. Since your departure from Manila and return to Hong Kong WE had had nothing direct from you on the operations of the Stabilization Board EXCEPT 354, September 12, 11 a.m., from Hong Kong concern ng the sale of dollar checks by United States officials, which matter is having our consideration. Lockhart and Micholson have reported upon market developments at Shanghai following institution of the plans which your Board decided upon at Hong Kong after consultation with bankers. Message also received from Aarons at Shanghai recommending against proposed modifi- cations of GENERAL Licenses 58, 59 and 61 pending fair trial of new arrangements and opportunity to improve thereon. Considering developments since you spoke with us from Manila, Regraded Unclassified 77 -2- #277, to Hong Kong, via N. R. Manila, please cable promptly your observations on Effectiveness of the system now in operation and your present rtcommendations including any revisions of the plan which was discussed with you. British have been receiving reports from Hall-Patch. WE hope you are discussing the problems with him and will give us the benefit of your opinion after such discussions. Please tEll Aarons in answer to his request that he is authorized to sail from Shanghai to Manila in order to proceed thence homeward by October 3 clipper. Aarons reports Smith working with him at Shanghai. Subject to approval by Sayre WE are sending Saxon and Anderson, from Manila to Hong Kong to relieve Aarons and Aikin. What will then bE your immediate personnel nEEds? Have WE failed to anwer any of your questions which you think could bE answered pending a working out of arrangements now under joint discussion? If so, please enumerate. Niemeyer is here but hopEs to leave within next few days for China. British in Washington have not yet received reply from London to their report of the plan which WE submitted to you. Consequently no representations have yet been made by either British or ourselves to Chinese officials here on Stabilization and Exchange Control plans. HULL EA:PL:MCE Regraded Unclassified 78 (Sanced by Mr. Luthringer of the Department of State to Mr. Cochran in the Treasury at 5:45 D.M., September 17. 1941.) DE RELGIQUE BG/14 D.5032 Washington, September 15. 1941. IC, Cear Sir: On the 6th of this month you were kind enough to inform me that the American. English and Dutch Banks have nledged their loyal collaboration to the China Stabilization Board, Ln order to maintain the exchange of the China currency, and you inquired with regard to the possibility of a similar agreement with the Banque Belge pour l'Etranger in the Far Bast. That seme day I sent B cable to our Consul General in Shanghai, in renly to which I have received today the assurance of EL loyal collaboration on the part of Banque Belge pour tranger, the only Belgian Bank in the Far Zast, with Agencies in Shanghai and Tientsin. However, our Consul General at Bhanchai is drawing my attention to the fact that the said Agencies are denied the privileges granted under the general license No. 59 of the Treasury Department "licensing, as generally licensed nationals," the Offices within China of 14 American, English end Dutch Banks, Consequently the Banque Belge pour l'Etranger has no contact whatsoever with the Stabilization Board. Besidee this inconvenience, the discrimination by the Treasury Department of the only Belgian Bank in the Per East. is greatly prejudicial to the prestige and to the interests of the Bank, and of the country altogether. I would, therefore, be very grateful to you if you could induce the Treasury Department to modify its attitude toward the Banque Belge pour l'Etrencer, Sincerely yours, Baron de GRUEEN - La 9/17/41 Regraded Unclassified ⑆ THEASURY DEPARTMENT 79 (2) Y United States Coast Guard WASHINGTON 15 September, 1941. SECRET From: Spagent, Shanghai, China. To I Secretary of the Treasury, I have received information that Sun Lee Co., Room 313, Number 40 Ning Po Road, Shanghai, has received one and a half million U. S. dollars from the United States since the froezing order went in- to effect. The sender is J. R. Williston Company, New York stock broker. The money is said to belong to Chno Shih Cheung, Chief of Consolidated Tax Bureau, Hanking. The manager of Sun Lee is a brother of Chao Shih Cheung, and Sun Lee is believed to be Williston's China agent. We doubt such transaction as above has been effected over the books of licensed banks, but we ão hear repeatedly that U. S. dollars are available in large blocks in Shanghai, which indicates & bad leak somewhere, I suggest that an investigation of Williston be made at your end. SECRET Copy:hbri9-15-41. Regraded Unclassified TREASURY DEPARTMENT 80 INTER-OFFICE COMMUNICATION DATE September 15. 1941. TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were no follows: Sold to commercial concerns £80,000 Purchased from commercial concerns 225,000 Open market sterling was again quoted at 4.03-1/2 and there were no reported transactions. The Argentine free peso declined to B. closing quotation of .2373, as compared with .2380 on Saturday. In New York, closing quotations for the foreign currencies listed below were as follows: Canadian dollar 10-5/8% discount Brazilian mllreis (free) .0505 Colombian peso -5500 Mexican peso .2070 Venezuslan boliver .2755 Uruguayan peso (froe) .4400 Cuban peso 7/16 discount In the absence of reporte to the contrary, the New York banks believed that the yuan-dollar rate in the Shanghai exchange market remained at approximately 5-11/32d. We sold $20,000,000 in gold to the Swise National Bank, which was added to its earmarked account. Under general license No. 70, and in accordance with a Treasury license issued today under the Gold Reserve Act, the Federal Reserve Bank of New York will effect the following transfers of gold in its vaults; $448,000 representing two transfers from the Bank of Portugal's Gold Account 3 to the ordinary account of the Bank of Portugal. Gold in Account G is the property of the Portuguese Govern- ment. The Bank of Portugal is purchasing the above amount of gold from the Government. and payment therefor vill be made in dollars. Regraded Unclassified 81 - 2 - No new gold engagements were reported. In London, spot and forward silver were again fixed at 23-1/2d and 23-7/16d respectively. The U.S. equivalents were 42.67$ and 42.55#. The Treasury's purchase price for foreign silver was unchanged at 35#. Handy and Harman's settlement price for foreign silver vas also unchanged at 34-3/44. We made no purchases of silver today. July CONFIDENTIAL Regraded 82 BRITISH EMBASSY, WASHINGTON. September 15th, 1941. PERSONAL AND SECRET. Dear Mr. Secretary, I enclose herein for your personal and secret information copies of the three latest reports received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, R.I.Campbell The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. Regraded Unclassified 83 COPY OF TELEORAS PROM LONDON DATED SEPTEMBER 18, 1941. 1. 17 ships of honeward bound convoy totalling 68 ships assacked by U. hosts off Greenland now believed torpedoed but salvare of three may be possible and one may only be missing Tran the convoy. Tonnege of mightorpedosd ranges from 1114- 7465, total 65,360. These estacks by U. boats have not gone unaversed. 2. Phree 2 W.G.B.'s had inconclusive engagement with energy 11ght craft off Doulogne night of 11th/12th. Two of our hoats sustained damage. :. canamanism "Hondures" 4,524 tons basbed and damaged In Half or /ues am/10th. :- During last day or two Royal Air Parce carried out several pro labe attacks on 1. boats 11. the Atlantic. 5. fodson on patrol claims two hits on merchant ship estimated 2,000 tons off Dorwagian coast. 0. Right of 11th/12th. 191 aircraft despatched to deliver mediumweight attacks on works and shipyerds Hostock, docks shipyards Kiel and 11ght attacks Havre and Doulogne. even aircraft lost, two crews safe. 7. hight 10th/11th. light Vellingtons dropped bombs lending stare and power station lessins. 1. South went of Cape Matapan a.m./11th Clenheim aircraft scored two hits on 2,000 ton merchant ship. Vonservers confirmed serious canage. 9. Corman Air Force. 11th/18th. 26 bombers and 0 night fichsons operated off Last coast penetrating Inland. 10. 10th/11th. Bomba dropped North Xame caused TO damage of casualties. Larnace (Cyprus) attacked without effect. derman sevence south contwards from Comel continues involving threat of encirclement to Russian troops north of Riov. Regraded Unclassified 84 TELEGRAM FILOR LONDON DAY X 101 NB/M 13th. 1941. 1. or goventeen ships reported probably torpodeed is homeware convoy off Oreenland 11 are ounk, 8 still aflost. ONE missing and 2 doubtful but presumed sunk. 8. Dutch submarins 0.81 on September 5th Isareo Italian 5,915 tons londed with phosphates 70 miles west of Naples. She picked up master and 22 of the erew. 3. September 12th. 11 Alenheima escorted by fighters sttacked convoy off Dutch cosst. À ship medium size received two direct hits and smaller ship also believed hit. 4. Night of September 11th/18th. Seven Sworefish attacked with torpedoes convoy of six merchant ships six destroyers off Kerkennah, one ship estimated st 6,000 tone hit, probably sunk. Another estimated at 8,000 tons claimed damaged. Yesterday 6 Blenheims again attacked same convoy. Four bombs hit large merchant ship and two hite acored on another. Heavy anti-sircraft fire experienced. Three Blenheims lost. 5. Night of September 19th/13th. 162 aircraft despatched delivered heavy attack on /renkfurt and light attack oa Cherbourg docks. two missing. 8. September 10th/11th. Bix wellingtons bombed Benghasi darbour, and 6 more attacked about 60 enemy aircraft on lancing ground neer Deros deetroying several. 9. 3icily. September 11th/12th. Over 16 tons of H... dropped Falerme cooks. Drydock containing merchant vessel straddled by bombs. a. German Air 'oree. Demy activity alight over #ritlah Inlon. our night fighters destroyed two bombers and one possible. 9. sevet. September 11th/18th. 13 enemy aircraft / bombed Regraded Unclassified - bombed Bues without effect, one destroyed by Hurricanes. 10. Tobruk. September 9th/10th. Air raids reported as almost continuous. About 100 bombs and possibly some mines dropped but damage not serious. September 10th. Samy aircraft bombs hit jetty and merchandise September 11th. Tobruk again attacked. No appreciable damage. 11. German advance held between Leningrad and Smolensk, southeast of Gonel, north from Kremenchug, and south from Berislev. Regraded Unclassified 85 Telegram from London dated 14th September, 1941. At 0500/12 neval aircraft carried out attack on shipping on Bodo Fierd one ship estimated 2,000 tons aunk. 2. In Glom Fiord power station possibly hit and hits obtained on aluminium works where fires were started. 3. Night of September 11th/12th a Soviet MTB claims torpedoed one destroyer, cas transport, off Petsamo. 4. Royal Air Force September 12th/13th. 132 tome H.K's and 5000 incendiaries dropped on Frenkfurt; cloudy conditions hempered securate bombing. 25 tone bombs dropped Cherbourg docks. Rudson made direct hit on 4,000 Lons merchant vessel near Borkum, another 2,000 tona vessel probably hit. 5. September 13th/14th. 154 aircraft despatched Brest and Havre doeks. All returned safely visibility Breet was excellent until spoilt by effects of smoke-screen. 6. Egypt. September 11th,12th Wellingtoms successfully attacked Beaghasi Harbour. One Italian bomber shot down near Mersa Matruh. 7. North Russis. September 12th. Our fighters carried out morties on aerodromes and six aorties escorting Russian bombers. One patrol destroyed two M.B. 109's probably destroyed another damaged cas Henschel. le lost one fighter. 8. Air Force September 13th/14th. 25 enemy aircraft sen-mining in Thanes Entuary. 9. Germans reported taken Svanks 60 miles east of Leningrad. Purther German progress south-east of Gomel and north from Kromonchug 18 diminishing the prospects of successful axtrication of Russians in Kiev salient. Regraded Unclassified RESTRICTED 86 MILITARY INTELLIGENCE DIVISION TENTATIVE LESSONS BULLETIN WAR DEPARTMENT No. 158 Washington, September 15, 1941 G-2/2657-235 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. The lessons necessarily are tentative and in no sense mature studies. This document is being given an approved distribution, and no additional copies are available in the Military Intel- ligence Division. For provisions governing its reproduction sea Letter TAG 350.05 (9-19-40) M-B-M, GERMAN GENERAL STAFF SCHOOL SOURCE This bulletin is based on a report submitted on July 18, 1941, by an American official observer in Berlin. The observer, who attended the German General Staff School for one year, limited his report to "aspects of the instruction which I particularly wish to discuss." RESTRICTED - 1 - Regraded Unclassified RESTRICTED 87 GERMAN GENERAL STAFF SCHOOL As in any school where there is a serious attempt to mould or direct the thought of the student, the basic feature of the German General Staff School is the daily mental contact between each student and his principal instructor, a tactics instructor. Each section of 20 to 35 students is directly under this instructor, who given the students more than half their instruction and coordinates the rest, which in actually given by half a dozen specialists. The tactics instructor 19 solely und completely responsible for the section in every way, and at the end of the year he is required to write a letter evaluating each atu- dent from the standpoint of physical, mental, and professionsl ability, and also from that of character and personality. Each year the section has a new tactics instructor, the last one of whom, with his one year acquaintence with the students and the preceding letters of evaluation до a basis, is responsible for finally making or withholding recommendo- tion for further training no a General Staff officer. There is tramen- dous incentive for the student to stand well. General Staff officers enjoy the special respect of the army and of the country - most of whose man are ex-soldiers; they are promoted more repidly; and almost all general officers are selected from among them. Obviously the success of the school depends directly and almost entirely on the caliber of the tactics instructors, who pra always General Staff officers themselves and are selected for their teaching ability after я practical examination and demonstration. The observer know well only his own instructor, B. splendid officer and e. fine gentle- can, Like most of the others, that instructor had had nearly four years actual combat service during the World War, but unlike most, his service had all been on the West Front. He had started out an nn artillery officer and was so considered, but during the years of von Seeckt's 100,000 man army he had served in the infantry and in the cavalry. Be- fore the present war WAS six months old he had become Chief of Staff of an arry corps - et the age of 43, He was in excellent physical condition. had been quite EL show rider and had never played golf or tennis in his life, He WAS a bachelor and completely wrapped up in his profession. The avowed purpose of the school in to select and train officers for the General Staff. The chief requirements are considered to be character and the ability to think through a military problem, large or tabll, in B logical and orthodox nanner. In this sense orthodox think- ing does not m-an uniform thinking: but it does mean that any General Staff officer's solution to B. military problem would have been considered by, and hence seems natural to, any other General Staff officer, although the latter might himself have selected et different solution, The Germans consider this agreement on military principles, and the methods of apply- Ine them, very important, while at the sarin time they 80 to such extreme RESTRICTED - a - Regraded Unclassified RESTRICTED 88 lengths to avoid formulas of any sort that they refuse to prescribe a form for a field order lest it absolve an officer from thinking B problem through. What they want 18 original thought on each problem, but always within the realm of their well tried bactical and strategic principles, Thue in practice it becomes the Job of the school to check on the stu- dent's character and to mould his ability to think along orthodox nill- tary lines, There is no question but that the school does 8 very fine Job. The check on the character comes through the close personal con- tact that the tactice instructor has with each student during the ten months in which they work together, and often play together, six days B. week, There are sightseeing trips, military and non-military, OCCB- sional "beer evenings" and, most important of all, three trips per year lasting a week or more: all of these provide opportunities for the in- structor to see the student outside the classroom. Teaching the student to think along the desired lines, then, be- comes the main preoccupation of the school end the purpose of practi- OAlly All the instruction. Industry and interest are assumed to exist end apparently always do; the tactical principles are all laid down in Truppenfuhrung, and details of organization and equipment are known to all or, if new, are furnished by the specialist instructors. The latter, who are sometimes General Staff officers, sometimes not, develop the subjects of their special branches, namely: signal corps, engineers, air corps, antitank defense. They do this under the supervision of the tec- tics instructor, and their methods of instruction approximate his, ex- cept that they have to do more lecturing than he does. Even for them, however, the basic of the instruction is applicatory, that is, the solu- tion of map problems. Often these problems are actually parts of more general tactical situations being studied under the tactics instructor at the time. Even military history, which 18 splendidly trught by ex- cellent retired officers with experience as higher commanders, is learned in the section room. The instructor describes B. historical situation as a problem confronting the commander; the student is then required to hand in 2% written estimate of the situation, or B written decision and the direction for carrying it out. This course is impressive in its bonesty and objectivity - mistakes are mistakes, and military skill is military skill, regardless of where they are found. The work of the tactics instructor himself is the mont of the whole course. Hie instruction is imparted almost entirely through the joint solution of tactical problems concerning first the reinforced regiment and then the infentry division, with the students doing the work, or as much of it as possible, in every case. At the start ench student is assigned some element of the reinforced infantry regiment he gives a 20-minute talk to orient the others. Each student prepared with which his previous service has made him very familiar and on which RESTRICTED - 3 - Regraded Unclassified RESTRICTED 89 also B regimental problem for solution either on the map or on the ground, and most Saturdays are devoted to these student problems, in which the author acts as instructor. His effort is then critiqued, along with the actions of the other students who had been acting in the normal roles of commanders, staff officers, etc. The instructor's method of handling a problem is extremely thorough and hence very instructive. He always begins B. new situation by issuing - usually the day before - B. typed description of the situa- tion. The students put this on their maps and familiarize themselves with it at home. The next day the instructor discusses various aspects of it and forces the students to carry the discussion by asking questions and encouraging differences of opinion. After everybody is fairly woll worked into the problem he may call for a written solution of some particular phase, or he may assign different students to various key positions and continue developing the situation with constant question- ing of all the students ns to the reactions and activities of the stu- dente assigned to the key positions. This is the most informal method of all and is never hurried in any way. All students are encouraged nnd, if necessary, are forced, by questioning, to take a definite stand, either with or against the statements of the key men. Key men are frequently shifted, if the problem is a long one with different phases. It is therefore impossible for anybody to fail to pay attention to, or take a definite part in, what is going on, and, though an original situation may be developed and carried on for days, it never drags. A slightly more formal method consists in appointing studente to key positions when the situation is issued and leaving them there for the duration of the problem, which is never more than one day. The In- structor himself acts as both the enemy and higher authority, and he al- ways details a student as his assistant to keep track of time and прасе, and to work out other detailed points of the problem. The student commander has & similar assistant or else is assigned one or more stu- donte RS staff officers, In such CADOS the commander confert with them And then acts (18 he thinks best. Afterwards in the critique all ques- tions are minutely examined and no effort is spared to clear things up for everybody. A striking feature of all discussion and critiques is the mitual respect shown by instructor and student, A student's ideas are always given the greatest consideration, especially if they differ from those of the instructor. Intellectual honesty is absolute. Students are never declared flatly wrong unless they have miscalculated time or space, or have obviously violated some principle laid down in Truppenfuhrung. Because the instructor's experience and position as a General Staff officer give him so mich prestige, and because he 80 obviously known what he is doing, there 16 never R Inck of respect for his expressed opinions. Clearly, only officers of exceptional ability and considerable RESTRICTED - 4 - Regraded Unclassified RESTRICTED 90 experience can instruct successfully under such & system. Having such excellent instructors who have proved their own tactical knowledge and have been tested for their teaching ability. the school gives them a very free hand, Each instructor makes his own schedule and decides the relative importance of the various subjects, If records were kept, the observer saw little sign of them. During the school year, although it was his instructor's first year, the commandant inspected only once and the assistant commendant only three or four times. One of the latter occasions was an all day problem during a week of tactical rides entirely away from Berlin, The instructor and section both seemed to feel it an occasion of some importance. This anme atti- tude of confidence and interest cerries on to the students who, having been specially selected, are admittedly good and are not graded, at least not visibly. Their fate is in the hands of the instructor, but they are never reminded of that fact; they know it and they do not for- get it. The German candidate for instruction at the school has to be recommended by his regimental and division commanders; then he takes both A written and practical examination, including a personal interview, given by the division or corps. The results are excellent; only good material comes to the school, end no equally good material is left out. noteworthy feature of the school is the principle of making officers serve with several branches. After the academic year, the students are assigned for summer duty in EL branch other than their own; that experience is very valuable, What can be done when there is really good coordination between all the elements of a large command is one of the chief lessons in this war. That lesson is undoubtedly due in large part to the fact that so many German officers now in key positions are experienced in two or more branches. RESTRICTED - 5 - Regraded Unclassified 91 RESTRICTED 0-3/2657-220; No. 493 M.I.D., W.D. 11100 A.M., September 15, 1941. SITUATION REPORT I. Eastern Theater. Ground: The German Arctic force which is attacking Murmansk has gained the east bank of the Lista River. German troops advancing towards Leningrad have reached the area eight miles southwest of the city. The Russian forces encircled northeast of Luga con- time to offer stubborn resistance. Southeast of Lake Ilmen, Corman forces advancing from Staraya Ruosa and Kholm have reached a line approximately fifteen miles west of the town of Valdai. Two separate Russian groups have been encircled in the area south of the Staraya Russa - Valdai railroad line. No information has been received with regard to opera- tions on the Central Front. The leading armored division of the advancing wedge of armored divisions, advancing southeastward from Gomel, reached Lokhvitza during the evening of Friday, September 12. It is believed that these armored divisions constitute the armored army of Generaloberst Guderian. To the northwest of Lokhvitza, Russian forces are with- drawing on both sides of Nezhin in a southerly direction. German forces have captured Kremenchug on the middle Dnepr and are advancing northward towards the Kiev-Poltava railroad. These forces reached the line of the Ehorol river on September 12. German forces advancing from the bridgehead of Berislav on the lower Dnepr have reached the isthmus of Perekop, the land bridge to the Crimea. Air: The German Air Force is concentrating against Russian air fields, troop concentrations and fortifications on the isthmus of Perekop, Orimes, II. Western Theater. Air: Fleet air are activity in the Arctic war zoné off the northwest coast of Norway constituted all reported action in this theater. III. Middle Eastern Theater. Ground: Increased patrol activity in Worth Africa is reported. Air: R.A.F. planes aided British ground troops in driving back Axia columns advancing into Egypt from the Libyan-Egyptian frontier. Axis planes raided Alexandria and supply centers at Birhabake, North Africa. British planes attacked Tripoli and Benghasi while Aris planes bombed Tobruk. RESTRICTED Regraded Unclassified Paraphrace of Code Cablegram CONFIDENTIAL Received at the Mar Department as 20:55 a.m.,Suptember 15, 1941 92 London, filed: 4:25 p.m., September 15, 1941. 1. British Air Activity over the Continent. a. Night of September 19-14. The amount of bombs dropped was as follows: on the Scharnberst and Onsisenau, 162 tone of HB, including 2 - 4000 pound and 30 - 2000 pound - pieroing bashe, and 800 incondiaries, on the Prine Magen, 12 tome of HE, including 1 - 4000 pound bomb, and an Le Havre, 10 tome of E. b. Day of September 14. A total of 220 fighters were - played M follows: 120 in the protection of shipping, 86 on in- terosption patrols, 7 on offensive missions and 9 on special operations. 12 Hlenbeins ware dispatched to attack shipping. These bombers ware not intercepted. c. Night of September 14-15. The operation of hombers was prevented by bad weather. 2. Carman Air Activity over Britain. a. Day of September 13. 20 reconnaissance sircraft and 10 long range bombars were used. b. Night of September 13-14. 35 long range bombers ware employed. 0. Day of September 14. No enery aircraft appeared over Britain. Other operations were on a very small scale except for an attack on shipping off the east coast. d. Might of September 14-15. A little activity against shipping cocurred off the Scilly Isles, Tyne and Loewesteft. 3. Aircraft Losses Reported. CONFIDENTIAL Regraded Unclassified CONFIDENTIAL 93 a. British losses. None reported. b. Ande losses. None reported. 4. British Mr Activity. Other Theaters. a. Mediterransan Theater. 19 tone of HE were dropped w 10 Wellingtons on the airdromes of Valeue and Heraklion the night of September 12-13. Fires were reported to have resulted in both of these raids. b. North Ressian Theater. Royal Air Force fighters made 13 attacks on German hold sirdromes and 6 flights accorting Bussian bombers. 1 R.A.F. fighter was lost. German losses were: 2 Me-109's shot down, 1 №109 probably destroyed and 1 Henschel damaged. [REPORTED EARLIER BY U.K. EMBASSY] 5. Axis Air Activity, Other Theaters. a. North African Theater. Very little damage resulted from raids on Tobruk and Mares Matruh on September 12. In accordance with information considered reliable, the Air Ministry believes the following to be a correct estimate of the damage dene in Berlin by British bombing raids during September: railway lines leading to Anhalter Station hit in 8 places, causing disruption of traffic for a week] hite on the elevated railmy which will probably cause an interruption of traffic for several weeksy 22 houses between Anhalter and Potedamer stations - pletely destroyed; Petadamer Station hit resulting in the doe- truction of facilities; and hits over the tunnel leading to the post office, which caused the death of 180 persons. LEE I. A. / 18, 2125P, 9/25/41 CONFIDENTIAL Regraded Unclassified 94 TREASURY DEPARTMENT Washington FOR RELEASE, MORN ING NEWSPARERS, Press Service Tuesday, September 16, 1941. No. 27-55 9/15/41 The Secretary of the Treasury announced last evening that the tenders for $100,000,000, or thereabouts, of 91-day Treasury bills, to be dated September 17, and to mature December 17, 1941, which were offered on September 12, were opened at the Federal Reserve Banks on September 15. The details of this issue are as follows: Total applied for - $493,411,000 Total accepted - 100,043,000 Range of accepted bids: (Excepting two tenders totaling $260,000) High - 100. Low - 99.985 Equivalent rate approximately 0.059 percent. Average Price - 99.987 If If 11 0.050 " (2 percent of the amount bid for at the low price was accepted) - 000- - Regraded Unclassified 95 September 16, 1941 2:50 p.m. HMJr: Hello. Harold? Harold Ickes: Henry, any oil going to Japan these days? HMJr: Any oil going to Japan these days? I don't think 80, but it 1e going to Spain. I: Hell of a lot going to Spain. HMJr: I know there's a lot, but I: Could you send me the figures on it? HMJr: Just one second, and I can tell you in one minute. There's none gone last week. Russia - no, there was none last week to Spain. I: None last week to Spain. HMJr: But you want to know what's been going I: Keep me informed on currently, will you Henry? HMJr: I think I send you a statement every week. I: Well, that may be. You see, I've been away. HMJr: Well I: I haven't been able to get down to the top of my desk yet. HMJr: Well, eupposing I have a little statement prepared, say, from the first of July to date? I: I'd like to have it. HMJr: How would that be? Regraded Unclassified 96 - 2 - I: Fine. HMJr: And I'll get it over to you - well, either tonight or the first thing in the morning. I: Yes. HMJr: How are you? I: And can you show me..... HMJr: Hello. I: ..... the amount sent last year, or would that be a fair comparison? HMJr: What would you like to have now? I: I'd like some figures to show me what the amount of the increase was. HMJr: Well, supposing we set it up beginning with the first of January, by month? I: Fine. HMJr: And then compare it by month? I: Fine. HMJr: How would that be? I: I'd appreciate it, Henry. Thanks a lot. HMJr: I'll do it right away. I: All right. HMJr: Thank you. I: Good-bye. Regraded Unclassified 97 September 16, 1941 3:00 p.m. GROUP MEETING Present: Mr. Cochran Mr. Thompson Mr. Haas Mr. Kuhn Mr. Foley Miss Chauncey Mr. White Mr. Schwarz Mr. Graves Mr. Bell n.M.Jr: Hello, gents. Is this all there is. I don't know whether you people feel the heat, but I do. Could you fellows come closer? I can't see those fellows down at the end of the room. It is just as well to come right up where I can spit in your eye. Where is Schwarz? You can tell General Burns and Mr. Young for me, I should think they would want to do something for Russia, and I am committed now to taking this - you handle Lend-Lease don't you, Harry? (Mr. Schwarz entered the conference.) White: Yes. Regraded Unclassified 98 - 2 - H.M.Jr: It is just damn silly nonsense they can't find enough money to repair that Russian boat, and I am not going to take an answer of "No." It is just damn nonsense. (Mr. Graves entered the conference.) H.M.Jr: Hello. See? It is ridiculous. God, they buy every other thing in the world. Why can't they repair a boat? They repair all the English boats. White: They do it under Lend-Lease. H.M.Jr: Well, our Navy yards are full of English boats. White: But under Lend-Lease, I think. H.M.Jr: What do they say? They say they can't do it under Lend-Lease. White: I don't think it is a legal restriction. I think it is a policy restriction. H.M.Jr: Nuts! You can tell them, too. (Laughter) Whatever it is, I mean - this is Harry Hopkins, General Aniline and Film. Foley: Yes, I will have an answer prepared. H.M.Jr: Do you want to hold it and prepare the answer? Foley: Yes. H.M.Jr: So we don't get ten different people handling this thing, here is a letter from the American Bankers, when do I get there. (Mr. Bell entered the conference.) Regraded Unclassified 99 - 3 - H.M.Jr: Hello, Dan. It is none of his business. I will be there in time to talk, you see, and if he will have a room and a parlor for me. Schwarz: Shall I send a note with my signature? H.M.Jr: Yes. Tell them I will be there in plenty of time and just give me the number of the room and the parlor, see? The only other thing is that Harold's friend from South Carolina, the banker, B. M. Edward, he should be invited to that lunch, you see. Schwarz: I will point that out. H.M.Jr: Will you? Chauncey: Is Mr. Kuhn going with you? H.M.Jr: I don't know, I had B. lot of trouble with him on the last trip. Chauncey: They asked in the letter. H.M.Jr: Does Mr. Kuhn want to go? Kuhn: It is up to you. H.M.Jr: He should whisper those things to me. I will talk to you (Kuhn) about it. We have plenty of time. It is very embarrassing. (Laughter) Oscar Cox has an idea on sterling which I refer to you (White). Harold, there is 8. Mrs. Carlebach comes in as a volunteer up to that organization that is supposed to be selling bonds. She has got a lot of ideas. She is 8. friend of Mrs. Morgenthau's. I think we did it through you. She was supposed to help Mrs. Lytle Regraded Unclassified 100 - 4 - Hull. I thought when you went up there you might send for her and talk to her, you see. Graves: Fine. H.M.Jr: Now, I am being visited this afternoon by the Acting Secretary of Agriculture. You (Foley) had better sit in. George, I hope you know now how to sell some cotton, because that is what I want to tell them. Do you know how to do it? (Laughter). Haas: Very easy. The inertia is not on our side. H.M.Jr: The President told them they should sell - start by selling two hundred fifty thousand bales of cotton every time it went above parity. Haas: They are limited to three hundred thousand a month. H.M.Jr: A month? Bell: Limited by what, George, statute? Haas: Statute. H.M.Jr: They can't sell more than that? Haas: I am pretty sure I am right on that. Do you know, Ed? Foley: No. H.M.Jr: Don't make any mistakes now, boys. I told the President they could sell six million bales. Can they sell it? Haas: But there is a time limitation. I think it - 5 - 101 is three hundred thousand bales a month. H.M.Jr: In the law? Haas: I think it is. H.M.Jr: Well, you had better know. Foley: When is he coming in? H.M.Jr: Four o'clock, boys, four o'clock. Don't you (Bell) want to sit in on this? Bell: I will. H.M.Jr: Would you like to? It is going to be fun. Bell: I would like to sit in on an educational conference. Haas: That is fine. He is going to do the same on wheat? H.M.Jr: Wheat hasn't reached parity yet, has it? Haas: That is right. H.M.Jr: If the President would announce it-- Haas: The press, the people will interpret the wheat market in view of what you are doing in the cotton anyway. H.M.Jr: Now let's see. You (Foley) will come in now and then. I am going to drop you out of it after this. I will just bring you in today. I am going to handle it myself with George. All right? Foley: Sure. Regraded Unclassified 102 - 6 - H.M.Jr: I put you in as a pinch hitter. Kuhn: Did you see the Baltimore Sun piece? H.M.Jr: I have got it right here. Kuhn: I have some more copies of it if anybody wants it. H.M.Jr: But George, for God's sake now, know what you can do 80 when I pound the desk-- (Laughter) Haas: I will have to see Ed. He is the lawyer. H.M.Jr: Get the statute out. You can read. Haas: I read it some months ago, so I am just depending on memory. H.M.Jr: He is not & farm lawyer. All right. You think they can sell that much? Foley: Well, the question is, Mr. Secretary, do they have six million bales, and the answer is that we were correct in that memorandum and they do have it. They mentioned the six million bales when I was over there; and Shields, who is the head of that Agricultural Adjustment Division, says that they have six million one hundred twenty-six thousand bales on hand. I think that the financial statement of the Commodity Credit also shows as of the thirty-first of July-- H.M.Jr: Well, the point is-- Foley: They have over six million bales. H.M.Jr: You see me through this meeting, and I will let George pick it up there, because he has Regraded Unclassified 103 - 7 - got a lot of farmers back in his organization. Bell: We get out an audit report of March 31 on it which shows the number of bales and also we get up a statement every month showing the cotton they have taken over. H.M.Jr: Who handles that for you, Dan? Bell: Heffelfinger gets up the statement for me. Remember, we send it in to you every month showing the number of bales of cotton? H.M.Jr: It is four o'clock, so you will have a little time to be ready. On the wheat, too, what they could sell. Haas: Yes, we can have that. H.M.Jr: What have you got, Professor Bell? Is that lunch on for Thursday? Bell: Yes, except Henderson. He can't come any day this week except Friday. I told him I didn't think you would want it Friday. He is talking to a Floyd Odlum group, including B. number of Congressmen on Thursday, and the Press Club tomorrow. I told him that I would talk to you and maybe he could send someone or we could talk to him later. He suggests, however, that you might want Jesse Jones in that picture because he is a big operator. H.M.Jr: Well, let me just get this. Where does the idea spring from? Bell: The idea came out of & luncheon conference that we had last week with Ronald Ransom and his whole group and our group as to whether or not this whole inflation picture couldn't better be controlled through Nelson and Regraded Unclassified 104 - 8 - Henderson's organizations, being supplemented or backed up by the fiscal and monetary organizations. I talked a little to Nelson about it, and he liked it, and thought that we ought to get together with some sort of a committee among the four organizations just to explore it to see what could be done. I think that everybody at that group meeting the other day thought it had possibilities. Am I speaking for you fellows, or are you against that idea? I thought everybody agreed at that meeting that that did have possibilities. White: Definitely. Haas: Yes. Bell: That might be the best place and one central place to control it, and the only thing that the monetary and credit authorities would do would be to back them up. H.M.Jr: It is always easier to add people, but it is awfully hard to get them off, so just let's leave it this way. Let's try to get Henderson to have somebody there to represent him. Who would come, Hamm? Bell: I don't know, but he said he could have some- body if you were agreeable. H.M.Jr: We will just have somebody and just sit down and talk about it. Bell: Nelson was quite enthusiastic about it. H.M.Jr: I don't want to add other people until we see-- Bell: I haven't read his speech of last night, but Regraded Unclassified 105 - 9 - he said he was going to town on it, that he was going to tell the American people-- Graves: He did a good job. I heard it. Bell: That they were going to have to cut down on the things they now want to use, and the time has come when they want to start. I don't know whether they told him or not. Graves: He did tell them. H.M.Jr: Would you (Kuhn) have somebody digest Nelson's speech on one page so your people can give it to me tomorrow? Kuhn: Right. H.M.Jr: What else? Bell: I talked to Currie about the Chinese situation, and he doesn't like Mr. Niemeyer, and he doesn't want to go to China with him, so that is out. I am in favor of sending no one if Currie can't go. H.M.Jr: All right. O.K. Bell: That is all I have. H.M.Jr: Could you have somebody give me, tomorrow morning, a breakdown of what the President said about what went to England? You get the financial reports, don't you, on that? It was very misleading, and I was simply amazed to see Arthur Krock say, "It was wonderful." I just can't imagine what got into Arthur Krock. Whoever does it, have them read tonight the fellow who writes for Scripps-Howard. Regraded Unclassified 106 - 10 - Schwarz: Ray Clapper. H.M.Jr: Yes. Have them read Ray Clapper. But I would like & breakdown, because I can't make head or tail out of it. I think Ray Clapper is right, and I think Arthur Krock is wrong. Krock thinks it is wonderful, but Clapper thinks it is awful. I think Clapper is right. Bell: You mean as to actual deliveries? H.M.Jr: Yes. Bell: About five hundred million dollars worth, as I recall it, including services. H.M.Jr: Much less than that. Foley: Less, about two hundred million. Bell: Four hundred thirty-one million or something. H.M.Jr: Let's have a breakdown for the nine-thirty group tomorrow morning. Bell: All right. H.M.Jr: Edward? Bell: I think I ought to talk to you sometime about the financial picture, go over it for the next few months. We haven't done that for some time. H.M.Jr: Pick me up tomorrow morning at about eight-thirty. Bell: Delighted Foley: Congressman Saunders from Lousiana, who is a very good fellow, called me just before I came in. He said he wanted to register a complaint about the difficulty he had purchasing tax anticipation notes. He first went to the post office and was told he couldn't buy them there. H.M.Jr: A little louder there. Regraded Unclassified 107 - 11 - Foley: He went to the post office and he was told he couldn't buy them there and then his wife went to the local bank down near the hill there some place and they didn't know anything about it, never had heard of them. So she came to his office and he called up the cashier and the cashier said that they didn't - he didn't know much about it but as 8. kind of & personal favor to the Congressman he would take it up with the Federal Reserve Bank of Richmond. He said he really wanted to buy those Tax Anticipation Notes 80 he could set aside a certain amount & month to have available to pay taxes with next year and he thinks it is outrageous. I feel a little bit aggrieved because I had a little difficulty too. Our circular says you can buy them here in the Treasury and you can't buy them here in the Treasury and the banks here have to send the stuff to Richmond and if you live in New York -- H.M.Jr: This is Bell's exclusive baby. Foley: You don't like to deal through the Richmond Bank. H.M.Jr: It is. Foley: He said, "Have you given any consideration to selling them through the post offices?" and I said, "We did a little experimenting" and that we were just waiting to see how this went and that wasn't foreclosed. H.M.Jr: Ask Bell. I don't know a thing about it. It is Bell's exclusive baby. Bell: Well, we did give consideration to all those Regraded Unclassified - 12 - 108 matters. These Notes have to be inscribed in the name of the taxpayer and there ought to be a record kept in a central point where they are going to be redeemed 80 that when they come in they can tell whether or not they are going to be properly used. We are not going to have registration records here in Washington, which are very expensive. So we did it, we thought, the cheapest way, by having the records centralized in each Federal Reserve district. Every bank, certainly, was advised by & special letter from the Secretary and they have got all of the data. The small banks, of course, haven't paid & lot of attention to it. H.M.Jr: I will tell you what you do. Ask the Comptroller's men to check up in & hundred banks in the next couple of days and just see. Tell them to check in every bank in their district that they visit, not to make a special visit but just to ask and to send in a telegraphic report. Let them get out telegrams sometime tonight to them, to every bank they visit tomorrow, and what is tomorrow, Wednesday? Bell: Yes. H.M.Jr: ...To send in a telegraphic report Thursday night. Bell: Of course they won't visit many banks within three days. They are in a bank for several days, you know. H.M.Jr: Let them check every bank they are in. If they did it, it would be -- Regraded Unclassified 109 - 13 - Bell: It would be several, yes. H.M.Jr: Let them do that and visit 8. couple of banks in town, just use the telephone for two days. Bell: They can do that. They can call up & number of banks. H.M.Jr: Let them call up 8. number of banks. For instance, if they are in Albany, examining one bank, it would only take them fifteen minutes to get the other banks on the phone and you would get a pretty good report. Let's have a report Friday morning. Bell: I think there is some of this. I have heard it. H.M.Jr: And I am not sure he isn't right on the post offices, no matter what the details are. Schwarz: We have had several stories of it. Foley: It creates a bad impression here in Washing- ton, particularly. We say that they are available at the Federal Reserve banks and at the Treasury. You go to the room that is designated on the circular and they haven't got them. Bell: Well, they had a mess down there. H.M.Jr: Now that Ed has got all the banks 80 they understand the foreign exchange regulations (laughter) he wants to make sure they understand the other thing. Bell: I am not so sure that that isn't the reason the Tax Anticipation Notes circular went Regraded Unclassified 110 - 14 - in the waste basket. H.M.Jr: Well, it all comes back, it is more important to get the smallest bank in the country to understand it than it is the National City or the Chase. Bell: They will take care of themselves. H.M.Jr: Will you do a little work? Bell: Yes. H.M.Jr: Your saying that, Foley, reminds me of the story this captain told today. I don't know why I think of Ed, but he said that - the captain told this story. This happened some years ago. An officer wrote in to the Secretary of the Navy, "My dear Mr. Secretary: I have just read your rules and regulations that the wives of officers can't follow them from one post to another. I ordered my wife not to follow me. She refuses to carry out my order. What should I do?" So he said the Secretary of the Navy changed the order. (Laughter) Foley: He was a very discerning fellow. White: After two weeks that is not bad. He learns awfully fast. H.M.Jr: I thought somebody would get it. (Laughter) All right. Have we got by you yet? Foley: No, not yet. H.M.Jr: I am going to have to stop at 3:30. Foley: Starting on Thursday of this week, the Federal Reserve bank in New York is holding Regraded Unclassified 111 - 15 - meetings in Binghamton, Albany, Buffalo, Rochester, Syracuse, West Caldwell, New Jersey, and in Fairfield, Connecticut, to explain the new consumer credit regulations of the Federal Reserve and our freeze control regulations. I see, Could they also explain how to buy a Tax Anticipation certificate? We better get in on that, Dan, seriously. Foloy= We had a little trouble with Knoke. Knoke wanted to kind of play up the consumer credit thing and play down our thing and we insisted that he carry them both on the same line and he kind of got mad with John Pehle and said he would have to take it up with higher authority in the bank, but just so long as we are given an equal break with the Federal Reserve Board, that is all we ask. Get them to add tax certificates. Poleyt Do you want to send a memo on it, Dan? Bell: Yes, H.M.Jr: Who is doing your -- Poley: Maybe it would be a good idea to send nome- thing to them. We are going to ask them to send Kimball because they weren't going to send a first class man. When are those meetings? 7cley: Starting Thursday, this week, in five cities in New York State, one city in Jersey, and one city in Connecticut, seven meetings. They start on Thursday and they run through Regraded Unclassified 112 - 16 - until the following Thursday. H.M.Jr: Send Allen Barth around and - what is the other man - Merillat? And let them spend two days going to these different meetings and send a report in to you for me. Kuhn: All right. Up in New York? H.M.Jr: Wherever they are. Find out where they are. Let them each spend two days. Let them cover as many meetings as they can. In two days they will get an impression for me. Foley: We are planning on having two fellows from here, one man from Pehle's office, Towson, and one fellow from Bernie's office, Joe Murphy. H.M.Jr: Oh, you are doing that? Foley: They are going to be on hand to answer questions and see that the thing is properly carried out. H.M.Jr: Let's have some neutrals. Schwarz: Observers. Kuhn: When are the meetings, Ed? Foley: They start Thursday this week. There is a notice of them in the Tribune this morning. H.M.Jr: Let them spend Friday and Saturday - supposing they get - what? Foley: Well, Thursday in Binghamton, Friday in Albany, Monday in Buffalo -- Kuhn: Monday will be better because -- 113 -17 - Foley: Tuesday in Rochester, Wednesday in Syracuse. Maybe Monday, Tuesday and Wednesday next week, Buffalo, Rochester and Syracuse. H.M.Jr: I don't want the same man to go to more than one meeting. Kuhn: One to each meeting, that is right. H.M.Jr: I mean, if, for instance, there is a meeting at Syracuse, Rochester and Buffalo, let one man cover those. Bell: They are different days in the week. They go around in a circle and come back to New York on Friday. Foley: They start on Thursday in Binghamton, Friday in Albany, the following Monday in Buffalo, Tuesday in Rochester, Wednesday in Syracuse, Thursday in West Caldwell, New Jersey, and Friday in New York City. H.M.Jr: You fix it up, Kuhn, to do it the best way. You may want to have one man cover the whole group. Foley: Yes, go to all meetings. H.M.Jr: I will leave it to you. A good fellow. Kuhn: They have their reports to do at the end of the week but at the beginning of the week they can do this. H.M.Jr: I will leave it to you. So somebody is there to sit there and tell Papa. You (Bell) get in on that with those tax things, will you? Bell: I will. I will have somebody there. Regraded Unclassified 114 - 18 - H.M.Jr: All right. You are looking better, incidentally, Dan. Bell: I am feeling pretty good. H.M.Jr: Is tonight the night? Bell: No. H.M.Jr: Tomorrow night? Bell: Thursday night. H.M.Jr: I don't mean yours, I mean the drinking party. When do you play golf? Bell: Tomorrow afternoon. H.M.Jr: Are you going to go to that, Harold? Graves: No. Bell: Tomorrow afternoon and tomorrow night. I won't look so good Thursday morning, I guess. H.M.Jr: Is Mac going? Bell: No. Graves: Yes, Mac is going. Mac. called me up and invited me to go today. At Congressional tomorrow? Bell: No, at Manor. It is a small group out there. H.M.Jr: Aren't you finished yet? Foley: Almost. H.M.Jr: Look at all these people with their tongues hanging out. Regraded Unclassified 115 - 19 - Foley: At the request of the State Department we are sending Joe Dúbois with John Hooker down to South America to help the missions down there in connection with the blacklist and the problems that are coming up. H.M.Jr: Do I sign something? Foley: No. H.M.Jr: Already gone? Foley: Already gone. (Laughter) There is 8. letter to Cochran about the letter he wrote to you and the Boston speech that he put in the record. Glass got permission to put your speech in the record but Cochran did the same day and since they don't put the thing in twice -- H.M.Jr: Is this Cochran -- Foley: They put it in under Cochran of Missouri and not Glass. He did it on his own. We didn't speak to him. H.M.Jr: You know, he is a great fellow for high prices in agriculture. Bell: No, that is Cannon. Foley: That is Cannon. He is Appropriations. H.M.Jr: Cochran? Foley: No, Cochran is the stabilization fellow. H.M.Jr: Is Cochran the defense fellow? Foley: Yes. - 20 - 116 Bell: Cochran is for economy, even though it is in agriculture. H.M.Jr: Good. We need a few friends. Were you through? Foley: We will have a proposal tomorrow in connection with writing to all the banks, the fifteen thousand banks, asking them for any suggestions or criticisms they may have in so far as freezing control regulations and reporting and all of that are concerned. H.M.Jr: For me? Foley: Yes. H.M.Jr: Going to let me sign it? Foley: Yes. H.M.Jr: Good, I will sign it. Foley: I think it would be a good idea. H.M.Jr: I do too. Foley: To have it on your stationery with your signature. H.M.Jr: I think so too. Foley: ...Asking each one to give suggestions and criticisms. H.M.Jr: You can't put on a P.S., how are the Tax Anticipation Notes going? Bell: You know, there are replies you got on that Regraded Unclassified 117 - 21 - letter, they all tried to let you know that they were cooperating fully and how many Savings Bonds they sold and they seemed very pleased that you had taken the trouble to write them, 80 I think it would be very good. Foley: I am through. Schwarz: Congressman Weiss of Pennsylvania called in a little while ago. He had accepted an invitation to participate next Tuesday in Pittsburgh in what he says is a Kiwanis Club meeting, but looms up on the line-up as a penel discussion with important Penn- sylvania people. One of their subjects, he says, is going to be financing the defense program, and he asked if the Treasury would send somebody. It might be a good time to send some Defense Savings speaker. H.M.Jr: A "Harold Whoozis speaker". He has got lots of speakers. Give it to Harold. He has got a speakers bureau. Schwarz: They could talk about Tax Notes, also. H.M.Jr: Merle? Regraded Unclassified - 22 - 118 Cochran: We sold thirty-two and a half million dollars worth of gold since Saturday, twenty to Switzerland, five to Argentina, and seven and a half to Java. It is the best we have done. H.M.Jr: What does Switzerland do with that gold? Cochran: Just hold it on earmark in New York. They can't do otherwise. H.M.Jr: After we turned them down on the two? Cochran: Yes, sir. H.M.Jr: That is surprising. Cochran: And on silver, the Guaranty will go in the market tomorrow to buy three million ounces for the East Indies, Curacao and Surinam. Bewley came by just before I came in to leave some British notes on their views with respect to our talks with Fox on China. I am having those copied to circulate. Regraded Unclassified 119 - 23 - H.M.Jr: Send a copy to Mr. Graves and to Cliff Mack, Miss Chauncey, of that nice telegram I got from Beaverbrook thanking me for what we have done on speeding up the purchases. He sent me a very nice cable. He is aw- fully smart. He has somebody there and immediately comes a very gracious cable right away and makes you feel good. Incidentally, ask Cliff Mack whether he has or whether he could get - they tell me there are nineteen steps up the ladder you have got to go up and then down again through the same steps when they buy through the Army. Does he know about it? Can you get it out of Phil Young's office? I would like to see it. They tell me it is wicked what you do for Lend-Lease. Ask Cliff Mack if he can get it from Phillip Young. No, let's do it through the English. Let's do it both ways. Ask Cliff Mack if he can get it from Phillip Young, what happens when the English want to buy from the Army and the Navy, and if he can't get it, then Harry White will try to get it from the English. White: Wait until he cannot get it? H.M.Jr: Yes, let's see him first. Are you all right, Ferdie? Kuhn: Yes, sir. I will have some suggestions for you tomorrow about the speech in Chicago. The Boston speech is being dis- tributed now. The OPACS is full of good will, but there is not much organization, not many facilities Regraded Unclassified 120 - 24 - over there such 88 we have, and we are getting in ahead of them with our own bond holders' distribution. E.M.Jr: They are not ready yet? Ruhn: They have all the pamphlets but they are just not equipped to do that kind of job. It is bigger than anything they have ever tackled. Miss Elliott will go on the sir in support of your wpeech on the 26th in Penn- sylvania. She wants to get some more radio time. E.".Jr: Yes. What is the program for tomorrow night? I mean, the radio program. Kuhne Going to have -- E.M.Jre I see you have Charlie McCarthy. Kuhne A Scendanavian number, Charlie McCarthy, Kate Smith and they doing a Stephen Vincent Benet poem. V.V.Jr: Is Charlie McCarthy in Hollywood? Kuhn: I think he is in New York. R.M.Jr: Will you let me kr OW tomorrow morning whether anything is going on from Hollywood tomorrow, or whether this is all from New York. Please. Kuhn: Sure. 8.7.Jrs George? Exes: Here is this report. H.P.Jr: That goes up to the House tonight. Can I look at this other report without crying? Regraded Unclassified - 25 - 121 Haas: It is about the same. Groves: Are we still losing ground on the E bond? Haas: It is still thirteen per cent down. That was what it was last time. H.M.Jr: Isn't that an improvement? Haas: That is what it has been in the last few days. Bell: You haven't lost any more? Haas: No. H.M.Jr: All right, what else? Haas: That is all I have. H.M.Jr: Harry? White: There is a good deal of material came from Coe. Here are some very brief letters that I think you might want to read. I am having the rest of the stuff digested. He is sending a lot of newspaper clippings that are of considerable interest, I think, to many persons. I am wondering whether you would want to consider having Barthdo the same thing with those clippings and get up a semi-fortnightly paper or something of that nature for circulation to the President and the Cabinet and 50 on? H.M.Jr: On England? White: Yes, and then they can continue to send us & steady stream of merely excerpts. I don't mean the whole paper. Regraded Unclassified - 26 - 122 H.M.Jr: I wonder if Donovan is doing anything of that character. Schwarz: He is certainly planning to begin it because that is one of the things he has outlined. H.M.Jr: Well, aren't you (Schwarz) and Ferdie - is that with LaGuardia or who is contacting Donovan? Schwarz: I was supposed to be available whenever any of LaGuardia's people come to us for information, but they are not ready. I have called them and asked what we could do to help. H.M.Jr: Well, turn it in to Ferdie - I mean, let's get it out and I can say to Donovan, "Are you doing anything like this, or not?" Let's have one. White: Let's try one sample copy. H.M.Jr: All right. Schwarz: That would fall more in Donovan's work than LaGuardia's. H.M.Jr: He most likely is still thinking about it. Kuhn: How many clippings did you get, Harry? White: Oh, a big batch of them. It looks like about fifty. Kuhn: Would it give you enough of a picture? White: Certain points that we are interested in, Lend-Lease operation, food situation, women's work, production for defense, criticism. We have a man there if you Regraded Unclassified - 27 - 123 want to have them cut. We can send any- thing you want. H.M.Jr: O.K.? White: That is all. H.M.Jr: I visited your place yesterday, Harold. Graves: Was it too bad? H.M.Jr: I had a long, long talk with Mr. Hayman. Everything up there has got to be a title. I called him Mister. I will go over it with you some time. Graves: I intend going to New York on Friday in- stead of tomorrow. H.M.Jr: Maybe I will get a chance to talk to you. I have got it very much in mind. Graves: All right. Tomorrew Mr. Iseby, our State Chairman in Michigan, is here and he would like very much to see you. H.M.Jr: I would like very much to see him. Graves: I think you might be interested to give him fifteen minutes if you can spare that much. H.M.Jr: I can do that at 3:15. I will put you down. Graves: The next day, Thursday, Dr. Gaines, our State Chairman of Virginia is to be in Washington on our invitation. He is the President of Washington and Lee, and he is a very distinguished gentleman. It would be nice to give him some time. Regraded Unclassified 124 - 28 . H.M.Jr: Three o'clock. Graves: Three o'clock Thursday and three fifteen tomorrow? H.M.Jr: Yes, I am putting them down in your name. Graves: That is all I have. Thompson: Admiral Waesche phoned that he has a report for you on the secret ins tructions issued to the Coast Guard on Saturday. I was wondering; it is so confidential he is keeping it in the safe. It is a report he said you asked for. H.M.Jr: I tell you what you tell him to do. Tell him to keep it there and deliver it to Mrs. Klotz when she gets back. Tell him to deliver it to Mrs. Klotz when she gets back. Thompson: Do you want the Admiral and Mr. Johnson to attend the nine-thirty meeting in Mr. Gaston's absence? H.M.Jr: Yes. Thompson: In order to legalize the circulation of your speech, we had to construe the mailing to be a part of the Defense Savings Program. I think that is entirely proper. The law prohibits distribution of material of that type unless it relates to the sale of securities. That is one of the exceptions in the law. I thought you ought to know. H.M.Jr: I am sorry that we couldn't put it on the back - you know -- Thompson: We are printing a defense legend on the envelopes and not on the pamphlets. We are putting it on the envelope to correct that, to tie it up. Regraded Unclassified 125 - 29 - H.M.Jr: Yes, it would have been better. Is there any question about it? Hell: If we had a Defense Savings circular of some kind that could go along with it -- H.M.Jr: It should be stuffed in. Kuhn: Two million of them are going to our Defense Savings people with other material, but there is a quantity which OPACS wanted to distribute from the Consumers' Division with a letter from the Consumers' Division as ammunition for them and that is what -- H.M.Jr: What I would suggest is, if you could stop the press, I would like that just the -- Kuhn: Minute Man? H.M.Jr: Yes, put on the back page. Kuhn: If they haven't all been printed, I will find out about it. H.M.Jr: Would that help any? Graves: I doubt that it is necessary to do that. Thompson: I think the speech itself is sufficient. Graves: The speech itself is germane. H.M.Jr: Any doubts? Foley: Well, it is indirectly related to the sale of your Defense Bonds. Regraded Unclassified - 30 - 126 Bell: It is less open to criticism if you have something there immediately on United States Savings Bonds. Foley: If you could put it on the back cover, stamp it. H.M.Jr: You could put it right in the center of the thing. When you leave the room, Kuhn, call up whoever is handling -- Graves: Mahan, and he is in my office now. He can probably answer your question. H.M.Jr: As I understand, it is not being mailed out separately, it is being stuffed in, isn't it? Kuhn: Not by OPACS. We are stuffing it in. H.M.Jr: But their copies haven't been printed yet. Kuhn: They have been printed, but they have not been distributed. H.M.Jr: They have been printed? Kuhn: Oh, yes. Graves: Delivered over there, are they not? Kuhn: Delivered, that is right. H.M.Jr: Was there any question about that? Kuhn: No -- Bell: Will they go out under a frank and the retum card, OPACS? Kuhn: They will go out under B - in an OPACS envelope Regraded Unclassified - 31 - 127 with an OPACS frank with a covering le tter signed by Harriett Elliott. White: Why couldn't there be slipped in the speech one of the regular sales tax bond application blanks? Boley: I an not worried about OPACS. They have got their own counsel, let them handle it themselves. The only thing I am worried about is paying thirty-five thousand dollars for the printing of this pamphlet and the use of the frank to send it out from the Treasury. Traves: Who is going to question it? Foley: It may very well be questioned by the group of Senators on the Hill who have taken opposi- tion to the Secretary's speech, the crowd that is going to try to override the President's veto on the freezing of commodities this after- noon. N.M.Jpr But somebody must have passed on the thirty- five thousand dollars. Thompson Well, the question came to me as to paying for it. That is the first I had heard of that dispute. S.M.Jr: Who signed the requisition? Thompson: The requisition went through the Defense Savings group. H.M.Jrr Well, somebody must have passed it on. Kuhn: Yes, I probably was at fault in not seeing this legal difficulty, but you had already sent out speeches of your own on Defense Savings and -- Regraded Unclassified 128 - 32 - Poley: Well, we have got an exception in the law. You remember when O'Mahoney put the restric- tions on the use of the frank in connection with the dissemination of material A couple of years ago, and Dan raised the question about advertising in SO far as the Savings Bonds were concerned. We went down and saw O'Mahoney and we got permission in the law to permit us to frank out material in regard to Treasury securities, so if we can work it in as material relating to our campaign for the sale of Defense Bonds, we are O.K. Gravest Well, that can be fully met, I think, by stuffing another item of literature in that -- Foley: Yes, and stamping on the envelope, "Buy Defense Bonds," and getting as much manifes- tation in the Savings Bonds as we can. Kuhn: Ours is all right. It is the OPACS thing that is a little difficult. H.M.Jr: Let's just get this. I want to pin this on one person. Let me pin this thing on you, Norman, and on OPACS and get proper legal counsel and see that - I can't be bothered with all this stuff. Please find out every list that it is going to, get a legal opinion, and see that the thing goes out so nobody can question it, and if there is any question, I would rather have it not go out or have it all go out through our own envelopes, call it back, but I am sure some Congressman or somebody will pick it up. It is up to you to see that there is no question or subterfuge and that the thing is done. If there is any question about OPACS - I don't agree with Ed Foley Regraded Unclassified - 33 - 129 who says let them worry about it. I am paying for the printing of the speech. The thirty-five thousand dollars I am paying, I want you entirely satisfied, and if you are not entirely satisfied so you can go and defend it on the Hill, or I candefend it - now, if there is any question, I want you to stop it. Thompson: I think we are a hundred per cent on our own. It is just on OPACS. H.M.Jr: It is on you, see. Will you accept it? Thompson: Yes, sir. H.M.Jr: And check every list, everything. If there is any question about OPACS, pull them back and we will stuff them in to our own envelopes, but I don't want to be worrying about that, please. And get plenty of legal advice. Don't you agree, Dan? Bell: I do. H.M.Jr: And rather than - if you don't mind, I am paying for the speeches. Foley: Yes, that is right. I merely meant, Mr. Secretary, that the primary thing is the payment for it, the appropriation out of which the payment is made. That is primary. And then the part that we send out here -- H.M.Jr: Well, it is being paid out of Harold Graves' appropriation. Is that agreeable with you, let Norman do it? Graves: Yes. H.M.Jr: If there is any question, we have got plenty of stuff going out and we can stuff them in. - 34 - 130 Kuhn: As I understand it, they are not being mailed out separately. They are being stuffed in with some other mailing. Bell: So far as Treasury is concerned. Kuhn: So far as we are concerned. But the OPACS is going out with nothing but a covering letter from Harriett Elliott. H.M.Jr: If you have got any question, pull them away and just send it out with our own stuff, but please lean over - my instructions to you are to lean over backward. I would rather not have the speech go out if there is any question at all, and there is plenty of mail- ing here that it could go with. Thompson: Yes. H.M.Jr: All right. 131 Nat. Bank Ex. Sal. & Exp. Comp. of Currency Night Letter September 16, 1941 Mr. Irwin D. Wright, District Chief National Bank Examiner, 1 Montgomery St., Room 921, San Francisco, California There seems to be a lack of understanding on the part of some banks regarding Treasury Tax Anticipation Notes. No understand some bank officials have stated in response to questions from customers that they are not informed regarding these notes and they are unable to give advice or assistance. Please contact the national banks through your examiners in those cities where banks are under examination and report to this office not later than Friday of this week as to whether the banks are generally informed regarding these notes and are rendering service to their customers 8.8 requested by the Secretary of the Treasury in his letter of July 28. Delano Comptroller Telegraph Office: Please send above wire to list attached. Regraded Unclassified 132 September 16, 1941 3:45 p.m. INVESTIGATION Prayest: Mr. Irey Mr. Frank This Seattle situation started some three or four months ago. It has been in the making since then. It involves the same general conditions that were involved in that Atlantic City case, that Mr. Frank investigated. It has to do with vice conditions enerally, disorcerly houses, gambling houses of all sorts, bookmaking establishments, Mosse betting and such things as that. Apparently it involves almost the entire police force of Seattle, county officers and state officers, in and around Seattle and Tacoma. The Mayor of Seattle, former Mayor of Seattle, who is now Governor, WSS the one who first brought the thing up, and it is at his sugges- tion that we started the inquiries in the first instance. Just before you celled me, A few hours before, I had received a letter from the man in charge out there going through the situation to some extent, and calling on me for addi- tional help, and I was giving that thought when you called, and W&S then thinking about calling Bill Frank down because of his exper- ience in this particular type of work, and having him C° out there and survey the field and make recommendations to us. Then your call ceme in. Regraded Unclassified 133 22 - . I got him down here and I find now that in winding up the Atlantic City situation, there has developed a pretty serious condi- tion involving jury tampering in which he has already got eight confessions. It will involve about fifteen defendants. Now, he expects to go before the grand jury next week and present that. It is a highly ser- ious and important situation. So that on that account he won't be available for a couple of weeks. But in the meantime, it occurred to me that We could let him wait until then to go out, but I could be getting some additional help in there, because I know they need it. That is the situation at the moment. Il.M.JHz You don't know who you are going to send? But eventually Frank will go? Treyr Yes, he will go, but I didn't have in mind him going out and taking charge of the inves- tigation, particularly. I want him to go out and see if there is any need of him taking charge of it. In other words, I would rather have the local men handle it if it is possible to do it. B.M.Jpt If he is busy, why can't Frank go out? What is the next job? I imagine this thing out there will be another year or two. Irey: Oh, yes, those things always last indefinitely. He has no other special job. M.M.Jr: We will send him out there. How do you spell Frank? Trank: F-r-a-n-k, William B. H.V.Jr: When does he have to be on the jury thing? Regraded Unclassified 134 - 3 - Trey: Well, next week sometime. Frank: Next week sometime. Trey: Whenever the grand jury is called he has to go before it and testify. H.M.Jr: Are you prepared? Frank: To testify? Yes, our case is almost complete. H.M.Jr: Do you have to work on it yourself? Frank: My testimony is needed -- H.M.Jr: What I am getting at, is, could you fly out to Seattle and come back again, just to see Boettiger? Trey: This is Tuesday. Now, what is the situation? Frank: Well, we are in the last week of the case, and that is always the important week, just before we go to the grand jury. H.M.Jr: This week is? Frank: Yes, and if it could be a voided -- H.M.Jr: How long will it be before the grand jury will be through? Frank: We should be through either next Wednesday or Thursday. H.M.Jr: That is all right. Irey: He will be out there the latter part of next week, then. H.M.Jrr I think it is good ball to send him out, in view of this call, you see. Regraded Unclassified 135 - 4 - (reyr Yes. H.".Jr: He wanted you to come out yourself. THE L had planned if he went later that I might C° out with him. M.V.Jr: You don't fly, do you? Trey: No, I am prohibited from flying. Why can't Frank go out there? He can go out and make -- Trays He can 8° and make the survey and you and I can talk loter about whether you want me to go out. Yes. Trey: Then you (Frank) can plan to go about A week from now, as soon 8S you get away from Atlantic City. Frank: I will be ready to go the day we finish grand jury. H.M.Je: Are you married? What will you do? This will be 8 long job. Frankt Yes. Treys I think when he comes back to mak e his report to us - he had planned to take some leave of absence and go on of trip west. He just bought himself a new automobile. I think he can just put his wife and children in the new automobile and drive back out there and stay there. IL.V.Jre Break in the automobile. Well, you talk it out. Make it easy for him. Would you like to go out? Regraded Unclassified 136 - 5 - Frank: I wouldn't object at all. I like that kind of work. H.M.Jr: Does it break up your family? Frank: No, it will be perfectly all right. H.M.Jr: It isn't B. hardship on you? Frank: No. I would like a little vacation. I haven't had a vacation in five years, since we went down there. H.M.Jr: How long were you on the Atlantic City case? Frank: This is the middle of the fourth year down there. Irey: It will be five years next month. Frank: Five years in November, and I haven't had a vacation for months before that. Trey: It was in November that this man came in to see you five years ago. H.M.Jrz What could you do in the meantime? Is there anything we could do between - I guess he will just have to wait, that is all. Ireyr In the meantime, Mr. Secretary, there is a lot of detailed work that can be done out there, routine work, and I will get these new men in. They will be reporting and learning the ropes. He can make this flying trip out and outline a program for them. H.M.Jr: And then when you go out there you will call on Mr. Boettiger. Frank: Yes. Regraded Unclassified 137 - 6 - H.M.Jr: You know who he is? Frank: Yes, sir. 138 September 16, 1941 3:50 p.m. HMJr: Hello. Operator: Mr. Boettiger. HMJr: Hello. John Boettiger: Hello, Henry. HMJr: Hello, John. How are you? B: Fine. HMJr: John, I've got Mr. Irey in the office here now. Hello. B: Yeah. HMJr: Is this John Boettiger? B: Yes. HMJr: And I also got W. E. Frank. Now, Frank is the agent who was in charge of the Nucky Johnson case in Atlantic City. Hello. B: Yes. HMJr: Are you familiar with that? B: No, I'm not, Henry. HMJr: Well, you B: How does he spell his name? HMJr: W. E. Frank. F-r-a-n-k. B: All right. HMJr: Well, do you know anything about the Nucky Johnson case? B: No, I don't. 139 - 2 - HMJr: Well, It took us just five years to make it, and the man 1s now in Federal Penitentiary. He was the bose of Atlantic City. B: Yeah. HMJr: It's one of the biggest 08.888 we ever had, 3: Fine. HKJr: And Frank will finish his testimony before the grand jury about next Wednesday, Then I'm going to put him in B. plane and send him out there. B1 Fine. Oh, that's grand. HMJr: In the meantime, we're going to strengthen our forces out there. But he's one of the best men we have in the service, and when he gets out there he'll call on you. BL Well, that's simply fine, Henry. I appreciate that very much. HMJr: But the way we figure, this is - these cases, you know, they take years to develop; and I'd rather wait one week to give you a really good man, and this 8: Well, I agree with that. HMJr: and Mr. Irey 1e going to watch it for me personally and I'll watch It also, B: I didn't want you to feel that I was sort of butting in on this matter HMJr: You're not - no, I consider you were doing me a favor. B1 by trying to tell people in the Federal Government how to run their business. HMJr: John, you're doing me e favor; and that's what Irey's attitude 1s, also. He's delighted. Regraded Unclassified 140 - 3 - B: Well, that's fine. HMJr: So we're all delighted and we feel that you brought it to my attention and we're all delighted, and I'm glad that Frank will be free in about a week. He's been tied up for five years on this one case. B: I would like to - I would like to have an underetanding, Henry, that my connection with this - I mean my telephoning you and what not would not be disclosed. HMJr: That's all B: Will you tell Frank and Irey that? HMJr: Yes. And would you want them to come and see you at your house? B: No, he can come to see me at the office. Just have him - we may take him out to the house later or what not, but HMJr: Yeah. B: .....it's perfectly reasonable that he would come and see me. HMJr: I see. B: That's perfectly all right. HMJr: Butyou don't want it advertised. B: I don't want - I don't want the fact that I had anything to do with his coming out here advertised. HMJr: Okay. Well, these are the hush-hush boys of the Government. B: Yeah. (Laughs) HMJr: I hope your income B: (Laughs) All right. That's fine. Regraded Unclassified 141 - 4 - HMJr: I hope your income tax is all right. B: Oh, my God. I don't know how I'm going to get the money to pay it. HMJr: I see. Well, you'd better buy some of our tax notes in advance. B: They don't pay enough interest. Hell, I can get more interest from the bank here. HMJr: Yeah. You and this man called Roosevelt. He's kicking about the interest always, whenever I try to sell him anything. B: (Laughs) HMJr: It's terrible. B: Yeah. HMJr: All right. B: How is the stamp drive going, Henry? HMJr: The stamp drive is going fine. I'm not satisfied with the bonds. B: Uh huh. HMJr: But after all, if they buy enough stamps, they'll convert them into bonds after while. B: That's right. And also, you're not paying any interest on the stamps. HMJr: Oh, go to hell. B: (Laughs) All right. HMJr: Give Anna my love. B: Thanks a lot, Henry. HMJr: Give Anna my love. Regraded Unclassified 142 - 5 pla B: Yes, sir, and I shall, Henry. HMJr: All right. B: Good-bye. HMJr: Good-bye. 143 September 16, 1941 4:00 P.M. RE INFLATION Present: Mr. Hill Mr. Ezekiel Mr. Shields Mr. Haas Mr. Bell Mr. Foley Mr. Cairns H.M.Jr: They tell me you are going to sell some cotton. Hill: Yes, we are selling lots of cotton. That is, the people that have it - we have loaned money to on the cotton are taking it out of the loan at a very rapid rate. The fact is they are about to take all the cotton out. H.E.Jr: How much is that? Hill: Well, they have taken about four million bales out. Last reports showed two hundred eighty thousand bales still in the loan. That was a week ago. H.M.Jr: But you have still got what, about six million bales? Hill: Yes, something over six million bales. H.S.Jr: That you control? Regraded Unclassified 144 - 2 - Hill: That the Government owns. Bell: What is the reduction in the holdings of cotton in the last thirty days? There was over seven hundred thousand bales reduction in your holdings in the month of August. Ezekiel: Practically all of that was in loan stocks. Bell: I thought part of that was already owned by Commodity Credit. Ezekiel: No, as of last March there was something over - just about four million bales under lien that the farmers still had interest in plus six million odd bales owned and since then the farmers have withdrawn, as Mr. Hill says, all except two hundred thousand bales. As a matter of fact, it is down now to about a hundred and eighty thousand since the first of September that they have withdrawn and sold and & small quantity, something like fifty thousand bales, of the loan cotton has been shipped to England. Bell: So that you actually own how much now, about six million? Ezekiel: About six and one eighth. H.M.Jr: Did Mr. Wallace report to you what the President said at cabinet last Friday? Hill: No. H.M.Jr: Well, I will tell you. Hill: He mentioned the fact that you had talked to him and asked him to talk to us. H.M.Jr: That is right. Regraded Unclassified 145 - 3 - Hill: But he didn't quote anything - I don't recall that he said anything about what the President said. He perhaps did. H.M.Jr: To explore this -- Hill: I went over and had a talk with the Vice- Bresident about it. He called me and said that you had asked him to talk to us about it 80 I went over to his office. H.M.Jr: That was at the President's request, to explore this selling of cotton or announce a policy of the Administration would be to sell it at any time that the price went above parity. Hill: Well, we went into that, yes. One of the things that has happened, these people are buying their cotton, the spinners are buying cotton and buying it very rapidly, as indicated by these men that have with- drawn it. That is the way they withdraw it, when they sell it. They are filling up the private warehouses and the price today is down some. What is it, today? Shields: Seven and ten points over. Hill: It has been going down for three days. It may indicate that the buyers have filled up their wants. H.M.Jr: Is there something special you want to say? I will listen first. Hill: No, you go right ahead. H.M.Jr: No, you are my guest. Hill: We just wanted to discuss this matter with 146 - 4 - you, especially the wheat end of it. H.M.Jr: Could I talk on cotton first? Hill: Yes, go right ahead. I will ask Mr. Ezekiel here. He has been working on that almost continually and perhaps has it better in mind than I might have. Go ahead and explain the cotton situation. H.M.Jr: Well, it isn't the cotton thing. If I might - you see, what you are telling me here, it is so complicated that - well, from reading the newspapers, I certainly don't understand it, but that is maybe a reflection on me, but I don't think that the woman that buys the cotton shirt understands it. What I would like to see, if I could, would be, if possible, for the President, you see, to make a statement. Ezekiel: The difficulty, Mr. Morgenthau, is this, that the release of the cotton owned by the Government has to be under the limits Congress has set. H.M.Jr: Which is what? Ezekiel: We are already operating under one limit, that we can sell no more than a million and a half bales in any one calendar year or no more than three hundred thousand bales a month. That would reduce the amount we could sell even if we started in selling to rather small quantities compared to what has been coming under the loan to this date. Shields: In addition we must get cost plus carrying charges. H.M.Jr: Can I interrupt you B. minute? I don't Regraded Unclassified 147 - 5 - understand your terms, you see. Does the three hundred thousand a month - is that charged up to what they withdraw themselves? Sekiol; No, simply of cotton owned. H...Jr: That would be over and above. Ezekiel: Yes, and as Mr. Shields says, even then only under condition it meets certain prices. That is, it can be sold at certain prices to recover what the Govern- ment previously put in to it but there is the further point, as you know, the Congress & couple of months ago passed this bill prohibiting completely the sale of that cotton for the duration of the emergency. H.M.Jr: I know. Inskial: That has not yet been voted on and I think the question as to whether it would be desirable to make a statement of the sort you suggest turns on the question of whether making that statement would be likely to have the result of getting us tied up so we couldn't sell any cotton at all. Well, I think Sam Rayburn answered that to my satisfaction. I don't think the thing is going to be raised. I don't want to get down on this level. I mean, you can satisfy yourself. You can ask Sam. Let me just put it on a le vel which I am thinking of. We, and I say we advisedly, have gone along here for eight years moving heaven and earth to try to get prices up and everybody is trained along those lines just the way the Farm Board was trained one way, to buy. It never was trained to sell. When I went in there, they had nobody that had ever made & sale. We were fortunate enough to cloan up Regraded Unclassified 148 - 6 - in that spring rise of '33 the merchandise that they had accumulated over years. Well, what I am trying to get over here, right or wrong, and it is a complete change of philosophy, and I want you to know I went over this thing twice with the Presi- dent before I made my speech - I mean, once on the whole wheat question, and then he read every word of my speech carefully be- fore I gave it. The point is that we have got to this point here, that we have gotten entirely new conditions which we have never had before since Mr. Roosevelt has been President, and I believe, again, right or wrong, that the Administration has got to change its whole philosophy about trying to put prices up. Now, I am willing to meet you fellows half- way, because I have to, not because I believe in it, that on this eighty-five per cent parity, based on this statement that the President made - I want to be perfectly frank with you. I don't believe in it, but the President made it, and I will stand on what he wrote, as his hired man, but I am going to fight like hell that when these things reach parity - and the Presi- dent went all over this wheat thing twice, not once but twice, and I drew his particular attention to the statement he signed on May 31 on the seven hundred fifty thousand bushels. So he understood it. Ezekiel: But Mr. Morgenthau -- H.M.Jp: Just a minute. As I say, we can't. And Agriculture - I mean, until the President tells me - calls me off, just so that you understand me - as soon as he simply says, "Well, Henry, you are wrong and I am not going along with you," all right, but this Regraded Unclassified 149 - 7 - thing - this whole attitude of the Govern- ment of driving the prices up, and the statement those seven Senators made about two dollar wheat and thirty cent cotton, and the President said at Cabinet - he told Talmadge of Georgia two or three years ago as long as he is President he will never permit cotton to go up like that. We are talking about a method of thinking, you see, Mr. Hill, and not - I don't give a damn - I am interested in the whole price inflation business, what it is going to do to & hundred and thirty million people, and what it is going to do to me with my responsibility to raise the money. That is what I am interested in. That is my responsibility, to sell bonds. If we have got inflation I cen't sell bonds. So the immediate thing, whether this will be just a short run - Sam Rayburn can give you and me the answer in one minute. I understand from Sam there isn't 8. chance for that bill so it doesn't bother me. Hill: I am not bothered about that particularly, either. H.M.Jr: But I want you to know where I stand and I want you to know that I went over this thing with the President twice. He read the thing very, very carefully. He knows about the wheat, he knows about the thing that he signed. I pointed out to him very carefully the whole thing, and he told me to go ahead, you see. Hill: Now, on the -- H.M.Jr: So -- Hill: Go ahead, excuse me. H.M.JP: No, I want to listen, but I wanted you to know where I stood. 150 . 8 - Hills Of course, as you said there, we have been trying to reach parity ever since the Administration has been in. Te are right around those figures now. It fluctuates up and down. Reekiel, Only for cotton, not for wheat. Hill: I am talking about cotton only. It is fluctuating up and down. Perhaps it was stimulated to that point by speculation, which may or may not be caused by the atti- tude of the Senators over here who were talking about the twenty-five and thirty cent cotton. Now, to go to selling, to try to put down the market, there is another big crop coming on - not a big crop, but there is a crop being gathered at this time, ten million bales, and about a million bales have been gathered up until now. If we went to selling it, it would just simply mean that more of that cotton would go in to the loan instead of being sold. That eighty-five per cent loan gives them a protection there that naturally 8 man is not going to follow down very far. Now, the price of cloth is not affected instantly by the fluctuations of cotton, of course. For instance, this shirt that I am wearing here only has about eight cents' worth of cotton in it. I have heard all that argument. Hill: It costs me twice as much to launder it once as the farmer got out of it. I am just saying that to show that a small fluc- tuation doesn't affect the producer - I mean the consumer of the cotton goods. Regraded Unclassified 151 - 9 - H.M.Jr: But you see, Mr. Hill, it is this thing Hill: We go along with you on not wanting these prices to go up. H.M.Jr: The thing that I am trying to get the President to say publicly, you see - he has made his statement on eighty-five per cent - that anything above that he is going to direct you fellows to sell, you see. Hill: Above eighty-five per cent of parity? H.M.Jr: That is his statement. Shields: He hasn't made that statement. Haas: Parity. Hill: Above parity, wasn't it? Haas: Parity he had in mind for selling, but the loan is eighty-five. H.M.Jr: What is that short statement he said that I keep referring to? Haas: He said not above parity. H.M.Jr: Not above parity. Whatever that statement is. Have you got that statement? Shields: The statement said, "We shall not take any action which shall endanger our parity objective." I think that is almost the words. H.M.Jr: Most likely it was written in your shop, so you know. You may have written it. Shields: That is about what it says. Ezekiel: Mr. Secretary, may I make one suggestion. I think in your discussion you have not taken - 10 - 152 much recognition of the fact that the Depart- ment is now engaged and has been for the last six months, in launching a very large program for the expansion of production of all the things that more is needed of. We are carrying on expansion five, ten, fifteen per cent of anything that is short today. H.M.Jr: Next season's crops. Ezekiel: Already this year we have gotten expansions of around eight or ten per cent of the impor- tant products, milk and eggs and beef, and 30 on. H.M.Jr: Which I think is swell. Ezekiel: Under guarantee to farmers if they made that expansion their prices would be protected. H.M.Jr: I think that that is swell. Ezekiel: That is the major job we are carrying on. Hill: That is one of the things that we don't want to tear down the confidence in the people. We are having to tell them that we are going to protect these prices up to a cer- tain point in order to get them to make this expansion, which in turn keeps the price from going out of reach. Now, with our lease-lend buying, we would soon run the people out of milk and eggs and cheese - not run them out entirely, but we would take so much off the market the people would have to pay a tremendous price. H.M.Jr: But Mr. Hill, how can this Administration defend the fact that here we are, we are following exactly the same pattern of the last war, and if this thing continues, we are going to have - I mean, all the same mis- takes we made last time, but all of them. Doaradod 153 - 11 - HIll: Well, we hope not, H.M.Jr: Well, but I mean-- Hill: Of course we have got to produce this food. The people are eating a lot more than they have heretofore. They have the money to buy it with. H.M.Jr: Absolutely. Hill: And it. we don't want it to get so they can't buy H.M.Jr: Well-- Hill: But if We don't give them enough insurance here on price, they will not produce and we have the demand. H.M.Jr: Now you see, one thing that I believe in heartily in Mr. Wallace's policy that I laid down was this ever normal granary. Now, if you keep your damnsix million bales and don't sell and at least make a gesture on the thing, you see, and make - and again, I go back to saying something about when the thing goes above parity or seventy-eight point five percent, whatever he said in this statement, you see - I mean, as long as I stick by what he says, you fellows can't have very much fight with me. Hill: We are not wanting to fight with you at all. K.M.Jr: But the point is, unless he or Mr. Wickard says something on this thing, which he hasn't - now, Claude Wickard told me, SO we understand, he was delighted when I made the statement and came out publicly. I was the first one in the Administration to say that I - I didn't mean to make a bad pun - that it was wicked to try to freeze that cotton, and he thanked me and Regraded Unclassified - 12 - 154 called me up and said, "That is swell, Henry." Then he came along and followed the thing up. And he was delighted becaused he said I could do it better than he could. I haven't got any agricultural legislation pending. Now, Shields? this thing here, what does it say, Mr. Shields: That is the one in connection - that has to do with the eighty-five percent loan in which he says that he wants farmers to get parity but not more than parity. Of course, the pertinent statement is the one in connection with H.R. 5300 which deals directly with the question of release. H.M.Jr: The point is, can't we get together 80 that we are all working for the same man and - why can't we get together to make this statement here effective? Shields: We would be delighted. We would like to cooperate more before things are done. H.M.Jr: Well, that is all right, I will ake that. (Laughter) I will take that, but also for my own record, the President said to me, "How does Claude Wickard feel about this?" I said, "I don't know, Mr. President," and he said, "Well, I think he would be all right." And I said, "Well, I haven't talked to him. Do you want me to show this speech to anybody?" And he says, "No, it is not necessary." So on that basis, I went ahead, but if I - if Wickard had been at Cabinet, which he wasn't, I had intended to talk to him. Ezekiel: He was out in the field on this production program. 155 - 13 - H.M.Jr: I looked for him at Cabinet and he wasn't, and I only showed the President my - my time table was that morning. I saw the President that morning. I expected to see Wickard at Cabinet, and I would have talked to him. I don't mind - you are right, but I had hoped to see him. Shields: You see, the timing was right at the time we were holding these meetings asking farmers to come along and produce these needed foods for lease-lend. H.M.Jr: Well, I thought I cleared it, and I had expected to see him in Cabinet. If I have caused you any embarrassment-- Hill: Oh, no, that part-- H.M.Jr: I am sorry. Hill: That is all right, don't think about that. H.M.Jr: I did, after all, I did expect-- Hill: Those things you can't always-- H.M.Jr: I want you to know, I don't think you knew that I went over this thing very, very carefully, but that is water over the dam, and I will be more careful next time. Hill: But we were just trying to explain our position and not-- H.M.Jr: That is all right. I am human. Hill: We were just trying to show you the position we are in. 156 - 14 - Now, we have got these regional meetings, the Secretary is out himself making speeches. He speaks in Chicago tomorrow, I believe, and Salt Lake City yesterday, and New York in a few days. We are asking these people to in- crease this in order that We not be short, which would sure bring the price up. We go along with you on your theory of not having these prices running away with themselves, but cotton is the only thing that has reached parity, and it is dropping back up and down. Some days it is-- H.M.Jr: Well, will you do this? Can we get together on this? Can't we take this statement, which I don't suppose there is one person in ten thousand off the farm that knows about it, you see, and get the President to take this state- ment, or Wickard, and say something - now here is cotton that is wobbling just over and above the line, and explain in detail what we are going to do, you see. Shields: Well, I would like to say a little about that. H.M.Jr: So that the consumer can understand what this is about. Shields: I would like to say a little bit about the legal situation here. H.M.Jr: Are you a lawyer? Shields: Yes, sir. H.M.Jr: I have got two lawyers here, I am all right. Shields: Yes, I know you have. H.M.Jr: Want to send for another lawyer? Shields: Our laws are all to obtain parity objective, 157 - 15 - and, as I understand it, the price control situation recognizes parity as a fair figure and possibly a little higher occasionally for agricultural prices. Now, our prices are not at parity except some of those products that we vitally need for lease-lend. Those products in which we have surpluses, notably cotton and wheat - but cotton had never been to parity until about the day you made your speech. It was the first time in ten years. Now, our situation was to rush in and knock down the price below parity the first time it reached there in ten years - hardly seemed in line with our parity objective. Now, there is this financial consideration. That agreement which you have in front of you which reports the legislative agreement in connection with that law provides that the loan rate plus the ACP payment, conservation payment, plus the parity payment, shall not equal a hundred percent parity. Now, if the price of our commodities ranges about nine percent above eighty-five percent of parity, we have to use the parity funds which were appropriated, two hundred twelve million dollars. If the price averages about parity, the parity money of two hundred twelve million dollars is reverted - reverts to the Treasury-- H.M.Jr: Well-- Shields: is one financial consideration. H.M.Jr: Yes, but again the two hundred twelve is so insignificant compared to this whole question of inflation and what the Government in its 16 - 158 whole buying program has to pay, increase due to inflation, that I would cheerfully chip in the two twelve if I could get together with you fellows and with Leon Henderson, who, I understand, has been talking about the cotton thing and has gotten no where with Agriculture. If Henderson's group and Nelson and the fellow that is doing the purchasing, MacKeachie and ourselves, if we could all get together 80 We could see the thing and present something to the President that we all had our names to, because I think the home front is inflation and it is very easy to get licked and we are getting lioked PA tht now on it. Shields: Of course the price has only been above parity in the case of cotton three or four days out of ten years, and it is only about eighty-five percent of parity in the case of wheat, and we do have a certain timing problem. We were concerned about whether we could sustain this veto, and we are interested in this price bill and in seeing that it is supported. Our whole question is not one of difference of opinion but one of difference of timing. We have had some experience with the cotton bloc, and we think this is no time when farmers are marketing their crops. It might be a little better to wait until the processors and speculators get the crop before we rush in and take any rash action. If parity is objected to, these crops haven't been at parity except for two or three days in the case of cotton, and I can't see that two or three days should have us terribly startled. H.M.Jr: Well, Mr. Shields, you and I just don't see eye to eye in this, because I think it isn't 159 - 17 - a matter of date, it is a matter of hours. This thing is just growing and growing and growing, and here you people have got the President to sign this thing on the Canadian wheat quota only allowing seven hundred fifty thousand bushels, and I got-- Ezekiel: Mr. Morgenthau-- H.M.Jr: May I finish? Hill: Wait a minute. H.M.Jr: I have got to be convinced, which I am not, and I will wait until Wickard gets back, that you people after eight years have changed your philosophy over there, that you are not still trying to get prices up. Hill: Well, of course we haven't changed philosophy about getting it up to parity because that is what the law set for us. H.M.Jr: How about beyond that, Mr. Hill? Hill: We have never implicated that prices should go running away. Now, on wheat, if I might speak on that for a moment, I am glad you mentioned - I won't explain there the reason we are here. We didn't want you to feel like we were just sulking in our tent over there, and Claude will be back in a day or two. I am not right sure when he gets back. I think he speaks in Chicago tomorrow, and then he is driving back from there sometime the latter part of the week. He will be here. H.M.Jr: I would love to see him just as soon as he gets back. Hill: I did want to call on you, though, and let you know that we weren't just sulking. Regraded Unclassified 160 - 18 - On this wheat business, now of course wheat is not up to parity. It is fluctuating around eighty-five percent of parity. One day it is up and the next day it is down. We still have quite a bit of wheat we haven't been able to get in the elevators on account of not having the space. We have two years' supply of wheat on hand today. We have the greatest carryover or will have at the end of this year, two hundred fifty million more than we had at the beginning of this year. Carryover is what we refer to as the amount that is left after we have used up that year's supply. Now, to turn in wheat from Canada, more than we have, would simply complicate our housing proposition or our storage proposition on the wheat and would put that much more American wheat in the loan. It wouldn't affect the price because it is right around the loan value, and you would just simply put that much more wheat in the loan. H.M.Jr: But if they-- Hill: Which, of course, wouldn't be a serious matter if we had plenty of room, and they are building room. We have built more storage this year than we ever built before. We still have some wheat on the ground in the West where they have never had a chance to get it in an elevator. The terminal elevators can't take it. Canada has some wheat stored in this country which we have been trying to get them to take out and send to England so we can have that space, and I just wanted to explain those problems that we are up against on it. The most acute is this program that we have 161 - 19 - on now trying to get some more food produced, and we are dealing with the same people that we are going to have to say, "Now, you don't get to parity." Of course, we can't say that to them on account of our law. We can say that - and they all agree. We have preached to them continually that the worst possible thing for agriculture was to have inflation of prices, of agricultural products, and I think we have made good headway with them because we have also - I have a letter on my desk right now where & man says, "We realize that the worse thing that could possibly happen to us would be too high prices for agricultural products." They feel that way about it. I don't think we will have much difficulty in holding these prices down around parity. I don't think we will have much opposition. Now, on the price of eggs and milk and cheese and those things, we have no surplus of them. Europe is crying for it, the babies don't have it, and we are trying to ship it for them, and we are using every effort so we can have it to send and for our people themselves to use. I have a little statement - do you have that statement? I appreciate the spirit and if you just - Claude and I never had any trouble. Hill: Well, he is very fond of you, and I didn't come over to try to convince you of anything but-- h.M.Jr: That is all right. I am -lad you came. Hill: I just came for a visit-- I firm glad you came. Regraded Unclassified 162 - 20 - Hill: Now, here is a statement there, just a con- fidential statement for discussion pur- poses. H.M.Jr: Well, now, could I take this home and read it? Hill: Oh, yes. It is just something I thought wouldn't thing. be published at this time or any- H.M.Jr: Oh, no. I would like to read this if I could. Hill: Just for the purposes of discussion. The growers have just voted a very drastic curtailment of their wheat acreage on account of over supply and are hollering about having done that, and we have collected a lot of penalties. Now to turn in some more on top of them when we find them over producing will be another thing that wouldn't make life very pleasant for us. H.M.Jr: Well, we don't expect that. Well, let me read this thing. I appreciate the spirit in which you have come over. Tell Claude Wickard that just as soon as he comes back I would like very much to sit down and spend an evening with him. Hill: I am sure he will be glad to. H.M.Jr: And see if we can get together. Hill: I haven't been able to talk to Mr. Wickard. He has been out in the mountains. 1G18 September 14, 1941 Confidential for I This measrandum sumarises the existing wheat and setten situations, and the policy this Department has been fellowing in dealing with the produc- tion and prices of farm products. These facts will min clear why W find ourselves unable to concur in the recomendation to the President that ha initiate stops to raise the Canadian quota, and, in the language of foore- tary Morgenthau's speech, "permit the entry of Canadian wheat in larger volume." Attached are copies of Secretary Wickard's press releases on April 6 and September 8. These releases cover the Department's present policy toward fare prices and preduction, which is are of increasing the production and supplies as rapidly as possible of all the products needed to neet the expanding domestic market and the lease-land requirements abroad. We have already secured expansions in production for 1941 ranging from 5 to 12% above the 1986-40 average for milk, hoge, and chickens. Our goals for 1942 call for further expensions in these products and beef ranging from 7 to 12% above the 1941 levels. This represents expension in output at as rapid I rate 4d the technological limits 05 crop and livestock production mis possible. to believe that - can get much further by expended production, even if that involves paying farmers reasonable prices to increase production, rather than by attempting to use all the existing supplies to hold dem prices, if that involves discouraging producers from making the expensions in production which the demands require. In wheat and cotten the situation is greatly different. the facts for these crops are summarised in Exhibit A. Our whent carryover rose 100 william bushels last season, and will rise nearly 500 more this season, to as all- time record high of nearly 700 million bushels. All grain storage eyes is filled to overflowing, and - wheat is being stared piled en the ground. Our fareers are saking efforts to reduce their wheat output to the present limited aarimts. They voted a marketing quota as themselves last spring, under which they are paying a penalty of 49 cents & bushel for we- quots marketings, and the tentative whent goals for next year call for a further reduction of 8 to 15 million acros below the present respond Regraded Unclassified 164 thest prices have been reaning at about s/4 of party, but recently have advanced to almost the 88% of parity leval decreed by Congress is fixing the DEF loan rate last May. with great expess supplies 45 hand, there is little likeliheed that wheat prices will advance further sew that they have reached this winimm floor established by direction. Iven at this price, the wheat farmer receives saly 1-1/4 osnte from a peand loaf of brend retailing at 8 to 10 casts. Last March the C.O.C. controlled through loan or emerchip nearly 10-1/2 million bales of cotten. This has DMV been reduced to 6-1/4 milliem bales, owing to farmers withdrawing 4 million bales for sale, plus - shipments of government-owned sotten to England. Meanwhile cotton prices have advanced from the very depressed levels of recent years to just about the parity lovel, standing at 96% of parity a September 10. The 1941 crop, new estimated at about 10.7 million bales, is slightly larger than our estimated domestic consumption for 1941-42. Almost all of this year's crop will be available for immediate use, as only very mall quantities are coming under the 1941 lean-enly six thousand bales up to September e, 1941, out of half & million bales ginned. Farmers have DOW withdrawn and sold almost all of their old loan cotton, and loss than 200,000 bales are still being left under the loan. Any further addition to the supply will have to 00mg out of the 6-1/8 million bales of government-owned stocks. Sales of these stocks, however, are limited by law to not more than 500,000 bales in any case month, or 1-1/2 million bales each calendar year. Regraded Unclassified Rafeibit A. 165 Sumary of Whet and Getten Situation - whent (a) stocks. Our eneryover of old wheat at the end of the coloco (July 1) averaged about 125 millice bushels prior to the 1989 depression. Recent and prospective carryovers are M follows: July 1, 1940 282 million bushels July 1, 1941 886 million bushels July 1, 1942 642 million bushels The prospective large increase is carryover reflects the heavy yield of this year and the virtually complete elimination of export markets. of the June $0 carryover, the United States Government was earrying 6 considerable portien, as follows: Commodity Credit Corporation Holdings (million bushels) June so, 1940 June 30, 1941 Net Change Thest owned 1.6 169.2 +167.6 Wheat under loan to farmare 10.3 58.4 + 28.1 Total wheat interest 11.9 207.6 +195.7 Since June 30, 1940, government wheat holdings have changed as follows: (willion bushels) June so, 1941 Aug. 51, 1941 Not Change Whest owned 169.2 174 + 4.8 Wheat under loan 88.4 180 +92.6 Total wheat interest 207.5 106 496.4 L-The Secretary of the Treasury 166 8th the asrket below leas rates during much of this period, farmore have continued to put large quantities of the current erop under the loan. (b) Prices. Whet pricess during recent months have renged as follows: Para price Parity price Farm price in percent of parity June 85.1 114.9 72 July 85.6 117.6 78 August 88.5 119.5 74 The market price for September 10 corresponded to & fare price of 88 percent of parity. Prices at the present time are at about the - level. In May Congress passed b gislation setting BS percent of parity as the mandatory level. Loans on 1941 wheat accordingly are being made at that figure, an average loan rate of 98 cents at the fars. Recent wheat prices have been ruming at just about market levels corres- ponding to the loan rate. Up to August 31, 116.7 million bushels of 1941 wheat had been placed under loan. During the first two weke of September, an additional 15 million busbele ware placed under lean. (o) Storage situation. The hugs stocks of wheat and other grain have placed exceptional pressure on farm and comercial storage facilities. For agethe we have been organising the movement of grain so as to clear storage space and make it possible to 2019 the crop. Despite these efforts the current crop year is marked by probably the greatest pressure - grain storage capacity ever experienced is this country. About every practicable commercial facility is in full use. Much temporary capacity has been made available on far a and at comercial storage points. And still it has been necessary to pile grain an the ground in scase areas of heaviest production, and to nove - grain stocks out of normal market pos tim. 1941 has been marked by excessive pressure on storage facilities, some congestion of markets, and extra handling and inadequate protection of a substantial part of the grain supply. (d) Acreage and production. Despite reduced acreages, whet production has been far outruming existing demands. Consequently, wheat farmers by recent referendum voted a marketing quota on themselves. In addition to loss of benefit payments, over-quota production is now penalised by A us of 49 cente a bushel on marketings by farmers in excess of their quota. The field call for 4 reduction in 1948 to so - SS millies acres, in contrast goals for 1942, now being discussed with farwars at regional meetings in the to 68-1/2 million this year, and the average of 72 million over 1934 to 1940. Regraded Unclassified 2-2/20 Secretary of the Treasury 167 The wheat situation is characterized by glutted terminals, travendous supplies - hand, prices supported at the states levels fixed by the loan, & full extra year's reserve supply an hand, and farmers attempting to got their production down to the present restricted outlots. Cotton (m) stocks. The greatly increased domestic consumption and the markedly reduced acreage are saking it poss ble to reduce our storage holdings of cotton, despite the almost vistual disappearance of the export market except for lease-lend shipments. Carryovers at the start of the season have PAR 4d follows: Total United States Cetton Stocks (williens of below) Aug. 1, 1940 10.6 Aug. 1, 1941 12.2 Aug. 1, 1942 11.75 1/ Estimated Stocks in government hands are being reduced as rapidly as conditions permit. Farmers are withdrawing their old cetten from the loan and sell- Lag it very repidly, as shown by the following data: Commodity Credit Holdings (thousend bales) April 1, 1941 June so, 1941 Aug. 51, 1941 Loan cotten 4,230 1,162 285 Owned cotton 0.171 6,118 6,126 All cotton 10,401 7,278 6,409 In addition, another 195,000 bales was withdrawn from loan between Aug. 51 and Sept. 8, making nearly & million bales released from government lien since June so, and 4 million below released or withdrawn since April 1, 1941. Meanwhile, movement of new-crop cotton into the new loan has been uniqually mall, leans being reported - only 5,580 bales of 1941 cotton through Sept. 6, 1941. (b) Prices. The hugs reserve stock has kept ootten prices depressed the below previous average levels for may years. Following the action of Congress in setting 85 percent at parity as the loan level, prions advanced sharply, as shown by the following figures. Regraded Unclassified 168 4 The Secretary of the Treasury Tara Price Farity Price Farm price in percent of parity July 1939 8.77 15.62 56 July 1940 9.54 15.78 61 1941 January 9.45 15.87 80 April 10.45 16.00 65 May 11.68 16.12 75 June 12.81 16.37 78 July 14.32 16.49 87 August 15.33 16.74 92 Sept. 10 16.82 17.48 96 1/ Para price estimated from market price. Market prices for spot cotton and the October future during last week corresponded to farm prices ranging from parity to at most one-half & cent over parity. Regraded Unclassified TREASURY DEPARTMENT 169 INTER OFFICE COMMUNICATION DATE SEP 16 1941 Secretary Morgenthau TO FROM Mr. Foley Robert H. Shields, Chief of the Agricultural Adjustment Division of the Department of Agriculture, advised us at 5:00 p.m. on September 15, 1941, that the Government owned 6,126,000 bales of cotton. On April 1, 1941, it had under loan 4,230,000 bales, which has been reduced to 283,000 bales excluding the 1941 crop. For the current crop the latest figures show 5,580 bales under loan up to and including September 6, 1941. Generally speaking, the cotton is stored relatively close to where it was produced. Some, however, is stored in the New England states, none in the Middle West and some in the Far West. 9.14.76 Regraded Unclassified 170 attachment to meeting w Hype price 9/16 when Hill Engkiel T shoulds from age were present 171 DEPARTMENT OF AGRICULTURE WASHINGTON 1 ) September 16, 1941 Confidential Memorandum for Discussion I This memorandum summarizes the existing wheat and cotton situations, and the policy this Department has been following in dealing with the produc- tion and prices of farm products. These facts will make clear why no find ourselves unable to concur in the recomendation to the President that ha initiate steps to raise the Canadian quota, and, in the language of Secre- tary Morgenthau's speech, "permit the entry of Canadian wheat in larger volume." Attached are copies of Secretary Wickard's press releases on April 8 and September 8. These releases cover the Department's present policy toward fare prices and production, which is one of increasing the production and supplies as rapidly as possible of all the products needed to meet the expanding domestic market and the lease-lend requirements abroad. (fe have already secured expansions in production for 1941 ranging from 5 to 125 above the 1936-40 average for milk, eggs, hogs, and chickens. Our goals for 1242 call for further expansions in these products and beef ranging from 7 to 12% above the 1941 levels. This represents expansion in output at as rapid el rate AS the technological limits on crop and livestock production sake possible. we believe that we can get much further by expanded production, even il that involves paying farmers reasonable prices to increase production, rather than by attempting to use all the existing supplies to hold down prices, 10 that Involves discouraging producers from making the expansions 12. production which the demands require. In wheat and cotton the situation is greatly different. The facts for these crops are summarized in Exhibit h. Our wheat carryover rose 100 million bushels last season, and will rise nearly 300 more this season, to an all- time record high of nearly 700 million bushels, All grain storage space 18 filled to overflowing, and some meat is being stored piled on the ground. Our farmers are making strenuous efforts to reduce their wheat output to the present limited markets. They voted a marketing quota on themselves last spring, under which they are paying a penalty of 49 cents a bushel for wer- Panta marketings, and the tentative wheat goals for next year call for & Arther rediction of a to 13 million scres below the present reduced acreages. Regraded Unclassified 172 Whest prices have been running at about 8/4 of parity, but recently have advanced to almost the 85% of parity level decreed by Congress in fixing the new loan rate last May. With great excess supplies on hand, there is Little likelihood that wheat prices will advance further now that they have reached this minimum floor established by congressional direction. Even at this price, the wheat farmer receives only 1-1/4 cents from a pound loaf of bread retailing at 8 to 10 cents. Last March the C.C.C. controlled through loan or ownership nearly 10-1/2 million bales of cotton. This has now been reduced to 6-1/4 million bales, owing to farmers withdrawing 4 million bales for sale, plus some shipments of government-owned cotton to England. Meanwhile cotton prices have advanced from the very depressed levels of recent years to just about the parity level, standing at 96% of parity on September 10. The 1941 crop, now estimated at about 10.7 million bales, is slightly larger than our estimated domestic consumption for 1941-42. Almost all of this year's crop will be available for immediate use, as only very small quantities are coming under the 1941 loan-only six thousand bales up to September 6, 1941, out of half a million bales ginned. Farmers have now withdrawn and sold almost all of their old loan cotton, and less than 200,000 bales are still being left under the loan. Any further addition to the supply will have to come out of the 6-1/8 million bales of zovernment-owned stocks. Sales of these stocks, however, are limited by Law to not more than 300,000 tales in any one month, or 1-1/2 million bales each calendar year. Regraded Unclassified 173 Exhibit A. Summary of Wheat and Cotton Situation - Wheat (a) Stocks. Our carryover of old wheat at the end of the season (July 1) averaged about 125 million bushels prior to the 1929 depression. Recent and prospective carryovers are as follows: July 1, 1940 282 million bushels July 1, 1941 386 million bushels July 1, 1942 642 million bushels The prospective large increase in carryover reflects the heavy yield of this year and the virtually complete elimination of export markets. Of the June 30 carryover, the United States Government was carrying a. considerable portion, as follows: Commodity Credit Corporation Holdings (million bushels) June 30, 1940 June 30, 1941 Net Change Wheat owned 1.6 169.2 +167.6 Wheat under loan to farmers 10.3 38.4 + 28.1 Total wheat interest 11.9 207.6 +195.7 Since June 30, 1940, government wheat holdings have changed as follows: (million bushels) June 30, 1941 Aug. 31, 1941 Net Change Wheat owned 169.2 174 + 4.8 Wheat under loan 38.4 130 +91.6 Total wheat interest 207.6 304 +96.4 Regraded Unclassified 174 2-The Secretary of the Treasury with the market below loan rates during much of this period, farmers have contimed to put large quantities of the current crop under the loan. (b) Prices. Whest prices during recent months have ranged as follows: Farm price Parity price Farm price in percent of parity June 83.1 114.9 72 July 85.6 117.8 78 August 88.5 119.3 74 The market price for September 10 corresponded to a. farm price of B5 percent of parity. Prices at the present time are at about the shitt level. In May Congress passed le gislation setting 85 percent of parity as the mandatory level. Loans on 1941 wheat accordingly are being made at that figure, an average loan rate of 98 cents at the farm. Recent wheat prices have been ruming at just about market levels corres- ponding to the loan rate. Up to August 31, 116.7 million bushels of 1941 whest had been placed under loan. During the first two weeks of September, an additional 15 million bushels were placed under loan. (c) Storage situation. The huge stocks of wheat and other grain have placed exceptional pressure on farm and commercial storage facilities. For months we have been organizing the movement of grain so as to clear storage space and make it possible to move the crop. Despite these efforts the current crop year is marked by probably the greatest pressure on grain storage capacity ever experienced in this country. About every practicable commercial facility is in full use. Much temporary capacity has been made available on fares and at commercial storage points. And still it has been necessary to pile grain on the ground in some areas of heaviest production, and to move some grain stocks out of normal market posi tion. 1941 has been marked by excessive pressure on storage facilities, some congestion of markets, and extra handling and inadequate protection of a substantial part of the grain supply. (d) Acreage and production. Despite reduced acreages, wheat production has been far outrunning existing demands. Consequently, wheat farmers by recent referendum voted a marketing quota on themselves. In addition to loss of benefit payments, over-quota production is now penalized by a tax of 49 cents a bushel on marketings by farmers in excess of their quota. The goals for 1942, now being discussed with farmers at regional meetings in the field. call for E reduction in 1942 to 50 or 55 million acres, in contrast to 63-1/2 million this year, and the average of 72 million over 1938 to 1940. Regraded Unclassified 175 5-The Secretary of the Treasury The wheat situation is characterized by glutted terminals, tremendous supplies on hand, prices supported at the minimum levels fixed by the loan, a full extra year's reserve supply on hand, and farmers attempting to get their production down to the present restricted outlets. Cotton (a) Stocks. The greatly increased domestic consumption and the markedly reduced acreage are making it possible to reduce our storage holdings of cotton, despite the almost virtual disappearance of the export market except for lease-lend shipments. Carryovers at the start of the season have run as follows: Total United States Cotton Stocks (millions of bales) Aug. 1, 1940 10.6 Aug. 1, 1941 12.2 Aug. 1, 1942 11.75 Estimated Stocks in government hands are being reduced as rapidly as conditions permit. Farmers are withdrawing their old cotton from the loan and sell- ing it very rapidly, as shown by the following data: Commodity Credit Holdings (thousand bales) April 1, 1941 June 30, 1941 Aug. 31, 1941 Loan cotton 4,230 1,162 285 Owned cotton 6,171 6,116 6,126 All cotton 10,401 7,278 6,409 In addition, another 195,000 bales was withdrawn from loan between Aug. 31 and Sept. 8, making nearly a million bales released from government lien since June 30, and 4 million bales released or withdrawn since April 1, 1941. Meanwhile, movement of new-crop cotton into the new loan has been unusually small, loans being reported on only 5,580 bales of 1941 cotton through Sept. 6, 1941. (b) Prices. The huge reserve stock has kept cotton prices depressed far below previous average levels for many years. Following the action of Congress in setting 85 percent of parity as the loan level, prices advanced sharply, as shown by the following figures. Regraded Unclassified 176 4- The Secretary of the Treasury Farm Price Parity Price Farm price in percent of parity July 1939 8.77 15.62 56 July 1940 9.54 15.75 61 1941 January 9.45 15.87 60 April 10.45 16.00 65 May 11.68 16.12 73 June 12.81 16.37 78 July 14.32 16.49 87 August 15.33 16.74 92 Sept. 10 16.82 17.48 96 1/ Farm price estimated from market price. Market prices for spot cotton and the October future during last week corresponded to farm prices ranging from parity to at most one-half a cent over parity. INFORMATION FOR THE PRESS United States Department of Agriculture 177 For September 8, 1941, P. M. Papers Washington. D. C. WICKARD ANNOUNCES PROGRAM TO MEET INCREASED FOOD NEED A farm production campaign for 1942 providing for a complete mobiliza- tion of American agrioulture to adjust production to domestic needs for nation- al defense and to the needs of the nations resisting aggression. was announced today by cretary of Agriculture Claude R. Wickard The campaign will be under the supervision of State and county USDA. defense Boards which are made up of representatives of all Department of Agri- culture agencies in the field. Production goals for 1942 and the part which agriculture will be called upon to play in the defense effort will be discussed with farmers and farm leaders in four regional agricultural defense conferences scheduled for Salt Lake City September 15 and 16, Chicago September 18 and 19, New York City September 24 and 25, and Memphis September 29 and 30. "For the first time in the history of agriculture in this country," said Secretary Wickard, "production goals for all essential farm commodities have been established. They have been established on the basis of a thorough canvass of the needs for improved nutrition in this country and the needs of the nations that still stand between this country and Hitler 'Every farmer in the United States will be contacted by local farmer committeemen under the supervision of USDA Defense Boards and will assist with individual farm plans to determine the extent to which each farm can contribute to agriculture's task in national defense. The adjustment machinery of the National Farm Program will be applied to the whole range of agricultural commodities to assure plenty of the commod- !ties for which there is increased need while continuing to hold in check the production of commodities of which we already have large reserves 524-42 Regraded Unclassified - 2 178 - 3 - "We are not going to repoat the mistakes of the first world ear which a long gories of difficultion for fars people. Through and the machinery of ellicated to be 113, and for 1942, it is expected to be 115. If 1942 production brought the National Form Program fargore can produce what wa need avoid the bad goale are reached it will be the third successive year of record production effects of an over-expanded form plant. The fact that NO are asking for Ensie total production next year would be mly about 2 percent greater than after greatly increased production of sood commodities does not mean that the lid 18 this year. such larger increases occur in the vitamin and mineral-rich livestock off on production of all noncoditive It is just as important to national products for which demand is increasing in this country and which are among the defense and OUP tature national selfare that we hold production of 5086 coa- foods most needed by the British. médition LA check as 1845 YO supplies of others. The British Government expects to need from this country about a fourth The gouis far 1947 VALL for the intest production in the history or of its supply of animal protein foods or the equivalent of enough to feed 10 agriculture but se are nét going 10 have to plow up the hills and the cilliou people. Total British needs for United States farm products are plaim 10 OF 11 Re have indequate FRACTVOS of feed graina For increased expected to apount to about 6 to 8 percent of total United States fare produc- production of !ivestock products and 0 will not be necessary materially le 11gm. Total exports, including Lease-Lend shipments, may amount to AB much ne increase total crop acreage next year 8 to 10 percent of total production. the production in gonerni 13 an good balance but greatly increased For the fiscal year 1942-43 it in expected that exports say require the supplien or some will be needed. In this emergency I have found is product of 25 to 27.5 million aores of cropland. which is about the sape as the necessary to accourage Ore expansion of the production of hoge, egga, avaporated average for the period 1936-37 through 1940-41 For the fiscal year 1940-41 ailk dry -Bi= silk abriese and chickens and accordingly I have today made a reports required only about half as such acrenge as is expected for the fiscal formal public annonne==ent EXAST the Department of Agriculture will support year 1942-43. prices for those commodition until Docember 31, 1942 ni not less than 85 percent of partig Increases 115 the production of other crops in 1942 are also desir- The following imbie compares 1942 goals with estimated production in 1941 able as indinated by the goals Other proclassions may be issued from time to and with average production for the 1936-40 period: Time if It is found that special encouragement Is needed to obtain adequate or desired supplies, or supplies shioh are considerably in excess of what fargere eight otherwise be expected to produce This public announcement 16 issued under the recent. Congressional authorization consained in the Stengall amendagnt to the not of July 1, 1941 extending the Life of the Commodity Credit Corporation Under the terms of that act, shanover the Decretary of Agriculture finds it necessary during the existing energency to encourage the expansion of production of any non-basic agricultural connedity the Department 16 required. within the limit of the funds available to support a price for the producers at not less than as per- cent of parity. "Of all Ure hn commodities of which increases are needed the goat urgent need is for sere silk We need to consune more dairy products in this country for improved health and strength and the British will néed tremendous quantities of cheese. ovaporated milk. and dried skin silk To reach the pro- duction goals for 1942 the greatest effort will de required in datrying In general the production goale reflect auggested or expected production substantially larger than in recent years for livestock products with adequate supplies of foed grains to supply increased livestock numbers. expanded produc- tion of cil-producing crops and = continuation of about the current level of production or less of cotton. -nont. and tobacco Codis for 1943 provide for à total fars production 15 persent higher than the 1924-29 average Uring 100 as the indus of farm production tor de 524-42-3 1924-29 period. the averago for the 1936-40 period was 105 For 1841 21 LE 524-42-2 Unclassified - 5 - 179 - 4 Unit 1936 - 40 Est. 1941 1942 goal Community Average or expecte 1936 - 40 Est. 1941 1942 goal productio Commodity Unit Average or expected production Sugar, Rice and Beans Milk and ERRO 116,809,000,000 125,000,000,000 Aores Cane 285,000 Lbs. 106,640,000.000 No acreage Sugar Milk Beet 800,000 limit excepted 3,400,000.000 3,676,000,000 4,000,000,000 Eggs Doz. = 3,533,000 3,436,000 Same as 1941 Rye (harvested) (harvested) Meat Animale Hogo Number " Slaughtered 71,000,000 79,300.000 1,047,000 -,186,000 1,200,000 63,196,000 Rice n 2,220,000 Same no 1941 24,850,000 25,100,000 25,000.00 1,880,000 Dry beans Beef & Veal n 644,000,000 680,000,000 750,000.000 Fotatoes and Sweet Potatoes Chickens 21,902,000 22,400.000 22,900,000 Acres 3,132,000 2,988,000 Abt. . 3,060,000 T Potatoes Lasb & Mutton of Sweet Potatoes 836,000 843,000 IF 850,000 Feed Grains and Hoy Corn Aores 93,980,000 87,363,000 67 1/2 to 90 all Vegetables " 36,992,000 38,197,000 Abt. 40,000.000 Date " Barley 12,881,000 14,813,000 14 1/4 to 14 (< Commercial Vegetables sil, Fresh use Acres 1.824,000 1,843,000 1,935,000 91 to 91 all. if 1,319,000 1,487,000 1,500,000 9,303,000 9,285,000 Processed Grain surghuma " n All hay 69,025,000 73,933,000 74 to 75 ail, Fara gardens No. 4,431,000 Abt. 5,760,000 Fruits Cotton, Whent and Tobacco Cotton 27,858,000 23,519,000 22 to 24 all Acres Citrus fruit Tons 4,800,000 5,200,000 (Since fruit pro- III 72,049,000 60 to 55 all (duction cannot Wheat 63,503,000 Deciduous (be quickly in- Fresh use Tons 9,000,000 1/ 9,600,000 (creased omphasis Tobacco: III 747,700 Abt. 762,000 Canned Casos 28,300,000 33,000,000 (will be on bette Flue-cured 955,600 Dried Tons 550,000 500.000 (distribution and a 358,000 (prevention of Burley II 388,000 363,900 (waste, Other domestic # 297,200 264,900 " 247,000 Forest Products Dil Cropa Peanuts threshed Aores 1,908,000 1,600,000 for nota Lumber Bd. ft. 4 24,800,000,000 31,500,000,000 32,000,000,000 1,736,000 1,900.000 for all 2/ Pulp wood Cords 16,000.000 15,800,000 9,300.000 Soybeana for beans E 3,433,000 5,550,000 7,000,000 A11 other wood Cu, ft. 5.300.000,000 5,850,000,000 6,100,000.000 Flaxseed E 1,696,000 3,225,000 Same as 1941 Naval stores Turpentine Bbls. 452,000 285,000 400.000 2/ In addition to peanut acreage allotments. V Total fresh production for all uses, except that non-commercial apples 524-42-4 are not included. 524-42-5 ---P-0--- Regraded Unclassified INFORMATION FOR THE PRESS United States Department of Agriculture 180 G Release - Immediate Mashington, D.C., April 3. 1941. U.S.D.A. ANNOUNCES PROGRAM TO INCREASE SUPPLIES or SOME FOODS The Department of Agriculture announced today an expansion of the Ever- Normal Granary Program into a food program designed to assure ample supplies for the United States, Great Britain and other nations resisting aggression. Under the expanded program. the production of pork, dairy products, "66" and poultry will be stimulated through the support of prices over the period ending June 30, 1943, at levels remunerative to producers. Other phases of the program include: 1. Continuation of the existing com loan program for 1941 and 1942. 2. Continuation of the policy of making loan corn available to producers at the loan rate plus certain carrying charges. 3. Allowing producers in the commercial corn producing area to increase corn acreage up to their usual acrenge. These producers would not receive corn payments. 4. No corn marketing quotas for the 1941 crop. Assuming continuation of existing price relationships and taking seasonal price variations into account, the Department will make purchases in the open market to support long term prices (Chidago basis) at levols approximately as follows: Commodity Hoge cwt. $9000 Dairy products( basis of butter 1b.) 31 Chickens 1b. .15 Egga dos. .22 1992-41 Unclassified 181 3 a - "It 16 time, # Secretary Wickard said, "to begin converting our ever-normal It vas pointed out that these prices would be subject to the customary granary supplies into ever-normal food supplies. commercial differentials for market grades and qualities. rVe have conducted intensive studies of the needa of the United States, The Government's purchases in the open market will be used to accurulate England, end other democracies. We believe we have 5 sufficient supply of most reserve supplies of food. These supplies can be used for transfer to the British agricultural consodities. Lorger supplies of some pork, dairy and poultry pro- and other countrice under the provisione of the Lond-Loase Act; for release boon ducts will be needed, however, in the United States, in the British Isles and in the barket in case of unwarranted speculative price increases: to mest requests Derope for several years, irrespective of the duration of the war. In Europe from the Red Cross for shipment to war refugee areas and for direct distribution foundation herds and flocks are being rapidly depleted. Even in normal times, through school lunch programs or through state welfare departments to public aid many Americans need more of these protective food products. Fecause of the Iver- fumilies, arrangements are also being sade for a full and complete coordination Normal Granary, feed supplies are abundant and farmers will only be too glad to of these purchases with those being made for our armed forces. increase their production of pork, dairy products. poultry and "" If prices Under the program, farmers will be urged to: (a) increase pork production sake 11 profitable to grow more of these foods. Consumers should realise that by feeding bage to heavier weights and by increasing ferrowing of pige: (b) in- fair returne to farmers for the food products mentioned are the best assurance, crease dairy production by feeding COME Dore grain and by silking more cowe: (o) not only of emple supplies, but, in the long run, of fair prices to consumers. encourage additional production of poultry by increasing the size of flocks. "This ever-normal food supply program will, we feel, stimulate sufficient Although producere in the commercial corn areas will not receive corn Day- increases in production to insure that food supplies will be adequate for all mente or be eligible for corn leans if they plant up to their usual acrease, there cedda bere and abroad. Consequently, there should be no danger of run-away markets will be no reduction in other paymente if the usual acreage of corn is not exceeds. for any of these food products. Should unwarranted speculation drive prices up to The Agricultural Adjustment Act of 1938 provides that the Secretary of unduly high levels at any time, the supplies in the hands of the Government will Agriculture may remove operation of marketing quotam in the case of national be released to atabilize prices and maintain then at reasonable levels. Under the emergency, or because of 6 material increase in export demand. "Obviously," Secretary of Agriculture Claude R. Vickard said, "the compare" ever-nornal food program, consumers will be protected and farmers will benefit tively few producere in commercial corn areas who wish to plant up to their usual by seiling more products et fairer prices than those that have prevailed during acreage of corn in order to have feed for increased dairy, poultry and livestock the past few years." production will vish, and should have at this time, assurances that there will The Secretary said the plan to in rease the production of food emphasized be no corn marketing quotas on the 1941 aron, Because of the ample feed supplies that national farm programs are adjustment programs in avery sense of the word. 1992-41-3 on hand in the country, however, moet producers should plant within their corn allotments. 199°-41-2 Regraded Unclassified 182 5 - "Since these programs began, we have pointed out that they could be used "Wheat can almost immediately be converted into bread and other foods to increase production," Secretary Wickard said, *and that farmers would like but substantial increases in meat supplies must be planned in advance. Generally nothing better than sn opportunity to prove that fact. speaking, the supply situation of wheat Le the situation of cotton, tobacco and "Furthermore, the soil conservation that has taken place during the past some minor commodities and the Department plans to do what it can to prevent ad- eight years has put farmers in & position to produce more and to produce it ditions to burdensome surpluses of these crops. without the soil destruction that took place during the first World Var. "Agriculture is perhaps better prepared than any other Industry to con- "I do not want this food plan to be misunderstood. This action does not tribute fully to national defense. Through national programs for agriculture, sean that ve should scrap our farm programs and rush out to produce more of every farmers have the machinery to produce abundantly and efficiently. Given reason- farm commodity without regard for our soil, or what this country and the other able returns on their products, farmérs will continue to produce abundantly at democracies will need. To do this would be to repeat the mistakes of the first efficiently." war and would injure everyone concerned. "This is not the time to vaste soil fertility, and farmers' efforts by producing without regard to actual requirements. It is only common sense to produce more of the commodities we need and to hold down on production of the commodities ve don't need and aren't likely to need. "For example, we are proceeding with plans for a marketing quota referen- dum on wheat May 31. The world carryover of wheat on July 1, 1941 is expected to be around the record carryover on July 1, 1940 of one billion, four hundred million bushels. The carryover in the United States is expected to be 380 million bushels, over 150 million bushels more than the average for the 10-year period 1930-1939, which in turn was higher than the previous 10-year average. For various reasons, England isn't taking much of our wheat and continental Europe is almost completely cut off as a market. For the protection of growers, ve need to take steps that will reduce the production of wheat just as we need to increase the L production of pork, dairy products, and some other foods. 1992-41-5 1992-41-4 Regraded Unclassified - 6 - STATEMENT OF COMMISSIONERS HENDERSON AND ELLIOTT - Supplemonting Secretary Mickard's statement today N.D.A.C. Commissioners Leon Henderson and Harriet Elliott said that the new food program had been worked out after consultation with their offices and that it had their approval AS a price and supply stabilization measure. "This program," they said, "contemplates moderate price increases for cer- tain commodities over the two-year period which will cover the costa of additional production required during the coming year. At the same tine it should forcetall more extreme price advances later on by insuring consumers of adequato supplies, "The prices set forth in Secretary Vickard's statement are an assurance ts consumers as well ns producers. Our offices have arrunged to keep in close touch with the Department of Agriculture at all stages in this program and to advise with it on purchase and sale operations 83 these affect prices. In the event of unwarranted or speculative advances NO will not hositate to Ask the liquidation of supplies to maintain price stability. At the same time we inkend to watch pro- cessors' and distributors! margins to nake certain that there are no increases it these spreads as EL consequence of the program. "It is particularly important that consumers and the government be given the benefit of current prices on stocks now held by processors and distributors and which were acquired at prices below those which will be maintained henceforth." -1-P- 1992-41-6 Regraded Unclassified 9/16/41- Dr. White as possible people whom These names were suggested by 183 HM, Jr could use as assistants. Treasury Department Division of Monetary Research Date September 16, 1941 19 To: From: T.E. MURRAY (Former receiver of the I.R.T.) DAVID PRINCE (General Electric Company) MORRIS COOKE (Formerly with the E.R.A.) JAMES W. HOOK (Formerly head of Geometric Tool Company) GEORGE WILSON (Head of General Electric Company) W. H. SCHUBART (Bank of Manhattan) Regraded Unclassified 184 FRANK ALTSCHUL 120 BROADWAY NEW YORK CITY September 16, 1941 My dear Henry: This morning I received the welcome news that the visa of Bloch-Laine was about to be issued. I presume that this is the result of your friendly intervention, and I am indebted to you for it. With many thanks, I am Yours sincerely, John Hon. Henry Morgenthau Secretary of the Treasury Washington, D. C. 185 SEP 16 1941 Dear Mr. Chens Thank you for your letter of July 31, 1941, conveying your assurance that the Chinsee Currency Stabilization Reard will cooperate with us in sttaining the objectives contemplated by our freesing order. Please be informed that, as our part, - will continue to do all possible to assist the Board in effecting its policies. I enjoyed the Hurna Road film very much. It must have taken a considerable effort to prepare. with best wishes for your good health. Sincerely yours, (Signed) 8. Morgenthau, Jr. The Secretary of the Treasury. The Honorable Kwang 2 Chen, Chairman, Chinsee Currency Stabilisation Beard, Changldes, China. File to ISF:me 9/10/41 free Regraded Unclassified 186 SEP 16 1941 Dear Mr. Chens Thank you for your letter of July 31, 1941, conveying your assurance that the Chinese Currency Stabilisation Board will cooperate with us in attaining the objectives contemplated by our freesing order. Please be informed that, on our part, - will continue to do all possible to assist the Board in effecting its policies. I enjoyed the Burns Road film very such. It must have taken a considerable effort to prepare. with best wishes for your good health. Sincerely yours, (Signed) B. Morgenthau, Jr. The Secretary of the Treasury. The Honorable Kwang Pa Chen, Chairman, Chinese Currency Stabilisation Board, Chungicing, China. Idea Seeip office ISF:mw 9/10/41 HEW FILE COPY ers 7m Regraded Unclassified September 16, 1941 187 Memorandum for Mr. Lochhead - From: Mrs. H. S. Klotz Would you please transmit this letter to Mr. Chen. Thank you very much. Regraded Unclassified Lecy, 5/28/41 KWANG PU CHEN 188 Chinese Currency Stabilization Board Chungking, China July 31, 1941 The Ronorable Henry Morgenthau, Jr. Secretary of Treasury Washington, D. C., U. S. A, Dear Mr. Morgenthau: Today's U. S. mail brought the good news that you had been kind enough to make time to see the Burne Road film and that you liked it, I had the picture made with the special purpose of giving my American friends an idea of the famous road. Although nearly ten months have passed since the picture was made and the traffic on the rond has c. onsiderably increased, the film still gives y rather sccurate picture of what the road and the region it passes through are like. The news that you have enjoyed it gives me much satisfaction and makes me feel that the film had not been nado in vain Since our return from inspection trips in Shanghai world the Interior about A week ago, Messrs. Fox, Taylor, end Frese and I have heen living in the sême Neighborhood. Their house is only about twenty feet from mine. The Chinese Curreno Stabilization Board have met often since our return end I am glad to tell you of the happy colncidence that, on the same day, July 25th., you froze Chinese and Japanese asgets in the United States, our Board passed the enclosed resolution recommending to the Chinese Government to request the U. S. Government to take exactly the action that you were then taking. This demonstrates P. similarity of approach which makes cooperation easy and pleasant. In addition to expressing my personal satisfaction over your government's action, I wish to tell you the the Chinese Currency Stabilization Board will cooperate with you, within the limits of our authority, to attain the objectives contemplated by the freesing order. With the kindest personal regards, the Sincerely yours, Regraded Unclassified 189 RESOLUTION ADOPTED BY CHINESE CURRENCY STABILIZATION BOARD ON JULY 25, 1941, CHUNGKING, CHINA "It is recommended that the Chinese Government request the Governments of the United States and the United Kingdom, at an early date and by simultaneous action, to freeze the Foreign exchange assets of the Chinese Government and of Chinese nationals in their respective countries. "The Board makes this recommendation in order the more effectively to manage and control the funds for the purpose of stabilizing the exchange value of the Chinese yuan with respect of the United States dollar and/or the United Kingdom pound sterling. "The Board further recommends that generous treatment by the control authorities be applied in regard to the require- monts of legitimate business interests." cour - /API THE I United Regraded Unclassified 190 UNITED STATES DEFENSE SAVINGS BONDS - SERIES I Sales for the Months of May, June, July, and August, 1941, by States It On Basis of Issue Price (In thousands of dollars) CONFIDENTIAL State May June July August Total Alabuma $ 565 $ 815 $ 1,041 690 $ 3,112 Arizona 302 408 565 272 1,548 Arkansas 427 513 645 533 2,118 California 4,845 5,075 11,279 8,022 29,220 Colorado 870 923 835 506 3.435 Connecticut 1,832 2,111 2,649 2,354 8,945 Delaware 200 269 257 232 958 District of Columbia 1,347 1,245 1,354 1,175 5,121 Florida 1,205 1,282 1,628 907 5,022 Georgia 813 829 1,423 1,607 4,672 Idaho 215 269 245 201 934 Illinois 7,195 7.542 11,435 10,655 36,826 Indiana 1,757 1,888 2,507 2,052 8,203 Iowa 1,313 1,430 1,868 1,605 6,216 Kansas 874 1,005 1,256 1,086 4,221 Kentucky 793 1,042 1,167 1,001 4,003 Louisiana 933 892 1,622 1,058 4,505 Maine 552 530 623 563 2,269 Maryland 1,293 1,452 1,691 1,556 5,992 Massachusetts 4,499 4,610 6,357 4,870 20,337 Michigan 3,128 4,981 5,149 4,377 17,634 Kinnesota 1,770 1,854 2,345 2,357 8,326 Mississippi 440 461 930 621 2,452 Missouri 3,413 4,069 4,791 4,139 16,413 Montana 375 396 555 480 1,806 Nebraska 669 716 850 740 2,974 Nevada 58 91 154 100 403 New Hampshire 318 277 444 376 1,414 Yew Jersey 4,951 4,953 5.879 5,206 20,990 Sev Mexico 110 133 168 209 620 New York 25,339 19,244 30,724 20,936 96,243 North Carolina 737 755 1,360 1,112 3.964 North Dakota 235 240 307 269 1,052 Ohio 5,169 5,716 7,215 6,551 24,655 Oklahoma 942 1,359 1,249 927 4,478 Oregon 1,380 1,774 1,530 1,379 6,063 Pennsylvania 6,955 7,488 5,636 11,891 34,970 Shode Island 784 695 819 748 3,046 South Carolina 436 438 712 568 2,154 South Dakota 209 241 322 282 1,054 (Continued) Regraded Unclassified CONFIDENTIAL UNITED STATES DEFENSE SAVINGS BONDS - SERIES E 191 Sales for the Months of May, June, July, and August, 1941, by States On Basis of Issue Price (Continued) (In thousands of dollars) State May June July August Total Tennessee $ 816 $ 891 $ 1,482 $ 1,031 $ 4,221 Texas 4,340 4,377 8,947 5,682 23,346 Utah 200 274 375 274 1,124 Vernont 270 216 370 279 1,135 Virginia 1,119 1,201 1,775 1,859 5.953 Washington 1,738 2,040 2,296 1,659 7.733 Yest Virginia 572 614 859 631 2,677 Wisconsin 2,035 2,572 2,769 2,258 9.634 Wyoming 154 184 228 187 754 Alaska 1 4 98 26 129 Ouro - - 2 - 2 Eawaii 90 130 251 221 692 Puerto Rico - - 58 13 71 Virgin Islands - - 1 - - Total $100,581 $102,517 $144,105 $118.636 $465,839 Adjustment to deposits - + 1,169 - 1,032 + - 137 Deposite with Treasurer of the United States $100,581 $102,517 $145,274 $117,603 $465,976 Office of the Secretary of the Treasury, September 16, 1941 Division of Research and Statistics. Source: May and June post office sales by states were estimated by the Post Office Department on the basis of actual sales by 111 larger post offices. May and June bank sales by states were reported weekly by the Federal Reserve Banks. All of the above-mentioned reports have been prorated in this table to result in estimated sales equal to deposits with the Treasurer of the United States. July and August sales were reported on a monthly basis by postmasters and by the Federal Reserve Banks. August figures are preliminary. Less than $500. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassified CONFIDENTIAL PRELIMINARY 192 UNITED STATES DEFENSE SAVINGS BONDS - SERIES I Sales in August, 1941. by States and by Type of Sales Agent On Basis of Issue Price (In thousands of dollars) I Total - All I 2 : : Post : State Banks All Sales Agents : I : Offices I Other : : Alabama $ 690 $ 299 $ 388 # 3 Arizone 272 146 122 5 Arkansas 533 236 295 3 California 8,022 5,098 2,830 94 Colorado 806 385 403 18 Connecticut 2,354 1,495 816 42 Delaware 232 162 70 - District of Columbia 1,175 815 317 44 Florida 907 491 394 21 Georgia 1,607 1,100 503 " Idaho 201 119 79 3 Illinois 10,655 6,648 3,861 246 Indiana 2,052 933 1,067 52 Iowa 1,605 607 990 8 Kansas 1,086 465 614 7 Ientucky 1,001 521 465 14 Louisiana 1,058 604 441 13 Kaine 563 295 267 1 Karyland 1,556 1,007 523 26 Massachusetts 4,870 3.304 1,499 67 Michigan 4,377 2,146 2,195 36 Kinnesota 2,357 1,328 1,004 25 Mississippi 621 273 347 1 Missouri 4,139 2,790 1,330 19 Montana 480 189 285 5 Febraska 740 212 525 4a Nevada 100 39 61 - New Hampshire 376 197 173 7 Sew Jersey 5,206 3,119 2,080 5 Sev Mexico 209 113 94 2 Few York 20,936 16,198 4,515 223 30rth Carolina 1,112 637 470 5 North Dakota 269 91 178 . Chio 6,551 4,183 2,155 213 Cklahoma 927 471 445 11 Oregon 1,379 939 431 9 Pennsylvania 11,591 8.979 2,872 40 Rhode Island 748 457 260 31 South Carolina 568 297 263 9 South Dekote 282 180 . 102 (Continued) Regraded Unclassified CONFIDENTIAL PRELIMINARY 193 UNITED STATES DEFENSE SAVINGS BONDS - SERIES I Sales in August, 1941, by States and by Type of Sales Agent On Basis of Issue Price (Contimued) (In thousands of dollars) : Total - All : I Post : State : Sales Agents I Banks All I Offices : : $ Other I # Tennessee $1,031 $ 584 $ 442 $ 6 Texas 5,682 4,543 1,068 71 Utah 274 106 166 2 Vermont 279 138 139 2 Virginia 1,859 1,398 448 14 Washington 1,659 1,063 546 51 West Virginia 631 316 314 1 Wisconsin 2,258 986 1,261 10 Wyoming 187 69 117 1 Alaska 26 15 11 - Puan - - - - Fawaii 221 69 6 147 Puerto Rico 13 - 13 - Virgin Islands - * - - Total $118,636 $76,779 $40,338 $1,518 Adjustment to deposits -1,032 Total deposits with Treasurer of the United States $117,603 Office of the Secretary of the Treasury, September 16, 1941 Division of Research and Statistics. Source: Sales were reported on a monthly basis by postmasters and by the Federal Reserve Banks. Note: Figures have been rounded to nearest thousand and will not necessarily addto totals. Less than $500. Regraded Unclassified 194 OFFICE FOR EMERGENCY MANAGEMENT DIVISION OF DEFENSE AID REPORTS WASHINGTON, D. C September 16, 1941 My dear Mr. Secretary, Transmitted herewith are two copies of & com- pilation showing that portion of the proposed additional Defense Aid appropriation proposed to be earmarked for procurement by the Treasury Department. It is anticipated that the proposed additional Defense Aid appropriation will be submitted to the Con- gress within the next few days, and I should appreciate it if representatives of the Treasury Department would confer with me on or before Wednesday, September 17, 1941, with reference to the defense of the Treasury Department portion of this appropriation before the Appropriation Committees. A copy of this letter, together with two copies of the compilation referred to above, is being forwarded to Mr. Clifton E. Mack. Sincerely yours, Alieip Philip Young, Gaung Acting Executive Officer. The Honorable, The Secretary of the Treasury Regraded Unclassified Copy Number) Tested to: Regraded Unclassified 2 PROPOSED ADDITIONAL DEFENSE AID APPROPRIATION Explanatory Notes 1. Provision is made for commitments which must be entered into before February 28, 1942, to neet Defense Aid requirements not covered by the original Defense Aid appropriation and not available by diversion from existing or prospective orders placed under other appropriations. 2, Delivery time factors considered in arriving at this proposal were as follows: a. Through May 31, 1942, on simple military and industrial articles and on services avail- able on & "pay-as-you-go" basis. b. Through December 31, 1942, on agricultural items to cover deliveries from the 1942 har- vests, for which implied commitments will have to be entered into prior to December 31, 1941. C. Through December 31, 1942, on military and naval items requiring considerable productive effort and forward planning. d. Through June 30, 1943, on complex military and naval items requiring long-term development of designs or facilities, or both. Regraded Unclassified 3 A BILL Making further supplemental appropriations for the national defense to provide aid to the government of any country whose defense the President doess vital to the defense of the United States, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That to enable the President through such departments or agencies of the Government as be may designate, further to carry out the provisions of An Act to Promote the Defense of the United States, approved March 11, 1941, and for each and every purpose incident to or necessary therefor, there are hereby appropriated, out of any money in the Treasury not otherwise appropriated, in addition to the suas appropriated by the "Defense Aid Supplemental Appropriation Act, 1941", the following vums for the following respective purposes. namely: (a) For the procurement, by manufacture or otherwise, of defense articles, information and services, for the government of any country whose defense the President doems vital to the defense of the United States, and the disposition thereof, including all necessary expenses in connection therewith, as follows: (1) Ordnançe and ordnance stores, supplies. spare parts, and materials, including armor and ammunition and components thereof, $1,190,000,000. (2) Aircraft and aeronautical material, including engines, spare parts, and accessories, $685,000,000. (3) Tanks, armored care, automobiles, trucks, and other automotive vehicles, spare parts, and accessories, $385,000,000. 4 (4) Vessels, ships, boats, and other vatercraft, including the hire or other temporary use thereof, and equipage, supplies, materials, spare parts, and accessories, $850,000,000. (5) Miscellaneous military and naval equipment, supplies, and materials, $155,000,000. (6) Facilities and equipment for the manufacture, production or opera- tion of defense articles and for otherwise carrying out the purposes of the Act of March 11, 1941, including the acquisition of land, and the maintenance and operation of such facilities and equipment, $375,000,000. (7) Agricultural. industrial, and other commodities and articles, $1,875,000,000. (b) For testing. inspecting. proving, repairing, outfitting. recon- ditioning. or otherwise placing in good working order any defense articles for the government of any country whose defense the President deems vital to the defense of the United States, including services and expenses in con- nection therewith, $175,000,000. (o) For necessary services and expenses for carrying out the purposes of the Act of March 11, 1941, not specified or included in the foregoing. $285,000,000. (d) For administrative expenses, $10,000,000. (a) In all, $5,985,000,000. to remain available until June 30, 1943. (f) Each of the foregoing appropriations shall be additional to, and consolidated with the appropriation for the same purpose contained in Regraded Unclassified 5 Sections 1(a), 1(b), 1(d), and 1(s). respectively of the "Defense A1d Sup- plemental Appropriation Act, 1941", Provided. That, with the exception of the appropriation for administrative expenses, not to exceed 20 per centum of any such consolidated appropriations may be transferred by the President to any other of such consolidated appropriations, but no such consolidated appropriation shall be increased more than 30 per contom thereby. SEC. 2. The President my, from time to time, when he doems it in the interest of national defense, authorise the head of any department or agency of the Government, to enter into contracts for the procurement of defense articles, information or services for the government of say country whose defense the President deems vital to the defense of the United States, to the extent that such government agrees to pay the United States for such defense articles, information or services prior to the receipt thereof and to make such payments from time to time as the President my require to protect the interests of the United States: and, upon payment of the full cost, the President my dispose of such articles, information or services to such government. SBC. 3. Any defense article procured pursuant to this Act shall be retained by or transferred to and for the use of such department or agency of the United States as the President my determine, in lieu of being disposed of to a foreign government, whenever in the judgmant of the President the defense of the United States will be best served thereby. 6 STC. 4. No part of any appropriation contained in this Act shall be used to pay the salary or vages of my person who advocates, or the is a member of on organization that advocates, the overthrow of the Government of the United States by force or violence: Provided, that for the purposes hereof an affidavit shall be considered price facis evidence that the person making the affidavit does not advocate, and is not a member of on organise- tion that advocates, the overthrow of the Government of the United States by force or violence: Provided further. That any person who advocates, or who is a number of an organization that advocates, the overthrow of the Government of the United States by force or violence and accepts employment the salary or wages for which are paid from any appropriation in this Act shall be guilty of a felony and, upon conviction, shall be fined not more than $1,000 or imprisoned for not more than one year, or both: Provided further, That the above penalty clanse shall be in addition to, and not in substitution for, any other provisions of existing lav. SEC. 5. This Act my be cited as *Title II of the Defense Aid Supple- mental Appropriation Act, 1941." 20 Table 1-s Sheet 1 of 1 Sumary of that Portion of the Proposed Additional Defense Aid Appropriation Proposed to be Earmarked for the Treasury Department # : 1 : : I 1 Agricultural, : Testing, In- I # I # I - I Aircraft and I 1 Miscellaneous . - Industrial, # specting, I Necessary - 1 1 E 1 Ordnance and : Aeronautical I Tanks and . Vessels, : Military Facilities and: and Other I Proving, Re- # Services and I Administrative: I : Ordnance Stores 1 Material Other Vehicles: Shipe, etc. # Equipment # Equipment I Commodities pairing, etc. 1 Expenses I Expenses 1 Total - Country United Kingdom $ " $ " $ " $ :: $ $ : $512,070,000 $ : 5 .. $ .. $512,070,000 :: .. .. : 50,000,000 : .. .. 50,000,000 China .. -- :- Total $ $ ** 5 $ 8 .. 3 .. $562,070,000 $ .. : .. 3 .. $562,070,000 .. : .. 21 Table V-b Sheet 1 of 3 Detailed Breakdown of Additional Defense Aid Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom 1 : 1 : : Proposed Appropriation : Appropriation Category and Items : Unit : Quantity : Amount : 1. Agricultural, Industrial, and other Commodities: Iron and Steel--United Kingdom I. Carbon Steel Tone 1,422,000 $ 64,000,000 2. Alloy Steel . 200,000 30,000,000 Total :. # 94,000,000 3. Iron and Steel--Dominions and Colonies Tone ** 90,000,000 Non-Ferrous Metals - 4. Copper e 50,000 13,750,000 5. Copper Refining . 36,000 1,260,000 6. Bismuth Metal . 320 640,000 1. Inconel & Monel Metale . 1,200 1,400,000 Total .. $ 17,050,000 Timber 8. Softwoods Stds. 7.500 1,000,000 9. Hardwoods Loads 35,000 1,400,000 10. Flywood & Veneers 2,000,000 Total : $ 4,400,000 Textiles 11. Silk, Rav & Vaste Lbs. 2,000,000 4,000,000 12. Silk Noils . 1,000,000 650,000 13. Manila Easp Tone 15,000 1,400,000 Total : - 6,050,000 Regraded Unclassified 22 Table T-b Sheet 2 of 3 Detailed Breakdown of Additional Defense A1d Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom : 1 I : : : Proposed Appropriation : Appropriation Category and Items : Unit : Quantity : Amount I 1. Agricultural, Industrial, and other Commodities (cont.) Chemicals 14. Borax Tons 3,000 8 150,000 15. Boric Acid . 2,000 210,000 16. Rasorite . 6,000 220,000 17. Carbonate of Potash # 1,000 145,000 18. Caustic Potash . 400 64,000 19. Butyl Phenol - 60 35,000 20. Drugs 1,000,000 Total : $ 1,824,000 Paper Materials 21. Woodpulp for paper Tons 100,000 7,500,000 22. Kraft Liner Board . 7,200 440,000 23. Building Boards . 12,000 1,300,000 24. Other Paper & Board . 4,000 900,000 25. Bagasse . 4,000 128,000 Total : $ 10,268,000 Wiscellaneous Materials 26. Molybdenum Tone 1,400 2,000,000 27. Tungsten Carbide . 15 250,000 28. Tungsten Vire . 5 500,000 29. Carbon Electrodes . 2,250 750,000 30. Abrasives . 6,000 1,440,000 31. Bentonite . 7,000 200,000 32. Diatomaceous Earth . 2,000 100,000 33. Carbon Black # 12,000 1,200,000 34. French Chalk . 500 32,000 35. Ray Hair . 1,000 225,000 36. Asphalt . 1,000 50,000 37. Ground Mica # 200 20,000 Total .. - 6,767,000 Regraded Unclassified 23 Table 7-) Dest 3 of 3 Detailed Breakdown of Additional Defense A16 Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom : - I I : I # Proposed Appropriation Category and Items # : Unit I Creatity I Amount - 7. Agricultural, Industrial, and other Commodities (cont.) Agricultural Machinery 38. Agricultural Implements $ 10,000,000 Total $ 10,000,000 A.R.P. & Repair Materials 39. Fire Hose Pt. 2,000,000 700,000 40. Horn and Hoof Meal Tons 150 11,000 Total 8 711,000 41. Ball Bearings 4,000,000 42. Road Construction Machinery 25,000,000 43. Electrical & General Equipment 30,000,000 44. Railway Equipment 25,000,000 45. Spot Purchase Fund 157,000,000 Grand Total - Treasury Department - U.K. $ 512,070,000 24 Table V-a Sheet 1 of 1 Detailed Breakdown of Additional Defense A1d Appropriation Proposed for Procurement by the Treasury Department for China : I : : : Proposed Appropriation : Appropriation Category and Items : Unit 1 Quantity : Amount 1 1. Agricultural, Industrial, and other Commodities: 1. Iron and Steel Ton 13,420 $ 606,500 2. Copper . 3.551 870,000 3. Pig Lead . 581 68,000 4. Zinc . 1,667 275,000 5. Brass Products . -- 300,000 6. Aluminum Products a -- 24,000 7. Chemicals . I 10,000 8. Tires and Tubes -- 266,667 9. Gas, 011 and Lubricants for Military Aviation - - 6,391,123 10. Gas, 011 and Lubricante for Transport Aviation and Vehicles - -- 37,113,710 11. Cloth, Cotton Tds. 28,953,000 2,540,000 12. Blankets, Woolen and Cotton En. 350,000 660,000 13. Medical Supplies, Army Health Administration -- -- 280,000 14. Rubber Footwear 500,000 333,000 15. Spot Purchase Fund 262,000 Grand Total - Treasury Department - China -- $ 50,000,000 196 SECRET SUMMARY AND BREAKDOWN OF THAT PORTION OF THE PROPOSED ADDITIONAL DEFENSE AID APPROPRIATION PROPOSED TO BE EARMARKED FOR PROCUREMENT BY THE TREASURY DEPARTMENT This defense of the United States within 31 and document contains information affecting the the national meaning of the Espioness A:, 50 U.S.C., of its Its transmission 0 : till revelation 32. contents in any manner to an unauthorized person is prohibited by law. Copy Number: 2-T Division of Defense Aid Reports Issued to: Secretary September 15, 1941 Regraded Unclassified 2 PROPOSED ADDITIONAL DEFENSE AID APPROPRIATION Explanatory Notes 1. Provision is made for commitments which must be entered into before February 28, 1942, to seet Defense Aid requirements not covered by the original Defense Aid appropriation and not available by diversion from existing or prospective orders placed under other appropriations. 2. Delivery time factors considered in arriving at this proposal were as follows: a. Through May 31, 1942, on simple silitary and industrial articles and on services avail- able on & "pay-as-you-go" basis. b. Through December 31, 1942, on agricultural items to cover deliveries from the 1942 har- vesta, for which implied commitments will have to be entered into prior to December 31, 1941. C. Through December 31, 1942, on military and naval items requiring considerable productive effort and forward planning. d. Through June 30, 1943, on complex military and naval items requiring long-term development of designa or facilities, or both. Regraded Unclassified 3 A BILL Making further supplemental appropriations for the national defense to provide aid to the government of any country whose defense the President doess vital to the defense of the United States, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That to enable the President through such departments or agencies of the Government as he my designate, further to carry out the provisions of An Act to Promote the Defense of the United States, approved March 11, 1941, and for each and every purpose incident to or necessary therefor, there are hereby appropriated, out of any money in the Treasury not otherwise appropriated, in addition to the suns appropriated by the "Defense A14 Supplemental Appropriation Act, 1941°, the following suns for the following respective purposes, namely: (a) For the procurement, by manufacture or otherwise, of defense articles, information and services, for the government of any country whose defense the President doems vital to the defense of the United States, and the disposition thereof, including all necessary expenses in connection therewith, as follows: (1) Ordnance and ordnance stores, supplies, spare parts, and materials, including arsor and ammunition and components thereof, $1,190,000,000. (2) Aircraft and aeronautical material, including engines, spare parts. and accessories, $685,000,000. (3) Tanks, armored care, automobiles, trucks, and other automotive vehicles, spare parts, and accessories, $385,000,000. Regraded Unclassified 4 (4) Vessela, ships, boats, and other watercraft, including the hire or other temporary use thereof, and equipage, supplies, materials, spare parts, and accessories, $850,000,000. (5) Miscellaneous military and naval equipment, supplies, and materials, $155,000,000. (6) Facilities and equipment for the manufacture, production or opera- tion of defense articles and for otherwise carrying out the purposes of the Act of March 11, 1941, including the acquisition of land, and the maintenance and operation of such facilities and equipment, $375,000,000. (7) Agricultural, industrial, and other commodities and articles, $1,875,000,000. (b) For testing, inspecting. proving. repairing. outfitting. recon- ditioning, or otherwise placing in good working order any defense articles for the government of any country whose defense the President deems vital to the defense of the United States, including services and expenses in com- nection therewith, $175,000,000. (c) For necessary services and expenses for carrying out the purposse of the Act of March 11, 1941, not specified or included in the foregoing, $285,000,000. (a) For administrative expenses, $10,000,000. (a) In all, $5,985,000,000. to remain available until June 30, 1943. (f) Each of the foregoing appropriations shall be additional to, and consolidated with the appropriation for the same purpose contained in Regraded Unclassified 5 Sections 1(a), 1(b), 1(d), and 1(e), respectively of the "Defense A1d Sup- plemental Appropriation Act, 1941°: Provided. That, with the exception of the appropriation for administrative expenses, not to exceed 20 per contum of any such consolidated appropriations may be transferred by the President to any other of such consolidated appropriations, but no such consolidated appropriation shall be increased more than 30 per centum thereby. SEO. 2. The President my, from time to time, when be doess 11 in the interest of national defense, authorise the head of any department or agency of the Government, to enter into contracts for the procurement of defense articles, information or services for the government of any country whose defense the President deems vital to the defense of the United States, to the extent that such government agrees to pay the United States for such defense articles, information or services prior to the receipt thereof and to make such payments from time to time as the President may require to protect the interests of the United States; and, upon payment of the full cost, the President may dispose of such articles, information or services to such government. SEC. 3. Any defense article procured pursuant to this Act shall be retained by or transferred to and for the use of such department or agency of the United States as the President say determine, in lieu of being disposed of to a foreign government, whenever in the judgment of the President the defense of the United States vill be best served thereby. Regraded Unclassified 6 SEC. 4. No part of any appropriation contained in this Act shall be used to pay the salary or vages of any person who advocates, or who is a member of an organization that advocates, the overthrow of the Government of the United States by force or violence: Provided. That for the purposes hereef an affidavit shall be considered prima facie evidence that the person making the affidavit doss not advocate, and is not a member of an organisa- tion that advocates, the overthrow of the Government of the United States by force or violence: Provided further. That any person who advocates, or who is a member of an organization that advocates. the overthrow of the Government of the United States by force or violence and accepts employment the salary or wages for which are paid from any appropriation in this Act shall be guilty of a felony and, upon conviction, shall be fined not more than $1,000 or imprisoned for not more than one year, or both: Provided further, That the above penalty clause shall be in addition to, and not in substitution for, any other provisions of existing law. SBC. 5. This Act may be cited as *Title II of the Defense A1d Supple- mental Appropriation Act. 1941.* Regraded Unclassified 20 Table V-4 Sheet 1 of 1 Sumary of that Portion of the Proposed Additional Defense Aid Appropriation Proposed to be Earnarked for the Treasury Department 1 # 1 : : 1 . Agricultural, # Testing, In- I : 1 # Aircraft and I 1 :Miscellaneous I 1 Industrial, # specting, 1 Necessary I 1 Ordnance and : Aeronautical 1 Tanks and I Vessels, : Military ,Facilities and: and Other . Proving, No- 1 Services and 1 Administrative: Ordnance Stores Material Other Vehicles: Ships, etc. I Equipment I Equipment I Commodities pairing, etc. 1 Expenses 1 Expenses T Total Country United Kingdom $ -- $ : 5 -- $ " $ ** $ .. $512,070,000 0 : 5 - " 3 : $512,070,000 : .. -- .. :- :: 50,000,000 : : : 50,000,000 China Total $ : $ .. 5 -- $ " $ : 3 : $562,070,000 $ : : : 3 : $562,070,000 Regraded Unclassified 21 Table V-b Sheet 1 of 1 Detailed Breakdown of Additional Defense A16 Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom : : : : : Proposed Appropriation : Appropriation Category and Items : Date I Quantity : Amount : 1. Agricultural, Industrial, and other Commoditive: Iron and Steel--United Kingdom 1, Carbon Stem1 Tons 1,422,000 $ 64,000,000 . 2. Alley Steel 200,000 30,000,000 Total : $ 94,000,000 1. Iron and Steel--Dominions and Colonies Tone : 90,000,000 Son-Ferrous Metals 4. Capper . 50,000 13,750,000 5. Copper Befining . 36,000 1,260,000 6, Dismuth Metal . 320 640,000 1. Inconel & Monel Metals . 1,200 1,400,000 Total : $ 17,050,000 Timber 8. Boftwoods Stds. 7,500 1,000,000 9. Hardwoods Londs 35,000 1,400,000 10. Flywood & Venners 2,000,000 Total -- $ 4,400,000 Textiles 11. Bilk, Baw & Waste Lbs. 2,000,000 4,000,000 12, Silk Noils . 1,000,000 650,000 13. Manila Happ Tons 15,000 1,400,000 Total : $ 6,050,000 Regraded Unclassified 22 Table Y-b Sheet 2 of 5 Detailed Breakdown of Additional Defense Aid Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom : 1. : # I Proposed Appropriation = corportation Category and Items : Unit : Quantity : Amount : Agricultural, Industrial, and other Commodities (cont.) Checicals 14, Boraz Tone 3,000 $ 150,000 15. Boric Acid 2,000 210,000 16. Razorite 6,000 220,000 17. Carbonate of Potash 1,000 145,000 15. Caustic Potash 400 64,000 19. Butyl Phenol 60 35,000 20. Druge 1,000,000 Total $ 1,824,000 Paper Materials 21. Woodpulp for paper Tone 100,000 7,500,000 22. Kraft Liner Board a 7,200 440,000 23. Building Boards . 12,000 1,300,000 2. Other Paper & Board # 4,000 900,000 25. Bagasse . 4,000 125,000 Total # 10,268,000 Miscellaneous Materials 26, Molybdenum Tone 1,400 2,000,000 27. Tungsten Carbide # 15 250,000 23, Tungsten Wire . 5 500,000 29. Carbon Electrodes . 2,250 750,000 10. Abrosives # 6,000 1,440,000 31% Bentonite . 7,000 200,000 32. Distomaceous Earth # 2,000 100,000 31. Carbon Black # 12,000 1,200,000 54. French Chalk # 500 32,000 15. Pav Rair . 1,000 225,000 16, Aephalt # 1,000 50,000 17. Ground Kica 200 20,000 Total 6,767,000 Regraded Unclassified 23 Table 7-b Sheet 3 of 3 Detailed Breakdown of Additional Defense A1d Appropriation Proposed for Procurement by the Treasury Department for the United Kingdom : I : I : Proposed Aupropriation : Appropriation Category and Items : Unit : Quantity : Amount : L Agricultural, Industrial, and other Commodities (cont.) Agricultural Machinery 35. Agricultural Implements $ 10,000,000 Total I 10,000,000 A.R.P. & Equair Materials 39. Tire Rose Ft. 2,000,000 700,000 40, Horn and Hoof Meal Tons 150 11,000 Total $ 711,000 41. Ball Bearings 4,000,000 42. Hoad Construction Machinery 25,000,000 43. Electrical & General Equipment 30,000,000 44, Railway Equipment 25,000,000 45. Spot Purchase Fund 187,000,000 Grand Total - Treasury Department - U.K. $ 512,070,000 Regraded Unclassified 24 Table 1-0 Sheet 1 will 2 Detailed Breakdown of Additional Defense A1d Appropriation Proposed for Procurement by the Treasury Department for China : : : : : Proposed Appropriation : Appropriation Category and Items : Unit : Quantity : Amount : T. Apricultural, Industrial, and other Commodities: 1. Iren and Steel Too 13,420 $ 606,500 2. Copper . 3,551 870,000 3. Ple Lead - 581 68.000 ". Itne . 1,667 275,000 5. Brass Products . -- 300,000 6. Alueinum Products - -- 24,000 T. Chemicale . -- 10,000 8. Tires and Tubes -- 266,667 9. Gas, 011 and Lubricante for Military Aviation -- - 6,391,123 10. Gas, 011 and Lubricante for Transport Aviation and Vehicles -- -- 37.113.710 11. Cloth, Cotton Tds. 28,953,000 2,540,000 12. Blankete, Woolen and Cotton Ea. 350,000 660,000 13. Medical Supplies, Army Health Administration -- : 280,000 14. Rubber Footwear 500,000 333,000 15. Spot Purchase Fund 262.000 Grand Total - Treasury Department - China -- $ 50,000,000 Regraded Unclassified OFFICE FOR EMERGENCY MANAGEMENT 197 DIVISION OF DEFENSE AID REPORTS WASHINGTON, D. C. September 16, 1941 My dear Mr. Secretary: It gives me great pleasure to enclose herewith B. copy of the Second Report under the Act of March 11, 1941. If you have any questions with respect to the material or figures covered therein, I shall he delighted to confer with you or your repre- sentatives at any time. Sincerely yours, Philip Young Acting Executive Officer The Honorable, The Secretary of the Treasury. Regraded Unclassified SECO THE ACT OF MARCH 11. 1941 Regraded Unclassified LETTER OF TRANSMITTAL The PRESIDENT OF THE SENATE. The SPEAKER OF THE HOUSE OF REPRESENTATIVES. I submitting this report pursuant to Section 5 (b) of the Lend-Lase Act of March 11, 1941, which provides that the President report to the Congress every 90 days on the operations under that act. The Lend-Lease Act was passed by the Congress just 183 days ago, One hundred and sixty-seven days ago, the Congress appropriated 7 billion dollars to carry out our national policy of giving every possible material assistance to the countries resisting aggression. The effective expenditure of this large sum in furtherance of our amount policy has presented tasks of large proportions. We have surveyed the needs of the countries we are aiding. We have correlated this program of nid with the procurement programs of our own Army and Nevy. We have arranged with our industries for the production of the grout quantities of material involved, The War Department, the Navy Department, the Treasury Depart- ment, the Agriculture Department, and the Maritime Commission are the agencies principally charged with the actual procurement of the supplies, They are now for along with their task. Over 6% of the 7 billion dollars appropriated have now been allo- ested. upon the recommendation of these agencies, for specific materials and services. Their procurement muchinery has been constantly at work, locating producers and placing contracts, Over 2½ billion dellars of legal commitments have already been made. Contracts will aoon be placed for the entire 7 billion dollar appropriation. Contracts have been placed and work has sturted on nearly H billing dollars of bombardment aircraft. New ways have been storted and work is in progress for about one-half a billion dollars of now merchant shipping. New facilities to speed the production of gims, ammunition, and other defense articles have been started under con- Tracto totaling about $262,000,000. Over $430,000,000 has been allorated, and over $250,000,000 has been obligated, for the purchase of milk. "ggre, and other agricultural products. Daily the mid being rendered is growing. Through the month of August the total dollar value of defense articles transferred and defense services rendered, plus expenditures for other lemi-lease purposes, amounted to $486,721,838. 1158-11-1 (I) Regraded Unclassified Il III Food and eteel and machinery and guns and planes have beery These lend-lease deliveries are not, of course, the only materials supplied in increasing quantities. Agricultural commodities Worth which have been rooving from our shores to the countries resisting $110,606,550 have been transferred to the countries We are anding aggresion. Prior to the Lend-Lease Act, large contracts were placed We have transferred to the United Kingdom more than 44 million here by Great Britain and by other countries from their own resources. pounds of cheese, more than 54 million pounds of eggs, more than NO Deliveries under these contracts are moving across the sea along with million pounds of cured pork, more than 110 million pounds of (friod lead-lesse articles. The true measure of the volume of war supplies beaus, and more than 114 million pounds of lard. We have trainferred moving from our shores is reflected in our total exports. Thus, since to them more than 3 million barrels of gasoline and oil. We have the beginning of the war, about $4,400,000,000 worth of goods have sent them many tanks. Merchant and naval ships and other train- Leen exported to the British Empire, portation equipment are being transferred in growing amounts. Figures nlone cannot show the significance of our help. Americans A substantial number of cargo ships and tankers have been chartered may Im justly proud of the way in which the tools they have forged. to the use of those countries whose defense is vital to OUR own, Our are standing up when tested under fire. An American-made Aying- yards are repairing allied merchant ships, We are equipping allied home spotted the Bismarck and American-made bombérs blasted the ships to protect them from mines; and we are arming them, A& much Scharnhorst and the Gneisenau, and they have helped make possible ns possible, against aircraft, submarines, and raiders. the great raids of the R. A. F. in the Battle of Germany. In the wars We have also, by repairing and outfitting their warships, helped the of the Western Desert, fighter planes from our factories are in the British and allied navies keep clear the vital sea lanes upon which vanguard of the attack and hundreds of our tanks stand ready to help depends continued resistance to Axis piracy. The repair of the and the Nazi scourge from the African continent. The British Empire has received the bulk of our aid. But we have battleship Malaya and the sircraft carrier Illustrious are outstand- also extended assistance to the many other countries engaged in the ing examples of this naval assistance. Over the whole range of technical and material assistatore required samo strugglo. China and the Dutch East Indies are receiving ever by modern warfare, we are, under the lend-lease program, rendering increasing quantities of supplies. The exiled governments of the countries under the Nazi yoke are sharing in the program. We are effective help. Important defense information is being supplied to already outfitting Polish troops who are training in Canada for action Britain and the other nations fighting the Axis powers. Our Lab- aversoas. We are also providing, directly or indirectly. aid for the nicians are instructing the Allies in the assembly, operation, and Dutch, the Norwegians, the Greeks, the Belgians, and the Yugoslavs, maintenance of the tools coming from our factories. Acruss th United States and across Africa, our plane ferry service is linking the IFI- know that every group which vields to or collaborates with the Nasis makes our own defense that much more difficult Likowise arsonals of America with democracy's outposts in the Middle East. rich group that resists Nazi aggression helps to keep the WHF from our On our airfields, thousands of British pilots are being. and will con- nwn hentisphere. time to be, trained, and already we are preparing n similar program The defense of the Western Hemisphere has been n prime considers to help the Chinese. We have supplied equipment for the Yunnan-Bueron Railroal and ation in our lend-lease program. Not only are we helping the Euro- for the Burma Rond in order to speed the flow of BETTIN and materials pain countries which stand athwart the Nazi path toward the Western Hemisphere, but we are also giving direct lend-lease aid to the countries to the heroic Chinese people. In addition to materials of war, We/SIT furnishing China with medicine and technical assistance to fight the of this hemisphere. We are strengthening Iceland, where our troops ravages of malaria. A military mission has also been disputched to and ships now stand guard over the approaches of the North Atlantic, and We have already embarked upon a comprehensive program of China in connection with the supplying of lend-lense aid. The 7 billion dollars appropriated for purchasing defense articles material aid to the countries of Central and South America to has been available less than 6 months, and actual transfers from the strengthen the common defense of our good no ghborhood. funds have necessarily been limited to articles which could be par- The gollant resistance of the Russian people hus been of enormous chased in a finished state or produced in that time. The speed with help to all peoples resisting the Nazi war machine. It hus completely which (uture lend-lease transfers will be made depends largely on the upset the Nazi time schedule and has destroyed the myth of Nozi speed with which our industries deliver the goods. The rate of our invincibility. We are using the energies of our Government to make production must be accolerated, and every step to schieve that end available supplies which nro urgently needed by Russia. By speeding deliveryies and by arranging the quickest transportation of American must and will he taken. IV materials, we are moving to strengthen the important Russian front, The Soviet Government's purchases here are being made with its own funds through its regular purchasing agency, The people of the United States know that we cannot live in a world dominated by Hitlerism. They realize that there can be no real pence, no secure freedom until we have destroyed the evil forces which seek to work us woe. Through their chosen representatives, they have declared B. firm and unalterable policy to build up an impregnable defense for this hemisphere, and to furnish unstinted material aid to the countries fighting against Nazi aggression and tyranny. We are not furnishing this aid as an not of charity or sympathy, but as a means of defending America. We offer it because we know that piecemenl resistance to aggression is doomed to failure; because the ruthless war muchine which now bestrides the continent of Europe can be combatted only by the combined efforts of all free peoples and at all strategic points where the aggressor may strike. The lend-lease program is no mere side issue to our program of arming for defense. It is an integral part, a keystone, in our great. SECOND REPORT national effort to preserve our national security for generations to come, by crushing the disturbers of our peace. UNDER To those peoples who are gallantly shedding their blood in the front lines of this struggle, we must offer not only a shield but B. sword, not THE ACT OF MARCH 11, 1941 merely the means to permit the stalemate of protracted defense, but (LEND-LEASE ACT) the tools of a final and total victory. This country has evolved the greatest and most efficient industrial system in history. It is our task to turn the workshops of our in- dustry into mighty forges of war-to outbuild the aggressors in every category of modern arms. Only in this way can we build the arsenal (V) of democracy. On this task we are now engaged with ever increasing vigor. Planes, tanks, gune, and ships have begun to flow from our factories and yards, and the flow will accelerate from day to day, until the stream becomes a river, and the river a torrent, engulfing this totali- tarian tyranny which seeks to dominate the world. FRANKLIN D. ROOSEVELT. THE WHITE House, September 11, 1941. CONTENTS Page CHAPTER 1. The Measure of Aid 1 CRAPTER 11. General Summary of Lend-Lease Operations 3 CHAPTER III. Lend-Lease Operations 7 I. Procurement Procedures 7 2. Allocations, Obligations, and Expenditures 9 3. Transfers 15 17 4. Exports CRAPTER IV. Distribution of Lend-Lease Materials Abroad 18 CHAPTER V. Scope of Lend-Lease Aid Rendered 21 1. British Food Program 21 2. Shipping Activities 22 3. Variety of Aid Made Available 23 4. China 23 5. Governments in Exile 24 6. Belgium 25 7. The Netherlands 25 S. The American Republics 25 9. Foreign Representation 26 APPENDIX 1. Memorandum on Distribution of Lend-Lease Materials Abroad 29 ) APPENDIX II. Methods Evolved to Expedite Defense Aid 31 (VII) Regraded Unclassified CHAPTER I THE MEASURE OF AID This is the second 90-day report to the Congress on operations under the Lend-Lease Act. It describes the position of lend-lease with respect to exports of defense aid rendered; it gives a general summary of lend-lease operations as well as an account of defense aid received by various countries for our defense; further, it describes the scope of lend-lease aid rendered. Prior to the passage of the Lend-Lease Act, the British and other foreign governments had placed contracts with American suppliers for the production of planes, tanks, guns, machine tools, and other defense articles. Large sums of money were expended for the ex- pansion of existing facilities and for the creation of new plants. By January 1941 over 3 billion dollars of British contracts alone had been placed in the United States. These foreign orders strengthened our own defense by increasing our productive armement capacity. The process of elimination of European countries on a "one by one" basis created a danger which the United States could not afford toignore. As the threat of aggression pressed ever closer to our secu- rity, experience demonstrated that only through the united efforts and united resources of the remaining free nations of the world could our own freedom be preserved. By the passage of the Lend- Lease Act on March 11, 1941, this country proclaimed its intention to supply defense articles to any nation which, in using them, could contribute effectively to the defense of the United States. Present operations under the Lend-Lease Act cannot alone give a true picture of the part being played by the United States in strengthening resistance to aggression wherever it is found. Today, the Into measure of the aid rendered by American shops and farms to the countries resisting aggression is represented by the combination of sid under the Lend-Lense Act and of materials delivered pursuant to contracts placed by the governments of the countries from their own resources, The following charts are illustrative of this nid: (1) 2 CHAPTER II UNITED STATES EXPORTS* TO THE BRITISH EMPIRE AND EGYPT GENERAL SUMMARY OF LEND-LEASE OPERATIONS DOLLARS Millions Monthly, September 1939 to July (94) DELLARS - Much progress has been made in implementing the objectives of the 240 A Egypt Lend-Lease Act since March 11, 1941. As of August 31, 5,373 re- zan British Empire quals for defense articles and services land been received by the 200 & United 100 Division of Defense Aid Reports from 12 different countries, Tables showing requisitions received, by countries, and distribution 160 160 of requisitions received, by cognizant United States agencies, follow: 120 Requisitions received through Aug. 31, 1941 120 Requisitions resired NO so Country Lend- Cash nim- 40 Less Total 46 o . # o A al + . D lisigime 15 1K F - AA A o H - f M A M of à A . o - o il 1931 1940 tirself 46 10 MI (94) DOLLARS DOLLARS Child 22 a Billions Comulative Monthly, September 1939 to July 1941 Billines China 320 200 4,0 Colombia I 1 4.0 Cubs 49 49 Republic u 27 58 3,6 16 Grade if 16 Nethertanda : 32 36 Nurany 7 - (6 12 LE Pulind as X2 Cound Kingdom 4,7% 11 4,747 1.6 26 ) Total 5,295 75 5,378 2.4 24 Ta Brain Empire Distribution of requisitions by sugnizant United States agencica plus Egypt 2,0 20 Julnt To All British Empire Country War Tree- Maritime Nary Aircraft Agth 1.6 16 Commis Other! Total any Cim- enlture sion milled 1.2 13 Payment 18 18 Brand M 3 M 6 . This 22 13 To United Angulam China 180 134 17 8 2 330 4 4 Volentia 1 1 Tata # 11 a 49 Dusanitan Republic # 29 56 a 1. Them 2 7 10 II o " D . e M - M - A . " o / F M . M . . 1 # - : 7 1934 1940 (94) Notherlands 3) o 1 36 Number 4. a I 8 including - Fuland 32 X2 - l'arteit Klogdom 2,634 893 145 074 215 15+ 8 4.747 Total 3,032 1,005 407 425 227 156 - A,273 Intlude regalations estimited and held: (3) Regraded Unclassified 4 5 All requests for lend-lease aid are carefully scrutinized and checked CHART OF PROGRESS by the Division of Defense Aid Reports, by the Bureau of the Budget, and by the staff of the procuring agency concerned, i. e., either the UNDER AN ACT TO PROMOTE THE DEFENSE OF THE UNITED STATES Army, Navy, Maritime Commission, Department of Agriculture. or Treasury Procurement Division. All items not essential to the suc- cessful prosecution of the war effort are eliminated. The governments receiving lend-lease aid have been scrupulous to limit their requests to vital needs, No requests for such items as living or administrative DOLLARS STATUS OF APPROPRIATIONS DOLLARS Billions Divisions expenses of any foreign purchasing commission or agency have been Program furning August made. T T Total allocations under the Lend-Lease Act which amounted to Progress during ally $4,277,412,879 as of May 31, had increased to $6,281,237,421 Progress during June by August 31, or from 61 percent to 90 percent of the available & 6. Progress ta May 31,1041 appropriation. Thus, 90 percent of the appropriation hus been allocated on the basis of specific requisitions and has passed from the stage of planning into active procurement operations Within 6 weeks . 5 no funds should remain to meet requests which already total much in excess of unallocated balances. Obligations as of August 31 totaled $3,555,587,895, or three * 4 and one-half times the May 31 figure of $995,015,322. Further- more, whereas on May 31 obligations were only 23 percent of alloca- tions, on August 31, 57 percent of allocations had been obligated. 1 $ Exports of defense articles provided under lend-lease during the 3 months ended August 31, 1941, totaled eight times such exports in the period between March 11 and May 31, 1941, indicating the stendily E = accelerating pace of defense uid, Total defense articles exported under the net during the period from March 11 through August 31, 1941, were valued at $100,447,670, of I I which 89 percent were exported in the 90 days ended August 31. During the period from March 11 to June 1, 1941, exports amounted to only 20 percent of transfers made. During the period of June 1 APPROPRIATIONS ALLOCATIONS OBLIGATIONS EXPENDITURES through August 31, 1941, however, exports were 98 percent of trans- fers made. This demonstrates the fact that lend-loase goods are now being transported and absorbed by shipping very nearly as rapidly as they are being made avoilable. A graphie presentation of progress under the Lend-Lease Act and of the relationship of exports to transfers is given in the pages following. Regraded Unclassified 6 TRANSFERS AND EXPORTS UNDER LEND-LEASE ACT CHAPTER III DOLLARS MILLIONS DOLLARS LEND-LEASE OPERATIONS MILLIONS 250 250 1. PROCUREMENT PROCEDURES 225 The administration of the Lend-Lease Act and its related activities 225 is the duty of the Division of Defense Aid Reports in the Office for 200 200 Emergency Management of the Executive Office of the President. Through this office flow the actual requisitions for defense articles, the 175 175 recommendations of the various operating departments, as well as the control records of all allocations, transfers, contracts, and shipments. 150 150 If a requisition is approved and an allocation of funds is made 125 by the President, procurement is undertaken by the department con- 125 cerned in accordance with its normal procurement procedure. The 100 necessary priorities to insure prompt delivery are arranged through the 100 procuring agency. Additions to facilities, if necessary, are worked 75 75 out with the appropriate authorities, and the transportation of the finished goods is planned with the assistance of transportation special- 50 50 ists in various fields. Official action on such requisitions can only be taken if, on the one hand, a formal request has been made by the 25 25 properly accredited representative of the foreign government, and, on the other, a formal recommendation with respect to this request has been submitted by the United States Government agency best quali- MARCH If TO MAY 31. 1941 JUNE I TO AUGUST 31, 1941 fied to deal with the particular item. In addition to the foregoing, & foreign country in the lend-lease area may file a requisition with the Division of Defense Aid Reports for the purchase of & specific item on a "cash reimbursement" basis. This system of purchasing provides for the procurement of an item in precisely the same way as that used for other lend-lease operations, TRANSFERS EXPORTS with the exception that the foreign government deposits cash with the United States Treasury against the value of the goods to be purchased. The use of the lend-lease mechanism for the making of such pur- chases is beneficial to the United States defense program because, under such a system, foreign orders, even though paid for in advance, become United States Government contracts under the supervision and control of United States Government agencies. This obviates the need for separate foreign priority ratings BB well as limiting the chances for conflicting production, exorbitant prices, and the misuse of raw materials, labor, and plant facilities. (7) 8 9 During the 3 months ended August 31, 1941, there occurred first so-called "cash reimbursement" transactions under the Lend- the 2, ALLOCATIONS, OBLIGATIONS, AND EXPENDITURES Lease Act. A total of $4,206,440 Was deposited with the United Allocations of defense-aid funds are made on the basis of recom- States Treasury during the period by four countries to cover purchases mendations from the cognizant United States Government agencies. of defense articles procured for them by United States Government The agencies are then empowered to obligate the money so provided agencies. These deposits were distributed by countries and by pm. for the procurement contemplated by the related requisitions. The curing United States Government departments as follows: Defense Aid Supplemental Appropriation Act, 1941, made $7,000,- 000,000 available for lend-lease purposes.¹ Of this amount, Communt department $6,281,237,421, or approximately 90 percent, had been allocated and Country Total War $3,555,587,895 obligated by August 31, 1941. On May 31 expendi- Navy tures totaled $68,078,942 and increased to $388,912,155 on August 31.º Brail $1,170,000.00 Total allocations, obligations, and expenditures at August 31 by Canada $1,170,000.00 $507,000.00 individual agencies and by appropriation categories are shown in the Dominkan Repablic 57,000.00 121,704.22 The Netherlands 1,600,000.02 tables below: 651,094.00 Total 1,171,231.22 Allocations, obligations, and expenditures under the Defense Aid Supplemental Appropriation Act, 1941, by departments, as of Aug. 31, 1941 Besides these two procurement operations under the provisions of Department or agency ADminions Obligations Expenditures the Lend-Lease Act, the Division of Defense Aid Reports bas as- War Department 82.347.802.241.87 sisted foreign governments in the lend-lease area in making direct cash Navy Department 1,105,743,081 218,568,006.12 34,641,071.31 contracts with American suppliers for the purchase of defense articles. Marilime Commission 631,664,023 817,149,073.48 183,031,080 65 Certain countries, such as the Netherlands East Indies and China, Treatory Department 346,490,118 14,308,804.21 Department of Agriculture 438,411.025 251,442,610.43 have continued to place cash orders in the United States, Federal Security Attacy 140,000 Department of State 15,000 In order that such direct cash operations may be made more effec- Executive Office of the President 25,000 3,400.89 5,370.89 tive, foreign governments file a Purchase Negotiation Report for the Office for Emergency Management 100,000 73,247.30 03,108.00 of The Hudget 25,000 2,622.75 1,622.78 purpose of securing an allocation of production capacity, adequate priority ratings, and information as to sources of supply. The Divi- Tabil 6,251,237,421 388,912,115.05 sion of Defense Aid Reports clears all Purchase Negotiation Reports with the Office of Production Management which, in turn, coordinates Allocations, obligations, and expenditures under the Defense Aid Supplemental the views of the Wor and Navy Departments with its own, so that a Appropriation Act, 1941, by appropriation categories, as of Avg. 31, 1941 composite recommendation may be made to the foreign government Appropriation category Allomitions Ofdigations Expenditures requesting such help. During the period since March 11th close to 1,200 Purchase Nego- Uniname and under states $1,422,145.460 lintion Reports were received by the Division of Defense Aid Reports. Airenset and material 2,027,396,269 1,347,100,819.54 Tapics and other vehicles Of these, around two-thirds were filed on behalf of The Netherlands, 222,347,202.50 Visits ned other wateresoft 600,430,400 008,277,440.71 around 10 percent on behalf of China, and the remainder by other military equipment 112,741,215 countries. Facture and squipment $11,013,50 262,160,380.00 $1,312,005.00 Aericultural, jedastrial, and other 425,471,250.00 132,470,446.07 In connection with the foregoing, it should be pointed out that Trating, etc., of defense 130,002.571 $2,672,192.23 in some instances Purchase Negotiation Reports are filed by such Services noil expectives. 13,356,500 1,211,679.37 Administrative expected 5,656,674 29,424.74 countries as the United Kingdom and China where the particular Total items involved may not be "lend-leasable" or where BR an adminis- 6,281,287,421 trative matter a direct cash transaction is desirable. or State amount. $13,000,000 was used bi reimburse the Trensury Department for Coul Ouird venda to the United Kingdom, leaving 89,987,000,000 available for alloration. . Expenditions represent that part of obligated funds to which e claim bas bies established by & supplier on the Tession of attiches DE services elther completed or in provide Regraded Unclassified 10 11 The significance of these allocations and obligations can best be Allocations, obligations, and expenditures under the Defense Aid Supplemental illustrated by an analysis of the variety and types of defense articles Appropriation Ad, 1941. by appropriation calegories and purpose classifications, to which they relate. For example, n. billion and a quarter dollars or of Aug. 41, Continued has been allocated for bombers; over a half billion for ammunition; appropriation estegory and purpose cissification Allocations Obligations Expenditives over a half billion for merchant shipping; over $350,000,000 for food; and over $200,000,000 for tanks and combat vehicles. About $440,- Aircraft and servonation material: 000,000 has been allocated for the development of facilities for the Aircraft: Numberdement. $1,255,175,700.00 $215,978,518.12 $1,005,004.04 production and distribution of defense articles, which will be a per- Pursuit Interceptor and Aghter 241,672,600.00 174,708,990.06 0,348.12 manent addition to our defense plant. Ubservation 10,82%,000.00 26,314,548.00 Transport, utility, and other 00,147,000.00 48,896,707.46 2,548,904.36 Almost a billion has already been obligated for the production of Training 112,147,070.00 71,044,200.28 200,100.12 bombers; almost B. half billion for merchant shipping; over a quarter Schtolal 1,709,964,770.00 1,234,843,103.92 6,700,030.54 billion for ammunition; and over $125,000,000 for tanks. The following table shows how lend-lease funds have been allo- Airrift--Engines, spare puris and accesories: Spare engines and engine parta 98,628,348.00 33,090,411.06 302,634.70 ented and obligated for various types of equipment, commodities, and Spare propellars and spare propeter parta $7,002,000.00 30,074,172.09 1,201,758.96 services. Accessies and other parts 11,170,191.00 5,561,002.38 1,352,735.63 Fubtotal 140.998.537,00 2,856,147,38 Allocations, obligations, and expenditures under the Defense Aid Supplemental Appropriation Act, 1041. for appropriation categories and purpose classifications, General accomentical supplies and equipment 26,177,000.00 15,447,232.34 646,271.61 Construction Inr stores of materials, Me 14,58%,500.00 2,080,778.43 272.90 63 of Aug. 31, 1911 Modernication and reconditioning of com- plaind aircraft $5,000,000.00 8,197,541.32 95,405.43 Appropriation cutegory und purpose classification Allocations Obligations Expenditume Clement pressrement expense Unquistributed 06, 674,402.00 9,128,672.80 Ordnance and storms Total 2,027,398,209.00 1,547,140,839.34 Ammunition Smill-arms amminition $113,349,478.00 $09,542,589.04 $00.98 Taxo and other vehicles: Artifiers ammunition 439,331,951.00 Ordrame Aircraft bomba and pyrotochnica 20,161,560.00 4,673,042.77 Tanks 182,173,000.00 128,783,277.00 Torpedoes 7,000,000.00 Other erdospre combat vehicles (except Explacives, propellent gowders, and mb- tanks) 18,215,000.00 18,885,600.00 ammantion 19,944,420.00 4,022,195.68 516,246.46 Ordnance tractors and special vehicles 6,408,400.00 1,422.31 ordensure sutomative sup- Subtotal 599.787.417.00 yitles, spare parts, notes- anties. the (for ordnance contat and Ordersion minterial: namember vehicles) 50,371,054.00 18.540.604.22 2,344,205.00 Small anne and infactry weapons 131.588.772.00 36,019,774.02 Artillers miterial 90,023,428.01 62,304,200.03 subtidal 237,164,454.00 2,344,773.40 Antialteratt material 357,490,500.00 112.642.212.21 4,278,011.00 Airoraft armatment 132,525,250.00 67,149,657.05 LIX,010 Other thip ordaisnce volides: Miscrillamos firm 2,098,211.78 Trucks 81,063,021.00 50,471,684.52 4,624,916.38 Saral una 15,208,850.00 30,000,000.00 853,499.00 Terposte equipment 2,932,000.00 258,300.00 Oller antomotive vehicles 7,883,150.00 A,475,562.44 491,639.80 Mine equipment 4,500,000.00 718,491.51 automotive supplies, spare ordinazion and erduance parti, enmponents, accounties, etz. (Int nume, 1,170,700.00 other than vehicles) 10,460,013.00 4,625,163.74 M9,650.73 and packing of delunse Sobtotal 758,398,118.03 326,781,221.07 articles 192,492.00 Schtolal 101.704.779,00 61,097,388.07 Armor (navil) 15,000,000.00 Stork fund and shop (net) 51,201.00 11.20.33 General procurement 6,831,000.00 (lear) procurement expense 2,277,000.00 28,825,995.00 (,421,740.50 Working fund for emergency purchases 400,000.00 Undistributed 41,726,425.00 Total 194,032,238.00 222,347,202.50 9,232,625.51 Total 1,422,145,400.00 584,470,116.44 Regraded Unclassified 12 13 Allocations, obligations, and expenditures under the Defense did Supplemental (1) Appropriation of Aug. 51, 1941-Continued Act, 1941. by appropriation calegories and purpose classifications, Alloentions, obligations, and expenditures under the Defense Aid Supplemental Appropriation Art, 1941, by appropriation cntegories and purpose classifications, (If of Aug, 31. !941-Continued Appropriation entegrity and purpose ciassification Allocations Obligations Expenditures Appropriation missury and purpose classification Allocations Obligations Expenditures Vesaols and equipment Int Wateroraft: Apricaltural, Industrial, and other commodities Combatant $14,554,000.00 $537.01 and aricles: Navel auxillary and small craft 02,042,000.00 31,440,244.94 $47.00 products-Focdstulle: Merchant 508,422,800.00 498,918,344.54 Thilly groduets and RP $98,373,500.00 $33,921,408.RI Meet. 6th, lowl 123,048,200.00 06,100,200.00 Subtotal 615,918,800.00 526,384,346.00 Frulls, reprisbles, and nuts 88,204,000.00 26.011.812.24 12,107,641.19 (jyean and unal products 10,428,500.00 7,728,712,00 Equipase 47,477,690.00 25,134,594.22 chocolide, and sucharine products. 213,800.00 245,Foo.00 180,312.44 Rental charter of vessels 35,711,800.00 31,788,700.00 Land. tabs, and nils 29,150,000.00 18,104,045.42 11,784,428.32 Working fund for emergency purchases 34,788,700.00 400,000.00 our not classified above 12,795,010.00 4,212,043.04 081,775.18 Undistributed 8,600.00 Subtotal 350,378,700.00 90,117,197.56 Total 602,496,490.00 109.617.971.87 Admittural products-Otter than fondatuffs: Miscellaneous military equipment, supplies and Collen 37,758,000.00 29,490,450.00 0,397,010.00 materials. quartermater equipment, supplies, Totaem 37,427,920.00 37,427,520.00 18,591,922.40 and mailerials: Other 614,505.00 150,000.00 Clothing 1,509,193.00 630,550.88 Equipage 4,701,879.00 3,769,253.57 Subtotal 75,800,513.00 87,068,325.00 10,488,002.40 1,187,523.80 Kitchen, mess, and Beld taking equipment 557,335.00 451,007.00 4,110.50 Tractic mane 1,158,637.00 equipment, materials, and sup- Fuel 5,012,700.00 25,034.43 pike Provisions 570,000,00 Machine toola 66,900,00 6,376.80 1,610.08 1,616.68 and packing of defense Agricultural implements 7,253,714.00 4,235,267.07 236,085.47 articles 409,800.00 2,730.79 Bund building equipment, materials, and 2,730.79 Miscellaneous quartermaster supplies 10,544,670.00 supplies 6,788,604.00 5,052,443.40 3,390,505.04 820,645.58 Electrics] equipment, materials, and sup- Subtetal 24,013,023.00 8,271,618.01 plan 5,580,123.00 764,075.36 37,744.50 Fire-Oghting equipment. materials, and Medical equipment, supplies sod material 830,538.00 1,492,920.00 623,001.76 $15,631.37 Signal equipment, supplies and material 62,894,159.00 Railred equipment, materials, and sup- 30,096,082.14 1,912,922.45 Chemical warfare equipment, supplies and mate- plici. 16,380,000.00 548,612.43 64,726.40 not Other 13,082,201.10 A,101,047.07 18,440.80 0,260,536.00 4,223,891.10 574,490.34 Eugineer equipment, supplies and material Undistributed 1,678,750.00 4,958.01 4,300.00 8,631,301.00 3,371,267.58 300,361.95 Air Corps equipment, supplies and material 3,307,064.00 Undistributed Subtotal $2,314,402.10 1,138,707.25 6,037,184.00 1,974,000.79 Total Minimile 112,741,205.00 55,662,802.00 6,291,655.73 Irvo and stril 198,753,948.40 5,206,102.82 Facilities and equipment for production: Copper and hease 17,074,768.00 3,761,003.28 $74,850.00 Acquisition of land and appurtenances 1.178.102.00 147,320.10 4,823.96 56,040,183.00 49,194,005.79 Rental of apportunance and facilities Zine 20,907,500.00 3,750,728.07 1,848,947.46 23,000.00 Less 1956,000.00 689.011.14 $70,011.14 Buildings: Other minis and alloys 13,713,895.00 8,047,341.48 570,294.62 Nonmetallie minurals On Government-oward property 8,430,500.00 126,642,729.00 114,420,932.22 On other than prop- Subtotal 101.924.772.40 60,774,620.37 any 504,138.00 504,138.00 Chrestrate: Subtotal 127.140.887.00 114.934.000,22 Name 200,000.00 Marbinery sod equipment Including that for Phosphones 12.800,000.00 4,446,047.72 630,007.37 Other tramiler 13,912,041.00 6,920,383.10 607,435.58 65,376,737.10 33,005,518.00 Investment in Intilities 001 owned by atomy: Baktotal Investment in facilities awned by Defense 27,762,041.00 11,255,050.03 1,300,472.05 Plant Corporation 41,204,182.00 43,294,789.00 General procurement expense and esal producta 65,087,199.00 29,942,720.02 6,400,673.82 Viluter products 13,107,480.00 2,098,720.34 199,427,554.00 0,642,882.01 Kipujement, materials, and other charges for naval Total 601,013,530.00 202,163,880.10 11,202,000.00 and williary bases 88,730,000.00 21,667,209.90 11.724.009.00 Citillan medical supplies, 2,064,483.00 1,223,100.00 141,720.00 Regraded Unclassified 14 15 Allocations, obligations, and erpenditures under the Defense Aid Supplemental An analysis of allocations for facilities, by agencies and subclassi- as of Aug. 31, 1041- Continued Appropriation Ad, 1941, by appropriation calegories and purpose classifications, fications follows: ALLOCATIONS FOR FACILITIES Appropriation entegory and purpose classification Allocations Obligations Expenditure War Department: Ordnance Department $152,330,000 All other commodities nod articles not otherwise Air Corps 102,141,737 classified $40,507,708.50 $12,429,641.7y Chemical Warfare 16,677,200 764,820.00 $21,000.00 Training of personal Corps of Engineers 6,000,000 Outfiling vessels. 10,375,120.00 11,862,027.12 10,000,000.00 Quarterminater Corps 15,000,000 Working fund for emergency purchases 718,932,41 120,10Lm) 10,000.00 Machine toole 61,153,002 General procurement expense. Undistributal 32,949,837.00 Transportation items 353,000 $353,654,030 Total 075,008,578.00 428.47),283.00 name Navy Department: Bureau of Ordnance 57,720,000 Servicing of défense artielen Vessels 99,052,903.00 Bureau of Ships 2,085,000 Other deluge articles 20,976,458.00 90,000.00 GMH Bureau of Yards and Docks 575,000 Delena-ild atorer 10,000,000.00 1,728,988.04 546,316.90 Bureau of Aeronautics 37,000,000 Undistributed 63,200.00 97,980,000 Total 130,072,571.00 05.162.231.RU Maritime Commission: Additional shipways 49,200,000 Miscellaneous services and expenses: Plant for turblies 800,000 Transportation and freight 3,204,700.00 1,208,470.30 1,028,228.27 Miscellaneous and enstingent expenses 1,570,806.00 253,104.98 50,000,000 192,048,18 Survey of port facilities 25,000.00 1, (48.10 30.00 Treasury Department: Undertributed 4,360,000.00 10,483.82 Machine tools 278,501 278,591 Total 13,300,506.00 1,463,123.44 Administrative expenses 5,658,574.00 326,312.10 ZABLTI Total 501,013,530 Grand total 6,281,237,421.00 3,558,587,894.40 With the help of lend-lease funds, the productive capacity of this country has thus been increased tremendously. Facilities for bombs, As noted in the table above, during the period from March 11 ( for planes, and for ships are now being built. Shipways in nine through August 31, 1941, $501,913,530 was allocated for facilities and States are now under construction and are scheduled for completion equipment, of which $61,431,593 was allocated for the procurement of by the end of this year. machine tools needed by Britain and China. 3. TRANSFERS Funds for additional facilities were distributed among the War Department, Navy Department, Treasury Department, and the Mari- Defense articles transferred to foreign governments totaled $246,- time Commission, and covered a total of S6 projects in this country 394,372 at August 31, 1941, in contrast to only $75,202,420 at May 31, plus tools for export. The distribution of these funds and projects 1941. These figures include defense articles procured under the among the several departments was as follows: Delense Aid Supplemental Appropriation Act, 1941, and defense articles procured with appropriations made prior to March 11, 1941. Amount Number d Summary of such transfers by departments and categor os is as Department allocated projects follows: FACILITIES IN THE UNITED STATES Maritime $20,600.000 IS a Navy 97,980.000 292,501,987 VP Wer MACHINE TOOLS FOR EXPORT Treasury 276,001 War $1,153,002 Total 201,913,530 50 Regraded Unclassified 16 17 Defense articles transferred under the Lend-Lease 1941 Act, by departments, as of Aug. 31, The nature of these items is such that their true importance cannot be gained from a mere examination of their titles and value. Accord- From appropria- From Deleras Department ur assney tions made prior Aid Supplemen- ingly, a fuller description is given in Chapter V of such of these items to Mar. 11, 1941 tal Appropriation Total Ast as may be appropriately discussed, consideration being had for the necessity of withholding information of military value. War Department $00,377,581.52 $14,024,216.97 Navy Department $74,401,247.00 4. EXPORTS 7,558,046.18 Maritime Commission 10,492,008.01 2,057,126.83 21,041,829.07 Treasury Department 13,255,000.00 14,588,111.41 12,550,002.04 Defense articles have been exported to the theaters of war, and to Department of Agriculture 110,006,550.20 $10,006,351.26 the industrial centers of the nations resisting aggression throughout Total 97,800,722.93 189,584,048.75 the world. While 70 percent of total exports have gone to the United Kingdom, substantial assistance has also been given to the allied Defense articles transferred under the Lend-Lease Act, by appropriation colegories, as fighting forces in the Middle East. In summary, the value of defense of Aug. 51, 1941 articles exported to the various areas was as follows: Exports of lend-lease cargoes, Aug. 31, 1941 From appropria- From Defense Appropriation category tions made prior Ald Supplemento- to Mar. 11, 1941 tal Appropriation Total All United King- Category dues, Middle Wastern East, and Homisphere Others Total Ordosnes and ordnance NONE $41,791,780.00 $1,314,631.24 Africa Aircraft and acrossitical material 3,924,025.14 4,952,704.45 6,576,729.37 Tanks and other vehicles 16,570,807.18 7,830,785.33 Ordmante and ordnance store $55,498,800 $3,000 $223,712 Vesh and other watereraft $15,773,521 31,006,636.71 L,889,004.46 Airmaft and arronsulical material 6,016,144 8,018,143 military equipment 3,531,837.81 L,157,934.51 4,699,772.33 Tinks and other vehicles 21,200,611 1,000,005 28,163,720 Purfillies and equipment 318,571.56 318,671.M Yesiels and other watercraft 2,312,720 2,313,720 Agricultural, industrial, and other commodities 128,465,808.41 Miscollaneous military equipment 104,017 RM, UIT Testine, reconiticioning, etc., of defense articles 54,026.18 011,340.83 003.767.01 Agricultural, industrial, and other commodities 115,700,346 250,088 2,058,102 113,074,508 Berv and expenses 18,951.00 Total 185,061,670 259,088 4,234,815 199,447.670 Total 97,800,722.03 148,584,548.78 To mointain an accurate record of defense articles transferred to 3 During the month of August 1941, 574,671 tons of lend-lease other nations, the Division of Defense Aid Reports has established A cargoes cleared United States ports for the United Kingdom and the Middle East. standard procedure for all cooperating departments and agencies with respect to receipts required from foreign governments in connection with such transfers. In addition to transfers of defense articles amounting to $246,394,- 371, the aid already rendered has included completed defense serv- ices and partial trunsfers on defense projects totaling $78,169,377. This aid is made up of the following items: Item Amount (1) Tenting and reconditioning of versels end other defense articles (9) Outfiting vousis with agricultimal, industrial, noil other 11,502,677.11 (a) Equipage, supplies, and material for Versels 1,671,308.78 (4) Reotal and charter hire nf version 34,788,700.00 (5) Military and naral hiues 11,734,W66.00 Total Regraded Unclassified 19 10 memorandum, recognizes this necessity, while at the same time affording the maximum protection to the interesta of the United States, Despite this policy, charges have been made, particularly in the CHAPTER IV (hree or four months after the passage of the not on March 11, 1941, DISTRIBUTION OF LEND-LEASE MATERIALS ABROAD that the British have been using lend-lease materials to compete with United States exporters in foreign markets, particularly in South The policy of the Division of Defense Aid Reports in regard to America. These charges are without foundation, as a few facts will the use and distribution of lend-lease materials which have been de- help to demonstrate. livered to B. foreign country has been carefully explored. The Defense Aid Supplemental Appropriation Act, 1941, was enacted The practical application of this policy has been the subject of on March 27, 1941. Requests for raw materials and articles available friendly negotiation for several weeks with His Majesty's Govern- for re-export were not filed for some considerable time thereafter and ment in the United Kingdom. On September 10, 1941, a formal shipments of such articles, e. 8., semifinished steel, timplate, etc., did memorandum covering the agreement reached between our two not begin until mid-July or later. Thus it is almost impossible that governments was handed to our Ambassador by Mr. Anthony lend-lease materials could have been fabricated and re-exported when Eden.¹ these charges were made. The competition complained of was clearly This memorandum contains two basic assurances by the British. competition from Britain's own products, and occurred at a time when The first assurance is that lend-lease materials which might be Britain was rapidly depleting her own capital resources in America in available for reexport have been and will be used within the Empire, order to pay for her war supplies. and then only for needs essential to the war effort. This assurance This competition is steadily decreasing. British exports have was required and freely given because it was the will of Congress declined precipitately in volume since 1937. For example, United and the American people that goods lend-leased to B country should Kingdom exports of iron and steel manufactures to points outside the be used by that country in the war effort. It has, therefore, been Empire dropped 70 percent from 1937 to 1940. Exports of machinery the policy, and His Majesty's Government have assured us that and cotton piece goods each dropped 60 percent in the same period. The first 6 months of 1941 showed an even more drastic decline. For lend-lease articles themselves have not, and will not be, reexported. The second basic assurance contained in this memorandum is that this period exports of iron and steel manufactures dropped a further the British will not permit exports of materials similar to those lend- 51 percent from the already low level of 1940, exports of machinery lessed to them, in any manner which will enable their exporters to dropped 8 further 46 percent, and exports of cotton piece goods enter new markets or to extend their trade at the expense of United dropped a further 55 percent. Thus in the first 6 months of 1941 the States exporters. The entire British export trade is restricted to exports of these three major categories of articles were only 14.7, the irreducible minimum necessary to supply or obtain materials 21.6, and 18.2 percent, respectively, of their 1937 level. essential to the war effort. Additional restrictions are imposed The memorandum of September 10, 1941, also deals with another aspect of the distribution of lend-lease materials abroad BB to which upon the export of materials similar to those obtained by the British under the Lend-Lease Act where there is a shortage of such materials the Division of Defense Aid Reports has felt a responsibility. It has been the policy of the Division that lend-lease goods are not in the United States. We have recognized that the United States cannot supply the to be used to further any private or local interests in the countries to British Empire through lend-lease with everything that Britain needs which they are transferred. In the great majority of cases this pos- for its war effort. There are essential articles that the British must sibility of private gain in not present, since most types of defense obtain here which do not come within the scope of the act and there articles are used or distributed directly by the government to which are also many things which they must obtain in other countries. they are transferred. In a number of cases, however, e. g., spare Payment for these necessities can only be made through the medium parts for tractors, trucks, and machinery, etc., ordinary commercial of British exports. Lend-lease policy, as expressed in the September The full lest of the memorandum agreement is and beth la the appendix. (18) 20 channels of distribution are used. It would be unwise and imprac- ticable to superimpose a new system of government distribution upon existing commercial distribution systems, merely to take care of & CHAPTER V relatively small portion of items being supplied under lend-lease. In cases of commercial distribution, the Division requires, not only SCOPE OF LEND-LEASE AID RENDERED that existing commercial channels of distribution provide the most A mere recital of figures indicative of the over-all progress of the efficient and economical method of transmitting the defense materials Defense Aid Program obscures the variety of assistance which has to the persons by whom they are to be used, but also that no profiteer- been rendered to nations whose war effort is contributing directly to ing will be permitted and that there will be no discrimination against the security of the United States. Only by translating these figures United States firms. Moreover, in the special case of food, free dis- into fond, und ships, and vital raw materials, and an infinité variety tribution is to be made through Government agencies wherever this of necessary services, as well as into airplanes, and guns, and tanks, is practicable, This policy, which has been consistently followed, was and shells, con there come B. full realization of the impact of this officially recognized in the September 10 memorandum of agreement. program on the present world struggle against oppression. 1. BRITISH FOOD PROGRAM In the case of the United Kingdom, for instance, hundreds of thousands of tons of food have gone safely neross the North Atlantic to maintain the health and stamina of British workingmen and British soldiers. The army of today, more than ever before, depends upon the workingmen behind the lines who produce the instruments of modern war. The American farmers have contributed much to the maintenance and expension of Britain's war effort and through this to the defense of the United States. The food program reflects interesting changes in the United King- dom's sources of supply of agricultural products since the war began. In the pre-war period, the United States supplied to the United Kingdom primarily such items as tobacco, cotton, and fresh fruits, Now, however, with the Northern European sources of food cut off, the United States is being called upon for more of the essential food- stuffs such as fats and protein foods, Because of the shipping siton- tion, including the shortage of refrigerated spuce, emphasis is on concentrates, and thus dried or canned fruits are shipped rather than the fresh products. Some of the more important items delivered through August 31, were: Amount delivered Cliecso 44,538,120 pounds. Dried ORICE 2,877,317 poitods. Frozen eggs 23,124,750 pounds. Dry skinu milk 12,590,617 pounds. Evaporated milk 2,057,796 CRAOR, Cauned meat 21,541,281 pounds. Cured pork 80,741,480 pounds, Dried beans 110,948,900 pounds One of the chief problems in this field has been the difficulty in supplying to the United Kingdom large quantities of commodities not (21) Regraded Unclassified 22 23 ordinarily produced in excess of our own domestic requirements. In 3. VARIETY OF AID MADE AVAILABLE a number of cases the United States has in the past depended upon substantial imports of such commodities for its own use. The Depart- These vessels have carried many cargoes, since the achievement of ment of Agriculture has proceeded on the assumption that this problem a masimum war effort requires far more in the way of supplies than must be solved through increased production and has, therefore, em- merely arms and ammunition. The supplying of essential machine barked on an energetic campaign to this end. (ools or critical raw materials to British users may well result in 10 or 100 times their value in terms of arms and ammunition eventually 2. SHIPPING ACTIVITIES finding its way to Britain's battle fronts. To this end, critical examination has been and is being made of the war effort of the entire Food and other products, however, cannot reach the United King- British Empire, so that the most efficient use possible may be made of dom or her fighting forces in other parta of the world unless transporta- United States resources in promoting its defense through maintaining tion is provided. Ships are being made available to Great Britain the productive capacity of others. and China from the American merchant marine, operated in some In the strictly military field, the United States has benefited through cases by American companies and American seamen where the Neu- the military secrets which have been freely disclosed to this Nation. trality Act allows. Vessels of Great Britain, Greece, Norway, Belgium, From such information have been ovolved jointly designed weapons, and Yugoslavia, have been repaired, fueled, provisioned, and fitted combining the best thought of the armed forces of this country and of out with mine protection and defense equipment to enable them to Great Britain, and incorporating the result of actual combat experience transport defense articles. which otherwise it would be impossible to secure. On April 14, the President, under the Lend- Lease Act, authorized Through the Lend-Lease Act we have also helped to break down the Maritime Commission to expend $500,000,000 for the construction the barriers of time and space which obstruct the prompt delivery of of new ships and $50,000,000 for shipbuilding facilities. The Com- the products of our factories to the battle front. The Air Corpa mission promptly thereafter entered into contracts to build 212 Ferrying Command, financed with lend-lease funds, has undertaken vessels, including 112 of the Liberty type, 72 tankers, and 28 (ast the task of flying the bombers and pursuit planes which our factories cargo veasels of different sizes and speeds, adapted to the needs of are producing under British and lend-lease contracts to points in the American foreign commerce and designed by the Maritime Commis- east where the bombers are taken over by the British for flight to sion under its long-range construction program. Since the original England, and the smaller craft are broken down for shipment. allocation, the 72 tankers contracted for under lend-lease have been The work of lend-lease funds in delivering the implements of war increased to 87. In addition to the larger cargo vessels and tankers, is not confined to this continent. Planes are soon to be ferried to the the Commission is also currently negotiating lend-lease contracts for Middle East and an air transport service is to be established to return 36 small coastwise vessela, 16 small tankers, and 26 harbor tugs. the ferry personnel and carry the spare parte and materials necessary It is estimated that the entire lend-lease ship construction program for the effective delivery of these aircraft. will be completed by the end of December 1943, with the heaviest As more and more airplanes are made available to the Royal Air deliveries occurring in the second, third, and fourth quarters of 1942, Force by increased production here and in the British Empire, the and the first quarter of 1943, during which time lend-lease vessel need for pilota mounts steadily. Arrangements have been made to deliveries will average one 8. day. The lend-lease program, of course, train thousands of young British pilots here in the United States, is separate from the Maritime Commission's other emergency programa so that when they return to England they can take their places in the under which there are being constructed 1,090 cargo vessels and front lines and be fully equipped to fly modern American planes. tankers.¹ This training has already begun. It will be carried on in Army, Through charter and freighting arrangements, there had also been Navy, and private air schools, and the aircraft, fuel, and equipment made available out of the American merchant marine & large num- ATO being provided through lend-lease. ber of cargo vessels and tankers for the transportation of defense 4. CHINA articles under lend-lease up to September 1, 1941. 1 The First Supplemental Appropriation Act for the final year 1942 empowers the Meritime Commission In the case of China, as with Britain, n. major task has béen to im- to acquire and merchant venda through appropriations and contract authorizations is . use prove, extend, and make secure the long communication lines over amount of $1,099,630,000. This appropriation net also empowers the President, when be it in De interest of the defense of the United States, to lege under the provisions of the Lond-Lease Adf any of the which defense articles must be delivered. Cargo vessels have been shipe arquired or constructed under such authorization or appropriation. supplied by the United States Marítime Commission to carry needed Regraded Unclassified 24 25 goods over the long voyage to Rangoon, Burma, the principal remain- Greek troops, after the brave defense of their country, managed ing port of entry into Free China. to escape in some numbers to British territory in the Middle Enst. Overland transport into Free China requires the use of highways, Here they are re-forming their units, re-equipping themselves with the railroads, waterways, and airlines. Fundamental steps have been United States material now reaching that Brea in increasing quantity taken to strengthen these vital routes. Paving materials have been and preparing to meet the enemy anew. delivered and applied to the resurfacing of China's life-line, the Yugoslavia is also represented by a Middle East Legion, toughened Burma Road, and a growing fleet of lend-lease trucks is in operation by experience and ready to use the military and naval equipment on Chinese arteries of military and essential civilian supply. Regular 68 made available to it under the Lend-Lease Act. shipments of gasoline, motor oils, spare parts, and tires are being pro- Norway is represented principally by her merchant sailors. Amer- vided to service these trucks and other vehicles. ican degaussing cable today protects Norwegian ships against mines, China's virtually limitless manpower, which built the Burma Road United States-supplied guns have been installed on decks against unaided, is now harnessed to lend-lease equipment and materials, aircraft and submarine attack, and in shipyards from the Caribbean in the tremendous job of rushing a railroad through malarial Yunnan to Maine, Norwegian ships are today being repaired after suffering Province. Under the direction of the United States Public Health bomb and shell damage in the vital job of transporting the goods. Service, is mission is being sent to protect the lives and health of 5. BELGIUM workers on this vital project. The protection of China's highways and railronds, her airfields and Only in the case of Belgium and the Netherlands, among the occu- cities from wanton acrial attack requires flects of modern fighter pied nations, does thure still exist free national soil which these govern- planes. Lend-lease contracts have been concluded during the past ments can defend. The Belgian Congo has obtained from this quarter to reinforce the Chinese Air Force by early shipments of this country scout ears, machine guns, aircraft, and hospital equipment, class of equipment. among other items, for the use, not only of its troops regularly sta- To advise and consult with Chinese authorities concerning the use tioned there, but of free Belgians who are re-forming their lines in of the defense articles already provided them under lend-lease pro- that free territory. cedure, as well as those scheduled for future delivery, there has been 7. THE NETHERLANDS organized a military mission, which is even now proceeding to Free The Netherlands is showing that in her colonies in the East and Chinn. It is expected that the observations of this mission, and West Indies, and in Surinam, there is being maintained the spirit conferences with the leaders of the armed forces of China, will deter- of stolid resistance which the world has come to expect of this people. mine the types of defense equipment best adapted to the actual The Netherlands East Indies are a strong force for peace in the Pacific. conditions of warfare in that country, and will insure the effective Furthermore, the world looks to this Empire for a large part of its use of the equipment provided. supplies of rubber; of bauxite, from which comes the aluminum for our airplanes; of tin; and of quinine. To enable these territories 5. GOVERNMENTS IN EXILE to protect themselves, we have made available to The Netherlands In providing for our defense, full consideration has also been given Government the use of our strained productive facilities. For such to the requirements of those European countries now occupied by products as The Netherlands have obtained they have paid in cash. the aggressor. These nations are represented politically by govern- There have been shipped to the Indies from the United States arms ments in exile; physically, by civilian workers, soldiers, and sáilors and ammunition of all kinds; bomber, fighter, and trainer aircraft; operating throughout the world for a common cause. naval boats and tanks; RS well as a wide assortment of commercial Poland stands out as the first country overrun by the invoder, goods urgently needed for the minimum existence level of this island Poles from the United States and Canada are joining together in a territory ent off from its home source of supplies. Canadian training camp, preparing to take their part in their country's 8. THE AMERICAN REPUBLICS fight. And from this country, guns, ammunition, and clothing are being supplied to the Polish Government for this venture under the In furtherance of the strategic requirements for adequate defense terms of the act. Also, the Polish merchant marine has received the of this Nation through complete defense of the Western Hemisphere, equipment necessary to carry on under the dangerous conditions im- steps are being taken to provide the other American Republica with posed by modern warfare at sen. the equipment and materials vitally needed ns insurance against 26 aggression. This decision follows an extensive analysis of the various essential requirements of each individual country, as well as of its relative position in the total defense of the Western Hemisphere. Naturally, the bulk of current production must go to those nations which are now actively resisting aggression and to the building up of the defenses of the United States, Yet, it has been found necessary to develop a broad program of aid to the American Republics which will assure to them the material required for the development of n. dynamic defense. Through the cooperation of the Departments of State, War, and Navy, these programs are rapidly being reduced to lend-lease requisi- tions, and these requisitions will be implemented by the necessary allocations of funds and placement of orders as rapidly as possible. In this connection it should be noted that two of the American Re- publics, Brazil and the Dominican Republic, have already utilized lend-lease facilities and paid over a million and a quarter dollars to secure military supplies on a cash reimbursement basis. 9. FOREIGN REPRESENTATION The Division of Defense Aid Reports maintains constant relations with the representatives of those countries whose defense the President APPENDICES has found to be essential to that of the United States. Programs of those nations for the continuous expansion of their war effort are constantly before us for integration with the United States program as a whole, and the lend-lease program in particular. To carry out a program as large and as broad in scope as the lend- lease program would be impossible without the benefit of "on the (27) spot" reports from competent United States representatives. In the administration of the lend-lease program, liberal use has been made of the diplomatic, military, and naval missions abroad. In addition, there have been established in the United States Embassy at London, and at the United States Legation at Cairo, Egypt, full-time representatives serving the lend-lease program. These sources of information will shortly be augmented by the military mission which is now en route to China. APPENDIX I MEMORANDUM ON DISTRIBUTION OF LEND-LEASE MATERIALS ABROAD FOREIGN OFFICE, S. W.1, 10th September, 1041. MY DEAR AMBASSADOR: With reference to the conversations about lend-lease material which have recently taken place in London and in which you have participated, I euclose B memorandum on the policy of His Majesty's Govern- went in the United Kingdom with regard to exports from this country and with regard to the distribution here of lend-lease material. I shall be glad if you will musmit il to your Government. Yours sincerely, ANTHONY EDEN. Ilis Excellency The Honourable John G. Winant, LONDON, September 10, 1941. DRAB Mu. EDEN: Thank you for your letter of September 10th, enclusing a memorandise on United Kingdom export policy and on the distribution of lend-lease material. I have caused the memorandum to be Transmitted Dume- distely to Washington for the information of my Government. Sincerely yours, Jour C. WINANT. The Right Honorable Anthony Eden, M. C. M. P., etc., etc., ple, Foreigo Office, S. W. 1. MEMORANDUM 1. AD materials which we obtain under the Lend-Lease Act are required for the prosecution of the war effort. This principle governs all questions of the distribution and use of such goods and His Majesty's Government have taken and will continue to take action to secure that these goods are not in any case diverted to the furtherance of private interests, Export Policy 2. Lend-lease materials sent to this country have not been used for export and every effort will be made in the future to onsure that they are not used for export, subject to the principle that where complete physical segregation of livid-lease materials is impracticable domestic consumption of the material in question shall be at least equal Mo the amounts received under lend-lease. 3. His Majesty's Government have not applied and will not apply any na- leriale similar to those supplied under lend-lease in such a way as to enable their exporters to enter new markets or to extend their export trade at the expense of United States exporters. Owing to the need to devote all available capacity and man-power to war production, the United Kingdom export trade in restricted to the irreducible minimum necessary to supply or obtain materials essential to the war effort. 4. For some time past, exports from the United Kingdom have been nure and houpo confined to those essential (1) for the supply of vital requirements of overseas countries, particularly in the sterling empire: (IT) for the acquisition of foreign exchange, particularly in the Western Hemisphore. His Majesty's Government have adopted the policy summarised below: (29) Regraded Unclassified 30 (f) No materials of a type the use of which is being restricted la the United States on the grounde of short supply and of which We obtain supplies from the United States either by payment or on Lend-Lease terms will be used in exports with the exception of the following special cases: (a) Material which is needed overseas in connection with supplies executial to the war effort for ourselves and our Allies, and which cannot be obtained from the APPENDIX II United States. (b) Small quantities of such materials neoded as minor though essential som. METHODS EVOLVED TO EXPEDITE DEFENSE AID poneuts of exports which otherwise are composed of materials not in shren supply In the United States. Included in the first report to the Congress by the Division of Delense Aid (e) Repair parta for British machinery and plant now in use, and machinery Reports was a comprehensive description of the procedure being followed in and plant needed, to complete installations now under construction, NO long as earrying out the Lend-Lease Act, together with samples of the principal forms they have already been contracted for. Leing used. Since the first report, there has been careful consideration of addi- Steps have been taken to prevent the export (except to Empire and Allied tional methods which would expedite the supplying of aid to countries realating territories) of euch goods which do not come within the exceptions referred to in aggression. Among recent developments in procedure are the following: (a), (b), and (c) above. (II) Materials similar to those being provided under lend-lease which are not Revolving Funds in short supply in the United States will not be used for export in quantities Modern war moves with Increasing rapidity and the theaters of war change greater than those which we ourselves produce or buy from any source. overnight. With these changes come urgent requirements for new types of ma- terial and now weapons. Distribution in the United Kingdom of Lond-Lease Goods To meet these critical requirements, whether it be a machine tool to replace 5. The general principle followed in this matter is that the remuneration re- one destroyed by enemy action, or special equipment for desert operations, there celved by the distributors, whatever the method of distribution, is controlled and have been established by the direction of the President revolving funde for the will be DO more than a fair return for the services rendered in the work of distribu- War, Navy, and Treasury Departments with which to finance immediately such tion. The arrangements rigorously exclude any opportunity for a apeoulative urgent requests BE are recommended for approval by the cognizant. departments profit by private interesta from dealing in lend-leased goods, In most cases, and endorsed by the Executive Officer of the Division of Defense Aid Reports. land-leased supplies will be distributed through organizations acting as agents By this authorization it in possible to initiate procurement with lend-lease of His Majesty's Government in the strict sense of the term and not as principale, funds within 24 hours after an urgent request is received from a country desiting Where for strong practical reasons this cannot be done a full explanation will be lend-lease aid. Blanket Allocations supplied to the United States administration and their concurrence sought before- hand in any alternative arrangemente proposed. The justification for retaining Included in the lend-lease program are approved projecta for supplying vast existing channels of distribution operating under strict Government control, is quantities of the same general type of defense articles. These Include programs that the crestion of elaborate bew organizations in their place would inevitably for basio r&w materials such BM steel which maintain the tempo of production result in loas of efficiency and the wasteful use of manpower, and retard the war abroad: for ship repairs which keep in service merchant and combat vossels; and effort. In the distribution of lend-lease goods there will be no discrimination for aircraft accessories which maintain the fighting efficiency of the combat air against United States firms. forces. These requirements cannot be particularized in advance even though the 6. Food is a special case. Only some 5 or 6 percent to tonnage of the total program as a whole can be closely estimated. British food supply is coming from the United States and without great practical To provide funds for immediate action, as such requirements are made known complications it would be impossible to have a separate system for the distribution by cable and overseas telephone, a series of blanket allocations has been made to of lend-leased food. Food distribution in carried out in the United Kingdom by various departments, carefully restricted as to total amount and purpose, but DO wholesalers, to whom the Government sells food BE principals. In fact, the established that the recipient of leud-lease aid can draw down these supplies or Ministry of Food has established a close control over all distributive margins 53 services AH needed by direct application to the cognizant department. that neither the wholesalers nor the retailers receive any greater remuneration than is adequate to cover the cost of the services performed. No fond obtained Accelerated Transfer Directive Procedure on lend-lease terms le or will be sold at uncontrolled prices, Thus the general In accordance with the act of March 11, 1941, defense artícles remain In the arrangements as regards the issue of lend-leased food fit into His Majesty's custody of the United States Government during the period of production and Government's policy of stabilizing the whole price level of foodstults, & policy to may nut be transferred to a foreign government without the specific authoriza- which the Government contributes £100 millions a year. tion of the President. Careful controls have been established so that such 7. In some cases direct free distribution is practicable and will be adopted. For example, some milk products (including lend-leased supplies from the United directives are issued only for limited periods and they are therefore subject to regular review by the President. States) are distributed direct and free of charge to children and others in need through schools, elinics and hospitals. The distribution is undertaken by State However, the exigeneles of war and the availability of shipping space often make it imperative that transfer authorization be issued more quickly than would agencies and the cost of the distribution is borne by the Government. (31) September 10, 1941. Regraded Unclassified 32 be possible if the requests were processed completely. To meet this requirement the President has delegated to the Executive Officer of the Division of Defense Aid Reports authority in urgent cases to authorize the transfer of all but a limited list of especially critical items. This power has, of course, been used sparingly, but its existence has been invaluable in the few times that it has been necessary to invoke it. Simplified Adjustment Technique In the operation of a program as large and as broad in scope as the lend-lease program, productive efficiency and the rate of delivery can often be improved by minor adjustments upward or downward in the quantity of specific items being procured. To process such adjustments through the same procedure as the original authorization would work & tremendous hardship on the cognisant departments and discourage their efforts in the direction of accelerating the program as a whole To encourage the use of such adjustments by simplifying the manner in which they can be made, the President has authorized the Executive Officer of the Division of Defense Aid Reports to approve such adjustments. 199 SEP 16 1941 is down Sir /rederick: I have your letter of September n, 1041 concerning the destrability of G. quick conclusion of the proposed txx convention between the United tates and the British Government. Through a coincidence, 1 had written to the Secretary of State on september 11, 1941, commenting upon a draft of the proposed convention and expressing my opinion that "the possibility of settling this problem by & tax convention seens to as to provide a readier and more feasible MOGRE than any other which has been suggested." If it should be advisable for as to write the Secretary of State again, I shall bring to his attention your letter and the memorandum of September 10, 1941, enclosed therewith. Sincerely yours, (signed) B. J5. Secretary of the Treasury. Air Prederick Phillips The British Supply Council in North america washington, D.C. By Messonem 10:00 ATE CLKIT 0-16-41 Tile Ar. Thompson Regraded Unclassified 200 COPY 11th September, 1941. Dear Mr. Secretary, You were good enough to write to Mr. Secretary Hull during July asking him to take up the question of the negotiation of B tax convention between our two countries. I now enclose for your information a copy of a memorandum on the matter which I have received from the Legal Department of the British Air Commission. I would draw your attention in par- ticular to the final paragraph of the first part of the memorandum, In which it 1E stated that the total liability may well run to 88 much as $20 millions or more; and to the second paragraph of the memorandum, explaining the delays which are taking place in the negotiation of the convention. In our present dollar situation it 15, of course, of considerable importance to ue to avoid payment of these taxes, and since, as you will Bee, some of the taxes are already due or are becoming due, the matter 18 one of urgency. The British Government will be most grateful for any esistance which you may be able to give us in impressing, particularly upon the State Department, the desirability of a quick conclusion of the convention. Believe me, Dear Mr. Secretary, Yours very truly, (signed) F. Phillipe The Honourable Honry Morgenthau, Jr., Secretary of the Treasury, Washington, D, C. Regraded Unclassified 201 FROM: W. 4. ROSEBOROUGH TO: BIR FREDERICK PHILLIPS September 10, 1941 R&: United States State and Loan] Taxation. Since the date of my memorandus to you of June 30, 1941 in which I endeavored to outline the actual and potential import- ance of United States state and local taxation, there have been various developments in this situation which should, I feel, be called to your attention. These developments have, on the whole, been unfavorable and the situation with regard to taxation by certain state and local authorities has DOW become critical, requir- ing prompt and definite action. I. Situation in the Various States. 1. Washlucton. This is the only state in which recent developments have been definitely favorable. AS a result of rulings obtained from the State Tax Commission it appears that neither the Use Tax nor the Fales Tax will be claimed upon aircraft (or equipment therefor furnished by the British Government) name- factured 1a this State. However, the so-called Manufacturer's or occupational Tax of 1/4 of 15 is claimed and to being paid upon current deliveries of aircraft by the Booing company. As this tax Regraded Unclassified 202 is imposed upon the manufacture of the airplanes it is difficult under present legislation to claim exemption although the British Government is bound by contract to pay the tax as a special item, thus causing its sconomic incidence to fall directly upon the Government. The total emount of the tax which will be payable with respect to airplanes presently on order or heretofore delivered will be something in the neighborhood of $75,000.00. 2. Celifornia. The situation in California, despite the efforts of the State Department and my recent discussions with the tax authorities of that State, resains confused and highly unsatis- factory. On July 8, 1941 the Attorney General gave the Governor of California as opinion which hold, in effect: À. That the tax is not due or. airplanes shipped out of California by means of common carriers (whether railroads or steamships). This was clearly established and provided for in the California Regulations. B. Steanships operating under the so-called Requisition Scheme of the British Government are deemed to be common carriers for this purpose. C. Sales taxes are due, however, or airplanes shipped from California ports abourd British owned vessels. The opinion is not, of course, clear as to whether this would apply to sirplanes delivered to, for example, the Australian Government, and shipped aboard vessels belonging to the United Kingdom Govern- sext. resumably the tax would not be payable in such a case. -2- Regraded Unclassified 203 D. The California Use Tax 10 not payable on "Exbodiment Loan" equipment belonging to the British Covernment and held by the aircraft manifacturers in California for Installa- tion. This exemption is on the theory that a foreign government 10 not a person within the meaning of the Use Tax Statute, the opinion does not cover or exclude the possibility of the applica- tion of the theory that the property is "used" within the meaning of the statute by the aircraft manufacturers themselves by reason of their storage and installation of the material. The language of the California Statute in defining the term "use" 18 broad enough to support such a theory. B. The personal property tax is payable upon the above referred to "Embodinent Loan" equipment, as well as on office furnishings and equipment owned by the British Government in California. This opinion appeared to eliminate the potential liability for California Use Tax and to reduce to a relatively insignificant amount the liability for the Sales Tax under the system of delivery being followed at the date of the opinisn. As a result of my discussions with the tax authorities of the County of Los Angeles, and the State authorities in San Francisco, I vas also encouraged to hope that exemption for the Personal Property tax upon Embodiment Loan equipment supplied by the British Government would also be granted. In the meantime, how- over, the situation with regard to the Sales Tax has been - pletely changed by reason of the flight of the airplanes from California by the United States Aray Air Corps "Ferrying Command". -3- Regraded Unclassified 204 the California aircraft companies have taken the position that, despite all stops which have been taken to minimise the danger of the imposition of the tax, there remains such arrisk that they must insist upon the entire amount of the Sales Tax being paid star to them and cannot be satisfied, as I had heped, either by an opinion of the Attorney General or by a ruling of the State Board of Equalisation. The total amount of this tax liability on air- planes flown or to be flown by the Ferrying Cessand will be - where in the neighborhood of $5,000,000.00. The potential liability for the Use Tax on all Rabodi- ment Loan equipment supplied by the British Government (both in the past and in the future) has again been raised by the action of the State Beard of Equalisation in assessing this Use Tax with respect to such equipment purchased from the Sparry Company. The actual assessment, made on August 25, 1941, amounts to something less than $7,000.00 but the fast that this assessment has been made would appear to indicate that the Board of Equalisation does not feel itself to be bound by, and does not propose to follow, the opinion of the Atterney General and again opens the door for the assessment of the Use Tax on the entire amount of Embodi- ment Loan equipment. This total potential liability may be estimated at somewhere between $7,000,000.00 and $10,000,000.00. No definite decision has yet been given by the auther- ities in Les Angeles County (who in tax matters are autonomous and act independently of state authorities) with respect to Personal Property Taxes, the actual assessments of which for this year are in Regraded Unclassified 205 excess of $300,000.00. While I am still in hopes that the ultimate decision might be favorable, 16 cannot be assured of this. The Sales Tax is also being claimed upon certain shipments which have been made in the past on vessels owned outright by the British Government. Although the amount of this tax an such shipments más in the past may not exceed $50,000.00, the prepartion of vessels armed outright by the British Government will, in all probability,inerease and sub- stantial amounts of tax on such shipments my be claimed in the future. 3. Nichigan- Two assessments of Personal Property Tax have been made by the City of Detroit upon facilities owned by the British Government and held by the Packard Company, and upon other personal property of the British Government in the City of Detroit. The total of these assessments is sonewhat less than $150,000.00 on an assessed valuation of some 85, 500,000.00. These assessments have not been paid and penalties and interest thereon are secumulating. 4. Connecticut. Capital facilities in the value of - thing in the neighborhood of $25,000,000.00 are held by the British Government in the State of Connecticut. The various authorities of the local taxing jurisdictions within which these facilities are held have, despite the efforts of the State Depart- sent, indicated their intention to tax this property of the British Government. The attitude of the State Tax Commissioner -5- Regraded Unclassified 206 10 set forth in the paragraphs quoted below, from his comminion- tion to the state Department, dated July 30, 1942.s "The memoranda furnished by the Solicitor for the British Ambassador refers to tax exemption in states where sales or Use Taxes are in operation, taking into considere- tion the comerce clause of the Federal Constitution. "The situation in Connecticut appears to no radically different, in that the British Government processors the fee and title to personal and real property in the nature of land, buildings and machinery which is office to the realty. To the writer's knowledge there is no exemption either in Connecticut law or in Treaties between Nis imjecty's dovernment to own real or personal property within the justa- dietion of the United States having the save exempt free local taxation unless said property was used for embasay or consular purposes. "May I call to your attention that the Tax Consid- sioner in Connecticut is an administrative officer without any vested power of supervision and direction over the musi- cipalities of the State unless expressly provided by Law, particularly when the question of tax examption is involved. "I shall be pleased to refer this matter to the Attorney General of the State of Connecticut for an opinion and on receipt of the same I shall forward you a copy of the opinion with a memorandum of procedure." It 1s difficult to give any estimate of the amount of taxes which my be imposed on the facilities held in Connecticut as the rates naturally vary in the various local jurisdictions. In all probability the rates on the average would be substantially lower than these in force in Los Angeles County (spproximately 55) but using these rates as a rough basis for estimating the possible tax, a total potential liability of $1,250,000 would be arrived at. 5. Rhode Island. Messachusetts and Pennsylvania. The situation with regard to taxation of facilities held by the British Govern- ment in these three states appears to be substantially similar to =6= Regraded Unclassified 207 that is Connecticut, although the amounts invelved are smaller. Leanl authorities in all of these states have indicated that they intend to impose real or personal property taxes and - have just been advised that a tentative assessment of $40,000 has been nade by the City of Pawtucket, Rhade Island upon fusilities owned by the British Government and held by the American Ourlikan Garda Corporation. A total of $100,000.00 would prebably cares the taxes of this nature which would be claimed by the local exth- orities in these three states for this year. 6. Now Jersey. Se far at is known, the authorities of this state have 80 far given no indication of their intention to tax the property, valued roughly at $15,000,000.00, - Tegr the British Government and held by Wright Aeronautical Corporation. It is quite possible, however, that such - may be imposed in this State and 10 is virtually inconseivable that the authorities of New Jersey would refrain from taxing this property if the authorities from other states success in taxing sinilar property. to summarise, present indications are that the total actual or potential liability for state and local taxation my well run to as smoh as $20,000,000.00 and it is senseivable that it may exceed this amount. 4a stated above, the situation 1a - tain cases has become critical and prompt and definite action should be taken. -7- Regraded Unclassified 208 II. is a result of missrous discussions with representa- tives of the Treasury, State and Justice Departments, extending over several sonths, it is, I believe, the unanimous opinion that the only effective way of dealing with this tax situation is the conclusion of a Convention between the two Governments. This, as you know, has been my conviction for many months. The number of local authorities to be dealt with is too great to make it feasible to obtain satisfactory results by discussion and negotis- tion. The type of taxes and the legislation under which they are imposed aretoo varied to render it feasible to deal with the matter by litigation. It is apparant that under the present state of the law the state Department does not have at its disposal the means to produce satisfactory results by its intervention with the various authorities. The difficulty in meeting the situation in this manner is aggravated by the fact that in many states the local authorities who impose the taxes not autonomously and are not bound by the opinions or rulings of the state authorities. Despite this unanimous opinion on the part of all inter- ested parties, progress toward the conclusion of the propesed Con- vontion has been disappointingly slow. lunerous conferences and discussions have been held At a joint conference (held about the 15th of August) between representatives of the State, Treasury and Justice Departments, a proposed text of the Convention was tenta- tively agreed upon. However, this text has not yet been formally -8- Regraded Unclassified 209 submitted for discussion with representatives of the British Government, but on August 23, 1941 it was resultited by the State Department to the Decretary of the Treasury and, I believe, to the Acting Attorney General, with the inquiry whether or not they still desired that the Convention be concluded and whether or not they still agreed with the proposed text. No subsequent action has been taken, and it is my understanding that no action can be taken until Mr. Hackworth, (to whom the hatter has been referred in the state Department) has returned from his vaction, on September 16th. It is then to be hoped that the draft Convention will be submitted to members of the British Embassy. The delay is most unfortunate, however, and steps should be taken to assure that the matter will be dealt with with the least pessible delay. Regraded Unclassified 210 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE September 16, 1941 TO Secretary Morgenthau Mr. White FROM subject: British Press Clionings on U.K. Food Situation 1. London's stocks of food are larger now then they have been during the last 12 months. According to the London Divisional Food Officer, there are sufficient stocks of elx of the most important commodities that will provide the ration, end in some cases double the ration, for everybody for two weeke in any emergency. 2. In order to stop black market deala, an order has been issued requiring all wholesalers dealing in foodstuffs for which retailers require licenses to be licensed themselves. Licensed wholesalers are forbidden to buy from anyone wao 18 unlicensed. 3. 111 will not be "rationed" but its distribution will be strictly controlled to ensure that the jeople who require milk most will get 1t, the balance being made svailable for the others. It 1s recorted that the quantities of milk produced in the winter months will not equal the present level of consumation. 4. Food prosecutions in July totaled ,846, the highest number of any month since the war began. Only 167 were unsuccesful. Since the beginning of the war the Ministry of Food has undertsken 26,417 prosecutions, 75,035 of them successful. 5. A resolution was unenimously carried by the Transport and General Workers' Union Conference calling on the Government to arrange A more equitable distribution of evailable food supplies, to be related to need and not to income. Regraded Unclassified 211 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE September 16, 1941 TO Secretary Morgenthau FROM Mr. White Subject: Negotiations between the Bank of England and the Yokohama Specie Bank for the Establishment of an Anglo-Jepanese Barter Account 1. The Ambassador, in response to inquiries regarding R newspaper report that a barter arrangement WAS being negotiated with Japan, was informed that an arrangement was under considera- tion for the establishment of an Anglo-Japanese barter account. However, blocked Japanese funds were not to be released and the amount of transactions under the arrangement would probably be small. Britain would balance her supply requirements against considerations of economic warfare. The one transaction now contemplated is an exchange of 300 tons of asbestos for the same amount of magnesium. 2, The Ambassador was also informed that the transactions under the proposed agreement would depend upon action taken by the United States. (Coe to Secretary of the Treasury, August 29, 1941) Regraded Unclassified C 0 P Y 212 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 Benjamin Franklin Station Washington. D. C, 16th September 1941. Dear Cochran, I enclose some notes about the Chinese scheme. These are rather scrappy. but I think their general tenor is clear: and if they are not set out in the most logical srrangement, it is because they are taken from more than one telegram. Perhaps Niemeyer and I might have an opportunity of discussing the matter with you at as early a date as you can manage after you have read these notes. Yours sincerely, /s/ T. E. Bewley. Mr. E. Merle Cochran, United States Treasury. Copy:wec:9-16-41 Regraded Unclassified o 0 P 213 1. While theoretically there in an argument for centralising in the Central Bank of China that Bank is in fact not in a position to exercise any complicated functions. Further, it is directly under the control of Dr. Kung as President. The Bank of China is also a Government Bank, with the advantage of commercial connections: and its efficient help has BO far been very valuable. It would be & misteks to alter the system which is being built up with its assistance. 2. The bulk of transactions will be for Shanghai account, and owing to pressure from Japan and Nanking, the Central Bank of China can cer- tainly not operate openly there. The Bank of China ie already the rec- ognised agency for emigrant remittances via Hong Kong. 3. The Joint Committee proposal (three from Agency: three from Board). apart from the difficulty of making it acceptable to Chinese amour propre, would have the effect of eliminating the two Chinese members of the Board (Cryepsi and Hsi-temou) who are practical exchange bankers. Would it not be better to accept the present Agency Standing Committee of five (on which the three Chinese members of the Board are in the majority) and add the two foreign members for liaison with Washington and London? This would be less open to opposition from Kung and probably in practice more effective. 4. Our belief is that the Chinese could not accept the proposal that the Board can claim dollars at B. fixed rate at any time from the Central Bank, nor does this seem to us B. reasonable request, having regard to the Regraded Unclassified 214 - 2 - purpose for which the Stabilisation Funds were set up - which was to create general confidence in Chinese currency, not to provide for pre- ferential individual claims on exchange resources. 5. It must be clear that the Stabilisation Funds' reserves cannot be used at the sole discretion of some Chinese Bank, and that the Central Bank of China, for instance, cannot acquire them automatically by tender- ing Yuan notes - & purely inflationary process. 6. We should favour therefore - (a) no centralisation of clearing accounts in the Central Bank of China, and (b) a modification of the Joint Committee proposal in favour of paragraph 3 above. But in any circumstances no modification of system can work or be brought into functioning until the Agency (or its improved Standing Committee) have evolved and put into working order an adequate devolution of licensing powers, which will obviate continual detailed reference to Chungking. Such reference for physical reasons is irreconcilable with the maintenance of even a modicum of current trade transactions. 7. In order to develop Exchange Control China would have (1) As regards outpayments of exchange to create an organisation operating a detailed control over payments for imports. finan- cial remittances. etc. (2) As regards inward exchange, to rely in the main on the coopera- tion of the British and American controls. Regraded Unclassified 215 The British Control could direct that no payments to China may be made otherwise than to a bank licensed by the Chinese authorities to deal in foreign exchange. 8. But the immediate problem is how to create an effectively operating machine to meet the above needs. This machine needs two essential parts - (a) Licensing machinery for allocating exchange both for goods and financial payments. (b) Banking machinery for paying and collecting exchange. On (a):- The requisite of any effective exchange control is that there are adequate facilities for quick local decisions as to whether exchange is to be allowed for a given purchase or not. Marginal cases, it is true, may need to be referred but the general run of requests for foreign ex- change must be dealt with quickly and on the spot if essential trade is to be kept moving. There is never any possibility of referring the vast majority of cases, much less in a country such as China. Who under the proposed plan would pronounce on individual applications? We assume that the Agency, in conjunction with the Joint Policy Committee will lay down general principles, but who will be responsible for administration in each locality? It is contemplated to select cer- tain banks who will be authorised to pay out exchange on lines laid down by the Agency, or is it intended to set up branches of the Agency, through whom local payments may be made? The banks may be unwilling to accept the Regraded Unclassified 216 - 4 responsibility of allocating exchange but we doubt whether it would be practicable to set up competent local branches of the Agency. On (b) So far as banking machinery is concerned, we do not believe that one central organisation could effect the necessary payments in exchange. Whoever is made responsible for allocating exchange, we think it will prove essential to use licensed foreign and Chinese banks as Agents in the receipt and payment of foreign exchange. It is clearly impossible for the British Control to canalise payments to China, as suggested in paragraph 7. until they are assured that there are an adequate number of such channels to make it possible for the counterpart to sterling payment to be made in Fapi wherever it may be called for in China. We do not see the position of the Central Bank of China in this matter. Clearly it cannot be willing to do all the work because it has not got the necessary branches, quite apart from any lack of confidence that might be felt in the may it would exercise its powers. Since the real licensing power would be in the hands of the Agency and the Joint Policy Committee, and the mechanics of banking would have to be worked through the local banks, there would not be much point in holding the funds in the name of the Central Bank. Would it not be better to hold them either in the name of the Agency or, better still, of the Stabilisa- tion Board, leaving licensed banks to settle direct with the body chosen Regraded Unclassified 217 - 5 - without going through the intermediary of the Central Bank? 9. The main difficulty in our minds is that anything unduly cus- brous is bound to break down completely. On our suggestion, the scheme would consist of - (a) The Agency responsible for directing control at the centre and laying down principles on which exchange could be granted; (b) The licensed banks paying and collecting exchange on behalf of the Agency, payments being made either at the banks' discretion under Agency guidance or against permits issued by the local branches of the Agency; (c) The body in whose name all foreign balances, over and above working balances, would be held. 16th September 1941. Copy:wec:9-16-41 (CONFIDENTIAL) C o 218 P Y PARAPHRASE A confidential telegram of September 16, 1941 from the American Consulate at Kunming reads substantially as follows: According to information received by the Consulate the arrivels at Kunming during the first half of September of trucks over the Burma Roed have reached a new high. This in attributed to the use of newly arrived American vehicles. The Consulate is informed that about 2,400 new trucks are due to be delivered to the Southwest Trensportation Bureau before the end of October and that 1,002 new trucks have been received. Many of these are said to be bound for the fronts. A large portion of them seem to be carrying gasoline. For their initial trip all new trucks are re- cuired by a recent regulation to carry Government cargo. Copy:bj:9-26-41 Regraded Unclassified PLAIN 219 Tokyo vin Shanghai & N. R. Dattd September 16, 1941 Rec'd 11:05 p.M., 19th, Secretary of State Washington 1465, September 16, 5 p.m. SECTION ONE) The following note verbale, number one hundred American one, has been received from the Ministry of Fortign Affairs: "The Imperial Ministry of Foreign Affairs presents its complimEnts to the American Embassy at Tokyo and has the honor to state that the views of the Japanese GovErnment concerning the matter of gran ting the necea- eary permission, on a reciprocal basis, for the payment of the Expenses of the Japanest and American Embassies Consulates and other Governmental establishments and for the payment of the living and traveling EXPENSE of the officials thereof, concerning which B. proposal was made in the American Embassy's memorandum of August 9, 1941, WERE expressed in the memorandum of the Japanese Government under date of August 26, 1941. The Ministry also acknowledges the receipt of the American Embassy's mémorandum of September 9, 1941 referring to the same subject Regraded Unclassified 220 -2- W1405, SEPTEMBER 16, 5 p.m., from Tokyo. subject and has the honor to inform the Embassy that the Ministry is in accord withthe following arrange- ment arrived at through Exchange of the above memorandum and to request the Embassy to forward the necessary docu- ments and to furnish the necessary reports and assurance to the Japanese Government in accordance with the above agreement. September 13, 1941. It is added that the necessary documents pertaining to the Japanese Embassy Consulate and other official ES- tablishments in the United States and to their personnel shall bE forwarded and the necessary reports and assurances made by the Japanese Embasay at Washington to the Department of State. Addendum one. The United States (or Japanese) Government shall forward tothe Japanese (or the United States) Government 0, list of the various official accounts (irrespective of whether there are in the name of the chiefs of Establishment individuals or any other names) belonging to the United States (or Japanest) Embassy Consulates GENEral Consu- lates or other United States (or Japanest) officials items 08 communications charges wages for employEes, rent. GREW CSB Regraded Unclassified 221 NWN BLAIN Tokyo via Shanghai & N. R. Dated September 19, 1941 Rec'd. 1:20 p.m. 20th. Secretary of State, Washington 1465, Nineteenth, (SECTION TWO) Entertainment Expenses, and other running EXPENSES customarily paid from such accounts shall bE combined in total sum for Each month, and the details of those itsms omitted. The Japanese (or the United States) Government, on the basis of the past record, shall grant a general license to the above mentioned United States, or Japanese, official Establishments and transacting banks to permit the free Expenditure of a fair monthly sum. With regard to the Extraordinary Expenditures involving large amounts of money such as the purchase of officE supplies, Extensive repairs on buildings Et cetera application shall bE made in Each instance by the United States (or Japanese) Govern- ment to the Japanese (or United States) Government. The United States (or Japanese) Government shall report to the Japanest (or United States) Government the method of replenishment of such accounts. The above mentioned report is required to specify clearly 222 -2- 1465, Nineteenth, (SECTION TWO) from Tokyo. clearly the source of the fund to bE used for replenishment of such accounts and the amount of the funds to bE transferred monthly to Each account concerned. The JapanEsE (or United States) Government shall grant promptly all nEcEssary pErmits to the above mentioned official Establishments and banks handling the transmissions to Enable the United States (or Japanese) official establishments in Japan (or the United States) Each month to replenish appropriately their official accounts. In order that assurances may DE given by the United States (or Japanese) Government to the Japanese (or United States) Govern- ment to the Effect that the payments permitted from such accounts are used only to cover official Expendi- tures of the United States (or Japanese) official Establishments in Japan (or the United States), the banks handling such accounts shall bE required to make prescribed reports to the Japanese Ministry of Finance (or the United States Treasury. GREW ALC Regraded Unclassified 223 AF PLAIN Tokyo via Shanghai &N.R. Dated Sept. 19, 1941 Rec'd 11:55 a.m. Secretary of State, Washington. 1465, September 19 (SECTION THREE) Two. The United States (or Japanese) Govern- ment shall forward to the Japanese (or United States) Government a list of the names of the United States (or Japanese) Ambassador and staff members of the American (or Japanese) Embassy at Tokyo (or at Washington); the American (or Japanese) Consul General and staff members of the American (or Japanese) Consulates General in Japan (or the United States); Consuls or staff members of the Consulates and all other Employees of the American (or Japanese) official establishments. It is required that the list shall indicate the name of the private account of each individual, the name and address of the transaction bank and the amount of monthly living and travel EXPENSE needed by Each person. Although such monthly amount is limited De 224 -2- 1465, September 19 (SECTION THREE) from Tokyo. is limited both for Japan and the United States to two thousand dollars or the equivalent for ambassa- dors, one thousand dollars or the Equivalent for financial commissioners, one thousand five hundred dollars or the Equivalent for counselors and mili- tary and naval attaches, one thousand dollars or the equivalent for first secretaries, SEVEN hundred fifty dollars or the equivalent for consuls and second secretaries and yen fifteen hundred for nll other American Government officials in Japan and five hundred dollars for Japanese Government offi- cisls in the United States, the Japanese (or United States) Government shall grant necessary licenses or similar treatment 90 as to render free the CASE of such required amounts. The Expression 'or its Equivalent' means the amount in yen of the afore- mentioned amount of dollars converted at the offi- oinl Exchange rate. When, due to special circim- stances, an amount is required in EXCESS of that granted by such general license or treatment cor- responding thereto, necessary permission for the Expenditure of such EXCESS amount shall bE granted on the basis of applications by the American or Japanese Embassy at Tokyo (or at Washington). The United Regraded Unclassified 225 -3- 1465, September 19 (SECTION THREE) from Tokyo. The United States (or Japanese) Government must give guarantees to the Japanese (or American) Govern- ment when forwarding the aforementioned list of names, that the accounts concerned included only individual accounts, that the funds concerned will bE used only to defray the personal EXPENSES in the Japanese Em- pire (or the United States) of the period in whose name the account is established. GREW WSB Regraded Unclassified 226 RS PLAIN Tokyo via Shanghai & N.R. Dated September 19, 1941 Ree'd 1:15 pem., 20th. Secretary of State, Washington. 1465, Nineteenth, (SECTION FOUR) andhis family and that when a person in whose name an account is Established departs from the Japanese Empire (or the United States) or loses his status, notification will bE given immediately to the Japanese (or United States) Government. Three. The Japanese (or United States) Government shall permit the remittance to the National Treasury of the balance from running EX- penses and the proceeds from the disposal of property of the Embassy, consulates general, con- sulates and other official establishments of the United States in Japan (or of Japan in the United States) as well as the income derived from the performance of consular functions. Also, officials and Employees of those Establishments shall bE permitted to remit funds to their home consul for the support of their families or for personal pay- ments, When such a remittance is made, a sum in yen Regraded Unclassified 227 -2-, No. 1465 from Tokyo, September 19, 1941; (SEC.FOUR), 1:15 p.m., 20th. yen (or dollars) corresponding thereto shall bE transferred to the frozen account. Four. Upon receipt from the Japanese Em- bassy at Washington of the list of Japanese of- ficials in the United States above the rank of Chancellor, the Government of the United States shall grant comprehensive permits each month the Yokohama Specie Bank necessary to make possible the payment of allowances remitted by the Japanese Government to the said officials through the Yokohama Specie Bank. GREW GW Regraded Unclassified NWN Tokyo via Shanghai & N. R. Dated September 17, 1941 228 Rec'd. 4:24 p.m. Secretary of State, Washington. 1465, September 19, (SECTION FIVE) The said officials shall be able freely to obtain their allowance. Five. The Japanese Government and the United States Government shall grant necessary permits to the National City Bank of NEW York and the Yokohama Specie Bank respectively, to enable the two banks to handle the financial transactions of American and Japanese Government establishments respectively. Fatabliahmente and American and Japanese official in Japan and the United States respectively. Oral In general, the Japanese Government has no objection to the drawing of drafts or checks by Ameri- can Government establishments or employees in the United States. As 8. practical problem, however, the Japanese Bank and the National City Bank of NEW York, which are supposed to handle these transactions, may decline to purchase euch drafts or checke of funds allotted for purchasing drafts and checke because of or Employees in Japan on the Department of State or on individual accounts Regraded Unclassified 229 (1465?) -2- 1460, September 19, (SECTION FIVE). accounts in the United States. As A practical problem, however, the Japanese Bank and the National City Bank of NEW York, which are supposed to handle these transactions, may decline to purchase such drafts of checks of funds allotted for purchasing drafts and checks because of insufficiency And also because of the irregularity of meil connections between Japan and the United States in order to avoid such inconvenience, it is considered that American official establishment and employees might also most suitably receive remittances from United States by telegraphic money orders through the Yokohama Specie Bank or remittance drafts" (END OF MESSAGE) Sent Department via Shanghai. GREW CSB Regraded Unclassified 230 GS PLAIN London Dated September 16, 1941 Rec'd 2:35 a.m., 17th Secretary of State, Washington. 4300, Sixteenth. Solicitors request cabled reply as to licenses referred to in Embassy's despatch No. 1098 of August lst. STCOR. WINANT EMB Regraded Unclassified TREASURY DEPARTMENT 231 INTER-OFFICE COMMUNICATION DATE September 16, 1941 TO Secretary Morgenthmu FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were se follows: Sold to commercial concerns £52,000 Purchased from commercial concerns £15,000 Open market sterling remained at 4.03-1/2. The only reported transaction consisted of £24,000 purchased from a. commercial concern. The Canadian dollar discount widened to 10-3/45 by the close, as compared with 10-5/8% last night. Continuing its downward movement, the Argentine free peso declined to a final quotation of .2368. It will be recalled that this currency W&B quoted at the current high of .2390 a week ago, In New York, closing quotations for the foreign currencies listed below were as follows: Brasilian milreis (free) .0505 Colombian peso .5800 Mexican peso .2070 Venezuelan boliver .2755 Uruguayan peso (free) 4400 Cuban peso 7/16% discount In Shanghei exchange market, licensed banks were reported to be quoting official rates only (for yuan in terms of our currency, approximately 5-11/324), We sold $7,500,000 in gold to the Bank of Java, which vas added to its earnarked account. The Federal Reserve Bank of New York reported that the following shipments of gold were being consigned to it: $6,242,000 representing two shipments from Canada, shipped by the Bank of Canada for account of the Government of Canada, for sale to the Bew York Assay Office. 2,102,000 from Colombia, shipped by the Central Bank of the Colombian Republic for its account, disposition unknown. $8,344,000 Total Regraded Unclassified 232 - 2 - The State Department forwarded a cable to us stating that the National Bank of India, Bombay, shipped $695,000 in gold from India to the Chase National Bank, New York, for sale to the New York Assay Office. We were advised that the Bombay gold price on September 13 was equivalent to $34.04, or 10# lower than the quotation for August 30. Silver advanced 1/16# to the equivalent of 44.75#. In London, spot and forward silver were again fixed at 23-1/2d and 23-7/16d respectively. The U.S. equivalents were 42.67# and 42.554. The Treasury's purchase price for foreign silver was unchanged at 35#. Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/4#. We made one purchase of new production silver amounting to 125,000 ounces under the Silver Purchase Act. This silver, which was bought for forward delivery, came from Peru. The Federal Reserve Bank's report of September 10, listing deposits of banks in Asia with the New York agencies of Japanese banks, showed that such deposite totaled $56,588,000, an increase of $124,000 since September 3. Also reported were selected items from the statement of the Yokohama Specie Bank's New York Agency: these showed no appreciable change. confidential Just Regraded Unclassified 233 RESTRICTED 0-2/2657-220: No. 494 M.I.D., W.D. 11:00 A.M., September 16, 1941, SITUATION REPORT I. Eastern Theater. Ground: Moscow reports the repulse of an attempt by German forces to land on the Baltic island of Oesel. German forces continue their advance towards the city of Leningrad. In the region south of Lake Ilmen, the Sixteenth German Army of General Busch reports the destruction of nine Russian divisions and the capture of 53,000 prisoners and large quantities of war materiel. Russian counterattacks on the Central Front appear to have subsided. No further information has been received as to the German operations in the Ukraine or in the direction of the Crimea. The Russian garrison of Odessa continues to offer stubborn resistance. Air: Soviet planes operated against German troop transports off Leningrad with reported heavy German losses. German planes made attack on the island of Oosel, North Riga. II. Western Theater. Air: Large numbers of British bombers attack Hamburg and industrial areas in Northwestern Germany and also LeHavro, also the Willhelmshaven and Ouzhaven submarine bases. No German activity reported over Britain. III. Middle Eastern Theater. Ground: No significant reports. Air: Italian communique reported attacks on Tobruk and Marea Matruh while the British claim raids on Tripoli, Benghasi, Gambut and Gerbini. RESTRI CTED Regraded Unclassified CONFIDENTIAL Purephro.se of Code Cablegram 234 Reserved at the Rar Department at 2,06 pam., September 16, 1941 Landon, fileds 5120 p.m., September 16, 1941. 1. British sto Activity over the Continent. a. Day of September 25. A total of 351 fighters were - pleyed as follows: 219 in the protection of shipping, 64 on 1.00 terception patrols, 61 on effensive missions, and 7 - special operations. finagerund w attacked by 6 Eleaheims, hite being obtained en a factory and a noter vessel. # Elemboine claimed hits - 2 motor vessels during an attack on shipping off the Frisian Islands. & B-17 carrying 2 - 2000 pound bember abandoned its mission against Cologes when it sighted A patrol of 6 Garman fighters over the Dutch coast in a position elightly above and about 20 miles ahoad. The B-17 was flying at 32000 feet, No interception was made and the B-17 returned with its bomb lead. b. Right of September 15-16. A. total of 209 boabers were dispatched as follows: 159 against the railmy center at - burg, 45 against the Le Have decks, 3 on ⑉ wining off Vara- sunde and 2 on 966 adving in the Fahrman channel. licet of these aircraft attacked their primary objectives. The weather NIF ditiens were faverable. 2. German Air Activity over Britain. a. Day of September 14. 15 reconneiseance and 15 long range benbers were mad. b. Right of September 14-15. 15 recommaisence planes and 5 lang range bembers vere employed. G. Day of September 15. No Gerean aircraft approved CONF over Regraded Unclassified CONFIDENTIAL 235 Regraded Unclassified Britain. Defensive patrols were unintained and recommissance of shipping w curried out - a small reals. d. Might of Replamber 15. A for isalated raids were made on Britain, Operations against shipping tesk place off the const of East Anglia, Mine laying aircraft with active in the Themas Istuary. 3. Aircraft Lesses Imported, 1, British leases, On Beytember 15, 1 Burrisans and piler and 1 Blerheis were lest, During the of September 15-16 beaber leaves were: 5 lost and 4 ereaked in Britain, the oren of the latter all being safe. b. Ands leases. On September 25, these were as fullows: 1 Ju-88 and 1 Mo-110 shot dom and 1 Me-109 and 1 Me-110 damaged. 4. British Air Activity, Other Theaters. a. North African Theater. Benghasi and Buree was attacked by 4 Wellingtons the might of September 13-14. a Suptember 14, 50 planes on the ground as Genber's were mashine gamed w 6 P-40's and 12 Burrisess. 2 P-40's ware damaged at several Aris air- craft ware destroyed e damaged. The - day - Aris meter column of 500 vahialse near Alam Dignaish - attacked w Mary- lands. 13 serties were made and direct lite obtained, resulting in several fires. 6 Marylands with a essert of fighters - CITALIAN FIGHTERS) engaged w 12 No-109's and 0-50'0 Leases resulting from this action were 3 Marricanes, 1 Maryland, 1 Me-109 and 1 0-50. 5. Axis Air Activity, Other Theaters. a. Middle Eastern Theater. The night of Suptember 13-14 CONFIDENTIAL CONFIDENTIAL 236 thes w attacked by is Axis aircraft. Only slight damage we caused. Alexandria was attached by 5 Ania planes the night of Apptember 14-15. The damage caused w this raid w also mall, LES I. B. $35.00 4.20P, 9/16/41 Distribution: Chief of the Army Air Ferom State Department (2) War Plans Division Office of Naval Intelligence (2) 0. H. 9. Record Section Intelligence Branch Secretary of Treasury O.A.S.W. A.S.N.A. Section File Collution Sgotiem B.K. 0-3 A.C. CE2D are CONFIDENTIAL Regraded Unclassified 237 September 17, 1941 9:00 a.m. RE SOCIAL SECURITY Present: Mr. Bell Mr. Brown Mr. Blough Mr. White Mr. llaas Mr. Currie Mr. Bell Mr. Viner M.M.Jr: All right, Bell, at your service. I love to give the Administrator of Petroleum Products the statistics on oil. Bell: Do you want Mr. Blough to explain what the program of the Social Security Board is? He gave you last week-- K.M.Jr: I tell you want I would like to do. I have done a little homework but not enough. I would like Mr. Blough, with interruptions - we will say no interruptions first. What the Social Security program is, as you understand it, and then what we are thinking of doing in connection with Professor Brown's separation wage and where the two, if any, overlan, you see. How is that? Is that all right, Dan? Bell: Yes, fine. Regraded Unclassified 238 - 2 - H.M.Jr: Do you think that is a good way to approach it? Brown: Very good. H.M.Jr: For my sake - everybody in the room most likely knows all about that, but I don't, so take it slowly. Blough: The Social Security program for this year is an expansionist program. In practically every field in which they have Social Security ser- vices; on the public assistance side, they want the old age assistance liberalized by making the eligibility tests easier and simpler and by increasing the minimum pay- ments. They want the Federal Government to contribute more in the poorer states for all of the public assistances through some variable grants in aid program and they want the general relief - 8 general relief cate- gory added to the other categories of public assistance. In the insurance program, which is quite separate and which seems to me might be con- sidered quite separately from the assistance program so far as its fiscal and other aspects are concerned, in the insurances, they proposed broadening, for one thing, the coverage of the old age and survivors insurance to include practically everybody that isn't in it now. All those they can on a com- pulsory basis and with respect to Government, state and local employees, on a voluntary basis, letting the governmental unit accept it or not as they like. The incorporation of a stamo book system to take care of the administration for the very transient groups like domestic servants, Regraded Unclassified 239 - 3 - agricultural labor and other groupe with which the employers - employers are nearly as numerous as employees. Likewise, to reduce the retirement age for women from sixty-five to sixty. Also to addto that program permanent disability so that it will not only be old age but it will be old age and survivors as it is now plus permanent dis- ability would be taken care of in that program. On unemployment insurance, they want it made a Federal scheme, & Federal plan instead of a Federal-State plan as at present. They want higher benefits for longer periods and they want the coverage extended to include prac- tically all people who work for wages except the Government employees and a few other groups that didn't seem to them practicable. H.M.Jr: Well, now, Roy, what is the present insurance scheme, right now? Blough: The present insurance scheme for unemployment insurance is a Federal three percent payroll tax plus Federal grants for administration. That is on the Federal end, plus Federal standards for administration. H.M.Jr: That is fifty-fifty, isn't it? Blough: The Federal Government pays all of the adminis- tration, as I understand it, of unemployment insurance. H.M.Jr: The whole three? Bell: But it comes out of the three percent tax. Blough: In effect, it comes out of the Federal share of the three percent tax. Regraded Unclassified 240 - 4 - H.M.Jr: But doesn't the worker contribute anything on it? Blough: The worker, in some states, contributes, but may I continue. The Federal Government doesn't have an insurance system. It has a forcing tax, a three percent tax, against which the employer is allowed to credit the taxes paid to the state government up to nine- tenths of that three percent, or two and seven-tenths percent. In other words, if the employer doesn't pay to a state unemployment system, he has to pay the whole three percent to the Federal Government. If he pays to a state unemployment system, he can use his tax receipts from the state as part payment of his Federal tax, up to nine-tenths of the Federal tax. As a result of that practically forcing Federal tax, every state in the Union has an unemployment insurance system to which em- ployers contribute and in a few states workers also contribute, but by and large it is an employer contribution system. H.M.Jr: And how much does that pay the worker? Blough: That pays the worker fifty percent of his wages up to twenty dollars a week, I believe is the maximum, after a week's waiting period, and not to exceed sixteen weeks. The standards vary, however, from state to state. I think that is a fairly typical standard, however. H.M.Jr: Up to twenty dollars & week? Blough: My understanding is most states have that as an upper limit. Brown: They vary a good deal, but fifteen to twenty is about the range of the maximum; and then the Regraded Unclassified 241 - 5 - range of the period of time paid is, say, from thirteen to twenty weeks. There is quite & bit of range in there. Blough: Yes. H.M.Jr: Do you mind if I stop right there? What I can't get il by own mind is, you have got this - you call it unemployment insurance. Blough: That is right. H.M.Jr: Now you come along with what you call a dis- missal wage. Now, just how do those two dovetail? That is what isn't clear in my mind. Brown: Of course the unemployment insurance is 8. long-range proposition that will go in- definitely, in good times and bad and in time of a defense program or ordinary busi- ness. In the case of the defense program, there seems to be an unusual risk tied up in over-all Government policy. That is the movement of millions of people into defense production and, at the same time, a very real effect on the earnings of workers, and then an expected morning after. In other words, it is an unusual risk factor. H.M.Jr: I appreciate that. Brown: So that the deferred wage, or whatever you want to call it, would be a special type of unemployment protection because of the unusual risk. H.M.Jr: Well, now, I have got the background. I get that. But I don't get how these two overlap or dovetail each other. That is what I need. 241 - 5 - range of the period of time paid is, say, from thirteen to twenty weeks. There is quite & bit of range in there. Blough: Yes. M.M.Jr: Do you mind if I stop right there? What I can't get in my own mind is, you have got this - you call it unemployment insurance. Blough: That is right. h.M.Jr: Now you come along with what you call & dis- missal wage. Now, just how do those two dovetail? That is what isn't clear in my mind. Brown: Of course the unemployment insurance is a long-range proposition that will go in- definitely, in good times and bad and in time of B. defense program or ordinary busi- ness. In the case of the defense program, there seems to be an unusual risk tied up in over-all Government policy. That is the movement of millions of people into defense production and, at the same time, a very real effect on the earnings of workers, and then an expected morning after. In other words, it is an unusual risk factor. H.M.Jr: I appreciate that. Brown: So that the deferred wage, or whatever you want to call it, would be 8 special type of unemployment protection because of the unusual risk. H.M.Jr: Well, now, I have got the background. I get that. But I don't get how these two overlap or dovetail each other. That is what I need. Regraded Unclassified 242 - 6 - Brown: Well, the idea is that I suggested, where in the case of a dismissal compensation, that would be the development of equities in the case of the individual. In other words, what he contributed or his employer contributed on his behalf would be labeled with his name so that when the post defense recession came, it would be to his credit as he became unemployed as an individual. In the case of unemployment insurance, that is insurance. That is for spreading of risk and the amount an individual pays in as long as he is eligible is only used to determine what his benefit average would be, whether it is fifteen dollars or twelve dollars. In other words, he could be draw- ing for twenty weeks against another person at ten weeks by the basis of rules rather than the exact amount he put in. Blough: The man who paid in the most might get nothing out of it. Brown: If he weren't unemployed. Blough: Yes. Brown: In this case, the idea is, since we will get into more money, that a man will get back whatever he put in. H.M.Jr: Just give me an example, for instance. Brown: Well, some of these young men that are normally getting, say, twenty-five dollars a week are now moving over into defense and earning fifty or sixty dollars B. week. H.M.Jr: Right. Brown: And by their contributing an amount per week and their employer contributing, they would Regraded Unclassified 243 - 7 - build up & kitty, see, that would become available to them as an individual when they were laid off and, say, were on the street for several months after this thing is over. (Mr. Currie entered the conference. H.M.Jr: Hello. Brown: Now, meanwhile they would be eligible for unemployment insurance, but this would be something additional to that because of the extra hazard involved in the defense program. H.M.Jr: What we are talking about is, for my edifi- cation, just how unemployment insurance, dis- missal wage, where they overlap, you see. Currie: Yes. H.M.Jr: I still don't quite get it. Let me ask you this. I can understand that a man - let's say we have got a fellow forty or fifty years old who is a skilled mechanic and they con- tinue him after this thing is over. But now we come along with a dismissal wage. As I understand it, it is to be fifty-fifty. Brown: Fifty-fifty would be the normal. H.M.Jr: Well, it would be something like that. Brown: Yes. H.M.Jr: All right. I want to ask you, supposing he isn't dismissed and let's say he has accumu- lated five hundred dollars in this fund. Let's say there is five hundred dollars acou- mulated to John Jones, you see, and he is not dismissed. Regraded Unclassified 244 - 8 - Brown: There would be two or three things, I should think. It could be held in the form of securities, that is, for & period of time, and then he can have it back if he 80 wanted or it could be added to his old age protection. That is what is happening in the case of some of the companies using it like Harvester. If & man is unemployed, it goes to him. If he is retained in the company, it goes against - makes it in addition to his pension when he is old. Bell: It buys him an additional annuity. H.M.Jr: But we don't have anything like that. Bell: Yes. Brown: No, we don't. Bell: Well, you couldn't put it in old age. H.M.Jr: We don't have anything like that. Bell: You would have to return it to him. White: There are a number of other possibilities, too, in which he could benefit by that depending on what details you want to work out. H.M.Jr: Is it warm in here? Currie: I was hurrying, Mr. Secretary. Brown: Well, it is an equity available to him and could be drawn in different ways. H.M.Jr: The reason I am asking these questions is, I raised this twice at Cabinet and Madam Perkins sat on me very hard. She says I don't understand it and she just brushes this 245 - 9 - dismissal wage thing aside. I don't know whether you know that she seems very much opposed to it. Brown: I didn't know it. H.M.Jr: Yes. She seems to be - no one evidently is doing any work on it. She seems very much - can you hold your talk a minute, Harry? White: Oh, yes. H.M.Jr: Now let me ask you another thing. Why isn't this, inside of this room, forced savings? Why aren't we forcing the fellow to save? Brown: Well, it is, but you can put it this way, any time you require a man to contribute, it is requiring him to save; but it is, of course, for specific purposes, not just general. That is, it is a program related to the defense program 80 that he will be able to help meet his situation after the defense program. White: Well, I think there is another reason why it is not forced savings in the pure sense, Mr. Secretary. Bell: Enforced savings, I think. White: I think it is an important distinction. It is that the employer contributes and gets nothing directly. Therefore, it is not forced saving for him in 80 far as the employee is concerned. He gets, depending upon the - how you share it, he gets an additional amount over what he saves. Secondly, the Government makes some contribution, either in the form of the administration costs or possibly in the form of & direct saving, 80 that it can be called forced saving only 246 - 10 - in the sense that the individual is required to save a portion of what he gets in return, but if you use that phrase with regard to that, then why not use forced saving with regard to old age pensions, to unemployment insurance, to even taxation, in which the employer may get certain benefits later on? I think it is stretching the term, forced saving, when you apply it to this. H.M.Jr: Let me ask you this: Why should the manage- ment contribute toward this? I mean-- White: Well, for a very important reason, I should say. H.M.Jr: Why? White: Two reasons. H.M.Jr: He is going to just - if he is doing business with the Government, he is going to add the cost. Bell: Going to increase prices. H.M.Jr: And increase prices. White: Well, he shouldn't. M.M.Jr: Well, where is he going to get it? Let's say it is three percent. White: Get it out of his profits, because he is supposed to be partly responsible - partly only - partly responsible for disemployment which occurs later. He shares some responsi- bility, both as a member of the business community and as an individual concern in which he hasn't made full provision for. Of course the Government shares also. That is, the people as a whole share, and that is why Regraded Unclassified 247 - 11 - the Government should make some slight contribution if possible. H.M.Jr: Well, I am going to argue with you. I have got a little factory, and I have got the various forms of insurance which are in existence today. Now you come along and say, because this fellow is getting fifty or sixty dollars 8 week, I, as a factory owner, should contribue toward the day when we have world peace. Now let's say it is going to be one percent or three percent. I mean, we have got to get out, I figure out all of these things. It is a direct increase to cost. I am not going to absorb it. I am going to pass it on. White: Every employer tries to pass on his costs when he can, but presumably when he deals with the public he may have some difficulty in passing that on. With the Government it may be easier, but I think steps ought to be taken to prevent the passing of that cost on in so far as it is possible. H.M.Jr: Well, I can see this. I can go this far. I can see why it is terribly important that the people who are in defense work today should be urged to set aside some of their money so that after the - what is it, you say thirteen weeks? Brown: Thirteen up to twenty. H.M.Jr: Weeks, that after that is off, they don't immediately come back onto the dole. We are talking here in the room. You have got to give me the time to think out loud. As I or anybody else talks about inflation or as it becomes more obvious, people aren't going to invest in the Government bonds. I mean, it Regraded Unclassified 248 - 12 - is going to be more and more difficult. They are going to go into equities. I just don't see - I mean, I just don't see how you are going to go to the Congress or to the owners and management, business management, and say, "We want you to set aside another one, two, or three percent out of your business today against - I can see at this moment why we should try to find some way to get - we are doing it through the voluntary payroll deduction plan, which is very moderately well, but I have got to be sold on this thing. Brown: Well, Mr. Secretary, I was on & committee on economic policy of the Business Advisory Council in which we went over this thing, and then they asked me to present it to the whole Council. Those are all presidents of com- panies and so on. We had quite a discussion and got relatively very favorable response. There was some, of course, definitely question- ing and others not. In fact, they got in quite a discussion as to whether the employer should pay all or the employee should pay all, but here is what we faced there. A great many corporations, I think upward of five hundred altogether, have paid in some form dismissal compensation because they felt 8. certain obligation in maintaining the morale of their total employees, that when they laid men off due to no fault of their own and who had served them for 8 period of time, that they owed something more than just the last pay check. Now, my own personal evolution on this idea was that we had the post defense problem to meet. I didn't think unemployment insurance was enough. On the other hand, we had the job of getting much larger flows of income to the Government from these wage earner levels. Regraded Unclassified 249 - 13 - H.M.Jr: That is right. Brown: They are making tremendous money compared to what they made before. It is a fairly difficult area in which to get income to Government. H.M.Jr: That is right. Brown: At the same time, politically and otherwise, 8.8 well as the advantage socially, it seems best to get it on an equity basis rather than a straight tax basis, that is, to get it from them for a period of time so that after the defense program was over they would get back something that was their own and had all the advantages of getting back something for which they had saved rather than relief from WPA or some other outright gift of Government. H.M.Jr: I am sold on that. White: May I give some reasons why the business man should be in favor of it, Mr. Secretary, why even from his point of view I think it is a desirable thing? In the first place, the forward looking businesses already have some such arrangement, whereas a good many of the less social minded or less progressive business don't. That puts the more forward looking corporations at a competitive dis- advantage in some cases. More important, however, is the fact that the businesses who will contribute to a scheme of this character are those who will benefit by its operations because during the down turn, in so far as this maintains business activity, they share in the general improved business. On the other hand, they likewise share in the Regraded Unclassified 250 - 14 - prevention of price rising during the period of inflation. So they get benefits which are very real, just as the employee gets benefits. Moreover, they are the ones who are benefiting more than the employee in absolute amounts, anyway, if not proportionate, from rising business during this period and finally, it is a social obligation which they have as leaders of enterprise or as participants of enterprise. They are responsible in large part for the way business operates. H.M.Jr: That is very pretty, Harry, very, very pretty, but how many do you think - how many business men do you think would subscribe to that? White: Just as many as subscribed to increased taxes. A good many of them won't subscribe. H.M.Jr: Well, how many is that? White: Not many. Therefore, they cannot be a criterion. H.M.Jr: I would like to meet them, Harry. Mite: I say not many. H.M.Jr: I would like to meet them. Brown: I think you would get much more support for this idea than the general taxes. In other words, they see the equity relationship. For example, they look back at the last war when we had silk shirts and pianos. H.M.Jr: Silk shirts and what? Regraded Unclassified 251 - 15 - Brown: Pianos. Remember these boys who work in the shipyards and every place else? They had to spend their money and they put it into all sorts of things and they paid two prices to get it. They just had to spend their money. That is the normal psychology of workers who get double income all of a sudden; 80 this is a case of getting this and holding it to pay their rent instead of paying double prices for 8. silk shirt. White: Why put it on that narrow basis of merely those who are getting large increases in pay? I think the severance wage is an important element of any social security program. That could be justified even if you never had & boom of this character result- ing from war. It has more - it has important fiscal consequences now which it wouldn't have under other circumstances. But - and I think those important fiscal consequences are an additional reason why the business man might very well be in sympathy with it where he otherwise wouldn't be. Blough: May I make one or two comments? I don't think the business man will like this nearly as well as taxes because in the case of this type of thing he feels he is going to pay it again later, whereas if he pays it in taxes there is no obligation on the part of the Government to pay it out again and he doesn't face the necessity for paying it back again, but I would like to pass on to one or two other things. Let us see what happens to these taxes, to these payments by the employer. (Mr. Viner entered the conference) H.M.Jr: We are talking about unemployment insurance Regraded Unclassified 252 - 16 - and dismissal wage. I hope you have got the answer. Hlough: Take these -- H.M.Jr: Do you want a lawyer in here now with all these economists? Bell: Not particularly. Blough: May I - whenever you are ready, Mr. Secretary. H.M.Jr: Go ahead. Blough: This dismissal compensation taxes or payments by the employer, take those parts that are paid by the employer if any, one of three things is likely to happen. Either the employer absorbs them - now, if he absorbs them, in the case of those people who are in defense industries or who have had big increases of profits due to defense, the Government bears seventy percent of the burden because those people would be paying thirty-one percent normal tax plus about seventy percent excess profits tax, which added together is a net burden of something over seventy percent. So if the employer absorbs it in those industries, it is the Government that absorbs or pays about seventy percent of the total. Now, the employer may not absorb it. He may not raise wages as much as he otherwise would. In that case it is the worker who takes the burden and in effect he is paying it just as if it were put directly on his payroll. Or in the third place, it may be passed on to the public in the form of higher prices, which means that in so far as the Government is the buyer, the Government again is paying it and in so far as the Regraded Unclassified - 17 - 253 consumer is the buyer there you have the so called real cost to the extent that it is the real cost going to the consumer but it isn't the real cost because it is on a savings account basis and not an employment insurance basis. Brown: May I just talk on that? I think the United States Government owes a dismissal compensation even if it bears a cost just as much as these progressive employers owe it to their people. The Government is pulling tremendous numbers of people to Government work indirectly or directly. H.M.Jr: Well, may I - I am sold on the dismissal wage. I think we ought to have it but I am trying to get the arguments back and forth and also fit it in. Now let me ask you this. I want to ask Bell this question. On the Social Security thing, when this is over, how we would be able to lower the taxes. Let's say we take in a billion dollars through the dismissal wage, you see. The funds are set up somewhere, I don't care where, but the money comes to us and we spend it, right? Bell: Yes. H.M.Jr: Now, this thing is over. We have either got to borrow or borrow it again to pay out the wage or have some kind of tax -- Haas: Borrow short term. H.M.Jr: One way or the other. We spend it now. White: Got to borrow it, that is right. Bell: All you are doing is borrowing that tax Regraded Unclassified - 18 - 254 money and it becomes & part of your public debt due to those individuals. Now, when you pay it out to them you have got to borrow from the other part of the public and pay it back. It doesn't increase your public debt. B.M.Jr: No, but this memo which I have which says that when the thing is over we will be able to drop these taxes, I don't think that that is quite -- Bell: You would be able to drop the dismissal - so called dismissal taxes. White: That won't affect the borrowing. That will merely mean that there are less sums available for you to borrow but it won't affect how much you have to borrow. On the contrary. K.M.Jr: It wasn't dismissal and the argument given me for the Social Security program wes that when this thing is over we will be able to reduce the amount. White: I think that was the other part of the program, Mr. Secretary. H.M.Jr: In the Social Security. White: Well, I think it probably referred to the part of the program of contributions to old age pensions and so on where it was stepped up for - partly for fiscal reasons and partly for others. Then they thought that if desirable you could move that down. But that wouldn't call for any more borrowing. H.M.Jr: But do you think we could intellectually and honestly say - let's just stick to the straight Regraded Unclassified 255 - 19 - dismissal wage. If we could call it some- how or other an emergency savings, something to tie it up with the emergency - that this is only for the emergency, and that when this emergency is over and if necessary, possibly to convince the people, make the legislation only for one or two years at a time. White: I think you could get it more easily that way. H.M.Jr: Only two years and then with a renewal to show the people that we only consider this for an emergency. What would you think of that? Brown: I think it definitely ought to be tied to the emergency, sir. White: Only because you can get it more easily that way, not because it is justified. H.M.Jr: No, no, but I mean - what do you think, Lauch, so as to leave it in the peoples' mind just like our gold devaluation and all that, it just runs for two years. It is emergency legislation. Currie: Yes, I think so. Present it as an emergency measure. I think it should be presented as an emergency measure to last as long as the emergency. H.M.Jr: Let me ask another question. Could this be worked out so that we could distinguish between ordinary unemployment insurance, which I under- stand is limited to twenty dollars a week -- Brown: That is right. H.M.Jr: Couldn't we say that - step it up from there Regraded Unclassified 256 - 20 where this leaves off. White: I think the unemployment insurance can easily - if you have this type of a wage and it has sufficiently broad coverage, the unemployment insurance can be postponed. That is, instead of beginning just the week after as it does in some cases, it could begin either three weeks or four weeks, depending upon how long the dismissal wage lasts, which would give an opportunity for the Administration to function more effect- ively in preparation of the insurance payments. Bell: Are you speaking of the disbursement of the funds or the tax? H.M.Jr: I am talking about the funds. Brown: Well, Mr. Secretary, there is a basic differ- ence between the unemployment insurance, being insurance, and this being equity. That is, it is in the individual name. Now, so that it would be repaid, suppose the man is unemployed. My own personal notion was that he would be paid in a lump sum. Now, the unemployment insurance is paid periodically. One of the troubles with the thing is that here we have got a tremendous concentration of people in Norfolk and places like that. In the case of unemployment - when the thing is over, tens of thousands of those fellows will go way back to Ohio and West Virginia and places of that sort. The dismissal compensation payment is going to help them do that, pick up their belongings and move back and start over, whereas the unemployment benefits are nothing but & relatively small periodic sum which, under the present arrangement, goes through & whole lot of 257 - 21 machinery to get payments in Ohio from Virginia contributions and so on. H.M.Jr: How about the argument that you hand a fellow a check for five hundred dollars and he is going to spend it all just like the soldiers' bonus? Brown: Well, there is always that, sir. White: And I think there are some other disadvant- ages to the lump payment which would have to be considered. There are some advantages. The important ones Mr. Brown has just enumerated, but there are some disadvantages that might make you end up, I think, with deciding that there shall be periodic payments, not stretched out in small amounts, but certainly not in one lump sum, maybe stretched out over three or four weeks. H.M.Jr: Evidently, Professor Brown, you haven't had a discussion with my people here, have you? Brown: Well, individually with some, some time back and at various times. Bell: Not since it was studied by this group. Currie: I might ask a few questions, because I am coming into this rather cold. H.M.Jr: You and me both. Currie: In the first place, I want to clear up one thing in my mind. You call it a dismissal wage. Does that mean that it does not accrue to the person if he leaves employment voluntarily? Brown: It is pretty hard to work out a terminology that clicks, but severance or termination or Regraded Unclassified 258 - 22 - separation, but since it would be an equity it would be in his name. If he continued in employment it would still be to his account, let's say withdrawable after & certain time or reserved for additional old age protection or something of that sort. I don't think you could disqualify him if he quit or were discharged. H.M.Jr: Well, I have got - do you mind? I just had a thought. Supposing again, using the fellow with five hundred dollars and he quits Pratt and Whitney. Let's say he doesn't go to work anywhere else. How would it be to say that this wage, this accumulation of savings, will not be paid to anybody until the President terminates the national emergency? Brown: That is right. H.M.Jr: See? Until the President terminates his national emergency, whether the fellow is fired or quits or retires. Blough: Or with the possible exception of some great personal emergency, a very special need. H.M.Jr: We would have a board to appeal to. Would that take care of you? Currie: Yes. H.M.Jr: I keep thinking of this, Lauch, in terms of emergency. White: If you want to modify that and make it flexible 80 it really declares an emergency in a particular commodity, because it is conceivable that you might have some industries - I mean, you wouldn't expect an emergency in all of them. 259 - 23 - H.M.Jr: Harry, you have got to keep in mind that we have got to sell this thing. The President has declared 8. state of national emergency. Some day he has got to say that is over and when that is over this thing would begin to -- White: It would increase its saleability, I think, unquestionably. H.M.Jr: Go ahead, Lauch. Bell: It seems to me it has got to be some other term. Haas: I think so too. The last war, Mr. Secretary, if you used that basis, you would have paid it out just when you were having the top of the inflation, you see, after the Armistice when the big price boom came. White: You can have some objective measurements, namely to decline unemployment at B. certain rate or something of that character. Bell: Certainly this emergency wouldn't be over until peace is declared. H.M.Jr: Use the commodity dollar. Use the General Motors-Cornell Index. Brown: One suggestion was that as of a certain time only those who were unemployed could withdraw and then maybe a year later or any other set time, those who were in employment could withdraw. In other words, that would control the outpayments by having those payments go only to unemployed persons first. H.M.Jr: Well, go ahead, Lauch. Currie: Well, the next question I had in mind was Regraded Unclassified 260 - 24 - considering this in relation to the unemployment insurance. That seems to me in the course of the discussion to be more or less dismissed as not being awfully helpful. We can't rely very much on that. I was wondering if we had given much thought to the possibility of extending - increasing the benefits, extending the period when these benefits are paid. The fund is growing pretty rapidly, isn't it, Dan? Bell: Oh, yes. You mean the unemployment insurance? Currie: It could be even more, probably. You could finance considerably higher benefits with an equalization scheme to have it more uniform throughout the country. White: You don't think there was any impression here that this would be in any way a substitute for the expansion of the unemployment insurance? I gather that this was to be in addition to the expense. H.M.Jr: Well, we are exploring it, Harry. Blough: There is B. certain limit beyond which we can't go on small incomes. At the present time what happens is, a man gets a hundred percent of his wage, less whatever the taxes are, and then when he gets in - when we get into a depression period, the Government finances him through relief. Now, what you are saying is this, in these heavy payroll taxes, that for people with small incomes, "We are going to take away from you part of your income, a substantial part, during the period when you are earning, SO that you can finance yourself during the depression period that follows,' and it seems to me in the case of a great many wage earners the size of their wages is so small that they simply cannot have fifteen percent, let's say, of that wage taken away and still finance themselves during the period when they are earning. They will have to have relief while they are working as well as while they are unemployed. Regraded Unclassified 261 - 25 - White: Let me restate that in terms of the same situation and see whether It sounds quite the same way. What you are asking the employers to do is to make some partial contribution. I am not directing my remarks to those who are advo- cating that the employee contribute all, because that is nothing but I scheme of forced saving that has all the disadvantage that you are suggesting, but he contributes part. It can easily be made progressive so that - your own suggestion, I think, in & memo was that those under ten dollars the employer contributes. Above, the employee makes some contribution. So that it becomes progressive and doesn't strike the very lowest strata and you can even make it more moder- ate on the group from eight hundred to twelve hundred income by having it somewhat progressive and they only contribute part and they are doing that at a. time when it is in their interest to prevent inflation, and when they are, as a group, better off, and it will take care to some extent of the time when they will be worse off, and it doesn't reduce the contributions which the Government presumably is going to make in unemployment insurance or any other form the Government sees fit to help them out in except relief, and the employee should be the last one who wants direct outright relief if he can avoid it. Blough: The prevention of inflation calls for con- tributions from the workers. This other idea calls for contributions from the employers. The two are not consistent. Brown: I wouldn't say that they are inconsistent. I think because the thing does a good job for two reasons doesn't make it internally Regraded Unclassified 262 - 26 - inconsistent. You are just using two arguments for the same thing. As this mat- ter of unemployment insurance over against this, the unemployment insurance is a per- manent machinery, and while it needs a very real improvement and will help in the post- defense, I don't think it should be lifted to a level which you would not want to continue, but now we are faced with an emergency where the Government of the United States really takes over a tremendous share of the economy and just pushes it to the limit, and then there has to be a relapse when peace comes. Now, that is a very special hazard for the great majority of our people, direct and indirect, that will be affected by defense and that is a particular hazard I think we need to face in advance rather than merely having it a relief - WPA - after the program. Currie: There is one important question of principle involved here, Mr. Secretary. That is, in one case the insurance or social legis- lation generally is designed to look after those who need it. All of us are the people who are working for the sake of those who are either unemployed or are old and can't work or disabled or something like that. This particular scheme, as Mr. Brown pointed out, is a matter of equity, that a lot of these people will continue to work in the post-defense period, most people will. The benefits will be given to the individuals, regardless of the need. In fact, the higher his salary has been, the higher his pay through the emergency, the greater his bonus will be at the end. There is quite B. difference in Regraded Unclassified 263 - 27 - principle in these two things. I think we ought to thoroughly explore that. Haas: Call it a readjustment bonus or something to separate it from this other. White: Moreover, I think we must bear in mind the fact, what I am convinced of, that unless we have some scheme of this character, we will be forced to go into an unadulterated scheme of forced savings. This is only a partial one. Haas: You may have to do that anyway. Viner: Is this an adulterated scheme of forced savings? White: It is adulterated by other contributions. It isn't pure. Brown: This is a well-bred scheme. White: A well-made scheme. Haas: You still may be in the other before it is over. H.M.Jr: Well, it is pretty close to forced savings. It is like using the word "convoy". We couldn't call it "forced savings" -- White: What would you call the share the employer gets? He doesn't get anything back. It certainly is enforced savings. H.M.Jr: Well, who thinks about the employer? White: The employer does, and really that is enough. He is able to take care of himself. Regraded Unclassified 264 - 28 - H.M.Jr: Harry, honestly sometimes I think Harry talks like a dollar a year man. I don't understand it. White: Yes, I am moving in that direction. (Laughter). Bell: If they keep on taking away taxes, you will be down to a dollar a year. (Laughter). Blough: It seems to me there is another aspect entirely we musn't forget in considering this, and that is that we are going to need a lot more taxes before this thing is all over. Viner: Spot newsflash. (Laughter). Blough: That is flash news as you point out, but relate it to this. To what extent will & scheme of this kind - I don't use the word "scheme" objectionably. I have juch sym- pathy for this plan. I would, however -- H.M.Jr: Harry doesn't have time to read his own memos, out öf his own shop, let alone yours. White: I read this one. (Laughter). H.M.Jr: He gets somebody to review them for me and incidentally, himself. Blough: There is one danger in it at this time, and that is, will we, if we introduce the plan now, have shut off the sources of increased taxes or would it be better to go the limit on increased taxes and then when you have gotten the last dollar out of them finally, then come along and say, "All right, we can't get any more from you in taxes. We will take some more which we will pay back to you." I put that very baldly. Regraded Unclassified 265 - 29 - It probably wouldn't be quite that bald, but there at least is that consideration. H.M.Jr: Roy, what we have got to try to do is this, and I am not at all satisfied that we are doing it. To keep abreast with these in- creased payments which are being made and mop up 80 much of them as we can, first so that the fellow won't have the money to spend, and second, that we get - raise the money in that way to pay for armaments. Now, I am not satisfied at all that we are mopping up the money as fast as the fellow is getting it. Blough: Oh, we are not. H.M.Jr: If we have him put the money into saving, well the answer is there will be that much less to tax from that group. You can't get it twice. But I think we would get it faster. That is my own feeling. If we could get it through having him put his money into savings than if we wait to tax them on it through tax bills, and it has the other advantage that - I mean the savings plan, insurance plan, that it is there for the cushion when this is over. So I don't know how you people feel, but I am inclined toward any - call it whatever you want, savings, insurance - rather than the taxes. Blough: Well, the taxes don't have to be paid back at the end. H.M.Jr: Because what we tax the fellow and take away from the fellow on seven hundred fifty dollars, the dollar that we take away from him doesn't do him much good five years from now. Regraded Unclassified - 30 - 266 Blough: Of course in the tax program you can put a bottom, a minimum on it and not tax below that point. H.M.Jr: Listening to this, if anybody disagrees with me I wish they would talk on this point, but I think every dollar we get out of savings and get 8. man to put into savings will be of some use to him when this is over, and I would rather do it in that way than I would through a taxation or certainly a sales tax or anything like that to raise the money. Bell: Well then are you coming around to the view that the dismissal wage proposal has priority over the insurance? H.M.Jr: No, I am using the two together. I am using the two together, but I am saying - all I am saying this morning is, and I am splitting it up to be knocked down, that whatever we can take through legislative action, take away from the worker and set up either in insurance or savings, I would rather do that than take it away from him in taxes. That is all I am saying. White: Mr. Secretary, these are such unusual -- H.M.Jr: Lauch? Currier I agree. Then the next question is, the further question, what way you will do it. H.M.Jr: Yes. But I mean there are two - Roy brought it up. You can either tax this fellow or you can take it away from him and set it up in an insurance or a fund earmarked for him. Bell: Of course the dismissal -- Regraded Unclassified 267 - 31- H.M.Jr: Excuse me. But which way we go,I haven't travelled that road, but as between taxes and that, I certainly lean toward insurance and dismissal wage. What? Currie: That is right. Bell: The dismissal wage gets back, regardless of who contributes it, whereas the insurance scheme, the fellow who may contribute the most may never get it back. Currie: I would say instead of that being an objec- tion to that, it may be a merit. After all, we have a lot of pressing social needs we haven't met in this country. We haven't got a decent old age unemployment insurance scheme. We certainly haven't got an old age pension scheme that is decent or health insurance, or disability insurance. There is a lot of more pressing urgent needs that to me - I am just thinking out loud - seem to outweigh the advantages of - if we could work that - outweigh the advantages of just giving five hundred dollars to somebody who is well employed and doesn't really need it. Bell: My point is that the unemployment insurance tax is a tax on a lot of people, and as Roy says, it is never paid back. Blough: It really comes to this. White: He gets something. He gets the assurance, whatever it is worth, that should anything happen to him, he is buying that degree of security which he may never cash in on, but at least he gets the pleasant and real satisfaction of knowing that he has something coming to him should he be unemployed. 268 - 32 - Bell: It is like the term insurance. Of course there you have to die to get it, and death is inevitable. But in the other place you have to be unemployed to get it, and you may never be unemployed. Viner: It is term insurance. If you think for some reason or other you are going to live forever, you don't have to take out the insurance, and also, If you are in a specially safe occupation, you may get special rates. This is unselective insurance and com- pulsory. Brown: Well, it is term insurance and certainly part of the advantage is the sense of protection, because I think you could manage salary fellows at three thousand who certainly got burned in '29 and times like that. H.M.Jr: I would just like to do two things. I would like to write a letter. Roy, you write it and show it to the people here. To the President, you see, something along this line: One person has to write it. Regraded Unclassified - 33 - 269 "Dear Mr. President: We in the Treasury have been studying the suggested program of the Social Security Board, and we are im- pressed with the enormity of it. I am afraid that in the preparation of this program the Social Security Board did not give serious consideration to my task and responsibility of financing the Government." I mean, some of you people may object to that. "I also would like to point out that the Social Security Board has not given con- sideration to what is known as either dis- missal or separation wage. Therefore, I am asking you either to postpone making any commitment yourself on this program, or if you feel that you must go ahead at this time, T would like to be present at whatever conference you hold on this sub- ject." Do you see, something along that line. *lought May I put in a few more sentences? H.W.Jr: any more you want, and then if you want to say that we here lean toward raising as much money as possible in combination with a savings plan, either through savings or insurance, you see. Do you want to put that in, SQ that he knows that we are just not opposed to anything? Flough: Yes. H.V.Jer But give it thought and show it to these people and try to get it to me - well, get it to me by tomorrow morning. That rives you twenty-four hours to write it. Regraded Unclassified 270 - 34 - Viner: You want them to go ahead with part of their program, don't you? H.M.Jr: I don't want the President to send a message to Congress on the program as it is now. McNutt is pushing it. If he feels he has got to do something, I want to be heard, but I want him to know that we here are giving it 8. great deal of time and thought and we will have some suggestions to make. Viner: I think that letter ought to strike the note that you do want a program very soon. Bell: Mr. Secretary, I think the only thing you need is the last sentence, that you don't want him to send 8 report without having you present. Now, Smith is trying to bring about just that. He wants you and himself and Altmeyer and McNutt present at that con- ference, and have it thoroughly discussed, and he wants the President to devote an hour to it. That is what he is trying to work. H.M.Jr: Well, I don't think it would do any harm for me to write a letter and simply run up 8 red light before the President. I am not satisfied, and the Social Security Board hasn't considered our problem. White: You must tie inflation up with that, because it is that aspect that makes it important. Bell: I think that the Social Security Board has considered one aspect of the Treasury's problem. I think they believe that this is a beautiful time to get their program through because of this talk of inflation and because of the need of the Treasury for funds. I think they have considered it from that angle, although in the Regraded Unclassified 271 - 35 - President's message they do not want to stress the fiscal aspects and I think that is a mistake. I don't think they will get it if they don't stress the fis- cal aspects. H.V.Jr: I would like to stop now. I want to absorb what I have heard. I would like to continue again tomorrow morning at nine o'clock. Would you rather have it nine fifteen, Lauch? Currie: No. H.M.Jr: For the benefit - I can make it nine fifteen just as easy. Could you do it? Brown: Well, sir, I am running a conference at Princeton. I will try very much to work it out if I could just have a time to do some figuring. H.M.Jr: Well, it isn't much use having it unless you could be here. Brown: I will be here, sir, if you want me. H.M.Jr: Nine or nine fifteen? Brown: It doesn't make any difference. H.M.Jr: With Viner here, I guess we had better make it nine fifteen. Viner: Nine thirty would be even better. H.M.Jr: I would like to give this another hour tomorrow. I have got a lot out of this, but I would like to keep at it, you see, and then we will get this letter off and you can have the letter here tomorrow morning, Roy. Regraded Unclassified 272 - 36 - Blough: I can have a draft of the letter even earlier than that if you wish 150 H.M.Jr: Well, if you can - I mean, If I see it, your letter is finished and you can go on home. You shouldn't be here this afternoon. He (Blough) is on a holiday. And then be back again tomorrow morning. Blough: All right, good. H.M.Jr: Have lunch at home. Blough: Well, we will work that out. H.M.Jr: It is silly to be here. Nine fifteen tomorrow. How is that? Bell: The Social Security Board has got a big program and when you hear it all the rates are going to run up what, ten per cent? Blough: Their program goes to ten per cent rates. H.M.Jr: I have read this thing. White: It is a very unusual time and it is going to take unusual measures. Bell: They have taken advantage of it, too. H.M.Jr: I want to get that letter off. If I could get it to the President today that is much better. You are very much interested in this? Currie: Yes. H.M.Jr: Have you got time to stick with us? Currie: Yes. Brown: I think there is a very basic argument for expanding social security now. 273 - 37 H.M.Jr: My mind is wide open. I would like to do the thing which is the best for the most people, and doesn't leave me completely in the hole with my own peculiar responsi- bilities of raising the money, that is all, but I will always give the social aspects a break over my own particular problem. Brown: But in developing the protection socially, there is a lot of income coming in during the period of good business. H.M.Jr: Well, one bridge I crossed this morning, which is important from my standpoint, I would rather get the money through savings or insurance than I would through taxes. Haas: So would the workmen. They would agree with you on that. Blough: That means that in the long run you want to get the taxes from the middle classes, but not from the working classes, because presumably these taxes will have to be collected la ter, at least enough to ser- vice the debt, during the post-defense period and what you have in mind is getting them out of somebody else besides these working classes. H.M.Jr: That is right. Bell: What you are doing is borrowing at this time from another group in effect. Later on you are going to have to tax the whole population to pay off that debt. H.M.Jr: That is right. Bell: You may have to refund it in the meantime. White: You would have to do that anyhow. Bell: Sure, you would have to do this anyhow. Regraded Unclassified 274 - 38 - White: You would have to borrow now anyway. Bell: This is certainly less inflationary. Haas: Post-war adjustment is much easier. H.M.Jr: It is anti-inflationary. Bell: When you have it all over you have to refund this debt by borrowing from other people and paying this back. H.M.Jr: Well, I will be back on the farm and the only thing that will worry me will be the price of apples. Haas: Borrowing from banks will be the proper thing to do then. White: I don't think you have a choice of this or taxes. I think you are going to have as hard a job as you want to get as much taxes as you can and this will be in a way supplementary. H.M.Jr: With this exception, Harry. Mark my word, I don't like to set this up, but it will be something like this or a sales tax. White: Well, I think you are right. H.M.Jr: It will be this or & sales tax, and certainly we want this before we want a sales tax. This takes care - helps to take care of inflation and it sets up the other thing, a nest egg for the worker when this thing is over, which I think from the standpoint of morale is terribly important. Well then, nine fifteen tomorrow morning? Brown: Yes, sir. Regraded Unclassified 275 - 39 - H.M.Jr: And I would like to ask Mr. Brown a personal question. 276 SEP 17 1941 Dear Mr. President: The Social Security Board has transmitted to the Treasury 4 draft program for expansion of the social security system, and I understand that this program is to be presented to you for action La the imediate future. I - wholeheartedly in favor of expending and improving the social cecurity cretem, and $ have se objections in principle to next of the Board's propeeals. The program, however, would of course have marked fissal effects which call for eareful com- sideration, particularly during the defense energency when the fissal requirements of the Government and the need for eteming inflationary tendencies are especially urgent. the timing of the initiation of various items is the progress should be very curefully considered from the point of view of their effect 65 Treasury receipts and disbursements during the next few years. There is also the need for simultaneous consideration of the Board's proposals and of other related proposals not dealt with is its program. such as the proposal for dismissal compensation (severance wages) under which special taxes on veges of employees and OR payrelle would be collected during the defense period with reinbursement is the post-defence veried at the time of dismissal or of general economic depression. I hope that the Treasury will be given a little more time for examination of the Board's preposels and for discussion with the Board in the 11ght of these considerations. If, however, you feel that you Regraded Unclassified 277 - 2 - and proceed with the program at - I would like to be present at whatever conferences you my hold en the subject is order that I my have the opportunity to present my views thereen prier to my final commitments being - Faithfully yours. (Signed) 1, Morgenthau, Jr. The President. the white House. copy for or.m.c. By secret Messenger 1:45P.m. Service RB:ded 9/17/41 Regraded Unclassified 278 September 17, 1941 MEMORANDUM FOR THE SECRETARY: The attached letter to the President regarding social security, which you requested this morning, was redrafted by Mr. Viner and Mr. White and has been approved in this form by Mr. Haas. Mr. Daniel Bell, who is out of the office this afternoon, has not seen it. RoyBlongh Regraded Unclassified 279 September 17, 1941 2:55 p.m. William Rosenwald! You very - when I was in Washington about a year ago, you very kindly expressed an interest in HMJr: That's right. R: in refugee work in this country. HMJr: Yes. R: A meeting is being called by Sam Rosenman and David Dubinsky and Will Shroder of Cincinnati, the Chairman of Council of Jewish Federations and Welfare Funde, and myself, in the middle of October. HMJr: Yes. R: And I'm very anxious to speak to you a few minutes about it, at your convenience. I know how busy you are, and I'll mane 8. special trio to Washington where I can have a few minutes with you. HMJr: Well, that's not necessary. I think I had an invitation to come to it, didn't I? R: Yes, you did, and we were sorry to receive your regret; but we'd like to speak to you about the content of the meeting - about helping us in connection with the formulation of the meeting. HMJr: Well, if you care to come down, I'll be glad to aee you. R: That's awfully nice of you If you would. Will you be free tomorrow? Any time at your convenience - preferably in the after- noon. HMJr: Well, let me nee. R: Or evening, if you prefer. Regraded Unclassified 280 - 2 - HMJr: No. What's tomorrow? Thursday? R: Yes. HMJr: I can see you at three o'clock. R: I'll be there. HMJr: Thank you. R: Thank you very much. Good-bye. September 17, 1941 281 3:13 p.m. HMJr: Hello. Operator: Secretary Jones. HMJr: Hello. Jesse Jones: Hello, Henry. HMJr: Jesse? J: Yeah. HMJr: How are you? J: Pretty good. HMJr: Jesse, I see by the papers you've got a bill up on the Hill there J: Yeah. HMJr: that affects us, the Treasury, as far 88 Customs duties are concerned J: Yes. HMJr: and as far as I know I don't think you did us the courteey of talking about it. J: Henry, I thought you cleared that some time ago in a much bigger way than this. HMJr: No. According to Bell - I've asked him to check it and J: Why there's a bill - Henry, I think there's e bill up there HMJr: Uh huh. J: been there two or three months HMJr: Yeah. J: put in by the War Department or somebody Regraded Unclassified 282 - 2 - HMJr: Yeah. J: ..... that covered this and much more. HMJr: Yeah. But the part that bothered our people - that's correct J: Yeah. HMJr: 18 the part that has to do with the bill - you know, the duties and the taxes - that part really should be Ways and Meane. J: Yeah. HMJr: I never believe in trying to make things more difficult, and I just thought I'd call you up and I wonder - 1s there anybody besides yourself looking after this? J: Well, Claude Hamilton and I. What did you have HMJr: Well, I think if it's Hamilton - and let Hamilton - if he'd talk to Dan Bell, 8607 J: Yeah. HMJr: Because Dan talked with the Budget and they say they don't know anything about it. J: Well, that's right. HMJr: (Laughs) Well, I don't want to - just because you didn't talk to me - I don't want to make any difficulty and I'd like to work the thing out J: Well HMJr: 80 that our boys here will be satiefied. J: Fine. Well, now, I cleared it with the President, of course, before I went up there. HMJr: Yeah. Regraded Unclassified 283 - 3 J: And this other matter, having been stalled and because it was - I assume because it covered a good many more things - this just applies to the RFC. HMJr: Well, if you'd have Hamilton talk with Bell. J: All right. HMJr: Let's see if the Treasury's interests can't be taken care of without trying to raise a jurisdictional fight between Banking and Currency and Ways and Means, you see? J: Yeah. HMJr: What? J: Well, of course, the Banking and Currency Committee already voted it out. HMJr: Yeah, but J: They approved the bill. HMJr: I don't know. Bob Doughton could, if he wanted to, raise objections. J: Yeah. Well, I'll get HMJr: Well, I expect - you know me well enough now J: Yeah. HMJr: and I just thought I'd call you up and say that we don't quite understand it and if you'll send your lawyer over to see Bell J: I'll be glad to do that. HMJr: I think it would be J: Okay. HMJr: Listen. J: Yeah. Regraded Unclassified - 4 - 284 HMJr: Why, I can't tell from reading the papers what you did for Oumansky. J: What did I did? HMJr: (Laughs) Yeah, what you did. J: What I did was to - we agreed to buy from Oumaneky HMJr: Yeah, J: from Amtorg - a hundred million dollars worth of strategic materials HMJr: Such as intestines? J: Huh? HMJr: Intestine organs? J: Yeah. HMJr: Huh? J: And to make them advances against those pur- chases up to fifty million dollars for the purchase of materials supplied in this country and to give them the money as they need it. HMJr: Up to fifty million for what they need in this country? J: To buy things in this country. HMJr: What do they do with the other fifty? J: Well, they don't get it. We - well, we pay them the dollars when we deliver the stuff, but they'll probably be quite a little while delivering it. HMJr: I see. Well, then we're not partners, 18 that it? J: We're' not partners, no. Regraded Unclassified 285 - 5 - HMJr: You and..... J: You and I, yes. HMJr: Well, how are we partners? J: You've got to come off with another fifty. Then that'll be a hundred. HMJr: (Laughs) I don't know anything about it. J: What? HMJr: I haven't heard a thing about it. J: What? HMJr: I haven't heard a thing about it. J: Okay. HMJr: Honestly, I don't know anything about it. J: Yeah. Well, that's what we've done. HMJr: Well, no one's approached me. I'm still - I'm still a virgin. J: Okay. HMJr: No one's made any advances. J: Okay. HMJr: All right. J: Good-bye. Regraded Unclassified TREASURY DEPARTMENT 286 PINTER OFFICE COMMUNICATION DATE September 17, 1941 TO Secretary Mergenthau FROM Mr BA Subject: Amo of cotton owned by the Government. In ance with your request, we have made another ol of cotton owned by the United States Gov hat the 6,000,000 bales, given in the at correct. This is a rounded figure taken ort of the Commodity Credit Corporation, a exact figure being 6,126,482 bales. In- for tio Department of Agriculture indioates that ABL August the figure remained unchanged. This repre- sents cotton lesignated in the official report as "owned by Commod Credit Corporation." There is, however, a statutor sion which provides that not more than 300,000 baie an be sold in any one calendar month and not more than 1, ,000 bales in any one calendar year. 287 September 17, 1941 My dear Mr. President: I am inclosing herewith a copy of the memoran- dum which I showed you at Cabinet last week. You questioned my figure of six million bales of ootton mentioned in this memorandum. I have had my people re-check this figure, and find that the latest report of the Commodity Credit Corporation, who is the owner of this cotton, shows that they had on hand, as of July 31st, 6,126,482 bales. There is, however, a statutory provision which provides that not more than 300,000 bales can be sold in any one calendar month and not more than one and a half million bales in any one calendar year. Yours sincerely, (Signed) 1. Morgenthau. Jr. The President, The White House. Enclosure. Sent by Secret Service. Regraded Unclassified 288 September 12, 1941 Secretary Norgesthan Br. Gairas Mr. Rase Subject: Use of form surpluses for inflation control within the frasework of the Administration's agricultural policy. The President has stated in his prese release of May 26, 1941, approving the 85 percent of parity loans (s. J. Res. 60): (1) "This is an effort to obtain fars prices 548787 parity. It reflects the Government's objective for the past eight years." (2) No stated that "wholly umanageable surpluses should not accumulate in the hands of the Government Finally, the Commodity Credit Corporation should be free to dispose is an orderly manner of many commodities ao- quired under the loan program." (3) "I am approving this Joint Resolution on the dis- tinot understanding that parity payments will be limited to the amount necessary to bring the basic commodities to parity but not beyond parity." A method by which the Government holdings of ootton and wheat could be used to stabilize prices, consistent with the Administration's stated policy on agricultural prices, is as follows: The President or the Secretary of Agriculture could an- nounce that the Government stood ready to sell wheat and cotton at parity price levels. The Government has 170,000,000 bushels of wheat and 6,000,000 bales of cotten available for this purpose. It is believed that those Are sufficient quantities to maintain the open market price at parity for the time being. The parity price for cotton 10 at approximately the present market level, and for whest somewhat higher than present market prices. Regraded Unclassified 289 September 17, 1941 Dear Harold: I an sending you herewith the figures on export of petroleum products. Please note that during the past month our exports to Japan have dropped off entirely. Also please note that beginning with September we started to export considerable petroleum products to Russia. I would appreciate hearing from you whether or not these are the statistics that you wanted. Yours sincerely, (signid) Henry Honorable Harold L. Ickes, Secretary of the Interior. By Messenger 9:30am Regraded Unclassified 290 Experts of Petrolem Products to Japan as firm W Departure Permits tranted (Is through of barrels) # * I I Part and trate Guesline Inhetesting oil # a = - god eil # I Readed or If (including I I I All = . I I posted ended All Aviation All Piscel sil) I Celifornia = I Total # Artation # other $ Total - I I 2/ y Total other thigh octano 1/1 I # = 1 a # # in. - 1941 335 1,003 90 1,053 - 790 790 3 129 132 Deb. 1. 1941 913 276 244 522 - 470 470 2 109 111 M. 1. 1941 31 472 296 767 - 269 269 9 183 192 5 s á ne 976 the as e 268 266 2 90 92 hgt. 1941 633 300 yes 652 - £ E 15 177 192 the 1941 5 477 170 an . 116 116 8 186 194 % la d. 3999 5 269 928 . 330 330 199 a 240 Day 19. 1941 674 653 199 773 - 188 188 39 90 129 me. 16, 1941 254 a s 3, 155 - 98 98 - 1 h bug. 17. 1940 798 w/ 962 y w 231 y y 114 Sept.13, 1948 . - - - - - - - - - 1990 647 629 338 967 22 203 225 - 10 10 Office of the Secretary of the Treasury, Division of Research and Statistics. September 16, 1941. Secres: Office of Derekent Skip Central, Treasury Department. w My mierial the which W commercial distillation there 6ML be separated more then 3 persont of eviation motor fast, hydrocries or hydrocarbon signature - President's regulations of July 26, 1940. 3/ Includes geoding free which by commercial distillation there can be separated more than 3 percent of eristies motor fast, hydrosarben or hydrocarben sixture. As defined is the Procident's regulations of July 26, 1940. y Net svailable. Regraded Unclassified 291 x Products I s as Ren w Reparture Permite treated (In through of barsets) I 1 I 1 I # oil - I I Thank - eil I (Sucinding I Monied of # m I I # All I I Aviation I I puried entet 411 Meant eil) I California - I Total # # child E Total # I I Total thigh 1/1 1 I I I 1/ # y any a $ - x 1948 - - - - 104 104 - - - 1. 15 - - s a - 95 95 i - - - - - - 19. s - - - - - - - I - e a - - - - - - - - - - - - - . - - - - - 19. - - - 162 160 - - - 16, 2 - 6 109 2 150 11 - 11 27. - - y y 75 - - - 85 - - - 496 190 w - - - - - - a 192 233 - - - liftle of the fearstary of the many, Division of Insuranch end Statistics. September 16, 194. Office of Revelued Ship Centrol, treasury Repartment. V key astorial from which w conservial distillation there - be segurated - this 3 person) of svintion noter fuel, hydrocarten of hydrocarion sixture - Prosident's regulations of July sú, 1940. If Insludes gaseline free which w commercial distillation there one be separated mero than 3 persont of uriation mter feel, hydrocarbon of hydrocortem sixture. % As defined in the President's regulations of July 26, 1940. Not available. Regraded Unclassified Regaste of Printen Products to Igala I n I # 1 e x I a 1 & 1 $ I $ oil 1 $ I of 8 Rebi # I as I I $ as I & within 8 m a 1 I 1 any $ this 1 Arkation I e 1 INC $ W - de THE 1 I e . . - , R - - - - sky 103 - 9 9 i 179 - - - - - 13 13 a - - - - 6 e - 22 5 - - - - - - . - - R - - - - e 67 - 1 1 201 - - - # 12 - = 132 - - - s s - s W3 - - - - 136 136 - 6 a - - - - - - 2 15 17 n - - - 143 - - - a a y 150 138 - - lifes w we having of to Treasury, titrizion of board and Stativtics. Beytember 16, 194. 1 I I a the I x V my ministal from which w conservial. distillation there - be separated more then 3 persont of oriation mier ful, hydrocasten or hydrocarten President's regulations of July 26, 1940. BY Includes gueline from videh W commercial distillation there - be organized note then 3 persont of orisklen mtor feel, hydrourine or hydrocarten sixture. M is defined in the Prosident's registions of July 15, 1940. Importe of Petrolem Products to Great Pritain 293 M Rest w Departure Permite Granted (Is of barrels) I 1 I I Fuel and Grate I $ I I lebriesting oil hont - edi I I Humbed or 8 I I 2 ALL I I 1 period eablet (fashaling All I California a I Total I Avialden other Total Aviation All I I I 1 - Total Mark sit) 1/1 I 2/ y ! I I I $ # I I $ m, 1941 137 9 - 9 178 27 205 14 36 R 1, 1941 5 - - - - 315 315 186 72 198 - 19th 578 - un 127 TO 165 255 149 16 225 $ 1941 w - - - 240 318 558 & s 139 759 - 55 55 260 555 as PL 306 157 1941 700 - s s 26 309 no 236 127 363 1. 1941 1,503 a - % 620 721 1,341 104 128 292 19. 1941 1,884 - * x 1,105 1,252 2,367 23 65 - 2,717 - 170 174 1,06 1,369 3,015 73 131 204 17. 416 w y 99 y y 130 4/ y 202 1941 2.732 - 90 90 1,514 2,955 4,069 207 103 320 Sept.14, 1940 one - - - 77 164 261 22 154 176 liftle of the Secretary of the treasury, Division of Recearch and Statistics. September 16, 1941. fourse: Office of Merchant They Centrol, Treasury Department. V by material from which w commercial distillation there our be separated more than 3 percent of eviation motor feal, hydrocarbon or hydrocaries sixture - President's regulations of July 26, 1940. 3/ Instrutes gaseline from which by commercial distillation there - be separated more than 3 percent of artation moter feel, hydrocarben or hydrosarbon sixture. y in defined is the President's regulations of July 26, 1940. V Bel svailable. Regraded Unclassified R or 294 THE SECRETARY OF THE INTERIOR WASHINGTON September 17, 1941. Dear Henry: Thank you for sending me the figures that came with your letter of September 17. You are most obliging. These are figures that I wanted. Sincerely yours, Horoll Teles Secretary of the Interior. Hon. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Regraded Uncla 295 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE September 17, 1941 TO Secretary Morgenthau FROM Mr. White Subject: Exports to China, Japan and Russia during the first week of September, 1941 1. Exports to Russia Substantial exports to Russia, amounting to $4,230,000 were reported to the Treasury during the first week of September. Industrial machinery ranked first in value with $1.7 million, sirolanes next with $1.1 million and gasoline third with 3.5 million. (See Annendix C). 2. Exports to Japan There were no shipments to Japen reported during the week under review. Much of the exports to occupied China, how- ever, may eventually find their way to Japan. 3. Exports to China (a) Exports to free China The figures for U.S. exports to China as reported to the Treasury for the first week of September, 1941 indicate that shinments to occupied China continue. Out of total exports vrlued at $398,000 to all China, free China accounted for only 1204,000, or legs than 25 percent. Oil well drilling equipment was the principal item. (See Angendix B). (b) Exports to occupied China Exports to occupied China amounted to $693,000 and, AS in the previous month, raw cotton and grains and prepars- tions were among the leading items. (See Anpendix A). Regraded Unclassified 296 APPENDIX A Principal exports from U. S. to Occupied China as reported to the Treasury, September 2 - 6, 1941 (In thousands of dollars) Total Domestic Exports $693 Raw cotton 327 Grains and preparations 47 Electrical machinery and apparatus 31 Medicinal and pharmaceutical preparations 28 Lumber 24 Cigarettes 22 Industrial machinery 16 Office appliances and supplies 13 Photographic and projection goods 12 Fruits and preparations 10 Treasury Department, Division of Monetary Research September 9, 1941 297 APPENDIX B Principal exports from U. S. to Free China as reported to the Treasury September 2 - 6, 1941 (In thousands of dollars) Total Domestic Exports $204 Oil well drilling equipment 145 Printed matter (bank notes) 59 Treasury Department, Division of Monetary Research. September 9, 1941 Regraded Unclassified 298 APPENDIX C Principal exports from U. S. to U.S.S.R. as reported to the Treasury September 2 - September 6, 1941 (In thousands of dollars) Total Exports, including reexports $4,280 Total Domestic Exports 4,180 Industrial machinery 1,557 Airplanes 1,152 Gasoline 496 Electrical machinery and apparatus 324 Cartridges 176 Aircraft engines 151 Lubricating oil 150 Total Foreign Exports (Reexports) $ 100 Cocoa beans 62 Spices 38 Treasury Department, Division of Monetary Research. September 9, 1941 Regraded Unclassified 299 APPENDIX D Exports from the U. S. to China, Japan and U.S.S.R. as reported to the Treasury Department, daily, July 28, 1941 - September 6, 1941 (Thousands of dollars) Exports to China Exports to Exports to Japan U.S.S.R. 2 To Japanese To Chinese Controlled Ports 1/ Controlled Ports July 28 - Aug. 2 542 395 1,657 4,523 ( 16. 4 - Aug. 9 2,794 - 159 551 Aug. 11 - - Aug. 16 969 309 42 986 Aug. 18 - Aug. 23 1,350 2 6 2,735 Aug. 25 - Aug. 30 735 1 - 1,023 Sept. 2 - Sept. 6 693 204 - 4,280 1/ These figures include reexports of $ 25 thousand during the week ending August 9 $ 83 If 11 " # If " 16 $ 8 If IF 11 = H " 23 $201 Il " If " # H 30 2/ These figures include reexports of $148 thousand during the week ending August 16 2 $ 40 If Il If to If If S 11 # If a = If # 23 $ 15 # If # If If = 30 $100 " If " " If Sept. 6 reasury Department, Division of Monetary Research September 9, 1941. Regraded Unclassified September 17, 1941 300 OFFICE OF THE VICE PRESIDENT INTEDIATE RELEASE Office Of Export Control Placed Under Boonomic Defense Board Vice President Henry A. Wallace made two announcements today dealing with the strengthening of our total dofense. He stated that the President had issued an executive order placing the Office of Export Control under the Economic Defense Board. The order also designates the Economic Defense Board as the agency to obtain, develop, and determine overall entimatos of materials and con- moditivo required for export purposes in the interost of the economic defense of the Nation, exclusive of lend-lesse operations, and to nd- vise the Supply Priorities end illocations Board of such estimated re- quirements. The Economic Defense Board also will provide A central clearing service to which exporters, menufacturers, and foreign importers may suh- Eit proposale for the export of materials and commodities; in addition it also will obtain clearance for such proposals from the several Federal prancies concerned with the control of exports and rulated finencial transactions, Vice President Wallece further canounced that the addi- tional functions of the Economic Defense Board will be administered by Mile Perkins, the Executive Director of the Board. Following the com- plotion of the difficult assignment of lounching the Export Control pro- Bric. Gen. 3. L. Moxwell has beon ordered by the President to re- the to the War Department to assume his former duties. The Vice President soid: "Under this executive order, -he power: of the Office of Export Control will be more closoly intugrited 11.70 the bronder work of the Economic Defense Board as sot forth La. the it, The international crisis require : Regraded Unclassified 2 301 our policy of preventing shipments to Axis-dominated countries. "At the same time, we must help 806 to it that other nations in that part of the world which is still free get enough goods to naintain the stability of their own economies insofar as that is possible. This is particularly important in the western hemisphere." The second announcement by the Vice President had to do with stepping up the supplies of raw materials for our total defense effort. He continued: "Because of our recrmament program and our policy of full aid to nations resisting aggression, certain materials are becoming increasingly scarce, which males the allocation of priorities under the Supply Priorities and Allocations Board much more difficult. In the time ahead, these difficultios will become greater. I an, therefore, asking both the Supply Priorities and Allocations Board and the Economic Defense Board to consult with nll affected Departments and agencies nt onco and re- port to me n.s soon as possible on the extent to which supplies of critically needed raw materials can be increased. I RM asking for an action program under which we can step up the total amounts of raw mater- iala available to us." An chelrman of both boards, the Vice President further explained that part of this increase will be secured from within our own country and part of it, of course, from other trade areas of the world, with par- ticuler emphasis upon the republics of this hemisphere. He scid: "We shall have to secure this increase in supply in whys best suited to the production of each commodity. Among the approaches to be considered, however, will be an expension of production fecilities both here end abroad, conversion of non-defense plants to military uses, the working of more shifts, and payment of premiums for certain motals coning from low-yielding veins of ore. "Iven with all this, however--and no chall drive forward aggressively Towid textimes mind belenced production in every trade orea open to us-- THE have to be máde by civilians and certain non- Regraded Unclassified - 3 - 302 defense industries within this hemisphere. The threat of Hitler is such that a 'business as usual! attitude is like a. foreign army within our borders. "Goods and more goods," the Vice President emphasized, "of the kinds essential to our defense effort are what we need most to assure the overthrow of Hitler. We already have an ever-normal granary which is being converted into an ever-normal food supply to provide for more adequate nutrition within the democracies. Insofar ns possible, we want to establish an 'ever-normal stock pile' of critically needed metals and other materials, particularly those coming from overseas, so that we shall have adequate reserves for our total defense in the difficult years shead of us. Our use of shipping must be further adjusted to achieve this goal. In the present world crisis, dollars have value only as we convert them into goods which are the life-blood of our national strength." Regraded Unclassified TREASURY DEPARTMENT 303 INTER-OFFICE COMMUNICATION DATE SEP 17 1941 TO Secretary Morgenthau FROM Mr. Foley Re: General Dyestuffs Corporation and General Aniline and Film Corporation. General Dyestuffs Corporation which is owned primarily by E. K. Halbach, its President, and Walter H. Duisberg (described in an indictment obtained by the Department of Justice as the American representative of I. G. Farbenindustrie) is the exclusive sales agent for dyestuffs manufactured by the General Aniline and Film Corporation. It has applied for a license to purchase the controlling interest in General Aniline and Film Corporation from I. G. Chemie. I. G. Chemie is a Swiss holding company which is believed to exist for the purpose of holding foreign investments for I. G. Farbenindustrie. We are still considering what action to take on this matter. 9.15.7L Regraded Unclassified THE WHITE HOUSE 304 WASHINGTON September 12, 1941 Dear Henry: I am enclosing & copy of a memorandum I got from a friend of mine in New York. I will give you his name if it will help any but he is a responsible attorney with a very important law firm and 8 great friend of the Administration. Very cordially yours, HARRY Fany L. HOPKINS Enclosure. +he Honorable The Decretary of the Treasury, washington, D. C. Regraded Unclassified COPY 205 GENERAL ANILINE FILM CORPORATION ÀS Pending before the Treasury an Application to Sell 1,500,000 shares of its Class "B" Common Stock The Veneral Aniline Film Corporation was originally organized by I.G. Farbenindustrie Aktiengesellschaft, which is the German Chemical Trust, and the bonds that are now outstanding are guaranteed unconditionally as to principal, interest and premium, if any, by I. G. Farbenindustrie. Some years ago, their interest was transferred to a Swiss Company and since that time they have maintained that there is no connection between the General Aniline Film Corpor- ation and German interests. I cannot prove that it is not controlled by the Germans but every one in the Street sin- cerely believes that it is. If the German Company divorced itself from this Company, why did they leave their endorce- ment on the bonds. For your information, General Aniline Film Corporation has outstanding the following securities: 5-1/21 Debentures due 1949 $18,000,000 Class "A" Common stock no par value 529,271 shares Class "B" Common Stock $1.00 par 2,050,000 shares Class "B" shares are entitled to 1110 of what the "A" shares get in liquidation and are entitled to receive dividends to the extent of 1/10 of what the "A" shares re- ceive. Both classes of shares are entitled to vote, You can readily see that the 2,050,000 shares would carry control of the Company. Regraded Unclassified 306 - 2 - The Company has sold 1,500,000 shares of "B" stock for a nominal consideration. This sale carries with it control of the Company and the matter is before the Treasury Department for approval. It is quite obvious what the purpose of such a sale is. 1. It would prevent the sale by the Alien Property Custodian of the 529,000 odd shares of "A" stock. No one would buy these shares because they would be afraid to have so much money invested in a company which they do not control. These are the real valuable schres of the Company. 2. After the war, if the interests to whom this voting stock was sold for a nominal con- sideration were friendly, the German interests would buy it back and control the Company. Certainly the Treasury should not approve such a sale, at least not without making a very thorough investi- gation. it is to be borne in mind that this is one of the largest chmical companies in the United States. Regraded Unclassified 307 K. FROM: MR. SCHWARZ'S OFFICE TO: The Secretary Elliott Bell of the Times called in at 10:40 a.m. to relay, at Mr. Sulzberger's request, the appraisel he had gethered on Thomas E. Murray. Bell said that Murray had developed a good reputation in E difficult situation es receiver of I.R.T., that he had handled the labor situation well. Murray is not looked upon 85 8 strong, powerful personality, conspicuous in a group or an obvious leader, but is considered shrewd, hard-working, effective, capable of doing an honest job end getting along well with his associates. Bell is prepared to answer any specific questions you may have. cs 9/17/41. \ Regraded Unclassified 308 CONFIDENTIAL September 17, 1941. TO: SECRETARY MORGENTHAU FROM: Mr. Schwarz co Leon Henderson at the Press Club today said that the next four months will be the critical period in the determination of possible full-fledged price inflation in the United States. He said that the new tax bill alone will not prevent a price spiral. While we need the brakes of increased taxes and encouraged and compulsory savings, he said, there will be from three to eight billion dollars of purchasing power running around loose in our economy that can only find expression in the price level. Leon read a list of wholesale prices for this spring, this fall and next spring scheduled by a large mail order company. For most items, the second jump was more than double the first. In answer to a question, he said that the Treasury and the Federal Reserve should be given ample controls to prevent credit inflation. -000- Regraded Unclassified TREASURY DEPARTMENT 309 INTER OFFICE COMMUNICATION DATE September 17, 1941 TO Mr. Foley FROM Mr. Feidler The three Acts upon which statistics have been compiled are (1) the Lever Act, Act of August 10, 1917, (2) the Joint Resolu- tion to prevent rent profiteering in the District of Columbia, ap- proved May 31, 1918, and (3) the amendments to the Lever Act, con- tained ir Food Control and the District of Columbia Rente Act, approved ! wer 22, 1919. The statistics on the Lever Act are based on the votes in the House and Senate on the passage of the Act itself. However, the only recorded vote on the Resolution of May 31, 1918, WELB the vote in the Senate on acceptance of the conference report. Likewise, the only recorded vote on the Act of October 22, 1919, was the vote on the conference report in the House. Consequently, it was necessary that the atatistics on the latter two Acts be based on those con- ference report votes, although it is recognized that B. vote against the acceptance of a conference report is not determinative of the voter's final position on the bill itself. The statistics are sufficient to show, however, that the vote on these measures did not influence the result of the succeeding Regraded Unclassified 310 - 2 - elections. It will be remembered that there was a Republican landslide in 1920 and that the Republicans made substantial gains in 1918. The position taken on price control measures would thus seem to have been a factor of no significance in determining the fate of a particular candidate. EAT gas Regraded Unclassified 311 SENATE VOTE ON LEVER BILL (ACT OF AUG. 10, 1917) YEAS - 81 Re-elected 41 50.62 x of the 65 who Defented, 1918 7 8.64 sought re-election, Defeated, 1920 8 9.88 41 or 63.08% were Defeated, 1922 9 11.11 re-elected, while Did Not Run 16 19.75 24 or 36.92% 81 100.00 $ were defeated. SAYS - 7 Re-elected 2 33.33 % Of the 5 who Defented, 1918 1 16.67 sought re-election, Defeated, 1922 2 33.33 2 or 40% were Did Not Run 2 16.67 re-elected, while 7 100.00 * 3 or 60% were defeated. NOT VOTING - 9 Re-elected 3 33.33 70 of the 5 who Defeated, 1920 1 11.11 sought re-election, Defented, 1922 1 11.11 3 or 60% were Did Not Run 4 44.44 re-elected, while 9 100.00 to 2 or 40% were defeated. Regraded Unclassified 312 SENATE VOTE - AGREEING TO CONFERENCE REPORT ON RENT CONTROL BILL. (H. RES. OF MAY 31, 1918) YEAS - 31 Re-elected 10 32.25 % Of the 25 who Defeated, 1918 3 9.68 ran, 10 or 40% Defeated, 1920 9 29.04 were re-elected Defeated, 1922 3 9.68 and 15 or 60% Did Not Run 6 19.35 were defeated. 31 100.00 % NAYS - 17 Re-elected 9 52,94 & Of the 13 who Defeated, 1918 3 17.65 ran, 9 or 69.23% Defented, 1922 1 5.88 were re-elected Did Not Run 4 23.53 and 4 or 30.77% 17 100.00 % were defeated. NOT VOTING - 48 Re-elected 28 58.33 70 Of the 40 who Defeated, 1918 3 6.25 ran, 28 or 70% Defeated, 1920 3 6.25 were re-elected, Defested, 1922 6 12.50 and 12 or 30% Did Not Run 8 16.67 were defeated. 48 100.00 * Regraded Unclassified 313 HOUSE VOTE ON LEVER BILL (ACT OF AUG. 10, 1917) YEAS - 365 Re-elected 277 75.90 $ Of the 335 who Defeated 51 13.98 sought re-election, Did Not Run 30 8.21 280 or 83.58% were Defeated for the 1.09 re-elected and 55. Senate 4 or 16.42% were Elected to the 3 .82 defeated Senate 365 100.00 % NAYS - 5 Re-elected 2 40.00 $ Of the 5 who Defeated 1 20.00 sought re-election, Did Not Run 51/02 2 40.00 2 or 66.67% were 5 100.00 re-elected, and 1, or 33-1/3$ WELB defeated. ANSWERED "PRESENT" - 5 Re-elected 3 60.00 % Of the 49 who answered Defeated 1 20.00 "present" or who were Did Not Run 1 20.00 "not voting" and who 5 100.00 % sought re-election 39 or 79.59% were re- elected and 10 or 20.41% were defeated. NOT VOTING - 55 Re-elected 36 65.45 1/2 Defeated 8 14.55 Did Not Run 10 18.18 Defeated for the 1 1.62 Senate 55 100.00 Regraded Unclassified 314 HOUSE VOTE AGREEING TO CONFERENCE REPORT OF BILL AMENDING THE LEVER ACT (ACT OF OCT. 22, 1919) YEAS - 210 Re-elected 157 74.76 % Of the 192 who sought Defented 32 15.24 re-election, 157 or Did Not Run 18 8.57 81.77% were re-elected, Defeated for the 3 1.43 and 35. or 18.23% were Senate 210 100.00 % defented. NAYS - g Re-elected 2 6 75.00 * Defeated 25.00 100.00 % ANSWERED "FRESENT" - 4 Re-elected " 100.00 20 NOT VOTING - 207 Re-elected 138 66.67 & Of the 176 who sought Defeated 38 18.35 re-election, 138 or Did Not Run 31 14.98 78.41% were re-slected, 207 100.00 to and 38, or 21.59% were defeated. Regraded Unclassified 315 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Thirteen Business Days of July, August, and September, 1941 (July 1-16, August 1-15, September 1-16) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of Increase : Sales Percentage of Increase : : or Decrease (-) : or Decrease (-) Item : : : : Sentember : August : Sentember : August : Sentember : August : July : over : over : over : over : : : : August : July : August : July Series E - Post Offices $ 20,815 $ 22,371 $ 27,780 -$ 1,556 - $ 5,409 - 7.0% - 19.5% Series E - Banks 34,858 42,625 47,676 - 7,767 - 5,051 - 18.2 - 10.6 Series E - Total 55,673 64,996 75,457 - 9,323 - 10,461 - 14.3 - 13.9 Series F - Banks 8,990 12,050 12,748 - 3,060 - 698 - 25.4 - 5.5 Series G - Banks 58,262 74,696 85,625 - 16,434 - 10,929 - 22.0 - 12.8 Total $122,924 $151,742 $173,830 -$28,818 -$22,088 - 19.0% - 12.7% Office of the Secretary of the Treasury, Division of Research and Statistics. September 17, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassif 316 CONFIDENTIAL UNITED STATES SAVINGS BONDS Daily Sales - September 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bond Sales Bank Bond Sales All Bond Sales Date Series E Series I Series 7 Sories G Total Series I Series I Series G Total September 1941 2 $ 3,021 $ 3.385 $ 1,182 $ 5,510 $ 10,077 $ 6,406 $ 1,182 $ 5,510 $ 13,098 3 972 1,933 585 5.790 8,308 2,905 585 5.790 9,280 4 1,365 2,540 645 4,846 8,032 3,906 645 4,846 9.397 5 1,852 3,689 1,162 10,486 15,336 5,540 1,162 10,486 17,188 6 1,419 3,144 707 4,666 8,516 4,562 707 4,666 9.935 8 2,858 3,032 521 3.549 7,102 5.890 521 3.549 9.960 9 973 2,013 528 1,532 4,073 2,987 528 1,532 5,046 10 1,479 2,883 975 4,984 8,841 4,362 975 4,984 10,320 11 1,422 2,657 484 3,168 6,309 4,079 484 3,168 7.731 12 1,312 3,004 436 2,536 5.975 4,316 436 2,536 7,257 13 988 1,997 498 3,493 5,988 2,985 498 3,493 6,976 15 2,312 2,384 797 4,898 8,079 4,695 797 4,898 10,390 16 843 2,198 470 2,807 5,474 3,040 470 2,807 6,317 Total $ 20,815 $ 34,858 $ 8,990 $ 58,262 $102,110 $ 55,673 $ 8,990 $ 58,262 $122,924 Office of the Secretary of the Treasury, Division of Research and Statistics. September 17, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceede of sales of United States Savings Bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassified 317 September 17, 1941. To: Secretary Morgenthau From: Alan Barth SUMMARY OF SPEECH BY DONALD M. NELSON Mr. Nelson opened his speech by complimenting the retailers on their cooperation with the Secretary of the Treasury in the sale of Defense Bonds and Stamps. Hitler's greatest allies, he said, are doubt and confusion. They arise, in part from "designing persons who play Hitler's game"; in part from public misunder- standing of governmental purposes. The Government must see that the public understands what it is doing and why. We are going to demand much of the American people. So far we have only begun to feel the effects of the defense program. We must greatly increase defense production. At the same time "we must provide the things which our civilian economy needs. Notice -- I said the things that it needs. Everything that it does not need is, in a sense, and for the duration of this emergency, sheer waste." Regraded Unclassified - 2 - 318 "We are compelled to use all of our materials, all of our men and all of our factories for the pro- duction of essentials." This means a somewhat lower standard of living for all. "We are going to give up the frills and the trimmings." In part, this may turn out to be a "blessing in disguise." Simplification of lines and styles of goods - not standardization - will aid the retailer. He does most of his business on a small part of his stock. The range of choice can be reduced, the fancy trimmings can be temporarily foregone. "Within a day or so the Office of Production Management will announce a broad, detailed campaign to bring those savings into effect." You will hear much more about priorities in the near future. They will be administered without favors or favorites. Acceptance of this sort of regulation is disagreeable but all-important for the preservation of our freedom. The controls will be planned carefully 80 that they can be dismantled after the emergency is over. Regraded Unclassified