Volume 452, October 17 – October 20, 1941

DIARY Book 452 October 17 - 20, 1941 Regraded Unclassified - B - Book Page Budget Non-defense expenditures in 1942 budget: Report submitted by Bureeu of Budget - 10/18/41 452 141 Business Conditions Heas memorandum on situation for week ending October 18, 1941 331 - C - China See War Conditions Coast Guard Commendant, with approval of Secretary of Treasury, to put personnel ashore to protect vital facilities, shore structures, etc.: Proposed Executive Order discussed at 9:30 meeting - 10/17/41 33 Waesche to cancel trip West on HMJr's instructions - 10/17/41 42,43 Connelly, Martin R. (Lieutenant) See Customs, Bureau of Copper See War Conditions: Lend-Lease Correspondence Mrs. Forbush's resume' - 10/17/41 104 Customs, Bureau of Shooting of Lieutenant Martin R, Connelly by Customs Guard John K. Yeung, as Connelly was leaving United States Army Transport PRESIDENT CLEVELAND a) Navy asked to permit personnel to testify - 10/17/41 103 b) Report to Secretary of War - 10/20/41 324 1) Stimson-HMJr conversation - 10/21/41: See Book 453, page 101 c) Supervising Customs Agent in Pacific Coast sent out to help - discussion at 9:30 meeting - 10/21/41: Book 453, page 14 d) HMJr's letter to Attorney General - 10/21/41: Book 453, page 98 e) Stimson-HMJr conversation - 10/27/41: Book 454, page 167 f) Resume of case to date discussed at 9:30 meeting - 10/29/41: Book 455, page 130 g) Pictures discussed at 9:30 meeting - 11/4/41: Book 457, page 98 h) Foley reports on police record - 11/4/41: Book 457, page 257 i) Reports received from Honolulu - 11/6/41: Book 458, page 73 3) Justice and Treasury select counsel - 11/12/41: Book 460, page 154 k) Foley gives HMJr complete report on trial to date from "Boh" Chambers in Honolulu - 11/26/41: Book 465, page 271 1) Verdict: Manalaughter - 10-15 years; probable appeal - 12/1/41: Book 467, page 30 a) 10 years at hard labor - 12/4/41: Book 468, page 226 Regraded Unclassified - D - Book Page Defense Savings Bonds See Financing, Government - 7 - Financing, Government Non-defense expenditures in 1942 budget: Report submitted by Bureau of Budget - 10/18/41 452 141 a) Report on first meeting with Committee - 10/29/41: See Book 455, page 151 Defense Savings Bonds: Treasury Hour: Albert Stoessel (friend of Werner Josten) to review programs in advance - 10/17/41 38,41 a) HMJr changes plan - 10/23/41: Book 453, page 309 Progress report - 10/17/41 74 Status of state organizations as of October 17, 1941 78 "Millions for Defense" - samples of 79,80,81,82 Field Organization News Letter, No. 22 83 Kentucky set-up discussed by Barkley and HMJr - 10/20/41 285 Comparative statement of sales for first sixteen business days of August, September, and October, 1941 - 10/20/41 306 - 0 - Guatemala See Latin America - K - Kentucky See Financing, Government: Defense Savings Bonds - L - Latin America Guatemala: Report on possible freezing control sent by DuBois (Treasury) and Hooker (State) - 10/18/41 197 - M - Mail See Treasury Department Regraded Unclassified - R - Book Page Revenue Revision Tax Anticipation Notes: Proposed letter to taxpayers discussed by HMJr, Bell, Sullivan, Morris, Buffington, Barnard, Odegard, and Kuhn - 10/17/41 452 46 a) Proposed letter. 66,67.69 b) "Know Your Taxes": See Book 453, page 298 - S - Stoessel, Albert See Financing, Government: Defense Savings Bonds - T - Tax Anticipation Notes See Revenue Revision Treasury Department Mail: Greater efficiency in handling at Foreign Funds, Public Debt, and Savings Bonds discussed at 9:30 meeting - 10/17/41 17 - U - Unemployment Relief Work Projects Administration report for week ending October 8, 1941 345 United Kingdom See War Conditions: Military Planning - W - War Conditions Airplanes: Employment in Aviation Manufacturing Industry - Haae report - 10/17/41 92 a) Chart 100 Shipments to United Kingdom and overseas commands - British Air Commission report - 10/17/41 101 Shipments to the British - Kamarck report - 10/20/41 356 China: Fox praised in Singapore Daily, Hong Kong - 10/20/41 364 Exchange market resume' - 10/17/41, etc 138,211,370 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Export Control: Exports to Russia, China, Burma, Japan, and France, as reported to Treasury Department during week ending October 11, 1941 - 10/18/41 452 180 Exports of petroleum products, scrap iron, and scrap steel from United States to Japan, Russia, Spain, and Great Britain, week ending October 18, 1941 350 Foreign Funds Control: Progress report as of October 20, 1941 349 Lend-Lease: Aid to Britain: Conference in White's office - 10/20/41 249 a) Agenda 280 Copper Mines: Purchase of output of three high-cost Michigan mines discussed in Foley memorandum - 10/20/41 354 Military Planning: Report from London transmitted by Halifax - 10/19/41 213 Purchasing Mission: Vesting order sales - 10/20/41 361,362 Work Projects Administration See Unemployment Relief - Y - Yeung, John K. (Customs Guard) See Customs, Bureau of Regraded Unclassified 1 TREASURY DEPARTMENT FOR RELEASE, MORNING NEWSPAPERS, Washington. Friday, October 17, 1941. The Secretary of the Treasury, by this public notice, invites tenders for $150,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under competitive bidding. The bills of this series will be dated October 22, 1941, and will mature January 21, 1942, when the face amount will be payable with- out interest. They will be issued in bearer form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000 and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o'clock P. m,, Eastern Standard time, Monday, October 20, 1941. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis of 100, with not more than three decimals, e. E., 99.925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. 28-10 Regraded Unclassified 2 - 2 - Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof, The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on October 22, 1941. The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatment, as such, under Federal tax Acts now or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest. Under 3 - 3 - Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from considera- tion as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued hercunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. -o0o- 4 October 17, 1941 9:25 a.m. RE FINANCING Present: Mr. Haas Mr. Hadley Mr. Bell Mr. Morris Mrs. Klotz H.M.Jr: On reading this memo, it isn't quite clear to me what you people had in mind. You say, "Offer & new Treasury security for four hundred cash and in addition offer the holders of the RFC the fifty percent." Maybe I don't understand it, but you say the RFC need-- Bell: They need five hundred million. H.M.Jr: Well, now, if you took the - yes. RFC, three hundred and the Commodity Credit - I take it you are bunching the two? Bell: That is right. You would offer a Treasury note, say, for four hundred million dollars. Is that what I put in there? H.M.Jr: Yes, that is right. Bell: Four hundred million dollars, and then you would increase that - that is, you would Regraded Unclassified 5 - 2 - offer for cash and then you would increase that four hundred million by fifty percent of the exchange of RFC and Commodity Credit, which would be a hundred and fifty, two hundred and fifty million, so you would have a six hundred fifty million Treasury note outstanding, and then you would pay off the two hundred fifty left in cash. H.M.Jr: Wait a minute. You see, you have got - now wait a minute. I have got the four hundred and half of the RFC and Commodity Credit, two fifty, which would give you 8 six fifty note. Bell: That is right. H.M.Jr: What are you going to do with the hundred and fifty? Bell: Hundred and twelve? H.M.Jr: No, the other half of the RFC. Bell: Pay that off in cash. Have one half of it exchanged. H.M.Jr: And the four hundred you raise will do that, is that it? Bell: Well, the four hundred plus the two fifty bills. You see, you are getting fifty million bills coming in also. H.M.Jr: I don't think that that is quite clear, the way you are putting it. Bell: You see we put down there, start the bills the twenty-second at fifty million dollars a week. H.M.Jr: Let me just see. I see. Regraded Unclassified 6 - 3 - Now, all of that one - now, what is two? Bell: Well, two is another-- H.M.Jr: Oh, no. Bell: ....another suggestion, yes. You can reopen a Treasury note - I don't think I am in favor of it, but you could reopen that old Treasury note. H.M.Jr: Could they say, "Here is one, and then the alternative the next time it is written? Bell: Well, we didn't recommend any one of them, but we said we suggest these for considera- tion. H.M.Jr: Oh! Well, it isn't clear to me that two and three are alternatives. Reading it quickly, you wouldn't know it. Bell: I see. I am not so sure that that fifty percent is even enough. There is quite a lot of kick in the market. H.M.Jr: Oh, I got wonderful statements in the Tribune today. Bell: Your Tribune is good, but the banks are feel- ing a little bit low about it, particularly some of your banks, your large banks, that have really taken your guaranteed and made a market for them, such as the Guaranty and one or two of the others, and they have pur- chased them, 80 they say, with the rights in mind. H.M.Jr: The Tribune just glowed. Morris: Well, I think that was on the major policy. I read that, and I think that is on the major Unclassified 7 - 4 - policy, which we are all in accord with. H.M.Jr: But today you are talking about something - there are no rights on this thing. Some- thing happened to this thing. Of course, I didn't have that in mind. Bell: It is pretty effective. H.M.Jr: I just wanted to see what would happen if I said it. Bell: There really wasn't much market yesterday. It was just a marking down. Hadley: A marking down. They weren't willing to sell at. par, but they would bid for them at par. H.M.Jr: Some banks call you? Bell: By golly, I have had calls from all over the country, and I have got one in from Chicago this morning waiting for me. McLucas called me. They weren't sore. They just said to tell the Secretary that they have been in this market, they have held these guaranteeds, and they haven't got them for speculation but for investments, but they have taken into consideration the right values. They buy them because it gives them an exchange privilege on the next one, and they don't have to be in the market and boosting up the market all the time to get their investments. They said to just tell you that, and that is all they wanted. Some of the people around New York yesterday said, "We just don't think the Secretary is going to be that brutal. He hasn't been in the past," and they have been patting you on the back as to your fairness in the past, and Regraded Unclassified 8 - 5 - they don't think you are going to be brutal in this. I had a lot of calls yesterday. H.M.Jr: Well, I understand this now. Bell: I told them that they would just have to keep their shirts on for a couple of days, and I thought the situation would be clarified by Monday. I told them you usually gave out some information as to what we were think- ing about before a financing, and you cer- tainly would do that again Monday. (Mrs. Klotz entered the conference.) H.M.Jr: Did you (Morris) get any calls? Morris: No, I didn't. H.M.Jr: All right. We will go into the next meeting. Regraded Unclassified 9 THE UNDER SECRETARY OF THE TREASURY WASHINGTON October16, 1941 TO THE SECRETARY: Subject: The November and December 1 - March 1 Financing Program November financing The following is the amount of financing which was contemplated for the month of November: Maturities New Cash Total RFC $300,000,000* $500,000,000 $ 800,000,000 U.S. Housing Authority 112,000,000* 150,000,000 262,000,000 Commodity Credit Corporation 204,000,000** - 204,000,000 $616,000,000 $650,000,000 $1,266,000,000 Maturing November 1. **Maturing November 15. In view of the long policy of the Treasury in granting exchange privileges, we definitely feel that "rights" should not be entirely eliminated at this time. We believe, therefore, that to keep faith with the market some provision should be made for allowing the holders of the maturing obligations of the Reconstruction Finance Corporation and Commodity Credit Corporation to exchange their holdings, at least in part, for any Regraded Unclassified - 2 - 10 other securities offered. At the time the obligations of the U. S. Housing Authority were issued, it was intimated by the Treasury that they might be paid off in cash at maturity. For this reason they have practi- cally no "right" value attached to them, and they may, therefore, be paid off and no exchange privilege granted. To provide for the refunding of the Reconstruction Finance Corporation and Commodity Credit Corporation maturities and the additional cash required between now and December 15th, we suggest the following for consideration: (1) Offer a new Treasury security for $400M cash, and in addition offer the holders of the RFC and CCC maturing obligations the privilege of exchanging them for the new securities offered up to 50% of their holdings, and pay off the USHA maturing obligations amounting to $112M in cash. This would require cash of $264M to meet maturities which was not contemplated in our cash position estimates, although we will get about $300M more on the recent bond issue than provided for in these Regraded Unclassified - 3 - 11 estimates. To follow up the policy agreed upon at yesterday's luncheon conference, begin on October 22nd to issue $50M additional bills a week. By January 14th we would have completed the 13 weeks and raised $650M additional funds. The total bills then outstanding would be $1,950M, at which time we could consider as to whether we wanted to go on at the rate of additional $50M a week to a total of $2,600M. (2) Reopen an outstanding Treasury taxable note for cash in the amount of $400M and exchange along lines of (1) above. For example, the 3/4% note maturing March 15, 1943, selling at about 100 25 - 27 would serve this purpose, 32 although selling a little high. (3) Either (1) or (2) with full exchange privileges. In either case additional Treasury bills should begin October 22nd. - 4 - 12 December 1 to March 1 financing Maturities New Cash Total Treasury .$ 426,000,000* $2,500,000,000 $2,926,000,000 RFC 310,000,000** 350,000,000 660,000,000 FFMC ..... 340,000,000*** - 340,000,000 $1,076,000,000 $2,850,000,000 $3,926,000,000 Maturing March 15 Maturing January 15 *** $236M callable January 15 and $104M callable March 1 Our cash position estimates contemplate raising new money for the Treasury of $1,500M on December 15 and $1,000M on February 1. Ordinarily we would refund on December 15 the March maturities amounting to $426,000,000. Our estimates also contemplated raising additional money in January in the amount of $350,000,000 for the RFC and refunding its maturities of $310,000,000, and also refunding the issues of the FFMC amounting to $236,000,000 callable January 15, and $104,000,000 callable March 1. The following are suggested for consideration in connection with the December and January financing operations, subject to change however depending upon what plan is adopted for the November financing: - 5 - 13 (1) a. Offer a Treasury bond on December 15 for $1,500M in cash, and in addition, refund the Treasury note of $426M maturing March 15; (b) Offer a new Treasury note in January for refunding the RFC maturity of $310M, and the two callable issues of FFMC aggregating $339M, or a total of $649M; or (c) Under (b) raise in January $450M in cash and grant exchange privilege on a 50% basis. (2) a. Offer a Treasury bond on December 15 for $1,500M in cash only; (b) Then in January offer a Treasury security in exchange for Treasury, RFC, and FFMC maturities; or (c) Under (b) offer Treasury security for cash of $450M and grant exchange privilege on a 50% basis for agency maturities. (This also assumes a bill program of at least $50M a week for 13 weeks.) - 6 - 14 (3) In view of the fact that it will be necessary to raise additional cash early in February, probably in the amount of $1,000M or more, the $104M issue of FFMC callable March 1 and the $426M Treasury issue maturing March 15 could be refunded into whatever issue is offered at that time. DWB DAMJ 15 October 17, 1941 9:30 a.m. GROUP MEETING Present: Mr. Haas Mr. Morris Mr. Bell Mrs. Klotz Mr. Buffington Mr. Barnard Mr. Sullivan Mr. Schwarz Mr. Foley Mr. Thompson Mr. Gaston Mr. Graves Mr. Kuhn Mr. Odegard Mr. Coe H.M.Jr: In this morning's Wall Street Journal the SEC seeks to remove tax law discrimination in favor of bond debt. Are you familiar with the study they are making? Sullivan: No. There are two or three other things we are going over with them. That represents a problem we have been working on ourselves. H.M.Jr: Well, don't you think that they might say something to us before they give it out? Sullivan: Yes, I do. As a matter of fact, they shouldn't be giving any of it out. Regraded Unclassified 16 - 2 - H.M.Jr: Well, it is Purcell, I think, who made a speech on it. The only way to talk to the fellows is to call them up and say, "Well, do you think that this is very nice?" Sullivan: He is a pretty good fellow. lle has always cooperated with us. I will read this. Foley: They haven't got very much to do over there now. (Laughter) They are like the Federal Reserve Board. H.K.Jr: Really? Foley: That is right. They are looking for something to do. H.M.Jr: Well, why don't they do & job on the utilities? Foley: Well, they are doing that. H.M.Jr: Without taking ten years to do it, I mean. How about Ambassador Winant's cable? Bell: I have it here, Mr. Secretary. That was handled before by Mr. White and Mr. Coe and we think you answered it, but I don't see any objection to sending another cable saying that we will back him up in the position he takes. H.M.Jr: Is that a cable? Bell: Yes, sir. You just initial it and I will see that it goes out. II.M.Jr: O.K. Bell: It is just for the record. It really doesn't mean an answer. Thompson: Here is a memorandum on Frazier and Coffren, your two chauffeurs. Regraded Unclassified 17 - 3 - H.M.Jr: The reason is, Frazier thinks the evening job is a little better. Thompson: Well, that is 8. little bad news in there. H.M.Jr: Oh, I didn't read it. When do they have to change it? Thompson: On the first of January. H.M.Jr: It is a nice Christmas present, isn't it? He has got to go back from two thousand to sixtean hundred. Nothing you can do? Thompson: We have argued it out and argued it out. They don't have a higher grade for any cabinet officer. Klotz: They knew that, though. Thompson: Oh, yes, they knew it. H.M.Jr: I think I would tell it to him now. Thompson: I had been planning to do that. I am having a rather complete survey made of the Mail Depart- ment. Up in Foreign Funds it is probably the worst spot but steps are being taken. H.M.Jr: I didn't hear very well. Would you mind repeating that? (Facetiously) Thompson: Foreign Funds. I might say, in fairness to them, they have reached the saturation point in mail and they are doing a good job. H.M.Jr: Did you say they are setting an example for the Department? Thompson: Mr. Bell also has beaten me to the gun down in Loans and Currency. He had already taken steps about three weeks ago to improve conditions there but I am having a check made all around. Regraded Unclassified 18 - 4 - H.M.Jr: I think every four years ought to be time for & little dusting off. Thompson: I think the delay now is because the saturation point has been reached and there is just tons of mail coming in. Bell: The volume is really terrific now. Thompson: I know the mail on my own desk is about a four hundred percent increase. But I will have 8 report for you on that. H.M.Jr: This is apropos of what you told me yesterday of some letters I have been getting. I think somebody ought to decide how often we go to these Defense Bond lists. I got a mean letter yesterday from 8. man that ought to know better, about how he had gotten two letters. Max Farrand. Kuhn: I prepared a mean reply, Mr. Secretary. It was a very nasty letter and the only one of its kind that I have seen. All the other people aredelighted to get these letters from you. H.M.Jr: But the point I am making, let's take the United States Savings Bond list. I don't think that we should circularize that - well, certainly not more than once a month, and I think if we circularize it -- Kuhn: We don't. We can't. H.M.Jr: Well, once in two months. Now Buffington has it in mind, you see. Kuhn: But it is physically impossible to do the turn- over of so many millions. H.M.Jr: I am just raising the question. I don't know how often it is done, but I think, Harold, you Regraded Unclassified - 5 - 19 ought to be controller on that. I think there is a limit to how many times you can go to a list like that. Kuhn: His complaint was that he got two of the same letter. Bell: You see, his name is in the file twice. They have taken it from different places, and there is 8. constant study of that list to eliminate duplications, but when you have got seven million names, it is impossible to eliminate all duplications. H.M.Jr: While I am on that, could you give me a report Monday on how far along you are with the mailing of my Boston speech? Kuhn: Well, Norman knows that already. Thompson: They have completed the mailing to the extent of available copies of the speech. They ran out of copies. Over two million copies have gone out. H.M.Jr: Don't you think that is enough? Thompson: There are three or four hundred thousand more to go and they just reported yesterday that they would have to get that additional number of speeches to complete the list. H.M.Jr: Do you think you want to do that? Do you want to do it? Kuhn: The requests are coming in all the time, Mr. Secretary. I have never seen anything hold up so long. Thompson: I haven't gotten my copy yet. Odegard: Wasn't the Max Farrand duplication due to the Regraded Unclassified - 6 - 20 fact that is name appeared on the lists of two of those learned societies? H.M.Jr: I am not bothered by it. It is just those kind of letters which they bring to me which just raises some of these things, and having talked with Buffington yesterday and knowing that he had this thing in mind, I am taking a little unfair advantage. He shouldn't come and tell me what he is thinking of doing. It made me wonder how much we go to those lists. Kuhn: Mr. Secretary, on the Boston speech Mrs. Forbush upstairs gets requests for about twenty-five hundred - I think almost twenty-five hundred B. week, in addition to what the Defense Savings people get. H.M.Jr: Good. Kuhn: And it keeps coming and Harry Hopkins wants us to send it to all high schools. H.M.Jr: Really? Harry Hopkins? Kuhn: Yes. He transmitted a request or a suggestion. I don't know how you feel about that. Thompson: It is & good place for it, I think. H.M.Jr: Well, I will leave that to you people. Professor Odegard can decide whether it is fit and clean, and so forth, for high school children. (Laughter) How about something nice for Mrs. Lewisohn? Kuhn: I handed it in at 9:10. (Laughter) H.M.Jr: That is all right. Did you have a time stamp put on it. Kuhn: Would you like one? Regraded Unclassified 21 - 7 - Bell: He can fix that too. H.M.Jr: Anything else, Norman? Thompson: That is all. H.M.Jr: All right. I am just telling you on the record, I think it is a very healthy thing, this check-up. My office may get a little unpopular, but the only way to keep us from getting after you is to do it before the memo comes. Bell: I have this -- H.M.Jr: We are just going to keep after you people, and it is the only way I can get the stuff; and if I get the service so we don't have to check up, I am sure we will all be delighted. The other point, Mrs. Klotz says, when you people do give me a report on something, could we have & little memorandum in writing so that they can close out our books on it, you see. I mean, you may stop by and say, "Well, I have done this," but there is no way that the girls know. Klotz: It makes it difficult. H.M.Jr: So if you would, when you run back, stop a minute and confirm it in writing, then they can close it out. Bell: I find they usually check up. H.M.Jr: It is all right. She has got a good organization. It keeps you people on your toes. Klotz: It is a nuisance, I know. Regraded Unclassified - 8 - 22 Bell: No, it is all right. H.M.Jr: If they don't like it they can beat the memo, and then you don't get any. But B. confirmation of any verbal thing, please. Bell: I have this memo that the Chinese Ambassador gave you about having someone from the Federal Reserve Bank go over there and study their central bank, one. Two, whether Fox could serve as an advisor to the Chinese Treasury. Do you mind if I talk to Eccles on it? H.M.Jr: No. Bell: I think we can prepare a cable on two and say we have no objection if it isn't burdensome to Fox. I expect it is largely honorary, anyhow. H.M.Jr: Well, if you and Coe would work it out. Bell: Yes, we will. H.M.Jr: Can I forget it? Bell: Yes. Well, we ought to have a letter, probably. H.M.Jr: All right. I think we should let the Ambassador know it. Bell: Yes, I think so too. H.M.Jr: Anything else? Bell: Yes. Mr. McGoldrick from New York wants to come down Monday and get his twelve and a half million dollars in obligations, and I think it is a publicity stunt. He might want a picture taken of samebody handing them to him. He said he would like to have a picture of you handing him the twelve and a half million, and if not, he would like to have a picture getting Regraded Unclassified 23 - 9 - off the plane back in New York. He says there is a campaign on. He paid his money yesterday to the Federal Reserve. Do you want to do that? H.M.Jr: Sure. He is a friend of Peter Odegard's. (Laughter) Bell: Harold Smith called me and gave me some background of the letter he wrote you on the state money. He had to do that, he said, because it was being approached through another angle to the President by some governor. It is something they have been working on for some time with one of the state treasurers. Now, the governor got hold of it and he approached the President and he wanted to stop that so he wrote to the President also and he said he wanted to explain it to you and he understands that this governor is going to write you a letter. It is the Governor of Virginia. He wanted you to know that. I also have his document that went up yesterday. It is about twenty-six pages long. H.M.Jr: I will take it to the country with me. I will most likely light the fire with it. Regraded Unclassified 24 - 10 - Rell: Well, it is interesting reading, but doesn't give much consolation to the committee, certainly, on '42 expenditures. Could Mr. Buffington and I have a few minutes today to discuss this tax note thing? Sullivan: I would like to be here when that is dis- cussed, too. H.M.Jr: Sure. Ruffington: Mr. Secretary, could we do that as late in the afternoon as possible? H.M.Jr: Yes, you can do it right late. You can do it about two oclock (laughter). We will say two fifteen. That will be the deadline. Bell: I would like to do it before. I have a luncheon engagement with the Hungarian Minister. H.M.Jr: Well, I can't do it before. Buffington: I won't be prepared before two fifteen. H.M.Jr: This will be the last appointment of the day anyway. Bell: I wanted to get something befo re he went away. H.M.Jr: Two fifteen. All right, Dan? Bell: Yes, sir. Coe: I gave Bewley the Russian information. He wanted to apologize for the fact that Regraded Unclassified 24 - 10 - Bell: Well, it is interesting reading, but doesn't give much consolation to the committee, certainly, on '42 expenditures. Could Mr. Buffington and I have a few minutes today to discuss this tax note thing? Sullivan: I would like to be here when that is dis- cussed, too. H.M.Jr: Sure. Buffington: Mr. Secretary, could we do that as late in the afternoon as possible? H.M.Jr: Yes, you can do it right late. You can do it about two oclock (laughter). We will say two fifteen. That will be the deadline. Bell: I would like to do it before. I have a luncheon engagement with the Hungarian Minister. H.M.Jr: Well, I can't do it before. Buffington: I won't be prepared before two fifteen. H.M.Jr: This will be the last appointment of the day anyway. Pell: I wanted to get something before he went away. H.M.Jr: Two fifteen. All right, Dan? Bell: Yes, sir. Coe: I gave Bewley the Russian information. He wanted to apologize for the fact that Inclassified 25 - 11 - Halifax hadn't told the Treasury people what Bewley told Halifax, for bothering you. H.M.Jr: Tell him I don't accept his apologies and I don't think it is necessary. Coe: We have got information that South Africa is selling more gold to Britain. For some time they have been accumulating a lot. Now it is going down again. H.M.Jr: That was this morning's paper? Coe: That is this morning's. That is all. Buffington: I have nothing. Schwarz: Felix Belair called and asked if you would say a word of tribute for the return of the March of Time program to the air. He said he spoke to you about it. H.M.Jr: I don't know which is the correct pronun- ciation, nertz or nuts. Schwarz: He said now we were in the radio business. I told him we weren't giving out testimonials. H.M.Jr: You can take your choice. I can't spell. Schwarz: I paved the way for that. H.M.Jr: Felix Belair's boss came in. He was going to let me hear from him about putting on fifteen minutes for us in connection vi th Life, and I have never had any answer. But that is neither here nor there. All right? Schwarz: Yes. - 12 - 26 H.M.Jr: George? Haas: (Handing reports to Secretary) Mr. Secre- tary, you probably noticed that there are very sharp breaks in the commodity market yesterday. The Dow Jones average had the sharpest daily break since it was computed in '33, and the ones that broke sharpest were the ones where the commodities were inflated, like grains and fats and oils, but all of them shared in the decline. Wheat went down the limit, ten cents. H.M.Jr: Peter? Odegard: 1 have nothing. H.M.Jr: Harold? Graves: We are all clear in Delaware. As luck would have it, we got a letter from Governor Buck yesterday saying that on account of bad health he would not be able to accept the chairmanship of that state. H.M.Jr: Wonderful. Who is the Senator, Hughes? Graves: Hughes is the Senator who called you. H.M.Jr: Fine. Graves: I think when you talk to Hughes it would be well to put it on that ground, that Buck finally declined. H.M.Jr: Now, Harold (laughter). Graves: Because we have got to go. in there again and make an effort to induce somebody else to take this job. I suppose you won't want to call on Hughes. 27 - 13 - H.M.Jr: I am not going to. Graves: We have now got our chairmen and administra- tors and deputy administrators in both North and South Dakota, and the governors of both of those states have agreed to accept honarary chairmanships of our organi- zations. They both were quite friendly and favorable to this program. H.M.Jr: Now let me see, that just leaves you New Orleans and New Hampshire? Suilivan: Oh, boy, I have got a star for you up there (laughter). H.M.Jr: I said to Harold, "Well, Harold, why don't you do something about New Hampshire?" 'Well now, Mr. Morgenthau, can't I leave the least until the last?" He said, "It is so insignificant" (laughter). Sullivan: We have the first presidential primary, don't forget. H.M.Jr: That is about fifty per cent correct. Sullivan: I have got a star for you. William J. Starr. Graves: This might be interesting to you. Our people who have been in North and South Dakota say that there is no following for Senator Nye or for the isolationist group in those states. H.M.Jr: I would like to do an extra good job in North Dakota and Montana. Graves: We are doing a good job already in Montana. We have been organized there for three months Regraded Unclassified - 14 - 28 and it is working well. I think we will do a good job in North Dakota. H.M.Jr: Thank you. What else, Harold? Graves: That is all. Barnard: Nothing. Kuhn: Nothing. Morris: Nothing. H.M.Jr: You and I are going to get together Monday? Barnard: Yes. Sullivan: That sounds like a pretty close corporation, Dan (laughter). Junior (Foley) and I ran across a bad situation -- H.M.Jr: Junior? (Laughter). Sullivan: .... in Brooklyn. There is a fellow up there that the Internal Revenue men have been after, an Austrian national, who apparently bought himself a job as a consular representative of Paraguay and acquired diplomatic status. He was in trouble with us on income taxes. H.M.Jr: What is his name? Sullivan: Faringer. H.M.Jr: That is Sam Klaus. Gaston: Yes. Sullivan: That is right. And Wednesday he blew into 29 - 15 - town with one attorney to see us on taxes and the Collector of Internal Revenue in Brooklyn representing him before the State Department to prevent his being put out of the country. That brings up the old, old problem as to whether or not collectors of Internal Revenue shall continue to practice law or engage in their own business. H.M.Jrz Good heavens, there is a succession of orders in Internal Revenue which I got out at the time I was having my fight with Senator Bulkley in Ohio. Sullivan: Well, apparently more than half of them are still in business, and I think as soon as Mr. Helvering comes back we had better take that up. H.M.Jr: If there ever were stiff regulations, they were written at that time. You (Graves) were in on that at that time. Foley: They have never been put into effect. Graves: I don't remember that specific thing, but I was in on the -- H.M.Jr: I mean that whole liquor case with the collector and all that. Graves: All that was done as a result of that was to issue a regulation or renew an old regulation absolutely prohibiting any employee in Revenue to have any interest in the liquor business, or, as I recall, tobacco business or any other business that was subject to supervision by the Bureau of Internal Revenue. I think our orders then went no further than that. 30 - 16 - Foley: It is something that ought to have attention, Mr. Secretary. (The Secretary held & telephone conversation with Senator Hughes). H.M.Jr: All right? Klotz: You didn't give him a chance. That was marvelous. Gaston: He says, "Ha, ha, that is too bad." Foley: I think you ought to do it, Mr. Secretary. H.M.Jr: What? Foley: I think you ought to clear it with him. Yes, I do, really. I think this is wrong. I really do. I feel quite strongly about it. H.M.Jr: Well, I feel quite strongly about it, too. We can't start it. Have a talk with Harold. He is & nice soft gentle fellow. Foley: I know, but to get a Republican fellow in a state who may run against a United States Senator, and set him up as the head of an organization in a state, I think that is wrong. H.M.Jr: Granted, but that doesn't mean at this stage of the game where we have got everything straightened out but New Hampshire, that I am going to let the political bosses appoint the people. We have gone through this whole thing without consulting the Senators. If we start now, where does that leave us? We have done the whole job. As far as I 31 - 17 - know, this is the only complaint I have had on forty-eight states, and I think that is a great compliment to Harold Graves. It is a great compliment. Now, my heavens, if he makes one mistake in forty-eight he is better than I am. He is the only Senator that has called us. Foley: This is the only one I have heard about, but it is a bad situation. H.M.Jr: I think he has done an amazing job to set up & non-political organization. We have got Willkie Democrats and we have got Willkie Republicans, and we have got all kinds. Just as long as their heart is in the right place and they want to lick Hitler, they are all right with me. This is the only complaint. Bell: I don't think you will get the cooperation of the community if you start to make the appointment, politically. H.M.Jr: No. I think Harold has done an amazing job. The purpose of the meeting is to exchange opinions. Don't you, on second thought, think 50? Foley: This is the only case I have heard of, Mr. Secretary, and it seems to me that is awfully raw. H.V.Jr: Well, it is the only one that there has been. All right. Where were we? Sullivan: Brooklyn. H.M.Jr: Well, can't we get out of Brooklyn? Sullivan: I think as soon as Commissioner Helvering returns, we ought to. Regraded Unclassified 32 - 18 - H.M.Jr: O.K. Incidentally, I have been making a little fun about Sammy Klaus. He wrote me a four or five page report on what he has been doing, and it is perfectly amazing what that fellow has done. It is an amazing report. Foley: He is not modest. Gaston: He has done a lot of good stuff. Foley: He is not modest (laughter). I'll bet I could take the report and .... H.M.Jr: Well, you will get a chance at it. All right? Sullivan: Yes. Foley: I have nothing. H.M.Jr: Hell, he is your assistant. Foley: Oh, yes? (Laughter). Sullivan: That is one of those compromises like I had on Blough. Foley: Well, don't rub it in. H.M.Jr: Assistant to the General Counsel, on your payroll. You ought to be proud. You ought to say, "Well, he is one of my boys." Foley: I would if he was. H.M.Jr: What else, Ed? Foley: Nothing. Gaston: I promised to bring to you the inquiry of the American Federation of Labor as to Regraded Unclassified 33 - 19 - whether or not it would be possible to lift the limit with respect to the purchase of Savings Bonds from union funds. That was just after I had gotten through explain- ing that we didn't want the union funds invested in Savings Bonds. So I am merely reporting that inquiry to you for the record. S.N.Jr: Well, the President of the Teamsters' Union, Tobin, he has been downright nasty about it. laston: Yes. S.M.Jr: But you have reported it anyway. Gaston: That is ri ht. I have here a proposed Executive Order which would permit the Commandant of the Coast Guard, on the approval of the Secretary of the Treasury, to put Coast hard personnel ashore to protect vital facilities, shore struc- tures and 30 on. I think it is Я desirable thing to have in case of an emergency. We have discussed it at some length. How about the Navy? How do they feel about it? Gaston: It is all richt with them. White Is there anything to show it is? teston: There is nothing here to show it. H.K.Jr: Nell, had you better vet something? Gaston: I will get something. H.M.Jr: I will sim it, not to hold it up. laston: This is & letter to the President through the Director of the Budget. I will get Regraded Unclassified 34 - 20 - something definite in writing from the Navy. H.M.Jr: Anything else? Gaston: No, I think that is all. H.".Jr: There was some Pittsburgh labor union wanted me to speak. I handed it to you (Kuhn) to prepare an answer. Kuhn: Pittsburgh labor union? H.V.Jr: Yes, they came in here. A longhand memo. Kuhn: You spoke to Fitzgerald yesterday about it? H.M.Jr: Yes. Kuhn: Yes, I have it. H.M.Jr: You are taking care of it? Kuhn: You can't do that. I think he told them that you couldn't. H.M.Jr: Well, you had better write it. I don't know, if anybody has not seen the March of Time picture on Norway, we are going to show it immediately now downstairs, if anybody would care to come down, he is invited. It is immediately below this room here. It is the March of Time, Norway picture. It will be shown in sixty seconds downstairs, if anybody would like to see it. Gaston: One other little thing, we are discussing a complicated matter of Cox and Gibbs, the naval architects, for design of an ice ship. I don't know whether you are interested or not. H.M.Jr: No. Regraded Unclassified 35 October 17, 1941 9:54 a.m. HNJr: Hello. Senator Hughes: Hello, Mr. Secretary. How are you this morning? HMJr: I'm fine. How are you, Senator? 5: Not 50 very good. HMJr: Oh, you're not feeling well? 55 I haven't been feeling well for several days. HYJr: I'm sorry. a: I'm over home. HMJr: Well, Senator, the cuestion about appointing Buck has taken care of itself H: Yes. HMJr: because he's not well enough. B: Huh? HMJr: He has heart trouble. H: Oh, has he? HMJr: So I understand. H: (Laughs) I don't know about that. I hadn't heard that. That's too bad. That's getting to be too prevelent. HMJr: Well, anyway that situation is solved; and while I'm very sorry that Mr. Buck 1s 111 H: Yes, I feel very sorry. HMJr: I'm glad to be able to do what you wanted. Regraded Unclassified 36 - 2 - H: Yeah. HMJr: So we're looking around for somebody else. H: Very good. I'll be back at Washington on Monday. HMJr: Right. I hope you'll be feeling better. H: Thank you very much. Hope you're well. HMJr: Take care of yourself. H: All right. HMJr: Good-bye. H: Thank you. Regraded Unclassified 37 October 17, 1941 12:01 p.m. Lt. Sinton's Secretary: Hello. HMJr: Sinton? S: Yes, sir. HMJr: What are the prospects for flying this afternoon? S: They're good, slr. We will have north winds, possibly twenty miles per hour, and a few clouds at three to five thousand feet; but the weather will be good. HMJr: Well, the earliest that I can take off now is two-thirty. S: Two-thirty. HMJr: That'll be the earliest. S: Yes, sir. Well, we can - the deadline should be three-thirty. HMJr: The deadline should be three-thirty? S: Yes, sir. HMJr: Well, I won't crowd you, but the earliest that I can get over to the port would be two- thirty. S: Yes, sir. That'll be Washington National. HMJr: That's right. S: All right, sir. We'll be ready. HMJr: Thank you. S: Good-bye, sir. Regraded Unclassified October 17, 1941 38 12:05 p.m. HMJr: Hello. Mr. Stoeesel: Good morning, Mr. Secretary. RMJr: How are you? S: All right, thank you. HMJr: I think you know the Werner Jostens very well. S: Yes. HMJr: I don't know whether you know he happens to be my brother-in-law. 8: Yes, I do. HMJr: Mr. Stoessel, the reason I'm calling you is this. You may or may not know that we have three radio programs 8 week - the Treasury does. S: Yes. HMJr: And on Saturday over WOR each week we have - Alfred Wallenstein does the programs for us, and Deems Taylor is the commentator. Well, frankly I have been disappointed because I just don't think that the music 16 sufficiently in tune with the times. In other words, a non- musician, it seems to me that the radio audience, that we could give them a little bit more exciting music. See? S: Yes. HMJr: And what I'd like to do is - if you felt you could do it - would be just send you in advance the programs that they 're proposing to do and then get your criticisms. S: Well, I should be very glad to give it to you, Mr. Secretary. Regraded Unclassified - 2 - 39 HMJr: See? Now, I have on my desk here, for instance, the program for October 25th, what they propose to do. I don't know whether, you know, it's something - whether it's the kind of music that we ought to be doing in these times or not. I mean, there's so much music that gets people aroused and makes them a little bit - feel patriotic - but on this particular program we've only been using foreign artists - foreign-born artists - I mean it's dedicated to that, you see. But a lot of this foreign composed music is exciting, and I don't think we've been outting that kind of programs on the air. What I'd like to do, if I could, would be to put in air mail 8. list of what we have been doing to give you an 1dea. S: Yes. HMJr: And then what we propose to do October 25th. 3: Fine. HMJr: And would it be rushing you too much to have an answer by Monday morning? S: I'd be very glad to send it to you, sir. HMJr: Well, that - and could I do that each week? S: Yes, I'd be very happy to. HMJr: And then possibly I'd arrange maybe - would it be possible, for instance, for you to come down here and spend an evening with me next week and we could go into it in greater detail? S: A week from tomorrow? HMJr: Well, any - no, sometime during the week. S: Oh, sometime during the week. Yes, any time that would suit your convenience. HMJr: Well, I'll get in touch with you again Monday Regraded Unclassified 40 - 3 - and find out. S: Yes, sir. Do you have my home address? 4 Jr: No, I don't. S: That's 14 Zeat 90. HMJr: Fourteen S: Fourteen East Ninetieth. HMJr: East Ninetieth. 5: And the telephone 18 Atwater 95358. RJr: Telephone Atwater S: Nine HMJr: Nine 8: five three five eight. HMJr: five three five eight. Well now, this will go out immediately and it ought to be delivered to your home tonight or tomorrow morning. S: Yes, sir. HMJr: And then if I could, say - you get something what I have in mind. S: Yes, I have an 1dea. HMJr: And I think if you Bee what we've done and what we propose to do, I think - well, at least you'll see why I'm disappointed. S: Well, I'll do the best I can about 1t. HMJr: That's all anybody can ask. Thank you. S: Thank you for calling. Regraded Unclassified 41 OFFICIAL OCT. 17,1941 MR. ALBERT STOESSEL JUILLARD SCHOOL OF MUSIC 130 CLAREMONT AVENUE NEW YORK, N.Y. ON SECOND THOUGHT BEFORE SENDING THE MATERIAL I WANT AN OPPORTUNITY TO DISCUSS IT WITH MR. DEEMS TAYLOR AND MAKE SURE THAT IT IS AGREEABLE TO HIM HENRY MORGENTHAU JR Regraded Unclassified 42 The Secretary Admiral Waesche is planning to leave tonight by train for San Francisco, where he 1s to address attend the American Merchant Marine Congress and to address it on Wednesday also to look into harbor protection net matters. He will return via St. Louis for XX & Mississippi River transporta++ tion meeting and be back in Washington Wednesday, Oct. 29. I agreed to this plan bebre I left for Seattle and he will go shead according to plan unless you object. He will be in continuous contact with headquarters and can be recalled by plane at any time. 155 FROM: MR. GASTON 43 October 17, 1941 12:32 p.m. Operator: He stepped out of his office. I'll have him in just a moment. HMJr: Oh, for God's sake. Where 18 he, Miss? Operator: She said he was just out in the hall and he's coming back. HMJr: Get him. Get him. Operator: All right. HMJr: Herbert Herbert Gaston: Yes. HMJr: I'm sorry, I disagree with you. This is no time for Waesche to be outside of Washington. Do you know that there was a torpedo - a destroyer was torpedoed this morning? G: I - yes, that's true. Yes, I hadn't thought of it in this HMJr: No, I'm sorry. I want Waesche here. G: All right. HMJr: I positively don't want him out of Washington. G: Yes. HMJr: I mean, this 18 no time for him to be touring the country. G: Yes. He discussed it with me - oh, it's a month ago. HMJr: Well, times have changed, and he should stay here. G: Yes. Regraded Unclassified - 2 - 44 HMJr: All right, then. Keep his organization on a twenty-four hour basis. G: Yes, right. HMJr: Thank you. G: Okay. Regraded Unclassified 45 ASSISTANT SECRETARY OF THE TREASURY October 17, 1941. MEMORANDUM TO: Secretary Morgenthau All FROM: Mr. Gaston Jim Rowe called me today to tell me that the President disapproved the appointment by O.P.M. of William A. Parker, whom the Bureau detected in an attempted tax fraud in 1937. Regraded Unclassified 46 October 17, 1941 2:15 p.m. RE TAX ANTICIPATION NOTES Present: Mr. Bell Mr. Sullivan Mr. Morris Mr. Buffington Mr. Barnard Mr. Odegard Mr. Kuhn Ruffington: In order that tax payers may know what their tax liability is going to be annually this year and what it was last year, and to show them accurately what monthly savings will be required to pay their income taxes, we plan to send out a circular to the demand depositors. It is the only record which we have. It will go to approximately twenty- five million people, represented by all of the banks in the United States. This pamphlet, in order that they can insert it in the monthly statement of accounts to cus- tomers. The first page carries a message from the Secretary of the Treasury, and then the following pages show, beginning with 8 single person with no dependents, and continuing through to a married person with three dependents, what their taxes were last year, what they are this year, payments they will have to make next year on this year's income, and the monthly savings necessary, and on the back we have put a short message headed, "Start saving now to make tax payments easier," and in the center, "Consult your bank about Tax Savings Notes." Regraded Unclassified 47 - 2 - We are not giving the taxpay er much infor- mation about the Notes, feeling that all commercial banks have the official circular on file, but rather trying first to make the taxpaper conscious of what his problem is. Once he is conscious of that, we will try to get him to go to 8 bank to secure detailed information about the plan. I have the proposed letter which I think everyone has looked over, which we would like to have the Secretary consider. H.M.Jr: When you say "everybody", who has seen this? Buffington: Mr. Broughton, Mr. Kilby, Mr. Kuhn, Mr. Graves, Mr. Bell, Mr. Sullivan, Tax Research. H.M.Jr: Has Odegard seen it? Buffington: Not in this last form. He has seen it up until the last changes that I made. H.M.Jr: Have you seen it, Barnard? Barnard: No. Buffington: I am sorry, I didn't prepare enough copies. I didn't know how many were going to be present. H.M.Jr: "We in America have decided upon an 'all- out' defense program that will require 'all- out' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representa- tives in Congress we have expressed our preference for paying as much as pos ible of the cost of defense out of current earnings. "Accordingly, our Federal income taxes have been increased so sharply that they will fall Regraded Unclassified 48 - 3 - heavily upon millions of individual budgets next year." I don't like that "so sharply". Sullivan: All right, go ahead. Buffington: You used somewhat similar phrasing, I thought, in 8. previous letter of July 28. It wasn't as strong as that. H.M.Jr: I don't like the "so sharp". Buffington: I have prepared the letter with and without that paragraph. I have another copy. Bell: Sullivan objects to that paragraph for other reasons. H.M.Jr: He objects to this letter? Buffington: No, he objects to the one that has just been read. Sullivan: That one paragraph. H.M.Jr: "We in "merica have decided upon an 'all- out' defense program that will require an 'all-out' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representa- tives in Congress we have expressed our preference -- (Mr. Odegard entered the conference). H.M.Jr: Peter, would you come in and sit down? I am doing a rush job which I would like you to take a look at before it goes out. This is the thing to acquaint the country with what the tax program is. The other Regraded Unclassified 49 - 4 - people have seen it, but you haven't seen it, but it is very important that you do see it, you see. I will start again. Odegard: I am sorry. H.M.Jr: I didn't let you know. It is my fault. And I didn't tell Buffington to see you, so it is entirely on me. Buffington: I did see you once, Mr. Odegard. You have seen it in one form, but not in this final form. H.M.Jr: When I leave here, these gentlemen can go over this if I haven't got the time to polish it up. "We in America have decided upon an 'all- out' defense program that will require 'all- out' taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our representa- tives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings. "Accordingly, our Federal income taxes have been increased so sharply that they will fall heavily upon millions of individual budgets next year. These increases are going to be hard to meet unless we all make definite plans for accumulating tax pay- ments well before they are due. "Your Government, therefore, is anxious that each taxpayer know as promptly and as accur- ately as possible what his income tax bill will be. As a service to the taxpayers, I Regraded Unclassified 50 - 5 - have had prepared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. "Tax Savings Notes are now being sold by the Treasury because thousands of citizens have already asked for a plan to enable them to save money systematically and con- veniently for this purpose. When you study the attached tables you will, I think, see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I am sure that your neighborhood bank will be glad" and so forth. My horseback opinion is that I would leave out that first paragraph. Bell: First? H.M.Jr: The first paragraph. I mean, I wouldn't talk about the "all-out defense". I would simply say, "Your Government therefore" - I mean, I would go into the idea that - it is in the rest of the letter, but I wouldn't talk about "all-out defense" or "all-out taxation" and the sacrifices, and so forth. I think it immediately sets up a resistance. Take a look at that, Peter. I think it immediately sets up a resistance. "We are coming to you, gentle men, and here in the first place is what we want to tell you, what it is. This is an easy way for you to figure your taxes and second, here is a suggested method of setting aside something each month out of current earnings to meet next year's tax bill." But my reaction at first blush is that you hit the Regraded Unclassified 51 - 6 - fellow first in the chin and knock him down and then you expect him to get up and fight for you. I am being very blunt. Now, Odegard may disagree with me. Sullivan is going to lay an egg in a minute if he doesn't say something. Don't lay an egg in the office, Sullivan. Sullivan: Everything you said is ancient history to me. I have been arguing this thing over and over. We are entirely in accord. H.M.Jr: With whom? Sullivan: You and I, on everything you have said so far. H.M.Jr: I don't like that "so far". Sullivan: That is right. I will help you to continue to keep pace with me here. In the letter it shows the taxes you paid this year and the taxes you paid last year. I don't see any point in the taxes last year. I think that is confusing. I further object to that for the more important reason that it is emphasizing that we are going up there to give them a sock. H.M.Jr: Sullivan, I am pleased to say we are still together. Sullivan: What is the date? H.M.Jr: It isn't the 17th of March. What is St. Patrick's Day? Sullivan: The 17th of March. Buffington: Mr. Graves asked me to say for him in this meeting that he thought if we took out that tax of last year's it would destroy ninety per cent of the effectiveness of what we were sending out. 52 - 7 - Barnard: I don't agree with that. I agree with you (Sullivan) on that. Odegard: I think, as 8. general proposition, it is a bad thing to make anything negative if you can make it affirmative. That is, people shy away from the things that - "cost" is & negative word. "Saving" is a plus word, and so on. I think it is a good thing to keep it as affirma- tive as possible. H.M.Jr: And so you would do what? Odegard: Well, I think that the elimination of the table showing last year's payments 80 that the increase is made very clear would improve it. H.M.Jr: And leave out last year's. Odegard: I would, yes. H.M.Jr: How can you make it glaring unless you compare it with something. Oh, I misunderstood you. I thought you said you wanted to make the increase glaring. Odegard: They will know that anyway. Sullivan: That is right. I had one other suggestion, Mr. Secretary. When this is printed up I think, as a matter of courtesy, I should t& e it to Mr. Doughton and also to Senator George, and if he is not here, Senator Connally, just so they will know before it goes out. I think this is one of the first direct approaches we have made to the taxpayers. H.M.Jr: That is all right, but that wouldn't -- Sullivan: Not at all. H.M.Jr: .... keep him from putting - you are leaving when, tomorrow? 53 - 8 - Buffington: Tomorrow night. Bell: John, do you mean the table as amended and taking out the column? Sullivan: Oh, yes. I mean after it is printed. You just don't want Doughton to-- H.M.Jr: I would go better than that. When your proof comes off the press Monday, I would show it to him. Sullivan: I think Mr. Buffington says that it has to be printed over this weekend or they can't print them before the first of November. H.M.Jr: Well, I would put - just as soon as he will give you a proof or a copy, I think you should go up and show it to them. Sullivan: All right, sir. Buffington: Dr. Odegard, hasn't this information been extensively in the newspapers, comparing last year's tax with this year's tax. Odegard: That is right. Buffington: Therefore, I can't share Mr. Sullivan's view or yours, when it has such 8. tremendous sales appeal, I feel, to the public. In other words, what my taxes were last year is behind me. I have already paid most of it, but now to see that comparison-- Odegard: Then why don't you say that? You ought to have it carried through, you see. You don't say that in the body of your letter. You don't say anything about last year's taxes. You say, "As a service to taxpayers, I have had prepared the following tables showing what you will have to pay in the coming year." Regraded Unclassified 54 - 9 - Buffington: I didn't want to repeat. The table speaks for itself. It is very clear that there is that comparison by the heading of those columns. Bell: You do show it in the little heading at the top? Buffington: Yes. Odegard: There is a dangerous thing in it, too, that I don't want to exaggerate, but many people will look at that and think that that is what they have to pay. The capacity of people to misunderstand-- Buffington: That is true. Odegard: .... is almost unlimited, and they will look at the statement of last year's taxes and say, "Well, that is what I have got to pay next year. Countless thousands of them, and if you keep it out, you avoid that possibility. Buffington: It is a simpler printing job. H.M.Jr: Where do you stand on this, Morris? Morris: I would make it just as simple as possible. H.M.Jr: How about you? Barnard: I agree with Mr. Sullivan. If you can do it, I would stick a sentence somewhere in there that reads like this: "When you get your money, don't forget that it isn't all yours. Some of it belongs to the Government, and anticipate payment when it will be due," or something to that effect. "It isn't all yours." Buffington: I had that sentence. I went so far as to Regraded Unclassified - 10 - 55 say that you must remember income tax has first claim on your income. Barnard: That is too high-brow. That isn't direct enough. "When you get your money, don't forget it is all yours," is a lot different than saying something about income tax payments. I am not critical, but I am trying to express myself. H.M.Jr: Well, here is what I am saying. I am not laying down any rules. I would leave off that first paragraph. I would only talk about - I would only have one table. Buffington: You mean-- Bell: One column. Buffington: .... two columns, monthly and annually? H.M.Jr: Monthly and annually, that is all right. Odegard: Mr. Secretary, would you leave out the whole column or couldn't you meet all your obli- gations by simply having it read, "We in America have decided upon an all-out defense program. Through our representatives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings, and your government, and SO forth." H.M.Jr: Do that once more. (Mr. Kuhn entered the conference.) Odegard: It simply leaves out the negative. H.M.Jr: Say it once more. Odegard: "We in America have decided upon an all-out Regraded Unclassified 56 - 11 - defense program. Through our representatives in Congress we have expressed our preference for paying as much as possible of the cost of defense out of current earnings." Then it goes on: "Your Government, therefore, is anxious, and so forth.' H.M.Jr: Well, following what Barnard says, does the man on the street know what it means, "paying out of current earnings"? Is that too high- faluting? Odegard: Then you could add Mr. Barnards sentence. Barnard: I am thinking of a telephone installer. He gets two thousand dollars a year. He doesn't get that language, though, and he doesn't know what you mean by tax liability. What you have got to pay under the 1941 Act for these people is what makes sense to them. Buffington: Tax Research insisted upon having-- Barnard: I bet they did. I know damnwell they did. (Laughter) I don't blame them. So would I if I were there, but it still doesn't change the fact that to a telephone installer, "tax liability" is a big word. Morris: But this is going only to people that have checking accounts. Barnard: I have got a suggestion to make there, or a question. That is your first easy distri- bution, but there is no reason in the world why you can't send this, for instance, to every telephone company in the United States. There is three hundred thousand employees, and ask them to distribute it. So will the steel companies. So will International Busi- ness Machines. Take all the big ones, not Regraded Unclassified - 12 - 57 to make too big a job, and they will do it for you, and they will get an awful lot of people that won't go to the banks. They are not going to ask the banks. Most of these corpora- tions will facilitate getting the information for these things. Morris: The payroll office. Barnard: Yes. Buffington: My thought is that this is the first distri- bution. Sullivan: You have got twenty-five million of these going out? Buffington: Yes. Sullivan: You are only going to have about twenty-three million returns next year, so either We are not firing in the right places-- Buffington: We had this problem, Mr. Sullivan: The January 1 income tax blanks which will go out, the envelope is full. You can't get anything in it. The next mailing of the income tax bills was going to be - will be December 1 for the December 15 bills. Sullivan: Too late. Buffington: The Defense Savings Bonds are sending out literature at intervals which makes that difficult, so this seemed to be the best coverage to hit broadly, and if banks want to send it out partially, they would still be available in those banks for public distri- bution. Sullivan: What I mean to say is, you are hitting a very large proportion of the people who are going to file income tax returns in this one broad- side. H.M.Jr: I came back with this idea from Detroit. I picked it up in Detroit. Let me say this. I would like to make one other suggestion. "See your neighborhood bank or write me a letter, or write the United States Treasury," you see. - 13 - 58 Buffington: I had that in before. H.M.Jr: But don't make it just the bank. It is a little bit too much like the aspirin program. "See your neighborhood drug store". Odegard: Had you rejected the idea, Mr. Buffington, of any mention of the collectors of Internal Revenue? Buffington: Yes, I would stay away from -- Sullivan: No, Peter, that isn't any good. You have got sixty-four of them in America. Most of these people live hundreds of miles from a collector. Buffington: I have tried the post office routes and this seemed to be the best focal point for the moment that we can get. H.M.Jr: But I would like for you to add that you can see your neighborhood bank or write to the Treasury of the United States. Sullivan: I think that is a good suggestion. Buffington: Excellent. Odegard: What percentage of the population live within those sixty-four cities? Sullivan: Oh, in most states there is just one for the entire state. Odegard: Yes. Kuhn: He is in & big city, isn't he, John? Odegard: He is usually in 8. big city and it reaches a very large number - the reason I suggested it was because I was impressed in Philadelphia with it - what I was told by the Collector of Internal Revenue there, the facilities that they have for assisting people in making out 59 - 14 - their income tax returns and so on. I don't know, maybe it isn't worth including. Sullivan: Peter, if the inquiries come here and we have one uniform set of replies, if they go to sixty- four different collectors, you don't get that same uniformity no matter how hard you try. Odegard: That is true. H.M.Jr: Or you can make it, "Or write me". That is simple enough. "See your neighborhood bank or write me." Kuhn: And they will do it. Bell: You will get a lot of letters. H.M.Jr: We have got a whole staff for that. Buffington: We plan to send this directly to the banks in the interest of time for November first mailing. It would require a covering letter from you. You may have somewhat the same criticism of the first paragraph, although that is almost identically what you told them in a previous letter. H.M.Jr: "On July 28 I wrote you regarding the"- this is the banks? Buffington: Yes. H.M.Jr: "New tax savings notes which were about to be issued. I told you --" Change that. I don't tell them; I inform them, "that I thought it important that taxpayers of the Nation become aware of the unprecedented taxes they will have to pay next year on this year's income. I also suggested that they be encouraged to set aside funds now, with which to meet these later payments. Regraded Unclassified 60 - 15 - "As 8. service to taxpayers, the Treasury has just prepared a pamphlet entitled 1 Know Your Taxes' __" Again, I would leave out most of that first paragraph. "As & service to taxpayers, the Treasury has just prepared a pamphlet entitled 'Know Your Taxes', showing monthly savings needed to meet individual income tax payments for 1941 salaries and wage incomes of selected sizes for single and married persons wi th selected number of dependents. "Pamphlets will be sent to you by the Treasury and I request that you enclose a copy" -- I wouldn't say, "and I hope you will find it feasible or possible" -- you see. "...That you enclose a copy with monthly state- ments of accounts which you send to depositors the end of October. "Your continued cooperation in furthering the Tax Savings Plan will be appreciated." Now, there is just one thought. This is all right. I am perfectly willing to do it, but here is an alternative. The possibility of letting the FDIC do it through all insured banks. Bell: Well, we get all the banks through the Federal. H.M.Jr: Do we? Bell: Yes, they are all on the mailing list of each Federal Reserve district. H.M.Jr: And these people, when I leave in a couple of minutes, they can stay behind right here in this 61 - 16 - room and help you get over the thing. I am moving very fast. I would leave off that first paragraph, "As a service to taxpayers, the Treasury asks you to join me" or something. But no request, no orders. "I sincerely hope that you will do this as a service to the country and help us." You know, something like that. You have got enough talent around here that can get that spirit. Right, Peter? Odegard: That is quite right. H.M.Jr: You know, just that "You will join me in helping us to do this sort of work", and 80 forth. Buffington: Mr. Bell, on the question of the printing office working over this weekend, is that a question that will have to be asked? Bell: We would like to get this proof to the printer so they can work over this weekend and give you seven million pamphlets by Monday morning. If they don't work over the weekend you may not get the seven million by November first, so it will cost us about five hundred dollars. H.M.Jr: O.K. Bell: That isn't very much. Sullivan: One suggestion on that opening sentence: We say, "We in America." How about, All of us in America"? H.M.Jr: Well, the main thing, I don't want a request. I don't want to direct them. I want to ask them to join me in a spirit of cooperation, you know. You have got enough talent around here. Buffington: I am sorry about that le tter. It has been around the circle so many times and I have changed it -- Regraded Unclassified 62 - 17 - H.M.Jr: Well, if they stay right in this room they can settle the thing. Buffington: That is fine. H.M.Jr: What else do you want? I don't see why you can't get it through tonight. Buffington: That is fine, if these men will just give me a few moments time. H.M.Jr: May I say one thing, on the whole program: In talking to a lot of people who are buying these notes on 8. monthly basis, they kick on two things. One is that it takes a lot of time to fill out an application, and they get the note back and they have no place to keep it, and it is a bother. That, I think, is the sales resistance. Barnard: Mr. Sullivan and I have been talking about having a man send his check in to the collector as often as once a month in multiples of five dollars. We have an account with him anyhow. Let him pay his income taxes in advance and give him a discount and when we get the administrative bill before Congress we will put in a provision like that and cut out all of this debt structure. H.M.Jr: Well, that doesn't have anything to do with this circular. Bell: But I wanted to tell you and I think we ought to try to get it through so that we can have it in the next year. H.M.Jr: Well, it doesn't go into the circular. Bell: No, it does not. Barnard: That is a good idea, though, awfully good. Regraded Unclassified - 18 - 63 H.M.Jr: I didn't get it, see. You will have to start in all over again Monday. Bell: We have got some resistance on that too in the mechanical operations but I think John will be able to overcome it. H.M.Jr: I'll tell you what I would like to do, if they could do this. I want Odegard and Kuhn to ride down to the airport with me. They could be back here at 3:15. Have you got anybody waiting in your office? Kuhn: Yes, but he is about to go anyway. H.M.Jr: Have you got anybody waiting in your office? Odegard: I was to meet Lew Douglas. H.M.Jr: Where could you meet at 3:15? Can they meet in your office at 3:15? Bell: They can. I have got an appointment but they can meet in there. Sullivan: They can meet in mine. Morris: I have got lots of room. H.M.Jr: Three-fifteen? Sullivan: Sure. H.M.Jr: Would you? Barnard: All right. H.M.Jr: And I will deliver these fellows. Three-fifteen. Can you get rid of your fellow? Bell: Yes. H.M.Jr: Is that all right? Regraded Unclassified 64 - 19 - Bell: Yes, sure. H.M.Jr: I have got one idea I would like to leave with you. Have this thing photographed and we can, for two or three thousand dollars, have a short newsreel made, which we pay for, to have it run in every newsreel theater. FHA used to do that. It cost about three thousand dollars, I think, something unbelievably small to have the thing photographed and then put on every newsreel theater. Think about it. We haven't used the newsreels. We have used the radio but that would reach forty million people, supposedly. What do you think, Ferdie? Kuhn: Better than the radio. Buffington: We thought of putting up placards in post offices containing this table. H.M.Jr: And the final thing, add, "If you care to ask for a copy of this circular you can get one at the boxoffice as you go out.' The theaters will do that. They will do that. "If you want a copy of this circular, you can get one at the boxoffice as you go out." Buffington: You will have to print sixty million up. H.M.Jr: Well, you can't make too many. People are going to lose them. We are trying to collect twelve million dollars worth of taxes. Supposing we spent a hundred thousand dollars on this thing. It would be a very small amount and it doesn't begin to reach that, does it? How much is it? Buffington: I can't get the figure yet. H.M.Jr: But supposing we set out to spend a hundred thousand dollars. But will you remember that newsreel idea? Buffington: Yes. Regraded Unclassified - 20 - 65 H.M.Jr: And we have newsreel people who could help you, see, and then you would get the moving picture distributing people to handle the thing and give them a package of the things to put in the box office. Buffington: If we take that third column out, Mr. Sullivan might have his picture taken with it, if he would be willing to. 66 On July 28, I wrote you regarding the new Tax Savings Notes which were then about to be issued. I told you I thought it important that taxpayers of the Nation become aware of the unprecedented taxes they will have to pay next year on this year's income. I also auggested that they be encouraged to set acide funds now, with which to meet these later payments. As a service to taxpayers, the Treasury has just prepared a pamphlet entitled "Know Your Taxes', showing monthly savings needed to meet individual income tax pay- sents for 1941 salaries and vage incomes of selected sizes for single and married persons with selected number of dependents. Pamphlets will be sent to you by the Treasury and I request that you enclose 8 copy with monthly statements of accounts which you send to depositors the end of October. Your continued cooperation in furthering the Tax Savings Plan will be appreciated. Yours very truly, Regraded Unclassified 67 Dear Taxpayers we in America have decided upon an "all-out" defense program that will require "all-out" taxation. Our eyes are wide open to the sacrifices we shall all have to make in the next few years for the sake of our country's defense. Through our represents- tives in Congress we have expressed our preference for paying as much as possible of the sost of defense out of current earnings. Accordingly, our Federal income taxes have been increased so sharply that they will fall heavily upon millions of individual budgets next year. 1 These increases are going to be hard to meet unless we all make definite plans for accumulating tax payments wall before they are due. Your Government, therefore, is anxious that each taxpayer know as promptly and as accurately as possible what his income tax bill will be. is a service to the taxpayers, I have pub-pro- pared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. Tax Savings Notes are now being sold by the Treasury because thousands of citizens have already asked for a plan to enable them to save money systematically and conveniently for this purpose. When you study the attached tables you will, I think, Regraded Unclassified - 2 - 68 see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I en sure that your neighborhood bank will be glad ) to help you start such a savings program. Regraded Unclassified 69 Dear Taxpayer: the in America have decided upon an "all-out" defense program that will require "all-out" taxation. Our ayes are wide open to the sacrifices we shall all have to make in the next for years for the sake of our country's defense. Through our repre- sentatives in Congress we have expressed our preference for pay- ing as much as possible of the cost of defense out of current earnings. Your Government, therefore, is anxious that each tax- payer know as promptly and as accurately as possible what his Income tax bill will be. As a service to the taxpayers, I have had prepared the following tables showing what you will have to pay in the coming year, and how much of your monthly income you should set aside regularly for tax payments. Tax Savings Notes are now being sold by the Treasury because thousands of eitizens have already asked for a plan to enable them to save money systematically and conveniently for this purpose. When you study the attached tables you will, I think, see the usefulness of these Treasury Notes in helping you to meet your own tax payments next year. I an sure that your neighborhood bank will be glad to help you start such a savings program. Regraded Unclassified 70 October 17, 1941. MEMORANDUM FOR THE SECRETARY'S FILES A meeting relative to the administration of Executive Order 8389 was held in Mr. Foley's office at 3:30 p.m. on October 16, 1941, attended from time to time by the following: Messrs. Foley (Chairman), Pehle, B. Bernstein, Districh, Lawler, and Timmons for the Treasury; Messrs. Acheson, Luthringer, Fisher, and Miller for State: Messrs. Shea, Swidler, Jurenev, Kreeger, and Rosenwald for Justice; and Mr. Knapp for the Board of Governors of the Federal Reserve System. Mr. Pehle referred to approximately fifty applications, involving $2,000,000, which seek to transfer funds from blocked Rumanian, Dutch, Belgian and Estonian accounts to Swedish account. The Swedish Legation in Washington has requested the reconsideration of these applications, stating that the funds involved represent purchases of merchandise by Sweden in various European countries, which merchandise was not delivered. Mr. Pehle pointed out that it has not been the policy of the Foreign Funds Control to license such reversal payments for several reasons. Several despatches from the British Government have indicated that should the Swedish banks receive these reversal payments they would then proceed to pay Rumania through other channels, possibly Switzerland. One application for 8 reversal payment from the Netherlands to Bulgaria was cancelled and the Attache of the Bulgarian Legation stated that Bulgaria had re- ceived payment through other channels, presumably the Berlin clearing arrangement. In view of all the considerations involved, the Com- mittee unanimously reaffirmed the denial of these applications. Mr. Acheson reported that with respect to the three Japanese boats which are coming to the United States to remove Japanese nationals, it has been made perfectly clear to the Japanese that such boats will not be allowed to bring cargo into the United States nor to carry any cargo from the United States. In connection with the recent denial of the Maywood Chemical Company application by this Committee, Mr. Bernstein said that & new proposal had been submitted. It is now proposed that the Regraded Unclassified 71 - 2 - German subsidiary of the Socony-Vacuum purchase the Maywood Chemical Company stock owned by Mrs. Janner, a resident of Germany, and place such stock in a blocked account in the United States in the name of the German subsidiary. The Committee agreed that this amendment to the previous application should be denied. Mr. Bernstein informed the Committee that Messrs. Pehle, Miller and himself had spoken with Mr. White, the New York State Superintendent of Banks. Mr. White was requested to take no strong action with respect to the Yokohama Specie Bank without consulting with the State and Treasury Departments. Mr. White was also informed that this Committee is prepared to license the payment of Japanese diplomatic expenses in the United States out of the Yokohama Specie Bank. Mr. White is to proceed with his discussions with the Yokohama Specie Bank looking toward the escrowing of sufficient assets to safeguard the interests of the American creditors. Mr. White also reported that the New York State banking license of the Yokohama Specie Bank had been extended for three months. Mr. Foley described to the Committee certain steps being taken by the Treasury in connection with its public relations pro- gram on freezing control. An article on Foreign Funds Control will appear in the November issue of Banking Magazine and the Secretary is addressing a letter to the president of each bank in the United States pointing out the importance of freezing control and requesting cooperation and suggestions. The Secretary is also addressing 8. letter to each state banking association, which states that speakers will be available to address meetings on various aspects of the freezing control. A committee consisting of Mr. Loree and other bankers from New York is to meet in Washington with representatives of the various Federal Reserve Banks, at which time 8 series of dis- cussions throughout the country will be planned. Mr. Acheson reported to the Committee that Mr. Stopford of the British Embassy had recently called on him with two British in- surance men. Mr. Acheson suggested that inasmuch as they wished to discuss insurance problems in connection with the freezing control and the Procleimed List, these matters should be taken up with the Regraded Unclassified 3 72 Treasury Department. Mr. Shea stated that the Department of Justice was looking into the possibility of the leakage of information through maritime insurance companies. He said that he would receive in two weeks a report from the Pilot Reinsurance Company and that he would send copies thereof to the Treasury Department. Mr. Lawler submitted a sub-committee report with respect to the plan of Sterling Products to obtain complete ownership of Laboratories Suarey. Sterling Products now owns 86% of the shares of such company. I. G. Farben has some sort of an equitable in- terest in 75% of 51% of the stock of Laboratories Suarey. The shares were originally paid for with Sterling Products money and the amount owing to Sterling for such purchase was to be deducted from profits accruing to I. G. Farben. It is now proposed to form a new corporation of which Sterling will own 86% of the stock, and liqui- date the old corporation. It seems clear that I. G. Farben will not realize any funds from this transaction. Representatives of Sterling Products have been informed that approval in this transaction under Executive Order 8389 implies nothing as to the legality of such transaction under Argentine law or the morality of the transaction. The Committee unanimously adopted resolution of the sub-committee that this transaction should be approved. Mr. Lawler also reported for the sub-committee on the sales outlets being developed in Latin America by Sterling Products for ethical pharmaceuticals. Seven corporations have been formed in the larger countries and Sterling proposes to use agents satisfactory to the American Commercial Attaches in the others. It is proposed to insert in the names of the corporations a reference to Winthrop, as it is planned to sell products made by Winthrop. It has been repre- sented that this use of the Winthrop name is necessary because of various sanitary requirements and because Winthrop has compiled the necessary clínical records over & period of years to support the sale of its ethical pharmaceuticals. The report of the sub-committee was adopted, and Mr. Lawler is to make clear to 8. representative of Sterling Products that this action does not in any way prejudice the Committee's freedom of action in passing on any application that may be filed by Sterling to buy out General Aniline & Film's interest in Winthrop. Regraded Unclassified 73 - 4 - Mr. Fisher referred to a note and oral statement which the State Department proposes to transmit to the Italian Embassy. In such note it is pointed out that American foreign service officers in Italy are unable to cash drafts drawn on the Secretary of State, and they have been forced to receive funds for their maintenance through Argentina and Switzerland. Of late the State Department has been experiencing some difficulty in remitting funds through these channels. It is pointed out to the Italian Government that it is expected that such State Department drafts will be accepted and when presented for payment they will be paid in free dollars, which funds may be utilized for the payment of Italian diplomatic expenses in the United States and for conversion into the currencies of non-blocked countries. Should, however, the American Government be forced to continue to effect remittances to Italy through Switzerland, we will require that the dollars necessary for the replenishment of Italian official accounts in the United States also be transferred to the United States from Switzerland. Mr. Fisher also read a telegram to Ambassador Grew in Tokio stating that in view of the faot that the contemplated payment of Japanese diplomatic expenses out of the Yokohama Specie Bank will represent & depletion of the very limited assets of such bank, this Government will require that dollar funds accruing to Japan as a re- sult of encashment of the State Department drafts be paid into an account with the Yokohama Specie Bank as a partial offset to Japanese payments. The Committee agreed to the despatch of such telegram. Regraded Unclassified 74 October 17, 1941 To: HAROLD N. GRAVES Subject: PROGRESS REPORT FROM DEFENSE SAVINGS STAFF SALE OF BONDS Actual cash receipts from the sale of E, F and G Bonds from October 1st through October 15th were $134,552,000, which is an increase of 9.5 per cent over the same period in September. Sales from September lst through September 15th were $116,608,000. Sales from August 1st through August 15th were 151,742,000. (Federal Reserve and other banks in many states were closed on Monday, October 13th, in celebration of Columbus Day.) SALE OF STAMPS Sele of Stamps as of September 30th reached a total of $18,998,000 for five months. September sales were $4,978,000, largest of any month, an increase of 11.8 per cent over August. In September 2,942,000 more Stamps were sold than in August. Total number of Stamps sold through September 30 was 61,855,000. Regraded Unclassified 75 -2- DIRECT MAIL Total receipts from all mailings (which began on June 21st) are $4,175,264. The industrial mailing has brought to date orders of $2,381,816; the customer mailing orders of $1,480,621. Both of these mailings are still pulling. Mailings for November, now being prepared, will include the following: To approximately 2,000,000 prospects of "over $5,000 income" in seventeen Grade A States; 400,000 corporations, etc.; twelve tests to 120,000 prospects; enclosures to 210 mail advertisers for their use. HOTEL COOPERATION Distribution of three million posters and folders to 6,000 hotels started this week, marking the participation of the American Hotel Association in the Program. In con- nection with this activity, an experimental sales and information booth for Bonds, Stamps and Tax Notes was opened in the Willard Hotel lobby. Regraded Unclassified -3- 76 POST OFFICE MANUAL Fifty thousand manuals describing and illustrating available display material and literature, prepared in cooperation with the Post Office Department, are being sent to postmasters. (Copy Attached). TREASURY BOOTHS Stamps, Tax Notes and Bonds have been sold at the four Washington booths since the opening dates (indicated), as follows: Garfinckle's (Oct. 3) Woodward & Lothrop (Oct. 6) Stamps $186.30 Stamps $678.70 Tax Notes 25.00 Tax Notes 50.00 Bonds 375.00 Bonds 2,493.75 $586.30 $3,222.45 Lansburgh's (Oct. 10) Willard Hotel (Oct. 15) Stamps $142.50 Stamps $10.25 Bonds 281.25 Bonds 37.50 $423.75 $47.75 Total sales -- $4,280.25 EXHIBIT The Baltimore National Defense Exhibit and Auto- mobile Show was held in the Fifth Regiment Armory from October 11th to 16th. An entire floor was devoted to the defense Regraded Unclassified -4- 77 exhibit which included equipment from all armed services and a Defense Savings Booth manned by the Baltimore Post Office Department. FIELD OFFICE Since October 10th North Dakota and South Dakota have been moved from the white to the yellow group. There are now only three states in which an organizational beginning has not been made - Delaware, Louisiana and New Hampshire. (See map attached). Two new field representatives have finished their training and are leaving for the field. Four other newly appointed representatives are completing the course. BUSINESS PUBLICATIONS Printed copies of the first four supplements for insertion in business publications are ready. (See copies attached) RADIO Many stations report that they are able to use as many as ten football announcements per game. Returns show that announcements were broadcast last week-end 378 times over 111 stations. (Farm announcements attached). Regraded Unclassified STATUS OF STATE CANIZATION : - Alvan ATTENTA ONEY NORTH DAKOTA NUMBEROTA SOUTH DAKOTA WYOMING / IOWA UTAH NEBRASKA ILLINOIS OHIO MISSOURI MARMAD KENTUCKY COPYRIGHT ST BAND MINALLYA COMPANY CHICAGO LOOSE LEAF OUTLINE MAP ALABAMA LOUISIANA & é 82 Hey: State andyLocel Committees Organized state Consittees Organized Administr tors and/or Chairmen Appointed lawaii lot Started OB 101 UNITED STATES e so son 200 100 seu soo with Regraded Uncla ssified LLIONS FOR DEFENSE DEFEN OR MILLIONS ww Poarades Soldiers in the drailing 120m-3 meticulous army whose plans presede our fighting mathines "THE MEN BEHIND THE MEN BEHIND THE GUN" He doesn't wear a uniform, nor man a gun, nor guide a plane, nor peer from the port- hole of a fighting ship, but he- the man behind the man he- hind the gun-is the soldier of the factory. honorable and in- dispensable volunteer in a key corps of America's army for defense. It takes five such of him for each fighter on the front line. Sweat and sarri- fice, we must know now. are the dues demanded of those who would enjoy for themselves. their own, and their posterity the blessings of democracy and freedom. Your defense dollar are needed to keep the behind the man behind No. gun in action. Soldiers in the shipyard the unsung army which gives the Navy the floating power to protect our commerce and our shores, Regraded Unclassified olders in the factory millions of men and acmen who make up the Soldiers on the assembly line wizards of the fool and wrench in Unrie army that helps provide the arsenal of demacracy, Sam's army of mechanics behind the scenes DE specialists in the defense army of indus- Soldiers on the farm-gigantic army of the soll to sustain America's total trial America. army for defense. Put Your Patriotism Into Action-Buy Defense Bonds and Stamps Unclassified A PERSONAL THE PAY ROLL ALLOTMENT PLAN MESSAGE PUTS PATRIOTISM INTO ACTION (This space is reserved for Many of the Nation's leading in- dustrial firms, both large and small, a personal signed message have established Pay Roll Allotment exclusively written for this Plans which permit their employees MILLIONS FOR DEFENSE to set aside regularly a portion of supplement by an outstand- their income for the purchase of ing and distinguished leader Defense Savings Bonds and Stamps. of the industry represented The establishment of the plan is by the participating publica- voluntary on the part of the em- tion. It is suggested that in ployer. as is the use of the plan by this message the industry the employees. The plan is flexible leader personally endorse so that if it becomes necessary the the Defense Savings Pro- employee can discontinue partici- pation. gram, indicate his personal sponsorship of the Defense Pay Roll Allotment Plans have been endorsed by the American effort in his industry and in- Federation of Labor. Congress of dicate why it is specifically Industrial Organizations. and the important and appropriate Railroad Brotherhoods. for people in his industry to By establishing a Pay Roll Allot- support the program. ment Plan. employers provide a Where possible. reference sound method for their employees should be made to the to participate in America's Defense industry's current contribus efforts. At the same time, employ- tions to the National Defense ees have the opportunity to build for themselves a financial reserve activity as a whole and to the that will protect them against future Defense Savings Program in economic changes. particular. If possible. also, The establishment and operation the message should mention of the plan is simple. Full details MILLIONS FOR DEFENSE have been worked out by the Treas- as a continuing contribution ury Department and will be sent to of the industry.) you upon request without obliga- tion. Simply address your letter to Department A. Defense Savings Staff, 1.8. Treasury Department. Wash- ington. D. C. TORDETENSE BUY The supplement is à special section of THIS BUSINESS PUBLICATION included 6 cooperation with the United States Treasury Department in teraif of the Defense Savings Program. Regraded Unclassified EVENSE FOR MILLIONS "WE, THE PEOPLE OF THE UNITED STATES " to provide for the common defense and service the blessings of filerty to nurselves and our posterity stated. in the length of IN single prophetic sentence. was The purpose of "We. the people of the I nited States." in formulating that charter of law and liberty which BE call our Con- stitution. Commission people, WP would rall these men of the Congress of 1787 whose signatures were affixed Die that setull-common unen with uneom- non fortitude and ++++++++++++++++++ vision. By only a decade removed from the rule of "colunists." these simple. unsphisticated potriot- mil themselves to the task of Inituding and bunts if framework for a free government. We, the people of the I nited States today. the Posing on this page for its collective portrait posterity of whom unr forefathers were mindful. the greatest speiety of free people in the world- are again engaged in a great national effort "for provide for the ......................... defense and service the people of the 1 nited States. Men and " blessing- of liberty to ourselves and our posterity, from many lambs. of many callings and of 01ˢᵗ The propletive phrase of 17167 is the complete and minds, but of one united will-to provide for it precise deveription of the purpose for which weare defense of the country that is their home. the asked To purchase today Defense Savings Bonds opportunity. their children's most precious inter and Stamps: itance. ] Put Your Patriotism Into Action-Buy Defense Bonds and Stamps Regraded Unclassified Determination, Hope. II isdom. Humor, I are the things in the faces of "Ill Il " the people of the United States." A PERSONAL MESSAGE What a Business Man Should Know About (This space is reserved for a personal signed message DEFENSE SAVINGS STAMPS exclusively written for this MILLIONS FOR DEFENSE Defense Saving- Stamps wrre created Inventing supplement by an outstand- everybody isn't always able to bus a minimum ing and distinguished leader Defense Suvings Bund. Defense Savings Statupe of the industry represented give overy nian. woman. and cluid in Venerica by the participating publica- an apportaints to participate in our Nation's tion. It is suggested that in Defense Program. this message the industry leader personally endorse Defense Savings Stamps are sold in demomina- the Defense Savings Pro- Hon- of (4) rents. 25 cents. 30 cents. $1. and & gram. indicate his personal They may be redecuned m cash at ans time. No sponsorship of the Defense interest is earned on the ------------ invested in effort in his industry and in. them onlil they have accumulated in dicate why it is specifically sufficient ------------- and exchanged Tear o Detense important and appropriate Savings Bond for people in his industry to Defense Suvings Stampe are on sale at hundreds support the program. of thousands of retail -tores throughout America. Where possible, reference Even though your have a sufficient income to should be made to the industry's current contribu- purchase Delease Phone: regularly. you may- find tions to the National Defonse many use for Defense Stamps: activity as is whole and to the They are a wonderful way to energrage theilt Defense Savings Program in and patriotism in children. Help them to AM particular. If possible, also, started by getting them an albom and eneourag- the message should mention ing them to buy -tamp> regularly. MILLIONS FOR DEFENSE as a continuing contribution Phoiness filest who understand the importance of of the industry.) system and balút will quickly appreciate the valor of this one: is you make a retail pur- chase 201 u part of Mor change in I Defense Stamps. FORDITENSE BUY time This supplement is a special tection of THIS BUSINESS PUBLICATION sunia BINIS behalf of the Defense Savings Program. published in cooperation with the United States Treasury Department in Regraded Unclassified C JR SCOF VE NDS S VEN (E (E RS AUT it OUR ATH ER R UGIT (TH IF NT 'EV NATON IN a EC IN 18 Γ NI. DDIV I % PROPOSTION REATED EQUA 10 ARE ENGAGED 1.. Great CIVIL WAR TESTING WHETHER THAT NATION OR ANY NATION so CON- CEIVED AND so DEDICATED ATED CAN LONG ENDURE WE ARI MET ON A GREAT BATTLEFIELD OF THAT WAR WE HAVE COME TO DEDICATI A PORTION OF THAT FIELD AS A FINAL RESTING PLACE FOR THOSE WHO HERE GAVE THEIR LIVES THAT THAT NATION MIGHT LIVE IT IS ALTOGETHER FIT- TING AND PROPER THAT WE SHOULD DO THIS - BUT IN A LARGER SENSE WE CAN NOT DEDICATE - WE WE CAN NOT CONSECRATE-WE CAN NOT HALLOW- THIS GROUND THE BRAVE MEN LIV- ING AND DEAD WHO STRUGGIED HERE HAVE CONSECRATED IT FAR ABOVE OUR POOR POWER TO ADD OR DETRACT THE WORLD WILL LITTLE NOTE NOR LONG REMEMBER WHAT WE SAY HERE BUT IT CAN NEVER FORGET WHAT THEY DID HERE - IT IS FOR US THE LIVING RATHER TO BE DEDICATED HERE TO THE UNFINISHED WORK WHICH THEY WHO FOUGHT HERE HAVE THUS FAR so NOBLY ADVANCED IT IS RATHER FOR US TO BE HERE DEDICATED TO THE GREAT TASK REMAINING BEFORE US- THAT FROM THESE HONORED DEAD WE TAKE INCREASED DEVOTION TO THAT CAUSE FOR WHICH THEY GAVE THE LAST FULL MEASURE OF DEVOTION - THAT WE HERE HIGHLY RESOLVE THAT THESE DEAD SHALL NOT HAVE DIED IN VAIN-THAT THIS NATION UNDER GOD SHALL HAVE A NEW BIRTH OF FREEDOM- AND THAT GOVERNMENT OF THE PEOPLE BY THE PEOPLE FOR THE PEOPLE SHALL NOT PERISH FROM THE EARTH. 4 N N a DEFENSE FOR MILLIONS America Means Freedom From Fear for Your Fam- ity-Foundation Unit of American Democracy and the American Way of Life. America Means Frontom To Own Your Own Lamil, Till Your Own Soil, Win Your Own Share of a Natural Abundance " SHALL NOT PERISH FROM THE EARTH!" There :- leauty in America clean-lined New England with its quiet verdant bills. pleasant valleys and the teridal whiteness of luer little Inwire: the -till Softhland, blazing bright, Invoriant with Hower and Truit: (he great sueep of the Vestorn plains under il emops of stars: the matelites- grandeur of the Rockies and the think Constal furests shiping down to the deep Parific's shore, There is lourty in America Southern lights gleaming with culture fact kine feeding on flir rich-grained prairies: Western runn- tains bedded with nies. oil flowing deep moder Southwestern plains. and power puffed from the churning streams of the Last. Front American minds and laboratories sprang must of the seientific wonders of the andern world the steamship, the telegraph. trans- occanic cable. telephone, electric light. the anotombile, and the air- plane, These things an- America's. and above all. Do conception of from inen governing themselves in order and prosperity and guarding the freedom of each to worship as Inc wislies, freedom to speak touch (IF he it. freedous In work and enjoy the fruitent his labor. II is incomeivable dut the last drop of American blood and the last dollar of American resource should not In pledged to the proposi- tion that the Tounty and blessing that is American democracy shall period from the earth. Put Patriotism Into Action-Buy Defense Bonds and Stamps America Means Freedom to Work-and Freedom to America Means Freedom to Live in Cit Choose the Time and the Place and the Kind of Work Country Lane-and in Peid You Want. America Means Freedom to Dream, to Hope, to Take a Long Look For- ward, America Meant Freedom to Warship- Each Man in His Own Conscience, Each Man by His Own Creed. America Means Freedom to be Loyal, to be Proud, to Give Devotion to the Un- dictated Desires of Your Own Heart. A PERSONAL HOW YOU CAN PUT YOUR MESSAGE PATRIOTISM INTO ACTION WHEN should you buy Defense Sav- ings Bonds? (This space is reserved for Now, They un- the most orgent investment in a personal signed message America today. 1- the montentum of 100% defense program grows daily, the need for action exclusively written for this un Defense Savings grows with it. MILLIONS FOR DEFENSE WHY should you buy Defense Sav- supplement by an outstand- ings Bonds and Stamps? ing and distinguished leader Because that is your was to put your patriotion of the industry represented into action 20 that The Imerican Il ay "stall not perish from the earth." Because it pro- by the participating publica- vides you with a unique opportunity to save tion. It is suggested that in systematically by patting your money into the signifest investment on the face of the earth this message the industry the I nited States of America-nnd (if liberal leader personally endorse interest rutes. the Defense Savings Pro- WHO should buy Defense Bonds and gram. indicate his personal Stamps? sponsorship of the Defense You should. No one else can take your place effort in his industry and in- in this program - no one else will bus your share, dicate why it is specifically WHAT type of Defense Bonds should important and appropriate you buy? for people in his industry to Whichever type best suits wan purposes. support the program. There an three types of Defense Bonds to 6ll three different needs, Your bank will explain Where possible. reference what they are and help you plan a program for should be made to the purchasing them. industry's current contribu- HOW much should you invest in tions to the National Defense Defense Savings Bonds? activity as a whole and to the 1. large a portion of vour income as you are willing To contribute to the Defense of America. Defense Savings Program in The main point is In set np a regular program particular. If possible, also, Savings. for your continuing participation in Defense the message should mention MILLIONS FOR DETENSE WHERE can you buy Defense Bonds and Stamps? as a continuing contribution Defense Bonds are ⑉8 sale at banks. saving- of the industry.) and han associations. all 1. S. Post Offices. and other designated agencies. Defense Stangs are on sale at hundreds of thousands of retail establishment- all over America. Buy a Bond Today, Start Saving Stamps Now! FORDEFENSE BUY UNIVO This supplement is a special section of THIS BUSINESS PUBLICATION STATE -WINGS published in cooperation with the United States Treasury Department in behalf of the Defense Savings Program. MEDUMS Regraded Unclassified ILLIONS FOR DEFENSE America Needs Guns for the Arsenal of Democracy. America Needs Scoot Cary for the Acional of Democracy. "THE WORLD'S BEST TOOLS TI Once America could Inc. and was. defended In line thousand lean lads who reached for the ruile reci their collage walls and marched off to victorias Today the high-caliter. rapid-firing automato miblest weapon in the modern army - arsenal per unteld tonnage. guus of great hore and a var lem medianical monsters and marvels are basic lolla for the forces who would forestall the blackout lefe they on this Hemisphere. Before tanks and gune can roll with regularity from the assemble America Needs Planes for the Arsenal of Democracy. BU PUT YOUR PATRIOTISM INTO Regraded Unclassified Amerita Needs Parachutes for the Arsonal of Democracy. America Needs Actillery Eyes for the Artenal of Democracy HE WORLD'S BIGGEST JOB!" erican facturies, tools of supreme strength and numute cision must first De forged. great workshope hailt. Inicians trained. Defense of Democracy is the biggest Yet attempted by America in this world: calls THE the financial contribution ever asked of its citizens: Thanks for each soldier in the Geht. lene of thousands of lar- for his protection and equipment. The biggest fense land you can loss makes one American soblier the ual in of his potential opponent in battle- UY DEFENSE BONDS AND STAMPS America Needs Aircraft Carriers tot the Arteral of Democracy. A PERSONAL MESSAGE SYSTEMATIZE (This space is reserved for a personal signed message exclusively written for this YOUR SAVINGS FOR DEFENSE MILLIONS FOR DEFENSE supplement by an outstand- ing and distinguished leader The best way to bity Defense Savings Bonds of the industry represented ison at systematic basis-a bond week, by the participating publica- exery month. or whatever space of time i- tion. It is suggested that in must corvenient. this message the industry leader personally endorse While it helps pay for National Defense the Defense Savings Pro- your money will be sufe, It will be given gram. indicate his personal ima. It will be arailable if you need it. sponsorship of the Defense effort in his industry and in- I order the Government's Regular Purchase dicate why it is specifically Plan you receive reminders at the inters al important and appropriate for people in his industry to you select. You may without penalty and support the program. at any time increase or decrease the amount Where possible, reference of Defense Bonds you buy. stop and begin should be made to the again. change the interval, or discontinue industry's current contribu- altogether. tions to the National Defense activity as a whole and to the Write to the Treasury Department. ashe Defense Savings Program in ington, D. C., and ask them to send you a particular. If possible, also, request form for the Regular Purchase the message should mention MILLIONS FOR DEFENSE Plan on Defense Savings Bonds. For your as a continuing contribution country's sake, for your sake, do it today. of the industry.) Buy Defense Bonds on the Regular Purchase Plan FORDEFENSE BUY ANITA This supplement is a special rection et THIS BUSINESS PUBLICATION published in cooperation with the United States Treasury Department in behalf of the Defense Savings Program. Regraded Unclassified 83 presentive FIELD ORGANIZATION News Letter BUY DEVENSE SAVINGS STAFF TREASURY DEPARTMENT. WASHINGTON, D. C. October 18, 1941 NUMBER 22 TO THE FIELD STAFF: Sales of Defense Bonds reached $1,504,411,000, as of September 30. September sales were $232,327,000. Stamp sales as of the same date totaled $18,998,000 for the initial five months. The exact number of individual bonds purchased and the number of in- dividual owners are unavailable. To can tell you that in five months in- dividual stamps wold totaled 61,855,000 pieces, divided by denominations as follows: TEN-CENT. 12,370,000; TWENTY-FIVE-CENT, 40,404,000; FIFTY-CENT, 5,511,000; ONE-DOLLAR, 3,123,000; FIVE-DOLLAR, 346,000. In our program to reach millions of Americans, the Series I (The People's) Bond and the Stamps loom large as criterions of success. Either accumulations through Stamps or payroll allotment deposits will ewell event- ually the mimber of I Bonds owned. Therefore, every payroll allotment plan and every Stamp sale promotion builds into the long-haul program. Rowever, to syphon off any real surplus from the rapidly growing national income, Bonds must go to owners monthly in increasing numbers. There are many, many thousands of Americans who should be so motivated by our Field Organization's activities that they will BUY A BOND A MONTH. Every convenient method to make buying a regular monthly habit should be established. Our local committees should encourage banks to establish the Depositors Draft Plan and to let depositors know it is available. The Treasury's direct mail plan should be widely known. In payroll allotment plans there should be many regular monthly purchasers of bonds from each allotment. Our task 18 to 60 promote our program that the number of Bond buyers increases steadily month by sonth. The best method is that which starts an !ndividual on a systematic thrift program which will be followed auto- matically. Sincerely yours, GALE F. JOHNSTON Field Director, Defense Savings Staff, Regraded Unclassified News Letter "YOU, TOO. CAN ANSWER YOUR COUNTRY'S CALL" YOU CITIZENS OF AMERICA ARE THE auv WERE WERE WE'RE shall your M DOING WE'RE SECOND LINE OF DEFENSE. BUYING BACK OF OUR DEFENSE INSURINE THE MORAL SUPPORT OUR IMERICA PART OUR YOU GIVE OUR BOYS MEANS BOMDS BOYS LIBERTY MUCH TO THEM AND THE STRENGTH OF OUR FIRST LINE OF DEFENSE! - By C. E. B. Klessig, Sheboygan Press, Sheboygan. Wisconsin. IN THIS ISSUE MISSOURI Reports - Page 3 NORTH CAROLINA - Page 4 WASHINGTON - Page 6 ILLINOIS - Page ? MAINE - Page 7 LOCAL INITIATIVE Produced These Attractive Exhibits - Page 5 DEFENSE SAVINGS In The Schools - Pages 8 and 9 BANKS Have Depositor Draft Plans - Pages 10 and 11 PEORIA BANK Hange Up & Record - Page 11 TO THE LADIES - Page 12 FARMERS Learn of Program - Page 13 NEW POSTERS For Banks - Page 14 RADIO PROGRAMS - Page 15 JUKE BOXES Boost "Any Bonds Today?" - Page 15 QUOTABLE QUOTES - Page 16 - 2 - Regraded Unclassified News Letter 84 MISSOURI School Program Outlined; Many Local Committees Active CITY AND COUNTY SCHOOL SUPERINTENDENTS from all parts of Missouri, more than 600 of them, met September 10 in Jefferwon City and voted enthusisatic endorsement of an eight-point program of preparedness instruction outlined by Lloyd W. King. state superintendent of public instruction. Instruction in thrift and the economics of Defense Savings 10 to be an important part of this general program. AN EIGHT-PAGE MEMORANIUM outlining in detail & suggested plan for school participation in the Defense Savings Program has been distributed to school executives and teachers through Missouri. State Administrator Dan M. Nee reports that this program outline has been extremely well received and that "Defense Savings Councils" have been formed in many schools. MISSOURI STATE GOVERNMENT EMPLOYEES are accepting the systematic savings Idea with enthusiasm. Two Departments already report 100% participation. A. CONCERTED EFFORT to get every city and town in the State to adopt a pay roll allotment plan is now underway. The City of Columbia WAS the first municipality to install the plan, according to the magazine of the Missouri Municipal League. HIGHLIGHTS:- In Flat River, the Lions Club has unanimously voted for 100% par- ticipation in the Defense Savings Program. In Hannibal, every member of the Retail Merchants Bureau has agreed to handle Defense Savings Stamps "for the duration"; the schools have organized & thrift and savings program: and & group of insurance men is actively at work assisting the Local Committee in connec- tion with the installation of pay roll allotment plans. O.A. Brown is the active chairman of the Hannibal Committee. In Independence, a Defense Savings easay contest was conducted by the schools in cooperation with the Chamber of Commerce. $24 in De fense Stampe were awarded as prizes. In Nevada, Dr. John S. Newlon in offering to cancel all unpaid accounts of $5 or less if his patients will take the money they owa him and buy Defense Stamps. In Norborns, the Farm and Farmyard Fair this year awarded premiums in Defense Stamps. In Perryeville, a Defense Bond rally in the courthouse yard mddressed by State Administrator Dan M. Nee. attracted s crowd of more than 3,000. The rally WAS heralded by a flight of Army pursuit planes over the city in the late afternoon and later by the school band, which presented a program of patriotic selections. - 3 - News Letter NORTH CAROLINA School Program Underway: Allotment Plan Adopted by Shelby Mills SCHOOL SUPERI WTENDENTS throughout the state have received from State Administrator C. H. Robertson the suggestion that in each school an assembly period be set aside for & presentation of the Defense Savings Program by either the school superintendent or principal or by a representative of the local Defense Savings Committee. Administrator Robertson has also arranged for each school superintendent to receive, direct from the Office of the Field Director, an ample supply of Defense Savings folders and posters for all schools under bis supervision. COUNTY FAIRS now being held in all parts of the State will, in most instances, have Defense Stamp Booths, staffed by attractive volunteer wales- girls and decorated with official posters. TOBAC CO FARMERS who are now gathering in the big leaf tobacco water houses in the Eastern part of the State to sell their crops are receiving Defense Savings literature. Deputy Administrator Forrest G. Miles reports, after a visit to this part of the State, that farmers throughout the mection are responding in a fine way to the Defense Savings sppeal. PROMINENT NEGRO CITIZENS are cooperating wholeheartedly with the Do- fense Savings Program, according to Administrative Robertson. Chairmen of local Defense Savings Committees in the State have been seked to organise Negro Sub-committees. These sub-committees have been formed and are already at work in a number of places, including Durham, Charlotte, Winston-Salem, and Alamance County. T. 3. McKinney, dean of Johnson C. Smith University. is Chairman of the Negro Sub-committee in Charlotte, and George W. Hill, President of the Winston Mutual Life Insurance Company, is the Chairman of the Negro Sub-committee in Winston-Salem. HIGHLIGHTS:- In Charlotte, teachers of the fifth through twelfth grades are having their pupils write essays on reasons for buying Defense Bonds and Stamps, and the banks of Charlotte are offering $25 Bonds M prises for the best essays. In Goldaboro, the city committee, R. M. Davis, General Chairman, has prepared A folder listing the chairmen and members and outlining the scope and functions of each of its nine sub-committess. In Baleigh, organization of the city committee was completed at A dinner meeting at the Sir Walter Ralsigh Hotel on the evening of September 8th. 0. P. Geogbegan, Jr. is chairman of this important committee which consists of 125 persons, organised into 15 divisions. In Shelby, the following cotton mills have announced allotment plans: Shelby Cotton Mills - 525 employees; Cleveland Cloth - 670; Dover Mill Co. - 550; Lilly Mills Company - 500; Eather Milla Company -526, - 4 - Regraded Unclassifie News Letter 85 LOCAL INITIATIVE AND RESOURCEFULNESS PRODUCED THESE ATTRACTIVE BOOTHS AND EXHIBITS HINDS COUNTY DEFENSE SAVINGS FOR DEFENSE NOR DEFENSE COMMITTEE AMD kitho NAMPS Stamp booth on main floor of Davison-Paxon Company in Atlanta. From left to right; Marion Allen, Booth at Mississippi State Fair. From left to Georgia State Administra- right: Mrs. Mitchell Robinson; Mississippi tor; Mrs. Paul Seydel Jr., State Administrator, Eugene Fly; 1. L. Hynes, Mrs. Bill Wise and Mr. field representative, Defense Savings Staff; Charles H. Jagels, Presi- Mrs. Bell; Orrin H. Swayse, Deputy State dent of Davison-Paxon Administrator; and Mrs. Joe Robinson, Chairman, Company. Women's Division, and Russ M. Johnson, General Chairman, Hinds County Committee. A typical local Defense Savings Head- GODBLESS quarters. Booth in the Crutcher AMERICA Hotel, McAlester, Oklahoma. From left to rights Mrs. Melvin Wilkins, Mrs. Nettie Mae Bedingfield in charge of headquarters and Mrs. Harry J. Bettes. BUY WHAT Display at Franklin County Fair, Jarn- Booth at the Indians State Fair ington, Maine. A postal clerk was on sponsored by the Marion County League duty at all times to sell Defense Bonds of Building & Loan Associations. and Stamps. - 5 - News Letter WASHINGTON Seven Thousand Seattle School Children Saving For Bonds SCHOOL CHILDREN in Seattle and King County are actively participating in the Defense Savings Program. On September 30, 1733 children received Defense Bonds for which they had completed payment, at formal ceremonies held in practically every school in the county. This outstanding action was possible because of the well developed school savings plan which has been in operation in Seattle schools for some years, in cooperation with the Washington Mutual Savings Bank. More than 7,000 King County school children are now saving regularly to buy Defense Bonds. Each Seattle school child. when he completes payment on a Defense Bond, receives a fine letter of encouragement from State Administrator Saul Heas, with which is enclosed & copy of the telegram in which Secretary Morgenthau instructed Mr. Base to convey his sincere congratulations to the boys and girls, and to their par- ente and teachers, for their "patriotic devotion and ssorifice." TWO IMPRESSIVE EXHIBITS featured Defense Savings at the Central Wash- ington Fair in Takima, where one booth was staffed by volunteers of the Women's Committee and another by Boy Scouts in uniform. Flag raising and flag lowering ceremonies each morning and evening were among the events which attracted attention to the booths. MANY STUETS helped put over "Retailere for Defense Week". For example: Seattle's original cable car. which is now mounted on & motorized chassis, was appropriately decorated with such signs as "Lick a Defense Stamp and you lick an 'iem" and paraded through down- town Seattle by members of the Junior Advertising & Sales Club. "Uncle Sam's Stampede," an original half-hour radio program, was broadcast Sunday evening, September 13, over Station KIRO. On this program, listeners were invited to telephone in and order Bonds or Stamps, appropriate announcements were made, and West- orn Union messengers dispatched to deliver Bond order forms or Defense Stamps and to collect for the securities. The program was sponsored by the Retail Trade Bureau and the Advertising & Sales Club of Seattle and resulted in the sale of $9,000 worth of Defense Bonds and Stamps. Special booths, staffed by volunteers from various women's organizations, were set up in all of the larger downtown stores. HIGHLIGHTS: In Premerton. the Carpenters Union has voted to invest $5,000 in Defense Bonds. In Longview, pay roll allotment plans have been announced by the Long- Bell Lumber Company, Feyerhaquser Timber Company and the Longview Mbre Company. - 6 - Regraded Unclassified News Letter 86 Highlights From Other States: ILLINOIS MAYOR KIWARD J. KELLY has accepted Honorary Chairmanship of the De- fense Savings Committee for Chicago. He was photographed purchasing a Defense Bond on the occasion of his acceptance. MANY STATE STREET STORES arranged Defense Bond windows for Chicago's "Retailers for Defense Week". ... Marshall Field had four such windows. MEMBERS OF CHICAGO LOCALS of the Amalgamated Clothing Workers of America had bought $25,000 worth of Defense Stamps by the first of Septem- ber, through their "group agents", and had taken $500,000 as their goal. MAINE PRACTICALLY ALL COUNTIES now have functioning Committee organisations. TICKET OFFICES of the Bangor and Arcostock Railroad are selling stamps, and in some communities with no post offices, are the only source of supply. FIRST GROCERY STORE in the State to adopt the salary allotment plan is Shrero's Market in Waterville. INSTALLATION OF AM ALLOTMENT PLAN by the Central Maine Power Company has recently been announced. Walter S. Wyman, President of the Company, is Chairman of the State Committee. AT MAINE FAIRS: Defense Bonde were prises on 4H Club Day at the Windsor County Jair. An Army "jeep" helped boost sales at the Skowhegan Fair, where Postmaster Prank Madden arranged & booth for the sale of both bonds and stamps. AN EDITORIAL COMMENT: "While showers of household gadgets are very nice for young ladies contemplating matrimony, they have certain notorious faults. They do, it must be conceded, stock the prospective home well with can openers, dish cloths, luncheon napery, ash trays, and even such fine things as linen, dishware, cooking utensile, and Aprons. All this is & tedious way of approaching 4 suggestion, which 10 both timely and practical. It is that friends of those who are about to wed depart from the time-worn shower tradition and sprinkle the happy couples instead with Defense Bonds and Stamps. "In this way, eight olive forks and 19 book ends would be avoided: Uncle Sam would have his defense program helped along: and the couple would start out with money in the bank and the means of bur ing what they really want when they get settled and seriously think about home making." -Portland Press Herald, Portland, Mains. - 7 - Regraded Unclassified News Letter DEPRESE SAVINGS IN THE SCHOOLS The week preceeding Armistice Day this year has been proclaimed "School Defense Wook" by the Governor of Texas. His proclamation reads; "WHERRAS, there exists in America today an urgent need for every- one to do his part in the National Defense Program; and "WHEREAS, the Defense Savings Staff for Texas 10 soliciting 'all- out aid' to make every citizen of Texas, old and young, Defense Bond and Stamp conscious by putting on an educational program in every school in Texas to acquaint the students with the importance of buying Defense Bonds and Stamps and through this medium pass the information and idea on into the homes of Texas: and *WHEREAS, the citisens of the Sovereign State of Texas, have heretofore in every crisie in the affairs of this great nation been willing and proud to do their full duty, and "WHEREAS, it is now the duty of the citizen of Texas, to invest in Defense Savings Stamps and Bonds; "NOW, THEREFORE, I, Coke Stevenson, Governor of the State of Texas, do hereby proclais and designate the week of November 3, 1941 to November 11, 1941 as SCHOOL DEFENSE WEEK in Texas, and arge all Texans to cooperate with the Defense Savings Staff for Texas and the school children of this State in this undertaking." TO ASSIST SCHOOLS in developing special programe for "School Defense Week", State Administrator Frank Scofield has circulated to school prin- cipals B. manual prepared by two school teachers of the city of Austin, which contains many specific suggestions for relating class room work in music, art, pensanship, spelling, English, public speaking, social studies, arith- metic, reading, dramatics, etc., to Defense Savings. This manual also con- tains many suggestions for school activities designed to sustain the in- terest of school children in Defense Bonds and Stamps throughout the year. OTHER SCHOOL NEWS; SCHOOL THRIFT PROGRAMS, which are conducted in many cities in cooperation with local banks and savings institutions, have in several cases been related specifically to Defense Savings by providing that & savings account at the option of the depositor may be used to purchase Defense Bonds each time the socount reaches $18.75. This has been done in Seattle, Washington; Dallas, Texas: Rochester, New York and New Haven, Connecticut, among other places. STAMPS ARS ON SALE one day each week in the class rooms of many schools. This is the plan used generally in Michigan where many schools inaugurated *Stemp Bank Day* last spring. Teachers and students work together to keep the necessary records, collect the money and purchase and distribute the stamps. - 8 Regraded Unclassified News Letter 87 OTHER SCHOOL NEWS (Continued) IN RURAL AREAS and some smaller towns letter carriers, and postal offi- ciels have arranged to visit schools periodically with ample supplies of stamps and to relieve teachers and students of a large part of the task of handling sissable sum of money. REPLICA "STAMP BANKS" and "post offices" have been built by some schools as semi-permanent fixtures in school corridors, class rooms or assembly halls. A REVIVAL OF BELIEF in the virtue of thrift is deemed by many to be one of the important by-products of the Defense Savings Program. Bearing upon this point is a report from an up-state New York town where a large consoli- dated school has arranged to have postal officials visit the school once each week and distribute Defense Savings Stamps through student banking committees. The report adds: "For several years the school maintained a banking service for its pupile but this was discontinued during the depres- sion years." EVERY SCHOOL PUPIL in Marshfield, Massachusetts has started on the road towards ownership of Defense Bonds. In that community. early in the current school year, every child in the elementary grades and all students in the junior and senior high schools received albums each containing one Defense Stamp. The distribution was made possible by the generosity of members of the Board of Trade, Kiwania Club and Woman's Club and was arranged by the Marshfield Defense Savings Committee, Shirley R. Crosse, Chairman. TYPIFYING THE ENTRUSIASTIC RESPONSE of school children is & report from Schenectady, N. Y. At Nott Terrace High School in that city the student council sponsored a band concert early one morning before school opened. The supply of Defense Stamps was exhausted in ten minutes. Later in the morning the school assembly period was devoted to B. Defense Savings Program and Principal Loydd S. Michael purchased the "first" stamps sold at the stamp booths sponsored by the school's three classes. DEFENSE SAVINGS FLOAT This float attracted much favorable atten- tion at the "Corn Carnival" parade held in Granger, Texas, September 24, 1941. - 9 News Letter MANY BANKS MAKE DEFENSE BOND DRAFT PLANS AVAILABLE TO CUSTOMERS From all parte of the country come reports that bankers have made it possible for their customers to participate in the Defense Savings Program by simply authorizing periodic drafts on their accounts to purchase Defense Bonds of specified series and denominations. The following is & partial list of banks which have installed this convenient "Buy A Bond A Month" plant ALABAMA - Bank of Fairhops. CALIFORNIA - Bank of America, San Francisco, COLORADO - First National Bank of Colorado Springs. CONNECTICUT - Riverside Trust Co., Hartford; Shelton Trust Co: American Bank & Trust Co., Community Bank & Trust Co., First National Bank & Trust Co., New Haven Bank, Second National Bank, and Trademens National Bank - all of New Haven. DELAWARE - Delaware Trust Co., Wilmington; Equitable Trust Co., Wilmington. DISTRICT OF COLUMBIA - Lincoln National Bank; Riggs National Bank. FLORIDA - Lewiston State Bank, Tellahassee. GEORGIA - Trust Company of Georgia, Atlanta: National Exchange Bank, Augusts; Fourth National Bank, Columbus: First National Bank & Trust Co., Macon: First National Bank, Romey Liberty National Bank & Trust Co., Savennah. ILLINOIS - National Security Bank, Chicago; Third National Bank, Rock- ford. INDIANA - First National Bank, Elkhart: Farmers National Bank, Reming- ton. MAINE - First National Bank, Damariecotta. MASSACHUSETTS - Hyannis Trust Co; Winchester National Bank; Guaranty Bank & Trust Co., Morcester. MICHIGAN - Commercial & Savings Bank, Albion; State Savings Bank, Escanaba: Farmington State Bank, MINNESOTA - First National Bank, Austin; Farmers & Merchants State Bank, Clarkfield; First National Bank, Deer River. MISSISSIPPI - Bank of Greenwood; Citizens Bank, Hattiesburg: Capital National Bank, Jackson; Deposit Guaranty Bank & Trust Co., Jackson; Bank of Morton. MISSOURI - Cotton Exchange Bank, Kennett; United Bank of Union. MONTANA - First National Bank, Great Falls; Great Falls National Bank: Montana Bank & Trust Co., Great Falls. NEW JERSEY - Suesex County Trust Co., Franklin: Leonia Bank & Trust Co. NEW MEXICO - First National Bank, Albur quarque: First National Bank, Santa Fe. NEW YORK - First National Bank, Glens Falls; First National Bank, New Rochelle; National Bank & Trust Co., Norwich. (This list is continued on the next page.) THIS DISPLAY BOOSTS BOND SALES This Defense Bond replica tank which belongs to the Hartford- Connecticut Trust Company 18 on the sidewalk in front of the Greenwich-Connecticut Trust Company. Since it was on duty in Hartford (see NEWS LETTER No. 15) it has been in Bridgeport and several other Connecticut towns. Everywhere it goes bond sales jump. - 10 - Regraded Unclassified News Letter SS BANK DEFENSE BOND DRAFT PLANS (Continued) NORTH CAROLINA - National Bank of Lumberton; Scottish Bank, Lumberton: Citizens National Bank, Gastonia; National Bank of Commerce, Gastonia; American Bank & Trust Co., Monroe: Security National Bank of Raleigh; Peoples Bank & Trust Co., Bocky Mount. OHIO - Peoples State Bank, Granville: Green- ville National Bank; National Bank of Lima: Savings Deposit Bank, Medina. OKLAHOMA - First National Bank of Tulsa. OREGON - Bank of California, N. A., Portland, PENNSYLVANIA - Abington Bank & Trust Co: Pioneer Dime Bank, Carbondale; Girard National Bank: Peoples National Bank, Norristown: Third National Bank & Trust Co., Scranton. SOUTH CAROLINA - South Carolina National Bank; First National Bank of Columbia; Bank of Hartsville; Citizens & Southern Bank. TENNESSEE - American Bank, St. Joseph. TEXAS - First National Bank, Alpine: Commercial National Bank, Brady; Commercial State Bank, El Campo; Commercial Bank, Mason: National Bank of Commerce, San Antonio: Citizens National Bank, Waco: City National Bank, Wichita Falls. VIRGINIA - Bank of Lancaster, Kilmarnock. WASHINGTON - Seattle First National Bank. IMPRESSIVE SALES RECORD HUNG UP BY PEORIA BANK More than $1,200,000 worth of Defense Bonds and Stamps were sold dur- ing the past five months by the Commercial Merchants National Bank & Trust Company, Peoria, Illinois (population 105,000). Since early in May this bank has used newspaper advertisements and special lobby displays to call attention to the Defense Savings Program. A new promotional program is now being developed around the song "Any Bonds Today?" Tellers' windows will be decorated with the front cover of the sheet music souvenir edition of the song; and ten times during banking hours a recording of the song will be played and distributed at low volume from twelve loud speakers located near the tellers' windows. Pictured below is the bank's attractive floral display which featured more than 1200 red and white peonies. BONDS - 11 - News Letter TO THE LADIES Some Useful Ideas from New York In New York, Mrs. Lytle Hull, vice- chairman of the State Committee in charge of women's activities, and her Executive Ameist- ant, Mrs. Marion Miller, have already made most of their committee appointments through- out the State. They were able to find the kind of women they wanted in each munici- pality, they report, by going to big state- wide women's organisations, like the state affiliates of the PTA, the General Federa- tion of Women's Clubs, and the Women's Trade Union League, and asking who the most active workers of those organizations were in each locality. Newspaper editors and women's page writers were also asked to supply the names of leadere in women's activities in each town, and the names of organisations which would probably want to work with local De- fense Savings Committees. "Flying Squadron" Mre, Lytle Hull and Miss Vivian Bolster of Hearn's Volunteers In New York City, a "Flying Squadron", selling Defense Stamps together has been formed composed of society women, at Bonwit Teller's Fifth Avenue club women, and business girls, who have Store in Now York City. volunteered to help the Defense Savings Pro- gram in any way they can. During "Retailers-for-Defense Week", these volunteers tended Defense Stamp booths in department stores. Helping out on this particular project, too, were the "Rearn's Volunteers", an or- ganisation of salesgirle from Hearn's Department Store, who are giving one day every week to National Defense work. INSTRUCTING VOLUNTEERS From long experience with volunteer workers, Mrs. Hull and Mrs. Miller know the importance of providing them with detailed instructions. For example. the volunteers who are helping to sell Defense Stamps in stores are given missographed sheets setting forth such suggestions and instructions as: 1. Tell shoppers who stop to examine the literature on display, where Defense Stampe are on sale (at the booth or cashier's desk) and that Bonds can be bought at any post office or bank. 2. Distribute albums with the first stamp sold if the shopper does not already have one. 3. Read the Defense Savings informational pamphlete in order to be able to answer questions intelligently. 4. Keep a record of stamps sold, and, if possible, of the number of people who make inquiry about Stamps or Bonds or pick up literature. - 12 - Regraded Unclassified News Letter 89 FARMERS LEARN or DEFENSE SAVINGS PROGRAM TRIPLE A CHECKS BUYING DEFENSE BONDS FARMERS are being encouraged to invest in Defense Bonds. All Triple A Boil conservation and parity payment checks (about 6,000,000 are distributed sach year) are now being delivered accompanied by & new Defense Savings fold- 07 entitled: "12 Facts For American Farmers About Defense Savings Bonds and Stamps." MEMBERS OF THE 800 RURAL ELECTRIFICATION COOPS., who represent approxi- sately 1,000,000 farm families, are now receiving the folder "Freedom for the Future" (referred to in NEWS LETTER NO. 18). ALL FIELD OFFICES AND AGENTS of the Departments of Agriculture and Interior are cooperating to keep Defense Savings before the rural families whom they serve. Field representatives of these Departments have been 1b- structed to cooperate closely with state and local Defense Savings Committees and to do all that they can to stress to farmers the importance of substantial and continuous investment in Defense Bonds and Stamps. OTHER NEWS FROM THE FARM FRONT:- All Creameries in Vermont, including both privately owned and cooperative creameries, are distributing folders giving information about the Defense Sav- ings Program. In addition, some of them are developing plans whereby the creameries help farmers buy bonds by making authorized deductions from milk checks. This is B plan which operates for farmers in much the same way that the pay roll allotment plan operates for wage earners and salaried employees. Future Farmers of America, organizations of boys studying vocational agriculture, are investing reserve funds in Defense Bonds. The Mississippi FFA organization reports the investment of $3,000; Florida, Louisiana and New Mexico organizations each report purchases of $1,000 Defense Bonde, and the Vermont group has made an initial purchase of a $100 bond. His fine Jersey COW produced the milk which brought the money which Danny Fugene Farrow, 4H Club boy of Spring Creek, Tell County, Arkansas, saved to buy the Defense Bond he proudly displays in the picture at the left. Danny's father, Glenn Farrow, in 1931 won the Future Farmers of America award as Master Farmer. Rural Electrification cooperatives throughout the country have invested $650.000 in Defense Bonds. In Missouri, every such cooperative has purchased Bonds. EA Minute Man Sculptured in Butter was the principal attraction at the exhibit of the Beatrice Creamery Company of Topeka, at the Kansas Free Fair in that city. 13 News Letter DISPLAYS AVAILABLE FOR OUTDOOR ADVERTISERS OUTDOOR ADVERTISING is doing much to keep the objectives of the Defense Savings Program before the American public. Already in scores of cities, banks and savings and loan associations and other local users of the outdoor advertising medium, and some national advertisers, notably the Wrigley Com- pany. have placed Defense Savings messages upon outdoor displays which they either own, lease or contract for. Pictures of & few of these billboards have already appeared in previous issues of this NEWS LETTER. A NEW PROGRAM of outdoor advertising is now getting underway. The newly established Outdoor Display Section of the office of the director of informa- tion has just announced that arrangements have been made with the Outdoor Advertising Industry for the production of a series of Treasury-spproved designs which will be made available at cost to users of outdoor advertising space and to the "plant operators" engaged in this business. Own a SHARE IN AMERICA POR DEFENSE BUY DEFENSE SAVINGS BONDS THIS SPACE FOR ADVERTISER'S IMPRINT A SMALL BOY AND A DOG (above) feature the design of the poster which is the first in this series to become available. This design was provided by the Mass Marketing Institute of Chicago. Colored miniatures of this design were mailed on October 14th by the Treasury Department to approximately 12,000 banks, insurance companies, and other financial institutions throughout the United States, together with & letter announcing the availability of these posters and outlining the procedure by which they can be obtained. The large 24-sheet posters for this design are now in the process of production, and should be available to advertisers about October 20th. FOR PAINTED BULLETINS, the two designe now available have been provided by Outdoor Advertising Incorporated. Both feature the Minute Man, and differ only as to the wording of the handlines. One says: "OWN A SHARE IN AMERICA. Buy United States Defense Bonds and Stamps." The other reads: *FOR DEFENSE AND SECURITY. Buy United States Defense Bonds and Stamps." - 14 - Regraded Unclassifie News Letter 90 DEFENDE SAVINOS 0 % THE AIR Leading Programs for the Coming Yook Monday, October 20 FOR AMERICA WE SING 9:30-10:00 P.M. (EST) Tuesday. October 21 MILLIONS FOR DEFENSE 8:00-9:00 P.M. (EST) (The Treasury Hour) NBC Blue Network Saturday, October 25 AMERICA PREFERRED 9/15-9:45 P.V. (EST) THESE THREE PROGRAMS are dedicated exclusively to Defense Savings. In addition, many regularly sponsored programs during the week will include announcements and other boosts to remind America's radio audience to "Buy a Share in America." "ANY BONDS TODAY?" IN FIRST POSITION IN NATION'S 300,000 AUTOMATIC PHONOGRAPHS nation-wide campaign to place "Any Bonds Today?" and other popular National Defense records as they become available in the No. 1 position on the nation's 300,000 automatic phonographs has been launched by the Automatic Phonograph Manufacturers Association and representatives of all major record- ing companies. Records which receive this position are played more often than any others in the machines. Each recording company will make special stickers, cards and title slips for distribution to all places where the automatic phonographs, popularly known as "juke boxes", are installed. This material is now in production, and the week of November 9 to 16 has been fixed as "Automatic Phonograph Operators Cooperating in the Promotion of United States Defense Bonds and Stamps Week." In Michigan, automatic phonograph operators got the jump on the rest of the country and, through the efforts of Roy Small, Conciliator for Local 737, United Phonograph Operators Association, CIO, and the United Music Operators Association of Michigan, "Any Bonds Today!* WAS given the preferred position on all 5,100 music boxes in Detroit and Wayne, Macomb and Oakland counties. Late in September, when Secretary Morgenthau made his trip to Detroit to discuss pay roll allotment with labor and business leaders, Frank N. Isboy. Michigan State Chairman, offered him $100 if be could find a juke box on which "Any Bonds Today?* was not the first tune. The Secretary took up the chal- lenge and, accompanted by State Administrator Giles Kavanagh, Chairman Inboy and one or two others, went to more than & dosen places, buying hot dogs and dropping nickels in the slote of automatic phonographs. Reports have it that the personal investigation cost the Secretary a pocketful of nickels and that Chairman Isbay kept his $100. "Any Bonds Today?* was in the top spot on every machine! - 15 - News Letter QUOTABLE QUOTES "In this, the most perilous hour in the entire history of civilization and Christianity, it becomes the duty of all who believe in the preservation of American freedom and the American way of life to do everything possible in behalf of the perfection of national defense. Every member of the Moose Lodge can increase his contribution to the nation's security and the perpetu- ation of his own liberty by purchasing Defense Savings Stamps and Defense Sevings Bonds to the limit of his capacity. ... Therefore, every member of the Loyal Order of Moose is urged to buy at least one Defense Savings Stamp 4b day and at least OTMP Defense Savings Bond & month." -- Mathew M. Neely, Supreme Governor, Loyal Order of Moose, Governor of West Virginia, and Honorary Chairman of his State's Defense Savings Committee. "The time has come for us to take our American Citizenship seriously. Ve have accepted the privileges afforded us by our form of Government as 8 matter of course, forgetful of the price our forefathers paid that we might be free. That freedom, and the Government under which we enjoy it. is not only challenged. but it 10 threatened. Let the bankers as a class take the lead in a great movement to arouse our people to the dangers which threaten, and try to make them conscious of their individual obligation and responsi- bility to our Government. Let us pledge anew our allegiance to the flag of our country, and rededicate our lives to ito protection and perpetuation." - Ed. L. Weathers, President, Kentucky Bankers Association. *Our Job is to sell every individual--without coercion and with each one the Judge of his own limitations-the obligation of THRIFT FOR DEFENSE," - William H. Bartley. State Defense Savings Administrator for Montana. 2. CAN KILL A THAT'S ONE OF WELL m NO WAR LITTLE TIME THOSE MINUTE MEN, READING THAT EXPIRT BUT M YOU THEY SAVED THIS POSTER. I'VE FOLKS EXPECT THEM FOR DE COUNTRY YEARS NOTICED A TO DO THEIR STUFF AGO, AND DID LOT OF THEM AGAIN, YOU'D BETTER A GREAT JOB AROUND BUY KICK - AND GIVE TOO - THEM SOMETHING STATES BESIDES A SQUIRREL BUN TO WORK WITH. - "BO", Comic strip character by Frank Beck. WcNaught Syndicate, Inc. - 16 - Regraded Unclassifie Page 91: "Program for Cuidence of Postmasters for Defense Savings Bonds and Stamps": See Book 450, P. 735 ERCEY TREASURY DEPARTMENT drun 92 INTER OFFICE COMMUNICATION DATE Oct. 17, 1941 TO FROM Mr. Hare Secretary DA Morgenthau Subject: Employment in the Aviation Manufacturing Industry 1. Employment in the aviation manufacturing industry is reported at 289,000 for August 1941, the latest month for which data are available. A total of 230,000 of these employees was engaged in the manufacture of airplanes and parte, and the remaining 59,000 in the manufacture of air- plane engines. These figures do not include employment in the Ford and Buick engine plants, estimated at 4,000 workers. 2. More workers were employed in the industry in August 1941 than in any previous month. There were 9 per- cent more employees than in the preceding month, 73 percent more than at the beginning of this year, and 132 percent more than a year ago. 3. Since the first of the year the industry has ex- panded by 121,000 employees. All of the larger companies reported gaine in employment during this period. Lockheed showed the greatest advance of the airplane manufacturing companies, with 15,000 additional workers. The largest increment for the engine companies was 7,000 at Pratt & Whitney. 4. The attached chart shows total employment in the industry, and in selected companies, since January 1937. Data from which the ourves were plotted are given in the accompanying tables. Attachments Regraded Unclassified 93 Employment in Aviation Manufacturing Industry (Airplanes and Airplane Engines) 1937-1941 : : : : : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Airplanes Jan. 22,100 23,700 25,251 58,000 138,900 Feb. 60,500 149,700 Mar. 24,100 24,200 27,875 64,500 155,800 Apr. 67,000 167,048 May 73,000 175,371 June 25,200 22,800 35,973 80,000 190,200 July 90,000 210,729 Aug. 97,448 229,644 Sept. 23,400 22,050 41,425 105,362 Oct. 115,241 Nov. 123,492 Dec. 23,800 24,450 52,800 131,200 Airplane Engines Jan. 5,500 6,500 6,989 13,900 38,550 Feb. 15,800 40,468 Mar. 6,000 6,600 7,825 17,300 42,869 Apr. 18,600 44,849 - May - 20,800 48,546 June 6,600 6,900 8,727 22,900 51,816 July 25,400 54,702 Aug. 27,019 58,882 Sept. 6,400 6,772 9,289 28,981 Oct. 32,633 Nov. 34,199 Deo. 6,600 6,847 12,600 36,045 Total Industry : Airplanes and Airplane Engines Jan. 009' L2 30,200 32,240 71,900 177,450 Feb. 76,300 190,168 Mar. 30,100 30,800 35,700 81,800 198,669 Apr. 85,600 211,897 May 93,800 223,917 June 31,800 29,700 44,700 102,900 242,016 July 115,400 265,431 Aug. 124,467 288,526 Sept. 29,800 28,822 50,714 134,343 Oct. 147,874 Nov. 157,691 Dec. 30,400 31,297 65,400 167,245 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941 Source: Bureau of Labor Statistics. Regraded Unclassified STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 1937-1941 94 : : : : : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Bell Aircraft Corp. Jan. 615 222 654 859 4,309 Feb. 865 5,043 Mar. 850 290 912 896 5,754 Apr. 840 6,540 May 873 7,036 June 808 440 1,410 1,192 7,738 July 1,480 7,743 Aug. 1,963 8,677 Sept. 718 235 703 2,413 Oct. 3,355 Nov. 3,597 Dec. 213 606 799 3,865 Boeing Airoraft Co. -- Seattle Jan. 1,834 1,493 2,380 5,137 6,939 Feb. 4,942 8,104 Mar. 1,726 1,700 2,749 4,759 7,960 Apr. 4,198 7,740 May 5,190 7,739 June 1,249 1,736 2,989 5,882 7,920 July 6,571 8,720 Aug. 6,926 11,145 Sept. 1,109 1,798 3,985 6,940 Oct. 6,391 Nov. 5,351 Dec. 1,380 2,285 4,749 5,657 Consolidated Aircraft Corp. Jan. 3,169 2,540 968 2,837 13,135 Feb. 3,477 14,097 Mar. 3,246 2,518 819 3,807 14,251 Apr. 4,349 13,886 May 5,040 13,547 June 3,099 2,104 832 5,821 14,007 July 6,743 15,238 Aug. 7,836 18,484 Sept. 2,617 989 1,408 9,289 Oct. 11,018 Nov. 12,355 Deo. 2,580 981 2,540 12,118 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. Regraded Unclassified Employment of Selected Airoraft 1937-1941 Manufacturing Corporations 95 (continued) STRICTLY CONFIDENTIA : : : 1 : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Curtiss-Wright Corp. -- Buffalo Jan. 1,241 2,211 3,802 4,380 8,273 Feb. 4,744 8,902 Mar. 1,500 2,347 2,939 5,016 9,607 Apr. 5,213 9,946 May 5,698 10,537 June 1,933 2,310 2,848 6,314 11,431 July 6,531 13,191 Aug. 6,597 13,966 Sept. 2,202 2,736 1,562 6,824 Oct. 7,682 Nov. 7,889 Dec. 2,007 3,491 3,447 8,010 Douglas Aircraft Co., Inc. Jan. 5,591 6,328 4,334 11,952 17,054 Feb. 12,077 18,057 Mar. 5,961 6,173 4,177 13,119 19,313 Apr. 14,033 21,502 May 14,656 22,678 June 6,653 4,672 5,445 14,957 25,019 July 14,662 25,940 Aug. 14,898 25,647 Sept. 5,532 4,028 6,318 14,219 Oct. 14,158 Nov. 14,726 Dec. 6,771 4,110 10,362 16,120 Lockheed Aircraft Corp. Jan. 910 1,577 2,305 5,157 11,544 Feb. 4,768 12,031 Mar. 1,094 1,594 3,509 4,362 13,028 Apr. 4,400 14,829 May 5,016 15,418 June 1,338 1,797 5,699 5,591 19,640 July 6,599 23,865 Aug. 7,296 26,247 Sept. 1,383 1,997 5,324 7,582 Oct. 8,517 Nov. 10,056 Dec. 1,428 2,123 5,156 10,904 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. Regraded Unclassified STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 1937-1941 96 (continued) : : : : .. : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Glenn L. Martin Co. Jan. 1,364 1,814 2,905 10,984 14,039 Feb. 9,407 13,771 Mar. 1,716 1,892 4,092 9,133 13,216 Apr. 9,010 15,482 May 9,357 16,180 June 2,044 2,134 6,029 9,133 18,313 July 9,513 21,082 Aug. 11,200 23,299 Sept. 2,032 2,341 10,070 10,019 Oct. 11,414 Nov. 12,871 Dec. 1,818 2,777 11,174 13,829 North American Aviation, Inc. Jan. 829 1,713 2,223 4,049 7,767 Feb. 4,324 8,247 Mar. 889 1,935 2,457 4,154 8,736 Apr. 4,371 9,590 May 4,336 9,803 June 841 2,400 3,125 4,782 9,770 July 4,918 9,693 Aug. 4,916 9,986 Sept. 1,272 2,685 2,992 5,111 Oct. 5,828 Nov. 6,064 Dec. 566 2,530 3,795 6,867 United Aircraft Corp. (excluding Pratt & Whitney) Jan. 2,350 2,245 1,826 2,757 7,011 Feb. 3,051 7,652 Mar. 2,444 2,168 1,766 3,468 7,418 Apr. 3,735 7,492 May 3,912 7,718 June 2,497 1,972 1,952 4,282 7,974 July 4,823 7,963 Aug. 5,016 8,224 Sept. 2,439 1,880 2,123 5,445 Oct. 6,010 Nov. 6,105 Dec. 2,338 1,774 2,588 6,401 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. STRICTLY CONFIDENTIAL Employment of Selected Aircraft Manufacturing Corporations 1937-1941 97 (continued) : : : : : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Vultee Aircraft, Ino. 364 742 4,057 Jan. 938 Feb. 4,325 440 959 4,544 Mar. 1,008 5,096 Apr. May 1,334 5,022 June 560 533 2,127 4,955 July 2,618 4,864 Aug. 2,857 4,842 430 288 Sept. 3,531 Oct. 3,652 Nov. 3,733 Dec. 334 662 3,851 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. Regraded Unclassified Employment of Selected Airplane Engine Corporations STRICTLY CONFIDENTIAL 1937-1941 98 : : : : : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Allison Engineering Co. Jan. 218 262 454 1,114 6,422 Feb. 1,261 6,720 Mar. 229 297 466 1,610 7,012 Apr. 1,958 7,114 May 2,766 7,670 June 238 339 558 3,254 8,133 July 3,917 8,420 Aug. 4,595 9,192 Sept. 238 382 642 5,282 Oct. 6,280 Nov. 6,295 Dec. 266 439 901 6,394 Continental Motors Corp. (Airplane Engine Division) Jan. 151 153 134 288 953 Feb. 344 1,057 Mar. 153 152 138 358 1,063 Apr. 368 1,186 May 378 1,235 June 162 144 171 388 1,245 July 398 1,230 Aug. 382 1,240 Sept. 135 146 203 567 Oct. 732 Nov. 855 Dec. 152 142 243 875 Lycoming Division of Aviation Manufacturing Corp. Jan. 849 729 519 581 1,607 Feb. 638 1,661 Mar. 889 704 521 657 1,645 Apr. 711 1,695 May 765 1,717 June 901 549 573 819 1,729 July 873 1,706 Aug. 970 1,859 Sept. 756 514 644 1,080 Oct. 1,459 Nov. 1,320 Dec. 762 506 689 1,576 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. STRICTLY CONFIDENTIAL Employment of Selected Airplane Engine Corporations 99 1937-1941 (continued) : : : : : : 1937 : 1938 : 1939 : 1940 : 1941 : : : : : Pratt & Whitney Aircraft Jan. 1,931 2,567 2,264 5,642 12,287 Feb. 6,549 13,483 Mar. 2,119 2,489 2,659 7,158 14,286 Apr. 7,541 14,865 May 7,765 15,824 June 2,384 2,555 3,066 8,504 16,633 July 9,121 17,524 Aug. 9,449 17,959 Sept. 2,471 2,384 3,394 9,406 Oct. 9,794 Nov. 10,377 Dec. 2,618 2,227 5,022 11,228 Wright Aeronautical Corp.-- -- Paterson -Jan. 2,254 2,607 3,398 5,411 12,847 Feb. 6,081 13,136 Mar. 2,515 2,705 3,771 6,537 13,415 Apr. 6,984 13,849 May 7,882 14,241 June 2,800 2,930 3,997 8,682 14,643 July 9,491 15,150 Aug. 10,151 15,602 Sept. 2,690 3,184 4,026 10,726 Oct. 11,240 Nov. 11,864 Dec. 2,608 3,374 5,141 12,408 Office of the Secretary of the Treasury, Division of Research and Statistics. October 16, 1941. Source: Bureau of Labor Statistics. Regraded Unclassified 100 STRICTLY CONFIDENTIAL EMPLOYMENT IN AVIATION MANUFACTURING INDUSTRY Factory Wage Earners 1937 1938 1939 1940 1941 M M J 5 N J M M J 8 N J M M J $ N J. M M J 6 N. J M M J 5 EMPLOYEES EMPLOYEES a Thousands Thousands Total Industry (Aircraft and Engines) 280 280 240 240 200 200 160 160 120 120 80 80 40 40 0 0 J M M J $ N J M M J $ N J M M 6 N J. M M J E NJMMJSN 1941 1940 Regraded Unclassified 1937 193 Selected Aircraft Manufacturing Companies Selected Airplane Engine Companies EMPLOYEES EMPLOYEES Thousands EMPLOYEES Thousands The Douglas Aircraft Co Blenn L. Martin Co. Thousands 22.5 Wright Aeronautical Carp. Patarian 15 0 200 125 20.0 17.5 20.0 17.5 15.0 ns 15.0 12.5 15.0 12.5 10.0 12.5 10.0 75 100 7.5 5.0 7.5 5.0 25 50 2.5 a 1437 1938 1939 1940 1941 27.5 2.5 0 Pract and Whitney Aircraft 1937 1930 1939 1940 194 17.5 25.0 D Consolidated Aircraft Corp. 1937 1938 1939 1940 1941 12.5 15.0 22 5 Boeing Aircraft Co. 10.0 12.5 20.0 7.5 10,0 17.5 5.0 7,5 15.0 2.5 5.0 12.5 o 2.5 10.0 1937 1938 1939 1940 1941 22.5 Lockhead Aircraft Corp. 0 7.5 1937 1938 1939 1940 1941 20.0 15.0 Curtiss-Wright Corp. 50 (Excluding Wright Aermautical Carp) 17.5 12.5 2.5 15.0 10.0 0 1987 1938 1939 1940 1941 12.5 7.5 (5.0 Allison Engineering Co. 5.0 125 10.0 7.5 2.5 10.0 5.0 0 7.5 1937 1938 1939 1940 (94) 10.0 North American Aviation. Inc 5.0 2.5 7.5 0 2.5 1937 1938 1939 1940 (94) 10.0 5.0 United Aircraft Corp o 1437 1938 1939 1940 1941 (Excluding Fratt and Whitney) 7.5 2.5 7.6 Lycoming Division of Aviation Manufacturing Corp. 5.0 o 5.0 1937 1938 1939 1940 1941 10.0 2.5 Bell Aircraft Corp. 2.5 7.5 B o 1937 1938 1939 1940 (94) (937 1938 1939 1940 1941 5,0 5.0 5.0 Continantal Motors Vuitee Aircraft Corp Birerats Engine 2.5 2,5 2.5 o o 0 1937 1938 1939 1940 1937 1938 1939 1940 1941 1937 1938 1939 1940 1941 1941 Regraded Unclassified 101 BRITISH AIR COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D.C. TELEPHONE HOBART 9000 PLEASE QUOTE REFERENCE NO With the compliments of British Air Commission, who enclose Statement No. 2, covering aircraft shipped, for week ending October 14, 1941. The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. October 17, 1941 Regraded Unclassified 11% constacton - 15, 1941. next Sceret 102 STATEMENT 70, 2. AIRCRAFT DESPATONNO FROM UNITED SATES VERK ENDED OCTOBER 14, 1941, DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED FOR USE IN CANADA THE transbro V. K. U.K. 20 -- -- TOTAL Toxton III U.K. U.K. 7 -- -- 7-50 Sanada ---- --- -- 22 Catalina Austrolia Melbourne -- 1 -- Thomator II T. K. U. X, (via Ganden) : 9 -- CUITIES Middle Cast Port Sudan 44 -- -- Canada : -- 4 Poston III 0. X U. 11 23 : -- Middle East Port'Sudan 8 -- -- Tudson III V. T. U. % : 1 -- (via Cander) MARTIN 17020 Bant Port Suden the : - AMERICAN ( "arrord II HAdle Tast Port Sudah 7 -- Canada -- -- 15 ---- MIND Chosapeake TT. %. U.K. 1 -- -- TOTAL 115 Regraded Unclassified 1023 My sour M. tegretary: De suptember 20, 1041, Licutenant Maria M. Commelly of the United States Any was fatally that w Customs Guard John E. Tesag at Manolalu, 9. N., as the forme was leaving the That bed States ATWY Treasport PARAILMENT CLEVELAND. I se informed by the netive collector of custome at Tonclula tast the shooting securred while the guart ⑉ 00 afficial daty, in connection with an sttempt of Montenent Conselly to pass through the exptome lisse with & paskage without aboiting 19 to impor- 1100 upen the court's request. The Custome Agency Service of this Department is conducting as investigation to secertain the facts and evidence is the may. 10 is believed that two United States sevel officers in Benelals are is presession of important information is the miter, but the loanl navel officials have refused to pormit there offlaws to Do taten- viewed. Criminal presention of Mr. Young for the sheoting but been instituted is the leeal erarte of I TOP informat that the trial my take place is the not fature. is view of the cortonement and urgeney of the miler, and of the information reselved from the mating cellector that the shoet- Lug countral is line of daty. I shall be obliged If you will instruct the appropriate noval efficials at w telegroph to permit the Customs Agescy Service to interview the savel officers smotional above regarding the matter. Very truty more. 401100 Secretary of the Treasury. 9a Comerable The Secretary of the Tary. nothl 10-16-41 Regraded Unclassified 104 INA .. ---- +14 :- we unitowed ,he - 12 2 - :- it about : 1. ... ":0 Lover caste ----- of 14 - white by storm, it IT - : to 16 :- in with When - - 4. original tool. % de ------------------------- in thrown the with lond Is: (1.4° Nich comment till N : Type) 21 12 The 2. crunt any letters le or in Soul YES, petrictic -: their 1000. - M 14, 179 crittent 12 23 criticise is of Invertment inform :- = with the the at: secont sollin DIE previnue IT. with letter - , its value X the A. 110 it. 191/14 : to - - :: main. : dellare : - : states N To - - NY the with X X : theres. - ado 5 as Secturity де will its " : there who - 1: to Twice LAS : 17.1 - is with Letter, % - class 121 Lin, Va Secretary, = the :: - Regraded Unclassified 105 FAVORABLE LETTERS Comments on the Secretary's Speeches Kre. Ralph A. Metzger, San Francisco, Oalif. I greatly admire your stand on the various issues which have come up from time to time, especially your suggestion of B. 100% tax on all profits above 6%. I hope the latter ie enacted into law for the period of the emergency. I hope this letter reaches you personally. ?. 3. Crook, South Boca Grande, Fla. 100% in favor of your recently expressed opinion. How about peasing it along to FDR7 "Man in the street" doesn't mind heavy texes, but violently opposed to excessive profits, and hopes you won't be fooled by the loud voice of Big Business. Boca Grande still beautiful and would be nice If you could vacation with 18 sgain this winter. Hope you can arrange it. J. P. Harrison, Texas Theatre, Denton, Texas. I am one of the 130 million Americans you mentioned in your speech, a small town theatre operator in a little college town down here in North Texas, but regard- less of my status, I have been trying to figure out the main events that seem to cast the most gastly shedow over the future. Your soeech enlightened ne more and at the same time it fascinated me by its sin- plicity and its ebundance of good old hard common horse sense. And just BE S. humble citizen that I EE, I want you to know that I am one of our 130 million Americans who are behind you in your mastodonic task. In the language of & showman, I have some other good adjectives that des- cribe It such est Colossal, Gigentic, and Stupenduous. R. 1. Masterson, Beaumont, Texas. Your address is put in such B concise and interesting manner that one cannot fail to read it thoroughly. The principles set forth in the address should be supported by all Americans, but I imagine the pressure groups in Washington will probably hinder the insururation of same, end there will be "heck" to Day in the "sweet bye ord bye". D. G. Merkel, Rest Orange, N. J. Your pamphlet, "A Speech and a Pledge", which you were so kind 65 to send me has impressed me greatly. I wish to thank you for this admirably clear and far-sighted speech, with which I heartily agree. When I listen to the men of my OWN profession, college professors and teachers, I am seriously worried. There 18 no doubt that they agree completely with the aimed of our Government's foreign policy. But there in on the other side a rising bitterness about the fact that the Government up to now was not able to prevent the rise of the cost of living. Regraded Unclassified - a - 106 2, H. Beardsley, Jacksonville, Florida. I have read of your suggestion to limit the emount of profits to the stockholders of corporations to 6% and think they are all very good. ... Corporations are made up largely of small people, like myself, who save and invest, and seldom 1f ever see over 6%. The directors and special heads at the time of their organization for the year, vote themselves 8. large salary (possibly they are worth it), which is known to the stockholders. Then at the and of the year they figure out a small amount to said investing stockholders, and take the surplus for themselves in the form of B. bonus. ... I have seen recently where the Courts ordered B. president of a tobacco company to refund his bonus to the rightful stockholders. This If followed up might put B. lot of money in circulation, where it right- fully belongs, and help increase taxes. Regraded Unclassified 107 Comments on Bonds fells Bilgrey, N. Y. C. I thank you for your letter of September 26. 1 you VETY happy that you thanked me personally for having bought a $25 Sevings Bond. I am proud that 1 could buy A Savings Bond with the first $20 I earned in the United States. I an a Dutch boy who fled from the Germans in May, 1940; on July 23, 1940, my parents and I entered the United States. During the past year, I attended the Long Island City High School, from which I graduated with honor in June. On June 17, my seventeenth birthday, I received the amount of $20 from the Nonufacturers' Trust Company, this representing the First Prize for nn essay contest, "Why Everybody Must Buy National Savings Bonds". I purchased my Bond on the following day. Dovid A. Williams, Cleveland, Ohio. I have not only used what surplus Junds by monthly income permits for the purchase of Defense Bonds, but have disposed of some other holdings and transferred same into this type of security. I am sometimes discouraged to find the lack of recognition that preveils among the run of men in the steel plants with regard to the critical situation that 1e presented to our great democracy. : do out mean to infer that I am pessimistic but feel quite certain that one of the biggest problems facing our Government today is to impress upon the individual in every way just what a critical situation It is, and bow necessary it is for everybody to put his shoulder to the wheel. 2hil S. Dickinson, Chicago, Ill. As you know, this section of the country is probably the center of the controversy as to the wisdom of our President's foreign policy. I am one of those who believes that the cont important problem before the American people today is to see that Hitler is licked, and so I personally an heartily in accord with every- thing he 18 doing to see that aid ie given to the forces opposing the Axis Power. I likewise realize that under present conditions all the members of our Administration are under terrific pressure. Finally, I RD in sympathy with what Iconceive to be meny of the social reforme that the Administration has instituted. There are, however, several things which are giving to those who do not agree with the President's foreign policy, arguments which are hurting the general program. First, your statement that all corporate profits should be limited to 6% of invested cepital, It has, unfortunately, tremendously increased the feeling of digastisfaction, Second, many of the group who dieagree with the President's foreign policy, and even many of those who agree with it, feel very strongly that if the country 88 5. whole is asked to make secrifices, the Government should help us likewise by seeing to it that non-defense empenditures are cut to the bone. All citizens of the country must change their scale of living, give up things they have had in the past, one make secrifices, which they are quite willing to do, et the seme time that our ove Government. which asks up to do NO, 18 not following this procedure at all. Regraded Unclassified 108 Quite the NO of the week's mail comes from Mildred Shane, Chicago, 111. 5):8 has invested her "widow's mite", $2,000, in U. S. Bonds. She writes that in order to buy more she vill have to get e job, and sucress that the Secretary can help her cut. However, there is B.D. alternative -- who could get married again. The drewbeck to this 16 -- "W boy friend is in jail. Ferhaps you can do something about releas- 100 He in my custody. He just drifted and got into wrong company, but he La smart and has B little money which could be invested in U.S. Bonde. We need help and 1f you furnish it, we will help you by buying 3004e". Name and address are given in order to make the assistance an easy matter for H.M.Jr. Willigm Roben, Canha, Neb. Appreciate very much your letter of Oct. 10 regarding Defense Savings plan, and wieh to advise I have contracted through my employers whereby I en buying e. certain number of the U. S. Befense Bonds each month. Every paragraph of your letter is in- spiring but sometimes I wonder if we are all doing our share, especially when e certain number of citizens cooperate and then in almost every delly paper we find strike sfter strike mentioned, which in practically every case has something to do with delaying the output of thanks, planes, and other vnluable equipment necessary end for the purpose of defenting Ritler end the Axis Powers. Henri Schueg Chassin, Santiago de Cuba. Taking its inspiration from the very forceful end stimulating campaign which the Treasury Depart- cent developed under your leadership for the sale of Postage Seving Stamps and Defense Bonde, and AS A contribution to the good cause of Continental solidarity and Continental defense, this Company has originated and adopted the design which appears on the postel license stemp used on the envelope bearing this letter. It shows an engle end e conder with claws outstretched in 8. gesture of mutual protection, and the legend - both in English end in Spanish - "The Americas will save liberty". The some slogen, with e similar design, 18 now being used in all of our Latin- American ndvertising. In submitting this design to you, we would like you to regard it BE R. token of the friendly sentiments which the peoples to the south of the Rio Grande entertain towards the United States. Regraded Unclassified 109 UNFAVORABLE LETTERS Comments on the Secretary's Speechee Robert Withington, Northampton, Mass. Your franked speech entitled, "The Fight Against Inflation", reached me yesterday, and It in worth the postage for me to acknowledge it, although my letter may never get to your desk. Of course I agree with you that the subject in one of supreme importance to every American, and I am glad you are con- cerned with it. I presume that you have read the remarks on "Texation" in TIME for October 6th (p. 23), and Mr. Robey's comments on your Intest proposal to limit profits in NEWSWEEK of the sare date (p. 38). I en- close the articles, hoping that you will note the fallacies in your reasoning. You do not (I fear) stress in your speech the need for limiting wages as well es prices, of which vages are an integral part. It would also be nice if the Government could cut ite non-defense spend- ing and 80 cut its taxes. I write an a salaried teacher, whose wages are not likely to go up. Our salaries are paid from money received for tuition end from funds received from the investments of the college. If perents cannot efford to send their children to college, one source is affected; if the return on stocks is reduced, the other source is dried up. At the best, our saleries are so small that we cannot save much; and with the increased taxes cannot soon save anything at all. We must listen to your appeal to buy Defense Savings Bonde with B. wry face, for, with the best will in the world, we cannot afford to buy them. Dr. A. H. Clagett, Upper Darby, Pa. I agree with you and pledge my whole-hearted support in this crisis. Because of changing conditions, encroschment on private practice by Social Agencies, and age, I am on the way out, but I, as 8. patriotic American whose ancestors fought in the Revolution, will continue to do my bit AB to economy. ... An the representative from our County Medical Society, I attended B meeting in the Court House at Medie, called for defense. I was under the impression that it ves to deal with emergencies end disasters erising in the County from invasion or sebotage. I went prepared to offer the services of every physician in the County and had done considerable work in arranging means for rendering emergency service in times of digaster. A call of the Roll revealed that there were representatives from Bar Tenders Unione, Barbers' Unions, Labor Unions, Women's Auxiliaries of all kinds. I was amazed when g. Resolution was passed asking the Federal Government for 8 loan of several hundred thousand dollars to construct a few playgrounds and B. swimming pool at e. public park near Swarthmore. I went from that meeting with 8 bad teste in my mouth and will attend no more. Playgrounds and pools are of little use when B. shipyard on the Delaware is blown up end human beings are scattered over the surrounding countryside. Regraded Unclassified 111 Comments on Bonds " 2. Keynor, President, The Waterbury Button Co., Waterbury Connt I en forwarding you under separate cover just a sample of what the Sustnnes executive is greeted with most every morning. (Bond literature) These advertisements, in many cases, n.s. you can well ree, cost good and plenty. It seems to me that this le 8 type of expenditure that ought to be brought to BY minimum at this time. Miss Behna Benson, Brooklyn, N. Y. To whom it may concern, whether you be President of these United States, or one of the clerks in the office of the Treasury, where there must be an over supply to be shle to send me one of these every few months. We would not have to pay such large taxes if you clerks at that end tried to save n. little of our money. DO NOT SEND ME ANY MORE BOND LITERATURE, I AM BUYING MORE BONDS THAN THE MAJORITY OF PEOPLE MAKING TEN TIMES MORE KONEY THAN I. Your office should get in touch with the Defense Bond sales office and get the names of the purchasers. Xrs. J. T. West, Jamestown, N. Y. Some time ago I bought for each of By 12 grendchildren A "Baby Bond", ell in my name, hut each grandchild named N.E "Co-owner" - they not even knowing I have done EO - have also done the seme for each of my 5 children. Now each month I get from 12 to 17 duplicate letters, addressed in each of their names, I do not like waste, and RS each of these are just thrown into my weste-basket, I an writing to 000 if there is any way to stop you send Its then to me constantly. We BTe all doing all we can to buy Defense Bonde and seve, and I would greatly appreciate thinking there might be nome effort of economy on the part of our Government. Nine Jonnie T. Schrage, Madison, Wis. Your letter thanking me for buy- ing C. S. Sevings Bonds and urging me to buy them regularly is probably the 20th or 30th letter of that type which you have eent me. By this time, It seems to me that the automatic sending of letters with e lot of expensive enclosures every time anyone does buy R. bond is A. bit westeful. After all, the purchase of these bonds 1s supposed to furnish money for Government use in necessary expenditures. A. i. Gillet, The Harter Corp., (Manufacturers of modern metal furniture, posture chairs, etc.), Sturgis, Mich. I appreciate your letter of October 3rd, thanking me for buying $10,000 worth of United States Savings 30nds, and requesting that I endesvor to buy these systematically. Our I have just returned from our factory at feel very disheartened. factory has a Government contract which takes 25% of our normal production, and I have just been advised by them that you have cut them down from 100% to 40%. When you take the 25% out of the 40% it only leaves 15% balance which se can ship to our regular customers. I also understand that our fattory hes been compelled to lay off quite 8 number of workers due entirely to our inability to secure the necessary materials to keep them workins. You surely realize that people out of work and without incomes you AP their part in buying defense Donis. Is there anything that you 241 *Dout all this? Regraded Unclassified 112 Mrs. Joseph K. Elder, Henderson Ky. On June 30th I took every cent 1 and out of the bank and bought U. S. Defense Bonds because 1 thought 10 was a patriotic duty and B. good investment. On July 3rd, while coming home from work, an Army truck ran through 8. red traffic light nod struck my autmobile. It was raining hard and no officer was on cuty to wern of approaching trucks. I have signed 8 number of effidavite and given all information requested, however, if any definite progress 18 being made to reimburse me, 1 em unaware of it. My last letter of inquiry WERE unanswered. This damage probably secue small to you in your capacity of handling millions and billions of dollars, but it has worked B. very severe hardship on me, I do not think our Government should withhold payment any longer on this just claim. I do not know how to proceed further and I hope you will do what you can to help me 60 that I can start buying U. 5. Defense Fonds again. Harm White, The Carpenter Advertising Company, Cleveland, Ohio. While your courtesy in sending out this letter is appreciated, let me remark that this is the duty of the citizen, even though he has to do it with his fingers crossed. I say with his fingers crossed, because I am be- coming more and more convinced that the entire fiscal policy of this Administration is headed for disaster. I say disester, because If it goes any further, it will simply give the President an excuse to pro- claim come sort of national socialism or quasi-Communism as the only way out. In en effort to analyze the reasons for the total 1sck of national unity, I am forced to the conclusion that it 18 due to the people's inebility to believe any more of the President's promises. Frankly, it has me more confused than ever before and I am therefore hoping that by some stroke, one way or the other, this European WAT will be over before we too will find ourselves under the same kind of rule that we have been BO valiantly opposed to. Franklin Lindsay, Austin, Texas. If your bonds are no sounder than your suggestion that profits of corporations be limited to 6% of their in- vested capital, I have enough of them. Arthur J. Neppel, Chicago, 111. What whameful waste to keep on sending letters and all the printed matter that goes with them to persons whom your records mist clearly indicate are buying bonds regularly, such as I A.D. doing. There must be thousands upon thousands of people in my category, and I'm sure I em expressing their sentiments and these of millions of others when I venture the opinion that it indicates an utter lact of inefficiency, and it is high time that your Department, and mll others connected with our national Government, strive to cut down to no absolute minimum all this deplorable end unnecessary expense. Regraded Unclassified 113 George K. Morrls, Lawyer, American Security Bldg., Washington, D. C. : 01 tremendously interested in the financing of the defense of the United States, but I must confess that when I read in the New York Times the reports of the Senate Finance Committee hearing in which e Government officer admits that he refused a contract for housing to IL Bldder (with B. $900,000 bid) who was over $400,000 lower than his nearest competitor on the and gned ground that the bidder's methods would revolutionize the building industry and would cause trouble with one of the national labor organizations, my feith turns 8. little faint. Cerl Scholz, Consulting Mining Engineer, Charleston, W. Va. Periodically I receive from you B. letter thanking me for my subscriptions to United States Savings Bonds. This, I an always glad to do as far 88 my means permit, but there is one feature which causes concern, not only to my- solf, but to many others situated like myself, end that is - our Administration is not making any effort to curtail expenditures not directly connected with our defense program. Is it possible that the attitude of our Administration 18 to create employment at e time viten there is e. scarcity of labor for the defense program, and the in- pelling motive is entirely of a political and vote gathering effort? I Am frank to say that this attitude is spreading very repidly, and vince it is your duty to find money. I think we are entitled to your help in having the Administration reckon with this feature. Prof. Harold L. Reed, Cornell University. I have bought the maximum amount possible of Series E and its predecessor in each of the last three years, and I am therefore especially vulnerable to B. further in- crease in prices end the cost of living. It is absolutely nec- essary that the Government deal realisticelly with the wage problem, particularly wages in the war industries. 1 P.T. alermed et such information 88 I receive regarding weste of Government funds in the construction of ammunition depots, camps, and BO forth. May I there- fore say that I am one of the number of persone who has done his part and I sm now waiting for official Administration to forget politics and ao its part. 1.1ms kg 5. Dobson, Springfield, Mass. I have just received the numerous pieces of literature on Government Bonds enclosed in your letter of Oct. Sth, and in return would like to ask why this Government feels that it 1s necessary to spend 80 much money for advertisement in connection with there bonds when every intelligent citizen of this country, who could afford to buy one, knows what they are. I feel that by this die- continuance of needless spending of money. the Government could ao its tart along this line which sould help greatly to curtail the chances of Infintion. Regraded Unclassified 114 - 10 - :. -- Turrought, Odessa, Texas. If we make application to work for 190 Government on A defense project to rush up work to give not at elá to England, unless we Join B. labor union that we do not visit to join, we are refused work. Then the Government calls « OF to buy bonds end fight in the ermy, nothing is seid about the Inhor union. N. Renty V. Colby, Berkeley, Calif. I have deliberately refrained the buying U. 5. Savings Bonds, since I disapprove strongly of +he Assinistration's foreign policy and the use to which the noney you *** sitempting to raise in this vey, 1s being spent. I write you 10 "newer to your form letter of September 16th, thanking me for "cotrictic cooperation", because I believe disapproval cannot be 41- too often if we are to evoid et least some of the catestrophe toverão which we are being led. Horee R. Melter, Niles, Mich. These bonds are without doubt S.S unfe -nd round 15 any Investment in the world. But I have stopped buying them because this is the only opportunity given be to register my opposition to the Government's war policy. Furthermore, I believe e myring of the citizens of this nation oppose this war policy. Frine Schick, Melay, Calif. Unfortunstely 1 have come to the con- clasion that the defense savings program, or any similar borrowing in the future will be disappointing since it will not reach the full parning capecity pf the American people. The lesson which I have learned na 92 economic observer in practically all European countries turing and after the first World Wer has taught ne that inflation vistever its causes may be - and appeals to serve 7 country by making investments in Government Bondo are hardly reconcilable. french E. Wolfe, Cincinnati, Chio. Why doesn't the Federal Government be honest with its texpayers and cut down non-defense expenditures by eliminating N.Y.A., C.O.C., and W.P.A. and other westeful outlays known to people all over the country? If citizens are asked to sacrifice and economise to pay heavy and burdencome taxes, our Government must first practice vist it preaches. At any rate, election days are coming and TEW ficials will be elected to do the job. Regraded Unclassified 115 - 11 - Comments on Texation Policies Dr. Lewrance G. Hallock, Los Angeles, Calif. We ordinary Americano have been struggling to provide for our femilies and our future in the face of ever mounting texation, but the biggest obstacle to our welfare hes often been the careless utterances of some of our high placed economic Quislings, like yourself, Mr. Morgenthau, who would betray All business, big and little. Maybe you elso "shed crocodile terro" for our big farmers and insurance companies who get fat checks from the rest of us taxpayers for not planting cotton or what not on lands that never SDW 8 good crop of enything. That's the kind of thing that makes us small middle class investors weep and its not crocodile teers either. The New Deal and its appeal to the mob. Kyer Prussian, Detroit, Kich. I auggest the Department change its procedure au to the amount of interest payable on Tax Anticipation Bonde. A differential les been set up wherein the large nen is penalized and the REALL man is given preference. I believe shout two and one-half per cent is paid on the money, and the b16 man who pur- chases a large smount does not get this. In this way, there is a distinction between the two, and it should not be so. Regraded Unclassified 116 - 12 - General Comments has 2, Modes, Bluffton, S. C. I don't mind being bled white for this mation's defense. I don't mind being bled white to help England. : CAR even hold my nose end not 886 too audibly over helping Russia - but always with the wistful hope that Hitler and Stelin will annihilate one another. As 2 taxpayer, I have bought farm and lebor votes for politicians BD long that I can take that with 8 grein of salt. But what I want to know 1s where you get the sheer nerve to ssk the already impl-pressed and overburdened texpayer to pay $30,000,000 for Mexican PORGAT If the idea is to bankrupt this democracy out of existence, it 10 well on its way to fulfillment. Disgustedly yours, E. D. MODEL. Williem M. Mill, Worcester, Mass. I received the enclosed circular today. (P. O. - "National Letter Writing Week" pamphlet) Ve are nuked to conserve supplies and now you will note the Government is urging us to use them. It seems rather a pity to raise the question, mut this type of thing with others is what I feel is the inconsistency of Government expenditures. This costs money and time. C. C. Xing. North Tonswends, N. Y, Here is an item for your official scrap book to show the longths to which certain Institutions are going. Today I cashed a City of North Tonawanda official check for $65.00 at the State Trust Co., the official depository for the City, requesting in addition to $61.00 in bills, $4.00 in silver end nickels. The Teller refused to accommodate ne with the four dollars worth of change unless I paid e fee of 1½ cente per "roll" for the silver and nickels. No re- quest WEB made that the change be rolled. It would be interesting to know whether the Bank was acting legally in refusing change without payment of the above fee. Albert Schwertz, Pennsylvania Glass Bottle Co., N. Y. C. There is A greet waste of materials and fuel in replacing whiskey bottles now being destroyed after contents are emptied, pursuant to B ruling of one of the Federal Departments. We would like to know more about this ruling end whether same cannot be suspended for the duration of the Defense Program. The bottles now being destroyed can be redistributed to the original owners for use, thereby making E tremendous seving in fuel and other important materials. ÀR usual, after an offering of Government securities, there have been complaints saying that the offering of bonds was 80 timed that small subscribers could not get their bide in, or information WAS not obtainable in time to take advantage of the opportunity. Amon Burt Thompson, Lawyer, Cleveland, Chio, writes, "It in unfair to the mill investor to make an offering in the morning end close the books in the afternoon, because certainly this gives a very great advantage Regraded Unclassified 117 - 13 - to the insurance companies who are able to and, in fact, do have officials that are in constant touch with the matter, and, of course, everybody recognizes that the banks have about all the U. S. bonde they should have. The point of the matter 1a that no individual can possibly keep in touch with what you are going to do if you do it in the morning and close the books in the afternoon. I had accumu- Inted some funds that I intended to use for the purchase of bonds of- fered yesterday, but the manner in which the matter was handled prevented my doing so." Edwin 3. Mayer, Lawyer, Chicago, Ill., writes, "Yesterday subscriptions were open for the new 24% issue, and books closed last night. I have EO many friends and clients - persons in moderate circumstances and men of considerable means - who would like to have subscribed end become owners of blocks of these bonds, ranging from $500 to $5,000. They feel, however, that their position is hopeless. There 18 no preference given to the small subscriber. Would it not be well to set up 8 priority in subscriptions up to B. definite amount? I would like to know personally that if I want up to $5,000 worth of my Government's bonds, that I have 8 right and can get them without resorting to the subterfuge of B. large subscription and B. scale-down." Stanley Setterwhite, Sen Diego, Celif. I was recently employed by Aetna Crounity and Surety Company on a National Defense Project here in Sen Diego. I wes paid by check twice monthly, and would stop in at the Bank of America, located et the corner of 6th and Broadway in this city, to have my check cashed. The bank did cash some three or four of my checks, then suddenly refused because I vas not known, The Aetna Casualty and Surety Company was not known, the Bank of America didn't know who (what bank) Aetne did business with, the check WE 6 drawn on a bank in New York, and I didn't have an account with Bank of America. You know and I know that banks are responsible for doing business with checks. We might A6 well receive our salaries in the form of any other useless paper if we cannot cash our checks. Bankers have B church ritual of courtesy and politeness when one goes in to deposit B. dollar. Go in to cash your check or withdraw B. dollar and notice the change. Regraded Unclassified 118 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 17, 1941 TO Ferdinand Kuhn, Jr. FROM Herbert Merillat PRESS COMMENT ON PRICES AND WAGES There has been 8. noticeable slackening of editorial discussion of the price-control bill. Organized labor, however, responding to the pressure for wage-control, is carrying on a vigorous campaign to prevent the inclusion of wage-restrictions in the bill. The farm conference in Washington, called by Senator Thomas, has received little editorial attention. Scattered comments from papers in farming regions, however, indicate wide approval for the refusal of Farm Bureau President O'Neal to endorse the demands of the conference. The more moderate newspapers in farming states have been afraid that the farmers' cause would be more injured than benefited by extreme demands -- for a guarantee of minimum farm commodity prices, for no ceilings on such prices, and for revision of the parity formula to gain further advantages for farmers. This mod- erate element has taken its stand on the parity principle and ssks for no more, no less, than parity prices for farm products. Regraded Unclassified - 2 - 119 The Des Moines Register, applauding O'Neal's walk-out, had this to say: "For agriculture to press now for more and more, indifferent to the effects that success in further demands would have on the dangerous upward price spiral, would in our very sober judgment be imprudent to the point of folly." Agriculture, it said, cannot consistently demand proper restraints on wages while making extreme demands itself. "It can't be 'whoa' for the other groups and not also 'whoa' for agriculture." Wage-Control Organized labor, for its part, is busily developing & case against wage-control 88 part of 8. price-control bill. "Labor," the paper of the railroad brotherhoods, for three successive weeks has carried editorials to bolster labor's arguments. One assailed Mr. Baruch 8.9 an "ambassador from Wall Street," seeking "to place war burdens on farmers and workers, while profiteers escape." Another welcomed the testimony of Dr. Isador Lubin, to the effect that recent wage increases had not been 8 signif- icant factor in price increases. A report of the American Federation of Labor claimed that wage increases had been unjustifiably used to excuse large price increases. Wage increases, it said, have added only two percent to manufacturing costs. Regraded Unclassified 120 - 3 - The C.I.O. News again repeated at length the arguments of C.I.O. President Murray against freezing wages in connection with price control. New Treasury Borrowing The Treasury offering of $1.2 billions of long-term bonds was the occasion for much editorial pondering of Federal borrowing policy. The terms of the bonds were considered well-designed to attract investors other than commercial banks. There is consid- erable editorial alarm, however, at the inflationary risks in relying to any great extent on borrowing from such banks. The alternative, say the commentators, lies in heavier taxation, much larger sales of defense bonds, and curtailment of non-defense spending. In particular 8. more vigorous sales campaign for defense bonds is urged. The press is disappointed at what it regards as 8 slump in sales. It points out that relatively few bonds are being bought by low-income groups and that heavier purchases by such persons are desirable, not only to raise money for the Treasury but to cut mass purchasing power. Regraded Unclassified 121 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 17, 1941 TO: Verdinand Kuhn, Jr. FROM Alan Earth EDITORIAL OPINION ON FOREIGN AFFAIRS: THE CRUCIAL TEST Firmness Rumblings from Tokyo, culminating in the resignation of the Tonoye Cabinet, have given the press an expectation of dramatic events in the Far East. As to their form, the editorial writers are uncertain; the preponderant view is that the Japanese will stab at the Russian rear. There is a corresponding vagueness as to the course which the United States should pursue. The Washington Post, for example, concludes an editorial on the subject in the following rather enigmatic fashion: "The situation is thus one of explosive poten- tislities which the United States and every other nation endan- gered by Japanese aggression must be prepared to meet with prompt- ness and vigor." The press as B whole desires to avoid conflict with Japan, yet insists on the sternest resistance to Japanese agression. The general editorial attitude toward Japan continues to C be bellicose and even contemptuous. It has been assumed during the past week that negotiations between the United States and Regraded Unclassified - 2 - 122 Japan have broken down. A number of commentators, in fact, have insisted that there was never any basis for such nego- tiations and that the Japanese had been employing them merely as a device to stall for time until the Russo-German situation should be clarified. Continuance of the talks has given rise to some apprehension that a deal might be made at the expense of the Chinese. In virtually all comment, this or any other species of "appeasement" is vigorously denounced. Doubt In both news and editorial pages, the nation's press has fostered B. feeling that the battle now raging around Moscow represents 8 crucial test for the forces opposing Hitler. The popular reaction, in the event of an imminent Russian collapse, would almost surely be one of deep disheartenment. Perhaps still more dangerous is an impression created by the newspapers that there is little or nothing America can do to influence the decision. Editorials even in strongly inter- ventionist papers reiterate that insuperable problems of pro- duction and transportation make it impossible for effective aid to flow from this country to the Soviet Union. No great optimism is expressed for the survival of Moscow; and there is occasional expression of the fear that Stalin may come to Regraded Unclassified - 3 - 123 terms with the Nazis. Much of the current comment, indeed, is in the form of & wringing of editorial hands. The future, in the event of a decisive German victory on the Eastern Front, baffles and frightens the commentators. Suppose, says The Omaha World-Herald, that Hitler, "having polished off his friend Stalin, having taken possession of the riches of the Ukraine and Crimea, chooses to call it a day he may say: 'I've got all I want ... Britain may keep her empire. I've no war with America. Let's quit. If you don't want to quit -- come and get me, if you can! The World-Herald, along with 8. great many other moderate or tepid supporters of Administration foreign policy, views such 8 proposal of "peace" with contempt. But it sees as an alternative only B. long, bloody stalemate with an American Expeditionary Force fighting abroad. And it quails frankly before the choice. It appears inevitable that & Russian defeat would give rise to 8 serious wave of defeatism among B. considerable body of press and public alike. Regraded Unclassified 4 124 Disappointment American newspaper commentators experience a natural abashment in discussing the advisability of 8. British invasion of the European continent. Since most of them are opposed to an American Expeditionary Force at this time, they hesitate to exhort the British to such an undertaking. But the degree to which they desire it was attested by the rejoicing with which they greeted the mere rumor that British forces had landed at Archangel. There seems to be 8. general understanding among American papers of the enormous difficulties in the way of an invasion effort. These are recited whenever the subject is discussed. Most commentators agree that the British lacked the manpower, training or equipment requisite for & sustained offensive. Yet through all the comment runs an undercurrent of disappointment and the sense of 8. great opportunity lost and unlikely to recur. Impatience In the face of such grave and immediate dangers as loom on the Eastern Front and in the Far East, the press has been inclined to consider the current debate over arming American merchant ships 8.8 relatively trivial. The torpedoing of the destroyer Kearny can scarcely fail to aggravate this feeling. Regraded Unclassified - 5 - 125 It is the spirit, rather than the letter, of the Neutrality Act which the newspapers wish to see erased. There appears to be a rather widespread feeling that the modification proposed by the Administration is timid and inadequate. Many commentators doubt that guns or gun crews are available in sufficient number or that they will afford effective protection against Axis U-boats and raiders. They argue that access to British ports is of far greater impor- tance, that abandonment of all pretense to neutrality is most important of all. Regraded Unclassified 126 October 17. 1948 Dr. Fede Mr. D. V. Ball STRICTLY CONFIDENTIAL Vould you please cond the fellowing cable to Ambassador Vineas at "For imbassador Vinant from the Secretary of the Treasury. In regly so year Be. 4782 of October s, 1941, the Treasury will proce for the administration of engert arrangements being handled is the United States and will support you is maintaining the position you are taking an this point." #D:lap-10/17/41 Regraded Unclassified 127 CABLE TO WINANT FROM THE SECRETARY OF THE TREASURY In reply to your No. 4782 of October 8, 1941, the Treasury will press for the administration of export arrangements being handled in the United States and will support you in maintaining the position you are taking on this point. Regraded Unclassified 128 October 17. 1942 w. Feis Mr. D. ". Bell will you please cast the fellowing cablegram to the American Sendens "No localogy from the Secretary of the Treasury. 90 facilitate the flew of explies to Buseta, the United States Treasury has agreed to buy sale from the Bussion deverament is advence of delivery and on this basis the Buseton has agreed to sell thirty million dollars of me. the Brittich Treasury represente- tive here has been informed about this. 0422 yes please inform w visans and m. Marrinon." (Signed) D. W. BELL FD:da:10/17/41 Regraded Unclassified 129 FOR CASADAY AMERICAN EMBASSY LONDON EROU THE SECRETARY OF THE TREASURY To facilitate the flow of supplies to Russia, the United States Treasury has agreed to buy gold from the Russian Government in advance of delivery and on this basis the Russian Government has agreed to sell thirty million dollars of gold. The British Treasury representative here has been informed about this. Will you please inform Ambassador Winant and Mr. Harriman. /huh Regraded Unclassified 130 October 17. 1941 Files Mr. Bictrich Attached is $ letter from the Federal Reserve Bank of See Test dated October 16 enclosing photostets of a letter dated Stytember an received w the Federal Receive Bank free the Stabilization Beard of China, Hong sons. which lists the - of the members of the Beard is Reglish and is Chineso characters. R FD:da:10/17/41 Regraded Unclassified : é 0 ? Y 131 FEDERAL RESERVE BANK OF NEW YORK October 16, 1941. Sir: Attention: Mr. Frank Dietrich In accordance with your telephone request, we are forwarding herewith eight photostats of a letter dated September 27, 1941, received by us from the Stabilization Board of China, Hongkong. Respectfully, /s/ D. J. Cameron D. J. Cameron, Manager, Foreign Department. The Honorable, The Secretary of the Treasury, Washington, D. C. Encs. Copy:vw:10-18-41 Regraded Unclassified + TABILIZATION BOARD OF CHINA CENTRAL BANK BUILDING CABLE ADDRESS TAOMENKOU. CHUNGKING SINOSTABO VIA AIR MAIL 27th September, 1941. Reserve Bank, 18 Are, We wish to confirm the following message which you on September 25th: IMPTEMBER 20TH SENT YOU THROUGH U.S. TREASURY POLLOWING EAGE: KEBVA LABUX EFIFS MERIA FEEGY OWBYC CULIE INHUY KAZOR - EVFYE CULIE RUMJI ETXUG GADEV XUWYX OWBYC CULIE KYHFY 157 UNQUOTE OF CHINA HAS BEEN ADVANCING "UNDS TO BOARD AND WE ARE 11003 TO RETURN AMOUNT so ADVANCED CABLE WHETHER BOARDS CUNT IS AVAILABLE (Signed) STABILIZATION BOARD OF CHINA HONGKONG BANK BUILDING HONGKONG EQUIC EDEBY Dt Yours truly, 1 MEM. STABIL Rady 02 BOARD the CE-CHINA Genera. Secreta Regraded Unclassified 133 varaphrase OF TELEGRAM RECEIVED FROM: American Embassy, Chunghing, China, via N. R. DATE: October 17, 1941, 9 a.m. NO.1 I 418. This tolegram has reference to Shanghai's telegrem No. 1472, 9 p.m., under date of the 15th of Ceteber 1941. I:am:in:demplete secord with the views of the Consul General in Shanghai. This telegram 10 being sent to the Department and 10 also besine reported to Shanghai, Ohine. GAUSS NPL SCH NT 10 11: SECURITY reque OE THE 811.51693,132 FINE P" OCL St V. 1121 Regraded Unclassified PARAPHRASE OF TELEGRAM RECEIVED 134 FROM: AMERICAN EMBASSY, ANKARA. TO: Secretary of State, Washington DATED: October 17, 1941, 7 p.m. TO.: 388 CONFIDENTIAL - NOT FOR PUBLICATION First. The exchange of goods valued at 96 million Turkish pounds, divided into two groups, is provided for in the Turkish- German commercial arrengement (comprising commercial agreement with protocol and thirteen confidential exchanges of notes, and payments agreement with confidential protocol end two exchanges of notes) which entered into force provisionally on October 9 and is to remain in force until March 31, 1943. Exchange is to be made for specific German goods c.i.f. value of 55 million Turkish pounds of which the most important are 18 million war catarials, iron and steel (i) machines, means of transport, thirty, and copper manufactures of which copper content is not to exceed 1,000 tone two point five by Turkish goods of similar value f.o.b. of which the most importent items are 10 million minerals and metals (copper, chrone "to be delivered after January 15, 1943" and antimony), olive oil, seven, cotton seven, mohair and other goets' hair six, skine five, and oleaginous seeds four point five. Tobacco 20 million, figs six point five, hazel nuts five point four, raisins three. fish two point five, and other Turkish goods to total 41 million are to be exchanged to the extent of 50% for German goods specified in first group with Regraded Unclassified -2- 135 with the exception of war material, copper manufactures and sugar beet seedi and hardware, iron and other metal manufactures and to the extent of 50% for any other sort of German goods. A confidential exchange of notes provides for a margin in each group of 10% of value of goods to be exported, although the commercial agreement stipulates that export of Turkish goods will be authorized to the value of German goods in corresponding category arriving in Turkey in customs. The meaning of this apparently is that the Germans could import from Turkey at the beginning Turkish goods in group one to the value of 5,500,000 Turkish pounds prior to the arrival in Istanbul of any German goods. Either Government may take measures necessary to restore equilibrium when the margin is exceeded according to provisions in the agreement. It was agreed in a confidential note that the Turkish Government would issue export licenses to Germany for seven thousand tons of cotton, eight thousand tons of olive oil, forty-five thousand tons of chrome and twelve thousand tons of copper. It is worthy of note in this connection that the export of copper, chrome and antimony to Germany was not authorized under the previous Turkish-German commercial agreement. There has also been an increase in the quantities of olive oil and cotton. Second. The two Governments agreed in a confidential exchange of notes, to conclude before March 31, 1943 an agreement concerning the delivery to Germany of Turkish chrome to be effected up to December 31, 1944 on the following Regraded Unclassified 136 conditions: (1) in schedule 1-A the amount of war materials specified must be entirely liquidated by delivery to Turkey of the materials in the conditions the agreement specified: (2) the two Governments will agree upon the further war materials for which chrome to be exported from Turkey will form the counter value: (3) exportation will be authorized by the Turkish Government of an annual quantity of chrome amounting to ninety thousand tons, for the periods from January 15 to December 31, 1943 and from January 1 to December 31, 1944, that is & total from the 15th of January, 1943 to the end of 1944 of one hundred and eighty thousand tons. Germany 18 to deliver to Turkey these war materials: heavy machine guns, forty relined Bochum guns, spare parts for German planes, Krupp guns 7.5/60 with sights and ammunition, Bochum guns 7.5/20 with ammunition, pontoons and engineering material spare parts for trucks and motorcycles. Third. In addition to payments arising out of commercial exchanges, the payments agreement which is similar to 1938 agreement, covers financial transfers of all sorts between the two countries. In & supplementary note provision is made for the utilization of excess blocked funds in Germany of persons residing in Turkey for the purchase by German banks for Turkish account of obligations of the Anatolian Railway, Port of Maydar Pasha and Turkish debt 1933 in circulation in Germany or in German-occupied territories. MACMURRAY Copy:hr:10-23-41. Regraded Unclassified 137 PM GRAY Berlin Dated October 17, 1941 Rec'd 6:38 p.m. Secretary of State, Washington. 3798, October 17, 2 p.m. This morning's press announcEs that in view of the fact that German funds in America are frozen, interest on dollar issues of the Dawes and Young loans will no longer bE transferred. Holders of dollar issues of American C.S WEll as non-American registry will bE paid by means of deposits to their credit at the Treuhand GESELLSCHAFT Von 133 MBH in Berlin. Special agreements in Effect will not bE affected. Details follow in air mil despatch. MORRIS. KLP TREASURY DEPARTMENT 138 INTER-OFFICE COMMUNICATION Chaundey DATE October 17, 1941 TO For Sporetary Morgenthau FROM Mr. Dietrich CONFIDENTIA Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns 544,000 Purchased from commercial concerns à 9,000 Open market sterling held steady at 4.03-1/2, and there were no reported transactions. The Canadian dollar, which closed at a discount of 11-1/4 yesterday, 1m- proved to 8 final quotation of 11% today. In New York, closing quotations for the foreign currencies listed below vere as follows: Argentine peso (free) .2360 Brazilian milreis (free) .0505 Colombian peso .5775 Mexican peso .2070 Uruguayan peso (free) .4650 Venezuelan bolivar .2670 Cuban peso 1/8% discount We purchased $1,125,000 in gold from the earmarked account of the Bank of Mexico. No new gold engagements were reported. In London, spot and forward silver were again fixed at 23-1/2d and 23-7/16d, respectively. The U. S. equivalents were 42.67$ and 42.55#. The Treasury's purchase price for foreign silver was unchanged at 35#. Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/4. We made no silver purchases today. A Regraded Unclassified 139 RESTRICTED G-2/2657-220; No. 521 M.I.D., W.D. 11:00 A.M., October 17. 1941 SITUATION REPORT I. Eastern Theater. Ground: Little definite information is available on the progress of the fighting around Moscow. Powerful German forces appear to be making steady progress. North and south of Kharkov, the slow German advance continues. The Germans claim to have established a bridgehead north of Taganrog. The Rumanian High Command states that their troops have penetrated the defense lines of Odessa. Air: German sources claim that much damage is being done against Moscow defenses during the present operations by air attacks. They also report heavy activity against Leningrad and shipping out- side Odessa. II. Western Theater, Air: Raids carried out by the R.A.F. last night were said to have been widespread, including the Ruhr Valley and the invasion port docks. German reports claim attacks on British shipping and har- bor facilities, while the British say that no bombs were actually drop- ped. III. Middle Eastern Theater. Air: Reports from both sides indicate a successful bombing by the R.A.F. of Naples. Malta and Benghazi were other objectives of the British in this theater, Ground: No significant information. RESTRICTED Regraded Unclassified 140 MEMORANDUM October 18, 1941. R The Secretary you Vr. Sullivan Mr. Buffington and I called on Chairman Doughton this morning and explained to him our purpose in sending to taxpayers the pamphlet disclosing their tax liabilities. Mr. Suffington explained the pamphlet and our objectives and the Chairman approved what we were doing. After Dr. Buffington left the room I sounded out Mr. Doughton in the question of our assimilating into the national debt and directly paranteeing the obligations of the Federal agencies, which are now only indirect obligations of the Federal Government. He was somewhat reluctant to approve it but suggested that he would think it over this weekend and call me on Monday. Senator George was in Georgia. Senator Connally was in Texas. Tenator Barkley was out of the city. Senator McNary could not be reached. I had a long conference with Senator Vandenberg who heartily reproved your contemplated action in regard to the obligations of the Federal agencies which are cuaranteed only indirectly by the Federal credit but he thought that it would be a mistake to accord the same treatment to the two billion two hundred million obligations of Federal agencies which me do not guarantee either directly 05 indirectly. As I was leaving Senator Vandenberg asked me about Social Security. I told him that I did not know what was going to be done about it. He then Irved that you vive very serious consideration to the consequences of syphoning off increased earning power through the medium of Social Security taxes Before you finally decided to do it. He said he thought that that would net the Treasury into the worst possible mess and that it would spell the and of Social Security as an insurance trust fund. Jrs Regraded Unclassified 141 Salinday-noon, 60/10/1941 Hold fivrelease REPORT ON NON-DEFENSE EXPENDITURES IN THE 1942 BUDGET Submitted by the Bureau of the Budget in Conformance With Resolution of Senate Finance Committee, Adopted on August 28, 1941 October 15, 1941 142 REPORT ON NON-DEFENSE EXPENDITURES IN THE 1942 BUDGET CONTENTS Page I. INTRODUCTION 1 II. THE PROBLEM OF REVISING NON-DEFENSE EXPENDITURES 5 A. Base Used for Revisions 5 B. Magnitude of Revisions 5 C. General Aspects of Revising Estimates 7 1. Performing Functions More Economically 8 2. Adjusting Programs to Improved Business Conditions 8 3. Curtailing or Abolishing Functions 12 D. Legal Implications of Revisions 13 III. ALLOCATION OF COMMITTEE'S REDUCTIONS 15 A. Civil Departments and Agencies 17 B. General Public Works Program 18 C. Aids to Agriculture 19 D. Aids to Youth 22 E. Work Relief 23 F. Social Security 25 Regraded Unclassified 143 APPENDICES Appendix A Resolution of Senate Finance Committee B Items Classified as "National Defense" in the Budget Documents for 1940, 1941 and 1942 and as of October 1, 1941 C Non-Defense 1942 Appropriations and Expenditures, and Hypothetical Revisions to Cut Budget Estimates of Expenditures by $1 billion, $1.5 billion and $2 billion D 1942 Non-Defense Expenditure Estimates by Type of Commitment E Chart: Income and Industrial Production F Chart: Employment and Unemployment G Chart: Prices, Cost of Living and Earnings H Reductions in Individual Programs Compared with Total Reductions K Chart: Number of Persons Receiving Work Relief 144 - 1 - I. INTRODUCTION This report is in response to the Resolution of the Senate Committee on Finance, requesting the Director of the Bureau of the Budget to supply B. revision of the estimated 1942 expenditures on the assumption of an instruction to reduce non-defense estimates by $1 billion, $1.5 billion and $2 billion respectively, and, further, to indicate changes made in the classification of defense or non-defense expenditures since the submission of the 1940 Budget. The request of the Committee is based upon provisions of the Budget and Accounting Act which direct the Bureau of the Budget to furnish aid and informa- tion to the committees of the Congress having to do with the finances of the Government. The Resolution of the Committee specifies that the Director shall submit his report by October 15, 1941. With this time limitation it obviously has been impossible to prepare the equivalent of three Budgets for 1942. An annual budget, as the Committee knows, contains one thousand pages of detail and is the product of four months of intensive hearings with every Department and agency of the Government. Since it has been impossible to employ the usual process of hearings and detailed examination of individual estimates, it must be assumed that the Committee had in mind a hypothetical approach involving a broad review of Federal programs to achieve arbitrary reductions of Regraded Unclassified 145 a , I $1 billion, $1.5 billion and $2 billion. This report is based upon such an hypothesis. The allocations of the Committee's reductions must not be considered as recommendations of the Director of the Budget for cuts in non-defense expenditures. It should be clearly kept in mind that it is the responsibility of the President alone to submit budgetary recommendations to the Congress. In preparing the report many difficulties of definition and classification have been encountered. The Committee's resolution implies that the term "non-defense expenditures" has precise meaning and that such expenditures can definitely be segregated in the Budget. In B. period of total defense effort such a segregation has little significance. Even if the interpretation of defense were restricted to military activi- ties, segregation of non-defense expenditures could not be made simply and precisely. For example, the beach patrol of the Coast Guard is paid from the same payroll as its neutrality patrol in the North Atlantic. The Tennessee Valley Authority, the Bureau of Reclamation, and the War Department are transforming peace-time water control projects to meet the power needs of defense. The Federal Trade Commission, the Inter- state Commerce Commission, and the Tariff Commission are shifting their normal programs in order to meet the demands for information essential to defense. The General Accounting Office has an enormous new load of auditing defense expenditures. The Bureau of Internal Revenue has the Regraded Unclassified 146 - 3 - job of collecting new taxes. In every department of the Government there are similar instances of the interrelation of "defense" and "non-defense" activities. Because of the magnitude of the defense portion of total current expenditures, there has been a natural tendency to lump all other expenditures under a general term "non-defense". In this approach, directness of relationship to defense effort is the primary determining factor in classification. Necessarily, this requires determinations which are arbitrary. Such determinations as have been made are set forth in a table in Appendix B in specific answer to the Committee's request. There is but one item -- U. S. Maritime Commission Ship Construction Fund included as "non-defense" in the 1940 budget and subsequently changed to a national defense classification. In summary, this report makes three arbitrary revisions of the 1942 Budget, without regard to the function of the Bureau of the Budget to estimate expenditures "necessary for the support of the Government". It is apparent that many of the indicated downward re- visions would seriously impair the defense effort and other vital Governmental activities. The normal process of budget building has not been followed. The Departments have not been consulted; no hearings have been held; and there have been no conferences with the President. In response to the request of the Committee, the Director 147 - 4 - wishes to reiterate that three arbitrary revisions of a budget prepared ten months ago should not be interpreted as recommendations with respect to the remaining months of the fiscal year 1942 or in any sense as a forecast of the President's Budget for 1943. 148 - 5 - II. THE PROBLEM OF REVISING NON-DEFENSE EXPENDITURES The Resolution of the Senate Finance Committee (See Appendix A for full text) requests detailed revisions of 1942 estimated expenditures on the assumption that the Budget Director had been instructed to reduce original 1942 appropriations by $1 billion, $1.5 billion and $2 billion. The specific request is as follows: such detailed revisions of the estimates of expenditures for the fiscal year ending June 30, 1942, as he would make if he had been instructed to prepare three budget estimates for such fiscal year in which the total annual expenditures for non-defense purposes were less by one billion dollars ($1,000,000,000), by one and one-half billion dollars ($1,500,000,000), and by two billion dollars ($2,000,000,000), respectively, than the total amounts appropriated for such non-defense purposes for such fiscal year A. Base Used for Revision The Resolution of the Senate Finance Committee does not specify the base for the requested revision. The Director of the Budget has adopted as a base the estimates of expenditure in the original 1942 budget. Estimates of expenditures rather than appropriations have been used because in many instances appropriations made for a fiscal year may be spent in future years. B. Magnitude of Revisions The significance of the $1 billion, $1.5 billion and $2 billion reductions which the Senate Finance Committee has asked the Budget Director to allocate can be easily underestimated if these Regraded Unclassified 149 - 6 - amounts are related to total expenditures for defense and non-defense of $25 billion for the fiscal year. On such B basis, a #2 billion cut amounts to 8 percent of the total expenditures. The same cut applied only to non-det'ense expenditures would amount to 30 percent. The following table illustrates the general effect of the reductions proposed by the Committee. The first column of figures shows the percentages for over-all reductions of $1 billion, $1.5 billion and $2 billion, respectively, in total non-defense expenditures of $6.6 billion for fiscal 1942. The second column gives the percent- ages if expenditures of $3,196 million that are "fixed" by contractual and legislative commitments are excluded. Such exclusions amount to almost 50 percent of all non-defense expenditures. Appendix D gives a breakdown of non-defense expenditures according to the type of commit- ments. It would not be reasonable to view all legal and legislative commitments as sacrosanct when a drastic revision of important govern- mental services is under consideration. Thus, balanced judgment would seriously question a policy of cutting sharply into such important items as expenditures for law enforcement, work relief, and the like, while leaving untouched agricultural benefits or grants-in-aid for Federal highways because they are based on prior commitments. For these reasons the third column of the table gives the percentage reductions if the exclusions of fixed commitments are 150 - 7 - limited to an amount of $2,094 million for interest on the public debt, veterans' pensions, and the other commitments enumerated in the footnote. Percentage Reductions Required to Lower All or Part of Estimated 1942 Non-Defense Expenditures by $1 Billion, $1.5 Billion and $2 Billion Reduction Reduction Pased on Non-Defense Over-all Based on All Expenditures after Excluding: Reduction Non-Defense All Fixed Certain Fixed of Expenditures Commitments Commitments * $1.0 Billion 15% 30% 22% $1.5 Billion 23% 44% 33% $2.0 Billion 30% 59% 44% These percentages indicate the drastic nature of the over-all reductions of $1 billion, $1.5 billion and $2 billion posed by the Senate Finance Committee. Because of their magnitude, the Budget Director in distributing the over-all reductions among Federal programs, has assumed that certain changes will be made in legislative and other commitments. C. General Aspects of Revising Estimates In arriving at the hypothetical revisions of estimates which are presented in the following section of this report, certain general considerations are relevant. In general, there are three major approaches to budget reduction: * The fixed commitments excluded are interest on the public debt, veterans' pensions and insurance, transfers to trust accounts, refunds, the Federal contribution to the District of Columbia, and legislative and judicial establishments. 151 - 8 - 1. By performing functions in a more economical manner through improvements in administrative management; 2. By reducing economic and social aid programs to adjust for improved business conditions; 3. By curtailing or eliminating functions. 1. Performing Functions More Economically The Bureau of the Budget and the various departments and agencies continuously study organization and procedures in order to evolve more efficient and economical administration. Constant effort is made to eliminate duplication and overlapping of functions. Reductions in expenditures from further improvements in government machinery will at best contribute in minor degree to any major budgetary revision. Moreover, they may require considerable time to become effective. In many cases improved administrative management is reflected in the ability to carry an increased work load rather than in a reduction of expenditures. 2. Adjusting Programs to Improved Business Conditions (a) Improvement in production, employment and income. Employment and income have increased markedly during the past year. This increase has been even more rapid than was expected a year ago because it has been necessary to expand and accelerate the defense effort. Hence Regraded Unclassified 152 - 9 - the expenditures for certain programs will be lower than was planned in the President's budget for the current fiscal year. The revisions in this report are based on the assumption that the intensification of economic. activities could have been foreseen last December when the original estimates were formulated, and would have been fully effective throughout the fiscal year. Various charts which picture the improvement in economic activities are attached (Appendices E and F). Appendix E shows the increase in agricultural incomes. Enlarged sales and increased prices brought higher farm receipts. Because of this favorable development, reductions of total payments for farm aid are incorporated in the over- all reduction programs requested by the Senate Finance Committee. General statistics showing improvement in income and production are, however, somewhat deceptive guides for the revision of estimates. The improvement of income and employment conditions is largely due to the tremendous increase in defense production. Various parts of the country, various groups of farmers, and various groups of labor are differently affected by the defense effort. Defense "prosperity" is spotty in its effects. There exist side by side scarcities for some types of labor, and unemployment for other types; scarcities of some farm products, and excesses of others; boom conditions in certain regions, and slack conditions in others. Therefore, an improvement in agricultural or employment conditions would not necessarily justify a corresponding reduction in farm or relief programs. 153 - 10 - (b) Continuous adjustment to changing conditions. If, in December of 1940, the improvement in business conditions could have been fully foreseen, smaller appropriations for the economic and social programs would have been recommended. This improvement has been cap- tured in the process of budget administration. Although the budget document is only submitted once a year to the Congress, its execution is revised constantly. Budget execution is a continuous economy drive. The President's recommendation to the Congress in May of 1941 for the WPA appropriation for the current fiscal year was $109 million below the estimate in the original budget document. The lower figure contemplated that average WPA employment would be 23 percent below the average on which the original budget estimate was based. The Administration can, within certain limits, adjust current expenditures to changing needs. In apportioning available funds a certain portion of the appropriations may be placed in reserve if it is believed that a. department or agency has appropriations in excess of actual needs. This reserve is withheld until the department or agency can demonstrate that the money is essential to its program. For the fiscal year 1942 reserves of $450 million have been established. This unusually large amount appears possible in the light of improved business conditions. A larger reserve could not be estab- lished at this time without a revision of the functions and programs which are the result of Congressional enactments. Regraded Unclassified 154 - 11 - Even if intense economic activity persists throughout the present fiscal year, the lowest of the three hypothetical figures requested by the Committee implies curtailment of government functions. (c) Price and wage increases. During the last year not only production, employment and income, but also prices and wages have increased. While an improvement in economic activities permits the reduction of certain expenditures, price and wage advances may cause & rise in other items. The considerable increases in prices and wages during the last year are indicated by the chart in Appendix G. In the downward revision of estimates, the possible effect of price increases upon government expenditures has been disregarded. First of all, price increases affect defense expenditures much more than non-defense ex- penditures. About 90 percent of defense costs are for weapons of all kinds, food, equipment, and construction, which are immediately affected by price rises. In contrast, only about 10 percent of non-defense ex- penditures are for direct purchase of material and equipment which are immediately affected by price increases. Some other items, such as rents and service contracts, will eventually be affected by price increases, but the direct effects in this field are not yet of great significance. The effects of future price developments must be borne in mind. If higher costs of living cause an increase in wages and salaries, Regraded Unclassified 155 - 12 - a substantial rise in non-defense expenditures will take place. Thus, it is likely that a part of the economies which are now possible are only temporary and may subsequently be offset by increasing costs due to higher prices. 3. Curtailing or Abolishing Functions All three proposals for reductions involve curtailment or abolition of some functions of government. In judging relative urgency of functions it is inevitable that the following factors be taken into consideration: (a) Defense implications. Many expenditures of defense importance are included in the so-called non-defense classification. All government functions have more or less direct relationship to defense in an era of total war and total defense. In many cases this relation- ship is so close that curtailment of the activity of & regular department would necessitate reestablishing the same functions, possibly at a higher cost, as an activity in some new defense agency. Numerous examples could be cited. On the other hand, it must be recognized that every possible curtailment of non-defense use of labor and material that is needed for defense must be effected. Postponement of non-defense construction may be a definite contribution to national defense. This is a factor of prime importance in any budget readjustment. Regraded Unclassified 156 - 13 - (b) Post-defense aspects. Preparedness for the post-defense period is an integral part of the whole program for the defense of democ- racy. During the last decade experiments were made and governmental policies and instruments were developed for an effective fight against depressions. It is essential to preserve and improve these instruments so that they may be available for immediate use in the post-defense period. It must also be assumed that the normal functioning of the government and the execution and enforcement of laws must be maintained. It would, for example, be utter waste to wreck the machinery for law enforcement now only to rebuild it later. The damage done to the well- developed operating machinery would be entirely out of proportion to the immediate saving. Abolition of an agency would be preferable to a drastic reduction which would leave an inefficient and demoralized organization. D. Legal Implications of Revisions The President emphasized in the Budget Message of January, 1941, that almost half of non-defense expenditures are for so-called "fixed commitments". These fixed commitments include contractual and legislative commitments such as the payment of interest, pensions, transfers to trust accounts and legislative commitments which cannot be changed without amendment or repeal of statutes. In many cases, Regraded Unclassified 157 - 14 - especially with respect to highway grants to State governments, commitments are made a year or more in advance and curtailments could not become effective immediately without breach of prior commitments. Although an effort has been made to minimize the legislative changes implied in the revisions of this report, the major revisions could not be made without many such changes. Regraded 158 - 15 - - III. ALLOCATION OF COMMITTEE'S REDUCTIONS In allocating the hypothetical reductions requested by the Senate Finance Committee, the Director of the Budget was guided by the principles set forth in the preceding section, although different weight can be given to the various criteria. It must be emphasized, however, that the reductions discussed in this report are in no sense a product of the normal budgetary process of request, review, and recommendation. The normal budget process could not be followed within the framework of the Senate Finance Committee request. Reductions pre- sented in this study have not been discussed with the agencies af- fected nor do they reflect the policy of the administration. They serve only as illustrations of a possible distribution of the over- all reductions, required by the Committee, among the different government agencies and programs. To facilitate an understanding of the revisions by major types of activities, a summary table of percentage reductions is presented on the next page. The amounts of expenditures on which the percentages are based are shown in Appendix C. Another table, Appendix H, indi- cates the ratio of the three over-all reductions which has been al- located to each agency and program. The following text discusses most of the major groups of govern- mental activities shown on the accompanying full page table. Regraded Unclassified 159 - 16 - REVISIONS OF ESTIMATED EXPENDITURES REQUIRED BY REDUCTIONS OF $1 BILLION, $1.5 BILLION AND $2 BILLION SPECIFIED BY SENATE FINANCE COMMITTEE* Activity Estimated Percentage Reductions to Achieve Total Cut of (Current Expenditures $1 Billion $1.5 Billion $2 Billion Classification) in 1942 Budget Per Cent Per Cent Per Cent (In Millions) Legislative, Judicial & $41 0 0 o Executive Civil Departments and Agencies 833 9.4 12.4 16.0 General Public Works Program 533 10.3 16.1 19.9 Veterans' Pensions and Benefits 564 2.1 2.3 2.5 Aids to Agriculture 1,061 28.6 44.1 45.5 Aids to Youth 363 51.0 67.5 94.8 Social Security 463 0.6 1.3 11.0 Work Relief 1,034 31.6 49.3 73.9 Refunds 89 o 0 0 Interest on Public Debt 1,225 0 0 0 Transfers to Trust Accounts 275 4.4 6.9 10.9 Supplemental Items- Regular 100 25.0 50.0 75.0 Total, excluding debt retirement $6,581 15.2 22.8 30.4 * These revisions reflect allocations of the total reductions posed by the Senate Finance Committee, and are not to be considered as recommendations of the Director of the Budget. 160 - 17 - A. Civil Departments and Agencies To achieve over-all reductions of $1 billion, $1.5 billion, and $2 billion, outs of 9, 12 and 16 percent, respectively, of irigi- nal estimates of 1942 expenditures have been allocated to the general category of civil departments and agencies. Related expenditures for these services do not become less urgent because of improved business conditions. Moreover, it must be remembered that many of the func- tions have direct and immediate importance for defense although they are included in the so-called non-defense operations of the Govern- ment. Practically all Government agencies have reoriented their 80- called non-defense activities to do their part in the defense program. In many cases, this adjustment has occurred without special defense appropriations or defense reimbursements. The Census Bureau, for instance, supplies information essential to many defense agencies. This work imposes 6. heavy additional burden which it has been possible for that Bureau to assume only by reduction of other activities. The work of the Bureau of Internal Revenue is another example of a "non-defense" agency which has a greatly increased work load. Reductions which have been applied to the expenditures of many of the independent offices and commissions would require postponing or restricting established regulatory activities-as in the case of the Federal Communications Commission, Federal Trade Commission, Securities and Exchange Commission and the Interstate Commerce Commission. Other reductions would necessitate greatly decreasing the number of services Regraded Unclassified 161 - 18 - supplied both to the Government and to the public at large by such agencies as the Bureau of Standards and the Coast and Geodetic Survey. The postponement of maintenance work on rivers and harbors would in- crease expenditures in future years. The Post Office Department showed an estimated deficit of $51 million in the budget document submitted last January. Because post office business has exceeded expectations, the deficit will be smaller than anticipated. If the postal deficit were to be erased, it would be necessary to raise postal rates or reduce services to the public. With the increasing demand resulting from present busi- ness conditions, the latter course is difficult. Nevertheless, the $2 billion over-all cut might well require the elimination of the postal deficit. B. General Public Works Program. The General Public Works Program would be cut 10, 16 and 20 percent, respectively, under the three reductions proposed by the Senate Finance Committee. In the original 1942 budget, public works expenditures were cut 10 percent below the estimated expenditures for the fiscal year 1941. From the point of view of non-defense work the cut was even greater because of a shift to large power and other projects essen- tial to the defense effort. Subsequent to presentation of the budget, it became necessary to request additional appropriations for important public works projects Regraded Unclassified 162 - 19 - such as new power projects under the Tennessee Valley Authority and the Department of the Interior. These projects are classed as "non-defense" expenditures, although they obviously spring directly out of the defense program. Reclamation, river and harbor, and public building projects, not directly related to defense but already under way, were con- tinued when stoppage would have meant waste. Their rate of construc- tion is now being spread over a longer period of time than originally planned. No new public works other than those vital for defense are planned for the current fiscal year. A big item in the public works program is the grants to states for Federal highways. These expenditures, to a large extent, reimburse states for the cost of work authorized and entered upon in the previous year. A reduction in the 1942 estimates for this function would be in conflict with legislative commitments. Given all these circumstances, a further reduction in public worksis practically impossible without curtailing works essential for defense or breaking legislative commitments. Application of the percentages of reduction mentioned in the opening paragraph of this section would require elimination of items such as the appropriations for public land highways, many activities of the TVA, and the prepara- tion of projects which may be essential in a post-defense period. C. Aids to Agriculture Of the $1 billion, $1.5 billion, and $2 billion cuts, the Regraded Unclassified 163 - 20 - tabulation shows that the Agricultural Aid programs would have to contribute 29, 44 and 46 percent, respectively, of their original budget estimates. The original 1942 estimates were slightly below those for the preceding year. The war in its initial period affected various sectors of American agriculture in very diverse ways. Certain groups of farmers faced increasing difficulties because of the loss of foreign markets while other groups benefited from improved domestic conditions. In December of 1940, when the original program for 1942 was formulated, a small reduction in outlays for farm aid appeared reasonable. Congress, however, went beyond the President's recommendations. In recent months the agricultural situation has shown a marked improvement as compared with conditions at the end of 1940. Influenced by further increases in domestic purchasing power and to an even greater extent by large scale food purchases for Great Britain, farm incomes have risen rapidly (see Appendix E). General improvement in farm conditions, extending to almost all types of farmers, will permit a substantial reduction of Government aid at some future time. The words "future time" are used because there is a considerable interval between the time when farm conditions improve and the date when reduction in farm aid payments is possible. Parity pay ments are intended to make up for the disparity between the farm prices of the preceding year and the parity prices of the same period. In other words, the amount of payments made in fiscal 1942 depends largely Regraded Unclassified 164 - 21 - on farm conditions which existed in the calendar year 1940. Likewise, payments for conservation and use of agricultural land resources cannot be suddenly curtailed without repudiating moral obligations. The Department of Agriculture announces its program in the fall so that the farmer can decide whether or not he intends to participate in the program for the ensuing crop year. Thus, in the late fall of 1940 payment rates for participating in the 1941 crop program were announced. These payments, in turn, will be made out of funds provided by 1942 appropriations. In order to achieve curtailments of the magnitude indicated above, parity payments have been reduced by $50 million. Payments for soil conservation have also been decreased by $100 million in the first, and $250 million in the second and third of the hypothetical cuts. The second and third reductions might have far-reaching economic consequences. It must be remembered that the Agricultural Adjustment program now aims at planned increases in production of many commodities as well as curtailments in those crops which contribute heavily to our major surpluses. It is possible that a sharp reduction of this program would cost consumers more in the form of higher prices than it would relieve tax burdens. This considera- tion does not preclude, of course, the possibility that a lesser re- duction in outlays may be feasible without impairing the fundamental objectives of the program. Regraded Unclassified 165 - 22 - In order to attain the total reductions it was also necessary in each case to eliminate the annual appropriation for the disposal of surplus commodities--$100 million in the original budget estimate and $125 million in the actual appropriation. In all three revisions a separate $100 million permanent appropriation was left untouched. This is an amount equal to the 30 percent of customs revenue which is permanently allocated to the Disposal of Surplus Commodities and mainly used for financing the stamp plan and similar projects. Elimination of the annual appropriation means, therefore, at curtailment of the funds available for the stamp plan, free school lunches, etc., by one-half of the original estimates for 1942. In making such a revision it should be emphasized that these programs have proved to be highly beneficial in improving the diet of low income groups among our citizens. The revisions for agriculture show only a slight increase under the $2 billion cut, as compared with the $1.5 billion cut. A further reduction would compel either repudiation of the commitments made for parity payments or a change in the law permanently allocating an amount equal to 30 percent of customs revenue to agricultural sid. Otherwise the only other alternative would be disruption of the ma- chinery developed for agricultural adjustment. D. Aids to Youth To achieve the three over-all cuts, reductions of 51, 68 and 95 percent, have been indicated for the youth program. Regraded Unclassified 166 - 23 - A substantial contraction of the CCC and NYA programs is already under way. Employment opportunities for youth have increased to such an extent that the number of enrollees is decreasing. (See Appendix K). This development has been taken into account in the reserve established for 1942. There still remains a body of American youth for whom these programs provide worthwhile training and healthful activities. In the larger perspective of national defense this work is not without sig- nificance. Certainly there can be little doubt that some sort of youth program will be necessary in the post-defense period. It would be costly to wreck existing organization which may be urgently needed later. E. Work Relief The original budget estimate for work relief in 1942 was 29 percent below the expenditures of the preceding year. Subsequently the President recommended a further cut of about 10 percent in view of increased employment. (See Appendices F and K). To achieve the over-all cuts posed by the Senate Committee work relief expenditures were reduced by 32, 49, and 74 percent of the original estimates. In considering such further curtailment of work relief, it must be remembered that the defense program has not affected certain types of workers and certain regions of the country. There are groups of people who are employable but who have great Regraded Inclassified 167 - 24 - difficulty in finding employment even in a tight labor market because their technical or other abilities do not fit the qualifications for the available employment. Many such people are now producing useful work on public programs. The defense program is expected to absorb additional millions of persons, but it is probable that, temporarily at least, increasing defense employment will be wholly or partly offset by rising dismis- sals in the consumer goods industries which are forced to lower pro- duction because of the lack of material, machinery, transportation facilities or skilled labor. While most of these people will be eligible for unemployment compensation, needy persons who exhaust their rights before new work is found will be eligible for WPA employ- ment. It also must be understood that 32 percent of present WPA workers and 38 percent of WPA expenditures are for defense projects. Whether WPA is or is not the most appropriate agency for such defense work, the fact remains that elimination of such WPA defense projects would necessitate the work being done by some other agency. A major reduction in work relief may increase the number of general relief cases which must be taken care of by state and local governments. The question whether or not such a development is de- sirable is related to the whole problem of Federal-state-local fis- cal relations. Under the $2 billion reduction program, about three-fourths of work relief expenditures has been eliminated. Regraded Unclassified 168 - 25 - F. Social Security Reductions allocated to Social Security programs are relatively minor-$3 million, $6 million, and $51 million, respectively, for the three cuts of $1 billion, $1.5 billion, and $2 billion. The 1942 budget provides for a 4 percent increase in Social Security expenditures over the preceding year. The increase is caused primarily by additions to federal grants necessary to match state pay- ments to a rising number of aged persons and to match state payments for increased assistance to dependent children. The Social Security public assistance programs are not related to defense, but are part of the declared long-range policy of the Congress to aid the helpless indigent. The payments do not directly reduce either labor or materials available for defense. Like any income payment, assistance payments may contribute to the inflationary pressure through making more funds available which the recipients can spend. But by providing a minimum income to people on the bottom of the income pyramid, such payments create purchasing power which is used primarily for goods and services that are neither scarce nor compete with defense. ***** In allocating the Committee's reductions this report has pre- cluded revisions of certain fixed commitments such as debt service; minimized reductions involving legislative changes; and avoided re- ductions which would disrupt law enforcement and other essential op- erations of the Government. Regraded Unclassified 169 - 26 - Under this approach, those social and economic programs which are not fixed by legal commitments, must bear the brunt of any major reductions. A substantially different result is obtainable only if the ap- proach is changed. If, for instance, to make a $2 billion reduction, veterans' pensions were cut, debt service reduced, and Federal grants- in-aid curtailed, then it would be possible to preserve a substantial part of the social and economic programs. Still other aproaches to allocation of reductions are possible. This report presents one schedule of revisions based on the Resolution of the Committee.