Volume 473, December 14 – December 16, 1941

DIARY Book 473 December 14 - 16, 1941 Regraded Unclassified Book Page Africa, South, Union of Gold mines - equipment for discussed in HMJr-Reid (Chairman, South African Purchasing Commission) correspondence - 12/15/41 473 217,233 a) Eccles-HMJr correspondence concerning - 12/20/41: See Book 175, page 269 Gold mines - Close's (Minister of Legation, Washington) letter: Book 481, page 334 - 1/3/42 Nelson's letter on exportation of gold mining equipment: Book 483, page 297 Airplanes Shipment to British Forces - Kanerck report - 12/16/41 373 Shipments, week ending December 16, 1941 - British Air Commission report 377 Anslinger, Harry See Appointments end Resignations Appointments and Resignations (Anelinger, Harry ( a) HMJr agrees: Book 477, page 106 - 12/23/41 (Friedman, Mrs. Elizabeth S. (Cryptanalysis Specialist) Cocrdinator of Information discusses assignments - 12/15/41 37,52 Landis, James M.: HAJr again consults Senator Walsh (Nassachusetts) concerning endorsement for Under Secretaryship of Treasury - 12/16/41 286 a) HMJr-Walsh conversation reported to Landis - 12/18/41: Book 474, page 126 b) Walah-HMJr conversation - 12/19/41: Book 475, page 30 c) HMJr-Barkley conversation - 12/22/41: Book 476, pages 1 and 117 a) HMJr-Landis conversation - 12/22/41: Book 476, page 77 e) McCornack-HMJr conversation - 12/22/41: Book 476, page 142 f) Mayor Tobin (Boston)-HMJr conversation - 12/23/41: Book 477, page 12 g) Walsh refuses cooperation - 12/27/41: Book 478, page 228 h) Barkley-HMJr conversation - 12/29/41: Book 479, page 98 1) George-HMJr conversation - 12/30/41: Book 480, page 2 3) Gose with Office of Civilien Defense at FDR's request - 1/6/421 Book 482, page 128 Argentina See Latin America - B - Business Conditions Haae memorandum on situation, week ending December 13, 1941 104 Regraded Unclassified - 0 - Book Page Coast Guard Distinguished Flying Crosses presented to pilot and crew of plane which crashed with HMJr as passenger - 12/15/41 473 180 (See also Book 478, page 75 - 12/26/41) Coudenhove-Kalergi, Count R. N. Offensive theory of winning war reported to FDR - 12/16/41 365 Krika (stepdaughter): Secretary of Labor Perkine asked to arrange for labor permit - 12/16/41 371 a) HMJr's note announcing approval: book 477, page 312 - 12/24/41 - D - Disney, Walt See Revenue Revision: Mickey House film - & - Eire Commodity exports reported to Donovan (Coordinator of Information) - 12/15/41 243 Exchange Market Resume's - 12/15-16/41 260,400 Export Control Exports to Russia, China, Burma, Hong Kong, Japan, France, and other blocked countries, week ending December 6, 1941 - White report 358 - F - Federal Bureau of Investigation Investigations of Treasury personnel to be made in Treasury Building during office hours - 12/15/41.. 21 Federal Reserve System For discussion of legislation to amend Federal Reserve Act, see Financing, Government Financing, Government Legislation to amend Federal Reserve Act 80 that Treasury could sell its securites directly to Federal Reserve Banks rather then going through open market, discussed by HMJr, Eccles, Morris, and Bell - 12/15/41 80,82 Non-defense Economies: See also Book 458 Meeting: HMJr, Bell, and Heffelfinger represent Treasury - - 12/16/41 290 Meeting: Bell and Heffelfinger represent Treasury: Book 474, page 31 - 12/17/41 Meeting: Bell and Heffelfinger represent Treasury: Book 474, page 159 - 12/18/41 a) Draft of proposed Bell report: Book 474, page 173 Regraded Unclassified - 1- (Continued) Book. Page Financing, Government (Continued) Non-defense Economies (Continued): Wickard told by Hill of suggestion that he (Wickard) be asked to testify concerning his own department: See Book 475, page 75 - 12/19/41 Report to be signed by HMJr subject to disagreement on Agriculture recommendations: Book 476, page 136 - 12/22/41 a) Preliminary report: Book 477, page 301 b) Elimination of publicity paragraph and paragraph thanking HMJr for assistance - see Bell memorandum: Book 478, page 23 - 12/26/41 Defense Savings Bonds: Fredericksburg, Virginia: Report on radio program - 12/15/41 473 186 (Iturbi, Jose (Lehmann, Lotte Offer services - 12/16/41 322,324 Foreign language press and radio effort reported to Mellett - 12/16/41 326 Foreign Funds Control Japan: Resume' of action taken since December 7, 1941, reported to American Embasay, Chungking, for Stabilization Board - 12/16/41 379 Latin America: Blocking of German and Italian funds as in case of Japanese funds discussed in Latin America cables in response to Treasury request - 12/16/41 386 (See also Book 474, page 228 - 12/18/41) Fredericksburg, Virginia See Financing, Government: Defense Savings Bonds Friedman, Mrs. Elizabeth S. (Cryptanalysis Specialist) See Appointments and Resignations - G - Gold Gold Mining Equipment: See Africa, South, Union of - I - Ireland See Eire Iturbi, Jose See Financing, Government: Defense Savings Bonds - J - Japan See also Foreign Funds Control Petroleum; Iron and Steel Scrap: Summary of exports to Japan since 1937 212 Regraded Unclassified - L - Book Page Landis, James M. See Appointments and Resignations Latin America See Foreign Funds Control Argentina: Financial position resume' provided by Washington Embasey - 12/15/41 473 248 Lehmann, Lotte See Financing, Government: Defense Savings Bonde - M - Mickey Mouse film See Revenue Revision Military Reports SS PRINCE OF WALES and SS REPULSE - lose of reported - 12/15/41 241 Reports from London transmitted by Halifax - 12/15-16/41 263,267,401 "Report from Hamburg" - Coordinator of Information report - 12/16/41 408 "Outline of World Military Situation (based on conferences with Military Intelligence) - Kamarck report - 12/18/41 415 Morgenthau, Henry. Jr. Distinguished Flying Crosses presented to pilot and crew of plane which crashed with HMJr All passenger - 12/15/41 180 (See also Book 478, page 75 - 12/26/41) - P - Philippine Islands Public relief and civilian protection funds: Quezon bege FDR to arrange - 12/15/41 139 a) HMJr-Foley conversation 140 b) Interior arranging for $10 million 143 Procurement Division Non-military purchases, coordination of: Discussion at HMJr's home by HMJr, Mack, and MacKeachie (Office of Production Management) - 12/15/41 177 - R - Revenue Revision Nickey Mouse film (Walt Disney): Possibility of discussed at 9:30 meeting - 12/15/41 28 "How to File Your Income Tax the Simple Way": Pamphlet discussed in Buffington memorandum - 12/16/41 307 Regraded Unclassified - S - Book Page Security Markets Current developments; effect of the war on prices of two new bond issues - Haas memorandum - 12/15/41 473 100 Speeches by HMJr Defense Savings Organization, Chicago, December 17, 1941: Draft 1 - 12/15/41 1 If 2 - 12/16/41 144 Reading copy - 12/17/41: Book 474, page 1 a) Cable to London: Book 474, pages 19 and 20 Stabilization Fund, Inter-Allied HMJr asks White to study possibilities of - 12/15/41 16 Statements by HMJr On Treasury appropriation - draft - 12/16/41 296 - if - White House Procedure set up for duplicate copies of papers submitted for FDR's approval or signature - 12/16/41 362 Regraded Unclassified Sunday, December 14, 1941. 1 Taken to the Secretary's house Mr. Kuhn, at 11 a. m. DRAFT OF SECRETARY MORGENTHAU'S SPEECH TO THE DEFENSE SAVINGS ORGANIZATION 2 AT CHICAGO, DECEMBER 17, 1941 Every one of us must be conscious today of a clearer vision and a deeper understanding than we had two weeks ago. We have had a shock, and we are wiser and stronger for having had it. The bombs on Pearl Harbor have destroyed much more than what the censors would call "military objectives". They have ripped our complacency to shreds. They have blasted the old comfortable belief that the wide oceans could save us from harm. They have blown away the notion that brutality and deceit and murder in another part of the world was of no concern to us in ours. We now know, or ought to know, that this whole world struggle is "our war" just as much 8.8 it was to the people of Warsaw in 1939, or to the people of Rotterdam or London Regraded Unclassified - 2 - 3 in 1940, or to the people of Athens and Moscow in 1941. We now know, or ought to know, that there can be no half way method of fighting an attempt to dominate the world. We now know, or ought to know, that this total war will require total effort on our part, with everything that we have and everything we are, with all our resources pledged to final and decisive victory. We in this room have been working hard for many months to mobilize our financial resources in the form of people's savings. But we have, I think, done more than that. Since the very inception of the Defense Savings program, it has been one of our major objectives to give the American people B. sense of their own direct and ines- capable involvement in this great battle for our way of Regraded Unclassified - 3 - 4 life. We have tried to make them realize that they were not isolated and could not be isolated from 8 struggle that would shape the future of everyone on this planet. We have tried to give the American people a greater sense of pride in their own country and a greater awareness of the dangers that face them. We have tried to give every man, woman and child in this country a sense of direct participation in its defense, 8. feeling that there is something for everyone to do in 8. great effort from which everyone will benefit in the end. Looking back over the past eight months, I think we can all be proud of what has been accomplished. I believe in all sincerity that the devoted work of the D-A Regraded Unclassified - 3 - 4 life. We have tried to make them realize that they were not isolated and could not be isolated from a struggle that would shape the future of everyone on this planet. We have tried to give the American people a greater sense of pride in their own country and a greater awareness of the dangers that face them. We have tried to give every man, woman and child in this country a sense of direct participation in its defense, a feeling that there is something for everyone to do in a great effort from which everyone will benefit in the end. Looking back over the past eight months, I think we can all be proud of what has been accomplished. I believe in all sincerity that the devoted work of the D-A - 4 - 5 Defense Savings staff and all our thousands of volunteer workers throughout the country has helped immeasurably to crystallize American opinion. I believe that the response to the bombs at Pearl Harbor was deep and wide and immediate partly because of our groundwork in the Defense Savings program. We have given to millions a new sense of being partners of their Government, of having a direct share in America and in American freedoms. To me, it is an achievement of far greater proportions than the raising of the more than 2 billion dollars which have rolled into the Treasury since the Defense Bonds first went on sale in May. Now that the groundwork has been laid, it is up to us to follow through, and that is the main purpose of - 5 - 6 my being here with you today. We must follow through, not only in terms of a few million individuals or a couple of billion dollars, but by 8. determined effort to reach every individual in this country. For total wars in these days are wars involving whole peoples. There is no exemption for any group or any section. Hitler and the Japanese make no exceptions in their conquests. The bombs that fell at Pearl Harbor were aimed straight at every one of us, and whatever Hitler may attempt in the Atlantic will be aimed at every one of us. We are all in this war together and we, the people, have as important a part to play as if we were manning a bombing plane or firing a gun from the deck of a battleship. - 6 - ? There is no need for me to go over the details which you have been discussing since yesterday morning. Our problem is one of financing the enormously expanding cost of the war while avoiding the immense and dangerous evils of inflation. I have said in this city, in B. talk to the American Bankers Association, that we were in reality fighting two wars -- one, the great struggle on all the continents and all the oceans, and the other the war against an insidious enemy here at home. That enemy is inflation. It creeps up on us as stealthily as 8. thief in the dark. As the President has said, inflation is 8. form of taxation that takes no account of the ability to pay and strikes directly at the American standard of life. Our problem, therefore, is 8. double one, and in this renewed and redoubled effort to which we of the Defense Regraded Unclassified - 7 - 8 Savings staff must now dedicate ourselves, we must make sure that we deal effectively with both enemies. For that reason, it seems to me, our major effort now must be directed at those in all walks of life who are in receipt of regular pay from wages and salaries. The fuel of inflation is current income, rather than the money that now rests in the vaults of savings banks. It may seem heartless to speak of excess spending, but there is such a thing and I mean by it spending in the face of a limited and dwindling supply of goods. The most effective course for us, as we have known from the very beginning has been to enlist current income and to divert excess spending, to persuade our people to set aside a part of their pay every pay day in Defense Bonds and Stamps. Let's now make every pay day Bond Day. And when I speak of - 8 - 9 regular investment every pay day, I am speaking not only of the millions of factory workers, not only the teachers and accountants, the clerks and civic employees who live on regular salaries, but also the farmers who are earning solid incomes for the first time in many years and who will be the first to suffer if we allow inflation to get out of hand. All these are the people we must reach, with 8. determined effort that will have an impact in Berlin and Rome and Tokyo, an effort that will give new heart and courage to the free peoples who are fighting on our side everywhere. I have been asked many times whether we have a goal, 8. quota for the United States. I have always avoided answering with a money figure because such & goal would D-A Regraded Unclassified - 9 - 10 have no significance. But I will tell you now what my goal is, what our goal for the next three months shall be and must be. It is to reach every single recipient of regular current income in the United States, and to have every one of these 35 million people setting aside some part of their pay regularly by the first of March. And when I say "setting aside", I do not mean merely a token contribution. I mean 8. real investment, the very limit that each person can afford without actually taking food and other necessities from himself and his family. I have given you a broad objective in terms of a three months effort. Now I should like to set for you a supplementary goal in terms of immediate effort -- 8. goal that must be attained this month if it is to be attained at all. As we say at the Treasury, this is - 10- 11 a "must" -- the first "must" that you have ever had from me. That is to see that every single Christmas bonus that is paid to individuals in your States and in your communities shall be invested this month in Defense Savings Bonds. I do not know how many thousands of individuals will receive bonuses at the end of this busy and prosperous year. But I do know that every dollar of such additional income must be set aside, firstly in the interest of the country, which needs those dollars urgently, but also in the interest of those who will need just that additional security when the war is over. There is not much time; Christmas is only a week off, but even one week is time enough if all of you set to work on this immediate problem the moment you return to your home States. Regraded Unclassified - 11 - 12 When this meeting ends, I hope that this organization will set to work in every State and every community in the United States, with the same devotion and determination that is now being shown by the men in our fighting forces. I have complete confidence in the ability of this great group to exceed both the goals I have set for you today. We have been more than fortunate in the men and women who have rallied to our help since the first of May in all parts of the country. It has been a truly thrilling experience for me as Secretary of the Treasury to see the superb cooperation we have had from labor and industry, from Republicans and Democrats, from foreign- born and American-born, from all the assorted groups and nationalities of which this united American people is composed. - 12 - 13 I am genuinely glad to 866 all our State leaders assembled here in one room, and to thank them on behalf of their Government for the work they have already done. Now that the greater and more insistent call has come, we are ready to meet it. Our organization has been set up, our people are hard at work, our country knows what Defense Bonds are and what they do. It is up to all of us now to spring into action in this great front line of freedom which is the United States of America. The men who are fighting at this moment on lonely islands in the Pacific are looking to us to supply them with the planes and guns they need. The whole country is looking to us, right here in this room, to raise billions of dollars 80 that our war effort shall not fail. Our allies in all continents, who have fought for A - 13 - 14 more than two years, are looking to us, and also the oppressed peoples in the conquered lands who are now living in a darkness that only we can end -- they, too, are looking to us. It is by far the greatest test and the grandest opportunity that has ever come to our country. We in this room must prove ourselves worthy of that opportunity. As Winston Churchill told his own people last year at a moment of supreme crisis, let us so bear ourselves that if the United States should last for a thousand years, men will still say "this was their finest hour". 15 RESTRICTED 0-2/2-17-220; No. 569 M.I.D., W.D. 11:00 A.M., December 14, 1941 SITUATION REPORT 1. Puolfic Theater. Wake Island: The havy reports further air sttacke on Wake yesterday. Two Jayanese bombers were abot down and several were caid to have been damaged by antiaircraft fire. Malays: A confidential press release announced this morning that heavy fighting continued in North Malaya today as British ground and air forces sought to dislodge inveding Japanese troops which have gained a foothold on both sides of the peninsula Sharp action le reported in the Zeliah APAR (northweat coset of Malayal and in the Kelantan area (Northeast coant) with no indication of the ture the fight is taking. Philippines: Continued fighting in Aparri, Visan. and Legnapi areas. The preas reports that Japanouse bombors Mew at a high sititude over Manila last night without dropping any bombo Hawali, No further reports received. Thailand: The R.A.F. raided the airdrome at Singora (southeast coant) on the 12th. Resulto unknown. Il. Eastern Theator. Germans appear to be continuing the withdrawsl from the salients north erid south of Moscov. The Suanjens claim to have captured Volkhovo (90 miles southeast of Leningrad) and, east of arel, the towns of Tefremov and Livny III. Western Thoator. No Further reports have been received. IV- Libyan Theater Ground: British mobile columna are nontinuing Flanking operations avainst Axio forcen nolcing lines atmatching 40 milsa into the desert from Garala. Air: The Gorman High Command stated that German and Italian righter planes had destroyed 15 British alance in this area. RESTRICTED Regraded Unclassified 16 December 15, 1941. NOTE FOR THE SECRETARY'S RECORD Secretary Morgenthau telephoned Mr. White at 10:00 a.m. Sunday, December 14, and asked him to think about and prepare a memorandum and plan for setting up an Inter-Allied Stabilization Fund. The Secretary had in mind a Fund to be used (1) during the war to give monetary aid to actual and potential allies and to hamper the enemy; (2) to provide the basis for post- war international monetary stabilization arrangements; and (3) to provide a post-war "international currency". HDW Regraded Unclassified 17 December 15, 1941 9:45 a.m. GROUP MEETING Present: Mr. Thompson Mr. Buffington Mr. Morris Mr. Gaston Mr. Kuhn Mr. Haas Mr. Blough Mrs. Klotz Mr. White Mr. Foley Mr. Sullivan Mr. Schwarz Mr. Sloan H.M.Jr: Gene, I might as well get it off my chest first. Peter Odegard was with us. We had three different radios and we finally got WJZ. I never suffered so in my life, watching poor Peter Odegard. I mean, I never saw a man so miserable in my life as when he listened to that program. Did you hear it, Ferdie? Kuhn: I heard it late last night. It was terrible. H.M.Jr: It is an all time low. (Messrs. White and Foley entered the conference.) This Herman Wouk's poem wasn't read. Altogether, I don't want to get started, but it is just that child - I mean, to use a child on that thing, it was awful. Well, everything - the man was singing "Any Bonds Today" following a hymn. He just couldn't keep the beat. Whoever Regraded Unclassified 18 - 2 - it was couldn't keep the beat and you remember I suggested doing the "Ballad of America" and you said there were too many words. Kuhn: And then they went and used 8. Walt Whitman thing that was completely out of place. It was not done by our radio people. They called in our radio people to help them about two days before the show came on because the people who were doing it in New York were obviously making 8. mess of it, but I don't know exactly who was responsible. I am going to try to find out. H.M.Jr: Well, whoever is responsible, out. Kuhn: Let's find out. Il.M.Jr: No, out. I mean, I don't want them. I don't ever want the Treasury's name to be so sullied as it was on Sunday, you see. Kuhn: Yes, sir. H.M.Jr: I don't care who it was, the man is out. I mean, nobody can do that twice to me. To see poor Peter go through what he did, it was just a crime. Will you find out? I mean, anybody that sullies the Treasury's name the way that was yesterday, I don't want them connected with the Treasury. (The Secretary held a telephone conversation with General Cox.) H.M.Jr: He is right. He says that with the Christmas tree on the White House grounds and the people knowing it, that some suicide squads could start fifteen or twenty miles out, cut off their engines, and then just glide in and just make for that Christmas tree and the President. Gaston: It would be much better on the Ellipse. Regraded Unclassified 19 - 3 - H.M.Jr: I don't think it would be much better on the Ellipse either. Morris: It shouldn't be. Gaston: I think the whole thing is a little bit screwy. H.M.Jr: The President doesn't like the Jefferson Memorial. He could put the Christmas tree on top of that. (Laughter.) Sullivan: All you have to do is light it on top and that is the target. H.M.Jr: Well, they give me these nice jobs. Mrs. Roosevelt has already raised perfect hell. Sullivan: I think she ought to. I think it is pretty bad. H.M.Jr: Raising hell - she wants to hold them. She doesn't want to give them up. Sullivan: She and I aren't together on that. H.M.Jr: Anyway, Gene, if you would, please. I don't want to ever listen to a thing like that again. I don't know how Ferdie feels about it. Kuhn: I am with you. H.M.Jr: Do you say amen? Kuhn: Oh, it was very painful. H.M.Jr: And then, Gene, the suggestion which I made to - I don't know whether you had time to pass it on. The calendar idea I have got. My idea is to make a calendar of this mural shown in this paper and find out what it would cost to make = good sized calendar and then let the Boy Scouts sell it for & dime. What is his name - Odegard was crazy about the idea. We could put up 8. Regraded Unclassified 19 - 3 - H.M.Jr: I don't think it would be much better on the Ellipse either. Morris: It shouldn't be. Gaston: I think the whole thing is 8. little bit screwy. H.M.Jr: The President doesn't like the Jefferson Memorial. He could put the Christmas tree on top of that. (Laughter.) Sullivan: All you have to do is light it on top and that is the target. H.M.Jr: Well, they give me these nice jobs. Mrs. Roosevelt has already raised perfect hell. Sullivan: I think she ought to. I think it is pretty bad. H.M.Jr: Raising hell - she wants to hold them. She doesn't want to give them up. Sullivan: She and I aren't together on that. H.M.Jr: Anyway, Gene, if you would, please. I don't want to ever listen to a thing like that again. I don't know how Ferdie feels about it. Kuhn: I am with you. H.M.Jr: Do you say amen? Kuhn: Oh, it was very painful. H.M.Jr: And then, Gene, the suggestion which I made to - I don't know whether you had time to pass it on. The calendar idea I have got. My idea is to make a calendar of this mural shown in this paper and find out what it would cost to make a good sized calendar and then let the Boy Scouts sell it for a dime. What is his name - Odegard was crazy about the idea. We could put up n Regraded Unclassified 20 4 - million, you see, and they would stay right up in the homes. They would stay up in the homes. And Ferdie, I still - the only criticism I have, I still can't make out that factory. If we are going to make five more murals, can't we do the criticism I made of the factory? Kuhn: I didn't think the factory was going to be in in that form. Klotz: It was supposed to be taken out. H.M.Jr: There are other factories. I mean, that factory - it is very hard to realize, Then one other criticism, the three planes on the left, if I am not mistaken, are old models. Let's get the latest model planes. You might just as easily get in some Bell Aircraft or something, or four engine Consolidated. That is an old model plane. Otherwise I think it is wonderful. Klotz: You mean you can tell it from that picture? H.M.Jr: The New York Tribune had a full reproduction. Norman, I still think the mural is swell, even though the dedication of Colonel Patterson's is too, too -- Thompson: The House Appropriations Committee have asked me to come up at 1:30 on our Treasury bill. H.2.Jr: Right. Thompson: You are scheduled to go up on Friday. H.M.Jr: Oh yes, have you put it on my calendar? Thompson: I gave it to Fitzgerald. They want to start out this morning and go right through the Treasury. We could probably clear it up and be ready for you to start it off on Friday. H.M.Jr: All right. Regraded Unclassified 21 - 5 - Thompson: Mr. J. Edgar Hoover has written you asking that you permit his agents to interview the Treasury personnel that they are investigating during office hours. The original arrangement was that they would only do them after office hours. I think it is proper that he be permitted to make his investigations. H.M.Jr: Are they going to do it in the Treasury? Thompson: Yes. H.M.Jr: In the room downstairs? Thompson: Yes. H.M.Jr: Can't do it after office hours? Thompson: Well, it is too restrictive. H.M.Jr: But they will do it in the Treasury? Thompson: They will do it in the Treasury. H.M.Jr: O.K. Thompson: There is a letter on it. H.M.Jr: The Chicago people won't be back by Thursday night, will they? Sloan: I think they will, yes sir. H.W.Jr: He told me not. He said they were going to run right on because that train leaves at 3:40 or something Wednesday. Sloan: I should think most of them would be in here by Thursday morning. Kuhn: Graves did say something about staying on himself to clean up some odds and ends there. Regraded Unclassified - 6 - 22 I don't know when he would plan to be back. H.M.Jr: Who else is staying? Kuhn: I didn't understand that anyone else was going to stay or needed to stay. I can find out this morning and let you know. H.K.Jr: Will you let Mrs. Klotz know? Kuhn: Yes, sir. Klotz: This morning. Thompson: Mrs. Spangler told me you wanted to talk about -- 11.18.Jr: Yes. Thompson: We will have that put right in, but we will have to use the Stabilization Fund. L.M.Jr: That is all right. I mean, there are times when our phone is tied up on OCD for 8 half hour and I just can't get to it. Thompson: I will have it put in right away. H.M.Jr: Harry? White: There are a few matters that are not immediately important, but I don't think they should go beyond this week, 80 depending upon your own schedule -- H.M.Jr: Well, it will be today. I will give you three o'clock. White: That is all right. H. .Jr: Chick? Schwarz: PM had B. story yesterday by Wexler that indicates Regraded Unclassified 23 - 7 - that Reuther says that he talked to you. H.M.Jr: Reuther? Schwarz: Reuther. H.K.Jr: Reuther? Schwarz: The CIO man. H.M.Jr: Well, he did a year ago. Schwarz: He quoted in his speech a Cabinet member and then in PM, no other paper, they said it was supposed to have been you. White: Have you read it? H.M.Jr: No. White: I think you should. Schwarz: It is in the morning clippings. H.M.Jr: PM? Schwarz: Yes. We may be asked during the day whether we will confirm or deny it. H.M.Jr: Did he see me? Schwarz: I don't know. H.M.Jr: Sure he saw me. Schwarz: Did he? White: Yes, he saw you. Schwarz: He quotes the Cabinet member as saying it is a good plan and the only trouble with it is the place where it came from. Regraded Unclassified 24 - B - H.M.Jr: No, that isn't true. White: Well, something. You have to read the whole article. I think you should read the whole thing. H.F.Jr: If they ask me did I see Reuther, the answer is yes. Did I think he had a good idea, yes. Schwarz: Could I see you for a few minutes after the meeting? It will just take a couple of minutes. H.M.Jr: All right. It will have to be fast. George? Haas: I have got several t hings, Mr. Secretary. One of them, I have got something on that plant capacity material you asked for and -- H.M.Jr: Well, I will give you -- Huas: ...and payroll deduction. H.E.Jr: I will give you 3:15. Haas: All right. 11.M.Jr: And here is B. follow-up for you, this question of the RFC plants. Haas: I have something on that. That is one of the things I wanted to see you about. H.M.Jr: You have got that? Haas: I haven't got it complete -- H.B.Jr: But you are getting it? Haas: Yes, sir. H.M.Jr: Can we kill this memo then? Regraded Unclassified 25 B - - Haas: You might as well leave it pending until I complete the job. H.M.Jr: That is an honest man. (Laughter) Ferdie? Kuhn: Can I show you the corrected speech this afternoon sometime? Or I can send it up to your house. H.M.Jr: No, I am going to do it. What is the matter with Bell? Foley: I saw him going out of the building around nine o'clock. Thompson: I think he went up to the Capitol this morning. He is due to go up again tomorrow, too. H.E.Jr: Oh. When will you be ready, Ferdinand? Kuhn: It won't take terribly long. H.E.Jr: Would you be ready by 11:30? Kuhn: No. H.M.Jr: All right. Would you be ready by 2:30? Kuhn: Two-thirty, right. White: Is anybody else going to see that speech besides yourself and Ferdie? (Laughter) Gaston: It is going to be public, Harry. Foley: You mean before he gives it? Kuhn: Harry, it is very general. White: I was just asking the question. Regraded Unclassified - 10 - 26 Kuhn: Certainly. H.M.Jr: Mr. Kuhn, will you arrange that anybody who would like to see it before I do at 2:30 gets 8. chance to see it? Kuhn: All right, sir. Before 2:30, John and Harry. H.M.Jr: Herbert says he wants to see it too. Kuhn: I have a letter from Mr. Berlin -- H.M.Jr: Let them see it before 2:30. Kuhn: ...with 8. new patter for his song that I think will need your approval. Gaston: You don't mean approval, do you? Kuhn: Or the other way. H.M.Jr: Well, I didn't have any red meat for breakfast. Kuhn: I can't rave about it. Shall I tell him it is all right? H.M.Jr: No, tell him what the President does, to go home and do his homework over again. Kuhn: All right. I think the first part of it is better than the last. That is all. H.M.Jr: If your seeing these people is going to crowd you at 2:30, I can see you later, but I will be fresher at 2:30. Kuhn: I can send them a draft of what you saw yesterday with the delations that you made yesterday. H.M.Jr: I think we had better stick to 2:30. Kuhn: Right. Regraded Unclassified 27 - 11 . H.M.Jr: What else, Ferdie? Kuhn: That is all. H.M.Jr: Gene? Sloan: Nothing. H.M.Jr: What happened to that radio man from Fredericks- burg or Frederickstown I asked you to send in? Sloan: Callahan spoke to me about that on Saturday. It was Fredericksburg, Virginia. He said you wanted him in here to talk to him after you heard his program and he is arranging to have him in here. Whether he is to be here today or not, I haven't heard yet. H.M.Jr: Will you find out? Sloan: I will tell Mrs. Klotz or Mr. Fitzgerald. H.M.Jr: Please. Roy? Blough: Mr. Groves said this morning that the first installment of that Gulick-Groves report covering relations during the war between Federal and State should be ready about the first of January. H.M.Jr: Hooray. Blough: He said also that one of the big parts of the study they had intended to have the Department of Commerce do on tax compliance, the costs of compliance with taxes by business men, that the Department of Commerce has had some WPA money withdrawn from it and will not be able to go ahead with it. H.M.Jr: Well, you tell that all to Randolph Paul when he gets here tomorrow, will you, and let him worry about it. Will you? Regraded Unclassified 28 - 12 - Blough: Yes. I thought you might be interested. H.M.Jr: I am, but I am not going to worry about it. Blough: Good. H.M.Jr: I have got another worrier for me now. John and I have got another fellow who takes some of our worries. We are splitting it three ways. Buffington: I have nothing. Morris: Nothing. H.M.Jr: John? Sullivan: We have been doing some work on this idea of putting across tax returns through movies. We are pretty much in agreement that it can't be done in the ordinary way, but George Buffington has an awfully good idea, I think, and that is that what John Barrymore can't do, maybe Mickey Mouse could, and we would like to get Disney on here and talk it over with him. H.M.Jr: Is that the result of seeing "Fantasia"? Buffington: No, not entirely. (Laughter) I think it will work. Sullivan: I think you can do it that way. You can't do it in a straight movie. H.M.Jr: After all, I like to think we are progressive. Jeff Coolidge says, "That terrible song of Berlin's," and if we can get people to pay taxes with that God-awful Mickey Mouse, we will have arrived socially. Sullivan: Well, if we can't get Mickey they are all candidates. H.M.Jr: Sure, try it; what are you going to do, have Regraded Unclassified 29 - 13 - Mickey go from question one to question five? Gaston: No, (Laughter) it is 8. problem of making an elephant fly. H.M.Jr: Very good, Herbert. Sullivan: If you don't object, I will call him and see if we can get him here. H.M.Jr: That is all right. Sullivan: That is all I have. M.M.Jr: That is quite a contribution. Sullivan: It is George's. Foley: I have here a telegram: "Re your request for report on the food picture. "Today Mr. Merillat and I, as well as Mr. Ambrose and Mr. Craft of the Los Angeles branch of the Federal Reserve Bank of San Francisco, met with substantially the same representative group we have conferred with in the past, namely, representatives of the two large markets, representatives of the State Department of Agriculture, and other men who are active in the market here in Los Angeles." H.M.Jr: When was that sent? Foley: It came in this morning. This was after I talked with you yesterday afternoon. H.M.Jr: Good. Foley: "We asked them to give us their impressions on the present marketing situation. "With regard to the supply of produce; the supply Regraded Unclassified 30 - 14 . of fresh vegetables was back to about eighty percent of normal on Friday as a result of publicity on General License 77 through the radio, press and various cooperative groups. It was estimated that the supply was back to normal on Saturday. There appears to be some decline in demand for fresh vegetables, due to reluctance to deal with Japanese nationals and fear of poisoning. No statistics are available, although it is indicated that housewives and so forth are relying more heavily upon canned goods. This may be merely a boycott of Japanese products, however. In the past two days the local papers have carried an article on ground glass discovered in canned shrimp apparently shipped from Japan, which may have been instrumental in augmenting the fear of poisoning. "It appears that many more farmers have been bringing their produce directly to market than previous to the declaration of war, thus replacing Japanese truckers who previously performed this function. It is to be noted that the farmers themselves are Japanese. The group present seemed to be of the opinion that the General License was too liberal, especially as it related to the activities of Japanese wholesale establishments, many of whose proprietors have been taken into custody by the FBI. It was the consensus of the group that it would be desirable to transfer ownership and control of the some twenty-one Japanese wholesale establishments doing business in the Los Angeles area from Japanese nationals to American citizens, most of whom would be of Japanese descent. The experience of the State Department of Agriculture authorities, es well as that of the heads of the two large markets, indicated that the food produce picture is very closely controlled through a hierarchy of associations, commencing with the local groups representing the small Japanese farmers Regraded Unclassified 31 - 15 - and culminating in Central Japanese Associations, which covers all forms of Japanese business. This master association has in the past worked very closely with the Japanese Consulate and a representative of the Consulate attends most of the meetings. "The control exercised by the group representing the farmers and the wholesalers is quite complete. For example, there is apparently very close supervision of prices and distribution by the association heads. An instance of this is to be found in the campaign started recently to enlist the cooperation of all farmers in the 'Food for Freedom' program. Through the association program practically every Japanese farmer had enlisted in this program very shortly after its announcement, "Upon the issuance of General License 77, the Association of Produce Dealers and Brokers, Los Angeles, wrote a letter to the representatives of three of the produce associations, calling their attention to the fact that the Japanese nationals on the market should comply to the present rules or a request will be made to the Treasury Department to cancel the participation of the offending firms under the General License. The representatives of the State Department of Agriculture have apparently worked out a scheme for eliminating the ownership and control of Japanese nationals in the wholesaling houses. They were not willing to discuss this with us in the presence of the marketing group. However, I advised them that should such a plan be worked out and the transfer of assets be desired, the State's interest in this matter should be communicated to the Treasury Department or the Federal Reserve Bank in connection with any applications filed to permit such 8 transfer." Jr: Just & minute. Regraded Unclassified 32 -16 - (The Secretary held a telephone conversation with Colonel Smith.) H.M.Jr: They may have one Thursday night. He agreed the sooner the better. Gaston: Try it with guns? H.M.Jr: They are bringing the ninety millimeter guns to Washington. Gaston: Isn't there some disadvantage in revealing the position of those? H.M.Jr: That I don't know, but he said they have got one of the best anti-aircraft men in the country here. Gaston: They could use them in some false position. H.M.Jr: They have no blanks 80 they won't do it. Gaston: No. H.M.Jr: Go on. Foley: "It is to be noted that several of the association leaders, as well as the leading wholesalers, have been placed in custody by the Federal Bureau of Investigation. There was some feeling expressed on the part of those present that the associates or the families of the individuals held in custody who are not permitted to carry on business under the General License, should be supervised. This also added to the feeling that the undesirable influences in the associations and the Japanese wholesalers who are nationals should likewise be permitted to dispose of their businesses. It is estimated that this program would take about a month to carry out without disrupting the normal flow of produce. Inasmuch as the elimination Regraded Unclassified 33 - 17 . of the small farmer who is a national would be too great a task to fulfill within the short period necessary without a serious disruption, it was felt that the advantage to be gained from it would be outweighed and that the situation would be satisfactorily cleared up by the elimination of the wholesaler. One market representative said that Japanese alien yardmen, that is, small stall operators in markets, would be replaced by Japanese- Americans. This replacement occurred to some extent before the issuance of General License 77, although some alien yardmen returned to market on Saturday. Three wholesale houses owned by Japanese aliens have been sealed by the FBI; two others are open but operating under difficulties, due to inability to get powers of attorney from owners held in custody by FBI. (Signed) Murphy and Merillat." H.M.Jr: One thing that wasn't clear, they said at the beginning that now that the farmers were bringing in their own produce they eliminated the hucksters and the impression was that these farmers were Americans, and later on they said they were Japanese. There was a conflict there right at the beginning. Foley: "It appears that more farmers are bringing their produce directly to market than previous to the declaration of war, thus replacing Japanese truckers who previously performed this function." H.M.Jr: Go on. Foley: "It is to be noted that the farmers themselves are Japanese." H.M.Jr: That is the point. But what do you gain? If the farmers are Japanese and the truckers are Regraded Unclassified 34 - 18 - Japanese, do you see what I mean? Foley: "...that more farmers have been bringing their produce directly to market.' I suppose that would mean American farmers were bringing them directly in instead of turning the stuff over to a Japanese trucker. H.M.Jr: Yes, but they say that the farmers are Japanese. White: There are a good many Japanese - American born Japanese who are farmers. I don't know whether that might explain the difference. H.M.Jr: Ed, after reading it all, what do we do? Foley: Well, I think it indicates that the licenses that we have issued have cleared up the normal flow of food to the Los Angeles market and from a supply standpoint the thing is no longer menacing. The whole problem of getting some Japanese wholesalers out of the business and getting Americans in their places is & problem that I think we ought to examine pretty carefully. I think always where you get a group of interested people like this you have got to be sure that you are not disturbing self interests and you haven't got a bunch of Americans that are just trying to get - eliminate some Japanese who have heretofore participated pretty heavily in the fruits of that business. U.M.Jr: Well, I will tell you what I would like to do. I don't know whether Wickard gets a copy of that or not, you see. Foley: Do you want to send a copy to him? H.M.Jr: I would like to send a copy over to Claude Wickard and say it seems to me now that this is something he definitely should advise me on Regraded Unclassified 35 - 19 - and I would like him - I would throw it into his lap and say what does he advise us to do? Foley: O.K. H.M.Jr: What else, Ed? Foley: I have got a press release I would like to clear with you on this license insofar as relaxing is concerned. H.M.Jr: Move fast. Foley: Will I read it? H.M.Jr: What is it? Foley: It is a press release I would like to clear with you on this license we would like to put out that we discussed with you on Saturday. H.M.Jr: Oh, that one? Foley: Yes. H.M.Jr: O.K. Let it go. Foley: And I have got another telegram now from the presidents of the Feds adding some twenty additional German and Italian concerns to the list that we have already sent to them. They have got the people up in New York to put in to these places and this is adding to it. Do you think I ought to clear it with Leo before I send it out? H.M.Jr: Yes. Foley: Ben and I are having lunch with Leo today. H.M.Jr: Is Ben going to do it? Foley: He won't be the counsellor. He is willing to Regraded Unclassified 36 - 20 - work out a solution, to help work it out, but he won't do it, service it himself. H.M.Jr: But he will help us? Foley: Yes. H.M.Jr: Good. No, I would definitely clear it with Leo and with Dean, too. All right? Foley: Yes. There was an interesting session over in Oscar's office yesterday on that legislation I would like to tell you about. H.M.Jr: I want to hear about it, and don't forget I want to see Steve Spingarn. Foley: Yes, H.W.Jr: Did you call the fellow up on the phone that the Attorney General asked you to call? Foley: Yes. H.M.Jr: Herbert? Gaston: I have got some memoranda here of some things that have already been done across the street and also some recommendations of two Secret Service men plus this battalion chief of the New York Fire Department on what further should be done over there. I don't know whether you would like to look at them or not. H...Jr: Yes, I will tell you. Stay after. You are staying for this meeting with General Fleming. Gaston: Oh. And one thing - two things I would like to mention to you, one is that Bill Donovan called on Harry Amelinger and wanted him to Regraded Unclassified 37 - 21 - take 8. full time job in connection with some intelligence work and Harry does not think he ought to take it because we have got 8. lot of important problems in Narcotics. He thought that he would be willing to work for him part time, and I think that is probably the best solution. I am mentioning it to you because I think Bill Donovan is likely to call you up and say he wants Harry Anslinger. 11.15.Jr: Let him have him. Caston: I think there are 8 good many rather important questions coming up. H.M.Jr: Well, I will be guided by that. He wants Mrs. Friedman. Gaston: Yes, they called me up about that Saturday and - rather, Jimmy Roosevelt called me up and I told him to negotiate with the Navy or Coast Guard direct on that. She has not come over here because they all agreed and Mrs. Friedman agreed herself that to split the unit would be bad, that it would interrupt their work and it would take her a long time to build an organization where she could function effectively. I thought that we had better just let it float along for the present without taking her away, because in this situation it would simply gum things up, in my opinion. H.M.Jr: I thought you said you wanted her. Gaston: They did want her. Ed and Sam Klaus wanted her, but after hearing her story again, it was the conclusion that it was simply going to disorganize matters to try to take her and one helper. If we could take the whole organization it would be different. H.M.Jr: Will you (Klotz) write & letter for my signature to Donovan that Mrs. Friedman is in the Coast Regraded Unclassified 38 - 22 - Guard and he should take it up with the Secretary of the Navy? All right? Gaston: The other thing I wanted to mention is that Pearson and Allen on their broadcast last night made a general appeal for people to give to the United States Treasury. I think we ought to decide whether we want to encourage that sort of thing or not. It may gum up our tax program pretty seriously if we encourage or permit these general solicitations of gifts to the United States rather than to Red Cross, and so on. Sloan: Could I say something on that? H.M.Jr: I want to stop now. Go ahead, Gene. Sloan: Neville Miller was down to see me night before last about that and the same thing happened and I told him we did not want that. I was sure that you would prefer that they buy stamps and bonds or tax certificates and please not to encourage it. N.V.Jr: Well, will you contact Pearson and Allen and tell them that for the time being -- Sloan: I would be glad to if you want me to. H.M.Jr: Yes, tell them for the time being we want to concentrate on Defense Savings Bonds. All right, Herbert? Ganton: Yes. Regraded Unclassified 39 December 15, 1941 9:49 a.m. HMJr: Hello, General. General Cox: How are you this morning? HMJr: Fine. C: I just wanted to call you to express my opinion about this Christmas tree lighting at which the President proposes to be present. HMJr: Yes, please. C: I understand that Christmas tree is to be placed within the White House grounds HMJr: Yes. C: to be lighted there. It'll be the only really well-lighted spot in that area. HMJr: Yes. C: It will be an invitation - if bombers are coming over - to reserve their time to come for that occasion, knowing that he's going to be there. HMJr: Yes. C: I think it would be most unwise for him to attend that in person. HMJr; Yes. C: It seems to me that he can, through a loudspesker system from the White House, say whatever he wants to and the same way he can pull a switch in the White House and light the tree. HMJr: Uh huh. 5: But for him to 80 out there..... HMJr: Hello. 5: For him to go out there personally and be present Regraded Unclassified 40 N I I in that lighted spot, le an invitation that I don't think he should issue. Now, I'm thinking about from overhead - not from the ground people. I'm just looking at it from the standpoint of a bombing squadron. HMJr: Yes. C: A suicide squad. HMJr: Yes. D: It seems to me that if they want to send a souadron over they could send them and they could create 8 divertisment, you see, on each side of Washington HMJr: Yes. C: while the actual planes could cut the engines off and coast in, and we'd never know where they were. HMJr: Right. Well, General, I'll certainly put in my two bits. C: Yes. HMJr: I know Mrs. Helm has tried to have the dance for the Army and Navy called off - that's at the White House - I don't know whether she's been successful. C: Yes, HMJr: But I told her to use my name with Mrs. Roosevelt C: Yes. HMJr; And the one for International Students - we're trying to drop that. C: Yes. HMJr! But this 1s for another reason. C: That's right. HMJr: And I'll do the best I can - I'll recommend that he doesn't do it. Regraded Unclassified 41 - 3 - C: You get my view on it. HMJr: Is it your idea to put the Christmas tree some- where else? C: Well, I'd put it out in the Elipse where it's usually held. HMJr: In the Elipse. C: Then I wouldn't have him attend it under - no matter where it's held. HMJr: And let him do it by remote control. C: That's 1t. That's it exactly. BMJr: Right. Now, General, while I've got you on the wire, I asked Colonel Smith of General Marshall's office - you know Colonel Smith? C: on, yes, Secretary of the General Staff. HMJr: Yes. If and when you have your anti-aircraft ready on the - hello C: Yes. HMJr: your ninety millimeters. C: Yes. HMJr: that I'd like to make an inspection. C: Fine. HMJr: And - I don't know whether they've arrived yet or not C: Well, the regiment came in yesterday. HMJr: Well, when they're in location and they're ready, I think I'd like to make an inspection. C: That's fine. Regraded Unclassified 42 - 4 - HMJr: And also, wherever your control is for your planes in connection with the anti-aircraft. C: Yes. That's all under the command of the Interceptor Command in New York. HMJr: Oh. C: But, of course, we will naturally work in the closest sort of touch with them. HMJr: Well, suppose - I guess I'd better leave it with Colonel Smith then, hadn't I? 0: Well, that's all right - I'll let you know. I'm. HMJr: Well, I thought I'd mention it. C: I'm making arrangemente for the quartering of those people, and that's already been attended to; and they should be in position very shortly, Mr. Secretary. Today or tomorrow. HMJr: Yes. C: I'll let you know - be glad to. HMJr: We're trying to make the boys happy who are ouartered in the Treasury. C: You've done it. HMJr: Have we? C: You've done it. HMJr: Good. C: Absolutely. HMJr: That's fine. C: I was in there late yesterday afternoon. HMJr: And they're all right. C : I went through all the installations and they Regraded Unclassified 43 - 5 - were well taken care of. Oh, yes. HMJr: Good. C: Very good. HMJr: Thank you. C: Many thanks to you. HMJr: Well, we had B. lot of people help here. C: Yes. HMJr: But I'll get after this other thing right away. C: Now if there's anything at any time about any of these troops that you want to take up, if you'll call right in to this headquarters, why it will be done immediately. You needn't bother about the War Department or anything else. HMJr: All right, General. C: Fine. HMJr: Thank you. C; Thank you. Regraded Unclassified 14 December 15, 1941 10:14 a.m. Overstor: Go ahead. RKJr: Hello. Colonel Amith: Mr. Secretary, this 18 Smith. HXJr: Good morning. is How are you this morning? HMJr: Fine. 9: Mr. Secretary, our sound locators and search- lights will not be in and in position until Wednesday. HMJr: Oh, oh. B: I wonder if you would like to see the officer who's making the dispositions and have him show you on the map where they are, and then let us take you on a tour around the place Wednesday. HMJr: Well, I'll be in Chicago Wednesday, and I'd rather wait until I get back Thursday. Maybe by that time they'll be in? S: oh, they will be in Wednesday; but you can Bee them any time after that. of course, the guns are in now. HMJr: Oh. S: But I think possibly it would be more interesting to you and more informative to see the whole set-up. HMJr: I'd rather - you mean I'd rather see the whole set-up? S: Yes, I think you would. Would you like to see 8 mag showing the general defensive disposition? HMJr: Well, why don't I do it all at one time? S: You can, very nicely. I'll be glad to do it. Regraded Unclassified 45 - 2 - HMJr: So S: I thought I would go with you HMJr: Yes. 8: and as a matter of fact, you see we're making the changes in - from the old to the new equipment. HMJr: Yes. S: The unit which is coming in here 18 just - is receiving its ninety millimeter guns practically on the ground. HMJr: I see. S: So what we've got is two regiments in here - the experienced one instructing the relatively inexperienced one. HMJr: Yes. S: And at the present time there's probably a good deal of turmoil going on, and, of course sound arranging and searchlight equipment is on the way by rail, but has not yet arrived. HMJr: Well, would S: Thursday will be all right. I'll come and get you or call you up Thursday. HMJr: How early could we start? S: Any time you like as early as you like. HMJr: How many hours do you think it'll take? S: Well, if you want to look at the whole thing. HMJr: No. S: it will take you all day. HMJr: Well, I haven't got the time. Regraded Unclassified 46 - 3 - 9: Well, then, I suggest what you do is go out and take B. look at one battery HMJr: Yes. St and at some of the sound arranging and searchlight equipment HMJr: Right. :: and then I can give you the dispositions from the map about as well B.E if you went around and looked at them. HMJr: Fine. 8: That's the way the Commander will probably make his own reconnaissance, anyhow. HMJr: Well, one other thing - Colonel - General Cox called me this morning, and I - about this tree lighting business, you see? S: Oh, yes. HMJr: He wants me to try to get the President to call that off. Hello. S: Yes, sir. HMJr: Now, are you in on that? S: Well, he haen't said anything to me about it. I Just - to be perfectly honest with you, sir, I don't think that the danger is great enough to get everybody stirred up to that extent. That 18, I don't see why they don't light that tree one or two nights for awhile. HMJr: Well, he's definitely opposed to it. S: Well, I'd rather consult the expert, who 1e General Jarman, the Coast Artilleryman on General Drum's staff, who 1e making all these dispositions. He may feel that way about it, I don't know. HMJr: Supposing you take a look at it; and you might Regraded Unclassified 47 4 talk with General Cox, because I don't want to be taking one thing and then S: What's your feeling about the thing? HMJr: After he talked to me, my feeling is not to have it on the White House grounds. S: Well, I wouldn't have it there, Mr. Secretary. HMJr: Well, he - that's where it was supposed to be. He recommended having it out here in the Elipse. I think that's just a.8 bad. 8: Why, that's just as bad. You might as well put it - well, what's the difference to an airplane? HMJr: That's just as bad. S: You could miss the Elipse and hit the White House just 8.6 easy 8.8 you could hit the White House. As a matter of fact, the odde are about the same. HMJr: That's just - I think if they're going to do it by remote control and the President speaking and they want the thing, then - well, I don't know where I'd put it, but I certainly wouldn't put it in the Elipse. S; No, I'd put it in some big park quite a long way from the White House. HMJr: Yeah. 8: I'll talk to Cox about it. HMJr: Supposing you talk until we get together, and I won't move on the White House on it until I hear from you. S; Well, Nicholson - Colonel Nicholson, who has until recently been in this office, and who 18 an expert anti-aircraft man, 1s really the man who-on the ground, who is making these dispositions. HMJr: Well, supposing you tie it up, because that - I mean, after all, that's your liaison job, ien't 1t? Regraded Unclassified 48 - 5 - S: Yes. HMJr: What? B: I will do that. Nicholson will be in here - he's coming in here this morning, and I'll talk with him about it and get his opinion. HMJr: Now, when I see you - I'm putting you down for eleven o'clock Thursday. S: Well, that'll be all right, sir. HMJr: Now, I also want to know how they control the airplanes. S: All right, sir. HMJr: For - that would cover the District. Where that control is - I understand S: That's in the Interceptor Commander, but I'll have all the details. HMJr: But I want to know - I mean, if there - where 18 that control, do you see? S: Yes. HMJr: What? S: Yes, sir, I'll have all that for you. HMJr: I understand that's up in New York. S: No, it's not up in New York. There's a man here who's doing 1t. of course, the planes would come from a number of different sources. The point 18 that the Air Corps Combat Commander - General Emmone - 18 right here at Bolling Field. HMJr: Yeah. S: Those things will be handled by him. HMJr: Well, when I see you at eleven, have the whole story. Regraded Unclassified 49 - 6 - S: Yes, I will. HMJr: Including - I mean, how the airplanes get their orders. S: I will, sir. They've got a good man on the job, 80 they HMJr: And also - I mean - by eleven - the blackout of the District, how that's controlled. S: Yes, sir. HMJr: If there is any control on that. S: Yes, sir. HMJr: What? 3: Yes, indeed, sir. HMJr: In other words, what I'd like to have is told me the whole thing, just how the thing clicks, you see? S: I'll do it. I'll have it for you, sir. HMJr: And then maybe we can have a little rehearsal. S: Yeah, I think it would if we gave all the pre- liminary arrangements 80 as not to scare people. HMJr: Oh, уеб. Well S: I think we could do it. It would be a very decided advantage to have one. HMJr: Well, I'd like to recommend that. S: Yes, indeed. Well, that's - accept that as okay, sir. We'll do that. HMJr: I mean, a blackout, an attack - let the gune go off 80 the people get used to the sound - hello. S: Yes, sir; I'm listening, Mr. Secretary. HMJr: I mean, let the guns fire. Regraded Unclassified 50 - 7 - S: Yes, sir. HMJr: So that they get used to the noise.- S: Well, I don't know whether they've got any blank ammunition for them or not, Mr. Secretary; but we'll see what can be done. HMJr: Well, I think we ought to have it. S: They've got service ammunition exclusively out here at these guns. HMJr: Oh, well S: And when they shoot them, somebody's liable to get hurt. HMJr: Yeah. Well, that's - we don't want to hurt any- body. S: But we'll see whether we can do something about it. We can make a stab - a very decent stab - at it anyway. HMJr: Don't you think it's a good idea? S: Yeah, very good. It's highly desirable right here - very desirable. HMJr: Yeah. I mean, let's go through the whole S: There are B. dozen reasons why we ought to do it and do it pretty quick, too. HMJr: Let's have 8 mock battle. S: Right, sir. Fine. I think it would be fun anyhow. HMJr: Well, I went through one in Norway and I thought it was fun, but it didn't turn out to be. S: Well, it's fun for us. HMJr: Yeah. S: We might 8.9 well have a little, we're catching hell from every other direction. Regraded Unclassified 51 - 8 - HMJr: I went through one in Oslo. S: Oh, you did, sir? HMJr: Yeah. In August, '39. S: Oh, you did? HMJr: Yeah. S: I didn't know that. HMJr: Yeah. S: Well, then, I'll see you Thursday with all the data. HMJr: Yes. S: And if you like, then, we'll go out and have a look at some of these things. HMJr: That's right. 9: And I'll let you see how the new guns function, anyway. HMJr: Thank you. S: That'll be Thursday at eleven, Mr. Secretary. Good-bye, sir. HMJr: Thank you. Regraded Unclassified 52 December 15, 1941. Dear Bill: I have your letter of December 14th, speaking of your desire to secure the services of Mrs. Elisabeth 8. Pricime, is connection with year code section. You knov that I as always happy to cooperate with you, but is this case, your re- quest should be made to the Secretary of the Navy. Mrs. Friedmen has long been associated with the Coast Guard, and that organization 10 MV under Savy jurisdiction. with cordial regards, Sincerely, (Signed) 3. Horgenthan, IN Colonel William J. Denevan, Coordinator of Information, Washington, D. c. By Measenger Sturyes 5:20 n.m.c. GEF/dbs Regraded Unclassified 53 COORDINATOR OF INFORMATION WASHINGTON, D.C. December 14, 1941. Dear Henry: Pursuant to conversations we have had with Mr. Gaston, I would greatly appreciate it if Mrs. Elizabeth S. Friedman, of your Department, could be assigned to this office for a temporary period pend- ing the return from England of Lieut. Jones early in January. I make this request only because of the urgent need for her services pending the establishment of our permanent code section. Sincerely, William J. Donovan Hon. Henry Morganthau, The Secretary of The Treasury. C Regraded Unclassified 54 WORWASH G1 LA 14-552 December 15, 1841 9,26 a.m. John a. Pehle Assistant to the Secretary Foreign Funds Control 268 Treasy Dept. RE YOUR REQUEST FOR REPORT ON FOOD PICTURE. ON DECEMBER 12, AND AT THE REQUEST OF MB TIMMONS I SENT A WIRE TO YOU DESCRIBING IN DETAIL THE FOOD SITUATION AND RECOMMENDATIONS WHICH HAD BRAN LADE TO US, AS NELL AS THE FIRST IMPRESSIONS OF THE EFFECT OF GENERAL LICENSE BO. 77. THIS IS SUPPLEMENTARY THERETO. TODAY MR. MERILLAT AND I, AS WELL AS MR. AMBROSE AND MR. CRAFT OF THE LOS ANGELES BRANCH 07 THE FEDERAL RESERVE BANK OF SAN FRANCISCO AST WITH SUBSTANTIALLY THE SAME representative GROUP KE HAVE CAFERRED WITH Ill THE PAST, NAMELY. REPRESENTATIVES OF THE In LARGE MARKETS, REPRESENTATIVES OF THE STATE DEPARTMENT OF AGRICULTURE, AND OTHER WHY WHO ARE ACTIVE IN THE MARKET HERE IN LOS ANGELES. WE ASKED THEM TO GIVE US THEIR IMPRESSIONS Oil THE PRESENT MARKETING SITUATION. W17 REGARD TO THE SUPPLY OF PRODUCE, THE SUPPLY OF FRESH VEGETABLES WAS BACK TO ABOUT 80 PERCENT OF NORMAL ON FRIDAY, AS A RESULT OF PUBLICITY 08 GENERAL LICENSE 77 THROUGH THE RADIO, PRESS, AND VARIOUS COOPERATIVE GROUPS. IT HAS ESTIMATED THAT THE SUPPLY WAS BACK TO NORMAL OK SATURDAY. THERE APPEARS TO BE SOME DECLINE IN DEMAND FOR FRESH VEGETABLES DUE TO RELUCTANCE TO DEAL WITH JAPANESE NATIONALS AND FRAM OF POISONING. BO STATISTICS ARE AVAILABLE, ALTHOUGH IT IS INDICATED THAT HOUSEWIVES. ETC. ARE RELYING MORE HEAVILY UPON CANNED GOODS. THIS MAY BE MERELY A BOYCOTT UF JAPANESE PRODUCTS, however, IN THE PAST TWO DAYS THE LOCAL PAPERS have (more) Regraded Unclassified 55 CARRIED AN ARTICLE ON GROUND GLASS DISCOVERED IN CANNED SHRIMP, APPARENTLY SHIPPED FROM JAPAN, WHICH MAY HAVE BEEN INSTRUMENTAL IN AUGMENTING THE FEAR OF POISONING. IT APPEARS THAT MANY MORE FARMERS HAVE BEEN BRINGING THEIR PRODUCE DIRECTLY TO MARKET THAN PREVIOUS TO THE DECLARATION OF WAR, THUS REPLACING JAPANESE TRUCKERS WHO PREVIOUSLY PERFORMED THIS FUNCTION. IT IS TO BE MOTED THAT THE FARMERS THEMSELVES ARE JAPANESB. THE GROUP PRESENT SEEMED TO BE OF THE OPINION THAT THE GENERAL LICENSE was TOO LIBERAL, ESPECIALLY AS IT RELATED TO THE ACTIVITIES OF JAPANESE WHOLESALE RETABLISHMENTS, MANY OF WHOSE PROPRIETORS HAVE BEEN TAKEN INTO CUSTODY BY THE F.B.I. If was THE CONSENSUS OF THE GROUP THAT IT WOULD BE DESIRABLE TO TRANSFER OWNERSHIP AND CONTROL OF THE SOME TWENTY ONE JAPANESE WHOLESALE ESTABLISHMENTS DOING BUSINESS IN THE LOS ANGELES AREA FROM JAPANESE NATIONALS TO AMERICAN CITIZENS, MOST OF WHOM WOULD BE OF JAPANESE DESCENT. THE EXPERIENCE OF THE STATE DEPARTMENT OF AGRICULTURE AUTHORITIES AS WELL AS THAT OF THE HEADS OF THE TWO LARGE MARKETS INDICATED THAT THE FOOD PRODUCE PICTURE IS VERY CLOSELY CONTROLLED (more) Regraded Unclassified 56 THROUGH A HIERARCHY OF ASSOCIATIONS, COMMENCING WITH THE LOCAL GROUPS REPRESENTING THE SMALL JAPANESE FARMERS AND CULMINATING IN CENTRAL JAPANESE ASSOCIATION, WHICH COVERS ALL FORMS OF JAPANESE BUSINESS. THIS MASTER ASSOCIATION HAS IN THE PAST WORKED VERY CLOSELY WITH THE JAPANESE CON- SULATE, AND A REPRESENTATIVE OF THE CONSULATE ATTENDS MOST OF ITS MEETINGS. THE CONTROL EXERCISED BY THE GROUP REPRESENTING THE FARMERS AND THE WHOLESALERS IS QUITE COMPLETE. FOR EXAMPLE, THERE IS APPARENTLY VERY CLOSE SUPERVISION OF PRICES AND DISTRIBUTION BY THE ASSOCIATION HEADS. AN INSTANCE OF THIS IS TO BE FOUND IN THE CAMPAIGN STARTED RECENTLY TO ENLIST THE COOPERATION OF ALL FARMERS IN THE "FOOD FOR FREEDOM" PROGRAM. THROUGH THE ASSOCIATION PROGRAM PRACTICALLY EVERY JAPANESE FARMER HAD ENLISTED IN THIS PROGRAM VERY SHORTLY AFTER ITS ANNOUNCEMENT, UPON THE ISSUANCE OF GENERAL LICENSE 77, THE ASSOCIATION Regraded Unclassified 57 OF PRODUCE DEALERS AND BROKERS, LOSAMGELES, WROTE A LETTER TO THE REPRESENTATIVES OF THREE OF THE PRODUCE ASSOCIATIONS, CALLING THEIR ATTENTION TO THE FACT THAT THE JAPANESE NATIONALS ON THE MARKET SHOULD COMPLY TO THE PRESENT RULES OR A REQUEST WILL BE MADE TO THE TREASURY DEPARTMENT TO CANCEL THE PARTICIPATION OF THE OFFENDING FIRMS UNDER THE GENERAL LICENSE. THE REPRESENTATIVES OF THE STATE DEPARTMENT OF ASRICULTURE HAVE APPARENTLY WORKED OUT A SCHEME FOR THE OWNERSHIP AND CONTROL OF JAPANESE NATIONALS IN THE WHOLE- SALEING HOUSES THEY WERE NOT WILLING TO DISCUSS THIS WITH US IN THE PRESENCE OF THE MARKETING GROUP. HOWEVER, I ADVISED THEM THAT SHOULD SUCH A PLAN BE WORKED OUT, AND THE TRANSFER OF ASSETS BE DESIRED, THE STATES INTEREST IN THIS MATTER SHOULD BE COMMUNICATED TO THE TREASURY DEPART- MENT OR THE FEDERAL RESERVE BANK IN CONNECTION WITH ANY APPLICATIONS FILED TO PERMIT SUCH A TRANSFER. Regraded Unclassified 58 IT IS TO BE KOTED THAT SEVERAL OF THE ASSOCIATION LEADERS, AS WELL AS THE LEADING WHOLESALERS HAVE BEEN PLACED IN CUSTODY BY THE FEDERAL BUREAU OF INVESTIGATION. THERE WAS SOME FEELING EXPRESSED ON THE PART OF THOSE PRESENT THAT THE ASSOCIATES OR THE FAMILIES OF THE INDIVIDUALS HELD IN CUSTODY WHO ARE NOT PERMITTED TO CARRY ON BUSINESS UNDER THE GENERAL LICENSE SHOULD BE SUPERVISED. THIS ALSO ADDED TO THE FEELING THAT THE UNDESTRABLE INFLUENCES IN THE ASSOCIATIONS AND THE JAPANESE WHOLESALERS WHO ARE NATIONALS SHOULD LIKE- WISE BE PERMITTED TO DISPOSE OF THEIR BUSINESSES. IT IS ESTIMATED THAT THIS PROGRAM WOULD TAKE ABOUT A MONTH TO CARRY OUT WITHOUT DISRUPTING THE NORMAL FL/W OF PRODUCE. INASMUCH AS THE ELIMINATION OF THE SMALL FARMER WHO IS A NATIONAL WOULD BE TOO GREAT A TASK TO FULFILL WITHIN THE SHORT PERIOD NECESSARY WITHOUT A SERIOUS DISRUPTION, IT WAS FELT THAT THE ADVANTAGE TO BE GAINED FROM IT WOULD BE OUT- WEIGHED, AND THAT THE SITUATION WOULD BE SATISF ACTORILY Regraded Unclassified 59 CLEARED UP BY THE ELIMINATION OF THE WHOLESALER. ONE MARKET REPRESENTATIVE SAID THAT JAPANESE ALIEN YARD MEN, THAT IS, SMALL STALL OPERATORS IN MARKETS COULD BE REPLACED BY JAPANESE-AMERICANS. THIS REPLACEMENT OCCURRED TO SOME EXTENT BEFORE THE ISSUANCE OF GENERAL LICENSE 77, ALTHOUGH SOME ALIEN YARD MEN RETURNED TO MARKET ON SATURDAY, THREE WHOLESALE HOUSES OWNED BY JAPANESE ALIENS HAVE BEEN SEALED BY THE F. B. I., TWO OTHERS ARE OPEN BUT OPERATING UNDER DIFFICULTIES DUE TO INABILITY TO GET POWERS OF ATTORNEY FROM OWNERS HELD IN CUSTODY BY F. B. I. MURPHY AND MERILLAT. Regraded Unclassified 60 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Honday, December 15, 1941. No. 29-3 The Treasury Department today further relaxed to some extent and under appropriate safeguards the tight restrictions which had been placed upon Japanese residing in this country. It will be remembered that on the outbreak of war the Treasury, as a pre- cautionary measure, placed a complete stoppage on all Japanese financial and commercial transactions and took custody of many Japanese enterprises. On December 11, the Treasury issued regulations governing living expenses and wages for Japanese nationals in the United States and regulations governing Japanese nationals engaged in the production, marketing, and distributing of food and agricul- tural products. The general license issued today by the Treasury unblocks the accounts of Japanese nationals who have resided continuously within the continental United States since June 17, 1940 and per- mits business enterorises within the continental United States owned and controlled by such Japanese nationale to continue to operate, except in those cases in which Treasury representatives are maintained on the premises or en official Treasury notice is posted indicating that such premises are under Government control. It 18 anticipated that Treasury representatives and posted notices will be removed from the premises of many Japanese entercrises in which they are now maintained, thus allowing such enterprises to resume normal operations under such general license. It is further anticipated that special business operating licenses will be issued to many Japanese enterprises in which Treasury representa- tives are continued to be maintained allowing such enterprises to operate under Government surveillance. Representatives in this country of concerns located abroad or owned and controlled by persons located abroad are excluded from the privileges of the general license. The Japanese nationals who are given the benefite of today's license are subjected to certain reporting requirements and other restrictions which will constitute sefeguards against the abuse of euch benefits. -000- Regraded Unclassified 61 TREASURY DEPARTMENT Office of the Secretary December 15, 1941, GENERAL LICENSE NO. 68A UNDER EXECUTIVE ORDER NO. 8389, APRIL 10, 1940, AS AMENDED, AND REGULATIONS ISSUED PURSUANT THERETO, RELATING 20 TRANSACTIONS IN FOREIGN EXCHANGE, ETC. (1) à general license 1s hereby granted: (a) Licensing as a generally licensed national any individual who is A national of Japan and who has been residing only in the continental United States at all times on and since June 17, 1940, and (b) Licensing as a generally licensed national any partnership, association, corporation or other organisation within the continental United States which is a national of Japan sololy by reason of the interest therein of B person or persons licensed as generally licensed nationale pursuant to this goneral licanse. (2) This general license shall not be dommed to license as a generally licensed national: (w) Any individual, partnership, association. corporation or other organization on the premises of which the Treasury Department maintains a representative or guard or on the premises of which there is posted an official Treasury Department notice that the premises are under the control of the United States Government, or (b) Any bank, trust company, shipping concern, steam- ship agency, OF insurance company, of Part 131: - Sec. 5(b). 40 Stat. 415 and 966; Sec. 2, 48 Stat. 1; 54 Stat. 179; Ex. Order 8389, April 10, 1940, as amonded by Ex. Order 5785, June 14, 1941, Ex. Order 8832, July 26, 1941. and Ex Order 8963, December 9. 1041; Regulations, April 10, 1940, as amended June 14, 1941. and July 20, 1941. Regraded Unclassified 62 - 2 - (c) Any person who, on or since the effective date of the Order, has represented or acted as agent for any person located outside the continental United States or for any person owned or controlled by persons located outside the continental United States, or (d) Any person who on or since the effective date of the Order has acted or purported to act directly or indirectly for the benefit or on behalf of any blocked country, including the government thereof, or any person who is a national of Japan by reason of Any fact other than that such person has been domiciled in, or a subject or citizen of, Japan at any time on or since the effective date of the Order. (3) A report on the appropriate series of Form TFR-300 shall be filed with the appropriate Federal Reserve Bank within 30 days after the date hereof with respect to the property interests of every person licensed herein as a generally licensed national if the total value of the property interests to be reported is $1,000 or more. (4) Every business enterprise licensed herein as e generally licensed national shall also file with the appropriate Federal Reserve Bank within 30 days after the date her of an affidevit setting forth the information required by Form TFBE-1, if the total value of all property interests of such business enterprise is in excess of $5,000. (5) Banking institutions within the United States effecting payments, transfers or withdrawals in excess of $1,000 during any month for the account of any person licensed as a generally licensed national hereunder, shall file promptly with the appropriate Federal Reserve Bank a report showing the details of such transactions. Regraded Unclassified 63 - 3 - (6) This general license shall not authorize any transaction which, directly or indirectly, substantially diminishes or imperils the assets within the continental United States of any national of Japan or otherwise prejudicially affects the financial position of such national within the continental United States. (7) As used in this general license, the term "business enterprise" shall mean any individual proprietorship, partnership, association, corporation or other organization engaged in commercial or other business activities within the continental United States. E. H. Foley, Jr. Acting Secretary of the Treasury. Regraded Unclassified 61 TREASURY DEPARTMENT Washington FCR IMMEDIATE RELEASE, Press Service Thursday, December 11, 1941. No. 28-97 The Treasury Department today announced regulations govern- ing living expenses and wages for Japanese nationals in the United States and regulations governing Japanese nationals engaged in the production, marketing and distributing of food and agri- cultural products within the United States. Under General License No. 11-A any Japanese national in the continental United States may receive up to $100 per month for living and personal expenses for him and his family. This license permits such payments from either the national's bank account or from his employer in the form of wages. Banks and employers making such payments are required to make certain that the Jaganese national is not drawing more than $100 under the license. Thus a Japanese national cannot draw $100 per month in the form of wages and at the same time withdraw $100 per month from his bank accounts. Under General License No. 77 Japanese nationals engaged in the business of producing, marketing or distributing food or agricultural products may, with minor exceptions, engage in all transactions incident to the normal conduct of such business. However, under the license a Japanese national cannot withdraw from his accounts during any one week for such enterprises sums in excess of his average weekly withdrawals during the last six months, Moreover, the license COVEDE only Japanese nationals who were previously licensed under General License No. 68. This action is intended to permit the orderly movement of fresh vegetables and other food In areas such as the Pacific coast in order to supply the needs of our civilian poculation and military forces. -000- Regraded Unclassified TREASURY DEPARTMENT, 65 Office of the Secretary, December 11, 1941. GENERAL LICENSE NO. 11-A. UNDER EXECUTIVE ORDER NO. 8389,' APRIL 10, 1940, AS AMENDED, AND REGULATIONS ISSUED PURSUANT THERETO, RELATING TO TRANSACTIONS IN FOREIGN EXCHANGE, ETC. (1) A general license is hereby granted authorizing pay- ments out of the blocked account of any national of Japan in the - continental United States for the living and personal expenses of such national and his household; provided that the total pay- ments under this general license from all the blocked accounts of any one national shall not exceed $100 in any one calendar month. (2) Banks, employers and other persons making any such pay- ments shall satisfy themselves, through affidavits or otherwise, that payments out of blocked accounts for living expenses for any one national and his household do not exceed $100 in any one calendar month. E. H. Foley, Jr., Acting Secretary of the Treasury. * Part 131: - Sec. 5(b), 40 Stat, 415 and 966; Sec. 2, 48 Stat. 1; 54 Stet. 179: Ex. Order 8389, April 10, 1940, RS amended by Ex. Order 8785, June 14, 1941, Ex. Order 8832, July 26, 1941, and Ex. Order 8963, December 9, 1941; Regulations, April 10, 1940, as amended June 14, 1941, and July 26, 1941. 28-99 66 TREASURY DEPARTMENT Office of the Secretary December 11, 1941. GENERAL LICENSE NO. 77 UNDER EXECUTIVE ORDER NO. 8389, APRIL 10, 1940, AS AMENDED, AND REGULATIONS ISSUED PURSUANT THERETO, RELATING TO TRANSACTIONS IN FOREIGN EXCHANGE, ETC.® (1) A general license 1s hereby granted licensing any person engaged, prior to December 7, 1941, in the production, marketing or distribution of food products within the continental United States and who is a national of Japan to engage in all transactions ordinarily incidental to the normal conduct of their business of producing, marketing or distributing food within the continental United States, Provided, however, that this general license shall not authorize (a) any transaction which could not be effected without a license if such person were not a national of any blocked country. (b) total payments, transfers or withdrawals from blocked accounts of any such person during any one week in excess of the average weekly payments from such account during the six months' period immediately preceding the date of this license, or (c) any transaction by or on behalf of nationals of Japan who were not generally licensed nationals under General License No. 68 prior to December 7, 1941. (2) Any person engaging in business pursuant to this general license shall not engage in any transaction pursuant to this general license which, directly or indirectly, substantially * Part 131; - Sec. 5(b), 40 Stat. 415 and 966; Sec. 2, 48 Stat.1; 54 Stat, 179; Ex. Order 8389, April 10, 1940, as amended by Ex. Order 8785, June 14, 1941, and Ex. Order 8832, July 26, 1941; Regulations, April 10, 1940, as amended June 14, 1941, and July 26, 1941; Ex. Order 8963, December 9, 1941. 28-97 Regraded Unclassified 67 - 2 - diminishes or imperils the assets of such person within the continental United States or otherwise prejudicially affects the financial position of such person within the continental United States. (3) Any bank effecting any payment, transfer or withdrawal pursuant to this general license shall satisfy itself that such payment, transfer or withdrawal is being made pursuant to the terms and conditions of this general license. (4) Where any blocked account in a bank is debited in excess of $500 per calendar month pursuant to this general license, such bank shall file with the appropriate Federal Reserve Bank a report for such calendar month setting forth the details of the transactions in such account during the calendar month. E. H. FOLEY, JR. Acting Secretary of the Treasury. 68 December 15, 1941 Dear Mr. Hanilton: Attached is the most recent report wa have received from our people in Los Angeles In regard to the food situation. Secretary Morgenthau would approciate any suggestions you may have as to how the matter should be handled. Very truly yours, (Signed) E.H. Foley, Jr. Honorable Carl Namilton Assistant to the Secretary Department of Agriculture Washington, D. C. EHFJr/fm 12;15 '41 Attachments Telegram from Murphy and Merillat (Los Angeles 12/15'41 9:24 a.m.) Press Release 12/15'41 on General License 68A General License 68A Press Release 12/11'41 on General License 11-A & 77 General License 77. Out 6 p.m. by Special Messenger Regraded Unclassified 69 December 15, 1941 Dear Mr. Hoover: Attached is the most recent report we have received from our people in Los Angeles in regard to the food situation. Secretary Morgenthau would ap- preciate any suggestions you may have as to how the matter should be handled. Very truly yours, (Signed) E.H. Foley, Jr. Mr. J. Edgar Hoover Director, Federal Bureau of Investigation Department of Justice Washington, D. C. EHFJr/fm 12/15'41 Attachments Telegram from Murphy and Merillat (Los Angeles 12/15'41 9:24 a.m.) Press Release 12/15'41 on General License 68A General License 68A Press Release 12/11'41 on General License 11-A & 77 General License 11-A General License 77. Out 6 p.m. by Special Messenger Regraded Unclassified 70 FOREIGN EXCHANGE CONTROL December 15, 1941 TO THE PRESIDENTS OF ALL FEDERAL RESERVE BASES. the FOLLOWING IS THE TEXT OF GENERAL LICENSE so. GRA AND PRESS RELEASE ISSUED IN COMMECTION THEREWITH: LHERE TAKE II ASSEXED GENERAL LICENSE AND PRESS heleasy YOU ARE REQUESTED TO HAVE COPIES OF THESE DOCUMENTS PREPARED AND DISTRIBUTED TO ALL BAS KS INCLUDING ALL BANKS IN YOUR DISTRICT AND TO ALL OTHER PERSONS AS YOU MAY DEEM APPROPRIATE. THE FOLLOWING 28 A TEXT OF CIRCULAR NO. 79, MERS TAKE IN ASSEXED GIRCULAR YOU WILL BE FURTHER ADVISED WITH RESPECT to THE FORMS REFERRED TO IN GENERAL LICENSE NO. SEA. (Signed) & 1. Feley, an Acting SECRETARY OF THE TREASURY LCA:gt 12/15/41 Regraded Unclassified 71 Regraded Unclassified COPY COUFIDENTIAL TREASURY DEPARTMENT Foreign Funds Control December 15, 1941 CIRCULAR NO. 79. Reference is made to General License No. GBA, as amended. (1) You should promptly institute a program of withdrawing all guards and supervisory personnel and removing the posting from the premises of =11 enterprises which would otherwise obtain the benefits of General License No. 68A, unless such enterprises (a) are of such size as to justify the maintence of guards end supervisory personnel, or (b) are known to you to be dangerous to the national interest. It to expected that in so for 00 possible you will effect this part of the program within the oning week. (2) You are authorized purment to the provisions of Paragraph 15 of General Ruling No. 4, as amended, to exclude from the provisions of General License No. 68A any person who on the basis of the considerations referred to in paragraph (1) and (b) above should be excluded therefrom. In sush oxses, you should assign guards or supervisory personnel and post the premises, if you deem such action desirable. (3) In cases in which you deem it desirable to continue to sain- tain, or to install, guards or supervisory personnel, you are authorized to issue appropriate operating licenses where you does such action not inesn- sistent with the national interests. You should report to the Treasury De- partment 08 promptly 00 possible full facts concerning all persons and enter- prises which are not permitted by you to regume operations. (4) Persons excluded from the benefits of General License No. 68A because of the maintenance of guards 07 supervisory personnel or because of the posting thereof, or specifically excluded by you pursuant to Paragraph 15 of General Ruling No. 4, as enended, should be included in notices seat by you to the bonking nstitutions with when such persons are known to have accounts. (5) You should return to such enterprises AS promptly as possible and to the naximum extent consistent to our national interests, any resords and documents and other papers which may have been removed under your authori- sation from the premises of concerns operating under General License No. 68A or under apecific license issued by you. 72 - 2 - (6) with respect to enterprises which, prior to December 7, 1941, did not have the benefits of General License No. 68 and which were doing business under an operating license granted by the Treasury Depart- ment, there will be forwarded to you e. list of numbers of these operating licenses which should be reinstated by you unless the enterprise in question is known to you to be dangerous to national interests. You are authorised to sake such changes in operating licenses &B are necessary to conform them to present enditions. (Signed) E. H. Foley, Jr. Acting Secretary of the Treasury. Regraded Unclassified 73 TREASURY DEPARTMENT Washington Press Service DEC 15 1941 The Treasury Department today further relaxed to 1000 extent and under appropriate zafeguarde the tight restric- tions which had been Placed upon Japanese residing In 11:10 numbers. It will to remembered that on the outbreak of war (:- Treasury, At 4 precautionary seasure, placed 6 complete stoppare on all Japanese financial and commercial transactions look subtody of many Japanese enterprises. : December 11, the Treasury Issued regulations diversing Ilving expenses and wages for Japanese nationale In tax milod States and regulations coverning Japanese mationals In the production, marketing, and distributing of food and acricultural products. The general license Issued today to the Treasury looks the accounts of Japanese nationals who have resided within the continental united States since June 11, 1040 and persits business enterprises within the confinental Inited States owned asi controlled sude callocals to continue to operate, except in those cuses in which Treasury representatives are saintained on the presious up an offlciel Preasury notice is nosted indicating that such premises are under Government control. It. is anti- cleated that Treasury representatives and posted notices will le removed from the premises of DAKE Japanese enterprises in with they 400 not maintained, thus allowing such enterprises is resume normal operations under such general license. It 10 curther anticipated that special business operating licenses will La Issued to any Japanese enterprises In which Treasury representatives are continued to Le maintained allowing such to operate under Fovermment surveillance. Representatives in this country of suncerns located did or owned and excirolled W persons located abroad are excluded Ire the privilegue of the general license. The Japanese nationals who are given the benefits coay's license are subjected to certain reporting require- are other restrictions which vill constitute enfeguards against the abuse of such benefits. 12-14-41 Regraded Unclassified DCE if FEDERAL REGULATIONS 74 do ss - may and Finance: Treasury upter I - Offices, Department of the Treasury art 181 - teneral licenses who Insure Order 10. uses, April 10, 1940, w and regulations Lessed personal thereto. person 131.00A TREASURY DEPARTMENT Office of the fearctary December 18, 1041. LICENSE NO. one wish REBUTIVE cause 14. uses, APRIL 10, 1940, w ARTISED, AND RESULATIONS ISTURE PURSUANT TREATO, RELATING to TRANSACTIONS DI FOREIGN RECEASE. LTC.. (1) A general license Le hereby (a) Licensing M a generally lismood actional my individual who is a national of Japan and who be boen residing only in the continuatal United states at all time - ml since June 17, 1940, pal (b) Licensing M a generally licensed national my partnership, accosiation, scrporation w other organization within the continutal Dalted Antos which is a national of Japan solely by resson of the laterist therein of 6 person w persons liemend as generally licensed nationals personal to this general items. (a) This general liemse shall not be docume to license M a generally licensed national: (a) say individual, partnership, association, corporation # other organization as the proudem of which the treasury Department unistaine & representative or guard or as the prested of which there 10 posted as official Treasury Department natise that the promises are under the centrol of the United Itstes deversement, or (b) lay bask, work conguay, skipping omern, - ship agency, w company, or (a) my person who, on of since the effective date of the Order, has represented or noted as agest for my person losted outside the embinestal United lister of too my person oned of controlled by persons losated outside the emitiontal United Mates, w . hn 183; - list, 8(b), w Mat. 418 and 1961 See. 1, 4d State is D6 state 179, is. from aree, April 10, 1960, of combed by 18. Order eres, Ime 16, 1061, In. Order 8958, July 16, 1941, and Ex. Order 1963, ", 1041, Regulations, April 10, 1940, as ammed Jame 14, 1941, and July as, 1041. Regraded Unclassified 75 - a - (a) lay yorson to a of siase the offective date of w Order has noted w purported w w directly w indirectly the the beautit w a behalf of my n Individual 1 I imme I w my person the to a national of Japes by - of any fact other this that mah person has hom decisibled sa, or a subject of cltim x, Japan at my the w w state the effective date of the order. (8) A report an the appropriate series of form 173-500 stall to filed with the appropriate Federal Reserve Bask within a days after the date hereef with respect to the property interests of every person Licensed herein as a generally licensed national M the total value of the property interests to w reported is $2,000 or - (4) Every business enterprise licensed herein as a generally liemsed cational shall also file with the appropriate Federal Recerve that within so days ofter the date hereef as affidavit cotting forth the information required by Perm 1783-1, If the total value of all property interests of cuch business m torprise is to - of 15,000. (a) leaking institutions within the Raited Hotes offecting page wate, transfers of withdrawn.le in 120000 of $1,000 during my mith form the account of my prom Licensed W a generally Liemsed national hars- wher, shall file prosptly with the appropriate Federal Reserve Smit 8 report showing we details of and treasactions. (c) This general liemse shall ast authorise my transaction which, directly or indirectly, substantially disinishes w importis the assets within the enutinental United Plates of my national of Jupen w otherwise projedicially affects the financial position of such national within the continental United states. (7) As and to tide general liemes, the term entergrise" shall - my individual proprictorship, partnership, association, corporation or other organization engaged in commercial w 0 the bastaces activities within the continuted United States. (Signed) R. H. Foley, Jr. Acting Secretary of the treasury, Regraded Unclassified roreign Funds Control 76 2020120 Salaries and Expenses Allot Foreign Exchange Control 1942 - 1-b December 15. 1941. To the Presidents of all Federal Reserve Banks: This telegram is supplemental to our similar telegram of December 11. You are instructed to add the following amendment "This license does not authorise any transaction prohibited by the Treasury Representative assigned to this enterprise." to licenses in your district in the names of the following business enterprises as promptly as you are able to effect the installing of Treasury Representatives in such business enterprises: ST. DERRIS-EURLMANN-ST. CLAIR DYESTUFFS CORP. 55 Van Dam Street, New York City. UNION PHARMACEUTICAL CO. INC., Bloomfield, New Jersey. ARTRA COSMETICS, INC. Bloomfield, New Jersey. SYNTRETIC NITROGEN PRODUCTS CORP. 285 Madison Ave., New York City. AMERICAN VELSOL COMPANY, 20012 Ninth Street, Lorain, Ohio. MAYWOOD CHEMICAL WORKS INC., New Jersey. BUFFALO ELECTRO-CHENICAL CO., INC. Sawyer Road, Tonawanda, New York. BILHUBER-KNOLL CORP., Orange, New Jersey Regraded Unclassified 77 to IV PARTIFICATE OF ALL FEDERAL RESERVE BANKS Page 2 1. BILLINES. INC. Grance, New Jersey AMERICAS ASSABIA CO. verehants and Manufacturers 3106.. llouston. Texas STAD HARD FABRICATORS, INC. Long Island City, have York AMERICAN OBERMAINE COMP. 355 Walton 190., Bew Tork City TO SIRUATA CORPORATION 27 william Street, New York City JOBASD MARIA PARING, INC. 2T William street, Sew York City PROVALLE DEPARATOR CO., INC. 30 Grange street, Bloomfield, liee Jersey AMERICAN Luadi COMPORATION 80 Broad Street, Nov York City DW8 AND CERVICAL CORPORATION 60 Bread Street, lieu York City THEOCOSE WILLE ASE CO., Inc. 104 Front Street, liew York City les Orleans, Louisiana AJAX TRANSPORTATION COMPANY 208 North greadway st. Louis, Vissouri ROBKAT C. KATER & COMPANY. IKC. New York City BOUTSINS RESID * CUBNICAL COMPLETE Glen Saint Mary, Florida Regraded Unclassified 78 2 the Presidents of all Federal Reserve danks Page 3. After the preasury Representative is installed and has worked but a suitable procedure with the banking institutions involved for the honoring of checks and other items outstanding and to be issued in the future, the following clause should be inserted in the licenser PNO payment, transfer or withdrawal may be effected unless approved by such Treasury Representative." The Treasury Representatives may be national bank examiners, bustoms officers, Treasury Investigators, or any other available (reasury personnel all of whom are being instructed to get in touch ith you immediately and be at your disposal in this connection. Such apresentatives shall be guided by the following general instructions: (1) No person shall be permitted into or out of the premises of such enterprises without approval of the Treasury Representative. Do ot keep out officials, employees and others on & wholesale basis but serely those individuals whom you have reason to believe to be dangerous. (2) Treasury Representatives shall determine the number and location of books and records and access to or use of such books and records shall be under surveillance of the Treasury Representatives. lo books or records shall be destroyed, effaced, nor shall any records 10 removed from the premises without the permission of the Treasury Representative. (3) No mail shall be delivered to such enterprises or opened xcept in the presence of or as authorized by the Treasury Representative Regraded Unclassified 79 ) the Presidents of all Federal Reserve Banks Page 4. who shall have the right to inspect all incoming and outgoing mail. (4) No payments, transfers or withdrawals of funds from bank accounts or otherwise shall be permitted except with the prior approval of the Treasury Representative. Approval shall not be given except for payments, transfers or withdrawals in the normal course of the legitimate business of the enterprise. Approval for normal expenditures shall be given promptly. (5) No changes in personnel shall be made without the prior approval of the Treasury Representative. (6) As soon as sufficient Treasury personnel for the purpose J made available the Treasury Representative and his staff shall begin 8. careful study of all books, files, correspondence, and all other records. The object of such & study will be to determine what trans- actions, relationships, activities and personnel of the business enterprise are opposed to the National interest. (7) Any transactions, relationships or activities opposed to the National interest shall be prohibited by the Treasury Representative. Appropriate measures shall be taken with reference to personnel whose continued employment is opposed to the National interest. 1.1. Foley, 22. SECRETARY OF THE TREASURY. ( 7:38:JUP 12/18/41 D.J.S. BB 12/15/41 - 11:30 A.M. Cleared over the phone with Leo Crowley and Dean Acheson after Secretary said go ahead bf they approved. F.H.F. Jr. Regraded Unclassified 80 THE UNDER SECRETARY OF THE TREASURY WASHINGTON December 15. 1941 Conference in the Secretary's Office this morning with Chairman Eccles. Kr. Morris and Mr. Bell vere also present. Mr. Scoles said that be would like to propose legislation to amend the Federal Reserve Act so that the Treasury could sell its securities directly to the Federal Reserve Banks rather than going through the open market. This restriction WSS placed on the Federal Reserve Banks by the Banking Act of 1935. It WBS proposed at that time by Senator Glass, who insisted upon including this restric- tion in the Act. The Secretary told Mr. Eccles that he was in favor of eliminating it at this time as it would help us level off the money market during tax payment times when the receipts wight be larger than the payments. It was agreed that Mr. Eccles would contact Mr. Oscar Cox regarding the proposed legislation; that he would prepare a letter which he and the Secretary both would sign, recommending 1t; and that Mr. Eccles and the Secretary would see Mr. Glass personally about the matter. Mr. Eccles then discussed at some length the question of Federal Reserve Banks making industrial loans under Section 13(b) of the Federal Reserve Act. Re said that the provision of that nection is so restrictive that the banks can not make loans without running the risk of impairing E. part of their capital structure. This, of course, they can not afford to do in these times. He suggests that the section either be amended to give the banks greater flexibility in making these loans or that the section be repealed entirely and the whole matter of making loans to small business concerns be left in the hands of the Federal Loan Administrator. He said that there was a great deal of objection in the War Department to the Administrator having this authority because he Is not liberal in making these loans and it is handicapping the War Department in entering into contracts with scall con- FORDEFENSE cerns for the production of defense materials. BUY Regraded Unclassified 81 - 2 - The Secretary told Mr. Eccles that we would study his memorandum and then he thought we ought to have a general conference with Mr. Jones regarding the matter. Generally speaking, he said, he was not in favor of two or more lending agencies in Washington but he was in favor of making some provision so that small businesses could borrow funds promptly. He said that when he finished reading the memorandum he might agree that the Federal Reserve should handle it rather than the Federal Loan Administrator. He said he would discuss this matter with Eccles after he had read it. The other matter discussed was the date for the open market committee to discuss with the Secretary the matters considered by them at their meeting on Friday of last week. The Secretary agreed to see them at three o'clock on Thursday, and I told them I could see them at 10:30 a.m. own Regraded Unclassified TREASURY DEPARTMENT 82 INTER OFFICE COMMUNICATION DATE December 15, 1941. Mr. Foley Mr. White TO Mr. Hass FROM Dave H. Morris, Jr. This morning Mr. Eccles discussed with the Secretary (Mr. Ball and I were also present) the desirability of either repealing Section 13(b) of the Federal Reserve Act, or modifying it radically 80 as to make it really workable. Mr. Eccles points out that under Section 13(b) as it now stands, the Reserve Banks and the Industrial Committeeseet up to pase on loans are necessarily extremely conservative in the making of loans, with the result that very few are actually made. With terrifically expanded activity in defense industries. the smaller companies have borrowed all they legitimately can, based on their capital set-up, from the commercial banks. However, in many instances it is imperative that they obtain additional working capital to provide for actual production. There is rapidly increasing pressure on this matter from the Army, Savy, and Mr. Odlum's group. Mr. Eccles points out further that while the RFC might make loans, they have never set up a properly decentralized force to handle small loans. Where big ones are concerned and the matter can be handled from Washington, every- thing works smoothly, but because of the requirement that practically every- thing be passed on by Washington, the making of small loans has, in practice, bogged down and without a large expansion of the RFC machinery ie bound to continue to do BO. With the above in mind, and also believing that if small loans are going to be made by any Governmental agency the banking communities would prefer Regraded Unclassified 83 - 2 - them made through the Federal Reserve Banks, Mr. Eccles suggests some entirely new legislation covering this proposal and submitted to the Secretary this morning a memorandum on the subject together with a copy of the proposed legis- lation. In doing no, he said he was fairly well satisfied with everything ex- cept the restrictions on the length of period for the loan and the amount to would be paid back within certain periods and, personally, he will prefer to remove all restrictions and leave the terms to the discretion of those making the loans. Mr. Eccles is very anxious to get a reply from the Treasury Department within the next day or two, so as to get it started before the Christmas rush. The Secretary has said he will give him an answer just as soon as possible. Consequently, will you let no know as soon as you have been over the attached material and are ready to discuss it and I will arrange a meeting. DHMJ Attachments: Summary of Industrial Loan Corporation Bill (1942), Principal points of Industrial Loan Corporation Bill (1942), Draft of Bill. Copy to Mr. D. W. Bell. SUMMARY OF INDUSTRIAL LOAN CORPORATION BILL (1942) 84 Creation of Corporation and Termination of Reserve Bank Authority. - The present limited industrial loan authority of Federal Reserve Banks would be terminated and transferred to broadened and more effective form to the Industrial Loan Corporation created by the bill. Functions of Corporation, - The Corporation could extend !inAncial assistance to commercial or industrial businesses by acquiring their obligations or preferred stock or by making commitments to acquire such obligations or stock. Such obligations could not have B. naturity in excess of 10 years. Periodic repayments on all such obligations and stock would be required in order to retire at least 40 per cent of prin- cipal amount within a 10-year period. Loans could be made to businesser directly or in cooperation with financing institutions, but not more than $1,000,000 of funds could be outstanding at any time to any one business. Capital and Surplus of Corporation. - The Secretary of the Trensury is authorized by existing law to pay to the Federal Reserve Banks approximately $139,000,000 to enable them to make industrial loans. This amount is already appropriated for this purpose. Under this authority approximately $27,000,000 has been paid. The bill would require payment of the remaining $112,000,000. These funds would be used by the Federal Reserve Banks to supply the capital and surplus of the Corporation, con- sisting of about $39,000,000 of surplus and $100,000,000 of capital stock to be issued to the United States and delivered to the Secretary of the Treasury. The Corporation would take over outstanding industrial loans and commitments of the Federal Reserve Banks, Borrowing by Corporation. - The Corporation could borrow from any Reserve Bank on promissory notes secured to the bank's satisfaction, but its aggregate debt to all reserve banks at any one time could not ex- :eed $250,000,000. Management of Corporation. - The members, Chairman and Vice Chalresn of the Board of Governors of the Federal Reserve System vocia " respectively. directors, chairman and vice chairman of the Corpors- tion. It could utilize the Reserve STATE 5. Its agents. and could use the employees of the Board or the Reserve Brike BE its own officers or employees but without extra compensation to them. of The Board of could the Dissolution dissolution of the Corporation. Corporation whenever there is no longer a ressonable need for its facilities. Upon dissolution, all its agueta is MICEIP of indoctedness will be Dell to the United States: Regraded Unclassified 85 PRINCIPAL POINTS OF INDUSTRIAL LOAN CORPORATION BILL (1942) General Objective. - Heretofore the Industrial Loan Corpora- tion Bill and the other Read bills had as their primary objective the assistance of emall business. The present Industrial Loan Corporation Bill has & broader objective, as set forth in the preamble. This ob- jective is to further the defense program by helping the country's in- dustries to obtain naximum production both of defense goods and of civilian supplies, As a corollary to this, it would assist the Gov- erament's anti-inflation program by increasing the supply of goods of all kinds. In this process small business units would of course bene- fit since they would in many cases be enabled to maintain or increase their production where additional financing could accomplish this. The preamble also contemplates that the operations of the Corporation shall nesist in meeting the requirements of the armed services and of the defense agencies established by executive orders of the President. Industrial Loan Corporation. - The bill would terminate the present limited authority of the Federal Reserve banks to make industrial loans, and would transfer this authority. in broadened and more effective form, to the Industrial Loan Corporation, which the bill would set up as an integral part of the Federal Reserve System, The activities of the Corporation could be promptly set in motion through the existing facill- ties of the Federal Reserve System. The plan would involve no increase in the budget. Loans to Business by Corporation. - The Corporation could erw tend financial assistance to commercial or industrial businesses by ac- quiring their notes, debentures, bonds, or similar obligations, by pur= chasing preferred stock in such businesses, or by making comitments to acquire such obligations or stock. Such obligations could not have B. maturity in excess of 10 years and provision would have to be mde, in of manner satisfactory to the Corporation, for periodic repayments or re- tirements on such obligations and stock sufficient to repay or retire at least 40 per cent of the principal amount within & 10-year period. The Corporation could extend its assistance to industrial or commercial businesses directly or in cooperation with financing institutions, but it could not have more than $1,000,000 of funds outstanding at any time to any one commercial or industrial business. Capital and Surplus of Corporation. - The capital and surplus of the Industrial Loan Corporation would be supplied from a fund of about $139,000.000 which has already been appropriated (out of the increment resulting from the devaluation of the dollar) for the purpose of assist- ing Federal Reserve banks in making industrial loans. The Secretary of the Treasury vas authorized to pay this sum to the Reserve banks for this purpose on the security of the approximately $139,000,000 of Federal Doe posit Insurance Corporation stock which the Reserve banks were required Regraded Unclassified 86 to purchase when the Federal Deposit Insurance Corporation vas organized. Purmuant to this authority, the Secretary has paid approximately $27,000,000 to the Reserve banks and the proposed plan would require him to pay the Delence. or about $112,000,000. The Reserve banke would be required to use rill of these funds to supply the capital and surplus of the Industrial Loan Corporation which would consist of about $39,000,000 of surplus and $100,000,000 of capital stock, to be issued to the United States and de- livered to the Secretary of the Treasury. The Federal Deposit Insurance Corporation stock now owned by the Federal Reserve banks would also be transferred to and be owned by the United States. The outstanding in- dustrial loans and commitments of the Federal Reserve banks would be transferred to the Industrial Loan Corporation. Upon the dissolution or liquidation of the Industrial Loan Corporation all its assets in ex- case of indebtedness would be paid to the United States. Borrowing by Corporation. - The Corporation could borrow from any Receive bank on the Corporation's promissory note Recured to the antisfaction of the Reserve bank but its aggregate debt to all Federal Reserve Banks at any one time could not exceed 250 million dollars. Management of Corporation. - The members of the Board of Gover- nors of the Federal Reserve System would be the directors of the Industrial Loan Corporation and the Chairman and Vice Chairman of the Board of Gover- ucre would be chairman and vice chairman, respectively. of the Corporation. The Corporation could utilize the Federal Reserve banks as its agents, and could use any employees of the Board of Governors or the Reserve banks as Its ove officers or employees, reimbursing the Board of Governors or the Reserve banks for such services. No director of the Corporation and no of- ficer or employee of the Board of Governors or of any Reserve bank would receive any extra compensation for his services for the Corporation. The MII provides that the Corporation "shall endeavor to decentralize its BC- tivities" and that functions other than the prescribing of regulations or the determination of general policies may be performed through designated representatives. Dissolution of Corporation When Not Needed. - The Board of Gov- ernors of the Federal Reserve System could order the dissolution and liqui- dation of the Corporation whenever it appears, either by reason of decreased volume or otherwise, that there is no longer B. reasonable need for the facilities of the Corporation. PROPOSED BILL VS. EXISTING LAW (a) Loan Policy. - In peace time, loans made by commercial banking institutions are necessarily based primarily upon the soundness of the risk. This has been true, although to B. lesser degree, as to loans cade by the Federal Reserve Banks under section 13b of the Federal Reserve Act In time of WET, however, it is essential that all necessary credit be Regraded Unclassified 87 made available to finance maximum possible production. In cases where this cannot be done without the assumption of risks which are not proper for commercial financing institutions to assume, the Gov- ernment must provide the funds in some manner. The removal of the restrictions in the existing section 13b would assist materially in this direction. The proposed Corporation, however, under the con- trol of the Board of Governors, which 10 e governmental agency, could adopt and more effectively implement the policies necessary to attain these ends. using the Federal Reserve Bank officers as agents for making loans. In this situation, such policies would not run counter to the responsibilities of the directors of 8. Federal Reserve Bank for the conservation of the bank's assete, since they would not pass upon the loans made by the Corporation. (b) Limitation on Loans. - The existing law restricts the authority of Federal Reserve Banks in this matter BO that loans can be made only to businesses which are established, only for working capital purposes, and only for five years. The law also requires that direct loans to industry be made only on e. sound and reasonable basis. (c) Availability of Funds. - Under existing law, the Secre- tary of the Treasury is authorized to pay the entire amount of @139,000,000 to the Federal Reserve Banks, and it would be possible for all losses sustained by the Federal Reserve Banks in using either this amount, or en additional sum up to $139,000,000 from their own surplus, to be taken from the amount thus provided by the Secretary. However, under his regulations on this subject, the Treasury has supplied only about one-half of the amount of outstanding loans made by the Federal Reserve Banks, and the loans have been made on & participating basis. Regraded Unclassified 88 A BILL To aid in the national defense program by liberalizing credit facilities for business and industry, to aid in resisting inflation by making available additional credit needed to maintain maximum production of civilian goods consistent with the defense program, to establish an in- dustrial loan corporation and for other purposes: Whereas, it is essential to the success of the national defense program that business and industry maintain the maximum possible production of goods and services for defense and for civilian supply; and Whereas, many small and medium size business enterprises are oarticipating or desire to participate either as contractors, subcontractors, or otherwise in the production of goods and materials necessary to the defense program, and could in many instances attain greater production if they were able to obtain requisite financial assistance; and Whereas, other such enterprises are producing goods and services necessary for civilian supply and could in many instances attain greater production if they were able to obtain requisite financial assistance; and Whereas, such production for civilian supply contributes to national defense by helping to maintain a reasonable standard of living and aids the Government's anti-inflation program by increasing the supply of civilian goods within the limits of established priorities and allocations; and Regraded Unclassified 89 -2- Whereas, in order that greater assistance may be rendered by the Federal Reserve System to the armed services and the defense agencies esteblished by executive ordere of the President, it is ossential that Bill agency of the System be given bront authority to onke loans to industry and business for defense end civilien needs; FOR, therefore, Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 13b of the Federal Reserve Act is puended to read as followe: "SEC_ 13b. (1) This section may be cited 9.5 the 'Industrial Long Corporation Act'. "(2) There is hereby created a body corporate with the name Industrial Losn Corporation (hereinafter called the Corporation). The principal office of the Corporation shell be located in the District of Solumbia, but it may designate and utilize as its agents for the per- formance of its functions any or all of the Federal Reserve banks, which are hereby authorized to act in such capacity, may establish 'reach offices, or may designate and utilize other persons or other existing institutions ES its agents for the performance of its functions. The Corporation shall have power (a) to adopt, alter, and use a cor- norate seal, which shall be judicially noticed: (b) to have succession until dissolved by Act of Congress or in accordance with subsection (13) of this section: (o) to sue and be sund, complain and defend, in Regraded Unclassified 90 any court of law or equity; (d) to make contracts and to lease or acquire such real estate and equipment as may be necessary for the transaction of its business; (e) to prescribe by its board of di- rectors by-laws and rules, regulations, and requirements, not incon- sistent with law, as to the manner in which its business and opera- tions may be conducted and the powers granted to it by law may be exercised and enjoyed. The Corporation may exercise all powers specifically granted by this section and such incidental powers as may be reasonably necessary to effectuate the provisions of this section in accordance with its purposes and to prevent evasions of such provisions. All rules and regulations of the Corporation shall be prescribed by the board of directors and all determinations of matters of general policy for the Corporation shall be made by the board of directors; but it is the sense of Congress that in the ad- ministration of the Industrial Loan Corporation Act the Corporation shall endeavor to decentralize its activities, and all functions of the Corporation other than the prescribing of rules and regulations and the determination of matters of general policy may be performed through such members of the board of directors, such Federal Reserve banks, or such officers, employees, or representatives as the board of directors may prescribe; and the board of directors shall not be required to authorize, approve, or otherwise pass upon individual transactions. Regraded Unclassified 91 "(3) For the purpose of providing funds to a commercial or industrial business, the Corporation is authorized, subject to such regulations and requirements as it may prescribe, (a) to make loans to, discount obligations for, and purchase obligations from such a business; (b) to purchase preferred stock in a corporation engaged in such a business: (c) to discount for or purchase from a financing institution obligations of, or preferred stock in a cor- poration engaged in, such a business; (a) to make loans to a. financ- ing institution on the security of such obligations or preferred stock: and (e) to make commitments to make any such loans, discounts, or purchases. The Corporation shall not make or acquire any such loan or obligation which has a maturity exceeding ten years, nor shall the Corporation purchase any such preferred stock unless the issuer of the preferred stock is obligated to retire the same within ten years; and all such loans, obligations, or preferred stock shall pro- vide in a manner satisfactory to the Corporation for installment pay- ments on the loan or obligation, or periodic retirements of the pre- ferred stock, sufficient to amortize at least 40 per centum of the principal amount within a period of ten years. The Corporation may include in its regulations, among other things. provisions regarding the kinds of preferred stock which it may acquire, and regarding the purchase price of obligations and preferred stock and the rates of interest and discount applicable to transactions hereunder, and may Regraded Unclassified 92 define for the purposes of this or other subsections of this section the terms 'commercial or industrial business', 'financing institu- tion', 'obligation', and 'preferred stock'. The Corporation may 6x- ercise the authority granted in this subsection either directly or in cooperation with financing institutions; but the amount of funds pro- vided by the Corporation pursuant to this subsection for any one com- mercial or industrial business and outstanding at any one time shall not exceed $1,000,000. "(4) The Corporation is authorized to borrow from any Fed- eral Reserve Bank, and any Federal Reserve Bank is authorized to make advances to the Corporation, on the latter's promissory notes secured to the satisfaction of such Federal Reserve Bank, but the amount of the indebtedness of the Corporation at any one time to all Federal Re- serve Banks combined shall not exceed the sum of $250,000,000. "(5) The net earnings of the Corporation, after making ade- quate provision for losses, shall be transferred to its surplus or undivided profits account. Upon the liquidation or dissolution of the Corporation all assets remaining after the payment of all in- debtedness of the Corporation shall be paid to and become the prop- erty of the United States. "(6) The Corporation is authorized to sell, exchange, or otherwise dispose of any obligations or preferred stock which it has acquired, with or without its endorsement or guaranty and upon such Regraded Unclassified 93 terms and conditions as it may doem advisable. The provisions of the Securities Act of 1933 shall not apply to any obligations issued by the Corporation under subsection (4) of this section, nor to transactions by any person in connection with any acquisition by the Corporation of obligations or preferred stock or any commitment to acquire them under subsection (3) of this section, nor, after any such obligations or stock are 80 acquired by the Corporation, to any subsequent sale, exchange, or other disposition of them by any person. "(7) The Corporation, its franchise, loans and other assets, its capital stock, its surplus, its reserves, and its income, shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or other taxing authority; except that any real property of the Corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed. "(8) Notwithstanding any other provision of law, all suits of a civil nature at common law or in equity to which the Corporation shall be a party shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such suits; and when the Corporation is a defendant in any such suit, it may, at any time before the trial thereof, remove such suit from & State court into the district court of the United States for the proper district by following the procedure for the re- moval of causes otherwise provided by law. No attachment or execution Regraded Unclassified 94 -7- shall be issued against the Corporation or its property before final judgment in any suit, action, or proceeding in any State, county, municipal, or United States court. "(9) The management of the Corporation shall be vested in a board of directors consisting of the members of the Board of Gov- ernors of the Federal Reserve System, and the chairman and vice chairman of the board of directors shall be the chairman and vice chairman, respectively, of the said Board of Governors. At meetings of the board of directors three members shall be necessary for a quorum. The Corporation may utilise, as its officers and employees, any employees of the Board of Governors of the Federal Reserve System, and any officers or employees of any Federal Reserve bank. If the Corporation should find it advisable, it may employ additional of- ficers or employees, and the employment, compensation, leave, and expenses of such additional officers and employees shall be governed solely by the provisions of this section, specific amendments there- of, and rules and regulations of the Corporation not inconsistent therewith. No director of the Corporation and no officer or employee of the Board of Governors or of any Federal Reserve bank shall re- ceive any compensation from the Corporation by reason of any services which he may perform for it. The Corporation shall determine and prescribe the manner in which its obligations shall be incurred and its disbursements and expenses allowed and paid, and may deposit in Regraded Unclassified 95 -8- any Federal Reserve bank its funds, which shall not be construed to be Government funds or appropriated moneys. The Corporation may in- vest its funds in direct obligations of, or obligations guaranteed as to principal and interest by, the United States. The Corporation shall reimburse the Board of Governors of the Federal Reserve System and the Federal Reserve banks and its other agents for their expenses in carrying out the provisions of this section on such basis as may be determined by the Board of Governors of the Federal Reserve System. "(10) The Corporation shall have a capital stock and sur- plus which shall be paid in in the amounts and out of the funds hereinafter provided. The Secretary of the Treasury is hereby author- ised and directed, on the date on which the Industrial Loan Corpora- tion Act becomes effective, to purchase from each Federal Reserve bank the stock of the Federal Deposit Insurance Corporation hereto- fore subscribed for by such bank and to pay to such bank therefor an amount equal to the entire sum which the said Secretary was originally given authority to pay to such bank under the provisions of this sec- tion less the difference between the aggregate amounts paid to such bank by the Secretary of the Treasury and the aggregate amounts paid to the Secretary of the Treasury by such bank under the provisions of this section prior to the date on which the Industrial Loan Corporation Act becomes effective. When the payment of such amount has been made by the Secretary of the Treasury to such bank, the United States shall become and be the owner of all the stock in the Federal Deposit Insurance Regraded Unclassified 96 - 9 - Corporation heretofore subscribed for or held by the said Federal Reserve bank and all rights of the said Federal Reserve bank with respect to said stock shall be transferred to and vested in the United States. Any and all of the obligations and liabilities to the United States and to the Secretary of the Treasury which have been imposed upon or incurred by any Federal Reserve bank under this section at any time prior to the date on which the Industrial Loan Corporation Act becomes effective shall on said date be completely discharged and terminated, and no Federal Reserve bank shall, after said date, have any obligation or liability to the United States or the Secretary of the Treasury by reason of any provisions of this section. The amount required to be paid to each Federal Reserve bank by the Secretary of the Treasury under the provisions of this section shall be paid out of the miscellaneous receipts of the Treas- ury created by the increment resulting from the reduction of the weight of the gold dollar under the President's proclamation of January 31, 1934, and there is hereby authorized to be appropriated, out of such receipts, such sums as shall be required for this purpose. "(11) Upon the receipt by each Federal Reserve bank from the Secretary of the Treasury of the amount specified in subsection (13) hereof, such Federal Reserve bank shall forthwith pay the entire amount so received to the Industrial Loan Corporation and also shall forthwith pay to the Corporation an amount equal to the difference Regraded Unclassified 97 - 10 - between the aggregate amounts paid to such bank by the Secretary of the Treasury and the aggregate amounts paid to the Secretary of the Treasury by such bank under the provisions of this section prior to the date on which the Industrial Loan Corporation Act becomes ef- fective: and out of the aggregate amounts paid to the Industrial Loan Corporation in this manner the Corporation shall set aside $100,000,000 as its capital and the remainder as surplus and shall issue to and in the name of the United States, and deliver into the custody of the Secretary of the Treasury, capital stock in the amount of $100,000,000. No stock in the Industrial Loan Corporation shall be transferable, have any voting rights, or be entitled to any dividends. Upon the pay- ment of such funds to the Industrial Loan Corporation by the Federal Reserve banks, the Corporation shall forthwith purchase from each Re- serve bank, and each Federal Reserve bank shall sell to the Corpora- tion, all assets held by the Reserve bank which were acquired under the provisions of this section prior to the date on which the Industrial Loan Corporation Act becomes effective, and such sale shall be made at the appraised value of the assets on the effective date of the Industrial Loan Corporation Act, such appraisal being made according to such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe. All commitments of each Federal Reserve bank outstanding under this section on the date on which the Industrial Loan Corporation Act becomes effective shall forthwith be taken over and assumed by the Corporation, Regraded Unclassified 98 - 11 - (12) When designated for that purpose by the Secretary of the Treasury, the Corporation shall be & depositary of public moneys under such regulations as may be prescribed by said Secretary; and it may also be employed as a fiscal agent of the Government; and it shall perform all such reasonable duties, as depositary of public money and fiscal agent of the Government, as may be required of it. Obligations of the Corporation shall be lawful investments, and may be accepted as security, for all fiduciary, trust, and public funds the investment or deposit of which shall be under the authority or control of the United States or any officer or officers thereof. The Corporation shall be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. "(13) Whenever it shall appear to the Board of Governors of the Federal Reserve System, either by reason of a decrease in the volume of the operations of the Corporation or otherwise, that there is no longer a reasonable need for the continuance of the facilities of the Corporation, the said Board may order the dissolution of the Corporation, and thereupon the Corporation shall be liquidated and its affairs wound up under regulations prescribed by the said Board. (14) The Corporation shall annually prepare a full report of its operations, and this report shall be included by the Board of Governors of the Federal Reserve System in the annual report made by it to the Speaker of the House of Representatives in accordance with the provisions of section 10 of this Act. Regraded Unclassified 99 - 12 - SEC. 2. Subsections (h), (1), and (k) of section 22 of the Federal Reserve Act are amended by inserting after the words "Federal Reserve bank" wherever they occur in such subsections the words "or the Industrial Loan Corporation"; and subsection (j) of said section 22 is amended by inserting after the words "Federal Reserve bank* the words "and of the Industrial Loan Corporation". SEC. 3. (1) The third paragraph of section 24 of the Fed- eral Reserve Act is amended by striking out the word "established" where it appears in said paragraph, and by substituting the words "the Industrial Loan Corporation for the words "a Federal Reserve bank" wherever they appear in said paragraph. SEC. 4. Sections 1, 2, and 3 of this Act shall become effective on the 1st day of the second calendar month following the date of its enactment. 12/15/41 Regraded Unclassified Itm. Toy 100 Nr. Lindlow PARTMENT "tekton IMUNICATION DATE December 15, 1941 TO FROM Secretary ABA Vorgenthau Mr. Hass subject: Current Developments in the High-grade Security Markets; Effect of the War on the Prices of the Two New Bond Issues SUMMARY (1) In the first three trading days following the Jopanese attack on December 7, prices of direct and guaranteed United States Government securi- ties declined substantially (Chart I). Since Wednesday prices have recovered perceptibly. Price movements of all maturity classes of Treas- ury securities hed been downward in the four weeke preceding the Japanese attack. The 2-1/2 percent bonde of 1967-72 had been especially weak, losing almost 2 points from November 8 to December 6. (2) The two new Treasury bond issues lost their pre- miume of 1-3/8 points by falling to 100 on Monday morning following the Sunday Jap attack on the United States (Chart III). After being maintained at par on Tuesday, Wednesday, and Thursday through Federal Reserve Open Market purchases, both issues floated fractionally above par on Friday and Saturday without support of Open Market purchases. Distress selling, according to the Federal Reserve confidential letter, came from small allotment holders. The larger portion of the selling was in the longer-term 2-1/2 percent issue. (3) Municipal bonds have declined more since the out- break of the war than any other class of high-grade domestic securities. The Dow-Jones average yield of municipal bonde, moving inversely to prices, rose 27 basis pointe during the week to 2.28 per- cent on Saturday (Chart IV). In contrast our aver- age yield of high-grade corporate bonds rose only 9 basis points to 2.69 percent (Chart II). Philippine Government bonds fell drastically during the week and bonds of Hawaii lese SO. Regraded Unclassified 101 Secretary Morgenthau - 2 I. United States Government Securities Prices of Government securities deolined very sharply on Monday -- the first trading day after the Japanese at- tack - and less rapidly on Tuesday and Wednesday. Thurs- day, despite the fact that Italy and Germany declared war on the United States, prices stabilized. During Friday the market rallied perceptibly, and these gains were, in the main, consolidated on Saturday (Chart I). The following table presents price changes, by classes of issues, in the week following the outbreak of hostilities: : : Average Price Change : Mon.- : : Wed. Thurs. : Fri.- :: Entire : : Sat. :: Week (Decimals are thirty-seconds) Treasury notes 1 - 3 years - .09 o + .03 - .06 3 - 5 years M .11 0 + .06 - .05 Treasury bonds 5 - 15 years to call -1.14 0 + .10 -1.04 15 years and over to call -1.25 0 +.10 -1.15 Guaranteed securities - .10 +.01 + .03 - .06 The extent of the price change in each maturity class tended to vary directly with length of maturity. Thus, it will be noted, Treasury bonds declined more and recovered more than Treasury notes and guaranteed obligations (all of which are short-term). During the past week the average yield of long-term partially tax-exempt Treasury bonds, moving inversely to prices, experienced a net increase of ten basis points, closing Saturday at 1.97 percent (Chart II). Regraded Unclassified 102 Scoretary Morgenthau - 3 The sharp declines of last week followed more moderate deolines which had occurred throughout the list during the preceding four weeks. Prices of Treasury notes had de- clined about 1/4 of a point during this period, while prices of Treasury bonds had fallen about 3/4 of a point. The 2-1/2 percent bonds of 1967-72 had experienced a decline during this period of almost two points -- much greater than any other Treasury issue. Thie issue is now (close on Saturday) 3-12/32 below its high reached on November 5. II. Hourly Price Changes in the Two New Treasury Bond Issues Since Closing of Subscription Books The two new Treasury bond issues offered for cash of 1.5 billions on Thursday, December 4, fell to par from premiums of about 1-3/8 pointe the day following the Jap attack on the United States. Chart III shows the hourly quotations for these new securities since trading first be- gan last Friday, December 5. Both issues opened last Friday at good premiums, 101-10/32 for the 2 percent bonde of 1951-55 and 101-13/32 for the 2-1/2 percent bonde of 1967-72. At the close for the day, the shorter-term 2's were up fractionally from the opening while the longer-term 2-1/2's were down insignificantly. Saturday morning, December 6, both issues remained steady, rising & little at the close. Thus, the market from Friday through the close on Saturday indicated 8. successful reception for the new financing. The next day in the Pacific the Jape launched the typical Ax1s brand of Sunday morning war. The next trading day, Monday, December 8, both new issues lost all their previous premiums of about 1-3/8 points by open- 1ng at 100. They both rallied during the day to a high of 100-16/32, attained at eleven o'clock, but at the close for the day the shorter-term 2 percent issue had fallen to 100-9/32 and the longer-term 2-1/2 percent 1ssue to 100-3/32. On Monday, according to the Federal Reserve daily con- fidential letter, selling of Government securities consisted principally of the new 2 and 2-1/2 percent Treasury bonds. Offerings were not heavy and were absorbed mainly by large Regraded Unclassified 103 Secretary Morgenthau - - 4 banks and a few insurance companies. The Federal Reserve System Open Market Account purchased no securities on Monday. On Tuesday, a gradual deoline set in, carrying both 1s- eues down below par (99-31/32) for the first time at one o'clock. The rest of the day prices were at par or very slightly above. A price of 100 (at some hours 100-1/32) pre- vailed not only the rest of Tuesday, but also all of Wednes- day and Thursday. According to the Federal Reserve confidential daily letters, fairly heavy selling of allotments on the new 2 per- cent and 2-1/2 percent Treasury bonds reached the market on Tuesday and Wednesday. Tuesday the Federal Reserve Open Market Account sup- ported the market by buying $8 millions of the 2 percent and $31 millions of the 2-1/2 percent bonds. Wednesday the Open Market Account purchased $6 millions of the 2 percent and $37 millions of the 2-1/2 percent bonds. The Federal Reserve letter reports that on Thursday the volume of selling of the new issues declined and some measure of support at par was afforded by insurance company demand. The Open Market Account purchases were smaller on Thursday than they had been on Wednesday, being about $4 millions of the 2 percent and about $16 millions of the 2-1/2 percent bonds. During Friday both new issues floated above par to B. high of 100-11/32 for the 2 percent bonds and 100-5/32 for the 2-1/2 percent issue. On Saturday both issues remained above par, but did not surpase the highe of Friday. The 2 percent bonds closed Saturday's trading at 100-6/32 and the 2-1/2 percent bonds at 100-2/32. The rise over par on Friday and Saturday occurred with- out support of purchases of the Federal Reserve Open Market Account. There are two interesting aspects to the selling of the new offerings during the last week. The first 1s that the banks and insurance companies were buyers, and the holders of small amounts were sellers (in quite substantial amounts in the aggregate). The second 1s that more selling occurred, both absolutely and relatively, in the longer-term 2-1/2 per- cent bonds than in the shorter-term 2 percent bonds. The Regraded Unclassified 104 Secretary Morgenthau - 5 greater selling pressure in the 2-1/2 percent bonds is shown by the purchases during the week by the Federal Reserve Open Market Account of about $84 millions of the 2-1/2 percent bonds contrasted to only $18 millions of the 2 percent bonds. The statement of condition of the Federal Reserve Banks as of the close of business Wednesday, issued for release in Friday morning papers, showed no change in the total bond portfolio of the Federal Reserve Banks. (The statement did show purchases of $12 millions of Treasury bills -- the first holdings of such securities since the end of 1939.) It should be noted, however, that purchases of the new 2's and 2-1/2's on a when-issued basis will not be settled for until Monday, December 15. III. Other High-grade Securities Municipal bonds declined more sharply than any other class of domestic high-grade securities during the last week. The Dow-Jones weekly average yield of municipal bonds rose 27 basis points to 2.28 percent during this period (Chart IV). Bonds of municipalities on the West and East Coasts were especially weak. The corporate bond market held up much better in face of the outbreak of war than did the municipal. The Treasury average yield of high-grade corporate bonds, moving inversely to prices, rose only 9 basis points during the week, to close Saturday at 2.69 percent (Chart II). This is only one-third of the decline experienced by municipal bonds during the same period. Bonds of the Territory of Hawaii held up moderately well in spite of the Sunday bombing. The Territory's 4-1/2 per- cent bonds of 1946-56 were down Monday only about 3-1/2 points from the previous day's close of 115-1/2, and no further loss was suffered Tuesday. In the next four days, an additional 4-3/4 points decline occurred, with the issue closing Saturday at 107-1/4. Philippine Government bonds suffered a more severe deterioration. The 4-1/2 percent bonds, due in 1959, dropped about 12 points Monday, and by Saturday were off another 6-1/2 points to 102. Regraded Unclassified Chart 105 I CHANGES IN THE PRICES OF U.S. SECURITIES Points Plotted Represent the Difference from December 25, 1940 Price of Bach Naturity Class 1941 1942 1541 - MAR, MAY JULY SEPT. 1942 NOV. JAN, NOVEMBER DECEMBER e 15 22 JANUARY POINTS 29 o 13 20 27 3 10 17 24 (act DRANGE) POINTS Saturday Quotations +11 Daily (SET CHARGE) +18 +3 + + +1 +2 - I + I . + + i +1 Boses, : OVER 15 Yes. + é NOTES TO CALL 1-3 Yes. o 0 o - Bonds, 5-15 Yes. to CALL - à +1 * NOTES - + 345 YAS I NOTES - I y 3-5 YRS, -1 -1 7 -11 24 -11 - NOTES BONDS, -11 1-3 Yes, -11 5-15 Yes TO CALL T -18 -11 BONDS OVER 15 Yes, -2 -5 -2 to CALL -26 -21 Y -4 -21 -a a -7 -1 -1 7 - il 36 " si -9 - il si 4 -4 4 -10 -46 = 4d 14. MAR, MAY -11 JULY SEPT. nov. JAN. -*) e 15 22 § to 13 1941 2 27 3 49 10 17 24 31 1942 NOVEMBER DECEMBER JANUARY ( 3 4 ) 1942 / Treasury i I F-131.1 Regraded Unclassified 106 Chart 11 E AVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS 1940 (94) JAN FEB MAR AM MAY AME AUG. SEPT. 1941 1942 AAY OCT. NOV. DEC. JAN, is FEB is MAR AN a # " MAY = e JUNE AAT AUG. DEPT. OCT, NOV. DEC. NOV. DEC. JAR E " - = . 18 - - - 1 E as 14 . - = E - # . - a . in inversed Scale Inverted Scale Inverted Scele PER CENT PER CENT PER CENT WEEKLY, Saturday Quotations 1.8 is 1.8 20 Long Term 20 Treasury 2.0 22 22 2.2 Partially tax-exempt Treasury Bonds de years SP more to contrast - device 24 24 24 26 26 26 Corporate 20 2.6 2.0 High-Grode 3.0 Corporate Bonde 3.0 so 32 8.2 12 14 14 34 3.6 16 56 PER PER PER CENT CENT CENT 1.00 LOO I.DO Spread between Treasury and Coporate Bonds .80 .80 .80 .60 Enroad 60 60 40 40 AO 20 20 20 o . - 0 0 JAN. FEB. MAR - APR 15 BY MAY JUNE MY AUE R in REPT. OCT. HOV. Dec. JAM PES MAR. APR. MAY - JUNE JULY . AUS. - - SEPT. M OCT. NOV DEC. - - I a . = & - - ET a # IF N . NOV. DEC. JAIL 1940 1945 1941 H42 . Change in composition of Long Term Treasury everage i I 1 # I a - - - - P-M-B-T Regraded Unclassified Chart III HOURLY PRICES OF THE TWO NEW TREASURY BOND ISSUES 2% 1951 -'55 and 25% 1967 - -'72 5TH 6TH 8TH 9TH 10TH 11TH 10 12 2 12TH 4 10 12 10 13TH 12 2 4 10 12 DOLLARS 2 4 10 12 2 4 10 12 2 4 10 12 2 4 10 12 DOLLARS 1011 1013 1011 1018 101 101 100t 100$ 100} 100|- 20 1951 -155 100 1001 100 21% 1967 -'72 100 991 991 99) 991 991 10 991 12 2 4 10 12 10 12 2 4 10 12 2 4 10 12 2 4 10 12 2 4 10 12 2 - 10 12 5TH 6TH 8TH 9TH 10TH 11TH 12TH 13TH DECEMBER 1941 107 - will the Secretary at the Treasury el - and Invoice F 222 108 Chart IV AVERAGE «YIELDS OF LONG-TERM TREASURY AND MUNICIPAL BONDS Yields Based on Saturday Quotations 1940 JAN. FEB. MAR. APR. NAY JUNE 1941 JULY AUG. SEPT OCT NOV DEC. JAR. FEB. MAR. 3 If 2 is 19 is IF " a APR = . a . MAY JUNE 20 JULY AUG. SEPT OCT NOV DEC. IF 31 is 25 18 14 4 23 7 EI 4 IS , is I is 29 it 24 10 = 7 a . " a 16 so IS a a 10 . # Inverted Scale Inverted Scale PER CENT PER CENT Partially tax-exempt Treasury Bonds" 1.8 (If years or more to earliest call data) 1.8 2.0 2.0 2.2 2.2 2.4 2.4 2.6 2.6 Dow-Jones Average Twenty 20-Year Municipal Bonds 2.8 2.8 3.0 3.0 3.2 3.2 PER CENT PER CENT .40 Spread between Treasury and Municipal Bonds .40 20 .20 0 o - 20 & 25 a 17 , is as IS 27 = " a EE 6 20 . 17 31 14 26 12 JAN 26 . 25 7 Il 4 FEB 16 MAR. I a 1 15 APR. 24 is JUNE 27 If 14 7 MAY JULY Il 5 If 2 is -20 AUG. SEPT. 30 II OCT. 27 Il NOV. 19 e DEC. 22 a ao JAN. FEB MAR APR MMV JUNE JULY AUG SEPT. 1940 OCT. NOV. DEC. 1941 "Break in line indicates change in composition of Long Term Treasury average Office of the Secretary of the Treasury Deleise of hound at Salida F-134-B Regraded Unclassified 109 December 15, 1941 12:08 p.m. Operator: Go ahead. AMJr: Hello. James Ferley: Hello. This 1s Jim Farley, HBJr: Yes, Jim. F: How are you? HMJr: I'm fine. F: I talked with you about that matter the other day. HMJr: Yes. F: Well, I'm convinced - I've talked with two men here in New York in addition to Patterson - one was Lew Douglas, and the other 18 Bayard Swope. HMJr: You've done what? F: I've talked with Bayard Swope. HMJr: Yes. in I have talked with Lew Douglas. HMJr: Yes. F: And I am convinced, Henry, as definitely as I was ever convinced of anything, that a great injustice would be done if Patterson would be asked to resign. HMJr: Really? F: Yes, I'm sure of that. HXJr: Uh huh. F: Now, I'm satisfied in my own mind, and if I waen't, I'd tell you. I've known you for years, and I wouldn't tell you anything that wasn't the truth as I saw it. Regraded Unclassified 110 - 2 - HMJr: Yes. F: I'm convinced that an injustice would be done here, and I'm convinced that he should be permitted to carry on; and I'm satisfied that he'll do a job for you and to those associated with him and see that the job is done to your entire satisfaction. HMJr: Uh huh. Well, does Douglas know that you're checking up for me? F: Beg pardon? HMJr: Would Douglas know that you're checking up for F: I talked with Douglas. I was very frank. You know, I'm a pretty frank fellow, the same as you are. HMJr: Yeah. F: And Douglas is convinced that that is true. HMJr: Uh huh. F: And so 1s Bayard Swope. Now, Henry, you let this thing go as is. HMJr: Yeah. F: You keep in touch with me, and I'm satisfied - as satisfied as any fellow could be - that Dick Patterson will do the kind of a job that you want done here. HMJr: Yeah. Well, he hasn't up to now, Jim. F: Let's admit the organization - I don't think it was - of course, Henry, as I've looked about on this situation here, your Department, or your committee, hasn't permitted these fellows to put the pressure on as they could have put on and maybe develop something to a greater extent than they have. HMJr: Well, that's their alibi. F: Now, the war 18 on here, Henry HMJr: Yeah. 111 - 3 - F: and I'm convinced that New York is the most loyal group of people in all the world - - New York State - in every emergency. HMJr: Uh huh. F: And New York State under every circumstance has always delivered. HMJr: Uh huh. F: And I'm sure that this committee that Dick has set up here will do this job to your satisfaction. HMJr: Uh huh. F: And I'm honestly convinced - he got a leave of absence from his company, and I think a terrible injustice would be done if he wasn't permitted to carry on and do this job; and I'm sure he'll do it. HMJr: Uh huh. Well, I'll give it another thought. F: All right. Now, do that, because honest, I never felt more right about anything in my life; and if I didn't, I'd tell you. HMJr: Okay. Thank you very much. F: All right. Well, you do that; and if there's any other change in the situation, I wish you'd call me. HMJr: Thank you. F: Okay. HMJr: Good-bye. Regraded Unclassified 112 December 15, 1941 3:25 p.m. HMJr: ..... that you showed me this morning - I mean, they were blaming the FBI in part for some of those things, you know? Edward Foley: Yeah. HMJr: I think I would send a copy of that telegram over to Hoover F: All right. HMJr: and ask hismen whether they wouldn't 00- operate with our men. F: All right. HMJr: Sort of put him on record, you know, a little bit F: All right. HMJr: to show that his fellows are tying up some of this too. F: Yeah. HMJr: Don't you think so? F: Okay. HMJr: What do you think? F: I think that's a good idea. HMJr: Yeah. F: We'll send a copy over there. HMJr: Big day for me. When I called McGuire she said she didn't know who Foley was or what he'd written. F: (Laughs) HMJr: Huh? What? 113 a I I F: What? HMJr: Sure, she said she didn't know. She said she always knew what Foley did, it must be it wasn't her Foley. F: (Laughs) You mean on that..... HMJr: Yeah. I asked her where the telegram came from. F: Well, the Interior people - Burlew brought it over to a meeting this morning in Bell's office HMJr: Oh. F: .....at one o'clock HMJr: Oh. F: and I thought it was something you ought to know about. HMJr: Sure. F: And we had it typed up and sent in. HMJr: Oh, well, I had quite a lot of fun kidding McGuire. F: (Laughs) She's kind of sensitive about that. HMJr: She likes to be kidded. F: She doesn't like to think she doesn't know what's going on here. HMJr: Is she sitting there? F: No, no. No, I'm talking on your wire. HMJr: Anyway, though, she liked it. I want Harry to sit in on it. F: Yeah, I told Harry about it. HMJr: All right. F: Harry knows about it. Regraded Unclassified 114 - 3 - HMJr: I'd send that stuff over then. F: All right. HMJr: Thank you. 115 December 15, 1941 10:30 a.m. RE AIR RAID SHELTERS Present: Mr. Reilly Mrs. Klotz Mr. Thompson Mr. Gston General Fleming Mr. Reynolds Mr. Wilson K.M.Jr: I want to compliment both of you. I got the greatest pleasure of seeing those fellows work- ing through the rain. I didn't get the pleasure because it was raining, but the thing was carried out, and I was thinking if you people can do a thing like that, what could they do if they really turned you people loose on emergency housing. I mean, to see those fellows working steadily right through that rain is the best demonstration of what you could do if they said, "Go ahead and build fifty thousand houses." Fleming: By the way, we are making that trench zigzag all over the place. That is on the advice of the Engineer officers. They said if we put it straight that we should have traverses because in case there should be a direct hit on the thing, if you have it straight, the whole thing could be dangerous. H.M.Jr: Where is Mike Reilly? Regraded Unclassified 116 - 2 - Wilson: He is at the White House. I don't believe he understood that he was to be here. Fleming: And too. besides we save a lot of trees that way, H.M.Jr: Good. Reynolds: We dug around the trees. H.M.Jr: That will please the President. He and I both like trees. Reynolds: We took one out, but it was a badly damaged tree. It would have died anyway in another year or two. Fleming: Do you want us to go ahead on this? H.M.Jr: If you would, please. Fleming: Or wait for Mr. Reilly? H.M.Jr: No, go right ahead. Fleming: I have consulted with the Army Engineers and with the Air Corps people since we had our conversation. The Engineers have been keeping very much up to date on bomb proofs and splinter proofs. They have a special group over there, and they have had men in England who have just recently returned from there and have the very latest information. The Air Corps says that about all we can expect here in Washington, certainly at present, the way things are now, would be token raids, just something to come in and terrify the population, show what they can do. They would have to come from B. carrier some place. That therefore limits the size of the bomb that can be carried to about two thousand pounds. They say there would be one ship with a two thousand pound bomb load that Regraded Unclassified 117 - 3 - would try to get through and - of course that is a pretty effective bomb, but they have used them up as high as six thousand pounds against London and that is all we could count on. H.M.Jr: One two thousand pound bomb? Fleming: Per plane. They would come over with a number of planes but - with the hopes of getting 8. few through. There is not much chance that they would come in day time. Our interceptor service, they think, is good enough to keep them away normally in day time, although somebody might be able to filter through if they were willing to sacrifice a large number of ships. There- fore, the chances are that if we get anything it will be at night and they will carry - instead of smaller bombs, this big bomb, 80 as to show what can be done. Their accuracy in daytime is very high. The Germans have showed that down in Africa, where they came in there and where they weren't hampered. They reallyhave good bombing. They can hit. In daylight, of course, they would be hampered very materially, and their aim in that case is not good. It is just a chance shot. The effectiveness against & night raid is 8. complete blackout of Washington, and I think that is some- thing that we should push forward just as hard as we can because-- H.M.Jr: It has already been done, General This morning I suggested to Colonel Smith, you know, secre- tary to the War Board or whatever they call it - he is General Marshall's man, anyway - that we have & practice, and I am hoping to have it Thursday night. Fleming: Well, that is-- H.M.Jr: I mean, the whole District, planes, anti-air- craft, a regular mock battle. But they will Regraded Unclassified 117 - 3 - would try to get through and - of course that is 8 pretty effective bomb, but they have used them up as high as six thousand pounds against London and that is all we could count on. H...,Jr: One two thousand pound bomb? Pleming: Per plane. They would come over with a number of planes but - with the hopes of getting a few through. There is not much chance that they would come in day time. Our interceptor service, they think, is good enough to keep them away normally in day time, although somebody might be able to filter through if they were willing to sacrifice a large number of ships. There- fore, the chances are that if we get anything it will be at night and they will carry - instead of smaller bombs, this big bomb, so as to show what can be done. Their accuracy in daytime is very high. The Germans have showed that down in Africa, where they came in there and where they weren't hampered. They reallyhave good bombing. They can hit. In daylight, of course, they would be hampered very materially, and their aim in that case is not good. It is just a chance shot. The effectiveness against B. night raid is a complete blackout of Washington, and I think that is some- thing that we should push forward just as hard as We can because-- H.M.Jr: It has already been done, General This morning I suggested to Colonel Smith, you know, secre- tary to the War Board or whatever they call it - he is General Marshall's man, anyway - that we have 8. practice, and I am hoping to have it Thursday night. Fleming: Well, that is-- H.M.Jr: I mean, the whole District, planes, anti-air- craft, B regular mock battle. But they will Regraded Unclassified 118 - 4 - announce it, but I hope to have it Thursday. Fleming: That is really essential, I think, because with our avenues and all, if there are any lights at all, it is easy to locate-- H.M.Jr: Well, I am pushing for Thursday night. Fleming: Well, that is fine. We can expect any bombing about at a half hour's warning, both day and night. The Air Corps tells me there would be that much time when they get word that & ship is trying to get through. Now, we discussed the problem of bomb proofing, and they are all convinced that the proper structure to build is one above the ground and not under ground. H.M.Jr: Is that right? Fleming: Yes, sir. The Admiralty in London has built a complete blackout building which is all above ground and their whole tendency is to go above ground rather than under ground, because the type of bomb that is dropped - there are about three of the mine type, that is a land mine type, to one that will explode on the surface and if you get your under ground ones, to guard against that, the explosive wave that is carried through the earth is much greater than the explosive wave that is carried just through the air, and & bomb proof that is under ground besides meeting the difficulties of water and drainage and all that is something to this terrific explosive wave that comes through the earth. And therefore their flight command is very small - that is the RAF - is under ground. That was one of the early ones built. Now they have gone to the above-ground and they all think it is far and away the best solution. The King and Queen, by the way, only have a Regraded Unclassified 119 - 5 - splinter proof, but that is for political reasons. They don't want anybody to think that they are - have more protection than anybody else. We have, fortunately, acquired a half block right over here from Pennsylvania Avenue to H Street and on the east side of 17th Street. We have practically all of that property now and can take the rest any time. H.M.Jr: I don't know where that is. Reynolds: That is the proposed extension for the State Department and it takes in the present Court of Claims building. H.M.Jr: I know the Court of Claims. Reynolds: That is right. It is the west half of that block. Fleming: That block all the way through to H Street. H.M.Jr: Have you got a map? Reynolds: Yes, sir. Gaston: That is the block west of Lafayette Park. Fleming: It is the west half of that block. Reynolds: Here is a map. This is the present State Department, and this is the property that is in the process of acquisition. H.M.Jr: You take the whole of that block? Fleming: No, just half of it. Reynolds: This half right here. H.M.Jr: I see. 120 - 6 - Reynolds: Last week I - we have practically all of it. We have all but two parcels acquired now. There are two little pieces we haven't gotten. (Mr. Reilly entered the conference.) H.M.Jr: What is your suggestion? Fleming: The suggestion is to build about a five story building on that site, a complete blackout building. No windows at all. It can be made - it would have about two hundred seventy-five thousand square feet of floor space. We can make it 30 that there is living quarters and everything else there. It can go ahead and just stand a long siege, that building. It has a very heavy reinforced roof. This is twelve feet. Now, the Admiralty has a ten-foot roof on it. Then this floor is - what is that, five? Two feet. Reynolds: This is 8. degree floor. Sometimes when 8. bomb hits here this falls out and we want some- thing to catch it. Fleming: The farther down you go the safer it is, 50 the ground floor and basement are completely safe. We think it is even safe on the top floor where we put the less important elements. H.M.Jr: Four hundred twenty feet long and how deep is it? Reynolds: It is about a hundred and forty-four feet deep. If you wanted to, you could put fifteen or twenty thousand people in it. H.M.Jr: Why don't you take the whole block? Reynolds: Well, there are other features in connection with the other purchases that we haven't - we haven't thought it necessary to do SO. This was - is being purchased for an extension of the State Regraded Unclassified 121 - 7 - Department building, only this half. Later on, at some other time, they can come around here and get the Brookings Institute and the rest of the block, but for the moment we would not recommend a building any larger than this one. H.M.Jr: Who would use this building? Reynolds: This group right through here. H.M.Jr: I see. Reynolds: Treasury, State, and the Executive Offices. H.M.Jr: That would take care of the President's sug- gestion on that? Fleming: Oh, yes. I think he probably wants some of the higher staff officers of the Army and Navy in there. H.M.Jr: I see. Reynolds: Our plan was to carry a tunnel from here over to the White House over to this building and from the State over to this building. H.M.Jr: How would we get over here? Reynolds: By the tunnel. H.M.Jr: Oh, we would go through this other tunnel? Wilson: The one that is being built right now. H.M.Jr: To the White House and from there through the others? Reynolds: We expect to extend that tunnel right on anyway over to the State Department. H.M.Jr: Oh, you do? Regraded Unclassified 122 - 8 - Reynolds: That is my understanding, that they want that. H.M.Jr: It doesn't show here. Reynolds: No, it doesn't on this one, This was a sketch that we made some little time ago. This tunnel will go right through here now and this tunnel here will be changed and - we made this a couple of weeks ago as our solution to this problem. We are very glad that the army and Navy agree with us on this. Fleming: Oh, they absolutely think it is the only thing. We can build this in six months time at a cost of about seven and a half million dollars. H.M.Jr: Do you think we ought to show it to the Presi- dent? Fleming: Yes. H.M.Jr: He is always interested in this stuff. Reynolds: He has been interested in 8 blackout building too, you know. He has always wanted to build one building that didn't have any windows in it. This won't have any because the walls are six feet thick. H.M.Jr: I think we ought to ask him for five minutes to show it to him. Fleming: We have got that bomb proof communications center now right out in front of the White House. Reynolds: Here is another thing. This tunnel comes right in here to the White House. They asked us to have a little shell down here about six hundred feet - to house the radio and 50 forth. H.M.Jr: Where would this be, right out in front? Regraded Unclassified 123 - 9 - Reynolds: Yes, under ground, and also that this room in here would be another stopgap for the President's use until this other structure is completed. (Secretary held a telephone conversation with General Watson as follows:) Regraded Unclassified 124 December 15, 1941 10:45 a.m. HMJr: Hello. General Watson: E. M. W. HMJrt H. M., Jr. General Fleming 18 here with me, and the other day the President asked me to get together and have ready a building which would house the White House staff, State, and Treasury. Now, we're ready to go ahead. I'd like to show it to the President with General Fleming, and it would only take about five minutes. Hello. W: I tell you, he's coming over here - he's over there with Knox now HMJr: Yeah. W: and when he comes over here - I haven't dated him uo at all - but God only knows how long he'll talk to Knox HMJr: Yeah. WA but when he comes over, let me ask him If he'll see you himself. (MJr: We want - I - it's - I don't want to go ahead and order B seven million dollar building with- out the President seeing it. W: I'll say, "Morg and Fleming are ready to discuss with the President a building to house the per- sonnel of"- what? HVJr: of the White house W: "White House". HMJr: Well, we'll start with the President. X: Yeah. ANJr: The President, State, and Treasury. Regraded Unclassified - 2 - 125 W: Yeah. HMJr: And we've got the building - everything is ready - - it's been approved by the Army, but I'd like to get his ideas. W: Well, look here, you got 8. place in there for the Secretary and the Military Aide? HMJr: I don't know. Personally, I know I'd like to put them right out as bait. W: (Laughs) HMJr: That's what I'd like to do, right out there 88 bait. W: (Laughe) Yeah, I Bee. I tell you, the Military Aide 18 too big to be used as bait. HMJr: We'll just put you out there as bait. W: I 800. (Laughe) HMJr: (Laughs) All right. W: I'll get it just as soon as he comes over. HMJr: All right. W: He wants to see Phil, anyhow; he hasn't seen him yet. HMJr: All right. W: All right. HMJr: Personally - - I mean, I think the best time - I know, if he could, say, see us right after lunch. W: Yeah. Well, I'll ask him. He's got one at three- thirty. HMJr: Well, if he could Bee us right after lunch - he likes to play with this stuff. W: Yeah, I think he'd like that. I think he'd enjoy it, yeah. He's got that speech today, the only Regraded Unclassified 126 - 3 - thing he's got on his mind. HMJr: All right. W: But I'll get that to him. H. M. Jr., - E. M. W. car calling off. Signing off - signing off. HMJr: All right. Regraded Unclassified 127 - 10 - H.M.Jr: He said where would they put him, and I said, "We would use him as bait." This is Pa. We would put him right out as bait. He thought he was too big, he said, for bait. (Laughter) Gaston: Tell him these are big bombs. Fleming: He would make a good target. H.M.Jr: Well, I think this. I know the way the Presi- dent likes to fuss with this, and I am not going to argue whether it should be above or below ground. It is built like a battleship almost and if everybody thinks that is the way to do it, I would never argue, but I do think that we ought to get it started. Fleming: I think SO. H.M.Jr: Don't you think when we go up for seven million dollars, we ought to haveatwin which we could build for the Congress? Reynolds: We have been in touch with the architects of the Capitol. What they have proposed hereto- fore is - not as a bomb-proof proposition but as a garage a place right out there in front of the Capitol in that little park there, but to us that is all wrong. We have been arguing for a building above ground. We just don't like to go down in a hole. H.M.Jr: Well, my suggestion would be that if the Presi- dent approves this or when we go up to Congress say, "Now, we would like to build an exact replica for you." Heynolds: I wouldn't go to Congress for the money. H.M.Jr: Have you ever tried to get any of the President's emergency fund? Reynolds: Oh, yes, and I have been quite successful in doing it. Regraded Unclassified 128 - 11 - H.M.Jr: Well, you are a better man than I am. Reynolds: It is the only way that we could get some of these temporary buildings built. H.M.Jr: What has he got, two hundred-- Thompson: Two hundred million. H.M.Jr: What he would most likely say is he will give it to us if we get a bill through to reimburse him. Reynolds: If it comes to a show-down, we have got twenty- five million dollars coming through the Congress now for buildings in or near the District, and we can take it out of that. H.M.Jr: How long would it take to have your working plans in such shape to let the contract? Reynolds: We can start the contract the moment we can get those occupants out of those buildings over there. We are working on that this morning. I told them we could give them ten days to get them out. Our drawings are suf- ficiently advanced that we could start the contractor to work tomorrow morning if neces- sary. H.M.Jr: I still say, though, that I would put somebody on to find a spot around the Capitol. Fleming: We are looking for spots up there. Reynolds: Oh, yes. H.M.Jr: And say, "Now, look, gentlemen, we will do just as well for you R.S we do down here." The only thing I was thinking about is, if this is the thing here, whether - the Library of Congress owns a piece up here on 16th Street. Regraded Unclassified 129 - 12 - Don't we own - we own the Cosmos building. Reynolds: That is right. H.M.Jr: I just wondered, if this is big enough, whether we didn't want to build another one here? Reynolds: I think it is large enough. H.M.Jr: You think it is? Reynolds: I think so. H.M.Jr: And I think it is to the advantage of the President to have everybody in one building, too. Reynolds: This is just the answer, there is no question about it. Fleming: And as I say, we can fix it so that his main staff could just live right there. H.M.Jr: Fine. You allot the space, don't you? Reynolds: Well, I have got sometimes to call on Cabinet officers when they scrap amongst themselves to give me a hand, you know, which you so generously did the other day. H.M.Jr: And it stuck? You know what I told Henry Wallace when he called me up about it? Did I tell you about Nelson Rockefeller? I said, "What is the matter with Nelson? He is a great big baby to have to go over to see the Vice President and cry on his shoulders." Reynolds: What we are doing to help you is to move out of that building down there, and we are moving into a temporary building so we are doing something for the Treasury. Regraded Unclassified 130 - 13 - H.M.Jr: Wonderful. I expect it. (Laughter) Now, what else have we got? Fleming: Well, this other-- Reynolds: Oh yes, just a moment. Can we get your approval of this little building out here in-- H.M.Jr: Will that be under ground? Reynolds: That will be under ground. We have got to go thirty-some feet to get that damn thing in there. Reilly: We feel we ought to have it, Mr. Secretary. This tunnel is not bomb proof, and we ought to have some place where we can go. H.M.Jr: Is this for the President? Reilly: Right out in front of the White House, for the President and for our communications center over there. H.M.Jr: I think you should have a communications center. Fleming: How long will that take? Reynolds: Well, it will take us about two to two and a half months, I think. It is a mean thing to build. When you get down that low, you are just about on top of a Jap's head, you know, with water and snow and everything else. Reilly: That won't interfere with construction of the tunnel whatsoever. Reynolds: No, we have moved it out far enough. H.M.Jr: Do you think they need that, General? Fleming: I think they should have something like that. Regraded Unclassified 131 - 14 - Reilly: If we get caught in that tunnel coming across here, if that street should cave in, we have no place to go. The house would be 8 mass of debris at that time, too. H.M.Jr: I am all in favor of it. Reynolds: That is an eight-foot concrete wall and an eight-foot ceiling, and then on the inside of it is another box which is free from the outside which is two feet thick and it gives you & pretty good protection. Now, it won't protect against 8. four thousand pound bomb. H.M.Jr: Would you make 8. little note when you have a breathing spell, see, what do they recommend over - make 8 note to remind yourself - I mean for people to build on their own place, you see. Fleming: I can tell you that. They have completely abandoned the Anderson shelter. It is for several reasons. One is that the people don't like to be alone, even in their own families in a damp shelter like that. They prefer a larger group. So they are building some now where they will take twenty to twenty-five families in localities. But the most popular of all is a small steel shelter that they have right in their own house. It is about as high as a table or as high as the window sill. It can be used as a table. It is bomb proof - not completely bomb proof but absolutely splinter proof, and they just put a mattress in there and the family goes in and all sleep together right in the house. Well, could you give me something - in the country we are isolated. They know where we live and I want to fix something up in my own house. I mean, if you would just tell me what to do, you see, It is a wooden house. We are Regraded Unclassified - 15 - 132 on top of a rock, though. We could put a cave underneath. The house is built on the rock. Reynolds: Is that 8 rock foundation? Well, we will make 8. study of it and give you a drawing of it if you like. H.M.Jr: I don't want you to bother. Reynolds: It is no bother, it is just a job. H.M.Jr: Well, if you had time. Reynolds: We can send somebody out there to do it. H.M.Jr: If you had time, then just what to do, because we are on a rock, and I don't know whether we should drill underneath, you see, and drill ourselves a cave or just have something in the basement, but I would like to do something. Reynolds: All right. Another thing that we are-- Fleming: Put in a wine cellar. (Laughter) Klotz: Yes, that is a good suggestion. H.M.Jr: We have argued about that. Reilly: Mr. Secretary, my suggestion is that when they make a survey they also make a survey of Hyde Park. H.M.Jr: There, the fellow has an idea. You have earned your salary for the year on that suggestion. Reynolds: Another thing that they are doing is building concrete boxes with 8. twelve-inch wall where they can hold about fifty people. That is for a shelter. There was 8. five hundred pound bomb dropped over there, and it didn't go off. So they built one of these things about twelve or thirteen feet away, and they Regraded Unclassified 132 - 15 - on top of 8. rock, though. We could put a cave underneath. The house is built on the rock. Reynolds: Is that a rock foundation? Well, we will make & study of it and give you 8. drawing of it if you like. H.M.Jr: I don't want you to bother. Reynolds: It is no bother, it is just a job. H.M.Jr: Well, if you had time. Reynolds: We can send somebody out there to do it. H.M.Jr: If you had time, then just what to do, because we are on a rock, and I don't know whether we should drill underneath, you see, and drill ourselves a cave or just have something in the basement, but I would like to do something. Reynolds: All right. Another thing that we are-- Fleming: Put in a wine cellar. (Laughter) Klotz: Yes, that is a good suggestion. H.M.Jr: We have argued about that. Reilly: Mr. Secretary, my suggestion is that when they make a survey they also make a survey of Hyde Park. H.M.Jr: There, the fellow has an idea. You have earned your salary for the year on that suggestion. Reynolds: Another thing that they are doing is building concrete boxes with a twelve-inch wall where they can hold about fifty people. That is for B. shelter. There was 8. five hundred pound bomb dropped over there, and it didn't go off. So they built one of these things about twelve or thirteen feet away, and they 133 - 16 - fastened some monkeys on the side of the wall and they fired this thing and it kicked it sideways about three feet, but it didn't hurt the monkeys. Now they are going to that for a shelter proof where you could run into. They try to keep it down to about fifty or seventy- five people. They have got them scattered everywhere, but if you have a direct hit, it is just too bad. It is just a complete black- out. H.M.Jr: Well, his suggestion on Hyde Park is excellent. Now, what else, gentlemen? Fleming: Is the President going to see us? H.M.Jr: Well, he is closeted with Colonel Knox right now, and Watson can't get at him, but he says as soon as the President comes over, he will let us know, and I will let you know. My guess is we will get an appointment after lunch. Fleming: All right, sir. H.M.Jr: That is my guess. As soon as I hear, I will let you know. Would you like to take Reynolds? Fleming: Yes. H.M.Jr: All right. Thank you very much, gentlemen. I will see you later. (General Fleming and Mr. Reynolds left the conference.) H.M.Jr: Now, Gaston, what is the White House stuff you have got? Gaston: I have two things. One is this Deasy, Cawley, and Kelly. Their recommendations as to what to do now for the White House. Regraded Unclassified 134 - 17 - Reilly: I went over all that last night and we are having experts come in to see what can be done. Gaston: And then the other stuff there is what they have done over there. H.M.Jr: Why don't I read it? Gaston: Yes. H.M.Jr: Deasy? Wilson: Deasy is the Battalion Fire Chief sent from New York City to London to study it, and we had him over at the White House yesterday to make a survey, and he is making a survey this morning at the Treasury Building and will later go to the Bureau of Engraving and make a survey. He is an outstanding man on that. Reilly: Most of those suggestions were considered not practicable. Gaston: You are moving on the number one report? The second report is for sand bags all around the White House. H.M.Jr: I can't read the thing the way it is. Gaston: I will give you a summary of it. H.M.Jr: And what they are going to do. Gaston: Yes. Reilly: We will have 8. joint report on it during the day. H.M.Jr: One thing I wanted to ask you. I can't read all that. General Cox called me, and he said please not to have any Christmas tree. So I spoke to Colonel Smith, and he said, Well, he didn't know whether he was right. So you boys 135 - 18 - had better get together now. Reilly: All right, sir. H.M.Jr: "No Christmas tree, says General Cox. Reilly: We suggested to Colonel Smith if the men couldn't have leave, there would be no party. H.M.Jr: That is the party, but General Cox said there should be no Christmas tree. Reilly: The President said he wanted it. I don't know if we could do anything about it or not. H.M.Jr: He is reasonable about it. Wilson: They called off the Rose Bowl and other gather- ings. They can call that off. Reilly: If you can do anything, I would appreciate it. h.M.Jr: He is reasonable, and you can say, "This is just like putting a torch there to guide them to the place." He didn't have the Christmas tree on his grounds last year did he? Reilly: No, we put it in there this year for the Presi- dentsconvenience so we wouldn't put him out there in the cold. H.M.Jr: General Cox suggests you do it all by remote control. Wilson: There would be approximately ten thousand or maybe fifteen thousand people inside of those grounds at least. H.M.Jr: These men were told to come at ten-thirty and they both knew it. Whatdid you fellows do,. forget? Wilson: No, I didn't forget, Mr. Secretary. I didn't Regraded Unclassified - 19 - 136 understand that I was to be here. H.M.Jr: I told them to come back at ten-thirty Monday. Wilson: Well, I think you directed that conversation at General Fleming particularly and asked him if he would come back and talk to you. H.M.Jr: I will send you an engraved invitation next time. Wilson: All right, sir, I am sorry. Reilly: Sorry, sir. 137 December 15, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston This summarizes the high points of a report to Chief Wilson yesterday by Agents W. D. Cawley, Jr., Secret Service, and L. E. Kelly, Alcohol Tax Unit, and Battalion Chief Daniel A. Deasy, New York Fire Depart- ment, who is Consultant of the Office of Civilian Defense, together with action being taken thereon. Skylights and ventilator shafts. Recommendation for covering them with six inches of sand topped by tin roofing; further expert advice being sought. Wire netting is being installed to protect interior from glass frag- mentation. East and West flanking terraces. Roofs to be covered with sand bags and machine guns installed. (I suggested protection of the open terrace along which the President travels from the White House to the Executive Offices. They are considering either B. wholly enclosed passageway or steel curtains to drop down on the outer edge of the terrace). Windows. Bullet-proof glass is to be installed in the windows of the President's office and study. Roll- down steel curtains are to be installed on these and some other windows in critical locations. Wire glass is to be installed in place of ordinary glass in exterior windows. Strong curtain walls are to he built around basement windows. Black-out drapes are being constructed for all windows. Doors. Glass is being removed and non-shatterable material substituted. The plate glass inner vestibule at the front door is being removed. Entrance doors are to have vestibules which will operate as light and air Regraded Unclassified 138 - 2 - or gas locks. Guards are stationed at all entrances. Interior glass is all being removed or protected against fragmentation. Combustibles. Old furniture and other unnecessary articles are being removed to safe storage places. Paints and other combustible liquids are stored in metal cabinets. Steam line. Electric motor cut-off is being installed in steam line where it enters building and airtight barrier constructed as protection against possible break in line outside building. Roof watch. The investigators recommended permanent guard on the roof with equipment to combat incendiary bombs. White House guards are being maintained on the terrace roofs and fire-fighting equipment is available. Refuge. The investigators suggested improvising 8. shelter under the porte cochere. This has been abandoned in favor of the plan for a double-walled underground shelter north of the building which may be built within 60 days. This will contain an auxiliary electric plant. Camouflage. Suggestion for changing the color of the building and making other exterior modifications for camouflage purposes is to be discussed with the Army Air Corps. Gas Protection. An eight-man squad of chemical war- fare experts is being supplied. Sand bag barricade. The investigators recommended a sand bag barricade 15 feet high completely around the White House building and Executive Offices. No steps have been taken to comply with this suggestion. It is believed the President would not permit it. Mr Regraded Unclassified TREASURY DEPARTMENT 139 INTER-OFFICE COMMUNICATION DATE Secretary Morgenthau TO December 15, 1941 FROM E. H. Foley, Jr. You will be interested in the following cable received December 15 from President Quezon: "Following for President Roosevelt from President Quezon: - 'I am in dire need of funds for public relief and the protection of our civilian population. I beg you to secure the passage of a law placing at the disposal of the Government of the Commonwealth the proceeds from excise tax on sugar already collected and if possible the Gold Devaluation Fund to be spent for the above mentioned purposes in agreement with the Commanding General of the United States Forces in the Far East. My people are already shedding their blood side by side with American soldiers and the civilian population are cooperating unto death in doing their part. My volunteer guards are serving day and night without compensation and I should like to give them at least free food. The National Assembly has appropriated all available funds of the Commonwealth Government and has authorized me to spend them for war purposes. It will have a tremendous heartening effect on my people if the United States Congress would in turn appropriate the money which after all has already been decided under existing legislation previously approved by the Congress to belong to the Government of the Commonwealth.' SAYRE." S.W7L. Regraded Unclassified 140 December 15, 1941 2:33 p.m. Operator: He's in Mr. Crowley's office. HMJr: Crowley's office? Operator: Yes. HMJr: Get him. Operator: All right. HMJr: On the phone. Operator: Right. HMJr: Ed, on this thing of President Quezon to Roose- velt Edward Foley: Yeah. HMJr: I think we ought to do something and move fast. F: Well, I do, too. HMJr: So if you'll fix up something. F: It seems to me, Mr. Secretary, there are two things that could be done. HMJr: Yeah. F: Either he can release some funds immediately HMJr: Yeah. F: from his emergency kitty, and - for what Quezon wants - at the same time recommend to Congress that legislation be passed either in this Omnibus bill or in some deficiency bill 80 that it would get through before they go home for Christmas to make that gold devaluation money, which 18 about twenty-three and 8 half million dollars. HMJr: How much 18 the other money you're talking about? Regraded Unclassified 141 - 2 - F: The sugar money? HMJr: Yeah, how much is that? F: I don't know what that amounts to, but it's somewhere around twenty-five million dollars, I think. HMJr: Well, that's what he's asking for. F: He's asking for either that or the gold devaluation money, both of which have been promised to him. HMJr: Which can he do - which can the President do faster? F: We thought he could do the gold devaluation faster. HMJr: I think they could get that through in one day. F: I should think if you read that telegram to the two committees HMJr: Yeah. F: ..... that you could get it through; or, if some- body had the telegram and got up and read it on the Floor of the Senate HMJr: Yeah. F: you could amend this Omnibus bill that's going through if you had the language all ready. HMJr: Has it gone through the House yet? F: It's coming up on the - it's coming up in the House either this afternoon or tomorrow. The Senate Committee - Judiciary Committee in the Senate - 18 considering it now. They presented it to the Senate Committee this morning. HMJr: Well, if you could get me something that I could send over to the President and say I'd like to do this in view of this telegram, let's do the gold first. Regraded Unclassified 142 - 3 - F: All right. HMJr: I think there's less controversy. F: That's right. HMJr: And - I don't know what you're doing with Leo, but I'd drop it. F: Right. Well, we're all through here and I'm coming right back. HMJr: And get me something to get over to the President and simply have everything ready. I'd like to have a green light from him to go ahead with this. F: Yeah. Yeah, I think it would help out there. HMJr: Because I think he's working on his speech. It's hard to reach him. F: All right. HMJr: But if you can get that moved fast, we'll have it put on the Omnibus bill. F: All right, I'll come right back. HMJr: What? F: I'll come right back. HMJr: Do that. F: Yeah. 143 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE December 15, 1941. Secretary Morgenthau TO FROM Mr. Foley Larry Bernard has just told me that Dave Speck, Interior's legislative counsei, called him a few minutes ago and told him that Interior was arranging with the Bureau of the Budget to get $10,000,000 out of the President's Emergency Fund to take care of the immediate needs of the Philippines and that they were going to include an appropriation item in the next supplemental appropriation for the war Department. Speck also said that Interior was sending a copy of Quezon's cable to the President. Bernard asked Speck whether he was sure everything was under control and whether they needed our help. Speck replied that everything was under control and that the Treasury could forget about the matter. i.w7h Regraded Unclassified 144 December 15, 1940 Discussed with the Secretary by Mr. Kuhn at 2:40 p.m. today. DRAFT OF SECRETARY MORGENTHAU'S SPEECH 145 TO THE DEFENSE SAVINGS ORGANIZATION AT CHICAGO, DECEMBER 17, 1941 This nation of ours has had a shock, and it is wiser and stronger for having had it. Every one of us must be conscious today of 8 clearer vision and a deeper understanding than we had two weeks ago. The bombs on Pearl Harbor have destroyed much more than what the censors would call "military objectives". They have ripped our complacency to shreds. They have blasted the old comfortable belief that the wide oceans could save us from harm. They have blown away the notion that brutality and deceit and murder in another part of the world could never touch us in ours. We now know, or ought to know, that this whole world struggle is our war, just 8.8 much as it was to the people of Warsaw in 1939, or to the people of Rotterdam or London D-B Regraded Unclassified - 3 - 147 in this great battle for our way of life. We have tried to make them realize that they were not isolated and could not be isolated from a struggle that would shape the future of everyone on this planet. We have tried to give the American people B. greater sense of pride in their own country and a greater awareness of the dangers that face them. We have tried to give every man, woman and child in this country a sense of direct participation in its defense, a feeling that there is something for everyone to do in a great effort from which everyone will benefit in the end. Looking back over the past eight months, I think we can all be proud of what has been accomplished. I believe in all sincerity that the devoted work of the Defense Savings D-B Regraded Unclassified - 4 - 148 staff and all our thousands of volunteer workers throughout the country has helped greatly to crystallize American opinion. I believe that the response to the bombs at Pearl Harbor was deep and wide and immediate partly because of our groundwork in the Defense Savings program. We have given to millions a new sense of being partners of their Government, of having a direct share in America and in American freedoms. To me, it is an achievement of far greater proportions than the raising of the more than 2 billion dollars which have rolled into the Treasury since the Defense Bonds first went on sale in May. Now that we have cleared the decks for action, it is up to us to follow through, and that is the main purpose of D-B - 5 - 149 my being here with you today. We must follow through, not only in terms of a few million individuals or a couple of billion dollars, but by a determined effort to reach every individual in this country. For total wars in these days are wars involving whole peoples. There is no exemption for any group or any section. The Nazis and the Japanese make no exceptions in their conquests. The bombs that fell at Pearl Harbor were aimed straight at every one of us, and whatever the Nazis may attempt in the Atlantic will be aimed at every one of us. We are all in this war together. Not all of us can pilot a bombing plane or fire a gun from the deck of 8. battleship. Not all of us are being asked to risk and give our lives for our country. D-B - 5 - 149 my being here with you today. We must follow through, not only in terms of a few million individuals or 8. couple of billion dollars, but by a determined effort to reach every individual in this country. For total ware in these days are wars involving whole peoples. There is no exemption for any group or any section. The Nazis and the Japanese make no exceptions in their conquests. The bombs that fell at Pearl Harbor were aimed straight at every one of us, and whatever the Nazis may attempt in the Atlantic will be aimed at every one of us. We are all in this war together. Not all of us can pilot 8 bombing plane or fire a gun from the deck of a battleship. Not all of us are being asked to risk and give our lives for our country. D-B Regraded Unclassified - 6 - 150 Those of us who are too old or too young to get into uniform are not even being asked to give our money. We are just being asked to lend our money to the Government, to invest our savings for victory. That, it seems to me, is a call to which everyone must respond. We must do it to the very limit of our ability. We, the people, must show that we are ready and eager to be of some service to our country. It has given me real encouragement to be told this morning that you of the Defense Savings Organization have been discussing detailed plans for intensifying and widening our effort, and that you have shown 80 much enthusiasm in these meetings. Our problem, as you all know, is one of financing the enormously expanding cost of the war while avoiding the immense and dangerous evils of inflation. D-B - 7 - 151 I have said right here in Chicago, in & talk to the American Bankers Association, that we are in reality fighting two wars -- one, the great struggle on all the continents and all the oceans, and the other the war against an insidious enemy here at home. That enemy is inflation. It creeps up on us as stealthily as a thief in the dark. As the President has said, inflation is a form of taxation that takes no account of the ability to pay and strikes directly at the American standard of life. Our job, therefore, is a double one, and in this renewed effort to which we of the Defense Savings staff must now dedicate ourselves, we must make sure that we deal effectively with both enemies. For that reason, it seems to me, our major effort now must be directed particularly at those in all walks D-B Regraded Unclassified - 8 - 152 of life who are in receipt of regular pay from wages and salaries. Inflation feeds on current income, rather than on the money that now rests in the vaults of savings banks. It may seem heartless to speak of excess spending, but there is such a thing; and by it I mean spending in the face of 8. limited and dwindling supply of goods. The most effective course for us, 8.8 we have known from the very beginning, has been to enlist current income and to divert excess spending, to persuade our people to set aside a part of their pay every pay day in Defense Bonds and Stamps. Let's now make every pay day Bond Day. And when I speak of regular investment every pay day, I am speaking not only of the millions of factory workers, not only of the teachers and accountants, the clerks and civic employees who live on regular salaries, but also of the farmers who D-B Regraded Unclassified - 9 - 153 are earning solid incomes for the first time in many years and who will be the first to suffer if we allow inflation to get out of hand. All these are the people we must reach, with & determined effort that will have an impact in Berlin and Rome and Tokyo, an effort that will give new heart and courage to the free peoples who are fighting on our side everywhere. I have been asked many times whether we have a goal, 8. quota for the United States. I have always avoided answering with a money figure because such a goal would have no significance. But I will tell you now what my goal is, what our goal for the next three months shall be and must be. It is to reach quickly, within the next few months, every single recipient of regular current B - 10 - 154 income in the United States, and to have every one of these 35 million people setting aside some part of their pay regularly within the shortest possible time. And when I say "some part of their pay," I am not thinking merely of a token contribution. I mean a real investment, the very limit that each person can afford without actually taking food and other necessities from himself and his family. When this meeting ends, I hope that this organization will set to work in every State and every community, through- out this great front line of freedom that is the United States, with the same devotion and determination that is now being shown by the men in our fighting forces. I have complete confidence in the ability of this great group to reach the goals I have set for you today. D-B - 11 - 155 We have been more than fortunate in the men and women who have rallied to our help since the first of May in all parts of the country. It has been & truly thrilling experience for me as Secretary of the Treasury to see the superb cooperation we have had from labor and industry, from Republicans and Democrats, from foreign-born and American-born, from all the assorted groups and nationalities of which this united American people is composed. I am genuinely glad to see all our State leaders assembled here in one room, and to thank them on behalf of their Government for the work they have already done. In thanking them I should also like to thank The Federal Reserve Bank of Chicago, our hosts at this luncheon, and all the member banks of the Federal Reserve System who D-B - 12 - 156 have given us such magnificent help ever since the start of the Defense Savings program. Now that the greater and more insistent call has come, we are ready to meet it. Our organization has been set up, our people are hard at work, our country knows what Defense Bonds are and what they do. It is up to each and every one of us to do our part. Our fighting men in the Philippines and Iceland, in Hawaii and Wake and Midway, in all the posts of danger on all the seven seas, are looking to us to supply them with the planes and guns they need. The whole country is looking to us, right here in this room, to raise billions of dollars to win this war -- and let none of our enemies make any mistake about it, we are going to win it. Our allies in all continents, who have been fighting our battle D-B Regraded Unclassified - 13 - 157 with our common enemy for long, hard years, are looking to us, and also the oppressed peoples in the conquered lands who are now living in darkness -- they, too, are looking to us to sweep that darkness and that misery away. It is by far the greatest test and the grandest opportunity that has ever come to our country. We in this room must prove ourselves worthy of that challenge. The words that Winston Churchill addressed to his own people a year ago can now be applied to ours: come, then, let us brace ourselves to our duty, and let us 80 bear ourselves that if these United States should last for a thousand years, men will still say, "This was their finest hour." 12/15/41 158 December 15, 1941 3:13 p.m. HMJr: Hello. General Watson: I brought that up to him. HMJr: Yeah. W: I don't think he's feeling good. AXJr: Oh, I'm sorry. W: He said you were crazy as hell. He's not going to build that building. HMJr: He asked me to. %: Well, he said, "What building", he eaid. I said, "Well, a building that Henry eaid the personnel of Treasury, State and the White House." HNJr: Yeah. W: I said, "It's evidently cuite a building - several million dollars." I didn't tell him that seven. HMJr: Yeah. #: "Why," he said, "tell him he's crazy, what is he talking about." HMJr: Well, I guess he's feeling low - he told me to do it. W: Well, he isn't feeling good today. HMJr: Oh. Why..... W: I don't think 80. HMJr: Why doesn't he 8° out for a drive or something? W: Well, I can't get him out. HMJr: What? W: I ein't able to get him out, Regraded Unclassified 159 2 I I HMJr: Oh. W: He's going to have - Knox has been with him all night and day. He HMJr: I see. Well, that's enough. W: That's enough to make anybody feel bad, isn't it? HMJr: That's right. W: Yeah. But he said - I think you better - did he say really build it for that purpose? HMJr: Well, he told me - well, he said - have a - what he told me was to have a bomb cellar, see? W: Yeah. HMJr: Now, all the engineers that come back from England say "Don't put the people in the cellar any more, put them up in the building." W: Yeah. HMJr: They've got - I think it's an eight or twelve foot concrete roof over this thing. W: Hmm! HMJr: This 18 the latest stuff that the Army engineers have brought back from England. W: It costs seven million dollars did you say? HMJr: Yes, sir. W: I didn't tell him anything about that. HMJr: Well, I tell you what we'll do. We're going to go ahead and get the property anyway. W: Sure. HMJr: And we'll have all the plans ready. W: That's what I'd do. He's not feeling right today. HMJr: And we'll go right ahead up to the point of signing Regraded Unclassified 160 - 3 - a contract. Yeah. W: HMJr: And..... W: He said, "He's crazy, I don't want any building", he said. HMJr: Uh huh. Well W: I said, "Well, he thought you did." HMJr: (Laughs) Did you tell him what I told you that you were just bait? W: I didn't tell him that. HMJr: I know darned well you didn't. W: He was too damn - in such a hurry. HMJr: Yeah. W: Willkie was going in. I was trying to get him to make his appointment before I went to lunch. HMJr: I know. Well, thanks, old man. We'll tackle him the end of the week. W: I think I would. Let's get him gradually. HMJr: Yeah. We're digging up his front lawn now as it 18. W: Yeah. Well, where are you going to put it? HMJr: The building? W: Yeah. You've got your ground, have you? HMJr: Yeah. I tell you, it's opposite the State Department where that - oh, I don't t know - that street that runs opposite from them - across the street - you know, where you used to go to get your passports in the old days. Regraded Unclassified 161 - 4 - W: Oh, yeah. HMJr: What? W: Yeah. HMJr: That block there. W: Yeah. HMJr: See? W: Yeah. Well, all right, you just go on - you know what to do. HMJr: I know what to do. W: I don't have to tell you anything. HMJr: And now this - while I've got you on the wire - General Cox called me up about this Christmas tree business. W: Yeah. HMJr: And he doesn't want it. W: Well, nobody else wants it; but President's going to have it. HMJr: Well, I may take a crack at him on it. W: Yeah, I think I would. He was a little undecided this morning. All of us said, "Why, I wouldn't have that." HMJr: Well, Cox says that you might just as well put up an airplane beacon right in front of the White House. W: Well, I think he's right. HMJr: And you might just as well have one then; and he definitely wanted me to help him, but I - if the President's not feeling right, I'll wait a day. W: Lay off a day or two. Regraded Unclassified 162 - 5 - HMJr: Okay, I guess after seeing Knox he needs a day. W: He'll need one more day. HMJr: All right. W: All right. HMJr: Thank you. W: Good-bye. 163 December 15, 1941 3:21 p.m. HMJr: I just heard from General Wateon and he says the President 18 a little off his feed today General Fleming: Yeah. HMJr: That's between us. And he said, "Where does Morgenthau get the idea of a building?" Well, of course, what the President told me was to build a cellar, see? F: Yes. HMJr: So I said we'd go - I told Watson we'd go right ahead and make the plans and get the property and we'd let it rest for a couple of days, and then hit him again. F: All right. HMJr: And Watson said that was the thing to do. F: Okay. HMJr: He said he'd had Knox all last night and all this morning, and it was enough to put him off his feed. F: I guess SO. HMJr: See? F: Well, you think I ought to just go ahead then? HMJr: You go ahead, but before - after all, you won't be ready to let the contract for ten days. F: Oh, no. No, no. HMJr: So I'd go ahead just as though we were going to. We'll ask to see him Thursday or Friday. F: All right, fine. HMJr: See? Regraded Unclassified 164 - 2 - F: Yeah. All right. Thank you. HMJr: Thank you. 165 TOLD FOR RELEASE HOLD FOR RELEASE hold FOR RELEASE DECEMBER 15, 1941 To be hold in STRICT and ID or tratination to e will the RSC of the Provident DATE ID bi Bondo or the Herate of Supromentatives, :- :szo must therefore be ecourcised to evoid pro- saturo publication. STERIN FARLY Secretary to the Provident TO THE CONGRESS (if THE UNITED STATES OF AMERICA: On December 8, 1941, I presented to the Congress a message 13 purson asking for e doclaration of ver BO an enover to the treach- attack más by Japan the previous day upon the United Statos. For the information of the Congress, and BE a public record of the Curto, I en transmitting this historical summary of the past policy or this country in rolation to the Pacific area and of the more im- myllote events leading up to this Japeneso malought upon our forces territory. Attoched heroto are the various documents end cor- respondence implementing this history, I A little over A hundred years ago, in 1833, the United States entored into its first Far Eastern treaty, a truaty with Sien. It was B. treaty providing for podos end for depondable re- Extionships. Ton years lator Calob Cushing was sont to nogotiate end in 1844 thore vas concluded our first treaty with China. In 1855, Commodore Perry knocked on Janan's doors. In the noxt few years those doors bogan to opon; and Japan, which bad kept 1:self nloof from the world, began to adopt what VO call Western civilization. During those early years, the United States used over Influence 1t could oxurt to protect Japan in hor transition With respoct to the ontire Pacific area, the United States has consistontly urgod, 0.0 It bas for all other parts of the globo, the Fundamontal importance to world pasco of fair and equal troat- nont unong nations. Accordingly whenover thore has been B tondoncy on the part of any other nation to oncroach upon the Indopendence and sovereignty of countries of the Far East, the United Statos has Trice to discourage such tondoney whomover possible. There wes a poriod when this American attitudo vna ospecially important to Japan. At all times it has been important to China and to other countries of the For Enst, At the and of the nineteenth contury, the sovereignty of the Phillppino Islands passed from Spain to this country. The United States yledged itsolf to n. policy toward the Philippinos designed to equip them to become = from and independent nation. That pledgo and that policy ve have consistently carried out. At that time there was going on in China what has boon called for concessions". Thore ves even talk about a possible I China, It vas then that the primityle of the Per Class vas leid down. In 1900, the Associated Covernment is that 10 policy VI.D to "cook a solution which MAY bring givit cent befety and poaco to China protoct All rights guarditions it primary by trenty and international lev /und rafogurs for the principle of oqual and impartial trado with all vote of the Phinoco Regraded Unclassified 166 - 2 - Ever sinse that day, we have consistently and unfeilingly advocated the principles of the open door policy throughout the Far East. In the year 1908 the Government of the United States and the Government of Japan concluded an agreement by an exchange of notes. In that agreement, the two Governments jointly declared that they vere determined to support "by all pacific means at their dia- possi the independence end intogrity of Chine and the principle of equal opportunity for commerce and industry of all nations in that Impire"; that it vas "the vish of the two Governments to encourage the free and penceful development of their commerce on the Pacific Ocean"; and that "the policy of both Governments" vas "directed to the maintenance of the existing status quo" in that region. The United States has consistently practiced the principles mmmoiated in that agreement. In 1921, following the close of the first World War, nine powers having intereste in the western Pacific not in conforence in Washington, China, Japan, and the United Statos wore there, One groat objective of this conference was the maintenance of peaco in the Pacific. This was to be achieved by reduction of armamont and by regulation of compotition in the Pacific and Far Eastern areas. Several treaties and agreements were concluded at that conference. One of these vaa the Nine Power Treaty (ase Annex 1). It contained pledges to rospect the sovereignty of China and the princi- ple of equal opportunity for the commerce and industry of all nations throughout China. Another wes B. treaty between the United States, the British Empire, France, Italy, end Japan providing for limitation of navel areament, (cee Annex 1) The course of events which have led directly to the present oribie began ton years ago. For 1t, WELD then -- in 1931 - that Japan undertook on a largo ecale its present policy of conquest in China. It began by the invasion of Manchuria, which was part of China. The Council And the Assembly of the League of Nations, at cnco and during many months of continuous offort thereafter, tried to persuado Japan to stop. The United States supported that effort. For example, the Government of the United States on January 7, 1932, specifically stated in notes sent to the Japanese end the Chinese Governments that It would not recognize any situation, treaty, or agreement brought about by violation of treaties. (see Annex 2) This barbaric aggression of Japan In Menchuria net the example and the pattern for the course soon to be pursued by Italy end Germany in Africa and in Europe, In 1955 Hitler assumed power in Gemany, It vas evident that, name re-armed, Germany would mbark upon n. policy of conquest in Europe. Italy than still under the domination of Mussolini also had resolved upon 1. policy of conques in Africa and in the Moditerraneen. Through the years Which followed, Gergany, Italy and Japan reached an understanding to time their acts of aggression to their common adventage -- and to bring about the ultimate enslavement of the rest of the world, In 1934, the Japanese Minister for Foreign Affeirs nent n. Triendly note to the United Statos, stating that be firmly believed that no question eristed between the two Covernments that vee "funda= montally incapable of amicable solution". Be added that Japan had "no intention whatever to provoke and nake trouble with any other Power". (ase Annex 3) Our Socretary of State, Cardell Bull, replies In Mrd. (Dee Annex 4) But in spite of this exchange of friendly sentiments, and almost immediately thereafter, the nots and atternboes of the Jepaness Regraded Unclassified 167 Government began to belie these assurances -- st loast 80 for as the rights and interests of other nations in Chine were concerned, Our Government theroupon expressed to Japan the view of the American people, and of the American Government, that no nation Les the right thus to override the rights and legitimate interests of other movereign states, (nee Armex 5) The structure of peace which had been founded upon the Wash- ligion Conference treaties began to be discarded by Japan. Indeed, is December of 1934, the Japanese Government gave notice of Ita in- MANA to Lorminate the Naval Treaty of February 6, 1922, which had United competition in neval armament, She thereafter intensified 11 multipliod her rearmament program. In 1936 the Government of Japen openly associated Itself with Correny by untering the enti-Comintorn Pact. This Past, GS TO all know, was nominally directed against do Seviot Union: but ita roal purpose was to form 3. loague of fascium the froo world, particularly against Great Britain, France ed the United Statos. Following this acacciation of Gormany, Italy and Japen, the days visa nov set for an unlimited campaign of conquest, In July 1937, feoling thomsolves ready, the armed forces of Japan opened now military operations against China, Presently, her loaders, dropping the mask of hypocrisy, publicly declared their intention to mizo and unintain for Japen B. dominent position in the ontire region of resturn Asie, the vestorn Pacific, and the southern Pacific. They thus accepted the German thesis that seventy or eighty million Gurmane wore by race, training, ability and might, superior in evory way to any other raco in Europe -- superior to about four hundred million other human boings in that aroa, And Japan, following outt, announced that the seventy or eighty million Japaness people Vera alan suporior to the seven or eight hundred million other in- inbitante of the Orient -- nearly all of when word infinitely older and core developed in culture end civilization than thomselves, Their empoit would make then mators of a region containing almost one-half Nio poyulation of the earth. It would give then complete control of rast sea lanes and trade routos of importance to the entire world. The military operations which followed in China flagrantly disregarded American rights. Japanese armed forces killed Americans. They voundod or abused American nen, voman, and children, They sunk American vesnols -- including a nevel vessel, the Panay. They bombed American horpitals, churches, schools, and missions. They destroyed American proporty. They obstructed, and in - cases, drove our, Amorican commerco. In the meantime, they were inflicting incalculable damage upon China, and gheetly sufforing upon the Chinese people, They voro inflicting wholomala injuries upon other nations - flouting all the principles of poace and good will smong non, There are attached hereto (nee respectively Annexee 6, 7, 8 und 9) lists of American nationale killed or wounded by Japanese forces in China since July 7, 1937; of American property in China reported to have boon danaged, dostroyed or seriously endangered by Japanese sir benking or air machine-gunning; of American nationale reported to have been assaulted, arbitrarily detained or subjected to indignities; of interferencau with American nationalarighte and interests. These lists are not complete. E:woter, they are ample evidence of the flagrent disrogard of American rights end civilized standards. II Meanwhile, bruto conquest wes - the rempage in Europe and the Moditorranson, littler and Missolini embarked upon a scheme of mlinited con- quant, Since 1935, without provocation or axcuse they have attacked, Regraded Unclassified 168 enquered, and reduced to economic and political alavery some sixtem independent nations. The machinery met up for their unlimited con- quest included, and still includes, not only encrmous armed forces, but *180 huge organizations for carrying on plota, intrigue, intimid- etion, propagen/in and babotage, This machine -- unprecedented in 2120 -- has world-wide remifications; and into them the Japanese plans and oporations have been atendily interlocked, As the forces of Cormany, Italy and Japan incrunsingly 000 kined their efforts over these years, I vas convinced that this con- limition would ultimotoly attack the United States and the Western Emisphero -- If it MOTO successful in the other continents, The very adistence of the United States BE B. groat froe people, and the froo datence of the American family of nations in the Now World, would to = standing challengo to the Axis. The Axto dictatore would choose toto ONE) time to mile it cloar that the United Statos and the New World word Included in their ticheme of destruction. This they 014 last Jenry in 1940, when Hitlor and Mussolini - treaty es alliance with Japan deliberately aimed at the visitod States. The etretegy of Japan in the Pacific area was e faithful counterpart of tirt used by Hitler in Europe. Through infiltration, encirclement, intimidation, and finally armed attack, control vas ex- tondod over neighboring peoples. Each such acquisition was a now starting point for :10% aggression. III Pursuing this policy of conquest, Jepen had first worked hor MAY into and fimily soized Manchurie. Noxt ahe had invadod Chinag of has sought for the past four and ono-half years to mb- jugiste her, Fassing through the China Soa closo to the Philippine Islanda, the thinn Inveded and took possession of Indochina. Today the Japanose rete extending this conquest throughout Thailand -- and secking the DO- supetion of Malaya and 3urma, The Philippinos, Borneo, Sumstra, Java other next on the Jsprnose time-tablo; and It 10 probable that further love the Jepance PAC#, are the names of Australia, New Zealand and ell the other Islands of the Pacific -- including Hawaii and the groat chain of the Aloution Islands, To the eastward of the Philippinos, Japen violated the nen- late under which she had received the custody of the Caroline, Marchall al Marione Inlanda after the World War, by fortifying them, and not my closing them to all comminue but her own, but forbidding any /troigner -von to visit thom. Japanese spokesmen, after their pustom, cloaked those non- questo with innocent-sounding names. They talked of the "New Order in Switam Rata"; and then of the "co-prosperity aphoro in Creater 2 Acia". What thoy really intended vus the enalevement of every vhich they could bring within their power, end the enrichment -- not of all Aala, not oven of the comm people of Japan -- but of the the loris who had soized control of the Japanese State. Here too they vare following the Nast pattern. By this course of aggression, Japan made it necossary for veriode countries, including our own, to keep In the Pecific in self- dofense large and forces and n vast amount of matorial which might otherwise have been und ugainst Hitler. That, of course, is exactly What Hitlor wanted than to do, The diversion thus created by Hitler's sity forced the posce-loving nations to entablish and estntain s. Tugs front in the Pasific. Regraded Unclassified 5 - 169 IV Throughout this course end program of Japanese aggression, the Government of the United States consistently endoavored to per- suade the Government of Japan that Japen's best intereste would lie in mintaining and cultivating friendly relations with the United States end with all other countries that believe in orderly and peaceful processes. Following the outbreak of hostilitics botween Japan and China in 1937, this Government made known to the Japanese Government and to the Chinose Government that whenovor both those Governments considered it desirable TO stood ready to exprcise our good offices. During the following years of conflict that attitude on our part romained unchanged. In October 1937, upon invitation by which the Belgian Gov- orrament made itself the host, nineteen countries which have interesta in the Far East, including the United States, sent representatives to Bruecols to consider the situation in the Far Scot in conformity with the Nine Power Treaty and to endeevor to bring about an adjustment of the difficulties between Japan and China by peaceful means. Japan and Cormany only of all the powers invited doclined to attend, Japan vas itself an original signatory of the Treaty. Chine, one of the signatories, and the Soviet Union, not B. signatory, attended, After the Conference opened, the countries in attendance made further at- tempto to percuade Japan to participato in the Conference. Japan again doclined. On Novamber 24, 1937 the Conference adopted 8. declaration, urging that "hostilities be suspended end resort be had to peaceful processes". Japan scorned the Conference and ignored the recommendation. It became clear that, unless this source of affairs in the Far Saot wee halted, the Pacific area vae documed to experience the name horrore which have devastated Europe. Therefore, in this year of 1941, in en endoavor to ond this process by peaceful moons while thore second still to be A chance, the United States entered into discussions with Japan, for nino months, those conversations were carried an, for the purpose of srriving et come understanding acceptable to both countries. Throughout all of these conversations, this Government took into account not only the legitimato interests of the United States but also those of Japan and other countries. When questions relating to the legitimato rights end intereste of other countries came up, this Government kopt in appropriate contact with the representatives of those countries, In the course of those negotiations, the United States stead- fastly advocated certain basic principles which should govern inter- national rolations. These were: The principle of Inviolability of territorial integrity and sovereignty of all nations. The principle of non-interference in the internal affaire of other countries, The principle of equality - including equality of comprcial opportunity and trontment. The principle of reliance upon International cooperation and conciliation for the prevention, end pecific settlement, of controv- ereice. The Japanese Government, it 10 true, repoatedly offered qualified statements of peaceful intention. But it became clear, Regraded Unclassified 6 - 170 M each proposal were explored, that Japan did not intend to modify in any vay her greedy designs upon the whole Pacific world, Although she continually maintained that the VIAE promoting only the prece and grester prosperity of Saot Ass, the continued her brutal asscult upon the Chinese people. Nor did Jepan abov any inclination to renounce bor unholy allience with Hitlerian. In July of this year the Japanese Government connived with Hitlor to force from the Vichy Government of France, permission to placo Japaneso armed forces in southern Indochina; and bogan sending her troops end equipment into that area, The conversations between this Government and the Japanese Government were thereupon suspended. But during the following month, at the urgent and incietent request of the Japanose Government, which again made emphatic profes- sion of peaceful intent, the conversations voro resumed. At that time the Japanese Government made the suggsstion that the responsible hoads of the Japanese Government and of the Gov- ernment of tho United States meot personally to discuss means for bringing about an adjustment of relations between the two countries. I should have been happy to travel thousands of miles to meet the Premior of Japan for that purpose, But I felt It docirable, before GO doing, to obtain somo assurance that there could be somo agreement on basic principles. This Government tried hard -- but without ene- cess -- to obtain such sesurance from the Japanese Government. The verious proposals of the Jepanese Government and the sttitude takon by this Government are set forth in e document which the Secretary of State handed to the Japanese Ambassador on October 2, 1941 (see Annex 10). Thoreafter, several formulas vere offered and discussed. But the Japanese Government continued trpon its course of var and conquest. Finally, on November 20, 1941, the Government pro- sented 6. new and narrow proposal, (000 Annex 11) which called for supplying by the United States to Japan of as much oil as Japan might require, for suspension of freezing messures, and for discontinuance by the United States of aid to China, It contained however no pro- vision for abandonment by Japan of hor varliko operations or aims. Such & proposal obviously offored no beste for a peaceful sottlement or ovon for a timporary adjuntment. The American Govern- mant, In order to clarify the iscues, presented to the Japanese Gov- ernornt on November 26, 8. clear-cut plan for a broad but simple not- tlement, (Boo Annex 12) The outline of the proposed plan for agreement between the United States end Japan WELD divided into two parte: In section one there wes outlined a mitual declaration of pollcy containing affirmations that the national policies of the two countries were directed toward pence throughout the Pacific area, that the two countries had no torritorial designs or aggressive intentions in that eron, and that they would give activo support to certain funds- montal principles of pence upon which their relations with each other and all other nations would be based. There VGB provision for mitual pledgen to support and apply in their economic relations with onch other and with other nations and peoples liboral oconomic principles, which vors emerated, baced upon the general principle of equality of comercial opportunity and treatment. In mection two there wore outlined proposed stops to be taken of the two Governments. Those stops enviseged a situation in which there would be no Japanese or other foreign armed forces in French Indochine OF in China. Mutual comitiments were suggested along lines Regraded Unclassified 171 N follows: (a) to enderwor to conclude 5 multilateral non-aggression net ests the governmento principally concerned in the Pacific area; 10) to order to conclude anong the principally interested governments as. agroement to respect the territorial integrity of Indochina and not to sect. or accept proforontial oconomic treatment therein; (c) not to support any government in China other than the National Government of the Republic of China with capital temporarily at Chungking; (d) to rolinquish extraterritorial and relatod rights in Chins and to endeavor to tain the agreement of other governments now possessing such wights to give up those righto; (o) to negotiato a trade agreement based GOE reciprooal moct-favorod-nation treatment; (f) to remoe froezing mettrictions imposed by each country on the funds of the other; (g) to NIX upm n. plan for the stabilization of the dollar-yen rate; (b) to agree that no agroement which either had concluded with my third power If prwarn shall be interpreted by it in e vay to conflict with the purpose of this agreement; and (1) to use their influence to catino other governmento to adhore to the basic political end economic principles provided for in this suggested agreement. In the nitst of those conversations, ve learned that new con- tingente of Japanese armed forces and now nasses of equipment were DOT- be into Indochina. Toward the end of November these movements were intermition. During the first week of Docember now movements of Termsed forces 1% cloar that, under cover of the negotictions, -ttacks on unspocified objectives were boing propared, I promptly asked the Jupaneso Government for a frank ateto- not of the roasons for increasing ita forces in Indochine, (see Annex 13) I were given en ovasive and specious roply (see Annex 14), Simul- tenecusly, the Jayanese operations went forward with increased tempo, No 411 not know then, ne ve now, that thoy had ordored are vero ovon then cerrying out their plan for a treachorous attack upon NO. I von determined, howover, to exhaust overy conceivable of- fort for penda, With this in mind, on the evoning of December sixth Tast, I addressed B. personal manuage to the Emperor of Japan, (soe Annus 15). In this Government's proposal of November twenty-sixth the Japaneno Government made no roply until December seventh. On that any the Jepennes Ambassedor here and the Special Representative whom the Japancee Government had sont to the United Statos to assist in peaceful acgotiations, dolivered a lengthy document to our Socrotery of Stati, one hour after the Japanese had launched = vicious attack Upen American territory and American citizens in the Pacific, That document (ace Annex 16) vas e for nimitos after its pocoipt optly characterized by the Secretary of State as follows: "I must say that in all my conversations with you (the Japanese Anbassador) during the last nine months I have never uttered one word of untruth, This 1ª borne out absolutely is the record. In all ny fifty years of public service I have never seen a document that wes more crowded with infanous felsehoods and distortions - In- franque felsehoods end distortions on fl coale 60 huge that I never imagined until today that any Government en this planot vas capable of uttoring them." : concer emphatically Ln 09011 word of that statement. for the recard of history, 13 16 assential in reading this OF my Namage always 10 been in mind that the actual air and sub- mrine attack in the Mawalian Isinnds commonsed on Bunday, December 7, it 1:30 P.M., Washington Time - 7:50 h.H. Honolului Time of unno day -- Wonday, December 8, 3:20 A.M., Tokyo Time. Regraded Unclassified 172 - 8 to my message of December 6 (9 P.M. Washington Time december 7, 11 A.M. Tokyo Time) to the Emperor of Japan, invoking accouration with me in further effort to preserve peace, there " W (inally come to ne on December 10 (6:23 A.M. Washington Time -- Deterthor 10, 9:23 P.M., Tokyo Time) a reply, conveyed in et telegraphic report by the American Ambassador at Tokyo dated December 8, 1 P.M. December 7, 11 P.H., Washington Time). The Ambassador reported that at seven o'elock on the morn- in of the 8th (December 7, 5. P.M., Washington Time) the Japanese Vinistor for Foreign Affairs asked him to cell at his official residence; el the Foreign Minister handed the Anbassador e memorandum dated December 8 (December 7, Washington Time) the text of which had been smossited to the Japanese Anbassador in Washington to be presented - the American Government (this was the memorandum which was delivered by the Japaness Ambansador to the Secretary of State at 2:20 P.M. on Docember ? (!!onday, December 8, 4:20 A.M., Tokyo Time); that 9a Formign Minister had boen in touch with the Emperor: and that the denired that the mescrandum be regarded as the Emperor's may to ny Further, the Andersador reports, the Foreign Minister nade an oral statement. Tuxtually, the oral statement began, "H18 Majesty MI expressed blk gratefulness and approciation for the cordial mussage of the Proxident". The mosage further continued to the effect that, If rights to our Inquiries on the subject of Incronce of Japanese forcup in Franch Indochina, His Majosty had commanded his Government No note 110 views to the American Government. The message concluded, certify, with the stutement: "Establishment of pance in the Pacific, and consequently of the world, hav been the cherished desire of His Majesty for the realization of which he has hitherto mado his Government to continue its earnest endoavors. His Majesty trusts that the President 10 fully aware of this fact." Thyan's real reply, however, made by Japan's war lords and ordersity Vormulated many days before, took the form of the attack thich tid been made without worning upon our territories at varines points in the Pacific. There is the record, for all history to read in amazement, III sorrow, in horror and in diagust! No are now at war. We ore fighting in self-defonse. We IN timiting La dofonse of our national Axistonce, of our right to be secure, of our right to onjoy the blessings of pence. i/e are fighting is informa of principles of Low and order and justice, against an effort of unprecedented forocity to overthrow those principles and to impoleo upon humanity a regime of ruthless domination by unrestricted ná arbitrary force. Other countries, too - a bost of them -- have declared war on Japan. Some of thom were first attacked by Japan, as we have bown, Phine line already boon valiontly resisting Japan in an undeclared war Cerood 4pou her by Jagan. After four and one-half years of #tubborn resistance, the Chinese now and honceforth will fight with renewed confidence and confirmed assurance of victory. ALL members of the Gruat British Commonwealth, themselves fighting heroically on many fronts against Germany and her Allies, have joined with us in the Battle of the Pacific as we have joined with them in the Battle of the Atlantic, All but throe of the governments of nations overrun by Gurran amiss have doclared war on Japan. The other three are sever- ing relations. In our own Hunisphore many of our Sigter Republics have declared THE on Japan and the others have given firm expression of their molidarity with the United Stotes. Regraded Unclassified 173 - 9 - The following are the countries which have to date declared war against Japan: Australia Conada China Costa Rice Cuba Dominican Republic Guatemala Haiti Honduras The Netherlands Nicaragua New Zealand Panama El Salvador South Africa United Kingdom Poland These and other ponce-loving countries will be fighting as are we, first, to put an end to Japan's program of aggression and, second, to make good the right of nations and of mankind to live in pence under conditions of security and justice. The people of this country are totally united in their determination to consecrato our national strength and man-power to bring conclusively to an end the pestilence of aggression and force which has long menaced the world and which now has struck deliberately and directly at the safety of the United States. FRANKLIN D. ROOSEVELT THE WHITE HOUSE, December 15, 1941. Regraded Unclassified 174 - 10 - Annexyst 1. Bonnto Document No. 124, 67th Congross, 2nd Session, which contains toxts of Washington Conference Trenties and Resolutions. - Identic notos to the Japanuse and the Chinese Govorn- monte, January 7, 1932. 3. Noto from the Japanobo Minister for Foreign Affairs, handed to the Secretary of Stuto by the Japanoso Ambassador, Pubruary 21, 1934. 4. Ruply thoroto, hundud to the Japanoso Ambessador by the Secretary of State on March 3, 1934. 5. Statement by the American Ambersandor to Jn, an to the Jayanate Minister for Foruign Affairs, Ayril 29, 1934. 6. List of American nationals killed or wounded by Japanuso foreus in Chinn since July 7, 1937. 7. List of Amorican property in China reported to have been damaged, dostroyed, or suriously undengered by Japanesu air bombing or hir m.chine-gunning since July 7, 1937. 8. List of American nationals reported to have been assculted, arbitrurily detained, subjected to indignitius, et cetern, sinco July 7, 1937, by Japanuse nuthorities or agents. 9. List of Inprimudo interferences with American trade and unterprise in China. 10. Document handed by the Secretary of State to the Japanose Ambiesandor on October 2, 1941. n. Document handad to the Secretary of Statu, by the Jepaneso Ambusendor on November 20, 1941. 12. Document hunded by the Secretary of State to the Inpanose Anbossnder on November 26, 1941. 13. Membrandum addressed by the President to the Secretary and the Undor Secretary of State, copy of which, under authorization of the Prosident, wha read and handed by the Under Suctory or State to the Japaneso Ambussedor on Docortbor 2, 1941. 14. Reply thuroto, handed to the Secretary of State by the Japaneso Adbassador on December 5, 1941. 15. Personal messago from the Prodident to thu Emporor of Japan, Documber 6, 1941. 16. Document handled by the Jupanoso Ambessador to the Secretary of State, December 7, 1941. Regraded Unclassified 175 December 15, 1941 Dear Ross: I an taking the liberty of sending you a copy of the New Republic and I want to draw your particular at- tention, on page 824, to "Exit, the Common Cold*. If this article is based on sound medical information, might I sug- gest that we put several of these lamps In the President's bedroom and in the oval room upstairs and that, as recom- mended, we treat the air that is pumped into his office through the air condi- tioning system. Yours sincerely, (Signed) Heary Rear Admiral Ross T. MoIntire, Surgeon General, United States Navy, The mite house. by Messenger Lixon 4. 35 n.m.c. Regraded Unclassified 175 December 15, 1941 Dear Ross: I am taking the liberty of sending you a copy of the New Republic and I want to draw your particular at- tention, on page 824, to "Exit, the Common Cold". If this article is based on sound medical information, might I sug- gest that we put several of these lamps in the President's bedroom and in the oval room upstairs and that, as recom- mended, we treat the air that is pumped into his office through the air condi- tioning system. Yours sincerely, (Signed) Heary Rear Admiral Ross T. McIntire, Surgeon General, United States Navy, The white House. by Messenger Dison 4, 35 n m.c. Regraded Unclassified 176 December 15, 1941 4:34 a.m. HMJr: Clif Mack, Mrs. Klotz tells me that you and McKeschie want to Bee me about some consoli- dation. Clifton Mack: Yes, sir. HMJr: Now, the only time I could see you people would be if you wanted to come to the house tonight at a quarter of nine I could see you. M: Well, that would be splendid. HMJr: Both of you. M: Yes, sir: that's fine. HMJr: Well, I could see you at a quarter of nine; that would be my only time. %: Very good. HMJri All right. M: Fine, and thank you. HMJr: How do you know you can deliver McKeachie? X: Well, I'll get him. HMJr: All right. M: Yes, sir. HMJr: Thank you. Regraded Unclassified 177 December 17, 1941 MEMORANDUM FOR FILE: Meeting . December 15, 1941 8:45 PM, 2434 Belmont Rd., N. W. Present: Hon. Henry Morgenthau Secretary of the Treasury Mr. Douglas MacKeachie, Director of Pur- chases, Office of Production Management Mr. Clifton E. Mack, Director of Procure- ment, Treasury Department The meeting was arranged to discuss the matter of coordinat- Ing non-military purchases. Mr. MacKeachie pointed out that the supply situation is be- coming more difficult due to the scarcity of many materials and that control would be necessary to avoid waste or unnecessary use. Re added that an executive order should be drawn up to authorize centralized control and that he, also someone from the Bureau of the Budget, might cooperate with me 8.8 8. Board or Committee to pass on requisitions involving matters of policy such as requests for materials that are not justified, illustrating the practice of Federal agencies to requisition steel furniture when wood furniture would serve the purpose 8.8 well. The Secretary stated that, in his opinion, there is ample authority in the executive order which created the Procurement Di- vision to determine policies of purchasing by the Federal agencies and to consolidate purchases, exclusive of the War and Navy Depart- ments, and that he did not believe that a further executive order would be needed for that purpose but that It might be well to obtain A legal opinion to determine what authority, if any, is needed to control the use of unjustified supplies. Mr. MacKeachie spoke of the program which the Procurement Di- vision and the Office of Production Management have been working out relative to the purchase of office furniture and the steps taken by the Office of Production Management to limit the use of steel office furnishings. The Secretary then asked me if, in my opinion, any further authority would be required to determine purchase policies or to consolidate purchases by the Federal agencies other than Army and Navy and I stated that, in my opinion, the present authority is non-military purchases since July 1st and are making consolidations adequate 8.8 to purchasing, further that TO have been recording all Regraded Unclassified -2- 178 10W on furniture, automobiles and studying heavy equipment, sub- stantial savings having been effected. I stated further that the degree of justification required of an agency to support a requisition of a tight material is a consideration that would come within the Office of Production Man- agement's determination as to availability. Mr. Morgenthau then stated that if any agency insisted upon ordering supplies which were not essential or justifiable and In- terfered with materials needed for military use, although not restricted by specific order, that the matter could be readily cor- rected by calling the situation to the attention of the head of the agency involved. I briefly reviewed the progress that has been made by the Pro- curement Division towards centralized control, pointing out that last year funds were requested to set up a Purchase Classification Group effective July 1 of this year and that commodity studies are being currently made, also that Mr. MacKeachie's comments fitted right into a. job that we are now doing. The Secretary then suggested that he be informed weekly of steps taken to consolidate and conserve supplies and in the mean- time obtain a legal opinion as to whether any additional authoriza- tion is in fact required. Director Clifton'E. of Mack, Procurement Regraded Unclassified TQ: - Miss Chamicay 179 - for filing matter completed 12/31/41. medals awarded 12/26/41. Q From: LIEUT. STEPHENS 180 - - 0.6 CHET CLASS ew KOUR 10 mi - OP-18 71 75 UNITED STATES COAST GUARD WASHINGTON 15 December, 1941. EMORANDUM FOR - The Secretary of the Treasury (vie Assistant Secretary Gaston: Subject: Distinguished Flying Crosses; presentation of. 1. Four Distinguished Flying Crosses have been received for the following personnel: Lieutenant William 8. Sinton Aviation Chief Machinist Mate Edmund T. Preston Avistion Chief Machinist Mate Lonnie Bridges Radioman, first class, Stephen J. Brodnan 2. Inasmuch as you were B. passenger in airplane V188 st the time the extraordinary flight was made which resulted in the awarding of subject Crosses, it is thought that you would like to make the presentation to the personnel concerned. annurance R. R.WAESCHE. FOR DEFENSE BUY United APPROVED EUVDE Regraded Unclassified 181 FOR IMMEDIATE RELEASE: Secretary Morgenthau has awarded Distinguished Flying Crosses to the pilot and crew of a Coast Guard airplane which was landed safely at Philadelphia on October 3 after having been severely damaged in a crash through tree tops near New Hackensack, New York. The Secretary, who was then head of the Coast Guard, was a passenger in the plane. Those receiving the crosses were the pilot, Licutenant William E. Sinton, Aviation Chief Machinist's Mates Edmund T. Preston and Lonnie Bridges, and Radioman (First Class) Stephen J. Brodman, all of the United States Coast Guard. approved Hinjs - Regraded Unclassified 182 FOR IMMEDIATE RELEASE: Secretary Morgenthau has awarded Distinguished Flying Crosses to the pilot and crew of & Coast Guard airplane which was landed safely at Philadelphia on October 3 after having been severely damaged in a crash through tree tops near New Hackensack, New York. The Secretary, who was then head of the Coast Guard, was 8. passenger in the plane. Those receiving the crosses were the pilot, Lieutenant William E. Sinton, Aviation Chief Machinist's Mates Edmund T. Preston and Lonnie Bridges, and Radioman (First Class) Stephen J. Brodman, all of the United States Coast Guard. Regraded Unclassified TO: The Secretary 183 0 Okay for release? @ 12/26 revir write very Photo dog. From: MR. SCHWARZ FOR IMMEDIATE RELEASE: 184 Secretary Morgenthau has awarded Distinguished Flying Crosses to the pilot and crew of a Coast Guard airplane on which he was & passenger October 3, when it was landed safely after being severly damaged in & crash through tree tops near New Hackensack, New York, in bad weather. Those honored were Lieutenant William E. Sinton, Aviation Chief Machinist's Mates Edmund T. Preston and Lonnie Bridges, and Radioman First Class Stephen J. Brodman, all of the United States Coast Guard. Since the latter's enlistment has expired, his medal was mailed to him. Lieutenant Sinton was pilot of the Coast Guard plane V-188 on the October 3 flight. While flying by instrument, the pilot brought his plane down through thick overcast in the late afternoon, preparatory to landing at New Hackensack. The plane swept the tops of 8. number of trees and & crash landing appeared imminent. However, the crew kept the craft in the air and, after a further flight of nearly two hours in low visibility and darkness, accomplished a dangerous, high-speed landing at Philadelphia without injury to the persons on board or further damage to the plane. In recommending the awards, Secretary Morgenthau said: "The courage, quick thinking, skill, resourcefulness and efficient teamwork of the pilot and crew transformed almost certain disaster into safety which seems incredible now in the light of the known damage to the airplane." -0o0- Regraded Unclassified 185 RANDOLPH E. PAUL 25 BROADWAY NEW YORK December 15, 1941 Dear Mr. Secretary: Cleaning up things in New York is not a completely simple matter, and it is now clear that I shall have to stay over until Tuesday. I think I shall be able to get swa/ toworrow evening, arriving Wednesday morning. In view of this slight delay I thought I would tell you that I had a very good ses- sion with Knollenberg yesterday and arranged for him to meet me in Washington for a fur- ther conference Thursday. Possibly then we shall want to talk with you for a few mom- ents. Knollenberg's ideas fit in with mine, and I think also yours, like a glove. Sincerely yours, Hon. Henry Morgenthau, Decretary of the Treasury, The Treasury Department, Wesnington, D. C. Regraded Unclassified TREASURY DEPARTMENT the 186 INTER OFFICE COMMUNICATION DATE December 15, 1941, and TO Gil FROM Serevith the report regarding the Defense Bond end prodotion of Redio Station NEVA, Fredericksburg, QE requested by the Secretary. Tha program entitled "Any Bonds Todey?" is broad- est ever TFVA from 1]:00 to 11:30 AN, kondey through may, eng resulted in a total sale of 43,100.00 virtor four days. After the initial progrem on Tuesday, 9th, the sales have averaged 600 per broadcest. The broadcasts originate from 8 "Defense Bond Head- established by NEVA in the window of 5 leading Its] department store. This temporery studio is squipped visa - private telephone, the number of which is announced oues et the opening of the broadcest. Listeners are - to call the number to order Bonds or Stamps. The ALS and address of persons calling are emounced on the air, at the amount of Stamps or Bonda which they wish to la adding machine has been instelled SO that total **1es pay be amounced throughout the helf-hour broadcast, 18 telephone requests for Bonds end Stamps ere reserved, Boy Scouts and Girl Scouts leave the Bond Head- cortern end deliver them to homes or business offices. 21: the 0988 of Bonds, they deliver BR evplication blank, THE give the purchaser complete instructions G.S to filling out the application and redeeming 10 for their Bond st just offices or banks. In accition to the telephone calls nude to the Bond Assocuurters, the announcer calla telephone subscribers, enl "Any Bonds Today?" AS B result of such a telephone call on one progren, the sanouncer wes riven en order for over 20,000.00 in donde by the head of a large corporation. Regraded Unclassified 187 20: .1.072. Page Two. 12/15/41. 2001 .R. GILCHREST. The program idea WUS conceived by John Bell, an at WEVA, and carried out by William R. Seth, intent Manager of the station. - Bell, B native of Baltimore, Maryland, is 22 years of 9.0, married, one has worked in radio as en bowuncer for three years. He attended Loyole College 10 aspylane for one year. ,.r. beth, also 8 native of Baltimore, is 27 years or VP nd arried. He graduated from the Univer Ity of with Carolina and entered rodio in 1933. Regraded Unclassified TREASURY department 188 INTER OFFICE COMMUNICATION DATE December 15, 1941 Secretary Morgenthau TO FROM Gene Sloan In replying to your attached memorandum I presume you are referring to the new pledge application (proof attached) which you approved last week. These applications are to be printed by the Government Printing Office and not by the Bureau of Engraving and Printing. The Government Printing Office has advised that 2,000,000 sets can be delivered by January 1st and 2,000,000 each week thereafter. However, if you refer to the Payrol Allotment Authorization Card (copy attached), which is also being rinted by the Government Printing Office, we are receiving large deliveries everyday and expect to have 14,000,000 delivered in the next ten days. Regraded Unclassified 189 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 15, 1941 TO Gene Sloan FROM Secretary Morgenthau When Peter Odegard was here yesterday, he told me that Hall of the Bureau of Engraving can only print 80,000 applications for pay roll deductions plans 8 week. This is unbelievable. If you are having any production troubles along these lines, please talk to me on Monday. Regraded Unclassified 432477 190 AGREEMENT FOR THE SYSTEMATIC PURCHASE OF DEFENSE SAVINGS BONDS No. (Place-City and State) (Date) NOTE-This in that an onder form. In accordance with this the pledger will make his own purchases DUPLICATE of Bands from a post office, bank, any other authorized issuing agency, be direct mail from the Treasurer Send to Pledgor. of the United States, Washington, D.C., through his employer, or organization of which be la . member. In Consideration of our Common Defense and National Welfare, I hereby promise and pledge that effective immediately, [ shall invest the sum of $ week each month } in Defenee Savings Bonds. I shall buy these Bonds: From a post office, bank, or other authorized issuing agency. By direct mail from the Treasurer of the United States, Washington, D.C. Under a Pay-Roll Allotment Plan (or other similar arrangement for systematic purchasing) Nete-Thie agreement is to be word from all established at my place of employment: persons regardins of way other arrangement ea- (Employer's name) (Employer's business address) tered ieta for the pur- Through a systematic plan for purchasing Bonds installed by an organization of which chase of Defense Sav- Ings Bonds. I am a member: (Name of organization) (Addems) FORDEFENSE This agreement will remain in full force and effect and will be faithfully fulfilled by me for the duration of the national war emergency, or until canceled by me, by writing to the State BUY Administrator, Defense Savings Staff, LETTER STATES surrace Bosos (Print) instituion (Last name) (Given name) (Middle initial) (Street end number) (City) (State) U.S. ADVERWMENT PRINTING OFFICE (Signature) T 62 Regraded Unclassified DEPT. & LOCATION DEDUCTION PAY-ROLL PERIOD 1st DEDUCTION ISSUE PRICE NAME APPLIED TO NET CREDIT PAY-ROLL PERIODS APPLIED TO NET CREDIT PAY-ROLL PERIODS PURCHASE END OF PURCHASE PAY-ROLL PERIODS APPLIED TO END OF NET CREDIT 4 5 OF BOND MONTH 12341 : 3 OF BOND 12341 PURCHASE MONTH END OF I OF BOND MONTH YEAR 19 YEAR 19 YEAR 19 2-203 J F M A M J J A 5 o N D YEAR 19 YEAR 19 YEAR 19 J F M A M J J A Regraded Unclassified PAY ROLL ALLOTMENT AUTHORIZATION FOR PURCHASE OF 191 UNITED STATES SERIES E SAVINGS BONDS By (Employee) (Company) I hereby authorize you to deduct from my earnings each the amount of (Pay-roll period) effective with the pay roll ending Each time the required $ has accumulated to my credit, to purchase and deliver to me a United States Series (Amount of Allotmant amount $ after until (a) Termination of my employment, (b) Written notice by me of the cancelation of this allot- E Savings Bond maturity value of $ Such deduction shall continue each pay period there- (Dwana) ment, or (c) Termination of this allotment arrangement by you. 1 understand that no interest is to be paid by the company on any accumulated funds. Register bonds in the name of and deliver to: (Department) Miss Mrs. Mr. - (Show given name, middle name or initial, and surname) (Louses) (Number and street) (City as town) (State) Address of Co-owner or beneficiary if different from above- (Ocupation) Miss Mrs. Mr. (Show given name, middle name or initial, and surname) (Winking Number (Number and street) (City or town) (State) This allotment is made in accordance with the terms and conditions of the Pay Roll Allotment Plan for the purchase of Series E United States Savings Bonds, the receipt of a copy of which I hereby acknowledge. (Social Security Name) Witness (Signature of employee) (Special Information Date Address (Number and street) (City or town) (State) Nort-The purchaser of a Savings Bond, if an individual, may designate one individual co-owner or beneficiary- but not both. Full name, not initials, and address must be noted. 10-22% Regraded 192 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Twelve Business Days of December, November and October 1941 (October 1-14, November 1-15, December 1-13) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of Increase Sales : Percentage of Increase : : or Decrease (-) : or Decrease (-) Item : : : : December : November : December : November : December : November : October : over : over : over : over : : : : November : October : November : October Series I - Post Offices $ 25,353 $ 19,874 $ 20,149 $ 5.479 1st 275 27.6% - 1.46 Series 1- Banks 47.376 36,217 36,845 11,159 - 628 30.8 - 1.7 Series 3 1- Total 72,729 56,092 56,994 16,637 - 902 29.7 - 1.6 Series 1 - - Banks 9,424 9,642 10,616 - 218 , 974 - 2.3 - 9.2 Series G - Banks 61,650 60,389 59,652 1,261 737 2.1 1.2 Total $143,803 $126,122 $127,261 $17,681 -$ 1,139 14.0% - 0.9% Office of the Secretary of the Treasury, Division of Research and Statistics. December 15, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totale. Regraded Unclassified 193 CONFID UNITED STATES SAVINGS BONDS Daily Sales - December 1941 On Basis of Issue Price (In thousands of dollars) Post Office Bond Sales Bank Bond Sales All Bond Sales Date Series 1 Series I Series I Series G Total Series 1 Series , Series 6 Total December 1941 1 $ 2,976 $ 3,904 $ 1,333 $ 7,220 $ 12,458 $ 6,880 $ 1,333 $ 7,220 * 15,434 2 1,229 2,592 623 5,750 8,964 3,821 623 5.750 10,193 3 1,510 2,734 870 5,289 8,893 4,244 870 5,289 10,403 4 2,411 4,036 726 7,530 12,292 6,447 726 7.530 14,703 no 2,015 4,805 1,152 12,357 18,314 6,820 1,152 12,357 20,329 1,001 2,293 656 2,776 5,725 3,294 656 2,776 6,726 8 3,282 4,764 1,011 3,810 9,585 8,046 1,011 3,810 12,866 9 1,828 3,877 601 4,996 9,475 5.706 601 4,996 11,304 10 1,651 3,566 491 2,612 6,668 5,217 491 2,612 8,320 11 1,909 4,763 719 3,423 8,905 6,672 719 3,423 10,814 12 2,773 5,012 658 3.768 9,437 7,785 658 3.768 12,211 13 2,767 5,030 584 2,120 7.734 7,798 584 2,120 10,501 Total $ 25,353 $ 47,376 $ 9,424 $ 61,650 $118,450 $ 72.729 * 9,424 $ 61,650 $143,803 Office of the Secretary of the Treasury, Division of Research and Statistics. December 15, 1941. Source: All figures are deposits with the Treasurer of the United States on account of proceeds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclas TREASURY DEPARTMENT 194 INTER OFFICE COMMUNICATION CONFIDENTIAL DATE December 15, 1941 TO FROM Mr. Haas Secretary 904 Morgenthau Subject: The Business Situation, Week ending December 13, 1941. Summary (1) The total volume of industrial output will likely be expanded above earlier expectations by the accelerated war effort, although production in various industries will be re- duced in the immediate future. The necessity of conserving strategic materials and speeding up war material output has resulted in drastic curtailment programs for the rubber and automobile industries. (2) Due to the vital role of shipping in the conduct of the war, still further expansion of shipbuilding 1s in pros- pect. One consequence of this will be to place a still greater strain on the plate making facilities of the steel industry, which already are a serious bottleneck in the defense program. (3) Basic commodity prices last week rose to new highs for the year. The BLS index of 28 basic commodities now stands 60 percent above the level of August 1939. The price rise during the week undoubtedly would have been greater if the Commodity Exchange Administration had not imposed temporary trading limits on certain commodities and if the OPA had not frozen prices of various others. (4) National income payments continued to rise in October and reached the highest level on record at an annual rate of $95 billions. This compares with $72 billions in August 1939. Due to the rise in living costs, however, the purchasing power of national income has levelled off since August. Living costs rose 1 percent in November and are now 12 percent above the pre-war June 1939 level. (5) Department store sales are showing a reduced gain over 1940 levels. In the first week in December (before the Japanese attack) the sales gain over year-earlier levels narrowed to 9 percent from 15 percent in the previous week. Since retail prices have risen 15 percent over last year, the volume of goods gold was actually below year-earlier levels. Regraded Unclassified 195 na General situation The gradual transition of industry from civilian to war 70008 production, which has been in progress for months past, will be greatly accelerated now that war has been declared, The net result seems likely to be an eventual greater expan- sion of industrial output than had previously been looked for, although the immediate effect on total output is under- tain. The outbreak of war with Japan, and the consequent threat to suipping from the Far East, will necessitate sharo curtail- ment in the operations of some industries. On the other hand, the industries producing sircraft, guns, ammunition, tanks and ships will further step up operations to a full 168- hour week basis. The expansion of output in existing defense plants will be lemented by the construction of additional production facilities, and the resulting greatly enlarged autout of war equipment promises to much more than offset curtailments in civilian goods production, once the expanded var effort gete into full swing. Restrictions imposed to conserve raw materials Some civilian gooda industries will be hard hit by the lack of raw materials due to the demands of the defense program and threatened interruptions to the flow of incoming subelies. The OPM last week prohibited the consumption of rubber unless intended for defense or certain essential civilian uses, pending the development of a longer range rub- ber control program. Moreover, the sale of new automobile tires to the public was banned until December 22 to forestall - insumers' Luying wave. The OPM also imposed further cuts on passenger car and light truck production. Passenger car production in January is to be 75 percent below year-earlier levels, and the December quote 18 60 percent below December of last year. às a result of the relatively high production in the first 2 Weeks of the month, and other factors, the industry 18 ex- proted to virtually suspend non-defonse production until EASTS in January, when such output 1s to be resumed on 8. reduced scale. Cae consequence of the drastic curtailment program in rospect for massenger cars, automobile tires and tubes, one other consumer roods will be to restrict important sources at excise taxes. Regraded Unclassified 196 - 3 - Shipping situation B. crucial factor In view of the vital necessity of maintaining the inflow of raw materials and the outflow of lend-lease shipments, while supplying armed forces on both oceans, shipping develop- ments are bound to play a role of supreme importance in the nation's war effort. Maritime Commission officials are therefore predicting & further enlargement of our mammoth shipbuilding program, which has already raised the number of active private shipbuilding ways (300 feet or longer) to 383 from only 83 in mid-1940. This enlargement will exert further heavy pressure on a wide range of heavy industries, including the hard pressed plate-making branch of the steel industry. It is estimated, according to the Iron Age, that only 600,000 tons of plates a month are being produced in the face of a demand for about 950,000 tons. In order to cope with the heavy demand for plates for ships, tanks, freight care and other purposes, the OPM instituted a complete allocation system at the beginning of this month. Unless this allocation system achieves much improved results, the lag in steel plate produc- tion may constitute & drag on the defense program. Large steel scrap shortage forecast Unfavorable predictions continue to be made with respect to the steel scrap supply. The Iron Age estimated last week that the shortage may run close to 10,000,000 tons in 1942. In an effort to alleviate the situation, the OPM launched B. salvage campaign last week. The nation's pig iron capacity is to be augmented this month by the blowing in of 2 new blast furnaces of the National Steel Corporation, which will increase the potential pig iron output by 750,000 tons per year, or more than 1 percent. Steel ingot production in November, after allowance for the shorter month, fell only slightly below October which was the highest month on record. Production in the first 11 months of 1941 totaled nearly 76 million tons or 25 percent above year-earlier levels. Steel ingot production last week was virtually unchanged at 97.5 percent of capacity, and 18 scheduled at 97.9 percent for the current week. National income et new high National income payments continued to expand in October and reached the highest level on record at an annual rate of Regraded Unclassified 197 $95 billions. This compares with only $72 billions in August 1939. (See Chart 1.) In the first 10 months of the year, income payments to individuals rose 17 percent above the corresponding period of last year. The most im- portant factor in the rise was an increase of 21 percent in salaries and wages. While income payments have continued to rise, the pur- chasing power of national income has shown little change since August, due to the rise in the cost of living. (Refer to Chart 1.) Living costs continued to rise in November, and Conference Board figures show an advance of 1 percent in the combined index as compared with the previous month. Chart 2 shows estimates of the BLS cost-of-living index and components based on the Conference Board data. As a result of this further rise, the cost-of-living index in November was 12 percent higher than the pre-war level of June 1939. Most of the advance has occurred since last February. Although all components of the index showed further increases in November, the widest advances were made by clothing and food, with estimated rises of 1.7 percent and 1.3 percent respectively. (Refer to Chart 2.) Department store sales lag In view of the high level of national income, merchants have been somewhat disappointed over the recent showing of department store sales. In the week ended December 6, the sales gain over year-earlier levels narrowed to 9 percent from 15 percent in the previous week. Since prices on December 1 were 15 percent above the corresponding date in 1940, the volume of merchandise sold by department stores in the first week of this month W&B below year-earlier levels. Preliminary reports for last week appear to indicate that department store sales showed a further lag, due in part to air raid alarms and blackouts in coastal cities. In view of the failure of sales to come up to earlier expecta- tione, merchants have recently shown signs of concern over the high level of inventories. A recent confidential survey conducted by the Federal Reserve Board indicated that on October 31 department store stocks were 35 percent above year-earlier levele, and the ratio of stocks to sales had moved up to 3.4 from 2.7 a year earlier, Regraded Unclassified 198 - 5 - Stocks decline, commodities rise at outbreak of war The outbreak of war in the Pacific brought rather heavy selling into the New York stock market, and at the Wednesday lows the Dow-Jones industrial stock average was down about 10 pointe from the previous week's close. By the end of the week, however, the market had steadied considerably. Ae a result of the decline, the Dow-Jones industrial average fell below the low point touched at the time of the French collapse in 1940. (See Chart 3.) Industrial stock prices also declined in the London market, halting at least temporarily the long rise which has been in progress in that market. (Refer to Chart 3.) In contrast to the decline in the stock market, commodity prices rose at the outset of the week and the Dow-Jones futures index on Monday advanced to the highest levels since compila- tion of the index was begun in October 1933. (See Chart 4.) However, the imposing of temporary price limite on certain commodities by the Commodity Exchange Administration and other factors halted the rise in the futures markets. Spot commodity prices, as measured by Moody's index, showed B stronger upward trend during the week. Reuter's index of commodity prices in the United Kingdom also rose moderately. (Refer to Chart 4.) BLS all-commodity index still at peak level The BLS all-commodity index in the week ended December 6 (before the Japanese attack) continued to move in a narrow range near recent peak levels. Grain prices in that week increased 5% percent, and were the only group showing a marked rise. The largest decline occurred in livestock prices. Basic commodities advance to new high The renewed price rise which has recently been getting under way received new etimulus last week from our entrance into the war. The BLS price index of 28 basic commodities on December 12 reached a new peak 60.2 percent above the August 1939 figure. Led by domestic products, prices of a number of commodi- ties touched new highs for 1941. (See Chart 5.) Prices for wheat, corn, barley, steers, and lard advanced beyond previous levels since August 1940. The rise in wheat prices Regraded Unclassified 199 - 6 - carried winter wheat approximately 15 cents above the Government's loan basis. This price is high enough to cover carrying and other charges on stored wheat, making it possible for farmers to withdraw such grain from Government loan stocks at a profit. Imported commodities (most of which are under price restrictions) showed little advance, the excep- tions being cocoa and flaxseed. Government action retards price rise Prices for certain commodities were kept from rising to even higher levels by prompt Government action. The Commodity Exchange Administration requested the futures exchanges tem- porarily to limit rises of some speculative commodities. Owing to the threatened increases in prices of certain imported com- modities, the OPA froze prices for coffee, cocoa butter, COCOA beans, and pepper at the levels prevailing on December 8. In addition, ceiling prices were imposed on a long list of fate and 0118 (not including butter) at levels prevailing on November 26. Butter prices will be covered by a schedule to be issued later. In addition, ceiling prices are to be placed on rew wool at the levels of the first week in December. Regraded Unclassified NATIONAL INCOME AND ITS BQUIVALENT PURCHASING POWER 1939 1940 1941 DOLLARS T 1942 DOLLARS BILLIONS BILLIONS Monthly 96 96 92 92 NATIONAL INCOME 88 88 64 84 80 80 PURCHASING POWER or NATIONAL INCOME * 76 76 72 72 68 68 J A 5 o - D J F M A M J J A $ o - D J F M A M J J A. $ o N D J , M A M 1939 1940 of 1941 1942 200 Chart 1 "BASED ON COST OF LIVING INDEX OF O.L.S. Aug. 1939 = 100 Office et the Secretary of the Transury - of - of Ship C 415 Regraded Unclassified Chart 2 201 COST OF LIVING AND SELECTED ITEMS JUNE 1939 = 100 1939 1940 1941 1942 PER PER CENT CENT 112 for 112 108 108 COST OF LIVING 104 104 100 100 120 120 FOOD 116 116 3 112 112 106 fir 108 CLOTHING 104 711 104 100 100 RENT, LIGHT, HOUSCHOLD FURNISHINGS AND HEAT AND MISCELLANEOUS 56 96 J 5 D M J $ o N D J , M A M J J A $ o N D J , M A M J 1939 1940 1941 1942 SOURCE: B.L.S. 2019 di the Secretary of the Treasury C - 413 Street of - and Distation Regraded Unclassified INDUSTRIAL STOCK PRICES IN U.S. AND U.K. 202 AUGUST 1936 - 100 Chart 3 weekly 1940 1941 APR. MAY JUNE JULY AUG. SEPT. ocT. NOV. DEC. JAN. FCB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. PER PER CENT CENT 100 100 96 U.B. 96 N.Y. 30 INDUSTRIAL STOCKS 92 92 88 88 84 84 80 80 70 76 72 72 68 68 64 64 60 $ 56 56 64 84 80 U.K. 80 LONDON 56 INDUSTRIAL STOCKS 76 76 72 72 68 68 64 64 60 60 56 56 52 52 48 48 44 44 APR. MAY JUNE JULY AUG. SEPT. OCT. NOV, DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. 1940 1941 F0-65-M Office of the Secretary of the Treasury Division of Research and States Regraded Unclassified Inclassified $ - 1 . j 1 I I % - No e % 1961 ⑉ 0961 - EXPIRATION # or El 9 62 ET 51 # - "Mass AVE are "INC 1479 AW 91 in - ST " *ave ( 19 III D91 = THE a car OF an e il c ***n - 984 I # 61 $ E $ NI #: F a SEL It 991 29 Ni or 001 $ 102 e ISI C 102 2 en 001 - (05) is *** MODDY's IN U.S. oz 152 = - и 012 IS NJ "S"N as YOU! ", ADDOR " TIZ 8 001 - ISSL "81 - - XMM 381 EL 912 a will 001 = 92 (essor-801) N. 612 = 251 % m = 061 2 see a KZ " are R die E HZ a 912 PUTURES F M2 % m a 252 % acr is one oz M2 20 or 8 DE a 9VZ a out 3 are $ est a est 8 IST INTO ASSON - and 4830 and por at DE 1. R an 51 R E via - or F EXPOLDO É ATTP 1961 i É *NYP É ANY AM *EYR - (16) Daily 0451 (stive - INVESTME) 203 'I'l ONY NI SEXEONI SOINS + Chert DOS MOVEMENT OF BASIC COMMODITY PRICES Chapt 4° AUGUST 1939-100 PER PER PER PER CENT Weekly Average CENT CENT Daily CENT 170 170 170 170 160 160 // Imported 165 165 Commodities 150 150 160 11 Imported 160 Commodities 140 140 17 Domestic 155 155 130 Commodities 130 150 150 120 120 17 Domestic Commodities 110 110 145 145 100 100 140 140 A 5 o N D F A M $ N D + a 10 " I = is 19 1 6 Y (II 7 - - J M J J A o J F 1940 1941 1942 SEPT OCT. NOV DEC 1941 Percentage Change for Individual Commodities, August 1940 Low to December 5 and to December 12,1941 PER Tallow 17143 PER CENT CENT 17 Domestic Commodities Cortonseed Oil 1576% II Imported Commodities -150 +150 Cucoo /2621 +125 Shellec 124/2 -125 Lard 1132% Barley 89.4% +100 Resin 88.7% +100 Coffee 945% Wheat 8352 Cotton 10/2 Burlap 729% +75 Abiga 73.92 +75 Frint Clath 73.15 Heles 5902 Butter 3212 Wool 525X +50 12inc 30/% +50 Flasseed 4472 Steent 26.3% Sugar 34/2 Leod 2322 Com 1983 Silk 21.0% -25 -25 Copper 11.0% Rubber /6.FI Stee/ Scrap dem 1.72 Tin 30r Steel Scrap exp an 0 o Dec 5 Des 12 Aug 1940 Dec 5 Dec. 12 Aug 1940 Cew Low P-M-5 $ Regraded Unclassified