Volume 485, January 12 – January 14, 1941

DIARY Book 485 January 12 - 14, 1942 Regraded Unclassified Book Page Airplanes Shipments to British Forces - Kamarck report - 1/12/42..485 184 Alten Property Custodian Crowley, Leo: "Non-Oivil Service order" discussed by HWT and McReynolds - 1/12/42 262 appointments and Resignation= Brown, Edward (President, First National Bank of Chicago): Under Secretaryship discussed by H.Jr and Schator Lucas - 1/12/42 52,85 Argentina See Latin America - - Batavia See Metherlands Sritish Purchasing Mission Vesting order sales - 1/12/42. 1/14/42 182,183, 467,466 Brown, Edward (President, First National Bank of Chicago) See Appointments end Resignations dusiness, Small, Loans to Ste Small Business, Loans to Business Conditions Here mesorandum on sisuation, week ending January 10, 1942 167 () I 1 Canada Dollar exchange position and effects of Lend-Lease decision not to purchase completed defense articles in Canada for transfer to other parts of Writish Empire - PWr's letter to Deputy Minister of Pinance Clark - 1/14/42 469 China Lend-Lease materials in Burma destined for China but transferred to British authorities discussed In SDR's memorandum to Chieng KHI-shek - 1/12/42 42 Loan discussed by HMJr, Phillips, Viner, Currie, rell, Foley, Sernatein, Coc. shd Southerd - 1/12/92 74 Conference on loan: present: HWr, Foley, Bernatein, One, Viner, and sell - 1/12/42 93 =) Soong visit discussed HhJr's proposal for loan - Coe resume' - 1/12/48 SE a) Sue's talk with Sornheric and Curtie 110 Fox-Oniand Kai-shek discussion of loan - 1/12/42 111 %iemever's activities in China reviewed by Fox 113 Conference: present: Treasury group, Corrie, and Hornbeck - 1/13/42 207 a) HMr's conversations with Churchill End 3000g reported 0) A medial doller sicilar to China trade dollar alsonased 1) conversation revorted to Viver, nell, Morrig, Kalen, part Hrs. Mote - 1/13/42 302 0) Stone told of conversations with FOR, Grurchill, atc. - 1/13/42 264 Regraded Unclassified - C - (Continued) Book Page China (Continued) Loan: Hornbecks's (State Department) disapproval of olan reported to Treasury supported by State Department correspondence with Gaues and Fox - 1/14/42 485 345 Phillips-Treasury correspondence concerning American-British assistance - 1/14/42 364 United States dollar-yuan stabilization fund - Coe report - 1/14/42 368 Berle and Pasvolsky (State Department) notes: See Book 487, page 460 - 1/23/42 Christenberry, Herbert W. Justice aske HMr to write a letter stating objections to appointment without request from thea - - 1/13/42 22 a) Gaston memorandum 34 b) Woolf memorandum 37 c) Intelligence Unit report 38 Coordinator of Information Foreign publications - committee to secure: Treasury to be represented by W. 1. Ullmann - 1/14/42. 464 Crowley, Leo See Alien Property Custodian Cuba See Financing, Government: Dafense Savings Bonde - D - Defense Savings Bonds See Financing, Government - 6 - Amerson, Thomas I. Investigation for Assistant General Counsel in Office of Price Administration discussed et 9:20 meeting - 1/12/42 25 a) Justine Wise Polier-HMJr conversation - 1/12/42 49 b) Justine Wise Polier-Ceston conversation - 1/13/42 270 c) Gaston-Henderson correspondence concerning report - 1/14/43 340 Exchange Market Resumes - 1/1°-13-14/42 197,320,474 Exports To Russia, China, Burma, Hong Kong, Japan, France, and other blocked countries, weeks anding December 27, 1941, and January 3, 1943 448,456 Regraded Unclassified - 7 - Book Page Financing, Government Non-defense Economies: See also Books 468 and 473 Legislation now pending wherein there is possibility of economy - Bernard report - - 1/14/42 485 394 Meeting - Bell memorandum - 1/23/42: See Book 487, page 301 Defense Savings Bonds: State and local payroll deduction plans discussed at 9:30 meeting - 1/12/42 7 a) Enforceability of contract - Foley memorandum - 1/17/42: Book 486, pages 151 and 235 b) Number of firms and employees covered - 1/17/42: Book 486, pages 153 and 244 o) Proportion of employees covered, by states - 1/21/42: Book 487, page 126 Motives for purchasing: Psychological Corporation report - 1/12/42 137 Unfilled orders: December 31, 1941, to date - 1/12/42 164 January 2, 1942, to date - 1/14/42 403 January 5, 1942, to date - 1/16/42: Book 486, page 105 Cuba: Possible sale of bonds discussed in American Embassy cable - - 1/12/42 188 Agents - - number of: Haas report - 1/13/42 297 (See also Book 486, page 318 - 1/20/42) - L - Latin America Argentina: Enemy alien funds abroad and at home - Executive Decree concerning - 1/13/42 324 Cuba: See Financing, Government: Defense Savings Bonds Loans to Small Business See Small Business, Loans to - M - Military Reports Reports from London transmitted by Campbell - 1/12-13-14/42 198,331, 333,475 "The German Military and Economic Position" - Coordinator of Information report: Kamarck summary - 1/12/42 201 - N - Book Page Nelson, Donald See War Production Board Netherlands Batavia: Deposit of $1,400,000 by De Javasche Bank with Federal Reserve Bank of New York reported - - 1/13/42 485 328 (See also Book 486, page 130 - 1/16/42; Book 487, page 161 - 1/21/42) - P - - Polier, Justine Wise See Emerson, Thomas I. Post-War Problems Twentieth Century Fund survey - copy sent to HMJr by Biddle 1/14/42. 406 British opinion on - Hoflich (H. D. White) memorandum: Book 486, page 298 - 1/19/42 Purvis, Mrs. Arthur HMJr thanks her for photograph and box which belonged to Purvis - 1/13/42, 272 - R - Revenue Revision Joint Committee: Stam's request for all memoranda from Internal Revenue Bureau relating to improvement of operation of income tax laws, closing of loopholes, and removal of inequities; and HMJr's reply - 1/12/42 125 (See also Book 488, pages 158 and 160) - S - Silver Sources of purchases under Silver Purchase Act - Dietrich report - 1/13/42 311 Small Business, Loans to Conference; present: HMJr, Viner, Bell, Morris, and Kades - 1/13/42 252 Supply, Priorities, and Allocation Board See War Production Board - T - Treasury Department 8-hour basis discussed at 9:30 meeting - 1/12/42. 1 New employee booklet discussed at 9:30 meeting - 1/12/42 3 Regraded Inclassified - U - - Book Page Ullmann, W. L. See Coordinator of Information Unemployment Relief Work Projects Administration report, week ending December 30, 1941 485 178 - W - War (Post) Problems See Post-War Problems War Production Board To take over functions of Supply, Priorities, and Allocation Board; Donald Nelson to be chairman - 1/13/42 310 a) Executive Order No. 9024: See Book 486, page 111 Work Projects Administration See Unemployment Relief Regraded Unclassified 1 January 12, 1942 9:30 a.m. GROUP MEETING Present: Mr. Bell Mr. Buffington Mr. Paul Mr. Viner Mr. Thompson Mr. Blough Mr. Foley Mr. Kuhn Mr. Gaston Mr. Haas Mr. Sullivan Mrs. Klotz H.M.JR: Norman? MR. THOMPSON: We are starting a Civilian Defense Training School this afternoon, after hours. "e will train about four hundred volunteers on how to handle bombs, gasses -- H.M.JR: Bonds? MR. THOMPSON: Bombs, if we have an air raid. I thought you might like to have that sheet for your files. H.M.JR: Right. MR. THOMPSON: I think the time has come for us to go on an eight-hour basis. Other departments are doing it. H.M.JR: What are we on now? MR. THOMPSON: We are on seven now. Regraded Unclassified 2 - 2 - H.M.JR: It wouldn't bother me any. MR. HAAS: We are just making it official. H.M.JR: Everybody in this room,I am sure, would be glad. MR. PAUL: I don't know, I sort of feel that it is foolish to just make people stay here and do nothing. There is 8. lot of resentment. If they have to work, then it ought to be on a nine or ten hour basis. MR. THOMPSON: They have all got work to do. There is no question about that. In fact, every branch of the Treasury is working voluntarily over time, but we want to regularize it so that the traffic situation can be -- MR. VINER: You mean forty-eight or forty-four? MR. THOMPSON: Forty-four. Five days of eight hours, and on Saturday four hours. MR. VINER: The rest of Mashington is doing it fast. MR. BELL: The other departments are doing it. I think we have got to fall in line. H.M. JR: There will be plenty to do. No one will sit here. I will walk through the building and look at them. MR. PAUL: I am not worried about the people assoc- inted with me -- MR. BELL: Every office is asking for increased personnel. MR. THOMPSON: Yes, and some of them are asking for authority to work over time. I think it should be Washington and the field. Regraded Unclassified 3 - 3 - H.M.JR: I don't think forty-four hours is too much for anybody, eight hours and four on Saturday. MR. THOMPSON: Well, the hours are staggered now. Internal Revenue, for instance, works from eight forty- five, nine, nine fifteen, and nine thirty. Some of them add a half hour on in the morning, and some in the evenings. MR. BELL: It would be nine to five? MR. THOMPSON: Yes. H.M.JR: I think it is all right, if you can work it out. What else? MR. THOMPSON: We have been working on a booklet which is somewhat of an encyclopedia of information for new employees. It covers all of the official matters that they should know, and in addition, all of the recreational and educational and other facilities. There is a foreword we would like to put in for your signature. I will read it. H.M.JR: Go ahead. MR. THOMPSON: "To the new employee. I wish to use this means of" -- H.M.JR: I can't hear until Jake Viner comes to attention. He is a hell of a teacher. MRSL KLOTZ: You always do that to him, too. MR. THOMPSON: "To the new employee. I wish to use this means of welcoming you to the Department. I should like to do this personally, but unfortunately the size of our organization makes it impossible for me to do 80. We are engaged in a great public service, which affects the life of every person in the United States. No matter what your particular job may be, I want you to know that the work which you are going is important 4 - 4 - to the Department, and to our country. As public servants we must discharge our duties faitufully and to the best of our ability. I sincerely hope that your association with the Department will be a long and pleasant one." H.M.JR: It sounds all right. MR. THOMPSON: If you would sign that, we will get it out. It is going to be a valuable little book- let. It covers everything the new employee should know. H.M.JR: Wonderful. What else? MR. VINER: Mr. Secretary, are you sure that you hope the association will be 8. long one, of these new emergency employees? MR. THOMPSON: "Association with the Department will be a long and pleasant one." H.M.JR: This is the employee, not me. MR. VINER: But I mean some of these are coming in for the emergency, aren't they? MR. THOMPSON: Well, this is for the rank and file of Civil Service employees. Most of them who come for the emergency stay anyway. MR. VINER: I didn't know you were willing to say you hoped they would. MR. THOMPSON: That is all. MR. BELL: Here is the circular for the bonds that we get out today. H.M.JR: For a minute I thought the President wasn't going to sign that thing. MR. BELL: I got word Saturday night that he was going to sign it Sunday. 5 - 5 - That is all that came in Saturday night on that Chinese thing. H.M.JR: Oh, yes. MR. BELL: I haven't distributed that to anybody. H.M.JR: Stanley Hornbeck is coming in to see me at ten fifteen. MR. BELL: I sent you some material Saturday. H.M.JR: I read it very carefully. There is one thing which is missing, this letter from this fire warden as to what we should do up at the house. MRS. KLOTZ: I didn't know there was such a letter. H.M.JR: Yes. MRS. KLOTZ: Oh, on the farm? H.M.JR: Yes. MR. BELL: There are a lot of rumors around over the country that the Government plans to confiscate sav- ings accounts. I have signed a good many letters denying them. I wonder if it wouldn't be well to put out a statement. We could send out that statement in reply to those letters. H.M.JR: It is all right with me. MR. BELL: It is becoming rather widespread. H.M.JR: It is all right with me. MR. BELL: I will work it out with Schwarz. MR. KUHN: It could be done at the press conference, Mr. Secretary. Regraded Unclassified 6 - 6 - H.M.JR: Oh, I don't want to get into it. I would rather do it this way. MR. BELL: I would like to have a formal statement, 80 that we could send it out in reply to these inquiries. H.M.JR: What else? MR. BELL: That is all I have. H.M.JR: Any back-talk or after-talk after the financing? MR. BELL: No. the bonds went up a little in the last hour, on the assumption that it was going to be 8. note issue, but only a couple of thirty-seconds. H.M.JR: You (Thompson) had better look these over. There are three to sign at once. Anything else, Dan? MR. BELL: That is all I have. H.M.JR: How long will you be at that Red Cross meeting? MR. BELL: Well, they usually last right up until one, but I don't have to stay that long. H.M.JR: Well, if I need you, I can send for you. MR. BELL: Yes. H.M.JR: Who watches the bond thing while you are gone? MR. BELL: Hadley. H.M.JR: If anything goes wrong, tell him to let me know. MR. BELL: I will have him call me also. 7 - 7 - H.M.JR: Will you? George, have you got & pencil? When these statistics of the tenth come in, you know, asking on the payroll allotment plan-- MR. HAAS: Oh, they won't - all we will have on the tenth, Mr. Secretary, is B. report from the companies who have - are under the plan. H.M.JR: Well, I asked Harold Graves this question. He said you would get them all from the tenth. Let me ask you my question. He said those all would be coming in to him. I wanted to know how many states have adopted the payroll allotment plan, and then within each state how many counties and cities or any other - townships, any other form of government. MR. BELL: You mean the local governments? H.M.JR: Yes. In other words, let's take the State of New York. We start with the State. Has the State adopted it, how many counties, how many townships, how many cities, you see. He said you would have all of that. I questioned it. MR. HAAS: When you asked him he asked us to get it, so we are working on it. H.M.JR: Well, he passed - but-- MR. HAAS: He passed it on. H.M.JR: But that wouldn't come through normally? MR. HAAS: Normally it wouldn't, no, sir. We wouldn't know, and I think our people misunderstood it. We thought he was talking about the classification of corporations by counties and states. H.M.JR: I want to know the various forms of units of government, how many of them are adopting this and how many are not, and for instance, all of these committees, the honorary chairman is the Governor. 8 - 8 - MR. HAAS: Yes, sir. H.M.JR: So I could write to the Governor of Arkansas, "My dear Bill, why don't you get your State," and 80 forth, and this is what the other States are doing, and get the States and various units of government. How many em- ployees are there working for government, outside of the Federal Government? MR. BELL: I don't know. H.M.JR: Well, there must be several million. MR. HAAS: There are. MR. BLOUGH: At least two and 8. half million. H.M.JR: Well, you get the two and a half million there, and a million and & half, more or less, on the Federal Government, and there is around four million right there. MR. HAAS: There may be 8. question - Ed Foley will probably know. Will the law permit them to deduct from payrolls? The Federal Government is not doing it. MR. BELL: Yes, we are. Yes, we are providing for it. We are going to put a plan into effect next payday, the 24th, beginning the 24th of January. Some of the states have adopted - New York City has adopted it and the State of Illinois has adopted it. I have got tele- grams from them. They want to be designated aa an issuing agent, which we are also getting ready to do. H.M.JR: Well, get the answer soon as you get each state lined up, shove it in there. Now, when are you going to get next month's statistics on payroll allotment? MR. HAAS: Well, we probably won't have any figures until maybe about two weeks from today. H.M.JR: But I mean, didn't we ask for something special? Regraded Unclassified 9 - 9 - MR. HAAS: On the tenth, Mr. Secretary. The companies are to - they are sending a list of the companies which have adopted the payroll deduction scheme, each State Administrator is sending it in. H.M.JR: Well, the 31st is a Saturday again. Let's certainly find out where we stand as of the 3lst. MR. HAAS: Yes, sir. H.M.JR: On the payroll allotment, will you please? MR. HAAS: Yes, sir. MR. BELL: You will get 8 report tomorrow of agents, and in that report will be included the corporations that have adopted the payroll deduction, plus the issuing agencies. H.M.JR: Ferdie, would you ask somebody over in the bond thing what we are doing to contact colleges to sell Defense Stamps? KUHN: Yes, sir. H.M.JR: And then other units of schools, high schools and private schools. MR. PAUL: Mr. Day, the president of Cornell, reported at a Federal Reserve meeting the other day that you ought to have -- H.M.JR: Pardon? MR. PAUL: Mr. Day thought you should put the rate up to three per cent. H.M.JR: I see. I think OCD has an organization over there that contacts colleges particularly. MR. KUHN: I think this is being done, but I don't know just what is being done. 10 - 10 - H.M.JR: Well, will you find out? MR. KUHN: It has been talked about many times. H.M.JR: We can't find any stamps in Vassar College. The girls have raised the question. This nice Houghteling boy was down here. They can't buy any stamps at Exeter, for instance. I mean, I would rather have too many places than too few places. And then the list would go to Dave Morris, or rather Bell. I don't know, Bell started it. What about this suggestion of having desks manned outside of post offices? MR. BELL: I turned that over to Dave. H.M.JR: Ask Dave Morris about that, Mrs. Klotz. MR. BELL: I told him what I had done up to the point he started in on it. H.M.JR: Right. MR. BELL: And he is looking into that, together with the other. George Harrison suggested this morning that you might designate the branch offices of insurance companies throughout the country on Savings Bonds. He said he had a hundred and four offices that he would be tickled to death to have designated. H.M.JR: Will you pass that along to Dave? MR. BELL: Yes, I have done that. I sent him a note. H.M.JR: Anything else, George? MR. HAAS: I have got & few more things. Do you want me to give these charts for Procurement Division to Mr. Swope? H.M.JR: Yes. Regraded Unclassified 11 - 11 - MR. HAAS: Do you want to look at them? H.M.JR: Not particularly. I think it would be nice to take them in yourself and explain them. MR. HAAS: Yes, I have been in to see him. I thought you would like to see how those statistics looked in red, white, and blue. That is the reporting form. Here are the tax notes for the five months they have been out. You notice the total of the tax notes and all the series of Savings Bonds is about equal, two and & half billion. H.M.JR: I don't get it. MR. HAAS: The totals. H.M.JR: I see. Gosh, it is just a dribble. MR. HAAS: That is right. Do you want us to try to get the figures on airplanes, tanks, and so on? H.M.JR: Has he ever seen that thing? MR. BUFFINGTON: We are almost back to where we started before I came down. MR. HAAS: Would you like to have us try to get those airplane figures for December? H.M.JR: Yes. MR. HAAS: On these British reports, you remember we thought we would liquidate it and get it out around the first of the year, and get out of it. You know the British have 8. mission here in town. Why not have the Government agencies interested in these figures contact the British direct? We do that, more or less, on particular items anyway. H.M.JR: Why don't you takelit up with Sir Frederick 12 - 12 - Phillips, and he will contact this man from the British Treasury that is reorganizing their offices, and tell him this is something we want to get out of. I would do it through Sir Frederick Phillips. You know, the Treasury in England is different than it is here. It outranks all other Departments. Their man is here reorganizing. Did you meet him, Dan? MR. BELL: Yes, when he first came over. H.M.JR: But do it through Phillips. MR. HAAS: Yes, I will do it. H.M.JR: Is that all, George? MR. HAAS: That is all. H.M.JR: How is the housing situation? MR. VINER: I think I have something, but I am not quite sure, yet. H.M.JR: You don't want to tell me because you are afraid I would tell it to somebody else? (Laughter). There is what you call confidence. MR. VINER: That is one consideration. The question is, my banking references (laughter). MR. PAUL: Always modest, aren't you, Jake? H.M.JR: Jake, have you seen all this stuff on the Chinese thing? Let me give it to you and I would like you to read it, because you will be in on it, and do you mind sending word back to Coe to be on his toes on this thing? We will have to think up something on the thing. Here is another one. I would like you to sit in on that. MR. BELL: You have the letter I got this morning, haven't you? 13 - 13 - H.M.JR: I haven't read that yet myself. This is pretty important, Jake. You might - Coe, and what is this other? Shattuck? MR. VINER: Southard. H.M.JR: You might tell them to be on their toes on the thing. I hope to get away Wednesday morning at nine o'clock. We have to do it between now and then. MR. BELL: It is pretty big. This is a better suggestion, probably. It cuts it down a little. H.M.JR: Well, I will read it. I will have this photostated and send you a copy. MR. VINER: Mr. Secretary, if you leave on Wednes- day, are you going to do anything about that small loans business before you leave? H.M.JR: No, unless you tell me I have got to. MR. VINER: I think you ought to say yes or no or that you are not going to take a part in it, because I think the Treasury is holding that up. MR. BELL: Can't we have a conference on that before you leave? H.M.JR: Sure. MR. BELL: With you? H.M.JR: Sure. Ten fifteen tomorrow morning. MR. BELL: It will have to be tomorrow, because Dave Morris -- H.M.JR: Ten fifteen tomorrow morning. MR. VINER: Otherwise -- 14 - 14 - H.M.JR: Ten thirty, I won't rush myself. Are you ready to give me 8. definite recommendation? MR. VINER: No, 1 am not. I think it is important that the Treasury either step out, or make 8 definite recommendation, because we have taken it on enough so that they are waiting for us. H.M.JR: Well, I didn't know that. MR. VINER: I think that is wrong. H.M.JR: Well, you are making B. contribution when you bring it to my attention now. I was not conscious of that. I did not know that I was holding it up. MR. VINER: Well, in a sense -- MR. PELL: We didn't have the final information until probably Thursday or Friday. Dave had his last conference with the Far and the Navy and the Federal Reserve Board. H.M.JR: Well -- MR. BELL: He has been working on it. H.M.JR: Well, for the record, I can't hold & thing up that isn't brought to my attention. You are the - first man that has said to me that you are ready. MR. VINER: Well, I don't say we are ready. I haven't had that sort of 8 part in it. I say the Treasury ought to move on and not hold it up, and if you are going away for 8 week, I think it would be a pity that we should be in a position to say we can't say anything. H.M.JR: I will say yes or no tomorrow morning. What else? Regraded Unclassified 15 - 15 - MR. VINER: That is all. H.M.JR: Roy? MR. BLOUGH: Nothing this morning. H.M.JR: Ferdinand Kuhn, Jr. MR. KUHN: The -- H.M.JR: you know, on the telephone, when I call you long distance, they say, "What is the name?" I say, "Ferdinand." They don't get it. I say, "You know, Ferdinand the bull." (Laughter). MR. KUHN: I have done that many imes myself, and it always works. H.M.JR: It always clicks. MR. KUHN: There is to be a Toscanini concert 8. week from Saturday. Do you want to get a list of fifty people to whom tickets should be sent, or can you leave that to others? H.M.JR: Listen, Mr. Robert Moses threw an inkwell at a fellow for much less than that. I will leave it to you -- MR. KUHN: If you have any wishes about it -- H.M.JR: No. MR. KUHN: I can send them out. H.M.JR: No. When is it? MR. KUHN: A week from Saturday. MRS. KLOTZ: I can't go that night. Change it, Mr. Kuhn; MR. KUHN: A rain check. Regraded Unclassified 16 - 16 - MRS. KLOTZ: Yes. H.M.JR: I would offer my parents a couple of tickets and also Mrs. Lewisohn. MR. KUHN: If there is anybody in here who would like to go in there, let me know. H.M.JR: Let them see Mr. Kuhn, Whatelse? MR. KUHN: That is all. H.M.JR: George? MR. BUFFINGTON: Nothing. MR. PAUL: If you are going away Wednesday, I think we ought to have 8. conference before then about the tax program. H.M.JR: All right. When are you ready? MR. BUFFINGTON: Well, we can see you any time. We want to clear the main outlines of the program that we are for. H.M.JR: When do you want to do it? MR. PAUL: I would prefer to do it tomorrow, but I can do it today. H.M.JR: About eleven thirty tomorrow night? MR. PAUL: Sure (laughter). H.M.JR: Three o'clock. I will give you all the time possible to get ready. MRS. KLOTZ: Tomorrow? H.M.JR: Tomorrow, yes. All right? MR. PAUL: Yes. 17 - 17 - E.M.JR: I don't know whether George was ewful smart or not in letting out that this was a twelve billion dollar program. What do you men think? MR. SULLIVAN: I don't get it. I have a conference with him this morning, with Eddie Greenbaum, on this repeal of the certificate of non-reimbursement. We had a hearing, a long hearing Friday afternoon and the committee finally reported it out without a minority report. They were in so much trouble they decided that they ought to do some advance missionary work in the Senate, so I am going up this morning, and I thought that casually I would refer to that, and I think I can find out. H.M.JR: You don't get it either? MR. SULLIVAN: Oh, it doesn't make sense, no. He in smarter than that. H.M.JR: Yes. MR. PAUL: After it was let out the press called up and I thought since it was out, it ought to be out straight and accurately, 60 I gave them the real picture on that. They didn't understand it. H.M.JR: My own feeling is if they had asked me to put it out, I would have said "No," but now that it is out, I am glad. After all, it is in the budget, and I don't think anybody understood it. MR. PAUL: I think somebody would have gotten it eventually, so it is just as well to flush it. H.M.JR: From the standpoint of the Director of the Budget, as 8 result of this meeting that came out, it is a corrected interpretation. MR. FELL: It is his interpretation, so far as I have been able to see from the paper. It is not the Interpretation we have put on it. Regraded Unclassified 18 - 18 - H.M.JR: Is that what it said? MR. BELL: I thought it was a seven billion dollar cash basis. MR. SULLIVAN: Tom Connally gave a breakfast yes- terday morning and Senators Byrd, Hill, Lucas, and Chandler were there, and Bob Patterson, and Forrestal, and about fifteen in all. He wanted to have an off the record discussion of various things. Berle was there. The only thing they were interested in, from me, the only thing thing I would talk about, was our interpre- tation of the budget message, and I let them have it, and they seemed very much relieved, so I know that they haven't got it straight up on the Hill yet. H.M.JR: Well, what I - I called up Randolph Paul in the middle of the night, when was it, Sunday morning? MR. PAUL: I don't like to have you call it in the middle of the night for me. It was pretty late in the morning. H.M.JR: I told him to create not the Maginot Line, but the Harold Smith line on those charts. I mean, we have got a chart which shows what Canada has done in taxes, what England has done, and what the present tax bill is. Then comes along the Treasury interpretation of seven billion dollars, but now we are going to have & Harold Smith line. MR. SULLIVAN: Now, wait a minute. Are you going to let that out? H.M.JR: It depends upon how good it is. 19 - 19 - MR. SULLIVAN: Well, I don't think you had better, and I will tell you why. H.M.JR: No, that isn't what I had in mind, but I wanted to show it to the President. MR. SULLIVAN: Then suppose Harold comes back and says, "No," here is the Harold Smith line with three billion dollars in sales taxes? H.M.JR: Well, that is all right. It doesn't make any difference. I want to know where - well, let's see what it looks like. MR. SULLIVAN: Let me have a crack at it before you do anything on it, will you please? H.M.JR: Let's take a look at it. I want to see the Harold Smith line. You (Sullivan) can see it before it leaves my office. MR. SULLIVAN: You can't tell where the line would be. H.M.JR: No, it is like everything else that you do, you ask for 8 legal opinion, and how do you know what you are going to get? (Laughter) MR. PAUL: You don't ask unless you do. H.M.JR: All right. Are you all right? MR. SULLIVAN: Sure, I am all right, but you haven't given me a chance here yet. Oh, incidentally, up at the hearing Friday after- noon one of the newspaper boys came up and said, "I want to ask 8 question. Do you know whether the Secretary had a bet with Doughton on who was going to give out about this conference Friday?" I said, "No, why?" He said, "Well, at the Appropriations hearing, I asked him about this conference and he said, 'Why don't you go see Mr. Doughton?" I had 8. great chance to win that bet. Regraded Unclassified - 20 - 20 H.M.JR: Do you want to know what happened? MR. SULLIVAN: He went to Doughton and Doughton "ave it to him. H.M.JR: No, I came out of the conference room and the three men said, "We understand that you are having & meeting tomorrow morning,' and he said - and I said, "Who told you that?" He said, "Senator George. Will you confirm it or deny it?" I said, "No, I can't say anything because I happen to have a bet on it." MR. SULLIVAN: Oh, is that where he got it? H.M.JR: I said, "Who did you get it from?" He said, "Senator George." He said, "Won't you tell us?" I said, "No, I can't tell you, because I happen to have a bet on it," but he already had it. I tell you, John, I have got one rule. If I ever do anything like that, it will be at least ten million dollars, not for one package of cigarettes. I can only do it once in this town. I won't do it for a package of cigarettes. MR. SULLIVAN: Well, I thought it was just coin- cidence, and I would like to report it to you. H.M.JR: No, I won't sell out for one package of cigarettes. MR. SULLIVAN: As a matter of fact, it didn't dis- turb me because after you told Harold Smith about it - (Laughter) no, this was the day after you told Harold Smith about it, and I knew it was out of the bag then. H.M.JR: I wouldn't do it for one package of cigarettes. MR. SULLIVAN: You remember Stam wrote you and made is formal demand for certain information. H.M.JR: Yes. MR. SULLIVAN: A letter is prepared for your imature. Regraded Unclassified 21 - 21 - Ed and I are in accord with it. Ed thinks you shouldn't answer it. I think you should. The letter talks to you and talks about what I have not done, and I don't think it would be right for me to answer it. H.M.JR: O.K. What does it say? MR. SULLIVAN: It says that we can't do it that way. We can't agree to furnish that information. Do you want me to report to you after I see George? H.M.JR: Yes, I would like to hear it. What else? MR. SULLIVAN: That is all. H.M.JR: I don't want to start a long discussion, but if the three of you would have a talk, getting back to the Morris Ernst proposal, and I told him to come in to see both of you, in which we would just issue the orders to the Internal Revenue to examine all tax-free associations, benevelent - any organiza- tion, also going back to the thing that the burden of proof once a year is on every organization, and they are entitled - I mean, permanents are cancelled. Any- body that wants to be tax free for '42 - the burden of proof is on him that he entitled to be tax free. MR. PAUL: You mean Ed and John and I? H.M.JR: The three of you. Any organization that was tax free, that that privilege is cancelled as of '41. Now, if they want to be tax free for '42, it is a clean cut thing, and they have to start all over. MR. SULLIVAN: There is a regulation being drafted on that. H.M.JR: Well, would the three of you get together on it? If you could get together on it, let me know, but that was my thought, just simply say, "Gentlemen, no organization is tax free for '42. The burden of proof is on you. I made the suggestion three or four Regraded Unclassified 22 - 22 - years ago and it never happened. This is my solution. MR. PAUL: I think it is a good thing to do. H.M.JR: Just wipe the slate clean, and I think the public would like it. And if you had a little time between now and Tuesday to sit down with Kuhn, I would appreciate it. MR. PAUL: I will. MR. SULLIVAN: That is all, sir. MR. FOLEY: Here is a memorandum of that telephone conversation on General Aniline and Dye and a copy of the letter to these people. H.M.JR: Fine. Thank you. MR. FOLEY: You asked about the Christenberry matter. H.M.JR: Yes. MR. FOLEY: There were two calls to me from Justice, one from Gordon Tweedie and one from Linton Collins. H.M.JR: I don't know either of them. MR. FOLEY: Well, Tweedie is in the Tax Division and Collins is in Jim Rowe's office. He was Mat McGuire's assistant, and there was a transition period when Linton Collins was doing the work. They asked whether or not you would write a letter to the Department of Justice on your own, not without - without any request from them, objecting to Christenberry, and I said-- H.M.JR: Objecting? MR. FOLEY: Yes. I said that was a very unusual request, and they said that the two Senators were push- ing very hard, and they didn't have anything that they thought they could hang their hat on and they would like you to write them a letter. I said, "Well, I will have to find out what we have on Christenberry, so I asked the - 23 - 23 Intelligence Unit for a report, which I have here, and they have nothing on Christenberry. They say that he wasn't in on the Louisiana scandals at all, and that he - from reliable sources gained from their investigation down there, he is honest and efficient and so forth, 80 when they called the second time I said if they wanted to find out what we thought about him they should write & formal letter, and they said they didn't want to do that. They wanted us to take them off the spot, and I said, "We can't do it." H.M.JR: Well, just for the record, this is the first time you have communicated that to me. MR. FOLEY: Yes, that is right. MR. VINER: Hasn't Pegler something on that this morning? H.M.JR: This is the first time you ever told me. MR. FOLEY: That is right. H.M.JR: You never sent me a report on that either. MR. FOLEY: No, I didn't think I should bother you about it. Here is the investigation report-- H.M.JR: No, wait a minute. I am just cleaning up my record on this thing. MR. FOLEY: Yes. H.M.JR: What? MR. FOLEY: That is right, I didn't talk to you about it. MR. GASTON: Ed asked me at that time to see what the Intelligence Unit had to say, and I asked Irey to get that report. Then my later contact with it was that on December 19 Jim Rowe called me up and said that - I wrote a memorandum to Ed about it, and I said, "They are still on the limb as to whether to recommend Christenberry. Justice didn't like it, but they are Regraded Unclassified 24 - 24 - being pursued by Ellender and Barkley who said it was essential to keep Ellender happy." He wanted to know what our position was, and I told him we hadn't found anything definite. He indicated that they would probably turn it down, and he wanted to know if they could say that Treasury and their tax division wêre both opposed to it, and I said, yes, they could say that, but it must be clear that we had nothing definite against this particular man on which to hang an ob- jection. H.M.JR: What do you say? MR. GASTON: He asked me-- H.M.JR: Who is "he." MR. GASTON: Jim Rowe. He said their disposition was, they were in a dilemma, they didn't know which way to go, but their present disposition was to turn it down on the ground that neither their tax division nor the Treasury Department liked it, and I said - he asked if that would be all right with us, and I said it would be all right with us, but it must be clear that we hadn't anything definite against this particular man, that it would have to be just on the general principle that he was one of the Long outfit. H.M.JR: Well, you see, he didn't get that from Foley, and then you gave him what he wanted. MR. GASTON: No, I didn't give him-- MR. FOLEY: He didn't give him a thing. They tried to get us to do it affirmatively. MR. GASTON: I told him naturally we wouldn't like one of the Long gang, but it must be clear that we had nothing definite against the man on which to support that position. MR. FOLEY: That is right. Regraded Unclassified 25 - 25 - MR. GASTON: Other than general dislike of the Long gang. MR. FOLEY: I didn't clear Christenberry. I said, "Why didn't you call down there if you wanted to get something on him?" H.M.JR: No, you misunderstood him. They wanted you to have me write an affirmative letter, but you also didn't say anything negative. Herbert sort of threw a shadow on the man. MR. GASTON: They wanted to know if he could say that the Treasury didn't like the nomination, and that the tax division - whether We would object to their doing that, and I said, "No, we would not - I did not think we would object to doing that, but he must under- stand that we have nothing definite against this particu- lar man. H.M.JR: That is all right. Just one second, please. Mrs. Klotz, this is the record. We are all right on it. I just wanted to make sure that we are all right. We are. Just make 8. note and put this in my file and say this was handed to me today, but I have not yet read it, you see. There is the rest of it. ME.. GASTON: You will probably want this too. That is a memorandum of my conversation with Rowe. H.M.JR: Mark this the same way, Mrs. Klotz. What else did you have on that? Does that clear you? MR. FOLEY: Yes. H.M.JR: Now, I have got one thing that I want you lawyers to do for me. Here is an investigation of Thomas I. Emerson, for assistant general counsel in the office of Henderson. Have we got the letter from Henderson? MRS. KLOTZ: I don't know whether it came to me. 26 - 20 - MR. GASTON: We tried to trace one Friday and there hadn't been any. H.M.JR: I have read this thing three times. Have you read it? MR. GASTON: Yes. M.M.JR: The reason I would like the lawyers to ret in on it is this. When It dets down to what this man - I mean, some of the statements, for instance, by Ida Klaus and Morris Ernst are amazing to me, to say the least. If you would make a note, evidently this man has seen this report. Somebody from the Department of Agriculture says that lie was a member out in Seattle of a Communist setup, but he has never been in Seattle. m, GASTON: That is the thing that aroused my curiosity as I ran through it. There was no confirma- tion that he had been in Seattle. H.M.JR: lie has never been in Seattle, but there are these two lawyer organizations which he still is a member of and from which he hasn't resi med. One is the Lawyers Guild, which I am familiar with, but the other one I an not familiar with and that he has stayed on and that is called - that is a new one to me. Do you remember the name of it, Herbert? International J-u-r-i-d-i-c-a-1 Association. Do any of you men know about it? MR. FULEY: Never heard of it. MR. GASTON: That is the first I hod heard of it. MR. PAUL: What part of the country does he come from? R.M.JR: lle comes from New York. MR. PAUL: The reason I asked that question was because the closer a man is to New York, the more he Regraded Unclassified - 27 - 27 should have gotten out of the Lawyers Guild. H.M.JR: Well, the Lawyers Guild is something else, but the Juridical Association is an affiliate of the International Labor Defense, a defense agency for Communists in the United States, which is in turn affiliated with a Communistic agency in Moscow. Also members are counsel for Harry Bridges and Earl Browder, John P. Davies, Isaac Ferguson, and 80 forth. Well, he has stayed on and also - this is all very much in the room, because I mean I don't know - please note that practically everything that he has done, Judge Pollier's husband is in the same boat. It is she who brought it to Mrs. Morgenthau. She stays with these people here in Washington, but everything practically that has been said about this fellow Emerson is also said about Pollier. MR. PAUL: How much time do we have on this? H.M.JR: Well, this report is written November 12 and the difficult thing on it is going to be, Hoover has 8 report on it and 80 has Dies. MR. PAUL: I can probably get some information if I have some time. H.M.JR: Well, it has been hanging fire since the twelfth. The point that I would like to make to all of you is this. I mean, if you don't mind my saying it, Herbert, there is a lot of just sheer bunk in that report. People who belong to the Shoppers Union, you see. A lot of people belong to the Shoppers Union. My wife belonged to the Shoppers Union and she got out when they started boycotting the Japanese because she didn't think she should do it as the wife of the Secre- tary. The man who wrote the report for Irey is not a first class man. The thing that I don't want to be 8. party to here is, after all, people should be permitted to belong to liberal organizations that stand for - liberal matters and certainly through Irey's organization Regraded Unclassified 28 - 28 - and the rest of it, I don't want to even approach hounding people, you see. On the other hand, if people like this want to be in a defense agency and did have real Communistic connections, that is one thing, but you have got to read that thing three times to get it, because he quotes a book, pages from a book. No, that was on that girl. MR. FOLEY: Well, the fellow who would know most about Tommy Emerson is Charlie Fahy, the Solicitor General, because he worked for Tommie. H.M.JR: Well, it gets down to the fight with Fahy - when he got out of the National Labor Relations Board he was kicked out with Fahy, and 8. new group came in. That is one thing, but again I want to say I am the last person in the world who wants to say that people can't belong to a liberal organization or even a left wing organization as long as it wasn't Communistic. MR. GASTON: I think they make a positive statement there that he ought not to be appointed. I told Elmer that the general thing was for our men simply to set forth the facts as they found them and not make any recommendation on it. H.M.JR: Well, you agree that that is not a well written report? MR. GASTON: Yes, I agree. I noticed there was no check-up on that Seattle end at all. H.M.JR: And he claims he never was there. MR. GASTON: Yes. I hadn't seen the thing until I got it then and sent it right in. MR. FOLEY: He - Emerson had a very good record in law school. He was on the Law Journal and was second or third in his class. H.M.JR: He was editor of the Law Journal. Regraded Unclassified - 29 - 29 MR. FOLEY: And he worked for Pollock in New York on those Russian insurance cases before he came down here about 1934. I have never seen the report, but I know Tommy Emerson. H.M.JR: Well, the unfortunate thing is, you see, whoever this man is, he gives references from the mayor where he lives. That is the only place he went to check up. The man in the home town he comes from says he is a swell boy and then in the report he says but he didn't investigate other references. But we have all this stuff, Shoppers Union and Lawyers Guild and all the rest of that stuff and then this Seattle stuff and then this goes over and this is on this man's record. I don't know how much more, but I would like you to talk to Irey pretty stiff on this thing. MR. GASTON: Yes. H.M.JR: Will you, Herbert, because you of all people-- MR. GASTON: Yes, I have been over that same ground before. H.M.JR: It directly comes under you, and you of all people-- MR. GASTON: I don't see those reports, that is the difficulty. I haven't been seeing them. I think maybe I ought to clear them before they go over. H.M.JR: I don't want you to clear all of them, but certainly it would be worth hiring-- MR. GASTON: Where they turn a man down on grounds he is a radical-- H.M.JR: Get a left-wing lawyer to sit at your elbow. MR. GASTON: I am a left-wing lawyer. MR. PAUL: I used to be in the Lawyers Guild. - 30 - 30 H.M.JR: Yes, but you fellows all got out. MR. PAUL: That is right. MR. FOLEY: He was one of the organizers. MRS. KLOTZ: You can't blame them for putting every- thing in that they know or find out. MR. FOLEY: Well, he shouldn't make a recommenda- tion, Mrs. Klotz. MRS. KLOTZ: That is another thing. MR. FOLEY: I objected on my fellows, too, because they make an investigation and the fellow came out of law school and he can have a perfect record from law school and we are hiring him because of his record, and yet they say he has no experience and shouldn't be hired. I am the one who makes that recommendation, and we had that out with Herbert and Elmer and they agreed to leave that out of the report. On these reports, I don't think they should make a recommendation either. They should set forth what they know and let the fellow who is going to assume the responsibility for hiring or not hiring determine from the facts in the record what the decision should be. MRS. KLOTZ: My point is that he should put in the report everything that he finds out. H.M.JR: If he is sure that it is correct, but like, for instance, he says that-- MRS. KLOTZ: That Seattle business? H.M.JR: A man in the Department of Agriculture who formerly was a Communist says that this man belonged to a Communist setup in Seattle and he says he has never been to Seattle. He is taking somebody else's word, but they have never checked it up. Regraded Unclassified 31 - 31 - MR. GASTON: He is talking about this Tommy Emerson who is one of the CIO Board who worked with us on the Coast Guard training. MR. VINER: Seamens Union? MR. GASTON: Yes, Merchant Marine Union. He is talking about that Tommy Emerson there. MR. VINER: There is a Tommy Emerson there, that is right. H.M.JR: Is there? Well, that is pretty dumb. Well, it is the kind of thing which I as a human being would very much like to avoid. (Mr. Sullivan left the conference.) H.M.JR: I realize we make all these investigations, but certainly I didn't feel very happy after reading this thing. But will you people do it-- MR. PAUL: I would like to make a little investi- gation of my own. H.M.JR: You would? MR. PAUL: I would hate to see the fellow excluded because he was-- MR. FOLEY: He is not excluded. He is working over there. They are hiring five hundred lawyers and Tommy Emerson is among them. H.M.JR: What I would like to do as long as we have done this, I would either like to see that the man has Communistic affiliations or he is a good American citizen. I think we ought to do that, don't you? MR. GASTON: Yes, I think we should, but at the same time I would go further than that. I think this law - this ex post facto law that if a man ever belonged Regraded Unclassified 32 - 32 - to the Communist Party, he can't work for the Federal Government is just as clearly unconstitutional as any- thing could possibly be. H.M.JR: Well, anyway-- MR. PAUL: I don't think it is so much whether he belonged to the Party, but how he feels now. H.M.JR: Do you know Tommy Emerson? MR. FOLEY: Yes. H.M.JR: All right. Let's see, Herbert, see if you can't clean that Emerson thing up, possibly this week. MR. GASTON: Yes, surely we will clear it up. H.M.JR: What I am going to do is ask Judge Pollier that when you give her a call would she come over and see you. Now, would you (Foley) get your gang lined up and I will see Herbert a minute. MR. FOLEY: Right away. Unclassified 33 January 12, 1942 This was handed to the Secretary by Mr. Foley, but the Secretary did not read it. 6 pristenbury Herbect 30 December 20, 19/1. TO: Mr. Foley FROM: Mr. Gaston Jim Rowe called pe Friday afternoon in his first political contact with to since he went to Justice. They are still in a dilerma as to whether to recomend the appointment of Herbert T. Christenberry, the present First Assistant District Attorney gt "our Orleans and brother of Huey Long's former secretary, to be District Attorney. Juntine doesn't like it, but they are being pursued by Ellender and by Barkley, who 3ayB that 1t in essential to keep Ellender happy. He wanted to know what our position was and I told him we had not found anything definite on which we could protest against the Christenterry nomination; that the only thing we knew against him was his rela- tionship with the Huey Long crowd. De thought the Attorney General might wish to turn the nomination down on the general ground that the Tax Division and the Treasury didn't like it. I told him I didn't think TFU would have any objection to that, but it must be made clear that ne had nothing spacific against this par- ticular man. Regraded Unclassified 35 January 12, 1942 This was handed to the Secretary by Mr. Foley, Lut the Secretary did not read it. Regraded Unclassified Mr Foluy 36 60% 7.2.2 132 r T A 1 A1 mr. FROM: MR. GASTON 37 TREASURY DEPARTMENT WASHINGTON OFFICE OF CHIEF INTELLIGENCE UNIT December 5, 1941. BUREAU OF INTERNAL REVENUE WHW:ENP PERSONAL AND CONFIDENTIAL TO: Mr. Gaston. FROM: Mr. Woolf. With reference to recent telephone conversation, there is attached for your information & copy of a com- munication of Special Agent George A. Lambert concerning ar. Herbert W. Christenberry. The original of this memo- randum was sent air mail from New Orleans on December 3 and as yet has not reached this office. The carbon copy was sent in the ordinary mail and arrived here this morning- While Agent Lambert has gone into considerable detail, I believe that you will be able to obtain such information as you see fit for your purpose. MAN Enclosure. Regraded Unclassified 38 TREASURY DEPARTMENT INTERNAL REVENUE SERVICE Regraded Unclassified INTELLIGENCE UNIT New Orleans, Louisiana, December 3, 1941. SI-Special INTERNAL REVENUE DEC @ 1941 INTELLIGENCE UNIT Chief, Intelligence Unit, Bureau of Internal Revenue, Washington, D. C. In rel Herbert W. Christenberry, Assistant United States Attorney, New Orleans, Louisiana. This report relates to the background, reputation, and or sections of Herbert N. Christenberry, First Assistant United States Attorney, Eastern District of Louisiana, New Orleans, Louisiana, and is being submitted at the verbal request of Mr. W. H. Noelf, Acting Chief, Intelligence Unit. Herbert W. Christenberry is a native of Covington, Louisiana. Re is approximately forty-two years of age, married, and lives with his wife and two dependent children at 3319 Bell Street, New Orleans, Louisians. During World Nar 1, be was in the United States Navy. Thereafter, he me employed M office manager for a New York brokerage fire to a period of approximately eight years and esde his home in Brooklyn. After severing his comections in New York, be case to New Orleans and studied law at Loyola University, from which he wes graduated. Re was later admitted to the bar of the State of Louisians. It is understood that for a period of time after being admitted to the bar, he either shared offices or was in a partnership to practice law with Sidney Witchell and Shirley 0. Wimberly, New Orleans, Louisians. Later, he was employed by the Debt Moratorium Commission, State of Louisiana, working under the supervision of the late B. W. Cason. Mr. Christenberry resigned his position with the Debt Moratorium Commission to accept the position of Assistant District Attorney for the Parish of Orleans under Charles Byrne, which position be hold for s. period of three or four years. He resigned this position in 1937 to accept the 39 In 791 Herbert W. Christenberry position of First Assistant United States Attorney, Eastern District of Louisiana, New Orleans, Louisiana, which position he still holds. Marbert W. Christenberry is & brother of Earle J. Christenberry, a professional secretary and former secretary to the late Senator Huey P. Long and Senator Rose McConnell Long. For & number of years Herbert W. Christenberry has been a close follower of late Senator Huey P. Long and the successors of his political mohine. The Debt Moratorium Commission was created during the administration of the Late Occar I. Allen, government of the State of Louisiana. The late B. W. Capon, under virous Mr. Christen- berry worked while employed by the Debt Moratorium Commission, was A staunch member of the Huey P. Long political mohine. Shirley Wimberly, with whom Mr. Christenberry at one time either shared offices or practiced law on & partnership basis, was 8 close friend and follower of the late Hugy P. Long during his last years, and is a very close friend of Earl K. Long. Mr. Wimberly managed Earl K. Long's guber- natorial campaign in the City of New Orleans during the 1939-1940 campaign. District Attorney Charles Byrne, former District Attorney for the Parish of Orleans, was named to that position by the late Oscar K. Allen, when Rugene Stanley, the present Attorney General for the State of Louisime, was forced to resign, apparently through political maneuvers. Some of the men with whom Mr. Christenberry has been associated and worked under in the past do not enjoy good reputations and the respect of the public in general. Charles Byrne was forced to resign his position as District Attorney for Orleans Parish as the result of his "whitewmshing" the investigations of the so-called tax reduction racket which operated in the City of New Orleans, reported under the casse of Joseph H. and Mary N. Connolly, SI-17511-F, and Arthur A. Steiner, SI-17718-F. B. W. Cason, during his term of office as Labor Commissioner for the State of Louisiana, was indicted by a Federal grand jury for the Western District of Louisiana at Lake Charles, Louisiana, on & charge of perjury in connection with his testimony regarding forced contributions to the American Progress, 8. newspaper founded by the late Huey P. Long and later published by Richard W. Leche, former governor of the State of Louisians now under a ten-year ponitentiary sentense for using the mails in IS scheme to defraud the State of Louisians. Be was later convicted of this crime. Shirley G. Wimberly and B. W. Cason were indicted by & grand jury in Orleans Parish, Louisiana, on June 26, 1940, four indictments -2- Regraded Unclassified 40 In rei Herbert W. Christenberry charging embesslement and one charging extortion. Specifically, they were charged with carrying the names of persons on the labor department payroll who performed no services. The status of these cases is unknown. Herbert W. Christemberry was not involved in the matters forming the basis of the so-called Louisiana "scandals" investiga- tions. In the first series of Louisiana investigations (1934-1936) he was questioned regarding the receipt of $800 from W. L. Stevens, Jr., 3I-10625-F, who asserted the payment was a commission. Mr. Christemberry testified the payment. represented è legal - tainer for which im performed no services. From usually reliable sources, it was learned that Mr. Christen- berry is thoroughly honest and that his official acts since becoming Assistant United States Attorney have never been questioned. While under suspicion at one time because of his political and personal connections, these doubts were soon dispelled. It was learned that be has conducted the work assigned to him in & credible manner and has prosecuted all cases vigorously. There is now pending in the United States District Court for the Eastern District of Louisiana, New Orleans, Louisiana, an indict- sent against James A. Noe, Monroe, Louisiana, who is charged with having conspired with Seymour Weise and others to defeat and evade taxes due by Win OF Loss Corporation, New Orleans, Louisiana. Briefly, the facts in this case are as follows: The late Governor Oscar K. Allen granted to James A. Noe, on October 23, 1934, an oil and gas lease on river bottoms in Ouachita and Morehouse Parishes, Louisiana, without cash consideration. On November 20, 1934, James A. Nos organized the Win or Lose Corporation. The incorporation papers show that he subscribed for ninety-eight shares of its capital stock: Seymour Weise subscribed for one share; and Earle J. Christenberry subscribed for the remaining one share. During the year 1935, the lease in question was sold for $320,000 cash. For that year the gross income of the corporation was $347,937.50. On August 27, 1935, the corporation distributed $200,000 to its stookholders, who were James A. Noa, thirty-one chares; Huny P. Long, thirty-one shares; Oscar K. Allen, twelve shares; Seymour Weiss, twenty-four shares; Earle J. Christenberry, one share; and Alice Lee Grosjean, one share. The return filed by Win or Lose Corporation for the year 1935 showed that for that year it paid -}- Regraded Unclassified In nt Herbert W. Christenberry 41 Regraded Unclassified salaries of $75,000 each to June A. Noe and Seymour Weise, and commissions of $17,396.88 each to James A. Noe and Seymour Weise. The balance of the distribution of $200,000 was shown to have been a dividend. James A. Noe admitted to Acting Special Agent in Charge Frank W. Lohn, on November 23, 1939, that the corporation had never paid salaries or commissions, but that the $200,000 with- drawal on August 27, 1935 was A dividend which he distributed to the stockholders in proportion to stockholdings. hering the course of Use Arrestigation = VIA at Loss Corporation caps, minutes of metings of directors produced for inspection, purporting to show that the directors of the corporation had authorized the payment of the salaries and 008- missions shown in the tax return. James A. Noe admitted in the conference of November 23, 1939 that the minutes supporting the deductions claimed in the tax returns were prepared "a long time after the return was filed." He did not say who prepared the minutes which were presented to support the false claim mde on the Win or Lose Corporation tax return. There is strong suspicion that the false admites were prepared by Earle J. Christenberry, but there is no proof in support of this belief. The case against James A. Noe has not M yet been set for trial. No date is expected to be set on this case until after the Supreme Court renders its decision in the Molasky case, which is expected soon. It 1a expected at this time that the James A. Noe case will go to trial either in February or March of 1942. It was learned from & reliable source that at the time the Win or Loss case was under consideration by the Federal grand jury at New Orleans, Mr. Christenberry informed the then United States Attorney Rene A. Viosea that he did not want to know anything about the всло, or participation therein; and that he purposely stayed away from the office because of the possibility of the grand jury returning an indictment against his brother. fambert George A Lambert, Special Agent. GALIWS + DEPARTMENT OF STATE 42 ADVISER ON POLITICAL RELATIONS January 12, 1942. 0: The Secretary of the Treasury. rom: Stanley K. Hornbeck. I have informed the Secretary f State of our conversation of his morning and of this communica- ) ion to you. 501 Regraded Unclassified - OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE 43 - b. . DEPARTMENT OF STATE WASHINGTON Dear Mr. Secretary: I enclose herewith for your confidential informa- tion a copy in paraphrase of the telegram of which I gave you information this morning and of which you requested 8 text. In that telegram there was conveyed & message from the President to General Chiang. As bearing on the matter to which that message related, I enclose also B. memorandum regarding a telegram sent to the Consul at Rangoon on December 30 informing the Consul of action taken by and a desire expressed by the Secretary of War in regard to the same matter. I further enclose a memorandum giving an account of B telegram sent to the Ambassador at Chungking on December 30 on the same subject. Yours sincerely, Stanley K. Hornbeck Adviser on Political Relations Enclosures. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Regraded Unclassified CONFIDENTIAL 44 PARAPHRASE STRICTLY CONFIDENTIAL A telegram no. 336 of December 31, 1941 to the American Ambassador at Chungking instructs the Ambassador immediately to convey to General Chiang Kai-shek & message from President Roosevelt to the following effect: Reports in regard to the recent incident in which was involved the matter of disposal to British authorities in Burma of Lend-Lease materials destined to and awaiting in Burma onward shipment to China has received the personal attention of the President who desires to assure the General- issimo that the action taken was contrary to this Govern- ment's policy which is directed toward supplying to China all the aid which is possible. It is the President's de- sire to assure the Generalissimo further that it is not this Government's policy to transfer material intended for China under the Lend-Lease program unless the matter has been discussed with the Chinese Government in prior conferen- ces and consultations. While sending these assurances to the Generalissimo, the President wishes to express his deep appreciation of the Generalissimo's unselfish and statesmanlike attitude in agreeing, in the interest of the common cause to which we are all dedicated, to the transfer to the British in Burma of certain material apparently greatly needed for defense in that region. STRICTLY Regraded Unclassified 45 STRICTLY CONFIDENTIAL PARAPHRASE On December 30, 1941 the Department of State sent to the Consul at Rangoon a telegram stating that the Secretary of War had sent to General Magruder a telegram approving the attitude adopted by General Magruder; that the Secretary of War could not support any such sequestration without General Chiang Kai-shek's consent; that the Secretary of War suggested that in view of the importance of Burma to China's defense and the need for making decisions, locally, General Chiang might send to Rangoon a representative having authority to make arrangements with the British as to what materials, if any, could be turned over to them, materials not thus turned over to be sent forward to China at once. The Secretary of War desired that the British authorities be informed that this Government was not willing to divert to the British materials which were destined for China without Chiang Kai-shek's consent first being obtained. STRICTLY CONFIDENTIAL Regraded Unclassified 46 PARAPHRASE On December 30, 1941 the Department of State sent to the Ambassador at Chungking a telegram stating that the Secretary of War had sent to General Magruder a telegram approving the position which General Magruder had taken in regard to sequestration by the British of Lend-Lease materials and stating that the Secretary of war did not support any such sequestration without General Chiang Kai-shek's assent. Regraded Unclassified 47 January 12, 1942 10:29 a.m. HMJr: Hello. Lauchlin Currie: Hello. HMJr: Hello, Lauch. C: Hello, Mr. Secretary. HMJr: Yes. C: I was just arranging transportation by air from China for Owen Lattimore to come back for consul- tation. HMJr: Yes. 5 And I wae wondering if you'd like me at the same time to do anything about Fox on this loan propo- sition. HMJr: Well, I'm just getting into it this morning. 0: Yeah. HMJr: Between now and sunset I'll know more about it. C: Fine. HMJr; I've just gotten e letter from Mr. Hull which I've not yet read. C: Right. Lattimore 18 leaving Chungking on the thirteenth. That's tomorrow. And I think I might be able to arrange for the military command to pick up Fox too, if you were interested. HMJr: Well, I'd bring Fox back. C: Yeah. HMJr: Bring him back. C: Yeah. I think Chiang Kai-shek would like to have him back to explain all these things, too. I've got an intimation of that. Regraded Unclassified 48 - 2 - HMJr: Well, I think I'd do it. C: Fine. HMJr: I'd appreciate it. C: All right, thanks. Good-bye. 49 January 12, 1942 10:31 a.m. HMJr: Hello. Judge Polier: Hello. HMJr: Henry Morgenthau. P: oh, good morning. HMJr: How are you? P! Fine. HMJr: Justine, over the week-end I read that report very, very carefully, and I'm not at all proud of it. Now what I've done 1e, I've asked four people - Mr. Gaston, Randolph Paul, Mr. Foley and Mr. Sullivan - all to study the thing, and I hope to get away Wednesday. Would it be agreeable to you if you got a call from Mr. Gaston to drop over and see him and talk about it? P: I'd be very happy to. HMJr: Herbert Gaston. He's Assistant Secretary, and this comee under him. P1 Fine. HMJr: And Ed Foley knows what'e-his-name. P: Clark? HMJr: personally. Yes. You see - and Randolph Paul's been teaching up at Yale. P: Yes. HMJr: And we already found out there's another Tommy Emmerson of the CIO, most likely, who they had in mind in Seattle. P: Oh. HMJr: It W&B something to do with the Marine Union out there. Regraded Unclassified 50 - 2 - P: Oh, I see. Well, do you think that that got over to Dies? HMJr: Well, I don't know; but they most - the chance - I mean, Gaston, who handled these CIO thinge for me several years ago immediately said, "Well, they're thinking of Tommy Emmerson of CIO, of the Marine Union", you 800. P: I 000. of course, a thing like that could do such instant damage. HMJr: oh, yes. Well, what we're going to do is this. We're going to go all the way through with it, and when we come out we'll either say that the man definitely should not be or he definitely should be. P: Well, there's nothing more one can ask for than that. HMJr: I mean, it'll be one or the other. P: Good. HMJr: I mean, it'll be clean-out. Either we'll recommend that he should stay in the Government, or we'll recommend that he should not. And within a day or two they'll hear from you. P: Well - you mean I'll hear from them. HMJr: Yes. And I'm very much obliged for your bringing it to my attention. P: By the way, Elinor said that Henderson . that you had not yet gotten the letter from Henderson, his complete reply detail by detail. HMJr: There's no letter from Henderson this morning. There's nothing that's come from Henderson. P: Because Tom was told it had gone over a week ago. HMJr: No. Henderson - - we called Henderson's office Friday, and he said he hoped to write it Friday. He never wrote it, and it hasn't come here yet. 51 - 3 - P: That's funny, because Ginsberg said it had gone. All right. HMJr: No, he wasn't telling you the truth. P: I see. HMJr: And - let me ask you something. Has - I take it Emmerson has seen this report, hasn't he? P: I don't know whether he saw it or Ginsberg dis- cussed it with him. HMJr: I see. No, we have not yet received any letter from Henderson as of five minutes ago. P: All right. Swell. HMJr: But thank you very much for bringing it to my attention, because I'm very unhappy about it. P: Thank you. HMJr: All right. P: Good-bye. Regraded Unclassified 52 January 12, 1942 11:07 A.M. HMJr: Hello. Senator Lucas: Yes, HMJr: Senator? L: Yes. HMJr: Could I ask your advice and opinion in strict confidence about a gentleman? L: Certainly. HMJr: Well, Senator Lucas, I haven't talked to this man yet; but before I did, I wanted to know how you and the Democracy would feel about Edward Brown, the president of the First National, Chicago, If I could get him to come down here to help me. L: Well, I think Brown would be all right. I don't believe there'd be much question about that. That would be my first reaction. I think he's been pretty sympathetic towards our position, even though he's head of a large bank out there. And as to his ability and his integrity, I think he would be all right, although I'd like to check up just a little further. HMJr: Well, my understanding was he publicly came out and voted for Roosevelt in 140. 1: That's true. HMJr: What? L: I think that's absolutely true, sir. HMJr: Well, under those circumstances, how could there be any question? L: Well, there can't be any question, but you called me up and asked me about It. I think he's all right, HMJr: Yes. Regraded Unclassified 53 - 2 - L: But I just want - if I might..... HMJr: Sure. L: just a little more time on it. I don't think there's any question about it at all. HMJr: But I am correct, didn't he - that he publicly L: I think that's true. I think that's true. And I mean - I was in that campaign out there - all through it - and I'm pretty sure Brown was all right. HMJr: Yeah. L: And that's what - that's one thing I wanted to check on for sure. HMJr: Well..... L: I'm sure President Brown was a hundred per cent with us out there. HMJr: Yeah. Well, as far as I know, he was the only bank in the middlewest that was. L: (Laughs) Well, that's right. HMJr: And what I'm trying - as I say, I haven't talked to him, but what I have him in mind for 1s Under Secretary. L: Yeah. HMJr: You see? L: Yes. HMJr: And I've looked high and low for a year. Dan Bell wants to be Fiscal Secretary, and we have that position vacant. L: Yes. HMJr: He's been after me for a year to let him resign as Acting Under Secretary, and become fiscal assistant. Regraded Unclassified 54 - 3 - L: Yes. HMJr: The position is there, and I've been looking for a man - a banker - who publicly voted for Roosevelt. Now, they tell me, for instance, that Walter Cummings, if he did vote for Roosevelt, he kept it a secret. L: Well, not only that, but the fellow was openly out for the Republican Governor out there. I won't say it was openly, but everybody knows that he was for Green for Governor. HMJr: Yeah. L: Now, as far as Cummings is concerned, I don't - I'll just say no HMJr: Well, I'm not considering him. L: No. Well, you're right. HMJr: (Laughs) L: Now, this other fellow's got a hell of a lot on the ball, too. HMJr: Yeah, I checked him with Charlotte Carr. L: Yes. HMJr: And she's all for him. She said he's one of the rareGod-sends that Chicago's ever had. L: Well, I think she's right about that. I mean HMJr: He was a director of Hull House. L: Yes. HMJr: Did you know that? L: Yes, I knew that he was interested in it. I didn't know that he was a director. But I know he's been a very, very philanthropic sort of a fellow and civic minded man, and on the liberal end of it. Regraded Unclassified - 4 - 55 HMJr: Yeah. L: Lot me call you back in thirty minutes, if I may. HMJr: Could you call me between now and twelve? L: Yes. HMJr: That would be wonderful. He's coming down - I don't want you to feel I'm rushing you. L: No. Well, I'll call you back. HMJr: He's going to have lunch with me. If you could let me know between now and twelve, because I have looked; and on the other hand, unless you were enthusiastic and could tell me that you'd support me on the Hill, I wouldn't want to start something. L: I think I can do it, and let me call you back, Mr. Secretary, between now and noon. HMJr: Thank you. L: All right. 56 January 12, 1942 11:13 a.m. HMJr: Hello. Operator: Mr. Sproul. HMJr: Good morning. Allan Sproul: Good morning. HMJr: How are you? Hello. S: Hello. HMJr: Henry Morgenthau. S: Yes, sir. HMJr: How's she going? S: She's going all right, 80 far. HMJr: Very much churning? S: Well, there's some churning, some selling of the - like the two's at '48-'50 and buying of the rights, but not a great deal yet. It's been fairly quiet 80 far this morning, and the attitude of the market seems to be that it isn't quite what they expected. It's taking them a little time to see what they're going to do, and that the exchange will probably go through without much churning and it will be after the books are closed that we'll be able to tell whether there's going to be a lot of churning or not. HMJr: I see. 8: But that the exchange will go through without much churning is the expectation now. HMJr: Well, I hear that the rights went up a little bit since Saturday. 8: Yes, that's right. It's around twenty-two now, Deeraded - 2 - 57 and that's to be expected, I think, inasmuch as the Saturday expectation was based at least on a part of the issue being notes with lesser value. HMJr: Good. Good. Well, we'll watch it. S: Right. We're watching it closely. HMJr: There's nobody feels badly about it, do they? S: I don't think 80. HMJr: Good. S: I think they think this offering is an attractive offering. The only question in the minds of any- one is what it may do to some of the other offerings of about that - around that maturity. HMJr: Well, we'll watch it. S: Yeah. HMJr: Thank you 80 much. S: All right. 58 January 12, 1942 11:30 a.m. FREEZING - GENERAL ANILINE AND FILM Present: Mr. Klaus Mr. Q'Connell Mr. Pehle Mr. Bernstein Mrs. Klotz Mr. Foley MR. FOLEY: I think we had better let Joe do the talking. H.M.JR: You are getting a little week, Joe. MR. FOLEY: He got married, you know, since we put him into General Aniline and Film, and he never got a honeymoon. H.M.JR: You ought to know. MR. FOLEY: I ought to know. At least I did better than he did. I got two weeks (laughter). When did you get away, Saturday afternoon? MR. O'CONNELL: Sunday afternoon. MR. FOLEY: And he went to work Monday morning. MR. O'CONNELL: I thought I was bearing up pretty well. I didn't know I looked weak. H.M.JR: Listen, who in the Aniline Dye Works during the last couple of years has been doing things 59 - 2 - which are to the disinterest of the United States Govern- ment? MR. POLEY: That is a big order. MR. O'CONNELL: Well, it is difficult to cut it that fine, Mr. Secretary. H.M.JR: Well, how long do you want? MR. O'CONNELL: Well, our position is that we could give you A list of five men who have been for years, maybe fifteen or twenty years, 80 closely 88800- iated with the I.G. Farbenindustrie in Germany, and with the German Dye Trust, and that association has continued right down until practically our freezing order as a matter of company policy. Those men are so definitely associated with German interests and their ties are so close to them, that the conclusion is justifiable that those men ought not to be permitted to participate in the activities of this company. H.M.JR: You have got five? MR. O'CONNELL: We have five top men. We have a list here of thirty men who are generally of the same category, in the sense that they are all I.G. Farben men, all Germans sent over here in the early '30's under contract with I.G. Forben, and have continued to maintain their contacts with Germany. They have all taken out citizenship except B. few. H.M.JR: Let me look at one. MR. KLAUS: Vom Roth would be the best one. H.M.JR: No, give me the first one. Dr. Hans Aickelein, vice-president. Sixty thousand dollars. Naturalized. Well, what have you got against the fellow? MR. O'CONNELL: That. That is all. Regraded Unclassified 60 - 3 - H.M.JR: What? MR. O'CONNELL: In his particular case, his German background and connection with I.G. Farben. H.M.JR: Well, how do you - how do you know, for instance that he is performing his duties well. MR. O'CONNELL: Well, I know that he is a very competent chemist. H.M.JR: How do you know he would be doing anything disloyal? MR. O'CONNELL: We don't know, other than his con- nections and background. It wouldn't necessarily follow, unless you assume as we have, and we have come to the conclusion that the I.G. Farbenindustrie as an organiza- tion dominated by the German Government has been in effective control of this company by I.G. Farben men. H.M.JR: Let's do it another way. Have you got the names of anybody who has been doing some dirty work? MR. KLAUS: Yes. Mr. Vom Roth. MR. O'CONNELL: You might glance at these. These are the worst cases, I should think. H.M.JR: He lives here on Kalorama Road? MR. KLAUS: One of his homes is on Kalorama Road. H.M.JR: There is nothing there that would What is ozalid? MR. O'CONNELL: Ozalid is the process in one of its divisions of the company. They manufacture a machine which reproduces drawings, blue prints, and so forth. Ozalid is the process, I think. They manufacture the sensitized paper used in the development of those Regraded Unclassified 61 - 4 - things, and the machine 18 in general use in most of the defense plants in the country, or at least in some thirty-five hundred of them, and it is our feeling that because of the character of the organization, it affords a very good opportunity -- H.M.JR: There is nothing in here. MR. O'CONNELL: Well sir, we haven't anything on anyone, and I don't think we ever will have anything that will justify putting & man in jail. H.M.JR: No, but I mean that you could publicly say that he did 80 and 80 and 80 and 80, and therefore we don't think he should be connected with the Government. MR. KLAUS: Well, he sent these reports to Germany. H.M.JR: Well, this doesn't say 80. MR. KLAUS: Well, that is the process that was followed. H.M.JR: There is nothing in this thing that says that he has done anything. MR. O'CONNELL: Well, I wouldn't want to - that alone he could also justify saying that it was in the ordinary course of business between his company and the German company which had licensed them under a patent, you see. MR. PEHLE: DuPont and General Electric and every- body else have sent things to Germany. MR. O'CONNELL: What was being done in this country during '38 and '39 has probably been done by a lot of other big organizations which have unquestionably exchanged information with Germany. H.M.JR: Look at the insurance companies. 62 - 5 - MR. KLAUS: But this is part of their plan. Kalle and Company sends Von Meister in here, and he has just come straight from the Zeppelin Works, and he gets this elaborate organization for defense plans, and he gets in former Zeppelin employees to do it, and they get into Government laboratories and forts and other places. H.M.JR: That doesn't say that. MR. KLAUS: This is just his personnel file. H.M.JR: There is nothing in there that says that. MR. O'CONNELL: Well, frankly, regardless of all -- MR. KLAUS: That is in the memorandum that I gave you the other day. H.M.JR: You gave me no memorandum the other day. MR. O'CONNELL: The one you read first, that short memorandum which described the activities of that divi- sion headed by Mr. Von Meister. We said it was headed by Mr. Von Meister, formerly of Zeppelin. H.M.JR: Well, let me ask you this. Do you feel - now think very carefully before you answer, and I am asking this man (O'Connell), not Sam. Have you gone into this 1bing far enough, rather than - that you feel that it is inimical to this country that these Germans should be there, and we should remove all of them? MR. O'CONNELL: Sure I do, but I don't think we ought to do it today. H.M.JR: When? MR. 0'00 NELL: When we have developed the facts B. little further. We are proposing that five men who are the top men, and on whom we have very little more Regraded Unclassified 63 - 6 - than we have on thirty or forty or a hundred others, we are proposing that we insulate those men by saying to the company, "You have got to get rid of those men," that on the others we block their accounts 80 that we will - and then we will subject them to 8. very close scrutiny as to financial transactions, see to it that they spend money only for purposes that we think are proper, we will accelerate our investigation, get some more people to continue the process that we have started, but which, the time being of the essence, we have got to accelerate. We can't do it now, I don't think. H.M.JR: I have got a suggestion to make. I don't think we are moving fast enough. How would it be - there are five and thirty, is that right? MR. O'CONNELL: Yes. MR. KLAUS: Well, 8 little more than thirty. It might be fifty. H.M.JR: Well, Sam, when I want to ask you - do you mind, please. MR. KLAUS: Sorry. H.M.JR: When I want to ask you something, I will ask you. Whatever the group is, five and some other group, how would it be to say pending your being ready, that we serve notice on John E. Mack that these people be kept off the premises, not separate from the payroll, but kept off the premises? MR. O'CONNELL: You meán the five? H.M.JR: Five or 8 hundred, I don't care. What- ever you think is the group that might be dangerous. MR. O'CONNELL: Well, I don't get the distinction between that and firing them. Regraded Unclassified 64 - 7 - H.M.JR: Well, there is all the distinction in the world. You are keeping these people off the premises because you are suspicious. That gives you time to develop your case. You say you are not ready to try today. MR. O'CONNELL: Oh, no. H.M.JR: Then you can keep them off the premises while you are developing the case, because it might take you weeks. MR. O'CONNELL: It certainly might very well take us weeks. H.M.JR: You don't know what they might do. But they are off the premises. They can do no damage. MR. FOLEY: They can do damage. H.M.JR: How? MR. FOLEY: Well, they have all got their confiden- tial people in the companies. They would be telephoning them. They would be having access to those people. H.M.JR: Well, would you put them in jail? MR. O'CONNELL: No. H.M.JR: Are you going to put them in jail even- tually? MR. O'CONNELL: I don't know what we are going to do. H.M.JR: They are at least not going into the office and having access in the files. MR. O'CONNELL: We have people in the office who are in a pretty good position to protect against any destruction of the files or anything of that sort. 65 - 8 - H.M.JR: Too slow. MR. O'CONNELL: As far as isolating them in the sense that we say they can't come on to the premises, it seems to me that is another way of saying, "We will stop this company from operating." H.M.JR: Do you want to stop it? MR. O'CONNELL: Well, if we take 8 hundred men who are almost all the key men of the organization and say, "Keep them out of here, we don't want them around the place at all" - if we are not going to fire them, and I don't believe we ought to go that far until we develop the facts, it seems to me that we ought to freeze their accounts and put them under closer scrutiny than we have so far. I don't think we protect by putting them off the premises. H.M.JR: Well, I am giving you an idea. Think about it, will you please? MR. O'CONNELL: Sure. MR. FOLEY: It is - I think if you look at that organization chart of just the operating end, and see the names, Mr. Secretary, you -- H.M.JR: What do you think? MR. KLAUS: Off the premises, frankly I don't think would be - these boys don't operate on the premises. They operate by phone and by - they have got - their job, the top man's job, is to see the little fellows do their work. They don't have any functions to perform. H.M.JR: Well, the fact that a man has got a German name doesn't mean anything. MR. FOLEY: Well, there is Foley. H.M.JR: Yes (laughter). That proves the point. 66 - 9 - MR. O'CONNELL= We are investigating Foley, too. MR. KLAUS: Those are all men who were sent in by I.G. Farben. H.M.JR: There is the point. Moody is one. MR. FOLEY: Shultz. MR. O'CONNELL: The men with the black stars and some others are I.G Farben men. H.M.JR: Look, boys, I am not going to sit here for a couple of weeks while you fellows - I know these lawyers' investigations. They go on for months. If this is going to be one of those regular lawyers' - you fellows would be going on for months, and God knows what those fellows would do. MR. FOLFY: Mr. Secretary, they have got a double job to do there. Joe's people are watching the tran- sactions and clearing the transactions, because the controls have been decentralized, and in addition to that with this whole problem of the APC thing unresolved, and with all the difficulties we have because John E. Mack is not cooperating with us, he thinks that we are just passing fancies, and that it will be only a week or 80 before we are all out and the Justice crowd will be in. It isn't the easiest thing in the world. H.M.JR: What does he think you are? MR. FOLEY: Passing fancies, birds of flight (laughter). H.M.JR: I just wanted to get that straight. Are you talking for yourself or your cohorts? MR. FOLEY: Well, I don't know whether I am or not. MR. O'CONNFLL: There isn't any doubt about wack's attitude. He thinks we are going to he gone shortly, and Regraded Unclassified 67 - 10 - he has been giving lip service to the idea of cooperation. H.M.JR: Well, where I differ with Mr. Foley, see, is this. One of the ways - that is the reason I sent for you. I wish I had more time, but you fellows think this over and I will see you again before I go home. One of the ways to prove the worthiness of this job is not to fool around with this thing, you see, and if you fool around with this thing, somebody will write in, "My God, the Treasury has had this thing for months. What have they done? Nothing." MR. FOLEY: But that is a whole lot more than any- body else has done, Mr. Secretary. H.M.JR: Ed, I am saying what Pegler might say or somebody else might say or Walter Winchell, some body who is 8 friend, you see. I don't think you got my point. MR. FOLEY: I got your point all right. H.M.JR: What I am saying is, somebody might criti- cize us for being slow, and use that as an excuse to get it out of the Treasury, and in to Justice, so there- fore the reason I sent for you was to satisfy myself why you fellows don't move faster. I make a suggestion, it might not be any good, and you make a counter-suggestion, but if you are going to sit around and wait here for months while you investigate this thing, I can't wait that long. MR. O'CONNELL: Look, at present, Mr. Secretary, we are doing two things and we haven't nearly as many people as we ought, to do it as rapidly as we ought to do it. We have got fifty people covering about eight or ten places where this does business. MR. FOLEY: With how many thousand people? MR. O'CONNELL: There are six thousand people employed in the company, and they spend five to six Unclassified 68 - 11 - thousand dollars a month in payroll and purchase of materials. H.M.JR: Don't get me wrong. Normally, what am I trying to de? I toying to build up a case and keep everything here so that this particular part of the work will be well done. I don't give a damn. Listen, I can function as Secretary of the Treasury, with the alien property over there with Leo Crowley. I will go on with it that way. But the boys have done a good job and I am trying not to let them down. Now, that is the whole idea. I am not sending for you to criticize you. I mean, it takes up my time, and I burn up my energy. Why? Because these boys have done 8 good job and I am trying to back you up. Now, go back and get some new ideas, see, and see how you can move in on this thing and in some way or other 80 that it isn't the usual legal thing, my God, until - it took him (Klaus) two years to do the liquor thing. He did a good job. Two years to find out where the liquor control was. Didn't it? MR. KLAUS: Liquor was only six months. H.M.JR: Well, six months. And that was a baby, compared to this. Six months. Two years on Annenberg. I can't wait that long. See me after four o'clock. Put some pep into this thing. As I say, I am not criticizing Ed or you or Pehle or anybody else, but I am telling you boys you have got to move, because these boys over there, Crowley and his fellows, are trying to think up ways to criticize you. Have you got it straight? MR. FOLEY: If we go too fast and we go too far, then we can get criticized too, because they can say that these fellows are taking action that isn't justified. H.M.JR: Who is going to say that? MR. FOLEY: Biddle and Crowley. 69 - 12 - H.M.JR: Well, I would rather have them say that than the other. MR. O'CONNELL: Of course the problem that I have here now is whether what we think would be justified is going too fast. H.M.JR: Well, take another look at it, do it so I don't get into hot water. MR. O'CONNELL: That is right. H.M.JR: And come back and see me after four o'clock. Take a new look at it, but don't think I sent for anybody this morning to criticize them. I am trying to be help- ful. MR. FOLEY: This is the type of letter we get from the Army Engineers. H.M.JR: We told them not to do business, didn't we? MR. FOLEY: We told them the facts. We said, "Sec- retary Morgenthau sends the suggestion that Government departments and agencies having to do with this take action so that the matter will not be repeated." MR. O'CONNELL: Then, Mr. Secretary, within a day or two before that Judge Mack wrote a letter to a friend of his in the Department of Justice complaining because we were -- H.M.JR: I know, and he is one of the passing fancy men Ed spoke of. MR. FOLEY: Well, don't ever fool yourself about John E. Mack. He is playing all the angles here all the time. H.M.JR: I know John E. Mack. He is my counsel. 70 - 13 - MR. FOLEY: He can get ninety thousand dollars a year for this. H.M.JR: All right. I will see you all after four o'clock. January 12, 1942 71 11:35 a.m. HMJr: What happened, John? John Sullivan: Well, he asked me to stay after Eddie Greenbaum and the Army fellows had left. HMJr: Yeah. S: And he had & couple of things he wanted to talk over, including excess profits. HMJr: Yeah. 8: He has come to the conclusion that if we were to repeal it and put on a high or corporate rate, to be known as the War Profits Tax, 80 that two hundred and fifty thousand corporations rather than thirteen would be paying it, if the Treasury took an affirmative position on the matter, he felt very sure that the Congress and the country would understand and applaud. HMJr: Yes. 8: I told him that we hadn't yet come to any con- clusion about the matter, but that I'd report his views. HMJr: Yeah. 8: Then I said that I was a bit confused by the interview in which he referred to the amount of money to be raised, and he said well, it hadn't quoted him correctly, but that in substance it was right; and I sort of smiled and said, "Well, I rather gathered that you were putting the target up 80 that when you pulled it down a bit, the boys would think you'd accomplished something." HMJr: Yeah. S: And he said, "Well, I definitely had that in mind." HMJr: I see. 8: Then he want on - of course, what they have in Regraded Unclassified 72 - 2 - their minds on the Hill was that five is the top. HMJr: What's that? S: Up on the Hill, they've pretty well decided that five is the top. HMJr: I see. S: But he said..... HMJr: Five is the top? S: That's right. HMJr: I see. S: And he said this morning that he thought that if we collected five or maybe perhaps six in the fiscal year, we'd be doing very well. Well, of course, if we collect five or six in the fiscal year, that's a tax bill which at an annual rate is substantially in excess of seven. HMJr: Uh huh. Well, you're going to tell this all to Paul, aren't you? S: Oh, I've already told him. HMJr: Wonderful. S: Yes, sir. HMJr: Thank you 80 much. S: Righto. HMJr: Thank you. S: Right. Regraded Unclassified 73 January 12, 1942 11:55 a.m. HMJr: Hello. Jim? James Forrestal: Oh, Henry, I was just wanting to see if you were free for lunch. HMJr: Unfortunately I'm not. F: Well, I thought you probably were not, but..... HMJr: I've got a man from out of town. F: Okay. Well, I'll check with your secretary to see if you're free any other day in the week. HMJr: Thank you. F: All right. 74 January 12, 1942 11:55 a.m. FINANCIAL ASSISTANCE TO CHINA Present: Mr. Southard Mr. Coe. Sir Frederick Phillips Mr. Currie Mr. Viner Mr. Bell Mr. Bernstein Mr. Foley. H.M.JR: Here is the proposition I want to talk to you people about. The President and the State Depart- ment want me to make a loan to China. I don't know what the status is of the Export Import Bank; but, Dan, if you would make a note to find out just where we stand, that is number one. Will you please? MR. BELL: You mean stand with respect to credits to China and how much they have got left? H.M.JR: Yes. MR. BELL: We probably have that. White is the representative of the Treasury on the Board, and I expect he has that information. H.M.JR: Well, let's get it anyway. MR. BELL: Right. H.M.JR: That is number one. Then I got this impression that what they were worried about was the fall of Singapore, but Hornbeck was here and said he Regraded Unclassified 75 - 2 - was worried about the fall of Manila, or rather the balance of the Philippines. Anyway, they are worried, and I got this letter from Mr. Hull. I have asked T. V. Soong to come in at three. I thought I would see him alone and see if he might talk and see what he has in his mind. I also - while you gentlemen are here, I will ask what the English are going to do. Then I want to ask Lauch if he thought - is this something that I can kid the Chinese along on until these people get back from Chungking. MR. CURRIE: Yes. At the meeting - two meetings I have sat in on this thing, one at the State Depart- ment and one over here, it was the general thought that we might agree to the principle of the thing, the need for financial assistance to China, but of course there are many questions about the amount, the rate of exchange, who shall do it, what fund, what Congressional authorization there may be, the possibility of perhaps doing it through Lend-Lease. That is something you might explore. There are many questions like that that we really have to go into and it takes some time, but we are sympathetic and-- H.M.JR: Do you think that is enough? MR. CURRIE: I think so, H.M.JR: Bernie, where do I stand on making & loan to China as to what I have said to Congress? MR. BERNSTEIN: I think pretty clearly you would have to go up to the Congressional committees just as you did previously on the China loan. H.M.JR: You do think so? MR. CURRIE: There is another little complication, Mr. Secretary, we discussed at our meeting the other day, and that is whether we should do this on our own or another one of these joint Anglo-American things. The Chinese would much prefer to have them separate. Regraded Unclassified 76 - 3 - H.M.JR: Separate? MR. CURRIE: Yes. H.M.JR: Somebody told me, I can't remember where I get these things from, that it is the English - the way they have treated Chiang Kai-shek that has made him so sore. They treat him like he was Shah of Persia or something like that, or rather the King of Albania. MR. CURRIE: Some one told me that Niemeyer began to talk in terms of obligating certain Customs receipts for payment. H.M.JR: Was it you that told me that? I got it somewhere. MR. CURRIE: I get a lot of that all the time. H.M.JR: What I would like to do, frankly, gentle- men, this is what I would like to do, and I need your help. I would like to do this thing in the way that we could sort of kind of feed it out to them if they keep fighting, but I would hate to put three hundred million dollars on the line and say, "Here, boys, that is yours." MR. CURRIE: I think it will have to be very frankly regarded as 8. subsidy, as a war measure, and not as a loan. H.M.JR: Well, the President as much as said that, but also I would like to keep it and kind of feed it out. Couldn't you work out something. - as I say, I will have Soong in at three. You see, here is my trouble, so that you know it. The President being will- ing, I am going to leave here Tuesday night, I hope, for a week, so if we are going to do anything in the way of some kind of an agreement - I spoke to Soong Saturday night at ten o'clock and told him I had just gotten this thing by hand, and I was interested so that word went over, and I will see him this afternoon. Now, I am going to ask him I think it is much better, 77 - 4 - point blank. Now, look, Fox and Lattimore are on the way back. Can we wait until they get here? I am definitely interested. We are going to do something. Is that enough? MR. CURRIE: They can be brought back within two or three weeks, I should say. H.M.JR: Is it as long as that? Hornbeck says he can't wait until they get back. I have never seen the State Department - Hornbeck, speaking for them, is anxious. I told him this morning, "I love to be pushed by the State Department. It is a unique experience. He has also forgotten - you know, he takes full joint credit for the first loan. He forgets he wrote a memorandum to Hull recommending we shouldn't do it, the first twenty-five. He has a short-lived memory like Arthur Krock's idea, you have got to go back to nine- tèen hundred and two when Mr. Hull introduced & bill for strategic materials to justify Hull's position. MR. COE: It would look from what State has said and also from some of the messages addressed to you that if they got an agreement to negotiate that that would solve the first-- H.M.JR: Who said that? I didn't see that. MR. COE: Well, in one of the messages which came through originally from Gauss, it said the first thing-- H.M.JR: Will you dig that out? Why don't you send for it? MR. FOLEY: Mr. Secretary, on going to Congress, don't you think the situation is different now that we are at war? H.M.JR: I don't know. We can find out. MR. FOLEY: You said you wouldn't make a loan out of the Stabilization Fund to a country at war, but the consideration for that statement was the entanglement Regraded Unclassified 78 - 5 - and now that we are at war, it seems to me the situa- tion is just as different as it can be. H.M.JR: Well, I think the thing to do, Ed, if we are going to go into this thing : - Wagner is back. He is Chairman of the Committee. The thing to do would be for you to go up and see Wagner and ask what he thinks. Tell him we have got a Chinese deal on, see, do I have to come up there. MR. FOLEY: All right. H.M.JR: And he could sound out the Committee. That is the easiest way. MR. FOLEY: Yes, I think that is right. H.M.JR: That is why I wanted everybody in on it. MR. CURRIE: There is this other possibility you might keep in mind, Mr. Secretary, and that is that this is strictly 18 political war measure. It is not & loan. H.M.JR: It is what is knownas silver bullets, isn't it? MR. CURRIE: That is right. It might be possible to get an amendment on the Lend-Lease appropriation for us to take over part of the cost of part of the Chinese army. It would amount to the same thing. Then they sould issue bonds here, you see. H.M.JR: Now, wait a minute, you are going a little fast for me, Lauch, I am just a country boy. I can't keep up with you. MR. CURRIE: We could make quite a case against a committee. H.M.JR: Do you realize we have got two Canadians employed here? (Laughter) MR. CURRIE: Do you know when you first employed 79 - 6 - me, I was an alien? H.M.JR: Yes, and I know how you got fixed up. I didn't know it then, but I know it now. MR. CURRIE: Really? I remember Jack's consterna- tion when he learned that. He rushed me up to Boston to take out my final papers. H.M.JR: Viner keeps a lot of bad things from me. MR. VINER: That was pretty bad. H.M.JR: I will say it was. MR. CURRIE: I think a fairly convincing case can be made before a Congressional committee on the grounds that we have been unable to render them & lot of material help, the Chinese, in the Lend-Lease program, partly because of the bombing of the Burma Road and partly because of other reasons. This would be a very substantial form of help to take over what would amount to part of the cost of their army. They are maintain- ing a huge army and it may amount to three hundred million dollars, you see, and then that would be strictly Lend-Lease and there wouldn't be this loan. It is not a loan. There is not the slightest chance of ever being any repayment. H.M.JR: I like your idea, and then you can come to whatever the agreement is on Lend-Lease, the tangible, direct, or indirect benefits we would get from it. H.M.JR: Would you need an amendment? MR. CURRIE: Yes. H.M.JR: I think this is a marvelous idea. MR. FOLEY: Why would you need an amendment, Lauch? MR. CURRIE: I don't think you have authority to Regraded Unclassified 80 - 7 - do it under the present loan. MR. FOLEY: Why nit? MR. CURRIE: It is for the purchase of articles or personnel to service those articles. That would have several advantages, Mr. Secretary. It would keep your loaning record a little bit cleaner from the point of view of eventual defaults. It would enable us to take unilateral action without reference to the British, which the Chinese would like. It would put the loan on its proper basis as a war measure, as a question of military export, not as a commercial loan. H.M.JR: I think that is a good idea. Let me ask you this, Lauch. How much do I have to clear with the State Department on this? Let me put it another way-- MR. CURRIE: Well, at the meeting the other day, Harry White took the position as the discussion developed that obviously this was a political matter and couldn't be treated as a Stabilization loan. Therefore, he thought that you would require a letter from the Secre- tary of State so informing you, that it was to be treated on political rather than economic grounds. MR. BELL: That is the reason for that letter. MR. CURRIE: And that is the letter. H.M.JR: But I don't have to call up Mr. Berle and say please, do I, as long as I have got Hornbeck advising me and keeping him informed? MR. CURRIE: Well, Berle has assumed the initiative in the State Department on this thing. H.M.JR: Well, I don't know he exists on this. MR. CURRIE: That is & very difficult matter. H.M.JR: Well, I will work with Hornbeck, that is Regraded Unclassified 81 - 8 - all, and see what happens. The reason that - Berle has got so many trick ideas, if I bring him in to this thing whatever we suggest he will want to modify it. Well, why don't I have what's-his-name in, Phillips? MR. BELL: Yes. (Mr. Phillips entered the conference.) H.M.JR: The reason I asked you to come over here is that the President and Mr. Hull have asked us to take up the question of financial assistance to the Chinese Government, and I just wondered - we are just getting started on it - - whether you would care to tell me how far you people have gone, how far you expect to go, whether you want to do it together or separately. MR. PHILLIPS: Well, sir, I did send you a little note. I will give it to you in three points. The first point, there was a suggestion put out by Sir Otto Niemeyer for the Chinese to issue an internal loan to be guaranteed by the United States and the United Kingdom. The guarantee suggested was forty million dollars and ten million pounds. The purpose of the loan is to mop up some of this surplus bank notes floating around China. That we are definitely in favor of. The second point, there were various reforms-- H.M.JR: And that you are in favor of? That would be done through what agency? MR. PHILLIPS: For discussion. H.M.JR: But mop up, you say, buy up some of their currency? MR. PHILLIPS: Yes. H.M.JR: Yes. MR. PHILLIPS: The second point, there are a whole series of reforms, the way banks are controlled, the Regraded Unclassified 82 - 9 - way interest rates are fixed, and various other detailed points, on which I think you will find that the United States Ambassador in Chungking is in full sympathy with sug- gestions that our people out there have made and that there is agreement to represent them jointly or separately to the Chinese Government. I am afraid I don't carry all those details in my head, but there is a reform pro- gram. Now, the final point is that Chiang Kai-shek has seen the British Ambassador. I assume he has seen also the United States Ambassador. He has represented that his position is not too safe. The Chinese public are impressed by Japanese advances and 80 on, and that, therefore, he must have some psychological support, and what he suggests is that-- H.M.JR: Your Ambassador suggests? MR. PHILLIPS: Not, this is what Chiang Kai-shek asked for from our Ambassador. What he suggested was we should advance a hundred million pounds, and you should advance five hundred million U. S. dollars. H.M.JR: That is the Generalissimo's suggestion? MR. PHILLIPS: Yes, which would add up to one billion dollars, more or less, which is about what Russia got, which I should think is the real precedent they are trying to follow. H.M.JR: I see. Which Russia got which was promised. MR. PHILLIPS: Through Lend-Lease. H.M.JR: But she hasn't got it. MR. PHILLIPS: Well, it was promised to her. Well, we don't know much about that suggestion. MR. CURRIE: On the same basis, Mr. Secretary, the Chinese have got six hundred million. MR. BELL: Through Lend-Lease, wasn't it? Regraded Unclassified 83 - 10 - MR. CURRIE: Yes. They haven't got it, but on the same basis. H.M.JR: Six hundred from us? MR. CURRIE: Those are the allocations set up. H.M.JR: They have been promised? You see, I am going to school on this, because I haven't been in on this. MR. PHILLIPS: Well, there is this huge demand from Chiang Kai-shek for money. Frankly, we don't know what he will do with the money. He has got no serious foreign exchange problem left because of course Hongkong and Shanghai are out of it and the only Chinese imports is stuff that is coming up the Burma Road and nearly all that is Lend-Leased, so we don't know what he wants with foreign exchange in those quantities, but he has asked for it. H.M.JR: How fast could you act on this forty million dollars, ten million pound thing. MR. PHILLIPS: In principle we could act pretty fast. The details would take a lot of working out. H.M.JR: But in principle? MR. PHILLIPS: In principle we could get a decision pretty quick. H.M.JR: How fast? MR. PHILLIPS: This week, I should think. I suppose we should have to have an act of Parliment, and I am not sure how you would do it. H.M.JR: Well, Mr. Foley is going to go up to see the Chairman of my committee to see whether I need anything or not. 84 - 11 - MR. PHILLIPS: But it is just a scheme. It is just an outlined proposal at present. H.M.JR: Well, that is within the realms of pos- sibility, isn't it? MR. BELL: That might be worked out as an amend- ment to the old agreement to increase the amount. MR. PHILLIPS: Of course, you know they have never drawn that - what was it, fifty million dollars you gave them. They have never even touched it, as far as I understand. H.M.JR: Is that right, gentlemen? MR. BELL: That is right. MR. SOUTHARD: They have never asked you to buy the yuan, Mr. Secretary. H.M.JR: So that fifty million is intact? MR. SOUTHARD: Yes. MR. BELL: They are getting close to there-- MR. SOUTHARD: But this is of course not a foreign exchange problem and isn't presented as a foreign ex- change problem, this present problem that you are now considering. H.M.JR: Which one, the forty million? MR. SOUTHARD: No, the whole new request, in what- ever form. H.M.JR: But this thing that Sir Frederick is talk- ing about is a foreign exchange problem. MR. SOUTHARD: Domestic problem. MR. PHILLIPS: As I say, they are paying for their 85 - 12 - war by printing bank notes, and there are too many bank notes now. This proposition is, the Chinese Government go to their citizens and borrow or take from them a great amount of this currency and we guarantee that when the time comes the Chinese will repay that in sterling or dollars. MR. BELL: Up to eighty million dollars? MR. PHILLIPS: Yes. H.M.JR: Well, I got the idea, you see - I am hoping to get away - off the record, tomorrow night for a week. That is why I am trying to push this thing. MR. PHILLIPS: Yes. H.M.JR: So if we do anything - whatever is in my mind, I will get in touch with you before I go. MR. PHILLIPS: Yes. H.M.JR: Thank you. January 12, 1942 86 12:03 p.m. HMJr: Hello. Operator: Senator Lucas. HMJr: I'll take it. Operator: Go ahead. HMJr: Hello. Senator Lucas: Mr. Secretary. HMJr: Talking. L: I see no reason why I can't go along with Brown and shall be glad to support him when he's sent up here for confirmation. HMJr: Well, that's awfully nice. Now, mind you, I haven't talked to him yet. L: Well, I understand. HMJr: And I haven't got the foggiest idea whether he'll be interested. L: Well, I won't say one word. HMJr: But with you it's all right? L: That's right. HMJr: Don't you think it would be good? L: I think it would be an excellent appointment, I really do. HMJr: Thank you. L: And you can tell him that I said so, if you want to use me at all, and tell him that I hope that he'll take it. HMJr: I will do that, because I know that'll have an influence. Regraded Unclassified - 87 - 2 - L: All right. Thank you 80 much. HMJr: I'll let you know just as soon as I know. L: Yes. Okay. HMJr: Thank you very much. Regraded Unclassified 88 January 12, 1942 2:00 p.m. HMJr: Hello. Frank Walker: Hello. HMJr: Frank? W: Hello, Henry. HMJr: How are you? W: All right, sir. How are you? HMJr: I hear you want an appointment for this man on the twenty-first? W: Well, I tell you, he's coming to New York, Henry, a week from today. HMJr: Yeah. W: And he wanted to come down here Wednesday or Thursday, whichever 1s agreeable to you. HMJr: Well, my trouble is, I don't think I'll be here. W: Would you be here for the dinner on the twenty- second? HMJr1 Oh, yes. That's right. That's right. W: That's right. HMJr: Wednesday. Well, I..... W: I took it for granted you'd be here the - when ie the dinner, the twenty-second, isn't it? HMJr: I'm not sure. W: I think BO. HMJr: Well, is he coming down especially for this? W: oh, he's coming on another matter. HMJr: Well, then - I meant if I didn't come - wasn't Regraded Unclassified 89 - 2 - here on the twenty-second, it wouldn't be too much of & disappointment. W: Well, it would be quite a disappointment to him, because he's very anxious to put this over. HMJr: Yeah. Well, I - - but I haven't done any of that, you know, Frank. W: Any of what? HMJr: The kind of thing that he wants. W: Well, he wants to do it, and he wants the Treasury to do it, you see. Oh, you mean you haven't - about those stare going out, you mean? HMJr: Yeah. We haven't done that. We've discouraged it. W: We have Lamour out now. HMJr: Well, she's just in New York. W: Uh huh. HMJr: That was something they put over. We had nothing to do with it. If they had put it up to me, I'd have turned it down. W: Yeah. HMJr: Will he be here on the twenty-second? W: Yes. HMJr: What? W: Yes. HMJr: How about eleven o'olock on the twenty-second? W: Fine. HMJr: And that 1s - - his name is Frank..... W: Frank Freeman. He's head of Paramount. He's up at Zukor's place. Regraded Unclassified - 3 - 90 HMJr: Oh. Frank Freeman. W: Yeah. HMJr: of Paramount. W: Yeah. HMJr: Well, I appreciate your interest, as always. W: Well, I'll go over it with him and we'll talk it over, and you make your own decision then. HMJr: He's the head of Paramount. W: Yeah. He's in charge of production; and in addition to that, he's the head of all the producers on the Acadamy Award and head of the Producers Association, you know, out there. HMJr: I see. Well, I realize he's an important fellow, and I'd like to see him and I'd be delighted if you'd bring him over. W: He says he'll get you a hundred million. HMJr: Well, it's a tidy sum. W: All right, Henry. HMJr: Thank you. W: Good-bye. 91 January 12, 1942 3:31 p.m. HMJr: Yes. Grace Tully: Mr. Secretary. HMJr: Talking. T: The President said okay on leaving Wednesday. HMJr: Fine. T: And also you can come in at quarter of ten in the morning. HMJr: Okay. T: At the house. HMJr: At the house? T: That's right. HMJr: That's tomorrow? T: Tomorrow morning. HMJr: Tomorrow morning. T: At quarter of ten. HMJr: Wonderful. T: That's right. HMJr: I'm amazed. T: What do you mean you're amazed? HMJr: Overwhelmed. T: Are you insulting me? (Laughs) HMJr: No, at the President. T: Oh, I see. Regraded Unclassified 92 - 2 - HMJr: You never amaze me any more. T: Oh, I see. (Laughs) HMJr: No, at the President. T: All right, fine. HMJr: At a quarter of ten. T: That's right. HMJr: Thank you. T: All right, Mr. Secretary. Good-bye. HMJr: Good-bye. 93 January 12, 1942 3:50 p.m. FINANCIAL ASSISTANCE TO CHINA Present: Mr. Foley Mr. Bernstein Mr. Coe Mr. Viner Mr. Bell H.M.JR: This is as much for the record as it is for you, without trying to -- (Mr. Viner entered the conference). H.M.JR: T.V. Soong just left here, and he went through a long rigamarole, trying to work himself up into the position to justify this loan. He said when he first got it, he couldn't present it, he hadn't been here long enough - I mean, he had been away from China too long. He said he didn't know how to present it. So they worked out this thing of five hundred million dollars from us and the same from the English, and the Generalissimo said, talking like a general, "I can't tell you where I am going to put my troops. I have got to have my troops, and then I will tell you where I will put them." Well, I said, "In the first place, if it is Russia vis-a-vis China, you have got more out of Lend-Lease than Russia, China has." He says, "Yes, we have been promised six hundred thirty million dollars." 94 - 2 - I said, "You have got all the stuff you want at Rangoon, and you can't move it." He said, "Yes, that is right." I said, "You have got the fifty million dollar fund, and you haven't used it." He said, "Yes, that is right. It is hard to explain." So I said, "Well, it is the troops you are thinking of, isn't it?" He said, "Yes." So I said, "How about if we could pay these troops with silver dollars, U.S. dollars? How would they like it?" His face lit up. He says, "Now, that is something. But the trouble is with the silver dollar, U.S. dollar, it hasn't got a dollar's worth of - there are some doubts in the fellow's head. A dollar bill would be just as good. It would be better, because it would be easier to transport." Well, I did & little - - I said, "Would you pay them five dollars a month?" "Oh, no, no." Then he got to thinking, fifteen dollars in Chinese money, and then he got - he said, "Well, maybe five dollars won't be too much A month. Well, of course a million troops, that is five million dollars a month. So they have got to buy clothing for them, they have got to build our - what do you call it? MR. BELL: Barracks? H.M.JR: And so forth and so on. So I said, "Well, what I em thinking of, Doctor Soong, once & month to make you an advance for a month." I said it about three times, 80 there is no doubt in his mind. I told you this morning I was trying to think of some way 80 that while the boys fight they get their money, and if they don't fight, no money. He got it. So I said, "This is just my idea, personally. I haven't consulted Mr. Hull, and I haven't consulted the President. This is my idea." So I said, "Won't you please talk it over and send a wire?" And he said he would. Then I pulled a boner. I told him I was going to Florida. And he said, "Wonderful. My wife has always wanted to go to Florida, and can't she and I come down Regraded Unclassified 95 - 3 - and visit you?" You (Bell) have got to keep that from happening. He said his contact would be with you, 80 you can tell him I am not well, or I am in bed, or I caught the measles or something. MR. BELL: I will tell him I don't know where you are. H.M.JR: If I told that to my wife tonight, she would say she wasn't going to go for my sake. So you have got to tell him that the Secretary really isn't well, or something. MR. BELL: I will make up some good story. H.M.JR: Now I am going to see the President at a quarter of ten tomorrow, and I am going to ask whether he likes this idea, and I told Soong I would call him. Tell Mrs. Klotz to be sure and remind me when I come back from the President to call T.V. Soong (Speaking to the reporter). Couldn't, in the absence of Harry, you (Coe) give this thing to Doctor Hornbeck, not over the phone, but tell him the suggestion I have made, you see. MR. COE: Yes. H.M.JR: And pass it along to Mr. Hull and also you give it to Lauch Currie, will you? MR. COE: All right. H.M.JR: But during my absence, any communication with T.V. Soong, I want it through Bell. I want Bell to have any communications with T.V. Soong during my absence, so we keep that straight, you see. Coe is a young fellow, and he can do a little leg work. We will let him let Lauch Currie know, and let Doctor Hornbeck know. Now, you legal guys -- Regraded Unclassified 96 - 4 - MR. FOLEY: How are you going to do it? H.M.JR: Well, that is your worry (laughter). MR. VINER: May I say a word? H.M.JR: Should I worry? MR. VINER: No. MR. BELL: It has got to be done through Lend-Lease. MR. VINER: I think that is the solution to the problem. I think it is all right. But I want to report a little conversation I had with Lauch Currie this morning. I was trying to work out something on the same lines, but I suggested gold. If you are really willing to go along this way and to make it really helpful to them, you have got two things there. You have got one thing, the payment of the soldiers. The other thing is that they can do 8. little bit of mopping up of their own money. Give them double that amount, instead of the ten million & month, ten million for the Army and ten million for money control purposes over there, so they can buy up their own currency and burn it. Soong may not have seen that. Otherwise, this won't adequately meet their problem. H.M.JR: Let the English finance that. MR. VINER: Between the two it may mean only ten, whatever the amount is, but there is that other problem. H.M.JR: Well now, I have got another idea that I want you monetary experts to think about. I wasn't entirely on the surface. Supposing you think a minute in terms of the U.S. dollar as the currency of the world. Think that over. Now, they can mop up - Jake - this is B bottomless well. They will print the damn thing faster. But you give them ten million dollars of U.S. dollar bills which we send in our bombers which are going Regraded Unclassified 97 - 5 - out there now, these four-engine bombers, and they take this stuff out with them. It begins to infiltrate decent money into a hopeless situation. You think this over. But buying the stuff up and destroying it, they will print it just as fast as you get it. But you put ten million a month into- the country, and another ten mil- lion, and you begin to get some solid money into the world. MR. VINER: Yes, but you - in Poland, you see, they operated on that basis, and the result was that -- H.M.JR: What basis? MR. VINER: They used dollars instead of their own currency. H.M.JR: When was that? MR. VINER: During their inflation. MR. BELL: They used gold certificates. H.M.JR: How did it go? MR. VINER: It went very well, as far as the gold certificates were concerned, but it just worked hell with their own currency. Treasury Department Division of Monetary Research 98 Date January 12,1942 19 To: Secretary Morgenthau V. F. Coe From: The appended memoranda may be helpful to you: 1, A statement of "pros" and "cons" of your proposal. 2. Drafts of suggested public announce ments of the loan by the President and yourself, either or both of which you might want to show the President. 3. A draft telegram to Dr. Kung, to start the ball rolling. Regraded Unclassified TREASURY DEPARTMENT 99 INTER OFFICE COMMUNICATION DATE January 12,1942 TO Secretary Morgenthau FROM V. Coe webject: Secretary's Proposal for Loan to China. he proposal of the Secretary is that the United States should assist China in financing her military expenditures, and particularly the pay and maintenance of the Chinese Boldiers. reliminary examination indicates that El loan to shina open the above lines can achieve the major objectives which hould be the joals of this overnment in relation to the pre- sent loan. It would be desirable, if the President agrees, to tell the eneralissimo that the Secretary is ready to discuss dis ordeosal, among others, and to make a public announcement 2st 128 otlations have begun. However, there are a number of different ways in which the secretary's proposal micht be carried out, and each of them neeGa to be explored. in view of the fact that a pod deal of information essen- LIBI for a decision is lacking, and that each of the possible were for carrying out the Secretary's proposal has its strong will IDS weak points, It would seem desirable that the announce- sont should be general, and not be confined to a specific proposal, IV Some of the possible ways whereby the United States could finance Chinese military expenditures are the following: I. Shipment of United States' currency to China and its Issuance there as pay for soldiers and other military expenditures. - I Shipment of United States' currency to China and its issuance there for the purchase of rice and other products for distribution to and use by the army. Regraded Unclassified 100 Division of Monetary - 2 - Research 3. Giving China dollar accounts in the United States, against which she could issue bonds, the fapi proceeds of which could be used for military expenditures. 4. Giving China earmarked gold, against which bonds could be issued as above. In order to evaluate these and other proposals, we ought to know more than we do as to how the Chinese Govern- ment 18 now paying its soldiers. Our present information is only that some yuan pay- ments are made and some rice payments are made, and that there is considerable variation in the amount and method of payment. Particularly with regard to the proposal to distribute United States currency in China, either for pay or for supplies, it is necessary to obtain more information as to how the people and the Government would react to this procedure. III. A preliminary listing of the pros and cons of the most novel of these proposals, (proposal number 1 above) is given below. IV. Advantages of using United States' currency to pay soldiers and to meet other military expenditures in China. 1. This proposal is in accordance with the political aim of the loan -- to assist Chinese military effort. 2. This kind of loan would meet the political necess- ity of making 8. large and spectacular loan. By relating the size of the loan to the size of Chinese military expenditures, this proposal helps to settle the question of how large the loan should be. 3. The Secretary's objective of paying out the money in installments, while fighting was going on, would be achieved. Regraded Unclassified 101 Division of Monetary Research L. This loan should secure the good-will toward the United States of the soldiers, ordinary people and the Government. This would be particularly true, if the amount paid out to the army meant that the effective purchasing power of the average soldier was increased. 5. mis proposal is in the direction of attempt- In to make the U.S. dollar currency into an international money. C. in so far as the soldiers and suppliers or allitary onás would accept 0.8. dollars, the nt a ainst inflation would be helped, since the need to issue more Chinese currency for these purposes would be eliminated. 7. Because the dollars would be hoarded by some people, the tendency to hoard goods would pro- bably be diminished. Not only because of the inflation, but also because Ohinese traders and merchants have had considerable experience with verious currencies, it would be more feasible in China than elsewhere to introduce B. !oreign currency Into the monetary system. C. It would be possible to meet these payments from wend-Lease, If this method is thou ht preferable to use of the Stabilization und or to En authorization from Con ress to lend to China. A number or the above advanta es could also be solleved time issuance of bonds, ayable, when due, in U.S. dollars. The use or U.S. currency to pay for rice to DE distributed DC the troops would also share in some of the above advan- 22 68, _I it proves to be true that the amount of yuan now cate to the troops is not large, and if it is doubtful that for proops would accept pay in U.S. currency, the proposal X buy rice and other supplies with U.S. currency may DE are easible than proposal II 1. Regraded Unclassified 102 Division of Monetary - 4 - Research V. Disadvantages of the proposal. 1. Chinese soldiers and ordinary people might be unwilling to accept United States' dollars, because all their purchases are made in yuan; because of the novelty of the currency; and because the denominations which could be eventually shipped, would be too large for their purposes. Accordingly, the government would have to provide yuan equivalent and there would be no diminution in the amount of Chinese dollars printed. 2. The United States' dollars which were issued would be hoarded and speculated in only by the wealthy. There would be thousands of black markets with rates different from the official one. 3. The Chinese people might interpret the issuance of the new currency to mean that the yuan were to be recalled, or abandoned. Therefore, the confidence in the Chinese currency might be still further undermined. The Japanese, along with the Chinese speculators, would want to obtain United States' dollars for the plenti- ful stocks of fapi which they held. Their throwing of these fapi on the market would further decrease the value of Chinese currency. 4. The difficulties of safe transport would be large. $10 million worth of $1. United States' notes weigh over ten and & half tons, or, just about what the same value of gold would weigh. $10 million worth of $5. notes weigh over two tons. Shipment of this amount of small notes by air would, therefore, be a considerable undertaking, at E. time when much precious cargo must be flown. The transport of this precious cargo over the Burma Road would require a good deal of armed protection. Both governments would use up a good deal of energy and adminis- trative ability on this problem of B. safe trans- port. (The transport difficulties could, of course, be greatly reduced if the United States' currency were used to purchase supplies, and not for the pay of soldiers.) Regraded Unclassified 103 Division of Monetary - 5 - Research 5. Payment of United States' dollars to the troops might increase corruption in the army. There might be, in addition to the Incentive to profiteer on the soldiers, a large number of spurious supply contracts. 0. Dissatisfaction of the soldiers with the rate of purchasing power of their pay might be deflected from the Chinese to the United States' Government. 7. Speculators, exchan e traders and sharpsters of all sorts, would prey upon the poor per- sons who receive the United States' dollars, and would deprive them of the benefits which the dollar payments are intended to secure. O. The Generalissimo and many other Chinese might regard this proposal as a metnod of making China dependent upon the United States through depriving her of a separate monetary system. Regraded Unclassified 104 Weight of Various Amounts of United States Currency Weight of Weight of Denomination $5,000,000 $10,000,000 $1 10,625 lbs. 21,250 lbs. 5 2,125 4,250 10 1,0622 2,125 20 531-2 1,0622 The above is for new currency as shipped by the Treasury to the Federal Reserve Banks. Notes are all shipped in pack- ages of 4,000. Each package weighs approximately 82 lbs. varying somewhat from package to package. The weight includes the paper wrapping each package and steel banding. The currency paper alone, unprinted, weights 8.0541 lbs. per 4,000 notes. Regraded Unclassified 105 Draft of Statement by President on Loan to China President Roosevelt amounced today the United States stood ready to assist China by financing her military unpenditures, including the pay of the Chinese soldiers. At the request of General Chiang Kai-Shek, he was asking the Secretary of the Treasury to open financial negotiations with the Government of China to this end. The President said that this step was an example of the spirit which animated the United Nations Declaration and of the firm intention of the pledged nations to cooperate in all ways possible to achieve their common objective. The President pointed out that the Chinese have been fighting for four and a half years; that they were continuing to fight, and that just the other day at Changsha, they had won a brilliant victory over the Japanese army. Not only were there millions of Chinese soldiers fight- ing the common enemy, but virtually the whole population was resisting the invader. The President said that these huge military operations called for immenso expenditures by the Government of China and the effort of meeting these huge expenditures had severely strained the financial and economic system of China. The President expressed complete agreement with the statement made by the Generalissimo in a note to the President that it was essential to the common war effort that the economy of China should be made as strong as possible. The President pledged that the United States Government would render every possible assistance to help feed and clothe the brave soldiers and people of China and do all possible to strengthen China's financial and monetary system. Regraded Unclassified 106 Proposed Statement by Secretary Morgenthau on Loan to China Secretary Morgenthau announced that at the President's requesty he was opening negotiations with the Chinese Government for additional finen- cial assistance. The Secretary said that the purpose of this assistance was to help China in meeting its enormous war expenditures and to keep its fighting soldiers paid and fed and clothed. Secretary Morgenthau said that even before December 7, this govern- ment had, through the Stabilization Fund and the Export-Import Bank, ren- dered important financial aid to China. The Secretary said that despite the most difficult circumstances under which the Chinese Government had had to operate, it had scrupulously lived up to the terms of all of its financial agreements. Secretary Morgenthau stated that the cost of the war to China was extremely large in relation to the financial resources of the country. Nevertheless, the Generalissimo, the Government, and the people had not healtated to throw everything that they possessed into the struggle. The Secretary said that he was sure that the attitude of the whole American people was stated by the President and that our people would want to help the Chinese people in the financing of this war. The Secretary said that he was particularly interested in exploring ways whereby the United States could help in paying and maintaining the Chinese armies. The Chinese financial problem, the Secretary stated, is a problem of paying far an army of millions of men. In the effort to meet this situation, the financial resources of the government and the people have been drained. Prices have risen and are rising very rapidly. The Regraded Unclassified - 2 - 107 internal financial and economic situation is serious. The Secretary said that he was convinced that it was essential to the Chinese war effort that China should be assisted in meeting these financial burdens and in maintaining an efficient economy. The Secretary announced that he was recalling Mr. A. M. Fox, the American member of the Chinese Stabilization Board, for advice and participation in the discussions concerning financial assistance to China. Regraded Unclassified 108 DRAFT TELEGRAM FROM SECRETARY MORGENTHAU TO FINANCE MINISTER KUNG In answer to your massage, dated January 9th, transmitted through Mr. Fox, I am happy to inform you that the President has asked me to begin negotiations with the Chinese Government relating to financial assistance. The President suggests that we explore all the possibilities whereby this Government could reduce the financial burdens on China of her war expendi- tures, including those of paying the brave Chinese soldiers. The President is making public this decision. I an aware of the financial difficulties you have had and recognize the force of your statements that your soldiers and people must be fed and clothed, that your financial and economic system must be strengthened, and that the United Nations must help each other to meet the economic trials of war. The people of the United States and their Government know that your people has fought this war long and well. We will gladly cooperate to help you to meet your economic problems. I shall welcome all proposals from you as to the ways by which the United States can help finance your military expenditures or strengthen your monetary and financial system. We feel that the political and military purpose of the loan you pro- posed would be best achieved through an arrangement by which the United States could help finance your current military expenditures. This idea, however, will require detailed consideration, and I shall be glad to receive your ideas on the subject. We especially need information as to Regraded Unclassified 109 - 2 - the different ways in which you make these military expenditures, including pay to the soldiers. I am hopeful that the negotiations can be carried forward rapidly. We have informed the British Government of this reply to your message. TREASURY DEPARTMENT 110 INTER OFFICE COMMUNICATION DATE January 12, 1942 TO Secretary Morgenthau FROM V. F. Coe Following your instructions, I called on Mr. Hornbeck and Mr. Currie and gave them the outline of the tentative proposal you had been canvassing with Mr. T. V. Soong, namely, that an arrangement be worked out whereby a certain sum of money be advanced monthly to China for pay of the soldiers and possibly for other military expenses, and that this money might actually be paid out to the soldiers in the form of U. S. currency. I also told them that you were inviting them to a conference in your office tomorrow morning at 9:15 a.m. Mr. Hornbeck sent his thanks for the information and for the invitation. He said that he would pass the infor- mation along to Secretary Hull and Mr. Berle and that he would be present tomorrow morning. (Mr. Hornbeck seemed to think that since the information concerned "operations", it should have been communicated to either Mr. Berle or Mr. Livesey, instead of himself. He said he would talk to you about this. In view of this, you may want to con- sider inviting Mr. Berle to your conference.) Mr. Currie thanked you for the information and said that he would be present in the morning. Regraded Unclassified di Your's diary prepared immediately following 111 nour's session with Generalissimo, January 12th, 1942 rut by saying that I wished I were as little concerned about -Gins's economic problems as about the possibility of a loan, DE minered with, "What are some of these problems?" Con- miscussion was had of deflation during which I pointed out 311 steam and power which could not possibly function if foolish Aertoomings and used the illustration of B. powerful boiler used 10 recommy nes exercised in saving coal - that, having started out as an maineer, I hated waste and inefficiency, and therefore steps must be TAXES tu keep these down. However, all expenditures are warranted woich increase an individual's and B nation's income and productive de pointed out that it seemed that the American and Brit- 180 take different views on these matters, to which I that there were two schools of thought, but that the more mj that deflation was unwise and that no economist interested IT. fature could possibly advise it to economize in improving : inductive fecilities, especially those which are already in C:R Generalissimo heartily agreed. 1014 le would like to have me point out to Secretary orden- 210 by MISONS for the loan: That the loan was not only a political Date which might require careful planning and intimate deteils, but WIS in nature B. war loan and as such it was difficult to give too great Insulla, for it is the essence of military strategy that an army had be well enough equipped and prepared to be able to meet the enemy's gerations and, therefore, be flexible enough to do so. THE tay points that Generalissimo wonted me to stress were: That America and China had to have and show mutual confi- lence in each other - China in America's sincerity and interest to give help and to do all those things necessary to win the war; America - that China is sincerely interest- ed in the successful termination of the war and to de oll those things that are necessary to accomplish that end with ny assistance that America would render. The Jeneralissimo was very anxious for me to make it clear to Decretary Morgenthau and the President the psychology of the people in China - that they have none through four oná half years of war and have become rather critical << the insistence of the British to demonstrate beyond the question of a doubt the necessity and the use of a loss and the British hesi tandy to give China as much of = loan as she requires in her deily military expenditures; test it is almost beginning to look to them that Great tritain does not want to help and it is for that reason that the Generalissimo has det ermined recently to seperate the loins, the american and the British, and now would very Even prefer to trest them seperately, He was immediately interested in the American loan and would take up the British loan later. The Generalissimo gave his assurance that he would make the best use of the funds if 8 loan were authorized and that American advisore would be closely consulted in the best use for such funis, also pointed out that it would help the soldiers front if they knew that a loan had been made lare e sough the financ 101 structure of China. He said he rould essure in this connection the loan would be use: wisely, Ve stressed Regraded Unclassified 112 2 the point that he was not just talking as the Generalissimo but as the voice of the people of China. I indicated to the Generalissimo that I was positive of the spirit and attitude of the leaders of the United States, even though I could not commit them, and that they would take 8 broad view as to the political necessity of a loan to China ; that if it were necessary to create a new spirit in America toward China, the task we were now undertaking would be impossible, but knowing the sympa thetic attitude existing in America, especially among administration leaders, our task was con- siderably simplified. The Generalissimo turned to me and said, "I suppose Lattimore told you that when the war broke out on December 8th we were on the threshhold of reducing our army from 5,300,000 to 2,800,000 as that was the only real way in which we could cut the budget and economize". Regraded Unclassified the Treasury February 18, 1942 BOX 113 utto ,,eimeyer's ctivities in China brief statement on the activities of Sir Otto Wiemeyer in importent pursuits may be briefly summerized as follows: for some time before be and merle Cochrane reached the newspapers carried many stories of the impending arrival of a Logomic Mission and of the conferences which it was to hold Subsequently all of the sessions but one were devoted to con- *t.c revision of the U. S. Freezing regulations with the develop- ratter beyond those suggestions which had already been common- sington. These so-called sconomic discussions caused consider- soung the Chinese because even before proceeding to Chungking held in the British Colony of Hongkong without any Chinese ovement. soon after reaching Chungking, sir Otto took an in the budget deliberations which were then going on, and set in defisitionary movement. This had a bad effect and tended to retard of essentials and various new industrial developments. «nen the interest in a foreign loan became apperent in hungking, alemeyer with the support of the British Amba ssador took sn active (roposing a British Loan. They offered to the inister of Finance Ivan of 10 million pounds, suggesting that cuotoms receipts be pledged as Men they could not make headway with Jr. Kung they approached -derican Ambassador and suggested that since the loan WBS in the nature political loan that he should join them in going directly to the Gener- This Ambessador Jauss refused to do, sir Otto's attitude with the Requestissimo likewise was such as to antagonize and raise resentment against the Colonial attitude" which was being exhibited. is 7uild up wir Otto in Chungking, the British community headed by the carried on A campaign of villification against the American Member the stabilization Board. The latter took no steps to counteract this for yould If the alligations were true, denials would do no good, and, if untrue, time soon disprove them. Regraded Unclassified TREASURY DEPARTMENT 114 INTER OFFICE COMMUNICATION DATE January 12, 1942 TO Secretary Morgenthau FROM V. F. Coe Subject: Telegram (No. 30, January 9) from Fox on China loan. The telegram indicates that for psychological and political reasons: (1) There should be an early announcement of the loan. (2) The loan should be "large." (3) Although formal controls or conditions are desir- able in order to make sure that the loan is used to strengthen China, it may be wise to postpone this matter until later in the negotiations. Mr. Fox asks whether if it is not feasible to tie the Stabilization Board in with the loan, it would be possible to provide some American "representation" in order to assure effective use of the money. From the discussions with Messra. Berle and Currie, it would seem that there is rough agreement with Mr. Fox on the above points. Regraded Unclassified 115 Y of TITEGRAM RECEIVED 2014 American Embassy, Chungking, China ATN: January 8, 19-2, 3 D.E. 30 The following is telegram TF-14 from Fox for the Secretary of the Treasury. QUOTE. I submit the follow- ing comment rolating to telegram TF-13. During the past few days what had been an attitude of despair here has changed to an attitude of firm insistence on financial aid, I doubt the possibility of imposing any formal restrictions now, although to assure that China and the Chinese people get the maximum benefit, zome formof control would be highly desirable. It is my belief that if E. large loan could be announced at an early date, this would produce desired psychological effect and a letter opportunity to obtain some informal safeguards in case it proves impossible to establish any controls. In case it is not feasible to tie the Stabilization Board in with the loan, would it be possible to provide American representation not for the nuroose of protecting the United States but with a view to makin certain the the funds would be used in the way which would most effectively strengthen China's economic and financial structure? LAUSS Regraded Unclassified 116 January 12, 1942 4:01 p.m. Operator: Go ahead. HMJr: Hello. Rockefeller: Neleon Hello, Mr. Morgenthau. HMJr: Who is this? R: Nelson Rockefeller. HWJr: Hello. R: How are you, sir? HMJr: Nelson, this 18 - I'm okay. In anewer to your letter - I've been trying to answer it, where you - I think somebody wrote it and you signed it - where you want to know everything that we're doing with the Stabilization Fund in South America. R. Well, that's putting it pretty broadly: but that's what we went to know - the agreements that you had already made, the terms of those agreements HMJr: Well, a little knowledge is a dangerous thing. R: Well, I agree with you on that, and I hesitated to HMJr: If you just want to know what the agreements are, we'll let you know what the agreements are. R: Yeeh. HMJr: But if you want to know the operations, that's something else. If you want a copy of the agreements, we'll give you those. B: Oh, you will? Well, now that would be very much appreciated; and what I would like would be to have one person here who could have 8 relationship with somebody - Harry or somebody Regraded Unclassified 117 - 2 - else - of such a nature that we can explain the problems we have in other areas 80 that we can talk frankly to that person and say, "Now, if we did this, how would that affect your activities." Because we don't want to be thinking in economic warfare or in some other areas of plans that might run at cross purposes with what you're doing. HMJr: Well, Harry's away. Frank Coe's here. R: Frank Crowe. HMJr: Coe. R: Coe. HMJr: C-o-e. R: of course, I know him, you bet. HMJr: So I'll tell him to furnish your people with copies of any agreements that we've made - or a summary of them, you see? R: Right. HMJr: A summary of what we've done in South America. And then if you people think you're going to do something to hurt the currency in those countries, why let us know; or, if you think we ought to help them more, let us know. R: All right. Well, that'll - we'd like to have it 80 we could talk frankly. HMJr: Who will your man be? R: Well, I'd like to have Mr. Nitze. HMJr: Nitze? R: Paul Nitze. HMJr: Yeah. Paul. R: Yeah. He came down first with Jim Forrestal, a partner of Dillon, Reed..... Regraded Unclassified - 3 - 118 HMJr: Do you know whether he's a Nazi or not? R: Well, I can guarantee you on that. HMJr: You sure? R: Yeah. HMJr: You'd better make sure. R: (Laughs) HMJr: I've heard about him. R: Okay. HMJr: But - well, I want to ask more about him. R: Fine. HMJr: As I'm talking here, somebody's raised his eye- browe in the room. R: Swell. Well, I'd like to - well, as a matter of fact I'd like to talk to you about the whole thing sometime yourself. HMJr: Okay. R: If I might, because I'd like to tell you a little about what we're doing. HMJr: Well, why don't you do that? R: May I do that? HMJr: Sure. R: Well, I want to give your - say, how about lunch on Friday of this week? HMJr: Well, I hope to be away. I'd love to do it, but I hope to get away for two or three days. R: You do? Well, then I'm going to call you, Mr. Secretary, for a day next week. HMJr: Fine. Regraded Unclassified 119 - 4 - R: And go over a little bit what we've - some of the areas we're working in with Milo Perkins now on that Joint Economic Warfare Board. HMJr: Well, in the meantime, if you want anything, Frank Coe won't give you anything more than you're entitled to. R: Okay. HMJr: All right. R: Thanks very much, Mr. Secretary. HMJr: Thank you. R: Good-bye. 120 January 12, 1942 4:18 p.m. Allan Sproul: Hello, Mr. Secretary. HMJr: Allan, I've got to see the press in a minute or two, and they'll ask me how this refunding has gone and I wondered what you thought would be a fair statement. S: Well, I should say that there's no question about the refunding going. HMJr: Yes. S: However, I don't think you can say that the reception has been outstanding or that the market has reacted enthusiastically to it. HMJr: No. Can I say that it's been well received? Would that be an overstatement? S: I think you can say it was well received, and that the market has acted well and that there's no question about its going. HMJr: Supposing I say, "It's been well received, and I'm confident of its success." S: I think that's a statement you can make. HMJr: Is that all right? S: Yeah. HMJr: Do you think it struck a bottom at par seventeen? S: Well, you can't say that yet. The selling was still drifting in along late in the afternoon, and you can't be sure that it's all out of the way, and as the day progressed there wasn't very strong buying. HMJr: Yeah. Well, we'll see tomorrow. They may go better. S: Yeah. But you couldn't say that yet. You'll have to see it again tomorrow. Regraded Unclassified - 2 - - 121 HMJr: Okay. Thank you very much. 8: But the day - well, it wasn't a big day at any time, either in the new bond or in the rest of the market, 80 that what's happened hasn't been on a big scale. HMJr: All right. S: All right. HMJr: Thank you. 122 January 12, 1942 4:45 p.m. General Watson: E. M. W. HMJr: H. M., Jr. W: They called up from the Capitol - some Congressman Wolcott - and said he'd been told by Steagall that there's going to be a Banking and Currency meeting with the President tomorrow. Do you know anything about it? HMJr: Never heard of it. W: I never have either. HMJr: No. W: Well, then we'll Just forget that. HMJr: Sounds like a phony to me. W: Sounds like somebody's trying to pull one. We'll forget that. HMJr: Some of this fifth column stuff. W: All right. All right. HMJr: Good-bye. W: Good-bye. TO: 123 THE SECRETARY: You will note that the avernge rate for bills dropped The for the week of January 7 to .119% for the week of JANUARY 2% This 18 due to the last that Chicago is buying time MILLA for April tax purposes. $142m 7 2150 went to chicago DWB 12, 1942 Office of the Under Secretary Regraded Unclassified 124 TREASURY BILLS Jan. 14 Jan. 7 Dec. 31 Dec. 24 Amount offered $ 150 M $150 M $ 150 M $ 150 M 318g tendered 385 352 317 353 0 4/ 0 0 2 o 1/ Low rate Sign rate .146% -335% .346% .320% Average rate 119 .304 .310 .295 Amount in New York $ 6 H 5126 M $ 117 M $ 99 M Amount in Chicago 143 13 9 32 Amount in San Prancisco 0 1 1 4 : Amount in belance of country 1 10 23 15 1/ $220,000 bid at 100.000, next low rate .149% 2/ 8 80,000 bid at 100.000 and slightly above, next low rate .185% 3/ 3540,000 bid at 100.000 end slightly under, next low rate 2439 II 32,160,000 bid at 100.000; $300.000 bid at 100.002. January I, 1541 Regraded Unclassified 125 JAN 12 1942 Dear Mr. Stam: This 1 m in reply to your letter of January 6. 1942, requesting that there be sent to you all memorands prepared by the Income Tax Unit and the Chief Counsel's Office of the Bureau of Internal Revenue, relating to the improvement of the oper- ation of the income tax laws, the closing of income to: loopholes, and the removal of tax inequities. I believe you will agree that it has been our practice, once our policies with respect to tax legislation have been formulated, to confer with you for the purpose of exchanging information and views even before ve have been called upon to make our recommendations to the Committees of Congress. to intend to continue this policy in the future no that information of the nature you request will thus became available to you in this manner. I feel that this 18 the only method which 70 can follow in this matter. A moment's reflection Regraded Unclassified 126 - 2 - will indicate the obvious impossibility of comply- ing with so sweeping a request as one for all semoranda of the nature mentioned. Requests for specific information can, of course be handled within the framework of the practice mentioned above which we have observed in the past. Further, it seems to me from the viewpoint both of the proper functioning of the Treasury Department and of a broader governmental policy respecting relations between the Executive Departments and the Congress, that it would be undesirable for memoranda of the nature you request to be sent to the Congress in advance of a definite formulation within the Treasury Department of its policies respecting tax legis- lation. For this reason, I believe thatan continu- ance of our prior policy in this regard is the most feasible method of imparting information of the type in question. with respect to possible requests by you for statistical information, ve shall, of course, make Regraded Unclassified 127 - 3 . such information immediately available to you to the extent of our facilities. I believe you will agree with me that when specific requests by you for material of this nature have been sent to us, we have always been willing to comply with them. Sincerely yours, (Stgned) n. Worgenthau. Jr. Secretary of the Treasury. Mr. Colin P. Stam, Chief of Staff, Joint Committee on Internal Revenue Taxation, House Office Building, Tashington, D. C. By Measenger Dinon 11:50 Fale to Thompson SSS;hdr 1-9-42 Regraded Unclassified COLIN e, - If - 4.0. L. ALMOS é WATER have. Der - - F PALLETTE d with Congress of the United States JOINT COMMITTEE ON INTERNAL REVENUE TAXATION Mashington January 6, 1942. Manable Henry Morgenthau, Jr., Secretary of the Treasury, Asshington, D. C. Dear Mr. Secretary: At the request of the Chairman, I am submitting herewith a copy of a letter dated November 27, 1941, addressed to the Commissioner of In- ternal Revenue, requesting memoranda prepared by the Income Tax Unit in- cluding the Chief Counsel's Office, relating to improving the operation of the income tax laws, closing income tax loopholes and removing inequit- ies. This information was requested pursuant to section 5011 of the In- ternal Revenue Code which gives the Joint Committee on Internal Revenue Taxation authority to investigate the operation and effects of the Federal system of internal revenue taxes, the administration of such taxes by the Bureau of Internal Revenue or any executive department, establishment, or agency charged with their administration and to investigate measures and methods for the simplification of such taxes, particularly the income tax. I understand that this material has been submitted to Mr. Sullivan but has not, as yet, been transmitted to the Staff. Recently I submitted to Mr. Sullivan a copy of the Bureau's suggestions which was furnished to us in 1934, pursuant to section 1203 of the Revenue Act of 1926 (now section 5011 of the Internal Revenue Code). This was submitted as a sample to show the type of material we have been getting in the past from the Bureau and to emphasize the fact that our re- guest of November 27, 1941, was in accordance with the practice which has been followed for many years. A copy of this letter is also enclosed here- with. I hope that you may be able to find a satisfactory solution of this problem which has been a troublesome one in connection with the last Licree revenue acts. Respectfully yours, date. IF3-1c Colin Chief of 2.Stam Staff. Regraded Unclassified C o P Y November 27, 1941. Honorable Guy T. Helvering, Commissioner of Internal Revenue, Washington, D. C. Dear Mr. Commissioner: By virtue of the authority conferred upon me by the Joint Committee on Internal Revenue Taxation pursuant to sections 55 and 5011 of the Internal Revenue Code, I hereby request to be furnished forthwith any memoranda pre- pared by the Income Tax Unit, including the Chief Counsel's Office, relating to improving the operation of the income tax laws, closing income tax loopholes and removing inequit- ies. Respectfully yours, (Signed) Colin F. Stam, Chief of Staff. CFS-ic Regraded Unclassified C 0 P Y December 26, 1941. Honorable John L. Sullivan, Assistant Secretary of the Treasury, Treasury Department, Washington, D. C. Dear Mr. Sullivan: I will appreciate it if you will return to me the copy of the Bureau suggestions which was furnished to us in 1934 pursuant to section 1203 of the Revenue Act of 1926 (now section 5011 of the Internal Revenue Code). I merely submitted this to you as a sample to show the type of material we have been getting in the past from the Bureau and to em- phasize the fact that my request to the Commissioner was in accordance with established practice. WASSAGER Spel Sincerely yours, cvn V1 CF3-1c (Signed) Colin F. Stam, Chief of Staf:. Regraded Unclassified 131 January 12, 1942. Becretary Morgenthau George Buffington Recently I have been seked by such organiza- tione AE the New York Stock Exchange, Investment Bankers Association, Outdoor Advertising Agencies Association, and othere where their services and/or facilities would be most useful in the war program. Usually we are able in the Treasury to find immediate use for these facilities and/or services. The thought has occurred to me that we may at some time accept and une fact ities and/or services which might be uped to better advantage by Home other department such as the Var Department, Havy Department, or D. E. M. It might be advantageous to consider appoint- ing A coordinator through whom these questions could be cleared. Much time will probably be saved by having one well informed person direct people to the Government Department to which the facility and/or service offered would be most effective. If you are interested I should like to discuss the matter further. 35:amo 1/12/42 Regraded Unclassified STANDARD FORM No. 14A TREASURY DEPARTMENT 132 New BY THE PRESIDENT MARCH No 1926 WASHINGTON TELEGRAM CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR Official OFFICIAL BUSINESS-GOVERNMENT RATES (The apprepriation from which payable must be stated on above line) - PRINTIME - 2-14117 Mary Pickford January 12, 1942 Pickfair Reverly Hills California Deeply appreciate your offer. May I miggest that you commissione your ideas to Fred Bestaon Chairmen of our excellent motion pleture condittee for Defense Savings care of Motion Picture Producers Hollywood. You can help W most usefully by cooperating with this committee. We all rember your help in last war and want to mlist you in this one Henry Morgenthau, Jr. Secretary of the Treasury FK/hkb Regraded Unclassified A S U 133 R Y T E L E G wsat 55 IT 19 R A TDS BEVERLYHILLS CALIF JAN 8 P HON HENRY MORGANTHAU H SECRETARY OF TREASURY TREAS DEPT T R 1 HAVE A PLAN I BELIEVE COULD BE OF HELP TO OUR NATION I E A OVED SERVING MY COUNTRY IN THE LAST WAR AND FEEL I MUST S U AGAIN BUT BEFORE PROCEEDING FURTHER WOULD APPRECIATE THE R BENEFIT OF YOUR VIEWPOINT WOULD YOU KINDLY WIRE ME Y PICKFAIR BEVERLYHILLS WHEN I MAY CALL YOU LONG DISTANCE T E PHONE. MOST CORDIALLY L E MARY PICKFORD. G R 855AM JAN 9. A Regraded Unclassified // 134 THANKEY III 1942 JAN 12 AM 7 43 15 WAATT DH HOLLYWOOD CALIF JAN 10 K OFC G T H R A T Y R. L R U A a E P E S E E R NT 8 HONORABLE HENRY MORGENTHAU SEC OF TREASURY SGD MARY PICKFORD CFM DLY ENDEAVOR SECURE ANS Y, A U MCLEOD. Regraded Unclassified 135 Times herald JAN 12 1943 reservations on the 8:30 American Soldier Hitches- Weitner from New York last night, but when they arrived - La Guardia Field only one seat abourd the plane remained. Plane Ride With Telling McCarl to take the seat, Hughes, a husky, 200-pound for- mer policeman, wandered about the airdrome investigating the pcs- Morgenthau aibilities of catching a ride. He BOW Lieut, W. E Sinton saming up the Coast Guard plane and asked him where he was bound. Private Gets Lift When Sinton said he was about to take Secretary Morgenthau En From N. Y. Here Washington, Hughes replied "Pine how about A lift? I've Without 'Thumbing' gotta get back to camp." Morgenthau Helpful Without benefit of thumb, A young Army private hitchhiked & Morgenthau arrived at his June- ture, and Lieutenant Sinton put ride from New York to Washing- the soldier's case to the Secretary, ton last night aboard the Const When Morgenthau heard all the Guard plane of Secretary of the eircumstances he readily agreed to Treasury Henry Morgenthau, give Private Hughes a hitch. Not B whit abashed by distin- The soldier was unable to give the Secretary his views an high guished company, Private James finance and taxation matters, E. Hugher 28, climbed out with whatever they might be because the Secretary when the plane ar- he sat with Pilot Sinton on the rived At the National Airport at flight down from New York. When they left. the plane here, midnight. and prepared to catch however, Hughes thanked his ben- A train for the next stage or his efactor and said he thought Mor- journey from his home in Roches- genthau was "A swell guy." The ter. N. Y., to Camp Biewart, ON. private also graciously consented to pose for newspaper photo Explains Predicament graphs with the Secretary, with the comment While the Secretary aloos be "Sure, this is a demodracy, amping, Hughes explained to TO ain't a" pollers that he and his buddy Pri- vale Joseph McCarl. 27. had marin Regraded Unclassified BOARD OF ECONOMIC WARFARE 136 ECONOMIC DEFENSE BOARD WASHINGTON, D.C. M In reply refer to: OPR-CHES JAN 12 1942 The Honorable The Secretary of Treasury Dear Mr. Secretary: The Vice President has called my attention to and asked me to thank you for the list of "MATERIALS RELD BY FOREIGN NATIONALS IN THE UNITED STATES, which you sent him. The list is invaluable to the people in our Requisitioning Division and, accordingly, I an sending it on to them with instructions that they contact, as you suggest, % John Pehle, of your Foreign Funds Control Division, for my additional information that may be needed in order that these materials may be made avvilable for defense uses. Sincerely your, Milo Perkins Executive Director Regraded Unclassified CHOLOGICAL CORPORATION 137 A STUDY OF PEOPLE'S MOTIVES FOR BUYING DEFENSE BONDS AND STAMPS Based upon 790 interviews, 570 in 12 urban centers, 220 in 11 rural areas, widely scattered throughout the coun- try. This study was made at the request of Mr. H. Paul Warwick of Warwick and Legler by the Psychological Corporation under the direction of Henry C. Link and associates. Assignment received January 5, 1942. Report submitted January 12, 1942. The Psychological Corporation 522 Fifth Avenue New York, N. Y. Regraded Unclassified The Psychological Corporation A name of prychologies of rempired acimitific monding which countries - - products, advertising and tales appeals, applio vehall to the mission, training and productivity of sales, office, and (werry personal; not as countel - the prychological upon sales, personal and public relations policies Mam Office INCORPORATED TH 1921 522 FIFTH AVE, New YORK, N.Y Telephone MURANT Has 2-1145 Mechanism of This Study - NO are AE This study, like other studies of the Psychological 5 Corporation, was conducted with the cooperation of psycholo- true They firm. M. gists located at various colleges and universities throughout the country. These osychologists, acting BE correspondents, mo have under their direction trained interviewers, consisting PIDCTORY of graduate and undergraduate students in psychology. Assign- exam ments for field work are made to these psychologists who then Mixa select the interviewers for the particular type of study, give them the special instructions necessary, make the exact Limi Main assignments in regard to streets and localities in which each Line interviewer is to work, and check up on each interviewer's NOME returns, These psychologists are professors and assistant pro- fessors and In some cases instructors, and therefore men not - Comptete only of unusual professional standing but men specially trained in the scientific measurement of people's minos and motives. One hundred twenty-five usychologists located in every 1 state of the union and with a standing force of well over six Minimine Days hundred trained interviewers are available for studies under the direction of this office. The importance of the prestige of this method of in- vestigation, aside from its scientific thoroughness and F accuracy, is illustrated by an incident that occurred in connection with the present study. In Denver, Colorado, one agitated or suspicious watern called the police and had the interviewer arrestvi. The local psychologist identified the interviewer to the police who released his and permitted him to complete his Inter- viewing. Henry C. Link Director of Social and Market Research Regraded Unclassified CHOLOGICAL CORPORATION 139 TABLE OF CONTENTS Pages Purpose and Procedure 1-8 Questionnaires 4-6 Distribution of Interviews in Urban and Rural Areas 7 Bonds and Stamps Already Bought 8-9 Where Defense Bond Advertising Was Seen or Heard 10 Summary of Principal Findings 11 Why People Should Buy Defense Bonds and Stamps 12-14 Quotations from the Questionnaires 15-22 What People Think Should be Done to Increase the Sale of Defense Bonds 23-24 Regraded Unclassified A QUALITATIVE STUDY The purpose of this study was to develop a method for discovering people's reasons for buying Defense Bonde and Stamps. The reasons we wanted to discover were not 20 much those which had prompted people to surchase these bonds and stiding In the pest as it was to discover the reasons which would most effectively motivate such purchases in the future. Above all, it WES the purpose to discover those reasons or motives in terms of people's own words and manner of ex- pression. As Mr. Warwick pointed out, having people's reasons in meir own words would provide excellent material for educa- tionel and promotional dopy. Moreover, it would provide a much better basis upon which to evaluate people's reasons and sotives than would be obtainable from having them check a list of suggested reasons, 88 is often done in studies of this kind. Although some factual information was also obtained In this study, everything was subordinated to the main purpose outlined above. PROCEDURE To accomplish the above purpose, informal or "depth" interviews rather than formal interviews were decided upon. Ten interviewers especially trained in nepth interviewing were ureu for & series of four test interviews all conducted in the New York Metropolitan area, totaling 205 interviews. The last 150 of these interviews were tabulated in a preliminary report submitted December 31, 1941, end are incorporated in the tables of this report. These series of test Interviews furnished an adequate cireck upon the method used und served to illustrate the type of results which might be expected. On the basis of this preliminary or test-tube approach, the study was extended to other representative parts of the country to include 440 in- terviews made in 11 urban centere and 220 interviews mede in IL rural areas. These are shown in detail in the teclo on Regraded Unclassified SYCHOLOGICAL CORPORATION 141 page 7. The rural interviews in each area were equally divided between people in small towns and villages of 2,500 population or under and people living on farms. This sample which totals 790 interviews, including New York City, is not intended to be 8. perfect cross-section of the population. Its primary purpose is to determine the extent of uniformity of the ideas of people about Defense Bonds. If this study shows uniform opinions and beliefs, then the probability that a. large representative cross-section would show any large differences is quite remote. Sample Questionnaires and Interviews. Following are several interviews exactly as made out in the field and illus- trating the type of data on which this report is based. Number of Interviewers. A total of 54 interviewers par- ticipated in this study, averaging 15 interviews each. This number of interviewers is important in 8. sample of 790 inter- views because personal bias on the part of any one interviewer has no significant influence upon the final result. People Interviewed. It was agreed in advance that our interviews should be confined to the middle income groups, those representing the large mass market. The lowest income groups were not interviewed in this study. Tabulation of Results. The tables presented in this report are based on 730 interviews in 11 urban centers and 10 rural areas. These interviews have been broken down by a grouping of the 11 urban centers into Eastern, Mid-Western, Southern, and Western cities. The purpose of this breakdown is to show the extent to which the results are uniform. Several tabulations have been made to see whether or not any difference exists between responses of men and women. No differences have been found, ao tables have not been presented on sex differences in order to speed up the preparation of this report. No differences were found between people in upper and lower middle-class income groups. Los Angeles interviews, representing an important west coast urban center, were not received until Monday morning, January 12. Since we were asked to complete this Regraded Unclassified TCHOLOGICAL CORPORATION 142 report in the shortest possible time, these 40 interviews could not be included in the tables prepared and typed on Saturday, January 10. A note on these interviews appears on page 11. Twenty rural interviews made in the vicinity of Atlanta, Georgia, have not been included in the tables because they also were received on Monday morning. These were typical of the other rural areas. Interviewing Conditions. Below zero temperatures were experienced by our interviewers in several places. This was not ideal for interviewing since it tended to reduce the responses obtained. Also people in rural areas were less responsive than the people in urban centers. However, people in the two southern cities were very responsive as will be seen on the table on page 14. While they had more to say the principal difference is found in more frequent mention of those reasons which occur with low frequency in other areas. In spite of these difficulties the interviewing in the field proceeded with good cooperation generally and people responded willingly to the questions asked. Regraded Unclassified 254(6) 1/5/42 143 sking study of what people know or think about U.S. Defense Bonds and per example: 3.M you seen or heard any advertising about these bonds? Yes No mealth (If yes) Mare? 1) newspaper 2) Padio - at program the Fillwords (5) Placards in the post office 1 (in too advertising say people should buy bonds and stemps? Ja help democracy for the rest of the I/C defense of the am cas, Unch Sam dellare + dimes parter Same vast - wink 1s the best review why people should buy these bonds or stamps? she nation has le raise the amount -/ ming e it is biller for IN 2 give ni buy hands I ag is just 10% lends they ment just led Jan to leter in when can which reasons are there way people should buy these bonds and stanps? safe for patients / way who for 6% the would this and there is cont I be good 4 have after the orts aline I/C ement do to cell note nil these bonds and stamps? (Got specific pain b them in the stores without having 11 whit cheer wait drive Souls (OVG) 4 Regraded Unclassified 254(6) 1/5/4: (P) 144 254(6) 1/5/42 Be are making u study of went poople know OF think nbout U.S. Defense Bonds and Starps, for example: L H-18 you seen or heard my advertising shout these tonda? Tue ato 7. Have you bodght any U.S. Defense Bonds? Yes No ; Stomps? You No L (If you) More! 1) Radio <) Paper (If "stampa") Are you buying the stamps regularly or just once Ln a while 3) B. (If fronds or etampa mought) Heye you had Corp difficulties in trying to buy boads 5. E.g. did the advertising auy people should by bonds and stamps? 7101 defense or stanpa? Yes No (If yes) Nost FOTO they? ) had to atem live a very lington to pl the bank. TO keep our soldiers performing all the duties, help the President They ask eveny to help & Diesident the 900 D work he tea Q we or sending MAY boys to fight, we have is sock them up. 4. Anot de 22M think 10 the beet FRANCO any people about buy themb bunda or elasps? 9, Comments of any (suote) as government nee do the money & all it can get. Every little bit can help to prepare all the ammunition + to puppose the tring and navy for their work + try to serve sur country just as fast as theyean. &, Rust other good re-mons are there a (mojdc by these bonds and stamps? so our country can be free and have sur Therty 0 us prese dent is WAs desput. will (lay F ABC 42 3 Group: B 0 in Randy later on 100 children's education Form Prosperous liverage of we can spore + the lices to let it stay there Poot ST. & lie. (or 180/ 34% that CITY ala U long as we came Date Jan 7. 1942 Interviewor D.E.L. . That aboutd the in till oil HOPE <2 the and stamps? (Got opecific toode) no ube all concerns employees 4 any each + everyone Yr give something M defined. JL 74/- behind the mills & all like that so that Theys will INC caving in seceives +il the housewife can 421 her things more acasonable, she can help max. (INCR) Regraded Unclassified 254(n) 1/5/45 (2) 254(0) 1/5/4 (2) 1453 7. thise you bought my U.E. Defenee Bonda? You do Stamps? You Ze any sking - study of wint people know or think above U.S. Defense Bonde und No for (If "stumpt") are you ruying the otampo regularly où just once AD e while 1. KN you seen of heard ay divertising about these bends? Yes No 8. (If bonds or strept tought) Have you till any diffirities in trying to buy fond, -. (ST YES) 1) Letters 2) os stamps? Yes lo (If 500) Knot they? ti like them everywhere. E. - (10 the advertising say people should buy bonds and stange? In help the country 3. Commite of may Lindi The man leaves somech money for de NO 2014 thank in the lost reven way guople should buy then Bands of stamps? I inc in a sailrond office] and well This money has got to a bond when these my accumuleah. term from somewher if you 1/A Chem to Maga stipulate the ant they the said shed heart the government was held our 4pay were fassed around the User d know it had to some stened to Pres. R result A speed from somewhere mg the eugar millo forer prices. the % very pious for her cittle grandion to his nichels dor stamper and he said N i, lines stoer god reasons ar there any puople should Eugh strust bonds má stampst Rex F Am 50 Group: b (Cunto) Helps people to take can C TOME was Your the money and save ST. & (10) (or have) 6909 an E TV House Date Jan7 Cardlyn Brow -nould do be soll yord % the board of Manps? (Get. operatie Could compel shire people & Buy zhebn simitimes super will do more for children waly one way they'd get it at way H they don X getyour this way it better than mg too compulary Regraded Unclassified 254(a) 1/6/41 CORPORATION 146 DISTRIBUTION OF THE 790 INTERVIEWS 7. Have you bought any U.S. Defense Bonds? Yes No Stumps? Yes No BY City: Urban Rural (Small Towns and Zura breas) (If "stampe") Are you buying the stamps regularly or just once in a while East Syracuse, N. Y. 40 Hanover, N. H. (Enfield, Etns, 8. (If bonda or stamps bought) Have you had any difficulties in trying to buy has Philadelphia, Pa. 40 Lebanon) gO or stamps? Yes Fittaburgh, Pa, 40 State College, Pa. (300lsburg, llo (If yea) What were they? Rew York, N. 1. 150 Pine Grove Milla) 20 Ithaca, N. I. (Drydan) 20 Mid-West St. Louis, Mo. 40 Springfield, Ohio (Ced.rville, Minnespolis, Minn. 40 Clifton) 20 Desiss, Neb. 40 Urbana, Ill. (Philo, St. Joseph) 20 Den Moines, Iowa 40 Columbia, Mo. (Ashland) 20 9. Comments of Any kindt Ames, Iown (Nevada, Colo) 20 The are a lot of people the Wichita, Kuness (Kechi) g South Birmingham, Ala, 40 Jonesboro, Ark. (Nettleton) 20 help out and don t same, this way they exp Bouston, Texas 40 Davidson, N. C, (Cornalius, Mecklenberg) 10 *Atlanta, Ga. (Theker, Decatur) 20 hibited the expenses of running a farm of it This lady seemed to the West Denver, Colo. 40 *Los Angeles, Cal. 40 Total 570 220 Stamps them from buying Bondel By Economic Group: # Urban Aex F Age, 35 Upper middle class 270 Louncide Group: B C Lower middle class 500 Fuen Prospersons Average Poor ST. & 10. (or RFDW) R.F.DI Nural Date 1-7-42 CITY Lebanon 1213 In smill town and farm uress people were interviewed in the Large Intervi MOIT Edw. Sh middle income groups typical of the areas in which the Inter- viewing was conducted. By Sex: Han Van 898 Women 397 - There were received on Monday, Junuary 12, 40 urban interviews from Los Angeles, Cal,, and 20 rural interviews from Atlanta, Ga. Ao noted pre- viously, these were received too late to be included in this report and the following tables, therefore, do not include the results of these two areas. Regraded Unclassified 147 SUMMARY OF ACTUAL BEHAVIOR IN TERMS OF BONDS AND STAMPS ALREADY BOUGHT This study is not concerned with discovering quanti- Lative facts about people's past purchases of bonds and stamps, where they had bought them, what amounts they had bought, what difficulties they had had buying them, etc., etc. Nowever, B. minimum amount of information on these points was sonsidered desirable and & few questions were retained S.O- ordingly. As a result we have the following facts based on the waswers to Q.7: Purchases Urban Rural Total X w VR Bought bonds only 17 8 15 Bought bonds and stamps 28 4 18 Bought stamps only 26 16 23 Neither purchased 54 72 44 Total 100 100 100 All these interviews were made after Christmas when the num- ber of people making such purchases had increased considerably ES compared with the number before Christmas or while we were making our first test interviews. However, it is likely and quite possible that there Ls some inflation in these figures Лце to people's growing realization that they ought to buy sonda and stamps even if they have not done so thus far. The people interviewed in this study do not include the lowest 20 per cent by incomes, nor the top 5 per cent. or the 56 per cent who had made purchases, 88 per cent claimed to have experienced no difficulty in making their purchases. of the 41 per cent who had bought stamps, 60 per cent male they and planned to buy such stamps regularly, and 40 part cent expected to buy stamps only occasionally. (Based on Wiswers to Question B.) Regraded Unclassified PSYCHOLOGICAL CORPORATION 148 DIFFICULTIES IN BUYING BONDS 0,8 (If bonds or stamps bought) Have you had any difficulties in trying to buy bonds or stamps? Yes No (If Yes) What were they? Of the people who reported difficulties in buying bonds, the principal problem was shortage of bonds or stamps. The difficulties reported were: No. of People Supply of Bonds or Stamps had run out 41 Banks don't take books for bonds, only cash 1 Clerks seem annoyed when you ask for them 1 Working hours are inconvenient for buying at most places 2 Didn't remember difficulty 4 Total Answers 49 Regraded Unclassified MYCHOLOGICAL CORPORATION 149 WHERE DEFENSE BOND ADVERTISING WAS SEEN OR HEARD ded Have you seen or heard any advertising about these bonds? Yes No Q.2 (If Yes) Where? Based on the answers of 780 men and women. The table below shows these results by a. broad geographic grouping of the urban centers to show the uniformity in these results. Percentages are based upon the number of people interviewed as shown in the last line of the table. All the 730 people interviewed said they had seen or heard some advertising of bonds or stamps. These 730 people recalled a. total of 2019 places or media in which they had observed this ad- vertising. Mid Total Grand East West South West Urban Rural Total 32 % or x % A % Radio 86 92 94 95 90 84 88 Newspapers 64 79 68 80 70 64 69 Post Office 7 16 19 5 11 29 16 Magazines 14 18 24 25 17 11 15 Billboards 18 16 29 15 19 8 14 Banks 15 14 20 5 15 6 12 Stores 10 12 11 28 12 7 11 Posters 14 6 10 10 11 4 9 Car Cards 11 9 6 5 9 1 7 Movies & Theatres 7 7 24 15 9 1 7 Department Stores 1 1 11 2 2 Miscellaneous* 22 29 34 25 26 26 26 Total Answers 2019 Total Inter- views 730 * Included in miscellansous are such places as: schools, factories, clubs, churches, newsatands, offices, mail, cartoons, railroad stations, etc. Regraded Unclassified THE PSYCHOLOGICAL CORPORATION 150 SUMMARY OF PRINCIPAL FINDINGS The table on the opposite page gives an abstract of the principal findings in regard to people's reasons for buying Defense Bonds and Stamps. The pages following give in consider- able detail actual quotations from the interviews in respect to Questions 4 and 5, that 18, people's own reasons for buying these bonds and stamps in the future. The striking difference between the reasons which have been given to people through promotion and the reasons they give themselves 18, of course, obvious. The most obvious fact seems to be this: People are thinking of the war and the purchase of bonds and stamps largely in personal terms. No might almost say that they are thinking in materialistic rather than in idealistic or altruistic terms. While it does not show up as a statistical result, many of the details of this study convince us that the term "Defense Bonds end Stamps" is very firaly established in people's minds. All the people interviewed had heard about them, and & very definite mental category has been established. The strength of such a. mental category or habit is a very important factor in considering any change in the name of these bonds and stamps. Though today such a term as "Victory Bonds and Stamps may seem more appropriate from a logical point of view, from a psychological point of view any sudden change in names might do more harm than good. Moreover, it should also be remembered that once a. name has become established, any changes in the emo- tional background of the war and its conduct attach themselves to the term already established. That is to say, the term "Defense Bonds" comes to stand, in people's minds and feelings, for victory, for war, for liberty, and for any other number of ideas which might arise. Los Angeles people gave the same reasons for buying bonds as people in other sections with one exception. They speak of "Providing War Material for the Army and Navy" and of needing the money to step up production about five times as often as in other sections. This is not surprising in an area concentrating on airplane production. These Los Angeles people speak of "Beating Hitler" or the "Japs" or the "Axis" no more frequently than in other sections. Regraded Unclassified 151 WHY PEOPLE SHOULD BUY DEFENSE BONDS AND STAMPS The table below is a comparison of the reasons for buying bonds which people recalled from advertising and the reasons they believe are the most important. Percentages are based upon 730 men and women interviewed. 9.3 Why did the advertising say people should buy bonds and stamps? 94 What do you think 1a the best reason why people should buy these bonds or stamps? 0.5 What other good reasons are there why people should buy these bonds and stamps? 2.3 0.4 & as to Good investment = 51 Good way to save 5 30 Patriotic duty 4 18 Help win the war 19 17 Help finance the war 15 17 Preserves our liberties 9 16 Provides war materials for Army and Navy 14 15 For defense of the United States 27 16 Help the Government 13 15 We can't fight but we can buy bonds 1 8 Prevent inflation 1 7 Defeat Hitler 8 7 Avoids increased taxes 1 6 An sid to England and our allies 1 1 Miscellaneous 2 5 Don't remember 5 Total Answers 866 1650 Total Interviews 750 730 Regraded Unclassified CHOLOGICAL CORPORATION 152 REASONS FOR BUYING BONDS AND STAMPS WHICH PEOPLE RECALLED FROM THE ADVERTISING 0.3 WAY did the advertising say people should buy bonds and stamps? The answers given by 730 men and women are shown by a geographic grouping of cities and rural people. All percentages are based upon the number of men and women interviewed as shown at the bottom of each column. Mid Total Grand East West South West Urban Rural Total x % % 89 re % % For defense of the United States 31 24 26 28 28 26 27 Help win the war 13 18 19 25 16 28 19 Provides war materials for Army and Navy 14 16 24 10 16 10 14 Help finance the war 9 16 26 18 14 9 15 Help the government 17 10 6 10 13 14 13 Preserves our liberties 10 8 24 5 11 6 9 Defeat Hitler 2 11 4 5 4 5 Patriotic duty 3 1 5 5 3 6 4 Good investment 2 2 20 3 4 8 Good way to save 5 1 9 4 1 8 Prevent inflation 1 3 1 1 We can't fight but we can buy bonds 1 1 5 2 1 An aid to England and our allies 1 1 1 1 Avoids increased taxes * 5 1 1 Miscellaneous 1 1 3 10 2 2 Don't remember 5 1 1 3 5 3 Total Answers 291 175 143 45 654 212 866 Total Interviews 250 160 80 40 530 200 730 * Less than .5%. Regraded Unclassified ICAl 153 REASONS PEOPLE BELIEVE ARE MOST IMPORTANT FOR BUYING BONDS AND STAMPS 2.4 what do you think is the best reason why people should buy these bonds or stamps? 0.5 What other good reasons are there why people should buy these bonds and stamos? The table below shows a summary, in broad categories, of the answers of 720 men and women to these questions. This table 1a also shown by the geographic grouping of cities and by rural people. Mid Total Grand East West South West Urban Rural Total 80 70 % me % Y % Good investment 49 53 61 63 58 47 51 Good way to save 27 31 47 28 81 28 30 Patriotic duty 19 17 15 10 17 23 18 Helo win the war 16 17 14 15 16 22 17 Help finance the war 12 19 51 15 17 17 17 Preserves our liberties 18 18 19 15 18 12 16 Provides war materials for Army and Navy 14 9 81 13 15 15 15 For defense of the United States 15 11 9 28 14 17 15 Help the Government 13 19 9 18 14 11 15 he can't fight but we can buy bonds 7 4 22 5 8 8 8 Prevent inflation 6 9 20 9 1 7 Defeat Hitler 6 4 5 5 5 12 7 Avoids increased taxes 6 4 20 8 7 E 6 An aid to England and our allies 1 1 1 1 1 Miscellaneous n 3 1 a 7 1 5 Total Answers 648 343 245 88 1224 426 1850 Total Interviews 250 160 80 40 530 200 780 Regraded Unclassified MYCHOLOGICAL CORPORATION 154 HOW PEOPLE EXPRESS THEIR REASONS FOR BUYING DEFENSE BONDS The quotations on the following seven pages illustrate in greater detail the actual responses of people to: 9.4. What do you think is the best reason why people should buy these bonds or stamps? Q.5. What other good reasons are there why people should buy these bonds and stamps? These quotations have been grouped under several headings which seemed to classi- fy the statements of people. Where a number appears in front of the quotations it means that the identical words (or practically identical) were used by that number of men and women. HOLOCICAL CORPORATION 155 Preserves Our Liberties 8 To enable our government and our democracy to survive. 5 The United States is the best place in the world - I'd like to help keep it that way, 11 To preserve the freedom of life - our way of living. 6 Country needs the money for defense of the country and our may of living. 9 We have to preserve Democracy. 4 One way in which people could really show the government they're be- hind it and want this type of government to continue. 3 We've had a Bill of Rights for 150 years, and we're going to take care of it now. 5 To uphold the Bill of Rights. 4 We're preserving our own rights. 2 To maintain the same form of Government we have now. 6 To save our freedom of the Democracy. 5 Protection for your family and your future. 2 To help make our country safe for democracy - I love freedom and bonds will help keep it. 5 To make our country free. To insure our way of living for our children. 2 We want to help keep our country a democracy and safe for our children. 2 To insure the continued independence of our country. We are all part and parcel of that responsibility. 2 Through buying stamps, our country will be a free country. 4 Insures protection of our way of living. To safeguard democracy. It's the government's money to start with. Very selfish if you don't buy, 8 To save our country. If we want to keep our country free or to preserve our rights, this must be done, 5 To insure our freedom. Establish freedom for the generations to come. Do your duty and save your hide. Life or death of nation - can't afford to let them run us. So they may enjoy the liberties as they always have. Freedom, etc. 2 Our way of life is entirely different from Axis nations' way of life. We must safe and aid democracy and in order to do this we must con- tribute whatever we can. We must buy bonds or put up with slavery. The most important thing is to protect the government. It is protecting our country our lives and our freedom. People should sacrifice anything for this. 2 We don't want their dictating over here. To help along in our victory. Help the government to save democracy. Free from threats of present military tyrants. To save the security of the United States - freedom of speech end not be dictated to. Regraded Unclassified CHOLOGICAL CORPORATION 156 Provides War Materials For Men in Army and Navy 2 We have used 80 much material to help Great Britain that we need to replenish and buy the badly needed materials. 15 To help build good ships and planes. 15 Government needs more cash for equipment; government needs the money for ammunition and equipment. 6 To support our War Program which needs money to build and maintain the best Army and Navy. 7 Ships, planes and tanks cost money and that's our way of getting it. 5 The more money, the more armaments. 11 To buy defense material, so government can have the funds for war materials. 10 It will help our boys doing the fighting. 4 To prosecute the war. 2 Protects all the boys who have to go. 4 The Army, Navy, and Air Force must be kept up. 8 We need the materials that can be bought with this money. 5 Building war material. To beat the war in providing material. The more money they can get to put in materials the quicker this war will be over. To help clothe the Army. Help get bombs to kill the Japs. 6 Need to supply the Army. So We can have enough ammunition to keep people from invading our country. To buy guns. 2 Helps arm the nation. Through buying these bonds it helps in manufacturing in which I work, keeps me busy, and helps in keeping ne out of war. If we are going to lick the Nazis, need lots of money to build war munitions. To have enough materials to stop the Japs. Country does need the money to buy defense materials, to lick the Japs, nobody worries about Hitler any more. Gives boys medical care and things they need. DISCOCICAL CORPORATION 157 Good Investment 196 Good (solid) investment; perfect investment; safe investment. 11 Pay more interest than banks - and you'll have something to look forward to 10 years from now when they mature. Like an annuity. Safe aa Rock of Gibraltar. 4 Best investment, for if 56 lose this war, nothing will be of value not even the money we did not buy Bonds with. 47 The safest and best investment and would help the government through this war - for if our government is not a good investment, nothing ia good. 19 Best investment for your money's safety and pays better interest than keeping in savings bank. 24 Carries the best possible interest; pays good interest; gives a good return. 4 A good sound investment - which can, if needa be cashed in 60 days. A good investment - we bought them for the children as part of their Christmas gifts, there's nothing better for security than Government bonds. 7 Good investment that carries good rate of interest and can be cashed any time you need the money. 12 If the bonds aren't any good then your money isn't any good. 8 It's the safest investment, for if are don't give now, our money will be worthless if we lose. 4 If you have any children, it's good to buy as an investment. 8 You get your money back and well over in 10 years. Good way to diversify your investments. 6 If we win the war they will be a good investment. A reason for safety is that itcan't drop below a certain figure. Even if it weren't a good investment which it 18, we should do all we can, Better return on money than anything outside of real estate. Safest investment - if country falls, bank falls. Protection. It's a good investment and this way is as good as banks. Invest in the government and defeat Hitler and Japan. Better than taxes, at least you get your money back. We may have & depression later on. People that buy them can get a little interest at the end of war. To help pay back our debt and there is going to be hard times. Good return on your money. Type of person to whom bonds appeal wouldn't save in any other way - good investment for poor. It would be much better to give DOW than to have those other countries (Germany - Japan) take it from you. We might get something out of the investment. A loan and not & gift to Uncle Sam and your investment is protected. Tax-free. Regraded Unclassified THOLOGICAL CORPORATION 158 Good Way to Seve 115 Good way to save money; easy way to save; good thrift idea. 2 To save money it's a good investment. It's a good way to save - you buy stamps as you get B. few cents and then you can eventually get A bond. 7 Good way to save and help our government at the same time. 5 Good way to save 80 that in 10 years you'll have something. 6 It's a blessing for those who haven't the will-power to save other- wise. 6 Good savings plan - you can save to put child through college or for future vacations. B A good way to save, but I would not want to tie up the money for 10 years. 5 A good savings - even better than Liberty Bonds. It's good savings - interest is greater and if you buy stamps with small change you can build up to a bond. 4 It's a reliable "bank" that gives you a good way to save your money. 5 It's B. nice way to save and show your loyalty at the same time. 5 Save money for the depression that's coming. 2 Systematic savings now means a future for everyone. 6 It's 8. good savings - better interest rate than banks pay. 2 Thrift back of it is sound. 6 Save your money in a helpful say. 2 Good form of compulsory saving. 5 A good way to save small amounts. 5 Save some money and get it all back at the end of the war, Instills new methods of savings for young and old. 2 Save for a rainy day. 4 Save money that might otherwise be spent foolishly. 5 Something for the future. 2 Ten years from now that money will come in handy. Laying out money for yourself by buying bonds. 5 Like putting money in the bank. No Can't Fight But We Can Buy Bonde 13 If we can't fight in the thing at least we can supply money to those who go. Gives every real American a chance to do his bit. 9 Most of us can't help in any other way. 18 Everyone can help fight this way. 2 To defend our country and to let the boys in our Army know we are standing behind them. 4 You feel like you are doing your bit for the government. CHOLOGICAL CORPORATION 159 Patriotic Duty 63 Patriotic duty to the country; a patriotic gesture; it's time to show our patriotism. 5 This 18 a debt we owe to both our country and our boys. Patriotic purpose only (don't think they are good investment). 5 It's our duty - anybody who earns a living here should be glad to buy all they can. 5 It's the duty, of the people to help the country. If we help our country in time of need we help ourselves as well - We must all do our share. As far as saving is concerned it makes no difference - only as a. help to the government, that's why everyone should want them. To invest in and assist our government is our patriotic duty - it's what our forefathers did and our duty is to keep it. Everybody should do their bit for the government - it's really a duty and people should be made to realize it. 2 Our duty to help all we can to save our country. 2 Buying bonds is patriotism in action. 15 A good way to show our loyalty to the country. 4 If we are citizens we should be willing to sacrifice for our future. 8 The president wants us to and we should cooperate. 4 A good way to show faith in our country. 18 A citizen's duty to his country. 3 Best time to prove that Democracy is a living thing. 2 Expression of confidence in our type of Government. 3 A good American's duty. Prevent Inflation 31 This gives us a chance to ward off inflation; prevents inflation. Best way to protect value of the American dollar. This money will buy arms, etc., so that government would not have to borrow money which we in turn would have to help pay back through taxes. To invest in these bonds when country needs money will probably prevent inflation. 4 To prevent inflation and people putting money into luxuries. 4 Keep off depression. 5 The boys in the service are doing their part - therefore, the ones at home should do their part by buying bonds and stamps. 2 The people who've got the money should buy bonds because the government needs the money to fight the war. Regraded Unclassified TCHOLOGICAL CORPORATION 160 Help Win the War Regraded Unclassif 78 To fight this war and win; to help win this war. 5 To win this war and to keep a good sound government in America. 4 To help the government now to carry out the war by getting money into the treasury. Every dollar brought into the government will help towards a victorious campaign. 10 To get enough money to win the war. It is our country that is going to win this war and TO should all do our share. 2 To save the United States from losing the war, 5 It's the one way we can win the war. Because we cannot win the war without the necessary defense. 10 To win this war as fast as possible. 2 It's a good way to raise the money to help win the war. It will end the war quicker. To help the war situation. To do all we can to help and to do all we can. You help the government and you help yourself. Our country needs it. If we don't win this war, it won't be good to us anyway - the money won't. We should use spare money to help win the war. For Defense of the United States 48 For the defense of the country, protect the country. 8 If we don't give the government enough money to keep things rolling, Japs or Germans will come and take all this away from us anyway. 6 To help support the Defense Program. 4 Should do our best to defend our country in this fight. Because if we are interested in our country and in our future it's money to build an Army and Navy so that no one in future would dare to declare war against us. 7 Keep America safe. - 3 Cheaper to buy bonds now rather than have to pay some foreign power who might take us over. 7 To help build up defenses of the United States. To make the country more unified. 2 We have to protect ourselves. 4 Prepare for our national defense. To help our government arm. 8 For defense. 2 Keep our country intact. 3 Protect our country from invasion. For the self-preservation of our people. For the security of the country. To save the country. Home defense. For the safety of the country. Build strong defenses so nobody will defeat us. Defense of English speaking people of world so we can be free of tyrants opposed to our Democratic way of living. SYCHOLOGICAL CORPORATION 161 Defeat Hitler Give government money BO we can proceed in whipping out Hitlerism so we may have a better way of life here. 11 To build up defenses so we can defeat the Japs and Hitler. 3 Beat the Axis. Elimination of the yellow peril. Clean out Europe-Nasism. 4 To keep Hitler from coming over. 3 Prevent Japs from coming over here. Beat the hell out of Hitler and his gang. 2 Defeat Hitlerism. I don't want to live in a country run by Hitler. Destroy the dictators. To help against Japan. 5 To whip the Japs. Keep the Japs over there. Kill those scoundrels over there. 2 Beat Hitler. Beat Japan. Can't have such things here as they have in Germany. 4 To whip Germany and Japan. Keep other countries off our soil. Cooperation to lick Hitler. Beat countries fighting the U.S.A. Help Uncle Sam win the war against Japan. An Aid to England and Our Allies Country needs money to help the others. Help England who is sort of fighting for us. Keep up our aid to England. Not only to help ourselves, but to help other nations. Regraded Unclassified PSYCHOLOGICAL CORPORATION 162 SUMMARY OF WHAT PEOPLE THINK SHOULD BE DONE TO INCREASE THE SALE OF DEFENSE BONDS Q.6 What should the government do to sell more of these bonds and stamps? (Get specific methods) The table below shows, for urban and rural areas a broad classification of people's answers. Some typical answers illustrating each of these categories are reported on the following page. Percentages are based on the num- ber of men and women interviewed. Urban Rural Total X % % Do what is being done only more so 15 19 16 More pressure by the government 8 7 8 More pressure by the employers 8 2 6 Government doing a good job now 22 24 25 Wage and salary deductions 17 11 15 House to house canvassing 8 11 9 Miscellaneous* 19 11 17 Don't know 12 26 16 Total Answers 584 216 800 Total Interviews 530 200 750 * Includes such suggestions as: furthering sales through school, churches and fraternal organizations; reduce unemployment; give store-change in stamps; reduce minimum price of bonds; reduce cost of living; etc. THE PSYCHOLOGICAL CORPORATION 163 TYPICAL ANSWERS TO Q.6 ILLUSTRATING THE CLASSIFICATIONS SET UP IN THE PREVIOUS TABLE Do what is being done only more 50 Carry on more campaigns because it doesn't get out as much in the smaller towns There should be more radio programs about it The main thing 1a to keep up the publicity Available everywhere - keep the supplies large enough 80 they will always be on hand Plug them on radio and in newspapers as often as possible More pressure by the government Might have the government make it compulsory to buy them If the government needs the money they should make it compulsory They should go out and make the people buy them - a little push helps a lot The government should make people buy according to their circumstances More pressure by the employers Think every employer should make them buy 5% of salary Business employers should put it up to their employees on pay day They could have the working people in the offices just take 80 much of it a month Put stamps and bonds in hands of reliable firms and then sell to employees Government doing & good job now I am afraid I have no other ideas that the government is not using at present I think you can get them most anywhere They are contacting people in every possible way except forcing them to buy There has been no means (methods) left undone They have covered the field thoroughly Tiage and salary deductions I think that wage earners getting time and a. half should take their half time wages in bonds Should pay defense workers part of salary in stamps or bonds Deduct percentage on a sliding wage scale House to house canvassing Interest people more - mail the people information about bonds and stamps - representatives going from door to door ex- plaining bonds and stamps to people Got organisation committees to call from house to house Canvase from house to house - like you sell anything else There should be soliciting of the bonds and stamps can : unfilled : : : Unfilled : Stoci of : IBM New Bonds : orders : : : orders : "3" type : deliveries orders manufac- Day : nt opening : : : nt close : bonds : tured this of : received : : : of : on : : today today business : : : business: hand : day Dec. 71 919 265 375 829 61 350 Jrn. 1 829 none - no mail 400 429 61 755 2 400 932 370 991 61 400 3 991 600 420 1,171 61 400 4 1,171 none - no mail none - closed 1,171 61 400 5, 1,171 257 445 1,255 333 310 E 1,285 1125 450 1,408 511 530 7 1,406 639 450 1,597 511 585 & 1,597 460 1150 1,597 511 450 0, 1,597 640 500 1,471 236 FRO 10 1,471 155 525 1,101 236 575 Office of the Secretary of the Treasury, January 12, 1942 Division of Research and Statistics. 275,000 nieces included in this figure vere in transit and had not renched the Federal Reserve Banks on this unte. Regraded Unclassified 165 CONFIDENTIAL UNITED STATES SAVINGS BONDS Comparative Statement of Sales During First Nine Business Days of January 1942 and December and November 1941 (November 1-12, December 1-10, January 1-10) On Basis of Issue Price (Amounts in thousands of dollars) : : Amount of Increase : Percentage of Increase Sales : : or Decrease (-) : or Decrease (-) Item : : : : December January : December : January : December January November : 1942 : : 1941 : over : over : over : over 1941 : : : : December : November : December : November Series 1 - Post Offices $ 54,038 $ 17,903 $ 16,583 $ 36,135 $ 1,320 201.8% 8.0% Series I - Banks 135,858 32,572 27,677 103,286 4,895 317.1 17.7 Series I - Total 189,896 50,475 44,260 139,421 6,215 276.2 14.0 Series 7 - Banks 21,050 7,463 8,019 13,587 - 556 182.1 - 6.9 Series G - Banks 84,142 52,340 50,762 31,802 1,578 60.8 3.1 Total $295,087 $110,278 $103,041 $184,809 $ 7,237 167.6% 7.0% Office of the Secretary of the Treasury, Division of Research and Statistics. January 12, 1942. 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 Unclassified 166 CONFIDENT UNITED STATES SAVINGS BONDS Daily Sales - January, 1942 On Basis of Issue Price (In thousands of dollars) Post Office Bank Bond Sales All Bond Sales Bond Sales Date Series 1 Series I Series ] Series G Total Series I Series 7 Series G Total January 1942 1 $ 3,982 $ 10,229 $ 1,964 $ 7,605 $ 19,798 $ 14,211 $ 1,964 $ 7,605 $ 23,780 2 4,802 10,736 2,056 7.779 20,571 15,538 2,056 7.779 25,373 3 4,457 9.557 1,278 5,453 16,289 14,015 1,278 5,453 20,747 our 9,684 26,724 3,240 13,704 43.668 36,408 3,240 13,704 53.352 6,711 7,659 1,341 6,778 15.778 14,369 1,341 6,778 22,489 7 6,748 21,267 3,692 18,832 43.790 28,015 3.692 18,832 50,539 8 7,509 21,297 3,821 12,871 37.989 28,806 3,821 12,871 45,498 9 5,746 12,359 1,798 4,765 18,923 18,105 1,798 4,765 24,669 10 4,398 16,031 1,858 6,355 24,244 20,429 1,858 6,355 28,641 Total $ 54,038 $135,858 $ 21,050 $ 84,142 $241,049 $189,896 $ 21,050 $ 84,142 $295,087 Office of the Secretary of the Treasury, Division of Research and Statistics. January 12, 1942. Source: All figures are deposits with the Treasurer of the United States on account of proceuds of sales of United States savings bonds. Note: Figures have been rounded to nearest thousand and will not necessarily add to totals. Regraded Unclassifie TREASURY DEPARTMENT 167 INTER OFFICE COMMUNICATION CONFIDENTIAL DATE January 12, 1942 TO Secretary Morgenthau FROM 1', Head SUBJECT: The Business Situation seez ending January 10, 1942 Summary (1) Despite the huge quantities of war materials to DE turned out for the war program, the combined volune of WILD and civilian goods production will be limited to the wwilable supply of raw materials and labor. Raw materials shortages and capacity limitations have caused a levelling are in the output of some important industries since last summer. As a result, the unadjusted FRB index of indus- trial neoduction rose only 5 points from June to December. (2) The shortage of iron and steel scrap has become core Acute and 1s limiting further expansion in steel opera- tions. The Great Lakes Steel Corporation, which 1s working almost entirely on defense orders, had to close down one- fourth of its open hearth furnaces at Detroit last week due to e lack of scrap. Other shutdowns occurred in the Cleveland and Youngstown districts. (3) Commodity prices continue to rise. The all- commodity index in the week ended January 3 rose to n new high since October 1929, and stood 2.3 percent above the level prevailing before the attack on Pearl Harbor. The index is now 25.7 percent higher than the August 1939 pre- war level. (4) The BLS index of basic commodity prices rose to 8. new high last week despite OPA ceilings on 17 out of 28 commodities in the index, partly because of inflationary napeots of the amended price control bill. The index of onsic roodstuff prices has now risen nearly 80 percent since the outbreak of the war in Europe. (5) The forthcoming cessation of automobile production for civilian use will have repercussions extending far be- yond the manufacturing branch of the industry. The country's more than 40, 000 automobile dealers and their employees will be especially hard hit. The freezing of car stocks, pending the working out of n rationing program, has =dded to dealers' difficulties. Regraded Unclassified 168 General situation The magnitude of the war program outlined by the President last week reises the question whether the production of these huge quantities of war materials in the allotted time will not require B severe curtailment in civilian goods production, on a scale berhaps sufficient to offset entirely (in terms of total injustrial production) the effect of further increases in the output of war materials. The critical time factor vill require that the needs of civilian industries be almost ruthlessly dis- respired, hence shortages of even minor quantities of scarce may cause videspreed shutdowns. The prospective -licin tion of oassenger automobile production after this month it lizely to have an important influence on total industrial inscuption, certicularly since several months will be required 20 re-tool the plants for use in the war effort. Assuming that the production of wer materials 111 de MALER to the utmost, and that the required cabacity for such unterials will eventually be available, the combined volume of and civilian goods production will be determined chiefly by The supply of raw materials and of Inbor. Whenever a point 11 reached where no further increase in supplies of essential my naterials (or of lebor) is possible, the over-all oro- duction volume vill tend to level out, since the production of divilian -oods must decline as repiely DE the production of 125 moterials increases. Evidence that we are approaching such e. level 18 beginning to Accumulate. Production in E: number of important injustries Its levelled out since last summer, indicating that output 0.5 been limited either by a shorta e of materials (EB in the rubber 1006s industry), E. limited capacity (ES in the produc- cion of non-ferrous metals and their products), or a restricted LEWONG due to shortages elsewhere (as in the building materials Investries). In Chart 1 18 shown the trend of actual outout for D group of these industries meking 110 a total weilht of 39 reserat in the FRB production index, in comosrison with the refuction trend for the other industries in the FRE index, '1th the trend for the combined index. In order to snow vatual levels of production, the indexes we not sesson- 0515 justed. It vill be noted that the raoio sevence in the combined TC iniex to June 1942 V&S açõe possible by rising production in book component groups, interrupted only by the coal strike 16 Acril. A distinct flattening out has been epperent since Sent June. The unadjusted FRB index in December, according to orelisin my cote, WE only 5 points (3 percent) riste The June figure, and 2 points lover then In October. Regraded Unclassified 169 Shortage of steel scrap becoming more acute A factor which will contribute toward B levelling-out of production in an important section of industry 18 the short- age of iron and steel scrap, which appears to be growing more serious. Cold weather has curtailed the collection of scrap, and stockpiles at mills are not available in the usual volume for carrying operations through the winter months. This 18 tending to limit the output of steel ingote, and although there 18 probably no question of the adequacy of the steel supply for war material production, it may mean that less and less will be available for the civilian goods industries. During the past week the Great Lakes Steel Corporation at Detroit, which 18 reported to be working almost entirely on defense orders, was forced to close down 4 of its 16 open hearth furnaces due to a lack of scrap. Likewise the Otis Steel Company at Cleveland had to close down 2 open hearth furnaces for the same reason and was confronted with the possibility of additional curtailment this week. In the Youngstown district, further shutdowns raised the number of open hearths made idle by the scrap shortage to 10. Despite the scrap shortage, the steel operating rate is scheduled this week to increase 1.4 points to 97.8 percent of capacity. This rate, however, still does not quite equal the rate prevailing just before the holidays. Steel and p1g iron production records set in 1941 In view of the scrap shortage, it 18 of interest that steel ingot production was maintained in December at 98.1 per- cent of capacity as compared with 98.3 percent in the pre- vious month. Production for the entire year reached almost 83,000,000 net tons, & gain of 24 percent over the previous peak figure set in 1940. Pig iron production also rose to new heights last year, exceeding the previous record set in 1929 by 18 percent. In view of the heavy demand for pig iron, it 18 encouraging to note that daily average produc- tion in December rose 3 percent above the previous month, and total monthly output exceeded 5,000,000 net tons for the first time on record. Commodity prices continue upward trend The BLS all-commodity index in the week ended January 3 rose 0.5 percent, making a total gain of 2.3 percent since the Pearl Harbor attack. (See Chart 2). This further gain carries it to the highest level since October 1929, and represents a total rise of 25.7 percent since the August 1939 pre-war level. Regraded Unclassified 170 A further rise in the all-commodity index seems probable for the second week of January, since the BLS index of basic com- modities in that week again turned sharply upward, reflecting in part the inflationary aspects of the Senate amendments to the price control bill. (See lower line on Chart 2). Although the advance in the all-commodity index since the Pearl Harbor attack was led by a sharp increase in prices for farm products, amounting to 6.7 percent, this increase was almost equalled by a 6.0 percent advance in prices for chemicals and allied products. Prices for this group touched a 14-year peak. The sharp increases in prices of chemicals reflected increased demande for agricultural purposes, more extensive substitution of plastics for metale, and higher requirements by Canada for manufacture of explosives. The BLS price indexes of basic commodities, both food- stuffe and raw materials, rose to noticeably higher levels last week despite the fact that 17 of the 28 commodities are under price restrictions. (See Chart 3). The foodstuffs index again rose sharply, and at the end of the week was nearly 80 percent above the level at the out- break of the war in August 1939. Among the domestic commodi- ties, cottonseed oil and rosin made the largest individual in- creases. Grains showed substantial strength and cotton prices reached a new seasonal high. Among the imported commodities, sugar, flaxseed, and wool prices advanced. The sugar price rise resulted from increasing the ceiling on raw sugar prices. At the close of the week an amendment was made to the schedule of refined sugar prices to bring them into line with the prices of raw sugar. Price control bill amended Amendments to the price control bill added by the Senate would almost eliminate farm products from any effective con- trol, and if the bill is adopted in its present form its use- fulness for preventing an inflation spiral will be seriously in doubt. Ae the bill now stands, the Secretary of Agricul- ture must approve any action taken with respect to farm pro- ducts, and no ceiling price may be established on any agri- cultural commodity below the highest of the prices determined on the following bases: (1) An "emergency wage parity price, II calculated on a new basis, in which wage rates are included with & weight of 20 percent, and the former index of coste of goode bought by farmers is given a weight of 80 percent. According to Senate testimony, this would raise the parity level approximately 21 percent. Regraded Unclassified in I I 171 (2) The average price for such commodity in the period from July 1, 1919, to June 30, 1929. (3) The market price on October 1 or December 15, 1941, whichever 18 higher. Commodity Credit Corporation offers cotton stocks for sale Government-owned stocks of cotton were offered for sale by the Commodity Credit Corporation on January 5, with the an- nounced purpose of making available to the mills certain de- sirable grades and staples. Since the offering price of 19 cents (based on 15/16 inch middling cotton in Carolina mill areas) 16 not much above current market levels, the offer should have considerable effect in stabilizing prices. This follows earlier action to release wheat and corn from Govern- ment stocks, which has already had a dampening effect on speculative activity in the grain markets, According to one current trade report, "The main dampening influence on bullish activity in wheat and corn is the Commodity Credit Corporation's offering of corn at practically the current cash market basis and of wheat only a little above the present price level It is estimated that the Government agency has sold 7,000,000 or 5,000,000 bushels (of corn) in the past week or so." The Commodity Credit Corporation also announced last week that total sales of cotton for export to foreign countries under the export subsidy plan, through January 2, amounted to 214,000 bales, of which 178,000 bales were sold to Canada. At the same time, it was announced that the Surplus Marketing Administration, under its program for the export of cotton to Canada, had sold nearly 177,000 bales. Both of these programs were put into effect last September. Automobile production for civilian use to be stopped The recent announcement of Administrator Henderson that production of passenger cars and light trucks for civilian use will be stopped around the end of this month was followed last week by an announcement that the production of medium and heavy trucks for civilian use will come to an end after March 1. Co- incident with these announcements, it was indicated that re- cent output schedules for passenger cars and trucks in the interim will be revised upward, recortedly to allow manufacturers to use up stocks of parts and materials. Thus output of around 200,000 passenger cars will be permitted this month, whereas the January quota had originally been alashed to 102,000 units. Likewise, the February production quota for heavy and medium trucks 1a being revised upward, Regraded Unclassified 172 Automobile output ban to have wide repercussions In connection with the ban on automobile production, the PM me also prohibited the sale of new cars and trucks pend- 12- the working out of 8 rationing program. This move froze an estimated 450,000 new cars in the hands of dealers, who are confronted with serious financing problems as a result, While much attention has centered on the dislocations vion the ban on civilian automobile output will impose on the menufacturing branch of the industry, those engaged in the celling branch are likely to be harder hit. After & trons- itional period, most manufacturers and their employees will roubtless become heavily engaged in the production of war On the other hand, the country'e more than 40,000 soon will be receiving no additional new products to Anll and will be able to dispose of existing stocks only under prescribed limitations. Moreover, many employees of motor vehicle dealers, who numbered more than 300,000 in 1939, will be thrown out of work. In addition to these more immediate and obvious effects, the ban on civilian automobile output VIII have repercussions extending far beyond the industry it- self. Among others, an important source of Federal excise TAX collections will be cut off, National income at 697 billion level Retail trade has been strongly supported by the sharp unward swing in national income, which got under way around the middle of 1940. This upward trend continued in November nen national income rose to a new high at an annual rate of necrly 97 billion dollare. Moreover, since the rise in national income in Movember was more rabid than the rise in living costs, the estimated purchasing power of national in- coue also moved up to a new high. (See Chart 4). As a result of the rapid rise in consumer incomes, mer- chants generally had anticipated & somewhat higher level of business in December than actually developed. Following re- (stively narrow gains over year-earlier levels in the two weeks efter the Pearl Harbor attack, department store sales 18 the week ended December 27 rose 40 percent above the cor- Personiling period In 1940, thou h the comparison 1e affected by an extra ore-Christmas shopping day in that week this year. The Inles ain in the week ended January 3 declined, but still - 27 percent above year-earlier levels. (Bee Chart 5). Regraded Unclassified PRODUCTION TRENDS BY SE ICTED INDUSTRY GROUPS Bosed on F.R.B. Unodjusted Indexes 1941 1942 - N o , # M A E of of A % o N D , F 2 A c Ji J. A 5 o E D DESCENT PERCENT 190 190 180 180 Industries Expanding 170 170 1. 160 160 Combined F.R.B. Unadjusted Indexes 150 150 140 140 Industries with Expansion Limited 130 130 120 120 110 110 Regraded Unclassified 100 100 J & 5 o N o V F M A M J J A 5 o N D J F 2 A = J. 4 A. 5 o N D 1940 1941 1942 *140LUDES INN AND STEEL, MACHINERY, TRANSPORTATION EQUIPMENT, DIEMICALS, FUELS, PETROLEUM AND DOAL PRODUCTS, TOBACCO PRODUCTS, MANUFACTURED FOODS. 173 TINOLUDES LUNDER AND PRODUCTS, WOR-FERROUS METALS MD PRODUCTS, METALS (RINING), STONE, DLAY AND ass. PAPER AMI PRODUCTS, PRINTING AND PUBLISHING, TESTILES AND FRODUCTS, LEATHER AND PRODUCTS, PUBBLE PRODUCTS, ALCOHOLIC REVENAGES. I Charge Office of live Secretary of the Treasury - of Resert - Statement C 416 COMMODITY PRICES 1926=100 PER PER CENT Weekly CENT 104 104 100 100 96 96 889 Commodities, B.L.S. 92 92 88 88 84 84 80 80 76 76 72 72 68 68 28 Basic Commodities, B.L.S. 64 64 60 A S o N D J F M A M J J A 6 o N D J F M A M J J A S o N D 60 1940 1941 1942 174 Chart 2 Office of the Secretary of the Transary - of - and Subties P-196-C Regraded Unclassified Chart 3 175 MOVEMENT OF BASIC COMMODITY PRICES AUGUST 1939-100 PER PER PER CENT Weekly Average CENT PER CENT Daily CENT 170 170 175 175 160 12 Foodstuffs 160 170 170 150 ISO 165 /2 Foodstuffs 165 140 140 160 160 15 Row Industrial Materials 130 130 155 155 120 120 16 Row Industrial 150 Materials 150 110 110 145 145 100 A S o N 100 D J F M A M J J. A S o N D J. F 140 140 e is 17 : a a 10 17 . a If 14 or 7 - 1940 1941 1942 NOV DEC JAN FEB 1941 1942 Percentage Change for Individual Commodities, August 1940 Low to January 2 and to January 9. 1942 PER PER -Tallow 171 42 CENT 16 Raw Industrial Materials CENT 12 Foodstuffs *Cottonized Dil 15832 450 -150 +125 +1 Shellac 124/2 Coeuo 1257) +125 +Land 11132 Rosin 1053% 20 Cotton 92.72 *Bor/ay/0/2% Print Cloth 78% 100 Coffee 9821 Burlap 7292 Wheat 8172 Hides 590% Wool 48.9% *75 Nogs 7942 Floxseed 48% Zine 301% Lead 23.2% +50 *Sugar 4332 Silk 2/0% "Butter 3302 Rubber 16.9% Steem 2881 Copper 118% +25 Care 2825 Steel Scrap dom 87% -Tin 30% Stee/ Scrap exp. 272 o e 1940 Jan 2 Jan 9 Aug 1940 Jan 2 Jan 9 caw Low NATIONAL INCOME AND IT8 BOUTVALENT PURCHASING POWER 1940 1941 DOLLARS 1942 DOLLARS BILLIONS BILLIONS Monthly 96 96 92 92 NATIONAL INCOME 68 BB 64 B4 80 80 PURCHASING POWER OF NATIONAL INCOME . 76 76 72 72 68 68 J. A $ o N D J , M A M J J A 5 o M D J , M AMJJASONDJPMAM J 1939 1940 1941 1942 BASED ON COST or LIVING INDEX or D.L.S. Aug. 1939 = 100 176 Chart 4 Office et the Secretary of the Transury - of - Date C 415 Regraded Unclassified Chart 5 177 DEPARTMENT STORE SALES 1935 . 1,59 - 100. UNADJUSTED JAN MAR, MAY JULY SEPT. NOV. PER CENT Weekly 260 240 240 220 200 200 -/UG 160 160 160 160 140 140 '41 120 120 100 100 8 60 40 60 (W) JULY SEPT. NOV. JAN. MAR. MAY the at lie Imcretary al the Treasury o 390 Invoice - - and Vehicles Regraded Unclassified TREASURY DEPARTMENT 178 INTER OFFICE COMMUNICATION DATE January 12, 1942 TO Secretary Morgenthau FROM Mr. Hans Employment under the Work Projects Administration dropped from 1,046,000 persons to 1,041,000 persons during the week ended December 30, 1941. This was 5,000 less than the prev- 1ous week's employment and 19,000 less than the number of persons employed at the end of November. Attachmente Regraded Unclassified 179 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending 1941 Number of Workers May 7 (In thousands) May 14 1,519. May 21 1,497 May 28 1,474 1,464 June 4 June 11 1,442 18 1,423 1,410 June 25 1,368 August August July July July June July 9 2 1,172 July 16 1,030 1,016 23 1,025 30 1,036 6 1,041 13 1,042 August 20 1,043 August 27 1,045 September 3 1,043 September 10 1,037 September 17 1,035 September 24 1,033 October 1 1,032 October OR 1,037 October 15 1,040 October 22 1,044 October 29 1,047 November 5 1,050 November 12 1,056 November 18 1,058 November 25 1,060 December 2 1,063 December 9 1,060 December 16 1,055 December 23 1,046 December 30 1,041 Source: Work Projects Administration 180 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers (In thousands) 1939 July 2,200 August 1,842 September 1,790 October 1,902 November 2,024 December 2,152 1940 January 2,266 February 2,324 March 2,288 April 2,092 May 1,926 June 1,665 July 1,701 August 1,691 September 1,704 October 1,779 November 1,821 December 1,878 1941 January 1,895 February 1,867 March 1,708 April 1,560 May 1,464 June 1,368 July 1,036 August 1,045 September 1,033 October 1,047 November 1,060 December 1,041 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month, They include certified and noncertified workers. Regraded Unclassified 181 WORK PROJECTS ADMINISTRATION Mamber of Workers Employed United States Monthly W.P.A. Employment Wookly W.P.A. Replayment 1536 1937 1938 1939 1940 (34) (4) 1940 1941 1942 are MAY JULY MIY, JAN, MAN. MAY WILLIONS WILLIONS CAT AMT NON sews ur or of WHERE MORRER) 2.7 H 2,6 2.6 If 3.2 2,5 2,1 4 2.4 AN 2.8 2.5 44 2,2 did ja 2,4 del 201 240 2,0 i.o 2.0 14% is 1.8 i.s 1,7 1+7 1,6 1.6 la 1,5 1,5 - 1.4 1.4 143 GT .= la 144 13 141 14 1.1 144 il D a M MAR, JULY a 1936 1937 1938 1939 1940 1941 140 1940 services --- ADMINISTRATION la Servicery - - Trairy se I Chaunney TREASURY DEPARTMENT 182 INTER-OFFICE COMMUNICATION DATE January 12, 1942 TO Secretary Morgenthau FROM Mr. Dietrich STRICTLY CONFIDENTIAL Official sales of dollar securities under the vesting order effective February 19, 1940: $ Proceeds of $ Proceeds of Shores Sold Bonds Sold Total no. on Nil Nil Nil to Nil Nil Nil F 1/11 Nil Nil Jin, 1 Nil Nil Nil 2 Nil Nil Nil 3 Nil Nil Nil Nil Nil Nil irles from Feb. 22, 1940 to Dec. 27. 1041 281,856,896 37,437,648 319,294,544 Ties from Feb. 22, 1940 to Jan. 3. 1942 281,856,896 37,437,648 319,294,544 319,294,544 proceeds of non-vested securities sold Dec. 22, 1941 - Dec. 27. 1941 800,000 proceeds of non-vested securities sold Sent. 1, 1939 - Dec. 20, 1941 240,000,000 = proceeds of non-vested securities sold Sent. 1. 1939 - Dec. 27. 1041 240,800,000 240,800,000 GRAND TOTAL 560,094,544 a "nite sold from Aug. 18, 1941 - Jan. 3. 1942 for $ 42 11 Shares Stock Dividend gold MR. 18, 1941 - Jan. 3. 1942 for $ 123 55,828 Rights sold from July 24, 1941 - Jan. 3, 1942 for 3102,928 & Regraded Unclassified For Miss Chauncey TREASURY DEPARTMENT 183 INTER-OFFICE COMMUNICATION DATE January 12, 1942 TO Secretary Morgenthau FROM Mr. Dietrich STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Sold Shares Sold of Bonds Sold Bonds Sold Dec. 29 Nil Nil Nil Nil 30 Nil Nil Nil Nil 31 Nil Nil Nil Nil Jan. 1 Nil Nil Nil Nil 2 Nil Nil Nil Nil 3 Nil Nil Nil Nil Nil Nil Nil Nil Sales from Feb. 22, 1940 to Dec. 27, 1941 9,847,581-3/18 281,856,896 45,610,016 37,437,648 Sales from Feb. 22, 1940 to Jan. 3. 1942 9,847,581-3/18 281,856,896 45,610,016 37,437,648 A 184 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 12,1942 Secretary Morgenthau TO Mr. Kamarck FROM Subject: Shipment of Planes to British Forces Summary 1. In the week ending January 6, 8 total of 72 planes (63 combat planes) were shipped to British forces. The bulk of the shipments, 61 planes, were sent to the Middle East. 2. Since January 1, 1941, Curtiss Wright has shipped over a thousand pursuit planes to the British. The Curtiss fighters, together with four other main types, provided 3,800 (or about 80 percent) out of the total of 4,870 planes shipped since January 1, 1941. Main Plane Types Shipped Number Curtiss Tomahawk and Kittyhawk Pursuit 1,005 North American Harvard Trainers 905 Lockheed Hudson (I,III,IV,V) Bombers 820 Cessna T-50 Trainers 549 Douglas Boston (I,II,III) Bombers 521 (Total of above) 3,800 Regraded Unclassified - 2 - Table A 185 Week ending Total Shipped since January 6,1942 January 1,1941 To the United Kingdom Light anû medium bombers 0 1,124 Heavy bombers 0 104 Naval patrol bombers 0 102 Pursuit 0 311 Army Cooperation 4 36 Trainers 0 24 Total to the United Kingdom 4 1,701 To the Middle East Light and medium bombers 23 353 Heavy bombers 0 5 Pursuit 30 878 Army Cooperation 0 10 Trainers 60 150 Total to the Middle East 61 1,396 To the British Pacific Forces Light and medium bombers 0 95 Naval patrol bombers 0 27 Pursuit 0 168 Trainers 0 105 Total to Pacific Forces 0 395 To the British Forces in Russia Light and medium bombers 0 44 Pursuit 0 49 Total to Russian Forces 0 93 To the Canadian Forces Light and medium bombers 1 55 Naval patrol bombers 5 13 Pursuit 0 42 Trainers 1 1,175 Total to Canadian Forces 7 1,285 Totals Light and medium bombers 24 1,671 Heavy bombers 0 109 Naval patrol bombers 5 142 Pursuit 30 1,448 Army Cooperation 4 46 Trainers 9 1,454 Total 72 4,870 - 3 - Table B - Shipments by Types 186 Week ending Total shipped since January 6, 1942 January 1, 1941 Bell Airacobra 0 154 Boeing B-17 0 20 Boston III 0 39 Brewster Buffelo 0 168 Cessna T-50 1 549 Consolidated Catalina 5 142 L.B.30 (B-24) 0 6 Liberator I (B-24A) 0 19 Liberator II (B-24B) 0 64 Curtiss C.W. 20 0 1 Kittyhawk 30 412 Tomahawk 0 593 Douglas Boston I 0 1 Boston II 0 81 Boston III 0 439 D.C. II o 10 Feirchild 24 R-9 4 26 Glenn Martin Baltimore 23 91 Meryland 0 150 Grumman Martlet II 0 41 Lockheed Hudson I 0 1 Hudson III 0 351 Hudson IV o 70 Hudson V 1 398 North American Harvard II OR 905 Mustang 0 80 Pitceirn Autogiro 0 5 Vought Sikorsky Chesapeake 0 50 Vultee Stinson-049 0 4 72 4,870 Regraded Unclassified 4 Table C - Plane Shipments to the British by Weeks 187 Week Light and Heavy Naval Army Ended medium Bombers patrol Pursuit Coopera- Trainers Total bombers bombers tion Weekly Average of Shipments in 1941 32 2 3 27 1 28 92 January 6,1942 24 0 5 30 4 9 72 TOTAL-Shipments since January 1,1941 to date 1,671 109 142 1,448 46 1,454 4,870 Regraded Unclassified 188 Junuary 12, 1942 Mr, Livesay Mr. Dictrich Vill you please sond the fellowing cable to the American Babancy, Changking: *For For from the Secretary of the Treasury. Reference cable No. 27. your 17-12, dated JAMARY 8, 1942. Tour inquiry 10 not entirely cloar to us. Paragraph 3(a) of Agreement of April 1 describes the procedure for making U.S. dollars available to the Board. The Treasury has net as yet purchased year with dollars because no request to that effect has been received by the Federal Reserve Bank of Nov York from the Central Bank of China. As seen be Central Bank has notified the Federal Reserve Bank of New York as prescribed in paragraph 3(a). the appropriate amount is U.S. dollars vill be credited to the Fund. FD:dm:1/12/42 Regraded Unclassified 189 OF TENACRAM DANT YOR American Embassy, Chungking, Chine DI January 12, 1942. o Date 17 This telegram is Irom the Secretary of the Treasury and 1a for a. to Manuel Fox. T.1a telegram refors to BU. 27 dated the sta of January, 1942, your TF-12. Re could not comprehend very clearly your Inguiry. description of the method for making dollars in morioan currency available to the Board in Iven in 3(a) 45 agreement of April 1, 1941. yet there DAY not been any yuan purchased by the Treasury with dollars secause S.A.S Yourd Reserve Bank of New York has not received from the Central Bank of China & request to tast sffect. The Fund will be credited the appropriate amount in curisan dollars just as JOUN 0.0 the Foteral superve Dank bas been notified by the Central Bank in the method prescribed in paragraph 3(a). AULL Regraded Unclassified 190 ID PLAIN Chungking Dated January 12, 1942 Rec'd. 6:36 C. m. Secretary of State, Washington. urgoit. 33, January 12, 11 L, 11, TF 15. CONVIDENTIAL FROM FOX von THE SECRETARY OF THE TREASURY. "liave been requested by Generalissimo and Dr. Hung to return for brief period to report to you on the Chinese internal financial and Economic situation. Leaving tomorrow ct 24 hours notice." GAUSS EDA Regraded Unclassified D P 191 Y Department of State Washington In reply refer to FD 811.51/4112 January 12, 1942 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses - copy of descatch No. 3172, dated December 23, 1941, from the American Embassy, Habana, Cuba, concerning sale of United States Defense Bonde in Cuba. The Secretary of State would & preciate being advised 16 to the reply to be made to the Embasey concerning the desnatch under reference. Enclosure: Despatch No. 3172, dated December 23, 1941, from Embassy, Habana, Cubs. enicopy 1-13-43 Regraded Unclassified C o P 192 I No. 3172. Habana, December 23, 1941 Subject: Sale of United States Defense Bands in Cuba. The Honorable The Secretary of State, Washington. Sir: I have the honor to enclose copy of a self-explanatory memorandum dated December 19, 1941, prepared by the Commercial Attache, with regard to the sale of the United States Defense Bonds in Cuba. I agree with the views expressed in the enclosed memorandum by the Commercial Attache, and in my opinion, the possibility of selling United States Defense Bonds abroad appears to be worth studying, especially insofar as the sale of such bonds in Cuba is concerned. Respectfully yours, George S. Messersmith Enclosure: Memorandum dated December 19, 1941. AFM/mp - 820. A true copy of the signed original. eh:copy 1-13-42 Regraded Unclassified Enclosure to despatch 20. 3173 of December 23, 1941, from the Imbassy at Habana (COPY) Habana, December 19, 1941 MEMORANDUM Sele of United States Defense Bonds In Cubs ( Ir. Ambessador (KT. Prints Wee Wheeler of the American Chember of Commerce called me yesterday to that at the last Board Meeting of the Chamber, on December 17, the Directore had decided to offer the services of the Chamber in the arle of Staten Defense Bonds if it were found that their services would be useful. Miss Wheeler inquired whether the Embewsy had any surrestions to offer in this connection. I told Kiss Wheeler that according to my information, which has been confirmed by Mr. Findlay of the Chase Bank, United States Defense Bonds can- not be sold abroad and can be sold in the United States only to United States citizens. If this is correct, and Mr. Findlay assures me that this 10 the case, I wonder whether it would serve any useful purpose for the to insuire of the Department whether any change in these regulations CAA be made. During the last world war Liberty Bonds were sold in Cube in large \unntities and the American Consulate at Cienfuegos, where I was Vice Consul at the time, organized a number of Liberty Bond drives which produced very milistential amounts. Seles were not restricted to American citizens and, in fact, the largest buyere in the Cienfuegoz Consuler District were the well- to-lo Spaniards, I believe that it would in many weys be to our interest if the sale of United States Defense Bonds could be permitted in Cuba and in other countries of the Western Homisphere. Many American citizens reciding in Cuba as well AS Subscribe and other sympsthizers of the democracies would doubtless wish to these bonds, and in the case of the large number of weelthy Snanierds in Cubs who, 18 you are aware, consider themselves es bein somewhat under a cloud, they would be afforded a tangible way of expressing their adhesion to our DAMBE by purchasing our Defense Bonde to the limit of their capacity. More- over, the psychological effect which the purchase of these bonds would have under their orners is also B. factor that might be teken into consideration. few days Ago there came over my desk 8 descatch from the Vice Consul 41 Idevitor in which lie also calls attention to the desirability of authorizing the only of MIT Defense Bonds abroad. -1/30 Regraded Unclassified C 0 P 194 Y AP PLAIN Stockholm Dated January 12, 1942 Rec'd 3:23 a.m.; 13th Secretary of State, Washington. 54, twelfth. Third Swedish defense loan will be floated this week. It is divided into three different forms of bonds: a. 3.5% forty year loan, B. 3% five year loan and savings bonds bearing interest at 3.5% for six and one-half years. In connection with floating of new defense loan holders of Swedish 4% bonds of 1931 and of 4.5% bonds of 1932 are invited to convert them into new 3.5 or 3% bonds. Total amount outstanding on state loans of 1931 and 1932 thus to be converted is 234 million crowns. In addition to this amount it is estimated that third defense loan will amount to at least 700 million crowns but no total amount of subscriptions has been fixed. Subscriptions to 3.5% bonds may be made between January 15 and February 28, 1942 and to 3% bonds between January 15 and February 28, 1942 and to 3% bonds between January 15 and May 15, 1942. Extensive propaganda campaign for third defense loan will be launched under slogan "In Defense of Sweden's Peace and Future". At press conference yesterday for this loan Minister of Defense gave some advance information on Government's five year plan for national defense which will be laid before Riksdag Regraded Unclassified 195 - 2 - shortly. Part of this plan has already been realized by recent Rikadag decision to adopt a new conscription law by which initial training period for conscripts was raised to 450 days. In army no quantita- tive expansion is possible as replacement reserves have already been given full training in past year. Instead quality of troops and their equipment will be improved. Army will be given greater strik- ing force and mobility by acquisition of more automatic weapons, strengthened artillery, more and larger armored cars and tanks, and more anti-tank guns and by setting up of more motorized and bicycle infantry. Two infantry regiments and two cavalry regiments will be converted into tank detachments. In navy stress will be laid on construction of light craft. New submarines are now being built in almost continuous stream, more motor torpedo boats are being turned out and a new torpedo carrying destroyer of between 1700 and 1800 tons is being planned. This type will be equipped with four 12 centimeter guns and strong anti-aircraft artillery. In addition to two cruisers already agreed to by Riksdag Govern- ment intends to propose construction of third cruiser of same type. On other hand there are no plans for construction of any larger ships to replace the three old battle cruisers. Coast artillery will be equipped with considerable number of new mobile batteries which may also be able to operate in conjunction with army. In air force five year plan is dependent on output of domestic aviation industry but it is expected that total of sixteen air flotillas may be set up except for air school, Costs involved were estimated at about 700 million crowns per annum which was only 6% of national Regraded Unclassified 196 - 3 - income and would therefore not have any decisive influence on standard of living. In addition to 750 million crowns of ordinary expenditures there were current expenditures for mébilization which may range from 600 to 800 million crowns per annum and non- recurring expenditures for material totalling about 500 million crowns. JOHNSON EMB Copy:ec:1-16-42 TREASURY DEPARTMENT 197 INTER-OFFICE COMMUNICATION DATE January 12, 1942 TO secretary Morgenthau FROM pr. Bietrich CONFIDENTIAL Registered sterling transactions of the reportin, banks were as follows: Sold to commercial concerns £75.000 Purchased from commercial concerns £47,000 upon market sterling rewained at 4. 3-3/4. and , -re vere no reported trans- notions. 2/8 Consdirn dollar continued to react from its recent recovery, with physically до business being transacted. Today's final cuotation yas 11-5/8% liscount: RE compared with 11,> or Jenuary 9 are 14-5/8% on December 30, low point of last month's decline. In Ley York. closing cuotations for the foroi n currencies listed below vers A Collows: Argentico pero (free) -2355 Brazilian milreis (free) .0516 Colombian peso -5775 Mexican peso .2065 Lruguayan peso (teem) .5250 "cnesuelan bollver .2675 Cuben peso Par le sold $19,950,000 in goli to the \viss Rational Jani:, which 165.6 suied DO 1 (s BILL' arked account. of the 6010 used in this transaction, $10,000,000 une by us from the General Fund, through the lew York Assay Office. le Federal meserve Bank of Yew Toric redorted tart the Central 3en. of the vioubian Republic will ship 43,080,000 in goli from Colombia to the Federal for its J-70 account, disposition unknown. to London, spot silver whe a ain fixed at 23-1/24, equivalent to 42.67% de forwari ouotation advanced 1/16a to 23-9/16d. ecuivalent to 42.784. The Greasury's nurchase prive for foreign silver VSB unclunged et 35% RU nbd - settlement price for foreign silver use also unclanged at 11-1/83. de maie no surchases of silver today. A Regraded Unclassified 198 BRITISH EMBASSY WASHINGTON, D.C. PERSONAL AND SECRET January 12th, 1942 Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military dituation. Believe me, Dear Mr. Secretary, Very sincerely yours, (For the Ambassador) RJ Complete The Vonourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. Regraded Unclassified 199 COPY NO 13 MOST SECRET (US SECRET) 111 NO.11 Information received up in " A.M. 10th January, 1942, 1. DEVILL One of R.V. Destroyers -s minded and yunk off Shoernose on the afternoon of the ninth. There are <bout 59 survivor." and ,'O missing. - Aftarnoon 8. naval minés eeper TAB damaged by An accustic mine. She in able to steam sui no chsulties were reported. H.C. Enips bonterded HALPAYA Page on the eighth. 4th. Car of H.X. Submarines torpadood an Hallon 5,200 tcal ressel Supt of PALERIO off which she wap I/ter neen in tor. 5th. 2.30 F.M. n° of M.... Submarines ottacked an enemy cattleship escorted by & cruiser and five destroyers approaching TARANTO. Four torpedoes tere fired at long cange and a yery heavy explosion indicated a possible hit or the battleship. 2. Willtary Libra Btb. Our advance from JEDABYA continues. On the roal) to XL ACHEILA the Coldstroam Guards -ere helá up in the evening fifteen milios from JEDABYA and twenty miles further south our columns Pere In contact hith enemy armoured cara and artillory. Other columns are following the gen- eral line of the FADI a. FARIGH Certy miles South of JEDARYA but they have been delayed by bad going and have been attacked by dive boniers. Malaya 8th. Our forces were hervily engaged during the day.. No de- tailed reports yet available. British North BORNSO - CESSELTON must not be considered under entimy control. 3. Air Operations Testern Front Sth/9th. BREST 176 tons, CHEABOURG 16 'ond. Visibility ⑉06 poor but burste etv seen in the target areas followed by fires. The bombers missing. 9th. Two Spitfires sttacked & factory near ETAPLES and thot down tro out of four onesy fighters nich attacked them. /9th/10th. 8) bombers., Regraded Unclassified 200 - 2 - 9th/10th. 83 bombers ore sent to BRISS. A fe" other air- craft ere sea-mining. Reports not yet received. Rediterrenean Libyn ater-log ed sero romos in the for am wes have restricted our sperations. 6th. L squadron of Morylands bombed a norstal 705301 and stores lumps near HAS EL ALI. Blenheims bomber HALFAYA defences intermittently urin the day scoring hits on on emplacements S.T. and dumps. In the JEDABYA area ten R.A.B.F. Kittyhark fighters attacked 24 b mbers escorted by 28 fi hters hich were cive-borhing our troops. leven enemy aircraft ere destroyed, four probably destroyed und four lanaged. One Kittyhark is sizuing. Beaufighters 3et fire to a 300 tor ship off BUBRAT = HSUL. Far Bast - Alays 7th. For scored sour hits al severel next cisses or. = 600 ton Japanese ship 260 riles Feet of RUTA BHATS and on 7th und Rth L. Cataline bonbed GONG KITAS Aerodrate (nouth-Bass d' YOTA BE 30) 4. /ircraft La over end from the (rttish Isles. German 2 destroyed with 8th/9th, 7 missing 9th/10th, 1 mircing equals 3. Late 96 6. BP.ST. me income missing, the crashed of return, orew safe. Fix K...P. conners Food pers ishout carualties. Regraded Unclassified TREASURY DEPARTMENT 201 INTER OFFICE COMMUNICATION DATE January 12,1942 Secretary Morgenthou TO U.P. Kamarok FROM 34 Summary of C.C.I. Report: "Tre German Military And Economic Position." 1. The Germans nad 7.2 million sen in the age group, -1-77, and doet of these have been withdraws from industry Into the aray. Any logges of these men of the best fight- inv POBS are virtually irreolacemble. Based on the rate (f German losses in the Poliph compaten, the Germans nove probably And 1.5 million battle casualties in the Russian "nr, I' to December 10. (This number must he far below the rent figure, since the fighting in Russia has been several times more fierce then in Polani, Our "ilitary Intellizence believes that the most reasonable estimate or German resuelties to December 1 is 2.0 to 2.5 million nen.) 2. The seven million men that left German industry for the armed forces since the war began, have been nartly realaced by other workers totalling 8 little more than four million. These new workers consist of foreign civi- Iions -- Itelians, Poles, Croats, etc. -- A million end R orisoners of wer, and German momen. Qualitatively, of course, the recruits are not AS good workers 89 the Germans they replace. This impairment in the letor force, torether with some material shorteres and trensportation Jifficulties, must have caused e decline in the volume of industrial output in Germany. The British estimate this Decrease to be 88 much RP 20 percent. All of the decline in out ut, however, has been concentrated on the poode and services evoilable for consumers. Production of war meter- 1818 LAP increased. 3. There 1° no reliable evidence that either the cimlity or the quantity of military production DRB suffered, ng yes, 98 9 result of gnortnees of metals. The British wellat, Rovever, that there will be R crisis in comer RIC enrone during 1947. Regraded Unclassified 202 - 2 Practically all the estimates of the German oetroleum nogition indicate that Germany is maintaining its consump- tion by drawing on its petroleum stocks. The British indicate that the present rate of consumption, if maintained, will exhaust German resources in 1942. The O.C.I. study, nowever, believes that complete exhaustion of stocks is unlikely in 1942. The Russion campaign has imposed en additional burden on the Germen transportation network, resulting in some symptoms of A transport shortage, such 88 the accumulation of coal At pit-heeds and the delayed movement of croos. 4. There is no evidence of A collapse in Germen morale. The Propagende Ministry 1e presenting the alternatives facine the German people AB being total victory or total annihils- tion. If the German people are made to believe firmly that an Allied victory will bring vengeance and disaster, It will take many severe defeats to bring about e collanse of morale. Regraded Unclassified 203 RESTRICTED 0-2/2657-220: No. 598 M.I.D., W.D. 11:00 January 18, 1942. SITUATION REPORT I- Pacific Theater. Philippines: Air activity continues limited. Japanese patrols and artillery active as more Japanese troops move toward the Luzon front. a Jeruary 9 United States planes bombed Japanese forces in the Davno Bay area, scoring B. direct hit on B shore based antiaircraft battery and another direct hit on a battleship in Malalag Bay, setting the latter on Tire. Hawaii: Negativo reports. Malaya: Press reports that the Japan- ese have occupied Ruala Lunpur, and that British forces have withdrawn slightly south of that city. No further reports from the east. Burna: Light air activity constitutes the only action. Netherlands Buct Indies: No further reports on the landing at Tarakan, northeast of Borneo, but the press reports that other landings have been made in Minahassa (northern elg of Celebes Island). West Coast: No further reports of hostile activity have been received, II. Eastern Theater. Operations continue on the central sector of the eastern front, Russian pressure in being extended west of Kaluga, The Russians claim the capture of Lyudinovo (70 miles west of Bolev) and Tikhonovo Pustyn (north of Kaluga). There are no important operations reported on the remainder of the front. III. Western Theater. Air: Air Ministry stated this morning that British bombers own attacked Brest lust night. All the planés returned safely. IV, Middle Eastern Theater, Ground+ Diminishing of activity in the Agheila-Acedubin sector 15 probably due to shortage of fuel and supplies for both forces. Con- Timed aerial, naval and artillary Bombardment, broken by minor raids anyer activities in the Sulum-Halfaya sector. Air: Bonbing of rear supply areas in continued by both British at Axis air Forces. Axin oir forden continue bombing Malte. RESTRICTED Regraded Unclassified 204 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Tuesday, January 13, 1942. No. 29-49 1/12/42 Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of 2 percent Treasury Bonds of 1949-51, open to the holders of Treasury Notes of Series A-1942, maturing March 15, 1942, the 3 percent Federal Farm Mortgage Corporation Bonds of 1942-47, called for redemption on January 15, 1942, the 2-3/4 percent Federal Farm Mortgage Corporation bonds of 1942-47, called for redemption on March 1, 1942, and the Reconstruction Finance Corporation notes of Series R maturing January 15, 1942, will close at the close of business Tuesday, January 13, except for the receipt of subscriptions from holders of $15,000 or less of the two issues of Federal Farm Mortgage Corporation bonds. The subscription books will close at the close of business Wednesday, January 14, for the receipt of subscriptions of the latter class. The offer to apply the pro- ceeds of payment of the 3 percent Federal Farm Mortgage Corporatio bonds and the Reconstruction Finance Corporation notes, and the offer to purchase 2-3/4 percent Federal Farm Mortgage Corporation bonds, in each case the principal proceeds of payment to be applied to payment for a like par amount of the new Treasury bonds will also terminate at the time the books close for the receipt of subscriptions of the respective classes. Many smaller holders of the bonds do not have as immediate access to their securities, and are not as conversant with the manner of entering subscriptions, as the larger holders, and for these reasons they are given an extra day in which to take advan- tage of the offering. Regraded Unclassified 205 -2- Subscriptions of either class addressed to a Federal Reserve Bank or Branch, or to the Treasury Department, and placed in the mail before 12 o'clock midnight of the respective closing days, will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and their division among the several Federal Reserve Districts will be made later. -o0o- Regraded Unclassified 206 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Tuesday, January 13, 1942. No. 29-50 1/12/42 The Secretary of the Treasury announced last evening that the tenders for $150,000,000, or thereabouts, of 91-day Treasury bills, to be dated January 14 and to mature April 15, 1942, which were offered on January 9, were opened at the Federal Reserve Banks on January 12. The details of this issue are as follows: Total applied for - $384,694,000 Total accepted - 150,047,000 Range of accepted bids: (Excepting one tender of $300,000) High - 100. Low - 99.963 Equivalent rate approximately 0.146 percent Average = " II 0.119 If Price - 99.970 -000- 207 January 13, 1041 9:15 a.c. PINANCIAL ASSISTANCETO CITINA Present: Mr. Currie 11. Foley Mr. Bell Wr. Viner. ...r. Hernstein- Mr. Coe Mr. Southard Mr. Hell- Mr. Hornbeck- Mrs. Klotz A...OR: Am I supposed to read this? has anybody else -ot copies? 10. COE: I just finished it last night. h.w.JR: Can you tive copies to these two entle- men? its heavens, it is E long memorandum. 13. COE: It is all on the first page. H.M.J.: well, here is the point. The Chinese will have to decide whether they like U. S. dollar currency or not. I made the proposal yesterday to 1. V. soons, and he seemed to like it very, very nuch, and to -ive you the back round, I waswholly indiscreet last night and enjoyed it. I first tried it out on califax, and it W&S all right. Then for onehour I zot kr. Churchill thinkin- about China. For one hour we talked about China. He is not supposed to be in mashington. lie isn't supposeuto be here. So I -ot him quite excited and I ot Lord seaverbrock quite excited Regraded Unclassified 208 - 2 - with the result that they are going to recall Sir Otto Niemeyer, 80 he said, "He is a penny-pinching so-and-so of B. Treasury man. He said, "He was there when I was in Treasury. I know what kind of a fellow he is. Who- ever sent him out there?" So the last thing 88 I left Halifax said, "I would like to see the telegram that goes out tonight on Otto Niemeyer." He says, "It is going to be & pip." He didn't use that language, naturally. But the point that Churchill got, he could see that they might figure it would be a time where you couldn't count on the White races and the yellow races had better get together. I am talking officially now. He said, "If there is anything the United States Treasury wants to do, you take the leadership and we will go along with you. We will back you up a hundred percent." I didn't bring up with him the question of Rangoon, but Lord Halifax told me that they have had several cables from the Government there and the thing isn't nearly as bad as it is made out to be, so I suggested, if it isn't, that he tell that to T. V. Soong. MR. HORNBECK: You say not as bad? H.M.JR: No, from the English standpoint. The last couple of days, he said, he has had their side of the story, and it wasn't nearly as bad. But at least I got Churchill's mind on it. He was very much interested. They all seemed to like the idea of this business of the soldiers. He raised & very good suggestion. He said, "Don't forget the Maria Theresa dollars that they used in Abyssinia. We might get up & special dollar for China." (Mrs. Klotz entered the conference.) MR. SOUTHARD: We used to have one didn't we, Mr. Secretary, many years ago? MR. VINER: The China trade dollar. We had 8. special one. H.M.JR: They would love that. What about the China trade dollar? Regraded Unclassified 209 - 3 - MR. SOUTHARD: It was a heavy silver dollar. H.M.JR: Meaning that they could-- MR. SOUTHARD: A little heavier than our standard dollar To meet some competition-- MR. VINER: Of mints. It was a manufacturing prestige proposition. We made some profit on it, didn't we? MR. SOUTHARD: Yes. We would have a transporta- tion problem now, I suppose, in getting heavy money in there. MR. VINER: Of course it is of question now of whether you want to get China back on anything like a metallic standard, and what that would do to the remainder of its paper standard. I would like to hear Currie on that. MR. CURRIE: I am thinking over some difficulties of a mechanical sort, Mr. Secretary. When I mentioned the soldiers, I was thinking more of the bookkeeping end of it. We would set up the account here, an amount equal to being sufficient to look after so many soldiers. If we put our own dollars over there, Mr. Secretary, I fear that you will have about ten thousand black markets all over the place with the soldiers and the small people rather being victimized on the rates of exchange. With B. bond issue, a dollar backed bond issue, it can only be exchanged at the official rate with American dollar bills. You will have an infinite number of quotations and speculations and a good medium for hoarding so I think on mechanical grounds there would be some difficulties. H.M.JR: Oh, yes, but don't - look, give Soong a chance now. He likes this. I am looking ahead. I may be all wrong, but I thought it might appeal to the President and to Congress, the idea of establishing the dollar as the universal currency. I mean, we have got Regraded Unclassified 210 - 4 - to do something, and if we followed the lead, Lauch, that they gave of using our money to buy up their trash, it is a bottomless pit. They could use a billion dollars to buy up their trash, and then they would have nothing when they got through. MR. CURRIE: Well, I don't want to be pedantic about it, Mr. Secretary, but there are usually two possibilities. On the earlier stage of inflation, if you put up good money, you run up against - bad money drives out good. This will be a medium for hoarding. At a very late stage of inflation, good money will probably drive out the bad. The other stuff ceases to circulate, such as the introduction of the new mark in Germany. H.M.JR: I am amazed at you quoting Gresham's law. When has Gresham's law worked in the last ten years? Give me an example where it has worked in the last ten years. MR. CURRIE: I don't think we have had any examples of two currencies circulating side by side. MR. VINER: Each one freely issued. MR. CURRIE: Each one freely issued and one being more valuable than the other. That is the only case where Gresham's law is supposed to apply. The only illustration I used to get when I taught at Harvard of exception was the gold in the Spanish War, and that was because they shot anybody who tendered a greenback. H.M.JR: Mr. Churchill kept saying, "Can't you give them a little gold?" He says, "As far as I am concerned, if I could lay my hands on & little gold, I would be very happy." MR. CURRIE: Gold would disappear immediately, Mr. Secretary, through hoarding. MR. VINER: Gold is too expensive to circulate in Regraded Unclassified 211 - 5 - China and the smallest coin would be too big. H.M.JR: Lauch - excuse me Jake. IR. VINER: That is all. H. Jr: The coin would have to be 30 small that it would be insignificant, but I B.I.L not going to be certainly a perty to what - and T. V. Soon- told 1,8 honestly he couldn't present = case. I said, "After nll, you DOVE not all the moods you want in Rangoon, and you can't begin to move them. You haven't touched your fifty million dollar fund." And he said, "Now, 2 know that. If Re said, "I have not to put it in the language of the Generalissimo. lie is a general. How can le say where is going to use five hundred thousand troops? de has ot to have them in reserve and then use them.' I said, "How, you have told your story," and he kind of lauched. Rut when I -ot on this basis of paying the soldiers in il. S. currency, he liked it. Now the difference was, there are two important thin 3. After "11, the soldier idea W&S yours in the first instance, end the C. S. currency is mine. If we could ret cut of this thing for the next two or three months at five to ten million dollars a month, and I drove it home very hard that this was a month to month basis, then we et by the coint, are they -oin- to fight or aren't they coin to fight. It doesn't rive them the excuse to say, "Well, you refused NS a billion dollar loan, and therefore we are coing to make neace." So I Am Just saying this. I an not trying to lay down the law oither. "ut if T. V. Soons would - and the Generalissimo would fall for this, and they would be willing to let us buy them off for five or ten million dollars a month for the next three months, Gresham's law or no Cresham's law, if I could see three months ahead I would recommend it. I don't know how you feel. MR. CUR-TE: It is just the difference of mechanics, M. Decreter, because as you say I surrested the soldier thing, but that is for the bookkeening. We would take over the cost of operating the Burma Road or the cost of civil government or the cost of 8 million Regraded Unclassified 212 - 6 - Chinese soldiers. Ne would pay into the Chinese en amount sufficient to equal at the current rate of exchange to that cost. They would issue the fani, you see. As I recall, wasn't there some cables from Fox complaining about the circulation of some of the American dollars in China? MR. BELL: In Shanghai. MR. BERNSTEIN: That WAS in Shanchai. MR. CURRIE: They were very worried over it. MR. BELL: Don't you think, Lauch, that the hoarding would come after the circulation of this currency had done a lot of good? In other words, you would put these dollar certificates in the hands of the soldiers, and they would spend them, and then after that maybe some- body would hoard them. MR. CURRIE: That is right. MR. BELL: The -ood would have been done. MR. CURRIE: My real fears come in there in the thousands and thousands of little black markets and the varying quotations and no two soldiers would ever get the same amount for their dollars. MR. BELL: Couldn't the Government fix et rate? MR. CURRIE: The money changers here-- MR. BELL: Couldn't the Government fix a rate at twenty to the dollar? MR. COE: The Government could fix a rate for the soldiers. The quartermaster could be the exchange master. Thereafter it rets out. R. VINER: Into the market. MR. SOUTHAND: Couldn't the black market be over- come by the Government using large denomination bills Regraded Unclassified 213 - 7 - and purchasing provisions and equipment, and then dis- tributing that? It is a matter of large quantities of rice and you could give very large denomination bills, five hundred dollar bills and hundred dollar bills could be used by the Government. What difference would it make if they were hoarded by the rice dealers? MR. BELL: That is a thought. H.M.JR: Well, again, if what's-his-name is going to go Biblical on the money changers, I will go back - I don't like the idea of hiring a lot of Hessian soldiers either to fight our war. Now, what we are talking about is, can we hire a million soldiers to continue fighting until we get going? I mean, that is the bald fact of the thing. MR. CURRIE: Well, I don't think it is quite that. H.M.JR: Well, I Am going you one better. MR. VINER: They have something at stake too. H.M.JR: No, but if you want to be sentimental or anything else about it, or moral, rather than senti- mental, you are talking about renting & million soldiers as cheap as we can to fight our wars. MR. BELL: I think the American currency might instill enlistments-- H.M.JR: That is worse. I wanted to make it worse. MR. CURRIE: Since we are using these symbols, Mr. Secretary, I will say this smacks of imperialistic practices. H.M.JR: I want to make it sound very bad, so that you will withdraw yours. MR. CURRIE: Because it - that is something that you could very properly leave to the Chinese, after Regraded Unclassified 214 - 8 - turning it into dollars. If they in turn want to turn the dollars into currency and take them back to China and use them that way, I assume we would have no objection. H.S.JR: Now, that is nice. X. CURRIE: I mean, I would advise against it. Jlt: Would you fight against it? 15. CIRRIE: I wouldn't want to interfere with their own setup. H.M.JR: would you fight against it? MR. CURRIE: I would strongly advise against it. All I ever do in 457 life is to advise, anyway. 11.M.JR: You advise against our -iving them U. S. currency to take back instead of a book credit? IS. CURRIE: Yes. Are you with him, Viner, on that? VINER: Oh, I think that the one important thin: is that we 20 ahead on something. I think that-- IC., CURRIE: It has got to be-- IR. VIDER: Wait 8 minute. I was roing on. I an impressed by his argument 88 to what circulating dollars would do in China, and my - I am also impressed by some- thing that I have just seen in this memorandum that I certainly wouldn't have imagined beforehand, that dollar bills are more bulky than rold, and I was concernes with Lauch's point vesterday that if you start shinning lots of -old over there, you are using up valuable transport space. Te have got Et transport problem even with dollar hills, but the issue isn't whether you - something shall he done, I think that is clear. It is a question of just Regraded Unclassified 215 - 9 - what the mechanism is. Now, you may recall that yesterday I said there is another phase that seems to me important. We have got to try to help them to mop up some of their currency. You are very pessimistic about that, and I have no judgment on it. H.M.JR: It is impossible. MR. VINER: You think you can't rely upon them at all. I don't mean so much to reduce the outstanding amount now, but as to act as a real brake to the extent to which they issue for their paper currency. H.M.JR: As far as I am concerned, I think it is impossible. They can't control it. They haven't got the machinery. MR. CURRIE: I wonder if you are getting together on this? I don't think you would say it is impossible for them to issue dollar backed bonds. What I think you have in mind is that they won't stop the printing presses. H.M.JR: Yes, that is right. I don't know whether you agree with me on that. MR. CURRIE: I would agree with you on that, sure. MR. VINER: So you think that on that basis, there has to be two currencies in China to cure this situation, but you prefer it shouldn't be - the second one shouldn't be U. S. dollars and should be dollar backed bonds? H.M.JR: Well, look, gents - does the State Depart- ment want to enter any objection? We are getting very technical now - on the approach that if it is acceptable to the Chinese, we do something to help them with their army, just that one thing? How we help them for the moment is unimportant. Regraded Unclassified 216 - 10 - MR. HORNBECK: As far as helping them with the army is concerned, I am sure we would not enter any objection on that. As iar as the idea of anything in which it would appear that we are doing the thing you characterized a little while ago, hiring Hessian soldiers, as far as that would appear, we would feel that that would be a pretty risky sort of thing from a political point of view. I talked with the Secretary about that and talked with Hamilton. H.M.JR: And you are willing to have us give them the planes and the pilots to fly them? MR. HORNBECK: Oh my, yes. H.M.JR: But you are not willing for us to pay the Chinese-- MR. HORNBECK: When you actually begin to hire human beings to make it more or less our hired army - we haven't gone very far into it because, as you know, I only found out about this late last evening. We just had a sketchy sort of conversation about it. But may I make one observation. You have expressed twice the idea that we have the problem of getting by the next two or three months, getting by the period in which we are going to have reverses and so forth, presumably. Now, it would seem to me - I am just thinking out loud - that that is not so difficult & problem if we are in position to assure the Chinese that we will give them this financial backing to the extent of three hundred million or five hundred million or whatever it is when we come to an agreement with Chiang by which he understands that it is going to be forthcoming, the details to be settled later on. I think that would pretty well take care of this question you raised, the question of whether the Chinese are going to fight or not going to fight. As you realize, Chiang Kai-shek is absolutely determined to fight. The problem that we have is the problem of giving Chiang and his immediate and loyal entourage a sufficient amount of support to enable them to over- come any objections or defections or anything else of certain opposition groups, not disaffected groups by any Regraded Unclassified 217 - 11 - means, but the defeatists and the appeaser groups and so forth and the Chinese articulate personnel. Now, if Chiang can say he has got the financial backing of the United States of several hundred million dollars, I think that would take care of that, and it doesn't have to be specified at this moment or in the next Week or the next two weeks exactly how you are going to do that. H.M.JR: Well, I don't - I won't argue now, but I don't agree with you. Whenever I have told the Chinese I am going to do something, I have thought it out and done it, and I haven't made them a promise, and then for some reason or other been unable to do it. He knows that. I mean, I wouldn't promise two or three hundred million dollars and then say, "We will work it out," and then have it come out twenty million dollars. Well, let me find out how the President feels. T. V. Soong has sent a message taking this suggestion. We will get a reaction from it. If you want to discuss this currency thing, Bell, if you would take this group into your room for 8. few minutes. MR. BELL: All right. H.M.JR: I would like you to discuss with them the pros and cons of sending this currency over there. I would like it very much. Could you give a little more time to this? MR. CURRIE: Yes. H.M.JR: And I will go over and see how the Presi- dent feels about it. Regraded Unclassified Treasury Department 218 Division of Monetary Research Date January 12,1942 19 To: Secretary Morgenthau v. F. Com From: The appended memoranda may be helpful to your 1. A statement of "proe" and "cone" of your proposal. 2. Drafts of suggested public announce. ments of the loan by the President and yourself, either or both of which you might want to show the President. 3. A draft tele ran to Dr. suns, to start the ball rolling. Regraded Unclassified January 12,1942 Secretary Morgenthau V. 1. Coe ubject: Secretary's Proposal for Loan to China. 1. The proposal of the Secretary is that the United States should nesist China in financing her military expenditures, and particularly the pay and maintenance of the Chinese boldiers. Preliminary examination indicates that 4b. loan to Coina along the above lines can achieve the major objectives which should be the soals of this government in relation to the pre- sent loan. It would be desirable, if the President agrees, to tell the Deneralissimo that the Secretary 1a ready to discuss this proposal, mons others, end to make a public announcement that ne otiations have begun. However, there are a number of different ways in which the secretary's proposal micht be carried out, and each of them needs to be explored. In view of the fact that 4 good deal of information essen- tial for a decision is lacking, and that each of the possible ways for carrying out the Secretary's proposal has its strong and its weak points, it would seem desirable that the announce* sent should be general, and not be confined to a specific proposal. II. Some of the possible ways whereby the United States could finance Chinese military expenditures are the following: 1. Shipment of United States' currency to China and its issuance there as pay for moldiers and other silitary expenditures. 2. shipment of United States' surrency to unine and its issuance there for the purchase of rice and other products for distribution to and use by the army. to Secy 1/13/42. Regraded Unclassified Division of Monetary . 2 - Research 3. Giving China dollar accounts in the United States, against which she could issue bonds, the fapi proceeds of which could be used for military expenditures. 4. Giving China earmarked sold, against which bonds could be issued as above. In order to evaluate these and other proposals, " ought to know more than we do as to how the Chinese Jovern- ment 10 now paying its soldiers. our present information is only that some yuan per- ments are made and some rice payments are made, and that there is considerable variation in the amount and method of payment. Particularly with regard to the proposal to distribute United tates currency in China, either for pay or for supplies, it is necessary to obtain more information 15 to how the people and the Government would react to this procedure. III, A preliminary lieting of the prom and cons of the moet novel of these proposals, (proposal number 1 above) is given below. IV. Advantages of using United States' currency to pay soldiers and to moet other military expenditures in China. 1. This proposal is in accordance with the political eim of the loan -- to assist Chinese military effort. 2. This kind of lean would meet the political necess- relating the size of the loan to the size of ity of making a large and spectacular loan. By Chinese military expenditures, this proposal helps to settle the question of how large the loan should be. 3. The Secretary's objective of paying out the money in installments, while fighting was soing on, would be achieved. Regraded Unclassified Division of Monetary - 3 - Research 4. This loan should secure the Good-will toward the United States of the soldiers, ordinary people and the Government. This would be particularly true, if the smount paid out to the army meant that the effective purchasing power of the average soldier was increased. 5. This proposal is in the direction of attempt- ing to make the 0.5. dollar surrency into an international money. 6. In 80 far as the soldiers and suppliers of military goods would accept U.S. dollars, the fight against inflation would be helped, since the need to issue more Chinese currency for these purposes would be eliminated. 7. Because the dollars would be hearded by some people, the tendency to hoard goods would pro- bably be diminished, Not only because of the inflation, but also because Chinese traders and merchants have had considerable experience with various surrensies, it would be more feasible in China than elsewhere to introduce a foreign currency into the monetary system. 8. It would be possible to meet these payments from Lend-Lease, if this method is thought preferable to use of the Stabilisation und or to an authorization from Con ress to lend to China. A number of the above advantages could also be achieved by the issuance of bonds, payable, when due, in U.S. dollars. The use of U.S. currency to pay for rice to be distributed to the troops would also share in some of the above advan- paid to the troops is not large, and if it is doubtful tages. If it proves to be true that the mount of yuan that now the troops would accept pay in U.S. currency, the proposal to buy rice and other supplies with U.S. currency may be more {sasible than proposal II 1. Regraded Unclassified 202 Division of Monotery - 4 - Research Y. Disadvantages of the proposal. 1. Chinese soldiers and ordinary people might be unwilling to accept United States' dollars, because all their purchases are made in yuan, because of the novelty of the surrency: and because the denominations which could be eventually shipped, would be too large for their purposes. Accordingly, the government would have to provide year equivalent and there would be no diminution in the amount of Chinese dollars printed. 2. The United States' dollars which were issued would be hearded and speculated in only by the wealthy. There would be thousands of black markets with rates different from the official one. 3. The Chinese people might interpret the issuance of the new currency to mean that the yuan ware to be recalled, or abandoned. Therefore, the confidence in the Chinese surrency might be still further undermined. The Japanese, along with the Chinese speculators, would want to obtain United States' dollars for the plenti- ful stocks of fapi which they held. Their throwing of these fapi on the market would further decrease the value of Chinese currency. 4. The difficulties of safe transport would be large. $10 million worth of $1. United States' notes weigh over ten and a half tone, or, just about what the same value of gold would weigh. 810 million worth of 05. notes weigh over two tons. Shipment of this amount of small notes by air would, therefore, be a considerable undertaking, at & time when much preeious eargo must be flown. The transport of this presious carge over the Burns Road would require a good deal of armed protection. Both governments would use up a good deal of energy and adminis- trative ability on this problem of a safe trans- port. (The transport difficulties could, of course, be greatly reduced if the United States' currency were used to purchase supplies, and not for the pay of soldiers.) Regraded Unclassified 227 Division of Monetary - 5 - Research 5. Payment of United States' dollars to the troops might increase corruption in the army. There might be, in addition to the insentive to profiteer on the soldiers, & large number of spurious supply contracts. 6. Dissatisfaction of the soldiers with the rate of purchasing power of their pay wight be deflected from the Chinese to the United States' Government. 7- Speculators, exchange traders and sharpsters of all sorts, would prey upon the poor par- sons who receive the United States' dollars, and would deprive them of the benefits which the dollar payments are intended to secure. B. The Generalissimo and many other Chinese might regard this proposal as a method of making China dependent upon the United States through depriving her of a separate monetary system. 4/201 1/12/42 Regraded Unclassified 224 coight of Various Amounts of United States Currency Wedght of Height of Denoximation 65,000,000 $30,000,000 $1 10,625 lbs. 21,250 lbs. s 2,125 4,250 10 1,0621 2,125 20 5334 1,062 The above is for - currency all by the Treasury to the Federal Reserve Beniss. Notes are all shipped is pack- agas of 4,000. Mach passings weight approximately as 1bs. varying commission from package to package. The weight includes the paper wrapping each package and stuel bending. the currency paper alone, unprinted, weights 8.0541 lbo. per 4,000 notes. 1/12/42 Regraded Unclassified DRaft of Statement by President on Loan to China President Roosevelt announced today the United States stood ready to assist China by financing her military expendi tures, including the pay of the Chinese seldiers. At the request of General Chiang Kai-Shek, he was asking the Secretary of the Treasury to open financial negotialisms with the Government of China to this end. the President said that this step was an example of the spirit which animated the United Rations Declaration and of the fire intention of the pledged nations to cooperate in all ways possible to achieve their counce objective. The President pointed out that the Chinese have been fighting for four and 1 half years) that they were continuing to fight, and that just the other day at Changaba, they had won 8 brillient victory over the Japanese army. Not only were there willions of Chinese soldiers fight- ing the common enemy, but virtually the whole population was resisting the invader. The President said that these huge military operations called for immens expenditures by the Government of China and the affort of meting these huge expenditures had severely strained the financial and socnomic yates of China. The President expressed complete agreement with the statement made by the Generalissine in & note to the President that 1% was escential to the conson war effort that the economy of Chine should be nade as strong as possible. The President pledged that the United tates Government would render every possible assistance to help feed and clothe the brave soldiers and people of China and do all possible to strengthen China's financial and monetary system, 1/82 1/12/62 Regraded Unclassified 226 Preposed Statement by Secretary Morganthes - Lean to China Secretary Morganthau amounced that at the President's request, be will opening negotiations with the Chinese Government for additional finm- sial assistance. The Secretary said that the purpose of this assistance will to help China in mosting its current wir expenditures and to keep its fighting soldiers paid and fed and clothed. Secretary Morgenthau said that even before December 7, this govern- sent had, through the Stabiliastion That and the Export-Import Bank, No- dered important financial aid to China. the Secretary mid that despite the most difficult siremstances under which the Chinese Government had had to operate, 1% had scrupaleusly lived up to the terms of all of its financial agreements. Secretary Marganthau stated that the cost of the var to China wes extremely large in relation to the financial of the country. Neverthaless, the Generalissime, the Government, and the people had net best tated to throw everything that they personsed into the struggle. The Secretary said that he - sure that the attitude of the whole American people - stated by the President and that our people would want to help the Chiness people in the financing of this 1 The Secretary said that be was particularly interested in exploring ways whereby the United States could help in paying and maintaining the Chinese andes. The Chinese financial problem, the Secretary stated, 10 a problem of paying for an any of millions of ass. In the effort to most this situation, the financial resources of the (mmet and the people have been drained. Pricess have rism and are rising very rapidly. The Regraded Unclassified 227 - 2 - internal financial and economic strustion is serious. The Secretary said that he was convinced that 18 was corential to the Chinese w effort that China should be assisted in meeting these finanzial burdens and in maintaining on efficient commy. The Secretary announced that he was recelling Mr. A. M. Fex, the American member of the Chinese Stabilisation Board, for advice and participation in the discussions concerning financial assistance to China, 2/12/62 Regraded Unclassified 228 DRAFT TELEGRAM FROM SECRETARY MORGENTHAU TO FINANCE MINISTER KUNG In UNIT to your mossage, dated January 9th, transmitted through Mr. you, I an haygy to inform you that the President has anited - to begin asgotiations with the Chimase Government relating to financial assistance. The President mgests that W explore all the possibilities wherely this dovernment could reduce the financial burdens on China of her war expendi- tures, including these of paying the brave Chinase soldiers. The President is miding public this decision. I un mare of the financial difficulties you have had and recognise the force of your statements that your soldiers and people must be fed and clothed, that your financial and economic system must be strengthemed, and that the United Nations mut help each other to met the economic trials of mr. The people of the United States and their Government low that your people has fought this ver long and will. We will glaily occperate to help you to meet your economic problems. I shall welcome all proposale from you as to the ways by which the United States can help finance your military expenditures or strangthen your monetary and financial system. We feel that the political and military purpose of the loan you pro- posed would be beet achieved through an arrangement by which the United States could help finance your current military expenditures. This Idea, however, will require detailed consideration, and I shall be glad to receive your ideas on the subject. No especially need information M to Regraded Unclassified 229 - 2 - the different ways in which you name these additory expenditures, isoluding pay to the soldiers. I an hopeful time the regotiations can be curried forward rapidly. We have informed the British Government of this reply to your message. V/C:meh 1/13/42 Regraded Unclassified 1/13/42 230 The Secretary brought back the original memorandum and gave it to Foley. The President verbally O.K'd it and told the Secretary to go ahead and take the steps proposed in the memorandum. TO: 231 MISS CHAUNCEY Mr. Foley carried the original to the Secretary this morning and it is our understanding that the Secretary will rry it to the White House. Since all communications going to the President should be submitted in duplicate, am sending you two extra copies, one for your files. MR. FOLEY 232 JAN 3. a 1942 Secretary Morgentheu Mr. Poloy Last Saturday, in accordance with your instructions, I sent A copy of the resorendus, which you want to the President last Friday, relating to or investigation of the General #niline and Film Corporation, to the Secretarios of State, War, Navy, Agriculture end Commerce, the Attorney General, the Comptroller General, the Coordinator of Information, the Chaire.n of the Securities and Exchange Commission, and the Office of morgency Management. These agencies have had relations, contract OF otherwise, with General Ani lne. In each letter of trunsmittal I ruggested Us advisability of taking store to eliminate situations of the character described in the memorandum. If you spren, 10 now propose to take the following additional stoons (1) Preoze the funds and suspend and bar from the premises of the comply the following officials who incarnate its I. G. Forben domination: Rudolyh Ruts - vice president and director of the company - salary, $40,000 No. year, the Mickelin - vice president and production sensger of the General ini.ine works - salary, $60,000 - year, Leonold Sokler - seting general MID-20P Igfu inaco Division - solary 827,000 - year, Villiam you Rath - vice president and secretary of the company, supervising the Ocslid Dividion - solary $46,000 - year, F. 1. von Voister - general manager Division - solary, $18,000 - year. 611 of these officials are naturalized Americ-n citizens with Garnac Backgrounds who, prior to their arrival in this country from Generaly, vere Approciated with I. G. Perben. (2) " to subject to freezing control, IMI A. restricted opecil License basis, twenty-five additional 02/10/19 of the comminy #7484 Benes appear on the attached list. Cake the foregoing officials shom De PO-OR- to suspend from the company, these individuals have Gerest origina of then being Germs Elimma) and have boen clonely identified with :. C. Firben for may years. At the present time -- do not insered to surpend Union eroons, but will supervise then through evotrol of their Pronis sending further investigation. Regraded Unclassified 233 Regraded Unclassified - 2 - The actual operations of the General Amiline and Film Corporation in all significant respects have been, and are, dominated and controlled by I. G. Farben, the German Dye Trust - which 1a the Masi Government. 40 I indicated in my separandus of January 7, 1942, the Osalid Division of the company, whose active heads and guiding spirite are William TOB Rath, known to have been connected with the German Secret Service in the United States and Switserland during the last var, end F. W. von Meister, VOB Rath's relative and junior aide, constitutes a wide-spread organisation with us- paralleled access to industrial defense plants and government agencies. To have avidence that the operations of this division included the sending of information to Germany. Be have found that the Agfa Insco Division of the company has a number of government contracts for the development of film relating to vital military secrets. fe have also found that, until recent weeks at least, the Division has been conducting experimental work in aerial photography and related out- jests with the Army. The seriousness of this situation is emply indicated by the fact that film development work for the Army has been carried on under the supervision of German aliens and naturalised German aliens who personify I. G. Farben domination. The General Aniline Division of the company, which is sugaged in the production of chesicals and dyes, is also permeated by I. 0. Farben sen and, in many instances, by evered Nasis. A major part of the work of this Division is the production of materials for other industrial concerns having government contracts and orders. 7e already have ample evidence to support the foregoing conclusions and to justify the stops we propose to take. is ⑉ proceed with our examination of the affairs of the company and its personnel, additional noves will be in- dicated, including more definitive action with regard to the individuals 70- ferred to in this memorandum. If this action meets with your approval " will issue the necessary instructions to the Federal Reserve Bank of New York and John E. Mack, the president of the company. Approved: JJO'C.gmb 1/13/42 234 berner Alaxewise Arich C. lott fari 1. From 1, Eneder Prons Philipp Elventel Ludwig Richter Ferdinand fitiens horst "ione George 1. Brottschneider Druno Charles Roshrl Frita ", Dersch Dr. Trich Reasbook Vermann Duerr, PT. lians Nert-t Sacha Mari 11. Foo-ton Dr. Billy :. schmidt .r. H. ". Grimmel Trich Schoder Hermann Moorlin Osker Schults Carl Bueller Keny Stoeckel Frite Multer Belmuth Rualler, Dr. J. Rudolph worch Paul Regraded Unclassified TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE JAN 13 1942 Morganthan Faley last Saturday, in accordance with your instructions, I sent a copy secreasive, which you sent to the President last Friday, relating investigation of the General Aniline and Film Corporation, to the formaries of State, Mar, Havy, Agriculture and Commerce, the Attorney the Comptroller General, the Coordinator of Information, the of the Securities and Exchange Commission, and the Office of Improvey Management. These agencies have had relations, contract or otherwise, with General Aniline. In each letter of transmittal I suggested the advisability of taking steps to eliminate situations of the character described in the sesorandum. If you agree, we DOW propose to take the following additional steps: (1) Freeze the funds and suspend and bar from the premises of the the following officials who incarnate its I. G. Farben domination: Rudolph Huts - vice president and director of the company - salary, $80,000 a year, Mans Lickelin - vice president and production manager of the General Aniline works - salary, $60,000 a year, Leopold Eckler - acting general manager Agfa Ansco Division - salary $27,000 a. year, William vom Rath - vice president and secretary of the company, supervising the Ozalid Division - salary $46,000 a year, F. T. von Meister - general manager Ozalid Division - salary, $18,000 6. year. All of these officials are naturalized American citizens with German premis who, prior to their arrival in this country from Germany, were dated with I. G. Farben. (2) We propose to subject to freezing control, on a restricted license basis, twenty-five additional employees of the company - appear on the attached list. Like the foregoing officials whom proce to suspend from the company, these individuals have German origins of then being German aliens) and have been closely identified with Turben for many years. At the present time we do not intend to suspend persons, but will supervise them through control of their funds pending investigation. Regraded Unclassified - 2 - The actual operations of the General Aniline and Film Corporation in all d afficant respects have been, and are, dominated and controlled by I. a. Farben, the German Dye Trust - which is the Nezi Government. is I indicated in my memorandum of January 7, 1942, the Osalid Division of the company, whose active heads and guiding spirits are William vom Rath, books to have been connected with the German Secret Service in the United States and Switzerland during the last war, end F. W. von Meister, vom Rath's relative and junior aide, constitutes a wide-spread organization with 10- paralleled access to industrial defense plants and government agencies. No have evidence that the operations of this division included the sending of information to Germany. We have found that the Agfa Ansco Division of the company has a. number of government contracts for the development of film relating to vital military secrets. We have also found that, until recent weeks at least, the Division has been conducting experimental work in aerial photography and related sub- jects with the Army. The seriousness of this situation is amply indicated by the fact that film development work for the Army has been carried on under the supervision of German aliens and naturalized German aliens who personify I. G. Farten domination. The General Aniline Division of the company, which ia engaged in the production of chemicals and dyes, is also permested by I. G. Farben men and, in many instances, by avowed Namis. A major part of the work of this Division 10 the production of materials for other industrial concerns having government contracts and orders. We already have ample evidence to support the foregoing conclusions and to justify the steps we propose to take. As we proceed with our examination of the affairs of the company and its personnel, additional moves will be in- dicated, including more definitive action with regard to the individuals no- faired to in this memorandum. If this action meets with your approval wes will issue the necessary tructions to the Federal Reserve Bank of New York and John E. Mack, the mident of the company. loved: JAN 1 3.1942 Hmh- Regraded Unclassified des Erich C. Pott P. Raeder App Bluemnel Ludwig Richter Bosse Horst Rinne attschneider Brumo Charles Roehrl dersoh Dr. Erich Rossboch Dearr, Dr. Hans Werner Sachs Foesten Dr. Willy A. Schmidt 1. Crimmel Erich Schoder Fourlin Oskar Schults der Emay Stoeckel ltar Helmuth Mueller, Dr. J. Rudolph Worch (Insky Regraded Unclassified 238 January 13, 1942 10:40 a.m. FEEEZING - GENERAL ANILINE AND FILM Present: Mr. Foley Mrs. Klotz Mr. O'Connell H.M.JR: Well, it worked beautifully. I read the thing to the President and he was extremely interested, and when I got through he said, "Do you know what my answer is, Henry?" I said, "No, Mr. President." He said, "Well, in case anybody asks you, you can say that the President has read it and his answer is, 'KIll the son of a bitch.' Excuse me, Mrs. Klotz. T apologize to you, but I am just repeating. MR. FOLEY: Good. H.M.Jie I am sorry, but this is what he said. MRS. KLOTZ: I enjoy it. MR. FOLRY: I think she probably feels the same way. H.M.JR: I told you I was going to repeat what he said, but that was his language. I am going to tell Crowley myself. Re has made up his mind. I an going to tell him that you will furnish him with a copy of the memorandum. Va. FOLFY: Right. H.M.JR: And then the President said, he wants to know who in the Army sent this stuff up. So I am going Regraded Unclassified 219 - 2 - to, while you are here, call up Colonel Smith and say, "The President wants to know who in the Army sent films up to General Aniline to be developed. MR. FOLEY: I think O'Connell 0' knows. He knows from that angle. H.M.JR: Well, send for him. MR. FOLRY: Let's have him in here. (Mr. O'Connell entered the conference). MR. FOLFY: Joe, do you know Who it is in the Army that has sent these films to General Aniline for development? MR. O'CONNELL: No, I don t. We contacted Army Intelligence in New York. MF., FOLEY: who is the Army man in it? MR. O'CONNE'L: There is 8 man named - there were two Army men at Binghamton. MR. FOLEY: Was that after we told them? MR. O'CONNETI: Oh, yes, no Army man was near the pluce until after we told the Army Intelligence. H.V.JR: But the Army has been sending film up there? MR. O'CONNELL: Oh, yes. In the plant in New York, the small plant, we found film which had come from \berdeen proving grounds showing -- H.M.JR: What plant is that in New York? MR. O'CONNELL: Well, it is the Agfa Ansco division laboratory. R.M.JR: Agfa Ansco, and you found film there? Regraded Unclassified 240 - 3 - MR. O'CONNELL: We saw film taken at Aberdeen proving ground being developed. H.M.JR: How long ago? MR. O'CONNELL: It was about the 15th of December. (The Secretary held a telephone conversation with Colonel Smith as follows:) Regraded Unclassified 241 January 13, 1942 10:45 a.m. Operator: Go ahead. HMJr: Hello. Colonel Smith: Yes, Mr. Secretary. HMJr: Good morning. S: How are you, sir? HMJr: Colonel Smith - I'm fine - I just returned from the President and I gave him a story on the - this Aniline Dye Company, you know. Hello. S: No, sir, I don't know. HMJr: Well, they control the Agfa Anaco Film. 8: Oh, oh, yes, sir. HMJr: And amongst other things, in B. plant in New York. We found film there from the Aberdeen Proving Grounds. 8: Yes. HMJr: Now the President said that he wants me to find out what Army officers, on what authority, have they been sending stuff to be developed at the Agfa Ansco Film. S: Yes, sir. Agfa Ansoo, yes, sir. HMJr: Knowing that this is a German-controlled outfit. S: Yes. You say they were up there from Aberdeen for development? HMJr: That's right. S: I see. HMJr: Now, this is just one instance we run into. Regraded Unclassified 242 - 2 - 8: Yes. HMJr: So if you'd mind making inquiries what other - he wants to know what officers under whose - who ordered film to be sent there, you see? S: Yes, sir. HMJr: Because he was tremendously shocked to think that they'd be sending Army film to a German- controlled company. S: Yes. HMJr: Within the last month. 8: I'll find out, Mr. Secretary. HMJr: And if I'm not here, will you tell Mrs. Klotz? S: Yes, indeed. HMJr: The President - he can't understand it any more than I can. 8: What was the nature of the film, Mr. Secretary, do you know? HMJr: Well, just a minute. Just a moment. (talks aside) One is a picture of a tank and another is of a - both tests - one a test of a tank and the other the test of a mobile gun. S: I see. Thank you very much. I'll find out from the Ordnance. HMJr: And we have pretty good reason to believe that all of these things have been copied and sent to Germany. S: Yes, sir. Well, I'll find out right away and I'll let Mrs. Klotz know. HMJr: Thank you. S: Good-bye, sir. Regraded Unclassified 243 4 - MR. O'CONNELL: We informed Army Intelligence of the situation that we found, both in New York and in Binghamton. The particular films that I referred to ware sent from 8 Philadelphia firm which had a contract with the Army - in other words, the War Department sent film to be developed to B. Philadelphia firm, which was either without facilities or -- H.M.JR: They didn't send it direct? MR. O'CONNELL: No, they did not. They sub-contracted either with or without - that is all right, though. They can't sub-contract in any Government contract I ever saw, without the approval of the Department. This Philadelphia firm sent the film to Agfa Ansco. They do have some contracts with other divisions of the Army Firect. When we first contacted the War Department, they said they had no contracts with Agfa Ansco. That is not true, and they, I think, are willing to admit that now. They have a contract with the Aeronautics organi- zation which -- H.M.JR: Well, if you have anything that would help to guide Colonel Smith - what is he, Edward Smith? You (Mrs. Klotz) can give him the address. I would send it over to him. MR. O'CONNELL: T could give the names of some of the Army people. For instance, Colonel Gregory, who is the G-2 man in charge in New York, hus been in Washington. MR. FOLEY: Do you want Joe to go see Colonel Smith? He can give him the background. H.M.JR: Do that. Mrs. Spangler oen arrange for you to go over. I think it would be good to go over there. Whisper to him so I don't have to tell him again, what the President said. The President said, "Go ahead. T am going to tell Leo Crowley myself. The President was delighted. MR. O'CONNELL: Pine. Regraded Unclassified 244 - 5 4 H.M.JR: The President's reaction was, "Kill the S.O.B." I mean, that is what he said. As long as the President feels this way, boys, now go to it. MR. FOLEY: We will. MR. O'CONNELL: We will. H.M.JR: Go to it. Get tough. I want a copy of - write out a memorandum -- MR. FOLEY: Of your conversation with Colonel Smith. MR. O'CONNELL: All right. MR. FOLEY: And you and Sam get together before you go over and get the people and the films and the instances and the sub-contracts and the contracts. H.M.JR: O.K. But I told Ed I didn't know what the reaction would be at the White House, but my hunch was all right, and if the President ever heard of Leo Crowley or an Alien Property Custodian or the Department of Justice, if he ever heard of it, you wouldn't know it. MR. FOLEY: Wonderful. MR. O'CONNELL: Couldn't be better. H.M.JR: And I didn't raise it. I will tell Leo Crowley if he wants a copy of the memorandum, he can get in touch with you, but we are moving in now. That is all. I want that pleasure. MR. FOLEY: Good for you. H.M.JR: I may be wrong, but certainly when John E. Mack calls up the White House -- MR. FOLEY: The President will knowlabout it. 245 - 6 - H.M.JR: And the President's answer is, "Get tough, boys." =