Volume 648, July 11 – July 14, 1943

DIARY Book 648 July 11-14, 1943 Regraded Unclassified - & - Book Page Alien Property Custodian General Aniline and Film Corporation: New directors to be elected - McConnell resigning as president - O'Connell-HMJr conversation - 7/12/43 648 12 a) HMJr's letter to O'Connell reviewed - 7/12/43, 7/13/43 14,21,157 b) McConnell's reason for resignation - 7/13/43 152 1) Report to stockholders as of July 12, 1943 156 c) McConnell's memorandum on post-war attitude toward Germany contained in memorandum sent in to HMJr - 7/16/43: See Book 649, page 134 - B - Bartelt, Edward F. See Financing, Government: War Savings Bonds (Payroll Savings Plan) Buffalo, New York See Revenue Revision: Withholding Tax Burgess, W. Randolph See Financing, Government: War Savings Bonds (3rd War Loan Drive) Business Conditions Haas memorandum on situation, week ending July 10, 1943 - 7/12/43 28 (For memorandum on week ending July 17, 1943, see Book 649, page 196 - 7/19/43) - C - Canada See Financing, Government: War Savings Bonds (3rd War Loan Drive - Slogan) Carter, Amon G. (President, Fort Worth Star-Telegram) Correspondence concerning son's (prisoner in Germany) inquiry about income tax payment - 7/14/43 219 China Discussion of Kung's request for $200 million in gold of $500 million loan to check inflation - 7/14/43 195 a) Message to Adler 197 (See also Book 649, page 145) b) FDR and Hull informed - 7/15/43: See Book 649, page 89 c) Adler's reply to (a) - 7/17/43: Book 649, page 175 d) a further memorandum on sale of gold in China, smuggling situation, etc. - 7/17/43: Book 649, page 177 e) Conference; present: HMJr, Bernstein, and Miss Kistler - 7/27/43: Book 651, page 199 f) Treasury reply (copy to Adler) - 7/27/43: Book 651, pages 212 and 214 g) Adler sent copy of 2nd Treasury message to Kung - 7/31/43: Book 652, page 261 h) Kung's reply - 8/2/43: Book 653, page 76 Regraded Unclassified - 7 - Book Page Financing, Government War Savings Bonds: 3rd War Loan Drive: Slogan announced in press release: "Back the Attack--with War Bonds" - 7/11/43 648 1 a) Canada asked for posters using slogan - 7/14/43 236 b) Mail report contains many suggestions - 7/16/43: See Book 649, page 120 Foreign Missions in United States: American citizens to be solicited - 7/10/43 4 a) Hull asked to make contacts - 7/14/43 245 Organization conference; present: HMJr, Bell, Sullivan, Thompson. White, Smith, Haas, O'Connell, and Xades - 7/13/43 60 a) McNamara (now with Bureau of Internal Revenue) discussed Burgess press release on framework of New York State Finance Committee - 7/13/43 239 Open Market Committee meeting plans discussed by HMJr, Bell, Haas, Murphy, Lindow, and Tickton - 7/13/43 92 Open Market Committee meeting - 7/13/43 97 a) Background for recommendations 116 b) Federal Reserve Bank holdings of United States Government securities 119 c) Treasury bills: Bell resume for June 23 and 30, July 7 and 14 120 Conference: present: HMJr, Bell, Haas, Murphy, Tickton, and Lindow - - 7/14/43 168 a) Lowering of rates rather than extending the yearage discussed Haas gives general outline of program - 7/14/43 253 a) HMJr discusses with Treasury group - 7/15/43: Book 649, page 49 Payroll Savings Plan: HMJr designates Bartelt chairman - 7/14/43 243 Foreign Missions in United States See Financing, Government: War Savings Bonds - G - General Aniline and Film Corporation See Alien Property Custodian - L - Lend-Lease Reports on purchases: Week ending July 10, 1943 - 7/12/43 47 # If " 17, 1943 - 7/20/43: See Book 649, page 338 # " " 24, 1943 - 7/27/43: Book 651, page 245 Regraded Unclassified - L - (Continued) Book Page Lend-Lease (Continued) U.S.S.R.: Report of purchases made through Procurement Division - 7/13/43 648 164 United Kingdom: Aircraft flight delivery as at July 6, 1943 - British Air Commission report - 7/12/43 49 Aircraft despatched, weeks ending June 29 and July 6 - - British Air Commission report - 7/12/43 51 - M - McConnell, Robert See Alien Property Custodian: General Aniline and Film Corporation See Book 651 for appointment in Treasury McNamara, J. B. See Financing, Government: War Savings Bonds (3rd War Loan Drive) Morrison, Herbert See United Kingdom - N - Netherlands Conference; present: HMJr and White, Netherlands Minister of Finance and Financial Adviser - 7/13/43 122 a) Loan possibilities discussed - R - - Revenue Revision Withholding Tax: Likert to check on impact in Buffalo - 7/12/43 22 Income Tax Form to be Filed September 15: Discussed by Sullivan at Treasury conference - 7/13/43 63 a) Sullivan to check with Smith 64 Discussed by HMJr, Bell, Paul, Smith, Thompson, Sullivan, Kades, Opper, Surrey, Cann, and Mooney: Atkeson present at 2nd conference - 7/13/43 123,207 a) Copies of forms 147,148 204,205 b) Helvering also disturbed, HMJr telle group 207 Publicity in two steps advocated by Sullivan and Smith - 7/15/43: See Book 649, page 29 a) Bureau of Internal Revenue's attitude on form explained to HMJr by Sullivan 32 Notice to Federal Income Taxpayers a) HMJr tells Cann he does not like - 7/28/43: Book 652, page 18 b) Conference: present: HMJr, Cann, Graves, Gaston, C. S. Bell, and Smith - 7/29/43: Book 652, page 181 Publicity man for Internal Revenue discussed by Treasury group - 7/29/43: Book 652, page 159 a) Likert-HMJr conversation on progress; HMJr may visit Buffalo - 8/11/43: Book 655, page 157 Regraded Unclassified - S - Book Page Slogan ("Back the Attach--with War Bonds") See Financing, Government: War Savings Bonds (3rd War Loan Drive) - T - Taxation See Revenue Revision - U - U.S.S.R. See Lend-Lease United Kingdom Morrison, Herbert: Defeat as Treasurer of Labour Party discussed in Casaday letter - 7/12/43 648 54 British Treasury personnel - - White memorandum on - 7/13/43 160 - W - War Savings Bonds See Financing, Government Regraded Unclassified TREASURY DEPARTMENT 1 Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Sunday, July 11, 1943. No. 37-47 7-10-43 The following statement was made today by Secretary Morgenthau: The invasion of Sicily and other news developments from battle fronts during the past twenty-four hours have provided & slogan for our Third War Loan Drive. It 1s: "Baok the attack -- with War Bonds. If AB anyone knowe who has read a newspaper or listened to news bulletins on the radio this morning, the United Nations are on the march. The first rumblings of the big offensive are being heard in all the Axis nations. Thou- sands of our men are storming Sicily. Tons upon tons of bombs are dropping on Germany, We are attacking Jap- held territory as never before, This 18 a great day for us. But it means that the time has come for us to really tighten our belts here on the home front. We have come to a most crucial period in the war, and the success that we will have on the fighting fronts will depend to a consid- erable extent upon the degree to which we here at home are willing to work and sacrifice and sweat for ultimate victory. It's going to be a costly victory. We have said that before, but we must repeat it again and again. The real war has only now begun, Billions of dollars more must be spent to keep the material of war going to our men at the fronts, Your Government must call upon you, the American people, for that money. Remember, it 1e up to all of us here at home to Back the Attack -- and to do it more enthusiastically, more thoroughly and with greater sacrifice than any attack has ever been backed by any home front in all history. Every- thing 18 at stake. Everyone must help to the very limit of his ability. -000- Regraded Unclassified 2 NOT TO BE RE-TRANSIATTED COPY NO. 13 56 SECRETARYOF OF 45 @FICE ASURY BRITISH LGST SPERET SECRET OBTEL NQ, 224 JUL EASURY DEPARTMENT Information received up to 7 a.m., 11th July, 1943. NAVAL In action off CAPE USHANT on the 10th, 3 German Torpedo Boats escorted by minesweepers were engaged. 1 Torpedo boat was severely damaged and 1 minesweeper probably sunk. One of H.M. Ships was seriously damaged forward and sustained 18 casualties, 5 of them fatal. 2 Norwegian Ships were slightly damaged. 2. MILITARY RUSSIA. No reports beyond official communiques. 3. AIR OPERATIONS. WESTERN FRONT. 9th/10th. GELSENKIRCHEN. 1,304 tons were dropped including nine 8,000 lb. and one hundred and eighty eight 4,000llb. H.E. in 40 minutes. Heavy A/A opposition but few fighters. Searchlights ineffective owing to cloud. 10th. 287 Fortresses with fighter support were sent to attack airfields in Northern FRANCE. Owing to thick cloud, only 67 attacked dropping a total of 142 tons of H.E. on airfields at CAEN and ABBEVILLE with fair to good results. 3 Fortresses were lost. Venturas attacked ST. OMER Railway centre and Typhoon bombers MAUPERTUS Airfield. 4 escorted Special Beaufighters obtained 6 hits on a 2,000 ton ship off NORWAY and set it on fire. One Beaufighter missing. SICILY. 8th/9th. Wellingtons dropped a total of 105 tons on airfields at COMISO, GERBINI and CATANIA. 9th. Nearly 650 bomber and fighter Sorties were flown against Airfields, Railways, Barracks and other military objectives including head- quarters at TAORMINA on the ¹⁸ˢᵗ Coast on which several hits were obtained, Regraded Unclassified 3 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Monday, July 12, 1943. No, 37-48 Secretary of the Treasury Morgenthau today announced the final subscription and allotment figures with respect to the current offering of 1-1/2 percent Treasury Notes of Series A-1947. Subscriptions and allotments were divided among the several Federal Reserve Districts and the Treasury as follows: Federal Reserve Total Subscrip- Total Subscrip- District tions Received tions Allotted Beston $ 1,022,210,000 $ 133,453,000 New York 7,301,921,000 696,267,500 Philadelphia 1,160,805,000 135,409,000 Cleveland 1,040,092,000 181,616,000 Richmond 905,249,500 173,076,500 Atlanta 1,139,315,500 378,140,500 Chicago 2,728,261,000 366,196,000 St. Louis 586,158,000 143,634,000 Minneapolis 422,874,500 86,000,500 Kansas City 670,095,500 115,537,500 Dallas 700,083,500 114,048,500 San Francisco 1,866,178,000 183,585,000 Treasury 300,000 300,000 TOTAL $19,543,543,500 $2,707,264,000 -o00- Regraded Unclassified 4 A H T R E COPY A 1943 JUL 12 AM 8 01 $ U wu2 43 GOVT NL COLLECT TREASURY DEPARTMENT Y BEACON NY JULY 10 1943 T. EDWARD BARTELT E of OFFICE OF THE TREASURY DELIVER 830AM MONDAY E G SUGGEST YOU CHECK UPON AMERICAN CITIZENS WORKING FOR FOREIGN A MISSION IN THIS COUNTRY AS TO HOW MANY WAR BONDS THEY BUY SUGGEST YOU DESIGNATE ONE AMERICAN IN EACH FOREIGN MISSION H TO STIMULATE THE SALE OF WAR BONDS COPY TO MRS KLOTZ HENRY MORGENTHAU JR 740AM JULY 12 $ Regraded Unclassified 4-A COPY 1943 JUL 12 MM 8 30 ww16 25 GOVT NL COLLECT TREASURY DEPARTMENT TOWO BEACON NY JUL 11 1943 DANIEL W BELL OFFICE SECY OF TREAS SUGGEST THAT WE CALL GROUP OF BANKING ADVISERS FOR THURSDAY. H PLEASE TALK TO ME ABOUT IT WHEN I CALL MONDAY, COPY TO MRS KEKLOTZ HENRY MORGENTHAU JR R 816AM JUL 12 1943 Regraded Unclassified 5 July 12, 1943 9:10 a.m. HMJr: Hello. You sound peppy. D. W. Bell: Oh, I'm full of pep. HMJr: Have a nice week? B: Very good, thank you. HMJr: Good. 3: Very good. HMJr: How is Mrs. Bell? B: She's fine. And I saw my daughter. HMJr: How is she? B: She's fine, too. HMJr: Good. B: And saw Delia. She wanted to be remembered to you. HMJr: Good. I think B: I've got the group here. HMJr: Yeah. The best news I have is I think Mrs. Morgenthau is going to be able to come up here next Saturday. B: Oh, isn't that fine. HMJr: Yeah. B: That's grand. Getting along all right now, huh? HMJr: Well, the boy's coming back is what made her want to hurry up and get well. B: Oh, that's fine. I hope she does. HMJr: Now, I've been sending telegrams all Saturday and Sunday. B: I have one. Regraded Unclassified S - 2 - HMJr: And you know what that group is that you got - I'll tell you - George Harrison was in the other day and he said he felt a little hurt. He thought he'd been fired - thought he was on that group and 80 forth and BO on, see? B: Yes. HMJr: Now, I think I sent in a list to you that B: Yes, I have it. Smith, Burgess, Edwards, Brown, Spencer and Harrison. HMJr: Well, there are some others. Fred Smith - Uh - Tom K. Smith. B: Yes. HMJr: You know that first group. B: Well, that's the group that We had advising us before the A.B.A. came into the picture. HMJr: I explained that to George B: Well, I did, too. HMJr: Did you? B: He understood it. HMJr: Well, he still felt a little hurt. B: (Laughs) Really? HMJr: Why couldn't We weld those two groups? B: Well, I suppose we could. The only thing 1s that that last group was picked by Hemingway HMJr: Well B: and if you recall, we asked him to put Spencer on and he said he'd already asked Mr. Steele and he came from a smaller bank which he wanted to give a chance. HMJr: Well, this is what my thought is - uh - we want to talk about the basket don't we? B: Yes, sir. Regraded Unclassified 7 - 3 - HMJr: Well, why can't we have the A.B.A. group and I could have a - three or four special advisors to me sit in - what harm can that be in order - I don't want to hold three meetings. B: I see no objection to that. Just call your regular advisory group and then have these other fellows on the side. HMJr: Yeah. You mean as the regular advisory of the A.B.A. B: That's right. HMJr: Then these two or three who are not on the committee. B: I think that's all right and probably better. HMJr: And now what would you say if I had them, say, for eleven o'clock Thursday? B: I think that's all right if I can get them. HMJr: Well, you can invite them and if they don't want to come, that's too bad. B: Yes. HMJr: Now, I don't think I'm going to have them for lunch - it's too hard to get food these days. B: That's right. Let them buy their own lunch. HMJr: What? B: Let 'em buy their own lunch. HMJr: Yeah. B: Uh - it may be a short notice. Would you want the full A.B.A. committee? HMJr: Leave that to them, Dan. B: I'll call Hemingway. HMJr: Yeah - but I would get out telegrams this morning. B: All right. HMJr: for eleven o'clock Thursday and will you tell FitzGerald? Regraded Unclassified 4 8 B: Yes, sir, I will. HMJr: Now, there's another thing - uh - on today's financial page of the Times is the first half-way friendly article on redemption, comparing our redemptions with Canada B: Uh huh. HMJr: and giving us & break and I wondered if anybody in Washington Y E had anything to do with that - I mean whether thi low Prenosil or what ever his name 1s. B: I don't know - Prenosil - I don't know whether he did or not. HMJr: Well, Fred Sm1 the might check up. B: (Talks aside) Fred Smith says that Prenosil did cover New York HMJr: Well B: and whether he had anything to do with this particular one he don' HMJr: You read that story because it's the first friendly story we've got on redemption. B: I'll check it up. HMJr: And, another thing - my local paper here had an A.P. story out of Washington in which it said the fight would be - it was sort of partly quoting George, "The fight was going to be for the sales tax, compulsory savings as against additional new taxes." B: Yes, sir. I saw that. HMJr: And that's the thing that I forecast would happen. B: And I understand Barkley made some statement that he thought undoubtedly this enforced savings would be a subject for a long discussion. HMJr: Right. B: I saw that yesterday. HMJr: Now, Dan, I wish you'd bring yourself up to date on what I've been doing with Norman Thompson and Bell on on the War Finance Organization, see? Regraded Unclassified 9 5 - B: Uh huh. HMJr: Because I'm going to hit that again at nine o'clock tomorrow morning. B: All right. HMJr: In fact, I announce now, I want a 9:30 group at 9 'clock provided Sullivan can get there. B: (Laughs) He heard you. HMJr: He heard me? Does he look sleepy? B: No, he doesn't look sleepy. HMJr: He doesn't. Well, good. Now, do you want to ask me anything? I've got a couple of other things. B: No, I haven't anything. I'll see if any of this group has. (Pause) Nothing, except Joe O'Connell has got something to talk to you about on the General Aniline and Film. HMJr: All right. B: Do you want to talk to him now or do you want to go ahead with your HMJr: Well, I've just got a few minor things which I'll B: Good. HMJr: which I'll talk at you and then you can parcel them out. They're only little things. B: All right. Go ahead. HMJr: I don't know - a week or two ago we were supposed to send either letter #1 or letter #2 of War Finance to all the Congressmen, and I wondered what the reaction was - if Fred Smith could contact Mrs. Forbush - maybe he could let me know tomorrow. B: All right. He's right here. HMJr: Did he hear that? B: It went to all the Congressmen and to the Committee. Regraded Unclassified - 6 - 10 HMJr: Well, I'd like to know B: Oh, wait a minute, just the Committee heads and he will check up on it and get the reaction. HMJr: He will check up? B: Yes. HMJr: Then, another thing which I want to suggest to War Finance - I - for instance, if We want to get out some 1 uh - mailing of something, there must be literally hun- dreds and hundreds of wives of officers in Washington who would be glad to volunteer for half e day. And I think Norman Thompson ought to get uo a sort of a roster. If we've got to get out something in a hurry, we'd call on these people for volunteers. B: Just to come in and work HMJr: For a half a day - to come in either the morning or the afternoon. B: Well, you know the Red Cross has quite a list of people who will come in and work and Mr. Bell is quite familiar with it. HMJr: Well B: All they do 18 call them un and the come down and work for half a day or a day. HMJr: Well, I know they have these rush jobs over at War Finance and if they knew where they could get twenty- five or fifty girls - they'd come in B: Yes. HMJr: Tell Norman to look into it. B: All right. HMJr: Will you? B: Yes, sir. HMJr: And then that's all I've got but I want to ask Harry White something if he's there. m Harry. Regraded Unclassified 11 - 7 - Harry White: Hello. HMJr: Hello, Harry. W: Good morning. HMJr: Good morning. Harry, did we get off that cable to Winant about W: We did, yes. Yes, sir. HMJr: Well, will you give Miss Chauncey a copy if you have not done 80, 80 I can, W: I think she has but I'll make certain. HMJr: I want to use that as a follow-up if I don't hear from Halifax by tomorrow. W: All right. HMJr: And I think you might send a follow-up today to Winant and ask him how it's coming. W: Yeah. I think We ought to give him another day or two. HMJr: Oh, no. He's had time enough. W: All right. HMJr: Send him a follow-up W: I'll have one ready for you HMJr: What? W: I'll have a cable ready for you. HMJr: I mean a follow-up cable. W: Yes. HMJr: Okay. And if you have no engagement, Harry, hold tomorrow night open, will you? I'm taking option on it. W: I have, but I can see what I can do to cancel it - let's say a certain part of the time. Regraded Unclassified - 8 - 12 HMJr: Well, you know, you wanted to go over that stuff with me. W: That's right. What hours do you have in mind? HMJr: What hour? Seven-thirty to one minute of nine. W: Okay. HMJr: (Laughs) All right. W: I'll keep those open. HMJr: What hours have you got in mind? W: (Laughs) Well, that kind of infringes on the hours I had in mind, but I'll change my schedule. HMJr: Don't do that. Maybe we could work it in during the day time. Don't do it. W: All right. HMJr: Don't disturb yourself. W: All right. HMJr: And - uh - - anyway.... W: You didn't hear anything further from that letter? HMJr: No. W: Oh. HMJr: When you see me tomorrow, just say to me, "Mr. Morgenthau, what did you want to tell me about the Mission to Moscow?" - and I'll tell you something. W: All right. All right, sir. HMJr: The picture W: All right, sir. It's Joe O'Connell. He wants you. HMJr: All right. Joe 0' Connell: Hello, Mr. Secretary. Regraded Unclassified - 9 - 13 HMJr: Good morning. 0: Good morning. Bob McConnell called me Saturday and tells me that he has submitted his resignation as President of General Aniline. HMJr: Yeah. 0: The meeting is scheduled - an adjourned meeting is going to be held tomorrow morning. HMJr: Yeah. 0: or tomorrow sometime, and they're electing a new slate of fifteen directors. HMJr: Oh-oh! 0: McConnell tells me that there are some new faces but that as far as he's concerned the general set-up is as bad as the other one or worse. Now, he did not feel free to talk because he was under something of a ban as far as talking very freely 1s concerned. He did indicate to me that in addition to his objections to the set-up of the new board, HMJr: Yeah. 0: he had gotten into a position of having very funda- mental differences with the Alien Property Custodian as to matters of general policy in the operations of the company. HMJr: Yeah. 0: He was speaking rather vaguely because he was not permitted to speak until he had - his resignation had been accepted which, I understand, will be tomorrow. HMJr: Oh. 0: But I gathered there is some plan under way for a - tying in the operations of General Aniline with some South American interests - the disposition of a part of the stock to either South American governments or some South American interests, with which he has taken rather violent exception. HMJr: Uh huh. Regraded Unclassified - 10 - 14 0: That 1s all I know. I drafted a letter which I thought you might be willing to sign and send to Mr. McConnell in which I was having you say that you'd like to have him come in and see you. I did not know whether your thoughts on that had changed since We talked before. HMJr: No. I think he is 8 very able person. C: So do I. HMJr: Well, have you got the letter there? C: Yes, I have. HMJr: Supposing you read it and let everybody lieten. O: It's got some bouquets in it, but I'll read it. HMJr: Sure. 0: "Dear Mr. McConnell: I have Just learned that you are resigning your positions as President and Chairman of the Board of General Aniline and Film Corporation after having served in those capacities since March 16 of last year. Mindful of the fact that at my insistence you took on the Job of running the affairs of this important German dominated industrial concern when the Government seized it, I could not let the occasion pass without indicating to you my appreciation for the yeoman service you have performed. I realized full well that the task of operating that company successfully, stripped as it had been of most of its executive personnel when you entered the picture, would not be an easy one. Further- more, it was essential that the Company be reorganized in such fashion that it would make the maximum contribution to the war effort. Your problem was complicated by the necessity of making very substantial changes in the personnel you inherited in order that the national security might not be endangered by the continuance of potentially disloyal and thus dangerous individuals in responsible positions with the company. It has been with a feeling of pride that I have followed the activities of the company under your guidance, not only during the period when you were responsible to me 8.8 Secretary of the Treasury and were operating under the General in- structions I gave you at the time of your selection, but also in the more recent period during which your opera- tions have been carried on under the supervision of the Alien Property Custodian, whose office succeeded the responsibilities of the Treasury Department in this matter late in April of last year. The results you 15 - 11 - O: (Cont'd) have achieved have amply justified the confidence that was reposed in you and both you and I, but particularly you, may look back upon your period of service with a great deal of personal gratification. Certainly it was 8. difficult job done extraordinarily well. I should like very much to have you come in to see me at your conven- ience. Sincerely yours." HMJr: The only - it's an excellent letter - I'd only add, "At your early convenience." 0: At your earliest convenience. That would be, I think, about Thursday of this week because the meeting 1s tomorrow and he - I gathered from him that he was planning to be in Washington about that time. HMJr: Well, when does he want this letter? 0: Well, he's - he's leaving that up to you. I thought it would be nice if the letter could get to him tomorrow. That's the day of the stockholder's meeting. I don't know that he has any - he has no intention of using it other than that he would like to - this is about all he is getting out of this year and e half. HMJr: Well, why don't you do this. Send him the letter in the form of a telegram - see? 0: Yeah. HMJr: And tell him I will confirm it with a signed letter when I get to Washington tomorrow. 0: Right. HMJr: Now, there's one thing. I'd like very much to know whether Fred Smith has any comments on this. He knows some of its background. 0: Well, he's sitting right across the table. (Talks aside) He has no particular comment. He says he thinks 1t 18 a good letter. HMJr: I mean - he thinks that - 'course this man will make this public - does he think it's all right? 0: Well, Fred (Talks aside) Regraded Unclassified 16 - 12 - HMJr: Hello. 0: Well, Fred thinks that quite possibly we might cut out the material that I have in - in here with reference to the period under which - during which he was under the supervision of the Alien Property Custodian. He suggests that possibly we might say that you have followed with pride the activity of the company not only during the period that you were - that he was responsible to you but since. Period. Without reference to the detail as to the Alien Property Custodian. HMJr: I think that' 0: Yeah. HMJr: That's an improvement. 0: Yeah. HMJr: I was afraid that somewhere or other Fred would bring in the word "sweat" - he's got a passion for sweat. 0: Well, it's too early in the morning for sweating I think. HMJr: I see. (Laughs) He doesn't want to bring in the word and say that 0: Hello. HMJr: and say "while you sweated under the Alien Property Custodian." O: (Laughs) Well that would be a change, too. I don't know whether that would be an improvement or not. Well, why don't we cut that latter part out and shorten it to that extent? HMJr: You could send it as a telegram signed - and say when I get in tomorrow 0: Right. HMJr: I'll send him a formal letter. 0: All right. That's fine. HMJr: I think that's all right. Of course, if I could get him, which I imagine I could, I think I'd much rather have him than I would this unknown man in New York. Regraded Unclassified - 13 - 17 0: That's what Chuck and I hoped you would say. We'd been talking about that a bit over the week-end. HMJr: Yeah. 0: and we know him. We know he's a very competent fellow HMJr: Yeah. 0: and while I haven't run down the other man entirely yet, he's - and he looks all right what we have seen of him - but very active in business right now. HMJr: Oh, he 1s? 0: Yeah. HMJr: Well, I'd much rather have .... 0: Well, that's fine. HMJr: this man, although I know he had some tax troubles and all that but that's all behind him. 0: Oh, those are all straightened out. And HMJr: There was nothing that wasn't perfectly honorable was there? 0: Absolutely not. No, sir. The record - his record is absolutely sound on that - in fact, he got a pretty sizable refund at the final end up of that tax case. HMJr: Oh, he did? 0: Yeah. HMJr: You don't think I ought to ask McConnell to come and see me at the hospital tonight? 0: Well HMJr: I 0: I could do that. I know how I could reach him if you think you'd like to see him. I think he could give you more detail now than he was able to give me. I don't think there is anything can be done to stop the thing tomorrow. Regraded Unclassified - 14 - 18 HMJr: Well, after all, I've done all I could. 0: Yeah. HMJr: Maybe it would be just as well not. 0: Yeah. By the way, did you know that he 1s a fairly close friend and has been for 8. long time to Mr. Baruch? HMJr: No. HMJr: Yeah. HMJr: No, I did not. D: That's my understanding. HMJr: No. I mean - I'm just thinking out loud - supposing he gives me all the dirt. What can I do? 0: Nothing. HMJr: I've gone - I've gone to the President on this once. 0: That's right. HMJr: What? 0: That's right. Well, I thought you might want to talk to him tonight about the other project. That's the only purpose I could see. HMJr: Oh! 0: But that could wait very well until he comes down later in the week. HMJr: What do the people think? Should I try to get the dirt once more or - I - I've gone all through it once - the President knows about it - Jimmie Byrnes knows about it 0: (To others: What do you think? - - - general discussion aside). Fred Smith doesn't t think you ought to go further and that's certainly the way I feel about it and I don't guess the other people here are familiar enough with it - the background - to have any particular comment. I think we ought to just send him the telegram saying you want to talk to him later in the week when he comes down. Regraded Unclassified - 15 - 19 HMJr: Yeah, well, you could tell him because I don't think I'll be there more than three days and he'll have - he better make an appointment. 0: Well, I'll do that if I can get your schedule fairly well. I can do that with him today. HMJr: I don't - do either of the girls know my schedule for Thursday? 0: (Aside: Do you know? Will he be here Thursday? Yes, the Secretary. Do you know his schedule?) HMJr: How about ten o'clock Thursday? 0: (Aside: What's on at eleven? - Answer: The bankers). Oh-oh, the bankers are going to be here at eleven on Thursday. HMJr: Well, what about ten o'clock? 0: Well, let's see, Miss Chauncey 18 coming in right HMJr: What about ten o'clock? 0: Press conference at ten-thirty. HMJr: Well, half an 0: Ten o'clock. HMJr: hour will be enough. O: Half an hour. HMJr: Ten o'clock. 0: Ten o'clock Thursday morning. HMJr: Why not give him ten o'clock. 0: Okay. All right. I'll talk with him and tell him that. HMJr: All right. You and Chuck feel he'd be the best man? 0: Yeah. HMJr: What? Regraded Unclassified - 16 - 20 0: Yes, much the best of the two because we know him. He's a - he's a competent fellow. We might not always agree with him but he's certainly smart. HMJr: That's right. I think we can leave it till - that way and then get him off this telegram and letter to follow. 0: All right, sir. That's fine. Do you have anything else for anyone else. HMJr: No, except that I just hope that they're going to be ready for Mr. Baruch at one o'clock on Wednesday. Does anybody know? 0: Just a minute. (Aside: He says he just hopes you'll be ready for Mr. Baruch at one o'clock on Wednesday.) Oh, yes. Fred Smith says he's sure they will be. HMJr: Is Haas present? 0: Yeah. He's here. HMJr: Well 0: He seconds the motion. (Brief discussion) Chuck - Fred says you got a couple of fellows from the Army to help, too. HMJr: To help Banyas, yeah. I have nothing else. 0: All right, sir. HMJr: Thank you all. 0: Thank you. Good bye. Regraded Unclassified The Secretary 21 Contingent Expenses July 12, 1943 Hon. Robert E. McConnell Room 1548 230 Park Avenue New York, N. Y. I have just learned that you are resigning your positions 86 President and Chairman of the Board of General Aniline and Film Corporation, after having served in those capacities since March sixteen of last year STOP Mindful of the fact that at my insistence you took on the job of running the affairs of this important German-dominated industrial enterprise when the Government seized it, I could not let the occasion pass without indicating to you my appreciation for the yeoman service you performed STOP I realized full well that the task of operating that company successfully, stripped as it had been of much of its executive personnel when you entered the picture, would not be an easy one STOP Furthermore, It was essential that the company be reorganized in such fashion that it would make the maximum contribution to the war effort STOP Your problem was complicated by the necessity of making very substantial changes in the personnel you inherited, in order that the national security might not be endangered by a. continuance of potentially disloyal, and thus dangerous, individuals in responsible positions with the company STOP It has been with a feeling of pride that 1 have followed the activities of the company under your guidance, not only during the period when you were responsible to me as Secretary of the Treasury and were operating under the general instructions I gave you at the time of your selection, but since then STOP The results you have achieved have amply justified the confidence that was reposed in you, and both you and I, but particularly you, may look back upon your period of service with a great deal of personal gratification STOP Certainly it was a difficult job done extraordinarily well STOP I should like very much to have you come in to see me at your earliest conve lence STOP Letter to the same effect as foregoing follows H. Morgenthau, Jr. Secretary of the Treasury. JJO'C.Jr/1sw Regraded Unclassified 22 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 12, 1943 TO Mrs. McHugh FROM Fred Smith IS You can tell the boss I beat him to the punch on this one. Dr. Likert is including in his plans for Buffalo a complete check on how withholding is working, what its impact is, and how families have readjusted their spendings and savings schedules to accommodate the withholding. Regraded Unclassified 23 API T E WU1 24 GOVT NL COLLECT 1943 JUL I2 AM 7 49 S BEACON NY JUL 10 1943 0 FRED SMITH TREASURY DEPARTMENT Y OFFICE SECY OF TREASURY DLR MONDAY 830 AM T E' WHEN DOCTOR LIKERT MAKES HIS SURVEY IN BUFFALO SUGGEST HE E CHECK UP ON HOW THE WITHHOLDING TAX IS WORKING. COPY TO MRS G KLOTZ HENRY MORGENTHAU JR. P H 737 AM JUL 12 1943. Regraded Unclassified 24 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 12, 1943 to Secretary Morgenthau FROM Fred Smith The article on redemptions, which you saw in the New York Times was widely distributed over Associated Press wires. It was written by Jerry Muchmore of the New York financial news staff of the Associated Press, and was based on material supplied in our bulletin to financial writers on bond redemptions. Mr. Prenosil had an interview with Victor Hackler, general Financial Editor of the Associated Press last week. He promised full cooperation on War Bond publicity, and started to carry out his promise with this article. At our suggestion he made an independent study of the Canadian situation before writing the attached article. Mr. Prenosil has thanked Mr. Hacker, and has told him that we are preparing a bulletin showing that, contrary to the impression in some quarters, war plant workers with high incomes buy the bulk of securities on the payroll savings plan, and thus it is draining off dangerous money. Ee said he would be interested and would give wide distribution to the material. Regraded Unclassified NEW YORK TIMES - July 12, 1943 25 BOND REDEMPTIONS Canada Adopts Pay-se-You-Ge Canada went a witholding-tax basis last year, and made it vir- LESS THAN 6% IN U.S. tually complete pay-as-you-go early this year. But in March, after Finance Min- Ister J. L. Itsley announced . step- up in deduction rates, redemptions Pigure Govers Entire Period of Canplix's war savings certif- icates-which resemble our WINE Since 'Defenee' lesues Were bonds-jumped to 34 per cent of the total sold, against 27 per cent Offered Originally in February. The redemption rate continued to increase; in April equaling U.A per OANADIAN RATE IS HIGHER oerit of gales, and then olimbing to 47.8 per oent in May. Intest Dgurs available. In the United States redemp- But Officials Here Await the tions have been far below those percentages. Canada's 1942 expe- Effects of Withholding rience showed redemptions of about 20 per cent. For the United States Levy on Holders the 1942 average was 3.9 per cent. As the total of outstanding bonds increases, redemptions natu- By The Associated Press. rally tend to rise in relation to Will Americans turn their war monthly sales. In June they bonds into cash and reduce their equaled 15.3 per cent, estimates of purchases now that wage earners the Federal Reserve Board indi- cate. But for the entire period are feeling the bite of the with- since "defense" bonds, now "war" holding tax? bonds, were first offered, redemp- Government and private finan- tions have been less than 6 per cial leaders hope not, for those cent. bonds are & double-barreled way Redemptions Here a Question of helping to fight Inflation now The question in whether Ameri- and helping to re-establist normal cans, feeling the reduction in take markets after the war ends. In the home pay as a result of withhold- meantime they help pay for & tre- Ing taxes, will boost redemptions mendously costly war. toward the Canadian percentages. Redemptions have worried the Inflation - conscious investment Canadian National War Finance circles are studying Canada's ex- Committee to the point that it perience with war savings certifi- urged recently that the public be cates under a pay-aayou-go Income educated to the importance of hold- tax plan to help them guess what ing the certificates. may happen to U. S. war bond "Although It. is obvious that sales of these instruments can be sales now that withholding has be- expected to increase as public hold- gun. ings increase," the committee said Government leaders have asked in a statement, "there is still evi- Americans to increase their bond dence of misunderstanding the part and of the ir- purchases as one of the best ways responsibility on to put aside the temptation to general public." spend money in inflationary ways. Aside from increased turn-ins of Private economists have 6X- certificates, the Canadian figures pressed a belief war bonds sales available show that May sales might slump with the inception of there were smaller than for any withholding. To counteract this month in 1942, at $5,500,208. Dur- possibility, the Treasury has em- ing 1942 the average was above phasized that pay-as-you-go does $6,600,000 a. month. not increase taxes, that it merely In the United States so far war bond sales have been rising at a provides a way for the taxpayer to fairly steady rate, although there end the year with income taxes was & drop in June compared with paid. the billion-dollar months of April and May, when the Second War own drive was under wav. Regraded Unclassified 26 COMINCH FILE UNITED STATES FLEET HEADQUARTERS OF THE COMMANDER IN CHIEF NAVY DEPARTMENT, WASHINGTON, D. C, July 12, 1943. Mr. Henry Morgenthau, Jr., Secretary of the Treasury, Treasury Department, Washington, D. 0. Dear Mr. Secretary: I have received your letter of July 9 relative to the pro- cedure for handling War Bond allotments by officers and enlisted men of the Navy. I am this date recommending to the Secretary of the Navy that he promulgate to all ships and stations a letter clarifying the procedure for the purchase of War Bonds by those officers and men sta- tioned outside the continental limite of the United States. This pro- posed letter directs that adequate facilities be made available to assure all officers and enlisted personnel the opportunity of register- ing allotments for the purchase of War Bonds. Competitive campaigns, or ratings, or high pressure selling campaigns are not, however, to be conducted for the reason that this would not be appropriate to the work the operating forces are required to do. Ships and stations are advised that issuing agencies have been established at bases outside the United States for the cash sale of bonds, and that other agencies with trained War Bond Sales Officers will be established upon the recommendation of the Fleet Commandere in Chief concerned. Naval agencies are not to be established at those stations where naval personnel are adequately served by Army organiza- tions. The proposed letter, as drafted for the Secretary of the Navy will best meet the requirements of Naval, Marine and Coast Guard per- sonnel in the war areas without being detrimental to their actual com- bat effort. Your help and interest are much appreciated. Sincerely yours, EgKing Admiral, U. Navy. Regraded Unclassified 27 7-12-43 TREASURY DEPARTMENT Commissioner of Accounts To you probably will be interested to know that I received a telephone call from Capt whank many Bord Promotinal officer, highly congratulation you for the skilfull waying which you handled the admial said it was the best thing situation. He thing that could have happened in the interest of the havy Bend frogram ad was highly elated. Respectfully Mr. Bartelt 8.7. Bartel Regraded Unclassified 28 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION CONFIDENTIAL DATE July 12, 1943 TO Secretary lorgenthau FROM Mr. Hare Subject: The Businees Situation, Week ending July 10, 1943. Summary Jace control: The Ver Labor Board continues to be confronted with heavy pressure for wage increases, and has again warned that the failure to stabilize living costs constitutes a threat to the maintenance of the "Little Steel" formula. The nation's shipbuilding workers, in addition to other labor groups, are now demanding & vage increase to compensate for increased living costs. Aside from the large number of vorkers involved, this demand derives mecial signifi- ornce from the fact that average hourly and weekly earnings of shipouilding workers are already in excess of nearly all other (Tougs, Cost of foods: The BLS cost-of-foods index declined 0,5 per- cent in June, marking the first downturn in the index since November 1940. Despite the decline, the index is still 12.1 parcent above September 1942 level, to which level labor dewands that prices be rolled back. The 10 percent roll- Lack in butter prices was the most important fector in the June decline in the index. Grop prospects: Generally favorable weather has improved crop prospects in recent weeks and regate crop production in 1943 WAS forecast, as of July 1, at 114 percent of the 1923-32 overage. This compares with the record crop of 126 percent in 1942. Record or neor-record oroduction of flaxseed, soybeans, peanuts, beans, dry Dece, notatoes, and sweet potatoes, which are regarded 0.8 "ver crobs", is expected. Steel production: Work stoppages and picketing at Pennsylvania coal mines continue to hamper steel operations in the Pittsburgh district, and U. S. Steel subsidiories were forced to bank 13 blast furnaces in the area by the end of last week. Retail trade: Due largely to the stimulus of heavy shoe buying, department store sales in June failed to show the usual seasonal decline, and the FRB adjusted index of sales rose to 12 from 125 in May. Soles durin™ the month (in doller volume) ran 24 percent above last year's level. Regraded Unclassified 29 - 2 - far Labor Board warns price rise threatens wage control The removal of the legislative threat to subsidized rollbacks on food prices should strengthen the hand of administrative agencies in coping with the demaná of labor proups that the "Little Steel" formula De scrapped unless prices are rollmn back. The Mar Labor Board, in e decision during the past week, again warned that the failure to stabilize living costs was threatening the maintenance of the "Little Steel" formula. In this connection the WI.B chairmen estimated that D. 10 percent increase in the wage advance permitted under the formula would nod 66 billions to the nation's payroll, with prices skyrocketing: E.S. a result. With wage demands of the coal miners and reilroad workers till unsettled, 1,100,000 shipyard workers are now demanding vage increases in what is said to be the largest case yet to come before the War Labor Board. In advancing their demands, the vorkers contend that they gave up automatic vage adjustment provisions in 1942 in exchange for a promise that wages would De adjusted if the line were not held on living costs. In reserting that the line has not been held, it is claimed that the cost of living in the past year has risen even faster than the ELS figures indicate, and that a wage increase 1111 have to be forthcoming if the Government 16 to fulfill its promises to labor. Aside from the large number of workers involved and the critical nature of the industry, aditional significance attaches to the shipbuilding workers' demande in view of the high wages that are already being paid in this industry. Thus, BLB data for April, the latest month available, reveal that everage hourly and weekly earnings of shipbuilding workers exceeded those of any other manufacturing group, with the sole exception of workers in the aircraft engine plants where earnings were a trifle higher. Average earnings of shipbuilding Workers in April were 1.25 an hour and 59.81 a week, in comparison with average earnings of 94 cente hourly and 42.48 Weekly for all factory workers. Cost of foods decline An encouraging development in the program to stabilize living costs was a decline of 0.8 percent in the BLS cost-of- food index in June, according to confidential preliminary figures. This decline marks the first downturn in the index nince Hovember 1940. The index is now 12.1 percent above Regraded Unclassified 30 - 3 - the level of September 1942, to which labor groups demand that prices be rolled back, and 51.6 percent above the pre- yor level of June 1939. The 10 percent rollback in butter prices WAS the most important factor in the June decline in the index. Prices of fresh vegetables, however, were noticeably lower due to seasonal downturns in prices of green beans, cabbage, lettuce, mainsh and potatoes. In contrast, egg prices advanced 3.0 per- cent in line with the seasonal upward adjustment in the ceiling price. Other food prices showed practically no change. Although it was expected by the OPA that the imposing of community ceilings would tend to reduce food costs by dis- couraging black markets, the BLS figures thus for do not undear to substantiste this theory. However, since it is oubtful whether above-ceiling prices have been reported to the BLS, the elimination of black market prices may not effect the food index. Reference to Chart 1 will show that retail and wholesale food prices since 1940 have followed a substantially similar pattern, although wholesale food prices have shown a larger increase for the entire period. However, retail food prices have risen 16.7 percent since May 1942 when the General Maximum Price Regulation became effective, as compared with a 10.8 percent increase in wholesale food prices. This may indicate more effective control of wholesale prices, but no ositive conclusions should be drawn because the indexes do not cover the same areas nor exactly the nume foods. Marketing margine increase recently Despite the large increase in the cost of food during the nest two and one-half years, marketing margins showed little change up until the last few months, according to figures of the Department of Agriculture. In other words, most of the increase in food prices went to the farmer, while the middlemen continued to receive about the same amount of money per unit of sale. (See Chart 2.) Food marketing margins, however, have increased rapidly since February, according to the Department of Agriculture figures. While the annual retail cost of 56 foods advanced from 0432 in February to 8475 in May (upper line on Chart 2), only 15 of this vas due to higher farm prices, while 128 Regraded Unclassified 31 - 4. - represented an increased toll taken by intermediaries--apparently going chiefly to retailers. A decline in the farm prices of live meat animals, between February and May. while retail west prices actually increased alightly in that period, partly accounted for the increase in marketing margins. Moreover, the sharp increase in prices of apples, potatoes, end sweet potatoes went largely to the middlemen. Although marketing margine remained quite stable during the var period until the last few months, labor costs of middlemen have increased sharply. Average hourly earnings of marketing employees have risen more than 20 percent in the last two and one-half years. The increase in labor and other overating costs undoubtedly would have tended to squeeze middlemen 1f it hed not been for the increase in their volume of business. Also middlemen have benefited from the shift in consumer demand to many high-priced luxury foods unon which margins are generally higher. (These items are not included in foods covered by the Department of Agriculture's figures.) Vegetable prices reduced A rollback of 50 percent in price ceilings of cabbage nná 25 percent for lettuce VAB announced by OPA last week on the first step in cutting back excessive prices of important fresh fruits and vegetables. No subsidies will be used in the rollback, but advantage vill be taken of the present seasonal Recline. Ceilings at wholesale and terminal markets 1111 be determined by & basing point price plus freight, and retail ceilinge will be determined by a specified nark-up over cost. The regulation provides for monthly or sessonal changes in the ceiling prices for cabbage, but lettuce ceilings are conarently to remain unchanged. The new ceilings become effective July 20 and will replace previous temporary ceilings established in February. Generally the prices for the vegetables covered by the order, and others which will follow, represent a rollback in prices to the maximum amount allowed under the legal limitations governing the pricing of rew agricultural commodities; that 1s, the highest price reached between January 1 end September 15, 1942 or the parity price. Allowance must be made for grade, location, and seasonal differentials. Regraded Unclassified 32 - 5 - New mark-up program announced An over-all fixed mark-up price program for most food products was announced last week by the OPA. The regulation poplies to both the wholes. le and retail levels of distri- oution anó 18 designed to simplify and replace a large number of separate maximum price ceilings which have been reviously issued. The effective date of the order for wholesslers and large retailers 16 July 26, and for small retailers, August 5. It is estimated that 95 percent of all dry groceries and 75 percent of all fresh vegetables are covered by the new order. Major grocery store items not included, however, are beer, liquors, candy, bread, milk, ice cream, fresh fish and tobacco. Ceiling prices of perishable commodities are figured by all Toups of retailers each Thursday for a week on the basis of the net delivered cost of the largest purchase received in the seven-day period before that Thursday. Increases in the mark-up for some minor canned fruits AME vegetables, rice, pickles, and relishes are provided in the order; however, OPA stated that the new regulation would Meintain the same reneral level of prices which VEB in effect April 8, when the President issued his hold-the-line order. The increased mark-upe simply restore in part & out-back which occurred May 17. The regulation does not affect prices in the 200 communities where dollar-and-cente ceilings are now in effect. Moreover, the extension of community ceiling prices vill gradually replace the order in many daces. Commodity prices fractionally lower Commodity prices were influenced by Congressional developments last week, and earlier orice gains were wiped out by the failure of Congress to raise the corn ceiling or to check the use of subsidy payments. The BLS index of 28 besic commodities declined fractionally. (See Chart 3.) Wheat and cotton prices were somewhat lower and, DE D. result of heavy marketings, hog prices declined 3 percent to around the Government support level of $13.75 per hundredweight. With feed barley in excellent demand as a substitute for corn, barley prices moved higher. Rosin prices increased noticeably. Regraded Unclassified 33 - 6 - The BLS all-commodity index in the week ending July 3 declined alightly to 103.0. After three consecutive declines the index 1s now 1.0 percent below the beak reached at the end of May, although 37.3 percent above the ore-War level of August 1939. Seasonally-lower prices for fresh fruits and vegetables, and a 7 percent decrease in bacon prices were largely responsible for the decline in the index. Crop prospects improve With the improvement in weather conditions in recent weeks, crop prospects are now generally favorable, according to the July 1 crop report of the Department of Acriculture. it regate crop production in 1943 seems likely to be at a relatively high level, 114 percent of the 1923-32 average, but considerably below the phenomenal showing of 126 percent in 1942. The 1943 figure includes crops not yet planted or not yet estimated, and allows for normal losses from drought and other causes. Growing conditions appear favorable in all except a few states and crop improvement has continued during the first week of July, according to the latest croo bulletin of the Weather Bureau. A large crop would undoubtedly have some moderating influence on food prices. However, the crops are off to a late and uneven start, especially in the east-central and northeastern parts of the country. In spite of the late plantings, the harvested acreage of the 52 principal field crops 18 expected to be almost 347 million acres, B.E. compared with 340 millions last year. The aggregate area of "wer crops" (flaxseed, soybeans, Decnuts, beans, dry Deas, potatoes, and sweet potatoes) shows na increase of nearly 5 million acres over last year. Record or nerr-record production of these crops is forecast. While the area in corn has been increased 5 million scres, the corn crop is estimated at 2,707 million bushels as compared with 3,175 millions produced in 1942. Combining the forecasts of of corn, oats, barley and sorghume for grain, the tonnage these 4 feed grains seems likely to approximate 107 million tons, which would be 17 million less then in 1942. In view of the record livestock production this year, & harvest of feed grains no lerger than 18 now indicated would necessitate in some decrease in the rates of feeding and some reduction the number of meat animals and poultry. Regraded Unclassified 34 - 7 The whent crop has improved since the June forecast and 10 now estimated 8 percent above expectations D. month ago. Probable production is placed at 791 million bushele, which would be much below the bumper crop of 981 million bushels in 1942. Production of decidunts "ruits 1s foreoast to be considerably lower than year und somewhat below the 10-year 1932-41 average. in fact grapes are the only important deciduous fruit that annears likely to be in ,006 supply in 1943. Peach. cherry, and pear crops will be much below average, and two ondition of the commercial apple crop on July 1 V.B.B only 53 percent, or 12 points below that of July 1, 1942. Citrus fruit production, it is estimated, vill approximate last season's crop. The total tonnage of all fruits for marketing during the 1943-44 season may be within 6 or 7 percent of the supply for 1942-43. Fectory employment sli htly lower in May but payrolls rose Despite further expansion in the circreft and shipbuilding industries, the total number of factory workers employed in min-May was about 37,000 less than a month earlier. Employment in the iron and steel industries declined, primarily as t. result of the completion of certain Government contracts, while pessonal decreases in employment occurred in the textile and leather industries. Reference to Chart 21. will disclose that factory employment has shown relatively little net advance since the end of 1942. In the face of the moderate reduction in employment, factory payrolls continued to forge ahead in May and showed 2. further rise of more than 1 percent. This continuing expansion in payrolls, despite a slight contraction in employment, indicates that the average weekly earnings of factory workers are still rising. By mid-May estimated average weekly earnings of factory workers (shown on Chart 4) were nearly 81 percent above the 1939 average, and were more than 20 percent higher than a year earlier. Steel operations still hempered by coal strikes Although steel operations were scheduled to rise 7 per- cent last week, continuance of picketing and work stoppages in the Pennsylvania coal mines continued to hamber operations. Regraded Unclassified 35 - 8 - As a result of labor troubles in the mines producing coal for the Pittsburgh steel mills, U. S. Steel Corporation subsidiaries in the Pittsburgh-Ohio area had to bank 13 furnaces by the end of the week. In addition, the important Clairton coke by-products plant was forced to operate at only percent of capacity. Slightly offsetting continued production difficulties in the Pittsburgh district, the Carnegie-Illinois blast furnace overations in the Chicago area were restored to full creacity last week as the No. 7 stack at the Gary plant resumed operations after a 10-month shutdown for rebuilding and enlargement. The rebuilt furnace's capacity is reported coubled, thus making it one of the world's largest. Heavy iog and accidents continued to hinder iron ore phioments on the Great Lakes in June, as evidenced by the fact that shipments dropped 6 percent below the corresponding month last year despite an increase in the size of the ore fleet. AB 21, result of the late start in the shipping season one the subsequent unfavorable weather conditions, this year's ore movement up to the end of June was 27 percent behind the corresponding period last year. In view of the deficit which will have to be made un in the remainder of the shipping season, it is fortunate that the new MacArthur look at Sault Bointe Marie has just been opened. This 18 a deep draft lock which vill permit heavier loading of the larger boats, and will also relieve the heavy dependence of the war program on the continuous functioning of the other locks at the Soo. June department store sales failed to show usual seasonal decline Department store sales normally show a seasonal decline in June, but the heavy wave of shoe buying in the first half of last month provided sufficient stimulus to maintain sales very close to May levels. As a consequence, the FRB adjusted index of sales for June rose to 129 from 125 in the previous month. Following the mid-month buying flurry in June, department store sales dropoed sharply but still ran substantially above year-earlier levels. (See Chart 5.) However, the gain of 39 percent in the week ended July 3 was partly due to the feet that the corresponding week last year had 1 less shopping CUT. Regraded Unclassified 36 - 9 - In contrast to a gain of 24 percent in June department store sales over the corresponding month last year, sales of mail order companies showed much narrower gains. However, Sears, Roebuck and Company sales in June ran above the previous year's levels for the first time since last October, although the gain was less than 1 percent. The comparable gain for Montgomery Ward and Company was nearly 8 percent. Indicative of the pinch of war-time goods shortages, the new Sears, Roebuck fall and winter catalogue reveals the elimination of around 250 articles, including such items as cotton sheets and pillowcases, alarm clocks, vacuum Jugs, anti-freeze and wheelberrows. Regraded Unclassified Chart 1 37 CONFIDENTIAL PERCENT 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 P-239-A Regraded Unclassifie E 5 1943 J 1943 a = J N Retail 51 CITIES, B.L.S. 5 1942 J 1942 2 FOOD PRICES 1940 . 100, Unadjusted Wholesale a B.L.S. J N $ 1941 J 1941 1 2 J N $ 1940 J 1940 3 2 J PERCENT 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 I % Service / % Der Dies 1 ] I 1 I 170 Chart 2 38 RETAIL COST OF 58 FOODS' AND MARKETING MARGIN 1941 1942 1943 OLLARS DOLLARS For Year Per Year Monthly 550 550 500 500 450 450 400 400 350 350 500 300 Farmer's Shore 250 250 200 200 150 150 100 100 Marketing Margin 50 50 0 o J F M A M J J A S o N 0 J F M A M J J A S o N D J F M A M J d A S o N D 1941 1942 1943 Source U.S.D.A. "Annuel purchases by o typical workingmons family. Office of the Secretary of the Transury Program - and Person 9-266 Regraded Unclassified MOVEMENT OF BASIC COMMODITY PRICES 1942 1943 1944 PERCENT PERCENT AUGUST 1939-100 220 220 210 210 200 200 9 Uncontrolled Commodities* 190 190 180 28 Commodities 180 170 170 19 Controlled Commodities 160 160 OCT DEC. FEB APR. JUNE AUG. OCT. DEC FEB. 1942 1943 1944 PERCENTAGE CHANGE DEC. 6. 1941 TO JULY 2, AND JULY 9. 1943 PERCENT PERCENT 19 Controlled 9 Uncontrolled Commodities Commodities Flasseed 6462 +60 +60 +50 .50 Beriey 44 /X Can 44.6% +40 +40 (Noge 350x 39 +30 Lard 28.8% +30 2682 Shelloc 12.3% Wheat 2432 (Lood 111% Steers 2352 +20 Print Cloth 7.8% +20 Cotton 2062 Sugar 6.9% Butter lasx Wool Tops 6.2 % Cottonseed Oil 5.9 I Zine 3 % +10 0% Change .10 Mides. Salh, Tin, Pubber, Coffee, Copper, St. Scrap,dom, o o St Screp.exp Cocoo 8% Tellow -4.12 Burlop 4.3 % 10 # 10 July 2 July 9 Dec 6. July = Dec. 6 1943 1943 1941 July 9 1943 1941 1943 *20 Controlled a Uncontrolled previous to June 26, 1942 Difice of the Secretary of The Treasury Regraded Uncla FACTORY EMPLOYMENT. PAYROLLS AND WAGES 1939 = 100, Unadjusted 1939 1940 12 1941 1942 1943 PERCENT PERCENT 320 320 300 300 280 280 260 260 Payrolls 240 240 220 220 200 200 180 180 Employment 160 160 140 140 Average Weekly Earnings of Factory Workers 120 120 100 100 Chart 4 80 80 J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N 1939 1940 1941 1942 1943 Office of the Secretary of the Treasury Division of Research and Statestics C Regraded Unclassifie Chart 5 41 DEPARTMENT STORE SALES 1935 - '39 - 100, Unadjusted JAN FEB MAR APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. PERCENT PERCENT Weekly 280 280 260 260 240 240 220 220 200 200 180 180 160 160 1943 1941 140 140 120 120 100 100 1942 80 80 60 60 JAN FEB MAR. APR. MAY JUNE JULY AUG SEPT. OCT. NOV. DEC. Ince of the Secretary of the Treasury C-390-B Dvem Research and States Regraded Unclassified 42 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 12, 1943 TO Secretary Morgenthau FROM Mr. White HOW Mr. Alex Royce, Economic Adviser to Mr. Murphy, and Chairman of the North African Economic Board, spoke to EL group of Government representatives, including Treasury representatives, on July 8. During the course of the discussion, he criti- cized some of the Government agencies for failing in their duties in the area, for having sent in- efficient and ill-trained personnel abroad, and for sending too many men into the area. At & later point, he stated that the Treasury was the only division in the area that was under-staffed and undermanned. He indicated privately, after the meeting, that the Treasury representatives were doing & good job and that Glasser and some of the others were people who should be seriously considered for any operations that might be contemplated in the future. Regraded Unclassified SECRET 43 treasury department PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON July 12, 1943 MEMORANDUM TO THE secretary: Supplementing report to you of July 5, 1943, the purchases against the African Program from July 5, 1943, to July 11, 1943, totaled $875,483.60 or a total of purchases for the program thus far of $46,963,043.74. Attached is report giving status of shipping against these purchases. Clifton E. Mack Director of Procurement FORVICTORY BUY VRITED STATES BONDS ARB STAMPS (37861) Regraded Unclassified 44 HIPPING REPORT AS OF JULY 10, 1943 Tonnage Tonnage Tonnage Tonnage Shipped to Date Under Load On Hand at Port En Route Commodity From U. S. A. At Port Waiting Vessels To Port Asbestos sheet packing 2 Bearings, ball, roller 1 1.38 1.21 Blasting caps 1.4 Belts 5.5 Boiler tubes 19 Bone glue 47 10.5 Books & booklets 2 Brass rods and sheets 161.74 14.82 36.5 Babbitt metal 53.85 Brick 169 23.06 Cable insulation winding mach. 4.5 Calcium carbide 2105 554 46.22 907.67 Cement 47 Cement, rubber 10.79 21.5 Chemicals 3029.11 631 1206.89 178.52 Coal cutters 12 Copper, tubing, sheets 191.03 79.88 72.07 rods, cable, and wire Corrugated boards 106 19.4 22 Clothing 2472.58 99.7 188 27.9 Copper sulphate 5697.7 47.5 Cotton thread 75.65 23.6 Cordage & twine 241.55 22.95 32 Drugs 40.08 .33 1 Electric motors 4.8 4.5 Electrodes 18.41 10.78 5.5 Envelopes 13.94 2.56 12.68 Files, steel 15 15 .4 Fullers earth 72 Telatin 2 2 Class, window 99.6 21 Regraded Unclassifie -2- 45 SECRET Tonnage Tonnage Tonnage Tonnage Shipped to Date Under Load On Hand at Port En Route Commodity From U. S. A. At Port Waiting Vessels To Port Glass, lamp chimneys 17 Glycerine 12.75 Grass hooks 1.27 Hooks, eyes, buttons, needles 17 6.5 Horse-shoes & nails 197.31 29.91 30.06 10.72 Hosiery 31.56 3.5 20.1 Jute bags 751.19 33.55 555 Lamps 5.18 Light bulbs 2. sockets 11.68 5.5 13.2 16.8 Lithopone 10.2 Lumnite 30 Mach. finished book paper 2 Tatches 394.38 8 84.64 62.35 100 Newsprint 1529.13 14 52 Mipples, bottles, eye cups 9 Oil, insulating 9.5 Padlocks 2.5 Paper products 889.58 114 430.09 37.67 Paper bags 95.32 190.6 Paint pigments 28.33 34.5 12.2 1 Piece goods, textiles 11,999.22 250.5 1,488.3 3,612.95 Pig iron 65 490 121 Pig tin 64 Powdered milk 119 Printers ink & supplies 11.5 Raw sugar 1545 Refined sugar 4190.5 Shoe tacks 19.54 9 Spare Tarts for autos, 1062.76 134 426.86 398.53 tractors " harvesters Spark plugs 4.5 5 .2 Regraded Unclassifie -3- 46 Tonnage Tonnage Tonnage Tonnage Shipped to Date Under Load On Hand at Port En Route Commodity From U. S. A. At Port Waiting Vessels To Port Spiegeleisen 161 Storage batteries & flashlights 69.27 21.5 42.99 7 Steel, pipe, bars, angles, wire 3860.50 994 3539.63 1068.72 Shoes, boots & soling 338.06 100.25 301.68 116 Sulphur commercial flour 184 2312 652.2 3759.5 Tin plate 845 Tires, tubes & tape 274.64 85 208.87 356.80 Tools 306.24 121.9 452.02 650.3 Tooth brushes .75 Tea 171.75 Trucks 229.8 166 88.5 22.46 Typewriter ribbons .5 Wire cloth 3.45 3.5 Wire nails 100.5 19 Wire rope 88.5 17 7 X-Ray film 1 18 Brake fluid .2 2.37 Zinc rolled sheets 27.5 Grain drills 22.46 Pump installations 12.85 Welding rods .31 14.8 Sodium silicate glass 28 Hardware 1.2 9 Lignumvitae planks 2 Transformers 7 Electrical appliances 1.27 Sprayers 2.29 Totels 44,208.20 6,704.87 10,329.20 11,850.44 Regraded Unclass 47 SECRET TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON July 12, 1943 MEMORANDUM TO THE SECRETARY: There is submitted herewith the operating report of Lend-Lease purchases for the week ended July 10, 1943. The Procurement Division is preparing a statement for the Office of Lend-Lease Administration based on expediters' reports received from the field offices which will show the present status of all requisitions prior to January 1, 1943, with particular reference to undelivered balances. This information will be used for the purpose of review with the requisition- ing countries to determine whether the original need exists or whether the requirements should be revised. gener Director of Procurement YORK NA 1 UGA FORVICTORY BUY UNITED STATES BONDS ARB STAMPS (37861) Regraded Unclassified 48 SECRET LEND-LEASE TREASURY DEPARTMENT, PROCUREMENT DIVISION STATEMENT OF ALLOCATIONS, OBLIGATIONS (PURCHASES) AND DELIVERIES TO FOREIGN GOVERNMENTS AT U. S. PORTS AS OF JULY 7, 1943 (In Millions of Dollars) Administrative Miscellaneous & Total U. K. Russia China Expenses Undistributed Allocations $3958.5 $1926.8 $1557.0 $103.4 $10.2 $361.1 (3958.5) (1926.8) (1557.0) (103.4) (10.2) (361.1) Purchase Authoriza- $2834.1 $1543.1 $1140.2 $40.5 - $110.3 tions (Requisitions) (2801.3) (1526.0) (1129.1) (40.3) - (105.9) Requisitions Cleared $2750.2 $1493.1 $1112.5 $40.0 - $104.6 for Purchase (2721.0) (1474.8) (1103.6) (40.0) - (102.6) Obligations $2660.4 $1461.0 $1070.7 $40.0 $6.6 $82.1 (Purchases) (2626.3) (1450.8) (1048.8) (40.0) (6.4) (80.3) Deliveries to Foreign $1160.3 $811.6 $317.3 $18.6 - $12.8 Governments at U. S. (1148.9) (806.0) (311.7) (18.6) - (12.6) Ports* *Deliveries to foreign governments at U. S. Ports do not include the tonnage that is either in storage, "in-transit" storage, or in the port area for which actual receipts have not been received from the foreign governments. Note: Figures in parentheses are those shown on report of June 30, 1943. Regraded Unclassified 49 BRITISH air COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D. C. TELEPHONE HOBART 9000 EASE QUOTE FERENCE NO With the compliments of British Air Commission who enclose Weekly Statement No. 111 covering Aircraft Flight Delivery as at July 6, 1943. The Honourable Henry Morgenthau, Jr. Secretary of the Treasury WASHINGTON, D. C. July 12, 1943. Regraded Unclassified 50 U.S. LOCATIONS OF OCENITC FLIGHT ATRORAFT SECRET 111 (Covering Novements through July 6, 1943) 1963 (1) C o 3 (5) (6) (7) (8) (9) (10) (11) BRITISIO BEFO 7% vant. di BOST. RAIR. 1178, 7 B24D 325 (mas) (BAC) 1 (1/2) (1/4) â (L/L) (A.S.I/L) (1.8) (1) (A.R) (L/L) TOTAL 20 96 5 140 m 9 371 172 1 44 182 135 4 30 1,998 BAST 5 95 48 31 179 SOUTH AFR.BOA 127 127 91 91 AUSTRALIA 27 27 STEMPONE 9 9 INDIA 3 3 EMP If CANADA 45 42 13 165 205 x 1 16 45 18 51 $ E 7 6 13 2 1 459 1 97 560 la reste - 3 6 1 w 2 1 1 20 F 1 € 1 1 1 1 2 5 Insure # Bermade (as reste) 4 31 , 44 Special daty** 4 1 15 4 29 2 45 Hontroal , 1 2 22 9 5 5 8 1 , 99 CRASSED who REPORT 18 20 , X 15 38 3 2 8 191 m reste export 1 2 3 At installation center 40 1 4 45 it milliotion mater 19 58 30 105 in reste medification conter 11 11 Special daty in U. & 1 2 3 Value repair 1 2 1 1 5 at starting yelat (Ism Boonk,ete) 1 2 1 4 CRASHED IN U. s. 1 2 5 1 25 1 12 2 2 7 58 DIVERTED 90 U. s. 50 20 20 351 TOTAL 20 165 520 663 1200 60 638 200 576 " 293 232 72 200 332 . Beloting - transferred to U. s. after delivery to U. K., which has boen shown us diverted to U.S. A 1 1 I 8 1 PLANNING AND AIRFRAKE SUPPLY BRITTIN AIR commission KASHINGTON, D.C. Regraded Unclassified 51 BRITISH air COMMISSION 1785 MASSACHUSETTS AVENUE WASHINGTON, D. c. TELEPHONE HOBART 9000 LEASE QUOTE EFERENCE NO With the compliments of British Air Commission who enclose Statements Nos. 92 and 93 -- Aircraft Despatched -- for weeks ended June 29 and July 6 respectively. The Honourable Henry Morgenthau, Jr. Secretary of the Treasury WASHINGTON, D. C. is July 12, 1943. 52 MOST SECRET STATEMENT NO. 92 AIRCRAFT DESPATCHED FROM THE UNITED STATES NEX ENDED JUNE 29th. 1943 TYPE DESTINATION ASSEMBLY BY BY FLIGHT DELIVERED POINT SEA AIR FOR USE IN CANADA CONSOLIDATED Liberator III India India 2 Catalina IV U.K. U.K. 1 CURTIBS Kittyhawk 8. Africa Capetown 21 Kittyhawk New Zealand Wellington 5 Kittyhawk Australia Sydney 50 Kittyhawk M.E. Port Sudan 15 DOUGLAS Dakota III U.K. U.K. 3 Dakota III India India 6 Dakota III S. Africa 8. Africa 1 akota III M.E. M.E. 5 LOCKHEED Hudson IIIA U.K. U.K. 2 GLENN MARTIN Baltimore IV M.E. M.E. 4 GRUMMAN Hellcat U.K. U.K. 9 NORTH AMERICAN Mitchell II(B25C) U.K. U.K. 2 Mitchell II(B25D) Bahamas Nassau 1 Mitchell II( U.K. U.K. 1 Mustang U.K. U.K. 18 Harvard S. Africa Capetown 11 arvard M.E. Port Sudan 6 arvard S. Rhodesia S. Rhodesia 8 VULTEE Vengeance India Karachi 18 Vengeance India Bombay 6 Vengeance Australia Melbourne 6 VEGA Ventura GR V 8. Africa 8. Africa 1 British Air Commission, TOTAL: 173 29 Movements Division, - - July 3, 1943. Regraded Unclassified 53 MOST SECRET STATEMENT NO. 93 Aircraft Despatched from the United States Heek Ended July 6th, 1943 ASSEMBLY BY BI FLIGHT DELIVERED TYPE DESTINATION POINT SEA ATR FOR USE IN CANADA CONSOLIDATED Liberator GR Y W'Africa W'Africa 4 Catalina 1B U.K. U.K. 1 CURTISS Kittyhawk S'Africa Capetown 10 Kittyhawk New Zealand Auckland 18 Seamew U.K. U.K. 5 DOUGLAS Boston III A U.K. U.K. 1 Dakota III N.B. N.B. 8 Dakota III India India 4 Dakota III U.K. U.K. 1 FAIRCHILD Fairchild PT 26 Algiers Algiers 10 LOCKHEED Ventura New Zoaland Auckland 2 Hudson III A U.K. U.K. 1 GLENN MARTIN Baltimore III A M.E. M.E. 1 Baltimore IV N.B. M.B. 7 NORTH AMERICAN Harvard S'Africa Capetown 13 Harvard Now Zealand Auckland 8 Harvard India Bombay 1 Mitchell II(B25C) U.K. U.K. 1 B 25 G U.K. U.K. 2 VEGA Ventura GR V Canada Canada 1 Ventura GR V S'Africa S'Africa 3 Ventura GR V N.B. N.E. 1 Ventura Canada Canada 1 Ventura S'Africa S'Africa 1 VULTEE Vengeance India Karachi 6 Vengeance Australia Welbourne 18 STINSON Stinson U.K. U.K. 11 TOTAL 102 36 2 British Air Commission, Movements Division. July 10, 1943. Regraded Unclassified Farmer 54 THE FOREIGN SERVICE OF THE UNITED STATES OF AMERICA THE AMERICAN EMBASSY AIR POUCH London, July 12, 1943. No. 60 AM Dear Mr. Secretary: This is in belated reply to your telegram 3722 concerning "the significance and background of the defent of Herbert Morrison as Treasurer of the British Labor Party". It is my belief and that of other observers here that Morrison's defeat 18 not of itself particularly significant or portentious. In the first place the vote was close when one considers the effect of "block-voting". Ernest Bevin appears to have taken a meticulously neutral attitude toward the candidates in that he did not openly try to influence the vote of his Transport and General Workers' Union delegation in either direction. It is reported that the pre-election caucus of this delegation decided for Greenwood by a majority of only one vote. Had this one vote gone the other way, Morrison would have won. From the enthusiastic reception given Morrison at the Conference, both before and after the election, there is every reason to believe that he retains the admiration and high regard of the labor movement generally. It 18 not believed that Morrison's defeat necessarily means the defeat of the general post-war program he has been preach- ing. It is true that as Treasurer he would have been in a position to help finance the election to the Party Executive of persons who agree with him, but this influence is not decisive and in any event would take a considerable period of time to produce any effects. At the same time, were other circumstances favorable, there is no reason to suppose that Greenwood, at one time in charge of post-war planning and believed to be in agreement with many of Morrison's ideas, would not exercise his power to influence elections with the same general objectives in mind. In short, the Party might have accepted Morrison's program The Nonorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington Regraded Unclassified 55 - 2 - program while rejecting him for office and it might have elected him to office while rejecting his program. As it happens, the Party "rejected", or at least failed to sanction, both the man (by a narrow margin) and much of his program. Morrison himself has said, and observers have agreed with him, that his removal from the Party Executive will not lessen his influence within the Cabinet but that, on the contrary, he might even feel more free to exercise pressure when not a responsible, mandated Party official. Specifically, here are some of the reasons commonly given for Morrison's defeat. All probably carried some weight with one section or another of the delegates but it would be impossible to evaluate them, 1. Greenwood's immense personal popularity. He has long, devotedly and for the most part ably, worked for the interests of the Party and the labor movement generally and is personally known and liked by an unusually wide circle of individual rank and file members. 2, There is a feeling that Greenwood was badly treated when removed from the Government and that he deserved the Party office as a consolation and as & sign of the continued loyalty of his followers. 3. Many give Greenwood the credit for instigating (when he was Minister without Portfolio in charge of post-war planning) the Beveridge investigation and Report. Morrison, on the other hand, was later put in the awkward position in the House Debate of having to defend the Government's cautious and non-committal attitude on the Beveridge Report. 4. It 18 stated that Morrison's program and his many forthright speeches are largely his own work and that he has not sufficiently consulted the trade union elements in the Party concerning them. This is said to have caused resentment and the feeling that Morrison is moved by personal ambition rather than a desire to carry out the wishes of the rank and file. 5. Morrison's background and support lie principally in the local Party groups rather than in the trade unions and it is a fact that the Party or political movement today is dominated by the trade unions. A Regraded Unclassified 56 - 3 - A considerable number of individuals and publications with "left" tendencies profess to see in Morrison's defeat the doom of the Labor Party. It may be a symptom but in view of the closeness of the vote and of the various conflicting and politically irrelevant factors noted above, I do not consider the election per se as a major symptom. That the recent Conference was a rather hollow affair and that the prospective position of the Labor Party in the post-war perioù is extremely precarious, I fully agree. But in my view the situation would not be much different if Morrison had been elected, The "highlights" of the Conference were the rejection of Communist affiliation and the continuance of the electoral truce - both, as Morrison himself said - negative acts. Almost nothing was done by way of hammering out & concrete positive program. In any event continuance of the truce prevents the Party from taking steps now to implement any such program, although many commentators, including Morrison, are urging the importance of B. concrete implemented program before the end of hostilities. It seems to me that the Tory majority in the Government remains in a position to delay action on social legislation at present on the grounds that the war must be won first and then, when the time is ripe and open opposition can be tolerated, to hold a general election in the atmosphere of post-war hysteria in which they can count on Churchill's immense prestige and yet can still use the argument that "things are uncertain and we must wait yet awhile". The Labor Conference did manage to extract a promise from Atlee that another Conference will be held after Germany is defeated or "when there is any question of B. General Election". The wording does not make clear who will raise the "question of a General Election" but one infers both from the wording and from the nature of the situation that the Tory majority will raise it. Any attempt on the part of Labor to precipitate B General Election would meet resistance on the same grounds as the recent motion to abandon the electoral truce - "Its not the time yet". This means that the time will be chosen by the Conservatives and will naturally be made to occur under circumstances as favorable as possible to themselves. In short the essence of the Conference which W&B "Remain loyal to the coalition for the duration but be ready to go to the people and into the opposition as soon as the emergency is passed", strikes me as very unrealistic. I Regraded Unclassified 57 - 4 I believe that in refusing to formulate a specific program now and in refusing to take it to the people now in the by-elections, means that the Party will one day be confronted with"the question of a General Election" without 8. known program und policy and at a time and under circumstances heavily weighted against it. Incidentally a thought has frequently recurred to me in recent days concerning the much-admired political unity of the British in comparison with the political difficulties our own Administration is experiencing. (Much has been said on this in the British Press in the past week or two). The thought is this: I wonder if the British Tories would behave as nicely as has British Labor if the position of the two parties in the Coalition were reversed? (which is roughly the situation at home) of course the political machinery in Britain is not comparable with that in the U.S. but I have the feeling that if, say, Morrison or Cripps had been Prime Minister for the past several years with a bare Labor majority in the House and a large minority Conservative "opposition" the Coalition and the Electoral Truce would not stand (and would not have been created in the first place) and that, consequently, the political scene here would be just about as difficult as it seems to be now in the United States. Yours sincerely Warday DIABILI of 70F 50 1843 LIGHTINA Debetructions BECEIAED Regraded Unclassified COPY 58 PARAPHRASE OF TELEGRAM RECEIVED FROM: AMERICAN EMBASSY, CHUNGKING TO : Secretary of State DATE: July 12, 1943, 2 p.m. NO. : 1158. CONFIDENTIAL Conditions at Hong Kong were described in a letter written to an American firm by a Chinese employee who on November 14 escaped. This letter was given to a consul in Kweilin 0:1 July 9 was delivered to a representative of the firm at englding. These conditions are reported as follows: 1. Four Hong Kong dollars was the exchange value Civen to military yen in July 1942. CX dollars 3 was the value of the Hong Kong dollar in May of this year. The American dollar at the same time was worth, at the black market rate, about three military yen. 2. A three-fold increase was seen in commodity prices last year and they are still rising. Rationed rice in May of this year sold for 30 sen per catty but the price was approximately yen 1.90 in the black market. 3. It is indicated on every side that the Japanese find getting commodities into Hong Kong increasingly difficult. Open admission of this fact in the newspapers was made by the adminis- tration. The use of coal and electricity, in April of this year were restricted. 4. The purchase of houses is being made by many Japanese who assume Chinese names for the purpose. 5. Taxes are recollected as from 1943 on luxuries. Establishments whose income in a year is more than 5,000 military yen are subject to the same requirement. A tendency toward inflation, while not yet marked, is visible. 6. It was stated by the author that operation of the Japanese civil administration is smooth and efficient and that a lot of Chinese people in Hong Kong are prevented from going to free China because of inflationary prices and, due to the impossibility of finding work, fear of starvation. ATCHESON Cogy:bj:7-28-43 Regraded Unclassified 59 OFFICE TREASURY SECRETARY 1943 JUL 13 AM 11 32 EASURY DEPARTMENT NOT TO BE RE-TRANSMITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL NO. 225 Information received up to 7 a.m., 12th July, 1943. 1, AIR OPERATIONS SOUTH WEST ITALY. 10th. Liberators dropped 56 tons at VUBQ VALENTIA Airfield. SICILY. 9th/10th. About 70 tons were dropped at syracuse, CATANIA, NOTO and other objectives. 10th. Spitfires flew 861 sorties over objectives in the landing area. 59 other Spitfires escorted bombing raids. Litchells dropped total of 137 tons at SCIACCA and TRAPANI. . MILO Airfields and at PALAZZOLO. 78 Fortresses bombed GERBINILLanding Ground. Casualties: Enemy - 10, 3, 10. Allied - 12 missing. CRETE. 9th. Liborators dropped 56 tons at ALEME Airfield. Enemy casualties: 5,1,5. 1 Liberator missing. LATE NEWS A 20,000 ton transport and a 16,800 ton transport, each carrying about 300 ($) troops in an escorted Southbound convoy were set on fire by Focke Fulf Aircraft off CAPE FINISTERRE last night and sunk. 1,815 survivors so far rescued. Regraded Unclassified 60 July 13, 1943 9:15 a.m. GROUP Present: Mr. Bell Mr. Sullivan Mr. Thompson Mr. White Mr. Smith Mr. Haas Mr. O'Connell Captain Kades Miss Chauncey Mrs. McHugh H.M.JR: Well Norman, McNamara - what about him? MR. THOMPSON: He is due in this morning. He hasn't arrived yet. H.M.JR: Good. I liked his looks. He was very suspicious, I think, that we were trying to move him out of the Bureau for political reasons, but I assured him that we only-- (Mr. White entered the conference.) MR. SULLIVAN: Political reasons? H.M.JR: Yes. Do you know McNamara? MR. SULLIVAN: Yes, I do. H.M.JR: What do you think of him? MR. SULLIVAN: I think he is so good I hate to see him leave my shop. H.M.JR: I told McNamara I would take the man wherever I found him. Regraded Unclassified 61 - 2 - MR. SULLIVAN: I understand that. Are you going to call Guy? H.M.JR: He is going to see Thompson. He has got to see - it will take him a day or two. When I make up my mind I will call Guy. MR. SULLIVAN: That is what I meant. H.M.JR: I won't call him; I will send him & telegram. (Mr. Bell entered the conference.) H.M.JR: I am going to take anybody wherever I find him to help me put over the war bonds. MR. SULLIVAN: There are different ways of doing it. I would like to see you afterwards. H.M.JR: Wherever I can find anybody to help us straighten out this organization I am going to do it. MR. THOMPSON: He is getting sixty-five hundred down there. H.M.JR: If I want Bill Heffelfinger, I will take Bill and Bell will smile. (Laughter) MR. BELL: Over my dead body. (Laughter) MR. SULLIVAN: You see, now, there is the difference. I am willing to let you have him, but I want to prevent something else that I think can be prevented with a tele- phone call. H.M.JR: Well, I see Dan feels perky this morning. (Laughter) Anyway, I think the thing to do is to get him and Ted Gamble together. Regraded Unclassified 62 - 3 - MR. THOMPSON: That is what I thought. I have 8 tentative organization chart drawn up for the organization which is quite good. H.M.JR: Could I see that right after this meeting? MR. THOMPSON: Yes. I was going to take that up with Ted. H.M.JR: Ted isn't here again this morning. MR. THOMPSON: I understand he got in at eight this morning. MR. BELL: His train didn't get in until eight-thirty, something like that. H.M.JR: Anyway, I would like to see that. Mr. Bell? MR. BELL: We are starting this morning to print that occupational currency. While I was in Boston I called up Forbes Lithographing Company to help us out in case we got in a jam. They said they would turn over their whole plant to us if necessary, so we are all set to go. We have about a hundred and - a little over hundred million dollars of yellow-seal currency in Africa, and & hundred million in reserve. H.M.JR: I think if I could get - we have an eleven o'clock meeting with the Open Mark t Committee, don't we? MR. BELL: Yes, sir. H.M.JR: Could I get together with you and George and George's brain trust around ten-thirty? MR. BELL: Yes, sir. H.M.JR: You can pour it into me. John? Regraded Unclassified 63 - 4 - MR. SULLIVAN: The associate director of the National War Fund was in last week and wanted to know whether it would be proper for Winthrop Aldrich to invite me to become sort of a special advisor to that board. H.M.JR: I thought - on the Chase Bank? (Laughtr-) MR. SULLIVAN: No, no. This is the national campaign. I think it was very nice, but I am afraid it would become involved in the problems of the-- H.M.JR: If you have any good ideas, give them to war Finance. We can use them. MR. SULLIVAN: All right. Yesterday evening the forms for the September 15 income tax returns went to press. I went over it with Mr. Mooney and Mr. Suman. I have a copy here if you would like to make out your own. It is far from satisfactory, but I am convinced it is the best that can be done to comply with the law. I got out my old return and assumed that my income this year would be the same as last; and with Mooney and Suman and myself I succeeded in completing mine in just an hour and thirty minutes flat. H.M.JR: What does 8 fellow like me, who is just a man on the street-- (Laughter) MR. SULLIVAN: I know what you are going to do, and I am not worried about you at all. H.M.JR: I was asking Mrs. McHugh this morning - she said, "Ask Sullivan; he can tell you in two seconds." (Laughter) MR. SULLIVAN: Well-- H.M.JR: Didn't I talk to you about that this morning? MRS. McHUGH: Certainly, that part is right. (Laughter) Regraded Unclassified 64 - 5 - MR. SULLIVAN: Anyway, here is a copy if you are interested. (Income tax form handed to the Secretary by Mr. Sullivan.) H.M.JR: Whose fault is this? MR. BELL: I thought it would be just six lines. MR. SULLIVAN: Six lines is what you file, but the fifty- five computations you have to make to get the answers you put on the lines are in here (indicating papers). MR. BELL: Why are you worried about the computations until March? MR. SULLIVAN: Because you have to file this estimated declaration September 15. H.M.JR: Now look, John, I wish that you - the minute you and Fred Smith are both free this morning - and not later than ten o'clock - I wish you would get together on this thing and see what we can do with the public, because, after all, through the Treasury representatives we have to meet the public, the Congress doesn't. And you are telling me, then dumping this on my desk - telling me it is Congress doesn't convince John Doe or anybody else. MR. SULLIVAN: No, no, we are going to get the blame for this. I have known that all spring. H.M.JR: I would like you and Fred Smith to get in a huddle on this. I am sorry Gaston isn't here, but I want everybody else - I don't think it is necessary to put it in writing, but Fred Smith's job is the relation between the Treasury and the public over-all, not just war bonds. MR. THOMPSON: That is what I understand. Regraded Unclassified 65 - 6 - H.M.JR: Besides his job of trying to keep me happy - I mean, he is working for me, but, after all, my job is to try to keep the Treasury and the public happy, and he advises me on that. Now, any of these things that come in - and then speeches - from now on I want to go both to Gaston and to Smith. Will you take care of that, please? MR. THOMPSON: Yes, sir. H.M.JR: So that somebody doesn't go off, "Well, I made 8. speech; the public is supposed to understand it." But you had better put the old bean on this, Fred. It doesn't help us one darned bit to sit back and simply say, "This is Congress." MR. SULLIVAN: Well now, Mr. Secretary, I wasn't suggesting to say that, because there isn't anything we can do about it. MR. SMITH: The OWI has asked to do something on that. We may drag them in and see if they can give us any help through OCD and that bunch. H.M.JR: If you don't mind, I don't want to take that defeatist attitude. I mean, we have got it; now let's see what we can do about it. See, John? MR. SULLIVAN: I agree with you, and I have in mind a plan of publicity just as we had in March for this very thing. H.M.JR: But the difference is this: No Bureau or any- body in the Treasury is going to go off by themselves now - good as the job was before - I mean, it has got to be-- MR. SULLIVAN: I think it should be. H.M.JR: Fine. That is the way I want it. That is Smith's job. Whether Harry White has got-- MR. WHITE: I think we might also take him in on this TFR-500. We have had some trouble up to now. I think we have made it satisfactorily, but I think in the light of what you say-- Regraded Unclassified 66 - 7 - H.M.JR: I mean, take your job, for instance, on this question of stabilization, world bank. I mean, I have got to know about it; and if I have to know about it, I want Smith to know more about it. See? And if he gets too much, he can get a partner to help him. But it is my responsibility that we meet the public, and I want him to have plenty of time - not rush him - so he can think about it. And it will be helpful to everybody, because he has been helpful to me. MR. SULLIVAN: I have a copy of that advertisement, including Justice Stone's picture. He was at Isle au Haut, and there is no telephone connection there. He will be on his way to Sugar Hill, and will be there this afternoon, and I will call him there. (Copy of advertisement handed to the Secretary.) H.M.JR: Do you mind if I just say something? I appreciate what you have done - I want to use you as an illustration. May I? MR. SULLIVAN: Certainly. H.M.JR: Without your taking offense? MR. SULLIVAN: Not a bit; go ahead. H.M.JR: Well, I ought not to be bothered with this kind of stuff, see, John. I told them, Smith and Louis - Jack Louis - I told them what I wanted. I told those boys, you see. I mean, just for the future-- MR. SULLIVAN: To go ahead with what? H.M.JR: I told them to handle it. MR. SULLIVAN: Yes, but - excuse me, Mr. Secretary - the reason I called you was because the Chief Justice wrote you a letter. There was no talk, no permission by him for the use of a picture. H.M.JR: Yes, John, again, granted, but you could have said to these boys, "Now wait a minute, I will get his per- mission, and not bothered me, see? MR. SULLIVAN: Yes. Regraded Unclassified 67 - 8 - H.M.JR: That is the point, why should I be bothered with it. Simply say, "Boys, I have to get his permission.' Then get it. Do you mind? MR. SULLIVAN: Not a bit. H.M.JR: I mean, using you. I think this is very nice, I am very much pleased with it. I think it is wondorful to have gotten the Chief Justice. I never would have had the temerity to go after him myself. I think this is swell; I am very much pleased. What else? MR. SULLIVAN: That is all. H.M.JR: Harry? MR. WHITE: We have this letter from McCarran on silver. Berle called me yesterday to say that Senator Thomas - not Elmer Thomas, but the other Thomas of Utah, who wasn't there - called him with respect to the silver, saying he was quite disturbed. H.M.JR: Start over again, will you, please? MR. WHITE: We have this letter from Senator Elmer Thomas enclosing a letter from McCarran in which McCarran recedes from the position which he took at the Committee where he wasn't enthusiastic, but he certainly didn't oppose it. And here he strongly opposes it and goes on the record. Senator Thomas of Utah called Berle to say that he was disturbed about this hundred million ounces to India. Apparently Senator McCarran got to Senator Thomas of Utah. That is my guess. Now, Senator Thomas of Utah is a very reasonable per- son, and I am quite - I am almost positive that if it were explained to him - not by McCarran, but by ourselves - that he also would go along. And in view of the fact that McCarran is making this, I suggest that I get in touch with Senator Thomas of Utah, at Berle's suggestion. H.M.JR: Sold. Regraded Unclassified 68 - 9 - MR. WHITE: Sir Harry Kisch, Economic Advisor to India, is coming here about the silver matter. In the light of McCarran's opposition, I have this suggesti that we might talk to him and that would give us add protection. Suppose we get an understanding from In that they will not sell this silver below a certain price. Now, we can decide on the price-- H.M.JR: Is he an Indian - this man Kisch? MR. WHITE: He is Economic Advisor to India - British. If we could get that we could either make it seventy- one cents or even a dollar. That would give us complete protection against McCarran and the other claims. Is that satisfactory? H.M.JR: Yes. There is a call in from Halifax. MR. WHITE: What is that? H.M.JR: Halifax is trying to call me. MR. WHITE: Do you intend to postpone letting Halifax know about this in view of McCarran's opposition? H.M.JR: No, I thought about it last night, Harry, and when I get ready to do it, this, if I am right, is something to keep the Indians happy and as such it is very important for the war effort. And I want to write a letter to Senator Thomas of Oklahoma and say that with India in such a strategic and critical position, I con- sider it very important at this time to make the loan as a war measure, and I am going to do it in the light of the fact that when I appeared nobody at that time raised any objection. MR. WHITE: We will draft & letter for you. Regraded Unclassified 69 - 10 - H.M.JR: This is either bad or good for the war, I think it is good and therefore I am going to do it, and if they don't like it, to hell with them. We will put it strictly as a military measure. I brought it all up at Cabinet. I played safe. MR. WHITE: Everybody was with you except McCarran and even he didn't-- H.M.JR: If it is good for the war, I am willing to take the criticism from McCarran or anybody else. What else? MR. WHITE: That is all. H.M.JR: Haas? MR. HAAS: I have nothing. H.M.JR: How can they just roll back cabbage and lettuce fifty and twenty-five percent? If they can do it for cabbage and lettuce, why can't they do it for any- thing else, which gets back to the original thing I told you when you (Kades) first came in here. If they can simply get out an edict that cabbage and lettuce goes back twenty-five and fifty percent, why can't they roll back anything? MR. KADES: In cabbage and lettuce they feel the farmers are making exorbitant profits at the present time and that all along the line the profits are far in excess of any other foods, such as meat, butter, and coffee. Consequently, even if they roll those back there is still a substantial profit left to everybody all along the line. H.M.JR: You are begging the question. I asked you how can they do it. I mean, if they can do it for that, why can't they do it for anything? Is it a difference between the controlled and uncontrolled prices? Regraded Unclassified 70 - 11 - MR. HAAS: I think this isn't a rollback, specifi- cally. It is 8. change in ceiling. CAPT. KADES: But it amounts to a rollback, but it doesn't squeeze anybody, and that is why they can do it without a subsidy. MR. BELL: They have a big margin of profit. MR. SULLIVAN: I think the Secretary is inquiring about authority. If they have authority to do it in one case, why not in another? CAPT. KADES: There is plenty of legal authority to do it in everything. I thought you meant how could they do it without a subsidy. H.M.JR: John pointed the thing up. If they can do it for cabbage and lettuce, why can't they do it - well, let's take the difficult one, beef. CAPT KADES: They can, legally, but when they roll back beef, in view of the fact that there is 8 very narrow margin of profit, they squeeze the man in the middle, the processor, wholesaler, or retailer, who has bought his beef at the higher price. When the price is rolled back he must sell at a loss. When the price of cabbage is rolled back, he doesn't have to. H.M.JR: Supposing you said - let's say, for argu- ment's sake, from the time beef leaves the hoof until it goes to your stomach, let's say it takes a month - I don't know. All right, then if your argument is they are worried about the fellow, why can't they say, "Effective August 13, the price of beef will be five cents & pound less" - giving everybody a chance to clear their shelves? CAPT. KADES: They can, Mr. Secretary, but the result of that is that in that intervening period no one buys anything, and there is a shortage created. That was one of the reasons why beef is short now. Regraded Unclassified 71 - 12 - H.M.JR: Who, when you say nobody buys-- CAPT. KADES: The wholesaler doesn't buy, and the processor doesn't buy, because he wants to keep his shelves bare until after the new celling takes effect. MR. WHITE: Isn't is possible to take care of that the way we do with silver - to let him sell the beef that he has bought up to a certain day to allow for the lag which takes place in the distribution process - give him the benefit of the doubt - 80 that any meat which he has bought at the higher price, up to a certain date he is permitted to sell at a higher price? The only one who would hold back - and he certainly wouldn't because he will say, "Next month I can get beef cheaper," that isn't going to make him buy less beef to- day. So if that is the reason, you could take care of it. We have that same problem in silver - did have it. CAPT. KADES: I don't know how you handle silver, but if you do that, the result is - if you say, for example, "I can sell beef at the old price up to the first of August," I clear out my shelves between now and the first of August, but I am not going to take on new beef at 8. higher price until after the first of August when the price is reduced. H.M.JR: If you don't mind, I don't think your argu- ment is all good because first you said you can't do it because the fellow has a lot of beef on his shelf. Well, the thing to find out is how long does it take him to clear it, and if it takes him one or two or three weeks, you give him the normal time - and supposing there are three or four days they have no beef? I mean, I just - it seems to me, sitting here, the perspective not being so close, and from watching what is going on in New York where there is a wholesale butcher selling to retail and doing 8 land-office business. He is handling fifteen thousand pounds a day from a Washington market, just doing a little Connecticut butchering, and he is doing 8. beauti- ful business. Regraded Unclassified 72 - 13 - I mean, it looks to me as though they are too much worried about the middleman's profit. I didn't know - this is the first time I had heard, and I questioned you - I am bold - I questioned whether they have the legal authority, unless you are positive, to put - just auto- matically put a ceiling on anything. Are you sure of your facts? CAPT. KADES: Mr. Secretary, they can put a ceiling on anything that has reached parity. H.M.JR: Oh, well, that is different. That is different. MR. HAAS: On retail, even if it hasn't, can't they? MR. O'CONNELL: They may fix the retail price to reflect itself back so as not permit the farmer to get parity. That is the limitation on farm prices. CAPT. KADES: Wheat is within a few cents of parity, and cotton hasn't reached parity, but almost everything else is above parity. MR. WHITE: Would it be parity if you rolled it back and if the lower price was passed on to the producer - you could still roll it back? CAPT. KADES: That is right. You are using rollback in two senses. MR. WHITE: I mean, could you reduce the ceiling? CAPT. KADES: Yes, so long as the reduced ceiling reflects parity to the producer. MR. WHITE: And it still could with beef? How much leeway do you have, generally - large amounts? CAPT KADES: Hogs are more than double parity. (The Secretary held a telephone conversation with Lord Halifax.) Regraded Unclassified