Volume 373 - Bank of America, February 15 – February 19, 1939

DIARY Book 373 February 15 - 19, 1941 - A - Book Page Acheson, Dean See War Conditions: Foreign Funds Control Agriculture, Department of See Financing, Government Allison Engineering Company See War Conditions: Airplanes (Engines) Appointments and Resignations Houghteling, James L.: "Duties" discussed at 9:30 meeting - - 2/17/41 373 52 Johnston, Gale 7.: Metropolitan Life Insurance Company agrees to release for few months in connection with Defense Savings Bonds - - 2/15/41 31 a) Sullivan meets in St. Louis and considers him excellent - 2/25/41: See Book 375, page 22 Argentina See Stabilization Fund Australia Wool: See War Conditions - B - Ballinger, E. R. See Personnel, Division of Bulgaria See War Conditions: Foreign Funds Control Business Conditions Hass memorandum on situation for week ending February 15, 1941 198 - C - Chile See War Conditions: Strategic Materials (Copper) China See Stabilization Fund # War Conditions Civilian Conservation Corps See Financing, Government Coast Guard Transfer to Havy again deprecated in Gaston memorandum - 2/17/41 101 Consolidated Aircraft See War Conditions: Airplanes Copper See War Conditions: Strategic Materials - D - Dakar See War Conditions: Gold Defense Advisory Commission, National See National Defense Advisory Commission - 7 - Book Page Financing, Government Securities and Exchange Commission asked to guard against any large private financing February 25-27, 1941, while Government refunding operations are on - 2/17/41 373 95,279 (See also Book 375, page 132) Department of Agriculture, Civilian Conservation Corps, National Youth Administration, and all public works: HMJr asks Bell to review with great care - 2/17/41 96 Debt limitation bill sent to FDR for signature - 2/17/41 98 a) Senators Barkley, Harrison, and Brown thanked for assistance 97 Treasury bill offering: Hadley memorandum - 2/17/41 99 Open Market Committee meeting - 2/19/41 281 United States Government securities now vested and available for sale - 2/19/41 332,334,336 Finland See War Conditions - G - General Counsel, Office of Report of projects during January 1941 187 German-occupied Europe See War Conditions Germany See War Conditions Gold See War Conditions Greece See War Conditions: Airplanes - H - Houghteling, James L. See Appointments and Resignations - I - Investigative Service, Treasury See National Defense Advisory Commission - J - Johnston, Gale F. See Appointments and Resignations - L - Book Page LaGuardia, Fiorello Job similar to Beaverbrook's suggested to FDR by HMJr - 2/18/41 373 230 - M - Mint, Bureau of Copper from Chile for Pennies: See War Conditions: Strategic Materials - N - National Defense Advisory Commission After Helm affair, HMJr tells Gaston not to do any personnel investigations - 2/18/41 226 a) Gaston discusses further original arrangement between HMJr and McReynolds by which Secret Service would do about 275 character investigations - 2/19/41 250 1) McReynolds-HMJr conversation - 2/21/41: See Book 374, page 193 2) FDR's memorandum and McReynolds' request to FDR - 2/28/41: Book 377, pages 204 and 205 3) FDR signs - HMJr and McReynolds discuss - 3/6/41: Book 379, page 193 4) Reimbursement discussed in Gaston memorandum: Book 379, pages 246 and 247 National Youth Administration See Financing, Government - o - Occupied (German) Europe See War Conditions: German-occupied Europe Ordnance See War Conditions - P - Parran, Thomas G. (Surgeon General, Public Health Service) Preliminary report from London on food situation - 2/17/41 108 Personnel, Division of McReynolds looking for job for Ballinger; Wilson, from Farm Credit, may be made Director - 2/17/41. 60 Price Control See War Conditions Regraded Unclassified - R - Book Page Rationing See War Conditions: Price Control Revenue Revision Tax-exempt Securities: Sullivan presents map on repeal of exemption on state and municipal bonds - 2/19/41 373 259 Port of New York Authority - Foley recommendations concerning in light of rescinding of tax-exempt feature of future issues - 2/21/41: See Book 374, page 247 Rifles See War Conditions: Ordnance - S - Secret Service See National Defense Advisory Commission Stabilization Fund Report for fiscal year ending June 30, 1940, transmitted to FDR - 2/19/41 328 Information with regard to China and Argentina provided for Senator Taft - - 2/19/41 329 - T - Taxation See Revenue Revision Tax-exempt Securities See Revenue Revision Turkey See War Conditions: Foreign Funds Control - U - Unemployment Relief Work Projects Administration report for week ending February 5, 1941 194 United Kingdom See War Conditions: Military Planning - Y - War Conditions Airplanes: Consolidated bomber being flown from California to England with British crew: Jackson asks HMJr concerning; HMJr asks Purvis - 2/17/41.. 82,85 a) Foley explains situation to Jackson - 2/18/41 228 Deliveries by purchasers and types, 1/1/40--2/15/41.. 348 - W - (Continued) Book Page War Conditions (Continued) Airplanes (Continued): Engines: Status and disposition of inspected engines of British Empire in United States for week ending February 4, 1941 - 2/15/41 373 25 Allison Engineering Company: Shipments - 2/17/41 131,132 Greece: Signed order given to Knox by FDR; HMJr telle Young Treasury will stay out of it - 2/17/41 89 China: British Government asked by Chiang Kai-shek for fresh expression of views if Chinese Government should discontinue support of market in Shanghai in order properly to use credite granted by British and United States Governments for currency purposes - 2/19/41 366 Exchange market resume' - 2/15/41, etc 22,185,236,371 Export Control: Exports of petroleum products, scrap iron, and scrap steel, from United States to Japan, Russia, Spain, and Great Britain, week ending 2/15/41 103 Finland: Financial condition, food situation, etc., reported on by American Minister, Helsinki - 2/18/41 241 Foreign Funds Control: Acheson in State Department 8 disappointment to HMJr: HMJr tells Frankfurter - 2/15/41 14,64 a) Acheson-HMJr conversation 80 1) Foley memorandum on conference in Acheson's office 218 (See also Book 376, page 201) Bulgaria, Yugoslavia, Turkey: Gold and dollar resources inventory shows that possible freesing of American accounts would seriously affect Yugoslavia only - 2/19/41 360 Hungary: Transactions with Guaranty Trust Company and National City Bank - 2/19/41 370 a) Study to be made as to whether this is part of movement of funds from United States: See Book 374, page 6 Transactions with Guaranty Trust Company and Chase National Bank - 2/20/41: Book 374, page 19 (See also Book 375, page 368 - 2/25/41) German-occupied Europe: Report on current experience of American companies with properties in Axis territory (White memorandum) - 2/17/41 115 Germany: Food situation reviewed by American Embassy, Berlin - 2/17/41 62 Gold: Belgian gold at Dakar: American Embassy, Berlin, reports possibility of turn-over to Reichebank - 2/18/41 240 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Lend-Lease Legislation: Conference on form appropriations should take; present: HMJr. Stimson, Knox, Wickard, Bell, Foley, Cox, Young, McCloy, Harold Smith, and Jump (Department of Agriculture) - 2/15/41 373 3 a) Lump sum idea favored b) Large sum allocated to FDR favored plus an Army program and a Navy program c) Two alternative methods presented in memorandum to FDR 10 FDR asked for appointment to discuss 13 a) Conference. - 2/17/41 73 Wadsworth amendment placing evaluation within power of FDR and not Comptroller General's office - 2/15/41 18 Military Planning: Report from London transmitted by Halifax - 2/15/41, etc 34,212,238 Ordnance: "The Million Enfield Rifles": Young memorandum following second conference with president and vice-president of National Arms Corporation - 2/18/41 224 Price Control: Rationing of civilian demand: HMJr transmits to FDR chart outlining problem after conference with representatives of Henderson's office - 2/17/41 133 a) Chart giving specific example: sinc 138 Purchasing Mission: See also War Conditions: Lend-Lease Legislation British Financial Position: British stockholdings in Viscose Corporation discussed (2/14/41) 1,12 Morgan (J.P.) loan: Purvis insists this is "device" to raise money quickly and not a "plan" - 2/16/41 40,342 British needs and ways of handling discussed by Hopkins and HMJr - 2/17/41 77-A a) FDR says Hopkins' visit to London was to ascertain needs; FDR wants to see Churchill personally 77-B Hopkins asks Churchill to publicise present heavy British taxes as request for increase in Lend- Lease appropriations is about to be made - 2/17/41 77-C Federal Reserve Bank of New York statement showing dollar disbursements for week ending February 5, 1941 - 2/15/41 27 Vesting order sales (resume of sales, February 22, 1940 - February 15, 1941) 102 United States Government securities now vested and available for sale - 2/19/41 332,334,336 - V - - (Continued) Book Page War Conditions (Continued) Strategic Materials: Copper from Chile for pennies discussed at 9:30 meeting - 2/19/41 373 264 (See also Book 381, page 39) Tax consequences of proposed sale of copper to Metals Reserve Company by Mines Products Corporation - 2/19/41 354 a) Closing agreements - Sullivan memorandum regarding - 2/26/41: Book 376, page 126 Wool (Australian): Pinsent gives lower valuation ($85 million to $120 million) for amount to be stored in United States - 2/15/41 33 Willkie, Wendell L. Gaston reports on talk at National Press Club luncheon following British trip - 2/17/41 78 Wilson, T. F. See Personnel, Division of Wool (Australian) See War Conditions Work Projects Administration See Unemployment Relief - Y - Yugoslavia See War Conditions: Foreign Funds Control 1 February 15, 1941 MEMORANDUM FOR THE SECRETARY'S DIARY On Friday afternoon, February 14, 1941, at 2:30, Merle Cochran brought in Pinsent and Playfair to talk with Bernstein and Foley in regard to raising money against the British stockholdings in Viscose Corporation. Pinsent said that negotiations had been progressing in New York for more than two weeks whereby Courtald, the British parent of Viscose, the United States subsidiary, would hypothecate with Morgan and Company its stockholdings in Viscose as collateral for a loan which Morgan would make to Courtald. Courtald would then make the dollars available to the British Government in exchange for sterling. Pincent said that the arrangement had hit a snag when lawyers for Morgan and lawyers for Viscose raised the question that the transaction might constitute a violation of the Johnson Act and the Neutrality Act in that Courtald might be charged with acting on behalf of the British Government. Mr. Foley asked Pinsent why the British had not requisitioned the American shares held by Courtald. Pinsent replied that it had been the British policy not to take over the control of American corporations from British corporations. Foley then suggested that Pinsent obtain 8. statement of facts from British representatives in New York and submit it to us. On Saturday morning, February 15, Foley walked home with Secretary Morgenthau and related the incident to him. Foley explained to the Secretary that the transaction raised a question of policy as to whether this Government should insist on the outright sale on the part of the British of the Viscose shares or whether we should facilitate transactions of this character by being instrumental in obtaining for Morgan and Company and Viscose an opinion from the Attorney General to the effect that the transaction did not violate the Neutrality Act or the Johnson Act. Secretary Morgenthau's immediate reaction was that loans of this character smacked of outright Regraded Unclassified 2 - 2 - violation of the spirit of the two Acts and he would not be a party to it. He said he did not want to be put in the position of explaining to Congress that we were going back on our representations made to the Committees that the British would have to sell all of their holdings in this country. Secretary Morgenthau instructed Foley not to assist the British in the consummation of this arrangement and to tell Pinsent and Playfair that he was grievously disappointed that they should even suggest that dollars be raised in this fashion, and that the Viscose shares should be sold outright as Sir Frederick Phillips had indicated to Secretary Morgenthau that the British were prepared to do with their direct investments in this country. 3 Notes on Meeting at the Secretary's House, at 9:00 A.M., February 15, 1941, con- cerning Lend-Lease Appropriation. Those present at this meeting were, Secretary Morgenthau, Secretary Stimson, Secretary Knox, Secretary Wickard, Under Secretary D. W. Bell, Ed Foley, Oscar Cox, Philip Young, John McCloy, Harold Smith, and Mr. Jump of the Department of Agricul- ture. E.M.Jr.: Pending the arrival of the Director of the Budget, I would like to ask Bell to read A memorandum on the form appropriations should take for lend-lease. (Copy of memorandum attached). Bell: The Sub-Committee mot yesterday to discuss the three kinds of appropriations, and the result was that the lump sum idea was favored. This sum would be allocated by the President, subject to questions of strategy and political tactics. Stimson: What appropriations are included? Bell: The appropriations prior to the passage of the bill, that is, the $1,300,000,000 as well as additional appropriations to be procured after the passage of the bill. Knox: What about the funds which are already available, and also the use of RFC funds? Stimson: Does this mean that we don't get any new appropria- tion if it is all included in a lump sum for allo- cation by the President? Bell: Yes. Knox: But this appropriation would just be used for lend- lease; does that mean a new purchasing organization would be set up? Bell: It is my understanding that you won't know what is for United States and what is for Britain until it is made. Knox: I can just see endless Greek situations coming out of this. When I wake up in the morning, I wonder what Henry wants today. Regraded Unclassified 4 H.M.,Jr.: Well, you know I didn't start it. Wickard: But you certainly do know who finished it, Stimson: When this bill is passed and working, there will be large desires for weapons and we don't know what will go where: that will be true of planes, ammunition, anti-tank guns and all things like that. A division will have to be made between what the Army applies for and what the President applies for. Now realizing that Congress has a keen interest in this, the Committee on Military Affairs would have no way of knowing and might not approve the division of material; it might not even know the aggregate amount. Knox: Isn't it possible to treat British requirements separately and take it to Congress no a separate requirement? I went to keep it spart from our own Departments, and we all know that the Chinese, the Greeks, and the British all want something. Stimson: You must remember this probable situation-we may get into the war while the bill is in effect, and, in that event, all our allies will want something. It seems to me that we must have A Board constituted to decide such questions; that is the only real way to do it although it may be determined in pert by the form of the actual appropriation. E.M.,Jr.: That was the idea of setting the appropriation up in alternate forms so that the President could decide. Stimson: We must think of the whole picture, H.M.,Jr.: It seems to me we are talking appropriations because they are the first step, not the organi- sation. Stimson: Is a Board possible under this memorandum? H.M.,Jr: Oh Yes. Smith: To us in the Bureau of the Budget this lump sum seems the simplest form for the appropriation to - 2 - Regraded Unclassified 5 take. The language can be simple and that is very important. Wickard: It will be impossible to 6° to Congress every time we need something--the whole thing would bog down. Stimson: I think you would run into a lot of duplication if you tried to handle all foreign purchasing separately. R.M.,Jr.: You SRW the Purvis memorandum, The President could take the needs as outlined there and add to them the Army and Navy needs, then place the orders for all of them AS one order. The stuff would not be divided up until it was made, McCloy: Our staff is already at work trying to put those needs together. Ve would like to have one appropriation with at least a 15 per cent switch, that is, 15 per cent could be switched around from one type of equipment, such as ordnance, to another, such AB nir. I think that there should also be a small contingent fund for anything else, There should be only one program. H.M.,Jr.: I know that the President is contemplating these orders as one over-all picture. Knox: He has nsked me for B. picture of the Navy. McCloy: Well, after all, Secretary Morgenthau wrote the President the General Wetson memorandum. Wickard: You're caught again. H.M.,Jr.: Did General Watson just send A copy of his memorandum? McCloy: Yes, he forwarded a photostat. Stimson: There is a certain amount of intricate and wearing work in putting together such a program. However, there will be A great deal of saving end economy if it can be handled centrally. The Board should save the President as much as - 3 - Regraded Unclassified 6 possible. Of course, as time goes on the program will become simpler. I wonder what took the place of this during the last war, Bell: The Allied Purchasing Commissi 4 coordinated the contracts. Stimson: I would like to know how that was done. Smith: You raised two points; (1) concerning the planning of the program, which must be done somehow, and (2) with respect to the responsi- bility of the Army and Navy. Stimson: We can't take that responsibility without the Board, We don't want to make the ultimate decision. Smith: On the appropriation process there is a feeling that a large fund allocated to the President would simplify the whole thing. You wouldn't save the President any time by making direct appropriations to the several Departments. I believe in the lump sum idea subject to policy decision by the Board as the best means to obtain flexibility. Stimson: We want to reduce the amount of work which will have to go to the President, end it should save trouble if the routine things were left in a direct Army approprintion. Smith: I feel that there is danger in splitting the lend- lease bill into two parts. If you divide it up, you must justify the Army and Navy part in detail, that is, so many guns, tanks, etc., and then when you get into so many bales of cotton and that sort of thing, you may find that you are subject to influences by pressure groups which would like to unload. I think it should be kept general in character even if it is out in the form of Army and Navy appropriations. It should not be marked as part of the lend-lease and mixed up with that. The lump sum is much clearer to out into appropria- tion langunge. H.M.,Jr.: Can I restate my position as I have changed my mind? I think this--as you know, I insisted on telling all there was to tell about British finances. If an - 4 - Regraded Unclassified 7 appropriation bill is to be prepared to care for the needs of England and given to the Budget on the basis of the Arthur Purvis memorandum, and then to be approved by the President and referred to Congress, I think you should tell them what the money is to be used for. It is a good way for democracy to work, If you do that, then in a year or two there can be no investigation of any lump sums, I like to see the democratic processes work as they are supposed to work. There is a lot to McCloy's idea of having as much of the appropriation flexible as possible and even to having a contingent fund of a billion or so on top. I suppose that the direct appropriations would run about 75 per cent of the total. Then, after the passage of the appro- priation bill, you could have a policy board, like Secretary Stimson suggests, make the neces- sary decisions. Knox: I am with you 100 per cent. McCloy: You must have one program. H.M.,Jr.: I think so. You can have an Army program and a Navy program and then an additional lump sum for contingencies. Seems to me that this policy board should also make the deal and it could have a sub-committee to cover the necessary ground work. Smith: I think we are missing the biggest point. After all, you can justify a lump sum in as much detail as you wish before the Committee. H.M.,Jr.: What committee? Smith: The Appropriations Committee. H.M.,Jr.: Oh, that's it--not the Military Affairs or Naval Committee. Smith: By adopting my point you are avoiding hundreds of types of appropriation language which will get you all snarled up. Cox: Having the Army and Navy in on it would tend to allay public fears. - 5 - Regraded Unclassified 8 Stimson: Even if you justify a lump sum appropria- tion, it wouldn't be handled in Congress by people acquainted with Army and Navy affairs. Smith: The Army and Navy would justify it just the same. McCloy: In the last war they didn't have a lump sum appropriation. You need flexibility for the Army as well as for the British. H.M.,Jr.: Even if a direct appropriation slowed up the passing of the bill for a week or two, I think it would be worth it. Knox: So do I. H.M.,Jr.: I don't think it's A good idea to take the power away from Congress--it's their responsi- bility and they ought to keep it. Knox: I can't get out of mind the idea that when we get through we are going to need a unified country more than ever, and that point is carrying a lot of weight in the Senate. H.M.,Jr.: What I would like to do would be to take one plan to the President rather than two plans. Knox: What do you think, Harold? Smith: I don't care much either way as far as the handling is concerned. Actually it depends a lot on strategy factors. Are we fighting a war or are we not? If we are much more detail would be required. I still think that I would give the President at least one alter- native. H.M.,Jr.: I think we are pretty well agreed among our- selves on one plan. Smith: Well, there was no agreement between us after two hours of discussion last night. H.M.,Jr.: Seems to me there is pretty good agreement here. - 6 - 9 Stimson: I like your fairness of mind, Henry, and I am trying to keep mine the same way. H.M.,Jr.; May I suggest that plan No. 2 be drawn up for the President, and Secretary Stimson's memorandum included in it as a part. I'll ask for an appointment Monday through Pa Watson. Wickard: I want it understood that I can talk directly with the British. You can't have so many boards that you can't move. H.M.,Jr.: Oh, you'll be a member of the board on all agricultural problems. Stimson: There is no intention of freezing you or any- body else. H.M.,Jr.: Well, gentlemen, thank you very much for coming. (Meeting adjourned about 10:10 A.M.) P.M. ooOoo - 7 - 10 APPROPRIATIONS TO CARRY OUT H. R, 1776 Regraded Unclas The following two alternative methods are presented: I. A lump sum appropriation to the President available through June 30, 1942 for either (1) new procurement through allocations to War, Navy, Agriculture, etc., or (2) new procurement and for reimbursement to War, Navy, etc., for defense articles turned over from its own existing or future stocks. If a lump sum appropriation is used for new procurement and also for reimbursement it may constitute an overall ceiling until a new appropriation is made. If a lump sun is used only for new procurement under H. R. 1776 the President will also have the additional discretion- ary power, under the bill as it now stands, to authorize (a) the dis- position of $1,300,000,000 worth of defense articles procured out of appropriations made before H. R. 1776 is enacted; and (b) the disposi- tion without dollar limit of any defense articles procured by the War and Navy Departments out of appropriations made to them after H. R. 1776 is enacted. Provision for plant expension can be made by increasing the existing appropriationsfor this purpose. II. Appropriations to War and Navy Departments, supplementing the various existing appropriations, and in addition a lump BUR appropriation to the President for allocation to other departments and agencies as well as to meet unforeseen contingencies of the Mar and Navy. 11 From the standpoint of simplicity and flexibility the lump sum method is deemed best. Among other things the lump sum method eliminates the necessity for predetermining the precise type of aid to be given to foreign countries. However, since other questions of policy and political strategy may be involved the other alternative method is also presented. Miss Chaungey 12 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE February 15, 1941 TO Secretary Morgenthau FROM Mr. Cochran The Secretary's stenotypist recorded the conversation which the Secretary had at 10 o'clock yesterday morning with Sir Frederick Phillips, and with Mr. Cochran present. The Secretary had indicated to Sir Frederick the desirability of Sir Edward Peacock being able at the earliest possible date to report some concrete results in his undertaking for the disposal of direct British investments in this country. At 11 o'clock Mr. Pinsent telephoned me that, following Sir Frederick's visit to the Treasury, a telephone conversation had been had with Sir Edward Peacock in New York. The latter had reported that difficulty had arisen on the legal side of the transaction which Sir Edward had hoped might be consummated at & very early date with respect to the Viscose Company. Since the difficulties set up by the lawyers were likely to block an early transaction, and perhaps make necessary & longer process for the handling of this property Pinsent asked whether the British could not take advan- lage of the Secretary's offer made to Sir Edward Peacock and avail themselves of the advice of our General Counsel. I brought this matter to the Secretary's attention at noon and then tele- shoned Mr. Pinsent that Mr. Foley and I would receive Mr. Pinsent and Mr. Playfair at 2:30 p.m. At the fixed hour I presented Messrs. Pinsent and Playfair to Mr. Foley; Mr. Sernstein and I remained during the conversation. The British were asked to obtain a emorandum from New York as to the details of the transaction and the difficulties aperienced, without any expression of legal opinion. We promised to look into this atter further as soon as such & report might be received. nowp Regraded Unclassified 13 February 15, 1941 10:55 am HM, Jr called General Watson's office and asked his secretary to tell the General that the Secretaries of War, Navy, Agriculture, Director of the Budget and HM, Jr would like to see the President the first thing Monday morning to report to him on their meeting this morning on a recommendation as to how the Appropriation Bill to the Lend-Lease Bill should be handled. HM, Jr would like the first appointment on Monday on the President's calendar. 14 February 15, 1941 11:00 a.m. Justice Frankfurter: Pretty well. How are you? You've had a vacation. H.M.Jr: Yes, sir! F: Glad you did. H.M.Jr: Are you where you can talk? F: Yeah. H.M.Jr: The reason I'm calling you 1s this: I asked Ferdinand Kuhn to get in touch with you today. F: He did. Tomorrow he's talking with me. H.M.Jr: Good. I'm terribly disappointed in your friend, Dean Acheson and I wanted to tell you about it. F: What's happened? H.M.Jr: Oh, he's just gone over lock, stock and barrel to the ring over there. F: (Laughs). That's a great maw over there, isn't it. H.M.Jr: Yeah, and I'm not the only person who feels that way. They've already sensed it in other quarters and F: Well, he may be temporarily trying to ...... Well, I don't know anything about it. H.M.Jr: Well, it's on this freeze thing and the whole business and everything else. Ferdi has the - all the details. F: Well, I'll talk with him. H.M.Jr: But I'm terribly disappointed. Well, I mean, he's - Feie has stood by his guns as far as I know. That's the interesting thing. F: In helping - I mean, in cooperating. 15 - 2 - H.M.Jr: Yes, he hasn't changed. But Hull evidently turned over the drafting of this thing to Acheson and he's been working with a man over at Justice and when I told Robert Jackson what they had agreed on, namely, selective freezing, where mF.B.I. man will go snooping at each company and then if they think they are a little pro-German then they certify and I'm to go in and freeze that company. F: Huh. H.M.Jr: They told our people that Jackson agreed to it. Well, I'd bet anybody 3-to-1 Jackson knows nothing about it, and I called him up and he said he'd be damned if he'd do it. He said he'd have nothing to do with it. He saye that's the last thing in the world he wants to do - another witch hunt. Acheson wrote the memorandum on that basis which Hull signed and sent it to the President. It's just unbelievable. F: Is that where the matter now 18? H.M.Jr: Yeah. F: Well, Ferdi knows all ..... H.M.Jr: Ferdi knows it inside out. a F: How free am I to have that knowledge after I get it? I mean how free am I to talk to Dean? Let me see what the talk 1s. H.M.Jr: As far as I'm concerned, I'm perfectly willing to have him know that I've laid the facts before you. F: You are. H.M.Jr: Yes. F: All right. Have you had a talk with him? H.M.Jr: No. He goes over there, works on this thing, which 1s vitally important to us, and he doesn't talk to anybody over here but works with this man - what is his name, used to be in the law school at Buffalo. 16 F: Shea. H.M.Jr: Yeah - works it out with Shea and Shea 18 telling our people that this 1s what Jackson wants and when Jackson heard about it he really got very angry, very angry. But we wouldn't know that - I mean, Dean has contacted nobody in the Treasury. F: Really. H.M.Jr: Yeah. F: Well, I don't understand that at all. I'm seeing Ferdi tomorrow afternoon and then I'll know all the details and, as I understand it, I'm free to know what I shall know. Is that it? H.M.Jr: Absolutely. F: And I'm free to, in talking with him, to let him know that I've talked with you as I have for sometime past on this matter. H.M.Jr: Yes, because the way I feel 1s if that's what his attitude is going to be, well then he's no different than all the rest of the gang over there. F: Yes. Well, I know that one of the things that worried him when he went over there was lest he because of his relations with other people - that he was going to play an independent role and I think that moved him very deeply. H.M.Jr: Well, what I did was I kept away from him because I didn't want him handicapped by being known as possibly ..... F: Well, that has worried him very much that his friendship for you and a lot of other people - that they might think that he comes in there to be an independent guy. That's an awful place you know, the State Department. H.M.Jr: That's why I kept away but this - and then the other thing which 1s 80 amusing, Berle said, "State Department is a policy shop. We don't want this export control," and they've placed the whole of it in the State Department. 17 F: Un-huh. Did you say the matter is now before the President? H.M.Jr: Hull wrote the President a letter yesterday of which he sent me a copy, which Ferdi knows about and has seen. I think he's got & copy of it, and he laid the whole thing before the President. So when I got this, after talking to Bob, he says, "Let's Hull, you and I get together," and I immediately wrote Hull 8 letter yesterday morning and asked that we get together because Bob and I absolutely will not do it the way Hull has asked that it be done. F: And the recommendation comes from Shea, you say. H.M.Jr: No, the recommendation ...... F: Collaboration. H.M.Jr: Well, it's a collaboration between Shea and Acheson but mostly, we understand, Acheson. Now the gossip 1s that Acheson got his facts - this 18 gossip - from Pasvolsky, because Berle and Feis agreed with me that if it was to be done it should be done by freezing on a geographical basis. They agreed to that and Pasvolsky was the only one who didn't. Now along comes a memorandum doing it by selective companies. It would be the damndest witch hunt you ever saw. F: Yes. Well, if I were Attorney General I wouldn't want to have that responsibility. H.M.Jr: Well, Bob said he wouldn't touch it and I wouldn't - even if he. said he would, I wouldn't carry out the orders. I'd say take the damn thing out of the Treasury. You can imagine the witch hunt, and for Dean to be a part of it, to me it's just unbelievable. F: Well, I'll find out and then I'll have a talk with you, Henry. H.M.Jr: Fine. F: Thanks for calling me. 18 FEB 15 1941 My dear Mr. McCornneks Thank you very much for your letter of February 14, 1941. na Foley and Oscar Cox discussed the matter which you raise in your letter yesterday afternoon with Senators George and Byrnes. It was tentatively decided to execute the idea you have in mind by an amendment on the Floor of the Senate, should & favorable occasion present itself. The amendment would add a sentence at the end of section 3(a)(2), which would read somewhat as follows: "Such value shall be determined by the head of each department or agency conserned in accordance with the rules and regulations premulgated under this dot, In the normal course, regulations to give effect to this and other provisions of the bill would be formulated by an Executive Order signed by the President. The Attorney General has hold Regraded Unclassified 19 or 8 8 that the Comptreller General has no power to PO- view the discretion of heads of executive depart- ments in matters of this kind, I think this language will take care of the problem satisfactorily. I appreciate very much your letting me have your views on this matter. Very truly yours, (Signed) E Morgenthau, Jr. Secretary of the Treasury. Hon. John W. McCormack, House of Representatives. EAFTr: OSC:aja 2/14/41 E.W.th. By Messenger 1200 Regraded Unclassified 20 OHN W. McCORMACK 2TH DIST. MASSACHUSETTS EUGENE T. KINNALY SECRETARY E ffice of the Majority Leader House of Representatives U. 5. lasbington, D.C. February 14,1941. Honorable Henry Morgantheau, The Secretary of the Treasury, Washington, D.C. PERSONAL. Dear Secretary Morgantheau;- I amsubmittingto you n. suggestion made to me by Congressman Wadsworth, and which I have discussed with Speaker Rayburn. I also talked over the telephone with Secretary Hull who suggested that I talk it over with you. Congressman Wadsworth offered an amendment in the House, whichI include herein. The second part of his amendment is what I call to your attention. "Jim" Wadsworth feels that something of this kind should be put in the bill to protect the President. He feels that unless something of this kind is done that the Comptroller General might take the position that under existing law he must pass upon the value of any "Defense Article" transferred, leased, etc., and that he might set a different value than the President. I can see this point. Wadsworth feels that something along these lines should be made a part of the bill "That the elements of expense and the amounts in this Act shall be determined, respectively, by the head of each department and agency concerned, under regulations to be approved by the President, which shall be uniform 80 far as practicable for all departments and agencies. Such language definitely places the power within the President. Is removes all dount as to the position that the Comptroller General's Office might tale, or feel constrained to take, under existing law, on reviewing values placed by the President or a department or agency. I think there is something to his suggestion, and I am passing it along to you for your consideration. John Sincerely your, Regraded Unclassified under this act 21 CONGRESSIONAL RECORD-HOUSE FEBRUARY 8 Pay or another from the of thrown The whole mircal and part of the garlous forms of dictatorship. Through printions thereafter to be made and de- economic support on the side of right. these herole efforts of men of the past, there will sexto be reistudled in the hearts fende them before the Committee on this great country has become the per- Appropriations of the House in the first of these men who love liberty the draire fection of what me now call democraby. instance. This procedure le known to for freedom, and a firther grasp will be Is It our contention that America owes every Member of the Bouse. There La taken upon the torch of liberty. nothing to the past and that It etc. by nothing unterual, in fact, 11 is the custom- This be not & question of whether or declaring its own self-sufficiancy and dwo ary procedure and If to the more custom- not se the Cireat Britain, or any other satisfaction, maintain that It should have any the more the bill. I think country, It 50 happina that the struggle Do part in shaping the dentiny of = I am justified In making that assertion. now being made by the democration la Victure world? Mr. TABER Mr. Chairman, will the expedint, for the proservation of our Our whole argument bee been world gentleman yield for a question? Ideals and tn Mar Interest of our own ground the theory of self-preservation. Mr. WADSWORTH Very briefly: yes. obtional defense. [Applaum] I contend that many of these countries Mr. TABER The gentleman does not (Mr. Charres asked and wes given Der- that are now fighting for their lives and in any may mean to Imply that by furing mission to revise and waterd bis OWD have lost their independence and liberty the ETOME timit as be has that the Con- remarks to the RECORD.) as free men have contributed materially gross should appropriate anything unless The CHAIRMAN. The question to on thoroughly justified to the advancement of our own country. the amendment offered by the gentle- It is true that we should not engage in Mr. WADSWORTH. Nothing of the woman from Manachusetis IMM. the quarrels of any foreign country from surt Of course. is le well known to AD Roasne). of us that under & Ilinited authorization the taet that we had no part in the The amendment was rejected, creating of things that brought about the Chief Exceutive must defend the estl- The Clek read BE follows: them quarrels, and, particularly, bed quins mide to the Congress for the ap- nothing to do with the beginning of this 9bc. a (a) Theme is harvity authurized to proprintions to come thereafter although be appropriated from three to time, out of those estimates may be smaller in the terrible conflict. But I do think Amer- any minusy to the Tressure not observise ap- aggregato than the total of the authorize- Ica owen to those forces that are fighting propristed. stuch amounts as may be neces- for their lives, directly or indirectly, or sary to carry ous the provisions and assem- don, and the Committee 00 Appropria- plish the purposes of this act. None may decide to appropriate & sum of nighting to preserve the heritage which (b) All money and all property which M money smaller than the authorized limit to ours, our entire moral support and everything we can possibly spare of our converted into money received under section fixed in the original act. material substance to this time of world 3 from any government shall, with the ap- It will be noted. Mr, Chairman I have proval of the Director of the Budget, revers peril. used In this amendment the phrase "gross to the respective appropriation or appropria- expense to the United States of the exer- I believe that it is possible to gain our Udos out of which funds Tue expended with objectives without even thinking of or respects to the defense article or defense ID- cise of the authority of this act." By the formation for which such consideration La use of that expression it will be seen that consenting to the sending of B single sol- (tary soldier the les. In confilcts inceived, and shall be available for espendi- this coverage, we will say, of $7,000,000.- ture for the purpose for which mich expended 000, this celling, 50 called, will include in of this kind you cannot determine the outcome by measuring the relative Funds were appropriated by law, during the the first Instance the value of the goods fiscal year in which such funds are received strength of armaments. which have been manufactured stready and the ensuing fiscal year or are now being manufactured as the There are other very important con- siderations, namely, the justice of the Mr. WADSWORTH. Mr. Chairman, I result of appropriations heretotore made offer an amendment. by the Congress. cause for which men strugglo, the Inabil- ity for any military organization to 60m- The Clerk read as follows: In other words. it will include in the Amendment offered by Mr. WADEWORE: On $7,000,000,000 the $1.300,000,000 limits- prehend and understand what the future page after line 21, . new paragraph tion already set. in that limited field might bring. For example, the Italian reading M follows: through the amendment originally who looked upon himself as the Napoleon "The My to IDs United Blates offered by the gentleman from New York Incaroate, who used all the skill and In- of the CARD act [Mr. TABER?, and for which & substitute telligence that he had in order to enter with defense and defense was adopted. It will include also all es- the conflict when he saw the victim al- Information shall not estand An the segre- gate the sum w $7,000,000 now Prootded, That penditures to be made as the result of most within the gramp of the pursuer. Be bided his time and chose a time when Coe elements of much sapense and the appropriations hereafter to be made be should join the challe in order to be amounts compitative small be under this act. Goods now in process there to get his part or the hide. Yel, determined, respectively, by the beed of each will be covered, and goods hereafter to department and agency concerned, under be made will be covered. Moreover, 11 where la he today? The great Napoleon regulations to be approved by the President, will Include expenditures which may Ft- has now lost his African possessions, and which shall be uniform 92 far - precticable sult from commitments and obligation all the dream of the expansion of his for all departments and agencies entered into by the President prior empire has vaniahed and be in now under Mr. WADSWORTH. Mr. Chairren, a the expiration of our 2-year period but the control of the Name diclator-not few days GRO I urged upon the considera- which cannot be filled or matured at that Napoleon-he in not even playing . good Unn of the managera of this bill, and is time. So when we use the phrase "(Toss second fiddle. may be recollected that I did se M a expense" we cover the entire program, These are the fortunes of ver and no friend of the measure, the suggestion that starting with the enactment of this hill, man can tell what the fortunes of war so over-all limitation be placed upon the retroactive to some extent. and continu- will be tomorrow. Bo I say, in enswer to funds authorized to be appropriated for ing on to the end of the authorized pe- those who say the democractes cannot the carrying out of the purposes of this rind of expenditure and the maturing of win because they are weak, torget these act. The amendment which I have just obligations; in other words. until 1946. 2 events of pant history. If our great coun- offered is intended, If 15. romets the ap- may only express a Judgment upon this try will in unity, mobilise through Its proval of the Committee, to establish matter, but to all probability the ex- ingenuity. through Its combination of such a limitation, penditures will be much the heavter m labor and industry It can provide the I may my at the beginning that the the first 2½ years and at the end of 2½ Beans whereby the democracies can be- entablishment of such 5. Illuitation M Taly years we shall have a chance under the come supreme in the air and rule the frequently done. Time after time the terms of this net- waves; and when that day comes this Compress has passed neta authorizing the [Bere the gavel fell] way will be over. It was true In the last performance of certain functions by Gov- Mr. McCORMACK Mr. Chairman, I war, there was not a shot fired on German ernnent, the performance of which must ask unanlmous consent that the time soil, but the German Empire fell, and If depend upon the expenditure of money of the gentleman from New York may be can and will do It sgain. n is my opin- and tax the passage of those acts has extended for 5 additional minutes. los that when these oppressed people who stated 9 maximum account to be author- The CHAIRMAN. Is there ohjection bave known what liberty Vas and under- ned. Under much authorizations the DI. to the request of the gentleman troms whand We bleatures that coma to tous bector of the Product or the department Massachusetts? men, are aware that this country has involved submite intimates for the ADDTO- There was DO objection. Regraded Unclassified 22 TREASURY DEPARTMENT / INTER OFFICE COMMUNICATION DATE February 15, 1941 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £12,000 Purchased from commercial concerns £11,000 Open market sterling moved from 4.03 at the opening to 4.03-1/4 at the close, Transactions of the reporting banks were as follows: Sold to commercial concerns -0- Purchased from commercial concerns £ 4,000 Continuing its improvement, the yuan advanced to 5-5/84 in Shanghai this dorning, up 1/8#. Closing quotations for the other currencies were: Canadian dollar 16-3/8% discount Swies franc (commercial) .2323-1/2 Swedish krona .2385 Reichsmark .4005 Lira .0505 Argentine peso (free) .2363 Brazilian milreis (free) .0505 Mexican peso .2066 Cuban peso 6-15/16% discount We purchased $500,000 in gold from the earmarked account of the Central Bank of hile. No new gold engagements were reported. The Federal Reserve Bank's report of February 11, listing deposits of banks in mia with the New York agencies of Japanese banks, showed that such deposits totaled 213,170,000, en increase of $8,524,000 since February 5. Most of the change in deposite bok place on the books of the Yokohama Specie Bank's New York agency. The latter's Principal dollar liabilities to and dollar claims on Japanese banks in Asia stood as bllowe on February 11: Doaradod 23 - 2 - February 11 Change From Feb. 5 Liabilities: Deposits for Japan & Manchuria. $65,316,000 + $8,751,000 Deposite for China 37,182,000 - 848,000 If : U.S. Treas. bills, comm. paper, etc. 27,463,000 - 1,127,000 Claims : Loans $61,997,000 + 5,333,000 . : Other - mainly Jap. import bills 13,296,000 + 1,228,000 The last three categories refer mainly to Japanese banks in Japan and Manchuria. Most of the $8,751,000 rise in deposits of such banks was accounted for by the $5,333,000 increase in the Agency's loans, plus the $1,127,000 reduction in the U. S. Treasury bills, etc. which the Agency holds for Japanese banks. CONFIDENTIAL HMS. Regraded 24 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION Chaunger DATE February 15, 1941. TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL The Federal Reserve Bank of New York reported the following transaction in the account of the Central Corporation of Banking Companies, Budapest, maintained with the Guaranty Trust Company of New York. Date Amount Debited Paid To february 14 $25,000 Guaranty Trust Company of New York for account of the Union Bank of Switzerland, Zurich R.M.S. 25 Table 1 AIRPLANE ENGINES Disposition of Engines Inspected by the British Empire Yesk ended February 4, 1941 Vosk ended February 4, 1941 1 Total to date : Inspected Engines Total inspected Exports during week : Engine company and Bactnes in airframes Inspected Engines I Exports to February a engines engines Number enginee inspected 1 I inspected : type of engine : Separate : en hand during to be Airframe company : engines of on hand to Total Separate Engines in January 26 vest accounted for and type of I February 4 February la engines 2/1 airframes engines sirframs involved Allieon Engineering Co. T 1710-015 1000 h.p. 303 96 399 . 16 Ourties Bowk 61A persuit 381 1,060 679 64 615 , 1710-MA 1150 h.p. 1 - 1 - - 1 1 - - - Total Allison 304 96 400 - 16 382 1,061 679 64 615 Jacobe Aircraft Engine Co. 1-400 225 h.p. - - - - - - 42 42 42 - L=5KB 330 h.p. 154 - 154 - - 154 154 I - - Total Jacobs 154 I 154 - - 154 196 42 42 - Igconing Division of Aviation Manufacturing Co. x 680-33 300 h.p. - - - - - - 3 3 3 - Mennaco Manufacturing Co. 3 la 125 h.p. - - - - - - 46 46 46 - Pratt & Whitney Aircraft R 985-832 450 h.p. 37 3 40 - - 40 44 la. 2 2 R 1340-S1H1-0 600 h.p. - - - - - - 50 50 50 - R 1340-S3H1 600 h.p. 249 15 264 - - 264 1,069 605 na 803 R 1535-834-0 825 h.p. 46 5 51 - - 51 603 752 752 , R 1690-5133-0 875 h.p. 4 - la - 14. Lockheed Lodester transport - - Is - 4 1 1830-20-0 1050 h.p. - - - - - - 3 3 3 - 1 1830-803-0. (312) 1050 h.p. 18 - 16 - - 18 290 272 30 242 R 1830-803-0 (16:9) 1050 h.p. 209 25 234 - 32 Martin bomber 202 485 286 214 72 E 1830-8103-0 (16:9) 1200 h.p. 167 16 183 - - 183 196 13 3 10 R 1830-82 1200 h.p. 14 - - - - - 14 - 14 - R 1830-8304-0 1200 h.p. 639 57 696 16 - 680 1,900 1,220 9kk 276 R 2800-S1A4-G. (512) 1850 h.p. - - - - - - 2 2 2 - Total Pratt & Whitney 1,369 121 1,490 16 36 1,438 4,863 3,425 2,002 1,423 Warner Aircraft Corp. 165-D. 165 h.p. 11 11 11 - - 36 36 36 - , Vright Aeronantical Curp. E 760-81 300 h.p. - - - - - 2 2 2 - - & 975-23 450 h.y. 4g - 49 - - 49 168 119 - 119 OR 1820-102A 1100 h.p. 47 - 47 - - 47 835 766 - 788 03 1820-105A. 1100 h.p. 76 1 77 - lake Brewster 339 pursuit 33 136 103 - 103 GR 1820-205A 1200 h.p. 170 - 170 1 - 169 672 503 68 435 02 2600-A5B 1600 h.p. 1,186 99 1,285 88 . 1,197 1,622 625 479 146 Total Wright 1,528 100 1,628 89 Lets 1,495 3,635 2,140 549 1,591 TOTAL ALL COMPANIES 3.355 328 3.683 116 98 3,469 9,840 6,371 2,742 3,629 Office of the Secretary of the Treasury, Division of Research and Statistics. Source: British Air Commission. Prepared February 15, 1941. Excludes spare parts but includes spare complete engines: excludes secondhand engines. Includes spare enginee for engines exported in airframce. Regraded Unclassified 26 Table II AIRPLANE Status of Inspected Ingines of the British Expire an Hand in the United States As of February 4. 1941 : 1 I 4 1 Total Enginee as engine factory Engines at airframs factory (or enroute thereto) : 1 Ingine cumpany and Inspected Englase Assigned 1 1 1. Tenaco for type af engine Airframe company and type of airframs involved engines swalting as issigned Estimated Incess Deficiency excess on hand export Total separate to Total two months engines in enginee I engines 1 : engines 1 airfrases supply , on hand nn hand I : I for export 1 1 I Allison Ingineering On. y 1710-015 1000 h.p. Curtise linwk 01-A parsuit 373 no 96 96 - 197 157 10 - Lockheed 322 2-engine pursuit 5 . - - - M 3 5 . v 1710-19 1150 h.p. Bell 7-39 airacobra pursuit 1 - - - , 1 25 - a Total Allison 382 60 9€ 96 - 206 215 15 24 Jacobe Aircraft Engine do. 1-60 330 h.p. Cessia 2-50 2-engine trainer 154 - 34 - 3% 120 100 20 - Pratt & Whitney Aircraft R 965-832 450 h.p. Grumman 0-21A asphibian boaber 40 - 3 - 3 37 - 37 - E 1340-8381 600 h.p. North American NA 66 trainer 264 42 112 - 112 110 294 - 184 2 1535-834-0 825 h.p. Tought-Bikorsky V-156 dive bomber 51 - 5 - 5 46 15. 31 Airfreme deliveries - it 1830-503-G (3:2) 1050 a.p. Lockheed 414-08 2-engine recommissance tomber 18 18 1 mosth late - - - - - 16 . a 1830-803-0 (16:9) 1050 h.p. Martin 1678 2-sagize bonber 202 92 X 25 - 85 202 - 117 a 1830-8103-9. 1200 a.p. Consolidated PET 183 10 63 14 49 110 69 41 # B 1830-8304-G 1200 a.p. Lockheed 414-13 2-engine recommissance bomber 493 - - - - 493 356 157 Airfrans deliveries - Grumman Navy fighter 120 - I - 120 7, 3 months late - 96 - Airfram deliverias Consolidated LB-30 4-engine bomber 26 - - - - 28 77 - 49 2 months late Separate english 39 - 39 39 # - - - - Total Prait & Whitney 1,438 144 247 76 169 1,047 1,017 380 350 Vright Aeronautical Corp. a 975-43 450 h.p. North American KA 64 trainer 49 49 - - - - . - - GR. 1820-102A 1100 h.p. Lockheed B14 2-engine reconnaissance bonher 47 47 47 Represents spares for - - - - - - completed airfrase oa 1820-205A 1200 h.p. Lockheed 414-56 2-engine recommissance bomber 162 63 94 - 34 5 125 - 120 contrast Grussas Savy fighter 7 - 7 7 - - - - - na 2600-452 1600 h.p. Vultee 72 dive bomber 136 - - - - 136 5 130 Airfram deliveries - # months late Martin 187 2-engine reconnaissance bomber 32 - - - - 32 7 25 - Boeing Douglas IIB-72 2-engine tember 30 . - - - 30 2 28 - Brewster 340 dive bomber 48 - - - - 4g - 48 - Airframe deliveries Douglas 097 2-engine bomber 322 60 - - - 262 # 185 5 months late - Airfrase deliveries Separate engines 629 368 261 261 - - - - - 1 month late 03 1620-105A 1100 h.p. Drevater 339 pursuit 33 12 19 - 19 2 76 - 3% Total Wright 1,495 552 381 268 113 562 20 466 154 Subtotal: engines is airframes 2,801 408 458 142 316 1,935 1,52 881 528 Subtotal: separate engines 668 368 300 300 - - . - TOTAL ALL ENGINES 3,469 776 758 442 315 1,935 1,512 881 528 Office of the Secretary of the Treasury, Division of Research and Statistics. Source: British Air Commission. Propared February 15. 1941. 26 Table 11 AIRPLANE ENGINES Status of Inspected Inglase of the Brittan Repire on Rand in the United States As of February 4. 1941 # I Ingines at engine factory # - : Total Ingines at airframs factory (or enroute thereto) Ingine company and A 1 Inspected Engines I 1 Assigned I : # 1 1 I Airframs company and type of sirframs involved 1 Reason for type of englas angines # avaiting F as - Assigned E Retionted # Incoss I Deficiency = is hand 1 export : Total : separate I to I Total I two months engines I in engines angines : 1 I engines airfrasses 1 # supply 1 on hand on hand I D : - : for export : : Allison Engineering Co. Y 1710-015 1000 h.p. Ourtise Hawk 61-A pursuit 373 so 96 96 - 197 157 10 - Lockheed 322 2-engine parents 8 # - - - 5 3 5 # 1 1710-14 1150 h.p. Bell P-39 airacobra pursuit 1 - 2 - - 1 25 - 24 Total Allison 382 60 96 96 - 206 85 15 24 Jacobe Aircraft Ingine Co. L-60 330 h.p. Cessas 7-50 2-angine trainer 154 - 34 - 34 120 100 20 - Pratt à Whitney Aircraft a 985-582 450 h.p. Grumman G-21A amphibian bosher No - 3 - 3 37 - 37 - a 1340-8381 500 h.p. North American NA 66 trainer 264 42 112 - 112 110 294 - 184 R 1535-884-0 825 h.p. Vought-Sikoraky Y-156 dive bomber 51 - 5 - 5 46 15 31 Airframs deliveries - R 1830-503-0 (3:2) 1050 h.p. Lockheed 414-08 2-englue reconnaissance benber 18 - - - - 18 18 1 south late - - E 1830-803-0 (16:9) 1050 h.p. Martin 1672 2-engine bonber 202 92 25 R - 85 202 - 117 x 1830-5103-0 1200 h.p. Consolidated PST 183 10 63 14 49 110 is 41 - B. 1830-8304-0 1200 h.p. Lockheed 414-13 2-engine recommaissance toater 493 - . - - 493 336 157 Airfrans deliveries - Gruman Havy fighter 120 - - 120 & y months late - - % . Airframs deliveries Consolidated 13-30 4-engine bomber 26 - - - - 28 77 , $ 2 months late Separate engines 39 - 39 39 - - - - - Total Pratt & Valtney 1,438 144 247 78 169 1,047 1,017 380 350 Wright Aeronmutical Corp. it 975-83 450 h.p. North American NA 64 trainer lag 79 - . - - . - . GEL 1820-102A 1100 h.p. Lookheed B14 2-engine reconnalesance bomber 47 - . - - 47 - 47 Represente spares for - completed airframe GR 1820-205A 1200 h.p. Lookheed 414-56 2-engine reconnalasance bonber 162 63 94 - 94 5 125 - 120 contract Grunnan Havy fighter 7 - 7 7 . - - - - on 2600-A5D 1500 h.p. Valtee 72 dive bomber 136 - - - - 136 6 130 Airframs deliveries - # months late Martin 187 2-engine reconnaissance boaher 32 - - - - 32 7 25 - Bosing Douglas 08-78 2-engine Scaber 30 - - - - 30 2 28 - Brewster 340 dive bomber 48 - - - - 45 - 48 Airframs deliveries - Douglas 037 2-engine bomber 322 60 - - / 252 # 5 months late 188 - Airframs delivaries Separate engines 629 368 261 261 - - - - - 1 month late GR 1820-105A 1100 h.p. Brevater 339 pursuit 33 12 19 - 19 2 ve - 34 Total Wright 1,495 552 381 268 113 562 20 466 154 Subtotal: engines in airframse 2.601 408 458 142 316 1,935 1,52 881 528 Dubtotal: separate engines 668 368 300 300 - - - - TOTAL All ENGINES 3,469 776 756 We 316 1,935 1,52 581 528 Office of the Secretary of the Treasury, Division of Research and Statistics. Sourcer British Air Commission. Prepared February 15, 1941. Charancey 27 February 15. 1941 CONFIDENTIAL Dear Mr. Knoke: Permit as to acknowledge, on behalf of the Secretary, the receipt of your letter of February 13, 1941, enclosing your compilation for the week ended February 5. 1941, showing dollar disbursements est of the British Expire and French accounts at the Federal Receive Bank and the mane by which these expenditures were financed. Tours faithfully, E. Morlo Cechran Technical Accistant to the Secretary L. V. Knoke, Equire, Vice President, Federal Recerve Bank of New Tork, New York, New Term. HM0:kma L for Seey's files 2/15/41 Regraded Unclassified 28 FEDERAL RESERVE BANK OF NEW York February 13, 1941. CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. E. Merle Cochran I am enclosing herewith our compilation for the week ended February 5, 1941, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours, L. W. Knoke, Vice President. Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosure Regraded Unclassified 29 ANALYSIS OF BRITISH AND FRENCH ACCOUNTS Strictly (In Millions or Dollars) Week Ended Feb. 5. 1941. Confidential BANK OF ENGLAND (BRITISH GOVERNMENT) BANK OF FRANCE DEBITE CREDITS DEBITS CREDITS Proceeds of Other Net Inor. Net Inor. Gov't Sales of Credits (+) or Gov't Proceeds (+) or Total Expendi- Other Total Securities (insi. Dear, (-) Total Expendi- Other Twtal of Gold Other Decr. (-) PERIOD Debita tures(a) Debits Credite Gold (Set.) (b) adj'ts) in Balance Dobite tures(=) Debits Credits Sales Credits in Balance 1989 Aug. 31 - Sept.27 94,3 3,6 90.7 207.8 185.4 33.6 -11.2(d) +113.5 19.4 6.0 13.4 11.3 - 11.3 - 8.1 Sept.28 Nov. 1 106.7 5.8 100.9 142.0 3.2 52.6 86.2(e) + 35.3 88.6 1 76.2 35.0 41.2 - 12.4 51.8 105.4 liev. 2 - 29 191.7 8.9 162,8 105.6 57.8 25.0 25.0 - 85.9 78.6 ) 82.9 55.1 27.8 + 4,3 Nov. 30 - Jan. 3 97.7 B.7 89,0 75.2 50.6 14.8 10.4 - 22.5 86.8 28.1 58.7 109.2 93.9 15.3 * 22.4 1940 Jen. 4 - 31 54.8 16.8 38.0 42.4 20.6 17.8 5.0(f) -11.4 61,5 31.5 30.0 55.9 50.1 5.6 - 5.6 Feb. 1 - 28 124.2 15.4 108.8 108.3 56.7 17.9 33,7 - 15.9 72.7 32.8 39.9 71.5 54.8 16.7 - 1,2 Feb. 29 - Apr. 3 115,5 14.5 101.0 94.0 60.9 21,5 11.6(g) - 21.5 99.6 35.9 63.7 105.0 75.4 29.6 + 5.4 Apr. 4- My 1 113.4 26.1 97.3 86.4 46.8 13.4 26.2(h) - 27.0 84.8 29.4 55.4 78.7 60.7 18.0 - 6,1 May 2 - 29 100.9 25.6 723 186.8 93.2 741 25,9 + 25.3 101.4 57.0 44.4 145.4 126.2 19.2 + 44.0 May 30 - July 3 283.2 145.3 137.9 319.3 301.3 5.1 18.9 + 36.1 (156.71) 127.3(1) 29.4 345.1(1) 535.6 9,5(1) +188,4 July 5 - 31 249,7 156.7 93.0 225.0 218.2 2.0 10,8 - 24.7 7.3 6.3 1.0 312 3,0 0.2 - 4.1 Aug. 1- 28 261.1 180.2 80.9 294.8 287.4 1.0 26,4(1) + 33.7 8.9 0.5 8,4 10.9 10,4 0.5 + 2.0 First year of war 1295.2 605.6 1,187.6 1,828.2 1,355.1 211.2 $0.9 + 35.0 B66.3 416.6 449.7 1095.3 900.2 195,1 +229,0 Aug. 29 0st. 2 316,8 244.3 72.5 308.9 271.5 6,0 31.4(k) - 7.9 8.6 4.4 4.2 1,3 I 1.3 - 7.3 Oct. 3- 30 196.7 167,8 28,9 198.5 160.5 6.0 32,0(1) * 1.8 0,5 0.3 0.2 0,5 I 0.5 - Oct. 81- Nov. 241.0 201.1 39.9 259.5 210.0 18.0 31.5(m) + 18.5 0.8 0.1 0.7 0.7 - 0.7 - 0.1 Nov. 28 - Des. 31 234.6 206.8 27.8 198.0 111.4 26.0 60.6(a) - 36.6 2,1 - 2.1 0.6 - 0.6 - 1.5 Jes. 2. 29 197.4 162.7 34.9 259.9 176.2 52.0 31,7(e) + 62.5 1,7 - 1.9 0.5 - 0.5 - 1.2 WEEK ENDED Jan, 15 56.9 49.9 9.0 163.8 143.6 14.0 6.2 +106.9 0,8 # 0.8 0.2 - 0.2 - 0.6 22 39.8 32.9 5.9 28.6 5.8 12,0 10.8 - 9.2 0.5 - 0,5 - - - - 0.5 29 41.8 39.0 4.8 19.6 1,0 12.0 6.6 - 22.2 0.4 0.4 0.1 - 0.1 - 0.3 Feb. 5 46.5 40.7 5.8 23.2 - 10.0 23.2(p) - 23.3 0,1 0,1 I - - 0.1 Average Teekly Expenditures Since Outbreak of War Transfore from British Purthasing Commission to France (through June 19) $19.6 million Bank of Canada for French Account (See fontnates on reverse side) Veek ended Feb. England (thrreish June 19) Cutulation from 5 July 6 128.1 2.3 million million 27.6 million England (since June 19) 56.6 million (a) Includes payments for account or British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control, and Ministry of Shipping. (b) Through June 19, these figures represent total sales of American securities in Second District reported for account of the United Kingdom. (Proceeds of these sales, however, may not have been oredited to the Bank of England's account in all cases.) Beginning with the week ended June 26, the figures represent transfers from the Bank of Montreal, New York Agency, which is custodian for requisitioned American securities held in this country. The transfers apparently reflect proceeds of official security sales, including those handled through private douls. From June 17 to July 19, transactions in securities payable in specified foreign currencies, including dollars, by United Kingdom residents were prohibited. (e) Includes payments for account of French Air Commission and French Purchasing Commission. (d) Includes 1justment for (b) above. (e) About $85 million transferred from accounts of British authorized banks with New York banks. (f) About $11 million transferred from accounts (f British authorized banks with New York banks. (g) About $8 million transferred from accounts of British authorized banks with New York banks. (b) About $10 million transferred from accounts of British authorized banks with-New York banks. (1) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day: (1) About $2 million transferred from accounts of British authorized banks with New York banks. (k) About $2 million transferred from accounts of British authorized banks with New York banks. (1) About $4 million transferred from accounts of British authorized banks with New York banks. (m) About $6 million transferred from accounts of British authorised banks with New York banks. (a) About $32 million transferred from accounts of British authorised banks with New York banks. (e) About $2 million transferred from accounts of British authorised banks with New York banks. (p) About $7 million transferred from accounts of British authorised banks with New York banks and $1.7 million transferred from account of Commonwealth Bank of Australia. Regraded Unclassified 30 Strictly ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS Wook Ended Feb. 5, 1941 Confidential (In Millions of Dollars) BANK OF CANADA COMMONWEALTH BANK OF AUSTRALIA DEBITS CREDITS DEBITS CREDITS Transfere Transfers to Proceeds Transfers from Official Net Incr. to Proceeda Net Incr. Total Official Other Total of British A/C Other (+) or Total Official Other Total of Other (+) or Debits British Debits Credita Gold For Own For French Credits Deon (-) Debita British Debits Credits Cold Credita Deor. (-) PERIOD A/C Sales A/C A/C in Balance A/C Sales in Balance 1939 ALLEN 31 - Sept. 27 17.5 0.6 16.9 21.8 15.1 0,8 - 5.9 + 4.3 - I - - - - - Sept.28 28 - Nov. 1 9.6 0.3 9.3 16.7 7.3 2.1 I 7.3 + 7.1 - - - - - - - Nov. 2 - 29 9.9 0.7 9.2 14.4 13.3 - , 1.1 + 4.5 - - - 1.9 1.9 - + 1.9 Nov. 30 - Jan. 3 30.0 - 30.0 22.6 13.3 3.0 - 6.5 - 7.2 2,5 1 2,5 5.8 5,8 - - 3.3 1940 Jane 4- 31 23.5 - 23.5 25.7 21.1 - - 4.6 + 2.2 5.2 0.3 4.9 3.3 S.O 0.3 - 1,9 Feb. 1 - 28 23.1 - 25,1 17.0 16.1 - - 0,9 - 6.1 3.3 0,1 3.2 2.4 2.2 0.2 - 0.9 Feb. 89 - Apr. 3 42.3 - 42.3 29.5 29,3 - 1 0.2 - 12.8 3.0 0.3 2.7 2.2 1.6 0.6 - 0,8 Apr. 1- May 1 38.2 - 23.2 42.9 24.8 15.0 , 3.1 + 4.7 2.3 - 2.3 2.0 1.8 0.2 - 0,3 May 2 - 29 37.9 15.0 37.9 50,2 50,0 - - 0,2 + 12,3 1.2 0,2 1,0 2,6 1.7 0,9 . 1.4 May 30 - July 3 44.1 - 14.1 72.5 72.2 - - 0,3 + 28,4 2.3 - 2.3 5.9 4.4 1,5 + 3,6 July 4- 31 28,2 - 28.2 117,6 96.3 - 19.2 2,1 + 89.4 4,6 - 4,6 5.0 4.2 0,8 + 0.4 Auge 1- 28 18.7 - 18.7 73.6 53.9 , 19.5 0.2 + 54.9 6.8 3.0 3,8 5.0 3,4 1.6 - 1.8 First year of war 323.0 16.6 305.4 504.7 412.7 20.9 38.7 32.4 +181.7 31.2 3.9 27.3 36.1 30.0 6,1 + 4,9 Aug. 29 - Oct. 2 44,3 - 44.3 43.9 16.4 - 27.3 0.2 - 0.4 8.7 2,5 6.2 8,0 6,7 1,3 - 0.7 Oct, 3 - 30 25.7 - 26.7 28,6 14.0 - 14,3 0.3 + 1,9 10.1 7,5 2,6 7.9 6,5 1.4 - 2,2 Date 31 - live 27 35.2 il 35.2 69.6 49.2 - 16.7 3.7 + 34,4 3.1 0,6 2,5 3,6 2.1 1,5 - 0.5 Nov. 28 - Dec. 31 48.0 . 48.0 60,6 42.5 - 13.7 4.4 + 12.6 4.8 - 4.8 6.8 4,8 2,0 + 2,0 Wer period through Deg 477.2 16.6 480.6 707.4 534,8 20,9 110.7 41.0 +230.2 57.9 14.5 43.4 62.4 50.1 12.3 + 4,5 Jan. 2- 2 29 33.7 - 33.7 33.9 16.9 - 15.0 2.0 + 0.2 4.8 - 4.8 6.8 5.1 1.7 + 2.0 Jan. 30 - Feb. 26 Feb. 27 - ADI. 2 WEEK ENDED: Jan. 15 9.0 - 9.0 1,8 1,8 - - . - 7.2 2,8 - 2,8 0,4 - 0.4 - 2.4 22 9.0 - 9.0 9.7 4.5 - 4.8 0.4 + 0.7 0,2 - 0,2 5.4 5.1 0.3 + 5.2 29 13.9 - 13.9 15.4 5.2 - 10.2 - + 1.5 0.9 - 0.9 0+9 - 0.9 - Feb. 5 B.4 - 8.4 7.1 4,6 - 2.3 0.2 - 1.3 2.6 1.7 0.9 1,2 0.6 16 - 0.4 Weekly Average of Total Debits Since Outbreak of war Through Fob. 5 $6.9 million Regraded Unclassified 31 C o P Y METROPOLITAN LIFE INSURANCE COMPANY New York City February 15th, 1941 Monorable Henry Morgenthau, Jr. Secretary of the Treasury ashington, D. C. My dear Mr. Morgenthau: I have your letter concerning Mr. Gale F. Johnston. I have been away from the office for a couple of days, holding business meetings with our Field Force, and am just now hastening to reply. We are, of course, desirous of cooperating in any request from the Government and we shall be pleased to release Mr. Johnston from his important duties with our Company for a period of "a few months" as requested by you. I have just telephoned Mr. Johnston at St. Louis and have informed him that I am writing you accordingly. I have no idea who brought Mr. Johnston's name to your attention in this connection but, whoever it was, is deserving of real thanks at your hands. In addition to being an outstanding citizen of St. Louis and active in community matters, Mr. Johnston is one of the exceptionally fine men in our Metropolitan family and he will surely give a good account of himself in the important work you propose to assign to him. With kind personal regards, I am Cordially yours, (s) Leroy A. Lincoln President Regraded Unclassified 32 FEB 13 1941 My dear Mr. Lincoln: In connection with a program now being developed for the promotion of the sale of Treasury securities to the public, it would be very helpful for us to have the services of your Mr. Gale F. Johnston. If he could be made available, we feel that he would be of great value in assisting in the organiza- tion of the campaign which we have in mind. It would be much appreciated if you could find it possible to lend him to us for a few months for the purpose indicated. Sincerely yours, (Signed) H. Morgenthau, Jr. HNG/mff Secretary of the Treasury. Mr. Leroy A. Lincoln, President, Metropolitan Life Insurance Co., 1 Madison Avenue, New York City. Regraded Unclassified 33 BRITISH EMBASSY, Washington, D. C. February 15th, 1941. Dear Merle, You may remember that in Phillips's letter to you of the 10th January he put the value of the 250,000,000 pounds of Australian wool to be stored in the United States at something between $130,000,000 and $150,000,000. Although, as we under- stand, the purchase of this wool by the United States Govern- ment is not likely to be proceeded with for the present, I thought I should let you know for purposes of record that we now find that the above figure for the value of this wool is too high, and that the figure should in fact be something between $85,000,000 and $120,000,000. The reason for the large difference between the minimum and maximum figures is that the grades of wool to be shipped have not yet been selected, but it seems possible that the actual value may be somewhat nearer the upper limit than the lower limit. I am also not clear at present whether the new figures for value are based on f.o.b. prices in Australia or c.i.f. prices. As I understand that the United Government under the storage agreement is to pay for the cost of shipment of the wool from Australia to the United States, the correct basis of the valuation, in the event of the purchase of the wool by the United States Government, would of course be the Australian f.o.b. prices. Yours ever, (Signed) Jerry Pinsent Mr. H. Merle Cochran, United States Treasury, Washington, D. C. Copy:emk Regraded Unclassified 34 BRITISH EMBASSY, WASHINGTON, D.C. Personal and Secret February 15th, 1941. Dear Mr. Secretary, I enclose herein for your personal and secret information copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 30 Telegram received from London dated February 14th, 1941. 1. Reference to convey attacked east of Asores, now known that at least three ships totalling 14,590 tons two being British and one Greek are sunk. Survivors state that at least four ships were undamaged. Reported that reider was "Admiral Scheer" or Hipper class cruiser. 2. German "Uckermark"st1ll afloat, attempt being made to tow her into harbour. One other Italian ship about 5000 tone was also captured on the 11th. 3. on the thirteenth two east coast convoys bombed but no damage reported. 4. One British ship (1900 tons) bombed and damaged off the east coast. 5. British tanker (10,516 tons) torpedoed and reported on fire and sinking in the north-west approaches. 6. Italian Somaliland. A cruiser bombed without damage off Brava. There was no reply to her fire from the shore batterics at Kismayu, the town being apparently ovacuated. Scuttled merchant ship was lying in harbour. 7. R.A.F. No day operations other than curtailed routine reconnaissances were undertaken yesterday owing to adverse weather conditions. Night of 13th/14th. No bomber commend operations took place. Albania. Four tons of bombs dropped on enemy camp at Elbasan. 8. German Air Force. Daylight 13th. Little activity Two/ Regraded Unclassified 36 - 2 e Two bombers and one fighter intercepted and damaged during attack on Dover balloon berrage. 9. Night 13th/14th. Thirty enemy aircraft crossed the coast, serodromes in east Anglis apparently being their objective. 10. Aircraft casualties in operations over and from the British Isles. German 3 damaged. British nil. Regraded Unclassified 37 RESTRICTED G-2/2657-220 M.I.D., W.D. No. 317 February 15, 1941 12:00 M. SITUATION REPORT I. Western Theater of War. Air: German. Fairly heavy attacks on the night of the 14th-15th in the London area. Considerable activity against shipping. British. Normal operations on the night of the 14th-15th over western Germany, focussing over the Ruhr. II. Greek Theater of War. Ground: Strong local Greek attacks which may indicate resumption of a coordinated offensive, but which cannot as yet be indentified as such. Air: No information available. III. Mediterrarean and African Theaters of War. Ground: In Italian Somaliland the British forces which captured Afmadu are advancing southward on the part of Chisimaio. British naval units are demonstrating along the coast. British progress in Eritrea appears held up. Otherwise no change in the situation. Air: The Italians claim effective aerial reaction against the British naval forces off Italian Somaliland. German attacks on British units in Libya continued. Malta was again attacked on the night of the 14th-15th. Note: This military situation report is issued by the Military In- telligence Division, General Staff. In view of the occasional in- clusion of political information and of opinion it is classified as Restricted. RESTRICTED Regraded Unclassified CONFIDENTIAL 38 Purephanes of Sale Indiagram Reserved as the Ver Department at 9:27, Pobruary 16, 1941. Lendon, filed 15:00, February 16, 1941. I a a $ I s I I Y Commai engaged in the usual petrols onl ⑉ Butter - plano attacked - compled French part. During the preseding night Constal Command planse attacked complet French onl Belgian parts with a observed results. During the - night planse of the Benber - started 6 number of fires at the inland German part of Databurg and attached a delecakirehen oil refinery. Airfields in Hollend and in the Dahr Valley - the tangeto of Ime Brittich reiders but the - of these missions could not be determined. Brittsh aircraft losses as a result of these operations was ⑉ fighter plane during the w and - benber during the night. ! 19-16 I I di I auto % il I into effect in Zenden at eight e'closk to the overing. Neverer, only a mail amber of beste vare released me Lendon w Gorman planse that passed over apparacally bound tw other potate. Other - str activities during this night consisted of 4 attack against Glousector, enother against Aberdon, 6 third along the const of mL - others against Liverpool. - planse based an the Channel Intrado curried out the first attack a the latter place. the - benking please were dectroyed during this night. During the proceding day - planse - fairly active over England. Continuous - CONFIDENTIAL Regraded Unclassified CONFIDENTIAL 39 yatrels vare operated along the cash coset of Britain má over the English (hormal end the Strait of Never. Daids vere curried out against Surfelk and Suffelk and call cities in costom Sections www nechine - and banked w lass Govern release. Galmon air eraft cosualties during deglight hours - three planes. 3. British planse based in Alam, the Balan, Gresce and Kenya cooperated with land forces in their respective meeters. Three Italian please vire destruyed W British fighter planes one beibers in the Salan theater. All Italian airfields an the Zale of Mades and in the Dedocannee Inlando were neverely and sussessfully attacked w British benders based in Newst. Reports circulating in London indiente that - damage - inflicted a Italian suilrend facilities W the British parachute troups that lended there. 4. Anis fighter planse were an patrol date in the Malta area and two attache with benbe and nines vere undo against husbers, desk facilities, not airfields an the Island. These raids resulted in - damage. In addition, burreebs at the Libyua city of Bengast vere dive benbed w - Aste plans. SCAWLEN Distribution: Secretary of Mar State Department Secretary of Treasury Asst. Secretary of Ver Chief of Staff Ver Plans Division Office of Havel Intelligence Air Cargo = + CONFIDENTIAL Regraded Unclassified 40 February 16, 1941 Spoke to Arthur Purvis at 6:30 today and told him that I had heard that Edward Peacock's lawyers had been in to see Foley yesterday, and I was very much disturbed to learn that they are proposing to get & loan through J. P. Morgan and not to actually make a sale. I said that I thought that was 8. very poor way to proceed. Purvis said that he had been in touch with Peacock since I spoke to him about it a couple of days ago, and it was simply a device with which to raise some money quickly, but they found that in using this device, they couldn't raise the money any more quickly than if they made a real sale. I said that I never could explain such 8. thing to the Congress and I thought it was a great mis- take. Purvis kept insisting that it was simply a device and not a plan, but I still questioned it, and he said, "Well, you'll have to take my word for it." He said he was working very hard with Peacock and pushing him to get through a sale as promptly as possible. Regraded Unclassified 41 February 16, 1941 Secretary Stimson called me at five minutes past seven, and wanted to know about the meeting for Monday, as he is anxious to go away Tuesday for a week's vaca- tion. He told me that he had sent the President a copy of his memorandum which outlined the setup to handle the Lend-Lease Bill after it has passed. I told him that I had not been in communication with the President to indicate how I thought the Appropriations Bill should be handled. 42 February 17, 1941 9:30 A.M. GROUP MEETING Present: Mr. Gaston Mr. Young Mr. Pehle Mr. Sullivan Mr. Foley Mr. Thompson Mr. White Mr. Haas Mr. Bell Mr. Cochran Mr. Schwarz H.M.Jr: I cut out of this morning's paper, John Sullivan, this report by Professor Lutz of Princeton, and I wish you would get a copy of it. I would like to read it. I think it would be a good thing to in- vite him down here, for you to invite him down here and have a talk with him. Sullivan: All right, sir. H.M.Jr: Did you see it in the paper? Sullivan: No, I did not. H.M.Jr: Well, this is kind of in two pieces. I am sorry I tore it. I think if anybody has any ideas - I can't do it this week, because Regraded Unclassified 43 - 2 - I have just booked myself up solid on financing. Chick, I have got the report from Graves on your division. Schwarz: Yes, sir. H.M.Jr: And it is an excellent report. I compliment you. Schwarz; Thank you. H.M.Jr: I don't know whether you have seen it or not. Schwarz: I haven't seen it, but I would be interested. (Mr. Foley entered the conference.) H.M.Jr: If you would please not let anybody else see it, if I could have your word on it. Schwarz: Surely. H.M.Jr: Is there any reason why he can't see it? Graves: No, no; he ought to see it. H.M.Jr: I would like your word on it. Schwarz: Thank you. H.M.Jr: One of the men that he compliments the most, I never knew existed. Schwarz: It shows how mysterious we are sometimes. H.M.Jr:- Lampman. I never met him. I never met Schooler. Schwarz: I will bring them in when there is an oppor- tunity. 44 - 3 - H.M.Jr: Herbert? Gaston: I haven't anything of importance. I had a letter from Sherman Minton over at the White House the other day telling us to investigate a man to replace 8. collector of internal revenue at Pittsburgh. It is the first en- trance of Sherman Minton in to the political picture. I have referred it back to Mr. Flynn. H.M.Jr: Where does he and - what is that other young fellow's name? Gaston: Jimmy Rowe? H.M.Jr: Yes. Where does one begin and the other stop? Gaston: So far as I know, neither of them is supposed to be in that picture now that Ed Flynn is down here, although he is away on vacation now at Palm Springs, California. H.M.Jr: Well, it isn't too much for you yet, is it? Gaston: Oh, no, not yet. We can stall on this for quite a while. H.M.Jr: Anything else? Gaston: No, I haven't got anything else. H.M.Jr: Coast Guard still intact? Gaston: Yes. I don't know whether you want to revive consideration of this question of the Italian and German ships. I don't think 80. The situation is still as it was. They brought it up to me the other day, and I said unless some- thing new occurred to make it more menacing or more disturbing, that we had better go right Regraded Unclassified 45 - 4 - ahead on the previous orders that we had. H.M.Jr: That is all? Gaston: That is all. H.M.Jr: Edward? Foley: Here is the outline of the appropriations program under H.R. 1776. H.M.Jr: Have you seen it? Foley: Cox worked it up with the people over in the Budget. H.M.Jr: I will give Dan a copy. Well, we will read this - we have a tentative appointment for 11:30, and I can only take one person. I think the person to take is Dan. So if you will be posted. Will you, Dan? Bell: It looks all right to me. Foley: Cox indicated that after they got back to the Budget, Smith again said that the other way was preferable, and he probably is going to submit a minority report orally. H.M.Jr: I am sure he is. I counted on that. Foley: He didn't participate in the drafting of this thing. One of his people did it. H.M.Jr: I was counting on that, because Secretary Stimson called up and was nervous about it and wanted to know, and I told him that I am sure that Smith will report afterward. Foley: I will show you the memorandum to Irey on that 46 - 5 - Viscose transaction. H.M.Jr: Well, I have sent word - I called up Purvis and told him it was just out of the question, that they couldn't put a deal like that through, and I told the President what I had done about it yesterday; and he said I was absolutely right, absolutely right. Foley: Harry and Bernie and I are going over to Dean Acheson's office at a quarter after ten. I think it would be a good idea if Pehle could come along also. H.M.Jr: Why not? It gives him something to do. (Laughter.) Foley: That will make it four against four. H.M.Jr: All right. Is that fair? Foley: Well, I don't know whether it is fair to the State Department. H.M.Jr: O.K. John? Sullivan: Mr. Doughton is still talking about that vacancy on the Processing Tax Board of Review, and I assume that I can state to him that after you get through with the financing and have time, you will be glad to discuss it. H.M.Jr: This week. I am through Monday. Ferdie, you might in confidence see our friend Ed Wright after this meeting. He is pretty good. Sullivan: I have got to see Doughton this morning, and the House will concur in the Senate's amend- ments to the Public Debt Act, and they are introducing -- (Telephone conversation with Secretary Stim- son follows.) Regraded Unclassified 47 February 17, 1941 9:40 a.m. H.M.Jr: Hello. Operator: Secretary Stimson. H.M.Jr: Hello. Henry L. Stimson: Hello. H.M.Jr: Henry talking. I broached that subject last night - the personal one. S: Yes. H.M.Jr: And the President thought it was an excellent idea and an excellent time. S: Well, I'm very glad to hear that. You were very kind. H.M.Jr: He unhesitatingly thought it was good. S: Well, did he give you any light on when we are going to meet on this ...... H.M.Jr: No, I simply told him that if he would see us, it was going to be a unanimous report so I thought he'd be more apt to see us on that basis. S: (Laughs). Well, will it be today? H.M.Jr: Well, what happened - it's set for 11:30 if he approves. S: oh, I see. But he hasn't turned you down? H.M.Jr: Oh, no. He does his appointments somewhere around 10 o'clock and then ..... S: I see, 80 somewhere between 10:00 and 11:30 I'll get word to come over. H.M.Jr: Well, your agent will let us know. S: All right. Well, I'm very much obliged to you, Henry. That relieves me very much. HMJr. That was easy. S: Thank you. Unclassified 48 - 6 - H.M.Jr: I always refer to General Watson as Stimson's agent, and he says, "Now don't get sarcastic;" and I said, Well, was he? Isn't he in the army?" "Well, he is no agent of mine. He lets me know about an 11:00 appointment at five minutes past 11:00. He is no agent of mine." Sullivan: Am I to go to St. Louis? H.M.Jr: Yes. When is it? Sullivan: I believe it is Friday. H.M.Jr: Don't you want to go? Sullivan: Sure, I am willing to go and take a crack at them, but I saw the letter you wrote to La Guardia suggesting that I go, and I hadn't seen that he had taken the suggestion. H.M.Jr: That is here. I have had no answer. Sullivan: Knox is going to speak out there too. H.M.Jr: That will be company for you. Sullivan: I think he is going to fly out Thursday, and I might fly out with him. H.M.Jr: All right. Anything else? Just as soon as we get this financing thing over, I am going into taxes up to here. (Indicating neck.) Sullivan: I had a talk with Senator George this morning. He is home in bed ill. It sounded like a pretty bad cold. H.M.Jr: Merle, would you drop over to the State Depart- ment sometime between now and lunch and take 8. look at the Balkan despatches and the Far Regraded Unclassified 49 - 7 - East despatches? Cochran: Yes, sir. H.M.Jr: Will you, please? Cochran: Surely. (Secretary on White House phone.) H.M.Jr: Hello Yes Yes Wonderful I would rather you would Is Harry going to eat with us? You say I am expected for lunch? Harry having lunch too? Well, I'll be damned H.M. Jr. signing off O.K Good-bye H.M.Jr: Twelve-thirty, and I should call the others. I said "no." Bell: Five minutes of one. H.M.Jr: Lunch with the President and Hopkins. Hopkins, incidentally, looks wonderful. He has got 50 - 8 - regular Yorkshire pink cheeks. Cochran: When do you want me to report to you? H.M.Jr: Oh, after lunch. Cochran: All right, I will go between 12:00 and 1:00. H.M.Jr: Yes. I will say now I will see you at 3:00. Cochran: All right, sir. H.M.Jr: The Balkans and the Far East. Cochran: Yes, sir. I had nothing this morning except Zoltowski, the Polish financial counselor, telephoned from New York Saturday saying he is writing a letter asking your intervention in behalf of a man named Roman, who used to be Minister of Commerce in Poland. His property is going to be taken over by the Germans. I told him that I didn't know that you could do anything. He has already written Bullitt and Biddle and has the Embassy taking it up with the State Department. H.M.Jr: I suggest you all read Frank Waldrop's article on this particular Pole who is here and there trying to get him out of the country. What is his name? He is a doctor. He didn't have it entirely straight. It is very interesting. White: Rajchman. H.M.Jr: He has got to leave the country, and his two friends, Mowrer and Harry White, are trying to move heaven and earth to keep him from getting out of the country. I won't tease you, Harry. Edgar Mowrer and Benjamin Cohen are the two men. Read it. Schwarz: It will be in the Times-Herald. 51 - 9 - H.M.Jr: I don't know how he missed you. White: It is the understanding we have. H.M.Jr: Very interesting. Cochran: Lacour-Gayet was phoning again on that matter of helping get refugees out of France. I think it is still a State Department matter. H.M.Jr: We are still way beyond a 24-hour basis on the $10,000,000 of gold for Africa. Cochran: That is all I have. Schwarz: I telephoned Gregory this morning with what came up in connection with his story of yes- terday. He said that he had been saving that material that he got, a good bit of it, when he was up in New York talking to bond dealers. He said he also talked to members of the Committee before which we asked an appropriation, and he talked to about three or four people in the Treasury and that he used annual reports for 1917 and '18 to get the background. H.M.Jr: I was glad to read it. I found out what we were doing. That was Gregory in the Tribune. Bell: I didn't see it. H.M.Jr: I thought it was a little previous. It was perfectly good. Schwarz: He also said that he got some from Ted Gold- smith. He got some help from him. Bell: From who? Schwarz: Ted Goldsmith. (Laughter.) Regraded Unclassified 52 - 10 - Gaston: Then he did see somebody in the Treasury. Bell: I will have to read the article. H.M.Jr: Read the article and you too, Kuhn. Schwarz: I compared it this morning with Goldsmith's letter, and Goldsmith doesn't have the same stuff in his letter. H.M.Jr: If you want to find out what We are doing down to the last ten cent postage stamp, it is very interesting. It is very favorable and very nice to me and all that, but I was just sort of amused that he had such a good pipeline. Schwarz: Well, they get around. Kuhn: Is this in yesterday's Tribune or today's? H.M.Jr: Yesterday's. Schwarz : He does the Sunday column. H.M.Jr: If'anybody wants to know what the program is, I suggest you read Nick Gregory in yesterday's Tribune. Schwarz: I will be asked today whether it is all right or not. H.M.Jr: It is all right. Schwarz: At the request of Mr. Houghteling with the approval of Mr. Graves, they deferred announc- ing his appointment. He was - he didn't want us to announce it quite that way. You may be asked this afternoon, however. I have had one query asking was he coming over here, and nobody knows yet. Dearadad 53 11 - H.M.Jr: My wife asked me the same question, and I said, "He succeeded Judge Hoyt." He is doing the same work that Choate and Hoyt did. Gaston: Work? (Laughter.) H.M.Jr: Yes. Ask Harold. Ask H.B. Harold. Harold says that is right. You know what H.B. stands for? Graves: Half back? H.M.Jr: No, ask Harold. Isn't he going to -- Graves: Yes, he is all right. He is very serious and intelligent about his approach to this thing and very industrious. Gaston: I remember Choate but not Hoyt. H.M.Jr: He has already dug up one thing, that we don't begin to cover every retail outlet each year. We don't collect our $25 stamps. If he does nothing else, if he gets that thing through and gets it back so we cover every retail liquòr outlet once a year, he would pay for his salary. Graves: Many times over. H.M.Jr: Harold was very suspicious, but he came back and was man enough to say he thought he was all right. I didn't know. It was a chance. All right? Schwarz: All right. Pehle: Riefler called Friday from Princeton and asked me to see Jacklin, who is the treasurer of the League of Nations. He is over here temporarily. He came in Saturday, and he was troubled about Regraded Unclassified 54 - 12 - the possibility that if we froze Swiss funds we would freeze the League of Nation's funds, and I told him that we had mechanical devices for giving them pretty complete freedom. H.M.Jr: Can't you put the League of Nations and the Vatican in the same category? Pehle: Sure you can. (Laughter.) Pehle: He wanted to know whether he could get some assurances as to how he would be treated, and I told him maybe he had better talk to State Department. H.M.Jr: It is worth one good dinner. Foley: We haven't been up there to lunch yet. Pehle: He didn't want to talk to the State Depart- ment. He said he had just talked to British Treasury officials and they said, "Stay away from the State Department. (Laughter.) H.M.Jr: Who told him that? Pehle: He just said British Treasury officials, and he had seen Sir Frederick, I think, so I don't know just who it was, but -- (Laughter.) I got the feeling that the point was that -- White: We got it. Pehle: He was afraid if he went over to the State Regraded Unclassified 55 - 13 - Department the State would use it as another argument against freezing somehow. He said he was going to Canada, and he gave me the impression that if Canada promised him com- plete freedom of his funds, he might move them up there. H.M.Jr: Good. Pehle: I think that wouldn't -- H.M.Jr: Tell him to take a look at Haiti, also. Pehle: He is operating out of Canada. That is all I have. H.M.Jr: Philip? Young: Mr. Van den Brock, the head of the Netherlands Purchasing Commission -- H.M.Jr: Yes, I have given him an appointment. Young: You have? And I think Mr. Zimmerman ought to come with him, who is the fellow who has been running the show during his absence in London. Is that for today? H.M.Jr: No, tomorrow. How about the Greeks? Are you going to let them know about their planes? Young: I haven't said anything about it or done any- thing about it. H.M.Jr: Well, I would do it today. Young: Ask the Minister to come in? H.M.Jr: Well, why don't you call up Frank Knox's office and find out what he has done about it first? Regraded Unclassified 56 - 14 - Young: Sure. H.M.Jr: Just to check. Young: Right. Then I will check with you again before I do anything on it. H.M.Jr: No, that is all right, go ahead. You have got to work the thing out to see that he really gets them now. Young: Right. That is all. H.M.Jr: George, I know you have still got that thing. Hang onto it. Tell Stephens I want to see you. Haas: All right. Allison was particularly late today, but that table has the figure. I marked it in. It is 66. H.M.Jr: Could you find out what the Allison engine - what number they are, whether they are D or E, the ones that are going to the Army now? I would be interested in the new ones for the Army. What ones are they that the Army is getting. From now on, if the English are still getting the - what is the first one they turned out? Haas: C. Are they still getting C, and what would that new one that the Army is getting be. Young: It is the E. H.M.Jr: I would like to know. Young: George and I have a new table here on the engines, the status of British engines, those in transit and awaiting shipment and export and so on. I would like to take a minute sometime to explain it to you, and we are getting a similar table on frames which will Regraded Unclassified 57 - 15 - match it. I think you will find the figures quite interesting, because they show a pic- ture that has never been shown before of just what the situation is. H.M.Jr: Well, I can see you gentlemen at 11:30. What are you doing at 11:30? Young: Seeing you. H.M.Jr: Fair enough. Haas and Young. We can clean up the other stuff from Leon Henderson's shop at that time, too. Haas:- That is all. H.M.Jr: Ferdie? Kuhn: I have nothing. H.M.Jr: Harry? White: In re-examining the value of the large British direct investments here on the first batch, which includes possibly a third, our estimates are running about 10 per cent higher than those of the Department of Commerce, largely because theirs were made four years ago, so that it is interesting at least to know they are not lower than the Department of Commerce. H.M.Jr: You mean higher than the 900 million? White: Yes, it will be, if the remainder of them remain the same, of course. The large compan- ies show somewhat higher in book value than theirs do. H.M.Jr: Anything else? Regraded Unclassified 58 - 16 - White: We would - Louchheim, with whom we are working in the S.E.C. on these evaluations, would - thinks that it would be very help- ful if he had your permission to go to the New York State Insurance Commission to get information and data on the British insurance companies. H.M.Jr: Go ahead. White: Is that all right with you? H.M.Jr: Go ahead. We have got to put a lot of pressure on these boys on the direct investments. I don't like the way they are acting at all. White: There was a comment in the British paper, Financial News, that just came in in which the leading article spoke of the danger to British interests of being forced to sell Courtauld and other items indicating a very definite displeasure at being forced to part with their direct investments, but that is natural. Possibly you remember that the New York bankers, many of them, were a little bit concerned over the proposed Inter-American Bank. H.M.Jr: Yes. White: They came down and had & meeting and they raised their objections. Their objections were explained away, and then an additional suggestion was made by them with the end result that they have gone along, and they are going to support it when it comes before Congress. You might be interested also in the wind-up of the several months' dispute between Argen- tina and the State Department on the Most Favored Nation treatment. They came to some sort of a compromise in which Argentina agreed 59 - 17 - to let them know ahead of time if any discriminatory treatment was being practiced. We have got a rather detailed study which shows that Germany has acquired an awful lot of gold and foreign exchange in the last year or two. We think that she has got almost three quarters of B. billion dollars. H.M.Jr: Good. That gives her that much more interest in gold. White: Well, you will notice that her comments on gold which were so prevalent a year ago, about getting along without it, have almost ceased. H.M.Jr: Anything else? White: That is all. H.M.Jr: Harold? How is Odegarde? Graves: Mr. Kuhn and I talked with him Saturday morning. Kuhn: Saturday, yes. Graves: He was out of bed but quite obviously not able to get out of his house. As I understood, he intends, if he is well enough, to be down here Wednesday. H.M.Jr: Good. Well, if you gentlemen want to see me, let Stephens know, will you? I am going to be very tight on appointments all week except financing. Dan? Bell: The Social Security Act as amended in 1939 sets up a Trust Fund Board to handle the Old Age Fund, and it is required to render a report on the first day of the session of Congress. We are a little late on it. We had some diffi- culty in getting agreement with the Social Regraded Unclassified 60 - 18 - Security Board, but now we have that agree- ment. It is here for you to sign. I read over the minutes of that meeting we had of March 10, 1938, of which Ransom wants & copy. I see nothing in it which he couldn't have except the argument or the explanation that Crowley gave for his helping Glass draw that bill. You remember he drew it. H.M.Jr: May I make a suggestion? Bell: I would just cut that out. H.M.Jr: No, he will have to come to your office and see it. I don't want it to leave the build- ing, Dan. Bell: It is nothing but just a matter of procedure. H.M.Jr: I know, but I don't like these things floating all over Washington. I never know where they are. Bell: O.K. I will let him come over. Thompson: Mr. McReynolds is working on the Ballinger case. I have been pressing him pretty hard. He is having a little difficulty finding a place at the same grade in salary, but he has definitely promised to work it out. H.M.Jr: What did we hear from the Department of Agriculture? Thompson: We can get Ted Wilson, not on a reimbursement basis, but on a direct transfer. They can't spare him. They are losing their assistant director. 61 - 19 - H.M.Jr: You can get him? Get him. Thompson: We can get him, yes. H.M.Jr: Couldn't I see him with you and have a talk with him? Thompson: Yes. I was wondering if you would rather wait until we get Ballinger placed. H.M.Jr: No. I would like to see what this man looks like, so if you will tell Stephens I would like to see - what is his name? Thompson: Wilson. H.M.Jr: I would like to see Wilson with you. I would like to see him. It is a question of today or tomorrow, because I am going to go into these other meetings, and I won't have any time. Please. All right, gentlemen. 62 DEPARTMENT OF STATE WASHINGTON February 17, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a copy of a strictly confidential memorandum dated January 24, 1941, received without covering communication from Mr. Donald R. Heath, First Secretary, American Embassy, Berlin, concerning Germany's food supply. Enclosure: Memorandum from Embassy, Berlin. Regraded Unclassified COPY 63 EMPASSY Berlin, January 24, 1941. AIR MAIL Strictly Confidential MEMORANDUM For Treasury from Heath and for the Department's informe- tion. Shortly after the outbreak of the war I had a conversation with the head of the research section of the newly formed National Defense Council who, while avoiding detailed comment on the economic problems confronting Germany, did state very categorically, and I believe sincerely, that Germany would be able to maintain her initial scale of rations without diminution for a period of two years. After that time, if the war continued, various factors would cause a gradual reduction in rations, among them; presumable shortage of agricultural labor, transportation difficulties, fuel shortage, difficulty of replacement of agricultural machinery and lack of phosphatic fertilizers. Similar predictions were privately uttered by other informed contacts. I now learn from what I believe to be a reliable source that at a recent conference on the food situation the Secretary of State of the Ministry of Food and Agriculture announced that it would probably be necessary by next summer (in other words some two or three months before the end of the first two years of the war) to reduce the meat ration and possibly the fat ration as well. My informant asked that this information be not telegraphed or in any way reported unless it could be done in the most confidential manner. Donald R. Heath, First Secretary of the Embassy Approved: Leland Morris Charge d'Affaires ad interim DRH/Jp A true copy of the signed original. Regraded Unclassified 64 February 17, 1941 10:41 a.m. Justice Frankfurter: Henry, this 1s Felix. H.M.Jr: Hello, Felix. F: I'd like to have a leisurely talk with you before very long, preferably tomorrow. When do you go to your shop in the morning - tomorrow? H.M.Jr: Oh, I leave the house usually at 8:15 or 8:30. F: Oh, God! Would you pick me up and we could have a talk then? H.M.Jr: Surely. Surely. F: It's something that I'd like to have a talk - not for five minutes over the phone. H.M.Jr: No. Well, now is that F: I spent a good deal of time on your damn job. (Laughs). H.M.Jr: (Laughs). F: I mean not on your job but on your commission and it's all really - I mean really it's going to be all right. H.M.Jr: You think 80. F: Yes, but what I'm concerned with 1e to give you a little bit of the background of the situation. H.M.Jr: Should I be at your house at 8:45 tomorrow? How would that be? F: That would be - that would give me fifteen minutes more in bed. That's a good place for a Judge. H.M.Jr: Well, I'll be at your house tomorrow morning at 8:45. Regraded Unclassified 65 - 2 - F: Or I'll give you a cup of tea in late afternoon at my house. What would you prefer? H.M.Jr: Today? F: No, tomorrow - well, I'll give it to you today. Sure. How about that? H.M.Jr: Well, what time do you get home? F: Well, what time do you get home and I'll bargain with you. H.M.Jr: I'm not terribly good in the late afternoon. F: You'd prefer it in the morning, wouldn't you? H.M.Jr: I'm not awfully good late afternoons. F: You'd prefer it in the morning, wouldn't you? H.M.Jr: Well, you've got me at my best. F: All right. Well, you pick me up at 8:45 tomorrow. H.M.Jr: Right. F: Thanks very much. In the meantime you know that the thing is going forward with a good procedure, I think. H.M.Jr: Well, our boys I think are over there now. F: That's what I'm saying. H.M.Jr: I haven't talked to Kuhn I haven't had a chance, 80 I don't know. F: Well, I've spent a good deal of time on it and I just want you to be - well, what shall I say - in a relaxed frame of mind. H.M.Jr: Well, I'm relaxed. There are two things that bother me equally. One is the accomplishment of what we were trying to go after and the other was my disappointment in ..... Regraded Unclassified 66 - 3 - F: Well, that's what I'm most concerned with and that's what I want to talk to you about. H.M.Jr: Well, that ...... F: That's more important than the immediate problem. H.M.Jr: Yes. If Dean Acheson isn't going to be what you think he 18, the sooner I know it the better. F: Well, - (laughs) - you assume he's going to be what you thought he was going to be. H.M.Jr: Wonderful. F: All right. H.M.Jr: May I thank you for all your time and trouble? F: No, you may not but I'll see you in the morning. H.M.Jr: But it's really important. F: It's more important than you think. H.M.Jr: Well, I'm ever 80 much obliged. F: Fine. H.M.Jr: Thank you. 67 February 17, 1941 11:46 a.m H.M.Jr: Hello. Operator: Mr. Lovett. Robert Lovett: Hello, Mr. Secretary. H.M.Jr: Good morning. L: Good morning, sir. H.M.Jr: Lovett, are you coming to see me tomorrow? L: 10:15, sir. H.M.Jr: Yes. Now, I've got another thing if you could have it. I know I've asked for a lot but if you can get it - I wonder if you could bring with you a list of any Army planes which are finished, completely finished, but have no engines, if that condition exists. L: Well, now, Mr. Secretary, I'm afraid you may get confusing information on that type of statistics because we would have a plane that is in the GHQ air force for example down in Panama that has no engines in it because the engines are being overhauled. H.M.Jr: I don't mean that; I mean at the factory - new. L: You mean on the planes at the factory. H.M.Jr: I mean Army factories - well, like the case of L: B-17. H.M.Jr: Yeah. L: All right, sir. H.M.Jr: I mean, are there any more cases like the B-17's where for instance in that case you were flying them out and had to send the engines back to get more. 68 - 2 - L: Yes. Well, I can get that for you very easily, sir, but I don't believe that's fully responsive to, perhaps, what's in your mind because I can say this, that we can get very much more accelerated air frame production if for example we had the engines that - the R-2800's of the Pratt-Whitney which are going to the British. In other words, the Martin B-26 bombers are held up not because of air frames but because there are no engines for them. H.M.Jr: Which engine do they take? L: They take the Pratt-Whitney 2800's. We are getting engines now from them; we are getting planes from them this month, but Martin tells us that he could double the production by April 1st if he could get engines. H.M.Jr: How much horse power is that? L: That's approximately 2,000 horse. H.M.Jr: No. Well, the English can't help you on that because they haven't got any. L: Well, they are beginning to come out now. H.M.Jr: Well ...... L: So the problem in other words 18 that there are certain types of air frames that we could accelerate production on if we could get engine deliveries. H.M.Jr: Well, you're a little ahead of me. All I want to know is there anything like the case of the Boeings where you actually are short of engine s and the planes are lying around without engines in them. L: The airframes without engines. H.M.Jr: Yeah. L: I can give that to you easily. 69 - 3 - H.M.Jr: That's all, Just are there air frames completed, under canvas somewhere, lacking engines. L: Yes, sir. Only for the Army, because I know of some for other takers that are in that fix. H.M.Jr: Well, Navy? L: I think the Navy is O.K. on engines. H.M.Jr: Well, I'm only interested in the Army and Navy. L: All right. H.M.Jr: Who did you have in mind? L: Well, there were some British planes completed out at Glendale, Burbank, that diá not have engines a couple of weeks ago. In other words, the air frames are coming through faster than the engines. H.M.Jr: You'd better check that; I question that. L: All right. Bob Gross told me on the phone, I think it was about two weeks ago. H.M.Jr: Yeah. Well, you might check that. L: Well, I won't bother with them, sir, because H.M.Jr: No, don't bother with them because I've got their tables here before me and what I had in mind was if you people have got - the Army and Navy have got planes sitting around completed without engines, maybe I could be a little helpful. That's what I was thinking about. See? L: Fine. Yes, sir. H.M.Jr: I mean on a temporary basis. That's what I was thinking about. If the English have anything like that, they can get that to us. Regraded Unclassified 70 - 4 - L: All right. That'll be helpful. H.M.Jr: Yeah. L: I'll have that ready for you tomorrow. H.M.Jr: Thank you. Regraded Unclassified 71 February 17, 1941 12:17 p.m. Congressman McKeough: Yes, Mr. Secretary. H.M.Jr: How are you? McK; Fine, thank you. H.M.Jr: Mr. McKeough, I just want to tell you I'm working on the Marx Brothers case. McK: Thanks very much, sir. H.M.Jr: I just wanted to let you know. McK: Well, that's very thoughtful of you. H.M.Jr: Do you know when it's coming up for trial? McK: Well, the situation with relation to the trial briefly is this: they were scheduled two weeks ago today - tomorrow. Then Monday, two weeks ago today, I appealed to Mr. MoGuire, because of my inability to get to Mr. Jackson, and after pleading my heart out he finally stated that I could have a week. H.M.Jr: I see. McK: And in the meanwhile that I was to ask Mr. Marx to come to Washington and meet with Mr. Wenchel on Thursday & week ago, which I did. Then Mr. Wenchel, as I understand it, called the Justice Department. To whom he spoke personally I don't know - oh, I think I do. It was Mr. Clark, and he asked Mr. Clark to give some additional time and that they were due a week ago tomorrow for trial. He indicated, incidentally, when he discussed that phase with me that Mr. Clark was somewhat piqued that he asked for the additional time. H.M.Jr: I see. McK: Then that leaves it, as I see it, waiting final decision from you - that 18, the Treasury Department. Regraded Unclassified 72 - 2 - H.M.Jr: Yeah. McK: And I know of no date certain that has been set. I'm sure that that might be confirmed by discussing it with Mr. Wenchel. H.M.Jr: We'll do that. McK: May I ask again, Mr. Secretary, in the event that no favorable decision is reached by you, that you be good enough to let me again see you before final decision? H.M.Jr: That's a fair request. Yes. McK: Thanks a million. H.M.Jr: 0. K. McK: Thank you, sir. Good-bye. 73 THE UNDER SECRETARY OF THE TREASURY WASHINGTON fee 2/17. file February 18, 1941 CONFERENCE AT THE WHITE HOUSE, 12:30 P. M., FEBRUARY 17, 1941 Those present besides the President were: Secretaries Morgenthau, Stimson, Knox, and Wickard: Director of the Budget Smith, Messrs. Harry Hopkins and Bell. The President discussed for A few moments Harry Hopkins' trip to London. He said he had practically lived with British officials and had come back with first-hand information; he had talked with Harry the night before until 2 A. M. and they had not finished yet. One important thing which we had overlooked was the coming need for food supplies. He thought that was something which should be looked into immediately by the Secretary of Agriculture. The President said that he had talked with the Congressional leaders that morning about the total requirements under the Lend-Lease Bill. He asked them how the Congress would feel about his submission of estimates, whether they would like to have a total at once, say 3 or $4,000,000,000 in cash and 3 or $4,000,000,000 in contract authorizations or whether they would like to have it divided into several submissions. They were unanimous in recommending that it be divided and that the amounts required be sub- mitted from time to time, including just enough cash and contract authori- sations to come within the capacity of the country to produce the articles. Secretary Stimson commented that this was important and he said that as we all knew, they have been working through Mr. Jones in the HFC in order to build up the capacity of the country and to keep that capacity producing in the interim while the Lend-Lease Bill has been pending. At this point the Secretary handed the President the memorandum which had been prepared in the Bureau of the Budget as a result of the conference held at his house on Saturday morning. He told the President that this was a memorandum of procedure which the four Cabinet officers present had agreed upon, but he was not so sure that his Director of the Budget was happy about it. He was there and could speak for himself. Regraded Unclassified 74 - 2 The President then read the first paragraphs of this memorandum, which are a summary of I and II detailed procedure and said it was all right with him but be was not quite sure it would be all right on the Hill. Be asked about percentage of flexibility and whether or not ten per cent would be sufficient. The Secretary said fifteen per cent had been suggested at the conference held at his house on Saturday. He personally was not able to say what that percentage should be. Mr. Smith stated that obviously some percentage would have to be worked out 8.0 it was necessary to have flexibility in operating the program. The President then asked as to what proportion would the funds be split between I and II, and just as & rough guess, someone suggested that it might be $3,000,000,000 cash and contract authorizations to the War and Navy, and $1,000,000,000 cash and contract authorizations as a lump sum which would take care of all the Departments, including Agriculture, Maritime Commission, etc. The exact figures would have to wait on the breakdown of the British program and its integration with the present National Defense program. The War and Navy Departments are now working on that. Mr. Smith then made his point, that while he was willing to go along on this program, he still was of the opinion that it was not the best method of procedure. He had discussed it at some length with the members of his own staff and they, with all of their background and experience, felt that it was wrong to split up this program among the many items of appropriations on the books of the War and Navy Depart- mente. He said that he thought there was a great chance of losing budgetary control by the Budget Buresu and accounting control by the Treasury over the appropriation procedures. Ee was quite certain it was not as simple as had been outlined and before we were through, we would have to go back to Congress many times to get authority for additional flexibility. The President said that he agreed with Mr. Smith in general but he was quite certain that the Congress would not give him a lump sum appropriation as large as we will need to carry out the provisions of the Lend-Lease Bill. He thought it would be better to handle it in the manner outlined in the memorandum, then as the materials or articles come off the manufacturing line it then be determined which were to go to the British and which were to form 8 permanent part of our National defense. He then asked me if I did not think this the best way to account for them and at that time have an account with the British to which these articles would be charged. I said that that was the only way to handle the matter under this proposed procedure, but I wanted to point out it should be understood that the only way the Treasury can handle the expenditures under this whole program is in the first instance charge them to our National defense so that each day when our Daily State= ment is published it will show & large National defense expenditure, part of which will be for the account of the British and which will not be determined until weeks or possibly months later. As the documents 75 - 3 - are signed leasing or loaning these articles and materials to the British and those documents are filed in the Treasury, that is the first oppor- tunity the Treasury will have to charge the British and credit our own National defense expenditures, and by that process reduce our previously published National defense expenditures. The one objection to this is that the expenditures in the first instance will be made, say in 1941, and the credits for the British may be made in 1942. In other words, you will have credits against 1942 expenditures for an adjustment of 1941 expenditures. While this is not the best thing, it is the only practical way that we can work it out without a great accounting organi- zation. There was some discussion as to the drafting of the bill but it was concluded that there was no necessity for this as the regular budge- tary procedure would be followed. The War and Navy Departments would submit their estimates to the Director of the Budget who would prepare the necessary documents for the President to submit to the Congress, which would be referred to the appropriation committee and on which that committee would hold hearings in the usual way. DWB Regraded Unclassified 76 APPROPRIATIONS TO CARRY OUT H.R. 1776 It is recommended that the following method be used to obtain the appropriations to carry out H.R. 1776: I. The War and Navy Departments should request funds for their own and foreign future needs for military and naval equipment. II. A separate request should be made for a lump sum to the President for allocation to the appropriate agencies to take care of: (a) Procurement of merchant ships, agricultural products, strategic and critical materials, etc. (b) Unanticipated needs including those of War and Navy. I. A major part of the foreign need is of a military and naval character of the same general categories as are provided in existing appropriations for War and Navy and thus provision to meet the foreign need simply requires expansion of those appro- priations. To afford some flexibility provision should be made for a percentage of interchangeability between appropriations within each department. The planning and production of planes, ships, guns and other articles would be melded and a separation could be given to the Appropriations Committees of the approximate Regraded Unclassified 77 - 2 - dollar amount of the equipment for United States and foreign needs in justification of the request for appropriations. The allocation of equipment need be made only at the time of disposition. We could thus retain for use equipment which had become more essential to our own defense than to that of a foreign country because such a country had been defeated, or for other reasons. By augmenting Army and Navy appropriations in the foregoing manner, the amount of the lump sum appropriation requested would be proportionately less. This would be more in keeping with the present method of securing funds for military and naval purposes and might be less subject to criticism than a request for one over-all lump sum. II. The lump sum would be desirable to cover the articles for which the need is not clearly known at this time and to provide for their procurement through those agencies best equipped to do the job. The lump sum will also be useful to meet sudden expansions of needs for military and naval equipment beyond those provided under the additional appropriations for those purposes and any percentage of interchangeability which it may be feasible to secure. It might also be required to take care of our own or foreign needs resulting from some major disaster. Regraded UInclassified 77-A A February 17, 1941 Hopkins told me that what the English want after the Bill passes are 50 more PBY flying boats, 90 long dis- tance bombers, and 30 destroyers (10 a month), and all the merchant shipping that we can spare. All this is over and above everything else that they are getting now. They want the above as soon as the Bill passes, plus experienced crews to fly them. They are useless to them without the crews. I told Hopkins the plan was for a four-man board, Hull, Stimson, Knox and myself, to decide how everything should be distributed. At first he didn't like it, and then he suggested himself as secretary to the board, and I said, "Swell." He said that he expects to devote the next two or three months entirely to promptly getting material for the English. 77.B February 17, 1941 The President said at lunch today that Hopkins was sent to England to find out what the needs of the English were for the next five months. One of the most interesting things the President said was, "I have just got to see Churchill myself in order to explain things to him.' 77-C c TELEGRAM The White House Mashington February 17, 1941. Hon. Winston Churchill We must implement Lend-Lease Bill at once with very large appropriations which must result in very substantial increases in taxes here. There is no adequate understanding in this country relative to the increases in taxes in England due to the war and the fact that Britain is making real financial sacrifices. You will understand that this attitude is not that of our Government but represents a lack of understanding on the part of the general public. Is it possible for you to arrange in some appropriate manner for a statement to be made in England at an early date indicating the great increase in your tax levies and any other financial sacrifices which the British people are making because of the war HOPKINS Regraded Unclassified 78 February 17, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston Wendell Willkie made a very fine talk before a National Press Club luncheon today. Answers to questions occupied more than half the time and he was very able and frank in dealing with them. He made an excellent impression. Kurt Sell of the German News Agency was present in the gallery where I sat. Willkie said that before he made the trip some business men who talked to him said they had seen reports that the British system after the war would be completely socialistic and they questioned whether we wanted to support England to achieve such a result. He made a particular point of seeking the answer to that question. He said he was convinced after talking to all the leaders, particularly the labor and radical leaders, in and out of the Government that the system of free enterprise would endure in England after the war but that the fight to enlarge the opportunities of the common man would go on after the war and that many inequalities would be corrected. He said the most essential thing was to keep the shipping "lung" open so that England could continue to breathe. For that purpose they needed most (1) destroyers, (2) bomber planes, (3) ships. He said the "highest authority" in this country had confirmed his belief that. we could furnish additional destroyers. He added: "If that isn't plain enough, ask me some more questions." C 79 Scherway 17. 1948 Piles Mr. Cookran Mr. James of - yes Festern Division of the Department of State tolephoned me at 3:15 this afternoon to inquire as to the procent status of our negotiations with the Chinese in regard to our stabilisation arrangement. When $ sold Mr. Jenes that so progress had been made the past for days. he indicated that the State Depart- must was very enger to have this matter cleared. I told his that w hoped to or at 10 this week. BMP HMC: da: 2. 18. 41 Regraded Unclassified 80 February 17, 1941 3:53 p.m. H.M.Jr: Hello, Dean. Dean Acheson: I wanted to call you and thank you for letting those lade come over here this morning and talk with us. H.M.Jr: Good. I haven't seen them yet, Dean. I just came back from the White House, so I don't know what happened. I'm at a disadvantage. A: Well, not a great deal happened and it wasn't because anything happened that I wanted to call you up, but simply to say that I think that it's the way to go about it to have a talk and talk quite a lot. H.M.Jr: I think so. A: We talked this morning. After a little while I think - you know there are some clashes of personality and they begin to wear a little thin after a couple of hours and people get fairly sharp with one another. H.M.Jr: Yes. A: I think we talked as long this morning as it was good to do at one clip. What I should like to do 18 to renew it again after everybody has cooled off a good bit, not with the idea that our discussions will affect this particular decision; I suppose that will be worked out by you and Mr. Hull and the President, but I think whatever happens it 18 very desirable that our people over here and your people - your fellows - should just work along without too much - we all tend to get a little pride of position, you know. H.M.Jr: Well, the only regret I have is that these meetings didn't take place before Mr. Hull put it down in black and white in the form of a memorandum to the President. A: Well, I think it 18 too bad perhaps that that has happened. Regraded Unclassified 81 - 2 - H.M.Jr: Because I doubt whether he'll want to recede from that position. A: Oh, well, I think if we can find out what it's all about we'll understand one another a lot better and I don't know - I don't understand the situation well enough H.M.Jr: Even after two hours? A: (Laughs). No, I don't. H.M.Jr: Well, anyway I'm glad to have talked to you and I'm going to see my boys later on and get a report. A: Well, I thought that maybe I could get one or another of our fellows, either Pasvolsky or Feis, and perhaps come over tomorrow. H.M.Jr: And see our people. A: Yeah, and start from where we left off. H.M.Jr: Good. A: What we were working on this morning is just what we want to accomplish and how we accom- plish it, to try to put a balance sheet on this thing, and I'd Iike to go on with that. H.M.Jr: Fine. I'm sure you'll find they do too. A: Uh-huh. H.M.Jr: Thank you, Dean. A: All right. 82 February 17, 1941 4:32 p.m. H.M.Jr: Hello. Robert Jackson: Henry? H.M.Jr: Yes, Bob. J: There is an item on the ticker which the State Department has juet called to my attention that the first of 26 long-range bombers built for Britain by Consolidated Aircraft is expected to take off later this week non-stop flight to England. The plane will be commanded by Wing Commander David John Waghorn of the R.A.F. when it leaves. Waghorn will be accompanied by four other crew members and possibly one or two passengers, it was said. Now they've been rather careful to observe the Neutrality Act by taking those things into Caneda and I wondered what had happened, if you knew, that changes this. They are pretty plainly in conflict with the Neutrality Act. H.M.Jr: Oh, really. Well, Bob, I don't know. I was surprised at all the publicity. It eeemed to me most unfortunate but I'll - are you watching this yourself? J: Yes, I just don't see how - in the first place I think it's dangerous from the viewpoint of public sentiment and this debate. I think it's 8. rather plain violation and in the second place I don't see how we can clear it. H.M.Jr: Well, would it be all right if they stopped at Jamaica. J: Well, I don't think that would help them any..... H.M.Jr: Bermuda? J: because it's a belligerent ship the minute ..... that they take it over and it's sailing over our territory without any permit from the Secretary of State. H.M.Jr: Well, they've been permitting machines to go every day to Canada. Regraded Unclassified 83 - 2 - J: Well, they go to Canada under our crews, as I understand it. H.M.Jr: Oh, that's the thing. J: Our crew makes delivery in Canada, then the Royal Air Force take off from Canada. It isn't a belligerent ship until the R.A.F. take it over. H.M.Jr: Oh, you'd be satiefied if our crew would deliver it either to Canada or to Jamaica? J: Well, I don't know any reason why Jamaica would be different than Canada. H.M.Jr: The reason I say Jamaica 18 that it's the Southern route and I know they've got a fine airport there, but it's been cleared that they can take them to Canada. J: Yes, but this is a departure from the method they've been pursuing. We sent the destroyers to Canada, if you recall, and made delivery there. H.M.Jr: I Bee. J: What I was wondering was if somebody has given them some approval of this method. of course, maybe they are just simply announcing this to throw the other people off the track. H.M.Jr: I don't know but I'll find out damn quick. I've just sent for Ed Foley and Phil Young and I'll put them on it. How long will you be at your office? J: Well, I'll be here a little bit yet. H.M.Jr: Will you be there for ten minutes? J: Yes, yes. H.M.Jr: I'll have an answer for you within ten minutes. I'll call them up myself and I'll have an answer for you in ten minutes. I'll call you back. Regraded Unclassified 84 - 3 - J: Well, you can tell them that we don't see any way that we can stand by and see that done in the present state of affairs. H.M.Jr: O. K. J: O. K. Thank you. 85 February 17, 1941 4:39 p.m. H.M.Jr: Hello. Operator: Mr. Purvis. Arthur Purvis: Hello. H.M.Jr: Hello, Arthur. As usual, you've got me into awful hot water. P: Oh, my. As usual? H.M.Jr: Well, yes. P: How? H.M.Jr: Well, the Attorney General 18 terribly excited and 80 is the State Department about this announcement on the ticker that a Consolidated Aircraft bomber 18 flying with an English crew directly to England and of course they call me up and think I know all about it and that I've given permission. P: Yes. I don't even know if it's one of ours; I haven't seen the ticker. Let me find H.M.Jr: Well, there has been all this stupid publicity about the 26 bombers leaving San Diego - it's been in every paper. P: Yes. I wonder where that comes from? H.M.Jr: I don't know. P: Let me ring up Morris and find out straight away. H.M.Jr: And then would you please call up Philip Young? The Attorney General is sitting in his office. P: Really worried about this. H.M.Jr: Yes, and they want to get out a denial tonight. P: Quite right. Regraded Unclassified 86 - 2 - H.M.Jr: Now an American crew can take this bomber either to Canada or I suggested Jamaica if you want to go the Southern route. P: Yes. H.M.Jr: The way they have right along. P: But did it claim that there is an English crew aboard her? H.M.Jr: That's what the ticker said - an English crew, it mentions them by name. P: Really. Would the difficulty be that they had also flown it over - I mean, did an English crew fly it across the continent? H.M.Jr: God, I don't know, but he says it is absolutely un-neutral for an English crew to fly a fighting ship from the United States directly to England. P: Correct. I mean, that doesn't require a lot of imagination, does it? Let me find out immediately what has gone wrong, if anything. H.M.Jr: And the whole thing - I mean, all of this publicity at this time with the bill up this week. To me it is just unbelievably stupid. P: I 'can't believe that we have anything to do with the publicity, but I'll find out. H.M.Jr: And would you mind telling Philip Young? P: Immediately, Henry. I'll go right at it now. H.M.Jr: Thank you. 87 February 17, 1941 Memorandum I would like to know from Chick Schwars as to where Gregory of the New York Tribune got all of his informa- tion from for the article which he wrote on the financial page of the Sunday paper. Please let me know Monday. H. Morgenthau, Jr. pee 9:30 on 217 reported when her to Schwary the sey Copy to Mr. Schwars. Regraded Unclassified NEW YORK Herald Tribune Financial Washington 8S By Nicholas P. Gregory WASHINGTON, Feb. 18-When Congress approver H. R. 2059, the will to increase the debt Mmit us and give the Treasury powers to anance the mulli-billien-dollar defense program. Henry MOT- renthau Jr., Secretary of the Treas my, will launch the arroad way Anabiling which this country has 228.850, or 52 per cent incre undertaken In one year short of a Item amount offered. quarter century. The organization for the distribu- At present the Treasury will attl- Mon of defense securities la vir- Line some of the Ideas developed aur- tually completed and the Treasury ling the first World War and borrow has ambiticus plans to make errry from HX experience gained in ope- citizen conscious of his dutins to arm rating the office which distributed the country. Although the defense the "baby bonds Although Mr. bond division will not be - clab- Morgenthau's plans are not final. orate as Usat employed by the late they are se follows: A bond export William Gibbs McAdoo, Secretary of will be employed to head the division the Treasury in the first World War, illstributing the defense bunds. ito is will be designed to be efficient. will be responsible to Daniel W. Mr. Morgenihau and late wids are Beil, Under Secretary of the Treas- anxious to avoid high pressure tac- Dry. Mine in selling the citizens time bonds Restonal organizations will be Financial Washington and savings stamps, mut a drive will aet-up with . mainted official for Dell' pur on which will miss no tricks. each group, How many of the From 40 histórical standpoint con- organizations will be created has from THEIR maibe . strong statements for name distons are different new from what not boen decided but " in expected form of Federal regulation et they were in 1917, when the govern- there will be more than unity. Mr. trusta atic_ another tope of security insurance whom The appeare before ment Isunched one of the most vige- Margenthau will neek an appropria- will be Immage for authoription. the temporary national economic hund-siding campatgns in the tion from the Bureau of the Budget All In the last War, the Tennsury committee 7vt. 24. Other payero- history of the country. to pur en an advertising campaign. will insire every effort to distributo ment departmente are expected to Il was decided that the citisens offer shour subjections. The I N. In 1017 and 1018 the average groups which participated with the defense bonds as widely as pusible E. C. two-day open meeting will he American was "green" shoul invest- distribution or the Liberty Bonds This policy, siems From . desire by the climacila point in the 8, E C ments Re had to be educated, and were sometimes oversealous In fill- Mr, Margenthau to make every de- investigation of life innurance and the campaign undertaken DV Mr. Ing their "quotas" and created em- SMITH consctous of Nie contribution to may become the torerunnet of Con- McAdoo was the Invertment of the tarrassment, For example, If a the national defense program. One gressional setion in the future. speculative wave which mised the eitisen of any of the central powers of the major differences of the two country Inter. This was true in the did not buy enough bonds (the periods under review la that to the Another department In the 00% sense that Americans finally became amount WM usually determined by last war the Liberty Bonda sure ernment which has taken more Usan conscious of what securities were. the subgroups in their community), not fully lawsble M lo Federal a passing Interest in the subject of markets, discounts. etc. True, some he WM bound to be morally chas- levies, witile under II. R. 2959 they Insurance la the Treasury, John L to the early days elipped their tixed by pointing the finger of scorn will De taxable Sullivan. Assistant Secretary In coupons from their bonds and threw either as unpairietic, n. spy or . In the taxe WAT the government change of leves is now engaged to them away, while as lato M 1929 saboteur, This created considerable Issued cartificates of indebredness BA drawing R tux bill. The mill will pro- some shareholders did not know racial feeling among the various 6 stopsop to- long-term manding. vide for some plan of taxation de- what to do with their righte when peoples. At present IL M. that the signed to gnd more mil of the life- opulent surporations ware other The Treasury believes that the government will resort to TIME nedi- insurance companies. Durine the outting "melons" or expaciting their quota system might be dispensived um or obtaining necessary túnds. 8. E. C. hearings 11 vas pointed out capitalizations. with In that If may never le und that in 1037 the We immpanies guid Another difference is this: In the publicly as a gauge of what state, 1.1/n Insurance only an Informalimal part of Check last war savings were net as great city, municipality, or town should Gerhard Goseil, of the Socurities income in taxou, compared will M they are at present. Now deposits subscriby to the defense securities. and Exchange Commission, will other Industries, in savings bapka are at record fig- Each regional director will altempt ured. Typical of the arguments of- to take advantage of community fered by the Treasury in 1017-'18 to spirit through actwork, Iterature Induce patriotic Americans to invest speeches and use of the radio. in the first Liberty Loan Dosted on The bonds and the sentings stampe May 14, 1917, wis the following: will be sold at pustofficel, action "The men and women of large and and department sidhes but In every moderate means owe . greater duty. effort, him presure tucties will be because they have A larger margin avoided Advertisers ellt be and/or of income, lo ent off self-Indul- MI contribute same et Iheir spare gences. to deny (hemselves uselest to bring attention to the and needless luxuries, to make bonde and stamps, nacrifices of conforts. pleasures, and conveniences that will effect gend- Preliminary plans of the Treasures the economies and set an example call für the Imuance of savings to the nation. Every dollar haved stamps in the demminations n( in represents actual supplies saved and conta. 26 cents, 56 cente and al. It made svallable for herolo soldiers may Issue A. 85 stamp for those who and suffering civilians in Europe eara faster. These stamps will he and America." convertible into bonds with . 895 The first Liberty Loan Issue mn- denomination. The bonds will sisted of a 34 per cent Issued at $16,75) refremable In Can installment. IL Has distributed as years at $25, A buyer of mamps rollows: The twelve Federal Re- will be able to rodeem them at their were Banks were used M the cen- face value at any time. However, tral agency In each of the twelve an Investive in a defense bond will Federal Reserve districts for re- not be able to well his holdings to celving subscriptious, for taking care the market. 31e will be given the of the details of allotment of sub- privilege of redeeming voem BE Unr scriptions, the handling of payments Treasury, OF any fiscal agent desig- after allotment and the delivery of nated by the authorities. Life bonds Subscriptions totaled A hund will allow for joint owner 4,000,000, and of this number 3,960,- ship. 1. ", inastand and wife, and 000, of 50 per cent. subscribed in one beneficiary. The navings stamps amounts ranging from 250 to $50,000, sind the bonds will la seld to NO- while the number of Individual sub- called small Investorm. and - times scribers Sex $5,000,000 and over will will Tall plarmi on the amount any nue investor mer for. for twenty-own, their authoriptions (I) amaing $188,789.000. Mr. McAd00 institutional myestors, súch si - gratified by the reception, The tanks. commission Issue drew authoriptions of $3,005,- (Continued on page 13, eclumn 1) Regraded Unclassified 89 February 17, 1941 TO: MR. YOUNG FROM: THE SECRETARY Dear Phil: Please keep out of this mess on the Greek planes. The President of the United States gave a signed order to the Secretary of the Navy and I want it to rest as between the Secretary of the Navy and the President of the United States and I don't want to get in on it in any form or manner and please advise anybody who calls you up that that is my attitude, including Admiral Towers. H. M., Jr. Regraded Unclassified 90 CONFIDENTIAL TO KEEP YOU POSTED February 17, 1941 To: The Secretary From: Mr. Young Re: Planes for Greece In accordance with your request at the staff meeting this morning, I got a complete story on the latest Greek plane developments from Admiral Towers. The story may be summarized as follows: Late Friday afternoon, Secretary Knox called Admiral Towers and showed him the chit directing that Greece should receive fifteen old and fifteen new Grumman planes now and another fifteen new Grumman's by the middle of March. Admiral Towers pointed out to Secretary Knox that this would require B. certificate from Admiral Stark stating that these planes were not essential to the National defense. Admiral Towers went to see Admiral Stark and the latter said that he could not give such a certificate as the Navy has a top priority on 1221 planes in order to fulfil its defense re- quirements and the Grumman's represent item No. 1 on this priority list. Admiral Stark authorized Admiral Towers to tell Secretary Knox that a certificate could not be issued. Admiral Towers B&W Secretary Knox on Saturday morning just prior to a meeting with the Greek Minister and laid the whole case before him. Admiral Towers was present at the meeting between Secretary Knox and the Greek Minister and at that time went over the case again showing how badly the Navy needed them. In response to a direct question by the Greek Minister, Secretary Knox said that the planes would be made available to the Greeks by this Government. Evidently, the Greek Minister immediately cabled Athens and advised the State Department. In response to a call from Wallace Murray, Admiral Towers asked Murray to go easy and to keep it quiet for the time being because Towers Regraded Unclassified 91 - 2 - felt very strongly that the transfer of these planes at this time would do great damage to the lend-lease bill. Admiral Towers emphasized this point again and again inasmuch es Admiral Sterk would have to make a certificate to Congress if the planes were transferred. Towers said he had also discussed the situation with Forrestal and Stark and that both agreed and thought the transfer of the planes would have very serious effect on the lend-lease bill if transferred at this time. It is the contention of Admiral Towers that inasmich 88 some of these planes won't be ready until March 25th, that the deal should be delayed until the passage of the lend-lease bill. As g. result of Admiral Towers' conversations with Admiral Stark and Kr. Forrestal, a conference was held this morning at the Navy Department at which Knox, Stark, and Forrestal were present. As yet there are no reports on the result of this meeting. Admiral Towers asked me to present to you his point of view As outlined above, TOY. Regraded Unclassified 92 ] [ OFFICE OF THE SECRETARY OF THE NAVY Greaks short of money to pay for projectites (64) Paid for 2000 m released 10,000 York safe Thack Contractor Co Frank Kunf Handel me by Feb. 1.00 oeloek sunday,17 1 I I 93 February 17, 1941 Lt. Stephens Secretary Morgenthau I want to make an appointment with Robert Lovett, Assistant to Secretary Stimson ,either Monday or Tuesday. He called me Saturday and I would like to see him. Also put down Wednesday noon for lunch Mrs. Morgenthau and Mrs. Herrick. Regraded Unclassified 94 February 17, 1941 Ferdinand Kuhn Secretary Morgenthau I wonder if the English couldn't find some way of getting out more publicity about the financial and economic sacrifices which they are making. I think it would be very helpful if they could. I wish you would think about this and discuss it with me. Regraded Unclassified 95 February 17, 1941 D.W.Bell Secretary Morgenthau Please put Chairman Frank of the SEC on notice that we are confidentially thinking of doing a big run on refunding between February 25th, 26th and 27th, and I would prefer not to have any large private financing on those dates. Regraded Unclassified 96 February 17, 1941 D. W. Bell Secretary Morgenthau I wish you would talk to me about putting a magnifying glass on expenditures for the Department of Agriculture, CCC, NYA, and all public works. I also want you to con- sider sending some men into the field to see actually what they are doing. Please talk to me about this at the earliest opportunity. Regraded Unclassified 97 TREASURY DEPARTMENT INTI OFFICE COMMUNICATION DATE February 17, 1941 TO Lt. Stephens FROM Secretary Morgenthau Monday I wish to call up Senator Barkley and Senator Harrison and Senator Brown of Michigan, and thank them for having passed the $65,000,000,000 debt limit bill. Letters sent to these two men on 2/18/41- 98 Debt himit Bill to white House THE HOUSE APPROVED MINOR SENATE AMENDMENTS TO LEGISLATION INCREASING THE DEBT LIMIT TO $65,000,000,000 AND SENT THE MEASURE TO PRESIDENT ROOSEVELT, 2/17--R1259P Regraded Unclassified 99 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE February 17, 1941 TO Mr. Morgentheu FROM W. H. Hadley TREASURY BILL OFFERING Aver. on 1st 100 Aver. 1st 100 mil. Aver. price for Total tenders mil. recd. NY & Chi. NY & Chi. last wk. country last wk, recd. NY & Chi, 1=day bills 0.008 0.0008 100.- $198,008,000 100 THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE FEDERAL RESERVE BUILDING WASHINGTON, D.C. February 17, 1941 To: Mr. George C. Haas, Director, Research and Statistics, Treasury Department. From: Mr. J. E. Hamm JEH The following, I think, will interest you in the light of our recent conversations. It is from the United States News for February 21, pere 31: "OPM is considering request for new legislation authorizing ration- ing of materials to nondefense in- dustries and to defense subcontractors. Planned is central control of all prior ratings and establishment of 'master schedules' in Washington." 101 February 17, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston Perhaps the question of the transfer of the Coast Guard is not entirely foreclosed. Maybe you will get another chance to be heard. I am still convinced that it would be a serious mistake to transfer the Coast Guard to the Navy unless and until we are actually at war or know that we are about to get into war. The Navy's insistence will not be met simply by offering a certain number of cutters to them. What I think we could offer in the last extremity is to make any ships, any number of men and any other facilities of the Coast Guard available to the Navy at any time on demand if the purpose is defense preparation. This would mean that if they wished to use a dozen cutters for maneuvers for a limited time, they could have them, or if they wished to make a test in any given area of mobilizing small craft, shore stations, and even light houses, in a defense game, they could be turned over to them temporarily for that purpose. Subject to these interruptions the Coast Guard could continue to carry out its civil functions in a normal way. Coast Guard units and equipment can always be made available to the Navy on orders of the President and in fact we have been giving them everything they have asked. I think that for them to take over the routine adminis- tration of the Coast Guard under peace-time conditions would merely embarrass and handicap them in licking their organization into shape. They can have the benefit of the men and equipment, so far as they would be useful to them for the purpose of defense preparation, without the embarrassment of being responsible for the civilian functions. It seems to me pretty plain that the formal transfer of the Coast Guard (to no good purpose as I see it) would create a very bad public impression. Mr UInclassified 102 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE February 17, 1941 Secretary Morgenthau TO FROM Mr. Cochran STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Sold Sharee Sold of Bonds Sold Bonds Sold February 10 50,822 1,437,420 455,500 456,182 11 14,948 360,323 186,000 181,651 12 H o 1 1 d & y 13 16,846-1/2 311,753 394,000 424,861 14 3,765 192,609 137,000 137,876 15 1,903 100,890 29,000 31,582 58,284-1/2 2,402,995 1,201,500 1,232,152 Sales from abruary 22, 1940 to February 8, 1941 5,211,751 158,975,861 15,753,800 14,850,759 TOTAL FEBRUARY 22,1940 TO FEBRUARY 15, 1941 5,300,035-1/2 161,378,856 16,955,300 16,082,911 Mise Poate reported sales of non-vested securities for the week ending February 8 totaled $600,000. M.M. Regraded Unclassified 103 EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL FROM THE UNITED STATES TO JAPAN, RUSSIA. SPAIN, AND GREAT BRITAIN AS SHOWN BY DEPARTURE PERMITS GRANTED Week ended February 15, 1941 : JAPAN : RUSSIA : : SPAIN : : GREAT BRITAIN : : TROLEUM PRODUCTS Fuel and Gas 011 (including Diesel 011) -- -- -- 168,986 Bbls. Crude - Blended or California High Octane Crude* 85,000 Bbls. -- -- -- All Other Crude 62,044 Bbls. -- -- 60,000 Bbls. Gasoline - Gasoline A** -- -- -- -- Gasoline B* 84,019 Bbls. -- -- 112,408 Bbls. All Other Gasoline -- - -- -- ricating 011 - Aviation Lubricating 011*** 7,863 Bbls. -- -- -- All Other Lubricating Oil 129,794 Bbls. - -- -- etraethyl Lead*** -- -- - I. Boosters", such as Iso- Octane, Iso-Hexane, or Isc-Pentane -- -- -- 61,687 Bbls. AP IRON AND SCRAP STEEL umber 1 Heavy Melting Scrap -- -- -- 2,120 Tons 11 Other Scrap -- -- -- 11,759 Tons ice of the Secretary of the Treasury, Division of Research and Statistics. February 17, 1941. Ice: Office of Merchant Ship Control, Treasury Department. Any material from which by commercial distillation there can be separated more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon mixture - President's regulations of July 26, 1940. Aviation Gasoline. As defined in the President's regulations of July 26, 1940. 104 February 17, 1941 Dear Jims Thank you for your memorandum of February 14th, listing blocks of stock recently offered for sale, in- cluding those for British account. I was interested in having this information. Yours sincerely, Henry Mr. James V. Forrestal, Under Secretary of the Navy. Regraded 105 February 17, 1941 Dear Jims Thank you for your memorandum of February 14th, listing blocks of stock recently offered for sale, in- cluding those for British account. I was interested in having this information. Yours sincerely, Henry Mr. James V. Forrestal, Under Secretary of the Navy. 106 February 17, 1941 Dear Jimes Thank you for your memorandum of February 14th, listing blocks of stock recently offered for sale, in- cluding those for British account. I was interested in having this information. Yours sincerely, Henry Mr. James v. Forrestal, Under Secretary of the Newy. 107 February 14, 1941 Dear Mr. Forrestel: The following blocks of stock have been recently offered for sale. Those for "British n/c* have been marked "F". Some of the recent offerings, such 88 "Molybdenum Corp., Pacific Gas & Klectric and S. H. Kress Co., have not been very successful, particularly the "Kress Co." which was offered at 26, with the account now closed is selling at 22 5/4, the unsold balance st the termination of the account is not known, although it 1a rumored that approximately 75,000 shares were unsold. Approx. Offering Approx. Total Dealer Amount Stock Offered By Price Spreed Concession 25,461 shs. United Fruit Co. - Lee-Higginson Corp. 68 2 1/4 F (1/8 Management 2 (5/8 Underwriting) 15,000 shs. Plymouth Oil Co. - Allen & Co. 16 3/8 (not available) -40 cents F 21,857 she. Lone Star Cement Corp. "Company bought direct 38 3/8 - F from British" (purchase price) 92,700 she. S.O. of Kentucky - Harriman Ripley & Co., Inc. 19 5/8 Management Fee .75 cents (.40 cents Underwriting) 6,000 shs. General American Transportation - Blyth & Co.,Inc. 55 1 1/4 1. 20,000 shs. Molybdenum Corp. - Eastman Dillon & Co. 7 3/4 # .40 cente Shs. * (5,000 bought at 7.35) (5,000 " at 7.10) (5,000 " at 7.15) 20,000 she. E. I. DuPont de Nemours Smith, Barney & Co. 148 4 2 1/2 (1/2 Management) (1 Underwriting) 5,000 ahs. Western Auto Supply Co. Merrill Lynch, B.A. Pierce & Cassatt 25 1 1/2 (sold at retail) 40,000 shs. Arkansas Natural Gas Co. - 6% Preferred - Allen & Co. B (not available) .40 cents 100,000 shs. Pacific Gas & Electric - Bonbright & Co.,Inc. Lazard Freres & Co.Inc. 28 1/4 1 S/8 .85 centa (.12 1/2 Management) (.40 Underwriting) 250,000 sha. S. H. Kress Co. - Lehman Brothers 26 1.85 1. Goldman Sachs & Co. (.20 Management ) (.65 Underwriting) A.T.Pale Regraded Unclassified 108 DEPARTMENT OF STATE WASHINGTON The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and has the honor to transmit the enclosed strictly confidential communication for his information. J. DCA Regraded Unclassified 109 PARAPHRASE w LONDON, - see, deted February 17, 1941 STRIGHT COMPLEMENTIAL Secretary w State, Washington. NON In the discussions between the Agricultural Attached and Food Hinistry officials advantage has been taken of DPs Parren's visit to carry these discussions further. Dr. Parren has been ensouraged by Mr. Hopkins to look into the feed situation, particularly whether the present and prospective diet is alliguate to maintain civilian marvie and ininstrial production. No material change has taken place in the position outlined is the Embasey's tologram dated January sa, no. 367, though air and cubmarine attacks against shipping have been intensified necerding to latest reports, except that the AgrienIturel Attachd and DF. Parran - in the opinion that the necessity for a major recrientation is British policy regarding courses and character of roods stuffe importe, 2.0. toward greater relience upon short hauls and - consentrated and autritionally necessary feelatuffs 10 beginnämer to be envisaged by both British feed and shipping efficials. TION - purposes or a thereugh discussion of the British feed position - the pessibilities of American help as will Regraded Unclassified 110 well as questions of machinery - procedure the Feed Ministry 10 considering, 10 has been inticated, the sending of a small delegation - the United mates. with respect to questions of mokinery - prosedure Food Mindstry efficials at present are instined to believe that Hinistry representation in Washington could best hendle longer term arrengements, and that current day-to-day developments might perhaps best be handled in London; not An nerese-the-table discussion of the many intricate aspects of the problem is considered assessary, however, before any definite declaions on machinery are mas. The feed and mutrition situations have been ass- a cussed with the Ministers of Food and thipping, experts in the Ministry of Food, the Australian High Consissioner, persons dealing with such problems in lesal areas, and informed declare, by Dr. Paymen, who found the greatest shartages to be in fats, milk products, and mate. the supply of dried fruits so about twenty persent below normal and the supply of citrus fruits and applies much reduced and expensive. It is estimated that this year the milk supply will be reduced by twenty persent, cheese supply fifty percent. Yes production, as 10 anticipated, will be charghy reduced and by the end of the year importe of - are expected to almost vanish. Margarine largely replaces Regraded Unclassified 111 replaces butter which is searee and subject to a two- curse yetion. The total weekly retion of fat so eight cursés. only disbeties are allowed special rations. Children and nursing mothers may new procure - extra milk but its general retiening so anticipated. There is no shortage of cabbages, carrete or potatoes, but no inported vegetables are available. CTION Parren is convinced that the mest important defense OUR need this year will be food. He was told by Lord Weelton that "Our people will stand up to booking but not enpty bellies". The Chief Medical Inspector of Fasteries stated that the lack of meat and cheese has caused muth grumbling among the verture an the heavy industries and that the great problem was the proper fooding of workers. Further data with respect to specific autritional deficiencies in the present rationed diot are being assembled by Dr. Payran. Cress expressed to D9. PAYFAR the Torher's anxisty that representatives of the United States Meritime Commission be sent to London to discuss supply reutes without delay. DCASONK:NT 2/19/42 Regraded Unclassified STRICTLY CONFIDENTIAL 112 PARAPERASE of tologram from LONDON, no. see, dated February 276 1941 STRICTLY COMPIDENTIAL Secretary of State, Washington. ION In the discussions between the Agricultural Attnehe and Food Ministry officials advantage has been taken of Dr. Parren's visit to carry those discussions further. Dr. Parran has been ensouraged by Mr. Hopkins to look into the food situation, particularly whether the present and prospective diet is adjuste to maintain sivilian nevels and industrial production, No material change has taken place in the position outlined in the Embassy's telegram dated January 31, no. 367, though air and submarine attacks against shipping have been intensified accurding to latest reports, except that the Agricultural Attachd and Dr. Paryan sensur in the opinion that the necessity fer a major rearientation is British policy regarding sources and character of food- stuffe imports, 1.0. toward greater relience upon short hauls and more consentrated and amtritionally necessary feedstuffs is beginning to be envisaged by both British food and shipping afficials. PION Per purposes of a thorough disenssion of the British food position and the pessibilities of American help as TEAM Regraded Unclassified 113 + well as questions of machinery and procedure the Feed Ministry is considering, it has been indicated, the sending of & small delegation to the United States. with respect to questions of mashinery and pressdure Feed Ministry efficials at present are inclined to believe that Ministry representation in Washington could best handle longer term arrangements, and that current day-te-day developments might perhaps best be handled in London). and An neress-the-table discussion of the many intricate aspects of the problem is considered necessary, however, before any definite desisions on machinery are made. ON The food and mutrition situations have been die- . cussed with the Ministers of Feed and Shipping, experts in the Ministry of Feed, the Australian High Commissioner, persons dealing with such problems in lesal areas, and informed doctors, by Dr. Parran, who found the greatest shertages to be in fats, milk products, and meats. The supply of dried fruits is about twenty persent below normal and the supply of sitrus fruits and apples much reduced and expensive. It is estimated that this year the silk supply will be reduced by twenty persent, cheese supply by fifty persent. Egg production, it is anticipated, will be sharply reduced and by the and of the year imports of "gge are expected to almost vanish. Margarine largely replaces Regraded Unclassified 114, replaces butter which 10 seares as mbjest to a - cases ration. The total weekly ration of fat is eight curren. only diabeties are allowed special rations. Children and mursing mothers may new promote - extra milk but its general rationing is anticipated. There is no shortage of cabbages, carrets or petatoes, but no imported vegetables are available. CTION Parran is convinced that the most important defense OUR need this year will be food. He was told by Lord Weelton that "Our people will stand up to bombing but - engly bellies". The Chief Medical Inspector of Fastapies stated that the lack of meat and cheese the & you ECEIA 00 grumbling among the workers in the heavy industrice E and that the great problem was the proplemfooding of workers. Further data with respect to specific autritional deficiencies in the present rationed diet are being assembled by Dr. Parran, Orees expressed to Dr. Parran the anxisty that representatives of the United States Maritine Commission be sent to Lendon to discuss supply routes without delay, 2/19/41 Regraded Unclassified 115 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Feb. 17, 1941. TO Mr. White FROM Mr. Southard Subject: Report on the current experience of American companies with properties in Axis territory, made on instructions from Under Secretary Bell. 1. General Conclusion: In the preparation of this report I interviewed senior executives in 21 corporations in New York City which currently have majority or important minority interests in factories, refineries, public utilities and stores in Germany, Italy, Occupied Europe, Japan and Occupied China. These executives generally agreed that in Germany, Italy, and Japan, their access to and control over properties has not materially changed since the beginning of the war, but that their situation in Occupied Europe has become difficult and that Japanese policy in Occupied China is freezing them out. As to foreign exchange treatment, remittances from Germany for interest, dividends, and sale of properties are in general freer than before the war, but virtually no funds can be brought out of Italy and remittances either cannot be made or are very small from Occupied Europe. There is evi- dence that hitherto fairly regular remittances from Japan are coming to an end, 2. Experience in the individual areas: (a) Germany: As to access to properties and control over pro- duction and sales. There has been no material change since the war began. There was already close governmental supervision over all American-owned factories and refineries whose production could contribute to the war. This supervision has continued and has been facilitated by the fact that the staffs were already entirely, or almost entirely, German Nationals. The few remaining Americans have in most instances been withdrawn but the original staffs are otherwise in charge. Ameri- can ownership of the properties has been respected but the head offices have not been receiving adequate information from their subsidiaries. As to Interest and dividends. American companies are currently getting interest and dividends out of Germany more freely than before the war. These remittances are being made by means of the complicated, pre-war mechanism of the dividend mark and mark- funding bonds at 10 - 12# per mark. This is an improvement over the Regraded Unclassified 116 Division of Monetary - 2 - Research 3 - 4$ rate of last July but is only about half of the 23# rate at which most of the investments were originally made in Germany. It is generally agreed that the Germans are using their dollars freely. Some American companies are receiving payment from the Germans on commercial account in the form of South American currencies. As to sale of properties. Germany has recently bought back American interests in several large German corporations and is nego- tiating for further such purchases. In addition, many companies have had tentative German offers for the purchase of their German factories. Some of these purchases have been made at surprisingly high prices. The motives behind this policy, which is a further indication of Germany's relatively fres use of dollar exchange, can only be guessed. It may reflect a fear of freezing of German funds, a desire to eliminate ties with American corporations, or mere optimism concerning the out- come of the war and future lack of need for dollar exchange. (b) Italy: So far as access to properties and control over pro- duction and sales are concerned, the experience of American companies has been identical with that in Germany. American ownership has been respected and the original staffs - already almost entirely Italian Nationals - are in charge. But the operations of the factories are under strict government control and the American head offices are receiving very inadequate information from their Italian subsidiaries. As to foreign exchange treatment, it was almost unanimously agreed that neither interest nor dividends can be remitted from Italy and that the Italian Government will not even permit the conversion of blocked marks into lire for the purpose of financing the operations of American-owned Italian subsidiaries. In contrast with the German situation, there is no evidence that the Italians are buying back American-owned properties. (c) In Occupied Europe: Commonly, but not invariably, a German commissar has been placed in American plants in this area. German interference has been greatest in Belgium and France and least in Denmark and Norway, In some cases - for example, petroleum refineries -- the commissar actually operates the plant, although American owner- ship is at least nominally respected and there has been no open con- fiscation. In other cases the commissar is inactive or does nothing more than to act as liaison with the German authorities, in some instances preventing the plant from being stripped of equipment. American head offices are getting exceedingly inadequate information concerning their properties in Occupied Europe. Some of them know Regraded Unclassified 117 Division of Monetary - 3 - Research that the output is being taken by the Germans in return for local currencies or occupation marks. As to foreign exchange treatment, only small amounts of money are currently coming out of this area in dollars. Many American companies foresaw the likelihood of exchange difficulties and had their subsidiaries incur bank loans prior to the occupation in order to remit in dollars, These com- panies have little or nothing blocked at present, but others have considerable amounts tied up in the occupied area. (d) Japan and Occupied China: American companies in this area are being gradually frozen out by the Japanese policy of monopoly and exclusion. But the head offices are receiving adequate information and have normal access to their properties. Until recently remittances into dollars from this area were apparently sufficient to avoid large blocked funds. Information is inadequate, however, and there is some evidence that the exchange situation is growing worse. For example, companies reported that within the last few months previously regular remittances had not been made. 3. The executives interviewed were not in agreement, and many were un- certain, as to the effects on their companies of extending the freezing policy to include other countries in Europe and Asia. (a) The financial enterprises were in general opposed to an extension of freezing, fearing that it might be extended to South America and that it may injure the position of the United States as a financial center. One big bank, however, would welcome the freezing of Swiss and Swedish accounts on the ground that they are being actively used by the Germans. Of 11 non-financial corporations expressing an opinion, only 1 was clearly opposed to an extension of freezing and the others were uncertain as to the effects on their companies, but were some- what fearful that Germany might retaliate by confiscating their properties. They were not much concerned over the probability that Germany would immediately stop all interest and dividend payments. Most of the executives wondered whether Axis assets in the United States are large enough to provide an adequate security for American assets in Axis territory. The response of the executives during interviews was almost invariably cordial and it appeared to me that a further explanation to them of the scope and intent of any extension of the freezing policy could easily win their interest. Regraded Unclassified 118 February 10, 1941. Mr. White Mr. Southard Subject: Current Experience of American Companies with Subsidiaries or Affiliates in Axis Territory. 1. Access to properties; control over production and sales. (a) In Germany and Italy: In general, it appears that American ownership in properties in these two countries has been respected, although one company (Standard Oil of New Jersey) reported to the State Department that its small Italian oil-producing company (but not its refinery) had been expropriated. Most of the American-owned com- panies were staffed entirely or almost entirely with Germans and Italians, and while in many instances the two or three American executives have been withdrawn the pre-war staff is otherwise still managing the proper- ties. Wherever the production is keyed into the military effort, there is close Government supervision which extends to control of the produc- tion program. Information in the form of financial and operations reports from either Germany or Italy-but particularly from Germany--are inade- quate and in many instances virtually non-existent. Some American companies have had only word-of-mouth information concerning their properties in the two countries. (b) In Occupied Europe: Generally speaking, the degree of German interference with American plants in the occupied countries appears to be greatest in Belgium and France and least in Denmark and Norway. No instances were found in which American properties had been actually occupied by the Germans except that they are using part of the National City Bank building in Paris. It has been the common, but not universal, experience that a German commissar or "conservator" is placed in the plants. In some cases-for example, the Texaco refinery in France--a German is in effective charge of production. In others the operations are in the hands of the original staff with only a minimum of German supervision. Several companies report that the German commissar has apparently prevented equipment from being taken out of the factories and in one case (the Belgian and French factories of International General Electric) an associated, but not controlled, German company has allocated enough non-military orders to keep the plants going, and consequently to justify their retention of their machinery. Regraded Unclassified 119 Division of Monetary - 2 - Research Few American companies are getting adequate information concerning the condition, operations, and financial results of their subsidiaries in Occupied Europe, although reports from Denmark and Norway are fairly regular. In the case of Holland, some companies are getting reasonably full reports whereas others find that only the most guarded information is being sent out. One company (Socony-Vacuum) can communicate with its Belgian subsidiary only via its German company. Among the companies consulted, the only instance of expropriation was that of the Standard oil of New Jersey pipeline taken over by the Roumanian Government. This was reported to the State Department. The American branch banks in France and Belgium have moved most of their cash, securities, and custody accounts into unoccupied France; and are gradually liquidating; but the safe deposit boxes of their customers are still in occupied territory and can be opened only under German super- vision. The balance sheet of the National City Bank in France, for example, totals $7.5 million (in dollars, sterling, and francs), of which $5.4 million are in dollars in New York and are consequently blocked in the United States. This bank's accounts receivable in French francs are rapidly being liquidated. The custody accounts in vaults in unoccupied territory have thus far not been requisitioned by either Berlin or Vichy. But the Chase National Bank reports that the custody accounts of its customers in the occupied zone can be settled only under the supervision of a German official, in the course of which all gold and foreign securities are placed in a separate account, which is then left in the Bank. The National City Bank's safe deposit boxes in Paris cannot be opened by the users except in the presence of a German official. (c) In Japan and Occupied China: American companies are receiving full information from their Japanese subsidiaries and affiliates. In no instance has there been interference with their free access to their properties or records but the expansion of Japanese activity and the tendency toward Japanese monopoly has so restricted the sphere of activity for any foreign company as to counsel retrenchment and gradual withdrawal. Companies such as International General Electric which have only minority interests in long-established Japanese companies naturally do not face the same problem; but have apparently been suffi- ciently uneasy over Japanese developments to have stopped advancing money to the affiliates and to have begun reducing their investments. Regraded Unclassified 120 Division of Monetary - 3 - Research 2. Remittance of interest and dividends. (a) From Germany: While some American companies are not getting anything out of Germany, the majority of those interviewed are convert- ing as much, and in many cases more, into dollars than they were before the war began. (1) In a few cases, interest in dollars has been paid on dollar loans made to German subsidiaries. For example, the Woolworth Company has regularly received dollars through Dillon Read on such a loan and at least one company has received interest at the 40¢ mark rate. (2) In most instances, however, the remittances of both in- terest and dividends have been made through the customary pre-war chan- nels of the dividend mark and the mark funding bond via the Konversions- kasse. Prior to last July, the rate on the dividend mark had been from 3 to 4$ and at that rate most companies preferred not to convert their blocked funds. For example, the Socony-Vacuum Corporation had its German subsidiary loan the July, 1940, dividend to its Austrian Company for expansion purposes. But by November, the dividend mark had appre- ciated to 11# or better and since then many companies have been actively withdrawing interest and dividends from Germany (for instance, Socony- Vacuum reversed the above-mentioned loan and sold the funds in the form of dividend marks at 11$). There is still a market for the mark funding bonds but with the proviso that the bonds must be delivered to the Konversionskasse or the Golddiskontbank in Germany. Some companies (for example, Woolworth) are reluctant to entrust the marked funding bonds which they have in this country to the existing mail service to Berlin. (3) One company which, prior to the war, was getting commer- cial accounts out of Germany in the form of Colombian pesos and Venezu- elan bolivars, was recently made a similar offer by the Germans but with the proviso that half of the amount involved should be placed to German account in dollars in New York. This proposal was refused by the com- pany which is still hopeful that it might be able to withdraw $300,000 worth of its blocked commercial credits in Germany in the form of dollars. Colombian pesos without assisting Germany to convert its pesos into Regraded Unclassified 121 Division of Monetary - 4 - Research It appears then that the movement of funds out of Germany is occur- ring on a fairly large scale through customary channels. But it is also evident that many companies still have considerable sums blocked in Germany and that some of them are actually not aware of the fact that conversion into dollars is possible at a rate as good as 11# or 12# per mark. (b) From Italy: It is the almost unanimous report of the compan- ies interviewed that the Italian foreign exchange situation is very tight and that virtually no funds - either interest or dividends - are being converted into dollars. (c) From Occupied Europe: The foreign exchange situation with refer- ence to remittances on interest and dividend account in the countries occupied by Germany is clearly chaotic and in consequence the experience of American companies is not uniform. A number of companies, foreseeing the danger of invasion, or at least of freezing, directed their subsid- iaries to anticipate earnings by borrowing from banks and remitting dollars. In consequence, a considerable number of the companies inter- viewed do not have any funds blocked. Others, however, do. Dollars in small amounts are being received from Denmark and from Norway; but from Belgium, occupied France, and Holland, little or nothing is being re- ceived. One company (Union Carbide and Carbon) has large and increasing amounts of blocked Norwegian kroner representing German payments for its output of ferro alloys. It anticipates using these kroner to conserve the properties and support the workers during the anticipated shutdown. (d) From Japan and Occupied China: or seven companies consulted which are operating in this area, all have been able to convert into dollars, amounts due on commercial, interest, and dividend account. However, International General Electric reported that November interest and dividends were not received from its Japanese affiliate and believes the exchange permits were not granted. Moreover, indirect reports were received that other American companies have considerable suns blocked in yen. Further information is needed in order to determine more accurately the exchange treatment being accorded American companies in this area. Regraded Unclassified 122 Division of Monetary - 5 - Research 3. Sale of properties: There is considerable evidence that Germany SIN currently repatriat- ing the securities owned in German enterprises by American corporations. Of ten American companies on which data were obtained, eight have had German offers in some form for the purchase of their interest in German enterprises. Two of these corporations - International General Electric and E. I. du Pont de Nemours -- have made one or more sales and have received dollars in settlement. The International General Electric sales and current negotiations are worth special mention. Late in 1940 the corporation's $10 million holding in Siemens and Halske bonds were sold to a New York dealer for $11 million and were destroyed by him on instructions from the Golddiskontbank. In December, the corporation sold its minority 1n- terest in Siemens and Halske shares for $693,000, or about 65 percent of the price paid for them in 1929. This sale was based on the Berlin quotation for the shares, with the reichsmarks converted to dollars at 9.2 cents. At the present time (January-February, 1941) the same brokers, operating for German account, want to buy the International General Electric holdings in A.E.G. (German General Electric) and in Osram (the great German lamp factory). Neither of these offers are yet good enough to be accepted; the offer for the A.E.G. shares would return only 24 percent of the original investment. It appears, therefore, that Germany has sufficient dollar exchange available to continue during the war its pre-war policy of repatriating American-owned German securities. Moreover, in contrast with the ex- ceedingly low prices received by the Americans in the pre-war period, the Germans have recently paid as much as 110 percent of par for the desired securities. The motives behind this current purchase of American interests in German corporations are not known and can only be guessed at. (a) The Germans may anticipate the freezing of their dollar funds and hence may prefer to use their dollars to buy back properties, thus reducing American claims on Germany in any post-war settlement. This fear of freezing may explain why the American and Foreign Power Corporation was recently asked by the Germans to pay an unmatured debt ahead of time. Certainly Germany is not interested in selling its own direct investments abroad: the International General Electric Company was not able to buy certain German interests in Mexico and Argentina. Regraded Unclassified 123 Division of Monetary - 6 - Research (b) The Germans may simply be optimistic about winning the war, do not need dollar exchange for more pressing purposes, and believe they may be able to buy properties now at good prices. (c) Possibly the Golddiskontbank, party to all known purchases of American interests in German enterprises, is able to make a reichs- mark profit by reselling the shares to German corporations. (d) The policy may reflect a German desire to eliminate the influence of powerful American corporations in great German unterprises. This view may be confirmed by the fact that the only completed transactions known are those involving International General Electric and Du Pont. 4. There is no unanimity of opinion among the corporation executives interviewed as to the effects -- immediate and remote -- on their companies of an extension of the freesing policy to include other countries in Europe or Asia. Of five financial enterprises, the executives of three were clearly opposed to an extension of freezing. The Guaranty Trust Company fears freezing might be extended to South America, believes the position of the United States as a financial center would be adversely affected, and sees no other useful purpose served by freezing than to prevent the use of funds for subversive activities. The Chemical Bank thinks some of its customers would be harmed by further freezing, but concedes that Germany could not retaliate beyond stopping the remaining interest and dividend payments. The American Express Company is afraid that Germany might retaliate by refusing to allow any more refugees to leave. On the other hand, the National City Bank is hopeful that United States control over foreign assets in this country might ultimately make it possible to swap its Paris building for some property here; and the Chase National Bank, while fearful of the effect of general freezing on its depositors and clients in South America and China, would welcome the freezing of Swiss and Swedish assets because it is at present impossible to determine which transactions are German. Of eleven non-financial corporations with properties in Axis territory, only one was clearly opposed to an extension of freezing. This company - Standard Vacuum -- is of the opinion that if Japanese dollar assets are frozen Japan may use that action to justify insistence on guilder payments for East Indian oil, Three of the eleven companies favor an extension of freezing to cover at least German and Italian dollar assets, believing that our bargaining position would be improved and that the treatment would be no more severe than that accorded us by Germany and Italy for some years. Regraded Unclassified 124 Division of Monetary - 7 - Research One of these companies urges that there be compulsory registration of all foreign assets in the United States to prevent evasion of freezing orders. The majority of corporation executives interviewed were clearly uncertain as to the effects of an extension of freezing to cover Axis assets. The reasons for their uncertainty may be summarized thus: (a) They are not sure that Axis assets in the United States are large enough to provide an adequate "security" for American assets in Axis territory. (b) They believe a general freezing of, e.g., all European assets in the United States would be desirable, but they are somewhat fearful of the consequences of picking out certain non-invaded countries for freezing. (c) They generally do not believe Germany would retaliate by con- fiscating their properties, but they are not sure and are consequently somewhat fearful. Most of them do not seem much concerned over the probability that Germany would immediately stop all interest and dividend payments. FAS:ion 2/10/41 mg 2/13/41 Regraded Unclassified COPY 125 List of Company Officials Interviewed in New York City in Preparation of Memorandum on the Experience of American Companies in Axis Territory Frank K. Houston, President, Joseph A. Bauer, in charge of Foreign Department. Chemical Bank & Trust Company. Mr. Archie Lochhead, President, Universal Trading Corporation. Mr. R. F. Loree, Vice President, Mr. Herman Brock, Guaranty Trust Company. Mr. O. S. Rentschler, President, National City Bank of New York. Mr. H. Donald Campbell, President, Mr. Stearn, Head, Foreign Department, Chase National Bank of the City of New York. Mr. S. R. Inch, President, Electric Bond and Share Co. Mr. Calder, President, American and Foreign Power Company. Mr. Jay Crane, Treasurer, Standard Oil Company (New Jersey). Mr. K. E. Stockton, Vice President, International Telephone and Telegraph Corporation. Mr. E. P. Small, President, American Express Company. Mr. W. S. S. Rodgers, President, Mr. W. H. Borie, Foreign Sales, Mr. S. H. Kuhn, Assistant Manager of French Company, The Texas Corporation. Mr. Robert C. Stanley, Chairman and President, International Nickel Co. of Canada. Mr. J. A. Brown, President, Mr. H. F. Sheets, Vice President in Charge of Foreign Operations, Mr. John F. Seal, Assistant Treasurer, Socony-Vacuum Oil Company, Inc. Regraded Unclassified 126 Division of Monetary - 2 - Research Mr. E. T. Singer, Treasurer, Mr. A. B. May, in Charge of Chinese Operations, Mr. K. F. Coe, in Charge of Japanese Operations, Standard-Vacuum Corporation. Mr. R. W. White, Treasurer, Union Carbide and Carbon Corporation. Mr. Graham K. Howard, Head of Export Division, Mr. Jenkins, General Motors Export Corporation. Mr. Clark H. Minor, President, International General Electric. Mr. W. Gibson Carey, Jr., President, Yale and Towne Manufacturing Company. Mr. Cosgrove, in Charge of European Operations, American Radiator & Standard Sanitary Corporation. Mr. Deyoe, President, Mr. Paul Hofer, Treasurer, F. W. Woolworth Company. Mr. J. o: Phillips, International Business Machines Corporation. FAS mmg 2/10/41 Regraded Unclassified 127 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Feb. 17, 1941. TO Mr. White FROM Mr. Ullmann Subject: Petroleum Situation in Japan 1. In the last six months we estimate Japan has increased its stocks of petroleum products by about one month's supply, and now, according to our estimate, has on hand about eleven or twelve months' supply. 2. Its sources of supply in the past six months have been: From the United States: 13.3 million bbla. From the Netherland East Indies (estimated) 5.0 If B From Japanese production (estimated) 2.0 If If Total new supply 20.3 million bbls. Estimated Japanese consumption (6 mos.) 17.5 " = Total-6 mos. increase in stocks 2.8 If II 3. Japanese stocks at the time of the President's Proclamation (July 26, 1940) placing petroleum under export control, were estimated to be between 30-32 million barrels. Present stocks would, therefore, approximate 33 to 35 million barrels. 4. Light refined products have comprised an increasing proportion of Japan's imports. In 1939 her imports of gasoline from the United States amounted to 1.2 million barrels, or 4 percent of all petroleum imports from this country. In contrast, her imports of gasoline from the U. S. in the last six months were 3.4 million barrels, or almost 26 percent of our shipments of all petroleum products to Japan. In quantity, our recent shipments of gasoline represent a six-times increase over 1939. Similarly, our shipments of lubricating oil (which is supposed to be relatively difficult to produce) also increased. In 1939, Regraded Unclassified 128 Division of Monetary - 2 - Research lubricating oil amounted to less than 2 percent of our petroleum exports to Japan; in the last six months, the product accounted for over 5 percent of our ship- ments. It is understood that about 40 percent of the new Japan- ese-Netherland East Indies contract is to be filled with refined products. 5. Our shipments of crude oil, gas oil, and fuel oil have declined from 1939 levels. However, Japan is getting increased quantities of these products from the Nether- land East Indies, whose exports to Japan rose from 2.3 million barrels of petroleum products in 1939 to an annual rate of 10 million barrels currently. Regraded Unclassified 129 Treasury Department Division of Monetary Research Date February 18, 1941 Mr. White Mr. Ullmann Export Control - Shipments to Japan Week ending Feb. 15, 1941 Lubricating Oil: 138,000 barrels (including 8000 bbls. of aviation lube) - almost one-third of total 1939 shipments. Gasoline: 84,000 barrels - - all high octane and licensed. Crude: 147,000 barrels - - about 60% high octane and licensed. Fuel and gas oils none Scrap: none. MR. WHITE Branch 2058 - Room 208 STRICTLY CONFIDENTIAL 130 ALLISON ENGINEERING COMPANY Shipments of Airplane Engines : Actual : Estimated shipments : shipments : on existing orders 1940 January 10 May 24 - June 22 28 June 23 - July 20 43 July 21 - Aug. 17 47 Aug. 18 - Sept. 14 140 Sept. 15 - Oct. 12 263 Oct. 13 - Nov. 9 233 Nov. 10 - Dec. 7 154 Dec. 8 - Jan. 4 228 1941 January 5 - 11 85 January 12 - 18 43 January 19 - 25 33 January 26 - February 1 32 February 2 - 8. 86 February 9 - 15 66 February 16 - 28 248 March 400 April 473 May 500 June 500 July 475 August 550 September 625 October 750 November 800 December 800 942 January 455 February 277 March 225 April 225 May 207 June 66 ffice of the Secretary of the Treasury, Division of Research and Statistics. February 17, 1941. Regraded Unclassified 131 STRICTLY CONFIDENTIAL ALLISON SHIPMENTS : Dec. 29: Jan. : Jan. : Jan. : Jan. 26: Feb. : Feb. : Total : Jan. 4 : 5-11: 12-18 : 19-25 : Feb. 1 : 2-8 : 9-15 : Dec.29-Feb.15 British OR 83 41 33 31 60 31 287 Army 4 2 2 - 1 26 35 70 Total 12 85 43 33 32 86 66 357 Office of the Secretary of the Treasury, Division of Research and Statistics. February 17, 1941. Regraded Unclassified 132 > STRICTLY CONFIDENTIAL Allison Shipments to the U. S. Army June 9, 1940 to February 15, 1941 Engine : June 9- : Jan. : Jan. 19 : Feb. : model : Jan. 4 : 5-18 : Feb. 1 : 2-15 : Total C 269 57 326 E 20 4 1 3 28 F 11 1 12 B1g engine (2,000 h.p.) 7 7 Total 307 4 1 61 373 Office of the Secretary of the Treasury, Division of Research and Statistics. February 17, 1941 Regraded Unclassified 133 February 17, 1941 My dear Mr. President: Before Loon llenderson left on his montion, he asked that I see his two principal assistants, 12r. Harri, who is an economist, and Mr. Ginsberg, who is his attorney, in case they needed guidance. last week, these two gentlemen had lunch with me and brought to my attention the question of the rationing of civilian demand for various strategie commodities. I asked them to work out the case of zine, which they did with the assist- ance of Mr. George limas, of my office. I had not realized until they brought this matter to my at- tention how important the rationing of the civilian demand for strategic materials is. I an enclosing a chart which clearly outlines the problem. I am also enclosing a draft of pro- posed legislation propared by Mr. lienderson's office. After reading these documents, I would appreciate suggestions from you as to how to guide these two gentlemen during Mr. liendersm's absence. I an sending a complete copy of this corres- pendence to the Attorney General. Yours sincerely, (Signed) 1 1 Jr. The President, The White House. Copy of ltr. and enclosures to Atty. Gen. Jackson Copy of ltr. to Leon Henderson with photostatic copy of By ! 940 enclosures. my 2-18 Regraded Unclassified 134 February 17, 1941 Lly dear Mr. President: Before Leon llenderson left on his vacation, he asked that I noe his two principal assistants, lb. Harm, who is an economist, and Mr. Ginsberg, nho is his attorney, in case they needed guidance. Last week, these two gentlemen had lunch with no and brought to my attention the question of the rationing of civilian demand for various strategic commodities. I asked them to work out the case of sinc, which they aid with the assist- ance of Mr. George Hass, of my office. I had not realized until they brought this matter to my at- tention how important the rationing of the civilian demand for strategic materials is. I am enclosing a chart which clearly outlines the problem. I am also enclosing a draft of pro- posed legislation prepared by Mr. Henderson's office. After reading these documents, I would appreciate suggestions from you as. to how to guide these two contlemen during Mr. Henderson's absence. I am sending a complete copy of this corres- pendence to the Attorney Ceneral. Yours sincerely, (Signed) 1 Menganthau, Jr. The President, The White House. Copy of ltr. and enclosures to Atty. Gen. Jackson Copy of ltr. to Leon Henderson with photostatic copy of I ₹ enclosures. Regraded Unclassified 135 February 17, 1941 Dear Bobs I am enclosing herewith a copy of my correspondence with the President. Any suggestions that you have to make would be appreciated by me. Yours sincerely, Henry Honorable Robert H. Jackson, The Attorney General. Encs. Copy of ltr. to President Photostatic copy of attachments to ltr. to President. 940 2-18 Regraded Unclassified 136 February 17, 1941 Dear Bebs I am enclosing herewith a copy of my correspondence with the President. Any suggestions that you have to make would be appreciated by me. Yours sincerely, Henry Honerable Robert H. Jackson, The Attorney General. Ence. Copy of ltr. to President Photostatic copy of attachments to ltr. to President. I A Regraded Unclassified 137 February 17, 1941 Dear Bobs I am enclosing herewith a copy of my correspondence with the President. Any suggestions that you have to make would be approciated by me. Yours sincerely, Henry Honorable Robert H. Jackson, The Attorney General. Ence. Copy of ltr. to President Photostatic copy of attachments to ltr. to President. & I Regraded Unclassified 138 STRICTLY CONFIDENTIAL THE NEED FOR POWER TO RATION CIVILIAN DEMAND IN ORDER TO MAINTAIN PRICE STABILITY A Specific Example ZINC, SUPPLY AND DEMAND IN THE FIRST HALF OF 1941 (FIGURES IN THOUSANDS OF SHORT TONG) The total picture appears as follows: Primary Production Scrap SUPPLY DEMAND 430 Militeryand British Civilion Demand Shortage 40 But this breaks down into two parts: / RATIONED MARKET-VIRGIN METAL (Price 7.25 Cents) Primary Production SUPPLY DEMAND 373 Military and British Rationed Civilian Demand 2. COMPETITIVE MARKET - SCRAP METAL (Price 10 Cente and up) Primary producers one - Scrop Rusing to estept orders Aux certein of their formar or SUPPLY 17 tomore who are furning to the secondary producers DEMAND 57 Remainder of Civilian Demand 1. The essential problem is to restore & balance 3. This means, in the first place, that legislation either by increasing supply -- this cannot be done during is necessary authorizing the President to ration supplies the next air months - or by reducing or otherwise oun- in the stust of abortage. Priority for Army and Havy trulling demand, orders may be required under Bection 2(a) of Public No. 2. 40,000 tone of demand can be eliminated in any 671, but there is no similar legal authority to nontrol une of three ways: and ration the residual supply for civillan purposes, (a) Lat price go up until 40,000 tone of demand 4. This power to determine the growth and survival turns to substitutes. of American industry is treasndous. It La unousstionably (b) Fix the prise (we think va can do 11) but the most far-reaching authority which the Government will leave the crucial power of deolding who require during the defense program. geta zino and who dese not to the secondary 5- Where should this power be lodged? Inglish producers. experience indicates that vilitary priurities and vivilian Quary: are they in & position to rationing should be administered by a single agency. This decide how zino can beet be used in the would suggest that the retioning power should be delegated national public interest? (Are the primary to OPM and Stettinius. English experience also indicates producers, who are DOV rationing all tine very definitely that these controls should not be lodged not taken for allitary purposes. La any with business groups their function Le So advise, not better position?) to control, It is questionable whether OPM and the (e) Piz the price and grant the rationing power military-business group who at present control silitary to . Government agency. priorities lists the breadth of sconomic and social vision This is obviously the only declrable assessary to A pruper administration of & separate and course. Rationing La a governmental power equally important progres of civilian retioning which will which aust be exproised in the public, DO Intimately touch the morale and economic welfare of not the private interest. STATE person in this country, Regraded Unclassified 139 STRICTLY CONFIDENTIAL February 13, 1941 MEMORANDUM TO SECRETARY MORGENTHAU From: David Ginsburg Subject: Emergency Priorities and Rationing Act of 1941 Herewith annexed 18 a draft bill and an accom- panying explanatory memorandum. The bill does two things: (a) It enlarges and clarifies the existing power over military priorities -- the existing power has been delegated to OPM; (b) It confers a new power -- the power to ration the residual supply among com- peting civilian interests. This is done by way of delegation of authority to the President. Where the new power should be lodged is his decision. The bill is in draft form. Before any action is taken I should appreciate the opportunity to revise and clarify certain provisions which we have included for pur- poses of discussion. Legal memoranda in support of the constitutional validity of the bill are also enclosed. Regraded Unclassified 140 STRICTLY CONFIDENTIAL Lt of party 29, 19/1 A BILL To Expedite Production and Delivery of Material Necessary for National Defense and for Other Purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) by reason of the existing national emergency in the interest of national defense of insuring the free flow of commerce, of removing burdens and obstructions thereto, it is essential to control and adjust the activities of persons engaged in the production and distribution of materials in such a manner as to give the requirements of national defense primary consideration and to provide for an equitable distribution of materials, in which shortages exist, to the civilian population. (b) It is hereby declared to be the policy of the United States, in accordance with which policy all of the pro- visions of this Act shall be interpreted, to provide means for the prompt, orderly and coordinated mobilization of the resources of the nation in order to insure that primary consideration will be given the requirements of national defense and in order to provide for the equitable distribution of materials among the civilian population where shortages are caused by action taken in the interest of national defense. Regraded Unclassified 141 Section 2. Whenever, during the existence of the national emergency declared by the President on September 8, 1939, the President finds it to be in the interest of national defense, he 1s authorized # (a) To require that delivery of materials by any person, pursuant to any public contract, shell take precedence over any other delivery by such person, to such extent and under such terms and conditions as the President may prescribe, and to place a com- pulsory order with any person for any materials, at a price determined by the President to be reasonable, and under such terms and conditions as the President may prescribe, which materials are of the nature and kind capable of being produced by such person or which such per- son owns or has in stock, and to require that delivery of such materials by such person pursuant to such order shall take precedence over any other delivery by such person; (b) to require that delivery of materials by any person, pursuant to any foreign contract, shall take precedence over any other delivery by such person, to such extent and under such terms and conditions as the President may prescribe; (c) to require that delivery of materials by any person pursuant to any subcontract which is related to a public contract, n. foreign contract or a compulsory order, shall take precedence over any other delivery by such person, to such extent and upon such terms and conditions as the President my prescribe; Regraded Unclassified 142 -3- (a) to establish a rule of priority prescribing the sequence in which contracts, private and otherwise, for materials shall be filled by any person; (e) to fix maximum and/or minimum production quotas of materials for any person, requiring such person not to exceed such maximum quotas in the production of materials and/or requiring such person to fill such minimum quotas in the production of materials if such person owns, has in stock, or is capable of producing such materials. Section 3. The President 1s hereby authorized to sell, under such terms and conditions 0.6 he may prescribe, any materials sequired pursuant to a compulsory order issued in accordance with this Act, Section 9 of the Selective Training and Service Act of 1940 or Section 120 of The National Defense Act (U.S.C., 1934 edition, title 50, sec. 80) to any person, or to any local or for- eign government, if such sale is deemed by the President to be in the interest of national defense. Any moneys received by the Pres- ident as the proceeds of any such sale shall be deposited to the credit of that ap ropriation out of which was paid the cost of such and the same shall be available during the fiscal year in which funds are received and the ensuing fiscal year, for the nurrose for which such expended funds were appropriated. Regraded Unclassified 143 Section 4. In the event that any person shall fail to comply in whole or in part with E. compulsory order placed, a rule of priority established, or a quota fixed, pursuant to this Act, or with a preference or priority requirement directed pursuant to this Act or Section 2(a) of the Act of June 28, 1940, which fail- ures to comply are hereinafter referred to as "violations", the President is hereby authorized to take immediate possession of the plant of such person and to operate the same, or to take possession for use by the United States of any materials covered by such compulsory order. Provided, That nothing herein shell be deemed to render inapplicable existing state or federal laws concerning the health, safety, security and employment standards of the employees in such plant. Any person who shall commit any violation shall be guilty of a felony and upon conviction thereof shell be punished by e. fine not exceeding $50,000 or by imprisonment of not more then three years or by both such fine and imprisonment. Compensation to be paid by the United States to any person or as rental for the use of the plant of such person/for any materials so taken shall be feir and just. Section 5 (a). The President may investigate any facts, conditions, practices, or matters, the investigation of which he decus necessary or appropriate to determine whether any person has Regraded Unclassified 144 - 5 - engaged in or is about to engage in any violation of this Act, or to aid in the administration of this Act, or in obtaining informa- $1on to serve as the basis for recomending further legislation concerning the matters to whil oh this Act relates. (b) The provisions of section 18, (o), (d), and (e), of the Act of August 26, 1935 (U.S.C., 1934 edition, supplement v, title 15, 860. 79r, (0), (d), and (e) relating to attendance of witnesses and the production of books, papers and documents) shall be applicable to such investigations in the semo manner and to the same extent as in the case of investigations by the Securities and Exchange Commission under said provisions. Section 6. Whenever it shall appear to the President that any person is engaged in or is about to engage in any acts or prac- tices which constitute or will constitute & violation of this Act, he may bring an action in the name of the United States in the proper district court of the United States, in the proper Philippine court of first instance or in the proper United States court of any Territory or other place subject to the jurisdiction of the United States, to enjoin or restrain such acts or practices, and upon & proper showing a permanent or temporary injunction or decree or restraining order shall be grented without bond. *Section 7 (a). Except as provided for in subsections (c), (a) and (a) of this section, the district courts of the *The provisions for judicial review contained in this section are tentative and should be examined carefully in the light of per- tinent authorities. Regraded Unclassified 145 -6- United States, the courts of first instance of the Philippine Islands, : nd the United States courts of any Territory or other place subject to the jurisdiction of the United States, shall have exclusive jurisdiction of violations of this Act and shall have jurisdiction, for cause shown, and subject to the provisions of section 17 (relating to notice to opposite party) of the Act entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes", approved October 15, 1914, as amended (U.S.C. 1934, title 28, sec. 381) to restrein such violations. (b) Any prosecution or suit under this Act may be brought by the United States in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defend- ant is an inhabitant or wherever the defendant my be found. Judg- ments and decrees so rendered shall be subject to review e.B provided in sections 128 and 240 of the Judicial Code, as amended (U.S.C. 1934 edition, title 28, secs. 225 and 347), and in section 7 of the Act of February 13, 1925, as amended, (U.S.C. 1934 edition, title 28, sec. 349). (c) Whenever an order for preference or priority or a compulsory order under section 2(a), (b), (c), and (d) or an order fixing maximum or minimum production quotas under section 2(e) Regraded Unclassified 146 -7- 1: insued, the person to whom such order in directed, and no other person, may obtain review thereof by filing 41 petition to set saide or enjoin such order in the District Court of the United States for the District of Columbie. A copy of such petition shall forthwith be served upon the President or upon the person or agency duly authorized to administer the statutory provision upon which the order in question WAB based, or upon the person or agency duly designated to receive such service. No such petition may be filed unless the person filing such petition shall have, within ten days after such order was issued, requested in writing the agency or person issuing such order to reconsider said order, and unless nuch etition is filed within thirty days after E ruling has been mrde on seid request. The filing or pendency of such E petition thell not operate E.E E. stay of such order. No order, injunction, or stay, restraining, suspending, or postponing the emforcement, operation or execution of such on order shell be entered by the District Court of the United States for the District of Columbia or by any other court, unless the Attorney General of the United States, or the person or agency administering the statutory rovision under which the order was issued, requests such order, injunction or stey. (d) Any party aggrieved by any final order, judgment, or decree of the District Court of the United States for the District Regraded Unclassified 147 -8- of Columbia my obtain a. review of such order, judgnent or decres in the United States Court of Appeals for the District of Columbia by filing in such court within sixty days after the entry of such order, judgeent or decree a petition, praying that such order, judgment or decree be modified or set aside in whole or in part. A copy of such petition shall be forthwith served upon the President or upon the person or agency duly authorized to administer the statutory provision pursuant to which the order in question WEE issued or the person duly designated to receive seid service. Provided, That where the party aggrieved by any final order, judgment, or decree of the United States District Court for the District of Columbia, is the United States, or any officer or agency thereof, such order, judgment, or decree may be reviewed by the Supreme Court of the United States upon application for certiorari made within 60 days after the entry of such order, judgment or decree of the Judicial Code. The judgmont and decree of the said Court of Appeals effirming, modifying, or setting aside in whole or in art any such order of the District Court of the-United States for the District of Columbie shall be final, subject to review by the Supreme Court of the United States upon application for certiorari by the party aggrieved by such judgment or decree nade within 60 after the entry thereof. Regraded Unclassified 148 - 9 - (e) After an order, judgment or decree to the effect that in order under section 2(a), (b), (c), (d) or (e) hereof, is invelid, becomes final and non-appeclable, the party against whom such en order U.S issued may, in accordance with sections 41 (20)and 250, Title 28 of the United States Code, bring E. suit against the United States for damages which have resulted directly from compliance with such invelid order up to the time that said decree became final and non- appealable. Where E. compulsory order 1s held invalid, such damages shall include the fair end just compensation for the material delivered or taken by the Government end for the use of the plant, possession of which has been taken by the Government: Provided, That if E. person ho 1s entitled to bring suit under this subsection is also entitled to sue under subsection (f) of this section, he must elect to sue under one or other of the subsections, and the institution of muit under one such subsection shall constitute E. ben to suit under the other subsection. A final order, judgment or decree ontered by the United States District Court for the District of Columbia or the United States Court of Appeals for the District of Columbia shell become, for the purpose of this section, e final 10 non-appealable order, judgment or decree when no petition for review has been filed within the eriod prescribed by subsection (c) of rir section, or hen certiorari has not been applied for within oriod prescribed by subsection (c) of this section, or when B Addion for certiorari has been denied, or when a etition for Regraded Unclassified 149 - 10 certicrari has been granted, and e final order, judgment, or decree IL b.eu entered by the Supreme Court. (f) Whenever the President shall place a compulsory order 1th any person for any materials or whenever the President shall, for ure of the United States, take possession 0^ any materials or of the want of any person in accordance with section 4 hereof, the ovner of such materials or such plant shall be prid as compen- sation for such materials or for the use of such plent, such sum as the President shall determine to be fair and just. If any such owner is untilling to accept RE full and complete compensation for such materials or for use of such plent, the sum 80 determined by the President, such owner shall be paid 50 percent of said sum and shall be entitled to sue the United States for such additional sum as, when added to the run already received by such owner, such owner may consider fair and just compensation for such materials or such use of his plant, in the manner provided by sections 41 (20) end 250, Title 28, of the Code of Laws of the United States of America: Provided, That no wren shall be entitled to bring such suit unless he shall, within ton days after he has been notified of the price fixed for materials or for the use of a plant, notify in writing the person or agency fixing such price that he deems such price unjust and request recon- sideration thereof. Provided further, That in determining, for the nurmose of this.Act, fair and just compensation for any materials, convatic market price or export price need not be followed when such Regraded Unclassified 150 -11 - prices are not fair and just because of conditions resulting from governmental activities related to national defense. Section 8. The President shell have authority from time to time to make, amend, end rescind such rules and regulations as my be necessary or appropriate to carry out the provisions of this Act; to utilize such Federal officers and employees and, with con- sent of the appropriate local government, such officers and employees of any local government, as he may find necessary to assist in the administration of this Act; to delegate to such agency or agencies EB he may designate or create, or to such officer, officers, employee or employees, as he may designate, any powers conferred upon him by this Act, by section 2(a) of the Act of June 28, 1940, or by ection 9 of the Selective Training and Service Act of 1940; to appoint, without regard to the provisions of the civil service laws but sub- ject to the Classification Act of 1923 as amended, such attorneys and experto and to appoint such other employees with regard to existing laws applicable to the employment and compensation of officers and employees of the United States, as he may from time to time find necessary\for the administration of this Act. Section 9. For the purpose of administering this Act, it is hereby authorized to be appropriated for the fiscal year ending June 30, 1941, the sum of dollars, and it is hereby authorized to be appropriated for each subsequent year thereafter Regraded Unclassified 151 -12 - a sun sufficient to carry out the purposes of this Act. Section 10 (a). As used in this Act: (1) The term "person" includes one or more individuals, partnerships, associations, corporations, business trusts, and any business organization, and any trustee, and any receiver or trustee in bankruptcy. (2) The term "public contract" includes any contract entered into by any executive department, independent establish- ment, or other agency or instrumentality of the United States, the District of Columbia, or any corporation all of the stock of which is owned by or on behalf of the United States, and any contract entered into by any local government. (3) The term "local government" includes the government of any state, county, town, township, or municipality, and any agency or political subdivision thereof. (4) The term "foreign government" includes any agency, commission, or representative of any foreign government. (5) The term "foreign contract" includes any contract entered into by any foreign government. I (6) The term "production" and the term "produces" each includes manufacturing, processing, fabricating, mining, furn- ishing, packing, accembling, and handling or working on in any other manner. Regraded Unclassified 152 -13 - (7) The term "subcontracts" includes (a) contracts for materials between persons who have obligations under public contracts, foreign contracts, or compulsory orders and any other person; (b) contracts for related naterials between such other persons and any suppliers; (c) contracts for related materials at any stage of production which dir- ectly or indirectly enter into or contribute to the produc- tion of materials ultimately to be delivered pursuant to a public contract, foreign contract, or compulsory order. (8) The terms "sale" or "sell" each includes exchange, lease, rent, bail and lend. (9) The térm "materials" includes materials, articles, supplies, and equipment, floating and otherwise, and ships, plant facilities, tools, equipment, or any part thereof, and services of any kind, except personal or professional services. (10) The term "plent" includes a factory or establish- ment that produces materials, or any pert thereof, end all patent rights, licensing rights, contract rights, purchase rights, and similar rights necessary or appropriate, or helpful to the operation of any plant. (b) As used in subsection (a) of this section, the terms "include" and "includes" shall not be deemed to exclude other things otherwise within the meaning of the term or terms defined. Regraded Unclassified 153 - 14 - (c) This Act shall be applicable in the several States and Territories, and the insular possessions of the United States, in- cluding the Philippine Islands, the Canal Zone, and the District of Columbia. Section 11. If any provision of this Act or the application thereof to any person or circumstances is held invalid, the remain- der of the Act and the application of such provision to other per- sons or circumstances shall not be affected thereby. Section 12. This Act may be cited as the "Energency Priorities and Rationing Act of 1941". 154 STRICTLY CONFIDENTIAL January 31, 1941 TERIORANDUM ITO: Legal Section, Price Stabilization Division SUBJECT: Draft Provisions for Judicial Review in Proposed Priorities Bill Section 7(c), (d), and (e) of the proposed bill set forth D. draft of provisions for judicial review of priority, cuote, end compulsory orders, issued pursuant to the authority grated by rection 2(a), (b), (c), (d), and (e) of the proposed bill. These provisions, which have been drafted without an adequate examination of the applicable legal authorities, are designed merely to serve as & basis for discussion. It may facilitate that discussion briefly to summarize the drift provisions and to indicate the problems which they raise. 1. Who may obtain judicial review. - Only the person to (4) order har been directed. 2. Procedural prerequisites for judicial review. (a) No petition for review may be filed unless RV or person issuing the order in quertion shell, within (fter the issuance of the order, have been requested to We the order. (b) / petition for review must be filed within after E. ruling has been mede on the request to reconsiden Regraded Unclassified 155 + 3. Venue and jurisdiction. - Such petition shall be filed within the District Court of the United States for the District of Columbia. 4. Stay of orders. (a) The filing or pendency of e. petition shall not operate ns & stay of the challenged order. (b) No order, injunction, or stay, restraining the enforcement or operation of an order shall be entered by any court at any stage of the proceedings unless the Attorney General of the United States, or the agency charged with responsibility for administering e. statutory provision upon which such order was based, requests such restraining action. 5. Appellate review of decisions of the District Court (a) The person to whom the order in question WE.S issued or the government may appeal from a final order or judgment of the District Court by filing a petition for review in the United States Court of Appeals for the District of Columbia within sixty days after the entry of the order by the District Court of the United States. (b) However, where the United States is aggrieved by any final decree or order of the District Court it may seek review by application for certiorari made within sixty days after the entry of the order of the District Court. Regraded Unclassified 156 (c) The final decision of the Court of Appeals is subject to review by the Suprome Court upon application for certiorari by the party aggrieved by such judgment or decree, made within sixty days after the entry thereof. 6. Provision for compensation for damages resulting from complience with on invalid order pending adjudication of its invalidity. After E decision that a priority, a quota or & com- pulsory order is invalid becomes final and non-appealable (as defined in the bill), the person to whom the order wes directed may sue in the Court of Claims or the federal district courts, for damages resulting from compliance with the order up to the time it was held to be invelid. With respect to review of compulsory orders issued under section 2(a) of the proposed bill, the following additional provisions for review of compensation are made. If any owner is unwilling to accept as full and complete compensation for materials and the plants commandeered the compen- sation which the goverment has fixed, such owner shall, within ten days after the fixing of the price, request the person or the agency administering section 2(a) to reconsider the price fixed. If after the disposition of that request, the price fixed is still unsetisfactory, the owner shell be paid 50% thereof and shall be entitled to sue the United States in the Court of Claims for such additional sum which, when edded to the sum he has received, the Regraded Unclassified 157 owner considers will be fair and just compensation for the materials, or for the plant commandeered. It 1a provided that, in determining fair and just compensation, the domestic market price or the export price need not be followed if such prices are found not fair and just because of conditions resulting from governmental activities relating to the national defense. It is also provided with respect to compulsory orders, that an election must be made between the remedy for damages incurred by complying with an order subsequently held to be invelid and the remedy for fair compensation which may be invoked by a person who, although admitting the validity of the compulsory order, challenges the fairness of the price it fixes. Passing for the moment, the question whether persons other then those to whom priority and cognate orders are directed should be entitled to judicial review of such orders, the foregoing provi- sions present the following questions: 1. Whether a requirement should be imposed by statute that any or all of the administrative orders should be preceded by an administrative hearing. This question is particularly acute in connection with orders fixing maximum quotas since such orders may recult in great hardship. No requirement of administrative hearings has been imposed. Thus the President, by virtue of the rule making power, could require or dispense with hearings depending upon the Regraded Unclassified 158 dictates of the interestsof national defense. 2. Whether the provision that review may be had only in the District of Columbia would impose undue hardship on persons distant from the District. On the assumption that appeals will be infrequent and timt any necessity for the Priorities Division to fight anneals all over the country might unduly hamper effective administration, the District Court has been made the exclusive forum for review. 3. Whether the provision for compensation for damages resulting from compliance with an invalid order pending adjudication of its invalidity, is necessary or desirable. The statute operates to resuire complience with priority quota and compulsory orders, et the risk of heavy penalties, until and unless there 1s c find and non-appealable adjudication of invalidity of such orders. The desir- ability of immediate compliance with such orders is self-evident. Because of persons to whom orders are directed, must immediately comply, or risk extremely severe penalties, it was thought desirable matter of policy, and necessary as E matter of constitutionslity, to white some provision for compensation for damager resulting from covelience with orders subsequently held to be invalid. It is recognized that it will be extremely difficult to compute such com- pensention. Nevertholess, it WOD felt that such E. provision would by mifficient to meet the objections stemming from the doctrine of Regraded Unclassified 159 -6- ez parte Young, since it permits the argument that a person may subject the orders to E judicial test without running the risk of either severe penalties or irreparable monetery loss. More- over, such a provision may enable the courts in a proper case to prevent onerous burdens which should be spread over the entire community from falling upon a single individual or enterprise. A basic question reised by the draft of provisions for judi- cial review 1s whether contractors whose contracts are subordinated by priority, quota, or compulsory orders should be given an oppor- tunity to challenge the validity of such orders. Provision for such en opportunity might perhaps be justified on the following grounds: 1. Such a contractor has a practical interest in the validity of such orders as great as the interest of the person to whom such orders are directed. 2. A requirement for prompt judicial review might be coupled with a provision that such review should be the only "moons of sttacking such orders and that such orders could not be attacked collaterally in breach of contract suits brought by private individ- unls. Such a provision might be desirable ES 8 means of assuring industry that damage suite would not be the penalty of cooperation with government policies. However, there is no compelling need to live industry such assurance in this way. The doctrine of impossib- ility would, in many cases, constitute EZ adequate defense. Regraded Unclassified 160 -7- Moreover, the cooperation of industry has apparently been forth- coming. Finally, contractors my themselves secure such ssur- inco by obtaining waivers from their customers. 3. Contractors whose rights are subordinated by priority, cuota, and mandatory orders, my have 6. constitutional right to be hecrd with respect to the validity or such orders. This Question 11.8 not been examined by this office. Opposed to as provision for judicial review et the instance of the deferred contractor are the following considerations: 1. It would considerably enlarge the class entitled to review and might constitute an invitation to judicial tests and their accompanying drain of administrative resources. 2. Since the penalties of the statute are spplicable only to those to whom orders are issued, the implications of ex parte Young would not require judicial review for subordinated contractors. 3. It is difficult to conceive precisely what the scope of the judicial inquiry would be. It would seem that the courts would be Foreclosed from considering whether the particular order WEB con- sistent with national defense, or whether there was alternative action zore conducive to national defense. It would seem therefore, that julicial inquiry would be confined to the question of whether the order in question was constitutional and authorised by statute. Regraded Unclassified 161 & Once the constitutionality of the tute W/D established, there would seen to be elight possibility that an order might be successfully challenged on the grounds that it T.S beyond the statutory quthority. This is true because of the extremely comprehensive powers conferred by the proposed statute. It should also be observed that Any provision for judicial review would require provisions for adequate notice of administrative or executive action. In view of the very contractors who might be affected by E single preference order and of the decentralised character of the present priority assignments by local contracting officers, it 18 doubtful whether o racticable method of giving the necessary notice could be adopted. The Federal Register 1s, of course, E. possibility. Moreover, it my be that priority orders would be confidential in character and that e mblic and widespreed disclosure of such orders and the identity of the contractors affected thereby might be unrise. In this connection, however, it should be observed that et present those to whom priority orders are assigned generally wake copies of such orders end use such copies to justify the deferment of other con- tracts in accordance with those orders. Some of the problems raised in connection :1th judicial roview of the orders authorized by the proposed bill are similar to problems raised in connection ith eminent domain proceedings. Accordingly, it is suggested that the Lands Division of the Department 1 Possibilities of such challenge would, of course, be increased by any Congressional modification limiting the scope of the statute. Regraded Unclassified 162 -9- of Justice be consulted. Moreover, in view of the fact that the Claims Division of the Department of Justice would probably be called upon to defund suits, it too should be consulted. 163 STRICTLY CONFIDENTIAL January 30, 1941. MEMORANDUM RE: Explanation of Draft Legislation Section 1 Section 1 contains B Congressional finding that industrial adjustments are necessary to insure that the re- quiremente of the defense program will be satisfied and a declaration that it is the policy of Congress to adjust the activities of producers so that the needs of national defense will be given primary consideration. This section, while not essential, is designed to assist in support of the bill's constitutionality should litigation be instituted. Section 2 The powers conferred by Section 2 are limited to the emergency declared by the President on September 8, 1939, and none of these powers can be exercised unless the President finds such action to be in the interest of national defense. Section 2(a). This provision authorizes the President, to require priority for deliveries pursuant to any public contract 1/ at 1. Public contracts are defined to include contracts of any federal agency and any state or local agency. Regraded Unclassified 164 the expense of other deliveries end to place compulsory orders and require priority for deliveries thereunder. But compulsory orders may be placed with & person only for materials which such person is capable of producing or has in stock. Reasonable prices are to be fixed by the President for materials covered by a compulsory order. Remarks Authority to require priority for all government con- tracts is necessary as is also authority to place compulsory orders. Section 2(a) of the Act of June 28, 1940 empowers the President to demand priority only for Army and Navy contracts. Section 9 of the Selective Training and Service Act of 1940 authorizes the President to issue compulsory orders but such power may be exercised only through the War and Navy Departments. Under this section of the draft bill, the President, or any agency to whom he might delegate his power could require priority for any federal or local contract and issue a compulsory order for any materials. The power to issue compulsory orders is not unlimited. Such an order can cover only materials which the person is capable of producing or has in stock. This language follows Section 9 except that this provision would clearly apply to dealers. Under Section 9 it is not clear whether dealers are covered. ?/ Materials are defined to include services other than personal or professional services. Regraded Unclassified 165 -3- Section 2(b) This provision authorizes the President to require priority for deliveries pursuant to foreign contracts, 1.0., contracts executed by any foreign government or foreign commission. Remarks Authority to require priorities for contracts of the British, Chinese, South American Republice and other approved foreign governments does not exist under existing legislation. The need for such powers is self-evident. Section 2(c) This provision authorizes the President to require priority for deliveries pursuant to any subcontract (including All subcontracts and supply contracts) related to a public con- tract, a foreign contract or a compulsory order. Remarks With respect to subcontracts related to Army and Havy prime contracts, this power exists by virtue of Section 2(a) of the Act of June 28, 1940 and/or Section 9 of the Selective Train- ing and Service Act of 1940. This conclusion, however, is not free from serious doubt and Section 2(c) of the bill clarifies this point and extende this authority to subcontracts related to other public contracts and foreign contracts. To exercise priorities effectively for government departments other than the Army and Havy and for foreign governments, this power is vital. Regraded Unclassified 166 Section 2(d) This provision authorises the President to prescribe the order in which civilian contracts shall be filled. It is applicable to all private contracts. Remarks: During the World War control over the order of deliveries pursuant to private contracts was effected indirectly - through control of the transportation system. Not only would such indirection be cumbersome today but it is wholly possible that it would not be effective. For no authority exists to exercise priorities over the trucking system or merchant marine. In addition, shortages in transportation by rail may not be so acute during the present emergency. Section 2(e) This provision authorises the President to fix maximum and minimum production quotas. Remarks: This subsection 1s designed to permit the direction of production into channels required by national defense, the imposition of a requirement that a producer increase production if he is capable of so doing, or that he decrease production. Control over productive capacity vas essential and was exercised during the World Var. But this control was again exerted by indirection. For the reasons given above, such control is not desirable. Hence a specific provision is contained in the draft bill. Regraded Unclassified 167 - 5 - In connection with the powers cont ined in Section 2 of the bill it should be observed that on effective priorities system ¿'e. wires: (a) Control over the sequence in which contracts are filled. (b) Power to determine and allocate output regardless of the contr ctual relationship between the producer and the user. This section authorizes the President to establish directly the order in which all contracts shall be filled, and to determine what material, to the extent of existing potential capacity, hould be produced. The bill does not authorize the President to require the diversion of material from one potential user to another in the absence of contractual relationships between the roducer and the desired user. In such E situation, the President may achieve this objective indirectly by placing e. ulsory order on behalf of the government and then reselling to the desired user, if such action is in the interests of national defense. It was deemed inexpedient to authorize such diversions directly in view of the desirability of having the government establish fair and just prices in such cases. Regraded Unclassified 168 + In this commection it should be observed that the definition of the word "materials" is broad enough to permit the diversion of equipment, 0.6., a machine tool, from one person who is using such equipment for the production of a non- essential product, ..6., pianos, to another person who will use the equipment in the production of an essential product, 0.8., aircraft. The price to be paid for such equipment, however, met be reasonable as determined by the President. Moreover, the diversion would have to be in the interest of national defense. Thus, safeguards have been inserted for the protection of private persons. Section 3 This section authorises the President to sell, lease, rent or bail any materials acquired in accordance with a. com- pulsory order placed pursuant to this bill, the commandeering section of the Selective Service Act of 1940 or Section 120 of the National Defense Act. Such sales may be mde to any person or any local or foreign government and the proceeds shall be deposited to the appropriation charged with the purchase. Remarks Inasmuch as the power to dispose of government property 1a vested by the constitution in the Congress, and as no general authority to dispose of property has been granted to the executive Regraded Unclassified 169 -7- br nch, this rovision 18 necessary. By service of the threat of cing com. alsory orders, cou Leu with the ower to dis one of TO wricls DO cquired, it is felt th t the President would be DLU infirectly to direct nd to .Lloc te the productive e city of ny monufacturer to designated users regardless of the contractual relationship between such nufacturer : nd the user. But if this ower to ale oue of materials in not granted to the President, the right to compel compli nce .ith allocation orders would be incomplete. Section 4 This section authorizes the President to commandeer, on a rental basis, the lant, factory or productive establishment of ..ny Jerson who refuser to comply with a riority requirement, note or compulsory order. Sinilarly, where & compulsory order covering materials en hand is not complied with, the President may t: take possession of such materials. Additional senctions are pro- vided for in that a person who is guilty of noncompliance may be fined 11) to $50,000 and/or imprisoned for not more than three years. In care the commandeering sanction is invoked, the owner of the L.nt or materials shall be paid a fair and just rental or price and the Government in operating the lent shall comply with all local nd federal health, safety, security end employment standards. Remarks Section 9 of the Draft Act and Section 120 of the Defense at contain almost identical provisions and may be relied on as d'océdents to support the inclusion of such a provision in Regraded Unclassified 170 + the bill. The need for stringent penalties is self-evident. Section 5 This section confere investigatory powers on the President. Es is authorised to investigate any facts, conditions, practices or matters which he deems necessary or appropriate to determine whether the bill has been violated or to obtain informa- tion to serve as the basis for recommending further legislation. Remarks Power to investigate the books and records of any person subject to the bill is necessary primarily as a club to secure complete data with respect to productive capacity and other matters and to determine whether the bill is being complied with. Almost identical power has been conferred on the executive branch by Congress in the past. This provision would create no new precedents. Section 6 This section authorizes the President to obtain injunctive relief whenever he finds that any person is engaging in activities which constitute or will constitute a violation of this bill. Remarks This form of relief will probably be more expeditious than would the invocation of the commandeering and criminal sanctions. Furthermore, it is less drastic and provides a more Regraded Unclassified 171 -9- democratic method for dealing with recalcitrant producers. Injunctive relief is available for the enforcement of priority orders issued pursuant to Section 2(a) of the Act of June 28, 1940 end has long been recognized as & proper method of enforcing statutory commands. Section 7 A separate memorandum concerning the question of judicial review with which this section deals hrs been repared and is attached hereto. Section 8 This section authorizes the President to promulgate necessary rules and regulations, to delegate his powers to Any feder 1. agency, state, or other local gency. In addition he is empowered to appoint, subject to the civil service <s, employees and officers and, without regard to such laws, wyers nd experts. Recerks Similar provisions are found in other statutes. Section 9 This section authorizes annual appropriations for bite ministr tion of the bill. Regraded Unclassified 172 - 10 - Remarks: This provision has been inserted in order to comply with a parliamentary rule of the House and thus assure expedi- tious consideration of a proposed appropriation should the bill be enacted into law. Section 10 This section defines certain terms used in the bill. Section 11 This section provides that if any part of the bill is declared to be unconstitutional, the other provisions will still remain. Remarks: This is the usual separability clause found in many recent acts of Congress. Section 12 This section contains the short title of the Bill: ""Emergency Priorities and Rationing Act of 1941". Regraded Unclassified 173 STRICTLY CONFIDENTIAL January 22, 1941 MEMORANDUM Re: Constitutionality of the Proposed Statutory Provisions Delegating Priority and Related Powers to the President The nemorandum which follows is designed to serve as the basis for a brief (if one becomes necessary) in support of the constitu- tionality of the provisions delegating authority to the President which are contained in 8. proposed priority statute. The Delegation in Question and the Requirement of an Effective Priorities System It. is a commonplace that modern war is a war of factories in which effective organization of the national economy is a prerequisite for victory. The present defense emergency, no less imperatively than war itself, demands such organization. To achieve it, B. coordinated priority and procurement system is indispensable. A priorities system resolves conflicting demands for materials, equipment and services in Accirdance with the paramount needs of national security. Thus, the Mobilization Plan, revision of 1939, states (at P. 3): - - Expedite Production and Delivery of Materials Necessary for others1 Defense and for Other Purposes" - Prepared by the Legal Price Stabilization Division. Regraded Unclassified 174 -2- "A priority may be defined as the means whereby precedence is established in the procurement program after considering All urgent and essential needs of the Nation. The right of government to institute drastic priority action has long been recognized, but it underwent rapid development during the world War. Priority soon became the most direct, powerful, and therefore the most important means of directing the flow of resources into desired channels of production. It assured equitable distribution of materials and services according to national requirements." (Italics added) An effective priority system requires not merely power to control the sequence in which contracts are filled but also the power to pre- scribe the uses to which productive facilities should be put and the power to allocate output without regard to the existence of contractual relationships between the supplier and the user. It requires also & mechanism by which needed materials and equipment can promptly and directly diverted from less essential to more essential uses. The proposed bill (hereinafter sometimes called "the bill") is designed to afford the legal basis for the establishment of an effective priorities system. The experience of the United Stutes during the last war demon- strates that such a system requires prompt adjustment to swiftly changing facts, the application of export techniques to a variety of situations, and the handling of complex details. Priority and procurement regulation, in short, must be sufficiently flexible to permit a synchronized, coordinated marshalling of industrial resources. The bill delegates broad authority to the President Lecause only such delegation will insure this necessary flexibility and coordination of priority and procurement policies. Regraded Unclassified 175 -3- The bill authorizes the President, during the existence of the national emergency declared by the President on September 8, 1939, to take the following action when he finds it to be in the interest of national defense: (a) To require priority for delivery of materials under any public contract at the expense of other deliveries (Section 2(a)); (b) To place a compulsory order with any person for materials and to resuire priority for deliveries under such order. The price for such materials is to be fixed by the President (id) and to be subject to judic- ial review;, (c) To require priority for deliveries under foreign contracts, 1.e., contracts executed by any foreign government or foreign purchasing commis- sion. (Section 2(b)); (d) To require priority for deliveries pursuant to any subcontract (including all subcontracts and supply contracts at any stage of production) which is related to a public contract, a foreign contract, or a compulsory order. (Section 2(c)); (e) To prescribe the sequence in which contracts, private and other- Nise, shall be filled. (Section 2(d)); (f) To prescribe the kind or kinds of materials which are to be pro- duced and to fix maximum and/or minimum production quotas to the extent of the skisting potential capacity. (Section 2(c)); 2/ "Public contracts" are defined in Section 11(a) 2 to include contracts of any federal agency, and any state or local governmental agency. Regraded Unclassified 176 -11- (z) To sell, lend. or rent any materials acquired in accordance with A compulsory order placed pursuant to the bill, Section 9 of the Selective Service Act of 1940. or Section 120 of the National Defense Act, to any person or to any local or foreign government, if such action 10 deemed a to be in the interest of national defense. (Section 3). Provision is made for adequate judicial review of the exercise of the President's power to issue compulsory orders, priority orders, or quota ordere. See Section 7, (c), (d) and (e). I The statute meets the requirements for valid delegation generally applicable to legislation. A long line of cases has sustained the delegation of authority to be exercised by administrative or executive agencies in accordance with brond standards established by Congress. See cases cited infra pp. 6-7. And standards controlling executive or administrative action no more. and often less, definite or restrictive than those involved here have been up- held. The recent decisions of the Supreme Court (United States Y. Rock Royal Cooperative, 59 Sup. Ct. 993: H. P. Hood & Sone Y. United States, 59 Sup. Ct. 1019) which sustained the validity of the Agricultural Market- ing Act of 1937 are particularly pertinent. The declared policy of that Act, which was applicable to eight anumerated commodities, wast "(1) Through the exercise of the powers conferred upon the Secretary of Agriculture under this chapter, to establish and maintain such orderly marketing conditions for agricul- tural commodities in interstate commerce as will establish prices to farmers at 8 level that will give agricultural commodities a purchasing power with respect to articles that Regraded Unclassified 177 farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. The base period in the case of all agricultural commodities except tobacco and potatoes shall be the prewar period, August 1909-July 1914. In the case of tobacco and potatoes, the base period shall be the postwar per- iod, August 1919-July 1929; and, in the case of all commodities for which the base period is the pre-war period, August 1909 to July 1914, will also reflect current interest payments per acre on farm indebtedness secured by real estate and tax payments per acre on farm real estate, as contrasted with such interest pay- ments and tax payments during the base period. "(2) To protect the interest of the consumer by (a) approaching the level of rices which it is declared to be the policy of Congress to establish in subsection (1) of this section by grad- ual correction of the current level at as rapid a rate as the Secretary of Agriculture deems to be in the public interest and feasible in view of the current consumptive demand in domestic and foreign markets, and (b) authorizing no action under this title which has for its purpose the maintenance of prices to farmers above the level which it is declared to be the policy of Congress to establish in subsection (1) of this section." 7 U. S. C. Sec. 601 (Supp. V) The Secretary of Agriculture, in order to accomplish the declared policy, was authorized to determine which of the commodities named were to be regulated; to issue, after notice and hearing, one or more of a variety of orders, specifying the geographical area to which the order mit be applicable and the period during which it would be operative. L150, as is disclosed by the declaration of policy quoted above, authorized to balance, according to his view of public interest, the de- of a price raising policy against a consumer protection policy. The unlegation there involved, as the dissent of Mr. Justice Roberts makes clear (H. P. Hood & Sona V. United States, supra, at. DO. 1027- sweeping in character. Regraded Unclassified 178 The Court, nevertheless, rejected the contention that the standards controlling the exercise of the delegated powers were no ill-defined as to render the statute invelid and presented the following summary of the pertinent cases (United States Y. Rock Royal Corp., supra, at P. 1013): "From the earliest days the Congress has been compelled to leave to the administrative officers of the Government authority to de- termine facte which were to put legislation into effect and the details of regulations which would implement the more general en- actments. It is well settled, therefore, that it is no argument against the constitutionality of an act to say that it delegates broad powers to executives to determine the details of anylegis- lative scheme. This necessary authority has never been denied. In dealing with legislation involving questions of economic ad- justment, each enactment must be considered to determine whether it states the purpose which the Congress seeks to accomplish and the standards by which that purpose is to be worked out with sufficient exactness to enable those affected to understand those limits. Within these tests the Congress needs specify only 80 far as is reasonably practicable. The present Act, we believe, satisfies these tests.". The proposed statute meets all of the récuirements for valid dele- gation affirmed in the Rock Royal case. It "states (with sufficient exact- neas) the purpose which the Congress (would seek) to accomplish," viz, "the prompt, orderly, coordinated mobilization of the resources of the nation in order to insure that the requirements of national defense will be not and to provide for the equitable distribution of materials among the :tvilian population." Moreover, it states clearly the standard ac- carting to which this purpose should be achieved, viz, "national defense." Finally, Ln view of the fact that an effective priority system, as has been Indicated, recuires the application of expert techniques to swiftly chang- Inc facts and complex detail, the proposed statute has been as specific as La "reasonably practicable." Regraded Unclassified 179 7- The principles of the Rock Royal case are, of course, not new. Brond standards had been upheld in an array of cases which afford impres- sive support for the constitutionality of broad delegation such as that involved in the Agricultural Marketing Act and that in the proposed prior- ity statute. Mahler Y. Eby. 264 U. S. 32, 40-41 (undesirable residents); Yes York Central Securities Co. Yes United States, 287 U. S. 12, 24-25 (public interest); Federal Radio Commission V. Nelson Bond & Mortgage Co., 289 U. S. 266, 285 (public convenience. interest or necessity); Frischer & Co. v. Elting. 60 T (2d) 711 (c. C. A. 2d, 1932) cert. den., 287 U. S. 649 (unfair methods of competition and unfair nots, the effect or tendency of which 18 to destroy or substantially Injure an industry): Federal Trade Commission V. Klesner, 280 U. S. 19, (public interdst). Electric Bond and Share Co. v. Securities and Exchange Commission, 303 U. S. 419, (necessary or appropriate public interest or for the protection of investore or consumer): McMann 1. Engel, 16 Fed. Sup. 446 (S.D. N.Y. aff'd, 87 7 (2d) 377, C.C.A. 2d.cert. don., 301 U. S. 384 (public interest); see also Sunshine Coal Co. V. Adkins, 310 U. S. 381, 397-399. In view of the foregoing authorities, there is no room for the con- tention that the proposed delegation is invalid, Panama Refining Co. T. Ryan, 293 U. S. 388; Shechter Poultry Corpora- tion T. U. S. 295 U. S., are not applicable here. The delegation involved in those cases was invalidated because no declaration of policy or standard of action was laid down for the guidance of the President. See Panama Refining Co. V. Ryan, supra, at pp 414 et seq: United States 1. Goldemith, 91 Fed, 983. 985 (C.C.A. 2d, 1937). Such a standard is, as has been clearly demonstrated above, defined by the proposed statute with sufficient definite- near to be well within constitutional limitations applicable to congressional delegation of power. Regraded Unclassified 180 & II where legislation directly affects foreign relations or national de- fense, the standards governing the exercise of the delegated authority may be broader than is generally the case. Even if the reposed statute did not meet the requirements for valid deleg tion generally applicable to legislation, it would not be unconstitu- tion 1. It is submitted that standards governing the exercise of delegated authority by the President may, when foreign relations or B. national de- Tense emergency is involved, be broader then 1s gener 11y the case and that the proposed st: tute cleerly meets the requirements for valid delegation in the context of E. defense emergency. In United St tes V. Curtiss-Wright Corp., 299 U. S. 304, the Supreme Court sustained & joint resolution conferring upon the President the authori- ty to prohibit the sale of munitions to the countries engaged in the Chaco conflict or to impose conditions upon such sale, if the President found that such action would promote the reestablishment of peace. In the course of its opinion, the Court announced the doctrine that delegation even though it might be invelid because too broad if it dealt with purely internal affairs, could be volid where "its exclusive aim W&S to afford c. remedy for a hurtful condition within foreign territory." The Court predicated this doctrine on the following consider tions: (1) The federal ower over intern tionel relations did not depend upon affirmative grants in the Constitution but was the necessary concomi- t. nt of sovereignty. (See P. 318). (2) In the realm of intern tional af- fairs, "with its important, complicated, delicate and manifold problems, the President has a very delicate, plenary and exclusive power... as the tole org n of the federal government... (See P. 320)." (3) Narrow re- strictions on the President's action in that field are unwise because "the form of the President's action - or, indeed, whether he shall act Regraded Unclassified 181 -9- at cll - may well depend, ... upon the nature of the confidential infor- intion which he has or may thereafter receive, or upon the effect which his action may have upon our foreign relations." (pp. 320-321). Delegation in connection with internal regulation designed to of- fectuate the defence program falls within the doctrine of the Curtis-Wright case. Such regulation is EO enmeshed with, and affected by, international relations that it must be considered 8 part thereof. Such regulation, noreover, is prompted by the same purpose which hes generated much of the regulation in the field of international affairs, viz., the desire to pre- vent this country's involvement in'war. In this connection, it in signifi- cant that the historic practice, going as fer back as 1794, of conferring wide authority upon the President to impose and revoke embargoes has been designed to avoid involvement in war. And it has this practice that the Court emphasized (at pp. 322-328) in announcing the doctrine of the Curtiss-Tright case. Surely, there can be no serious question that de- fense regulation, which is so intimately connected with international rela- tions and which springs from the same basic purpose, falls within the doc- trine or that case. But even if an unreal division be made between international affairs and internal defense regulation, it is clear that every reason for sustain- ing bronder standards in the field of international affairs applies to defense regulation. Thus, as the Supreme Court expressly recognized in the Curtiss-Nright case (et p. 318) (1) the power to declare and wage war, like the power over international relations, is a "necessary concomitant of nationality" and would exist even if it had not affirmatively been conferred Regraded Unclassified 182 -10- by the Constitution; (2) The President, DD Corriander-in-Chief, 18 the repre- contative of the nation in the exercine of the wer power. The power to ur includes the power to propare for wor; and when war 1. being weged in every cart of the world, except the Western Henisphere and threatens to Involve this country, no distinction in the President's mt.: tur can be cade who prestime preparation rether than wartine action is involved. There In the name inherent End compelling necessity to delegate brond authority to the President EQ DE to permit both proupt adjustment to swiftly changing, and often confidential, facts and effective coordination of complox detail. t. Charles Evens Hughes, now Chief Justice, in & speech before the American Bar Association 1917, gave classic expression to the special need for executive and administrative floxibility in wartine: "Congress cannot be permitted to abandon to others its proper legislative functions; but in time of wer, when legislation must be adapted to many cituations of the utmost complexity, which must be dealt with effectively end promptly, there is special need for flexibility and for every resource of practicelity; and, of course, whether the limits of permissible delegation are in any care overstepped always remains El judicial question. We thue not only find these great war powers conferred upon the Congress and the President, respectively, but clso a vest increase of administrative authority through legislative action springing from the necessities of war." These observations are not less pertinent when industrial mobilization for E defense emergency rather then war is involved. (4) A long line of legislative precedent affords overwhelming support to delegation pursuant to he war power which confers broad authority to the President. See e.e., 3/ It. 1z clear that the grent of priority must be geared to military plans, thich are often confidential, and foreign developments, which elso are often confidential. Regraded Unclassified 183 -11- Section 120 of National Defense Act, 50 B.S.C. Sec. 80 (1916); Emergency Shipping Fund Act, 40 Stat. 101 (1917); Naval Appropriation Act, 59 Stat. 556, (1916); Food and Fuel Act, 40 Stat. 276, (1917); Trading With the Enemy Act, 40 Stat. 411, (1917). Moreover, the Supreme Court itself has already indicated that broad standards may be established when authority delegated to the President in- pinges on his activities as Commander-in-Chief. Thus United States V. Chemical Foundation, 272 U. S. 1, involved the Trading With the Enemy Act which required the public sale of seized alien patents unless the President, stating the reasons therefor, should "in the public interest determine other- wise." The United States brought suit to set aside certain patent sales made to it by the Chemical Foundation on the ground, among others, that the statutory provi on for determining whether there should be a private sale involved are inconstitutional delegation of legislative power. The Court re- jected that contention and stated (at p. 12): "It was not necessary for Congress to ascertain the facts of or to deal with each case. The Act went as far as was reasonably practi- cable under the circumstances existing. It was peculiarly within the province of the Commander in Chief to know the facts and to de- termine what disposition should be made of enemy properties in order effectively to carry on the war." (Italics added) See elso Selective Draft Law cases, 245 U. S. 366 ; McKinley Ve United States, 249 U. S. 397. In view of the foregoing, it ie clear that the proposed delegation falls within the doctrine of the Curtiss-Wright case, and would, accordingly, be VALID even though it did not meet the requirements applicable to legislation not firectly related to foreign affairs and the war power. Voreover, even as- the inapplicability of that doctrine and that the delegation in question 1 It should be observed that it 16 doubtful that the ill-defined doctrine of the Curtiss-Wricht case has any historical basis. Accordingly, of reliance should not be placed on that doctrine. Regraded Unclassified 184 -12 - must be tested by all of the constitutional requirements generally appli- cable to legislation, there is, as we have demonstrated above, no question that the proposed delegation is constitutional. 185 295 - TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE February 17, 1941 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns $47,000 Purchased from commercial concerns 21,000 Open market sterling was steady all day at 4.03-1/4. There were no transactions by the reporting banks in this type sterling. The Canadian dollar improved to 14-7/8% discount after opening at 16-1/4% discount. The higher rate was due to B. emall demand by tourists going to Canada for winter sports. In Shanghai the Chinese yuan and sterling both appreciated against the dollar. The Chinese yuan was quoted at 5-11/16#. up 1/16 and sterling was $3.93-1/2, up -1/24. In Hongkong sterling moved up 1# to 3.91#. Closing quotations for the other currencies were as follows: Swiss franc (commercial) .2323-1/2 Swedish krons .2385-1/2 Reichsmark .4005 Lira .0505 Argentine peso (free) .2360 Brazilian milreis (free) .0505 Mexican peso .2066 Ouban peso 6-15/16% discount There were no purchases or sales of gold consummated by us today. No new gold engagements were reported. In London the price of silver was unchanged at 23-1/4d for both spot and forward deliveries. The dollar equivalent of these prices is 42.21#. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/48- The Treasury's purchase price for foreign silver was also unchanged at 35¢. Ye made two purchases of silver amounting to 100,000 ounces under the Silver Purchase Act. This silver consisted of new production from foreign countries for forward delivery. Regraded Unclassified 186 -2- We also purchased 150,000 ounces of silver from the Bank of Canada under our regular monthly agreement. During February we have purchased a total of 200,000 ounces as compared with the agreed monthly limit of 1,200,000 ounces. 10mg CONFIDENTIAL 187 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE- FEB 17 1941 TO Secretary Morgenthau FROM Mr. Foley In accordance with the request contained in Mr. Thompson's memorandum of December 26, 1939, there is attached a summary report of studies or projects carried on in the Office of the General Counsel for the month of January, 1941. 9.10.74 Attachment 188 SUMMARY REPORT ON STUDIES OR PROJECTS IN THE OFFICE OF THE GENERAL COUNSEL - JANUARY 1941 The following matters received attention in the Office, of the Chief Counsel for the Bureau of Internal Revenue: 1. Bill (S. 4269, 76th Cong., 3rd Sess.) to extend old age and sur- vivors insurance. Consideration was given to a bill introduced by Senator Wagner to extend old age and survivors insurance protection to approximately ten million additional persons and unemployment compensation protection to about five million additional persons. 2. Filing of Philippine tax returns in Honolulu instead of Balti- more. Consideration was given to recommending legislation whereby persons who have their principal place of business in the Philippines shall file their income tax returns in Honolulu rather than in Balti- more. 3. Question whether living quarters, etc., furnished by Hawaiian sugar plantations constitute wages. Consideration W&B given to an interesting question arising in the case of Hawaiian sugar planta- tions which involves the question of whether living quarters, fuel, water, etc., furnished by the plantations to their employees consti- tute wages, end their value. The above matters were handled under the supervision of G. E. Adams, Head, Legislation and Regulations Division. The following was the subject of special study conducted under the supervision of Assistant General Counsel Cairns: 4. Cases and interpretations of statute forbidding land holdings Regraded Unclassified 189 - 2 - of more than 500 acres in Puerto Rico. The study, prepared by Mr. Du Bois, was a discussion of the history, effectiveness, en- forcement, and judicial interpretation of the so-called "500-Acre Law", section 3 of Joint Resolution No. 23 of May 1, 1900, 31 Stat. 716 (U.S.C. title 48, sec. 752), which restricts the number of acres of land that may be held by & corporation in Puerto Rico. Consideration was given to the efforts of the Puerto Rican legis- lature since 1935 to enforce the law and to the economic advisability of the law. The following matters received attention in the Legislative Sec- tion under the direction of Assistant General Counsel Bernard: CONTINUATION OF PROJECTS 5. Bill to relieve the hospitals from double taxation under Harrison Narcotic Act (for description see original report, item 9). This bill, prepared by Miss McDuff, together with subsequent material sub- mitted in support of particular phases of the bill, is still receiving consideration by the Bureau of the Budget. 6. Fidelity bond bill (formerly identified as "Bond Survey) (for de- scription see original report, item 10). Due to the interest of about ten other agencies in this bill, which was prepared by Mr. Spingarn, the Bureau of the Budget has not yet been able to give it the usual clearence. 7. Federal depositary system (for description see original report, item 6). Mr. Reeves has completed his work on a draft of, this bill, Regraded Unclassified 190 - 3 - and it is now in the Under Secretary's office awaiting the determi- nation of several policy questions reised by the Office of the Comp- troller of the Currency. 8. Acting as inistrators bill (for description see June report, item 33). Miss McDuff is continuing her study of the necessity and feasibility of general legislation to provide for acting bureau or division chiefs in the absence of & chief. 9. Law Committee of Defense Communications Board (for description see November report, item 23). Mr. Spingarn is continuing his work with the Law Committee, as the Treasury representative, on drafts of legislation to authorize complete control by the Government of radio and wire communication facilities in time of war or impending war. 10. Codification of Public Debt laws (for description see December report, item 14). Mr. Koken 1a continuing his work on this project. The following matters were worked on under the direction of Assistant General Counsel Bernstein: 11. Foreign Funds Control. Further work was done on the matter of drafting licenses and other documents incident to the various ex- tension proposals of the freezing control. Numerous conferences were held and Messrs. Tiebout and Davis from the New York Federal spent a number of days working with this office in the development of a number of measures that may be necessary. Messrs. Bernstein, Luxford, DuBois and Sutton worked on this matter. Regraded Unclassified 191 - 4 - 12. Proposed Executive Order. A number of further drafts of the proposed Executive Order consolidating the various economic defense easures have been prepared, including a revision of the membership of the Economic Defense Board, which has been restyled the Civilian Economic Defense Committee. The inclusion of E. new title relative to the functions of the Attorney General on defense production, re- strictions arising out of foreign and domestic control; vesting in the Secretary of State veto power with respect to those portions of the order administered by the Secretary of the Treasury; limiting the scope of the foreign control to continental Europe, except Russia, Greece, Turkey and the Vatican. lie have participated in a considerable number of conferences at the Department of Justice and at the State Department attended by representatives of the Department of Justice, the State Department, and Leon Henderson and David Ginsberg of the SEC, discussing the various drafts of the Executive Order relating to economic defense. Messrs. Bernstein, Luxford and DuBois worked on this matter. 13. Argentine Agreement. We have worked with the State Department and the Federal Reserve Bank of New York on the question of the evi- dence to be furnished by the Argentines relative to the authority of Argentina and the Central Bank to enter into the agreement. Tie drafted suggested forms of the decree to be issued by the Argentine Government and the statute to be passed by the legislature. This matter is still being taken up by the State Department with the Regraded Unclassified 192 - 5 - Argentine representatives. Mr. Bernstein and Mr. Sutton worked on this matter. 14. Chinese Agreement. We prepared a redraft of the stabiliza- tion agreement which has been submitted to the Chinese. We are still waiting to hear from the British and Chinese on the arrange- ment. Mr. Bernstein worked on this matter. 15. Belgian Decree. We received a letter from the State Depart- ment enclosing a note from the Belgian Ambassador relating to var- ious Belgian decrees affecting rights of Belgian banks and other officials to deal with property in this country. The letters and note were sent to the various Federal Reserve Banks, and a pamphlet containing such information has been printed by the Federal Reserve Bank of New York for general distribution to interested parties. Mr. Bernstein worked on this matter. 16. Federal Reserve Board legislation. This office discussed with Messrs. Wyatt and Williams of the Federal Reserve Board the proposed changes to be made in the bill relating to government and foreign central bank deposits in banks in this country. We advised the Federal Reserve Board of our approval of the new draft of the bill and have written a report to the Senate Banking and Currency Com- mittee to the same effect. Mr. Dernstein worked on this matter. 17. Gold from South Africa. This office worked with Mr. Cochran on the agreement and other arrangements relative to the shipment of gold Regraded Unclassified 193 - 6 - from South Africa on the American battleship. Mr. Bernstein worked on this matter. 18. Inter-American Bank. Mr. Bernstein attended meetings at the State Department of the verious agencies that worked on the Inter- American bank and discussed the attitude of the private banks and some of the suggestions made by them. 19. 2. & F. Assets Realization Corporation V. Corciell Hull. On January 6, 1941, the Supreme Court decided that the petitioners could not contest the payment by the Secretary of the Treasury of the sabotage awards. This office participated in conferences with the Department of Justice relating to the payment of such awards. Considerable work was done in connection with the awards paid since January 10, and in regard to certain small awards to members of five underwriters groups. Miss Hodel worked on these matters. Regraded Unclassified 194 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE February 17, 1941 TO Secretary Morgenthau FROM Mr. Haas M Employment under the Work Projects Administration declined further to 1,892,000 persons during the week ended February 5, 1941, 8. decrease of 3,000 from the preceding week. Attachments 195 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending Number of Workers 1940-41 (In thousands) July 3 1,608 July 10 1,620 July 17 1,659 July 24 1,690 July 31 1,701 August 7 1,709 August 14 1,708 August 21 1,698 August 28 1,691 September 4 1,690 September 11 1,687 September 18 1,689 September 25 1,704 October 2 1,747 October 9 1,762 October 16 1,768 October 23 1,776 October 30 1,779 November 6 1,783 November 13 1,785 November 20 1,806 November 27 1,820 December 4 1,832 December 11 1,855 December 18 1,872 December 25 1,878 January 1 1,880 January OR 1,887 January 15 1,893 January 22 1,896 January 29 1,895 February 5 1,892 Source: Work Projects Administration 196 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers 1938 (In thousands) July 3,053 August 3,171 September 3,228 October 3,346 November 3,287 December 3,094 1939 January 2,986 February 3,043 March 2,980 April 2,751 May 2,600 June 2,551 July 2,200 August 1,842 September 1,790 October 1,902 November 2,024 December 2,152 1940 January 2,266 February 2,324 March 2,288 April 2,092 May 1,926 June 1,665 July 1,701 August 1,691 September 1,704 October 1,779 November 1,820 December 1,878 1941 January 1,895 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. 197 WORK PROJECTS ADMINIOTRATION Number of Workers Employed Monthly W.P.A. Employment United States 1935 1936 1937 Weekly U.P.A. Employment 1939 1940 MILLIONS 41 1939 1940 1941 If MILLIONS BILLIONS MAA MAY APL nu JM. MT assu WIRLING of of or WORKERS WHENE 3.4 3.4 3.2 J.J 3,3 3.2 3.2 3.2 2,8 3,1 3.1 2.8 3.0 3,0 2.9 2.9 2.4 2.4 2,8 2.8 2.7 2.7 2.0 2.0 2,6 1.0 2.5 2,5 1.6 2,4 24 1.6 2.3 2.3 2.2 1.2 2.2 1.2 2.1 2.1 2.0 2.0 - .8 1.9 1.9 1.8 1.8 A - 1.7 1.7 1.4 1.6 1.5 0 0 1.5 NOV. JAM. BAR. MAY JULY SEPT. I JMN. MAR. 4. 1 - J E of M - of MI - . . JAN. MAR. MAY JULY SEPT. 1935 1936. 1937 1938 1939 1940 '41 1939 1940 1941 soumer: WORK PROJECTS ADMINISTRATION Office of the Secretary of the Treasury 2 221 02 - of - - Statements Regraded Unclassified