Volume 410, June 18 – June 19, 1941

DIARY Book 410 June 18 and 19, 1941 - & - Book Page Appointments and Resignations Dwan, Ralph: Foley plans to move Dwan from Chief Counsel of Customs to one of Assistant Chief Counsels for Internal Revenue - 6/18/41 410 12 - B - Banco di Napoli Trust Company. Chicago See War Conditions: Foreign Funds Control - C - Chile See Latin America China See War Conditions Coast Guard Training program expansion to help meet growing requirements of Navy endorsed in HMJr's letter to Knox - 6/19/41 149 a) Knox's letter - 6/18/41 150 b) HMJr's letter to Chairman, Committee on Appropriations - 6/19/41 151 (See also Book 412, page 326 - 6/23/41) Cowles, Gardner See Financing, Government: Defense Savings Bonds - D - - Defense Savings Bonds See Financing, Government Dwan, Ralph See Appointments and Resignations - Y - Farben, I. G., Industrie See War Conditions: Foreign Funds Control Financing, Government Reconstruction Finance Corporation financing discussed by HMJr, Bell, Hadley, Haas, and Murphy - - 6/19/41 162 Defense Savings Bonds: Cowles (Iowa) and Luce organizations: Lack of cooperation with program discussed by Wallace and HMJr - 6/19/41 157 Sherwood (Robert E.) speech - - 6/19/41 219 Regraded Uclassified - G - Book Page Germany See War Conditions - H - - Hungary See War Conditions: Foreign Funds Control - L - Latin America See War Conditions: Foreign Funds Control Chile: Hochschild transmite report on Nazi activities - 6/18/41 410 80 Luce, Henry R. See Financing, Government: Defense Savings Bonds - o - 011 See War Conditions: Export Control - R - - Revenue Revision Excess Profits Tax: No further extension of time for filing returns discussed at 9:30 meeting - 6/18/41 2 Estate tax rates as proposed compared with present - - 6/18/41 4 Schedule below Treasury rates adopted by House Ways and Means Committee - - 6/19/41 211 - S - Secret Service Protection of President - report on - 6/19/41 213 Sherwood, Robert E. See Financing, Government: Defense Savings Bonds Standard Oil Company of New Jersey See War Conditions: Foreign Funds Control - U - United Kingdom See War Conditions: Military Planning Regraded Uclassified Book Page War Conditions Airplanes: Shipments to the British - Kamarck report - 6/19/41 410 237 China: Deflation policy as means for improving price situation - Gause memorandum from Chungking - 6/19/41 245 Exchange market resume' - 5/18-19/41 93,255 Export Control: 011: Ickes warned to obtain approval of FDR or State Department in forbidding export or import of oil from or to United States - 6/18/41 217 Foreign Funds Control: General freezing order discussed by representativew of Treasury, State, and Justice - 6/18-19/41 32,208 a) Coordinating Federal Bureau of Investigation activities with those of Treasury discussed b) Standard 011 sale of Hungarian properties to I. G. Farben discussed 1) Cochran memorandum on conversation with Crane - 6/18/41 52 Banco di Napoli Trust Company, Chicago: Run of sizeable proportions reported by Comptroller's Office: citizenship papers or equivalent proof required for withdrawals from savings accounts - 6/18/41 37 Germany: Nasi assets available for expenditure in United States before general freezing - H/Jr's memorandum for FDR - 6/18/41 65 Latin America: Stopford (British Embassy) discusses "Axie funds passing through or situated in Latin America" with Cochran - 6/18/41 20 Military Planning: Reports from London transmitted by Butler - 6/18-19/41 88,88,257 War Department bulletin: German Army - miscellaneous notes on - 6/18/41 91 Purchasing Mission: FDR authorizes transfer of defense articles - 6/18/41 41 a) Worthington ... air compressors b) Caterpillar tractore e) Graders and spare parté Regraded Uclassified 1 June 18, 1941 9:30 a.m. GROUP MEETING Present: Mr. Viner Mr. Gaston Mr. Thompson Mr. Graves Mr. Blough Mr. Haas Mr. Odegarde Mr. Kuhn Mr. Schwarz Mr. Cochran Mr. White Mr. Foley Mr. Sullivan Mrs. Klotz H.M.Jr: Herbert, we will start with you. (Mr. Foley entered the conference.) Gaston: I don't think I have anything special. H.M.Jr: Have you got that thing I asked you? Gaston: Yes, I have. I have got a little note for you that I didn't get to yesterday. I had Birgfeld up and talked to him at some length and I don't know whether that letter is right. H.M.Jr: Thanks. (Mr. Sullivan entered the conference.) 2 - 2 - Gaston: The transports are rendezvousing at present down off Norfolk. They were - the transports which our men are manning. They have - I think all three of them have left New York and they are to meet down at another point. H.M.Jr: Where is Sullivan? Sullivan: Right here, sir. H.M.Jr: All right, John, say your piece. Sullivan: You spoke yesterday about not permitting any further extension of time on the filing of excess profits tax returns. The Commissioner has sent a memorandum to all of the collectors of internal revenue and has drafted 8. press release to be given out so that the collectors will be protected and it will help them in their job. I thought I might give that to Mr. Schwarz and he can release it over here. H.M.Jr: All right. What else? Sullivan: Yesterday afternoon they worked most of the time on the state taxes. We disposed of the two troublesome proposals that would - one, proposed by Congressman Dewey, that would allow a person to buy a tax anticipation certificate to be used for paying his state taxes, those certificates to be tax exempt. The other proposal was that they could take out insurance payable to the United States and that insurance would be tax exempt, and both of those have been eliminated. I think today they will vote tentatively on the surtax schedules on individual income taxes and excess profits taxes. They are back now talking more definitely in terms of three and 8 half billion dollars. Regraded Uclassified 3 - 3 - H.M.Jr: Is the story in the Wall Street Journal fairly accurate? Sullivan: I didn't see it, sir. H.M.Jr: Well, take 8. look at it. Schwarz: Here it is. H.M.Jr: While you are looking at it, I will talk to Blough. Sullivan: Yes, sir. H.M.Jr: Blough, I have got a memo here that you were to collaborate with Mr. Brown to submit a report of the skilled labor shortage and the advisability of increasing Social Security rates. Are you making any progress? Blough: Yes, we were in touch with Professor Brown yesterday and the memo - I had hoped to have it with me this morning, but it required some revision. It will be ready any time today, however. H.M.Jr: Can you have it for tomorrow's meeting? Blough: Yes, indeed, sir. All you wanted in that, as I understand it, was the dismissal compen- sation side and not the skilled labor shortage side. You said you had that in hand other- wise. H.M.Jr: That is right. Senator Harrison recommended Percy C. Young for 8 position on the Processing Tax Board on May 16. Sullivan: That is right, and Mr. Doughton recommended somebody else. We have been sitting on the Regraded Uclassified - 4 - lid. I think we can continue to sit on it until this bill is through. There are vacancies there, but -- H.M.Jr: Nothing will happen until the bill passes? Sullivan: I don't think it will be wise, because we will have to choose between them; and incidentally, I talked with one of Senator Harrison's best friends, and he said that the operation was an agreeable surprise. They expected to find something malignant and they did not find it. This story is partly true. I think there is 8. likelihood they will go above this net figure on the increase in corporate taxes, because there is a feeling that the more they get out of the corporate taxes, the less they will have to take in excise taxes. H.M.Jr: Anything else? Sullivan: No, sir. H.M.Jr: Roy? Blough: I just want to report progress on that - those tabulations of return on invested or on equity capital of corporations for the excess profits material. I have one additional table today, and there will be some more coming along. I don't know if you want it handed to you piecemeal or whether you would rather wait. H.M.Jr: I don't think SO. Kuhn is very much interested and is working on it for me. Is that all? Sullivan: Yes, sir. Regraded Uclassified 5 - 5 - Bell: Before they go, Mr. Secretary, you remember some time ago I brought up the question of the Social Security Board report. The President wanted to submit it this month. I think you ought to have about an hour's conference with Roy and John and me, and probably if you had some evening that might be better. We could take it from eight- thirty to nine-thirty. H.M.Jr: Next week? Bell: Yes. Roy ought to have a day or so in order to get the points together. H.M.Jr: All right. Will you remind me again? Bell: Yes. H.M.Jr: Can they be excused now? Bell: Yes. (Mr. Sullivan and Mr. Blough left the conference.) H.M.Jr: Herbert, if you will stay behind, I want to ask you 8 couple of questions. Gaston: Yes. H.M.Jr: Anything else? Gaston: There is one thing I should have mentioned to you. Guy Helvering called me up yesterday, John being up on the Hill, to tell me that they were compromising - they were settling, rather, 8. case against a man named Kaplan and you knew of him because of his interest in 8. molasses concern that had alcohol connections when you were over at Farm Credit. H.M.Jr: That is right. Regraded Uclassified 6 - 6 - Gaston: He had some Canadian personal holding companies and he is paying a million and three quarters in back taxes. H.M.Jr: A million and three quarters? Gaston: I think it is a million and three quarters. It is at large sum. It is over 8. million. I have got a notation on my desk. H.M.Jr: You remember that? Graves: Very well. H.M.Jr: I would like to have the figures. Gaston: I will get you the details on it. H.M.Jr: I have an interest in knowing what it is. Graves: Incidentally, on that case they called on me for our files about that old matter. You remember, & special corporation was organized to take over the capital of the molasses interests. Corn Products was interested and so on. I sent them - H.M.Jr: It was quite a smelly case. Graves: Yes, it was. Gaston: He said - I asked him if there was any present Alcohol Tax interest and he said no, that he was entirely out of that. H.M.Jr: Yes, if it comes to me, I would like to see it. Gaston: I will get 8. better memorandum. H.M.Jr: There are sort of collateral things that I was interested in. You (Graves) might take 7 - 7 - a look at it, too. You remember we never quite understood that particular thing in New York State, you remember. Graves: Yes. Well, it turned out all right. The new corporation took over the business of the capital corporation and it was kept straight. H.M.Jr: It is & long time ago. Anything else? Gaston: No. Graves: Thirty-five and thirty-six, I think. H.M.Jr: Foley? Foley: The news commentator at seven-thirty and again at eight-thirty, I am told, said that the President was contemplating reorganizing OPM and creating 8. Department of Supply, the idea being discussed with Wallace, Henderson, and Currie. There wasn't anything in the paper about it, but it was on the radio this morning. Schwarz: It is on the ticker this morning. H.M.Jr: A Department of Supply? Foley: Yes. H.M.Jr: Where do you suppose he gets those ideas from? (facetiously) Foley: I haven't any idea. H.M.Jr: Currie is up to something again, is he? White: Yes, Currie is always up to something. Bell: Aided and abetted. 8 - 8 - Foley: Zenith Radio, 80 far as we have been able to find out, hasn't any contracts but has 8. couple of sub-contracts with the Sperry Gyroscope and Bendix Aviation Corporation amounting to a couple of million dollars. The President approved those anchorage regulations yesterday and we had them put in the Federal Register and sent them air mail to our lawyer last night so he will have them this morning to use in court. I think that will take care of that suit. H.M.Jr: You say he has got Government contracts. Foley: No prime contracts, but there are a million or more sub-contracts with Bendix and Sperry Gyroscope. H.M.Jr: Did you give that story to Leach? Did he like it? Schwarz: He wired it instead of air mailing it. H.M.Jr: Would you get a copy of today's Chicago Daily News? Schwarz: I have asked them to watch for it. I don't know how much advertising they get. They might thin it down. Foley: If you have any more trouble with him, the Navy might be interested in his boat. Gaston: Advertising doesn't affect the news policy of reputable modern newspapers, Chick. H.M.Jr: You are talking about a publisher and also a man who is a member of Mr. Roosevelt's Cabinet. Schwarz: They tell me McDonald is no longer a Commander of the Naval Reserve. 9 - 9 - H.M.Jr: What happened to him? Oh, McDonald is the president. Schwarz: Of Zenith. Foley: He is the fellow that is giving us the trouble. H.M.Jr: Can the Navy take his yacht? Foley: Sure. White: And pay him for it. Maybe that is what he wants. Schwarz: He is asking too high a price so far. Gaston: He has 8. grudge against the Coast Guard. One time they made 8. spectacular rescue there, and he considers himself sort of the big boy of the yacht basin and he came bustling aboard or tried to go aboard the Coast Guard cutter to find out what they had done, and the petty officer in charge saw no reason why he should let him aboard or tell him any- thing about it and he told him, "I am a Captain of the Reserves in the United States Navy and I demand to come aboard," and the chief boatswain said, "That doesn't make any difference to me, you haven't any business aboard here," and sent him away. H.M.Jr: Who decides where his yacht is to be anchored? Gaston: We are clarifying in this amendment to the regulations the power of the Captain of the Port to classify ships and yachts according to their draft and length and so on and assign them different anchorage regulations by classifications, and what his complaint was, is that other craft were allowed to anchor in this location so he should be allowed to anchor, and it was discrimination against Regraded Uclassified 10 - 10 - him for the Captain of the Port to tell him to move, 80 now we are clarifying the right of the Captain of the Port to say that because of size and so on he wants him to go somewhere else. H.M.Jr: If there is any more trouble, let me know; and we will move him out another half mile. Schwarz: Four Coast Guard reserve boats have been able to go in where he moved out of. Foley: Dean Acheson called up last night and said that some of the people over in the State Department were disturbed in connection with the procedure that he had approved in connection with the reporting of diplomatic funds by these neutral countries under the order. They have to tell us how much they need and what they propose to spend it for, their payrolls and the salaries and so forth. Then after they spend it, if they want to get more money, they have to account for the expenditures and then explain how they are going to spend the next allotment that they request. What he wants, he thinks, is 8 modification of that in 30 far as these neutral countries are concerned, whereby they would give us the names of the banks where their bank accounts are and then be permitted to use their funds without re- strictions under the general license. Of course, we would be able to watch those accounts. We would be able to have daily reports from the banks as to the withdrawals from those accounts and then any time any- thing looks suspicious, we could report that to the State Department and they could call in the Ambassador or Minister and put it up to him. I told him I thought that you would be dis- posed to go along with the State Department on a matter of that kind. 11 - 11 - H.M.Jr: Sure. Foley: He said that they were going to have 8. meeting over there this morning, and he would call back before they did anything. H.M.Jr: What else? Foley: Huntington Cairns went up to New York yester- day and say CBS and NBC, and they are now willing to play without restriction the Treasury song. H.M.Jr: Now there is something. Now I can knock off the rest of the week after getting them to put their - they can play that? Foley: Yes. They were a little afraid you might be worried if you turned the radio on sometime and heard just part of the song, but that would be only because they didn't have time to run the whole thing. (Laughter) They don't want you to crack down on them just on account of that. H.M.Jr: Tell Huntington, "Good work," will you? Foley: Yes. H.M.Jr: That is something. (Kuhn) Call up Irving and tell him. Foley: We asked Dean to find out from Phillips whether or not the Italians had given equal treatment to Giannini's bank in Italy in connection with their retaliations against American interests. H.M.Jr: Yes. In Italy? Foley: Yes. I thought it would be good to find that out. Regraded Uclassified 12 - 12 - H.M.Jr: Me too. Anything else? Bell: They own 8 bank over there, don't they? Foley: They own several. They have got a big bank and it has branches. It has branches in Trieste and Naples and Rome. Bell: Transamerica? Foley: Yes, owned by the holding company H.M.Jr: Maybe Johnny Hanes was right after all. You just want to rub them out. Foley: I just want to see that he gets treated the same way everybody else does. He has got more immigrant accounts in that bank of his-- H.M.Jr: So far, we have just gotten this far. (Laughter) Everything we do is a rub-out so far. Foley: I have got 8-- H.M.Jr: Good work. Foley: I have got a personnel problem in the Bureau. Jimmy Ryan, who is one of the assistant chief counsels to Wenchel, is resigning to take 8. position with a large Chicago firm. What I would like to-- H.M.Jr: Not Zenith? Foley: No, this is 8 law firm. What I would like to do is to take Ralph Dwan, who is chief counsel for Customs, and move out Regraded Uclassified 13 - 13 - Dwan's assistant, Chambers, to be chief counsel for Customs. I discussed it with Bill Johnson and that is agreeable to him. H.M.Jr: How about Herbert? Foley: Well, I assume if it is all right with Bill, it is all right with Herbert. Gaston: That is right. Bill is a pretty good lawyer. H.M.Jr: It means nothing to me. Foley: I believe it will strengthen the Bureau a little bit. H.M.Jr: Clear it with Norman. Anything else? No more rub-outs? Foley: No more rub-outs. H.M.Jr: Or rub-downs? George? Haas: I have got a minor thing, Mr. Secretary, that I thought ought to be brought to your attention. You sent to Undersecretary Patterson a copy of that industry report. Sometime back his secretary called our office and said - marked the report for attention, Mr. Lovett, and the acknowledgment comes back now signed by Lovett, Assistant Secretary of War for Air, and I wondered if - originally he was just an Assistant to Patterson, I take it, and I wondered if you - we could address it direct to Lovett. H.M.Jr: Sure. O.K. Regraded Uclassified 14 - 14 - Haas: And leave Patterson out completely? H.M.Jr: That is all right. Cochran: Stopford was by yesterday afternoon, and he had the first draft of a memo on South America that you mentioned when he was in here. He decided to hold it until he gets some replies from cables which he sent to his people in Buenos Aires and Rio. H.M.Jr: I would like to see him myself. Cochran: All right. I will tell him to bring it in as soon as he gets it. Playfair asked to be remembered to you. He is flying back today. H.M.Jr: Oh! What else? Did you (Kuhn) take care of my Mrs.? Kuhn: All taken care of this morning. H.M.Jr: Gone back up, has it? Kuhn: Yes, sir. H.M.Jr: In the not toodistant future, Jake, I will talk to you. I will tell you what I had in my mind a little after I get straightened out. Is the baby all right? Odegarde: Fine. H.M.Jr: Can't we take a picture of that baby and use it in-- Regraded Uclassified 15 - 15 - Odegarde: Suits me. H.M.Jr: For Defense Bonds or something? I think every- body would want to buy-- Odegarde: Suits me. H.M.Jr: I will get in touch with you during the day. Schwarz: I assume you have seen page four of the New York Times. H.M.Jr: Yes. I was just struck dumb. Schwarz: Maestre, the president of that company is the leading spirit, I understand. I have checked. H.M.Jr: Maestre, Bob Maestre? Schwarz: M-a-e-s-t-r-e. It is not Bob, I think. He is New Orleans, isn't he? H.M.Jr: Mayor of New Orleans. Schwarz: This is the St. Louis Maestre. H.M.Jr: I would like to know how come. I think you will find the director of it is Mr. Darcy of the Darcy Advertising Agency. It is a full page advertisement by a St. Louis bank in the New York Times saying, "Uncle Sam is too modest." Graves: Yes, I have seen the advertisement. H.M.Jr: But this is in the New York Times, a St. Louis bank. Graves: They are also advertising out of St. Louis. H.M.Jr: That costs money, a full page ad in the New Regraded Uclassified 16 - 16 - York Times. Gaston: That is Darcy showing us that if he were running the thing he could put some real pep into it. H.M.Jr: That is what I thought. Gaston: Yes. H.M.Jr: That was my reaction, that that was Darcy. Is that page in here? Get it. You (Graves) haven't seen it, have you? Graves: I haven't seen it in the New York Times, but I have seen it elsewhere. Schwarz: I can get it photostated down to a handier size. H.M.Jr: Send it around. Graves: I told you once that such advertisements had been put in the papers by more than fifteen hundred banks during May, and I have the collection. It includes this one among many others. H.M.Jr: Anything else, Chick? Schwarz: That is all, sir. H.M.Jr: Harry? White: Nothing. H.M.Jr: I will get in touch with you later on. Are you going out this morning to any meetings? Will you be out of the Treasury today, this morning? Regraded Uclassified 17 - 17 - White: No, sir. H.M.Jr: Because I have got to talk to you about this thing of - the request of Ambassador Winant. White: Yes. You also wanted to talk about a couple of other things. H.M.Jr: All right. Harold? Graves: Nothing. H.M.Jr: Bell? Bell: We have gotten several cables from Fox. H.M.Jr: Yes. Bell: And in each one he seems to be more worried about Mr. Rogers. H.M.Jr: So I see. Bell: The last one he sent got into the economic studies of China and also about a confi- dential secretary for him. Now, as to Rogers, we think he ought to keep his shirt on and keep out of that mess be- cause that is a matter for the British and Chinese Governments, and we think it is more important that he start the board and get busy there than to start this economic study, and we would like to send him a cable along these lines. Want me to read it? Harry hasn't seen it, but Merle and I just finished it as we came in. H.M.Jr: Talk it over with Harry. Bell: This is part of Harry's draft. We expanded it, Harry, to take in the cable we got last 18 - 18 - night. H.M.Jr: Would you mind talking with Harry first? Bell: No. I should think that he ought to keep out of that Rogers mess. H.M.Jr: I don't know. What else? Bell: Congressman Hebert, who introduced the bill to provide for staggered paydays, wrote you B. letter yesterday criticizing the Treasury for not answering his letter of May 28 ad- dressed to Mr. Bartelt and for not giving him the information that he asked for. He said he wanted to know if it was the policy of the Treasury that Congressmen should get their information from the newspapers. H.M.Jr: Yes. Bell: Well, he had written Bob Jackson asking him if it was legal for the departments to change the present paydays' scheme or was it necessary to have legislation. Bob wrote back and told him that there was no legislation needed, that it was an Execu- tive matter and could be taken care of, and he says, "As to the history of why the pay- days are now the fifteenth and the thirtieth, you would have to go to the Treasury, and I suggest you write Bartelt, Commissioner of Accounts." Hebert writes Bartelt on the twenty-eighth and said, "I am enclosing 8. letter from Jackson which is self-explanatory, and I should be glad to have your comments on this matter." It was acknowledged on June 2. It came in on Saturday and was acknowledged on Monday, the second. We told him that we would study it and give him the information, Regraded Uclassified 19 - 19 - assuming that he wanted a history of the paydays. We have acknowledged it this morning. I have got a letter here for your signature acknowledging his letter and telling him why he didn't get a reply earlier and tell- ing him that Treasury did not give any - out any press notice whatever. It was given out at the White House. H.M.Jr: Anything else? Bell: That is all. Thompson: Woodside how has word from the factory that your new Cadillac will reach Washington Saturday. H.M.Jr: It will get here Saturday? Thompson: It will probably take 8. couple of days to get it all tuned up. H.M.Jr: All right. Thompson: I have some Stabilization cables. H.M.Jr: All right, ask Stephens. Regraded Uclassified 20 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION Chauncey DATE June 18, 1941 TO Secretary Morgentinu For FROM Mr. Cochran STRICTLY CONFIDENTIAL At 5 p.m. yesterday afternoon Mr. Stepford, Financial Counselor of the British Embassy, called on me. He showed me draft notes which he had prepared upon Axis funds passing through or situated in Latin America. It will be recalled that when the Secretary had him in to meet with our Group on last Monday morning where the working of the new freesing regulations was discussed, the Secretary had invited Mr. Stopford to give any comment. Mr. Stopford had raised the question as to possible leaks in Latin America which might warrant further extension of the Control. The Secretary had suggested that Mr. Stopford prepare a memorandum on this point. Mr. Stopford told no yesterday evening that his notes were only preliminary and that he had cabled his colleagues in Buenos Aires and Rio de Janeiro requesting concrete information from them to support his memorandum. He asked, therefore, if he might delay the submission of the memorandum until he had this supporting informa- tion. At the Staff Meeting this morning I reported the foregoing to the Secretary. He asked that the memorandum be given directly to him whenever I may receive it. Upon coming out of the meeting, I telephoned Mr. Stopford. I told his that I had reported to the Secretary upon our conversation of last night, and that the Secre- tary desired that I submit directly to his Mr. Stopford's memorandum as soon as it is received. Mr. Stopford promised to pursue its preparation actively. Sav Regraded Uclassified 21 June 18, 1941 11:43 a.m. HMJr: What's on your mind? Oscar Cox: On the British finances thing HMJr: Yeah. : All the earmarke are that the financial fellows haven't been following what their supply people are doing and it becomes fairly apparent from the commodity statements which you have George Haas get out and I sent you sort of a long winded note on it this morning. HMJr: Well, Oscar, if you have time I'd much rather talk to you about it because I'm getting awfully restless about it. C: Well, 80 am I, because the thing.... HMJr: Well, what are you doing between now and 1 o'clock? C: Well, I got a meeting on this gun thing, which 18 8. part of B. rescue procedure. HMJr: Oh. C: And a ... HMJr: What time 1s that meeting? C: Well, it's on now and probably wont be finished until 1 o'clock. HMJr: On, well Regraded Uclassified 22 - 2 - C: Well, could I come after lunch? HMJr: No, I'm free at three. C: Oh, unfortunately I got a meeting on this price legislation up on the Hill. Why don't I check with Mrs. Klotz and see if 1 can make a date in the very near future. We're talking to the British at 12 on this - on the extent to which we can resoue them on contracts that have been entered into already. HMJr: Well, when - you mean that - let me settle it this way - when will the - Bell told me that you would - it yes or no today. C: Well, I think - I think we'll have an answer on a good part of it today after this 12 o'clock meeting. HMJr: And you say that the supply people are not up on 1t?. C: No, they have been placing orders just as one typical illustration, they've been placing orders for steel using up good dollars when there isn't Any excuse in the world for it. They should have placed it under Lend-Lease and I think Phillips is got to pull the reins on his supply people. HMJr: Well, let me - I get booked up. How about 11:30 tomorrow? C: That'll be fine. HMJr: What? C: That'll be fine. 23 - 3 - HMJr: 11:30 tomorrow. C: All right. HMJr: And then by that time, you will have a yes or no. C: I think 80. HMJr: What? C: I think we ought to come close to one. HMJr: Well, I'm getting very restless. C: Well, I think you're right, I am too. HMJr: All right. C: Goodbye. HMJr: Thank you. Goodbye. 24 June 18, 1941 2:35 p.m. Arthur Purvis: opinions here. HMJr: Oh, really. P: In a big way. That's the very first time. HMJr: Well, that's nice of you to say that. I thought you might like to read it. P: I enjoyed it immensely. HMJr: I enjoyed reading the news- paper you let me have. P: (Laughs) HMJr: And I thought you did an excellent job in Montreal. P: Well, you were very nice. HMJr: Arthur, are you very busy this afternoon? P: We've got a Council meeting, Henry. HMJr: Oh. P: And Byrnes is coming over at 5. If there is anything, I could possibly rearrange Byrnes. HMJr: Well, I mean you're busy from when to when? P: The Council meeting should be over in about an hour and a half - by about four. 25 - 2 - HMJr: No, I'd have to be .... P: Something before that? HMJr: Well, I happen to be free around three 0' clock and I'm - I don't want - I - this whole business of Keyne's and all that, I want to talk to you about it, particularly a letter to Hopkins which really cuts across you. 5: Yes. Well, a - I saw a letter when I got back this morning - I got a copy of that letter and noted - I mean I read it with that little feeling myself that he'd moved out 8. bit. I'd like to have that talk - it's just that thie is B Council Wednesday and we have thie time some new people coming in to sit withous. HMJr: Well, you keep - Juel let me think - I tell you what we might do .... P: Shall 1 ring you when I get out and then see what suite you? HMJr: Well, I think we better put it off and let me juet see how - - it was just that I got a break today. P: Yes. HMJr: And tnis wring bothers me. P: Yes, quite. HMJr: Well, your Council meeting be over when? P: About 4 o'clock, perhaps 4:15. Then Byrnes 18 coming at 5 because he's worried over Lease- Lend matters. HMJr: Oh. Regraded Uclassified 26 - 3 - P: It'll De between half an hour and three quarters of an hour with nim 1 would imagine, normally. HMJr: Why don't we - why couldn't we start fresh in the morning? P: Yes. HMJr: What? P: I'a love to. Any time you say. HMJr: Well, P: Iou don't walk down, I suppose, do you? HMJr: Well, 1 leave terribly early... P: Yes, what time? HMJr: Well, I leave the house around - oh, 8:30. P: Well, would you like me to join you? Do you walk down or do you ride down? HMJr: I walk part of one way. P: Yes. HMJr: Is that too early? P: Not a bit. HMJr: Surely? P: Not a bit, I'll be there at 8:30 if that suits you. HMJr: Fine. P: I'd love it. HMJr: Let's do 16 that way. P: Good, I'll be there at 8:30. HMJr: Thank you. 27 June 18, 1941 2:46 p.m. HMJr: Hello. Operator: Mr. Mellett. HMJr: Hello. Lowell Mellett: Hello, Henry. HMJr: Hello, Lowell. M: I got a call from our Director and Conductor this morning that .... HMJr: Who? M: Our State Director. HMJr: Yeah. M: That the Louisville bankers and the Bankers Association of Kentucky are upset because they can't get a list of registered aliens, that they are very fearful that they are passing out assets to aliens that shouldn't have them. They have no list to check against, said they tried to get it at Cincinnati district office of the Immigration and Naturalization Bureau, but were refused the list and then I got a wire from him suggesting that these district Directors be authorized to release such lists, to Postmasters in the various states. HMJr: Uh huh. M: With authority to permit inspection by interested banks and other agencies holding alien assets, etc. HMJr: Yeah. 28 - 2 - M: Well, I don't know whether it is a good idea or not, sounds reasonable on the face of it but any case, if it could somebody should speak to the Bureau here. I presume that would be your office. HMJr: Aliens? M: Yeah. HMJr: No. M: Frozen assets. HMJr: Well, I tell you, there will be 8 meeting in 10 minutes in Foley's office with Frank Shea and Dean Acheson and I'll get this word to them and they can take it up at their meeting at 3. M: Yes, all right. HMJr: Is that quick enough? M: Well, all I know is that the Bankers out there are afraid that aliens are drawing out funds that you wouldn't want drawn out. HMJr: Well M: And they think they need a list of aliens to check against. HMJr: I don't know, but I'll put it up to this crowd within the next ten minutes. M: All right, fine. Then the acts would have to be taken by the Bureau of Naturalization and Immigration. HMJr: Well, of course, Shea 1e there for Justice and I'll tell them to let you know. 29 - 3 - C: Well, all they need to do to take action on it and do it if they can - if they would let me know 80 I can get word to those Kentucky bankers HMJr: Sure. Thank you for bringing it to my attention. C: Right-o HMJr: Thank you. 30 June 18, 1941 4:00 p.m. HMJr: Hello. Operator: Colonel Donovan left on the 3:30 plane for New York. His Secretary, Mr. Mahar, 1s on the line. HMJr: All right, please. HMJr: Hello. Operator: Go ahead. Mr. Mahar: Yes, Mr. Morgenthau. HMJr: I've been expecting to hear from Colonel Donovan. M: Oh, you have? HMJr: Yes. M: Well, I guess he must have forgot about it today while he was here. HMJr: Well. M: I'm sure he forgot about it. He was at the White House. HMJr: I know, he was to let me know just as soon - after he'd seen the President. M: I see. Well, I know he must have forgot about it because I was with him all the time and almost till the time he got on the plane. 31 - 2 - HMJr: Well, would you get word to him that I would appreciate - I've asked something of him and I'd like to have a yes or no. M: Yes, all right. Now, where can I reach you this evening, Mr. Morgenthau? HMJr: Well, I'll be home. M: You will. And that number? HMJr: No, he can call me through the Treasury. M: All right, thank you very much. HMJr: But, I would like to hear from him. M: I'll be glad to get in touch with him and .... HMJr: Tell him I'd like - I really would like to have a yes or no on the proposition I put up to him. M: Yes, I'll be sure to tell him. HMJr: Thank you. M: All right. 32 June 18, 1941. MEMORANDUM FOR THE SECRETARY'S FILES: A meeting relative to the administration of Executive Order 8389, as amended, was held in Mr. Foley's office at 3 p.m., June 18, 1941, attended from time to time by the following: Messrs. Foley, Gaston, Cochran, Viner, Bernstein, Pehle, Coe, and Aikin for the Treasury, Messrs. Acheson and Luthringer for State, Messrs. Shea and Kreiger for Justice. After Mr. Pehle read a report appearing in today's Boston Daily Globe, it was decided that Mr. Pitman of the Boston Federal should contact the newspaper, correcting the misstatements, par- ticularly with regard to the position of aliens in respect to General License 42 and in connection with remittances authorized under General Licenses 32 and 33. Mr. Aikin immediately tele- phoned Mr. Pitman requesting him to contact the newspaper. The problem of coordinating F.B.I. activities with those of the Treasury was again brought up. Mr. Shea mentioned that there were active files on 8,000 names of those suspected of subversive activities or sabotage. He thought considerable du- plication of effort would result unless some clear delineation of work was established beforehand. He was particularly anxious that the Treasury take no special freezing action on an account before checking with the F.B.I. in order that there would be no interference with a good source of information. Mr. Foley as- sured him that the Treasury would fully cooperate, and Mr. Pehle stated that the Treasury had and would continue to consult with the F.B.I. before giving Federal Reserve banks instructions to block particular accounts. Mr. Pehle gave Mr. Shea a list of the names concerning which telegrams had already been despatched to the various Federal Reserve banks. After Mr. Foley had admitted that there would be some overlapping in the activities of both the F.B.I. and the Treasury Department agencies, he repeated his remark of the previous meeting that before an effective under- standing could be reached, a memorandum should be submitted out- lining a tentative delineation of activities. Mr. Shea asked Regraded Uclassified 33 - 2 - about Mr. Pehle's press interview which indicated the Treasury Department was setting up a large staff for investigatory work, questioning the advisability of this until some workable arrange- ment between the F.B.I. and the Treasury had been developed. In fact, Mr. Shea said he thought this was the very purpose for which he had been called into the conference. While agreeing that this was the case, Mr. Foley emphatically stated that the Treasury Department did not intend to suspend their activities in mid-air while haggling over procedure. Messrs. Acheson and Gaston remarked that the investigatory activities of the Treasury Department did not concern themselves with criminal violations per se, sabotage, and subversive activities, which are fields clearly covered by the Department of Justice. The discussion closed with Mr. Foley again emphasizing the importance of having n memorandum outlining the various aspects of the problem. Mr. Foley read a message from Louisville concerning the availability for blocking purposes of the Department of Justice alien registration lists. After considerable discussion during which Mr. Bernstein read an article appearing in today's New York Herald Tribune concerning "lists", it was agreed that alien registration lists should not be circularized because, as Mr. Gaston correctly pointed out, a large number of the names on them would not be those of "nationals" within the mean- ing of the Executive Order. The Treasury is not yet in a position to publish a black list, Mr. Bernstein pointed out, and in any case word would soon get around whose accounts ought to be blocked. Mr. Pehle mentioned that his office had also received a query from the Atlanta Federal concerning the Department of Justice alien registration lists. He believed that immigration records would be a more effective source of information for the Treasury Department. In response to Mr. Acheson's query, Mr. Bernstein explained why the date of June 17, 1940, had been used in General License 42. From that date on, there had been a flood of refugees pouring into this country. Many of these probably have Axis connections; accordingly, the date of the collapse of France was chosen. Regraded Uclassified 34 - 3 - Mr. Cochran asked whether there had been B. complete blooking of the accounts of those whose names had been sent to the various Federal Reserve banks on June 15, and Mr. Bernstein replied that generally this was the case but that an attempt was being made to see that no injustices were done. Mr. Cochran then said that he had been asked by Mr. Nishyama, a Japanese consular official, whether consulate and diplomatic officials were exempted from the necessity of reporting assets. Mr. Bernstein pointed out that the report requirement is both plenary and applicable to all. In the past, the Treasury Department has not had adequate reports but the report problem is now a big one, the various aspects of which, in Mr. Bernstein's opinion, will have to be carefully studied by the State Department. Mr. Pehle suggested a compromise: diplomatic and consular officials could be relieved of report- ing their assets when these are held by banks, since there is a burden on the latter to report. Diplomatic and consular officials might be required only to report those assets held other than in banks. Until the State Department has had an opportunity to explore the various aspects of this problem, it must be held in abeyance. Mr. Acheson concurred, mention- ing that consular and diplomatic officials might possibly be exempted from the report requirements so far as their personal assets were concerned. Mr. Cochran inquired whether there was any reason at this time for Federal income tax investigation of Japanese corpora- tions. Mr. Foley replied that he did not know of any. Discussion then turned to the proposed sale by the Standard Oil Company of its Hungarian properties to one of the I. G. Farben Industrie groups. It was agreed that this was a State Department problem and Dr. Viner called attention to the fact that Germany was still observing some sort of & commercial code in their efforts to purchase European subsidiaries of American corporations. Mr. Acheson explained the circumstances surrounding the sale of the International Telephone and Telegraph Rumanian properties, stating that at the time this was consummated "Rumania and the war were B. long ways off". Regraded Uclassified 35 - 4 - lie remarked that this company had approached the State Department recently regarding the sale of its Spanish interests, but the State Department had objected in view of the changed situation. Mr. Bernstein stated that while the sale of these foreign properties by American corporations might appear super- ficially to be sound, it resolved itself into an opportunity by an individual concern to get some dollars, but that as far ds this Government was concerned, effective steps have been taken to assure that in any case these dollars would not other- wise accrue to Germany to prosecute the war, and furthermore, the claims of other American creditors' to the blocked dollars must be considered. Dr. Viner observed that while American corporations may have written off these foreign properties, the United States Government had not. i.r. Pehle said that Mr. Stopford had called regarding a telegram received from the Bank of England in response to an inquiry about funds held in this country for high German officials. Reference was made to an article written some time ago by H. R. Knickerbocker. The Bank of England dis- claimed definite knowledge of large deposits belonging to German officials, but suggested as & "lead", Isadore Lazarus, alias Lee Lane, presently an inmate of the Atlanta penitentiary on & passport violation charge. Mr. Acheson asked whether any assurances had been received from foreign governments, and Mr. Pehle replied that there had been none. He did refer again to the conference which Foreign Funds Control had had with the Swedes. Mr. Bernstein stated that although general licenses had been drafted, none had yet been issued. Mr. Pehle said that Mr. Stopford had been in to see him to discuss the problem of currency and securities held up by the British authorities in Bermuda. Since the British Govern- ment was not sure of its position, steps were being taken to clarify it in an official and public release. The British seem to be concerned lest their actions cast reflections on the efficacy of the Treasury's control. Regraded Uclassified 36 - 5 - Mr. Foley read a telegram advising that there had been & sizeable run on the Banco de Napoli, Chicago, whose officials were "leaning over backward" to comply with the freezing Order. Before paying depositors, the Banco de Napoli is demanding production of citizenship papers. 37 June 18, 1941 noted AWB Memorandum From the Comptroller To the Under Secretary Mr. Oberwortmann, our Chief Examiner in Chicago, telephoned this morning and said that there 1s a run of sizable proportions this morning on the Banco di Napoli Trust Company of Chicago. I have passed this information along to the Federal Deposit Insurance Corporation and to the Foreign Funds Control. From a perusal of the report of examination of the bank made by the Federal Deposit Insurance Corporation, it would appear that they are in extremely liquid condition and would be able to meet any run. Our examiners have been in the institution since last Saturday afternoon, but they find that the management of the bank 19 leaning over backwards to prevent any un- authorized transactions taking place. They have very few commercial accounts, nearly all of their accounts being savings in character. The bank is requiring production of citizenship papers or equivalent proof before permitting withdrawals from savings accounts. Mr. Oberwortmann says that he really feels that there is no necessity for our examiners to be in the bank at all, and that there might be some advantages to withdrawing them - the bank for instance could then say to disturbed depositors, "There isn't even an examiner in the bank." I believe there has been less cooperation on the part of the Illinois State Banking Department than is the case in New York. Since starting this memorandum I have talked to Mr. Crowley who informs me that he has talked to his Chief Examiner in Chicago who informs him that in his opinion the run will not amount to much and will quickly subside, and that the bank is in good position to take care of any situation that may arise. Preston Delano Regraded Uclassified 38 4 Estate tax rate Schedule A compared with present estate tax rates Net estate after : Schedule A 1/ : Present rates 1/ specific exemption: Bracket rate : Cumulative : Bracket rate : Cumulative (in thousands : (percent) : tax on higher: of dollars) : : amount (percent) tax on higher : : amount o - 5 3 $ 150 2 $ 100 5 - 10 1, 450 2 200 10 - 20 5 1,350 4 600 20 - 30 L2 2,550 6 1,200 30 - 40 15 4,050 8 2,000 40 - 50 18 5,850 10 3,000 50 - 60 21 7,950 12 4,200 60 - 100 25 17,150 12 - 14 9,600 100 - 250 25 54,650 17 - 20 36,600 250 - 500 27 122,150 20 - 33 89,600 500 - 750 29 194,650 23 - 26 151,600 750 - 1,000 31 272,150 26 - 29 222,600 1,000 - 1,250 33 354,650 32 302,600 1,250 - 1,500 35 442,150 32 382,600 1,500 - 2,000 38 632,150 35 557,600 2,000 - 2,500 41 837,150 38 747,500 2,500 - 3,000 44 1,057,150 41 952,600 3,000 - 3,500 47 1,292,150 44 1,172,600 3,500 - 4,000 50 1,542,150 47 1,407,600 4,000 - 5,000 53 2,072,150 50 - - 53 1,922,600 5,000 - 6,000 56 2,632,150 56 3,482,600 6,000 - 7,000 59 3,222,150 59 3,072,600 7,000 - 8,000 61 3,832,150 61 3,682,600 8,000 - 9,000 63 4,462,150 63 4,312,600 9,000 - 10,000 65 5,112,150 65 4,962,600 10,000 - 20,000 67 11,812,150 67 11,662,600 20,000 - 50,000 69 32,512,150 69 32,362,600 Over 50,000 70 - 70 - Treasury Department, Division of Tax Research June 18, 1941 1/ Exclusive of temporary defenso tex. 39 4 Comparison of Federal estate tax (bofore allowance of credit for State doath taxes) under present retra and Schedule A upon net estates (before exemption) of selected sizes 1/ Net estate : Amount of tex 2/ : Effective rates : Increase in tax before exemption: Present law Schedule A :Present: (000) Schodule A Amount : lew Percent : $ 50 $ 220 $ 495 0.4% 1.0% $ 275 125.0% 60 6EO 1,485 1.1 2.5 825 125.0 80 2,200 4,455 2.8 5.6 2,255 102.5 100 4,620 8,745 4.6 8.7 4,125 89.3 200 21,660 35,245 10.8 17.6 13,585 62.7 400 63,780 92,105 15.9 23.0 28,325 44.4 600 112,340 152,105 18.7 25.4 39,765 35.4 800 167,340 215,245 20.9 25.9 47,905 28.6 1,000 228,780 282,405 22.9 28.2 53,625 23.4 2,000 588,000 668,685 29.4 33.4 80,685 13.7 4,000 1,499,640 1,646,325 37.5 41.2 146,685 9.8 6,000 2,655,140 2,819,645 44.3 47.0 164,505 6.2 10,000 5,323,500 5,488,005 53.2 54.9 164,505 3.1 20,000 12,532,700 12,697,205 62.7 63.5 164,505 1.3 40,000 27,391,820 27,556,325 68.5 68.9 164,505 0.6 60,000 42,361,380 42,525,885 70.6 70.9 164,505 0.4 100,000 73,521,380 72,685,885 72.5 72.7 164,505 0.2 Treasury Department, Division of Tax Research June 18, 1941 Under Schedule A, the attached rate schedule is substituted for the pre- sent schedule. In all the computations, the specific exemption is $40,000 and the credit for State death tries is nasumed to be 80 percent of the tax imposed under the 1926 Act. The defense tax is 10 percent of the Federal tex after allowance of the credit for State death texes. 2 Includes dofense tax. 40 MEMORANDUM FOR THE SECRETARY June 18, 1941. In rel Mail Alluding to the Speech at Anheret Last Saturday. Up to the last mail today (Wednesday) 26 letters had been received. One was highly laudatory (from a personal friend and sent down- stairs.); 1 started with congratulations but was lukevars and critical of a number of the statements; 24 were violently antagonistic, contain- ing phrases such as - "Your recent talk smacked of the typical come-on variety of pro-British propaganda". "How did you dare talk to the Anherst College Alumni the way you did?" "Only var can cover up the spending orgy in Washington". "We are willing to die on our feet, but not to defend international bankers." "Ye of the 83 percent of Americans opposed to involvement in this war are as determined to keep out of it as you 17 percenters are to get us in. No sale, Mr. Morgenthau." One of the more thoughtful letters vas from a Philadelphia Dentist, 8 Catholic who wrote with some perplexity and unhappiness over the con- flict between the stand of the Catholic Church in this country and the Administration policy. "Our spiritual Superiors in the United States have denounced our meddling in foreign affairs as immoral and un-American. Today our Pastor, former secretary to the Papal representative told us, 'We cannot police the world because God has not delegated us as such. This propaganda is dishonest and only the ignorant believe it'." The writer agrees with his Church Superiors and not with the Secretary's talk, which be calls "very bad propaganda and norally wrong". .... "You can force our sons into the conflict but our Catholic moral train- ing is against you". I an sending the letters and postal cards to Mr. Kuhn as I think he would like to ... them all, but shall keep them together and can send you either samples or the entire group if you wish to see them. Regraded Uclassified 41 THE WHITE HOUSE WASHINGTON June 18, 1941 My dear Vr. Secretary: I find that: (1) The defense of the United ringoom is vital to the defense of the United States; (2) Sections 4 and 7 of the Act of March 11, 1941 have been complied with by the necessary agreement on the part of His Lajesty's Government in the United Finguon; (3) It would be in the interests of our national defense to transfer the defense articles set fort in the an- nexed schedule. I therefore authorize you to make the transfer to His Majesty's Government in the United Kingdom of the defense articles set forth in the annexec schedule. I should appreciate it if you would arrange with the Chairman of the writish Surply Council in North America for the time, method, and other details of the disposition. Very sincerely yours, finalitation The Honorable The Secretary of the Treasury Regraded Uclassified TRANSPER DIRECTIVE NO D-76-T 42 Defense Articles Authorised for Transfer to the Writed Kingdom by the Secretary of the Treasury Requisition Articles Number Quantity Description 513 50 Worthington air cooled diesel driven air compressors and 12 months supply of spare parts 529 36 Caterpillar tractors 18 Graders and spare parts IUN 181941 43 THE WHITE HOUSE WASHINGTON June 18, 1941 My dear Vr. Secretary: I find that: (1) The defense of the United Kingdom is vital to the defense of the United States; (2) Sections 4 and 7 of the Act of March 11, 1941 have been complied with by the necessary agreement on the part of His Majesty's Government in the United kingdom; (3) It would be in the interests of our national defense to transfer the defense articles set forth in the an- nexed schedule. I therefore authorize you to make the transfer to His Majesty's Government in the United kingdom of the defense articles set forth in the annexed schedule. I should appreciate it if you would arrange with the Chairman of the British Supply Council in North America for the time, method, and other details of the disposition. Very sincerely yours, finalition The Honorable The Secretary of the Treasury DIRECTIVE NO D-76-T 44 Defense Articles Authorised for Transfer to the United Kingdom by the Secretary of the Treasury Requisition Articles Number Quantity Description 513 50 Worthington air cooled diesel driven air compressors and 12 months supply of spare parts 529 36 Caterpillar tractors 18 Graders and spare parts JUN 181941 Regraded Uclassified 45 THE WHITE HOUSE WASHINGTON June 18, 1941 My dear Kr. Secretary: I find that: . (1) The defense of the United Kingdom is vital to the defense of the United States; (2) Sections 4 and 7 of the Act of March 11, 1941 have been complied with by the necessary agreement on the part of His Majesty's Government in the United kingdom; (3) It would be in the interests of our national defense to transfer the defense articles set forth in the an- nexed schedule. I therefore authorize you to make the transfer to His Majesty's Government in the United kingdom of the defense articles set forth in the annexec schedule. I should appreciate it if you would arrange with the Chairman of the British Supply Council in North America for the time, method, and other details of the disposition. Very sincerely yours, finalition Mucsure The Honorable The Secretary of the Treasury DIRECTIVE NO D-76-T 46 Defense Articles Authorised for Transfer to the United Kingdom by the Secretary of the Treasury Requisition Articles Number Quantity Description 513 50 Worthington air cooled diesel driven air compressors and 12 months supply of spare parts 529 36 Caterpillar tractors 18 Graders and spare parts JUN 181941 THE WHITE HOUSE WASHINGTON June 18, 1941 My dear Kr. Secretary: 1 find that: (1) The defense of the United zinwdom is vital to the defense of the United States; (2) Sections 4 and 7 of the Act of March 11, 1941 have been complied with by the necessary agreement on the part of His Majesty's Government in the United Einguon; (3) It would be in the interests of our national defense to transfer the defense articles set. forth in the an- nexed schedule. I therefore authorize you to make the transfer to His Wajesty's Government in the United kingdom of the defense articles set forth in the annexec schedule. I should appreciate it if you would arrange with the Chairman of the writish Surply Council in North America for the time, method, and other details of the disposition. Very sincerely yours, The Honorable The Secretary of the Treasury Regraded Uclassified TRANSFER DIRECTIVE NO D-76-7. Defense Articles Authorised for Transfer to the United Kingdom by the Secretary of the Treasury likion Articles Quantity Description БО Worthington air cooled diesel driven air compressors and 12 months supply of spare parts 36 Caterpillar tractors 18 Graders and spare parts 1941 Regraded Uclassified 49 June 18, 1941 TO THE SECRETARY: Poloy, Maite, Cochren and I have been over Mr. Jomes' re-traft of Mr. Ceshres's of the conference hold is year office as June 10, 1941, at which time you adviced Mr. Jense of your feture relations with fir Above Peacesk conserning the sale of British dollar access is this creatry. Ve have agreed to Mr. Jones' revrite of membership except the last sentence. Mr. James said: *Mr. James agreed to inform the Treasury of the results of My transactions upon with he passes, and stated that bis purpose vas, as for as practicable, to make KFC loans available to the British to emable then to meet their commitments M Secretary Hargen then in parias for American supplies." Ve suggest that the part underlised in this quotation be elisizated: otherwise it is O.K. Tou told Jense at the conformace that lay that you would initial a copy of this and that be should also initial a orgy for the files. I would appreciate 11, therefore, if you would initial the original and one carbes, and I will - that Mr. Jamos initials and gots the copy for Me file. DVB:BLE Regraded Uclassified 50 Regraded Uclassified June 10. 1941 learntary Margenthan m. Destres 48 11 s'alesk this serving the incretary of the Treasury received the secretary of Commerce. Nesers. Bell, Feloy. White and Cockins vers procent. Rr. Norgenthan sold Nr. Jonse that be Le receiving fir Idward Peneak this afteration. Be added that he would 11km to spook to Hr Idvard Passed along the following lines. Sev that Mr. Jears has received the required legislation from Compross, the british representatives should approach Mr. James directly is set instance where they decire to obtain a less against britten direct Lavestments is the United States, OF where British evast American correrations vish be berrew for the purpose of esking funds available to the Brittsh deverment. The responsibility for passing es Fack treasestions would be that of Rr. James. Mr. Jenes agreed to accept this responsibility with the understanding that be be free so call upon the Secretary of the treasury and members of his staff for support. assistance and 12- formation, with & view be obtaining for the brittsh, or British companies, the largest possible amount of dollar lease in each situation. My. Hargesthou and m. Jenes agreed that their basic desire we " - that the British de not have to secrifice their investments is this country through foresd sales, or fail le obtain the meximum memi of dollars through lease to brittsh evard - panise. OF upon the courtity of Britten overd American investments. to most their resultments is this country. The foregoing outline of the approach be Hridward was agreed upea W the two learstaries. N. Morgeathon streesed the point that he could not leek Late every transaction which the with proposed to enter. Valees - system nob as the above Le adopted. there would be change for confusing triangalar converse- time such as beek place this past week is the case of Contro thread doal. Mr. Margenthen considers 10 undesirable for the Britten to approach consumsation of a doal with private basiness and then - to the Treasury is 4 resk as the last simite to obtain approval of the Secretary to the transaction under reference. la believes that Brittsh interests would best be served W the plan which be has one- covered. The point ves made that the Secretary of the Pressury, with the assistance of the British, made been 10 Cangress the various holdings of the British to the United States at the time the Loud-Lease Mill was under consideration. It Le MV the daty of the British themselves se handle these assets is the DEBIT nest likely to procure a of dollar exchange to pay for their commitments is this country. My. James agreed so inform the Treasury of the results of any transactions upon which be passos, and stated that his purpose me. 44 far se practicable. to - 970 lease svailable to the Brittek to amble the to amot their constitutes for American supplies. RMC:1ap-6/17/41 - TO: Miss Channey 51 Seculary has the original to: hotostat position Bell Cochngu while Foley Viner 6/18/41 From: LIEUT. STEPHENS Regraded Uclassified 52 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 TELEPHONE: REPUBLIC 7000 BENJAMIN FRANKLIN STATION WASHINGTON. D. C. Mr Secretary Morgenthau, June 18th1941 The Treasury, Washington, D.C. Dear :I Morgenthau, For some five weeks, LS you know, ** have Less stending much time, /rimartly in connection 1th your undertaking to Sir F. Phillips, on the question what old commitments we CE be relieved of, consistently its the statement ...de by the Director of the Budget, And at last it looks : S 11 2018 sort of finality would be reached on this, one WHY or the other. Meanwhile time ,asses by (though usefully and to my great advanture in many mays), and it seemed to me advisable to attempt to crystallise the position on the other line of approach which you told le concerned :r Hopkins primarily, namely relief by additional lease- lending in respect of entirely new commitments. I have, therefore, sent him a letter of which I enclose a copy; and I hope you ill feel that the lines of approach I seek to open up are suitable and not unpromising. Some time I should much appreciate a talk "ith you on the "consideration" question, about which formal negotiations have now bean initiated, though they have not yet reached any degree of definition. Yours sincerely, JMKeyns Regraded Uclassified 53 ITY Verry Hopkins Esq., June 17th,1941 The Mite House, Tashington, D.C. Dear "r Hopkins, In the five weeks which have assed since I gave Mr Morgenthau memorandum outlining what the Chancellor of the Exchequer had sent me to say, no positive progress has been made. But the possibilities of the situation have been very carefully explored by Sir F. Philiips and byself with the officials of the Treasury Deg staent and :Ith Mr Cox, the have been Most kind and sympsthetic ind helpful but love been up against difficulties which were none of their muking. I an given to understand that, as = result of this examination, for Competition will De advised shortly of the utmost which is possible by with of relieving us of existing comsitments. But it is clear, I think, that the amount, 1f any, available after satisfying Mr Argenthau's promise to Sir F. Thil ips to find relief of from $300,000,000 to $400,000,000, will not 50 far towards satisfying the nevils /hie I outlined in my memorandum. The time has come, therefore, "hen I need guidance from you "2" it would be useful for (a@ to try to mike progress, in so far 38 this is possible through the Lend/Lease machinery. Leaving details and minor sources on one side, and assuming that we are already putting in requisitions in res,ect of all U.S. exports to U.K. which can be handled administratively on our side and are personable on yours, there appear to me to be only two methods which -2- 54 :r of substantial importance:- (1) The financial estimates made in London assume that munition exports to the British Commonwealth outside Britain (excluding Canada) mill pe lent-leased but that we shall have to pey cash for other exports to those destinations. If you were prepared to ap. ly to requisitions Lend/Lease on behalf of other parts of the Empire outside North America the same general criteria that you apply to recuisitions from Pritain, this would afford us a material relief. I do not mean by this that you should not apply to Dominion ap: lications stricter tests under the priority arrangements where commonsense and the necessities of the situation suggest that stricter tests are appropriate; but that types of cases which would be oligible for Lend/Lease 1f they were for the U.K. should also be eligible when they are for other parts of the Empire in all cuses there the stuff is available for them to take. This would, I suggest, be a sensible sort of arrangement to make, since it would amount to substituting Lend/Lease supplies ""ide" present no administrative or other difficulties in place of U.K. requirements which do present such difficulties. It :- unli'tely that the relief obtainable in this was yould do the whole trick, but it would 60 a long way. It is a difficulty in the way of by obtaining reliable estimates at short notice that London might think it inadvisable to encourage the Dominions to draw up requirements along these lines unless there was some reasonable no e of their getting satisfaction. Our total disbursements in respect of exports from the U.S. to the British Empire outside Great Britain and Canada are estimated at $450,000,000 a year, but only a proportion of this, say a third to a half, is likely to prove workable through the Lend/Lease machinery, at any rate in the first instance. -3- 55 What I contemplate in making this suggestion is not independent lend-leasing direct to the Dominions, but lend-leasing to Great Britein with authority to transfer to the Dominions. This procedure has the advantage that it does not complicate the "consideration" agreement or the organisation which is now conveniently centralised under Mr Purvis. Otherwise the President would have to make five distinct consideration agreements and you would have to deal with five independent requisitioning authorities. Moreover if the requisitions on Dominion behalf are not centralised and criticised by us before they reach you, considerable waste of time may ensue. There are also other difficulties which I need not labour. (2) The only other important way in which you can help us would be by obtaining fresh authority from Congress when next the President asks for an appropriation. We estimate that we are spending currently in the United States At least $700,000,000 a year, which, for one reason or another, is not being paid for through the Lend/Lease machinery, of which $250,000,000 1s for Great Britain and $450,000,000 for the rest of the Empire ex- clusive of Canada (as mentioned under (1) above). As you know, we have a common purse with the Dominions, apart from Canada, for dollar expenditure, and we must provide the dollars needed for their essential purposes as well as for our own. It is these heavy disbursements, additional to our pre-Lend/Lease commitments for munitions, which are the source of our financial difficulties. If we could be relieved of a substantial part of these, we should be - relatively speaking - in an extremely satisfactory position. To be more precise, would it be possible for the President to take authority, when next he approaches Congress for a Lend/Lease appropriation, to ask for a sum of (say) $500,000,000 a year (or Regraded Iclassified -4- 56 $250,000,000 If the Dominions are being dealt with under (1) above) which he was free to make available for expenditure in the U.S. otherwise than through the strict Lend/Lease procedure of requisitions etc.? This yould enable him, in effect, to make & cash transfer to us provided we undertook to expend it in the U.S. for current needs other than on pre-Lend/Lease munition commitments which we should continue to meet out of our own resources as we have agreed to do. He could point out to Congress that 2 few months' experience has shown that the Lend/Lease procedure is convenient and appropriate over 95 per cent of the field, but that there remains 2 margin where It is administratively inconvenient or impracticable, so that he needs at little elbow room to deal with this marginal field. Otherwise, it is a case of spoiling the ship for the sake of a coat of paint. We have this magnificent conception of Lend/Lease; "consideration" is being discussed on lines more magnanimous than ny hitherto recorded transactions between great nations; and yet, on account of our resources having been so completely enhausted before Lend/Lease came into operation, we suffer anxiety and possible embarrassment through being unable to accumulate the minimum reserves which are necessary to carry the vast financial responsibilities of London. At the present moment the total gold reserves of the Bank of England are less than $50,000,000, and the cash reserves of the Dritish Treasury less than $100,000,000 - which would be laughable 1f it were not so embarrassing. To build these up, except very slowly, but of our accruing resources is impossible while we are facing the double task of paying off old commitments and financing current expenditure of the sterling using parts of the Empire in the U.S. outside Lend/Lease. Yet it needs only a trifling addition to the -5- 57 assistance we are already receiving to give us the necessary comfort of mind and freedom from daily cares - at gain to our Administration in =11 the circumstances of the present hour altogether out of proportion to the sums involved. I am sending Mr Morgenthau a copy of this letter so that he will be aware of what I am suggesting. Yours sincerely, (Signed) J.M. Keynes home Bonverse- 58 tions with Hophins, Purvis of Coy June 19- meeting 6/19/41- 3:30 P.M. - 59 OFFICE FOR EMERGENCY MANAGEMENT DIVISION OF DEFENSE AID REPORTS WASHINGTON, D. C. du learn Lem dated June 18, 1941 6/19/91 diclated by - his conversation with Cos, Dear Secretary Morgenthau: At the conference which was held on Monday with Mr. Bell, Mr. Cochrane, Sir Frederick Phillips and John Maynard Keynes, I called to the attention of Phillips and Keynes the illustrative fact that the British had placed an order through their purchasing missions for steel for the week ending May 31, 1941, in an amount of $528,000. I suggested that they might want to look into this. The very excellent British Empire Commodity Statements which are prepared by George Haas for you show that for the four- week period ended April 19, 1941, British orders placed in the United States through the British purchasing missions amounted to $107,689,000. Since that time such orders have been placed as follows: Week Ended Total April 26 $ 4,975,000 May 3 5,437,000 May 10 11,795,000 May 17 4,830,000 May 24 3,771,000 May 31 5,571,000 These orders ought to be looked into for three principal purposes; (1) Why they were not placed under Lend-Lease; (2) Which, if any, of them could be picked up by Lend-Lease; and (3) Whether future orders of this type should not be picked up by Lend-Lease to the fullest extent possible. If you think it wise, I think it might be desirable to have a copy of these British Empire Commodity Statements sent to Sir Frederick Phillips and John Maynard Keynes for their investiga- tion so that the supply branches can be tied in with the financial end. As I understand it, the supply branches are probably interested Regraded Uclassified 60 - 2 - in doing the buying with their own funds. This would seem to be the case, for example, in steel purchases which were made for the week ending May 31. In that case the picture seems to be that by reason of having obtained a cancellation, the steel purchasers felt that they had the dollar exchange free to place their own order. As far as I know, there was no reason for not having the order placed through Lend-Lease. Sincerely yours, Oscar lot Hon. Henry Morgenthau, Jr. Secretary of the Treasury Treasury Department Washington, D. C. Regraded Uclassified 61 June 18, 1941 In connection with the attached memo, the Secretary instructed Mr. Cochran to tell Mr. Crane that inasmuch as it is a foreign properties matter he should get his advice from the State Department and keep the Treasury informed Regraded Uclassified 62 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 18, 1941 TO Secretary Morgenthau FROM Mr. Cochran At 10:20 this morning Mr. Jay Crans telephoned me from New York. He asked if Mr. Bell and I could receive him if he came to Washington tomorrow forenoon. I told him that we would both be here, but inquired as to what his mission was. He referred to the information which he had recently given me by telephone in regard to the approach of the Germans toward purchasing the Hungarian properties of the Standard 011 Company of New Jersey. He said that B message had now been received to the effect that the German negotiator who is in Brasil has found that he cannot get into Cuba, where it had been proposed that he should meet with a representative of the Standard 011. Consequently the question arises as to whether one of the Vice Presidents of the Standard 011 should proceed to Rio de Janeiro for consulta- tion with the German representative. Mr. Crane recalled to me that he had given Secretary Morgenthau & report on the general sale proposal as soon as it had come up some months ago. I remembered this, and told Mr. Crane that I thought this present inquiry of his should be brought by me to the attention of the Secretary. Mr. Crane said that his question is whether the Treasury Department, in the light of recent changes in the relations between the United States and Germany, would look with favor upon the Standard proceeding with its negotiations with the Germans, or would prefer that the Standard drop the whole matter. I told Mr. Grane that I would let Kr. Bell know of his message, and also see whether I could get some advice from the Secretary, and then call him back. Mr. Crane offered to come down to Washington on tonight's train, or fly down early in the morning. if ve wish to see him. He would have to be back in New York tomorrow night for a dinner which Dr. Rendolph Burgess is giving in honor of Mr. Pinedo, ex- Finance Minister of Argentina. In answer to my question, Crane told me that this latest development would be brought to the attention of Mr. Atherton in the Department of State, but that he did not think this had yet been done. He said Mr. Atherton had been kept informed of all earlier steps. It will be recalled that our letter to Attorney General Jackson on this subject went out only yesterday, and that & copy thereof vas simultaneously sent to Secretary of State Hull. m Regraded Uclassified 63 6-5- also 6 118 momot with per from Beel with E. att ne 6/10 moth 11.45 yesferday marning and I sand the with the Secy of as Sir Edw. Peococh Are also 6 /10 etc meeting with Seey reported on Callian / dones Regraded Uclassified 64 o 15 Broad Street, Sev York Telephone HANOVER 2-2460 o F BRITISH PURCHASING COMMISSION May 28, 1941 PRIVATE DearSecretary Morgenthau. When I was in Washington last week vs were ao preoccupied with the Tincose business that it vas not possible to bring up other matters, otherwise I should have mentioned the Contes-Clark group of thread companies to you. The British authorities regard the work of these companies as of particular importance because eighty per cent of the output of the British mills is being exported and producing foreign exchange. In order to safeguard the position as much as possible, arrangements were made many months ago by which, should one or more of the large mille in Scotland be put out of action, the American company could carry on such part of the foreign business as was affected. Experts were sent out here some months ago, designs, gauges and all other elements necessary to produce for each country what it has been accustomed to. The British authorities would regard it as a real misfortune if anything vore to happen to interfere with these arrangements. In any event the more I looked into the matter. the more I felt that these companies were not likely to prove very satisfactory from a sale point of view, I am glad to be able to tell you, therefore, that with the help of Kr. Clarence Dillon I have been able to bring arrangements almost to completion under which a loan will be made to the company. partly by banks, partly by insurance companies, of sixteen million dollars with a favorable rate of interest. This is a. great deal more than I had at one time expected, and I have no hesita- tion in saying that from every point of view it will be B. antisfactory transaction. If I may do BO I propose to telephone on Monday afternoon, to seic if you approve of what I an provisionally arrenging in order that I may have the matter closed without delay. Yours mincerely. (Signed) 1. R. Peacock Sir Edward Peacock Honorable Henry H. Morgenthau Secretary of the Treasury The Treasury Washington, D.O. COFf:lap-6/5/41 Regraded Uclassified 65 JUN 18 1941 Memorandum for the President What accets did the Basic have available for expenti- ture in the United States before Germany was brought under foreign funds control? Mr. John Franklin Carter's (Jay Franklin's) memorandes of June 12. dealing with the above topic. greatly under- estimates the agests which the Mania had available for expenditure in the United States before the resent extension of foreign runds control. Mr. Carter rightly emphasises the extent to which German assets in the United States have gone into hiding. Discovery of the true ownership of such hidden German assets will be one of the most difficult problems in the administration of our foreign funds control. However, Mr. Carter 18 in error in saying that: "The only 'free' German recerve of dollar exchange 10 the approximately $50,000,000 in American securities held in trust in Switzerland for the account of the German Dye Trust". Purther, he is recording a mistaken belief when he says that: "German funds in the United States are not believed to amount to more then $10,000,000 in each and securities". The following is the true nicture, in accordance with the best information available before 99 have completed our inventory of foreigh property in this country and with due allowance for gape in our knowledge of the assets con- vertible into dollars which the Masis hold in other countries: 1. gold - - It in not at all impossible that the Germans have as such as 63/4 billion of gold. apart from French gold. Some gold they no doubt had when the war began. They say have taken over some of the $68,000,000 of Polish gold which the French noved to Dakar, besides such private gold holdings as were left in Poland. The British report that the Germans Regraded Uclassified 66 - 2 - seised $160,000,000 worth, from official held- ings, in Holland. Probably about $190,000,000 worth of Belgion gold (but possibly as such " $260,000,000) is being turned ever to then w France. They have certainly asquired come Swedish gold, and they have probably acquired some Swies gold and come Russian gold. They my have acquired come private gold in Aleace-Lorraine, Belgium, the Notherlands, etc. 2. Dollar Balances -- Balances in the United States is Germany's OVR name Are small, but she has substantial balances in other sountries which, before the receit extension of our foreign funds control. sould be converted into dollars at will. Cormany's known dollar balances in the United States are nov only " million. By far the larger part of Germany's dollars have been held in dollar accounts (or local currency accounts convertible into dollars) is Switserland, Spain, Portugal, Sweden, and Latin America. It is from these accounts that Germany did draw the dollars to pay perhaps as such as $100,000,000, since the outbreak of war, for the repurchase of German securities formerly held by foreigners and to buy up branch plants in Germany owned by foreign corporations. It is with these dollars that -- while she has only #6 million on deposit in the United States -- Germany is currently making offers totalling many tens of millioms of dollars to buy up American-owned branch plants in German-controlled territory. 3. Long-term Dollar Investments -- In the United States, held in German BARGE. perhaps $35,000,0001 held abroad. or in the United States. but not in German FAMIL certainly larger. A Treasury study of known German long-term invest- ments in the United States, based on the withhold- ing tax returns, estimated the value of such nesets at the end of 1940 at approximately $35,000,000. This estimate makes no allowance for concealment nor for liquidation since that date. Regraded Uclassified 67 - 3 - Germany has sequired centrol of United States scourities which may total hundreds of millions of dollars through her administration of the occupied countries. Such United States securi- tise, fermerly belonging to nationals of the occupied countries, as she has not conficented, purchased (with funds supplied by the cosupied country), or brought under German control by the assumption of administrative authority ever banks and security agents, have been required to be registered in special blooked accounts. Novever, we hope that eur centrols will new render the liquidation of those securities in the United States impossible. (Signed) 1. Horgesthan, in File Copy HDW a "348" OG:rel 6/18/41 FILE COPY Regraded Uclassified 68 THE WHITE HOUSE WASHINGTON June 13, 1941. MEMORANDUM FOR THE SECRETARY OF THE TREASURY FOR YOUR INFORMATION F. D. R. $ 24) 69 C 0 JOHN FRANKLIN CARTER P (Jay Franklin) Y 1210 National Press Bldg., Washington, D. C. June 12, 1941. MEMORANDUM ON GERMAN FUNDS AVAILABLE FOR NAZI PURPOSES IN THE U.S.A. Reports to Frank Page of I.T. & T. from Colonel Behn indicate that the only "free" German reserve of dollar exchange is the approx- imately $50,000,000 in American securities held in trust in Switzerland for the account of the German Dye Trust. Nazi authorities are permitting trading on the Amsterdam Bourse, etc., in certificates which represent American securities seised in occupied territory or taken under what amounts to forced sale from their inhabitants. These securities are held by the German authorities against. the certificates. Offer was made to purchase I.T. & T. proper- ties in Germany with such certificates; offer was refused. German funds in the U.S. are not believed to amount to more than $10,000,000 in cash and securities. Much more has gone into hiding: sefe-deposit boxes, dumies, etc. and is being held for use as needed by the German authorities. Perhaps a sudden freezing of all safe-de- posit boxes might locate this currency etc. (egd) J.F.C. Regraded Uclassified 70 C 0 P Y PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Berlin. DATE: June 18, 1941. noon. NO. : 2415. At eleven P.M. the Reichsbank announced that it was continuing to pay remittances end asserts (7) to United States citizens as before, although banking institutions have been refusing to cash U.S. checks and officials of the Foreign Office have informed inquirers that they should not request by telegraph travel mark remittances from New York. Please advise Treasury Department. MORRIS. EA:MSG Copy:bj:6-18-41 LEOHNICY 10 THE OFFICE Bel n 10 in S to / Regraded Uclassified 71 im 18, 1941 Mesore. Joio and Hamilten Mr. Cochren will you kindly ml at the expense of the Stabilication Past of the Preasury, a cablegram along the following lines: "American Changhing. For Fax from the Secretary of the freesury. Reference your informative messages June 11 from Bong Zong and 239 June 15 through Moberty. (2) freasury feels question of Regare sypeintment or MP appointment 10 entirely s matter for the British Gevera- ment's decision me for the Chince Government's opproval or non-apyrovel. We should not attempt to influence decision other my. (2) treasury hopes that five number Deard " contemplated vill be not - for business at carliest procticable date. Treasury believes establishment of the Deard should have priority over exploration of and political problems. (3) the Doard 10 octablished treasury contemplates writing New York head effices of American backs is this coliciting their cooperation with the Doard is stabilization of years. Bunero have reached Treasury that - American banks in theoughes show signs of breaking any from - front is support of fept, onch banks feeling from their point of view that there are ocusiderable adventages is reading early verking agreement with the 7.2.3. Please report say information you my receive on this point which sight be helpful is Treasury's approach to the New York basks. (b) Please consult our an question of confidential clerical cooletance." HMC:dm:6.k5.41 Regraded Uclassified 72 June 15, 1941 Files Mr. Cookren Upon receipt yesterday from Mr. White's office of the letter of the 8 true the Free French Delegation is You York to the Secretary of the Treasury, "Attention of Mr. Acheson", I telephoned Mr. Name) Rober, is charge of the French desk is the Department of State. I told his of this letter. & said that the witer thereof, Mr. Jacques is Steyes, had fervarded a copy thereof to is. Been Ashoson is the Department of state, for when the communication was originally intended, after learning that a nistake had been sale is addressing Mr. Achoon is the Preasury. Mr. Rober said, therefore, that there use se used to seal this letter a. In sawer to of inquiry as to whether m, Mr. Rober, received representatives of the Free French Delegation, he told as that he did receive each people, but as French citizens vise have taken refuge is United States, and net as efficials. bell EMC:dm:6.18.41 Regraded Uclassified c' 73 0 P Y FREE FRENCH DELEGATION IN THE U.S.A. 730 Fifth Avenue - New York City Circle 7-2364 June 2, 1941. Secretary of the Treasury, Washington, D. c. Attention of Mr. Acheson. Dear Mr. Acheson: I beg to send you herewith the copy of a cable which I have received from General de Gaulle's Headquarters in London. I have reason to believe that its con- tents will interest you. Very sincerely yours, (Signed) Jacques de Sieyes. Jacques de Sieyes. Jds: If COPY - dm - 6/17/41 74 o P I June 5. 1941 Mr. White Mr. Snider Subject: Translation of & cable to Mr. Achsson from M. Jacques de Sieyes, which the latter received from General de Gaulle's headquarters in London. Mr. Acheson June 2, 1941 Telegram from London, May 29, 1941. Give the widest possible publicity to the following documents: General Doyen, President of the French Delegation of the Armistice Commission at Wiesbaden, gave a report on February 5. 1941, to General Runtsinger, Minister of War at Vichy. According to this report, if Germany should vin the var, the Departments of the Nord, of Pas-de-Calais, part of the Somme, of the Aisne, of Ardennes, of Meuse, of Meurthe-et-Moselle, part of Rente Saone, and of Doubs, would, like Alsace Lorraine, not only be annered but colo- nised by Germany. Here are the essential passages of the report: "I believe it is By duty to recall to you that the German claims have not been presented all at one time, but that the Germans have tried, and up to the present time have succeeded, in presenting them one after another. Now, the establishment of the western frontier of Germany on the Mouse and on the Escant is part of the program of claims, the idea of which they are now seeking to inculcate into the German people. "The more or less complete realization of this program does not depend on our policy but on the possibilities that the outcome of the war with England will give to the Reich." Insist on the fact that a General who has the confidence of Vichy emphasizes that the treatment inflicted on France does not depend upon the policy of Vichy but only on the result of the war between England and Germany. Regraded Uclassified 75 - 2 - Here is the conclusion of General Doyen's report: "A part of the territory in France appears particularly coveted by the Reich: namely, that of the occupied zone. The German Armistice Commission has just advised us that & German agricultural society has been charged with the exploitation of the lands which were abandoned following the prohibition of the return of the population into the occupied zone. When it is added that the recruitment of French workers for Germany is being carried on intensively, notably in the Departments of the Nord and of Pas-de-Calais, and that veritable raids are organized as a result of which thousands of Frenchmen are separated from their homes, there is reason to suspect that the Nasi Government seeks to depopulate systematically a part of our country in order to install Germans, as occurred in Alsace-Lorraine. Signed: Doyen." COPY - dm - 6/17/41 76 C Regraded Uclass 0 P DEPARTMENT OF STATE I WASHINGTON In reply 'refer to June 15, 1941 RA My dear Mr. Secretary: The Charge d'Affaires ad interim of the Republic of Haiti, at the request of his Government, has advised this Department of the desire of the National Bank of the Republic of Haiti, a government institution, to purchase $750,000 worth of gold for the purpose of serving as a reserve against the circulation of Haitian currency. The gold, if purchased, would remain on deposit with the Federal Reserve Bank of New York for the account of the National Bank of the Republic of Haiti. At the same time the Charge has inquired if the Federal Reserve Bank of New York would be willing to re-purchase the gold at the same price, in the event that the Haitian Government should decide later to sell it. A translation of the instructions received by the Charge d'Affaires from his government is attached. I should appreciate an expression of the viewsof the Treasury Department in regard to this matter. Sincerely yours, For the Secretary of State: 101 Summer Welles Under Secretary The Honorable Eenry Morgenthau, Jr. Secretary of the Treasury Enclosure: Translation of instructions from Port-au-Prince, Haiti, May 31, 1941. 77 [TRANSLATION] SECRETARIATE OF STATE FOR FOREIGN RELATIONS URGENT Port-au-Prince, May 31, 1941, Mr. Charge d'Affaires: I invite you to advise the Department of State of the United States, upon receipt of these presents, of the desire of the National Bank of the Republic of Haiti to buy $750,000.00 in gold intended to guarantee the Haitian monetary circulation. I also request you to ascertain, by making use of the good offices of the Department of State, the willing- ness of the Federal Bank to take back the gold in question at the purchase price in the event that the National Bank of the Republic of Haiti should decide to sell it. You will note that the gold in question is to remain on deposit with the Federal Bank for the account of the National Bank of the Republic of Haiti. Please accept (etc.) (Signed) Fombrun Mr. Jacques C. Antoine, Charge d'Affaires of the Republic of Haiti, Washington, D.C. Tr:Ce:HSF 78 COPY DEPARTMENT OF STATE WASHINGTON In reply refer to TA 840.51 Frozen Credits/1938 June 18, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses herewith copies of a telegram, no. 1158, dated June 17, 1941 from the American Embassy in Moscow, concerning foreign funds in the United States frozen under Executive Order No. 8785. Enclosure: No. 1158 from Moscow, June 17, 1941. 79 GMW GRAY Moscow Dated June 17, 1941 Rec'd 10:42 a.m. Secretary of State, Washington. 1158. June 17, Noon. The Moscow papers this morning publish the following Tass despatch from New York: "According to the Washington correspondent of the United Press Agency Roosevelt has sequestered German and Italian funds in the United States of America. The White House simultaneously announced the sequestration of funds of all countries of con- tinental Europe. Along with this it vas declared that the sequestration can be lifted from the funds of Sweden, Finland, Spain, Portugal, and the Union of Soviet Socialist Republics through the medium of general licenses upon the appropriate assurance that the general licenses will not be used "for the purpose of evading this law". STEINHARDT NPL BY 20 10 MS S vs Copy:bj:6-19-41 Regraded Uclassified 80 Copy of Letter from Y, Santiago, June 18,1941. The political situation here has changed somewhet. It is evident that our President believes that e balance in his Cabinet between friends or the Nazie and friends of England would be desirable. Rosetti, our 10% Minister of Foreign Affairs, is 6 decided Nazi and his reputation Is not the good. The Minister of the Interior, Mr. Olavarria, is leaning towards the Nezie, while the rest of the Cabinet Ministers are quite respectable people. The activity among the German Colony for training purposes etc. still continues unabated. It appears, however, that news of the food situation In Germany 18 none too good and the continuation of the resistence of land, together with the attitude of the U.S., has had 8. considerable bioling effect upon the enthusissm in the German Colony. It is becoming gradually evident that Chileons of Germen descent are peparated from Nezi activities to 8. certain extent and, altogether, people of Geruan extraction who half a year ago held their hends very high are beginning to become visibly worried. The former enthusiasm 18 being limmed by several circumstances and incidents of which I wish to mention 070 rather emusing one: You have heard that the German steamers left Chilean ports a few yorks 5g0. One of then wes the steamer "Erlangen", which left from Purto Montt. The steemer was first filled up with all sorts of material, rincipally food stuff, and all this wes supplied by a Nazi firm, Wagner Chadwick. When the Captain had everything aboard, he was confidentially idvised that bombs were hidden among the merchandise. So promptly he inloaded again and when he had unloaded everything but 300 tons, he got rders to pull out. The Embassy here, then, attempted to sell the mer- Chandise, which turned out to be B rather poor quality. Finally they rought pressure upon Wagner & Chadwick to take book everything at cost, nd at last that firm consented but under the condition that the bribe oney paid by them to Mr. Boettcher, the Commercial Attache of the breasy, and Mr. Schulte, who 18 elso close to the Embassy, be returned b them. These little incidents are gradually raising some discord in $10 Colony and not everybody 18 convinced that the high officials of the Party are soting from exclusively altruistic motives. The firm attitude of the U.S. Government is bound to have its fecta here, 1f it lasts, end the decision of the Am rican companies lot to have any Germen employees, the inability of the banks to bring funds from the States, etc. might All help to quiet things down in this art of the world. TAUL L is s nue Regraded Uclassified Secretary Morgenthau - 280 81 DEFENSE SAVINGS STAFF SPECIAL NOTICE ADVANCE NOTICE RADIO PROGRAMS WEDNESDAY - JUNE 18 Time: 7:00 - 7:30 PM. Program: "QUIZ KIDS" This program originates in Chicago, Illinois. Mrs. Henry horgenthau, Jr. will be Guest Speaker from the National Broadcasting Company Studios in Washington. Station: WMAL 82 DEFENSE SAVINGS STAFF ADVANCE NOTICE RADIO PROGRAMS WEDNESDAY, JUNE 18 Time: 11:00 - 11:15 AM. Program: Kate Smith Speake Station: WJSV Time: 1:30 - 1:45 PM. Program: "Valient Lady" Entire Program turned over to Defense Savings Bonds and Stamps including opening and closing commercials which will be substituted by Announcements for the Defense Savings Bonds and Stamps. Station: WRC Time: 3:30 - 3:45 PM. Program: Lorenzo Jones Station: WRC Time: 6:30 - 7:00 PM. Program: Meet Mr. Meek Station: WJSV Time: 8:00 - 9:00 PM. Program: Texaco Star Theatre with Fred Allen Station: WJSV Time: 9:00 P.M. Program: Heavyweight Championship Fight between Champion Joe Louis and Billy Conn. Announcements for Defense Bonds and Stamps between Rounds. Station: WJSV THESE PROGRAMS PROMOTE SALE OF DEFENSE BONDS AND STAMPS. Regraded Uclassified 83 TREASURY DEPARTMENT Ts INTER-OFFICE COMMUNICATION DATE June 18, 1941 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £94,000 Purchased from commercial concerns £13,000 Open market sterling was first quoted at 4.03-3/4. Around mid-afternoon, it moved to 4.03-1/2, remaining at that level for the rest of the day. The only reported transactions consisted of sales of £2,000 to commercial concerns. The Canadian dollar discount widened to close at 11-7/8%, as compared with 11-9/16% last night. The Uruguayan free peso, which closed at .4200 yesterday, advanced to a final quotation of .4260 this afternoon. In New York, closing quotations for the foreign currencies listed below were as follows: Argentine peso (free) .2380 Brazilian milreis (free) .0505 Mexican peso .2070 Cuban peso 1-3/16% discount In Shanghai, the yuan advanced 1/32# to 5-15/324. Sterling was quoted at 3.92-1/4, up 1/44. There were no gold transactions consummated by us today. No new gold engagements were reported. We were informed that the Bombay gold price on June 14 was equivalent to $34.15, representing a decline of 15# from the quotation of June 7. Silver in Bombay was 1/16# lower, at the equivalent of 44.61#. In London, a price of 23-7/16d was fixed for both spot and forward silver, a gain of 1/16d in each case. The U.S. equivalent of this price is 42.55#. The Treasury's purchase price for foreign silver was unchanged at 35#. Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/44. There were no silver purchases made by us today. Regraded Uclassified -2- 84 The Federal Reserve Bank's report of June 11, listing deposits of banks in Asia with the Yes York agencies of Japanese banks, showed that such deposits totaled $69,986,000. 5. decline of $656,000 since June 4. The two largest changes in deposite occurred at the Mitsui Bank agency, where there was e. decline of $687,000 to $1,109,000, and at the Yobohama Specie Bank agency, where deposits rose $650,000 to $65,429,000. The latter agency's principal dollar liabilities to and dollar claims on Japanese banks in Asia stood as follows on June 11: Change from June 11 June 4 Liabilities: Deposite for Japan and Manchuria, $48,319,000 + $1,162,000 Deposite for China 15,352,000 - 550,000 . : U.S. Treas. Bills, com. paper, etc. 30,848,000 + 3,296,000 Claims : Loans $19,539,000 - $6,568,000 . : Other - mainly Jap. import bills 5,910,000 - 778,000 Japanese and Manchurian bank deposits increased only $1,162,000, despite the receipt of more than $9,000,000 from the Bank of Java account at the Federal Reserve Bank. (Reference was made to this transfer in our report of June 11.) The difference of nearly $8,000,000 was presumably used to reduce Agency loans, pay off Japanese import bills. and to purchase U.S. Treasury bills, etc. Swill CONFIDENTIAL Regraded Uclassified 85 BRITISH EMBASSY, PERSONAL WASHINGTON, D.C. AND SECRET 18th June, 1941. Dear Mr. Secretary, I enclose herein for your personal - and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, hark Butter The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 86 Telegram from London dated 16th June, 1941. On 15th June the Royal Air Force attacked conveys off the enemy coast. One merchant ship of 1,000 tone and one 4,000 tons hit with bombs, one 5,000 tens ass torpedo and left with heavy list. During case attack 6,000 ton merchant ship thought to have received glancing hit by bomb. One 8 boat also damaged. 2. P.M. 15th June. Vichy destroyer Cassard class was sighted by aircraft northwest of Cyprus on Easterly course and at 03:00 June 16th she was hit by two torpedoes from aircraft about 40 miles northwest of Tripolis, Syria. 3. Nine Wellingtons attached Bengasi the night of June 13th/June 14th. During intensive operations in Libya our sircraft have destroyed 11 aircraft on the ground, 3 in the air and destroyed OF disabled 3 light tanks and 23 M.T. vehicles. 4. Sollum area. British patrol reached Gembut area 40 miles west of Bardie and destroyed 12 Italian V.T. vehicles. Yesterday our forces captured Capusso and Bir Waer. 5. Abyasinia. In 01mmak area it appeara that one enemy division has completed withdrawal from west of the river Didesse, Baco 65 miles east southeast of Maji has been evacuated by the enemy. 6. Iraq. One of our columns has left Amare en route for Begdad. 7. Syria. On 14th June nine Blenheims destroyed at least 3 aircraft on the ground at Aleppo. On the right our forward troops are established north of river Nahr el Aouaj. Najha captured. Moukelba reported captured subject to confirmation. In center Jessine occupied/ Regraded Uclassified Name 87 - 2 - occupied morning of 15th June. Sidon captured 12:00 hours 15th June. 8. Last night we sent over 182 aircraft which attacked railway centers in the Ruhr Hanover and Dunkirk. All returned but one, Enemy activity United Kingdom negligible. Four airoraft of Condor unit attacked a convoy at 07:50 hours on 15th June. They were engaged one by one by a Cataline flying boat escorting the convoy. Catalina reported having received minor damage but no casualties. It was subsequently reported four enemy aircraft foroed landed in Portugal, 3 of which were German and it is thought probable that these were the aircraft which attacked the convoy. Regraded Uclassified 88 BRITISH EMBASSY, PERSONAL WASHINGTON, D.C. AND SECRET 18th June, 1941 Dear Mr. Secretary, I enclose herein for your personal - and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, have Butter The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 89 Telegram received from London dated June 15th, 1941. On June 14th substantial reinforcemente of Hurricanes arrived at Malta. 2. P.M. 14th. Two French destroyers sighted five miles west of Beirut returned eventually when attempt to intercept was made. 3,300 ton Italian tarker was torpedoed and eunk of Cape Helles e.m. June 10th probably by British submarine. Norwegian tanker of 6,000 tons reports that on the 12th was shelled by shore battery when 15 miles off Iles de Los, French Guinea. An aircraft which was spotting also muchine- gunned her. 3. Night of 14th/15th, 29 bombers sent to Cologne. All returned but conditions bad. Night before Royal Air Force bombers dropped 71 tone of high explosives including 16 of 2,000 pounds on positions of Scharnhorst and Gneisenau, 86 tons of high explosives including 6 of 2,000 pounds dropped on positions of Prinz Eugen. Target screened and ground haze but many burste seen very close to ships. 4. 6 offensive fighter patrols carried out over France 14th. They shot down 3 enemy aircraft and damaged 3 without loss. Night of 12th/13th 6 wellingtons successfully bombed Benghasi. Burets seen on or near two 3,000 ton ships. 5. Libya. Egypt. At the end of say estimated number of Itelian tanks 18 medium, 45 light, all in Tobruk area. Originally there were 230. Night of 11th/ 12th mechanised patrol encountered 16 Italian M.T. vehicles destroying 12. Night of 12th/14th our troops improved/ Regraded Uclassified - 90 -2- improved our position in Medawa Salient by means of advance. 6. Abyssinia. June 9th in Gambela area our troops met considerable opposition in attack from the South. Casualties slight and operation continuing. 7. Iraq. Tigris column has arrived near Amara. Haditha column reports still some onemy activity near Abu Kemal. 8. Syria. In centre our troops have reached Jezzine and operations continue northwards. About Sidon strong Vichy resistance with tanks reported. Regraded Uclassified 91 CONFIDENTIAL MILITARY INTELLIGENCE DIVISION TENTATIVE LESSONS BULLETIN WAR DEPARTMENT No. 121 Washington, June 18, 1941 0-2/2657-235 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. The lessons necessarily are tentative and in no sense mature studies. This document is being given an approved distribution, and no additional copies are available in the Military Intel- ligence Division. For provisions governing its reproduction, see letter TAG 350.05 (9-19-40) M-B-M. MISCELLANEOUS NOTES ON THE GERMAN ARMY SOURCE These notes are based upon information released by a high British official source on March 23, 1941. CONTENTS 1. CAMOUFLAGED PARACHUTE 2, FLAME THROWERS a, Test Report on Portable Flame Thrower b. Possible Use of Flame Throwers in Support of Landing Operations 3. ANTI-GAS EQUIPMENT 4. SLEEPING GASES 5. CHEMICAL WARFARE TRAINING OF PARACHUTE TROOPS CONFIDENTIAL -1- Regraded Uclassified 92 CONFIDENTIAL MISCELLANEOUS NOTES ON THE GERMAN ARMY 1. CAMOUFLAGED PARACHUTE A type of German parachute never before found in England has recently been examined. It may be used for dropping German agents, Although the parachute is of the same size and general character- istics as the German version of the Irving parachutes hitherto re- covered in England, there are a number of important differences. The whole surface of the canopy is camouflaged, and the cords, ordinarily white, are dyed sepia. The camouflage, very in- geniously executed, forms an all-over pattern on the cloth in shades of emerald green, gold, olive green, and combinations of these probably formed by overprintings. The method of application is almost certainly printing, but it is difficult to be quite sure of this because the parachute examined was wet when found. The camouflage was apparently applied to the cloth before the chute was made up, probably by machine printing of the surface type or possibly by screen printing. Al- though it is not easily recognized, there is a definite repeat of the design within about 32 inches from any given point on the whole cloth, but it is most difficult to detect this, partly because of the irregular all-over effect of the pattern itself and partly be- cause the cloth is cut on the bias. Arrangement of the triangular sections from the perimeter to the anulus further assiste in dis- guising the repeat of the pattern. If, the design is not printed, it may possibly be applied by spraying, with a stencil used to distribute the design. 2. FLAME THROWERS 8, Test Report on Portable Flame Thrower A standard German portable flame thrower recently taken from the tail of a DO-17 has been repaired, and tests have been completed with the following results: (1) Mechanism It was found that the trigger control did not operate satis- factorily for intermittent firing. This difficulty was overcome by the introduction of a suitable spring. The hydrogen valve would not hold pressure and this defect CONFIDENTIAL -2- Regraded Uclassified 93 CONFIDENTIAL was finally traced to porous metal around the valve seating. When a remedy was sought by bushing the part between the hydrogen valve and the main oil supply pipe, it crumbled away. For test purposes, commercial Schrader valves were put in, but these were found to leak gas at 150 atmospheres pressure unless a harder rubber seal was used. There is no reason why either of these faults should be in- herent in the design of the flame thrower, but it 18 evident that the sample tested was of indifferent quality. (2) Performance Under satisfactory weather conditions, a maximum range of 25 yards was obtai ned. Average conditions indicate a range of 20 yards, which falls to 16 yards as the nitrogen pressure drops to a minimum, The duration of the jet, when uninterrupted, was 12 seconds, with an approximate discharge rate of 1/5 gallon per second, (3) Fuel A mixture of 90% heavy furnace fuel oil and 10% benzol, gave satisfactory ignition and deposited burning oil on the ground at full range. A mixture of 80% heavy fuel oil and 20% gasoline gave sicilar results. Heavy liquid creosote free from undissolved solid matter was next tried, but inflammation was not obtained throughout the pressure range of the apparatus. The trajectory was straight, and during the part of the test when inflammation was obtained, all the creosote was burned in the air before reaching the ground unless the range was shortened by depressing the nozzle. The performance was about what would be expected from a weapon of this size and weight. b. Possible Use of Flame Throwers in Support of Landing Operations Reports have been received indicating that the Germans are using flame throwers during certain phases of specialized invasion training which is being carried out in Western Germany and France. The flame throwers are reported to be mounted on boats and to have a range of from 50 to 300 meters; it is considered probable, how- ever, that if flame throwers are used on boats they are more likely to be of the one-man portable type than of the fixed type. It has been found that the upper practical limit of a. flame thrower's range is about 150 yards. A flame-thrower mounted on a boat standing off shore is not likely to find suitable targets on shore within this range. Moreover the flame thrower, with its pumping motor and fuel storage tank, would represent a volume and CONFIDENTIAL -3- Regraded Uclassified 94 CONFIDENTIAL weight which attacking craft could probably not afford for a weapon of such doubtful value. The discharge rate of e jet giving a 150- yard range is about 2/2/2020 tons a minute. Once the troops and armored vehicles taking part in the landing have disembarked and are on the beaches, an assault on the antitank obstacles and defense positions becomes a normal land operation in which the German troops are well trained. The final reduction of pillboxes by portable flame throwers forms part of training for an assault operation, and it 18 quite reasonable that flame throwers of this type - or, alternatively, the tank-mounted type-would be seen in use during landing practice. The portable flame thrower has the advantage of flexibility, although its max- 1mum range under favorable conditions is only 20 yards. Reliable details of the tank-mounted flame thrower are lacking, but it probably has a range up to 150 yards, with a jet duration of one to two minutes. It is considered that, with resolutely defended positions and pillboxes sited to give cross covering fire, the use of flame throwers, either portable or tank-mounted, would be very restricted, since either form of this weapon is very vulnerable to rifle or machine gun fire. 3. ANTI-GAS EQUIPMENT It has been reliably reported that tablets of bleaching powder are now being distributed to workmen in all large German towns and factories for application to the skin against the effects of mustard gas and lewisite. A sample tablet has been received. To it was attached a label bearing the inscription Chlorkalkstift D, or Bleach Pencil D. This tablet was found, upon analysis, to consist of bleach- ing powder which had undergone extensive decomposition through exposure. It would still provide a slight beneficial effect on contaminated skin, although it is definitely inferior to the Losantin tablets in bakelite containers provided in German Service respirators. 4. SLEEPING GASES There have been numerous reports of sleeping and narcotic gases, but thus far such gases have been considered impracticable for use ao chemical warfare agents. CONFIDENTIAL Regraded Uclassified 95 CONFIDENTIAL A possible explanation of the origin of these reports has now been found. The Czecha appear to have used the names of hypnotic drugs as code names for some of their chemical warfare gases - for example, sulphonal for mustard gas, and luminal for lewisite. The fact that bombs and other weapons charged with Crech chemical war- fare material have been associated with these code names is possibly responsible for rumors that the Germans have narcotic gases. Reports that such gases have put troops out of action for five to six hours may be connected with the fact that this is the period required for mustard gas to produce vesication. Some of the longer periods mentioned - five to seven days - might refer to estimatos of its persistence or the time required for action through the skin. 5. CHEMICAL WARFARE TRAINING OF PARACHUTE TROOPS Three recent independent reports from good sources have re- ferred to the training of German parachute troops in the use of gas or in self defense against it. The first report stated that parachutists have been issued a special type of respirator, smaller than the normal. This reference probably involves the canvas carrier supplied in place of the normal metal one for the purpose of lessening weight. Samples of these can- vas carriers have actually been obtained. The second report, in describing a large scale parachute ex- ercise in Germany, stated that all personnel descended wearing respirators. The third report stated that @ hand grenades were being issued to parachutists. In this connection, other reports have told of storage of gas in lead containers and of emptying gas-charged weapons after the comparatively short period of 17 months on account of corresion. Both these reference suggest a highly corrosive liquid such as the lachrymator, bromobensyl cyanide. It is considered highly probable that parachutists would be armed with gas grenades which might be filled with tear gas. Grenades of this type would be silent, quick acting, and useful for surprise attacks on isolated posts. CONFIDENTIAL -5- Regraded Uclassified 96 RESTRICTED 0-2/2657-220 No. 420 M.I.D.,W.D. 12:00 M., June 18, 1941. SITUATION REPORT I. Western Theater Air: Severe air fighting over the English Channel during daylight of the 17th. German. No reports of attacks on Great Britain. British. Last night the attacks on the Rhine and Ruhr industrial areas were renewed in force. II. Mediterranean and Middle Eastern Theaters Ground: The British attack toward Tobruk has been repulsed, and the attacking force is retiring. It is unknown whether the Axis forces are pursuing. Air: Air forces of both sides were used in close support in Libya. Axis. Night attack on Malta. British. In Libya, raids on airfields at Derna, Martuba and Gazala. Bardia was bombed. III. Syria. Ground: Slow progress by the invaders toward Damascus and Beirut. In the north a small allied force is approaching Aleppo. Air: Widespread activity by small force. RESTRICTED Regraded Uclassified confidential 97 Paraphrase of Code Cablegram Received at the Ver Department at 14:26, I'me 18, 1941. London, filed im 18, 1941. 1. British Air Activity Over the Consinent. a. Eight of June 16-17. is uncomed number of bechers operated over the continent against the following targets: Daisbarg, 4,000 four pound incondiaries, 500 twenty-five yound insendiaries, 48 high explosive bombs; Cologne, 80 high explosive and 11,000 incondiative, Desselderf, 90 high explosive 8,800 incondiary bombs. 13 tome of bonies were carried w one Stirling. (G-2. This statement is questioned. It is believed that 13,000 pounds of bombe is nearer correct, as that is the approximate maximum load.) 1. Bay of Im 17. Bethman was attacked by 25 aircraft of the bonber command. Fighter protection was furnished during this flight by 36 giving close ossort and 36 Spitfires operating as high cover. Strong patrols of fighters carried out patrols along the French and English coasts. 1. Hight of June 17-18. Bombing in the area of Charbourg and Dunkirk and effensive recommaisence vere accomplished by aircraft of the coastal commend. 2. forma Air Activity Over Britain. 1. Pay of Im 16. Germary operated over Regland with 40 pureuit aircraft, 20 recommissance planse, and 10 Long reage bonhers. 275 fighter aircraft operated on defensive missions over the continent. CONFIDENTIAL INFORMATION COPY Regraded Uclassified CONFIDENTIAL 98 1. Hight Im 16-17. - operated against Regions with 20 parent and 30 misolaying aircraft. 1. Fight due 17-18. There vse - comp activity - the southwest coast of Ingland a a elight scale. 3. Aircraft Leases Reported. 4 the British report 12 aircraft missing or destrayed. 2. The extent of German losses is given as 12 ME-109's destroyed and possible damage to 13 mrs. 4. British Air Activities. Other Theaters. a. Egration Theater. Forward troope operating is Egypt wase given complete protection from Aris attacks w patrols of Burrieance and P-40's. In this theater it is reported that 4 ME-109's vare damaged or destroyed. The herbore at Benghasi, Derma, Naturba, Artine, Gazala and Bardia on the night of June 15th were banked. b. Middle Eastern Thester. In this area objectives were machine graned. and banded - a limited seale and there was - recomations missions carried ent. 5. Axis Air Activity From Other Territories. liene reported. 6. Information received to the effect that British Air Attache in Washington has explained to the United States Government basic policies regarding nearesy together with reasons for releasing to the public inform- tiem emerging radio direction finder apparates. IM Distribution: Secretary of War Var Plans Division State Department Office of Naval Intelligence Secretary of Treasury - Valor Secretary of Ver 0-3 Chief of Staff Air Carps + CONFIDENTIAL Regraded Uclassified CONFIDENTIAL 99 of the Coblegues I $ at 16137, - se, 1943. Busharest, filed sume 18, 1941. in wher of the - has bom 1 to - effect that 130 task - contribuing a variety of oil products be at I I I planed 1 $ I State - 10th, Desharest - enforced the "dischout" with memi strictmes. May people - everything the city. Official permite are regalred for trains one busine. Commensing - stal, the ⑉ of private mater vehicles will be eat das w desette restrictions. a this date also guestime retion - take fures. as Italian tenbers have comment leading dissel fuel and other sile at Constrates. I Distribution: Secretary w Ver State Department I I r Unior Secretary of Wet thief of Shaff Asststant Unief of staff, 6-2 Ver Plans Division Office of Havel Intelligence CONFIDENTIAL INFORMATION Co Regraded Uclassified 100 June 19, 1941 I called Oscar Cox at a quarter of eight, and asked him whether they were making any progress on the English financial situation. He said that they were. I said that I was worried because I wanted to keep my word with Phillips. Cox said, "Well, don't worry about your word. You have kept it. You have given them at least $400,000,000 worth of relief which they hadn't counted on." I asked Cox what Hopkins' reaction was to Keynes' memorandum. He said he didn't know, but Hopkins was call- ing B. meeting at ten o'clock this morning to get it started. I asked him what he thought of Keynes' memorandum, and he said, "Well, I think Keynes is 8. very annoying fellow." I said, "Well, Purvis is coming for me at 8:30 and I was going to make a suggestion, and I want to know what you think of it." I said that I am going to suggest that they form a committee composed of & representative of Hopkins, a representative of the Treasury, and 8. represents- tive of the English, and that they meet at 4:30 every day and pass on all dollar commitments and see whether they have to be made in dollars from the British Treasury, or whether they can go through Lend-Lease. Oscar said, "I think that's 8. swell idea." He said, "I know 8. lot of the things that they are buying could go through Lend- Lease. For example, they have a $15,000,000 cash order for airplanes which could just as well go through Lend- Lease.' He said, "They are paying out about $300,000,000 in cash, and I am sure 8. great deal of it could go through Lend-Lease." I told Oscar that it was his letter of yesterday that started me thinking along these lines. Then I asked him whether the English were still buying outside of the Purchasing Commission. He said, "Yes, they are." I said, "They ought to control that," and he said, "They certainly ought to control it." I said I em going to insist that all purchases clear through the Purchasing Commission, and then through this committee which will pass Regraded Uclassified 101 - 2 - on the orders each day just the way it was done when we had them on an allowance of $35,000,000 a week. Oscar was very enthusiastic about my suggestion. 102 June 19, 1941 On my way to down this morning, I explained to Mr. Purvis my idea of a committee to meet each day and rule on whether or not England should pay cash for each individual order, or whether they should come under Lend-Lease. He was very enthusiastic. 103 June 19, 1941 9:07 a.m. HMJr: Good morning, Harry. Harry Hopkins: Good morning. HMJr: How are you? H: Fair. HMJr: Well, H: Physically better. HMJr: Well, I'm glad to hear it. Harry, I've got a suggestion which I think would help you and me. The English as you know tell us that they are going to be out of dollars - they are talking very blue, but I'd like H: God damn them, they go out and order a lot of steel, I notice. HMJr: I know. Now, what I'd like to do is this. I'd like to have a meeting every day, I'll start it in my office where we'd have somebody representing Purvis, somebody representing Phillips and the unknown man who is the comptroller of dollar exchange. H: Yeah. HMJr: That somebody, I hope it would be Oscar Cox and we go over the future, never mind the back stuff and they'd start out by saying we have BO many dollars in the Empire.... 104 - 2 - H: Yeah. HMJr: Now, we've got so many orders we want to place and I'm going to say, well, we want to sit down with your comptroller of exchange, whoever he is, and go over, every time you buy any dollars, we want to okay it. H:9 Yeah. HMJr: And if it can go through Lend- Lease, Mr. Cox is here representing Mr. Hopkins, but we want to know the net position of what your dollar has accounted every night and not be told two weeks from now or 30 days from now that you're busted. Now, that would be looking forward, you see? H: Uh nuh. HMJr: And it would at least give me a chance to turn around. H: Give you a chance to watch that dollar exchange without hearing about it after the cat's out of the bag. HMJr: That's the idea. H: I - - that's a damn good idea. HMJr: Now, I don't know who the dollar - the fellow that runs it and I had Purvis come to the house at 8:30 this morning and he's crazy about the idea and I said, "Who is the person?" He said, "Henry, 1 don't know", and he said if you ask them I think it's going to bring it to light, but he said, "I can't control it", but he said, "If you do this, then we'll know". What do you think? Regraded Uclassified 105 - 3 - H: It's a damn good idea. HMJr: Well, if you like it.... H: And Oscar, of course, would be fine.. HMJr: I'd like to H: He could, you know HMJr: Pardon? H: You trust Oscar and 80 do I. HMJr: Oh, sure. H: And he can speak for me and make commitments on my behalf right there, you see. He wont have to call me up. HMJr: Well, if you like it, I'll start the first meeting at 3:30 today. H: Good. HMJr: See? And then H: (Laughs) I'm going to be very interested to hear about the first meeting. HMJr: Well, if you had nothing, would you... H: No, no, I don't want to.... HMJr: What? H: No, no, I don't want to go, It's pure inquisitiveness. HMJr: Oh, well I mean I'd love to have you. 106 - 4 - H: I couldn't help any. HMJr: What? H: I couldn't help any. HMJr: You might, you - would you care to come? H: No, I don't think so, Henry. HMJr: Anyway, will you send Cox? H: You bet I will. Oscar is coming over this morning to see me and HMJr: And then this back stuff, we're working like hell to clean it up, see? H: The what? HMJr: The back stuff. H: Well, I've asked Oscar to come over to see me this morning to see if we can't pull something out of a hat here this morning on the back stuff so that we can, all of us, stop worrying about it. HMJr: Well, if you could it would take a terrific load off my,... H: And I'd like to see if I can't do that before you meet this afternoon. HMJr: Well, that would be wonderful. H: Because I've got a long letter here from Keyne - a long winded letter from him. 107 - 5 - HMJr: Well, how did you react to that? H: To Keyne's letter? HMJr: Yeah. H: Not very well. HMJr: Me neither. He sent me a copy. H: I don't like his style and approach. My own private opinion 18 that except from the point of view of the British Treasury, he'd just be well off at home. HMJr: You and me, both. H: You see, he says he's sent here on a mission, and his mission has got to be complete. HMJr: Yeah. H: Well, God Almighty, seems to me you might well say, "Well what in hell is Phillips been doing here all the time"? HMJr: That's right. H: And ..... HMJr: Well H: I'm Just wondering, of course, I suppose it's none of our business to. HMJr: You mean that.... H: Here's the point about Keyne. If he hangs around here until we get mixed up in a new Lend- Lease bill, he's apt to pull some real boners with some of the people on the Hill or Regraded Uclassified 108 - 6 - something and he'll be telling us how to write a Lend-Lease bill and people will get madder than hell around here about it. H/Jr: Well, let me make 8 suggestion. After all, he came over here on a cable from Winant. 5 Yeah. HMJr: Has Winant gone back yet? H: Yeah. I think Winant should land in England today, I think. HWr: Well, why don't drop e .... H: A bee after Winant. HMJr: What? H: Yeah. HMJr: Why don't you drop a bee R: At Winant, Yeah. HMJr: And tell him that he sent him over here H: And we've heard everything.... HMJr: Yeah. H: Yeab. HMJr: That's the way to get him back home. H: I have a feeling that he can't accomplish much anyway. Don't you? I mean, he certainly can't do any more than Phillips can do. Regraded Uclassified 109 - 7 - HMJr: He can't do any more than Phillips and he's all over town holding meetings. One meeting that I heard of, quite critical of the President, see, a meeting that was up at Frankfurter's and quite critical of how the President is running the country and - what? H: Uh huh. HMJr: So, we have enough troubles. H: Yeah, that's right. HMJr: We've got enough troubles. H: Yeah. HMJr: Winant is the fellow who can pull him back. H: Yeah, you see now what he's doing, too. He now moves on me - writes me a letter and sends you a copy, see? HMJr: Yeah. H: Well, now - God damn it, if he's here for the Treasury - the British Treasury - his business 1s to be writing you letters and sending me copies. You see what he's going to do, he's going to move on any front he thinks he can move on. HMJr: That's right. H: I don't mind - I mean I don't - it doesn't bother - I think I'm over emphasizing the importance of it. 110 - 8 - HMJr: No, I don't think you are because when I got it, I just said, "God damn it". H: Yeah, that's the way I felt about it. HMJr: what? H: That's just the way I felt about it. HMJr: It's just too bad if he's got to wait 5 weeks. H: I have no doubt that if I'd got a two line note or copy of a note from Phillips, which in substance would have said, well now, we're in quite & Jam and wish you could help us - Personally, I undoubtedly would stir my stumps far more than getting a six page letter from Keyne, you see? HMJr: Yeah. H: We don't have to be motivated that way. He sort of assumes that we don't give a damn, and it just - it irritates me and I must irritate you more. HMJr: Well, 1t sort of puts me in the feeling as though - well, Morgentnau really ien't ..... H:- Doesn't really care about it. HMJr: That's the point and after everything that I've been through. H: rean. HMJr: And I imagine it makes you feel the same way. Regraded Uclassified 111 - 9 - H: Yeah, it does. It does. He comes around here and I've heard somewhat the same thing about the other matter, too. They!re very free with his advice and - he's one of these fellows that just knows all the answers, you see? HMJr: That's right. H: And I have a hunch, although, I don't know it, I have a hunch he's irritating somebody's a - Englishman. HMJr: Well H: He's got a new job, you know. HMJr: What's that? H: Well, he's working with the Ambassador on this over all agreement. HMJr: on really. H: Yeah. HMJr: Well, that's &..... H: So he may be around you on that, but that's something else from this. HMJr: Well, B.B I - Winant could pull him back. H: All right, I'll see if I can't soon as I hear... HMJr: And you... H: Gill has arrived, I'll see if I can't .... 112 - 10 - HMJr: And you tell Cox to be here at 3:30. H: Yeah. HMJr: And then - you like the idea. H: Yeah, very much. HMJr: Thank you. H: All right. Goodbye. 113 June 19, 1941 9:28 a.m. HMJr: Hello. Jim Farley: This is HMJr: (Laughs) How are you? F: All right. HMJr: Good. F: How are you? How's your father? HMJr: He's wonderful. F: Is he all right? HMJr: Both my parents are up at Bar Harbor. F: Oh, is that 80? Well, that's fine. HMJr: Jim, I want you to go to work for me in the State of New York and head up our Defense Savings Bonds for the State. F: Well, now what do you want me to do, and when, Henry. I haven't been able to do - I've been on this greater New York thing for 60 days and I haven't been able to do anything else, see? HMJr: Well F: And, I'm still on that. HMJr: Well, when will that be done? 114 N 1 I F: Well, that's going to Jam me for at least another month. HMJr: Well, Jim, this thing of ours 1e a long time thing, but if we could see you and explain it to you and know that you would head it up, we'll give you an organization and every- thing else. F: Well, give me a day on it, will you? HMJr: Sure. r: I'll call you back. HMJr: I hope you'll do it. I spoke to the President and he said he'd like very much to have you do it. F: Well, I'll call you back. Give me a day or 80 on it. I'm going - I've got to go away Monday night, I think, or Tuesday night down to Texas and that will take - I'll be down maybe a week or 10 days and then when I come back I'll have to pick up the loose ends on this other thing that I'm trying to get out of the way, I want - this ought to have been out of the way a month ago, but I've got another month on it. HMJr: Well, without trying to crowd you, could you let me know by forenoon tomorrow. F: Yes, I'll do that. 115 - 3 - HMJr: Will you? F: Yean, I'll do that. HMJr: By forenoon tomorrow. F: Well, what would be - what would you want - what is there to it now? HMJr: Well, what we want - what we do with - in each State we've gone, we've asked the Governor to be Honorary Chairman and then we set up a Committee with a fellow that will sort of head it up and we want to go into every town and every community and get the people on a, without any too high pressure methods to invest in these defense savings bonds and give all these people that want to volunteer a chance to go to work, I mean, and help us. F: Between you and me, I couldn't give very much time, though, Henry, I don't t want to - I'm not trying to dodge anything. HMJr: Yeah. F: Besides, you know, I've been - since I've come up here all I've done 18 public service, you see? HMJr: I see. Well, you are BC well known in the State - you got 80 many friends that ..... F: But I know, you have to give it direction, you know. HMJr: That's right. Regraded Uclassified 116 - 4 - F: I never do anything unless HMJr: No, it'll take time, Jim. It'll take time. F: Well, let me - I'll talk to you in the morning. HMJr: Yeah. It's a time consumer, it wont be just something that - I don't want you for window dressing. F: Well, I know and I wouldn't want to do it for that. HMJr: No. F: See? HMJr: Yeah. F: Well, I'll talk to you in the morning. HMJr: Thank you. Regraded Uclassified 117 June 19, 1941 9:30 a.m. GROUP MEETING Present: Mr. Thompson Mr. Haas Mr. Viner Mr. Foley Mr. Schwarz Mr. Blough Mr. Gaston Mr. Bell Mr. Graves Mr. Sullivan Mr. Cochran Mr. Kuhn Mr. Odegarde Mrs. Klotz H.M.Jr: What has happened to Doughton? Sullivan: Patiently waiting. I think it is just as well. They talked and talked and talked and didn't get around to vote. H.M.Jr: Just 8 second. Why didn't you tell me Mrs. Bell had been operated on? Bell: Oh, we didn't want to bother. It came all of a sudden. H.M.Jr: Mrs. Morgenthau felt terrible. When did it happen? Bell: She made up her mind when I was up at the Regraded Uclassified 118 - 2 - committee meeting on Saturday, and it was all arranged when I came back 80 she went Friday night and was operated on Saturday morning, and she is home now. She is fine. H.M.Jr: Why didn't you tell me? Bell: Well, I didn't see any reason to. H.V.Jrs Mrs. Morgenthau folt terribly. She called in and -- Hell: Well, she needn't feel badly, because there wasn't much anybody could do. She just had to stay quiet 8. couple of days. H.V.Jr: But it was Saturday Bell: Saturday morning, yes. She made all arrange- ments when I was up on the Hill. I didn't know anything about it. H.M.Jr: But she is doing nicely^ Bell: Fine, yes. Sullivan: They are going to vote this morning on the income tax rates and the excess profits tax rates and then they are going to recess until Monday morning, so we will have time to get together on the excises. H.V.Jr: A little louder, please. Sullivan: So there won't be anything doing from whenever they get through voting today until Monday morning. H.V.Jr: Now, what do you want to report? Is that all? Sullivan: That is the whole story. Regraded Uclassified 119 - 3 - H.M.Jr: Now, Professor Blough, when are you going to have something for me? Blough: You mean on the -- H.M.Jr: Oh, a framework of facts for a speech, facts. Blough: I think we will be pretty well out of the woods on that today, Mr. Secretary. I had some additional material yesterday. H.M.Jr: When are you going to talk to Kuhn about it, and me? Blough: I can talk with him at any time after the committee gets through. Noon, we hope. H.M.Jr: When will that be? Blough: This afternoon. H.M.Jr: Mr. Kuhn is available. Blough: Fine, excellent. H.M.Jr: During the night I got an idea which I think is a good one, and I have gone to town on it. It was instigated by a letter which I got from Oscar in which he is complaining that we are buying some five hundred twenty-eight thousand dollars worth of steel which could go through the Lend-Lease. So I thought if I could get Purvis and the Treasury and the great mystery man who controls their dollar exchange to come here every day and sit down with us and say, "Now look, we have 50 much dollar exchange for the Empire on hand. Now, this is what we would like to buy today and this is what we - the commitments we have got outstanding. How much of this can you clear through Lend-Lease?" And insist for the first time, which they have never done, that all Regraded Uclassified 120 of it go through Arthur Purvis. And that we know, so that we are not told two weeks from now that they have no dollars and that we get some notice and if they are really going to run short, that we can put the pressure on Jesse or somebody else to see that they can run another two weeks. I said to Purvis this morning, "If we know when this doomsday is coming -" well, I called Oscar this morning and he is crazy about the idea. He says, "That is wonder- ful." I had Purvis at the house at eight-thirty and he says, "Fine." I said, "I would like to know who is the man who runs the exchange." He says, "I don't know who he is. I don't even know where he in 10- cated." And he says, "Like on so many things that you have done, I think this will focus it where it belongs." I said, "Now, I am not interested for the moment in the dead cats which are behind us, We will do the best that we can with those, and Oscar told me that at least four hundred million dollars worth of relief has been provided for, at least, and he is coming here at eleven-thirty this morning, Oscar." And I said, "I am interested in from now on what are we going to do to keep the English going,' and I told Purvis that this fellow Keynes makes me sort of feel as though - well, I am the fellow that has sort of got him in this trouble and the interesting thing is that I had 8 long talk with Hopkins this morning and Hopkins says this memorandum from Keynes sort of makes me feel as though T am not doing my work. Regraded Uclassified 121 - 5 - He had exactly the same reaction. He says, "Why should Keynes write me 8 letter anyway? If he wants to write you and then you send me 8 copy, that is something else. But why should he write me six pages com- plaining because he has been around here for five weeks. He says, "I wish he would go home." So I said, "Well, you can tell Winant that he sent him over here. Drop something in Winant's ear to send him home." He says he is going to, and he is working now with the Ambassador on the quid pro quo. Pell: I think that was a proper letter for Hopkins. N.Jre What? Fellt I don't see anything wrong with that letter. Honkins is the proper official with whom he should take it up. White: I think it is an appropriate letter. Fells It shouldn't have come to you, Mr. Secretary. Viner: I thought it was a very good letter. I read it carefully. Either you want to help them or you don't. You have to tell them. Well, I am sick and tired of having British people come over here. Viner: Tell them and don't deal with them, then. H.M.Jrs T haven't. I haven't seen the man. I haven't seen Phillips. Timer: That is the trouble. No it is not the trouble. I an sorry. After Regraded Uclassified 122 - 6 - what I have gone through for two and 8. half years for them to send a person over here to put me in 8. position as though I wasn't trying to do everything I can, I say it is a damn outrage. Viner: It is a very generous letter. H.M.Jr: I say it is 8 damn outrage. Viner: The letter says, "No country has ever dealt so generously with another country." H.M.Jr: I am sick and tired of publicly holding up the British hands and then they send somebody over here and he goes to a meeting and criticizes the President of the United States for the way he is running this country. I say that man should go home. We don't need any Englishman criticizing the President of the United States how he is dealing with his Cabinet and that is what Keynes did. Viner: I think that is totally irrelevant. H.M.Jr: I am sorry. White: I, too, am sorry to see you take that atti- tude, because I think he has a task. I think he has tried very, very diligently and very carefully to accomplish his ends. I think he has tried to be careful of everybody's feelings. He hasn't wanted to recede from a position. I have the feeling that he has behaved, so far as I know, O.K. with us and that includes this last letter he sent, in a way that I believe is above criticism. Hopkins: Why should it have exactly the same reaction on Hopkins? Regraded Uclassified