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Volume 484, January 9 – January 11, 1941
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Volume 484, January 9 – January 11, 1941
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 484
January 9 - 11, 1942
Regraded Unclassified
Book Page
fa-Ansco Film Corporation
See Foreign Funds Control: General Aniline and
Film Corporation
Airplanes
Shipments to British Forces, year ending
December 31, 1941 - Kamarck report - 1/9/42
484
148
Shipmonto, week ending January 6, 1942 - British
Air Commission report - 1/9/42
154
- B -
Barth, Alan
Editorial Opinion on the War: State of the Union -
1/3/42
108
DRICH, Bernard %,
See Customs, Bureau of: Butler, J. domer
critish Ministry of Economic Warfare
See Military Reports
British Purchasing Mission
Federal Reserve Bank of Hew York statement suowing
dollar disbursements, week ending December 31, 1941
282
Butler, J. Homer
See Customs, Bursau of
- C -
China
Loan: FDR urges HWr to work out possible security
for - 1/9/42
186
a) qull memorandum - 1/10/42
289
b) Coe resume' of action to date - 1/10/42
296
Kung cable as result of W&T situation in Pecific -
1/9/42
192
Cochran, H. Merle: Hull thanks HMJr for copy of
excellent report - 1/10/42
287
Cochren, H. Merle
See China
Correspondence
Mro. Forbush's resume' - 1/9/42
85
Coty's
Sec Customs, Bureau of: Butler, J. Homer
Customs, cureau of
Butler, J. Homer:
Baruch (dernard K.) letter recommending leniency,
and Treasury answer - 1/9/43
69
Ganton memorandum on conference with Butler: See
Book 486, page 8 - 1/18/47
a) HMJr-Gaston conversation: Book 487,
page 64 - 1/21/42
1) Chronological resure' I Book 487,
page 390
Regraded Unclassified
- D -
Book Page
Defense Savings Bonds
See Financing, Government
Dominican Republic
See Latin America
- E -
Economic Warfare, British Ministry of
See Military Reports
Exchange Market
Resume - 1/9-10/42
484
213,311
- F -
Financing, Government
War-time interest rate policies of Great Britain
and Canada - Currie memorandum - 1/9/42
156
Classification by Type of Purchaser of the Sales
of Treasury Notes, Tax Series A and B, August to
December, 1941 - 1/10/42
269
Defense Savings Bonds:
Pickford, Mary: Offers assistance through Lieutenant
Douglas Fairbanks - 1/9/42
74
a) Pickford-HMJr telegrams: See Book 485,
page 132
Kircher, Albert: Plan which would hold citizens
not purchasing "up to public ridicule and scorn"
disapproved by Treasury - - 1/9/42
75
Minute Man on private stationery - Callahan
resume' - 1/10/42
271
Comptroller General advised of proposed voluntary
payroll savings plan - 1/10/42
272
Foreign Funds Control
General Aniline and Film Corporation: Resume of
investigation for FDR - 1/9/42
131
a) FDR's proposed course of action - 1/10/42
222
b) Conference: present: HMJr, Foley, O'Connell,
Pehle, Klaus, and Bernstein - 1/12/42:
Book 485, page 58
c) FDR verbally approves further course of action -
1/13/42: Book 485, page 230
1) HMJr reports on conference with FDR:
Book 485, page 238
a) Tells Crowley: Book 485, page 259
d) Agfa-Ansco Film Corporation - - War Department
report on ordnance films - 1/14/42: Book 485, page 373
e) Report to FDR: Copies sent to Federal Security
Agency, Agriculture, Justice, etc. - 1/14/42:
Book 485, page 374
Progress report - 1/10/42
278-A
Regraded Unclassified
- G -
Book Page
General Aniline and 711m Corporation
See Foreign Funds Control
- H -
Hawaii
Japanese banks - liquidation of:
Instructions concerning . - 1/9/42
484
121
Treasury instructions for liquidation of Pacific
Bank, Sumitomo Bank of Hawaii, and Yokohama
Specie Bank, Ltd. - 1/13/42: See Book 485,
page 291
a) Governor of Hawaii's questions - 1/20/42:
Book 486, page 322
Enery property - Treasury instructions concerning
eent to FDR for approval - 1/9/42
123
- J -
Japan
See Hawaii
- K -
Kircher, Albert
See Financing, Government: Defense Savings Bonds
- L -
Latin America
Dominican Republic:
Enemy funds - control over - 1/9/42
197
- M -
Military Reports
British Ministry of Economic Warfare - Casady report
summarized by Coe - 1/9/42
163
Reports from London transmitted by Campbell 1/3-10/42.
215,312
Kemarck summary - 1/9/42
218
War Department bulletin:
Japanese Warfare on Malayan Front notes on - 1/9/42.
220
Ministry of Economic Warfare, British
See Military Reports
- P -
Pickford, Kery
See Financing, Government: Defonse Savings Bonds
Regraded Unclassified
- R -
Book Page
Revenue Revision
Conference with legislative leaders; present for the
Treasury: HMJr, Bell, Paul, Sullivan, Tarleau,
and Blough - 1/9/42
484
53
a) Memorandum to FDR
62
1) Charts attached on schedules used at
conference
- S -
Social Security
See Revenue Revision
- T -
Taxation
See Revenue Revision
Regraded Unclassified
1
January 9, 1942
11:20 a.m.
Oscar
Cox:
Hello.
HMJr:
Hello, Oscar.
C:
How are you this morning?
HMJr:
oh, all right. How are you?
C;
Fine. Two quick ones. One I've already cleared,
on this gift statute, with Ed.
HMJr:
Gift statute? What?
C:
Gift statute.
HMJr:
Oh, yes.
C:
There's & possibility that we'll go up in the next
couple of days on a second war powers bill.
HMJr:
Good.
C:
And that'll mean a fast way of getting it through.
HMJr:
Yeah.
C:
So I'll check it with him.
HMJr:
Yeah.
C:
And secondly, McCloy was over yesterday.
HMJr:
Who?
C:
McCloy.
HMJr:
Yee.
&
And he was excited about some stuff that Ed had
been talking to Hookins on as to the slowness of
the War Department in getting their money obli-
gated.
HMJrt
Yes.
C:
And he mentioned that the newspaper reporters
Regraded Unclassified
2
- 2 -
already had it, and that
HMJr:
Had what?
C :
Had some of the statistics that Ed had gotten
out.
HMJr:
When you speak of Ed, you mean Ed Stettinius.
C:
Yeah.
HMJr:
Yes.
C:
And he seemed to imply that it got out from the
Treasury, and I said well, he hadn't any business
implying that; and I thought I'd just tip you off
on that. I don't
HMJr:
Who implies that?
C:
McCloy.
HMJr:
Where would I get the statistics?
C:
Well, Stettinius sent out to all the Procurement
heads, that 1s, yourself and Secretary of Agri-
culture, these executive statistics which show
the - what each department's been doing on Lend-
Lease.
HMJr:
Oh. Well.
C:
It isn't anything to worry about.
HMJr:
I haven't time to worry about McCloy's worries.
C:
Okay.
HMJr:
No.
C:
In about another twenty-four hours, we'll have
a draft on that thing I talked to you about the
other night.
HMJr:
Well, I want to again say that both Stimson and
Knox would have to personally ask me to do it
Regraded Unclassified
3
- 3 -
before I'd consider it.
C:
Oh, I agree. I think you're a hundred per cent
right.
HMJr:
I wouldn't consider that.
C:
Yeah. Well, if it makes any sense we'll see what
we can do on that on their requesting it.
HMJr:
Okay.
C:
Thanks.
HMJr:
Thank you.
Regraded Unclassified
4
TREASURY DEPARTMENT
FOR RELEASE, MORNING NEWSPAPERS,
Washington
Friday, January 9, 1942.
The Secretary of the Treasury, by this public notice,
invites tenders for $150,000,000, or thereabouts, of 91-day
Treasury bills, to be issued on a discount basie under competitive
bidding. The bille of this series will be dated January 14, 1942,
and will mature April 15, 1942, when the face amount will be
payable without interest. They will be issued in bearer form
only, end In denominations of $1,000, $5,000, $10,000, $100,000,
$500,000, and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banke and
Branches up to the closing hour, two o'clock D. m., Eastern
Standard time, Monday, January 12, 1942. Tenders will not be
received at the Treasury Department, Washington. Each tender
must be for an even multiple of 41,000, and the price offered
must be expressed on the baeis of 100, with not more than three
decimale, e. 8., 99.925. Fractions may not be used. It is urged
that tenders be made on the printed forms and forwarded in the
special envelopes which will be supplied by Feieral Reserve Banke
or Branches on application therefor.
Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized
dealers in investment securities. Tenders from others must be
accompanied by payment of 10 percent of the face amount of Treasury
bills applied for, unless the tenders are accomoanied by an express
guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which public
announcement will be made by the Secretary of the Treasury of the
amount and price range of accepted bide. Those submitting tenders
Mill be advised of the acceptance or rejection thereof. The
Secretary of the Treasury expressly reserves the right to accept
or reject any or all tenders, in whole or in part, and his action
in any such respect shall be final. Payment of Recepted tenders
at the prices offered must be made or completed at the Federal
Reserve Bank in cash or other immediately available funds on
January 14, 1942, provided, however, any qualified depositary will
be permitted to make payment by credit for Treasury bills allotted
to It for itself and its customers up to any amount for which it
shall be qualified in excess of existing deposits when 60 notified
by the Federal Reserve Bank of its district.
29-46
Regraded Unclassified
5
-2-
The income derived from Treasury bills, whether interest or
gain from the sale or other disposition of the bills, shall not
have any exemption, as such, and loss from the sale or other
disposition of Treasury bills shall not have any special treatment,
AB such, under Federal tax Acts now or hereafter enacted. The
bills shall be subject to estate, inheritance, gift, or other
excise taxes, whether Federal or State, but shall be exempt from
all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United
States, or by any local taxing authority. For purposes of taxation
the amount of discount at which Treasury bills are originally sold
by the United States shall be considered to be interest. Under
Sections 42 and 117 (a) (1) of the Internal Revenue Code, as
amended by Section 115 of the Revenue Act of 1941, the amount of
discount at which bills issued hereunder are sold shall not be
considered to accrue until such bills shall be sold, redeemed or
otherwise disposed of, and such bills are excluded from considera-
tion as capital assets. Accordingly, the owner of Treasury bills
(other than life insurance companies) issued hereunder need include
in his income tax return only the difference between the price
paid for such bills, whether on original issue or on subsequent
purchase, and the amount actually received either upon sale or
redemption at maturity during the taxable year for which the
return 18 made, as ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this
notice, prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.
-000-
Regraded Unclassified
E
January 9, 1942
11:35 a.m.
FINANCING
Present: Mr. Haas
Mr. Morris
Mr. Lindow
Mr. Bell
Mr. Hadley
Mrs. Klotz
Mr. Shaeffer
H.M.JR: All right, Dan.
(Mr. Shaeffer entered the conference).
H.M.JR: Hello, Shaeffer. Were the boys satisfied?
MR. SHAEFFER: Yes, sir.
H.M.JR: I don't have to say anything?
MR. SHAEFFER: They are satisfied, as far as I
know, sir. They are up there now.
H.M.JR: Were you?
MR. SHAEPPER: Yes, sir.
H.M.JR: O.K. If you need anything or need any
advice, speak to Paul and Sullivan.
MR. SHAEFFER: Right.
H.M.JR: But they are all right?
MR. SHAEFFER: Yes, I think SO.
Regraded Unclassified
- 2 -
H.M.JR: That statement WAS O.K.
MR. SHARFFER: Thank you.
H.M.JR: Thank you. Go ahead, Professor Bell.
(Mr. Shaeffer left the conference).
MR. BELL: I have not talked to Rocles.
H.".JE: Shame on you. Why don't you say literally
what you mean, "I haven't listened to Mr. Eccles."
MR. BELL: Same thing. I talked a few minutes to
Rob Rouse, but A very few, because I wanted him to
finish his conferences by the time we got in here.
The market, he says, as he has gotten it so far, is
leaning toward a note, and a few people went a bond,
hut those that want a bond call attention to the pres-
sure a bond is liable to have on the '51-'55's we put
out last month. Our group is still leaning toward one
lssue, in the '49-'51 area.
H.V.JR: A new issue?
MR. BELL: Yes, A new issue. Piser, I think, is
leaning toward a three-year note, and possibly reopening
the bond. Am I right on that? I haven't talked to
him.
Mk. HAILEY: No Piser doesn't like any bonds.
MR. BELL: Put if you are going to have 8 bond,
he wants to reopen the '48-'50?
MR. HADLEY: No, he would prefer none.
MI. BELL: Well, I haven't talked to him.
H.V.JR: Stop talking like 8. lot of WPA workers and
leaning up against each other, and make up your own
minds.
MH. BELL: I thought I got that in there. I haven't
Regraded Unclassified
8
- 3 .
talked to Piser and I haven't talked to Eccles and I
haven't talked to Sproul, because they hadn't finished
their conferences, and they thought they would by
eleven thirty. I tried to get McLucas in Detroit, and
Sihler in Chicago, but it is pretty hard to get tele-
phone connections these days, and I didn't get them
before I came in here.
H.M.JR: Well, why don't I go to work right now?
MR. BELL: They have calls in for those people.
H.M.JR: I hope to leave here at five minutes of
three today for the farm.
MR. BELL: How many of these securities are held
in New York, about nineteen per cent?
MR. LINDOW: Right.
MR. BELL: So I thought it might be well to get &
little outside viewpoint on it. Rouse says that the
market wants B. note. Devine --
H.M.JR: Who says the market wants a note?
MR. BELL: Rouse says the market wants 8. note.
There is some indication that we ought to give the
market what it wants, which is a note, and some people
want a bond, so for that reason they suggest a reopening
of the '48-'50's at EL hundred and three quarters to
a hundred and one. Devine says, "Don't under any condition
open it for le 86 than a hundred and one, because of the pres-
sure, it will haveon the other two. They think the empha-
sis ought to be put on the note. I think that is what
Rouse will tell you. I thought I would also call
Graham when I got out of here, because he has about
twelve or thirteen million of these. The First of
Detroit has thirty million, and they have the FFMC
bonds, which they might give us some good advice on.
It is hard for us to see why a note wouldn't have the
Regraded Unclassified
9
- 4 -
same pressure on the note market, which hasn't been
very good, that the bond will have on the intermediate
bonds, especially the twos.
H.M.JR: You don't know yet how much money you
will want in January - in February, do you? Does
that make a difference?
MR. BELL: Does that make a difference?
H.M.JR: Yes.
MR. BELL: No, why?
H.M.JR: Well, I mean whether you are going to -
if you are going to need a billion and a half you couldn't
do that with a note. If you needed a billion in Feb-
ruary, you might do it with a note.
MR. BELL: No, we certainly will need not less than
a billion.
(The Secretary held a telephone conversation with
Mr. Sproul and Mr. Rouse, as follows:)
Regraded Unclassified
10
January 9, 1942
11:45 a.m.
HMJr:
Hello.
Allan
Sproul:
Good morning, Mr. Secretary.
Robert
Rouse:
Good morning.
HMJr:
How are you? Do you gentlemen down there know
what you want?
8:
We know what we're ready to recommend, I think.
HMJr:
Well, I'd like to have it.
S:
Well, we've thought it over and discussed it
somewhat with the market, and our first opinion
18 that this - as you know, as you indicated the
other day - it's not just a refunding, it's the
beginning of the whole war financing program and
involves particularly next February's financing.
HMJr:
Yeah.
8:
Therefore, we think it's desirable to keep 8.8
steady a market as possible, have as little
churning as possible, and as little encouragement
to any bulge in the market in either direction 8.8
possible
HMJr:
Yeah.
S:
80 we feel that if you give the person holding
only a note, that the bond market 18 liable to go
up temporarily and then may decline again before
your February financing, and that would be un-
desirable.
HMJr:
Yeah.
S:
On the other hand, if you give them only a bond,
it would probably have some undesirable effect
out in the area of the '51-'55's, which are pretty
well placed but which are still undergoing some
distribution.
Regraded Unclassified
- 2 -
11
HMJr:
Yeah.
S:
So our recommendation would be for a two-way
issue, probably a one and B. quarter per cent
note of about June '45.
HMJr:
Wait a minute. One and a what?
S:
One and B. quarter per cent note of June '45.
HMJr:
June '45, yeah.
S:
And reopen the '48-'50's at par and a half.
HMJr:
Reopen '48-'50's at a hundred and a half. Right?
8:
And that we think would give the holders of maturing
rights a choice of whichever kind of a security
they want; it would put the premiums on the two
securities near enough together 80 that there
shouldn't be much switching around to take ad-
vantage of a higher premium on one than the other,
and it shouldn't unsettle either market unduly.
HMJr:
Let me just - wait a minute. (Talks aside)
Just wait & minute.
S:
Yeah.
HMJr:
Just hold on, will you please?
Hello.
S:
Yeah.
HMJr:
You wouldn't go out five years for me, would you?
S:
With a note?
HMJr:
Yes.
S:
Not and combine it with the reopening of the
'48-'50's. I think it would be better to go
out only the.
HMJr:
Too close, you mean?
S:
......
three years and five months. I think you
Regraded Unclassified
n I I
12
get it too close together to meet the require-
ment of giving the holders a choice of the two
different types of securities.
HMJr:
Well, what would you do in February?
S:
Well, in February, I think you could either come
in the medium term market or I think, as I said
the other day, that involves the whole question
of speeding up the Savings Bond sales plus some
provision of a longer term issue at two and a
half per cent for investors.
HMJr:
Well, I tell you what I think we'll have to do.
I haven't talked to Eccles yet. Could you gentle-
men be available to talk to me at two o'clock?
S:
Yes, we can be.
HMJr:
Both of you?
S:
Right.
HMJr:
I'll call you right around two.
S:
All right. We'll be here.
HMJr:
And - I'm not going to - I had hoped to do it in
one issue, but you think if you do it in one -
whatever one you do, whether it's a note or a bond -
you upset the other.
S:
I think so, yes.
HMJr:
Uh huh. You feel pretty sure about this?
S:
Yes, I do.
HMJr:
Uh huh. Just a minute. (Talks aside)
I'll call you back again at - you be ready, if
you don't mind, from two o'clock on.
8:
We'll be ready at two o'clock on.
HMJr:
Thank you 80 much.
S:
All right. Good-bye.
Regraded Unclassified
13
- 5 -
MR. BELL: That isn't bad.
H.M.JR: No, it is not bad.
MR. MORRIS: That isn't bad.
MR. BELL: Not going to put the amphasis on the note.
MR. MORRIS: I think the greatest thing against
it is it looks timid, but not very.
H.M.JR: Granted, but --
MR. BELL: It won't be considered timid if the
market wants it.
MR. MORRIS: That is right.
MR. BELL:It will go then.
MR. MORRIS: That is right.
H.M.JR: You fellows don't know what Eccles wants?
MR. BELL: No.
MR. MORRIS: Higher interest rates. I mean funda-
mentally that is what he does want. That is what you
have got to think about.
H.M.JR: You know, it is amazing, this stuff that
they have done on time payments, how little anybody hears
about it.
MR. BELL: Time payments? You mean instalment cre-
dit?
H.M.JR: Yes.
MR. BELL: How little they have done?
Regraded Unclassified
14
- 6 -
H.M.JR: No, how little you hear about it.
MR. BELL: Well, it is not a drastic thing at
all. They are still feeling their way.
MR. MORRIS: He made some mention yesterday that
Henderson's office was beginning to push him on it again,
somewhat to his surprise, because he thought there
wouldn't be any, but apparently it is up a little.
H.M.MR: I think the cumulative effect of this
budget is going to sink in on the people, but they haven't
got it yet.
(The Secretary held a telephone conversation with
Mr. Ecoles as follows:)
Regraded Unclassified
January 9. 1942
15
11:50 a.m.
HMJr:
Hello.
Marriner
Eccles:
Hello.
HMJr:
Marriner.
is
Yee, Henry.
HMJr:
We here haven't made up our minde. I talked to
New York. You know what they recommended?
E:
I haven't talked to them this morning. I under-
stand what they were talking about was an option.
HMJr:
Well, what - I just hung up - and what they sug-
gested was this. Half in a one and a quarter
per cent, June 145 note, and the other half to
reopen the '48-'50'B at par and one half.
E:
I don't agree with them. (Laughs)
HMJr:
He says optional, not half. Optional.
E:
Yeah. Well, I tell you, on a refunding issue
where fifty-six per cent 18 held by the banks
and the Fed hae eighty million, which makes it
two thirds of this issue 18 held by the banks,
I think that when you begin to give an option
on 8. refunding issue, it looks like we're scared.
It's looks like we've got a problem on, and I
personally don't think that this justifies an
option; and what I would - what we would favor
here - and I think we're - in fact I know we're
unanimous on it
HMJr:
It makes it sound suspicious.
E:
Well
HMJr:
I'm being A little funny.
is
Well, I think you may have reason to be. (Laugha)
But - Ransom said that he hadn't thought very much
about it and he didn't care one way or the other,
I mean, and.
Regraded Unclassified
16
- 2 -
HMJr:
Look, old man, Just give me the results. I'll
take it as long 88 it's unanimous.
E:
September, 1946.
HMJr:
September
E:
In a note.
HMJr:
Wait a minute. September 1946.
E:
That's right. No, I mean December. Not September - -
December T46.
HMJr:
Yes.
E:
That's practically a five-year note.
HMJr:
Yeah.
E:
One and a half.
HMJr:
One and a half. All in that?
E:
All in that. The whole thing.
HMJr:
Sink or swim.
E:
Yes, sir. Now, the reason that we favor a note
18 that it - you can price it pretty well so far
as rights are concerned and it fite into the policy
we've discussed of holding rights values down.
Secondly, the commercial banks own a substantial
amount, and we think it desirable that they get
their stuff in short-term.
Third, the market 18 possibly less able to take
bonds at the present time, and we'd just as soon
and we'd like to see bonds kept out of the picture -
let them get a little more hungry for bonds than
apparently they are now. The opening up of either
the two's of '48-'50, which as I understand, New
York is suggesting at a premium, or the putting out
of a new issue of '49-'51's at two's does have a
relationship - pretty close relationship to the
two's of '51-'55 which were just put out, which are
selling now at very close to par.
Regraded Unclassified
- 3 -
17
HMJr:
Yeah.
E:
And 8.6 long 88 these two's - that is the opening
up of the '48-'51 or a new issue of '49-61 - would
have to be priced at possibly B. higher rights
value or premium than the note issue, and then in
effect we would freeze that premium, because we
would have to support the '51-'55's at par, and
in supporting that at par, it would largely freeze
the premium on either a '49-'51 issue, or a 148-
'55 issue; and I think that there's no call for
8 bond and the last thing I would do is give the
option. If you want to put a bond out then the
second choice to the note, I would favor the -
say the '49-'51 two per cent bond.
HMJr:
Well, this note that you're recommending. That's
a five-year note, isn't it?
E:
Yeah, that's five years. Practically five years.
It would be five years lacking & month - lacking
& - yeah, lacking 8. month.
HMJr:
Well, now, let me tell you, Marriner, what I'd
like you to do. Our boys here still haven't made
up their minds. I told them yesterday that if we
were going to do either & bond or a note, I wanted
to do it all in one or the other, see.
E:
Well, I agree - we agree with that one hundred
per cent.
HMJr:
New York doesn't. Let me give you the ressons,
then you can talk to them yourself. They say that
if you do a bond, then the note market will get
out of line; if you do a note, the bond market
will get out of line. Well, I don't know what's
correct.
E:
Well, I don't - that doesn't make sense.
HMJr:
Well, what I'd like you to do is this. Could you
talk to them?
E:
I'll be glad to talk to them.
HMJr:
And then what I'd like to do would be - I told
them to be ready at two o'clock.
Regraded Unclassified
- 4 -
18
E:
Yes.
HMJr:
And I'd talk to them and to you between two and
two-fifteen.
M:
Yeah.
HMJr:
Now - - but we have still got tomorrow morning to
make up our minds. But between now and two, if
you and New York could anyway get together, it
would be helpful to us.
E:
Well, I will call New York. I didn't get in touch
with them this morning. We didn't have very much
time and notice, and by the time I got all the
Board members and we had a discussion of it here,
why we didn't have a chance to talk to them.
HMJr:
Well, right after two o'clock I'll be in touch
with you. Will you be available?
E:
Yes, sir. I'll make it a point to be available and
I'll get in touch with New York and discuss the
thing with them between now and then.
HMJr:
Thank you 80 much.
M:
All right. Good-bye.
Regraded Unclassified
19
- 7 -
H.M.JR: Look, boys, I don't know, but you all
kind of get together and I can still have until tomorrow
morning.
MR. BELL: Oh, yes, you have got until tomorrow at one
o'clock.
H.M.JR: I frankly don't like to do & billion dollar
issue in two bites. I just don't like to do it. I
said that yesterday. And I also said I wanted to do &
note, didn't I?
MR. HADLEY: You said a note or & bond.
H.M.JR: And my own feeling from past experience,
for whatever it is wor th, you do & bond and then you
do & note and then you do a bond and give the bond
market a little time to take care of itself. Right
now if I had to make up my mind, I would do & note.
MR. BELL: A billion dollars in the note issue
is 8. little heavy at one date, and that near. It rolls
around pretty fast.
H.M.JR: Well, would you all come back at two
o'clock and do as much on this as you can?
MR. BELL: Yes.
Regraded Unclassified
20
January 9, 1942
2:05 p.m.
FINANCING
Present: Mr. Haas
Mr. Lindow
Mr. Hadley
Mr. Bell
Mr. Morris
Mrs. Klotz
H.M.JR: All right, Dan.
MR. BELL: We like New York's suggestion. It is
the safest and we think we will have the least trouble
with it that way.
H.M.JR: Is that the way you want it?
MR. HAAS: Yes, sir.
H.M.JR: Who do I call up first?
MR. BELL: I think I would get Marriner first
and see if he has been changed over.
H.M.JR: Are you all together on this?
MR. BELL: Yes, we are.
MR. MORRIS: Yes, sir, we are.
MR. HAAS: There was no struggle.
H.M.JR: Good.
21
- 2 -
MR. BELL: We went back in there and discussed it.
MR. MORRIS: As & matter of gossip, I had lunch
with Ed Smith of the Northern Trust of Chicago, and he
told me what we were going to do.
H.M.JR: He told you what you were going to do?
MR. MORRIS: No, he said that was what the gossip
was in the market, that we were going to do. He said
the gossip in the market is the New York proposal. I mean,
he didn't say it that way, but he said 8 three and &
half year one and 8 quarter, and reopen the twos. He
said the market is ready for it, and happy about it.
MR. BELL: We want to keep him happy.
MR. MORRIS: Of course I laughed.
H.M.JR: Don't you think it is good to send this
telegram?
MR. BELL: I assume you are doing it hoping that
he won't say anything to disturb the market?
H.M.JR: well, I think it is a billion dollars,
and he is entitled to know.
MR. BELL: Of course I suppose you would want to
give him a letter sometime tomorrow.
H.M.JR: Oh, yes.
MR. BELL: What arrangements do you want to make
for getting that letter, through the Secret Service?
H.M.JR: If they can get it up to me. Well, you
will have to get it to me, have the Secret Service
bring it up, and then I can sign it and you can take it
over to the President.
Regraded Unclassified
22
- 3 -
MR. BELL: Sunday morning?
H.M.JR: Well, you won't be ready Saturday after-
noon?
MR. BELL: Yes, but I didn't know whether he could
get it up there Saturday or not. You see, he could
leave here probably before one.
H.M.JR: Why don't you get him a seat on the two
o'clock plane? Do you suppose it would be ready by two?
MR. BELL: Yes. It will be ready shortly after
twelve.
H.M.JR: I would get a seat on the two o'clock
plane. I think there is a one thirty plane, and he can
have & car meet him at LaGuardia, and he can come up
to my place in an hour and a half or an hour and three
quarters, and I will sign it. The President is supposed
to be over here, across the street, but he isn't.
(Mrs. Klotz entered the conference).
H.M.JR: What do you think, Mrs. Klotz? First these
people come in and they shiver. Then they have all
gone bankerish on me.
MRS. KLOTZ: I don't believe it, Mr. Secretary.
H.M.JR: Absolutely.
Is somebody looking at how much it costs to tele-
phone from here to Chicago?
MR. BELL: I told you how much it was.
H.M.JR: How much is it?
MR. BELL: It is something like three thousand a month.
Regraded Unclassified
23
- 4 -
H.M.JR: Don't we use that a lot?
MR. BELL: I wouldn't say an awful lot. I don't
think it will be justified.
H.M.JR: I wonder if they have teletype in Chicago.
MRS. KLOTZ: Surely they must.
MR. BELL: I will tell you what McLucas said. He
said that he would like to have & two per cent bond
in the '48-'50 area. I asked him if he was interested
in & note, and he said "No".
(The Secretary held & telephone conversation with
Mr. Sproul and Mr. Rouse as follows:)
Regraded Unclassified
January 9, 1942
24
2:15 p.m.
Operator: Go ahead.
HMJr:
Hello.
Allan
Sproul:
Hello, Mr. Secretary.
HMJr:
Yes. Well, has Chairman Eccles worked on you?
S:
Chairman Eccles worked on me for about forty-five
minutes.
HMJr:
(Laughs) You're on the loudspeaker, and that
gets a chuckle. No wonder you sound a little
weak.
8:
(Laughe)
Robert
Rouse:
(Laughs)
S:
Well, we came out here.
HMJr:
Have a drink on me, boys.
S:
(Laughs) I needed it.
HMJr:
All right.
S:
We came out here that I still felt that the better
offering was the split offering, or the shorter
note and the re-opening of the '48-'50 bond. I
said that my second choice would be as it had been
to offer one note which was approximately a five-
year note, which he had recommended.
HMJr:
Yeah. Well, did you budge him?
S:
No, I didn't budge him.
HMJr:
I see.
S:
We left it this way, that our objective was the
same to try to do something that would cause the
least churning about in the market and the least
arbitraging and buying and selling just to take
Regraded Unclassified
- 2 -
OR
advantage of the issue, but that we differed In
our judgment 88 to which way would accomplish
that objective.
HMJr:
Well, how much have you talked to the market?
S:
Well, Mr. Rouse and I between us have canvassed
quite a bit of the market - - that is, both the
people who hold some of these maturing rights in
substantial amounts, and others who haven't that
interest. Between Mr. Rouse and me, we've perhaps
talked with ten people.
HMJr:
Well, have you put up these two alternative plans?
S;
Well, we've let them do the talking, and these two
alternative plans I should say have come out 86
the majority view, although they're not unanimous
on it.
HMJr:
Well, I think I'll let the thing simmer until to-
morrow morning, and there's no reason why - what
time do you people get down? Are you down there
by ten o'clock in the morning?
S:
(Laughs) Why we're down here always at nine-
fifteen. That's not very early.
HMJr:
Well, sometime ten and eleven I'll get in touch
with you.
8:
All right. We'll be here.
HMJr:
Because there's no reason why I can't make up my
mind because that'll help Bell. And you know we're
thinking of announcing it - putting it in the Sunday
papers.
B:
Yee, I know you are.
HMJr:
What do you think of that?
S:
I think it's a good idea.
HMJr:
I don't see why not.
8:
No.
Regraded Unclassified
26
- 3 -
HMJr:
It lets the fellows
S:
Gives them a little time to think about it and
get ready for Monday.
HMJr:
That's right. Now - - well, I don't - Bell may be
talking to you again, but I don't - I personally
lean toward the note.
S:
You do?
HMJr:
Yeah. But I haven't talked - I mean, my contacts
are just limited to the Federal Reserve and my
own people.
B:
Well, I think if we had just sat down with the
figures and the charts and tried to figure it
out without consulting the market, at all, we
probably would have come out at that conclusion;
but I think after our discussions with the market,
we think the reception would be better of the split
offer.
HMJr:
That just makes me a long-haired professor.
S:
(Laughs) Just a theorist.
HMJr:
Okay.
S:
An academic decision.
HMJr:
Okay. I'll be in touch with you in the morning.
8:
There's one variation which we are considering
which your people might want to consider, and
that is putting the bond out at par and three
quarters instead of par and a half just to weight
it in favor of the note.
HMJr:
Well, you're getting down to shavings now.
8:
(Laughs)
HMJr:
I mean.
8:
Well, it's - the attempt 18 to make the premiums
as close together as possible 80 there will be as
Regraded Unclassified
27
- 4
arbitrage as possible, and it's a matter of guess
partly there.
HMJr:
But my reason - I'd like to do a note this time,
and then in February I'd like to do a bond.
8:
Well, I think if you'll do it this way, you would
still be able to do your financing in February,
with our idea being to keep the market steady with
as little churning about as possible. Now, it's
juet to keep it in shape for February's financing.
HMJr:
Well, let me - Just let me switch for a minute.
I know that Dave Morris has been in contact with
you on what I call my new outlets.
S:
All right.
HMJr:
Getting these corporations that have the plan in -
how's that coming along?
S:
Well, 88 I told him, we sent letters to 8. great
number of corporations with large staffs and a
great many of them already having the payroll allot-
ment plan - those went out on Thursday - and the
indications are we'll get a good reeponse but we
really haven't the facts yet to give you.
HMJr:
No crossing of wires with the state committee,
18 there, on this?
B:
No, I don't think 60. Mr. Rouse site in with them
continuously and 18 in touch with them, and I don't
think we're crossing any wires with them.
R:
I've kept them informed, Mr. Secretary.
HMJr:
Good.
R:
And I don't think there's any problem there at
all.
HMJr:
And any of your banks or post offices out of bonds?
8:
They are out of some denominations. We're still
not able to supply them with their full requisition
in all denominations, but we keep - we give them
Regraded Unclassified
28
- 5 -
some bonds of each denomination.
HMJr:
But you're still short?
B:
Yeah. Still short.
HMJr:
Well
S;
But we're - and fortunately, not in the lower
denominations. I think we have plenty of
$25.00 pieces now.
HMJr:
You have?
S:
Yeah. It varies from day to day.
HMJr:
Well, I think the worst of our production problems
are behind us and next week we really ought to get
into our stride on production.
B:
Well, that would be fine. We've been sort of
promising them from week to week that next week
would.
HMJr:
Well, I think that the worst is behind us. You
know what our troubles were?
S:
I know, yes.
HMJr:
Our troubles were with the IBM.
8:
Yeah. They couldn't provide the machines.
HMJr:
No, but now - no, the cards.
S:
The cards.
HMJr:
But now they've got that, and our troubles - I
think another week will see us in good shape.
8:
Well, we can go along as we're going along and
HMJr:
This 18 no - I mean, it looks as though another
week that we'll really - oh, by Monday week, we
ought to be really in good shape.
S:
Yeah. The sales here have been very satisfactory
Regraded Unclassified
29
- 6 -
the first five days.
HMJr:
Fine. Thank you.
S:
We'll be on deck tomorrow between ten and eleven.
HMJr:
Wonderful.
S:
Righto.
Regraded Unclassified
30
- 5 -
(The Secretary held a telephone conversation
with Mr. Eccles as follows:)
Regraded Unclassified
BI
January 9, 1942
2:23 p.m.
Operator: Go shead.
HMJr:
Hello.
Marriner
Eccles:
Hello, Henry.
HMJr:
Hello, Marriner. Well, have you changed any?
E:
No. No, not at all. I talked for fifteen or
twenty minutes with Sproul, and he gave me his
arguments for the two issues, and I thought they
were pretty thin. As I got them, it was that
there'd be less churning or secondary market if
you gave the holders of these exactly what they
wanted, whereas if they were all given the note.
they'd take it and then there'd probably be eome
selling of the note and the buying of some bonds,
and you might run the bond market up 8 little.
And I sald, "Well, that would be a good thing.
The Treasury and ourselves have been buying some
of these bonds, and we certainly could prevent
that. We could keep that - if that should happen,
why we'd be very glad to let them have some of
the bonds that we've purchased and be in a position
to buy later. So I seld, "That doesn't make much
of an argument with me." And I seid, "The diffi-
culty, it seems to me, 1s in trying to price 8.
short note and the bond, and especially where you
put B. premium on the bond. And wherever there's
B difference in the premium, which there may well
be, then you're going to find B. lot of arbitrage
operations and more churning and switching than
you'll get with A straight note."
Now, he didn't feel very strongly, and when I got
through talking to him, he eald, well the other
happened to be his first choice but he didn't
feel very strongly about it. That's - I - he
didn't - his argument didn't change my viewe of
the situation, because I Just didn't feel that
they were very strong, very effective. I still
favor the December 146 note.
HMJr:
I see there's nothing in 146 after June 15th clear.
is
You say there's nothing clear after that?
Regraded Unclassified
32
IV , I
HXJr:
I say that's clear.
is
Yeah, that's right. It comes at a good time,
It comes at a good time, and the fact that these
are held sixty - two thirde of them by the banks
and the Fed, it seems to me that that kind of an
issue ought to be looked upon with a good deal
of favor. I don't like to see the idea of a
billion dollar issue thinking that a billion
dollar refunding issue causes you to have to
give options. It Just looks to me like an element
of weakness in feeling that you've got to cater
to the market so you've got to give them a chance
to exchange it into what they want.
HMJr:
Well, Marriner, Bell will work on it the rest of
the afternoon, and I'll be on the phone again
tomorrow morning, and
65
How do you feel about it?
HMJr:
Well, I personally lean a little bit towards the
one note.
Yeah. Well, I - we're all unanimous here - Pizer
and Goldenweiser, the Board - I mean, we all feel
more or less the same way that I've expressed
myself now, and - it's just those boys - those
market boys up there. They get 80 damn close
sometime to 8. market situation, that it's just
like they can't see the forest for the trees.
And I think sometimes we can see it a little
better - being a little farther removed from
it.
HMJr:
Well, they've just called De e. long-head theorist,
at least I called myself that, because I'm too
far sway from the market.
E:
oh, hell. You don't believe that?
HMJr:
No. They're all right. They're doing their beet.
to
Well, that's right. I mean, after all, I told
Allan that - I said, "We want your judgment, of
course." I sald, "If we can get together, that's
fine," but I said, "if we can't. we expect you to
Regraded Unclassified
33
- 3 -
give your best judgment, but," I said, "How
strongly do you feel on this thing?" He said,
well, he didn't feel very strongly. He said
he didn't think that there was really any dif-
ference in the objective. It was just that
he thought there would be maybe less of a market
adjustment in the one case than I did.
HMJr:
Okay, Marriner. Very much obliged, and either
Bell or I will be in touch with you between ten
and eleven tomorrow morning.
E:
Fine. Okay.
HMJr:
Thank you very much.
E:
Good-bye.
Regraded Unclassified
34
- 6 -
H.M.JR: What have you got there, Dan?
MR. BELL: Here is Chicago.
H.M.JR: Please.
MR. BELL: "Following comments regarding exchange
offering. First National for own account. They have
five million notes, having sold some of their holdings.
Prefer not over five year maturity, with one and five
eighths per cent rate. Northern Trust. Suggest double
issue, three year note at one and 8. quarter per cent and
8 seven year bond at two per cent, limiting subscribers
to fifty per cent of each issue. Knight at Continental.
Own no rights. Recommend single issue of notes priced
to command three quarter per cent premium. Say December,
'44 at one and a eighth per cent. They believe single
issue would also help to keep matter of rights subdued
and to build up appetite for cash bond offering in
February."
That is in line with your thought on it.
H.M.JR: Let's have it again. It sounds smart.
MR. BELL: It is impartial, because he doesn't
own any rights.
H.M.JR: Say it again. That is me.
MR. BELL: You have got them all.
"Recommend single issue of notes, priced to command
three fourths per cent premium, say December, 1944, one
and an eighth per cent. They believe single issue would
also help to keep matter of rights subdued end to build
up appetite for cash bond offering in February. Harris
Trust. Have March notes. Prefer new note issue from two
to five years, priced to command one half point premium.
Preferring single issue. Also believing this will help
subdue right values. Greer at First National prefers
Regraded Unclassified
35
- 7 -
two issues, two and one half year note at one percent,
and bond issue with either maturity or optional date
seven and one half to eight years at two per cent. He
leans toward limiting subscribers to fifty per cent on
each issue."
Here is one from Lincoln, Nebraska. This fellow
usually comes in to see me when he is in town. He is
the executive vice-president of the First National Bank
out there. "Contact with various bond brokers seems to
indicate Treasury refunding bond might be a two per
cent seven or eight year bond. It is our judgment
that & twelve to fourteen year two and a quarter bond
would be ideal at this time. Should be worth about one
point premium on market, resulting in two fifteen yield,
which would not affect present market of two and 8 halfs
of '54-'56 or the ten-fifteen year twos. Also would
make a nice comparison favoring the Defense twelve year
two and a halfs. For our own use, we would much prefer
this suggested bond as against shorter two per cent
issue, and think the reception would be much better
and also create no disturbance to existing issues.
Hope we are not presuming in suggestion. Thank you."
McLucas says that he prefers the two per cent bond
of the '48-'50, one issue. I asked him if he would take
8. note, and he said "No," he didn't want & note, and I
asked him if it was 8. two-way issue of B note and a bond,
and if we reopened the '48-'50's at 8. slight premium,
would he take it, and he said, "I don't like a premium"-
or what I would take. He said, "I don't like a premium
at all, but I would take the bond with the premium in
preference to the note."
H.M.JR: Your balances must be pretty good. We
have taken in 8 hundred and ninety-eight million
dollars in eight days on these bonds.
(Mrs. Klotz left the conference).
MR. MORRIS: Can I make one comment which is just
for consideration in this one note thing when it gets
Regraded Unclassified
36
- 8 -
out close to the five-year, if you do a one and 8. half,
I am just a little worried about the psychology of getting
into a one and 8 half note there. I would much rather
make it 8 little shorter and at least keep it one and three
eighths, and the other side of this refunding is that
there are four issues of 8. very mixed sort that are
being refunded. It isn't quite the problem of where you
refund 8. single issue.
H.M.JR: But how much of it, Dave, is in the hands
of the Fed and the banks?
MR. HAAS: Fifty-five per cent in the banks and
eight per cent in the Fed.
H.M.JR: Sixty-three per cent?
MR. MORRIS: That is right.
MR. HAAS: But the insurance companies hold - and
the mutual savings hold, fifteen per cent and other
holders which probably could favor 8 long bond hold
twenty-two, so there is thirty-seven.
H.M.JR: Boys, I don't think we can do business on
less than 8. billion dollars of anything. Now, we open
up this '48-'52 for five hundred million, and you knock
it down, and then we come along and open it up once more,
because I certainly would have to open it up a second time.
On the other hand, if I keep the '48-'52, I could open
it up for a billion if I wanted to. If I do a note, it
is going to help the bond market, isn't it?
MR. BELL: I suppose it would starve the bond
market. The people who want 8 little higher coupon
would not go into this, certainly, the insurance
companies, but there would be some churning because
the insurance companies wouldn't want this, and they
would unload it.
MR. HAAS: This doesn't hurt you.
Regraded Unclassified
37
- 9 -
H.M.JR: How far back would you have to go for
one and three eighthe, how many months?
MR. HADLEY: Back to June.
H.M.JR: Six months. Well, that is B. bad time.
MR. MORRIS: Yes, it is a heavy maturity.
H.M.JR: That is bad.
MR. HADLEY: You might do it in September, but it
would be a little thin.
MR. BELL: What is the matter with one and 8 quarter?
MR. HAAS: That gets away from the --
MR. BELL: Heavy maturities, and you are a long way
from the one and a half.
H.M.JR: One and a quarter? Where is the one and
a quarter.
(Mrs. Klotz entered the conference).
MR. HADLEY: June, '45.
H.M.JR: What is it?
MR. HAAS: June, 1945.
MR. BELL: Almost three years and & half.
H.M.JR: No, I don't like that.
MR. MORRIS: I don't like that either.
H.M.JR: Look, Bell, I am not fixed, but I have
got certain ideas, and just 50 that you get them, you
remember I think it was the last time - when was it
I said - it was before Pearl Harbor, wasn't it, that
Regraded Unclassified
38
- 10 -
I said, "We have got 8 big job and I can't do less, we
have got to do this thing in a big way"? Do you remember?
MR. BELL: It was the October 20 issue.
H.M.JR: And they wanted me to do it in - how did
they want me to do it then, do you know?
MR. BELL: They wanted you to --
MR. HAAS: Two bonds, I think, an intermediate
and 8. long.
MR. BELL: A short bond, a two per cent bond, and
a two and three eighths, and then drop to the '60-'65.
H.M.JR: How much was it?
MR. BELL: It was B. billion one.
H.M.JR: And I insisted on doing it all in one.
MR. BELL: That is right.
H.M.JR: We can't be fooling around with five
hundred million dollar issues or two options on the
billion dollar refunding, but I am going to sleep on
it --
MR. BELL: Well, that is what we started out with,
thinking of that --
H.M.JR: Well, I am going to sleep on the --
MR. BELL: Statement.
H.M.JR: And I will be in touch with you gentlemen
tomorrow morning. Now, the only hedge I am making
against what I am saying is, and all this is confidential,
but this is extra confidential, because I don't want
to frighten anybody - I don't think, you see - I don't
Regraded Unclassified
39
- 11 -
know whether I said this to you or not - that the market
yet appreciates what this --
MR. BELL: The size of this?
H.M.JR: No, the whole thing. I mean, the way
the stock market and the bond market have been acting,
I just don't think they understand.
MR. BELL: You are probably right.
H.M.JR: And fortunately we had our tax meeting this
morning, and these boys will be talking all day, and there
will be 8 story in tomorrow morning's paper, and we can
see how it affects the market, if at all.
MR. HAAS: We should, Mr. Secretary, be able to do
it. You take the British situation which in terms of
national income is as large as our projected effort in
this country, and they have accomplished that in terms
of their bond market at increasing bond prices, so
I think people in the bond market - in other words,
their bond market has been going up since the war.
H.M.JR: Well now, wait 8. minute. Since when?
MR. HAAS: Since about August, '39, if you take the
British war loan, that '52-'60, I think it is.
H.M.JR: Well, George, that may be true, but don't
forget you are dealing there with five or six institu-
tions.
MR. HAAS: That is right. It is a much easier job
than you have here.
H.M.JR: And I have yet to get the velocity at which
you take the money out and at which you take the money
in, and Dan, don't forget you are sitting there with
a balance of about two billion six, which is more or less
sterilized, isn't it, in the sense that it is out of the
market and --
Regraded Unclassified
40
- 12 -
MR. BELL: Yes, butwe are putting it back in.
H.M.JR: Yes, but you have got about - well, a
billion more than you need.
MR. BELL: For the moment.
H.M.JR: Yes. I still don't know and nobody knows.
You borrow this money, and you give it to the people
to spend for defense. How long does it take to flow
back into the peoples' pockets and back into the banks.
Now, how long does that thing take, see, and we just
don't know. There was the Christmas shopping and - you
just don't know.
MR. BELL: Of course the biggest part of our bal-
ance, Mr. Secretary, is in the banks.
H.M.JR: I know, Dan, but this thing - but this
whole business of - you take out the money and give it
to the Army and Navy, and they spend it and they have
got to pay for wages and steel, and it has got to flow
back into the banks, and it has got to be there for
these people to be investing. I just don't know.
That is why this time I am inclined to go to a note
which gives us another month, and we might even go
to March with a two billion dollar bond issue. I don't
know.
MR. BELL: Don't hit March. We have got an income
tax problem in March.
H.M.JR: Maybe you people have got all the enswers.
I haven't.
MR. BELL: We haven't any answers.
H.M.JR: I just haven't got the feel of it. That
is why I would rather have & note, and then when the
thing settles down 8. little bit, maybe we will be able
to pick up what we need in bond money very nicely.
Regraded Unclassified
41
- 13 -
MR. HAAS: I don't like the one and a half. I
feel like Dave on that, because I think, Mr. Secretary,
you establish that rate on the five, and it is going to
weaken that structure on your bonds.
H.M.JR: Well, you fellows figure - you won't have
to fight with me at one and three eighths, if that is
what you want to do, shave an eighth off.
MR. MORRIS: It may make it a bad place, but if
what you say is right, and I think it is, you are going
to be dealing in three billions by '46 just as easily --
H.M.JR: What do you think I say is right,
Dave?
MR. MORRIS: You want at least a billion minimum
for at least one thing. I think by '46 it will be three
billion. It won't worry you any more to refund than
a billion.does now.
H.M.JR: But if you people, after thinking it over,
and I want you to think about it and talk with New
York and the Fed and the rest of them, and if you decide --
if it is going to be & note, should we steer clear of
the one and & half? I mean, you wouldn't have an awful
lot of argument with me on that.
MR. BELL: You don't like the one and a quarter?
H.M.JR: No. No, I want to throw it into '46.
MR. MORRIS: I may be all wrong, but the one and a
half is the one thing I have some conviction of.
H.M.JR: You are afraid of trying to fix it there?
MR. MORRIS: Yes. I don't like the one and & half.
H.M.JR: I think you are right. No, I want to get
out - that would be four and a half years, wouldn't it,
Regraded Unclassified
42
- 14 -
or four years and five months, something like that?
O.K. gents, thank you all.
Regraded Unclassified
43
January 9. 1941
TELEGRAM FOR THE PRESIDENT
To be transmitted by the White House
Treasury contemplates a refunding operation on Menday
and Tuesday of next week of naturing or called securities
aggregating cas billion seventy-six million dollars consisting
of Reconstruction Finance Corporation notes of three hundred
tea million dollars naturing January fifteenth, Treasury notes
of four hundred twenty-six million dollars maturing March fifteenth,
Federal form Mortgage Corporation bonds of two hundred thirty-six
million dollars called for payment January fifteenth, and Federal
Farm Mortgage Corporation bonds of cas hundred three million dollars
called for payment March first. Expect to make decision about
moon tomorrow after which I will present usual letter containing
ay recommendation for your approval.
7.K
Regraded Unclassified
44
January 9. 1941
TELEGRAM FOR THE PRESIDENT
To be transmited by the White Home
Treasury contemplates & refunding operation on Meaday
and Tuesday of next week of naturing or called securities
aggregating one billion seventy-siz million dellars consisting
of Reconstruction Finance Corporation notes of three hundred
tea million dollars maturing January fifteenth, Treasury notes
of feur hundred twenty-six million dollars misuring March fifteenth,
Federal Farm Mortgage Corporation bends of two hundred thirty-six
million dollars called for payment January fifteenth, and Federal
Para Nortgage Corporation bonds of cas hundred three million dollars
called for payment March first. Expect to make decision about
BOOR tenerrow after which I will prosent usual letter containing
ay recommendation for your approval.
Regraded Unclassified
TREASURY DEPARTMENT
45
INTER-OFFICE COMMUNICATION
DATE January 9, 1942
TO Secretary Morgenthau
FROM # H. Radley
TREASURY NOTES
Apurox. Terms
Naturity
Coupon
Yield
Price
Premium
5 years
12/15/46
1-1/2%
1.30
100.31
31/32nds
1.35
100.23
23/32nds
1-3/8%
1,27
100.16
16/32nds
1.32
100.9
9/32nds
TREASURY BONDS
7-9 yrs.
1948 - 50
2d
1.80
101.10
1 pt. 10/32
Dec. 15
1,82
101.6
1 pt. 6/32
y 1/4 1/4 yrs,
1949-51
2).
1,83
101.4
1 pt. 4/32
Mar. 15
1.85
101,
1 point
7 1/2-9 1/2 yrs.
1949-51
2)
1,85
101,1
1 pt. 1/32
June 15
1,67
100.29
29/32nds
: 1/4 /ro.
1950
25
1.80
101.16
1 pt. 16/32
Mar. 15
1.82
101.11
i pt. 11/32
+6 Leas 1 month
REOPEN ISSUE
Amount
Present
Reoffer
Jayue
Outstanding
Price
At:
Premium
I/D 2). 3/15/46-50
1110 million
101.15 -
100
1 pt. 15/32
100-1/4
1 pt. 7/32
100-1/2
31/32nds
" A re-opening of the 2,0 of 19411-50 would probably result in the price of
sume issue automatically fulling to 102.
Regraded Unclassified
Calendar of Direct and Guaranteed Bonds and Notes
January 1, 1942
(In millions of dollars)
Callable Issues 2/
Fixed maturities
Date
Description
First callable
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1942-Jan.15
RFC 7/8%
310
Jan.15
FFMO 3%
236
Feb.
Mar. 1
FFMC 2-3/4%
103
Mar.15
Note 1-3/4%
426
Apr.
May
June
July 1
RFC 1%
276
July 1
HOLO 2-1/4% (1942-44)
875
Aug.
Sept.15
Note 2%
342
Oct.15
RFC 7/8%
320(T)
Nov.
Dec.15
Note 1-3/4%
232
Total
1,000
1,245
675
1943-Jan.
Feb.
Mar.15
Note 3/4%
66(T)
Apr.
May 1
000 3/4%
289
June15
Note 1-1/89
629
June15
Bond 3-3/8% (1943-47)
454
July15
RFC 1-1/8%
324(T)
Aug.
Sept.15
Note 1%
279
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Note 1-1/8%
421
Total
1,395
613
1,855
1944-Jan.
Feb. 1
UBHA 1-3/8%
114
Mar.15
Note 1%
-515
Mar.15
FFMC 3-1/45 (1944-64)
95
Apr.15
Bond 3-1/4% (1944-46)
1,519
Apr.15
RFC 1%
-571(7)
May 1
HOLC 3% (1944-52)
779
May 15
FFMC 3% (1944-49)
335
June15
Note 3/46
416
July 1
HOLC 2-1/46 (1942-44)
875
Aug.
Sept.15
Note 1%
283
Sept.15
Note 3/4%
635(7)
Oct.
Nov,
Dec.15
Bond 4% (1944-54)
1,037
Total
1,849
605
2,586
1,709
day
1945-Jan.
Feb.15
CCC 1-1/8%
412(T)
Mar.15
Note 3/4%
718
Apr.
May
June 1
HOLO 1-1/2% (1945-47)
755
July
Aug.
Sept.15
Bond 2-3/46 (1945-47)
1,214
Oct.15
Bond 3-1/4% (1943-45)
1,401
Nov.
Dec.15
Bond 2-1/2%
541
Deo,15
Note 3/4%
531(T)
Total
1,730
1122
1,214
76°
1,401
1 Excludes special issues, issues redeemable at option of holder, Footal Bavings
bonds, PHA debentures, and Issues for which an exchange offer DAB been gade and
2/ Callable issues with respect to which e definite notice of call DAO been endo
accepted by the bulk of the holders,
are listed as fixed maturities
Regraded Unclassified
47
Calendar of Direct and Quaranteed Bonds and Notes
January 1, 1942
(In millions of dollars)
Callable issues 2
Fixed maturities
First callable
Date
Description
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
tead
Direct
Quaran-
teed
1946-Jan. 1
Conversion 3%
16
Feb.
Mar.15
Note 1%
503(T)
Mar.15
Bond 3-3/45 (1946-56)
489
Apr.15
Bond 3-1/4% (1944-46)
1,519
May
June15
Bond 3% (1946-48)
1,036
June15
Bond 3-1/8% (1946-49)
819
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
519
2,344
1,519
1947-Jan. 1
Conversion 3%
13
Feb.
Mar.
Apr.
May
June 1
HOLO 1-1/2% (1945-47)
755
Bond 3-3/8% (1943-47)
454
June15
July
Aug.
Sept.15
Bond 2-3/4% (1945-47)
1,214
Oct.15
Bond 4-1/4% (1947-52)
759
Nov.
Dec.15
Bond 25
701
Total
714
759
1,668
755
1948-Jan.
Feb.
Mar.15
Bond 2% (1948-50)
1,115(T)
Mar.15
Bond 2-3/46 (1948-51)
1,223
Apr.
May
June15
Bond 3% (1946-48)
1,036
July
Aug.
Bept.15
Bond 2-1/26
451
Oct.
Nov.
Dec.15
Bond 2% (1948-50)
571
Totel
451
2,909
1,036
1949-Jan.
Feb.
Mar.
Apr.
May 15
FFMO 3% (1944-49)
835
June15
Bond 3-1/8% (1946-49)
819
July
Aug.
Sept.
Dot.
Nov.
Dec.15
Bond 3-1/8% (1949-52)
491
Dec.15
Bond 2-1/2% (1949-53)
1,786
Total
2,217
619
635
Excludes special issues, issues redeemable at option of holder, Postal Bavinga and
bonda, PHA debentures, and issues for which an exchange offer has been made
accepted by the bulk of the holders.
2/
Callable issues with respect to which a definite notice of call has been made
are liated an fixed maturities.
Regraded Unclassified
Calendar or Direct and Guaranteed Bonde and Notes
January 1, 1942
(In millions of dollars)
Callable issues 2
Fixed maturities
First callable
Date
Description
Final maturities
Direct
Guaran-
teed
Direct
Guaran-
teed
Direct
Guaran-
teed
1950-Jan.
Feb.
Mar.15
Bond 2% (1948-50)
1,115(T)
Apr.
May
June
July
Aug.
Sept.15
Bond 2-1/21 (1950-52)
1,186
Oct.
Nov.
Deo.15
Bond 26 (1948-50)
571
Total
1,186
1,688
1951-Jan.
Feb.
Mar.15
Bond 2-3/4% (1948-51)
1,223
Apr.
May
June15
Bond 2-3/4% (1951-54)
1,627
July
Aug.
Sept.15
Bond 3% (1951-55)
755
Oct.
Nov.
Dec.15
Bond 2-1/4% (1951-53)
1,118
Dec.15
Bond 2% (1951-55)
-533(T)
Total
4,033
1,223
1952-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(T)
Apr.
May 1
HOLO 3% (1944-52)
779
June
July
Aug.
Sept.15
Bond 2-1/24 (1950-52)
1,186
Oct.15
Bond 4-1/46 (1947-52)
759
Nov.
Bond 3-1/8% (1949-52)
491
Dec.15
Total
1,024
2,436
779
1953-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.
Oct,
Nov,
Deo.15
Bond 2-1/2% (1949-53)
1,786
Bond 2-1/46 (1951-53)
1,118
Dec.15
Total
725
2,904
1/ Excludes special lasues, issues redeemable at option of holder, Postal Bavings
bonds, THA debentures, and lasues for which an exchange offer has been made and
accepted by the bulk of the holders.
Callable issues with respect to which . definite notice of call has been made
are listed as fixed maturities.
Regraded Unclassified
Calendar of Direct and Guaranteed Bonds and Notes
January 1, 1942
(In millions of dollars)
Callable issues 2
Fixed maturities
First callable
Final naturities
Date
Description
Direct
Quaran-
Direct
Guaran-
Direct
Guaran-
teed
teed
teed
1954-Jan.
Feb.
Mar.15
Bond 2-1/2% (1952-54)
1,024(f)
Apr.
May
June15
Bond 2-3/44 (1951-54)
1,627
June15
Bond 2-1/46 (1954-56)
681
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 4% (1944-54)
1,037
Total
681
3,668
1955-Jan.
Feb.
Mar.15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June15
Bond 2% (1953-55)
725
July
Aug.
Sept.15
Bond 3% (1951-55)
755
Oct.
Nov.
Deo.15
Bond 2% (1951-55)
533(T)
Total
2,611
2,013
1956-Jan.
Feb.
Mar.15
Bond 3-3/44 (1946-56)
489
Mar.15
Bond 2-1/2% (1956-58)
1,449(T)
Apr.
May
June15
Bond 2-1/4% (1954-56)
681
July
Aug.
Sept.15
Bond 2-3/4% (1956-59)
982
Oct,
Nov.
Dec.
Total
2,431
1,170
1957-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Bept.
Oct.
Nov.
Dec.
Total
1
Excludes special issues, issues redeemable at option of holder, Postal Bavings
bonds, THA debentures, and issues for which an exchange offer has been made and
accepted by the bulk of the holders.
2/
Callable issues with respect to which a definite notice of call has been unde
are listed as fixed maturities.
Regraded Unclassified
50
Calendar of Direct and Guaranteed Bonds and Notes
January 1, 1942
|In millions of dollare)
Callable lesues 2/
Fixed maturities
First callable
Final maturities
Date
Description
Direct
Guaran-
teed
Direct
Guaran-
Direct
Guaran-
teed
teed
1958-Jan,
Feb.
Mar.15
Bond 2-1/2% (1956-58)
1,449(T)
Apr.
May
June15
Bond 2-3/4% (1958-63)
919
July
Aug.
Sept.
Oct.
Nov.
Dec.
19
1,448
1959-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.15
Bond 2-3/45 (1956-59)
982
Oct.
Nov.
Dec.
.
Total
1960-Jan.
Feb.
Mar.15
Bond 2-7/8% (1955-60)
2,611
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.15
Bond 2-3/4% (1960-65)
1,485
1,46
2.611
MIN
1961-Jan.
Feb.
Mar.
Apr.
May
June 1
Panama 3%
50
July
Aug.
Sept.
Oct.
Nov.
Deo,
20101
Excludes special issues, issues redeemable at option of holder, Postal Bavings
bonds, THA debentures, and issues for which an exchange offer has been made and
2/ Callable issues with respect to which a definite notice of call has been made
accepted by the bulk of the holders.
are listed as fixed saturities
Regraded Unclassified
51
Calendar of Direct and Guaranteed Bonda and Notes 1
January 1, 1942
(In millions of dollars)
Callable issues 2
Fixed maturities
Description
First callable
Final maturities
Date
Direct
Guaran-
teed
Direct
Guaran-
Direct
Guaran-
teed
teed
1962-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Dot.
Nov.
Dec.
Total
1963-Jan.
Feb.
Mar.
Apr.
May
June15
Bond 2-3/46 (1958-63)
919
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
919
1964-Jan.
Feb.
Mar.15
FFHC 3-1/4% (1944-64)
95
Apr.
May
June
July
Aug.
Sept.
Oct,
Nov.
Doc.
Total
99
1965-Jan,
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct,
Nov.
Dec.15
Bond 2-3/4% (1960-65)
1,485
Total
1,485
Excludes apecial issues, issues redesmable at option of holder, Postal Bavings
bonds, THA debentures, and issues for which an exchange offer has been made and
accepted by the bulk of the holders,
Callable issues with respect to which a. definite notice of call has been sade
are listed as fixed maturities.
Regraded Unclassified
52
Calendar of Direct and Guaranteed Bonds and Notes
January 1, 1942
(In millions of dollars)
Callable issues 2/
Fixed maturities
First callable
Date
Description
Final maturities
Guaran-
Guaran-
Direct
Direct
Guaran-
teed
teed
Direct
teed
1966-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
1967-Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.15
Bond 2-1/2% (1967-72)
2,666(T)
Oct.
Nov.
Dec.
Total
999'a
Bond 2-1/2% (1967-72)
2,666(T)
1972-Sept.15
1 Excludes special issues, issues redeemable at option of holder, Postal Savings
bonds, FHA debentures, and issues for which an exchange offer has been made and
accepted by the bulk of the holders.
Callable issues with respect to which a definite notice of call has been made
are listed as fixed maturities.
53
January 9. 1942
MEMORANDUM FOR THE SECRETARY
From:
Mr. Blough
Subject: Tax conference with legislative leaders
January 9, 1942.
(The following report of the conference is from
memory, based on notes taken by Mr. Blough.)
The conference was held in the office of the
Secretary of the Treasury, Friday, January 9, 1942,
from approximately 9:20 to 11:15 a.m. Present at the
conference were Senator George, Senator Vandenberg,
Congressman Doughton, Congressman Treadway, Mr. Stam,
The Secretary, Under Secretary Bell, Mr. Sullivan,
Mr. Paul, Mr. Tarleau, and Mr. Blough. Mr. Stam came
in a few minutes late and Senator Vendenberg left at
10:40.
The Secretary said that he had called the meet-
ing because he wanted to talk about the problem of
the tax bill and let the tax leaders in Congress see
what ideas the Treasury wse working on and try to
reach an agreement insofar as possible before he
appeared on the Hill.
Senator George asked if the Treasury had any plans
to recommend. The Secretary said no, that there were
some preliminary ideas which the Treasury had been
working on. Senator Vandenberg asked if the plans the
Treasury had in mind contained any new methods. The
Secretary said they did not. Mr. Doughton said that
at the last tax bill more or less of B. promise had been
made to taxpayers that the administrative changes would
be taken up first. Mr. Doughton said he wondered if
the Treasury wanted to put something else ahead of those
changes. This question was not directly answered.
The question of the Social Security tax bill was
then raised, The Secretary said he had hoped that the
tax bill would be taken up before the social security
changes. Senator George, Mr. Doughton and Mr. Treadway
expressed agreement.
Regraded Unclassified
54
2
Mr. Treadway asked if there was any general sales
tax in the Treasury plans. The Secretary said there
was some difference of opinion about it; that the
Budget Bureau has one tax man and has some ideas on
the subject, The Secretary said he took the view that
it might be necessary to come to it later but it should
be the last resort; that in the Treasury thinking selec-
tive excises were preferable at this time to a general
sales tax. Senator Vandenberg asked what new excises
there were and said that the more new excises were added,
the nearer to 8. general sales tax the law came. Mr.
Sullivan said that the new excises were on commodities
competing with the defense program.
Mr. Doughton said he hoped that it would be possible
to avoid the kind of embarrasement that they had had last
year. The Secretary asked him what he meant. Mr. Doughton
said he referred to the letter from the President, sent
after the House Committee had reported its bill, and giving
positions opposite to those taken by the Treasury on joint
returns, excess profits tax, and personal exemptions. The
Secretary said he would do the best he could but that he
V&B just a hired man and could not guarantee what would
happen. Mr. Doughton said of course no one can guarantee
but they would like to avoid that sort of thing happening
again,
Senator George said, in considering corporation
taxes, he was disturbed about the maximum rate. He asked
Mr. Paul what the maximum rate was now and Mr. Paul told
him about 72 percent, Senator George asked how much the
Treasury contemplated in corporation taxes. Mr. Paul
explained that several different schedules had been worked
out and it was found that if the present excess profite
tax were retained it would take marginal rates of from
81 to 88 percent to yield $3 billion of revenue from this
source; that some schedules had been worked out eliminating
the excess profits tax and making the tax substantially 8.
flat rate one. Mr. Paul said that the Treasury was just
thinking about these different approaches. Mr. Treadway
asked if the Secretary would make definite recommendations
when he appeared before the Committee. The Secretary said
he did not know; that it depended to a considerable extent
on the outcome of the conferences.
Regraded Unclassified
55
- -
the the
Mr. Paul then showed three charte. one showing
corporate rates, & second individual rates, and 8
third the present individual rates compared with
Canada and Great Britain.
Mr. Paul then went to the subject of loopholes.
He mentioned the taxing of outstanding issues of State
and local securities and said that was included in
arriving at the $300 million; that if only future issues
were taxed the immediate revenue would be small. He
then mentioned mandatory joint returns. Mr. Doughton
said everyone knew how controversial that was. Mr. Paul
said that a provision had been included for a separate
earned income credit. Mr. Doughton said that was also
controversial. Mr. Doughton went on to say that they
would not get a sales tax, at least not his vote, until
the Joint returns loophole was closed. He said he had
fought the sales tax in the past but did not aay he
would now.
Senator Vandenberg said the retroactive taxation
of State and local interest would never get by. The
taxation of future interest might be approved but there
18 such e basic resistance to taxing outstanding issues
that however aquitable a plan was worked out, it WBB a
"deed duck' right now. Mr. Paul said that meant the
revenue must be secured somewhere else. He asked
Senator Vandenberg about & special war tax on tax-exempt
interest. He said that Mr. Harrison of the New York
Life Insurance Company thought that life insurance com-
panies should be texed for the war. Mr. Treadway then
asked how they proposed to tax life insurance. Mr. Paul
explained some of the Treasury ideas and said the whole
thing was still uncertain and that Mr. Harrison thought
the tax should be on premiums or outstanding insurance.
Senator Vandenberg reverted to the tax-exempt
securities issue. He said the taxation of outstanding
issues collides with the protection of local governments,
which 1s strong in Congress. For example, the proposed
treaty with Great Britain to exempt British war materials
from local taxation did not last five minutes in the
Foreign Relations Committee. Senator George said he was
not prepared to say that outstanding tax exempts could
not be subject to taxation during the war. It 18 true
Regraded Unclassified
56
4
there are many small holders who do not get large
amounts of income but in a war we may have to shut
our eyes to this fact. It might be possible to get a
moderate tax, Mr. Paul asked Senator George if he
would be interested in plane for improving the equity
of taxing outstanding issues. Senator George said he
would and asked Mr. Peul to go over the matter with
Mr. Stam. He pointed out that in the past they had
always had a tough right in the Senate on taxing
future issues.
Senator Vandenberg asked what Mr. Paul thought
about a gross income tax with no exemptions, 8.6 B. war
tax. Mr. Paul said he vao fearful that there would be
great inequities since, for one thing, there wight be
no net income.
Senator George asked if the Treasury was still
considering the withholding tax, Mr. Paul said that
it might be found desirable to withhold the normal
income tax and the lowest surtax and to provide flex-
ibility in collection at source 80 that the tax would
not be withdrawn if it was not needed but could be
withdrawn if it was desirable to combat inflation.
Mr. Doughton asked if the collection at source was not
very difficult to defend on the grounds of equal treat-
ment, since the tax cannot be withheld from lawyers,
doctors and many other people. Mr. Paul said that
Mr. Tarleau Was working on a plan to extend withholding
to lawyers and other groups. Mr. Tarleau said that
several plane had been developed and that he thought
could be worked out in such a way 86 to get substantial
justice. Mr. Stam asked if the withheld tax would be
a credit against the regular income tax. Mr. Paul said
yes, it would in effect be an advance collection.
Senator George said that the collection at source had
great virtue from the viewpoints of both the Treasury
and the taxpayer and that it 1e very desirable that we
should move in that direction. It would be almost
impossible to get taxes of the necessary magnitude
without it. He said he had the idea of superimposing
B. supplementary tax which would reach tax-exempt interest
and he thought this would be easier to pass than taxing
such interest under the income tax law. Mr. Treadway
and Senator Vandenberg agreed. Mr. Paul said that the
reason for not making it a supplementary tax was that
it would not be in the interest of simplicity. Mr. George
said that the withholding idea was in the right direction
Regraded Unclassified
57
- 5 -
and that he had almost concluded that something closely
akin to a gross income tax on primary profite should
be imposed. Senator Vandenberg said that would be a
way to impose a tax on bonds.
Mr. Paul then turned to the subject of percentage
depletion. He said he had conferred with Mr. Davies,
Assistant Petroleum Administrator. There 10 some con-
cern about the laok of new sources of oil supply.
Mr. Paul said he was thinking along the lines of
changing percentage depletion 80 as to promote new
discoveries but not to allow depletion for the established
fields. Some oil men think this practical. Mr. Doughton
said that that was a plain distinction which should be
properly recognized in the tax. Mr. Sullivan said there
was particular injustice in the royalties field,
Mr. Tarleau explained how royalty owners received per-
centage depletion although they took no risk. Mr. Doughton
said if percentage depletion was not a loophole he did
not know of one. Mr. Stam asked about percentage deple-
tion on properties, which had been brought in heretofore
with the understanding that such depletion would be
allowed. Mr. Paul said it would not be necessary to
take it away from them but it should be eliminated if
the oil field was sold. Mr. Stam said he would like to
talk about that subject.
Senator Vandenberg expressed the view that there
would be tremendous resistance to new and additional
selected excises; much m less to a general sales tax.
Mr. Paul said that the basis of selection was in part
competition with the defense program and in part on
commodities which would not enter the cost of living or
parity indices. Since taxes entering into these indices
would cause a movement to increase wages, the sales tax
Would make wage increases more likely. Senator Vandenberg
said that popular reaction would be very strongly against
the selective excises because the industries picked out
for the excise are those which are already suffering
from special burdens such as priorities. To add excise
taxes would result in one awful squawk. Mr. Doughton
said that the excises had always been imposed on the
basis of getting money and to impose them on these
commodities would undoubtedly arouse indignation. The
Secretary pointed out that the commodities taxed would
compate with national defense. Benator Vandenberg said
that controlling that competition had been done by
priorities. He cited the case of automobiles and said
Regraded Unclassified
58
- 6 -
that at 11:00 he Vas meeting with Mr. Knudsen to 800
what could be done about the unemployment in the auto-
mobile industry. Mr. Sullivan asked whether all the
automobiles made would not be sold regardless of the
tax. Senator Vandenberg answered yes but that public
opinion was overwhelmingly hostile to the tax.
Senator George said that 8.8 a legislative matter
it would be easier to put over a general sales tax
than drastic increases in special excises. The question
in his mind he said was the exemptions which would be
demanded. There might be 80 many of them that not much
money would be raised. Mr. Treadway agreed and cited
the example of the 1932 proposals. Mr. Doughton said
that of course the excise taxes were passed along and
gave effects similar to the general sales tax. Mr. Paul
referred to the fact that the excises were not heavily
weighted in the cost of living or parity indices. He
then agreed that Detroit was in bad shape now but asked
whether later it would not be making lote of money.
Senator Vendenberg agreed but said it would take fifteen
months to make the transition as it had taken nine months
in Great Britain, during which time the chaos was terrific,
Mr. Treadway asked whether with the decrease in
automobile production the revenue would not fall off
rather than increase, as shown in the schedule. Mr. Paul
and Mr. Blough pointed out that the falling off in
revenue had been taken into consideration in current
budget estimates and that the revenue estimate was the
amount in addition to what would be received under the
present law. Mr. Treadway and the Secretary then dis-
cussed briefly the question of purchasing government
automobiles and tires through retail dealers. The
Vecretary pointed out that if & subsidy was to be given
it should not be up to him to give it since he had 8
legal responsibility to buy at the lowest price.
Mr. Paul then brought up the subject of capital
gains and losses, pointing out the large amount of
losses which had been taken at the end of 1941. He
said the losses should be offset only against the gaine
with & liberal carryover against capital gains in later
years. Senator Vandenberg asked whether this result
would not be reached with a gross income tax. Mr. Paul
said he did not think it could be reached in this manner.
Regraded Unclassified
59
7
The Secretary brought up the question of now to
interpret the amount the President expected to be
raised. Mr. Stam at first did not get the point but
the Secretary made clear he had in mind the difference
between annual rate and fiscal year collections for
1943. The Secretary said he had sent a. telegram to
the President and read it at the meeting. The telegram
was to the effect that the Secretary understood the
President's desire was to have a tax program of $7 bil-
lion on an annual basis.
Mr. Stam and Senator George said they had gone
over the question yesterday and that the Secretary
was correct about the amount, since #7 billion in
fiscal 1943 would be $10 or $12 billion on the basis
of full year. The Secretary said that the collection
basis runs throughout the budget tables but that he was
in complete disagreement with the Budget Bureau. He
said he nad received no answer from the President and
ao was going to take the position publicly that the
intention was & 47 billion tax program. He said he
nad sent & copy of tne telegram to the Director of tue
Budget.
The Secretary said if the Congress wanted $10 bil-
lion, that was up to it. Mr. Doughton said we need
every dollar we can get without disturbing the system.
He suggested going over the taxes and deciding with
respect to each source how much can be raised. If the
total is more than $7 billion, all right; and if less,
all right. The Secretary said that unless the President
changes his views the Secretary must go after $7 billion.
If the Congress raises more than that the Budget Bureau
would be happy and the Secretary would not object.
Mr. Treadway asked whether, in view of the
Secretary's statement of the sales tax as a last resort,
the comments of Senators George and Vandenberg on the
excises had changed his ideas on the sales tax.
Mr. Treadway said he was in accord with them with
regard to increasing the present excise taxes and felt
that the 1941 $30 billion program had about put the
limit on excises. The Secretary said he would oonsider
the matter again; that his mind le wide open on the
subject.
Senator Vandenberg left at this point.
Regraded Unclassified
60
Mr. Paul then said that it was also intended to
eliminate hardships and that this item did not appear
in the schedules. Senator George said that he under-
stood that. He again referred to the sales tax as
being easier to get than selective excises but indi-
cated he did not know if it would be possible to
escape wide exemptions. He and Mr. Doughton and
Mr. Treadway agreed that it would not be possible to
get both the increases in excises and the general sales
tax. Mr. Doughton said that the Secretary's choice
would carry great weight and that the country should
know which he thought was the better.
Mr. Treadway said he thought it vas advisable
to know what attitude the Treasury takes on telling
the rest of the Committee about various proposale, for
example, joint returns, which would cause an awful
fight. The Secretary said he would leave it to the
congressmen present. Mr. Doughton said the attitude
of the Administration would be determining in the
Joint return fight. Benator George said it was true
that a united front was necessary but he did not 100
how the war was to be financed without doing that sort
of thing. The Secretary said it would be necessary to
get Senator Barkley's approval. Mr. Treadway said he
must also get Speaker Rayburn's approval. The Secretary
said that could not be done. Mr. Doughton said that they
could override the Speaker with Administration support.
Senator George said he did not think going away
from the excess profits tax was a real alternative,
He said many people in Congress want a special tax on
var profits. He said he recognized the difficulties
but the pschology was strongly against getting rid of
the excess profits tax and there was no use in wasting
time on an alternative plan. Mr. Paul, Mr. Sullivan
and Mr. Doughton agreed.
Senator George asked what suggestione there were
to continue; should Mr. Stam and the Treasury staff sit
around and eliminate their differences, or what. He
said the Treasury should not bring a half dozen alter-
natives to the Committee. Mr. Treadway asked if the
Treasury intended to revise suggestions before going to
the Committee. The Secretary said yes and that he hoped
this would be one of several conferences. Mr. Treadway
told the Secretary the Republican members would stand
with him.
Regraded Unclassified
61
- 9 -
The Secretary asked when the Committee on Ways
and Means would want B. program formally. Mr. Doughton
said any time the Treasury was ready and suggested
about the 25th. Mr. Treadway objected to postponement
beyond the 15th, eaying the people expected action
about that time. The Secretary said he would prefer
to see some further wait in order to get together.
Mr. Doughton said that any time up to the 20th would
not hurt the Committee. The Secretary said that the
Treasury wee ready to sit down with Mr. Stam any time
but does not know how long it will take to get together.
Mr. Stam said he would like some time before sitting
down with the Treasury representatives and that it would
take him B few days to get ready. Mr. Doughton suggested
it would be better to have criticisms of delay than to
go into the bill prematurely. He suggested that the
Treasury take A week longer if it needed it. The
Secretary said that was not the point; that Mr. Stam
said he needed the time. He suggested that the date
be left in the air and not fixed at this time.
Mr. Doughton said it would not be possible to fix it
now but that it should be as soon as the Treasury can
get ready. The Secretary said it also depended on
when Mr. Stam would be ready. Mr. Stam said it would
take him some time. Mr. Doughton suggested that they
might get together Monday. Mr, Paul said that was fine
and Mr. Treadway said it was soon enough. Mr. Doughton
suggested that after Mr. Stem and the Treasury people
had completed their meetings, B second conference
could be called. There was general agreement that this
procedure was correct.
Mr. Treadway then raised the question of whether
the figures would be given them at this time. The
Secretary assured them they could have & copy of the
figures. It Was understood that they would all be
kept confidential since they were in such preliminary
stage. Senator Vandenberg did not take a copy, having
left before the point was determined, (After the
meeting the Secretary said he thought the Senator had
preferred not to take a copy but indicated that
Mr. Sullivan might call and find out if he wished one.)
It was decided that the Congressional members would
give out the only statement to the Press and would indi-
cate that the purpose of the conference was to talk
generally about the tax program.
RB
Regraded Unclassified
62
January 9, 1942
My dear Mr. Premident:
We have just held e very good meeting
with Senator George, Senator Vandenberg,
Congressman Doughton, Congressman Treadway.
and the Treasury staff.
I am sending you herewith, for your
information, the preliminary data which we
presented at this meeting and three charts
which are keyed to the schedules.
The Congressional tax staff and our
tax staff are now going to E° to work and see
if we can have a meeting of the minds.
If, after reading this material, you
have any questions or suggestions, I am at
your services.
Yours sincerely,
The President,
Hyde Park, Rew York.
(Via White house Mail Pouch)
Regraded Unclassified
INDIVIDUAL INCOME TAX
Effective Rates for Married Person without Dependents
Present Exemptions
PER
PER
CENT
CENT
90
90
Proposal E
80
80
Proposal C
70
70
Proposal B
Proposal A
60
60
50
50
40
40
30
30
Present Law
20
20
10
10
0
0
I
2
4
6
10
20
40
60
100
200
400
600
1000
2000
4000
NET INCOME IN THOUSANDS OF DOLLARS
de
N-PAIL
Regraded Unclassified
CORPORATION INCOME TAX
Effective Rates
PER
CENT
PER
CENT
90
90
80
80
70
70
Proposal "G-2"
60
Substitute for present normal
tax surtax, and excess profits tax
60
50
50
Proposal "F"
40
Substitute for present
Proposal "B"
normal tax and surtax
Substitute for present
normal tax, and surtax
40
30
30
Present Law
20
Present normal
tax, and surtax
20
10
10
0
2
4
6
10
20
40
60
100
200
400
600
0
1000
2000
NET INCOME IN THOUSANDS OF DOLLARS
4000 Regraded 6000 Unclassified
INDIVIDUAL INCOME TAX
UNITED STATES, UNITED KINGDOM AND CANADA
Effective Rates for Married Person without Dependents
PER
PER
CENT
Acts of 1941
CENT
90
90
80
80
Canada
United Kingdom
70
70
60
60
50
50
United States
40
40
30
30
20
20
10
10
0
o
.6
I
2
4
6
10
20
40
60
100
200
400
600
1000
2000
4000
NET INCOME IN THOUSANDS OF DOLLARS
the
they
Regraded Unclassified
66
Excerpt from Daily Report of Mr. Sullivan
for January 9, 1942,
1:00 - Hearing before House "ays and Veans Committee.
Present: Jesse Jones, Secretary of Comperce, Floyd Odlum
of OFF, Robert [etterson, Under Secretary of mar, James
Perrostal, Under Secretary of Navy, and John I. Sullivan,
Ascistant ecretary of Treasury. Discussion ro F.R. 257,
repealing Sec. 12/ (1) of the Internal Revenue Code, relating
to certificates of non-reimburrement for amortization. All
of ns testified and the Bill was reported out without a
minority report. I explained that this was not e Treasury
problem, Fut that the Treasury would not object to the
legislation.
Regraded Unclassified
67
January 9, 1942
Vy dear Mr. President:
I can't begin to tell you
how much I appreciate the copy of
your addresses from July, 1940, to
January, 1941.
Please accept my very best
thanks.
Yours sincerely,
(Signed) 1. Morgenthou. 30,
The President,
The White house.
By Moservigue Decordise 4:30
Inmc
Regraded Unclassified
TREASURY DEPARTMENT
68
INTER OFFICE COMMUNICATION
DATE January 9, 1942
Secretary Morgenthau
TO
PROM Mr. Thompson
with reference to the telephone call received at your home
from the OPM employee, Morris W. Scheffer, he has been in and
interviewed and I have the impression that he is Somewhat of A.
psychopathic case, which no doubt would be grestly aggravated
should he be dismissed. He was given to understand that he could
not continue to annoy Government officials and gave reasonable
Assurance that this practice would be discontinued.
Arrangements were made to have his plans gone over by a
Mr. Underwood, consulting architect in charge of defense housing
for the Public Buildings Administration, who advised him as to the
best procedure to follow to put these plans to practical use. The
Office of Production Management agreed that they would reinstate
him effective January 9th for e period of six months on probation.
He seemed pleased about the interest shown him, and I do not
anticipate further difficulty so far as the Treasury Department is
concerned.
He is married and has a small child.
If
I want to thank Mr. Thompson
and mo Klotz Intaking care
of this situation for think me.
Regraded Unclassified
The have not
69
January 9, 1942
My dear Mr. Baruch:
This will acknowledge receipt of your let-
ter of January 5th, with which you enclosed a
letter dated December 8th from Mr. Isaac W.
Digges, both letters referring to the dismissal
with prejudice of J. Homer Butler, formerly
Assistant Treasury Attache in Paris.
I am satisfied that no injustice was done
in this case.
I appreciate your writing to me on the mat-
ter and in view of your interest I regret that
it is not possible to come to any other decision.
Sincerely yours,
(Signed) 1. Worsenthane IN
Mr. Bernard M. Baruch,
597 Madison Avenue,
New York, New York.
Regraded Unclassified
70
ASSISTANT SECRETARY OF THE TREASURY
January 9, 1942.
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Caston
Mr. Digges' letter adds
nothing that we do not know. It is
consistent with the record, although
it does not contain all the facts.
knowing what we do of Butler's char-
acter, we never suspected him of
accepting a bribe. Digges says that
Butler readily admitted, when question-
ed by the British agent, that the cases
containing the oils did not belong to
him. This is true, but it occurred
after the British had learned the facts
from examination of the baggage in the
hold and the admissions of the real
owner, Robert.
119
Regraded Unclassified
BERNARD M. BARUCH
597 MADISON AVENUE
NEW YORK
January 5, 1942.
Dear Mr. Secretary:
The enclosed letter is
self-explanatory.
I have known Homer
Butler for a good many years and my
Judgment is that he might do a stupid thing
but never a dishonest one.
He has told
me his story and I believe he is guiltless
and did not deserve the severe punishment
meted out to him.
I think we should be
severe but I think we should be Just. I
know you are both, particularly the latter.
Sincerely yours,
Bunnd m Bauch
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
NAVY DEPARTMENT,
72
Bureau of Ordnance,
. 19
MORANDUM: was Klats
us urong entlom gesterday
mentioned that he would he
internated in seeing the
inclosed memo send To
all offer of the Bureau
+ Ordnance
Ru Ince
Regraded Unclassified
NAVY DEPARTMENT
BUREAU OF ORDNANCE
73
(Ad4)
WASHINGTON, D.C.
20 Docember 1941
MEMORANDUM FOR "ALL HANDS" IN THE BUREAU OF ORDNANCE:
Subject:
A Christmas Present of "WAR BONDS".
1.
THIS Christmas is Different! You and I
know Why! We are in a War to WIN!
2.
In this War - We need money from everyone
to my Christmas prescnte for our Country in the shape of
MINE, projectilos, bomos, tornedoes, mines and denth charges!
IT WILL BE THESE which will bring pleasent Christmas days
for 16 in the future.
3.
Each of us should buy part of a bond, or
as many bonde BE we can afford until it really "nurte".
We can give these as presents to our family, our friends,
or - put aside for even our grandchildren. It will be these
bonds and our backing here in the Navy Department which will
help make possible a VICTORY at sea.
4.
I urge that you stop in Room 3016 of the
Personnel Section - or see the representative in your sec-
tion - and act at once to give a "WAR BOND", or more, 08
your Christmas contribution to our shiomates at Hawaii, Cavito,
and on the "the Seven Scas".
5.
Let's give -- Before it is too Late!
Rear Admiral W. H. P. Blandy, U.S. Navy
Chairmen, National Defense Bonds Committee
Bureau of Ordnande
aukua
Captein W, R. Van Aukon, U. S. Havy (Retired)
Vice Chairman
as
Regraded Unclassified
74
1-9-42
itrut. Jourlas Feirbanks called at the request of Miss Mary
Helford.
Miss Pickford is sending B. wire to the Secretary
and will try to reach him by telephone this afternoon.
Shrieone has suggested to Miss Pickford that she take B
specially chartered train through the country and she
would like to come East and talk to the Secretary about
il,
It would be a special drive throughout the
country. She would have several prominent people who
would help to draw crowds. It would be A streamlined
version of her activities with the old Liberty Loan Drive.
She is very anxious to swing her prestipe and weight,
throughout the country, in the sale of defense bonds and stamps.
Lieut. Fairbanks said there is no one in the
profession who has her prestige and dignity. with anyone
else it would be almost B circus, whereas with her It
would have distinction about it.
I suggested to Lieut. Fairbanks that he also
tall to dr. Kuhn about this (which he did) and that I
would pass the above message along to the Secretary.
nmc
Regraded Unclassified
75
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 9, 1942
TO
Secretary Morgenthau
FROM
Mr. Kuhn
MT
Albert Kircher, a Chicago advertising agent,
sent us the plan which prompted this editorial.
Another copy was forwarded to you by Senator Brooks
of Illinois.
We returned all Mr. Kircher's plans to him with
a letter strongly disapproving that portion of it
which would hold up citizens to public ridicule and
scorn" for not buying Defense Bonds. We also sent 8.
letter to the same effect to Senator Brooks.
Copies of our replies are attached.
7.K
Attachments
Regraded Unclassified
January 8, 1942
Dear Mr. Kircheri
On behalf of Secretary Morgenthau I em writing to
acknowledge your letter and plan dated December 18. Our policy
is that all such plans be taken up for discussion and recom-
mendation with the nearest State Administrator for Defense
Savings, in your case Mr. Norman B. Collins, Defense Savings
Staff, 1357 Federal Reserve Building, Chicago. I suggest that
you send your plan to Mr. Collins and his organization.
Marry interesting plans are received here daily and =
cannot pase on the merits of any unless it is first presented
in the manner I have suggested,
There is, however, just one comment that I should like
to make so that you may understand the Treasury's position.
No not only do not countenance, but we disapprove any attempt
to hold up any one to ridicule or scorn in connection with
Defense Savings. We do not believe in the effectiveness of
intimidating Americans, and this aspect of your plan, at least,
would be entirely contrary to our policies and our purposes.
We appreciate very much the trouble you have taken to
draw up this comprehensive plan, and we are sure that it was,
an you say, "conceived in the sincere desire to be helpful to
our Government in these difficult days."
Sincerely yours,
continent Tohn. 16%
Perdinand Kuhn, Jr.
Ameistant to the Secretary.
Mr. Albert Kircher,
President, The Albert Kiroher Company,
111 North Canal Street,
Chicago, Illinois.
PK/hkb
Regraded Unclassified
77
January e, 1942
My dear Senator:
I an enclosing a copy of a letter sent on
behalf of Secretary Morgenthau to Mr. Albert Kircher,
111 North Canal Street, Chicago, about whom you wrote
to the Secretary on December 24.
You will notice that we disapprove strongly
of that part of Mr. Kircher's plan which would hold
up any of our citizens to "public ridicule and scorn"
for not buying Defense Bonds. We do not believe that
such intimidation will sell bonds or build public
morale, and we have avoided it like the plague.
Sincerely yours,
(e'-") Fordloand Kuhn, Jr.
Ferdinand Kuhn, Jr.
Assistant to the Secretary.
Hon. C. Wayland Brooks,
United States Senate,
Washington, D. C.
Inclosure.
FK/hkb
Regraded Unclassified
The
78
News
JAN 7 1942
INGENIOUS, BUT NO THANKS
A
N advertising agency sends us, in a handsome brochure, an
ingenious plan for stimulating the sale of Defense Bonds
and Stamps.
The proposal is that non-buyers of the bonds and stamps
be exposed to "public ridicule and scorn." This would be accom-
plished by issuing each month, to those who do invest, lapel
buttons, automobile stickers and home-window posters, each
bearing a bold "V" for Victory-all three of these devices to
appear in a new color each month. (For those who bought only
stamps, and not bonds, one "leg" of the "V" on the button
would be omitted.)
"The vast majority of people," says the advertising agency,
"must be constantly prodded by every form of emotion to
recognize and honor their obligation to the United States of
America."
The plan has been submitted to Secretary of the Treasury
Morgenthau. We doubt if he will go for it. We doubt, if he
subscribes, any more than we do, to the theory that threats
of public ridicule and scorn are necessary to the success of the
Defense Bonds and Stamps plan. If such a scheme were adopted,
we might as well reconcile ourselves to an early reappearance
of the hysterical and cruel anti-"slacker" measures that were
a disgraceful feature of the Liberty Bond drives in the last war.
Regraded Unclassified
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Six Business Days of January 1942 and December and November 1941
(November 1-7. December 1-6, January 1-7)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
: Percentage of Increase
Sales
:
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
January
:
December
=
January
:
December
January
December
November
:
:
:
:
over
:
over
:
over
:
over
1942
1941
1941
:
:
2
:
December
:
November
:
December
:
November
Series 1- Post Offices
$ 36,385
$ 11,142
$ 10,660
$ 25,243
$
482
226.6%
4.5%
Series E - Banks
86,171
20,364
17,860
65,807
2,504
323.2
14.0
Series 1- E Total
122,555
31,506
28,520
91,049
2,986
289.0
10.5
Series P - Banks
13,573
5,360
5,738
8,213
-
378
153.2
- 6.6
Series G - Banks
60,150
40,922
40,534
19,228
388
47.0
1.0
Total
$196,279
$ 77,788
$ 74,792
$118,491
$ 2,996
152.3%
4.0%
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 8, 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
80
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Daily Sales - January, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Bond Sales
Date
Series I
Series E
Series 7
Series G
Total
Series I
Series I
Series G
Total
Jamuary 1942
1
$ 3,982
$ 10,229
$ 1,964
$ 7,605
$ 19,798
$ 14,211
$ 1,964
$ 7.605
$ 23,780
2
4,802
10,736
2,056
7,779
20,571
15,538
2,056
7.779
25,373
3
4,457
9,557
1,278
5,453
16,289
14,015
1,278
5,453
20,747
5
9,684
26,724
3,240
13,704
43,668
36,408
3,240
13,704
53,352
6
6,711
7,659
1,341
6,778
15,778
14,369
1,341
6,778
22,489
7
6,748
21,267
3,692
18,832
43,790
28,015
3,692
18,832
50,539
Total
$ 36,385
$ 86,171
$ 13,573
$ 60,150
$159,894
$ 122,555
$ 13,573
$ 60,150
$196,279
Office of the Secretary of the Treasur, Division of Research and Statistics.
January 8, 1942.
Source: All figures are deposite with the Treasurer of the United States on account of proceeds of
sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
81
Unfilled Orders for Savings Bonde at the
Federal Reserve Banke and the Post Office Department
December 31 to date
(In thousands of pieces)
:
Unfilled
:
:
: Unfilled
New
Bonds
:
:
:
orders
IBM Deliveries this day
orders
:
Orders
manufac-
Day
:
at opening
:
:
:
at close
:
:
Received
tured
:
of
:
:
:
of
A type
:
B type
:
Total
Today
today
:
business
:
:
: business
:
:
Dec. 31
919
285
375
829
350
-
350
Jan.
1
829
none - no mail
400
429
123
200
388
2
429
932
370
991
55
345
400
3
991
600
420
1,171
400
1
400
4
1,171
none - no mail
none - closed
1,171
400
I
400
5
1,171
257
173*
1,255
710
-
310
6
1,255
425
272
1,408
520
1
520
7
1,408
639
450
1,597
525
-
525
Office of the Secretary of the Treasury,
January 8, 1942
Division of Research and Statistics.
"A" type only. The Bureau manufactured 272,000 "E" type bonds on January 5 and
178,000 such bonds on January 6, but these bonds were not shipped out of
Washington and are not counted for the purpose of this table.
Regraded Unclassified
82
CONFIDENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Seven Business Days of January 1942 and December and November 1941
(November 1-8, December 1-8, January 1-8)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
Sales
:
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
:
January
:
December
:
January
#
December
January
December
November
:
:
:
:
over
:
over
:
over
:
over
1942
1941
1941
:
:
:
:
December
:
November
:
December
:
November
Series 1 - Post Offices
$ 43,894
$ 14,424
$ 11,950
$ 29,470
$ 2,474
204.3%
20.7%
Series 1 - Banks
107,467
25,128
20,973
82,339
4,155
327.7
19.8
Series IN - Total
151,362
39,552
32,922
111,810
6,630
282.7
20.1
Series 3 - Banks
17,394
6,371
6,089
11,023
282
173.0
4.6
Series G - Banks
73,022
44,732
41,991
28,290
2,741
63.2
6.5
Total
$241,777
$ 90,655
$ 81,003
$151,122
$ 9,652
166.7%
11.9%
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 9. 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
83
Unfilled Orders for Savings Bonds at the
Federal Reserve Banks and the Post Office Department
December 31 to date
(In thousands of pieces)
:
Unfilled
:
New
:
Bonds
:
Unfilled :
:
orders
:
:
:
orders :
IBM Deliveries this day
orders
manufac-
Day
:
at opening
:
:
received
tured
:
at close
:
:
of
:
:
:
of
:
:
today
today
A type
B type
:
Total
:
business
:
:
: business :
:
Dec. 31
919
285
375
829
350
I
350
Jan.
1
829
none - no mail
400
429
188
200
388
2
429
932
370
991
55
345
400
3
991
600
420
1,171
400
-
400
4
1,171
none - no mail
none - closed
1,171
400
-
400
5
1,171
257
173*
1,255
310
-
310
6
1,255
425
272*
1,408
520
I
520
7
1,408
639
450
1,597
525
I
525
8
1,597
460
460
1,597
450
-
450
Office of the Secretary of the Treasury,
January 9, 1942
Division of Research and Statistics.
"A" type only. The Bureau menufactured 272,000 "B" type bonds on January 5 and
178,000 such bonds on January 6, but these bonds were not shipped out of
Washington and are not counted for the purpose of this table.
Regraded Unclassified
84
CONFIDEN
UNITED STATES SAVINGS BONDS
Daily Sales - January, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Bond Sales
Date
Series I
Series I
Series 7
Series G
Total
Series I
Series F
Series G
Total
January 1942
1
$ 3,982
$ 10,229
$ 1,964
$ 7,605
$ 19,798
$ 14,211
$ 1,964
$ 7,605
$ 23,780
2
4,802
10,736
2,056
7,779
20,571
15,538
2,056
7.779
25,373
3
4,457
9.557
1,278
5,453
16,289
14,015
1,278
5,453
20,747
3,240
13,704
53,352
5
9,684
26,724
3,240
13,704
43,668
36,408
6
6,711
7,659
1,341
6,778
15,778
14,369
1,341
6,778
22,489
7
6,748
21,267
3,692
18,832
43,790
28,015
3.692
18,832
50,539
8
7,509
21,297
3,821
12,871
37,989
28,806
3,821
12,871
45,498
Total
$ 43,894
$107,467
$ 17,394
$ 73,022
$197,883
$151,362
$ 17,394
$ 73,022
$241,777
Office of the Secretary of the Treasury, Division of Research and Statistics.
January 9. 1942.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
85
MEMORANDUM FOR THE SECRETARY.
January 9, 1942.
Mail Report
The radio address on Sunday, January 4th, brought in
one of the most voluminous fan mails we have ever received.
On the whole, it was en exceedingly favorable response.
The sour notes were few, and not so terribly sour. To
11:00 8.m., Friday morning, 202 comments on the speech had
been received -- 11 of which were telegrams. This does not
invlude a few letters from personal friends, nor those which
were obviously inspired by the speech but did not make any
mention of it, and so could not fairly be counted B.S other
than the regular Defense Bond mail.
Nine firms asked for speakers to address their employees:
37 asked information on the payroll deduction plan - most
di these letters being from firms, and e. few from employees.
Blent firms stated that the payroll deduction plan, or B.
similar one of their own, was in good working order. Eighteen
writers wanted jobs in connection with the campaign, and
meny made suggestions as to its conduct. There were 7 let-
ters from school teachers, nurses, or hospital workers 80
employed that salary deductions could not be made, but who
were anxious to subscribe to some regular plan. There were
4 complaints -- 2 of them of lack of Bonds; 1 of Post Office
indifference; 1 of refusal to accept coins.
There were 3 abusive, anonymous communications.
In the general bond mail, complaints have somewhat in-
opensed, but I would say the tone is not SO violent as in
DAST weeks. There is more understanding of the pressure
under which the Treasury has been working. There continue
to be requests for a button or some sort of symbol, and
there are the usual suggestions that we call them Victory
Bonds; that we have Bonds of smaller denominations, etc.
Two writers have said that if we would take their automobiles
off their hands, they would put the money into Bonds: and
Regraded Unclassified
SB
- 2 -
Memorandum for the Secretary.
January 9, 1942.
there are always depositors in closed banks, investors,
etc., who offer to turn over such assets to the Govern-
ment in exchange for Bonds.
There has been another wave of suggestions for tax
revenue. A national lottery still has its adherents, many
of whom are now sending their ideas to Congressmen, who in
turn, forward them to us.
Inquiries concerning individual income tax cases are
being referred to us again, after almost stopping. An
average of about 10 B. day come from individuals who want
advice.
The Secretary's attitude toward the farmer has elicited
some very interesting letters. Three of them say that there
is no use bringing suggestions or statements as to conditions
to the attention of the A.A.A., and ask if the Secretary will
not personally pass upon their ideas.
Contributions are not quite so heavy. An interesting
one was that of Post #3, American Legion, Marion, Ark.,
which sent & check for $110, representing gifts from 22
Italians of the town who asked the Post to accept and convey
their contributions. A few representative quotations from
letters conveying such gifts are included in the following
pages.
Regraded Unclassified
1
87
Favorable Comments on THE SPEECH
Anglo American Trading Corporation, N.Y.C. (Telegram)
Heartily in accord with policy outlined your broadcast
Sunday regarding Defense Bonds. Our Corporation and
employees will support plan advocated and undertake to
subscribe to the fullest extent.
Francis J. Temple, Drexel Hill, Pa. I listened with
pleasure to your radio address of last evening, and I
enclose my check for $18.75 for one Defense Bond, and
I intend to make a special effort to purchase R Bond
each month.
Frank Garbarini, Cranford, N.Y. If some plan can
be devised to buy Bonds and have the money deducted out
of my pay, I would like to buy an $18.75 Bond each month.
I Em employed at the Federal Ship Building and Dry Dock
Co., of Kearney, N. J., operated by the Navy. " $ " There
are many men that feel the same as I do, but working 8.8
we do, we find it inconvenient to purchase Bonds at the
Post Office or at the bank.
Vally Szekely-Shelley, Havana, Cuba. I was listening to
your animating speech last night in the radio, transmitted
to Havana. Although it was not yet granted to me to im-
migrate to the United States, which I have applied for a
few months ago, I still feel already like one who will
have the great privilege of becoming 8. U. S. citizen and
therefore 1 have paid special attention to your appeal.
I am earning just a little money, but I have already
treasured up 8. certain amount to invest into U. S. Defense
Bonds as soon as I will be admitted to the States. I wish
to continue this by saving 8 5% of my weekly earnings in
the future too SQ 8.5 to be able to contribute with my
dollars and cents to the victory of the democracies.
Clarence H. Taylor, Baltimore, Md. It was indeed with the
greatest amount of interest that I read your statements
that it may be necessary to force people now working to
purchase National Defense Bonds. Personally, I am in hopes
that such 8. procedure will not be necessary - to force
those employed at this time into doing that which they
should do 8.5 an obligation.
Regraded Unclassified
- 2 -
88
Timothy F. MoInerney, Chicago, Ill. You
mentioned
that Labor Unions and corporations on the whole were
giving splendid cooperation, but you never mentioned
whether the employees of the largest labor employer in
the United States, the Government's employees, were buy-
ing their share. On next Wednesday evening, as 6.
delegate to the Cook County Council, American Legion,
I mill advocate more activity on behalf of the male of
Bonds by the Legion, and I will move that the Cook County
Council Commander appoint B board chairman for every Post
on our roster.
William A. Hahn, President, Standard Railway Fuse Corp.,
Boonton, N.J. I was impressed with your broadcast and
realize the need for cooperation on the part of employers
In getting their employees to subscribe to Defense Bonds.
The first of the year I urged our employees to use all
their increase in income towards the purchase of Defense
Bonds. I have just received A report from our Boonton
plant that 100% of our employees have purchased outright,
approximately $3,000 in Defense Bonds. Of course, I under-
stand the above is not the solution to continuous buying.
If you have B. definite plan which we can submit to our
employees, calling for the setting aside of a percentage
of their salary per week, I will appreciate receiving it.
A. E. Johnston, U. S. Army Representative, Kansas City
Life Insurance Co., El Paso, Tex. At this moment, 5:30
MST, you have completed your address to America, which
to me has been most impressive. This is no responsibility
of yours, or of our President, to raise and provide the
necessary funds to carry to a successful end and victory
the war which is now raging, but is a responsibility and
E. duty of each and every one of us. We are not doing any-
thing charitable for our Govt. when we buy Stamps or Bonds -
we are only performing 8. duty that is incumbent upon us to
insure and provide liberty to our children, and their chil-
dren in the future.
Moe W. Smith, Brooklyn, N.Y. % * Some years ago I wes
with the U. S. Government in the Internal Revenue Bureau,
connected with the Prohibition Dept. known as Izzie and
Moe. Izzie Einstein and Moe Smith. At present I am not
doing anything and I thought this would be 8. good idea.
I could be of service in going around to factories, business
men and organize them into groups for buying Defense Bonds.
Regraded Unclassified
3 -
89
Mrs. Nancy G. Close, El Рабо, Tex. I have just listened
to your talk to the American people, on the purchase of
Defense Stamps and Bonds. I think it was B. wonderful
talk, and one that should awaken us to our responsibili-
ties, and make us "dig-in" farther and be more determined
that we will win this fight. * I have firmly resolved
that I will redouble my efforts and buy more Defense Stamps
to be converted into Bonds, and in my humble way, help
defeat the dictators.
Ernest W. Ruegg, Boston, Mass. Your message yesterday on
the radio made it very plain that you do not recognize
the word "impossible", and this is what gave me the cour-
age to approach you in this matter. Three weeks ago I
wrote to the Secretary of the American Steamship and
Tourist Agents Association about the idea of appointing
Travel Agencies as "Deputy Offices" for the sale of De-
fense Stamps and Bonds. Certainly many business firms
will, of their own initiative, collect funds for Bonds
and Stamps each week, but the Travel Agents, if made to
organize properly, could contact additional thousands of
firms and help you drive more money the Treasury way.
Ludwig Stern, Brooklyn, N. Y. It is our intention to
interest our employees (about 300) to buy War Savings
Stamps and U. S. Defense Bonds. Not one of our employees
whom I approached today knew about your last evening's
broadcast, and it now seems advisable that your message
be recorded or re-broadcast over leading radio stations.
Furthermore, I recommend that transcription of your talk
be available for use in factories and other establishments
to acquaint employees with the timely and important mes-
sage delivered in your forceful and excellent manner.
I. Allen Hanover, Brooklyn, N.Y. All the members of the
Navy Yard Civil Service Association join me in requesting
that you seek legislation that will permit the deduction
from our Govt. semi-monthly checks, the same as pension
deductions are now made. It is our belief that there is
some prohibitory statute on the books which only permits
the deduction of the 36% for pensions. This law should
be rewritten, so that subscriptions to Defense Savings
Bonds may also be deducted from the pay check.
Regraded Unclassified
90
Walter N. J. Doyle, Laurelton, Long Island, N. Y. I am
a veteran of the last World War, which was won by the
people purchasing Liberty Bonds. You will reoall that
every man in the armed service was asked to buy these
Bonds, as well as the people that stayed at home. I my-
self WAS glad, after I was discharged, to come out with
these Bonds paid for while I was fighting in France.
I had to send $15 home for the support of my family; I
paid $5 a month for Liberty Bonds; and $6.60 8. month for
insurance, out of my $30 B month on this side and $33 B.
month on the other side fighting. + si 45 I have 8, son in
the 105th field artillery, Battery C, and have been asking
him to send part of his pay home to buy Defense Bonds,
but SO far I have been unsuccessful in making him see my
way. He makes $52 a month and pays $6.50 8. month on
insurance, and with the rest he does what he pleases.
It would be a swell idea if you or the President could
impress upon these boys to buy Defense Bonds so that
when they come home they will have money of their own.
Murry Melamed, Brooklyn, N.Y. I found your speech quite
interesting because of more reasons than one. Mainly be-
cause of why and how we can help our country win this war.
Deducing from your speech, I am more convinced that we
who are not in the actual fighting army are part of another
army just as big and important.
Thomas P. Milligan, N.Y.C. I enjoyed your radio speech
the other night very much, and it seems to me that we are
missing 8. bet by not organizing 8 Stamp and Bond Club in
each office. # # I have started one in my own office and
it seems to have met with great enthusiasm. You spoke
over the radio of having each plant organize and I assume
that you meant the manufacturing plant, whereas there are
thousands of offices in New York that should be called
upon and organized in this manner. # # # I would be in-
terested in receiving a copy of the plan that you spoke
of and compare it with the one I have put in force.
Martin W. Lewis, N.Y.C. I listened with great interest to
your address of yesterday, and congratulate you sincerely.
Please send me information as regards employees savings plan
developed by your Department.
Regraded Unclassified
- 5 -
91
Henry Modell, Chairman, Local Board, Selective Service
System, Brooklyn, N.Y. Let me congratulate you for your
wonderful radio talk of last evening. Your stirring ap-
peal to all Americans to purchase Defense Bonds and
Stamps was indeed inspiring. Perhaps you may recall
meeting the writer at your office some time ago during
Secretary's Roper's Smaller Business Men's Conference.
# In order to stimulate greater interest in the sale
of Defense Stamps and Bonds, I respectfully urge you to
launch a National Victory Slogan Contest, As an incentive,
I will contribute $100 toward the slogan fund.
Edw. D. Ibbotson, Utica, N.Y. Congratulations to you on
your remarkable address, "The Job Ahead". Every American
citizen will be inspired to do more and still more to help
win this war. You will be interested to know that before
Pearl Harbor we started Defense Bond Sales by distributing
your address, "Inflation", to each of our employees.
Following this with the request to each employee to sign
up on pay deductions to buy Defense Bonds. Now, every one
of our 432 employees are subscribing for Defense Bonds on
authorized pay deductions. Total amount is $24,000.
Sam Keener, President, Salem Engineering Co., Salem, Ohio.
(Telegram) In response to your radio appeal, I am de-
lighted to inform you that the entire organization of Salem
Engineering Company, comprising over 150 employees, has
whole-heartedly subscribed to the purchase of Defense Bonds
and Stamps every month. Salem Engineering remembers Pearl
Harbor.
Mrs. B. E. Bamberger, N.Y.C. (Telegram) After your appeal
over the radio Sunday night, for buying Defense Bonds, I
for one immediately held E. meeting with my employees
(Wards Millinery) and everyone enthusiastically shall buy
each and every week from their weekly earnings Defense
Savings Stamps. I pray in the name of God that one hundred
thirty million Americans shall follow my example. May our
American millions buy billions of bullets for the enemy.
Mrs. Clare Sutherland, Arlington Mills, Lawrence, Mass.
I am doing as you requested, giving you the name of my
firm, which has not, as yet, mentioned this wonderful idem
of saving for Defense Bonds, and which many of us workers
would be only too glad to acquire such an easy way of
taking out of our pay before we could spend it other waste-
ful ways.
Regraded Unclassified
- 6 -
92
Cliff E. Myrick, Tucson, Arizona. I wish to state that
I am 13 years old and have saved pennies and nickels
for the past 10 years, which I have invested in three
U. S. Bonds and three 25-cent Stamp books. Now, Mr.
Morgenthau, I would like to have your opinion as to the
probability of the Government furnishing a small, in-
expensive, red, white and blue pin to wear as a symbol
for those who have purchased bonds. It would at least
show up the slackers, and I would know whom to approach
in my classroom and see that they bought Stamps or Bonds.
R. R. Wright, Sr., Chairman, Citizens Committee, National
Negro Bankers Assn., Philadelphia, Pa. I listened with
rapt attention to your excellent radio address urging
the purchase of Defense Bonds and Stamps for the financ-
ing of this war. *** We are definitely doing all we
can here to encourage the sale of bonds and the promotion
of morale among our depositors, stockholders and friends.
During the last 45 days we have sold more than $100,000
worth of Defense Bonds, and we are continuing to urge our
depositors to purchase these Bonds.
C. F. Brown, American Calendar Company, Greeneville, Tenn.
I heard over the radio last night that our salaries will
very likely be taxed as much as 15%, and the amount must
be invested in Government Savings Stamps and Bonds. This
strikes me as 8 master stroke. I happen to be one of the
common herd who wants to put forth every effort possible
in the winning of this war, and I see in 8. move of this
kind an opportunity to do this, and at the same time pro-
vide a little backlog that might carry me or my family
through a spell of sickness, should such an eventuality
materialize.
Milton H. Lees, San Francisco, Calif. Attached please
find circular that was distributed to our employees this
week. We are B. small firm with B. monthly payroll of ap"
proximately $7,200. We are proud of the fact that based
on the attached circular, we were able to have our employees
buy $3,000 of Defense Bonds in one week's time. 4i: # # True,
it has cost us a few dollars, but we are sure that it has
been invested in the greatest cause in our history.
Regraded Unclassified
7
93
Frank H. Livingston, Route #1, Mound, Minn. We heard
your plea for "all-out" purchase of bonds by the common
people. Have tried at the Excelsior Bank and the Mound
Post Office to buy B. $100 Bond but they don't have any-
thing but the E Bond. I want the G Bond because it
carries the least interest. I believe we Americans should
take Bonds and not even ask interest. I am willing to
take a $100 Bond without interest. The Bond is not an
investment. It is 8. duty to my country. Will buy more
as we can. # Tire rationing may mean my job 8.6 I em
on the road, but nevertheless, we are for all out for
America". # se si Pardon the lengthy letter but your radio
address invited a letter.
H. J. Shorter, Detroit, Mich. Congratulations on your
radio talk Sunday evening. Your cool, calm and collected
voice was not only very convincing, but reassuring as well.
Let the public hear you more often.
Mrs. Lillian LaBrosse, Western Union Telegraph Co., New
Orleans, La. Please send me the Treasury's plan for pay-
roll buying of Defense Stamps and Bonds. I wrote to
Major Bowes last week and he referred me to you. I work
for Western Union, and no one asked me to do this. I think
if I present my boss with your plan, it will go over. At
present we are buying about $60 per week - would like to
treble that amount. Maybe our Company would make a study
of your plan in all of our offices - anyway, here's hoping.
Morton Bodfish, Executive Vice Pres., United States Savings
and Loan League, Chicago, Ill. I heard your talk on the
radio Sunday evening on, "The Job Ahead", and thought it
& very fair and appropriate statement which should give
great impetus to the sales of Defense Bonds and Stamps.
Savings and Loan Associations are making all plans to re-
double their efforts in this connection.
Mrs. George Cone, Rensselaer, N.Y. Your talk Sunday night
was must inspiring. The only disappointment was, you did
not say anything to the children, so I do hope if you speak
again, you will mention them, as I work in 8 store that has
B. postal sub-station, and we have many children buying stemps.
One little fellow has his book - the $18.75 in 10¢ stamps -
nearly full, and he is very poor, and his book is very soiled
and worn. I asked him why he couldn't keep it cleaner, and
the answer I received was -- "Lady, it ain't the outside of
the book, its the Stamps that will buy my Bond".
Regraded Unclassified
- 8 -
94
Albert Kircher, Chicago, Ill. Your radio broadcast
Sunday has been favorably received. You are correct
in stating that token purchases will not win the war.
It has come to my attention that while some large
employers of men and women have arbitrarily told their
employees the amount that would be deducted each month
from their pay checks, in many instances, these deduc-
tions are only loose, spare change purchases. 4b # 0
I do not believe in n coercive effort, but do feel that
8 definite method to popularize and identify buyers of
Defense War Savings Bonds and Stamps should be in the
plan.
John H. Scott, Tulsa, Oklahoma. Your appeal to the
American people yesterday was listened to with keen and
sincere interest. Your voice impressed us as the voice
of one who loves the light of truth and righteousness;
of one who is sincere; of one who judges Righteous
Judgment" in all things, that Justice may prevail through-
out the land. The poise and personality behind your voice
impressed us with the vision of a man who would not know-
Ingly betray or injure any man or set of men, far less,
the safety of America.
Emmett J. Durr, New York State Hospital, Ray Brook, N.Y.
After hearing your broadcast last Sunday evening, I de-
cided not to postpone any longer from writing to you.
I am working here at the N. Y. State Hospital, and have
the opportunity of meeting and knowing all of the employees
and patients, also many outsiders throughout this vicinity,
and many of these members have suggested that I should sell
Defense Stamps and Bonds. As our Postmaster does not seem
to try to push the sale of these Stamps and Bonds, I am
saking your permission and approvel to try to sell these
Stamps, and if possible, the Bonds.
Fred G. Pohl, Ozone Park, N.Y. After hearing your radio
address last Sunday, I called our entire night and day
forces together and asked them if they were willing to co-
operate with our Govt. by purchasing Defense Bonds. I am
pleased to report to you that every member of our organiza-
tion has voted his approval to have 10% deducted from his
weekly wages, to be accumulated until such time as he has
sufficient money to purchase a $25 Bond. These individual
funds do not cease with the acquisition of B. single Bond,
but rather are to perpetuate until that time when the Govt.
no longer finds it imperative to secure money through the
sale of Defense Bonds.
Regraded Unclassified
95
- 9 -
Unfavorable Comments on THE SPEECH
Frank H. Spuhler, Camden, N. J. I am alarmed at the
many warnings aimed by the New Deal Government at the
wage-earner in regard to purchase of Defense Bonds, and
the threat of compulsory deductions from pay envelopes
for the purchase of these Bonds. 90% of the wealth is
owned by 5% of the population, and none of these 5% can,
by any stretch of the imagination, be termed "wage-carners"
So you should direct your threats to the "coupon-clippers"
"dividend recipients", and "unearned income plutocrats"
who are now lying on the sands in Florida, giving their
all (hot air) for all-out-defense.
Joseph J. Prussitis, Philadelphia, Pa. I Am B. railroad
employee; payroll deduction sales of Defense Bonds have
not been pushed as much B.S. they could be. I do know it's
not a one-man job. but if someone with authority and push
gets behind the movement, the sales can be stepped up.
Katherine E. Bassett, Forest Hills, N.Y. Could we not
have more definite information concerning the probable
rate of taxes for 1942 and 1943 so we may have something
on which to figure the possible amount we can spend for
Bonds? I am sure the American people would welcome the
truth, if they could get it - vague generalities give no
information.
J. P. Gill, Morgantown, W. Va. I work at Morgantown
Ordinance Works and desire to call attention to the no-
check-off rule applied here. What can you do to remedy
this situation?
C. N. Perry, N.Y.C. Your address was fine, but you said
nothing as to saving on the general expenses of the Govt.
and on the cost of production. Our President is 8 bit
unbelanced on the subject of spending. *** Doesn't all
this come under your Department? Surely something draatic
should be done to out costs and to SAVE. But my income
is static and small, and it is getting harder and harder
to out down, and also, it is hard to see money being
wasted by the Govt. Don't answer this - that is B. waste
of time. If you do anything, I will soon know.
Regraded Unclassified
- 10 -
96
Miss Elsie Kingdon, N.Y.C. I heartily agree with all
you say, and personally will do my part. I know it is
the policy of our Government to be fair about everything,
and I therefore wish to bring to your attention certain
things that have not seemed at all fair to me, B. wage-
earner. We seem always to stress that the "wage-earner"
should deny himself everything to pay the costs of the
war -- but there are thousands of citizens having excellent
incomes, who live a life of ease -- Florida in winter,
north in summer -- these incomes being derived from
Government tax-exempt bonds, pensions, annuities, alimony,
etc., on which, B5 I understand it, they pay no taxes.
& Why should they be exempt? + # # If it is an ALL OUT
FOR DEFENSE PROGRAM, let us make it an ALL out!
C. W. Zarbaugh, McWhorter, W. Va. I have just listened
to your talk over the radio in which you sald the employees
of the industrial organizations were not buying Defense
Bonds as they should. Well, I will agree with you. I for
one am one of those employees and would like to buy just
AG many as I can, but the Government has left us in the
dark as to the income tax we are going to have to pay.
and we are afraid to sign for them until the income tar
is paid, and we know where we stand. You know if we do
not have the money to pay that tax, we are certainly in
bad. I think after income tax is paid, you will find our
boys will buy bonds the same as other patriotic citizens.
George 0. Jackson, Jackson Engineering Co., Indianapolis,
Ind. As 8, citizen, I believe it is my privilege and duty
to take exception to two remarks you made in your "fireside
chat". * * * On two occasions you particularly complimented
Union Labor on their support of the sale of Defense Bonds,
and had nothing complimentary to say about unorganized
labor, the farmer, the white collar worker, or industry.
You had no kind word for those employers who are support-
ing the purchase of war Defense Bonds on 8. payment basis.
It was definitely bad taste to promote disunity in the same
speech in which you were asking everyone to purchase war
Defense Bonds. I hope you will find it proper and fitting
in future speeches to be fair and impartial and forget
politics for once.
Regraded Unclassified
97
11
Patrick Albert Flynn, N.Y.C. I am an average man. My
salary is very modest. This year taxes will put & large
dent into my income. How can I make any additional secri-
fices to buy Bonds? It positively cannot be done. The
Administration has dragged us in this mess, they have
appropriated billions and billions of dollars to GIVE
AWAY to England and Russia. If what they have appropriated
is not enough, why blame us, why put this matter up to us?
Daniel A. Cotteral, North Haven, Conn. I am employed by
the New Haven Clock Co., and there has been nothing done
here about the Defense Bond sales.
Helen B. Sinclair, Indianapolis, Ind. Of course we are
ready to do everything in our power, and in a voluntary
way -- provided the Administration, from President Roosevelt
down, cuts non-defense spending to the bone, clears out
the thousands of New Deal bureaucrats who are still feeding
at the Federal trough, and stops playing politics in these
critical days,
Jack Braunstein, Rockaway Beach, N.Y. In your redio
broadcast of Sunday evening, January 4, 1942, you stated
that you would like to hear from employees of companies
and corporations who have not as yet instituted 8. program
for the sale of Defense Bonds to employees. I am an em-
ployee of the City of New York, which with over 140,000
employees has not as yet, to my knowledge, presented any
plan for the sale of Defense Bonds.
Cyril Y. Boswell, N.Y.C. I fully believe in raising funds
for the defeat of the Axis Powers. However, I think your
talk noticeable for its serious omission. It was all aimed
at workers, while you yourself admit that workers have
generously responded. Yet you do not mention collection
from the "economic royalists", the rich. You seem to side
with the idea of putting all the burdens of the war on the
poor. Two-thirds of the nation is still half starved 8.8
evidenced by the 40% of rejections of army draftees. You
ask for money. This money goes to pay for the war contracts
given by the officials of the big corporations to their own
companies over the desks of the OPM. Mr. Knudsen has
sabotaged defense production for over a year, and still
remains on the job even while we are war. This aids Hitler
and Japan.
Regraded Unclassified
21 . I
98
FAVORABLE Comments on Bonds
W. A. Kielmann, President, The Peoples National Bank &
Trust Co., Lynbrook, Long Island. * # % Probably, owing
to the fact that the bonds can be converted into cash,
many persons who could well afford to accept larger
denominations, are buying the smallest bonds. We have
occasion to sell large groups of $25 bonds, one woman
taking as many as 75 of this denomination. We try to
encourage the acceptance of larger bonds and the most
common obstacle which we seem to meet, is instructed
women who say that their husbands have told them to get
certain denominations. We have, of course, always been
careful not to discourage the sale of the bonds by reason
of our efforts to save work, but if the public were ap-
prised over the air and through other media that to take
larger denominations will help their Government, through
the saving of paper and labor, I feel sure that the public
would be willing to accept larger denominations.
S. Gabel, President, Hagedorn & Company, Insurance, N.Y.C.
We have introduced in our office 8. plan whereby Hagedorn
& Co. present each employee with 8. $25.00 Defense Stamp
Album containing one dollar's worth of stamps with the
understanding by the employee to thereafter faithfully
buy from our treasurer each week at least one 25¢ stamp
for insertion in the album until it is completed. This
applies equally to the officers and clerks, down to the
office boys, regardless of the amount of Defense and
Treasury Bonds anyone possesses. Everyone certainly can
afford to help our country in this manner.
Rev. Mr. E. Dean Ellenwood, Woonsocket, R. I. Receipt of
your letter of Dec. 19th, in re "our" purchase of U. S.
Defense Bonds leads me to report to you that Mrs. Ellenwood
and I, together, have, during 1941 purchased the full quota
of Series S Bonds permitted to us as "co-owners" in a single
calendar your - according to instructions gleaned from your
published announcements. We are now prepared to purchase,
Immediately after January 1, 1942, our second $5,000 of
these Bonds, which we will have registered to "either of us"
ns por those now owned by US. # » I did not intend to write
1 "Christmas letter" - but here's my heartiest wishes for
Christmas for every member of your Department, and on up to
Y.O.R. for whom I have had the very great satisfaction of
voting THREE TIMES:
Regraded Unclassified
99
- 13 -
Dorothy I. Moore, Brooklyn, N.Y. As 8. volunteer teacher
of English to adult refugees, the following has come to
my notice: One of my students who has been in this country
since June, 1939, has found that, for the first time in
many years he has been able to save money. He decided
that the best investment he could make would be Govern-
ment Bonds, and after the Defense Bonds were issued, he
bought them, as he was able. About 8 month ago he received
B. form letter from you, thanking him for his purchase and
urging on him the desirability of buying Defense Bonds
systematically. The recognition of his efforts through
your letter gave him such pleasure that he brought it to
me in class, to show how the American Government commended
those who give it support. His wife told me that he almost
cried when he first read the letter. This man, I may say,
was an educated and prosperous citizen of the middle class
in his native country, and not a person to be emotionally
overcome without real cause.
Regraded Unclassified
- 14 -
100
Unfavorable Comments on BONDS
B. E. Thompson, Publicity Director, Richwood Chapter,
State Defense Administration, Richwood, W. Va. (Telegram)
Prospective investors here want to know if their money
spent for Defense Bonds would be applied to defense, or
whether part of it would go for relief commodities which
State Administration is issuing to CIO strikers here, in-
cluding many able-bodied men and women who have refused to
return to work, and are violently endeavoring to prevent
many patriotic citizens from working on defense produc-
tion. Many other patriotic citizens being prevented by
CIO from working, request we advise you that they would
like to invest in Defense Bonds but will be without income
until they are permitted to return to work.
James McCall, Lawyer, N.Y. A lot of women in this com-
munity, and amongst others, my daughter, are trying to work
their heads off to advance the sale of U. S. Defense Bonds,
and you have allowed your Department recently to issue 8
regulation requiring every owner of any U. S. Bonds to
attach a certificate to every coupon before he can cash it,
an swful nuisance and B. perfectly nonsensical thing, and
apparently done to help the investigators of the different
Commissioners of Internal Revenue to keep track of the in-
come of the individual taxpayers, and it will be 8. perfect
"Black Out" for the sale of Defense Bonds as soon as that
is known to the public.
John F. Ewald, Secretary, Peoples Savings Bank of Yonkers,
New York. As an officer of this bank, which is cooperating
wholeheartedly in the sale of U. 3. Defense Bonds and Stamps,
I am concerned with the heavy withdrawal of savings for this
purpose. It seems to me this defeats the purpose of the
Bonds and Stamps, and if continued too far, it will simply
mean that banks will have to sell bonds, possibly Government,
to get the money to give the depositors to buy Defense Bonds
and Stamps.
Regraded Unclassified
- 15 -
10:
Suggestions Concerning DEFENSE BOND CAMPAIGN
Mrs. George Tolstoi, Fort Monroe, Ve. The unfortunate
reverse of the U. S. on December 7 has apparently Im-
mortalized the phrase, "Remember Pearl Harbor". The
purchase of defense bonds has become B patriotic nec-
essity. May I suggest, in commemoration, the issuance
of A special series of defense bonds to be known as the
Pearl Harbor Series? I believe that such a series, even
for E large sum of money, would be subscribed and over-
subscribed in a gratifying short period of time. In the
event this suggestion is favorably accepted, may I be the
first to purchase a $100 Pearl Harbor Defense Bond?
Erwin S. Barrie, Director and Manager, Grand Central Art
Gelleries, N.Y.C. For sometime you have been using &
reproduction of the "Minute Man" by Daniel Chester French
in announcing the sale of Defense Bonds. Mr. French was
& great American, and both his family and I, who was his
art representative, feel that it would be 8. great courtesy
if his name could be used in very small type when his work
is reproduced. This is the customary procedure in the
business world and I know Mr. French's thousands of friends,
all of whom are loyal Americans, would appreciate this con-
sideration from the Government.
Allen Prewitt, Lawyer, Frankfort, Ky. I desire to suggest
the issuance of bonds, like those which taxpayers may buy
to pay income taxes, which wealthy men could buy and which
would be redeemable 100 cents on the dollar, under any
conditions, for the payment of the holder's estate taxes.
Many rioh men try to find 8 safe reserve for such taxes;
It might tap considerable funds for our war effort: end
such bonds should also be made available to estates of
decedents which are trying to liquidate against B. later
determination, often long drawn out, of estate tax liability.
Regraded Unclassified
102
- 16 -
Comments on PRESENT EMERGENCY
Valentine Schyniczek, Sandoval, Ill. " # 90 I am B. common
workman, and I have no money left over, but I do have a
collection of old Foreign Coins which can be melted over.
I am sending them to the U. S. Treasury Dept., 80 that
they can remelt them and construct at least one bullet
that will help destroy the bloody oppressors. I am
foreign born, lived 30 years in one, once Imperial Country,
and have lived in my adopted Country of the U. S. America
For 31 years, and I am sure I know the difference between
freedom and oppression. Please accept my smell donation
to help win the war.
Irving C. Teahan, Holyoke, Mass. I am over the active
military age and my son is only 12 years old, SQ in trying
to do my part I am enclosing B. check for $100 to pay the
interest on four $100 Defense Bonds I gave to my wife and
three children for Christmas. I trust you will use this
in the same spirit with which it is given.
R. N. Sucher, Editor and Publisher, The Elmwood Gazette,
Elmwood, Ill. The writer seeks permission of your office
to make the following offer to the subscribers of the
Elmwood Gazette, and to the Yates City Banner, newspapers
which are published in this office. During the year 1942,
or for the duration of the war, 25% of all subscription money
collected by the Elmwood Gazette or the Yates City Banner
will be turned over to the Treasurer of the U. S. to be
used for defense purposes, in any way that that office might
see fit. This offer is to include the same proportion of
any back subscriptions collected at any time during this
offer. We realize that this offer is a little unusuel, but
we ask that you please believe that it is made in all sin-
cerity. For your information, the writer enlisted in the
U. S. Naval Reserves on April 10, 1917, and would be enlist-
ed in the present affair if physical condition permitted.
Today, however, we cannot take part in person but no do feel
that we can be of some use in other ways.
Regraded Unclassified
103
- 17 -
George C. Terry, Terry & Tice, Real Estate, Louisville, Ky.
This blind, 86-year old citizen, father of two World War
veterens who saw service abroad, and grandfather of two
seventeen-year old fellows who will soon be in the present
war, wishes to call your attention to the enclosed article
from this morning's Courier-Journal, and to tell you how
very greatly I appreciate the quite extraordinary things you
are now advocating, which looks to the saving of many use-
less expenditures, every dollar of which will be needed in
the present conflict, which - with all your careful manage-
ment of our Treasury - will cost us billions after your
very best management. I congratulate you. I take my hat
off to you. I shall tell my four children end my seven
grandchildren about you and your noble work.
The first and only "kick" in connection with the recent
announcement of limitation on the sale of tires comes from
a salesman for & food product concern, M. C. Berkeley, of
Baltimore, Md. Mr. Berkeley says that he writes from e
patriotic as well as 8. personal standpoint. "First, from
a standpoint of sales - to wit - the Dept. of Agriculture
is pressing farmers to grow more foodstuffs, and the canner
in turn, pack more. The canner employs no salesmen, de-
pending on brokers, like myself, to sell their products to
the wholesale grocer. As brokers, we represent and sell
for some 200 canners throughout the country, so curtailing
their sales efforts and expense. Even if the Federal Govt.
takes 50% of the canners' products, there remains 50% to
sell and get into the regular channels to the consumer.
This is where we fit in. Second, from a standpoint of my
earnings and becoming a public burden, and 50 depriving the
State and Federal Governments of what is now a good revenue.
% 4b a I can't cover some 2,000 miles monthly by rail, or
busses, since many of the smaller towns aren't on the sched-
ule, and if they were, it would take three or four times the
length of time to cover, and the terrific expense would not
warrant it, or make it profitable to do.
Edward Lindsay, Decatur Newspapers, Inc., Decatur, Illinois.
Local #419 of the International Alliance of Theatrical Stage
Employees and Moving Picture Machine Operators Union has
turned over to me & check for $37.50. The Union's idea is
that the check will be used to buy a defense bond that will
be given to the first Macon County pilot who bombs Tokyo,
or to his family if he is killed.
Regraded Unclassified
18 -
104
Mr. V. Frame, Washington, D. C. As the father of a soldier
at Hickman Field, and 68 a Veteran of the last War, I wish
at this time to give one day's wages as a Guard, approxi-
mately $4.25, to national defense, and also to purchase
three bonds for national defense at $18.75 each. Therefore,
I enolose my personal check for $59.50 and 8 dollar's worth
of defense stamps to bring it up to $60.50, for which please
mail me the three bonds. Hoping this will do some good, on
behalf of my wife, my younger son and myself, - Yours for
Victory.
Johnny Forkish, Mt. Rainier, Md. I get 5-cents every day
with which to buy my milk while eating my lunch. I'm pretty
Eat now, so I will drink water instead. I am sending you my
next week's milk money. I hope it flaps 8. Jap.
Mrs. N. E. Bank, Beverly, Mass., sends two $100 bonds, two
35 stamps, one U. S. Treasury check for $40. They say,
"Remember Pearl Harbor.' This morning I get B. pension check
for "Remembering the Maine." For & long time I put my
pension in Postal Savings, and after you issued Defense
Stamps, put it in those. Please Sir, ashamed I am, taking
money from my country at war. They tell me if I give it
up (the pension), someone will get EL good thing out of it,
so I send it to you, Mr. Morgenthau. More I cannot do.
Please Sir, get out a pension payment bond fund stamp and
please invite the rest -- that's within your reach and be-
yond me.
Pietro Fera - Recognizing that the Constitution of the U. S.
of America is the only one approaching most closely the
Ideals of man, and desiring that the American people should
triumph against the barbaric plots of three villains, headed
by Hitler, I am sending my small contribution of $10. Had
I been able to give more, I would have never used the system
of bonds and stamps. To the nation at war one does not lend
at usury, but one gives what one can voluntarily. (Written
in Italian.)
Regraded Unclassified
- 19 -
105
Mrs. Grace Fitzgerald, Los Angeles, Calif. Whenever
anything is said or written about economy in the Government,
WPA is the first thing spoken of. What is to become of
the men and women over fifty who depend on WPA for 8. living?
# Women over fifty are not wanted, no matter how able
or willing they may be. I have travelled this city over,
trying to find work in private industry. On several 00-
casions I have been encouraged until I had to tell my age,
then I was sunk. # * It seems to me that this Government
should do something to keep employed the people in the age
bracket I have mentioned. There are thousands of men end
women in their twenties, thirties, and early forties who
never look for work in private industry. They are quite
satisfied to stay on WPA, and some I know have refused
other work offered to them. Some of them have never worked
except on WPA. One young woman, a supervisor, tola me that
she could get work outside that would pay her better than
does WPA, but, she said, "After this war is over, 8 lot of
people in private industry will be out of work, but I will
still have this. * Not 8. person under fifty years of
age should be on WPA unless physically disabled. They can
get work in private industry, perhaps not just the work
they would like to do, but work that will pay them well.
There are many physically able, highly educated men
and women over fifty, eating their hearts out to do some
work for defense. They are not afraid of long hours. Many
who, like myself, have tried desperately to get work in
private industry, and, like myself, have failed. What is
to become of us? The high rate of interest asked by insur-
anoe companies is responsible to some extent for the un-
employment of older workers. So while Unemployment Insur-
ance helps some workers, it hurts others. We older Americans
want to help win this war. Can't some way be found to use
our willing hands, our skill, and experience?
A very special offer of assistance from a real linguist --
Eli Vidak, Maybee, Mich. I am lisning you spiking on Radio.
You urget 8.5 to bay Defence Bonds. I am ready to dut so
but I nidet job. Government shut put mi on job forst befor
I kent help SO baing Defence Bonds. * I am American
vidison born on Yugoslavia. I speac 7 langvech and reding
vel, I tinging, SO vil bi gut wach for Sabotaghes. Bat I am
eabel to do any works. I am gout drivers aniy motor vehicle.
Hau son I geat job? I DA glead to helph may entry.
Regraded Unclassified
106
- 20 -
Ralph B. Edson, Springfield, Mass. It may interest
you to know that MASB. Banks are apparently taking ad-
vantage of war times to insist on amortization of their
mortgages, which lessens the opportunity of mortgage
holders to buy Defense Bonds. I have several pieces
of property, purchased before the depression, and which
I carried in the red during that time. Within the past
month, I have been notified that I must amortize the
mortgages held by two different Mass. Banks which carried
those same mortgages through the depression without de-
manding this.
Dwight F. Bracken, Director, Placement Service, Fordham
University, N.Y.C. The New York Times of today's date
mentions that Mr. Walter Disney has been in contact with
you regarding the preparation of a film to promote the
sale of Defense Bonds. This to me seems to be a very
practical project. However, I believe it should contain
the assurance that inflation will not make thrift unwise -
that our money will be useful in purchasing various goods
after the war emergency is over. The public must be shown
that research in connection with war activities will, for
example, help make better automobiles, refrigerators, and
radios, but that only he who has been thrifty will have
the purchasing power in the future to avail himself of
these goods.
D. R. Morrison, Takilma, Oregon. Being familiar with
practically all mining operations on the Pacific coast,
I feel duty bound in this grave crisis to mention these
facts to someone who may be able to relieve the pressure
which is now retarding the progress of many industries.
is no shortage of copper in the United States?
I am wondering if the OPM is aware of the fact that there Are
#
they aware of the fact that there would not be an idle mine
in the country if they could operate at 8. profit? Are they
aware of the fact that aside from the big mines that are
now idle, hundreds of thousands of tons of copper would be
produced if the price would justify shipping the ore to the
smelters? 45 Chrome is another item that the Paclfic
coast could supply the demands for if the price would justify.
Regraded Unclassified
- 21 -
107
Comments on TAXATION
M. 0. Goldman, Baltimore, Md.
It
will
unquestion-
ably be the case that a great many people who have not,
for one reason or another, set aside money with which to
pay the income taxes which will have to be met, will need
to corrow from small loan concerns. # * The tax savings
certificates will help, but not in 1941 tax payments.
i would like to suggest that these certificates be more
winely advertised this year. For the present tax payments
which are shortly due, in order to protect those people
who need it now, I would suggest that instead of allowing
them to seek loans from these concerns under unfavorable
conditions, you inaugurate a system of payments whereby
when the small taxpayer, under oath, declares his inability
to meet even the quarterly payments required, that an ex-
tended period of say ten months be permitted, end that 8.
tax rate of a true 6% on unpaid balances be set up. A small
charge might be made in addition to take care of the nec-
essary expense in bookkeeping. The payments might be ar-
ranged for by Post Office Money Order, which would increase
Post Office revenue and benefit all concerned.
J. W. Dargavel, Executive Secretary, The National Association
of Retail Druggists, Chioago, Ill. (Letter addressed to the
President, and referred to the Treasury by the White House.)
We are concerned about the consequences of the tax
program on the public health, unless the new revenue legis-
lation contains 8. provision to allow deduction for doctor
bills and other similar expenditures in the determination
of net taxable income. Such a deduction is allowed in the
Minnesota State Income Tax law, and there has been no
consequential loss of revenue to the state. It is en al-
most universal trait of human nature that, when a curtail-
ment of the femily budget becomes necessary, the first item
curtailed is medical care. If it becomes necessary for the
Government to take from 1/4 to 1/2 of the people's income
in taxes, the result, in terms of the health of the people,
might become serious. It is a most important pert of our
task in fighting this war, to safeguard the nation's most
important military resource -- public health. Germany has
had to neglect this resource and there is reason to believe
that she is weakening -- let us hope she is cracking. But
let us not crack under the same impact!
Regraded Unclassified
108
For your information
January 9, 1942
To Archibald MacLeish
From Alen Barth
EDITORIAL OPINION
ON THE WAR:
STATE OF THE UNION
Vessage
The American press accepted the President's message on
the state of the Union as 8 challenge. The response everywhere
was B. resounding affirmation of the President's own words --
"Let no man say it cannot be done. It must be done -- and
we have undertaken to do it."
The Cleveland Plain Dealer reported the message under
8. banner front page headline: "It Will Be Done!" Nation Booms
Back to War Plea of Roosevelt. The Chicago Tribune did its
own booming back in the form of an eight-column streamer in
huge black type: We'll Do War Job: Industry. The Boston
Herald bedecked its first page with giant letters announcing:
U.S. Backs Huge Arming for "World-Front" AEF.
The editorial reaction of almost all newspapers showed
intense fervor for the job at hand. "The President has
given us 8 blueprint for victory," observed The Chicago Sun;
The Christian Science Monitor called the speech "a Promethean
Regraded Unclassified
- 2 -
109
promise"; The Cincinnati Enquirer considered it "dynamic";
The Raleigh News and Observer found in it "inspiring lead-
ship".
Most editorial writers applauded the President's
designation of specific quotas for the production of planes,
tanks, guns and ships. There was no disposition among them
to regard the goals as unattainable. They united, however,
in an insistence that the President's program could be
accomplished only through profound changes in American living
habits and an all-out work effort by the people of the country.
The Cleveland Plain Dealer expressed the common feeling in
simple terms: "America's gadget civilization must end."
Background
Mr. Roosevelt's words were delivered against 8. back-
ground of extreme editorial dissatisfaction with the progress
of production to date. It is, of course, habitual with the
press to charge that the present Administration inhibits
industry. For 8. long time commentators have demanded
a single responsible chief of production; they have little
faith either in OPM or SPAB. Now they are renewing, in
even greater volume than before, their cries for the coor-
dination of all procurement activities under a Minister of
Regraded Unclassified
110
- 3 -
Supply. Many of them point to Lord Beaverbrook as
B. model for the United States, asserting that there is no
individual here, save the overburdened President himself,
qualified to meet the British supply chief on equal terms.
Lately, however, the press has displayed growing
symptoms of -impatience with industry itself. There is an
occasional reproachful note in comments on the slowness of
conversion. Columnists Lippmann, Clapper and Thompson
have repeatedly pointed out that it was the influence of
automobile manufacturers which thwarted the Reuther plan.
Other commentators now acknowledge that "the crackpot
CIO scheme" must be put into operation. The Washington
Post openly endorses it; even The New York Herald Tribune
gives it a kind of grudging and tentative approval.
But editorial writers show little sympathy with
labor's desire to share in directing the conversion
process. To most of their minds this raises the spectre
of socialism. They were embarrassed by the CIO advertise-
ment criticizing OPM and considered it not quite sporting
of labor leaders to say, "We told you so." Yet a number
of them feel that management, particularly the management
of the automobile industry, has put itself in an untenable
position.
Regraded Unclassified
- 4 -
111
The editorial reluctance to grant labor effective
participation in the direction of the war effort springs
from a deep general uneasiness over the consequences which
the war may impose upon the American economic system.
Heavy deficit spending remains a bugbear to the edito-
rial mind; inflation, collapse, socialization of industry
are vaguely feared. Yet this fear is subordinate to the
fear of an Axis triumph. American victory in the war is
everywhere held to be the primary and paramount need.
The more responsible commentators show some aware-
ness that the cleavage between management and labor
constitutes a serious threat to the recently welded
national unity. Accordingly, they plead vehemently for
compromise and solidarity. They are moved by a profound
confidence in the capacity of American production to win
the war, provided that productive resources are mobilized
unsparingly. They show no hesitation about facing the
temporary sacrifices involved; indeed, they are all but
unanimous in urging rigid restrictions on civilian con-
sumption of scarce articles such as rubber and metals.
But they cannot exorcise their fear of some permanent
change in the social structure.
Regraded Unclassified
- 5 -
112
The press accepted with enthusiasm the President's
assertion that we will fight the enemy "wherever and when-
ever we reach him." And it gave special applause to the
pledge "to maintain the security of the peace."
News
Newspapers reflect growing concern over the progress
of the war in the Far East. Loss of the Philippines is now
taken entirely for granted. The fall of Singapore is gravely
feared.
Against this background of discouragement, the press
continues to present as dramatically as possible every
heartening incident in the Pacific. The Chicago Tribune,
for example, employed & big, black banner headline to report:
Japs Suffer Worst Defeat. The story disclosed only that four
Japanese planes had been downed. The New York Herald Tribune
gave & three-deck front page spread, so that those who ran
might read, to the announcement: Army Bombers Pound Japanese
Battleship, Sink, Destroyer; 700 Luzon Invaders Killed; Navy
Tender Fights Off 15 Planes 7 Hours.
The most common editorial generalization drawn from the
Pacific fighting is that air power has now unquestionably
demonstrated its superiority over sea power.
Regraded Unclassified
- 6 -
113
Allies
The designation of a Briton to the supreme command of
allied forces in the Far East was accepted by editorial com-
mentators without complaint and, in fact, by almost all of
them with hearty approval. A supreme allied war council is
generally urged and expected.
Regraded Unclassified
114
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 9. 1942
TO Ferdinand Kuhn, Jr.
FROM. Joseph Velia
EDITORIAL COMMENT
ON DOMESTIC ISSUES:
QUALMS ABOUT THE EUDGET
There is no editorial dissent with the need for 8 vast
wer program as outlined by the President in his budget messare.
Newspapers throughout the country agree that there can be no
quibbling over the price of victory, which, they recognize,
may go still higher as the war proceeds. Nevertheless, they
ore staggered by the 56 billion dollars in immediate expendi-
tures and the 9 billion dollars in increased taxes anvisioned
by the President.
Ecitorial writers and columnists seize unon the incompre-
hensibility of these figures as dramatic evidence of the need
for (1) holding government non-defense expenditures At 8
minimum by cutting to the bone, if not eliminating sltogether
expencitures for farm benefits, work relief, and youth aid,
(2) spreading and "equalizing" taxes, (8) promptly passing
effective price control legislation, (4) establishing in the
"nited States an agency similar to bnglend's Vinistry of Supply
in order to insure efficient war production.
Regraded Unclassified
- 2 -
115
Non-Defense Economies
While encouraged that some of the economies advocated
by the Byrd Committee are contained in the budget, an over-
whelming majority of the newspapers in all sections of the
country criticize the President for not cutting deeper into
non-military expenditures. Most editorial writers insist
that there is no longer any need for such agencies as the
WPA, CCC, and NYA. They make no distinction between the
old peacetime and new defense activities of these agencies.
The President is also severely criticized by the leading
metropolitan newspapers for stating that parity should be
maintained by government subsidy if farm prices drop.
The only note of warning against "penny-wise and pound-
foolish" economies comes from such New Deal newspapers as the
St. Louis Post-Dispatch and PM. Having opposed the economies
suggested by the Byrd Committee and Brookings Institution,
PM now evidences surprise and regret that the President should
chop the appropriation of such an agency as the FSA while
leaving the door open for parity payments which generally
benefit well-to-do farmers. And the Post-Dispatch argues:
"Reduction of non-defense spending should not be seized upon
as an opportunity for clubbing agencies to death without
Regraded Unclassified
- 3 -
116
discrimination. Some of them have been given important
defense jobs -- such as the Farm Security Administration's
new task of organizing huge trailer towns for workers in
the mushroom munition plants."
Taxes
The press agrees that the war must be financed 8.8 much
as possible by taxation. But judging by the way most edito-
rial writers over-stress one or two of the tax suggestions
made by the President, the press is far from being in complete
agreement with the Administration on the type of taxes that
should be levied. In general, editorial writers stress the
President's statement on the need for anti-inflation taxes
and ignore his appeals to increase and tighten progressive,
selective taxes.
Leading metropolitan newspapers, along with the business
groups for which they generally speak, have consistently
advocated a general sales tax. Delighted that the President
has forsaken his opposition to this type of tax, they argue
that a sales tax would curb inflation and at the same time
"spread" and "equalize" the war burden. With most editorial
comment centering around the possibility of a sales levy,
Regraded Unclassified
- 4 -
117
the President's other anti-inflation tax suggestions
receive relatively little attention. Most newspapers are
traditionally opposed to withholding taxes, however, and
some attack the suggestion to increase Social Security taxes.
The financial journals, naturally, are upset by the
President's appeal to recapture war profits and increase
progressive taxes. The President's emphasis on the merits
of progressive taxation indicates "trouble" to the Wall
Street Journal and an "undermining of private enterprise
and fostering of State Socialism" to the Journal of Commerce.
Price Control
Unless the Senate Banking Committee's price bill is
passed without further delay, the press fears that inflation
will drive the cost of the war out of all bounds. Many news-
papers, including the Scripps-Howard chain, still favor over-
all control of prices and wages, as well as more drastic
controls over farm commodity prices. But they are not as
insistent on these points as previously. Most editorial
writers oppose any device which would give the Department of
Agriculture jurisdiction over farm prices; such devices, they
feel, would weaken the effectiveness of the bill.
Regraded Unclassified
125
1942
1/9% FOR THE PRECIDENT:
The Treasury is turning over to the Vice
prestment for the immediate use of GRAD, important
information with respect to 8. large quantity of stra-
tevic Micrials which vere consigned to the chiliopines
a starf points in the Far East and now will not be
10. 16 assume that STAR will take incediate etess
:- requisition all such naterial for war use.
1th respect to other material of non-strategic
learrtunce, it is expected that the American banks which
TERM financing the shipments vill generally assume the
realumeibility of safeguarding and disposing of the goods
to Treasury license. However, in cases where
the толка are not willing or in a position to do this,
the articularly in the case of goods which will deterio-
city. the Treasury Department will proceed, with your
- to take over the goods in the name of the
United states and cake appropriate disposition thereof.
diente. Resident Commissioner of the Philippines, 18
region the Treasury to take some such action in the cape
12 consi ned to the Philippines.
If you approve of this procedure, it will be
interted if you will 110 indicate below.
(Signed) H. in
sent
more
Pack.
1-9-4L
= rehle:ged 1/9/42
Regraded Unclassified
174
THE SECRETARY or THE THE#SURY
WASHINGTON
JAN 9 1013
MEMORANDUM FOR THE PRESIDENT:
The Treasury is turning over to the Vice
President for the immediate use of SPAB, important
information with respect to a large quantity of stra-
tegic materials which were consigned to the Philippines
and other points in the Far East and now will not be
shipped. We assume that SPAB will take immediate steps
to requisition all such material for war use.
With respect to other material of non-strategic
importance, it is expected that the American banks which
were financing the shipments will generally assume the
responsibility of safeguarding and disposing of the goods
pursuant to Treasury license. However, in cases where
the banks are not willing or in 8. position to do this,
and particularly in the case of goods which will deterio-
rate, the Treasury Department will proceed, with your
approval, to take over the goods in the name of the
United States and make appropriate disposition thereof.
Elizalde, Resident Commissioner of the Philippines, ie
urging the Treasury to take some such action in the case
of goods consigned to the Philippines.
If you approve of this procedure, it will be
appreciated if you will 80 indicate below.
HMmmthand
Approved:
Frunklin
January 12 190
IL
Regraded Unclassified
TREASURY. DEPARTMENT
120
INTER OFFICE COMMUNICATION
DATE JAN 9 1942
Secretary Morgenthau
TO
FROM Mr. Foley
Att
The Foreign Funds Control is now obtaining
over-all reports with regard to the applications pending
not only in Washington, but in all the field offices.
The over-all figures show that the amount of pending cases
in all offices does not exceed 3 or 4 days' work.
9.1.7h.
Regraded Unclassified
121
DRAFT OF CABLE TO POINDEXTER CONCERNING LIQUIDATION OF
JAPANESE BANKS IN HAWAII
You are authorized to liquidate, under laws applicable to Hawaii,
Ly receivership or conservatorship as you may deem expedient, the
offices in the Territory of Hawaii of: (a) the Pacific Bank, (b) the
unitomo Bank of Hawaii, and (c) the Yokohama Specie Bank, Ltd. In
connection therewith you may, by license or otherwise, authorize,
Anong other things, payments to depositors, sales of securities, de-
livery of collateral, payments of salaries and other expenses, and
all other acts appropriate to the orderly liquidation of these bank
offices. Amounts due to blocked nationals should generally be
transferred to blocked accounts in domestic banks. It is expected
that complete records will be established and maintained in connec-
lion with the liquidation.
It is assumed that you have the personnel necessary to accomplish
the orderly liquidation of these banks OI that additional personnel
our be acquired locally. Should you requiro additional trained
personnel from here, you should promptly advise us of your needs.
20 be sentant by BB. 1-9-42.
Regraded Unclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
122
INTER OFFICE COMMUNICATION
DATEJAN 9 1942
Secretary Morgenthau
TO
FROM
Mr. Foley
may
You may be interested in the following excerpt from a
letter from A. E. Tree, the Foreign Funds Control man in Hawaii:
"The Military Covernor of the Territory is the Commanding
Officer, now General Emmons. His Executive is Lieutenant
Colonel Green, who held the same office under General Short.
Our relations with the office of the Military Governor
have been agreeable and cooperative since the beginning
and Colonel Green has endorsed and supported our activities.
Under military necessity certain alien property had to be
surrendered for safekeeping and/or confiscation, such as
firearms, explosives, cameras, binoculars and radios.
Other property was removed from persons in custody, mostly
personal effects. Under pressure of the attack, some
equipment was commandeered for military purposes. Problems
have also arisen in connection with protection of the
property of enemy agents who were executed." (under-
scoring added)
9.15.7.
Regraded Unclassified
122
JAN 9 1942
YOR THE PREMIDENT
In as memorandum of December 23, 1941, I outlined
to you R recommendations for dealing at once with the
mercency situation regarding enemy property in the Philip-
You approved to instructing the Righ Commissioner
to met the emergency by exercising any or all of the powers
conterre upon you under Title III of the First .ar Posers
not, 1041.
The following message has just come to ay attention
with respect to a similar problem in Hawail:
:ort shafter Ill 5 20 P
Dec 24
Injustant General
Car Department
ashington DC
Mr. A. be Tree, Treasury Department, appointed
temporary allitary alien property controller to nc-
cept. account for, and handle centrol of surrendered
allen property until such the AS 5 voderal Illen
Custodian may be appointed under some statu-
tory authority.
Longhs
AS in the CADE of the Millepines, Covernor Poin-
Sexter LIKE been lumaline freening control for ne in Hawali
40, since July of this year I _ave provided 11- bith a staff
of exports to Lely his deal *ith the Japanezo situation
under Iroezing control. se ... Tree, - 346 been agrointed
termorary military alien property controller by Imone, is
: Treasury CAR actually La charge 0) freezing control in
Regraded Unclassified
124
- 2 .
While the situation at this time in Hawaii is
not comparable with that In the Philippines, I think it
is a wise precaution to give Governor Poindexter now the
same general powers, with appropriate limitations, that
BE have already given Sayre with respect to the Philippines.
This action will give Governor Poindexter and Tree ade-
quate statutory authority to meet the present emergency
and still permit a coordination of the program in Hawaii
with that in the United States. At the sure time in the
event communication with Hawaii should become difflcult
in the future, our men will have full authority to meet
any emergency which might arise.
Attached to this memorandum is 4 draft of a
proposed sable from se to Governor Poindexter covering
this matter. If you approve I will have the cable dis-
patched at once.
As in the case of the Philippines, I do not
think this matter should be delayed pending the issuance
of an Executive Order relating to enemy property in this
country.
(Signed) H. Morgenthau, Jr.
I approve the foregoing action.
THE WRITE HOUSE,
sent via WH.
mail pouch
to 2
Regraded Unclassified
1:35
Processed Text of Cable to Covernor Poindexter from Secretary of the Transary
The following morringe has just to ay attentions
Fort Shafter tu 5 20 ?
Dee 24
Goneral
VAT Department
Washington, D. C.
Mr. 4. E. Tree, Treasury Department, appointed
tesporary silitary alien property controller to
accept, account for, and handle control of surrendored
alien property until such time GE 4. Federal Alien
Property Custodian say be appointed under BONG statu-
tory authority.
Swone
On December 18, 1941 the President approved the First Far
Powers 108, 1941 (Public Ro. 354, 7768 Congress). Sections 301 and 302
of ritle III of such Act read as follows:
(Hore take la taxt of Pections 30% and 302 of
struched Act
You will note that these acctions seend section 5(b) of the
Trading with the enemy Act of October 6, 1917, no seended, parsuant
to which freezing control has been administered.
In order that you any be fully subhorized to goal with any
emergency which night arise in Hawaii and with She approval of the
President, all of the powere and authority conferred upon the President
under the above-voted provissons of law are hereby delegated to you
in no for as Hawaii is concerned. Hosever, In the absende of co
tion difficulties or the need for carrgency sobles where delay eight
Regraded Unclassified
126
- 2 -
be prejudicial, it will be expected that the progress with respect to
enesy and other foreign property in Howaii will be coordinated with
that in costimental United States in such the same meaner as it is today,
You will be advised from time to time 40 an over-all program 10 ennounced
is Fashington. Be will, of course, continue to expect you to adapt my
general instructions to local conditions in dewail.
The powers conferred by the statute are very broad. Congress
expects that complete records will be established and maintained with
sespect to property soined or otherwise received is your austody. Please
be guided accordingly.
Secretary of the Treasury.
Regraded Unclassified
127
THE SECRETARY OF THE TREASURY
JAN 9 1942
FOR THE PAESIDENT
In my memorandum of December 23, 1941, I outlined
to you my recommendations for dealing at once with the
emergency situation regarding enemy property in the Philip-
pines. You approved my instructing the High Commissioner
to =eet the emergency by exercising any or all of the powers
conferred upon you under Title III of the First War Powers
Act, 1941.
The following message has just come to my attention
with respect to a similar problem in Hawaii:
Fort Shafter TII 5 20 P
Dec 24
Adjutant General
War Department
Washington DC
Mr. A. E. Tree, Treasury Department, appointed
temporary military alien property controller to ac-
cept, account for, and handle control of surrendered
alien property until such time as a Federal Alien
Property Custodian may be appointed under some statu-
tory authority.
Emmons
As in the case of the Philippines, Governor Poin-
dester has been handling freezing control for me in Hawaii
and since July of this year I have provided him with a staff
n: experts to help him deal with the Japanese situation
under freezing control. A. E. Tree, who has been appointed
temporary military alien property controller by Emmons, is
the Treasury man actually in charge of freezing control in
Rawaii.
IGINAL ONE TO MR. POLEY
Regraded Unclassified
128
- 2 -
While the situation at this time in Hawaii is
not comparable with that in the Philippines, I think it
is a wise precaution to give Governor Poindexter now the
same general powers, with appropriate limitations, that
we have already given Sayre with respect to the Philippines.
This action will give Governor Poindexter and Tree ade-
quate statutory authority to meet the present emergency
and still permit & coordination of the program in Hawaii
with that in the United States. At the same time in the
event communication with Hawaii should become difficult
in the future, our men will have full authority to meet
any emergency which might arise.
Attached to this memorandum is a draft of a
proposed cable from me to Governor Poindexter covering
this matter. If you approve I will have the cable dis-
patched at once.
As in the case of the Philippines, I do not
think this matter should be delayed pending the issuance
of an Executive Order relating to enemy property in this
country.
the mithan
I approve the foregoing action.
Firmitm Marrich
THE WHITE HOUSE,
January/2,1942
Regraded Unclassified
129
Proposed Taxt of Cable to Governor Poindexter from Secretary of the Treasury
The following message has just come to my attention:
Fort Shafter TH 5 20 P
Dec 24
Adjutant General
War Department
Washington, D. C.
Mr. A. E. Tree, Treasury Department, appointed
temporary military alien property controller to
accept, account for, and handle control of surrendered
alien proparty until such time as a Federal Alien
Property Custodian may be appointed under some statu-
tary authority.
Emons
On December 18, 1941 the President approved the First War
Powers Act, 1941 (Public No. 354, 77th Congress). Sections 301 and 302
of Title III of such Act read as follows:
[Here take in text of Sections 301 and 302 of
attached Act]
You will note that these sections amend section 5(b) of the
Trading with the enemy Act of October 6, 1917, as amended, pursuant
to which freezing control has been administered.
In order that you say be fullyauthorised to deal with any
emergency which might arise in Hawaii and with the approval of the
President, all of the powers and authority conferred upon the President
under the above-quoted provisions of law are hereby delegated to you
in so far as Hawaii is concerned. However, in the absence of communica-
tion difficulties or the need for emergency action where delay might
Regraded Unclassified
- 2 -
130
be prejudicial, it will be expected that the program with respect to
enemy and other foreign property in Hawaii will be coordinated with
that in continental United States in much the same manner as it is today.
You will be advised from time to time as an over-all program is announced
in Washington. We will, of course, continue to expect you to adapt any
general instructions to local conditions in Hawaii.
The powers conferred by the statute are very broad. Congress
expects that complete records will be established and maintained with
respect to property seised or otherwise received in your custody. Please
be guided accordingly.
Secretary of the Treasury.
Regraded Unclassified
1:11
JAN 9 1942
My dear Mr. President:
Attached for your information is a
memorandum briefly setting forth some of the
results to date of our investigation of
General Aniline and Film Corporation.
When we entered the war we put 8.
group of Treasury people into the various
offices of General Aniline who have been
supervising and investigating the company
from the inside.
The investigation is still under
way and some of the items uncovered are of
such interest that I felt you would want
to know about them at this time.
Sincerely,
(signed) H Morgenthau, Jr.
The President
The White liouse.
Attachment.
EHF:mp 1/7/42
Copied vls 1/9/42
Regraded Unclassified
132
January 7, 1.142
Lecretary Morgenthau
.. Holer, Jr.
Dince our entrace into the war We Leve not 8
(roug JI Treasury people under Joe "Connell supervising
are investigatin Iron the inside the eneral Aniline
are -ila Corporation, which Ass been Slocked under the
freezin order. Several nonths 100 e prevented the
cale of teig company to eneral lyestuff Lecause we were
convinced from our study of the erren cominated industrial
setup in this country that Ceneral gestuff, like oneral
and /Ilm, WES part of Line I. :- /arbeningvatrie,
the Sure ermen cye trust.
JVP investigation to date has disclosed sirious
situations affection the national interest.
:- The unlic Livision. Eviston, vace D.Y
:- von elster, who came to this country cirect (rom an
association with Canada ,eppelin orks the rate
UPLE, ann aucoseded by several devices In provicing access
Cor its TCA -- often Terman alives or merican
eitize 6. -- to the crafting POODE of scout sex in Latrial
plants, Inviction defense Instail bions and Lovernment
experimental coratories, are in america valueble in-
dustrial Information; the covice vised was the leasing, and
taxs the continuous servicley, of & " o podution or blue-
printin anchine. .00 cor oration 1.02 also successed in
a selain contracts for the microprintis of niter States
Devernment archives. 42 alroady have found documentary
ovidence that mited Clates Tavy Invormation 80
has been transmitted to Company Sy the corporation.
:- The ivision. It LES been roand
List this SEE succeeded In A variety of 1825 In
obtainin sucens to confidential vilitary files of the
Sited tates overement. FOR lostance, A 00 (*2) Intora-
Lurg, In charge of & efrail alien assisted by 100 other
Regraded Unclassified
136
- 2 -
Gorman allens, was found to be developing and processing
films of experimental United States Army tanks, taken at
the Aberdeen proving grounds. A related field under current
investigation is the use of Agfa-Ansco for the development
of military and reconnalesance film of value to the Corman
Covernment. For instance, the company's laboratories were
used in 1939 and in 1940 for the development of film taken
in the Andeon region between the Canal Lone and the Pacific
Coast by 8. so-called "scientific" expedition sponsored by
the German Government.
3. The Company as a cloak for subversive activities.
The fact that the company has over 6000 employees and expends
about $60 millions annually, provides the German Covernment,
through I. G. Farben, with unusual opportunities for the
concealment of German agents and expenditures for propaganda
and other subversive purposes. For example, a person,
educated in Germany and a confessed Nasi Party member both
in Germany and the United States was sent by the company
"to the Homeland" to undergo training in various subjects
with the avowed purpose of enabling him to become the
"confidential assistant" to the head of the film and camera
division of the company. Other instances have already been
discovered where young Germans of military age were given
temporary employment In the company after which they left
for China and Japan for purposes not yet established.
The facts in these cases have been turned over by
us to the Federal Bureau of Investigation and to Army
Intelligence. We are continuing our investigation and
expect to be in position, in the near future, to make
specific recommendations as to personnel and other changes
which should be made in the public interest.
(Initialed) E. 1. T., Jr.
EHF:mp 1/7/42
Regraded Unclassified
137
JAN 9 1942
A) care oir /rederick:
I have examined the documents Lest you
submitted to the Treasury an December Ji,
stating that the British covernment would
like to sell to the ceritine Commission two
aritish-owned shipyards in order to improve
its Collar position. I - writing to inform
you that I have written Adairal Land recom-
sending that the Commission purchase theme
yards. A copy of my letter to Admiral Land
is enclosed.
Very sincerely yours,
[Signed] 1. Morgenthaw. ST.
Secretary of the Transury.
sir Frederick Phillips,
Dritish Furchaning Commission,
Willard notal,
Washington, D. C.
By Messenger Brown yis
Copies a
n.m.c
1-5-42
Regraded Unclassified
138
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE JAN 9 1942
Secretary Morgenthau
TO
Mr. Foley
FROM
44
A despatch from our Embassy in Rio de Janeiro, Brazil,
states that Norbert A. Bogdan of the J. Henry Schroeder Banking
Corporation is strongly opposed to the plan of the Export-Import
Bank to grant special lines of credit to approved banks in the
American Republics and that Bogdan is trying to undermine the
plan in Brazil. It is reported that Bogdan feels that the
proposed credit facilities would interfere with the business of
his company, and that a Brazilian banker recently remarked that
Bogdan is doing his utmost to "torpedo" the Export-Import Bank's
project.
9.10.7h.
Regraded Unclassified
1-9-42
MEMORANDUM
M information below was received from a source in New York City and
110 information from that source is generally reliable.
"The subject is married but her husband 18 not known. She resides at
14° Bart 35th, New York City, and is engaged at 95 Madison Avenue,
(IN York City. She is about 32 years of age, has dark brown hair and
eyes, 1A untidy in appearance and of medium height. She has no other
humaness connections,
"Inv Aubject is the organizer of the Young Men's Vocational Foundation,
Inter which organization is actively engaged in securing positions for
- yyo will non who have been placed on probation or released from re-
In 1938 she edited a magazine and visted the New York
att Reformatory at New Hampton, New York. During the year 1939-40,
I'F previdation, she claims, secured various permanent positions for
IV 5. The nurnose of the organization is to handle only boys and
nea detween the ages of 16 and 25, who are mostly sent to them by the
Authorities. She is closely affiliated with & Mrs. Lionel C. Perara.
PR.. unose husband is the Vice-President and Secretary of this or-
golication. She received B. donation of $5,000 from Marshall Field for
the Young Men's Vocational Foundation, Inc. She claims to have been
The originator of the American Youth Congress but was forced out.
State 14 not known to be & 'Red,'
"TATES are many prominent people mentioned an being associated with her
wronent organization. About six months ago the agents of the building
forced them to move due to the riff-raff and colored persons who were
curing to her offices at B West 40th Street. They sremw, BR stated
above, at 95 Madison Avenue, New York City. She claime to have a close
association with Mrs. Eleanor Roosevelt, and has mentioned the fact
a acyoral occasions that she has attended luncheons and conferences
-Ita her st the White House."
Regraded Unclassified
A book entitled "American Women," which includes the standard bio-
graphical dictionary of notable women, Volume III, 1939-1940, found in the 140
Public Library, Washington, D. C., lists the following:
"Ilma, Viola, orgn. official; Born Mainz, Germany, April 24, 1910;
daughter of Alfred and Henrietta (Stern) Ilma; Education, attended Julia
Richmond High School; Present Occupation, Executive Director, Young Men's
Vocational Foundation. Previously: Chairman, American Youth Congress;
Editor, Publication, "Modern Youth."; President, Central Bureau for Young
(merica; Church: Quaker; Member; American Woman's Association; Hobbies:
horseback riding, dancing, theatre. Author: "And Now Youth." Home:
22 East 11th Street. Address: 345 Lexington Avenue, New York City."
It is understood that the Washington Post Magazine, Sunday,
September 9, 1934, carried an article written by Osgood Nichols entitled
"A Lone Girl Seeks to Lead Nation's Youth to Victory." Efforts are now
being made to obtain a copy of this edition. In the event a copy is not
available, we will search the files of the Library of Congress.
Regraded Unclassified
The "Literary Digest" of August 5, 1933, carries the following item:
141
aditor, "Modern Youth,' her own brain child, declares that "However
adults feel about militarism, the youth of the country wants no more wars.
Feir of complexion, she is a good mixer and sufficient of an equestrienne
to enjoy rides with Mrs. Franklin D. Roosevelt. Founding "Modern Youth",
she decreed none of its staff be over 30. She will resign at 31."
Regraded Unclassified
142
"This woman organized youth groups, as a result of 8.
trip to Germany some years ago, during the Hitler
regime. She was much impressed by the youth movement
in Germany, Her trip is said to have been financed by
& Wall Street business man. After she organized these
youth groups, according to her claim, the communists
stole the movement from her by boring from within. She
was in Washington for a time and people who knew her
described her as being very emotional and unstable,
stating that she played around with a lot of people in
a sex way. She is married to a communist, name unknown.
Her husband is an avoved communist. She switches from
side to side. She should not be recommended for anything
due to her emotional instability. She has done a lot of
writing."
The above information comes from a person who requested
that the source not be disclosed, The information has
not been verified and the reliability of the source
furnishing same is not known.
Regraded Unclassified
called AL the Library of Congress and examined publications edited by
JD January B, 1942, I 143
VIAID I/ma, particularly the book, "And Now Youth. It was determined
wist 1812 Is the only book written by her. It was published by Robert
sallay, 2 jest 13th Street, New York City, Copyright, 1934. It is cheaply
touns =W sells for fifty cents. Miss Ilma was 23 years of age at that
In her book the author attempts to outline the problems, hopes, and
purposes of modern youth and their causes and effects. She sets out what
she telieves to be the reasons for their unemployment and what she terms
their engral bewilderment with present social, economic, and political
conditions. She relates how the dictators of foreign countries came into
power by their able leadership and by capitalizing upon the loyalty,
energy, and interest of the young people of the nations. She criticizes
the dictator governments and attempts to outline a new plan which she
calls "National Democracy." However, she continually leaves the underlying
thou ht that the youth of America with proper leadership would soon be the
control ling factor governing American politics and economics. She com-
gnded the purposes and policies of our Chief Executive, whom she described
15 a young man's President, and concluded that the youth of America must be
thoroughly organized in order that they could come into power and carry out
the "Logian plan which she tries to outline.
Many of the ideas which she expresses are at cross purposes. She
states that wars must be definitely and completely outlawed even if it
would sean that all youth would flatly refuse to fight. At the same time
she states that in the event some foreign power would become aggressive
towards its people or towards other nations the United States with all its
armed M. ght should immediately step in and suppress such aggression. She
speaks of even doing away with R. 0. T. C.'s and using the millions of
dollars spent for battleships and war equipment to care for the needy. She
prophesies that leadership of the youth movement will develop out of its
own ranks and anticipates great things when young people rule the country.
The following is practically a verbatim foreword of Robert 0. Ballou,
publisher of the book:
Regraded Unclassified
144
-2-
YONEWORD. "The voice in the wilderness today is the voice of youth,
boxildered and groping in an age so materialistic that money has become an
ideal as powerful and awe-inspiring as God once was.! Thus doés Ilma, the
dynamic editor of "Modern Youth," a magazine which made a spectacular if
brief impress on the thought of the young in 1933, open her discussion of
the problems, hopes, and purposes of American youth in 1934. Young
America's constructive impatience in a civilization which mills about con-
stantly at the periphery of war, which spends billions of dollars for
onttleships while millions of its population exist without proper food
or housing or constructive outlets for their energies, is vividly reflec-
ted In the pages of this book.
"While Miss Ilme was editor of "Modern Youth", she received letters
from and had personal contacts with thousands of restless young persons
who exhibited an amazing seriousness of purpose and serious intent to
make a constructive effort toward better social, economic, and political
conditions in America. The thoughts and feelings of this group have been
passionately set forth by Viss Ilna in "And Now Youth."
"There is an amazing absence of redicalism in its pages and a trem-
endous sanity and insistence upon time-tried institutions, which in the
conception of the author and apparently of her contemporaries have been
mismanaged and must be reconstructed, but cannot be completely scrapped.
"The book carries an astounding conviction that in a badly nis-
managed world there is a (Toup about to come into its management who will
perhape do a better job than the group which preceded it."
Robert Ballou, Publisher.
The author devotes the first chapters of her book by relating how
the Prohibition Era left youth in a condition entirely unfit and unsuited
for the problems which were presented after the economic crash of 1929;
that they were used to quick and easy living and after the crash there
was nothing they could do; that they could not find jobs and were unable
to follow their inclinations. She attributes this condition to self-
centered materialism and ruthless capitalism.
The author devotes a chapter to politics, stating that young people
are not particularly interested in politics and are prone to revolts and
destruction; that politics in something of a mystery; and that the young
en who are heard are radicals. She, however, continues by saying that
young people do discuss politics among themselves and that while they al-
ways thought that the man at the top were experts, the young people have
now found that they know as much about politics as those who are running
Lt do. She states that in its best sense politics stands for ideas,
Wests, cooperation, and public duty; that in this as in other things
Regraded Unclassified
145
-3-
youth nas continually faced a closed door, out a door which will now have
to be kicked down or be opened from within; that in Europe they heard the
knocking and opened the door-Stalin, Mussolini, and Hitler focussing
their political progress by making youth the most important part; that
tiey swept into power propelled by the vast energy of youth and by appeal-
ing to it emotionally; that they were hungry for attention; and that the
leaders who made them feel individually necessary to the fate of the nation
received support that swept everything before it; that all that was neces-
sary was organization; and that the enthusiasm of the youth took care of
the rest.
She states that the ruthlessness of capitalism is something of the
past; that it was a system of life for the Mellons, the Morgans, the Insulls,
the Litchells, and the Herrimans; that this system collapsed on the econ-
ondo side in the great depression and on the political side during the
great war; that this loss has shown that new wheels are needed; and that
youth can observe three roads.
The author lists the first of the three roads as the worn and rutted
road of tradition, capitalistic democracy, the second as the road of
Comminism, and the third as the road of Fascism. She then continues,
"But isn't there a fourth road? Less discernible, but feasible,
the "road of national democracy." According to this doctrine the state
and the individual are indispensable components and it is designed to
assure the individual a freedom of expression which is not possible in
the old type of society, 8 society for a few individuals. By laying
strees on the obligations of every individual towards the social unit
of which he is a small part, instead of underscoring his rights irres-
pective of the effect upon the social group, national democracy seeks
to contribute to the greatest good of all. It is directed freedom,
neither the rule of Communism which does away with individual initia-
tive, nor the rule of uncontrolled democracy, which leads to chaotic
and suicidal competition; it is a reign of cooperation between the in-
dividual to whom is conceded the privilege of developing a nation ec-
onomically, and the state, which makes the concession in the interests
of the general group."
The author states that keeping in mind the purposes of youth,
there is no doubt that Roosevelt is the leader to whom they should turn;
that he is a young man's President; and that he must know that the fut-
un of America lies in the strength of youth to carry on.
She devotes a chapter to peace stating, "What could be more simple
than a wholesale refusal to fight? Suppose a government issued a call to
the and three people volunteered. Can you jail a nation?" She contends
1/101 diplomatic relations between nations should be strengthened, however,
Regraded Unclassified
146
I: in any particular instance diplomatic ns otistions should fail;
the R swift and concerted military pressure on B wayward and trouble-
saking notion would undoubterly bring results; that the United States
15 & (rest power and in the event We see symptoms of war developing, ye
disperate guid use our influence to swing the balance. Rer argu-
note aroing peace and war seem at cross purposes.
The author states that she went to Geneva in September, 1933, 0.5 a
representative young person, who was a good listener, but that she WAG
at the cross purposes of arguments and that apparently
maily of accomplished; that youth had no part in the program and was
(St. recresented; and that the meetings were little more than a series of
She relates that she visited in Germany for ten days, talking with
reminy yours Maris as possible. She found that Germany was miserably
mailed :/ defeat and struggling with economic depression; that the youth
ad geneats had the prospect of paying for reparations, all of which wes
(shewetening and which gave Hitler the opportunity be needed; that vitier
the power behind young people and knew how to capitalize on it; that
with is following him with relif ious fonaticism, so blindly loyal
that it has lai to the excesses which have brought the condemnation of
the world upon it; however, that these errors were less the fault of youth
lie ratilt of the leaders. She states, "In this book it is not my
- to efend or attack Hitlerism; I am concerned only in pointing out
the fact that 1.18 methods are efficient to the highest degree.
its critijude if spplied to a different end perhaps nobler cause would be
just Ag @fficacious." She censures his short-si, teaness in connection
12/- I'm Jews, intellect, and morality, but states, "This much is true,
64-/ nes hea e rebirth of opportunity; faces are full of loughter:
16 little complaining and much cooperation."
The -uthor devotes a short chapter to Fascism, stating that when
assolini and his followers came into power they were absurdly young,
- CI time Wistever right or wrong there might be in their beliefs and
rarrad, it cannot be denied that Jussolini correctly interpreted
Seriings of his people; that he offered great leadership and magni-
fromat courage and most important of All, he succeeded; that Mussolini's
pushed Italy right into the front rank of world notice by always
U.les of Foscism in her discussion, that his success you = splen-
young men and women; end that vhile she will not be interested
- of suwer end dormant youth.
be states that the yours people of England ,ore coutious than
other countries; that they are not interested in mar; and that believao this
- plank upon which American and English youth stand. She
Regraded Unclassified
147
16st from the shops of things in the rest of Europe it was apparent that
interest of peace. She further stated that the political programs of
English and Amerlcan youth must combine to resist outside forces in the
one country were generally not adapted to any other country and could
not be 8: pected to work there; that leaders must always rise from within
and love a particular accommodated program.
The author devoted a short chapter to Spain, stating that there
are little activity among Spanish youth by reason of lack of leadership,
not that that might come.
She also devotes a short chapter to Russia, stating that young
of not the Mussian system worked, that youth was the dynomic force in the
people are the primary cause of the rulers and that regardless of whether
Dovernment.
with reference to American youth the author stated that there was
discontent, disillusionment in the past, and scepticism as to the future;
that it was impossible to find jobs; that the exposure of the greed of
our pre-war successful men has left them in a state of defeat. She pró-
vides the following answer to this condition: To builo anew on an ideal
of service whereby life might be made richer and fuller; that our old
system was muilt up by trial and error; and that we must examine it care-
fully and discard that which is false and selfish and harness that which
is worthwhile; that youth is content to wait for leadership which would
Lake initiative; and that their aims bear little resemblance to the harah
and tyrannical organisations of Europe; that they hold none of the fans-
ticism and violence of the Namis; and that they do not went to force all
minus into one mold as do the Communists, but that they do believe in
original and individual thinking; that their energy must be organized
and centralized; that both organized and un-organized youth must be
joined into one force with leaders to be drafted from its ranks; that
service. She concludes by stating that we are at a turning point; that-
prevails; and that leaders must not come for wealth or fame, but for
dictatorship is not sought because belief in representative democracy
there are E. few enlightened leaders among our parents who can carry on
for a few years, but we are the leaders of tomorrow and we must study,
work, and cooperate to lead the country and ourselves toward a higher
life,
Regraded Unclassified
TREASURY DEPARTMENT
14°
INTER OFFICE COMMUNICATION
DATE January 9, 1942
Secretary Morgenthau
TO
Yr. Kamarck
FROM
subject!
Plane Shipments to British Forces in the year
ending December 31, 1941
Summary
1. In the year ending December 31, 1941, Rritish Morcer
received from the United States 8 total of 4,834 planes of All
types 13,353 combet planes). This is equivalent to monthly
average deliveries of 403 planes (278 combat planes.)
2. Light and medium bombers made un slightly more than B
third of the total, while troiners and oursuit planes were each
viiently less than A third. Only 109 heavy bombers were deli-
vered to the British, or two percent of the total deliveries of
M11 tynes. The distribution by tynes was 88 follows:
Number
Percent of Total
Type
1,647
34
Liont and medium bombers
1,445
30
Trainers
Pursuit
1,418
2°
Nevel ontrol bombers
137
3
109
2
Heavy combers
42
1
Army Cooperation
36
1
Commercial ilanes
Total
4,834
100
United 3. Kingdom, while Just over B. third went to the Viddle East, the
HALf of all the combat planes were delivered to the
The critish Pacific Forces received less than 10 percent of
total. The distribution of the combet planes by destination
189 RE follows:
Destination
Number
Percent of Totel
United Kinrdom
1,673
50
1,193
35
Modle Eastern Forces
o
Pecific Forces
290
1
Consilan Forces
104
=
0%
Forces in Russia
Total
3,353
100
Regraded Unclassified
149
No
her Type it 6m bombers
1,798
35135
Trainers
1.512
29 30
Parent t
1,418
27
28
Thank the to bankers
137
3
3
Have luber
109
Y
2
planes
62
/
/
am eatim
42
/
/
Total
5,078
97 10096
5016
Destination
No.
1,710
49
m- Eastern Forces
1,193
34
Pan her Forces
290
8
din- Forces
218
6
in Russia
93
3
3,504
100
Regraded Unclassified
Shipments of U.S. Planes on British
Account for Year Ending December,
150
1941
Table & - Shipments by Area (Year Ending December, 1941)
Total Reported
in 1941
To the United Kingdom
Light and medium bombers
1,161
Heavy bombers
104
Naval patrol bombers
102
Pursuit
311
Army Cooperation
32
24
Trainers
6
Commercial planes
Total to the United Kingdom
1,740
To the Middle East
Light and medium bombers
330
Heavy bombers
5
1118
Pursuit
Army Cooperation
10
142
Trainers
Commercial planes
56
Total to the Middle East
1,391
To the British Pacific Forces
Light and medium bombers
95
Naval patrol bombers
27
168
Pursuit
105
Trainers
Total to British Pacific Forces
395
To the Subttah Forces in Ruesia
44
Light and medium bombers
49
Pursuit
Forces in Russia
93
Total to
To the Canadian Forces
Light and medium bombers
168
TO
Naval patrol bombers
42
Pursuit
1,241
Trainers
1,459
Total to Canadian Forces
Totala
Light and medium bombers
1,798
109
Heavy bombers
137
Naval patrol bombers
1,418
Pursuit
42
Army Cooperation
1,512
Trainers
6?
Commercial Plenee
5,078
Total - All Types
Regraded Unclassified
Table B - Shipments by Types
151
(For Year Ending December, 1941 )
Total Reported
in 1941
Bell Airacobra
154
Boeing B-17C
20
314 Flying Boat (commercial)
3
Boston III
39
Brewster Buffalo
168
Cesena T-50
614
Consolidated Catalina
129
Catalina I-A
8
Consolidated L.B. -30 (B-24)
6
Liberator I (B-24A)
19
Liberator II (B-24B)
64
Curtiss C.W. 20 (troop carrier)
1
Tomahawk
593
Kittyhawk
382
Douglas Boston I
1
Boston II
81
Boston III
439
D.C.II (communications plane)
10
Fairchild 24 R-9 (reconnaissance)
22
Glenn Martin Maryland
150
Baltimore
68
Grumman Martlet II
41
Lookheed B-14
1
Electra (commercial)
10
Hudson III
502
Hudson IV
70
Hudson V
397
Lodestare (commercial)
28
Transports (commercial)
21
North American Harvard II
897
80
Mustang
Pitcairn Autogiro
5
Stearman
1
4
Stinson 0-49 (observation)
Vought Sikorsky Chesapeake
50
Grand Total - All Types
5,078
Regraded Unclassified
- 2 -
Table A - Shipments by Area
(For Year Ending December
152
1941)
Total Reported
in 1941
to the United Kingdom
Light and medium bombers
1,124
Heavy bombers
104
Navel patrol bombers
102
Pursuit
311
Army Cooperation
32
Prainers
24
Commercial planes
6
Total to the United Kingdom
1,703
To the Middle East
Light and medium bombers
330
Heavy bombers
5
Pursuit
848
Army Cooperation
10
Trainers
142
Commercial planes
30
Total to the Middle East
1,365
To the British Pacific Forces
Light and medium bombers
95
Nevel patrol bombers
27
Pureuit
168
Trainers
105
Total to gritish Pacific Forces
795
To the British Forces in Russia
1:41
Light and medium bombers
49
Pursuit
93
Total to British Forces in Russia
To the Canadian Forces
54
Light and medium bombers
3
Neval natrol bombers
42
Pursuit
1,174
Treiners
1,278
Total to Cenedian Forces
Totals
1,647
Light and medium bombers
109
Heavy hombers
137
Seve1 ostrol bombers
1,418
Pursuit
42
Army Cooperation
Trainers
1,445
16
4,934
wint rcial mianes
Regraded Unclassified
- 3 -
153
Table B - Shipments by Types
(For Year Ending December, 1941 )
Total Reported
in 1941
Bell Airacobra
154
Boeing B-17C
20
314 Flying Boat (commercial)
3
Boston III
39
Brewster Buffalo
168
Cessna T-50
548 614
Consolidated Catalina
129
Catalina IA
OR
Consolidated L.B.-30 (B-24)
6
Liberator I (B-24A)
19
Liberator II (B-24B)
64
Curtiss C.W. 20 (troop carrier)
1
Tomahawk
593
Kittyhawk
382
Douglas Boston I
1
Boston II
81
Boston III
439
D.C.II (communications plane)
10
Fairchild 24 R-9 (reconnaissance)
22
Glenn Martin Maryland
150
Baltimore
68
Grumman Martlet II
41
Lockheed B-14
1
Electra (commercial)
10
Hudson III
351 502
Hudson IV
70
Hudson V
397
Lodestars (commercial)
23 28
Transports (commercial)
21
North American Harvard II
897
Mustang
80
Pitcairn Autogiro
5
1
Stinson 0-49 (observation)
4
Vought Sikorsky Chesapeake
50
Grand Total - All Types
4,834 5078
154
BRITISH AIR COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D.C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO.
With the compliments O₂ british Air Commission,
who enclose Statement No. 15 - Aircraft Shipped -
or the week enueu Junuary D, 1942.
The Hon. Henry Morgenthiu, J.,
Secretary O. the Pressury
Desington, D.G.
January 9, 1942
Regraded Unclassified
Most Secret
STATEMENT NO. 15.
155
AIRCRAFT DESPATCHED FROM THE UNITED STATED
DURING WEEK ENDED JANUARY 6, 1942.
TYPE
DESTINATION ASSEMBLY POINT BY SEA BY AIR FLIGHT DELIVERED
FOR USE IN CANADA.
CESSINA
Canada
I
-
-
T-50
1
CONSOLIDATED
Canada
I
-
5
Catalina
I
CURTISS
Kittyhawk
Middle East
Port Sudan
30
-
-
FAIRCHILD
U. K.
U. K.
4
-
-
24R9
GLENN MARTIN
Baltimore
Middle East
Port Sudan
23
-
I
LOCKHEED
-
1
Hudson V
Canada
1
-
NORTH AMERICAN
Harvard II
S. Rhodesia
Durban
8
I
1
TOTAL
65
---
7
British Air Commission,
January 8, 1942.
Regraded Unclassified
156
January 9, 1942
Dear Lauch:
Thank you 80 much for sending me
0. copy of the statement on the war-time
interest rate policies of Great Britain
and Canada.
I read it with great interest.
Yours sincerely,
(Signed) F. Berganthave Jr.
Br. Lauchlin Currie,
Administrative Assistant to the President,
The White House.
Regraded Unclassified
7 1 1. a - Bell
THE WHITE HOUSE
receiptions has
WASHINGTON
ben child
December 24, 1941.
Dear Mr. Secretary:
Some time back I had my assistant,
Mr. Salant, prepare a brief statement on
the war-time interest rate policies of
Great Britain and Canada.
The present appears to be an
appropriate time to bring this statement
to your attention.
Sincerely yours,
Landle a
Lauchlin Currie
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
noted by D.H.Bell- D.
1/14/42-
October 20, 1941. 158
WAR-TIVE INTEREST RATE POLICY IN GREAT BRITAIN AND CANADA
Great Britain and Canada have borrowed heavily to meet their
war expenditures, yet in both countries interest rates are lower than
they were at the outbreak of the war. Official policy is mainly
responsible for this development. The British and Canadian Governments
have pursued a policy of preventing any increase in rates, and this
policy was clearly understood and accepted by the public.
A. Great Britain.
There was an initial period of uncertainty in Grest Britain at
the outbreak of the war as to the future of interest rates. Wars
in the past had always meant high interest rates; the "five percent
63rth of 1914-18 was still fresh in the memories of the investing
public. Furthermore, the Government hesitated in forming and announc-
inc. is policy.
By now, all doubts have long since been resolved. By frequent
statements in the House of Commons, as well as by its borrowing and
open resekent operations, the Government has made its position clear.
For example, after the first two borrowing operations early in 1940,
the Chancellor of the Exchequer emphasized that the terms of those
loane established precedents for the remainder of the war, saying:
"The policy of the Government is to aim at stability of
Interest rates and to secure that the yields offered on future
lonns, whatever their type, shall, after making due allowances
for such factors as the periods of the loans, be in agreement
Regraded Unclassified
159
-2-
with the level of interest rates as established by the
recent two percent Conversion Loan and of the three
percent loan just issued."
A year later, in February, 1941, the current level of interest
rates was 80 well established that the Government consented to
give up the power to borrow at higher rates. This occurred in dis-
cussion of the annual bill empowering the Treasury to issue loans.
Following the wording used in previous years, the bill authorized
the Treasury to borrow at a maximum rate of five percent. The
Chancellor assured the House that he had no intention of allowing
rates to rise, and agreed to change the maximum figure to three
percent.
The easy money policy has received prominent mention in three
of the four war-time budget speeches. The most recent statement
occurred at the very beginning of Sir Kingsley Wood's April 1941
budget address:
"The measures we have taken have combined to make it
possible for us to borrow at what, by the standards of any
previous war, is B. very low rate of interest
We have no
intention of borrowing on worse terms as the war proceeds.
We shall hope to improve upon them."
The success of the policy is indicated by the course of interest
rates. The yields on long-term Governments have not only failed
to rise, they have shown a substantial decline. One long-term
issue which was selling to yield four percent in September 1939,
reached 3% percent 8. year later and is now selling on a three percent
Regraded Unclassified
160
basis. Other yields have fallen correspondingly.
The terms of new Government loans have reflected this improve-
ment in yields to some extent. The largest source of borrowed funds
has been 21/2 percent War Bonds, an intermediate term security which
is "on tap" at the Treasury. The first 1ssue of these bonds, put
on sale in June 1940, had a maximum maturity of seven years. A new
issue was just announced, carrying the same coupon but meturing in
nine years. Taking all financing into account, the British Treasury
has borrowed at an average rate of about two percent,
The amount borrowed at these rates has been substantial. Great
Britain entered the war with a national debt about double her national
income. In the first 18 months of war Treasury borrowing amounted
to about 30 percent of the national income in the same period. One-
third of this amount has been obtained from foreign sources, and
should probably be deducted. The remainder, constituting 20 percent
of the national income, may be considered 83 borrowed "from strictly
domestic sources." of this 20 percent, B percent was borrowed from
the commercial banks and the Bank of England, leaving 12 percent
borrowed from domestic sources other than banks. The corresponding
figure for the last six months of the 18-month period, running from
September 1940 to February 1941, is 15 percent, and for the most recent
half year it probably would be considerably larger.
See British White Paper on War Finance. This amount represents
the increase in foreign balances in London, which are largely
invested in Treasury bills, and the re-investment by British
residents of the proceeds of foreign investments which they have
sold to the Government or on the market.
Regraded Unclassified
161
B. Canada
The Canadian experience with respect to interest rates has
closely paralleled the British. Bond yields rose sharply at the
outset, and there was & great deal of discussion of the future of
interest rates for the first few months. But it soon became gener-
ally accepted that they would remain stable or drift downward, and
Government bonds gradually recovered to their pre-war levels. The
terms of the three war loans have become progressively more favor-
able to the Government.
The official policy was stated early in the war, in the budget
speech of September 1939:
"What we cannot meet by taxation we shall finance by means
of borrowing from the Canadian public at rates as low as
possible. There may be some who expect or fear that interest
rates will rise substantially, perhaps a few who are thinking
in terms of conditions during the last war. Such a view
completely overlooks the vast. changes that have taken place.
We do not expect that any material change in interest rates
from peace-time levels will be necessary to attract a sufficient
portion of the large increase in savings which should be
produced by the expanding production and incomes under war-time
conditions. And we refuse to believe that those of our people
who will benefit from the new conditions would seek to take
advantage of war necessities to demand any undue increase in
the interest rates which we have paid in peace-time."
Regraded Unclassified
-5-
162
This statement was the only public declaration on interest
rates. The leading banks and institutional investors constitute
& small group, however, and they constituted the bulk of the war
loan committees. It is quite probable that the Treasury and the
Bank of Canada informed this group that they would allow no rise
in rates.
The Dominion Government has relied heavily on borrowing,
though in relation to national income its borrowing operations
are smaller than the British. It is estimated that the Government
loans in the current fiscal year will amount to 22 percent of the
national income. If two-fifths of this amount is obtained from
the banks, as in the past, the remainder will come to 13 percent.
Regraded Unclassified
TREASURY DEPARTMENT
your
INTER OFFICE COMMUNICATION
DATE January 9, 1942
Scoretary Morgenthau
TO
V. F. Coe IFC Coe
FROM
Subject: Recorts of the British Ministry of Economic Warfare.
Attached 1s 8 copy of come strictly confidential
recorts by the British Ministry of Economic Warfare, for
the week ending November 10, 1941, and sent to us from
London by Mr. Cassday. A SEV of the interesting coints
are the following:
1. The British Ministry of Economic Warfare wishes
tiles the United States would refuse to transfer Swiss
germerked gold to Portuguese account, claiming that the
refusal would prevent the Swiss from financing German
surchases in Portugal until Swiss assets in the United
states are exhausted.
2. The British have E quote for exports of oil needs
And nute to Portugal, and evidence continues to accumulate
of the passage of these products from Portugal to the
enemy.
the United States to ban importe of dollar notes; and
3. The British Ministry of Sconomic Werfare wants
ere specifically opposed to such imports from Sozin, gince
This would give Germany a good market for dollar notes,
4. The British apparently are controlling Swedish
imports to prevent Sweden from importing goode in excers
of its own needs.
Regraded Unclassified
164
EMBASSY OF THE
UNITED STATES OF AMERICA
LONDON, ENGLAND, November 19, 1941.
STRICTLY CONFIDENTIAL
Dear Mr. Secretary:
The enclosed material will be of interest to Dr.
White's Division.
Enclosed are some strictly confidential notes made
available by the Ministry of Economic Warfare. The
material itself is not especially startling but I thought
it would be of interest to you. It 18, however, what the
Ministry designates as "most secret" and should not,
therefore, be given much circulation.
Sincerely WKensday yours,
1481 8 JES
The
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington.
Regraded Unclassified
VET SECRET
1155
ENEMY TRANSACTIONS DEPARTMENT
Report for week ending 10th November, 1941.
J.
We have now received the text of the amendment
to U.S. General Licence 32, under which family remittances
to Europe from the U.S.A. are regulated.
The position is more satisfactory than NO had thought,
Dollars resulting from these remittances can only be
credited to the blocked account of & banking institution
of the country in which the payer resides. Our fears
that this traffic would continue should Portugal for
instance, be prepared to accept blocked dollars for
e/cudos, should not be realised as Washington tell
us that there 1s now no danger of remittances to Axis-
controlled nationals over countries such 85 Portugal or
Switzerland. In addition, the American paying bank has
to satisfy itself as to the bona fides of the payes.
Misunderstandings as to the operation of the rapidly
expanding network of U.S. freezing regulations are being
gradually cleared up by correspondence with Washington,
one of the outstanding points under discussion being
whether branches in South America of U.S. banks are still
to deal in dollars with Axis or Axis-controlled nationale
resident in Europe.
2/
The American Embassy, Berlin has informed H.M.G.
that the German Government now require that francs
expended for the relief of British subjects in Occupied
France must be purchased with free dollars. Hitherto
the francs have been advanced by the Vichy Government
against sterling credited to them in the Reciprocal
Advances Account.
A sum of $200,000 per month is involved in the pro-
posal. on the other hand about 8,000 British subjects
are more or less dependent (in many casss, entirely de-
pendent) upon these relief payments.
The possibility of finding en alternative method of
payment, less edvantageous to the enemy is being explored,
00 far without success.
3.
& telegram was received from Washington saying that
the Swiss proposed to transfer 10 million dollars' worth
of their earmarked gold In the U.S.A. to Portuguese
secount, against which the Portuguese would release to
them the equivalent amount of gold held on their account
in Switzerland. Stopford added that the Treasury
Department were inclined to refuse permission for this
transfer as they would also have to transfer other gold
held on Swiss account in the U.S.A. We wired back to
him that we hoped they would maintain their refusal,
for apart from the general desire on the part of the
Ewies to remove gold from the D.S.A., prompted no doubt
by the feeling that sconer or later they might have
their/
Regraded Unclassified
-2-
their general licence withdrawn owing to the extent to
which they realize they had become subservient to
Termany. Permission to make the particular transfer
suggested would enable the Swiss to go on financing
Derman purchases in Portugal until their assets In the
D.E.A. were exhausted.
The method adopted hitherto by which these purchasee
are financed 18 that the Swiss buy escudos from the
Portuguese for transfer to Cerman account, selling them
Swiss france convertible into gold in Switzerland, If
this gold is now returned to the Swiss in exchange for
the gold in the U.S.A. the only limit to such purchasee
Is the extent of the Swiss asseta in the U.S.A.
A telegram was received from Vigo informing us of
& proposal by the Spanish Foreign Exchange Institute to
ship $50,000 in notes in the 'Magallanes' to New York
and advising us that further shipments of notes were
contemplated. No informed Vigo that permission should
not be given either for this shipment or for subsequent
shipments and advised Madrid of our reasons this
action. To grant exemption in this case would nullify
the whole usefulness of the Enemy Currency Regulations,
for not only would it enable the Spanish Foreign Exchange
Institute to dispose of notes which may possibly have
been obtained either directly or indirectly from Germany,
but It would mean the continuance of the existence of a
market in notes in the Iberian Peninsular thereby enabling
the Germans to continue to obtain good prices for such
notes Q8 they desired to cash.
Be have advised Washington of this episode and of
the proposals to use notes in the case of the Campachano,
now fortunately dropped, and have urged them to approach
the U.S. Authorities again with B view to persuading
them to ban the import of dollar notes.
5.
A meeting ⑉ held with the Admiralty, Foreign
office, Colonial Office, Censorship and various members
of M.E.W. to discuss the application of the Enemy
Currency Regulations to passengers. It was decided,
after consultation with Washington, that passengere
should be allowed to take up to $1,000 or its equivalent
per adult passenger before rendering themselves liable
to have their currency removed for seizure under the
Regulations. All amounts above this figure and all
Amounts of securities will be liable to seizure. At
the request of the Foreign Office it has been decided
to allow existing procedure to continue for the time
being. in 80 far 88 officials with diplomatic privilegee
are concerned, but no are asking the Colonial stations
to report details of currency carried by such persons.
Following 6. telegram from the Insurance Mission
last wook giving the lines of 8. preliminary agreement
with the U.S. Government, another telegram was received
indicating that as much progress had been made with the
proposale for cooperation as was possible before the
Mission returned to London, adding that the Canadians
had agreed them in principle. A further telegram from
the Mission was received later giving the proposed
Dasle
Regraded Unclassified
167
-3-
basis for understanding between the British and U.S.
Insurance Markets in regard to the grant of insurance to
vessele holding American Ship Warrants, but without 6
British Ship Warrant. These proposals are being
examined by the M.O.W.T. in conjunction with us.
We discovered that under the inverted navicert
procedure, navicerts had been issued in respect of
shipments from Switzerland and Ireland without any
declaration having been made as to non-enemy insurance.
We have arranged that in future all applications for
Navicerts from those countries shall be accompanied by
6. Statement of Insurance.
It has been suggested by 8. London Insurance Broker
recently in the Middle East that much Turkish and
Persien re-insurance could be diverted from the enemy if
London would make further efforts to obtain it. This
claim is being investigated, but our impression 18 that
(1) Turkish Re-insurance has in the recent past been
unacceptable to the London Market owing to transfer
difficulties.
(2) Persian re-insurance with England 19, or has been
until very recently rationed by the Persian Govern-
ment for political reasons, but that a substantial
amount 1s already done in London. This is being
confirmed by the J.I.C.
Information was received that the representative of
8. Lloyd's Broker in Persia was in relations with the enemy.
We also learnt from the D.O.T. that this epresentative,
a prominent man in Persia, was apparently misconducting
the company's business and had come in conflict with the
local Minister of Finance. The brokers in question have
been told to investigete the matter and have taken it up
through the D.O.T. Statutory Listing may follow.
D. W.
12th November, 1941.
Copied in American Embassy,
London, November 14, 1941.
Regraded Unclassified
168
SECRET
ENEMY RESOURCES DEPARTMENT
Work for Week Ending 10th November
1. Memoranda prepared:
a) Possible sources of substitutes for fuel oil in
North Africa (for 011 Department).
b) Review of available evidence of this year's crops
in Europe (for Weekly Summary).
o) Draft paper on price control in Germany.
d) Labor in the Germen aircraft industry: influence on
output of changes in design.
-) Ship repair facilities available in Italy (for oil
Dept. in connection with assessment of damaged
tanker tonnage now in port).
f) Draft report on German tank and A.F.V. production.
g) Pre-emption recommendations.
h) Increase in spinning and weaving capacity in Turkey
during the last few years.
1) Comparison of clothes ration cards in Great Britein,
Germany and Italy.
j) Alcohol production in German Europe.
2, Portugal: Unshipped balances. In connection with an
application from London to ship certain quantities of oil seed
and nuts which were not shipped in the third quarter but would
not be additional to the quota for the fourth quarter, it was
once more pointed out that evidence continued to accumulate
of the passage of vegetable oils from Portugal to the enemy.
While it was decided to authorise the present applications
it was agreed that the whole question of the Portuguese quota
for vegetable oils and seeds should be reviewed when the
quota for the first quarter of 1942 came up for decision.
3. Sweden: Sugar and Honey. A request had been received
from the Swedes to permit the import of 200 tons of honey
during the fourth quarter of 1941 in place of their quota of
5,000 tone of sugar. As this quantity of honey represented
more than Sweden's imports for three years, the request was
viewed with suspicion by the Committee, and it was suggested
that the Swedes should be asked to give their reasons for
wanting this quantity of honey, 88 well as an indication
of the use to which it was to be put.
4. Purs and Fur Skine: It 10 known that Germany is making
desperate efforts to obtain furs and fur skins of all kinde,
and as . large number of applications to import these commod-
ities into Neutral Countries have been received it seemed
reasonable to connect the two facts. The suspension of
imports into Switzerland has been obtained as a temporary
measure pending a report from Serne, and applications for
Spain, Portugal and Sweden are being closely scrutinized.
It Is hoped to present a reasoned memorandum to the Permits
Committee in the near future.
5. & representative of Crookes Laboratories attended 0
meeting regarding Norwegian fish oil refineries.
6, Discussions have taken place with representatives of
M.I.10b regarding methods of calculation of consumption of
rubber by the Cerman Army.
7/
Regraded Unclassified
169
-2-
7. A survey of wax exports to Japan (particularly from Brazil)
has been carried out with the object of discovering whether
the cooperation of the United States Government should be
sought in pre-empting these supplies.
B. Arrangements have been made for members of the Engineering
and Armaments Sections to inspect the German submarine which
was recently captured complete and which 1a now refitting at
S. dockyard in the North.
NEXT WEEK
A8 for week ending 3rd November, together with:
a) The strength of para military formations in
German Europe.
b) The strength of the Italian Army,
c) Developments in Trade Agreements in German
Europe since August 11th.
d) Solvents in German Europe.
R. H. OWEN.
11.11.41
Regraded Unclassified
170
MOST SECRET
SHIPPING DEPARTMENT.
REPORT FOR WEEK ENDING MONDAY,
10th November 1941.
1. S.S. "NYASSA".
It was reported from New York that when this
ship sailed therefrom recently for Lisbon, some forty
of its officers and crew were each carrying amonget
their personal effects a radio set. As there had
previously been evidence from Censorship Sources which
suggested that there might be a scheme on foot to
import radio sets into Portugal by this means, with 8.
view to avoiding Portuguese customs duties or for
some other ulterior motive, the matter was brought to
the attention of the Contraband Committee. The Comm-
ittee decided in the first place that a. holdback guar-
antee should be obtained from the shipowners, and
this was duly done. It later appeared that, though on
insufficient information as to the number of sets be-
ing carried, H.M. Consul General, New York, had not
objected thereto. The matter was again referred to
the Committee and it was decided that the holdback
guarantee and the delay of some days, during which the
sets were kept in the Customs House at Lisbon, would
have been sufficient to impress on all concerned the
fact that the carriage of identical articles by 80
many members of 8. ship's company, must necessarily
arouse suspicion. This incident has drawn attention
to the difficulty of deciding the propriety or other-
wise of the carriage by individual members of a crew
of neutral ships into their own country of goods which
are said to be for the personal use of themselves or
their families. The question of evolving some stand-
ard, whether by particular articles, or by value, or
by quantity, for permitted imports of this kind, is
now under consideration.
2. S.S. "MARIA RAMOS"
It was reported by Barcelona that certain shipe
among them the 5.5, "Maris Ramos", which trades regularly
between Malaga and Barcelona, had taken olive oil from
the former port to the latter for transhipment to the
German 8.3. "Lisboa", for carriage to Genos. When this
matter was brought to the attention of her owners, who
are Warrant holders, they stated that they only accepted
at Malaga goods shipped on a "cabotaje" permit, 1.0.
one for ordinary coastal traffic only, whereas if goods
are to be transhipped and exported, an "exportation"
permit is required. Barcelone points out that this
means that shippers of goods from Molaga for transhipment
at Barcelona to Italy, are in fact, paying certain
shipping taxes twice. This seems significant as it
suggests that our control of Spanish shipping is
sufficiently effective to make the shippers of such
goods resort to expensive devices to conceal their
eventual destination. AS to this particular case, the
owners
Regraded Unclassified
171
-2-
owners of the "mario Ramos" stated that whatever sort
of permit 18 used, it would be possible for their
Malaga office to ascertain the eventual destination of
the goods, and they have agreed to give instructions
that all goods intended for transhipment to Italy
should be refused.
3. SMUGCLING ON LLOYD BRASILEIMO SHIPS.
As an addendum to the smuggling of lighter flints
on board the ships of this company which was mentioned
in the Report for the week ending October 24th, it
has now been learned from Lisbon that 8 further attempt
to amuggle these articles was made when the 8.8.
"cuyaba" was there recently.
H.M. Consul General successfully intervened to
prevent considerable quantities being taken on board.
4. SHIP WARRANTS FOR GREENLAND.
The most interesting warrant application of the
week was in respect of three Greenland ships. These
shipe were to be employed between Greenland and the
United States and application for Ship Warrants was
made for them. It appeared that they were to be op-
erated by the Greenland Government, but the status or
existence of such a body is not entirely clear. It
appears, however, that the affairs of Greenland are
largely run by & Committee in Now York, and there is
a Governor of South Greenland who is a responsible and
pro-Ally individual. He had signed the Warrant under-
taking in respect of these ships, and after consulta-
tion with Neutral Trade Department, it was decided that
his signature should be accepted, and the warrants
issued to him. In case there should be any difficulty
there is a. safeguard in that the ships will, in fact,
by managed by the Denish East Asiatic Company, who are
already warrant holders.
5. INSURANCE
A very satisfactory reply has now been received from
the Insurance Mission in Washington to the telegram
which we sent raising questions relating to the insur-
ance of ships holding United States Ship Warrants re-
ferred to in Weekly Report for week ending Monday,
October 27th, 1941. Parts of the telegram were cor-
rupt and it is therefore impossible to give full de-
tails at present, but it is clear that the United
States have agreed that the possession of e. British
Ship Warrant shall normally be the sinequa non, and
although in certain instances they suggest that in-
surance on either the United States or London Market
should be withheld if vessels do not also possess
United States Ship Warrants. There seems very little
doubt that we shall readily be able to agree to their
proposals/
Regraded Unclassified
172
-3-
proposele when the full details have been clarified.
6. VLABOV.
Negotiations with this Statutory Listed shipownes
were broken off about - month ago as all our efforts to
secure the services of his 3 ex-Roumanian, now Penamantan
vessels, have proved fruitlees.
It will be recalled that Vlasov went to the Ar-
gentine some months ago and that soon after his arrival
there, reports reached us that the 3 ships were be-
ing transferred to the Argentine flag. The Argen-
tine Government were immediately informed that we
would not recognise these transfers and that we would
continue to regard the vessels as Roumanion end to
reserve our belligerent rights irrespective of what
flag they were flying. The Argentine Government then
Informed us that they would not confirm the permanent
certificates of transfer (temporary certificates hav-
ing already been issued) until they had had an oppor-
tunity of considering our reasons for regarding the
ships as enemy-owned. H.M. Ambassador in Buenos
Aires was supplied with this information in full.
The Argentine Minister in Washington is now giv-
ing the United States Authorities no peace over this
case. The Selter Mission and our Embassy have, there-
fore, suggested that in order to convince the Ameri-
cans, firstly that any responsibility for the vessels
continuing to lie up reste entirely with the owner,
and secondly, 80 as not to embarrass unduly the United
States Authorities in their relations with the Argen-
tine Government we should offer to re-open negotiations
on the following basis:
(a) The 2 ships in U.S. and Brazil to be char-
tered to the U.S.M.C. by the Dolphin Come
pany for the duration of the war; transfer
to Argentine flag to be recognised; limit-
ation of trade to the Western Hemisphere.
(b) The vessel in Lisbon to be chartered to
the Ministry of War Transport by the Dol-
phin Company for the duration of the war,
and to operate under the Panamian flag.
No limitations of trade.
(c) All charter monies earned in the United
Kingdom or United States to be blooked
with the exception of such funds as are
required for the operation of the vessols.
Special arrangements to be made for the
release of such funds.
(d)
Regraded Unclassified
173
-4"
(d) Vlasov personally, to remain on the
Statutory List, but the Dolphin Steam-
ship Company and the 3 ships to be recomm-
anded to the Black List Committee for do-
letion from that List, subject to the
above proposals being implemented.
It is thought probable that neither Vlasov nor
the Company will agree to these suggestions unless
Vlasov personally 18 de-listed and his assets in this
country released. These include 3 ships which have
been equestrated and are at present employed by the
Ministry of War Transport.
That being the case, we shall carry out our
threat of regarding the vessels as enemy and on-
deavour to intercept them if they put to sea.
Provided we can convince the United States Author-
ities, as we think these proposals will, that we
have taken all steps we can reasonably be expected
to with B. view to getting the vessele into service,
we and the Ministry of War Transport consider that
the price we shall have to pay for losing the service
of the ships is infinitely preferable to giving may
completely to Vlasov who must undoubtedly, from his
behaviour and record, be regarded a.8 an enemy of
this country.
7. ENEMY SHIPPING CLAIMS COMMITTEE.
On 3lst October, the Par Eastern Committee
agreed that the Enemy Shipping Claima Committee should
be authorised to arreet French vessela calling at
Manila, leaving it to be decided between the Admiralty
and this Ministry as to the exact moment at which a
start should be made with arresting these vessels.
At Professor Hall's request, however, it was further
agreed that Washington should be informed before any
arrest was actually made. It is hoped that these
arrests may be used to supplement the scheme which
the State Department proposes to formulate of limit-
ing bunkers to French veesels at Manile, and it is
proposed to begin by arresting any French vessel
which might be used to carry rubber to France prov-
ided that there 1a a claim against the vessel. The
next vessel falling within this category is not due
at Manila for some two or three weeks,
8. I.I.V. COMMITTEE
At their 6th Meeting on Wednesday, November 5th
the M.E.W. Committee considered the Question of
French Far Eastern shipping, and the means which
could be adopted to prevent Prench ships from carry-
ing cargoes useful to the enemy to French North
Africa or France itself. The Committee also con-
sidered tanker traffic in the Aegeen, and the case
of certain British ships which have been seized by the
Vichy authorities.
SHIPPING DEPARTMENT
12th November, 1941.
COL. VICKERS (2).
Mr. Ingrams.
Sir N. Benthall
Pay.Capt. Brown
Mr. Mark Turner
Mr. Dudley Ward
Mr. Owen
Mr. Watson
Regraded Unclassified
174
MOST SECRET
OIL DEPARTMENT
Progress Report for Week Ending
Monday 10.31.41.
Neutral Section.
1. Draft letter, to be agreed with Petroleum Depart-
ment, to Co-ordination Centre, Washington, setting out
the petroleum situation in Shanghai.
2. Routine letters re navicerts and C.S. cables, to
Lisbon and Madrid.
3. Draft telegram to Washington regarding bunkers for
the French Flag ship FRANCOIS LOUIS DREYFUS at
Manille.
4. Note for the French Shipping Department, Neutral
Trade, on supplies available of bunker fuels for French
oil-burning ships at Indo-China, Madagascar, Dakar,
Casablanca and Occupied France.
5. Minute to Neutral Trade on Washington telegram 6341
Arfer of the 28th October regarding importe of petroleum
products into Madagascar, and summary of the position of
the present Par Eastern leak from Indo-China to North
Africa and French Metropolitan porte.
6. Minute regarding application by the Shell Company
for 700 tons of petroleum residue for the Shanghai
Power Company. The Consul-General, Batavia, has
enquired for our views as regards an export licence
from the N.E.I. with a view to informing the Dutch
authorities. We have come to the conclusion that in
this instance we shall offer no objection, but we do
not propose to put any pressure on the Dutch to grant
the licence.
7. Minute on Stockholm telegram No. 658 to the
Foreign Office of 4th November. A Swedish Delegation is
shortly due in London and 18 asking, as usual, for in-
creased quantities of petroleum products, including
aviation spirit. The figures have not yet been dis-
closed to us, and the question 18 largely one (a) for
the Air Ministry regarding stocks, consumption, etc.,
and (b) whether guid pro quo can be extracted from the
Swedes. The old argument that if we desire to keep
Swedish morale up to the mark in the hope of their re-
sisting aggression it will be necessary to pump into
Sweden quantities of petroleum products, will once again
be made.
8. Minute on Tangier telegram No. 301 Arfar of the 3rd
November, which stated that the most important French
ships in Algiers and Tunis were now converted to coal
and that the last oil burners in Morocco were being
converted/
Regraded Unclassified
175
-2-
converted. Also that the coal mine at Karedza use
being rapidly opened up. The suggestion therefore,
was put forward by the 011 Department (1) that no
more hunker oil was required for French North Africa,
(2) AS French North Africa was manufacturing large
quantities of indigenous coal, no further importe of
coal to be permitted from the U.S.
Enemy Section.
1, Attended further meeting of Hartley Committee on
AXIS industrial oil consumption.
2. Attended second meeting of Colonel Auld's Com-
mittee on Axis oil production, and later, with Sq.
Ldr. N. Thomas and Mr. Congreve, prepared estimates
of synthetic production for the Committee.
J. Discussed with Prof. Postan and Dr. Lees of the
Anglo-Irenia 011 Company the effect of destruction
in the oilfields in Maikop and Grozny areas.
4. Prepared list of Italian Refineries and their
extimated capacity, storage capacity in Italy, Albants
and Italian North Africa.
Transport Section.
1. It was discovered that Major General Appleyard,
Director of Emergency Repair at the Ministry of Worke
and Buildings, possesses an expert knowledge of the
working of German contractors and the TODT organisation
in particular, and an equally expert knowledge of the
Conditions under which contractors must work in Russia.
Maj. Gen. Applayard was interviewed and seems likely to
be able to decide the conflicting expert evidence on
Herr Todt.
2, The rest of the work of this section has been the
preparation of statistics and drafts for the impending
general report on the Enemy 011 Position.
Colonal Vickers
Mr. Turner
Sir E. Benthall
Mr. Trench
Mr. Dudley Werd
Mr. Owen
New V n
Pay Capt. Brown
Mr. Ingrame
Mr. Wood
Mr. Somerville
are
Regraded Unclassified
176
SECRET
ENEMY RESOURCES DEPARTMENT
Work for Week Ending 10th November
I. Memoranda propared:
e) Possible sources of substitutes for fuel oil in
North Africa (for 011 Department).
b) Review of available evidence of this year's crops
in Europe (for Weekly Summary).
o) Draft paper on price control in Germany.
d) Labor in the German aircraft industry: influence on
output of changes in design.
o) Ship repair facilities available in Italy (for 011
Dept. in connection with assessment of damaged
tanker tonnage now in port).
5) Draft report on German tank and A.F.V. production.
g) Pre-emption recommendations.
h) Increase in spinning and weaving capacity in Turkey
during the last few years.
1) Comparison of clothes retion cards in Grest Britain,
Germany and Italy.
1) Alcohol production in German Europe.
2. Portugal: Unshipped balances. In connection with an
application from London to ship certain quantities of oil seed
and nuts which were not shipped in the third quarter but would
not be additional to the quota for the fourth quarter, it was
once more pointed out that evidence continued to accumulate
of the passage of vegetable oils from Portugal to the enemy.
While 1t was decided to authorise the present applications
it was agreed that the whole question of the Portuguess quota
for vegetable oils and seeds should be reviewed when the
quote for the first quarter of 1942 came up for decision.
3. Sweden: Sugar and Honey. A request had been received
from the Swedes to permit the import of 200 tons of honey
during the fourth quarter of 1941 in place of their quota of
5,000 tons of sugar. As this quantity of honey represented
more than Sweden's importe for three years, the request was
viewed with suspicion by the Committee, and it was suggested
that the Swedes should be asked to give their reasons for
wanting this quantity of honey, as well as an indication
of the use to which it was to be put.
4. Pure and Fur Skins: It 18 known that Germany is making
desperate efforts to obtain furs and fur skins of all kinds,
and as a large number of applications to import these commod=
itiss into Neutral Countries have been received it seemed
reasonable to connect the two facts. The suspension of
imports into Switzerland has been obtained as 9 temporary
measure pending a report from Berne, and applications for
Spain, Portugal and Sweden are being closely scrutinized.
It 1a hoped to present - reasoned memorandum to the Permits
Committee in the near future.
5. A representative of Crookes Laboratories attended .
meeting regarding Norwegian fish oil refineries.
6. Discussions have taken place with representatives of
M.I.10b regarding methods of calculation of consumption of
rubber by the German Army.
7/
Regraded Unclassified
177
-2-
7. A survey of was exports to Japan (particularly from Brazil)
has been carried out with the object of discovering whether
the cooperation of the United States Government should be
eought in pre-empting these supplies.
8. Arrangements have been made for members of the Engineering
and Armaments Sections to inspect the German submarine which
use recently captured complete and which 18 now refitting at
a dockyard in the North.
NEXT WEEK
As for week ending 3rd November, together with:
a) The strength of para military formations in
German Europe.
b) The strength of the Italian Army.
c) Developments in Trade Agreements in German
Europe since August 11th.
d) Solvents in German Europe.
R. H. OWEN.
11.11.41
Regraded Unclassified
178
MOST SECRET
SHIPPING DEPARTMENT.
REPORT FOR WEEK ENDING MONDAY,
10th November 1941.
1. 8.5. "NYASSA".
It was reported from New York that when this
ship sailed therefrom recently for Lisbon, some forty
of its officers and craw were each carrying amongst
their personal effects a radio not. As there had
previously been evidence from Consorship Sources which
suggested that there might be A scheme on foot to
import radio sete into Portugal by this means, with -
view to svoiding Portuguese customs duties or for
some other ulterior motive, the matter was brought to
the attention of the Contraband Committee. The Comm-
ittee decided in the first place that $ holdback guar-
antee should be obtained from the shipowners, and
this was duly done. It later appeared that, though on
insufficient information as to the number of sets be-
ing carried, H.M. Consul General, How York, had not
objected thereto. The matter was again referred to
the Committee and it was decided that the holdback
guarantee and the delay of some days, during which the
sets were kept in the Customs House at Liabon, would
have been sufficient to impress on all concerned the
fact that the carriage of Identical articles by BO
many members of a ship's company, must necessarily
arouse suspicion. This incident has drawn attention
to the difficulty of deciding the propriety or other-
wise of the carriage by individual members of . crew
of neutral ships into their own country of goods which
are said to be for the personal use of themselves or
their families. The question of evolving some stand=
and, whether by particular articles, or by value, or
by quantity, for permitted imports of this kind, 1a
now under consideration.
2. S.S. "MARIA RAMOS"
It was reported by Barcelona that certain ships
among them the .... "Maria Ramos", which trades regularly
between Malage and Barcelona, had taken olive oil from
the former port to the latter for transhipment to the
Cerman 5.5. "Lieboa", for carriage to Genoa. When this
matter was brought to the attention of her owners, who
are Warrant holders, they stated that they only accepted
at Malaga goods shipped on a "cabotaje" permit, 1.0.
one for ordinary coastal traffic only, whereas if goods
are to be transhipped and exported, en "exportation"
permit 11 required. Barcelons points out that this
means that shippers of goods from Malaga for transhipment
at Bareelona to Italy, are in fact, paying certain
shipping taxes twice. This seems significant " it
suggests that our control of Spanish shipping 1s
sufficiently effective to make the shippers of such
goods resort to expensive devices to conceal their
eventual destination. AS to this particular case, the
owners/
Regraded Unclassified
179
-2-
owners of the "mario Ramos" stated that whatever sort
of permit 18 used, it would be possible for their
Malaga office to ascertain the eventual destination of
the goods, and they have agreed to give instructions
that all goods intended for transhipment to Italy
should be refused.
3. SMUGOLING ON LLOYD BRASILEIMO SHIPS.
As en addendum to the amiggling of lighter flints
on board the ships of this company which was mentioned
in the Report for the week ending October 24th, it
has now been learned from Lisbon that a further attempt
to smuggle these articles was made when the 8.2.
"cuyabe" was there recently.
H.M. Consul General successfully intervened to
prevent considerable quantities being taken on board.
4. SHIP WARRANTS FOR GREENLAND.
The most interesting warrant application of the
week was in respect of three Greenland ships. These
shipe were to be employed between Greenland and the
United States and application for Ship Warrants was
made for them. It appeared that they were to be op-
erated by the Greenland Government, but the status or
existence of such S. body is not entirely clear. It
appears, however, that the affeirs of Greenland are
largely run by & Committee in New York, and there is
a Governor of South Greenland who is a responsible and
pro-Ally individual. He had signed the Warrant under-
taking in respect of these ships, and after consulta-
tion with Neutral Trade Department, it was decided that
his signature should be accepted, and the warrants
issued to him. In case there should be any difficulty
there is a safeguard in that the ships will, in fact,
by managed by the Danish East Asiatic Company, who are
already warrant holders.
5. INSURANCE
A very antisfactory reply has now been received from
the Insurance Mission in Washington to the telegram
which WS sent raising questions relating to the insur-
ance of ships bolding United States Ship Warrants N-
ferred to in Weekly Report for week ending Monday,
October 27th, 1941. Parts of the telegram were cor-
rupt and it is therefore impossible to give full de-
talla at present, but it is clear that the United
States have agreed that the possession of e British
Ship Warrant shall normally be the sineque non, and
although in certain instances they suggest that in-
surance on either the United States or London Market
should be withheld if vessels do not also possess
United States Ship Warrants. There adems very little
doubt that NO shall readily be able to agree to their
proposals/
Regraded Unclassified
180
-3-
proposals when the full details have been clarified.
6. VLABOV.
Negotiations with this Statutory Listed shipownes
were broken off about 8 month ago " all our efforts to
secure the services of his 3 **Roumanian, now Panamanian
vessels, have proved fruitless.
It will be recalled that Vlasov went to the Ar-
gentine some months ago and that soon after his arrival
there, reports reached us that the 3 ships were be-
ing transferred to the Argentine flag. The Argen-
tine Government were immediately informed that ve
would not recognise these transfers and that we would
continue to regard the vecaels as Roumanian and to
reserve our belligerent rights irrespective of what
fleg they were flying. The Argentine Government then
informed us that they would not confirm the permanent
certificates of transfer (temporary certificates hav-
ing already been issued) until they had had an oppor-
tunity of considering our reasons for regarding the
ships as enemy-owned. H.M. Ambassador in Buenos
Aires was supplied with this information in full.
The Argentine Minister in Washington 1a now giv-
ing the United States Authorities no peace over this
case. The Selter Mission and our Embassy have, there-
fore, suggested that in order to convince the Ameri-
cans, firstly that any responsibility for the vessels
continuing to lie up rests entirely with the owner,
and ascondly, 80 as not to embarrass unduly the United
States Authorities in their relations with the Argen-
tine Government we should offer to re-open negotistions
on the following basis:
(a) The 2 ships in U.S. and Brazil to be char-
tered to the U.S.M.C. by the Dolphin Com-
pany for the duration of the war; transfer
to Argentine flag to be recognised; limit-
ation of trade to the Western Hemisphere.
(b) The vessel in Lisbon to be chartered to
the Ministry of War Transport by the Dol-
phin Company for the duration of the war,
and to operate under the Panamian flag.
No limitations of trade.
(c) All charter monies earned in the United
Kingdom or United States to be blocked
with the exception of such funds as are
required for the operation of the vessels.
Special arrangements to be made for the
release of such funds.
(d)
Regraded Unclassified
181
÷
(d) Vlasov personally, to remain on the
Statutory List, but the Dolphin Steam-
ship Company and the 3 ships to be recome-
ended to the Black List Committee for de-
letion from that List, subject to the
above proposals being implemented.
It is thought probable that neither Vlasov nor
the Company will agree to these suggestions unless
Vlasov personally 10 de-listed and his assets in this
country released. These include 3 ships which have
been equestrated and are at present employed by the
Ministry of War Transport.
That being the case, we shall carry out our
threat of regarding the vessels as enemy and on-
desvour to intercept them if they put to sea.
Provided we can convince the United States Author-
ities, as we think these proposals will, that we
have taken all steps we can reasonably be expected
to with a view to getting the vessels into service,
we and the Ministry of War Transport consider that
the price we shell have to pay for losing the service
of the ships is infinitely preferable to giving may
completely to Vlesov who must undoubtedly, from his
behaviour and record, be regarded as an enemy of
this country.
7. ENEMY SHIPPING CLAIMS COMMITTEE.
On 31st October, the Far Eastern Committee
agreed that the Enemy Shipping Claims Committee should
be authorised to arrest French vessels calling at
Manila, leaving it to be decided between the Admiralty
and this Ministry sa to the exact moment at which a
start should be made with arresting these vessels.
At Professor Hall's request, however, it was further
agreed that Washington should be informed before any
arrest was actually made. It is hoped that these
arrests may be used to supplement the scheme which
the State Department proposes to formulate of limit-
ing bunkers to French vessele at Manila, and it 10
proposed to begin by arresting any French vessel
which might be used to carry rubber to France prov-
ided that there is a claim against the vessel. The
next vessel falling within this category is not due
et Menila for some two or three weeks.
B. R.E.V. COMMITTEE
At their 6th Meeting on Wednesday, November 5th
the M.E.W. Committee considered the question of
French Far Eastern shipping, and the means which
could be adopted to prevent French ships from carry-
ing cargoes useful to the enemy to Franch North
Africa or France itself. The Committee also con-
sidered tanker traffic in the Aegean, and the case
of certain British shipe which have been seized by the
Vichy authorities.
SHIPPING DEPARTMENT
12th November, 1941,
COL. VICKERS (2).
Mr. Ingrams.
Sir N. Benthall
Pay.Capt. Brown
Mr. Dudley Ward
Mr. Mark Turner
Mr. Owen
Mr. Watson
Regraded Unclassified
182
MOST SECRET
OIL DEPARTMENT
Program Report for Week Ending
Monday 10.11.41.
Neutral Section.
1. Draft letter, to be agreed with Petroleum Depart-
ment, to Co-ordination Centre, Washington, setting out
the petroleum situation in Shanghai.
2. Routine letters re navicerts and C.S. cables, to
Lisbon and Madrid.
3. Draft telegram to Washington regarding bunkers for
the French Flag ship FRANCOIS LOUIS DREYFUS at
Manilla.
4. Note for the French Shipping Department, Neutral
Trade, on supplies available of bunker fuels for French
oil-burning ships at Indo-China, Madagascar, Dakar,
Casablance and Occupied France.
5. Minute to Neutral Trade on Washington telegram 6341
Arfar of the 28th October regarding imports of petroleum
products into Madagascar, and summary of the position of
the present Far Eastern leak from Indo-Chine to North
Africa and French Metropolitan ports.
6. Minute regarding application by the Shell Company
for 700 tons of petroleum residue for the Shanghai
Power Company. The Consul-Generel, Batavia, has
enquired for our views as regards an export licence
from the N.E.I. with & view to informing the Dutch
authorities. We have come to the conclusion that in
this instance we shall offer no objection, but we do
not propose to put any pressure on the Dutch to grant
the licence.
7. Minute on Stockholm telegram No. 658 to the
Foreign Office of 4th November. A Swedish Delegation 1s
shortly due in London and is asking, as usual, for in-
creased quantities of petroleum products, including
aviation spirit. The figures have not yet been dia-
closed to us, and the question 1a largely one (a) for
the Air Ministry regarding stocks, consumption, etc.,
and (b) whether quid pro quo can be extracted from the
Swedee. The old argument that if we desire to keep
Swedlsh morale up to the mark in the hope of their re-
sisting aggression it will be necessary to pump into
Sweden quantities of petroleum products, will once again
be made.
8. Minute on Tengier telegram No. 301 Arfar of the 3rd
November, which stated that the most important French
ships in Algiers and Tunis were now converted to coal
and that the last oil burners in Morocco were being
converted/
Regraded Unclassified
183
-2-
converted. Also that the coal mine at Karedsa was
being rapidly opened up. The suggestion therefore,
was put forward by the 011 Department (1) that no
more bunker oil was required for French North Africa,
(2) as French North Africa was manufacturing large
quantities of indigenous coal, no further imports of
coal to be permitted from the U.S.
Enemy Section.
1. Attended further meeting of Hartley Committee on
Axis industriel oil consumption.
2. Attended second meeting of Colonel Auld's Com-
mittee on Axis oil production, and later, with Sq.
Ldr. N. Thomas and Mr. Congreve, prepared estimates
of synthetic production for the Committee.
3. Discussed with Prof. Postan and Dr. Lees of the
Anglo-Irenia 011 Company the effect of destruction
in the oilfields in Maikop and Grozny areas.
4, Prepared list of Italian Refineries and their
estimated capacity, storage capacity in Italy, Albania
and Italian North Africa.
Transport Section.
1. It was discovered that Major General Appleyard,
Director of Emergency Repair at the Ministry of Works
and Buildings, possesses an expert knowledge of the
working of German contractors and the TODT organisation
in particular, and an equally expert knowledge of the
conditions under which contractors must work in Russie.
Maj. Gen. Apployard was interviewed and seems likely to
be able to decide the conflicting expert evidence on
Herr Todt.
2. The rest of the work of this section has been the
proparation of statistics and drafts for the impending
general report on the Enemy 011 Position.
Colonal Vickers
Mr. Turner
Sir E. Benthall
Mr. Trench
Mr. Dudley Ward
Pay Capt. Brown
Mr. Owen
Mr. Ingrame
Mr. Wood
Mr. Somerville
/ THE a
- / DEPARTMENT I
Regraded Unclassified
184
Jenuary 9. 1942
Rr. Livesey
Mr. Dietrich
will you please send the following message by radio to the Philippine High
Commissioner at Fort Hills from the Secretary of the Treasury.
"Please advise by radio whereabouts of Anderson, Saxon, Helson,
Hebbard, Price and North of Foreign Funds Control staff and if they
are well."
FD:da:1/9/42
Regraded Unclassified
185
TELEGRAN SENT
PLAIN
FD
January 9,1948
U.S. "NE COMMISSIONER,
(MILITATE ISLADS).
S, Sinth.
V- ALE SECRETARY 2 et
NOTE. Please revist = VENTO products of
inderson, Saxon, Price and North of
Fortign Punds Control soft m: : if they are well.
FULL
(FL)
Regraded Unclassified
THE WHITE HOUSE
WASHINGTON
JAN. 5, 1942
MEMO FOR THE DECRETARY OF THE TREASURY:
IN REGARD TO THE CHINESE LOAN, I REALIZE
THERE IS LITTLE SECURITY WHICH CHINA CAN
GIVE AT THE PRESENT TIME, YET T AM ANXIOUS
TO HELP CHIANG-KAI-SHEK AND HIS CURRENCY.
I HOPE YOU CAN INVENT SOME WAY OF DOING
THIS, POSSIBLY WE COULD BUY A CERTAIN
AMOUNT OF THIS CURRENCY, EVEN IF IT MEANS
A PARTIAL LOSS LATER ON.
FOR.
THE WHITE HOUSE
PENALTY FOR PRIVATE LIBE TO Avaio
OFFICIAL BUSINESS
PAYMENT OF POSTAGE, $300
By WHITE HOUSE MESSERGER.
MR. FRANK DEITRICK,
ROOM 279,
TREASURY DEPARTMENT.
CONF IDENT IAL.
Regraded
187
Original sent to farm Saturday
For Mr. Southard.
Regraded Unclassified
187
Original sent to farm Saturday
by Mr. Southard.
Regraded Unclassified
188
December 9. 1942
Mecretary Morgenthau
V. 5. Coe
Subjecti Conference on Loan to China
Mr. White held a conference with Membra. Berle,
Currie, Liveney, and Legal Division, to Giscuss
Chiang Kei-sbek's request for a loan. It was agreed
that they would B.S.K Secretary Bull to send a letter
to the secretary stating that for political reasons
otistions on such a loan should be started. The
group agreed that Fox and Adler should return to advise
on the juestion of bond issues, etc.
Rf. Soons rang about this matter and 1 told (11m
Lost it was receiving sympathetic consideration and
being studied. He said be would like to talk about it,
and SA. seeting vas agreed to.
Vriion
Regraded Unclassified
189
January 9, 1942
Mr. Livesay
Ar. Districh
will you please send the attached sable to the merican Nabasay, Chungking.
for For from the Secretary of the Treasury.
FD:da:1/9/42
Regraded Unclassified
190
DRAFT OF RADIO TO FOX, CHUNGKING
1/7/42
Referring to final paragraph of your radio of January 1
containing suggestion at to General License 75, the effect of our
action of December 26 respecting remittances in only to stop
remittences through the offices of banks in occupded STORE. This
10 true since under General License 75 dollar amount of remittance
must be paid to designated sgent for account of appointed bank,
and on December 26 we revoked appointed bunk status of officer in
occupied area. Therefore, as you have suggested, General License
No. 75 is now only valid for remittences to free China and to
occupied China via free China.
LCA:lhb 1/7/42
Regraded Unclassified
TELEGRAN SENT
191
PLAIN
January 9, 1942
METRASSY,
CHUNGKING.
11, ninth.
FOR FOX FROM THE secretary OF THE TREASURY.
QUOTE Referring to final paragraph of your radio
To January 1 e ntaining suggestion ns to GENEral License
75, the Effect of FUD action - f DECEMBER 26 respecting
perittences is only to stop remittances through the offices
of brake in cocupied arens. This 1s true since under
General License 75 dollar mount -f remittance nust DE
2012 t: designated agent for recount if nopointed bank,
and on DECEMBER 83 ME revolved NY9 inted bank status
1 in coupied -}^E'! Therefore, 25 you have
objected, General License No. 75 is now only vrlid for
regittraces to free China and to coupied China vin free
END QUOTE.
HULL
(FL)
7D:7L:V0L
Regraded Unclassified
JEV
Chungking via N.R,
192
This telegram must bE
paraphrased before being
Dated January 9, 1942
communicated to anyone
other than B. Governmental
REc'd 3:28 a.m.
agency. (BR)
SECRETARY of State,
Washington,
29, January 9, 2 0,00, (SECTION ONE)
TF 13
FROM FOX FOR THE SECRETARY OF THE TREASURY:
"Dr. Kung who is convaltscing from what has
SEEN variously diagnosed as typhus, typhoid, and
para-typhoid, asked DE this morning through Madame
Kung to transmit following reply to your message of
December 16 (Section Four of your 304). Understand
that lessage was prepared after consultation with
Generalissimo, Vice Minister of Finance, Ok-Yui par-
ticipating. MEESAGE reado: 'Seoretary Morgenthau.
DEETY appreciate your message December 16th through
Fox. Heartily agree with you on outcome of war.
Thank you for considering oralisinary proposal sent
through Cochran but this no longer practical since
spread of war in Proific altering Economic as well
as strategic situation. For four nad B. half years
Chinn has been fighting WED of resistance with 11:1-
told sacrifices -26 HERVY strein on her resources,
HER financial
Regraded Unclassified
193
-2- #29, January 9, 2 p.m., (SECTION ONE), from ..
Chungking via N. R.
HER financial and Economic situation is now in pre-
carious state. Brave soldiers at the front ill-fed
and ill-clothed whilE livelihood of people difficult
due to rising prices. NECESSARY KEEP control of
prices and currency without curtailing production.
If financial and Economic front, already very critical,
should collapse impossible to carry on war.
GAUSS
WSB
194
EJ
Chungking via N. R.
This telegram must bE
paraphrased before being
Dated January 9, 1942
communicated to anyone
other than a Governmental REc'd 8:04 n.m.
agency. (BR)
SECRETARY of State,
Washington.
29, January 9, 2 p.m. (SECTION TWO)
Present world war developments make it 1m-
perative for democratic countries to pool their
military and Economic resources as their ExistEnce
and survival are interdependent. Therefore, I
appeal to you for a $500,000,000 political war
loan. WE have also approached Britain for a
100,000,000 pound loan in order to cover the total
amount needed, and are awaiting their reply. Am
confident if you will lead they will follow. Pur-
POSE is to replenish reserve in order to restors
confidence in currency, restrain prices, offset
diminished imports by increased production, and
meet other urgent war needs. On Economic grounds
as WEll as from the standpoint of joint military
front there are sound justifications for the loan
but frankly my reason for approaching you is above
all political. The import of such a loan is EVEN
more important than that of the LEASE Lend Bill.
Timeliness is the ESSENCE of such n move in order
to show
Regraded Unclassified
195
-2-#29, January 9, 2 p.m. (SECTION TWO) from
Chungking via N.R.
to show China's confidence in the allied powers
is matched by Equal confidence of allied powers
in China in the most crucial months of Emer-
gency immediately ahead. Early announcement of
loan would have immediate Effect throughout Asia
including Japan our common Enemy as WELL as ElEC-
trifying Chinese public opinion. Appreciation of
your keen and continuing interest in China gives
me confidence in sending you this telegram. H.
H. Kung'.
My comment follows in a separate telegran".
(END OF MESSAGE).
GAUSS
WSB
196
TELEGRAH SENT
HRL
PLAIN
January 9, 1942
MEMBASSY,
LONDON, (ENGLAND).
103, ninth.
FOR CASADAY FROM TREASURY.
CUOTE. The Trensury found useful the reports
Pro- the kinistry of Economic "crfare which you sent
on November 19. Will you planse, if oossible, send
them regularly. Also the nore important of the
prepared "3:" the various departments of
the inistry and referred to in the reports. Such
of these memoranda ns you annuot send by cirmail
peuch DIEPSE BEND by bont mail. VNQUOTE.
HULL
(FL)
70:31:21.cB
Regraded Unclassified
C
0
F
Y
197
DEPARTMENT OF STATE
WASHINGTON
January 9, 1942
In renly refer to
FY 740.00112A European War,
1939/5316
The Secretary of State presents his commliments to
the Honorable the Secretary of the Treasury and transmits
herewith a copy of air mail despatch no. 828 of Decem-
ber 18, 1941 from the American Legation nt Ciudad
Trujillo, with its enclosures, numbers two and four,
translations of the Fresident's Decree end of a letter
from the Secretary of the Treasury to managers of all
local banks, providing the freezing of funds of enemy
nations and enemy nationals by the Dominican Dovernment.
The clippings from Le Necion, enclosures numbers
one and three of which only one set was received, have
been retained in the files of this Denartment.
Enclosure:
From Ciudad Trujillo,
no. 828, December 18.
1941, with enclosures.
Regraded Unclassified
198
No. 828
Ciudad Trujillo, D. R., December 18, 1941.
Subject: Control Over Enemy Funds.
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
I have the honor to refer to the Legation's despatch no. 814
of December 12, 1941 in which the action of the Dominican Govern-
ment in freezing the funds of enemy nations and enemy nationals we.B
reported.
Immediately that decree no. 1366 of December 11, 1941 was
issued, it became apperent that its terms were too strict and in-
clusive, in that they did not permit any type of transaction by any
enemy national whatsoever, regardless of whether or not he was sus-
pected of activities inimical to the security of the Western Hemis-
phere. As a result a decree was issued on December 16, whereby
the former rigid prohibition of decree no. 1366 is continued only
with respect to enemy nationals who are mublicly listed as suspects.
Other enemy nationals are permitted ordinary commercial transactions
"which are justified for the maintenance of their normal business
activities in the interest of domestic economy." All such trans-
actions are subject to controls to be set up by the Department of
State for the Treasury, and the transfer of property, property rights.
Regraded Unclassified
199
-2-
and mortgages is prohibited except when done in accordance with
court decisions handed down against enemy nationals or when especially
authorized by the Secretary of State for the Treasury. The decree
also provides for & committee to be established for the purpose of
studying appropriate measures to supplement those already existing
on the control of enemy funds. This committee is scheduled to pre-
sent its recommendations within 15 days to the Executive. The
Legation 1e informed that the system outlined in this despatch may
be found by the committee to be adequate.
1-2/
Copies and English translations of the decree are enclosed herewith.
In accordance with the provisions of the abovementioned decree
the Secretary of State for the Treasury on December 17 addressed a
letter to the general managers of the three banks operating in the
Dominican Republic, in which he set the rules whereby enemy nationals
not on public suspect lists may conduct their businesses. These rules
place all transactions by enemy nationals under the absolute control
of the banks wherein such nationale carry their accounts. All income
from transactions by these persons must be deposited with the banks,
and no payments from their accounts may be made without full explanations
of the purpose of the withdrawal to the bank. Transactions in
securities and foreign exchange are prohibited except when conducted
through the bank. Copies and translations of the Secretary of the
Treasury's letter are enclosed herewith.
The Legation has been informed by the Resident Inspector of the
Royal Bank of Canada, who attended the above-mentioned meeting, that
for the present it is contemplated that the Proclaimed and Statutory
Lists will be used as the suspect list mentioned in the decree.
Respectfully yours,
Robert M. Scotten
Regraded Unclassified
-2-
200
Enclosures:
1. Clipping from La Nacion
of Dec. 17 containing
President's decree.
2. Translation of above.
3. Clipping from La Nacion
containing letter from
Secretary of the Treasury
to managers of all local
banks.
4. Translation of item no. 3.
711.3
VB:vmm
Copy: 1-9-42
Regraded Unclassified
201
Inclosure no. 2 to despatch no. 528 of Dec. 18, 1941, from
the American Legation, Ciuded Trujillo.
Translation - \01;vmm
From Le Nacion of December 17, 1941.
(Official Publication)
M. DE J, TRONCCSO DE LA CONCRA
President of the Dominicen Republic
Using the lowers conferred on be by Peragraph 5 of Article 49
of the Constitution of the Remublic;
In view of Articles 1 and 3 of Lew no. 544 of Sentember 7,
1041 on the control of foreign "unds modified by Lew no. 632 of
December 11, 1941,
I DECRIB:
Article 1.- A. special commission is created Mich will be
appointed by the Executive to study, prepere and pronose necessary
pessures to supplement the measures already existing on the control
of funds belonging to foreign states with which the Reoublic is rt
war and to their nationale, when such funds nive in time Dominicen
Republic.
The Commission referred to in this orticle shrll present Its
recommendations to the Executive within fifteen days from the date
of the vublication of this decree.
Article 2.- Alieno subject to the control of cands enteblie'ed
by decree no. 1366 of December 11, 1941 shell undertaire only PLORE
transactions which are indiegeneable to meintain the cormal rhythm
02 their respective activities In the interest of donestic economy
In accordance with the enecification: one restrictions which "ollow:
Regraded Unclassified
+
202
(a) There are prohibited and they shall be without legal effect
whatsoever all transfers of funds which benefit directly or indirectly
those states with which the Republic is at war, or their allied states,
or the nationals of all those states who are listed as the authors
of suspects of activities contrary to the national interests in liets
which the competent authorities will make public as they see fit.
(b) Those foreigners whose funds are subject to control who are
not in the special situation noted in paragraph (a) may undertake with
full legal effect those civil or commercial transactions of an ordinary
character which are justified for the maintenance of their normal
business activities in the interest of domestic economy.
(c) Those foreigners whose funds are subject to control may not
validly undertake banking transactions of any nature except in
accordance with the instructions, specifications, restrictions and
discriminations ordered by the Department of State for the Treasury
and Commerce, and which said Department of State will communicate to
the central offices of the banking institutions established in the
country.
(a) The transfer of properties or property rights or mortgages
on properties or property rights undertaken by nationals of states
with which the Republic is at war shall not be valid except when
undertaken in the fulfillment of judicial decisions issued against them
by the courts of the Republic. Nevertheless, the Secretary of State
for the Treasury and Commerce may authorize the transactions referred
to in this paragraph in Cases in which they are undertaken in the
interest of the national economy, and under the condition that the
suns which, through such transactions, would be paid to the nationals
Regraded Unclassified
203
-3-
of those countries affected by the control of funds, shall be
deposited in one of the banks established in the Republic for the
purpose of the control referred to in paragraph (c) of this article.
Article 3.-The present decree will enter into force as soon as
it is published in one or more of the newspapers in Ciudad Trujillo.
Signed by the President of the Republic on
December 16, 1941.
WB:md:vmm
Regraded Unclassified
204
Enclosure no. 4 to despatch no. 828 of December 18, 1941,
from the American Legation, Ciuded Trujillo, D.R.
Translation - WB:vam
From La Nacion of December 17, 1941.
Ciuded Trujillo,
District of Sento Domingo,
December 17. 1941.
No. 15675.
To the General Managere of the
Banco de Reservas de la Republica Dominicene,
The Royal Bank of Canada, and
The Bank of Nove Scotia.
Sire:
Inview of the provisions contained in the decree issued yesterday
by the Executive and published today on the control of funds belonging
to foreign States with which the Republic 1a at war end to their
nationals, the following rules are issued, the execution of which
in under the supervision of the three above-mentioned banks:
lat). The banking operations of the interested party will be con-
trolled by the Bank in which his account is established.
2nd). Normal business transactions will be permitted, but the
income of all commercial transactions, rents, or other transactions
must be deposited in the bank holuing the account of the interested
party. The income from exportations nade by the interested party will
be subject to these same restrictions.
3rd). Payments charged to the benk account of the interested
party will be in the form of checks OF receipts against savings accounts.
The interested party will not be permitted to issue checks against his
current account in any amount without previously obtaining the approval
of the benk where he maintains his account. The checks or receipts
against savings accounts shall contain B complete explanation on the
Regraded Unclassified
205
-2-
reverse indicating the purpose of the transaction.
4th). The checks or withdrawals in excess of the limit which
this Department of State fixes must be previously approved by the
undersigned Secretary of State before being paid by the banks.
The checks and withdrawals of money within the established limit
will be paid without restriction in accordance with the control set
up in paragraph 3.
5th). Imports from abroad must be represented by drafts accompanied
by the appropriate shipping papers which must be sent through one of
the banks established in the Republic. The interested party will not
be permitted to maintain current accounts abroad.
6th). The interested party will not be permitted to sell or
purchase securities or foreign exchange, including in this restriction
the purchase or sale of drafts or checks in dollars on New York or
any other place. Such transactions must be made through the bank
which maintains control over his account.
7th). No person or entity to whom the present provisions apply
may maintain in operation more than one bank account, except in the
case that a previous arrangement exists between the banks charged with
putting into operation the present control system and with the approval
of the Secretary of State for the Treasury and Commerce.
8th). The interested party to which the present control system
applies shall pay an adequate remuneration for the control services
exercised by the bank where his account is established.
Very truly yours,
V. Alvarez Pina
Secretary of State for the Treasury
and Commerce
Copy:bj:1-10-42
Regraded Unclassified
0
0
206
P
Y
INC
PLAIN
Stockholm
Deted Jenuery 9, 1942
Rec'd 3:15 S.M., 11th
Secretary of State
Washington
41, ninth.
National debt December 31st 6149. Ricebank report
January 7 foreign exchange reserves 758. gold holding
948, note circulation 1599 ell million crowns, new
three month treasury bills in the emount of 140 million
crowns discounted at one percent, consumption price
index December 15 rose to 148.3. industrial wege
negotiations which were adjourned December 20 will
be resuned January 10, embar X nlaced on printers Ink,
oil, opints and varnishes end also on oil bearing seeds.
INFORM COMMERCE.
JOHNSON
KLP
Copy:bj:1-14-42
Regraded Unclassified
0
0
207
P
Y
DEPARTMENT OF STATE
WASHINGTON
January 9, 1942
In reply refer to
FD 102.1/6366
The Secretary of State presents bie compliments
to the Honorable the Secretary of the Treasury and
encloses couies of the paraphrase of telegram no. 70,
dated January 8, 1942, from the American Legation,
Bern, Switzerland, transmitting a message from
Mr. Royall Tyler to the Secretary of the Treasury.
Enclosure:
From Legation, Bern,
no. 70, January 8, 1942.
Copy:bj:1-9-42
Regraded Unclassified
208
PARAS/HIRE OF TRIEGRAM RECEIVED
2001 American Legation, Bern, Switzerland
WITH January 8, 1942, 11 came
0.: 70
Reference is mide to telegree 20. 380 sent by the
.wartment on the 23rd of December, 1941.
Thanks are sent to the Secretary of the Treasury by
I, Royall Tyler for nis considerate telepran which has
just uson received and best wishes for the coming your
one sent to the Secretary of We Treasury by MI. Tyler.
HOODIE
Regraded Unclassified
209
Typed 4:05 p.m.
December 23, 1941
To: U.S. MINISTER TO SWITZERLAND, BERNE, SWITZERLAND
From: SECRETARY OF THE TREASURY
"Will you please thank Mr. Rpyall Tyler for the letters and
memoranda which he has sent to me. They have been useful and
enlightening and I want him to know that I have appreciated
receiving them and hope he will continue to send them.
HDW/efs
12/23/41
Regraded Unclassified
210
December 23, 1941
TO:
DR. WHITE
FROM:
THE SECRETARY
Please have the State Department send a cable
to our Minister in Switzerland asking him please to tell
Royall Tyler that I appreciate the various letters and
documents he has been sending and hope he will continue
to send them.
Regraded Unclassified
C
0
P
211
Y
DEPARTMENT OF STATE
WASHINGTON
January 9, 1942
In reply refer to
FD
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses copies of telegram no. 27, dated January 8,
1942, to the American Embassy, Santiago, Chile, trans-
mitting a message from the Secretary of the Treasury
re Societe des Mines de Cuivre de Naltagua.
Enclosure:
To Embassy, Santiago,
no. 27, January 8, 1942.
Copy:bj:1-9-42
TELEGRAM SENT
212
PD
GRAY
January 8, 1942
11 p.m.
AMEMBASSY,
SANTIAGO (CHILE).
27.
QUOTE. From the Treasury.
Societe des Mines de Cuivre de Naltagua sells blister copper at rate
of over two and one-half million dollars annually to American Metal, New
York, through latter's Chilean subsidiary, Samco. Continuance of these
copper shipments for ultimate account Metals Reserve Corporation highly
desirable, but consideration must be given to Continental French ownership
and control of Societe. To should appreciate receiving report financial
status, Societe, with specific emphasis on profite accruing from American
business, especially period June 1940 to date, and showing also cash re-
sources and where located. In view of strong possibility Societe effects
remittances in substantial amounts to Continental France, we should like
details such remittances, and should like you to explore possibility of
assurances from Societe and Chilean authorities that further such remittances
will not be made if we continue to license payments from United States under
Executive Order 8389. It has been suggested that any disruption of present
remittance arrangements with American Metal might result in Societe's
ceasing operations or seeking another market. Tourcomments on these
possibilities and on possibilities of ensuring supply of copper in any event
are requested. Please comment also on any unusual arrangements between Societe
and Samco of others affecting disposition of copper or profite arising
therefrom. UNQUOTE
HULL
(AAB)
FD:FL:BMcB DM
FF
EO
RA
Copy:bj:1-9-42
Regraded Unclassified
TREASURY DEPARTMENT
212
INTER-OFFICE COMMUNICATION
DATE January y, 1942.
TO
Secretary Morgenthau
FROM IIF. Dietrich
CONFIDENTIAL
Exgistered sterling transactions of tue reporting Danks were as follower
Sold to commercial concerns
259,000
Purchased from commercial concerns
& 5,000
Continuing ita recovery from the low of 14-5/8% discount reached last
30, the Canadian dollar advanced to & final quotation of 11% today.
jack speculative demand is believed to have arisen during the pest few days,
reportedly due to the absence of official denials of rumore that arrangements
were being considered to place the Canadian dollar at par with the U.S. dollar.
In Dew York, closing quotations for the foreign currencies listed below
were ne fallows:
Argentine peso (free)
.2360
Brazilian milreis (free)
.0516
Colombian peso
-5775
Mexican peso
.2065
Urugusyan peso (free)
.5250
Venezuelan boliver
.2685
Cubsu peso
Par
In order to increase the Stabilization Fund's gold balance, WE purchased
$2,500,000 in gold from the General Fund, through the New York Assay Office.
the Federal Reserve BANK of New York reported that the Bank of Canada
we enipying $2,648,000 in gold from Canada to the Federal for account of the
adverment of Canada, for sale to the New York Assay Office.
In London, spot and forward silver were fixed at 23-1/24, equivalent to
The Treasury's purchase price for foreign silver wes at 354-
attacy and Herman's settlement price for foreign silver WPS also unchanged at
inde no purchases of silver Today.
Regraded Unclassified
214
- 2 -
The report of December 31, 1941 received from the Federal Reserve Bank of
you York, giving foreign exchange positions of banks and bankers in its district,
revealed that the total position of all countries was short the equivalent of
$3,996,000, an increase of $446,000 in the short position since December 24. Net
changes were as follows:
Short Position
Short Position
Change in
Country
December 24
December 31
Short Position*
England**
$ 552,000 (Long)
$ 152,000 (Long)
+$400,000
Europe
2,582,000
2,593,000
+ 11,000
Canada
786,000 (Long)
862,000 (Long)
- 76,000
Latin America
195,000 (Long)
43,000 (Long)
+ 152,000
Japan
159,000
159,000
---
Other Asia
2,321,000
2,286,000
- 35,000
All Others
21,000
15,000
- 6,000
Total
$3,550,000
$3,996,000
+$446,000
. Plus sign (+) indicates increase in short position, or decrease in long position.
Minus sign (-) indicates decrease in short position, or increase in long position.
**Combined position in registered and open market sterling.
CONFIDENTIAL
&
Regraded Unclassified
215
BRITISH EMBASSY
WASHINGTON, D.C.
Personal & Secret
January 9, 1942.
Dear Mr. Secretary,
I enclose herein for your personal
and secret information a copy of the latest
report received from London on the military
situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
(Fo the
R.I. Campbell
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
Regraded Unclassified
216
COPY NO.
MOST SECRET
(U.S. SECRET).
OPTEL NO. 9.
Information received up to 7.10 A.U. Ath January 1942.
1. COMBINED OPERATIONS.
Light forces raided Helle Fjord between Sergen and Trondheim
on the night of the 6th/7th and sank B. medium sized Elerchant Ship and too
trawlers off Floro and shelled a Garman canning factory. Fighter
protection and reconnaissance were provided by Coestal Command. During
raid Thitley aircraft successfully attacked Sola aerodrome Stavanger.
Little opposition was encountered and our ships suffered neither damage
nor casualties. All our aircraft returned safely.
2. NAVAL.
Nothing to report.
3. MILITARY.
Libya.
Bad weather had hindered operations. On the morning of the
7th our patrola reported that Jedabya mas clear of the enemy. Our
troops are following up but visibility is very poor. In the frontier
area on the 5th/6th the Transvaal Scottish occupied a ridge of the
escarpment two miles south of Sollum Barracks.
Malaya.
Our forces in the Eastern Sector have withdrawn liest of the
Pahang River to the area Raub-Bentong. In the est, oning to heavy
pressure throughout the 7th by enemy infantry supported by about thirty
tanks, our troops have withdrawn South of the Slim River. In the Kuala
Selangor area, situation in unchanged.
4. AIR OPERATIONS.
Western Front.
6th/7th. 36 tons of high explosive were dropped at Brest
where burata were seen near the dry docks. One of our aircraft failed
to return and another crashed but five of crew safe. A Hudson scored
two hits on & 2,500 ton Merchant vessel off the Dutch Coast. Six other
aircraft of coastal command cade individual attacks on single Merchant
vessels in the Bergen area but in most instances results were unobserved
owing to intense anti-aircraft and searchlight activity. Two Hudsona at!
missing and one enemy aircraft was probably destroyed.
Regraded Unclassified
217
Page 2,
7th/8th. 68 aircraft were sent to Brost and 27 to St. Nazaire, The
letter attack was made under good weather conditions and is believed to
have been successful. All these aircraft have returned but reports are
not yet complete concerning those sent to Brest.
MEDITERRANEAN.
Libya.
4th/5th. 7 enemy aircraft bombed Benghazi and destroyed B.
small oil dump. 5th/6th. Tobruk was ineffectively bombed by 17
aircraft, while at one of our landing grounds one Blonheim was destroyed
and another damaged. 6th. Blenheims operating singly or in pairs
attacked AAC hit gun positions and mechanical transports in the Halfaya
area. 6th/7th. Three Wellingtons bombed Tripoli (L) harbour.
Malta.
6th and 7th. The aerodromos at Takali and Halfar were
unserviceable. On 6th/7th Naval aircraft hit two merchant vessele
steering North off Vest Tunisia,
5.
The Italian battleship CAVOUR, sunk by Fleet Air Arm at
Taranto on 11th November 1940, was raised early in July and placed in
dry dock at Taranto. She has now left probably for Genoa or Trieste
B.S being the only ports likely to be sufficiently equipped to undertake
the extensive repairs necessary.
Regraded Unclassified
TREASURY DEPARTMENT
218
INTER OFFICE COMMUNICATION
DATE Jenuary 9, 1942
Secretary Morgenthau
TO
Mr. Kamarck
FROM
ject: Summary of Military Reports
German Military Position
Accordin- to the estimate of British Military
Intelligence, the Geruan army has been go badly
supken by its first serious defeat of the wer that
German strategic plane for the immediate future must
nave been completely upset. Hitler needs B BUOGORE
somewhere for political reasons, but it will te
it least two months before re will be atle to pro-
vide forces for large-scale operations on B front
outside of Russia.
(V-X- Ocerstions Report, December 25-January 1)
Susso-German Front
The Russiane still retain the initiative and are
preventing the Germene from executing A planned with-
drawal. There is still no indication AS to when and
where the Germans will be able to stabilize their
front. The main German air forces on the southern
front have been concentrated against the Crimeen
operations of the Russians. This has left only 8
small force to be employed against the Russian advances
on the rest of the southern front. On the Moscow front,
the number of airolanes at the disposal of the Germans,
varticularly close-sunport units, is at present in-
ACEQUATE to interfere seriously with the Russian Attacks
(The Russians apparently were right in stating that
Their numerically amaller air force TR8 superior to
the Germans in quality.)
(U.X. Operations Report, December -January 1)
Regraded Unclassified
- 2 -
219
Libya
The British state that the distance of their troops
from the rail-head in Egypt 18 too great to enable them
to maintain large forces as far west as the Axis army
south of Jedabaya. While patrols can be intermittently
put in the rear of the Axis forces on the road leading
to Tripoli, such encirclement cannot be maintained. The
facilities of Benghazi were 80 badly damaged that the
British could not use the port for some time. (It has
probably just been put into use now -- which may explain
the Axis withdrawal from Jedabaya towards Tripoli.)
Axis submarines have been operating on the British sea
supply lines from Alexandria to Cyrenaica.
The Axis troops have received some supplies from
small craft and U-boats. These supplies have been landed
at small ports along the Jedabaya-Tripoli highway.
(U.K. Operations Report, December 25-January 1)
MILITARY INTELLIGENCE DIVISION
INFORMATION BULLETIN NO.
NOTES ON JAPANESE WARFARE ON THE MALAYAN FRONT
WAR DEPARTMENT
WASHINGTON, D. C.
Regraded Unclassified
RESTRICTED
MILITARY INTELLIGENCE DIVISION
INFORMATION BULLETIN
WAR DEPARTMENT
No. 6
Washington, January 9, 1942
MID 461
NOTICE
The information contained in this neries of bulletins
yill be restricted to itams from official sources which are
reasonably confirmed.
This document 18 being given an approved distribution,
and no additional copies are available In the Military Intel-
Ligence Division. For provisions governing its reproduction,
980 Letter TAG 350.05 (9-19-40) M-B-M.
NOTES ON JAPANESE WARFARE
ON THE
MALAYAN FRONT
FOREWORD
The information in this bulletin, other than photographs
and descriptions of veapons, has been extracted from reports sub-
mitted by American official observers with Allied Forces nov en-
gaging the Japanese in the Far East. The photographs are reproduced
from an elbum recently published by the Tokyo Asahi ("Morning Sun"),
one of the leading vernacular newspapers in Japan, showing Japanese
troops In their operations against the Chinese. These photographs
should be accepted with reserve, because they were published as
propaganda. Navertheloes, they give a general idee of the that Japanese our
coldior's equipment and his methods of warfare. In order
troops may Fumiliarize themselves with the appearance of their enemy,
classified as Restricted, might be removed and placed on bulletin
It. in suggested that these photographs, which aro themselves not
boards.
RESTRICTED
Regraded Unclassified
RESTRICTED
CONTENTS
Section
Page
1.
TACTICS OF GROUND FORCES
1
2.
TACTICS OF AERIAL ATTACKS Oil AIRDROMES
2
3.
AERIAL ATTACKS Oll GROUND TROOPS AND
INSTALLATIONS
2
4,
ANTITANK DEFENSE
2
5.
MATERIEL
3
6.
SUPPLY
8
7.
THE FIFTH COLUMN
8
B.
REPORT OF FOREIGN CORRESPONDENT
8.
RESTRICTED
Regraded Unclassified
RESTRICTED
ILLUSTRATIONS
(at end of text)
Cover Design.
Camouflaged Japanese Machine-Gunners
Figure 1.
Group of Grenade Throwers
Figure 2.
Nambu Light Machine Gun, Model 1922, on
Bipod Mount
Figure 3.
Heavy Machine Gun, Model 92 (1932), on
Antiaircraft Mount
Figure 4.
Heavy Machine Gun, Probably Model 3
(1914), on Tripod Mount, Being Moved
by Hand
Figure 5,
90-mm. Mortar, Model 94
Figure 6.
Infantry Battalion Gun, Model 92
Figure 7.
Infantry Battalion Gun, Model 92, with
Redesigned Carriage
Figure 8.
Packing Ammunition to Be Transported to
the Front
Figure 9.
Transport Units Delivering Ammunition to
the Front Lines under Fire
Figure 10.
Cooks Preparing Rice Balls for Soldiers
near the Front Lines
Figure 11.
Ration Detail Throwing Rice Balls Vrapped
in Straw into the Front-line Trenches
Figure 38,
Japanese Soldier Waiting 10 June into a
Trench with Water Canteens
RESTRICTED
RESTRICTED
NOTES ON JAPANESE WARFARE
ON THE
MALAYAN FRONT
1. TACTICS OF GROUND FORCES
a, The Japanese use roads until contact is established with hostile
forces. Then, avoiding frontal attack, they make, wherever possible,
flanking movements through the jungle and the rubber plantations. The
Japanese also make expert use of small craft, including launches and
landing boats, in carrying out flanking movements by river or along the
coast.
b. Japanese companies advance behind one and two-man patrols which
are armed with submachine guna. When the patrols are fired upon, they
do not stop, but meneuver around the flanks and infiltrate deep into
the British position toward their objective, attempting to reduce any
opposition met,
c. If British units counterattack, Japanese advance parties per-
mit them to pass through and then turn and deliver fire on the flanks
and rear of the counterattacking troops.
d. The Japanese work their way through the jungle with ease, They
display considerable initiative, vigor, and physical stamina and par
tiently wait under cover to take adventage of an opportunity to advance.
e, The Japanese have used the following tactics:
(1) Orders are issued orally for attacks on specific objectives:
(2) Small tanke accompany infantry attacks;
(3) No type of terrain is considered an obstacle;
(4) Attacks are by aggressive infiltration, followed up by the
forward elements of the supporting troops and determinedly pushed to-
ward a successful conclusion;
light machine guns, thus providing a volume of fire that seems to indi-
(5) Front-line troops are equipped with submachine guns and
cate heavier armament than that actually possessed.
f. So far the Japanese have used mainly machine guns, submachine
gune, mortars, and grenades, but not much artillery. They are, however,
beginning to increase the use of artillery. Mortars and grenades 08-
pecially have been very effective.
B. The British have come to the following conclusions in regard to
RESTRICTED
- 1 -
Regraded Unclassified
RESTRICTED
the tactice of the Japanese:
(1) A linear or static defense is inoffectual. To overcome
such a disadvantage, the best system of defence would be self-contained
combat posts as pivote of maneuver for an aggressive reserve. These
self-contained poste would have all-round defense.
(2) The Japanese have unusual aptitude for overcoming terrain
obstacles.
(3) After infiltrating to the flanks and to the rear of the
opposing forces, the Japanese press home the assault with great deter-
mination.
h, Night Operations. The Japanese are reported to have been
rafting troops down rivers at night.
2. TACTICS OF AERIAL ATTACKS ON AIRDROMES
a. Japanese bombers attack airdromes while their fighters draw
R.A.F. fighters into combat. The bombers fly some distance from the
field after the initial attack and wait until the R.A.F. fighters, be-
cause of lack of fuel, are compelled to land. Then the Japanese
bombers return and attack the R.A.F. fighters before they can refuel
and take to the air again. The R.A.F. is thue unable to intercept
the bombers, Of course, the success of these tactics is made possible
by the small number of R.A.F. fighters in the area.
b. Effective bombing of objectives around the odges of airdromes,
sparing the runways, has been accomplished because the Japanese
bombers have been confronted with little opposition. When the loader
in the formation signals, all the planes in the formation release
bombe simultaneously. Airdrome strafing 1a the main activity of the
Japanese fighter planes.
3, AERIAL ATTACKS ON GROUND TROOPS AND INSTALLATIONS
a, Small flare bombe in strings of six to eight are being dropped
by some Japanese planes. These flares have a percussion-striker ex-
plosive charge in the nose; and when they burst on impact, they give
off a flash and cloud of smoke. On the ground they leave a brown
stain,
b. Japanese planes attack communications, and trucks left exposed
during daylight hours have been destroyed.
4. ANTITANK DEFENSE, The British have found it difficult to maintain
tank obstructions on the roads, because the Japanese steadily harass
RESTRICTED
- a -
Regraded Unclassified
RESTRICTED
the British flanka by infiltration. Tanks are employed with tactica
similar to those used by the infantry, as described in Section 1.
5. MATERIEL
a. Anti-personnel Air Bomb. This bomb has a relatively ineffec-
tive shrapnel load encased in lead.
b. Individual Equipment
(1) Only a minimum of equipment 1a carried in addition to arms
and ammunition, and this 18 generally very light.
(2) Rubber belts which can be blown up for crossing rivers are
a part of the equipment.
(3) Dress is often varied and non-military. At night, com-
manders wear crossed or single white eaches; N.C.O.'s, white arm banda.
C. Small Arms. The regular bullet used in the rifle and in the
light and heavy machine guns is a 6.5-m. pointed Spitzer-type nickel-
steel-coated lead projectile which leaves & amall wound. The 6.5-mm.
bullet 1e approximately .25 caliber.
d. Grenades and Submachine Gune. Among the light equipment are
many grenades and a large proportion of submachine guns. See figure 1
for a group of grenade throwers. The following description of the
Heavy Grenade Thrower, Model 89, is taken from the Japanese Handbook
(WD TM 30-480, May 14, 1941), pages 79-80:
Weight (total)
10.5 lbs.
Length
20 in.
Length of tube
10 in.
Caliber-
50 mm. (about 2 in.)
Ammunition used-
Model 89 shell
Time-fuze hand grenade
Signal grenade
Smoke grenade
Practice grenade
Range for model 89 shell
140 to 700 yds.
Range for other ammunition
40 to 200 yds.
Signal, vertical
100 yda.
7.5 860. after discharge
Time of fuze
or on impact
One man--10 shots per min.;
Rate of fire
two men--20 shots per min.
Effective area of burst,
model 89 shell
50-yd. radius
Time-fure hand grenade
25-yd. radius
RESTRICTED
- 3 -
Regraded Unclassified
RESTRICTED
0. Machine Guns
(1) Light Machine Gun. Figure 2 shows the Nambu Light Machine
Oun, Model 1922. The following description of this weapon is taken
from the Japanese Handbook, pages 76-771
(a) The Nambu Light Machine Gun, Model 1923, is & gas-
operated, air-cooled, hopper-fed gun with & biped support permanently
fixed to the piece near the mussle. It is normally fired from the
prone position at ground targets. The hopper has a capacity of 30
rounds, which are loaded by placing in the hopper, one on top of the
other, six 5-round clips of rifle ammunition. These are forced into
the feed mechanism by a follower pressing down from above. The prin-
cipal measurements and characteristics of this gun are as follows:
Weight
22.44 lbs.
Length, over-all
43,5 in.
Caliber-
0.256 in. (6.5 m.)
Rifling-
4 grooves, right twist
Roar sight
Graduated from 328 to
1,640 yde.: no windage
or drift corrector
Mussle velocity-
2,375 ft. per sec,
Maximum range-
4,374.4 yds,
Cyclic rate of fire-
500 rds, per min.
Effective rate of fire
150 rds. per min. in
bursts of five
(b) Although the light machine gun 18 usually fired from
the prone position supported by its bipod mount, a tripod mount,
model 1922, is carried by the gun squad for use at desired. When the
legs are fully extended and the tripod 18 raised to its maximum ser-
viceable elevation, the gun is about 4 feet from the ground. The tri-
pod contains both traversing and elevating devices, but when the piece
is so Do 3043 against aircraft, the elevating device is unfastened so
that 126 weapon may be moved freely, both vertically and horisontally.
When the piece io mounted on this tripod, the legs of the bipod are
folded back along the barrel. The weapon is essentially & machine
rifle kusn the bipod 16 used and at light machine gun when mounted on
the now tripod.
(2) Esavy Machine Gun. Heavy Machine Gun, Model 92 (1932)
(figure 3), is an improvement on Heavy Machine Gun, Model 3 (1914)
(figure 4), which is described in the Japanese Handbook, page 77.
Model 93 is now in general use in the cavalry and infantry arms, though,
it ie estimated, not in sufficient quantity to equip the entire Japa-
nese Army in a large-scale offensive. The description of Model 92
which follows is taken from & report of an efficial observer:
RESTRICTED
- 4 -
Regraded Unclassified
RESTRICTED
(a) Mount. The mount is geared for elevating, and & small
hand-wheel on the front of the tripod connects with the elevating
screw. At the end of each of the tripod legs are attachments allowing
for the insertion of handles. The rear handle is U-shaped, These
handles add greatly to the caso of manipulation, and are also utilized
for antiaircraft fire. In the latter case the U-shaped bar becomes
the supporting spade of the gun, and two soldiers elevate the mussle
by means of holding the front handles over their heads, Such a firing
position for this comparatively heavy gun gives poor accuracy.
(b) Measurements and Characteristics:
Weight, gun-
61,6 lbs.
Weight, tripod
60.5 lbs.
Length of gun-
43 in.
Length of bore
25 in.
Caliber-
0,303 in. (7.7 mm.)
Rifling-
4 grooves, right twist,
one turn in 20 cm,
Life of barrel
40,000 rds. (approx.)
Traversing angle
360° of which approx. 35°
on are graduated in mile
Maximum angle of elevation -
11°
Maximum angle of depression- -
15°
Ground clearance of barrel:
Low firing position-
14.4 in.
High firing position
21,4 in.
Rear sight
-
Graduated from 300 to
2,700 m.; no correction
for windage or drift
Cyclic rate of fire-
450 rds. per min.
Maximum effective rate of fire
About 200-250 rds. pe: in.
Muszle velocity-
2,700 ft, per sec. (er lated)
Maximum range-
4,587 yds. (4,300 m.)
The clip holds 30 rounde of ammunition and is inserted into the gun
from the left side. These clips are made of pasteboard and are loaded
at the factory, thus eliminating pre-loading preparation on the part
of the gun crew, When not in firing position, the gun is covered with
a leather case,
(c) Anticircraft Adenter (figure 3). The gun 18 equipped
with an antiaircraft adapter, which is inserted between the gun proper
and the tripod elevating screw. This adapter allows 8 maximum angle
of 80 degrees and a vertical range of 1,000 meters. It requires less
than a minute for an experienced crew to attach this adapter to-the gun.
A brace attached from the adapter to the gun is telescopic and
RESTRICTED
- 5 -
RESTRICTED
allows the gun to be held firmly at any desired elevation. The high
elevated sight 1s detachable and 1s used only when the gun is operated
as an antiaircraft weapon, When the sight and the adapter are not in
use, they are carried in 8. canvas-covered case slung over the back of
one of the ammunition carriers.
f. Mortars. The Japanese have at least four experimental mortars.
Figure 5 shows the 90-mm. Mortar, Model 94, Its characteristics have
been reported as followe:
Maximum range-
4,155 yda,
Minimum range-
612 yds.
Weight of bomb
-
11 lbs. 10 630,
(with chemical filling)
Total weight in action
350 lbs, 8 023,
A mortar projectile of unknown caliber has been reported to have a
small blasting effect.
B. Infentry Battalion Gun. The Japanese have another weapon
which combines the lightness and portability of the mortar with the
stability of a field gun. This weapen is called the Infantry Battalion
Gun, Model 92, and is shown in figure 6, Figure 7 shows the same model
with a redesigned carriage. Because of the weakness of the crank-
shaped axle, it is presumed that the newer modela have straight axles
and so mount the gun higher. The follewing description of this weapon
is taken from the Japanese Handbock, pages 82-83:
(1) General. The Infantry Battalion Gun, Model 92, is a 70-mm,
rifled gun capable of delivering fire from a. range of 200 to 2,800
yards, Its characteristics are-
Weight:
-
101 lbs.
Gun-
-
77 1bs,
Mount-
-
420 lbs.
Mounted gun and caissen-
-
30 in. (approx.)
Length of bore
-
-
27 in.
Over-all length-
-
5 ft. (approx.)
Mounted over-all length-
-
27 in. (approx.)
Width of wheel tread
-
300 to 1,500 yds.
Effective range-
- 45°
Traverse
-10° to +50°
Elevation-
40 yds. (approx.)
Danger area of burst
(a) Breachblock. Two threaded segments, rotating and opening
downward.
RESTRICTED
- 6 -
Regraded Unclassified
RESTRICTED
(3) Carriage
(a) Rocoil Mechanism. Length of rosoil, about & inches.
(b) Traversing and 3levating Mechanism. Traversing hand-
wheel on the left of the barrel and elevating handwheel on the right.
Both handwheels are operated by the gunner, who lays first for direc-
tion, then for elevation. Elevating mechanism 1a similar to that of
our old pack howitzer. Traverse is about e. heavy pintle mounted on
the axle,
(a) Shield. Armor plate about one-eighth of an inch thick.
(d) Trail. Split 5 feet long. welded except where rivoted
to spade,
(e) Panoramic Sight (same RS field artillery). Mounted
on the aight bracket on the left side of the Diece, The night bracket
includes n range drum with four divisions marked in mile, en alevating
bubble, and a cross bubble for correcting for difference in level of
wheels.
(4) Ammunition. Somifixed with brass case, High explosive
shrapnel and smoke shells are used. The range ie extended by incroas-
ing the powder change. At maximum range the time of flight for the
different powder charges 1s-
Charge So.
1
30 sec, (3,075 yds.)
Charge No. 2
25 sec. (1,975 yde.)
Charge No. 3
20 soc. (1,300 yde.)
Charge Mo. 4
15 sec, (985 yda.)
Minimum permissible rangee with instanteneous fuzes employing low-
angle fire varies with the gowder charge, elevation of gun, and target.
With ground level ranges are--
Charge No. 1
1,100 yds.
Charge No. 2
660 yds.
Charge 20. 3
225 yds.
Charge No. 4
110 yde,
Minimum ranges with delayed-action fuzes ground level aro--
Charge No. 1
660 yde.
Charge No. a
330 yds.
Charge No. 3
330 yde.
Charge No. 4
330 yds.
-
RESTRICTED
- 7-
Regraded Unclassified
RESTRICTED
Rate of fire: 10 rounds per minute, 5 rounds per box.
(5) Other Vehicles
(a) Limber. This is a simple box mounted on an arle.
Two boxes of ammunition, sights, and accessories are carried in the
limber chest.
(b) Caisson. Similar in construction to the limber and
contains three boxes of ammunition.
6. SUPPLY
Figures 8 to 12 inclusive are included simply to show some
methods used by small units in supplying ammunition, food, and water
to the front lines. Of particular interest is the method employed by
the Japanese soldier in transporting ammunition (figure 9). It vill
be noted that the ammunition boxes are carried as shoulder packs,
leaving the arms free for negotiating difficult terrain and permitting
greate) freedom of action under fire. Figure 10 shows the preparation
of simple food, and figure 11 shows a method of getting it forward
over exposed terrain. This method 18 of interest, for it indicates
that advance elements, even though they may be held to the ground by
hostile fire, can still be fed by a. simple process. What holds true
for the supply of ammunition to small units also holds true for the
supply of water, as large canteens strapped on the back of the soldier
will be noted in figure 12.
7. THE FIFTH COLUMN
B. According to a prisoner taken in northwestern Malaya, the
Japanese landed without rations and got help from Fifth Columnists.
b. The Japanese are making wide use of propaganda leaflets
dropped from the air.
Civiliane dressed in the uniforms of British-Indian soldiers
have c. operated with the Japanese. In some instances they even know the
British-Indian N.C.O. 'e by name.
8. REPORT OF FOREIGN CORRESPONDENT
with the British Forces in Northern Malaya showing Japanese methods The of
The following excerpte from an account by a war correspondent
warfare included in this bulletin for informational purposes.
account has are not been confirmed, but the reader can in some instances
draw his own conclusions from the confirmed data contained in Sections
RESTRICTED
- 8 -
Regraded Unclassified
RESTRICTED
1 to 7 inclusive of this bulletin.
"Japanese successes have been attained through superiority
of numbers and equipment and the use of clever but simple tactics ea-
pecially adapted to the tropical lands. British officers at the
front describe Japanese losses ae 'enormous', but emphanizo toat the
attackers keep pouring in, apparently determined to advance at any
cost,
"The Japanese equipment includes one innovation, a two-nan
carrier, probably empecially designed for use in the tropica. This
little carrier can negotiate smaller streams, rice fields, rubber
groves, and thin jungles, but is not heavily enough armored to resist
British antitank rifles. It 1s proving a useful weepon in commination
with the heavier tanks and armored care that the Japanese possess.
"The Japanese tactica are based on infiltration and mobility.
Apparently groups of mon are simply being told to reach a certain ob-
jective many riles ahead, and they scatter all over the up to do it.
When groups encounter a British strong point, they do not attack, but
melt away and filter past, alorg the flenke of the British position,
concealing their movements in Jurgies of rubber trees. The strong
point is later attacked by strong Jepanese forces armed with heavy
equipment, and simultaneously the Japanese close in on the flanks and
rear.
"Japanese advance patrole armed with tommy guns sometimes for
days are constantly working toward an objective, often lying low in
the dense undergrowth to conceal thomselves from the British. A
number of mávance units are sent to attack the same objective, BO that
if acmo meot grief on the way, the others vill slip through and gain
the goal. The Jupanese obvioualy have made an intimate study of their
terrain and apparently Impr every road and path in Northern Malaya.
"The Japanese regulare have a unique uniform, consisting only
of light khaki shorts, a sleeveless upper germent that looks 111.4 an
undershirt, and low rubber shoea. The Japannee tactice are leading An to
a savage warfare of movement, ambush, surprise, and encirclement.
American military observer 1 met at the front said:
"'It is like Indiana fighting with tommy guns.'
"The Japanese have air superiority in Northern Malays, but BO
far they have not been using planes much at the actual front in battles bombing
or strafing. The raido on British airdromes are bringing air
in which the British, despite numerical inferiority, emerge victorious.
RESTRICTED
- 9 -
Regraded Unclassified
RESTRICTED
"British land forces are rapidly adapting themselves to the
Japanese type of jungle fighting, and much of the struggle at the
front now consists of patrols stalking patrols, infiltration and
counter-infiltration, intermingled with hard battles for strong points
in which artillery is brought into use, ...
"British officers have been in the thick of close-in fighting,
and I heard many stories of officers leading Indian units in savage
charges.' (By F. Tillman Durdin, New York Times, December 18, 1941)
RESTRICTED
- 10 -
Regraded Unclassified
Fleure 1. Group of Grenade Throwers.
-
Regraded Unclassified
Figure 2. Nambu Light Machine Gun, Model 1922,
on Bipod Mount.
Figure 3, Heavy Machine Gun, Model 92 (1932), on Antiaircraft Mount.
Regraded Unclassified
with
Figure 4. Heavy Machine Gun, Probably Model 3 (1914), on Tripod Mount,
Being Moved by Hand.
Regraded Unclassified
A
Figure 5. 90-mm. Mortar, Model 94,
Figure 6. Infantry Battalion Gun, Model 92.
Regraded Unclassified
Figure 7. Infentry Battalion Gun, Model 92, with Redesigned Carriage.
Regraded Unclassified
Regra
Figure 8. Packing Ammunition to Be Transported
to the Front.
12'
Floure 9. Transport Unite Delivering Ammunition to the Front Lines under Fire.
Regraded Unclassified
Figure 10. Cooks Preparing Rice 3A11s for Soldiers near the Front Lines.
dmi Regraded Unclassified
-
Figure 11. Ration Detail Throwing Rice Balls Wrapped in Straw
into the Front-line Trenches.
Regraded Unclassified
Figure 12. Japanese Soldier Waiting to Jump into a Trench
with Water Canteens.
E
Regraded Unclassified
221
RESTRICTED
0-2/2657-220 No. 595
M.I.D., W.D.
11,00 January 9% 1942
SITUATION REPORT
I. Pacific Theater.
Philippines: Hostile air activity limited. Fighting con-
tinues along the front while the enery continues to TOYS troops toward
our lines. Hawaii: No further reports. Palaya: British have
to new positions south of the Slin River under increasing Japanese
pressure. The press reporta that enemy infiltrations threaton Ifnus of
communication. ¡lo change in the Rast. It is also reported by the
gress that Japanese raided from the air last night, causing
oli; at lianage, This ./8.5 the first hostile raid on Singapore in 58 hours.
Burna: Light eneoy air activity continues, il.-.I. Japanese air attacks
continuo over wiboina, according to the press. China: To Curther
wrified reports. Vest Coast: Negative reports.
II. Rastern Theator.
Ground: The situation on the Lussian front remains unchanged.
Foth sides report fighting. (:00 situation ICD will be issuel today.)
III. estern Theater.
Mr: The official rition press release this orning stated
that strong Pritish air forces hud again last night attacked Derman
novel bases at Brest and donks at Charbourj.
IV. Hidle Eastern Theater.
Ground: Strong rear [uard actions characterize the rith-
dreval of Axis forces from the Agedobia sector to ard not line of
defense to the westward. Artillery, noval and nerial bombardment
continue in the Halfaya sector.
Air: 3rd weather has restricted aerial Activity in the
for rard creas of Tripolitania. The Axis activity over Lalta, mich ARE
Increased the past wook pontinues unibated.
RESTR
Regraded Unclassified
January 10, 1942
Demoroneum for the Secretary's Diary:
This morning around 8 o'ciock, Secretary Morgenthau
telephoned me irom the Farm and said that he had reread the
attached memorandum in regard to General Aniline and Film
Corporation which he had sent to the President last evening.
He said ne was quite concerned about the matter and
wanted CO know what was being done to prevent Government films
Deing sent to the company laboratories for development. I
ovinted out that the situation had been called to the atten-
tion of the Army personnel in the tield and they were well
HWAYE of the problem. The Secretary said that this was not
and he wanted a letter sent to the neads of the Govern-
gent Agencies having contracts with General Aniline and Film
enclosing a copy of the memorandum he had sent to the Presi-
dent and suggesting that steps be taken at once to prevent
LIKE reoccurrence of situations described in the memorandum.
The Secretary also said ne wanted Sam Mlaus and Joe
D'Connell to be in his office Monday morning with recommenda-
tions ss to individuals in the company who we had reason to
melieve ned committed or were responsible for the commission of
SCLS unfriendly or disloyal to the United States.
The attached letter and copy of memorandum to the
President were delivered by hand this morning to the !gllowing:
The Secretary of War
The Secretary of the Navy
The Secretary of State
The Secretary of Agriculture
The Secretary of Commerce
The Attorney General
Wayne Coy, Office for Emer ency Management
Lindsay 0. Warren, Comptroller General
Edward C. Bicher, Chairman of SEC
william J. Domovan, Coordinator 01 Information
Regraded Unclassified
223
TREASURY DEPARTMENT
C
0
P
Washington, D. C.
Y
My dear Mr. President:
Attached for your information is a
memorandum briefly setting forth some of the
results to date of our investigation of
General Aniline and Film Corporation.
When we entered the war we put a
group of Treasury people into the various
offices of General Aniline who have been
supervising and investigating the company
from the inside.
The investigation is still under
way and some of the items uncovered are of
such interest that I felt you would want
to know about them at this time.
Sincerely,
(Signed) H. Morgenthau, Jr.
The President
The White House.
Attachment.
Regraded Unclassified
221
January 7, 1942
Secretary Morgenthau
E. H. Foley, Jr.
Since our entrance into the war we have had a
group of Treasury people under Joe O'Connell supervising
and investigating from the inside the General Aniline
and Film Corporation, which has been blocked under the
freezing order. Several months ago we prevented the
sale of this company to General Dyestuff because we were
convinced from our study of the German dominated industrial
setup in this country that General Dyestuff, like General
Aniline and Film, was part of the I. G. Farbenindustrie,
the huge German dye trust.
Our investigation to date has disclosed serious
situations affecting the national interest.
1. The Ozalid Division. This division, headed by
F. W. von Meister, who came to this country direct from an
association with German Zeppelin Works and Maibach Auto
Works, has succeeded by several devices in providing access
for its men -- often German aliens or German-born American
citizens -- to the drafting rooms of about 3500 industriel
plants, including defense installations and Government
experimental laboratories, and in amassing valuable in-
dustrial information; the device used was the leasing, and
then the continuous servicing, of & reproduction or blue-
printing machine. The corporation has also succeeded in
obtaining contracts for the microprinting of United States
Government archives. We already have found documentary
evidence that United States Navy information so obtained
has been transmitted to Germany by the corporation.
2. The Agfa-Ansco Division. It has been found
that this company has succeeded in a variety of ways in
obtaining access to confidential military films of the
United States Government. For instance, 8. company labora-
tory, in charge of a German alien assisted by two other
Regraded Unclassified
225
2
German aliens, was found to be developing and processing
¡ilms of experimental United States Army tanks, taken at
the Aberdeen proving grounds. A related tield under current
Investigation is the use of Agia-Ansco for the development
of military and reconnaissance film of value to the German
Government. For instance, the company's laboratories were
used in 1939 and in 1940 for the development of film taken
in the Andeon region between the Canal Zone and the Pacitic
Coust by a so-called "scientific" expedition sponsored by
the German Government.
3. The Company as a cloak 10r subversive activities.
=40 2 act that the company has over 6000 employees and expendo
mout $60 millions annually, provides the German Government,
through I. 0. Farben, with unusual opportunities for the
noncealment of German agents and expenditures for oropaganda
MIJ CT other subversive purposes. For example, a person,
educated in Germany and a confessed Nazi Party member both
in Termany and the United States was sent by the company
"to the Homeland" to undergo training in various subjects
with the avowed purpose of ehabling him to become the
"contidential assistant" to the head oi the ilm and camera
clvision of the company. Other instances have already been
discovered where young Germans of military age were given
tempurary employment in the company aiter which they left
for China and Japan for purposes not yet established.
The lacts in these cases have been turned over by
116 to the Federal Bureau of Investigation and to Army
Intelligence. We are continuing our investigation and
to be in position, in the near inture, to make
specific recommendations as to personnel and other cusares
water should be made in the public interest.
(Initialed) E.H.Y.,Jr.
Regraded Unclassified
2017
January 10, 1042.
Dear Mr. Secretary:
Secretary Morgenthau sont the
attached memorandum in regard to General
Aniline and Film Corporation to the
resident last ovening.
This morning he directed no to
send EL copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that stops to
taken to eliminate situations of the
character described in the memorandum.
Pincerely,
(Signed) E.H. Foley, Jr.
Acting Secretary of the Treasury
The Honorable
The ecretary of griculture.
Attachment.
6HF:al 1/10/42
Regraded Unclassified
227
January 10, 1942.
Dear Mr. Secretary:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed rae to
send a copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) & H. Falsy, Jr.
Acting Secretary of the Treasury.
The Monorable
The Secretary of State.
Attachment.
EHF:ml 1/10/42
Regraded Unclassified
228
January 10, 1942.
Dear Mr. Secretary:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send 6. copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described In the memorandum.
Sincerely,
(Signed) L.H. Foley, Jr.
Acting Secretary of the Treasury.
The Honorable
The Secretary of Commerce.
Attachment.
EHF:ml 1/10/42
Regraded Unclassified
229
January 10, 1942.
Dear Mr. Secretary:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send a copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) 1. H. Foley, dr.
Acting Secretary of the Treasury.
The Honorable
The Secretary of War.
Attachment
EHF:mp 1/10/42
Regraded Unclassified
230
January 10, 1942.
Dear Mr. Secretary:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send a copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) 1. B. Foley
Acting Secretary of the Treasury.
The Honorable
The Secretary of the Kavy.
**********10/42
Regraded Unclassified
231
January 10, 1942.
Dear Mr. Coy:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send a copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) E. H. Felsy, dr.
Acting Secretary of the Treasury.
Hon. Wayne Coy,
Office for Emergency Management
State Department Building
Washington, D. C.
Attachment.
EHF:mp 1/10/42
Regraded Unclassified
232
January 10, 1942
Dear Mr. Eicher:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send a copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) E.H. Feley, Jr.
Acting Secretary of the Treasury.
Hon. Edward C. Eicher,
Chairman, Securities and Exchange Commission
1778 Pennsylvania Avenue,
Washington, D. C.
Attachment.
EHF:mp 1/10/42
Regraded Unclassified
032
January 10, 1942.
|ear Colonel Londan:
Secretary orgenthau sent the
attached memorandum in regard to General
Aniline and /ilm Cor oration to the
President last evening.
This morning he directed ne to
send a copy to you end the other interested
departments and agencies of the Government
having contracts or dealin 8 with this
company, with the suppestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) 1. E. roley. Jr.
Acting Secretary of the Treasury.
lon. ,illiam J. Lonovan
Coordinator of Information
Twenty-fifth and 1 Streets
Washington, i. C.
IllEampned/10/42
Regraded Unclassified
234
January 10, 1942.
Dear Vr. Warren:
Secretary Morgenthau sent the
attached memorandum in regard to General
Aniline and Film Corporation to the
President last evening.
This morning he directed me to
send & copy to you and the other interested
departments and agencies of the Government
having contracts or dealings with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Rigned) 1. B. Foley. Ir.
Acting Secretary of the Treasury.
Hon. Lindsay C. Warren
Comptroller General of the United States
General Accounting Office Building
Fifth and F Streets
Washington, D. C.
Attachment.
EHF:mp 1/10/42
Regraded Unclassified
January 10, 1942.
Dear Xr. Attorney General:
Secretary Morgenthau sent the
attached memorandum in regard to General
Iniline and Pilm Corporation to the
President last evening.
This morning he directed 70 to
send & copy to you and the other interested
departments and arencies of the Governme t
having contracts or dealige with this
company, with the suggestion that steps be
taken to eliminate situations of the
character described in the memorandum.
Sincerely,
(Signed) L.A. Phier, it.
The Honorable
The Attorney Goneral.
Attachment.
RhF:mp 1/10/42
Regraded Unclassified
236
THE ATTORNEY GENERAL
Washington
January 10, 1942
by dear Mr. Foley:
I have your letter of today
transmitting Secretary Morgenthau's menorandum
in regard to General Aniline and Film
Corport tion.
Sincerely yours,
/s/ Francis-Biodle
Honorable E. E. Foley, Jr.
Acting Secretary of the Treasury
Washington, D. C.
Copied - ml 1/13/42
Regraded Unclassified
237
SECURITIES AND EXCHANGE COMMISSION
Washington
fice of the Chairman
January 12, 1942
Honorable E. H. Foley, Jr.
Acting Secretary of the Treasury
Washington, D. C.
Dear Mr. Foley:
Re: General Aniline and Film Corporation
Receipt is acknowledged of your letter of January 10,
1942 and the copy of the memorandum of January 7, 1942 to
Secretary Morgenthau relating to the above subject. Te appreciate
having this added information that has been developed from your in-
vestigation and in line with your suggestion, we shall remain on the
alert to assist in the elimination of situations of this character.
Very truly yours,
/s/ Edward C. Eicher
Edward C. Eicher,
Chairman.
Copied - ml 1/13/42
Regraded Unclassified
238
NATIONAL ADVISORY COMMITTEE
FOR AERONAUTICS
P
Washington, D. C.
I
January 17, 1942
Honorable E. H. Foley, Jr.
Acting Secretary of the Treasury
Treasury Department
Washington, D. C.
Dear Mr. Foley:
I have your letter of January 14, 1942,
enclosing confidential memorandum regarding
General Aniline and Film Corporation. We
are intensely interested in the situation
described and are grateful for the warning
contained.
Yours truly,
/s/ J. C. Hunsaker
J. C. Hunsaker
Conied - ml 1/20/12
Regraded Unclassified
239
Executive Office of the President
P
OFFICE FOR EMERGENCY MANAGEMENT
Y
Washington, D. C.
January 21, 1942
Mr. E. H. Foley, Jr.
General Counsel
Treasury Department
Washington, D. C.
Dear Mr. Foley:
I wish to acknowledge and thank you
for your recent letter enclosing a memorandum
in regard to General Aniline and Film Corpora-
tion.
Sincerely,
/s/ Wayne Coy
Wayne Coy
Liaison Officer for
Emergency Management
Copied - ml 1/23/42
Regraded Unclassified
240
January 10, 1942
11:05 a.m.
D. W. Bell! Hello.
Marriner
Eccles:
Hello, Dan.
m
Good morning, Marriner.
E:
How are you?
B:
Fine. Have you had any further thoughts on
this financing?
No, I still - except this. Yesterday when
talking to the Secretary A couple of times,
I said the December 146 note, as an alternative
you could take the June '45 note. The December
146 would have to be at one and 8 half.
in
Un huh.
in
That's a five-year note. Now that might make
the rights - it depends on how you figure the
thing - as there is some difference as to the
value of the rights on that sort of an issue;
I think you figure them anywhere from B helf
up to - oh, uo to twenty-five to twenty-eight
thirty-seconds.
B1
That's on the '46?
is
Yeah. Now, of course, personally I'd like to
see - we've got these rights values down - I'd
like to see whatever issue is out out priced
in line with about the rights values. I'd like
to see it at around a half, but on A note issue.
I think a half 18 enough for the rights.
B:
Uh huh-
in
Now, I.....
B1
What would you do on June 1457
is
Well, I'd - June '45 18 one and A quarter, end
I'm sure that your rights there will be somewhere
Regraded Unclassified
241
- 2 -
around twelve to sixteen thirty-seconds.
B:
Yeah. We've got sixteen to twenty-two.
E:
Well, I think you're 8 little bit long there;
but anyway, the rights value on the June 18
not quite as much as the rights value on the
'46.
B:
Yeah.
E:
And that's the only - of course, you've got a
little longer issue on the '46, and maybe the
rights value should be a little bit lower than
on the other. You see, the June is a three and
a half year issue as against five.
B:
Yeah.
E:
But that's the only additional thought I had on
it. Either one of those would be - look all
right to me - and I'm not awfully strong either
way.
B:
Well, we, as a group, here in the Treasury and
the subordinate group, certainly is opposed to
the one and 8. half as it gets awfully close to
the two and 8. half. There's too wide a spread,
and then we have trouble with our long bonde,
it seems to us, when we go to B. one and a half.
But we're also opposed to putting it into one
issue in the note area, because you're shoving
the securities out and let them drift right into
New York, where you've got the weakest reserve
position. That was in our note market all along.
E:
They're not going to drift there If
B:
Why not?
E:
Well, they won't drift into New York unless they
want the investment. In other words you've got
B:
Yeah, but the people outside of New York are not
crazy about notes.
E:
You've got two thirds of your issue already in
Regraded Unclassified
- 3
the banks, and they're going to take - without
question, they refund them. of course, I
argued the thing yesterday and we are unanimous
over here in feeling that it should be a note
issue; and in talking to New York, they want to
put out, of course, the ootion, which we don't
agree with them at all on. Now, it's uo to the
Treasury to make the decision.
Allan wasn't very strong one way or the other
on it. He said his first choice would be the
opening up of the '48-'50, and likewise putting
a note issue out, selling the 148-150 at the
premium. I think you're going to have a cell
of 8 time pricing the two issues. You'll have
arbitrage - I think you'll have more of en after
market at two than you will the one. That's my
feeling about the matter, and further
I don't nuite get that, because you really are
giving them what they want when you give them both
a bond and a note, If you give them just one,
you'll have a lot of people that won't want what
you give them and they're bound to sell it.
Well, that's - you mean sell what?
The trouble is, you put out more bonde now when
your bond market is already weak
Well, 80 18 your note market.
Well, It's nothing like
It's been weak longer than your bond market.
nothing like your bond market, though. Your
long bond market, it seems to me, is the par-
ticularly weak market; and if you out out bonda,
then - of course, Allan sald, "Well, if you don't
put out bonds, then the bond market goes up." So
you put out notes, and the bond market goes up.
Now you're arguing If you put out notes the bond
market will 5° down.
Who, me?
Yeah.
Regraded Unclassified
243
B:
No, I'm arguing that you're going to pull -
well, it might, because you might pull the
note market further out of line and it might
have an effect on the bond market; but I think
certainly you've got to wait on your note
market, which is already just AB weak if not
weaker than your bond market.
4
Well, if you were putting out & new issue, it
may be an entirely different picture, but you're
not putting a new 18sue out - you're refunding
which is now short-term stuff with short-term
stuff. Certainly everything that you're re-
funding - I think there may be some merit to
your argument if you were putting out a new
issue, but you're not. This 1e merely a re-
funding issue, and
B:
Well, don't you think you get 8 churning when
you give people something they don't want?
E:
Well, I don't - we've never given the market
exactly what they want. The trouble is when
you say what they want, there's B. lot of dif-
ference of opinion. You get New York wants
one thing, the country may want another thing.
And the dealers want something else.
B:
That's what we find here.
E:
If we're going to - Dan, if we're going to let
the market run the thing, of course, we'll
always be in hot water; and I think that if
the market was one organized strong for it,
but the trouble 18, the market is a very nebulous
sort of 8 thing, and I think what we've got to
do 16 to decide what fits into a pattern or &
policy and adhere to it, and I think the market
is going to take it.
B:
Well, I don't know that the market 18 BO nebulous.
We talked to twenty or twenty-five bankers or
dealers and they all are handling this security
and 18 that a you ought to have a split issue. Don't to
lot of them holding them, and their opinion
you think that's a pretty good indication as
what you ought to do?
E:
oh, I think that's what the New York banks and
Regraded Unclassified
244
- 5 -
the dealers - I think pretty largely those
fellows get together up there and
8:
Well, I've talked to Detroit and I've talked
to Chicago.
E:
Sure.
B1
And I got, I think, one suggestion from Chicago
that there be B. single note; and when we asked
the fellow whether or not he'd be interested in
that note as & secondary distribution, he said,
"Yeah, I'll be interested at par."
Et
What did he mean, "at par"?
B:
"At par", he said. "When the market takes it
down to par, I'll be interested in it, but I
won't be intereeted in it otherwise." So that's
what his decision amounted to.
in
Well, I don't care what you do on the thing. I
think you're not going to have any good market
on this thing until the market knowe exactly
what our program 18. I mean, I don't care
whether you put out a note or you put out a
bond or you put out 8 split issue - I etill
think that there's a whole element as to what's
going to be done with the fifty billion dollar
financing picture ahead, if everybody 1e going
to more or less wonder how the money's going to
be raised.
B:
Well, I'm willing to
E:
I think that'e the principal problem, no matter
what you do. No matter what you do, there's
always a question, "Is the interest rate as good
88 we're going to get?"
B:
I'm perfectly willing - I don't know whether the
Secretary is willing - but I'm perfectly willing
to eay that we're not going to pay more than two
hold the long bonds at not less than par and we'll
and 8 half per cent for money, and we're going to
give them all the additional reserves they need.
You needn't worry about excess reserves.
Regraded Unclassified
245
- 6 -
Yeah. Well, I wouldn't go on that at all.
Well, you see, there you are now. You're
weakening. But that's exactly what they want.
Yeah, but that kind of a program, 88 I told
you the other day, merely saye that we'll
guarantee demand money at two and a half per
cent. There's nothing
B:
Well
When you BAY we're going to hold the long lesue
to par and that's all we're going to do, I think
you've got to have 8. program that's much more
comprehensive than that. I think it's 8 question
of whether you're going to do all this - do it
on a basis of market financing, leaving it up to
the market to tell u.a. what they want. I think
that's your question.
B:
Well, I don't think we've left it up to the
market all the time; but I don't think that
we can leave out the ladder, because if you
say two and a half per cent, we may be paying
it for five years. I don't think we want to put
ourselves in any trap like that.
E:
Well, I agree with that. I think you've got to
go more, though, than merely saying we're not
going to pay more than two and a half per cent;
and I don't think that you can say that we're
going to peg the market at par on the long issue
because when you do, you can't do market financing.
In other words, the market's got to have some
fluctuation and it can't be a pegged market.
If you say it's a pegged market, then, of course,
why have market issuer. It seems to me, the
minute you peg your market, the thing to do then
1s to have tap issues to do your job. I mean,
that's the way I look at the thing: and I'm per-
fectly willing myself to say two and a half per
cent, and in effect, peg the market; but then go
ahead and get your money from 8. basis of tap
issues, except what you have to fill in through
the banks. I mean, I'm not concerned about two
Regraded Unclassified
246
- 7 -
and a half at '67-'72. I'd Just as soon go
that far, but I don t like to - I don't want
to say that we'll guarantee that at par, and
then expect to do financing on a market basis.
B:
In the long issues. That's where - that's the
only part we differ.
E:
Well, now on this
B:
We may be together, but I still think we can
maintain them at par and do issues on whatever
rate and basis that fite into that scheme of
things, between zero and twenty-five, thirty
year bonds, at whatever rate we decide that
will go in the market and still maintain those
at par.
5.
Well, of course, I don't like long bond - to
be putting a lot of long bonds out on the market
depending on the excess of the reserves of the
banks to finance your long-term market. I think
you just - then you're going to hold it for the
duration - then you're building up for yourself
Just & hell of a lot of trouble, and it's entirely
contrary to what any of the others - either the
British or the Canadiana - are doing or expect
to do; and I - it's contrary, I think, to the
best judgment of, I know, New York and also all
of us here. Not that - we still feel that the
banks should be used in the short field, and that
we should - that the market should be used largely
for
B:
Even a two per cent range 16 a short field. I
mean, that's
E:
That's right. Well, what I meant in a short
field - I meant anywhere - close bills or short
bonde. Anywhere up to - not to exceed ten years.
B:
Uh huh.
E:
That's what I meant. And from there out, I would
all funds there are. We've got enough long-
depend on the - I'd design tap issues to then get
market bonds out for some time. We can't say
that the investor who wants market bonda can't
Regraded Unclassified
247
get them. There's B lot of them out, and he
can get them, if he wante an element of specu-
lation which there always 1s in 8 market bond.
B:
Yeah, but we're not talking about 1ong bonds.
I mean, you wouldn't consider the '49-'51 area
a long bond here, would you?
E:
No. Oh, I don't mean from this point now. I
was thinking of getting general stability in the
market. I was thinking not 80 much on the re-
funding. I don't think the refunding 16 a par-
ticular problem. I was thinking of
B:
Another cash.
E:
I was thinking of the cash in e long-range
program.
B1
Yeah.
E:
And what I meant to say was, that the whole
market is sort of, you know, wondering what -
where rates are going to go: and I think that's
why we find the bond and the note and the whole
market today sluggish. It 1sn't because of the
lack of funds for investment, it's merely be-
cause the general uncertainty and a waiting for
B shift-over from what we may term B normal
market program to a war program.
3:
Yeah.
E:
I think that's just where we are in the interim,
and we're going to stay there until we get a
definite program. Now
B1
I told you my program.
a
(Laughs) Yeah, I know you did, but
B:
What?
E:
I think it's all tied together. Well, I
think I think It's just a difference of emphasis.
B:
(Laughe) Well, Marriner, you and the Board
haven't changed, I take it.
Regraded Unclassified
- 9 -
248
E:
No, no. We still
B:
Except you add the June 145.
E:
Well, that's right. We still - I think the
Board wouldn't disagree on that either. I
mean, what the Board 18 anxious to do - they
think one issue, and they think it ought to
be a note 1seue and they think it ought to be
priced BO that the rights are not high.
B:
Yeah. Well, I think if it's going to be a
one issue in a note, then I would lean towards
your one and a quarter.
is
Well, I think that the rights on the one and
a half are too - I mean there weren't - I mean,
you're giving them a little bit too much, I
think, on the December '46.
B:
I would agree with that, but I don't like the
one and a half.
E:
You don't like what?
B:
I don't like the one and B half, December '46.
E:
Do you think it gives them a little too much
money?
B;
Yeah, and I think the psychology of a one and
8. half rate out there, getting close to that
bond area 1e all wrong at this time.
E:
Well, of course, there's a. half B per cent difference
between that and the '48-'50's.
B:
And there's a one per cent between that and the
twenty-five, thirty that worries me a little more
than that other.
E:
Well, except this, that those long ones, Dan -
this goes into
B:
I don't think we want to let.....
E:
You've got a different investment market. Now
here's what you've got. On your one and a half,
Regraded Unclassified
249
- 10 -
your one and a half 18 a bank investment.
At one and a half the insurance companies and
your mutuals oan't get by with one and a half,
and your estates. They've got
B:
They could on a two, though, and that's the
reason I
E:
Well, I know; but they need two and EL half,
though they may take some two's. But you take
your long-term, permanent investor, and by God
they need not less than two and a half and
they're much less interested in the maturity
than they are in the rights. Now, that's the
banking set-up. I think most of them would
sooner take one and a half, five years than a
two and a half, twenty-five years.
B:
Yeah, but
E:
I think that is true in the banking picture,
but not among your investors. Your investors -
they're more interested in the right, I think,
than the maturity.
in
I've been willing All along to see short-term
rates tightened B little, but I think they've
gone far enough and I don't want to see them go
any further; and I'm afraid that the one and a
half per cent would be an indication to the
market that - well, the Treasury's not interested
this short rate and they're willing to pay more
for the short money, and then that just has en
effect all out through the line. Whether that's
psychological
is
You were paying one and a helf a year ago.
B:
On
E:
When you took into account the tax-free - you
mee what we've more or less lost sight of this
year, we've thought of a rate and not of a net
yield after taxes; and up until last spring,
we were
B:
Well, we hope we oan forget tax-exempts in due
course.
Regraded Unclassified
250
- 11 -
E:
Well, that's right, but the market doesn't.
The market always - there's a certain amount
of arbitrage going on between the taxable and
the tax-exempte.
B:
Yesh.
E:
And when you take a one and 8. half, five years,
and you deduct the tax - the 24 per cent normal
tax and compare it with what we were financing
a year ago - we're financing considerably cheaper
today on the basis of one and a half for five
years than we have any other time except the
last six or eight months.
B:
Well, let's keep it that way.
E:
What 18 it?
B:
Let's keep it that way. Right where it is now,
if we keep it, why I'll be satisfied.
E:
Well, I - well, but, of course, the one and a
half at December 18 keeping it that way if you
take into account - you're paying the market
three quarters of a point for underwriting -
I mean, that's what it 1e. AB far as the in-
vestor 18 concerned, the one and 8. half 18 in
line when you take into account the cost of
underwriting, isn't it? You see, it's priced
on a market, practically. if you think the
underwriter is entitled to three quarters of
a point.
B:
Well, I don't think we can change that now,
unless we go to a tap issue. Let me ask you
this, have you had any further discussion this
morning with your Board about this. I mean,
since yesterday afternoon?
E:
Yesterday afternoon. No, I didn't talk to them
this morning because they were just thoroughly
unanimous on this thing. There wasn't a single
one of them that wanted a bond.
B:
Uh huh.
Regraded Unclassified
251
- 12 -
E:
John McKee, particularly, WAB very much
against it. Ransom was more indifferent.
I mean, Just
B:
Yeah.
E:
But they all caid that we think that a note
is the thing to do, and they had, each of
them, a little different argument. Ransom
said that the way it looked to him, he wasn't
very strong, he hadn't thought much about it -
you know, he was more or less - didn't care
very much one way or the other. Now, there
he was on the one side, and John WBS.....
B:
Pretty strong on the other.
E:
John was more strong on the other side.
B:
Yeah.
E:
I mean, now that's about the
B:
Uh huh. Well, you have added the June '45,
which I think is 8. good suggestion.
E:
Well, the only reason - that's a question of
pricing, Dan.
B:
Yeah.
E:
Now the reason - yesterday on the '46, Piser
had estimated a half of one per cent right
value, see? That 18, sixteen thirty-seconde -
he said that on a December 146, the rights
value would be about sixteen thirty-seconds,
see?
B:
Yeah.
E:
Well, now - 60 that the Board's view, the the Board
favoring the December '46 was based upon
rights not being more than sixteen thirty-
seconde. They all agree that the rights should
be kept down.
Now, in discussing it again with Piser, and
cheoking it, I raised the question - I sald,
Regraded Unclassified
252
13 I I
"I don't agree with you on those rights,
Piser, I think sixteen thirty-seconds too
low." See?
B:
Yeah. We think BO too.
E:
And after I checked It with other issues here.
it seemed to me that the rights value 18 three
quarters to seven-eighthe,
B:
That's right.
is
I said that those rights looked & little bit
high to me. Now, I said, "We've got to take
a look at some other note."
Well, the net result 18 - BD I went to the
June 145, and I'm sure the Board would feel
likewise, because they were just as much opposed
to having - giving these rights too much value.
B:
Yeah. And June 145 is vacant, too.
E:
That's right. June 145 was vacant, and the
rights on June '45 are somewhere not more than
a half.
la
Yeah.
E:
And they're in line with the market on rights,
So that's the only reason for the shift - was
the new appraisal of the rights value.
B:
Well, I think that's 8 good suggestion.
E:
That seems - that.....
B:
Wait a minute, will you?
&
Yeah.
B:
Well, all right, Marriner. Thanks very much.
The Secretary's calling me now.
E:
All right. Dan. Good-bye.
Regraded Unclassified
(Secretary calling from New York)
253
January 10, 1942
11:35 a.m.
HMJr:
I asked them in New York, and I gave them a
good cursing out on the whole Federal Reserve
System
D. W.
Bell:
Oh, you did? (Laughs)
HMJr:
Yes, I did.
B:
Well, I've just had a half hour's talk with
Eccles.
HMJr:
We're paying the price now for Marriner Eccles'
monetary theories, and I told them they've got
me in a vice and I don't like it.
B:
Yeah.
HMJr:
And we've just got to wiggle out of it, that's
all. And to go - to do what New York wants to,
Dan, get out a three-year note at the beginning
of the war, we've got to keep those spaces for
some emergency, Dan.
B:
I see.
HMJr:
Hello.
B:
Yeah.
HMJr:
I can't tell the Street - am I out - who's all
in the room?
B:
Hadley, Morris, Haae, and Lindow and Mrs. Klotz.
HMJr:
Good. Tell Mrs. Klotz to etay there. She's
going to have to settle this. Hello.
B:
She's going to have to settle it.
HMJr:
Yeah, somebody has to.
B:
(Laughs) All right. She's here.
HMJr:
Well, the point 18 this. I can't - I've got to
Regraded Unclassified
254
- 2 -
keep those two, three, and four year spaces
for some time when we get some really bad news.
B:
Yes.
HMJr:
80 that's out the window. Now, you fellows tell
me I shouldn't say five years, one and a half
per cent - it's too high - and I agree with you.
B:
Yeah.
HMJr:
So I put it up to the Board in New York, "Which
would you rather have? Can we open up the '48-'50
or do a new one at two?"
B:
Yeah.
HMJr:
They said, "Theynew one." I said, "Well, thank
God. At least we agree on that."
B:
They said a new one?
HMJr:
They said a new one.
B:
Yeah.
HMJr:
So at least there's agreement on that.
B:
All right.
HMJr:
What?
B:
Yeah. We agree with that.
HMJr:
You agree with that.
B:
Yes, I do.
HMJr:
Well, you fellows have got me now - I think
you're right. I don't know what we can do about
this short-term money market, but we're going
to have to do something; and it doesn't help
any to get out another note, does it?
B:
No. We don't think 80. The Board thinks 80,
but we don't.
HMJr:
Well.....
Regraded Unclassified
255
- 3 -
B:
Now, Eccles has come around this morning to
the June '45, one and a quarter.
HMJr:
One and & quarter.
B:
June '45. He said that he thinks
HMJr:
oh, no.
B:
He thinks the one and a half, December '46, 18
& little rich. That's the reason for his change.
HMJr:
Listen, Dan, one thing I know 18 that there'll
be times where we need the three - we'll need
144 and 145 and 143.
B:
Probably will.
HMJr:
That's why I've been insisting on getting the
notes out as far as possible.
B:
Uh huh.
HMJr:
Now, here's the point. If - the long-term money
market is still reasonable, 1sn't it?
B:
Yes.
HMJr:
What?
B:
Yes.
HMJr:
The short-term money market 18, we think, dis-
torted. Right?
B:
Well, it's tightened; I wouldn't say it's dis-
torted. I think it wouldn't take much to carry
it beyond the line where we want to see it go.
HMJr:
Well, if we leave it alone for a month, it may
got better.
B:
The note market has been the worst market we've
had.
HMJr:
I say it might get better.
B:
Yes, sir.
Regraded Unclassified
- 4 -
256
HMJr:
Well, I think - Dan, I think we'd better get
out a new two.
B:
You do.
HMJr:
Yeah.
B:
Well, I think we'd all agree with that.
HMJr:
What?
B:
We all agree with that.
HMJr:
You all would?
B:
Yes, sir.
HMJr:
Well, what does Mrs. Klotz say?
B:
(Laughs)
HMJr:
I'm trying not to be too serious. It's hard
not to be, though.
B:
She favors the two per cent bond.
HMJr:
She does?
B:
Yeah.
HMJr:
Well, she's getting on the bandwagon.
B:
(Laughs) Well, she says there's five of us
here. She knows she has to. (Laughs)
HMJr:
Well, look.
B:
Yeah.
HMJr:
Why not let's just say - look, Dan, we can't
go wrong on this. Hello.
B:
Well.....
HMJr:
On the '49-'51.
B:
We can't afford to go wrong, and I don't think
we are.
Regraded Unclassified
257
- 5 -
HMJri
No, no. I mean we won't go - they 88y we
won't 8° wrong.
in
Well, I think that's right.
HMJr:
What?
B:
There's 8. good market there.
HMJr:
They Bay it'll churn. Well, let it ohurn.
B:
Well, I think you've got some of these securities
in the hands of people, Bay, like the Guaranty
and those others that will cooperate on that,
even though they may not went it; end I think
they'll hold it.
HMJr:
Well, I told them - I talked the way I've never
talked before to New York. They kept saying,
"This 18 what the market wants." I said, "Now,
listen, at this stage the market better take
what I want. I can't - one month after we're
in the war adjust myself to a false position,
which has been created by the Federal Reserve
System. They're wholly responsible for this."
I mean, they built this thing up for over six
months, beginning with last July. Now I've
got to pay the price.
B:
Well, I - If we keep it here, I'm not so worried
about it; and I think if we take B strong position,
we can keep it here.
HMJr:
Pardon me?
B:
I say I don't worry so much about the rates and
the present market if we can hold it here: but
I think to shove these short-term rates up any
higher, 1e certainly going to affect your bond
rates out in that long area.
HMJr:
Are you and I making B. record?
B:
Yes, sir.
HMJr:
All right. Good.
B:
All right. Do you want us to talk to you any
more?
Regraded Unclassified
258
- 6 -
HMJr:
Well.....
B:
Or 18 this the final decision?
HMJr:
I think I'd better just break this news to
those fellows in New York and cheer them up
a little bit, because I was pretty tough this
morning,
B:
All right. Do you want to call them back then?
HMJr:
Yeah.
B:
And we'll go ahead with this.
HMJr:
Pardon me?
B:
We'll go ahead with the two per cent bond at
'49-'51.
HMJr:
That's right.
B:
Well.....
HMJr:
Are you - are you all smiling? Are you all
right?
B:
Yes. Now wait a minute. We'll see where we
want it.
HMJr:
Pardon me?
B:
We'll just see where we want it. I take it
it's March. See what we've got.
HMJr:
I've got 8. table also. Wait a. minute.
B:
March is empty on a call date and 80 16 June.
HMJr:
I haven't the table.
B1.
the matter with June? Bride's month. I'd like
(Talks aside) I like June, don't you? What's
June.
(To Secretary) We like June.
HMJr:
You like June.
Regraded Unclassified
259
- 7 -
B:
Mrs. Klotz likes June. She said that's a
nice month.
HMJr:
That's the month for the brides.
B:
Yeah, that's right. (Laughs)
HMJr:
All right. Let's
B:
And that'll give you around twenty-nine to a
point one thirty-second premium.
HMJr:
How much?
B:
Twenty-nine thirty-seconds to a little over a
point, in that area. That's plenty.
HMJr:
That's nice.
B:
Yeah, that's plenty.
HMJr:
We'll call it the"wedding bell bond".
B:
The "wedding bell". What's the "bell" for on
there? (Laughs)
HMJr:
Dan, if I supply the wedding, you supply the
"Bells".
B:
All right. I'll supply the "Belle". I'm not
in a position to supply the wedding. (Laughs)
I hope I'm not to the point.
HMJr:
Well, you've got a daughter and I have three
children.
B:
Yeah, but I don't want her to get married yet. (Laughe)
HMJr:
What?
B:
I don't want her to get married yet.
HMJr:
No. But she might.
B:
Well, that's all right; and we'll go ahead.
HMJr:
And you're going to put it into June.
Regraded Unclassified
260
- 6 -
B:
Yeah.
HMJr:
Now, there's no directions other than that
'46-'49. Three and an eighth.
B:
That's right.
HMJr:
And you'd ought to pick that up
B1
Well, that's a high rate, and we ought to pick
that up before '49, yes. There are others that
cross it, but then we've always got that picture.
HMJr:
What?
B:
There are other issues that cross the '49,
which you could pick up earlier on a call,
but which mature later; but then you always
have that situation.
HMJr:
Well, I'll just call them up and try to cheer
them up a little. I think it's all right.
Now, does anybody have any doubte there in your
office - in my office?
B;
Everybody's unanimous.
HMJr:
Wonderful.
B:
We all agree on it.
HMJr:
Does Mrs. Klotz want to say anything to me?
From her own room or anywhere?
B:
How's that?
HMJr:
I sald has Mrs. Klotz got anything more?
B:
(Talks to Mrs. Klotz) Have you got anything
more?
(To Secretary) No. She says, "nothing"-
HMJr:
All right.
B:
Fine.
HMJr:
I'm not going to call again.
Regraded Unclassified
- 9 -
261
B:
All right. But you are going to call New York?
HMJr:
I'll - yeah. What's - do you know their
number?
B:
No I don't, but I'll switch you.
Operator: Yes, sir.
HMJr:
What's New York's number?
Regraded Unclassified
262
OF
TREASURY DEPARTMENT
WASHINGTON
THE SECRETARY
January 10, 1942
Dear Mr. President:
Approximately $236,000,000 of 3 percent Federal Para
Mortgage Corporation bonds have been called for redemption on
January 15 and $103,000,000 of 2-3/4 percent bonds of that Cor-
poration have been called for redemption on March 1. In addi-
tion, $310,000,000 of Reconstruction Finance Corporation notes
inture on January 15 and $426,000,000 of Treasury notes nature
on March 15. In line with the policy determined upon last
October, I propose to offer the holders of these four issues
an opportunity to obtain & new issue of 2 percent Treasury bonds,
on a par for par basis, with adjustments of accrued interest to
January 15 in the case of the Treasury notes and the 2-3/4 per-
cent Federal Parm Mortgage Corporation bonds.
The bonds will be dated January 15, 1942, and will
nature June 15, 1951, with provision for redemption on and after
June 15, 1949.
The authorizing act provides that bonds may be issued
only with the approval of the President. Accordingly, I trust
that the proposed 10000 will meet with your approval.
Faithfully yours,
Secretary of the Treasury.
The President,
The White House.
FORDEFENSE
BUY
APPROVED:
UNITED
STATES
SAVINGS
Bonza
I
Regraded Unclassified
263
(For your information in connection
with your work or the Byrd Committee)
Veterans pension bills, involving
estimated first-year costs of more
than $33,000,000, will be considered
W 8. subcommittee of Senate Finance
Committee at 10:30 Jan.13.
Regraded Unclassified
TREASURY DEPARTMENT
264
INTER OFFICE COMMUNICATION
DATE JAN 10 1942
TO
Secretary Morgenthau
FROM Tr. Foley
For your information relative to your work on the
Joint Senate and House Committee on economy, H.R. 4 and
H.R. 4845, veterans pension bills, mentioned in previous
reports as involving estimated first-year costs of more
than $33,000,000 will be considered by a subcommittee of
the Senate Committee on Finance at 10:30 o'clock Tuesday
morning, January 13. Our previous report as of December
1, 1941 indicated that there had been hearings on November
27, 1941, but that the subcommittee had not met in executive
session to consider the bills further.
9.107
Regraded Unclassified
265
STANDARD FORM No. 14A
TREASURY DEPARTMENT
si 74 PRESIDENT
MARCH 10. 1125
WASHINGTON
TELEGRAM
CHARGE TREASURY DEPARTMENT. APPROPRIATION FOR
OFFICIAL BUSINESS-GOVERNMENT RATES
H. Morgenthau Jr - OFFICIAL
(The appropriation from which payable must be stated - above line)
& - - -
2-1417
January 10 1942
MR. EDWARD E. BROWN
PRESIDENT FIRST NATIONAL BANK OF CHICAGO
CHICAGO ILLINOIS
WHEN YOU ARRIVE IN WASHINGTON MONDAY MORNING PLEASE TELEPHONE
MY SECRETARY AND LEAVE WORD WHERE YOU CAN BE REACHED
HENRY MORGENTHAU JR
Regraded Unclassified
266
WASE
January 9, 1942 2:15 PM gh
SECRET SERVICE WASH WILSON
SECRET SERVICE CO SCHAETZEL
MESSAGE FROM THE SECRETARY TO MR E N BROWN PRESIDENT OF THE FIRST
NATIONAL BANK OF CHICAGO DELIVERED AND MR BROWN REPLIED HE WILL
ACCEPT THE INVITATION AND WILL ARRIVE WASHINGTON ON B AND 0 CAPITOL
LIMITED AT 8.40 AM MONDAY JANUARY 12TH.
MR BROWN STATED HE MUST
DE IN CHICAGO ON TUESDAY JANUARY 13THM
ENC
Regraded Unclassified
267
0
OPP
CG I
XXX
CG 803
0%
CG
803 COVT
T OK
V
1111
SECRET SERVICE CCO SCHAETZEL
SECRET SERVICE WASH WILSON
PLEASE HAVE AN AGENT DELIVER THE FOLLOWING MESSAGE IMMEDIATELY
LAIT FOR REPLY FROM MR. BROWN AND THEN RETURN TO OFFICE AND
TELETYPE REPLY AT ONCE TO US FOR DELIVERY TO THE SECRETARY
*VP EDVARD E. BROWN
PRESIDENT FIRST NATIONAL BANK OF CHICAGO
CHICAGO, ILLINOIS.
VOULD APPRECIATE IT IF YOU COULD COME TO WASHINGTON TO SEE ME
01 HOLDAY JANUARY 12. WOULD LIKE YOU TO HAVE LUNCH WITH ME AT
OFF OCLOCK.
HENRY MORGENTHAU JR
SECRETARY OF THE TREASURY
END
of WILL 00 SO FND SCHAETZEL
Regraded Unclassified
268
THE SECRETARY OF THE TREASURY
WASHINGTON
January 9, 1942
VIA SECRET SERVICE TELETYPE
MR. EDWARD E. BROWN
PRESIDENT FIRST NATIONAL BANK OF CHICAGO
CHICAGO ILLINOIS
WOULD APPRECIATE IT IF YOU COULD COME TO
WASHINGTON TO SEE ME ON MONDAY JANUARY TWELFTH.
WOULD LIKE YOU TO DAVE LUNCL WITH I AT ONE
OCLOCK.
HENRY MORCENTI.AU JR
SECRETARY OF THE TREASURY
Regraded Unclassified
269
Classification by Type of Purchaser of the Sales of Treasury Notes
Tax Series A and Tax Series B
August to December, 1941
(Par amounts in millions of dollars -
As reported by the Federal Reserve Banks)
Type of purchaser : Tax Series : Tax Series :
Total
and month
:
A
:
B
:
Individuals 1/
August
16.0
50.0
66.0
September
6.2
21.1
27.3
October
5.2
20.4
25.6
November
3.5
14.3
17.8
December
5.4
36.7
42.1
Total
36.3
142.5
178.8
Corporations
August
3.7
1,024.9
1,028.6
.9
260.3
261.2
September
October
.6
411.5
412.1
November
.6
301.9
302.5
December
.4
303.1
303.5
Total
6.2
2,301.7
2,307.9
Total sales
19.7
1,074.9
1,094.6
August
281.4
288.5
September
7.1
October
5.8
431.9
437.7
November
4.1
316.2
320.3
5.8
339.8
345.6
December
42.5
2,444.2
2,486.7
Total
Office of the Secretary of the Treasury,
January 10, 1942.
Division of Research and Statistics.
1/ Includes partnerships and fiduciaries.
Regraded Unclassified
270
Sales of Treasury Notes - Tax Series A and Tax Series B
August to December, 1941
Classified by denomination
(Par amounts in millions of dollars - As re-
ported by the Federal Reserve Banks)
Series and
:
:
:
Aug.
Sept.
Oct.
Nov.
Dec.
Total
denomination
BX Series A
$25
.6
.3
.3
.3
.3
1.8
.8
.4
.4
.3
.6
2.5
50
18.3
6.4
5.1
3.5
4.9
38.2
100
Total - Tax Series A
19.7
7.1
5.8
4.1
5.8
42.5
tax Series B
$100
1.2
.5
.5
.5
.9
3.6
1.4
2.1
8.7
500
2.8
1.2
1.2
1,000
27.5
12.7
12.1
11.2
19.2
82.7
120.5
44.8
44.2
43.9
58.7
312.1
10,000
100,000
374.9
103.2
114.2
104.4
120.9
817.6
63.0
28.0
26.5
32.0
22.0
171.5
500,000
485.0
91.0
233.0
123.0
116.0
1,048.0
1,000,000
Total - Tax Series B
1,074.9
281.4
431.9
316.2
339.8
2,444.2
Total - Both Series.
1,094.6
288.5
437.7
320.3
345.6
2,486.7
January 9, 1942
Office of the Secretary of the Treasury,
Division of Research and Statistics.
Regraded Unclassified
TREASURY DEPARTMENT
271
INTER OFFICE COMMUNICATION
DATE January 10, 1942
Secretary's Files
TO
Mr. Callahan
FROM
M
The following is a report on what has been
accomplished to date with regard to using the Minute
Man on private stationery:
To date, approximately 1500 electrotypes
of the Minute Man in heights of 1 and 2 inches have
been furnished to private business firms for use on
stationery, business cards, etc.
The American Bankers Association, Building
and Loan Companies, etc., are requesting that we
furnish them with approximately 16,000 mounted electro-
types 1 inch high to be given to individual companies
in these associations to use on letterheads, statements,
etc.
We are ordering this material in lots of 500
electrotypes at a time, so as to be sure they are
furnished only upon direct request, thus assuring more
nearly 100 per cent usage.
272
My dear Hr. Comptroller General:
This Department has under consideration a Voluntary
roll Savings Plan for the purchase of Defense Savings liends by -
cloyees of the Treasury Department.
the essential features of the plan AP6 similar to those
outlined in your letter of December 4. 1941. 3-20620, to the See-
retary of the Havy. However, the Teasury desires that certain
changes be made in the heading of form 10, approved for the lawy
Department on December 11. 1941.
It 18 desired that the word "mthorization" be mustl-
tuted for the word "pledge" and that the word "alletments" be
substituted for the word "deductions," no that the first line of
the heading of the card will read *Indivional authorization card
and record of payroll allotments." On the second line of the head-
inc. in smaller type, it to desired to substitute the words "for
purchase of Defense savings Bonds" for the vords *for Defense
Savings Bands reservations." 100, in the body of Stee card, change
the word "reservation," wherever it monears, to the word 'allotment.'
Briefly, the reason for requesting these chan -- 10 the unfavorable
connotation which the words *oleder*, "decuction", and "reservations"
carry to most amployees.
Regraded Unclassified
273
- 2 -
In view of the fast that voluntary payroll allotment plan
for the purchase of Defense Savings Bonds might eventually be adopted
by other departments, 11 is suggested that provision be nade in the
allotment card for the name of the department or establisiment and
the bureen OF division of the department or sstablishment.
Under the Department's proposed procedure, duly authorized
certifying officers vill be responsible for certifying to the Division
of Disbursement, on approved payroll forms, the amount of each pay-
roll allotment, supported by a schedule (Form 1096) reflecting the
amount of such allotments. The total amount of the allotments vill
be deposited by the Chief Disbursing Officer, Division of Disbursement,
in a special deposit account with the Treasurer of the United States
entitled "Employees" Payroll Allotment Account, U. S. Defense Savings
Bonds."
The Chief Disbursing Officer, Division of Disbursement, will
be designated as the bond issuing officer for the purpose of issuing
bonde to the employees of the various bureaus and offices. lie will
furnish bond for the faithful performance of his duties as bond issuing
officer and will be responsible for maintaining ademate records and
safeguards of uniseaned stock and of seeing that bonds are issued in
the proper form and in the proper crounts. Ronde purchased by -
ployses in the field services of the Department. whose salaries are
paid through regional offices of the Division of Disbursement, will
be issued by the Chief Disbursing officer through the appropriate
Regraded Unclassified
- 3 -
274
regional assistant disbursing officers.
The heads of bureens and offices will be responsible for
maintaining an accurate account or record relating to the payrell
allotment made in the case of each participating employee under
his juriadiction. Upon accumulation In an employee's account of
as amount equal to the purchase price of a bond of the denomination
for which he has nade allotments, an authorized certifying officer
will certify to the bond Issuing officer (1.8., the Division of
Disbursement) the name or names of the person or persons to whom
the bond is to be insued and the purchase price thereof. A8 the
same time he will certify on Form 1046 the total amount to be trans-
ferred by the Chief Disbursing officer from the employees' Payroll
Allotment account to the Public Debt account to cover the purchase
price of the bonds to be issued to the employees. A list showing
the names of the persons to whom bonds are issued, the denominations,
and the purchase price thereof will be forwarded to the General Ad-
counting Office with the Chief Disbursing Officer's Account current.
where an employee desires to vithdraw money from his allot-
eent account before accumisting the amount necessary to purchase &
bond for which the allotments were made the Dividion of Disbursement
will make refund to the employee, on Torn 1047, when certified by
an authorized certifying officer. but only for the full amount standing
to the employee's credit. Partial vishdrawals will not be permitted.
Death claims vill be reforred to the General Accounting
office for direct settlement in the usual manner.
Regraded Unclassified
275
- r
In case of resignation or transfer of an employee to
another department, or from one bureen OF office of the Treasury
Department to another, the employee will be authorised to deposit
the amount movemery to complete the purchase of a bond. Othervise,
the amount standing to his credit will be refunded on Form 1047. as
indicated above,
The individual anthorization and account card, referred
to above as "Individual Authorisation Card and Record of Payroll
Allotments" will be retained in the administrative office concerned
until it has been completely filled or until the account is closed
out through a refund of the money to the employee, after which it
will be sent to the General Accounting Office.
The Department desires to place this procedure into effect
as seen as possible but not later than the first pay period coments-
ing on any date after January 23. 1942. In view of the time required
for procuring the necessary forms and of acquainting the employees
with the provisions of the plan, it would be appreciated if I could
have your early advice at to whether there are any features of the
proposed plan which my not be acceptable to the General Accounting
Office.
Very truly yours,
(Signed) Il W BELL
Acting Secretary of the Treasury.
Hemorable Lindsay C. Varren,
Comptreller General of the United States.
113/5m
1/10/42.
Regraded Unclassified
276
CONTUENTIAL
UNITED STATES SAVINGS BONDS
Comparative Statement of Sales During
First Eight Business Days of January 1942 and December and November 1941
(November 1-10, December 1-9, January 1-9)
On Basis of Issue Price
(Amounts in thousands of dollars)
:
:
Amount of Increase
:
Percentage of Increase
Sales
:
:
or Decrease (-)
:
or Decrease (-)
Item
:
:
:
:
January
:
December
: January
:
December
January
December
November
:
:
:
:
over
:
over
:
over
:
over
1942
:
1941
:
1941
:
December
:
November
:
December
:
November
:
Series I - Post Offices
$ 49,640
$ 16,252
$ 14,402
$ 33,388
$ 1,850
205.4%
12.8%
Series 1- E Banks
119,826
29,005
24,356
90,821
4,649
313.1
19.1
Series I- - Total
169,467
45,258
38,758
124,209
6,500
274.4
16.8
Series y - Banks
19,192
6.972
7.083
12,220
-
111
175.3
- 1,6
Series G- Banks
77,787
49,728
45,450
28,059
4,278
56.4
9.4
Total
$266,446
$101,958
$ 91,291
$164,488
$ 10,667
161.3%
11.7%
Office of the Secretary of the Treasury, Division of Research end Statistics.
January 10, 1942,
Source: All figures are deposite with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and vill not necessarily add to totals.
Regraded Unclassified
CONFID
UNITED STATES SAVINGS BONDS
Daily Sales - January, 1942
On Basis of Issue Price
(In thousands of dollars)
Post Office
Bank Bond Sales
All Bond Sales
Bond Sales
Date
Series I
Series I
Series G
Total
Series E
Series 7
Series G
Total
Series 3
January 1942
1
$ 3,982
$ 10,229
$ 1,964
$ 7,605
$ 19,798
$ 14,211
$ 1,964
$ 7.605
$ 23,780
2
10,736
2,056
7.779
20,571
15,538
2,056
7.779
25,373
4,802
4,457
9.557
1,278
5,453
16,289
14,015
1,278
5,453
20,747
3
26,724
3,240
13,704
43,668
36,408
3,240
13,704
53.352
5
9.684
6
6,711
7,659
1,341
6,778
15.778
14,369
1,341
6,778
22,489
6,748
21,267
3,692
18,832
43,790
28,015
3,692
18,832
50.539
7
8
7.509
21,297
3,821
12,871
37.989
28,806
3,821
12,871
45,498
5.746
12,359
1,798
4,765
18,923
18,105
1.798
4,765
24,669
9
Total
$ 49,640
$119,826
$ 19,192
$ 77.787
$216,806
$169,467
$ 19,192
$ 77,787
$266,446
January 10, 1942.
Office of the Secretary of the Treasury, Division of Research and Statistics.
Source: All figures are deposits with the Treasurer of the United States on account of proceeds
of sales of United States savings bonds.
Note: Figures have been rounded to nearest thousand and will not necessarily add to totals.
Regraded Unclassified
Unfilled Orders for Savings Bonds alt the
Federal Reserve Banks and the Post Office Department
December 31 to date
(In thousands of pieces)
:
Unfilled
:
:
Unfilled
Stock of :
New
Bonds
IBM
:
orders
:
:
orders
"B" type
:
orders
manufac-
deliveries
Day
:
at opening
:
:
at close
bonds
:
received
tured
this
of
:
:
of
on
:
:
today
today
day
:
business
:
:
business
hand
:
Dec.
.
31
919
285
375
829
61
350
Jan.
1
829
none - no mail
400
429
61
388
2
429
932
370
991
61
400
3
991
600
420
1,171
61
400
4
1,171
none - no
mail
none - closed
1,171
61
400
5
1,171
257
445
1,255
333
310
6
1,255
425
450
1,408
511
520
7
1,408
639
450
1,597
511
525
8
1,597
460
460
1,597
511 1/
450
9
1,597
649
500
1,471
236
550
Office of the Secretary of the Treasury,
Division of Research and Statistics.
January 10, 1942.
275,000 pieces included in this figure were in transit and had not reached
the Federal Reserve Banks on this date.
Regraded Unclass
278-A
TO:
HAROLD N. GRAVES
SUBJECT:
PROGRESS REPORT FROM DEFENSE SAVINGS STAFF
January 10, 1942
SALE OF BONDS
Actual cash receipts from the sale of E,
F and G Bonds for the first six business days of
January were $196,279,000, an increase of 152.3 per
cent over the same period in December, 1941. (During
the first six business days of December 1941, America
was at peace.)
Actual sales for the first six business
days of December were ₩77,788,000, end for the corres-
ponding period in November were $74,792,000.
of the total cash receipts from the sale
of all Bonds, Series E sales were $122,555,000 for the
first six business days of January, en increase of 289
per cent over the same period in December.
SALE OF STAMPS
December Defense Sevings Start sales
totaled $25,650,562.80, an increase of 300 per cent
over November Stamp sales. Breakdown of Stamp sales in
December by denominations follows:
Regraded Unclassified
278-B
-2-
Denomination
10 cent
$2,340,850.80
25 cent
15,133,438.00
50 cent
3,179,782.00
$1
3,418,232.00
$5
1,578,260.00
Total $25,650,562.80
NEW YORK STORE SALES
Defense Bond and Stamp sales in retail stores
in New York City totaled $468,701 in the four days
since sales began January 2, a preliminary report
indicated. (Stories from Herald-Tribune and New
York News attached.)
REGULAR COMIC STRIP FOR BONDS
A half page comic strip entitled "Small Fry"
is being made by Al Cobb, who draws "Li'l Abner".
This will appear every other Sunday in newspaper comic
magazines beginning in February. Two strips have al-
ready been drawn and approved. Mr. Cobb, one of the
country's highest paid cartoonists, is contributing
his services.
NEWSPAPER ADVERTISING CAMPAIGN
By telegram, 1,473 daily newspapers ware
asked to sell to local advertisers a series of bonds
and stamps advertisements. of this number, 1,350 news-
papers wired spprovel of Treasury's ad plan. Replies
are still coming in.
Regraded Unclassified
278.C
-3-
Advertisements in proof form and mats are
being furnished newspapers on a continuing basis,
starting in ten days. Before the telegram was sent,
various papers had undertaken similar advertising
campaigns. (Copies are attached).
EDITOR AND PUBLISHER PROTESTS
Editor and Publisher, trade magazine for
newspapers, carried an editorial this week criticis-
ing the Treasury for asking business publications to
run full page advertising on pay roll savings on a
free basis. The magazine said it had declined to run
the ad.
Editor and Publisher was the only trade
magazine taking this stand. The ad is being run by
more than 600 other publications, with total circula-
tions exceeding 6,000,000.
MAGAZINES.
News Week has written advising they will
print full page ad on pay roll savings.
Collier's Magazine has promised editorial
on payroll savings.
EXTENSION OF SELLING AGENCIES.
State Administrators were notified of
Secretary Morgenthau's plan to permit corporations with
large numbers of employees to qualify as agents to sell
E Bonds.
Regraded Unclassified
278-D
-4-
SPECIAL
Several years ago Proctor and Gamble asked
3,500 people which prizes would be most attractive:
cash or "baby bonds"? The answer was cash - three to
one.
Recently, 3,500 people were asked the same
question, this time comparing Defense Bonds with cash.
The answer favored Defense Bonds, a complete reversal
of opinion.
TELEVISION
Last night (Friday, January 9) C.B.S. broad-
cast 8. 45 minute (8:15 to 9:00 p.m) television show
featuring bonds and stamps.
Robert W. Sparks, Field Director, spoke for
Treasury Department; films from Liberty Loan Drive in
last war were shown; posters of this war were televised
and Ed Reed, who is head of cartoonist committee for
Treasury, exhibited a number of cartoons being used in
this campaign.
This is one of a number of television shows
planned.
TOSCANNINI
Three more Toscannini concerts, with N.B.C.
symphony orchestra are scheduled, one each in January,
278-E
-5-
February and March. Dates now definitely set are:
January 24 and February 28.
HOUSE MAGAZINE
This activity is already showing tremendous
results. Attached is portfolio showing clippings from
numerous house organs. To date, 684 house magazines
have indicated that they will run or have run, our
column feature "Defense Bonds Buy Tanks."
Regraded Unclassified
278-F
-6-
LABOR PRESS ADVERTISING
Following President Roosevelt's message to
Congress telegrams were sent to all labor papers who had
not advised us they would publish the Payroll Savings
advertisement. To date, 95 papers have replied that they
will run the ad, in addition to 99 which previously had
indicated they would use it. This is a total of 194
papers with an approximate circulation of 1,100,000.
FIELD OF ENTERTAINMENT
American Federation of Musicians is sending
notification to all 133,000 members to lend all cooperation
to the Defense Savings Program. Bond and Stamp announce-
ments will be made before every audience at every
performance. "The International Musician," official
AFM publication, will carry on its first page instructions
on how to make these announcements and also a list of
suggested Defense Bond messages.
American Guild of Variety Artists have their
campaign well underway. Through their offices in key
cities throughout the country, they are reaching into
vaudeville, theaters, cafes, hotels, music shows, ice
carnivals, rodeos, water shows, carnivals, circuses, etc.,
with Defense Savings messages. All 18,000 members have
been instructed to make announcements at each performance.
Regraded Unclassified
278-G
-7-
AGVA offices, in addition, are contacting vaudeville
theater and cafe managers, urging lobby display of
Defense Savings posters. Members of AGVA have written &
new song, "Buy More Defense Stamps and Lick the Other
Side," which they are promoting. Title of the song is
also being used as a slogan and incorporated on AGVA
letter heads.
American Guild of Musical Artists is placing
the slogan "Buy Defense Bonds and Stamps" on every program
of every concert artist in the United States. Many
artists plan to make special appeals during their concerts
in behalf of Defense Savings.
Actors Equity is working out plans to present
Defense Savings announcements during legitimate pro-
ductions, which will be impressive and yet not destroy
the illusion of plots.
Eddie Cantor and the cast of "Banjo Eyes,"
have signed the Payroll Savings Plan, and photographs
of the cast, taken Friday, January 9, are being readied
for national distribution. Cantor's announcement that
all profits from "Banjo Eyes" would be invested in
Defense Savings Bonds was released to the press by the
Defense Savings Staff here.
Photographs of the cast of "Pal Joey,"
participating in the Payroll Savings Plan, were taken
in Washington and have been sent to Chicago newspapers
Regraded IIn
278-H
-8-
FIELD OF ENTERTAINMENT (continued)
for release when the show opens there Monday, January 12.
Guy Lombardo and his orchestra have also signed
the Payroll Savings Plan. Photo is attached.
All theatrical press agents are being notified
to place emphasis on Defense Bond and Stamp tie-ups
wherever possible. A representative of the Defense
Savings Staff will address a meeting of the Publicity
Club of New York on Thursday, January 15.
SCREEN STARS
Dorothy Lamour is in New York City devoting her
time to the promotion of the Payroll Savings Plan. She
will tour Philadelphia, Baltimore, Washington, Albany,
Syracuse, Rochester and Buffalo.
Judy Canova will be guest star at the North
Carolina Defense Savings Rally in Charlotte, on January 19.
Carole Lombard will make radio broadcast appeals
and give press interviews in the interest of the Defense
Savings Program enroute from Hollywood to Indianapolis
where she will guest star at a Defense Savings Rally
on January 15.
Jane Withers and George Raft will make frequent
appearances for Defense Savings throughout the Southern
States between January 15 and February 15.
Sabu, favorite of children, will open the
Newspaper Carrier Defense Savings Stamp rally in
Regraded Unclassified
278-L
-9-
SCREEN STARS (continued)
Washington, D. C., and will then go on tour to one city
each Any for about ten weeks, starting around February 1.
CIVIC CAMPAIGNS
Special camptigns to romote the surchase of
bombers through wides read sale of Defense Sevings State
and Bonds are being started immedi tely by all Hearst
newspapers.
NEUSHALLS
Broadcast Music Incor oroted (BMI) has ublished
C new song, "They Sterted Something" (But Ke Are Going To
End It) by Ernest Gold, Robert Sout OR Don McCray. The
song continuity "lugs Bond AND Stamp sale.
FIELD DIVISION - PAYROLL SAVINGS
Among the lorger industries of the nation, the
following re orted those develo emnts in Defenec Payroll
Covings during the week:
Congoleum-Nairn, Inc., with 3,000 employees,
now line 100 per cent participation.
Republic Steel Cor oration, with 70,000
employees, will install myroll allotment within the next
three or four days.
United StAtes Steel Cor constion adopted peyroll
allotment for some 300,000 ent loyees bhie week and exlects
Regraded Unclassified
278-5
-10-
FIELD DIVISION - PAYROLL SAVINGS (continued)
80 percent cooperation at the outset.
United Fruit Company hes adopted Payroll
Savings in all its branches.
United Aircraft, Connecticut, доз 22,350
employees out of 32,000 participating in Payroll Savings
and contributing $45,000 weekly in allotments.
Boeing Aircraft authorization cards are being
received at the rate of 300 weekly.
Spring Air Company plants in Holland, Michigan,
and Owensboro, Kentucky, report employees in plant end
office, in addition to executives, are subscribing one
day's wages or salary every month.
Electric Boat Company, Groton, Connecticut,
is averaging $8,800 weekly in Bond and Stamp purchases,
with 4,400 out of 7,200 employees participating.
Delta Electric Company in Marion, Indians,
has adopted a unique system to push up participation
by employees in Peyroll Savings. Company has erected a
large board in front of its plant on which are listed
employees enrolling in plan. (Photograph is atteched. )
Nine firms in Ellensburg, Washington report
100 per cent participation in the Payroll Sevings Plan.
Consolidated Builders, Inc., have installed it at Coulee
Dam. The Chechalis (Washington) Kiwanis Club reports
Regraded Unclassified
278-k
-11-
FIELD DIVISION - PAYROLL SAVINGS (continued)
100 per cent participation and is undertaking a campaign
to install Payroll Savings in every firm in town under
the slogan "100 Firms 100 Per Cent."
PLEDGE CAMPAIGN
The Field Office reports plans complete for
the Pledge campaign to go forward in Oregon on January 20.
A test Pledge campaign for a county in Oregon is also in
prospect.
FIELD OFFICE
Status of organization work throughout the
country follows:
Changes Since
States January 3,1942
State and local committees organized.
41
+ 4
State Committees organized.
7
- 4
Administrators and/or chairmen
3
appointed.
1
Not started.
52 incl. D. Alaska,
Hawaii and two
field divisions
in California.
(See Map Attached.)
278-L
-12-
DIRECT MAIL
Direct mail sales for the week were $1,205,547,
bring the total mail sales as of January 8 to $15,444,176.
Of this, the First Customer Mailing has produced $4,843,797
in 93 days of pulling. In 103 days of pulling, the First
Industrial Mailing has produced sales totaling $3,280.241.
RADIO
The Treasury Hour Radio program was named by
Variety, trade paper of radio, stage and screen as one of
the best programs of 1941.
Radio Minute Women named to supplement group
of National Radio Minute Men, all of whom have accepted
invitations to broadcast repeatedly. Women's group
includes following program conductors, who will use men
and women guest speakers:
Alma Kitchell, NBC; Adelaide Hawley and
Mary Lee Taylor, CBS; Bessie Beatty, MBS; Mary Margaret
McBride, Isabel Manning Hewson, Nancy Booth Craig and
June Hynd, NBC. List of guest speakers to appear on
their programs is attached. (Radio Attachment No. 1).
Regraded Unclassified
278-M
-13-
Dorothy Lamour is set to make "Minute Man"
appeal and sing "Any Bonds Today?" on the Lucky Strike
Hit Parade broadcast over CBS on January 10, and on the
Texaco Fred Allen program on January 21.
Radio Minute Men will make Bond and Stamp
talks on the Quiz Kids broadcasts for an indefinite
period. Speakers for first ten weeks have already been
booked. Other network sponsors which have arranged for
Minute Men talks are Kraft Cheese, Armour & Co.,
Williamson Candy Co., Cudahy Packing Co., S. C. Johnson
Co., Brown and Williamson Tobacco Co., P. J. Wrigley Co.,
Carnation Milk Co., Mars, Inc.
Farm Minute Men have been regularly scheduled
on 184 programs. New Farm Defense Savings Radio copy is
attached. (See Radio Attachment No. 2).
Foreign Language Minute Men have been scheduled
on 156 programs.
Regular Boston Minute Men radio appearances
began on January 5, with eight now scheduled daily over
all Boston radio stations.
Time of the Mutual Broadcasting System
Treasury broadcast "America Preferred," is being changed,
effective January 10, from Thursday to Saturday nights.
New time is 8:00 to 8:30 p.m. EST.
Regraded Unclassified
278-N
-14-
The first Negro radio program, regularly
scheduled for Defense Savings Program, will be heard
Sundays over the Columbia Broadcasting System, beginning
January 11. Program is "Wings Over Jordan".
The Wander Company, sponsors of "Captain
Midnight", is organizing an "honor roll" of listeners
who buy Defense Stamps. The program is designed to
reach children from eight to twelve years of age, and
has 600,000 enrolled as "Captain Midnight" club members.
The sponsors are beginning a five week promotion campaign
and the Mutual Broadcasting system is publicizing.
Actors and actresses in all the 14 Blackett-
Sample and Hummert radio serials have been asked by
Anne Hummert to participate in Payroll Savings Plan.
(See Radio Attachment No. 6). American Federation of
Radio Artists has advised that it will subscribe a large
sum to Defense Bonds.
Although the Louis-Baer fight lasted only
two minutes and 56 seconds, two appeals for the Defense
Savings Program were made during the broadcast sponsored
by the Gillette Safety Razor Company.
Regraded Unclassified
278-0
-15-
Adam Hats Company, in connection with its
radio campaign of sports broadcasts, is placing adver-
tisements in newspapers throughout the country in behalf
of Bond and Stamp purchases. (Copy of advertisements
attached) (Radio Attachment No. 4).
Eighty per cent of Benrus Watch Time Signals
will be given over to Defense Savings announcements for
an indefinite period. They are heard 44 times daily in
11 cities. (Radio attachment No. 5).
Esso News broadcasts (Standard Oil Company of
New Jersey) has scheduled 128 Bond and Stamp announcements
for January. These are broadcast in 34 cities.
Also attached: an example of Payroll Defense
Savings material as part of a radio script. (Radio
attachment No. 7).
PRESS
Response to telegraphic requests to leading
editorial cartoonists to stress Defense Payroll Savings
is most encouraging. Attached are cartoons by Berryman,
two by Talburt, and one by Rolin Kirby. Originals of
these cartoons are being sent to the Treasury and sent out
by the Press Section to all newspapers. Two cartoons
emphasizing Payroll Savings are scheduled for the next
mailing of cartoons.
Regraded Unclassified
278-P
-16-
PRESS (continued)
Photos of Jack Dempsey, buying Defense
Bonds, after his effort to enlist in the Army was
turned down, were distributed by International News
Photo, Aome, and were widely used by newspapers.
Copy from the New York Herald Tribune is attached.
Use of mats of new Defense Savings Posters
by all newspapers continues. A proof of mat sent out
this week and tear sheets showing reproduction in the
New York Times and Herald-Tribune of January 10 are
attached.
Mats of comic cartoons are also getting a
widespread play in the press. Tear sheets from various
newspapers showing these cartoon reproductions are
attached.
Editorial from New York Herald-Tribune on
Defense Savings is also attached.
Regraded Unclassified
278-Q
-17-
NEWSPAPER CARRIER PLAN
Based on preliminary sales reports from 474
newspapers, a total of 34,688,140 ten cent Stamps --
or the equivalent in Bonds or Stamps of larger denomi-
nations, with cash value of $3,468,814 -- have been sold
by 101,088 newspaper carrier boys. The sales average is
$34.31 per boy.
These newspapers have a total city circulation
of 10,532,666. The plan has been in operation from one
to 16 weeks (Philadelphia Evening Bulletin) with the
average period of operation being four weeks. (See chart
attached).
Regraded Unclassified
218-R
ANALYSIS OF SALES OF E BONDS IN DECEMBER
Total Sales - May through December
New York leads all states in total sales of E Bonds since start
of the campaign, followed by Pennsylvania, Illinois, California and Ohio in
that order. Nevada is at the bottom of the list of states, with Hawe11
(incomplete returns) ranking above, and Puerto Rico, Alaska, Virgin Islande,
Gues and Башса ranking below Nevada.
Total Sales 1n December
New York also led all states in total sales in December, followed
by Pennsylvania, California, Illinois, New Jersey and Ohio. Nevada was again
at the bottom of the state list with Hewaii. Puerto Rico, Alaska and the
Virgin Islands below Nevada in rank.
Bonds Sold in December as a Percentage of Total Sales
Since Start of the Campaign
61.3% of total E bonds sold in Puerto Rico since start of the
cammaign were sold in the month of December. 43.9 of the totel E bonds
sold in Nevads were sold in the month of December. At the other end of
the scale, 24.0% of total E bonds sold in Vermont were soll 14 the month of
December.
Percentage Change in December Sales over November
Percentage changes in sales in December over November ranged
from a decrease of 60% in the Virgin Islands to an increase of 482.8 in
Puerto Hico. Taking just the states, percentage increases ranged from
142.7 in Vermont to 426.7 in Louisiana.
Regraded Unclassified
278-5
-2-
Per Capita Sales
District of Columbia led in per capita sales in December followed
by Nevada, New Jersey, Connecticut and New York in that order. South Carolina
was at the bottom of the list of states. Hawaii (incomplete returns).
Puerto Rico and the Virgin Islands ranked below South Carolina with Alaska
above in rank.
Sales of 3 Bonds as a Percentage of Income
Taking sales of I bonds as a percentage of estimated 1941 income,
Montana ranked first followed by Missouri, Wyoming. New York, North Dakota
and Mississippi. Vermont ranked last among the states.
Às can be seen from the attached map, the areas making the best
showing were the Northwest, the East Coast from Connecticut and New York
through Virginia, the West Coast (with the exception of Washington) and a
strip down through the middle of the country from Wisconsin through Texas and
Louisiana (with the exception of Arkansas). The area making the poorest show-
ing was the South. The percentage of income going for defense bonds apparently
tenda to decline with the income level.
Employees Exposed to Payroll Savings
New York led the list in the number of employees exposed to payroll
savings as of January 24th. followed by Pennsylvania, Michigan. Illinois and
Ohio. At the foot of the list was Louisiana with no employees exposed.
Comparing the percentage of all employees exposed to payroll savings
in the U. S. that were exposed in each state with the percentage of the total
sales of È bonds that were made in each etate in December, there appears to be
Regraded Unclassified.
278-T
-3-
& close correlation between the two series in December. Notable exceptions
were New York which had 24.25% of the total U.S. employees exposed to payroll
savings but which sold 16.86% of the total bonds sold. Pennsylvania had
12.92% of the U.S. employees exposed with sales totaling 8.72% of the bonds
sold in the U. S. Michigan had 9.01% of the total U.S. employees exposed
against 4.07% of the sales. On the other hand, Texas sold 3.65% of all the
bonds sold in December with .84% of the total U.S. employees exposed to pay-
roll savings. Since the figures on the sales of I bonds are for December and
the figures on employees exposed to payroll savings are through January 24th,
no definite conclusions can be drawn. Also, varying wage levels in the states
should be taken into consideration. However, since the percentages compare BO
closely in many states, it is indicated that the payroll savings plan is having
a marked effect on the sale of E bonds.
Radio Announcements
Texas led all states in the number of general one minute radio
announcements in December (possibly partly explaining why the percentage
of total U.S. sales vas higher in this state than the percentage of all U.S.
employees exposed to payroll savings exposed in the state). California ranked
second with Pennsylvania third. Vermont ranked last.
DECEMBER SALES OF E BONDS AS A PERCENTAGE UF ASTIMATED 1941 INCOME PAYMENTS.
ages
/
278-U
40%
/
RAND MONALLY
imme
/
-
NORTH CARDITA
MISNESOTA
732
55 ? 55
52%
43
-
For
WISCONSIN
i
SOUTH DAKITTA
50%
WYOMING
/
51%
40%
MICHIGAN
56%
39
MAIL
!
58%
41%
UTAH
IOWA
47
ILLINOIS
CATIO
50%
51%
54%
CULORADO
39
INDIANA
35
37%
41%
5mo
MISSOURI
46%
4%
west
40
VIRGINIA
KANSAS
47
47%
NO%
VINGINIA
44%
60% 60 2
ARIZONA
58%
54%
51%
KENTUCKY
MORTH CAROLINA
ATTENTA Date
NEW MEXICO
10
OKLAHOMA
37%
TEXAS
TERMESSEE
44
37%
LOOSE LEAF DUTLINE MAP
45'
53
42%
42
ALABAMA
[crongia
SOUTH CARCILTHA
321
MOSISSIPPI
55%
39
33%
LOUISIANA
49
48%
&
FLORIDA
B
&
45%
466 or above 024 states a D.C.)
Below .467 (24 states)
101 80
UNITED STATES
Regraded Unclassified
279
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
January 10, 1942
Anty
:
0110
D. C.
Luis you W
n'll - be
- i to OKLING = ALV nel
tal of ano Britten 44411
DATE to ans bomo-19 in mastion THE
Frederica millips.
145 your instruction - I 1410 1 So
------------------------- - copy 02 has recent INVOICE to me
U.S. Eve toot letter I WILL
chine visit the oritish 2111 not 10
12% mark Jul transition & while
mich - in settiment of your of time
D. 5. obligation in? Huncio under the
:- Por your and Information
: understand time to 061- the AP Department
+- admin 74 V1 6.18 its 11676 In
With net ADDRE,
Amounts ut,
Regraded Unclassified
280
THE ITISH CRUNCIL I NOT ICA
00 a
Franklin "tion
1942.
Dear Mr. Stettinius,
Thank ou for your Tabe. 5" the 1st
instant, "ast ang /r.
and General Turn is no" out of date.
In via 0" the mantCast brant -
stall have to go du ut the proceedr the sales of
t1 not rubber from Malays mich in Un most moli!
parts of our ex ort trade, I uproad No. (orgentheu
further, who communicated 1th 21. Patternou. I enclose
A copy of & letter which I received (ro Xr. Potterson
and B. memorindum chich I 12: retionsl not 1th
Colonel Parke Holland.
I should add $1.05 size that
memorandiva are to a required out as rough estimation
and it vill Imp nome before the exict ficures
known.
There is, of courie, aretica of our
recovering from Tun 1a any 1 respect at material
delivered 13 art of the United the unlertatings nt
the Moscow Conforence. "of" fuall * seceive payment of
any kind from Juseia 1. respect of (a) riti made
material, (b) Land-Losse m to 1al delivered to lussia
in fulfilment of British o livetions under the
Protocol. The onl & mont ne #ho 14 from
would be in respect of material, 15 any, inlivered Ln
fulfilment of ritish or Mom ind which had (FOV-
1ousl cost as dollars under pre-lend an smoth.
"ours sincerel
(1m-d) F. Talli
Mr. E. E. Stattindus, J=.,
Office of
Five ?ifteen 22nd
"uni V. 17.
Regraded Unclassified
281
THRABUNY DEPARTMENT
OFFICE OF THE SHOREDARY
January 10, 1942
CORFIDENTIAL
Received this date from the Federal Reserve
Bank of Box York, for the confidential informa-
tion of the Secretary of the Treasury. compla-
tiem for the week ended December 31. 1941. show-
ing dollar disbursements out of the British
Empire and French accounts at the Federal Reserve
Bank of New York, and the seans by which these
expenditures were financed.
A
lap-1/10/42
Regraded Unclassified
0
o
?
282
1
FRIERAL RESERVE BANK
OF BEV YORK
January 8, 1942
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. D. White
I as enclosing our compilation for the week ended
December 31, 1941. showing dollar disbursements out of the
British Empire and French accounts at this bank and the means
by which these expenditures were financed.
Faithfully yours,
(Signed) L. V. Knoke
L. W. Knoke,
Vice President.
The Honorable Henry Morgenthan. Jr.,
Secretary of the Treasury,
Washington, D. 0.
Enclosure
Copy:1c:1/10/42
Regraded Unclassified
OF
DEBITS
CREDITS
Proceeds of
INF.
Gor's
Salas of
(+) or
Cor't
Promots
Total
Expendi-
Other
Total
Securities
Other
Decr.(-)
Total
Expendi-
Other
Total
of Gold
Other
Der, (-)
PERIOD
Debite
tures(a)
Debits
Credite
Gold
(Official)(b)
Credita(e)
in Balance
Debite
tures (d)
Debite
Credite
Sales
Credite
in Balance
But year of was
(0/29/39-0/26/40)*
1,793.2
605.6
1,187,61,828.2
1,356.1
52.0
420.1
+ 35.0
866.3(p)
416.6(e)
449.7
1,095,3(a)
900,2
195.1(e)
+229.0
period through
1940
2,792.3
1,425.6
1,356.7
2,793.1
2,109.5
108.0
575.6
+ 10.8
878.3
421.4
456,9
1,098,4
900,2
198,2
+220.1
sear of was
2,203.0
1,792.2
410.8
2,189.8
1,193.7
274.0
722.1
- 13.2
38.9
4.8
34.1
6.8
-
8.8
- 30.1
1942
Aug. 26 - Oct. 1
140.9
105.9
35.0
176.2
20.1
2.0
154.1
+ 35.3
0.3
-
0.3
0.5
-
0.5
+ 0,2
Date 2- Det. 29
109.0
77.3
31.7
150.9
0.8
-
150.1
+ 41.9
0.3
-
0.3
0.3
-
0.3
Oct. X- Dec. ,
156.1
111,6
44.5
134.6
-
1,0
133.6
- 21,5
16,1
-
16.1
0.4
-
0.1
- 15.7
Dec. 4- Date 11
88.4
69.6
18.8
51.5
-
-
51.5
- 36.9
0,8
-
0,8
0.4
-
Oct
- 0,4
1942
-
TEXT:
Das, 10
29.5
24.6
4.9
8,0
-
-
8.0
- 21.5
0.2
1
0.2
0.1
-
0,1
-0.1
17
17.8
13.2
4,6
18-7
-
-
15.7
+ 0,9
(g)
-
(e)
(g)
-
-
(g)
24
18.7
14.2
4.5
6.8
-
-
6.8
- 11.9
0.1
-
0.1
0.1
-
0.1
-
31
22.4
17.6
4,80)
18,0
-
-
18,0(f)
- 4,4
0.5
-
0.5
0,2
-
0.2
- -0.]
very Conditions Since Outbreak of lar
Transfers from British Purchasing Commission to
700 19,1940) $19.6 Million
Bank of Canada for French Account
England through June 19,1940) 27.6 million
Took ended December 31, 1941
-
willion
Regland (since June 19,1940) 41.6 million
Cumulation from July 6, 1940 162.7
million
4a asothly breakdown see tabulations prior to April 23, 1941,
refor monthly breakdown tabulations prior to October 8, 1941.
(See attached sheet for other footnotes)
Regraded Unclassified
(a) Includes payments for account of British Purchasing Commission, Brit ish Air Ministry, bittle Buyply leard,
Supply Timber Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the Now York Agency of the Bank of Montreal, which apparently represent
the
proceeds of official Brit sales of American recurities, including those offected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the me, although the receipt of the proceeds at this Bank cannot be 1dent ified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Morgenthsu, total official and private British liquidation
of our securities through December, 1940 mounted to $334 million.
(0) Includes about $85 million received during October, 1959 from the accounts of British authorized banks with New York banks,
presumably reflecting the requisitioning of private dollar balames. Other large transfers from such accounts since October,
1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar
receipts.
(d) Includes payments for account of French Air Commission and French Purchasing Commission,
(e) Adjusted to oliminate the effect of (20 million paid out on June 26, 1940 and returned the following day.
(f) Includes:
$4.0 million transferred from New York accounts of British Authorized banks;
$1.8 million transforred from account of Commonwealth Bank of Australia;
$2.6 million representing receipts from wool shipments.
(g) Because of further attachments on the French account hero, there were no transactions in this account during the work ended
December 17, 1941.
(h) Includes $3.0 'million transferred to De Javanche Bank's account here.
Regraded Unclassified
BANK
OF
CANADA (and Canadian Government)
DEBITS
CREDITS
DEBITS
CREDITI
Transfers
to
Proceeds
Transfers from Official
Transfers
British A/C
Net Incr.
to
Proceeds
Net Incr.
Official
of
(+) or
Official
of
(+) or
Total
British
Other
Total
Gold
For Own
For French
Other
Decr. (-)
Total
British
Other
Total
Gold
Other
Dear. (-)
PERIOD
Debita
A/C
Debite
Credits
Sales
A/O
A/C
Credits in Balance
Debite
A/C
Debits
Credite
Sales
Credits
in Balance
First year of war
(8/29/39-8/26/40)=
323.0
16.6
306.4
504.7
412.7
20.9
38.7
32.4
+181.7
31.2
3.9
27.3
36.1
30.0
6.1
+ 4.9
War period through
December, 1940
471-2
16,6
460.6
707.4
534.8
20,9
110,7
41.0
+230.2
57.9
14.5
43.4
62.4
50.1
12.3
+ 6.5
Second year of was
(8/29/40-8/27/4)**
460,4
-
460.4
462.0
246.2
3.4
123.9
88.5
+ 1,6
72.2
16.7
55.5
81.2
62.9
18.3
+ 9.0
Aug. 26 - Oct. 1
23,1
-
23.1
52.2
21.2
-
-
31,0
* 29,1
10.7
0.5
10,2
2,8
2.1
0.7
- 7.9
1941
Oct, 2- Oct. 29
37.4
-
37.4
19.7
11.9
-
-
7.8
- 17.7
8,2
5.5
2.7
8.0
5.9
2.1
+ 0,2
Oct, 30 - Dec. 3
52,8
0,1
52.7
32.5
19.3
-
-
13.2
- 20.3
10.3
6.9
3.2
11.6
9,0
2.6
+ 1.3
Das. L. Das. 31
AT-3
-
47.7
22.2
17.3
-
-
4.9
- 25.5
3a9
1.8
2.1
2,8
0,2
2.6
- 1.1
1942
BEEK ENDED:
30°
the
2.8
-
Dec. 10
3.9
-
.
-
-
2.0
+ 0.9
0.1
0.1
0.6
0.6
+ 0.5
17
17.8
4.0
2.6
-
-
17.8
1,4
- 13.8
1.3
#
2.3
0.5
0,2
-
0.3
- 0.8
14.7
5.5
4.5
-
-
1.0
- 9.2
3
-
14.7
0.1
0.1
-
24
0.1
-
. 0.6
31
11,3
-
11.3
7-9
7.4
-
-
0,5
- 3.4
1,8
1.8
I
1,6
-
1.6(a) - 0.2
Weakly Average of Total Debite Since Outbreak of War
Through Docember 31, 1941
$
7.7
million
- For monthly breakdown 200 tabulations prior to April 23, 1941.
** For monthly breakdown --- tabulations prior to October 8, 1941,
Regraded Unclassified
2SE
ERITISH EMBASSY,
SUX 302
wishington, D. C.
V.T. 1100AA/10/42
10th January, 1942.
Denr Kr. Dietrich,
I have heard from London that consequent on the action
taken by the United States Government the British Government
is freezing all Philippine assete under their control. le
expect to receive the full text of the order in due course.
In tire meentime I an informed that general permission will be
given for pre-zero payments of orders, cheques, drafts, and
letters of credit.
London has stated that there is no oranco in the United
in dom of the Philippine National Bank, but that banks in
the United Kingdom have been warned that all authorizations
issued by the United States High Commissioner to the Philippines
have been revoked.
A6 you are douctless aware, ap lication of the British
Trading With the Enery Act follows automatically from the fact
of occupation by the enemy. although for the information of
the public, specific notification is issued on each occasion.
I am sending this information to Mr. Penle and to Dr.
Livesey.
Yours sincerely,
(Sed) E. J. Stooford
Kr. Frank Districh,
Room 279. D. S. Treasury Dewartment,
Massington, D. C.
0apy:1c:1/13/42
Regraded Unclassified
ADDRESS OFFICIAL COMMUNICATIONS TO
287
THE SECRETARY OF STATE
WASHINGTON, ac
DEPARTMENT OF STATE
m
WASHINGTON
January 10. 1942
My dear Mr. Secretary:
I wish to thank you for putting at the disposal
of the Department a copy of the report of Mr. Merle
Cochran upon his special mission to Hong Kong and
China in the latter part of 1941. Even & preliminary
review of this report shows how very illuminating it
18 and how useful it should be in dealing with current
Chinese economic and financial questions that are
before this Government.
Sincerely yours,
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
288
JAN 1 1942
Dear Mr. Secretary:
1 an sending no you for your Information a
copy of the report submitted to me by Mr. M. Marle
Geshran on his return from his special mission to
Bongkong, China, in the latter part of 1941.
Very sincerely yours.
(Signed) E. Margrathaw. in
Secretary of the treasury.
Enclosure.
The Nonerable
Cardell Full,
justise
Secretary of State.
FAS:hmd:1/5/42
Please return to Secretary's office
n.m.c
Shompson
Regraded Unclassified
OFFICIAL COMMUNICATIONS TM
THE SECRETARY or STATE
289
- 9, e.
DEPARTMENT OF STATE
WASHINGTON
January 10. 1942
In regly refer to
FD
My dear Mr. Secretary:
Reference is made to Generalissimo Chiang Kai-shek's
request of December 30, 1941 that the United States Covern-
ment provide China with $500,000,000 of financial help in
order to support Chinese morale and prevent the effects
of further depreciation of the Chinese currency and
deterioration of the fundamental economic situation in
China (Ambassador Gauss' telegram 548 of December 30,
1941). Reference is also made to Ambassador Gauss'
recommendations thereon as transmitted in nis telegram
549 of December 31, 1941, and to informal discussions of
the matter by officers of the State and Trensury Jecart-
ments and with Mr. Lauchlin Currie.
The Generalissimo's proposal lies been given very
careful consideration. I feel chat, as an Act 02 war-
time policy and to prevent the impairment of Chine's
military
The Honorable
FORDEFENSE
Henry Morgenthau, Jr.,
BUY
UNITED
STATES
Secretary of the Treasury.
SAVINGS
BONDS
AND STAMPS
Regraded Unclassified
290
-2-
military effort which would result from loss of confi-
dence in Chinese currency and depreciation of its pur-
chasing power, it is highly advisable that the United
States extend financial assistance to the Government of
China in amounts up to $300,000,000 at the present time.
I believe that a determination of this Government's
policy to this effect need not await ascertainment of
the attitude to be taken by Great Britain on the similar
Chinese proposal with reference to sterling credits.
I feel that the greatest possible expedition in
reaching a position where an announcement can be made
is highly important. I feel also that it would 300m to
be highly desirable that the British Government be kept
currently Informed of our views and decisions in regard
to this matter in order that the British Government may
be afforded opportunity, should it so desire, to take
simultaneous and comparable action.
Sincerely Condel shill yours,
Rix 2:30pm
Secretary of State
1010 Hr.
Regraded Unclassified
1/12/42
291
#photostats b today to Messrs. White, Southard,
and Viner.
Original given back to Secretary.
TM
STATE
DEPARTMENT OF STATE
WASHINGTON
January 10. 1942
In
refer to
FD
My dear Mr. Secretary:
Reference is made to Generalissimo Chiang Kai-shek's
request of December 30, 1941 that the United States Govern-
ment provide China with $500,000,000 of financial help in
order to support Chinese morale and prevent the effects
of rurther depreciation of the Chinese currency and
deterioration of the fundamental economic situation in
China (Ambassador Gauss' telegram 548 of December 30,
1941). Reference is also made to Ambassador Gauss'
recommendations thereon as transmitted in his telegram
549 of December 31, 1941, and to informal discussions of
the matter by officers of the State and Treasury Depart-
ments and with Mr. Lauchlin Currie.
The Generalissimo's proposal has been given very
careful consideration. I feel that, as an act of war-
time policy and to prevent the impairment of China's
military
The Honorable
Henry Morgenthau, Jr.,
BUY
Secretary of the Treasury.
Regraded Unclassified
-2-
military effort which would result from loss of confi-
dence in Chinese currency and depreciation of its pur-
chasing power, it is highly advisable that the United
States extend financial assistance to the Government of
China in amounts up to $300,000,000 at the present time.
I believe that a determination of this Government's
policy to this effect need not await ascertainment of
the attitude to be taken by Great Britain on the similar
Chinese proposal with reference to sterling credits.
I feel that the greatest possible expedition in
reaching a position where an announcement can be made
is highly important. I feel also that it would seem to
be highly desirable that the British Government be kept
currently Informed of our views and decisions in regard
to this matter in order that the British Government may
be afforded opportunity, should it so desire, to take
simultaneous and comparable action.
Sincerely Condellule yours,
Reids 2:30Pm
Secretary of State
Regraded Unclassified
SIGNATIONS TV
or STATE
B.C.
DEPARTMENT OF STATE
WASHINGTON
In
by refer to
January 10. 1942
My dear Mr. Secretary:
Reference is made to Generalissimo Chiang Kai-shek's
request of December 30, 1941 that the United States Govern-
ment provide China with $500,000,000 of financial help in
order to support Chinese morale and prevent the effects
of further depreciation of the Chinese currency and
deterioration of the fundamental economic situation in
China (Ambassador Gauss' telegram 548 of December 30,
1941). Reference is also made to Ambassador Gauss'
recommendations thereon as transmitted in his telegram
549 of December 31, 1941, and to informal discussions of
the matter by officers of the State and Treasury Depart-
ments and with Mr. Lauchlin Currie.
The Generalissimo's proposal has been given very
careful consideration. I feel that, as an act or war-
time policy and to prevent the impairment of China's
military
The Honorable
FENSE
Henry Morgenthau, Jr.,
BUY
nameo
STATES
Secretary of the Treasury.
WINGS
lumps
Regraded Unclassified
military effort which would result from loss of confi-
dence in Chinese currency and depreciation of its pur-
chasing power, it is highly advisable that the United
States extend financial assistance to the Government of
China in amounts up to $300,000,000 at the present time.
I believe that a determination of this Government's
policy to this effect need not await ascertainment of
the attitude to be taken by Great Britain on the similar
Chinese proposal with reference to sterling credits.
I feel that the greatest possible expedition in
reaching a position where an announcement can be made
is highly important. I feel also that it would seem to
be highly desirable that the British Government be kept
currently Informed of our views and decisions in regard
to this matter in order that the British Government may
be afforded opportunity, should it so desire, to take
simultaneous and comparable action.
Sincerely Condellule yours,
Reid 2:30Pm
Secretary of State
1-10 AwB
Regraded Unclassified
TREASURY DEPARTMENT
296
INTER-OFFICE COMMUNICATION
DATE January 10,1942
TO
Mr. D. W. Bell
FROM V.F. Coe
There are some brief notes attached concerning the
didna loan.
1. The conference Mr. Walte held with State out
31 which came B. decision to get B. letter on political
reasons for the loan.
2, A conversation with Soon in which he told us
hist ne had su ested that the Generalissimo sená a
direct appeal to the Secretary.
3. A digest of this direct a peal.
is. Digest of Fox's latest cable on the loan,
5. A draft telegram recalling FOR and Adler for
advice on the loan.
includeres
Regraded Unclassified
TREASURY DEPARTMENT
297
INTER-OFFICE COMMUNICATION
DATE January December 9. 1942
TO
Secretary Morgenthau
FROM
V- F. Coe
subject: Conference on Loan to China
Mr. White held a conference with Messrs. Berle,
Currie, Livesey, and Legal Division, to discuss
Chiang Kai-shek's request for a loan. It was agreed
that they would ask Secretary Hull to send a letter
to the Secretary stating that for political reasons
negotistions on such a loan should be started. The
group agreed that Fox and Adler should return to advise
on the question of bond issues, etc.
Mr. Soong rang about this matter and 1 told him
that it was receiving sympathetic consideration and
being studied. He said he would like to talk about 10,
and a meeting was agreed to.
Regraded Unclassified
298
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE January 10, 1942
TO
Secretary Morgenthau
FROM V. F. Coe
Eqbject: Conversation with Mr. Γ. V. Soons, January 9
In B. discussion concerning the proposed loan to China,
Vr. Soong save informally the following additional information:
1. The Generalissimo is cabling you airect about the loan.
Mr. Soong had suggested the need for a direct approach to
you. The Generalissimo replied that he was sending B. cable to
you, signing Kung's name.
2. Generalissimo and British.
The Generalissimo told Mr. Soong that the British proposal
( 500 million) was utterly inadequate and included a lien on tne
customs, and that ne felt it useless to deal directly with them.
He is also accusing Niemeyer of breach of faith, saying the
latter first agreed and then refused to put through a messaje
from Chiang Xai-shek to the British Government,
3. Political reasons.
On the political situation, P. Soons presented the same
bicture as others. de pointed out that whereas the Chinese nad
expected the war to mean more military and economic assistance,
they found that the reverse was the case. They were being asked
to send troops into Burma, were finoing supplies curtailed and
there was & possibility of the road itself being cut off. Be
thought that if Singapore fell it would have a very bad effect
on them.
4. Urgency of the loan
Mr. Soong said that 11' Sin apore fell it would be bights
important to make sn announcement of a loan almost simultaneously
and in large sums.
Regraded Unclassified
299
Division of Monetary
Research
-2-
5. Uses of the loan
Mr. Soong put forward informal views in favor of a loan
used as a reserve on various fronts -- mopping up currency,
backing currency, increasing production, paying military
expenses, etc. He mentioned the possibility of a mixed
commission to determine uses, as in the Stabilization Fund
case.
Mr. Soong promised to send to the Treasury data which
he had told Mr. White he possessed on the internal financial
and economic situation.
TREASURY DEPARTMENT
300
INTER OFFICE COMMUNICATION
DATE January 10, 1942
TO
Mr. White
FROM
Mr. Friedman
Subject: Digest of cable from Fox of January 9 transmitting
message from Dr. Kung.
1. Dr. Kung asked Mr. Fox to transmit a reply to the
Secretary's message of December 16. Fox understands
that the message was prepared after consultation
with the Generalissimo.
2. The message expresses deep appreciation of the Secretary's
message of December 16. Dr. Kung thanks the Secretary
for considering the proposal sent through Cochran but
says that it is no longer practical.
3. The message stresses the precarious state of China's
financial and economical situation and says that if
the financial and economic front should collapse it
would be impossible to carry on the war.
4. Dr. Kung appeals for & $500 million political war loan
and says that Britain has been approached for B one
million dollar pound loan. The Finance Minister feels
confident that if the United States will lead, the
Briti sh will follow.
5. The proposed loan is said to be sound on economic
grounds as well as military, but Dr. Kung says frankly
his reason for approaching the Secretary is above all
political.
6. Timeliness is said to be the essence of such a move
in order to show the confidence of the Allied powers
in China. Early announcement of the loan would have
an immediate effect throughout Asia and would electrify
Chinese public opinion.
7. Dr. Kung concludes the telegram by saying that the
appreciation of the Secretary's keen and continuing
interest in China gives him confidence in sending
this telegram.
301
Treasury Department
Division of Monetary Research
Date 1/10/42
19
To:
Secretary Morgen thau
From: V.F. Coe
Fox disagrees with Niemeyer
about the loan. Your message
of Dec. 16 to which Pox refers
was one of willingness to
cooperate for victory.
Regraded Unclassified
TREASURY DEPARTMENT
003
INTER OFFICE COMMUNICATION
DATE Januar y 9, 1942
TO
Mr. White
FROM
Mr. Friedman
Subject: Digest of cable from Fox dated Jenuary 6, 1942
regarding loan to China.
1, Sir Otto Niemeyer Beeme to realize that loan to Onina is
desirable, the only question being the size of the loan.
However, he believes that China's request for loan will
be turned down.
2. Mr. Fox thinks this would be an unfortunate mistake. He
thinks that it is most important 0.8 far 8.8 Great Britain
is concerned to offer to supply goods from Indie and Burma
rather than & large amount of money.
3. Mr. Fox suggests that there should soon be received for
delivery to the Generalissimo a message along the lines
of our statement of December 16 (section four) but a
little more specific if it 18 feasible.
Regraded Unclassified
303
AF
Chungking via N. R.
This telegram must bE
paraphrased before being
Dated January 6, 1942
communicated to anyone
other than a Govern-
Rec'd 6:22 s.m,; 7th
mental agency. (BR)
Secretary of State,
Washington.
19, January 6, (?) p.m.
COMFIDENTIAL FROM FOX FOR THE SECRETARY OF THE
TREASURY.
TF 11
Sir Otto Niemeyer and Hall-Patch called yester-
day to discuss loan to China, Wismeyer SEEMS to rea-
lize: (one) that political situation is bad and that
Economic and finencial considerations are secondary;
(two) that loan to China is desirable, the only QUES-
tion being the BiZE of the loan.
Tiemeyer does not believe any goods can get into
China and that China's request for a loan vill be turned
down. I think this would bE an unfortunate mistake. I
believe that it is [JOI'E important as fer 98 Great Bri-
tain is concerned to offer to supply goods such as
cotton and cotton yarn from India and Burma and from
India steel if it can be, Et ceters, rather then large
amount of money, and that there should soon be received
for delivery
Regraded Unclassified
304
-2- #19, January 6, (?) p.m. from Chungking via N.R.
for delivery to Generalissimo a message along the
lines of your statement of DECEMBER 16 (section four
of 304) but & little more specific if it is feasible
at this stage.
GAUSS
NPL
305
January 10, 1942
MICRICAN ENBASSY,
CHUNCKING, CHINA.
TOR FOX you THE SECRETARY OF THE TREASURY
IF THE ARRAIGE/ENTS CAN BE MADE, SECRETARY MORGENTHAU WOULD
LIKE FOR YCU AND 18. ADLER TO RETURN TO WASHINGTON TO ADVISE THE
PREASURY IN COMMECTION WITH DISCUSSIONS ⑆ ECONCLIC AND TRANCIAL
ASSISTANCE TO CHINA. CALL YOU ARPAIGE FOR All ALTENATE FOR YOU FOR
WE PERIOD INFIT YCU ARE AWAY 7' 01' CENTA?
IF WOULD E "ELPFUL F YOU COULD DISCUSS IT PROBLE' OF
TAXIL ASSISTANCE WITH THE CHILESE AUTHORITIES AND BRTIG DATA
HEARING ON THE PRESENT SITUATION.
Regraded Unclassified
306
0
DEPARTMENT OF STATE
P
Washington
Y
January 10, 1942
My dear Mr. Secretary:
In your letter of December 19, 1941 you expressed
your concern for Messrs. W. F. Frese and W. H. Taylor
who were in Hong Kong, working with the Chinese Stabi-
lization Board. You requested that the Department of
State give them all possible assistance and suggested
that the American Consul General in Shanghai might be
able to add them to his staff.
Your office was advised by telephone on Decem-
ber 20 that communication with Shanghai had been out
off since December 7, when the Consulate General was
closed, and that it had not been possible to send
messages to Hong Kong since December 17. A channel
of communication with Hong Kong via Chungking was re-
established for a short time a few days later. On the
24th, after consultation with your office by telephone,
a telegram concerning Messrs. Frese and Taylor was
dispatched to the American Consul General at Hong Kong
but
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
- 2 -
307
but I have now been advised that it was not possible to
get it through to its destination.
The Department's latest information, contained in
a telegram dated December 27, 1941 from Mr. C. E. Gauss,
American Ambassador at Chungking, was to the effect that
it had been reported indirectly that Americans remaining
in Hong Kong were unharmed and that they were housed in
the Hong Kong and Shanghai Bank Building. The offices
of the former American Consulate General at Hong Kong
were located in this building. Although I am unable to
give you any definite assurance concerning the two men
in whom you are interested, I am certain that the former
American Consul General at Hong Kong will do everything
in his power to assist them.
The Department of State has begun negotiations with
the Japanese Government through the intervention of the
Swiss authorities in Tokyo for the exchange of Japanese
official personnel in the United States for American
official personnel in Japan and Japanese-occupied territory.
Such negotiations are necessarily involved and complicated
and repatriation
308
- 3 -
and repatriation of our people may not be completed for
some time. However, the Department of State will make
every effort to have Messrs. Frese and Taylor included
in the American party if an exchange takes place.
Sincerely yours,
For the Secretary of State:
/s/ Breckinridge Long
Assistant Secretary
Regraded Unclassified
BOY
DEPARTMENT OF STATE
Washington
In reply refer to
FD 818.51/950
Jenuary 10, 1942
The Secretary of State presents his complimente to the
Honorable the Secretary of the Treasury and encloses copies of
the persobrase of telegram No. 471, deted December 30, 1941,
from the American Legation, Sen Jose, Costs Rice.
This telegram refers to the Legation's despetch No. 3522,
dated August 11, 1941, and its enclosure, concerning "Cedules" or
Certificates of the Credito Hipotecario de Costa Rice and Mexican
Government Bonds, which was transmitted to the Secretary of the
Treasury in this Debertment's letter dated Sestember 3, 1941.
Enclosure:
From Legation, San Jose,
No. 471. December 30, 1941.
en:copy
1-12-42
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
310
FROM: American Legation, Sen Jose, Costa Rica.
DATE: December 30. 1941, 6 p.m.
NO. : 471
Reference 1a made to despatch No. 3522, dated August 11,
1941, from the Legation.
A well informed source has informed ne that Banco
Nacional de Mexico has offered to sell from 1500 to 2000
Credito Hipote Cario Cedulas to Brnco de Costa Rice, Sen Jose.
LANE
EH: COPY
1-12-42
Regraded Unclassified
TREASURY DEPARTMENT
311
INTER-OFFICE COMMUNICATION
DATE January 10, 1942,
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Metrich
Registered sterling transactions of the reporting banks were BE follows:
Sold to commercial concerns
£4,000
Purchased from commercial concerns
24,000
Open market sterling remained at 4.03-3/4. The only reported transaction
consisted of £2,000 sold to a commercial concern,
The Canadian dollar discount widened to 11-3/8%, as compared with 11%
last night. Virtually no business WELB transacted.
In New York, closing quotations for the foreign currencies listed below
were as follows:
Argentine peso (free)
.2355
Brazilian milreis (free)
.0516
Colombian pe so
.5775
Lexican peso
.2065
Uruguayan peso (free)
.5250
Venezuelan bolivar
.2685
Cuban peso
Par
There were no gold transactions consummated by us today.
No new gold engagements were reported,
X
Regraded Unclassified
312
BRITISH EMBASSY
WASHINGTON, D.C.
10th January, 1942.
PERSONAL AND
SECRET
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,
(For the Ambassador)
R.I.Coptell R. Hell
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
Regraded Unclassified
310
COPY NO.
VOST SECRET
(U.S. SECRET).
OPTEL NO.10.
Information received up to 7 A.M. 9th January 1%2.
1.
NAVAL.
Nothing of importance.
2.
MILITARY.
Libya.
7th. The enemy withdrawal from Jedabya continued being
closely followed by units of the guards and other forcos. The face 1a alow
on account of minefields and booby-traps but by evening our troops had
reached the area 20 to 30 miles 8.8.5. of Jedabyn, El clash between one of
our columns and the enemy having taken place on the road 4 miles South.
8th. Our advance continued slowly on account of minefields.
Columns to the South are threatening the enemy right flank. Enemy armour
not yet definitely located.
Malaya.
No further information.
1,
AIR CPERATIONS.
llostern Front.
7th/8th. 76 tons of B.Z. and over 8,000 incondiaries were
dropped at Brest but apart from some fires results were unobserved. 46 tona
and 2,000 incendiaries were dropped et St. Nazaire in clear weather. Bursta
were seen across the docks, subcarine pens and railway centre, followed by
large fires. 5 R.C.A.F. and 4 R.A.A.F. aircraft took part without casualties
8th/9th. 151 aircraft were sent to Brest and 29 to Cherbourg. A few others
were minelaying and dropping leaflets. No reports yet.
l'editerranoon. Libya,
Blenheins attacked Telfaya. Hurricanes on reconnissance
reported considerable ..T. movement between Jedabya and E1 Agheila. Their
fighter escort probably destroyed A enemy aircraft but 7 of then are sizetne,
two pilota safe.
l'alts.
8th. 27 enemy attacked Luqa.
Burna,
An attack took place on aerodronee in the Dangkolt area by
aircraft of the American Volunteer group. 7 emery aircraft ingime destroyed
on the ground, one of ours is missing.
Regraded L Unclassified
311
TREASURY DEPARTMENT
Washington
FOR RELEASE, AORNING NEWSPAPERS,
Fress Service
Sunday, January 11, 1942.
No. 29-47
1/10/42
Secretary of the Treasury Morgenthau today announced a plan
for refinancing a Treasury issue and three corporate issues which
shortly come due for payment. These issues are the Treasury Notes
of Series A-1942, maturing March 15, 1942, the 3 Percent Federal
Farm Mortgage Corporation bonds of 1942-47, called for redemption
en January 15, 1942, the 2-3/4 Fercent Federal Farm Mortgage Corpo-
ration bonda of 1942-47, called for redemption on march 1, 1942,
and the Reconstruction Finance Corporation Notes of Series 3,
maturing January 15, 1942. An issue of Treasury bonds is being
made available to the holders of the four issues enumerated on a
par for par basis, with adjustments of accrued interest to January
15, 1942 in the case of the Treasury notes and the 2-3/4 Federal
Farm Mortgage Corporation bonds. The basee on which the securities
comprising these four issues may be presented and accepted, and
the new bonds obtained, are specifically set corta in the official
circular released today. The books will be opened for the receipt
of subscriptions tomorrow morning, January 12,
The Treasury bonds now offered will be dated January 25, 1942,
and will bear interest from that date at the rate of two perdent
per annum payable on a semi-annual basis or. June 13 and December 15
in each year. They will tature June 15, 1951, but may be redeemed,
at the option of the United States, on and after June 15, 1949.
They will be issued in two forms: bearer bonds with interest
cousons attached, and benda registered both as to principal and
interest. Both forms will be issued in the denominations of 352,
$100, 3500, $1,000, $5,000, $12,000 and $100,000.
Regraded Unclassified
315
-2-
Pursuant to the provisions of the Public Debt Act of 1941,
interest upon the bonds now offered shall not have any exemption,
as such, under Federal Tax Acts now or hereafter enacted, Other-
wise the securities will be accorded the same exemptions from taxa-
tion as are accorded other issues of Treasury bonds now outstanding
These provisions are specifically set forth in the official circu-
lar released today.
Subscriptions will be received at the Federal Reserve Banks
and Branches, and at the Treasury Department, Washington. Banking
institutions generally may submit subscriptions for account of
customers, but only the Federal Reserve Banks and the Treasury
Department are authorized to act as official agencies, Subscrip-
tions should be accompanied by securities of one or more of the
four issues enumerated in the first paragraph of this statement,
to an aggregate par amount equal to the par amount of the new
Treasury bonds subscribed for. Coupons dated January 15, 1942
should be detached from the 3 Percent Federal Farm Mortgage Corpor-
ation bonds and the Reconstruction Finance Corporation notes and
cashed in regular course. Following acceptance of the Treasury
notes and the 2-3/4 Percent Federal Farm Mortgage Corporation bonds,
accrued interest to January 15, 1942, about $10.33 and $5.90 per
$1,000 respectively, will be paid to the owners of the securities
surrendered.
The right is reserved to close the books as to any or all
subscriptions at any time without notice. Subject to the reserva-
tions set forth in the official circular, all subscriptions will
be allotted in full.
The amounts of the four issues now outstanding are approxi-
mately as follows: Treasury Notes of Series A-1942, $426,000,000;
3 Percent Federal Farm Mortgage Corporation bonds of 1942-47,
$236,000,000; 2-3/4 Percent Federal Farm Mortgage Corporation
bonda of 1942-47, $103,000,000; and Reconstruction Finance Corpora-
tion notee of Series R, $310,000,000.
The text of the official circular follows:
Regraded Unclassified
316
UNITED STATES OF AMERICA
2 PERCENT TREASURY BONDS OF 1949-51
Dated and bearing interest from January 15, 1942
Due June 15, 1951
REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND
AFTER JUNE 15, 1949
Interest payable June 15 and December 15
1942
TREASURY DEPARTMENT.
Department Circular No. 676
Office of the Secretary,
Washington, January 12, 1942.
Fiscal Service
Bureau of the Public Debt
I. OFFERING OF BONDS AND INVITATION FOR TENDERS
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at per, from the people of
the United States for 2 percent bonds of the United States, designated Treasury
Bonds of 1949-61, the amount of the offering to be limited to the amount of
securities tendered and accepted as provided in the following subparagraphs:
(a) Treasury Notes of Series A-1942. -Treasury Notes of Series
A-1942, maturing March 15, 1942, will be accepted in payment for
Treasury bonds subscribed for hereunder.
(b) 3 Percent Federal Farm Mortgage Corporation Bonds of 1942-47.-
The Secretary of the Treasury offere to epply the proceeds of payment of
3 percent Federal Farm Mortgage Corporation bonds of 1942-47, called for
redemption on January 15, 1942, tendered for payment in accordance with
Sections III and IV of this circuler, to payment for Treasury bonds
subscribed for hereunder. Tenders of 3 percent Federal Farm Mortgage
Corporation bonde of 1942-47 for that purpose are invited.
(c) 2-3/4 Percent Federal Farm Mortgage Corporation Bonds of 1942-47.-
The Secretary of the Treasury, on behalf of the Federal Form Mortgage
Corporation, offers to purchase on January 15, 1942, at par end accrued
interest, 2-3/4 percent Federal Farm Mortgage Corporation bonds of 1942-47,
called for redemption on March 1, 1942, to the extent to which the holders
thereof subscribe for Treasury bonds hereunder. Tenders of 2-3/4 percent
Federal Farm Mortgage Corporation bonds of 1942-47 for that purpose are
invited.
(d) Reconstruction Finance Corporation Notes of Series R. The
Secretary of the Treasury offers to apply the proceeds of payment of
Reconstruction Finance Corporation notes of Series R. maturing January 15,
1942, tendered for payment in accordance with Sections III and IV of this
circular, to payment for Treasury bonds subscribed for hereunder. Tenders
of Series R notes for that purpose are invited.
Regraded Unclassified
317
- 2 -
II. DESCRIPTION OF BONDS
1. The bonds will be dated January 15, 1942, and will bear interest from
that date at the rate of 2 percent per annum, payable on a semiennual basis on
June 16 and December 15 in each year until the principal amount becomes payable.
They will mature June 15, 1951, but may be redeemed at the option of the United
States on and after June 15, 1949, in whole or in part, at par and accrued
interest, on any interest day or days, on 4 months' notice of redemption given in
such manner as the Secretary of the Treasury shall prescribe. In case of partial
redemption the bonde to be redeemed will be determined by such method as may be
prescribed by the Secretary of the Treasury. From the date of redemption desig-
nated in any such notice, interest on the bonde called for redemption shall cease.
2. The income derived from the bonds shall be subject to all Federal taxes,
now or hereafter imposed. The bonds shall be subject to estate, inheritance, gift
or other excise taxes, whether Federal or State, but shall be exempt from All
taxation now or hereafter imposed on the principal or interest thereof by any
State, authority. or any of the possessions of the United States, or by any local taxing
3. The bonds will be acceptable to secure deposits of public moneys. but
will not bear the circulation privilege and will not be entitled to any privilege
of conversion.
4. Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $50, $100, $500, $1,000,
$5,000, $10,000 and $100,000. Provision will be made for the interchange of bonds
of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury.
5. The bonds will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States bonds.
III. SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banke and Branches
and at the Treasury Department, Washington, and should be accompanied by securities
of one or more of the issues enumerated in Section I hereof, tendered for payment
or purchase as the case may be, to an aggregate par amount equal to the par emount
of Treasury Bonds of 1949-51 subscribed for hereunder. Benking institutions
generally may submit subscriptions for account of customers. but only the Federal
Reserve Banks and the Treasury Department are authorized to act as official
agencies.
2. The Secretary of the Treasury reserves the right to reject eny subscrip-
tion, in whole or in part, to allot less than the amount of bonds applied for, and
to close the books as to any or all subscriptions at any time without notice: and
any action he may take in these respects shall be final. Subject to these
reservations, all subscriptions will be allotted in full. Allotment notices will
be sent out promptly upon allotment.
Regraded Unclassified
- 3
318
IV. PAYMENT
1. Payment at par for bonds allotted bereunder must be made on or before
January 15, 1942, or on later Allotment and may be made only in Treasury Notes of
Series A-1942 or through application of the principal proceeds of payment of 3
percent Federal Farm Mortgage Corporation bonds of 1942-47, 2-3/4 percent Federal
Farm Mortgage Corporation bonds of 1942-47, or Reconstruction Finance Corporation
notes of Series R, in an aggregate par amount equal to the amount of bonds allotted
hereunder. Coupons dated March 15, 1942, must be attached to Treasury Notes of
Series A-1942 when surrendered, and accrued interest from September 15, 1941, to
January 15, 1942 ($5.89779 per $1,000) will be paid following acceptance of
the notes, Coupons dated March 1, 1942, must be attached to 2-3/4 percent
Federal Farm Mortgage Corporation bonds of 1942-47 in coupon form and accrued
interest from September 1, 1941, to January 15, 1942 ($10,33149 per $1,000) will
be paid following acceptance of the bonds. In the case of registered bonds of
either issue, checks in payment of final interest will be drawn in accordance with
the assignments on the bonds surrendered.
V. SURRENDER OF CALLED BONDS
1. Coupon bonds.- -3 percent and 2-3/4 percent Federal Farm Mortgage Corpora-
tion bonds of 1942-47 in coupon form tendered hereunder should be presented and
surrendered with the subscription to a Federal Reserve Bank or Branch or to the
Treasurer of the United States, Washington, D. C. Coupons dated July 15, 1942,
and March 1, 1942, respectively, and all coupons bearing subsequent dates, should
be attached to such bonds when surrendered, and if any such coupons are missing,
the subscription must be accompanied by cash payment equal to the face amount of
the missing coupons. The bonds must be delivered at the expense and risk of the
holder. Facilities for transportation of bonds by registered mail insured may be
arranged between incorporated banks and trust companies and the Federal Recerve
Banks, and holders may take advantage of such arrangements when available,
utilizing such incorporated banks and trust companies as their agents.
2. Registered bonds.-3 percent and 2-3/4 percent Federal Farm Mortgage
Corporation bonds of 1942-47 in registered form tendered hereunder should be
assigned by the registered payees or assignees thereof in one of the forms here-
after set forth, and thereafter should be presented and surrendered with the oub-
scription to a Federal Reserve Bank or Branch or to the Treasury Department,
Division of Loans and Currency, Washington, D. 0. The bonds must be delivered at
the expense and risk of the holder. The proper forms of assignment are
(a) Where 3 percent bonds are surrendered.- If the new bonds are
desired registered in the same name as the bonds surrendered, "Federal Farm
Mortgage Corporation for payment, the proceeds to be applied to payment for
Treasury Bonds of 1949-51"; if the new bonds are desired registered in
another name, "Federal Farm Mortgage Corporation for payment, the proceeds
to be applied to payment for Treasury Bonds of 1949-51 in the name of
"; if the new bonds are desired in coupon form, "Federal
Farm Mortgage Corporation for payment, the proceeds to be applied to payment
for Treasury Bonds of 1949-51 in coupon form to be delivered to
Regraded Unclassified
319
(b) Where 2-3/4 percent bonds are surrendered.- If the new bonds
are desired registered in the seme name se the bonds surrendered, "Federal
Parm Mortgage Corporation for purchase, the principal proceeds to be
applied to payment for Treasury Bonds of 1949-51"; if the new bonde are
desired registered in another name, "Federal Farm Mortgage Corporation
for purchase, the principal proceeds to be applied to payment for
Treesury Bonds of 1949-51 in the name of
"; if the new
bonds are desired in coupon form, "Federal Farm Mortgage Corporation
for purchase, the principal proceeds to be applied to payment for
Treasury Bonds of 1949-51 in coupon form to be delivered to
VI. GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions, to make allotments on the basis
and up to the amounts indicated by the Secretary of the Treasury to the Federal
Reserve Banks of the respective districts, to issue allotment notices, to receive
payment for bonds allotted, to make delivery of bonds on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
bonds.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offering.
which will be comminicated promptly to the Federal Reserve Banks.
HENRY MORGENTHAU, JR.,
Secretary of the Treasury.
Regraded Unclassified
320
PARAPHRASE OF TELEGRAM RECEIVED
FROM: United States High Commissioner to the
Philippines, (Manila), Fort Wills via N.R.
DATE: January 11, 1942, 11 a.m.
NO.1 16.
The High Commissioner refers to telegram No. 6,
dated the 9th of January.
Since January 1 no communication has been received
from others of Treasury staff in Manila. All vere re-
ported well and safe nt that time. An inquiry through
Swise Consul, Manila, 16 suggested.
SAYRE
Regraded Unclassified
RESTRICTED
321
RESTRICTED
G-2/205/-220: No. 597 M.I.D., 7.D. 11:00 A. Janu try 11, 19L2.
SITUATION REPORT
I. Pacific Theater,
Philippines: Sharp enemy attack on our right Mark
his been thrown back with heavy Jap losses. Hostile air activity
comparatively light. Rowall: Negative roports. Malayar Heavy
fighting in the vicinity of Kuala Lumpur where the situation 8
confused. No report from the East. British Borneo: Japanene
are reported in Jesselton, British North 3ornco, Three: Slight
air activity continued on both sides. Borneo: According to the
pross, a strong floet of Jap transports be an List night to Crind
troops on the Island of Tarakan off the Northeast const of Jornoo,
liest Coast: No further reports of hostile activity
II Septurn Theater.
The Missiane are naintaining pressure on the central front
went and nouthwest of Moscov. There 12 no reported change in the
situation.
III. Western Theator,
ADT: The air ministry stated that the R.A.F beroad Dem
and the lase at Wilholnsboven, on will DE airdrunes in the Iow
country and COVID at Doulogne,
IV- liddle Mastern Thoster.
Iibyan Theater,
Cround: No change.
Air: Aris air forces contime to burb Males From
royorts indicate a credito remive mirit or the D. (-1)
aircraft in The Cyrensica - Triportania secto), centinus
actions against Holfoye and sup 1: routes in Tripolitation
RESTRICTED
Regraded Unclassified