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Volume 602, January 6 – January 10, 1943
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Volume 602, January 6 – January 10, 1943
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 602
January 6 - 10, 1943
- A -
Book Page
Agriculture
For country banks as sources of credit, see
Financing, Government: War Savings Bonds
American Bankers' Association
See Financing, Government: War Savings Bonds
- B -
Banks (Country)
See Financing, Government: War Savings Bonds
- C -
Canada
See Lend-Lease and Office of Economic Stabilization
Cannon, Clarence (Chairman, Appropriations Committee)
See Government Departments
China
Kung thanked for invitation to visit and assured that
United States Treasury advice on China's finances
is always available - 1/8/43
602 156
Correspondence
Mrs. Forbush's mail report - 1/8/43
134
Country Banks
See Financing, Government: War Savings Bonds
- I -
Economic Stabilization Board
See Office of Economic Stabilisation
Elkus, Abram I.
See Financing, Government: War Savings Bonds
Elliott, Harriet
HMJr thanks Dean of University of North Carolina for
continued loan - - 1/8/43
122
- 1 -
Financing, Government
Security markets (high-grade) recent developments
in: Haas memorandum - 1/6/43
6
Government securities - recent changes in prices and
yields: Haas memorandum - 1/8/43
130
Federal Reserve operations in Government securities -
1/9/43
167
Regraded Unclassified
- 1- (Continued)
Book Page
Financing, Government (Continued)
War Savings Bonds:
Country banks as sources of credit: Correspondence
between Agriculture, Treasury, Chester Davis, and
Hemingway (President, American Bankers' Association) -
1/6/43
602
18
a) Wickard-HMJr conversation - 2/9/43:
See Book 607, page 173
American Bankers' Association congratulates HMJr on
success of recent drive - 1/6/43
21
Ohio (P.J. Trounstine) protests treatment accorded
volunteer organizations - 1/6/43
25
Elicus (Abram I.) congratulates HMJr on success of
recent drive - 1/7/43.
71
Survey by Treasury on respective functions and
operations of War Savings Staff and Victory Fund
Committee discussed in American Bankers' Association
letter to Harold Thomas - 1/8/43
126
Payroll Savings Plan: Analysis as of January 2, 1943 -
1/8/43
128
Sales, first 8 days of November, December, and January -
1/9/43
170
- G -
Government Departments
Federal Bureau of Investigation to investigate waste -
Cannon (Chairman, Appropriations Committee) plan
discussed by Biddle at Cabinet meeting - 1/8/43
105
- L -
Lemaigre-Dubreuil, M.
See North Africa, French
Lend-Lease
Tonnages on hand in New York City - - Chief of Transportation,
War Department, report on - 1/6/43
31
Canada:
Suggestions as to reasonable reserve of United States
dollar exchange to be maintained and Canadian gift to
United Kingdom discussed at conference between
Canadian and United States Treasuries - 1/8/43
107
a) Memorandum stating problem - 1/13/43:
See Book 604, page 10
b) Currie memorandum - 1/19/43: Book 604, page 196
c) Conference: present: Plumptre, White, and
Miss Kistler - 1/20/43: Book 604, page 207
d) Treasury letter to Deputy Minister of Finance
Clarke - 1/26/43: Book 605, page 145
1) Clarke's reply - 1/30/43:
Book 605, page 235
Joint War Production Committee of Canada and United States
reports estimates of payments to be made to Canada by
United States for munitions - 1/8/43
121
Regraded Unclassified
- L - (Continued)
Book Page
Lend-Lease (Continued)
U.S.S.R.: For continuation of shipments to, 800
Procurement Division
United Kingdom:
Federal Reserve Bank of New York statement showing
dollar disbursements, week ending December 30, 1942 -
1/7/43
602
89
Aircraft flight delivery as at January 5, 1943 -
British Air Commission report - 1/9/43
171
British gold and dollar exchange assets - report on -
1/9/43.
173,178
(See also Book 603, page 153 - 1/11/43)
Lumber
Stockpile discussed at Cabinet meeting - 1/8/43
105
- M -
May, Erwin
Designation as Financial Attaché, Stockholm, Sweden -
Gaston memorandum - 1/6/43.
30
Military Reports
British operations - 1/6/43, etc.
52,99,100,
159,182,183
"The War This Week, January 1-7, 1943" - Office of
Strategic Services report
102
Office of War Information report - 1/8/43
162
- N -
North Africa, French
Political situation discussed by FDR at Cabinet meeting -
1/8/43
104
Lemaigre-Dubreuil, Robert Murphy's "opposite number,"
discussed in Bullitt note - 1/9/43
164
- 0 -
Ohio
See Financing, Government: War Savings Bonds
- P -
Price Control
See Office of Economic Stabilization
Procurement Division
See also Lend-Lease
U.S.S.R.: "Shipments of cardinal importance" - FDR's
memorandum to HMJr sent to Procurement Division -
1/6/43
35
War Production Board reports on production
performance against materials and equipment commitments
of Second Russian Protocol - 1/15/43: See Book 604, page 210
. Office of Economic Stabilization
Rinutes of meeting - 178743.
121-A
a) Discussion of Canadian price control program
Regraded Unclassified
- R -
Book Page
Reconstruction Finance Corporation
Purchases by subsidiaries from British Empire sources
in 1942 reviewed in letter from Assistant Secretary of
Commerce Clayton - 1/7/43
602
85
Revenue Revision
Forgiveness of taxes for widow of soldier or sailor
killed in action: HMJr asks for plan for - 1/8/43
103,165
a) See Sullivan memorandum - 1/11/43:
Book 603, pages 16 and 17
b) Sullivan and Paul asked for a plan - 2/10/43:
See Book 607, page 300 - 2/10/43
Forgiveness to any member of armed forces for net income
tax exceeding one-third of his pay: HMJr asks Paul to
consider - 1/9/43
165
a) See Sullivan memorandum - 1/11/43:
Book 603, page 20
Roosevelt, Eleanor
Visit to Houses of Parliament described in leaflet -
1/7/43
76
- S -
Security Markets (High-grade)
See Financing, Government
Stabilization Fund
Earnings and expenses for November and December, 1942 -
1/6/43.
37
- T -
Taxation
See Revenue Revision
Trounstine, P. J.
See Financing, Government: War Savings Bonds
- U -
U.S.S.R.
See Procurement Division
United Kingdom
See Lend-Lease
- W -
War Savings Bonds
See Financing, Government
TREASURY DEPARTMENT
1
INTER OFFICE COMMUNICATION
DATE
JAN - 1942
TO
Secretary Morgenthau
FROM
Mr. Heas JA
Subject: The milk price situation in New York City, submitted
in response to your request of January 4.
Earlier developments: On October 10, 1942, the Department
of Agriculture announced a subsidy program on sales of fluid
milk in the New York Metropolitan Marketing Area, designed to
maintain dairy farm income without raising price ceilings to
consumers.
Under this program, which was financed by the Commodity
Credit Corporation, the Department of Agriculture bought milk
from dealers at the prices they were required to pay farmers
in the current month under Federal Milk Marketing Order No. 27,
and resold it to dealers at the lower prices specified in that
order a.s. effective for August 1942.
The subsidy amounted to 40 cents per hundredweight of
milk in December, with the price to farmers $3.50 and the cost
to dealers $3.10. The subsidy has cost the Government recently
between $800,000 and $900,000 a month.
Recent developments: The subsidy on fluid milk in the
New York area was discontinued December 31 by the Department
of Agriculture, at the direction of Stabilization Director Byrnes.
In its place, certain retail price increases were authorized
during the three-month period ending April 1. At that time
it is intended that the price increases will be rescinded, and
e program effecting economies in milk distribution 1s to be
worked out as a substitute for the higher prices.
Director Byrnes explained the withdrawal of subsidies in
New York (and in two other areas) on the ground that it would
be administratively impossible to extend the subsidy to all
areas likely to be affected by the squeeze between farm prices
and retail ceilings.
The action increasing retail milk prices in New York 1s
also designed to replace previous individual March ceilings
(which in some cases were abnormally low) with uniform ceiling
Regraded Unclassified
2
- 2 -
prices for specified types of sales. The ceiling price for
home delivery 18 to remain unchanged at 17 cents & quart,
and oeiling increases of 1 cent to 2 cents a quart will apply
to sales in retail stores and at wholesale. The maximum price
in retail stores will be 14 cents & quart in bottles and
15 cents in cardboard containers.
Secretary Wickard announced on January 4 that a program
1s being worked out as rapidly as possible to reduce costs of
marketing milk, with a view toward rescinding the recent
price increases, and stated that it should be possible to
announce EL number of specific milk marketing economies by
mid-January. Commenting on Secretary Wickard's statement,
the President of the Dairymen's League of New York State has
cited the need for an overhauling of New York City's
"extravagent" delivery system.
Men in the Dairy and Poultry Branch of the Agricultural
Marketing Administration, who are working on the program for
reducing distribution costs, are somewhat dubious about the
possibility of effecting sufficient economies in milk
distribution during the next three months to replace the
recent price increase. They point out that some saving will
be made by eliminating certain low-profit products and un-
essential services, and probably by reducing the number of
deliveries, by insisting on full loads for each delivery
truck, and by allowing only one man per truck. Any changes
effecting a reduction in labor costs will be opposed by the
unions, but it 16 here that the field for reducing costs is
largest. The use of cardboard containers is not a solution,
since they cost more than glass bottles, except in the case of
new plants in which the entire processing, handling, and
distribution system is built around the use of this type of
package.
The increase in milk prices, in place of the subsidy, 16
criticized by milk distributors in the New York area on the
ground that it seriously curtails their operating margins. An
over-all increase of about 1 cent B. quart would be required to
replace the subsidy of 40 cents per hundredweight. While the
authorized price increases will amount to 1 cent a quart for
most stores (and more for some stores) the distributors contend
that 40 percent of their sales are for home delivery, for which
no increase 18 permitted. (The Department of Agriculture says
21 percent 18 sold for home delivery in New York City.)
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 5, 1943.
TO
Secretary Morgenthau
FROM
Lr. Here #
deservate
Attached 1s + remort on the Johnson Milk Company of
Detroit. The renort 18 Lased unon information which was
obtained in Weshington, mostly from the Desartment of
Apriculture. You will note that the employment of non-union
labor is one of the feAtures of the olen, and at the present
time the Johnson Milk Company 18 in difficulty.
In view of these circumstances, I hesitated to send A
man to Detroit without first checking with you. In noving
A Treasury man go out now to look into the situation, you
might be taking some risk of being involved in the controversy.
Dear genge Iagic X you which
Regraded Unclassified
TREASURY DEPARTMENT
4
INTER OFFICE COMMUNICATION
DATE
JAN6 - 1943
TO
FROM
Mr. Hass
Secretary MA Morgenthau
Subject: Operating methods of the Johnson Milk Company of
Detroit.
In response to your request of January 4 for information
on the merchandising methode of a chain store retailer of milk
in Detroit who sells milk at reduced prices, I have ascertained
that the organization in question is the Johnson Milk Company.
I have obtained information about the company from the Department
of Agriculture and from testimony on Mr. Johnson at TNEC hearings.
This company was started on January 1, 1936 by a Mr. George A.
Johnson, who had previously been in business for 13 years in
Grand Rapids, Michigan. At present the Johnson Milk Company
is said to account for about 12 percent of the milk business in
the city of Detroit.
The merchandising methods used by this company are
cractically identical with those used by High's in Washington, D. C.
The lower prices at which the company sells its milk are due
very largely to the following policies:
1. Milk 18 sold only at its own stores, hence there
18 no delivery cost and no oredit risk.
2. A 4-cent bottle deposit is required, which
transfers Et. large part of the bottle loss to the
consumer.
3. Non-union labor 1s employed.
1. Milk 1e bought directly from unorganized farmers
at a flat rate, rather than through the producers'
association on B. blended rate basis.
As B. result of his buying policies, Johnson pays a flat
price per hundredweight for his milk irrespective of its final
use, whereas purchasers from producers in the association are
charged on the basis of the percentage being sold as fluid
milk, butter, etc., with the highest charge being placed on
fluid milk and lower charges on other uses. Since Johnson
sells principally fluid milk, his possible profit margin 1s
wider than if he were buying through the producers' association
and paying the higher fluid-milk price.
Regraded Unclassified
5
- 2 -
If Johnson's buying practice were projected on an
industry-wide basis, however, it would result in the break-
down of the present milk price structure designed to
stabilize seasonally the price of fluid milk, which 18
supported by the Department of Agriculture. His system
18 possible only in a limited way, because he takes advantage
of the pricing system of the producers' association.
The Johnson Milk Company recently had its license to do
business revoked by the Agricultural Commissioner of the State
of Michigan, allegedly because of being in arrears on payments
to producers, such arrears reportedly running up to 2 months.
However, attorneys for the company succeeded in getting a stay
of execution on the license revocation and the company 18 still
operating.
The Johnson Milk Company has been the center of numerous
controversies since its organization in 1936, and his methods
have been investigated by various Government agencies.
Mr. Johnson testified at length regarding his business dur-
ing the TNEC hearings in 1939. He has been at odde with the
Michigan Milk Producers' Association, and 16 not well regarded
by organized labor in view of his employment of non-union
labor.
Since the success of the company in reducing retail
milk prices 1s due in large degree to the fact that, in
handling a relatively small proportion of the total milk
sales in Detroit, it can exploit the pricing system of the
Milk Producers' Association, and to the fact that non-union
labor 1s employed, the system does not appear practicable
for operating on a substantial scale. However, a company of
this type provides an economic service to the consumer in
checking monopolistic pricing practices of milk distributors.
The Johnson Milk Company has doubtless kept retail prices of
milk in Detroit lower than they would otherwise have been.
Regraded Unclassified
6
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 6,
1943
TO
Secretary Morgenthau
FROM Mr. Hasa
Subject: Recent Developments in the High-grade Security
Markets
SUMMARY
(1) Since the close of the campaign, prices of Treasury
securities have risen moderately (Charts I and II).
Changes in the prices of high-grade corporate and
municipal bonds during December were quite small
(Charts II and III).
(2) Excess reserves of member banks were maintained
around $2.5 billions during the first two weeks
of the December financing campaign. In the two
weeks December 16-30, however, they were allowed
to decline by almost $1.0 billion (Chart IV). It
would be desirable if excess reserves were restored
to and maintained at or above $2.5 billions.
(3) Transfers of funds in payment for securities issued
by the Treasury in December were facilitated by in-
creased use of War Loan deposits. The geographical
distribution of the use of such accounts is rather
uneven.
(4) In the past four months, the Federal Reserve System
has given considerable open-market support to par-
tially tax-exempt Treasury bonds, thereby tending
to "freeze" the spread between the yields of taxable
and tax-exempt issues. It might be better if open-
market operations were concentrated on giving all-out
support to taxable securities while allowing tax-
exempts to find their own level.
(5) The Dominion of Canada is preparing to refund a 5 per-
cent bond issue of $100 millions which was originally
floated in the United States in 1922. The refunding
issue will be in three parts of $30 millions each,
including a 2-1/2 percent, 5-year bond; a 3 percent,
10-year bond; and & 3 percent, 15-year bond. The
yields of outstanding Canadian bonds payable in this
country are shown in Chart V.
Regraded Unclassified
7
Secretary Morgenthau - 2
I. Recent Movements in the Prices of
High-grade Securities
After remaining unchanged, on the average, during the
December financing, the prices of taxable Treasury secu-
rities rallied following the close of the campaign. Price
movements from the close on December 23 are shown by
maturity classes and tax status in the table below and by
maturity classes in Chart I.
:
Average price change
: December 23, 1942-January 4, 1943
:
Taxable
:
Tax-exempt
Total
:
(In thirty-seconds)
Notes
1 - 3 years
+3
+1
+2
3-5years
+2
-
+2
Bonds
5 - 15 years to call
+7
+2
+4
15 years and over
to call
+13
+5
+11
Changes in the prices of high-grade corporate and muni-
cipal bonds during December were small (Charts II and III).
II. Excess Reserves
During the first two weeks of the December financing
campaign, the excess reserves of member banks were maintained
at about $2.5 billions. In the two week period, December 16-
30, however, they were allowed to deoline by almost $1.0 b11-
lion to $1,656 millions (Chart IV). On the latter date,
excess reserves of banks in New York City totalled $235 mil-
lions, while reserves in Chicago were deficient by $5 millions.
The reduction in the week ended December 23 may be attributed
8
Secretary Morgenthau - 3
principally to the small volume of open-market purchases by
the Federal Reserve System (only $90 millions) in the face
of an increase of $482 millions in Treasury cash and bal-
anoes with the Federal Reserve Banks, and an outflow of
$237 millions of currency into circulation. In the week
ended December 30, Federal Reserve purchases amounted to
$362 millions, but they were considerably more than offset
by a combination of other factors, including a further in-
crease of $326 millions in the Treasury's cash and deposits
in the Federal Reserve Banks, and an increase of $197 mil-
lions in required reserves partly attributable to payments
for subscriptions to Treasury securities which were made in
the form of War Loan deposits.
In our opinion, the amount of excess reserves should
be restored to $2.5 billions as soon as possible and held
at around that level indefinitely, or until experience shows
that a lower level 1s adequate for financing the war.
The measure of the amount of excess reserves necessary
for the efficient financing of the war must be derived from
the two factors of (1) the largest amount of new securities
which the Treasury expects to sell to the commercial banks
in a single "bite", and (2) the ratio, as determined by
past experience, of the probable amount of commercial bank
subscriptions to such new securities to aggregate excess
reserves.
Both the Treasury and the Federal Reserve people are
generally agreed that $2.0 billions 18 about the right size
for a single "bite". It may well be, as a result of the
educational efforts currently being made by the Federal
Reserve System, that at some time in the future less than
$2.5 billions of excess reserves will be adequate to insure
full subscription to such a "bite". This does not appear
on the record to date, however, and until it does, the
maintenance of $2.5 billions of excess reserves would seem
to be the part of prudence.
Regraded Unclassified
9
Secretary Morgenthau - 4
III. Special Depositaries
Transfers of funds in payment for subscriptions to new
Treasury securities, offered in December, were facilitated
by increased use of War Loan deposits. By this device banks
can make payment for securities purchased for their own or
customers' accounts by crediting the Treasury on their own
books. For example, the increase of $197 millions in required
reserves, referred to above, in the week during which payment
was made for the certificates of indebtedness, was occasioned
by an increase in deposits by about $1 billion, presumably
credited to the Treasury. Had the banks been required to pay
by drawing on their reserves with the Federal Reserve Banks,
the effect of a transaction of that magnitude would have been
to draw down excess reserves by the full billion.
Between October 31 and December 19, 1942, the number of
banks qualified as Special Depositaries for War Loan deposite
increased from 3,253 to 5,260. The aggregate amount of War
Loan deposits for which they are qualified 18 $9,355 millions
or a little more than 10 percent of the total assets of all
active banks. The distribution of Special Depositaries about
the country 1s not uniform. In terms of the amounts of
deposits for which the banks are qualified, the New York
Federal Reserve District leads with about 18 percent of total
assets. The Dallas District shows quite a high percentage
as compared with other areas away from the eastern financial
centers. Details are shown in the table below:
:Amount of Government : Percent of
Federal Reserve District
deposits for which :total assets
qualified
:
of all
: (Millions of dollars )!member banks
Boston
461
11.9
New York
4,317
17.6
Philadelphia
408
9.9
Cleveland
558
9.9
Richmond
321
10.7
Atlanta
282
10.7
Chicago
1,059
10.3
Bt. Louis
242
9.8
.
#
Minneapolis
Kansas City
233
8.9
Dallas
310
13.5
San Francisco
416
6.0
* Figures not available.
Regraded Unclassified
10
Secretary Morgenthau - 5
IV. Yield Differentials Between Taxable and
Partially Tax-exempt Treasury Bonds
In the last 4 months, the Federal Reserve System in its
open-market operations designed to maintain the pattern of
rates in the Government security market, has found it
necessary to give increasing. attention to the purchase of
partially tax-exempt bonds. This may be seen in the follow-
ing table, which compares the average price changes of
partially tax-exempt Treasury bonds with Federal Reserve
Bank net acquisitions of such bonds.
:
Average
: Net acquisitions by
Month
:
price change
: Federal Reserve Banks
: (Thirty-seconds). : (Millions of dollars)
April
-10
-
May
+5
-
June
-7
-1
July
#
-7
August
-4
-4
September
-6
+43
October
-1
+103
November
-9
+216
December
-2
+246
There was no Federal Reserve support in the partially
tax-exempt field during the 5 months, April - August; during
that period, Federal Reserve holdings of partially tax-
exempts were reduced by $12 millions. Since the beginning
of September, however, Reserve holdings of partially tax-
exempts have increased considerably.
To some extent, these price changes may have been
occasioned by adjustments of the spreads between taxable and
partially tax-exempt bonds to changes in the tax law. Under
the Revenue Act of 1942, the tax on income from bonds is
computed on the yield instead of on the coupon as formerly.
In the shorter maturity ranges, the spread between the
yields of taxable and partially tax-exempt bonds is just
Regraded Unclassified
11
Secretary Morgenthau - 6
about equal to the 24 percent normal corporation income
tax on the yield, as the table below indicates, suggesting
that issues in this area are largely held by investors who
are in a position to take full advantage of the tax-exemption
feature. (Quotations in the tables below are as of the
close on December 31, 1942.)
Issues
Yield
(Percent)
2
percent taxable bond 3/15/48-50
1.75
2-3/4 percent partially tax-exempt
bond 3/15/48-51
1.31
Spread
.44
Normal tax on 1.75 percent yield
.42
In the longer maturity ranges, the spread between the
yields of taxable bonds and those of partially tax-exempt
bonds of similar term tend to be smaller than the amounts of
the tax on the yield of the taxable issues, suggesting more
extensive holdings in this area by investors to whom the tax-
exemption feature is of little or no value. This 1s shown in
the table below:
Yield
Issues
:
(Percent)
2-1/2 percent taxable bond 3/15/56-58
2.22
2-3/4 percent partially tax-exempt
bond 9/15/56-59
2.05
Spread
.17
Normal tax on 2.22 percent yield
-53
12
Secretary Morgenthau - 7
It should be noted, however, that the foregoing figures
do not necessarily represent the current view of the market
with respect to the proper spread in yield between taxable
and tax-exempt securities. They represent merely the opinion
of the market some months ago, as modified by such subsequent
changes in the relative prices of taxable and tax-exempt
securities as the open-market operations of the Federal
Reserve System have allowed to take place. The character of
Federal Reserve operations during the past four months, more-
over, would seem to indicate that, had the market been left
to its own devices, the spread would have narrowed during
this period. This likelihood raises the broad question of
whether it might not be more desirable if Federal Reserve
open-market operations were concentrated on giving all-out
support to taxable securities, while merely maintaining an
orderly market for tax-exempt securities and allowing them
to find their own level.
V. Dominion of Canada Refunding
The Dominion of Canada has filed a registration state-
ment with the SEC for $90 millions of bonds to be sold in
the United States for the purpose of refunding the Dominion's
5 percent bonds of 1942-52. The issue to be refunded was
floated in this country in 1922 and first became callable
on May 1, 1942.
The new securities will be divided into three groups
of $30 millions each, and will include a 2-1/2 percent bond
due January 15, 1948, but callable January 15, 1947; a 3 per-
cent bond due January 15, 1953, but callable at any time at
a price which decreases from 104 at the outset to par after
January 15, 1951; and & 3 percent bond due January 15, 1958,
but callable at any time at a price which decreases from
104 at the outset to par after January 15, 1955. The yields
of outstanding Canadian Government securities payable in
United States dollars are shown in Chart V.
Regraded Unclassified
13
CHART I
13
CHANGES IN THE PRICES OF U.S. SECURITIES
Points Plotted Represent the Difference from December 6, 1941 Price of Each Maturity Class
1942
1942
SEPTEMBER
OCTOBER
DEC. JAN. FEB. MAR. APR. MAY JURE JULY AUG. SEPT. OCT. NOV. DEC.
NOVEMBER
19
26
3
in
17
24
POINTS
31
,
DECEMBER
14
21
20
:
12
is
24
POINTS
(Not Change)
(Net Change)
POINTS
Saturday Quotations
Daily
(Net Change)
+
+2
+2
4
+1
+1
+1
+1
NOTES
3-5 Years
+
t
a
o
o
NOTES
1-5 Years
o
NOTES
0
1-3 Years
BONDS
-1
-1
5-ю Years to Cell
-1
NOTES
3-5 Years
-2
-2
-1
-1
BONDS
Clear 15 Mears to Call
BONDS
Over IS Years to Cell
-3
-1 +
-1
-3
-2
BONDS
-2
5-15 Years " Cell
-4
1
-21
-21
-5
-5
-3
-3
-6
de
-3t
-
-7
-7
-4
-4
- -
-8
-4
28
I
12
=
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
is
26
3.
10
17
24
31
7
14
21
=
DEC.
JAN.
FEB.
MR.
APR.
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
1942
1942
Office el to limitry of the Trumpy
F-153-K
- el - - -
Regraded Unclassified
14
14 CHART II
AVERAGE YIELDS OF LONG-TERM TREASURY AND CORPORATE BONDS
1941
MAR
MAY
JULY
SEPT.
NOV.
1942
JAN.
.
in
M
.
$4
-
-
MAR.
IN
.
a
-
is
BY
MAY
=
-
,
IT
is
JULY
H
a
#
SEPT.
1942
.
#
PERCENT
as
as
NOV.
.
18
#
-
4
.
-
-
SEPT
es
a
e
B4
OCT
MOV
DEC.
-
,
#
-
#
.
inverted Scale)
-
.
#
PERCENT my
17
a
3
,
1
A
=
.
12
.
PERCENT
WEEKLY Saturday Quotations
Inverted Scale)
Soals)
1.6
DAILY
1.6
14
1.7
1,7
1.7
1.8
1.8
1.8
1.9
1.9
1.9
Partially tax- exampt
2.0
Treasury Bonds
2.0
Partially tax-exempt
2.0
Treasury Bonds
2.1
2.1
21
2.2
2.2
2.2
Taxable
2.3
Treasury Bonds
2.3
11
Taxable
Treatury Bonds
2.4
2.4
14
2.5
2.5
2,5
2.6
2.6
2.6
2.7
2.7
1.7
High-Grade
Corporate Bonde
2.8
2.0
High Grade
1.5
Corporate Bonde
2.9
2.9
2.9
3.0
3.0
3.0
3.1
-
-
I
.
-
=
.
#
--
T
#
.
-
-
.
.
#
1
.
=
#
a
.
-
of
=
a
N.
3.1
a
-
a
a
=
8.1
JAN,
IF
-
-
MAR
.
⑉
.
D
-
-
4
-
-
-
=
.
⑉
9
=
,
.
.
a
9
#
a
a
-
IF
=
a
,
1
#
MAY
#
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
SEPT.
OCT
NOV
DEC
1941
1942
1942
. Change in compasition of Long-Term Treasury everage
- el - - # a -
- -
Regraded Unclassified
AVERAGE YIELDS OF LONG-TERM TREASURY AND MUNICIPAL BONDS
Yielde Based on Saturday Quotations
1941
1942
FEB
MAR.
APR
MAY
JUNE
ANY
AUS
sept
OCT
NOV
DEC.
JAN
FEE
MAR
AML
MAY
AME
MY
AUG.
SEPT.
OCT.
NOV.
DEC.
I
is
IS
#
#
se
il
24
*
If
.
#
I
:
=
18
ET
.
19
.
If
#
-
I
if
.
-
.
-
.
-
-
,
-
a
.
4
9
.
=
-
.
.
as
,
E
Inverted Scale
Inversed Scale
PER CENT
PER CENT
Partially tax-exempt Treasury Bonds
1.8
(if years or more to sorliest cell deta)
1.8
2.0
2.0
2.2
2.2
Dow-Jones Average
2.4
Twenty 20-Year Municipal Bonds
2.4
2.6
2.4
2.6
2.8
$ 0
3.0
3.2
1.2
PER
PER
CENT
CENT
.40
40
Spread between Treasury
and Municipal Bonds
20
20
o
o
15
20
,
a
-
a
1
is
"
it
=
e
2
,
#
,
H
I
.
#
a
17
#
o
-
as
.
.
-
(7
-
I
:
14
:
26
20
=
JAM
APR
I
-
$
JUNE
.
È
JULY
SEPT
6
AUG
OCT
=
4
il
-
-
NOV
DEC
21
-
JAN
26
ID
FEB
Y
,
E
.
MAR.
19
APR
MAY
AIRE
JULY
1941
-
SEPT.
OCT.
NOV
DEC.
1942
"Armi en line mécoles change - - of Long Term Treasury average
Office of the Secretary of the Treasury
- - - -
F-13 Regraded Uncla
CHART IV
MEMBER BANK EXCESS RESERVES
16
1941
1942
NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
DOLLARS
DOLLARS
Billions
Billions
3.8
3.8
3.6
3.6
All Member Banks
3.4
3.4
3.2
3.2
3.0
3.0
2.8
2.8
2.6
2.6
2.4
2.4
2.2
2.2
1.2
1.2
New York City Banks
1.0
1.0
.8
8
.6
6
4
4
2
2
4
4
Chicago Banks
2
2
o
0
NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
1941
1942
"Change in reserve requirements
F-251
Regraded Unclassified
YIBLDS OF CANADIAN GOVERNMENT SECURITIES, JAN. 2, 1943
Payable in United States Dollars
1943
'45
'47
'49
'51
PER
'53
'55
'57
'59
'61
'63
'65
'67
'69
CENT
PER
CENT
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
o
1943
'45
'47
'49
'51
'53
'55
'57
'59
'61
'63
0
'65
'67
'69
17
Office of the Secretary of the Treasury
of Research and Bististies
F - 258
Regraded Uncla
18
January 6, 1943.
Dear Chesters
On behalf of the Secretary I as writing you in regard
to the matter described in your telegram of December 19.
Secretary Morgenthau, who is away for a few days, was very
glad to take this up with Secretary Wickard, of the Depart-
ment of Agriculture, and has now heard from him.
Secretary Wickard also had heard from Mr. Hemingway,
whom you mentioned in your telegram as communicating with
that Department. Mr. Morgenthau has been assured that the
Department of Agriculture has no intention of overlooking
or appearing to overlook country banks as sources of credit.
Their operations were assumed to exist, ao that instructions
issued by Agriculture dealt only with those of their own
credit agencies. In order to clarify the matter, Mr. Wickard
assures Mr. Morgenthau that further editions of the book you
criticised will draw attention explicitly to the credit
obtainable from country banks.
Although you my have already seen it, I an sending you
a copy of Mr. Wickard's letter to Mr. Hemingway.
Sincerely yours,
f DAN
Mr. Chester Davis
President
Federal Reserve Bank
St. Leuis, Missouri.
Inclesure.
GEF:DWB:ew
1-6-43
Regraded Unclassified
19
DEPARTMENT OF AGRICULTURE
1 ))
WASHINGTON
December 31, 1942
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
Dear Henry:
I am sending attached copy of my correspondence with Mr. Hemingway
of the American Bankers Association. As you will see, this De-
partment had no intention of overlooking or appearing to over-
look the country banks as sources of credit. Their operations
were simply assumed, and in our instructions to our people we dealt
only with the operations that the credit agencies associated with
this Department would have to carry on in the coming year. In
future editions of the campaign book referred to by Chester Davis,
and in other materials we will correct the oversight and draw
attention explicitly to the credit obtainable from country banks.
Sincerely,
Claude
Secretary
Enclosure
Regraded Unclassified
COPY
20
DEPARTMENT OF AGRICULTURE
WASHINGTON
December 29, 1942
Mr. W. L. Hemingway, President
Ame ican Bankers Association
St. Louis Missouri
Dear Mr. Hemingway:
All of us in the Department of Agriculture depend upon and welcome
the support of the nation's banks in the 1943 Food for Freedom pro-
gram pledged in your telegram of December 19. The 1942 record was
meritorious. We count on equally strong support in 1943 as farmers
face up to a very difficult task.
I em advised by the Director of Information that the omission of mention
of commercial bank credit in the information campaign handbook was purely
an oversight. The book wes prepared to guide the Department agencies in
handling information issued in connection with their operations. Natural-
ly the copy was directed toward the part to be played by credit from
Department agencies. The idea was not, however, to imply that these are
the only sources of credit.
In future materials to be issued concerning the Farm Mobilization, the
credit sections will draw attention to the Food for Freedom committees
which stand ready to assist in procuring adequate financing, and the
financing support for the 1943 production available from the commercial
banks.
Sincerely,
/s/ Claude R. Wickard
Secretary
21
January 6, 1943.
Dear Mr. Heningvay:
The Secretary received your letter of December
26, and had distated a reply. but because of his
absence from the office on account of illness, be
was not able to sign the letter.
I hav that you have already arrived in the
city and have seen Mr. Dell and others in the
Treasury. 1 just vanted to let you know that your
letter had reached Mr. Morgenthan, and that he
would have been very glad to ⑉ you and the Com-
nittee during the course of your meetings is
Mashington if be had not been any from Ms effice.
b would also visa no to thank you for your
Sensen's Greetings and to send you his best wishes
for the conting year.
Sincerely yours,
(Signed) H. S. Kintz
N. I. Klets,
Private Secretary.
Mr. V. L.
Progitest, The American Insters
Accountion,
Been 673, The Villard,
By Mess. Bundy 3:00 1/6
Washington, D.
File in Diary
GMF/de
Regraded Unclassified
22
le
Thank you letter to Mr. Hemingway,
President of ABA, for his congratulations
on your successful financing.
-
the
23
THE SECRETARY OF THE TREASURY
WASHINGTON
December 30, 1942.
Dear Mr. Hemingway:
Thank you very much for the message of
congratulations contained in your letter of December 26,
1942. I am indeed gratified at the splendid response
received from all sources to the Victory Fund Drive.
I appreciate the work which your Committee performed
in getting the banks of the country to cooperate so
fully in this drive.
I shall of course be glad to see the Committee
on either January 5th or 6th when you meet in Washington.
If you care to, you are at liberty to use the room in
the Treasury Building which you used the last time you
were here.
With best wishes for the coming year, I am
Sincerely yours,
Secretary of the Treasury.
Mr. W. L. Hemingway
President
The American Bankers Association
Mercantile-Commerce Bank & Trust Company
St. Louis, Missouri.
spell 24
THE AMERICAN BANKERS ASSOCIATION
OFFICE OF THE PRESIDENT
-
MERCANTILE-COMMERCE BANK AND TRUST Co.
ST. LOUIS, MISSOURI
W. L.HEMINGWAY
PRESIDENT
December 26, 1942
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
Now that the returns are in from the recent
drive I want to extend my congratulations to you on the splendid
results. It must, indeed, be gratifying to you to Bee how splen-
didly the people have responded to your call.
Our Committee, which met with you last month,
will meet again in Washington on the 5th and 6th of January, as
those dates appear to be the only ones on which we can get a full
attendance for some time. We intend to review our experiences of
this last drive for the purpose of making what improvements we can
in our method of assistance. If you should care to meet with us,
we will, of course, be very glad to call at an hour most convenient
to you.
With my kindest regards and the Compliments of
the Season, I am,
Sincerely Hemingway yours,
President
25
January 6, 1943.
Dear Mr. Treastine:
In the absense of the Secretary, I as
acknowledging your personal letter of
December 29. Both the letter and its -
closure will be brought to Mr. Morgenthau's
attention just as soon as he is back at his
desk.
Sinderely yours,
(Signed) H. S. Klotz
H. s. Klets,
Private Secretary.
Mr. Phillip s. Transtine,
Chairman, Ohio War Savings Counittee,
Cloveland, Ohio.
GEF/dbs
Regraded Unclassified
26
TREASURY DEPARTMENT
WAR SAVINGS STAFF
OFFICE OF
December 29, 1942
OHIO WAR SAVINGS COMMITTEE
PHILLIP J. TROUNSTINE, Comme
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Dear Henry:
Now that the Victory Fund Drive has been successfully concluded, I
offer my hearty congratulations. I know how you must have felt the
weight of this responsibility. I would like however, at this time,
to call your personal attention to certain matters relating to that
drive and the way in which it was conducted. I need not tell you that
my reasons for thus reporting direct to you are impelling or I should
not presume to do 60.
As Chairman of the War Savings Committee for Ohio, at which job I am
spending all of my time, my first interest is naturally the continued
success of the War Bond effort. However, I am not so biased in that
interest that I cannot see the tremendous importance of the work of
the Viotory Fund Committee. It seems to me that both of these programs
are of the utmost importance to the success of the war effort. It has
therefore been most distressing to me to see this December drive launched
and conducted with a seemingly deliberate attempt by the Victory Fund
Committee in Ohio to dominate the entire War Bond program and to compete
directly with our well set up and functioning organization. Money has
been spent and the impression given that this Committee is well financed
by the Treasury, while of course our County Committees must finance them-
selves.
All of this has caused much confusion in the minds of our volunteer workers
and, if continued, will adversely affect our progress to an immeasurable
extent.
I have seen your telegraphic instructions 8.6 to selling and organization
policies either ignored or misinterpreted. I have seen a definitely de-
termined attempt to discredit the E Bond and to compete with it 80 as to
eventually force its replacement with a negotiable coupon bearing bond.
FORVICTORY
In faot, this prediction has been made and repeated.
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
27
- 2 -
Honorable Henry Morgenthau, Jr.
The Fourth Federal Reserve Bank at Cleveland 18 at present employing
sixty people to take care of redemption of 8 Bonds. That statement has
been too freely used and has caused widespread rumore in our State as
to the tremendous amount of redemptions. Reports that the E Bond must
eventually be discontinued are traceable directly to this Bank. The
Victory Fund Committees in Ohio practically adopted the slogan of "beat
the bushes" for sales, Two districts, to my knowledge, have conducted
house-to-house canvasses. Publicity has stressed the small buyer from
$18.50 up, and $300.00 per month income earners. This you definitely
asked them not to do. There have been deliberate attempts in parts of
our State to raid our personnel. In one instance an important volunteer
was taken by being given a paid job. Many other workers were taken away
from us, our people believing the War Bond organization was being absorbed.
Publicity has been generally misleading.
I do not want to bother you with too many of the details. I have, however,
collected a sampling of publicity in our State which I am sending, with a
copy of this letter, to Harold Graves. If you wish to see it, he will
have it for you.
I have no doubt that much of this has already been brought to your atten-
tion and that you yourself have felt deep concern about it. However, I
hope I may presume to suggest to you that regardless of the relative
importance of the two operations, the Treasury Department as a whole can
ill afford, in my opinion, to permit one branch to practically sabotage
another, and it is my considered judgment that the Victory Fund leaders
deliberately and willingly superimposed their organization upon ours to
the very serious and definite detriment of the War Bond program. If I
am correct in this, then the cause is equally 8.6 disturbing as the effect,
To assure you that Roy Moore and I as Administrator and Chairman are in
accord in these matters, I an enclosing copy of his letter dated November
23rd to Mr. Graves. My only justification for addressing you personally
in this manner ie my very deep interest in the whole Treasury situation
and 6. mutual interest in the clarification of its disturbing elements.
Naturally, I have no objection to whatever use you may wish to make of
this letter.
Sincerely,
Phil
Regraded Unclassified
COPY
28
November 23, 1942
Hon. Harold N. Graves,
Assistant to the Secretary of the Treasury,
Treasury Department,
Washington, D. C.
Dear Mr. Graves:
The central war bond organisation in Ohio is not one, I submit, to be
contankerous about the sanctity of its toes in the matter of being
stepped on. We have tried to accept and adjust ourselves to the in-
escapable complexities rising out of the immensity of the national
job, and the Washington viewpoint generally.
However, we should feel remiss indeed if we failed to point out to you
that the intensity and seriousness of our state-wide attitude in regard-
ing the war bond job as an extremely important one are at the moment
strained to the point of breaking. Tie have had the feeling that even
before, but particularly since, the Kaneas City meeting we could 660
more definite and enduring progress than at any time since we began to
organize the State. You will remember we took our newly appointed dollar
a year chairman of the State F & G Committee to Kansas City for inspir-
ation and guidance of which he brought back an emazing quantity. Tie
had set about and had extremely gratifying progress to measure in the
F & G phase of organisation after having been on again and off again,
with and without the Victory Fund Committees since June. That work
of course was completely discarded, the time wasted, and our patience
still further strained by the announcement that we would no longer
have to do with anything but the E War Bond. And we have no quarrel
with this since it 16 the judgment of the Treasury Department and since
we are interested primarily in the whole Treasury problem rather than our
own particular corner of it. I mean this very seriously and I an sure
I speak for at least the central staff of Ohio.
But regardless of the imperative need for the stupendous nine billion
dollar financing program in December, we doubt very much that proper
protective steps have been taken to prevent the crumbling and disintegra-
tion of the volunteer organization for was bonda as the result of the
kind of announcements that have come from Washington or at least attri-
buted to the Treasury Department and from local Victory Fund Committee
chairmen. For example, the Cleveland Plain Dealer last week inted
the story of the drive for Ohio's quota and Cuyahoga County's share
of it by the Victory Fund Committee under the leadership of the President
of the Fourth Federal Reserve District with area and local chairmen named
in the story and with the definite impression that this huge financing
undertaking would embrace and absorb the entire War Bond organisation
throughout the state. Similar stories have been printed elsewhere in
Regraded Unclassified
29
- 2 -
Hon. Harold N. Graves
local papers with local application as in the case of the Canton
Repository yesterday which left no doubt in the minds of our workers
that they are now a subordinate part of the Victory Fund Committee
in Stark County and will be expected to contribute their comparative-
ly small share of the nine billion dollar total as a part of the newly
super-imposed Victory Fund group.
I am writing at this length and in this manner not only to urge upon
you a bold and courageous clarification of this confused set-up,
regardless of inter-departmental ideas and personalities in the
Treasury Department, but to help us, insofar as possible, to hold
together our own war bond volunteer personnel so that after the
great nine billion dollar push is over we will have as much as
possible left of a continuing war bond group as the injurious moves
thus far taken will permit.
I must reiterate and urge you to believe this plea comes from no
prejudices or personal sensitivity in the premises. We do have a
very deep sense of the frustration already apparent which will render
us as a state war bond organization practically impotent when the
heat and smoke from the big fire have blown away, unless something
can be done quickly and effectively to indicate to the local volunteers
whether they are to be Victory Fund or War Bond.
I hope you will see in this an effort to be of assistance in solving
the problems rather than to impede your own efforts to bring order
out of the welter of confusion that seems to have us practically
stopped in our tracks. Mr. Trounstine is familiar with the contents
of this letter and he and I are in full accord.
Very sincerely,
State Administrator
War Savings Staff for Ohio
Regraded Unclassified
30
January 6, 1943.
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
As the result of a request made by the Office of
Strategic Services through Harry Anslinger, I recommended
to the State Department in a letter yesterday that Erwin
May be designated as Financial Attache of the United
States Legation at Stockholm, Sweden. I sent this letter
along after discussing it with Dan Bell and with Harry
White.
Harry White was in some doubt whether May would
have the initiative and resourcefulness to get out of
Stockholm all of the types of information that would be
desirable. We considered the possible substitution for
May of a man from Harry White's organization, or one
whom he would select, but finally came to the conclusion
that the best course would be to designate May as the
Financial Attache and to give him the assistance of an
economist to be approved by White. Harry Anslinger,
who with Bill Johnson discussed the matter with Harry
White and me, feels sure that he can get approval from
the O.S.S. and the State Department to sending a second
man along.
wh
31
THE JOINT CHIEFS OF STAFF
M 31
WASHINGTON
January 6, 1943.
SECRET
The Honorable
Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
Attached hereto is a memorandum
prepared by General Gross, Chief of Trans-
portation, Services of Supply. It has
been prepared with reference to Mr. Mack's
memorandum to you of December 30th, which
you asked me to have investigated.
Sincerely yours,
John JOHN R. adian DEANE,
Brigadier General, U. S. Army,
Secretary.
Encl.
VICTORY
BUY
DONDS
ARS
EXAMPS
SECRET
SECRET
BRORET 32
WAR DEPARTMENT
Auth. Ch/Trans.
OFFICE OF THE CHIEF OF TRANSPORTATION
Initials
97180
WASHINGTON, D.C.
Date
1-2-40
In reply refer to:
January 2, 1943.
SPTOW 565.2 T
A 1519
MEMORANDUM FOR BRIGADIER GENERAL J. R, DEANE
Secretary Combined Chiefs of Staff
SUBJECT: French Lend-Lease Cargoes.
1. Reference is made to the attached memorandum addressed to
the Secretary of Treasury regarding Frend Lend-Lease cargo on hand at
the Port of New York.
2. The items summarized in Mr. Mack's memorandum represent the
unshipped balance of the so-called Vichy cargo which was acquired by
Treasury Procurement after consultation with the Office of the Lend-
Lease Administration, the State Department and the War Department to
provide an immediate supply of consumers' goods for shipment to
North Africa. An aggregate of approximately 12,000 tone of these
materials were procured during the latter part of November and December.
Approximately 6,800 of the 12,000 tons of material was shipped on
UGS-3. A detailed breakdown of materials shipped is as follows:
922 tons soap; 2320 tone of sugar; 1219 tons evaporated milk; 149 tons
clothing; 135 tons cotton piece goods; 119 powdered milk; 1621 tons
copper sulphate; 161 tons tea; 88 tons matches; 9 tons Chambray;
55 tons tobacco; 10 tons drapery; in addition to this figure there
were 1,800 tons loaded aboard vessels at the same time but which re-
turned as they could not keep up with the convoy.
3. In addition to the quantities shipped on UGS-3, it is estimated
that at least 12,000 tons of these materials will be shipped on UGS-4.
The material carried on UGS-4 should cover the entire list given in
Mr. Mack's memorandum except that the quantity of matches has been
reduced to 100 tona. Arrangements have been made with the Lend-Lease
Administration to accumulate B. stock pile of from 40-50,000 tons of
these civilian materials in the New York area, These materials are
to be shipped as filler cargo aboard the vessels assigned to the Army.
It is anticipated that the quantity of these materials carried on subsequent
convoys will be materially increased, and every effort will be made to
carry 30,000 tons per month as requested in the recent radio received from
General Eisenhower. The exact quantity to be carried on any convoy is
of course governed by the amount of urgently needed war materials which
are available for shipment at the time.
PYICTORY
1 Incl:
BUY
UNITED
Memo 12/30/42
C. P. AROSS,
STATES
WAR
Major General,
BONDS
ARE
Chief of Transportation,
STAMPS
SECRE
Regraded Unclassified
33
A 1520
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
December 30, 1942
MEMORANDUM TO THE SECRETARY:
Supplementing my memorandum on December 29,
which shows various tonnages on hand at New York City
waiting vessels - these tonnages have been on hand since
the following dates:-
Used Clothing
408 Tons
December 10
Cotton Piece Goods
1710 Tons
December 10
Refined Sugar
3071 Tons
November 27
Raw Sugar
245 Tons
November 27
Powdered Whole Milk
8 Tons
December 27
Matches
310 Tons 100
December 22
Copper Sulphate
675 Tons
November 27
6,4r
(th-05-51) 5/501f has
Clinton E. Mack
Director of Procurement
POPVICTORY
BUY
UNITED
STATES
WAR
July
BONDS
AND
STAMPS
Regraded Unclassified
34
A 1521
Amount
Shipped
On Hand At NYC
En Route
Commodity
Purchased
From USA
Waiting Vessels
To Port
Used Clothing
1208 tons
300 tons
408 tons
500 tons
Cotton Piece Goods
2970 "
260 If
1710 "
1000 If
Shoes
200,000 pair
0
0
200,000 pair
Cotton and Knitted Wear
180,000 dozen
o
0
180,000 dozen
Refined Sugar
3947 tons
876 tons
3071 tons
0
Raw Sugar
2160 DE
1915
"
245 If
0
Powdered Whole Milk
178 If
170 If
8
If
0
Condensed Milk
234 If
234 11
0
0
Tea
173 "
173
If
0
0
Matches
410 "
0
310 #
100 tons
Nails
4.3 "
4.3 "
0
0
Pharmaceuticals
10.4 If
10.4 If
0
0
Copper Sulphate
2632 If
1957 If
675 If
0
Books
5000 each
5000 each
0
0
Lamp Chimneys
80,000 each
0
0
80,000 each
Phonograph Records
1,000 each
0
0
1,000 each
Newsprint
30 tons
0
0
30 tons
Printer's Ink
200 lbs.
0
0
200 lbs.
Machine Finished Book Paper
2 tons
0
0
2 tons
Cordage and Twine
300 tons
0
0
300 tons
Thread
100 tons
0
0
100 tons
Totals
* 5899.7 tons
6427 tons
*Total tonnage "Shipped From USA" does not include weight of 5000 Books.
Uncl
35
original to Mr. Mack
Photostats in President's folder.
CONFIDENTIAL
THE WHITE HOUSE
36
WASHINGTON
January 6, 1943.
MEMORANDUM FOR THE SECRETARY OF THE TREASURY:
I understand both the Army and Navy are definitely
of the opinion that Russian continuance as a major factor in
the war is of cardinal importance, and therefore it must be a
basic factor in our strategy to provide her with the maximum
amount of supplies that can be delivered to her ports. I fully
indorse this concept.
The present Second Protocol agreement with the Union
of Soviet Socialist Republics terminates in large part by the
end of this fiscal year. I have therefore taken steps to ascer-
tain Soviet needs for a Third Protocol covering the period
July 1, 1943, to June 30, 1944. As soon as these needs have
been received, I intend to ask the various interested agencies
as to the degree to which they may be met.
In the meantime, in executing the Second Protocol and
in planning the overall program to the end of the fiscal year
1944, the necessity of meeting Soviet needs in accordance with
the above strategical viewpoint must be regarded as a matter
of paramount importance.
CONFIDENTIAL
Regraded Unclassified
37
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 6, 1943
TO
Secretary Morgenthau
FROM
Mr. White
HDW
This 1s a comparative statement of the earnings and
expenses of the Stabilization Fund for the months of
November and December, 1942.
Earnings
November 1942 December 1942
Interest earned on investments $ 19,461.48 $ 20,167.21
Interest earned on yuan
---
8,630.14
Total
$ 19,461.48 $ 28,797.35
Profits on foreign exchange--
Swiss francs
--
13.82
Profits on handling charges
on gold
33,727.45
86,507.81
Grand Total
$ 53,188.93 $ 115,318.98
Expenses
Salaries
$ 19,800.03 $ 18,866.26
Travel
148.06
1,233.30
Subsistence
42.00
36.00
Telephone and Telegraph
1,388.95
2,005.68
Stationery
487.01
96.01
All Others
403.24
321.28
Total
$ 22,269.29
$ 22,558.53
Net earnings
$ 30,919.64 $ 92,760.45
Earnings increased in December, as compared with
November, as a result of increased sales of gold to foreign
countries for earmark with the Federal Reserve Bank of
New York and of interest earned on yuan purchased from China
under the agreement of April 1, 1941, during December.
This report was completed from figures supplied by
Mr. O'Daniel.
Regraded Unclassified
38
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 5, 1943
TO
Secretary Morgenthau
FROM Mr. White HDW
Subject: Status of Stabilization and Gold Agreements on Dec. 31
1. Stabilization Agreements in Operation
Amount
ountry
Dated
Expires
Commitment
Outstanding
Collateral
razil
1/
7/15/37
7/15/47
$100,000,000
None
None
gold
hina
7/14/37
6/30/43
50,000,000
None
None
gold
hina
4/1/41
6/30/43
50,000,000
$10,000,000
None required
cuador
3/1/42
6/30/43
5,000,000
None
None required
celand
5/1/42
6/30/43
2,000,000
None
None required
2. Stabilization Agreements Concluded but
0
not yet Effective
exico
11/1/41
6/30/43
$ 40,000,000
None
None required
3. Gold Sale Agreement
Payment due
ountry
Dated
Expires
Commitment
Outstanding
within:
uba
7/6/42
6/30/43
$ 5,000,000
None
120 days from
each sale
4. British Coin Purchase Agreement
ountry
Dated
Expires
Commitment
Purchases
1beria
9/26/42
6/30/43
$
2,000,000
None
/
This agreement, as amended, also provides for sale to Brazil of
up to $100,000,000 in gold, of which $49,415,080 has been sold.
Regraded
39
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 6, 1943
TO
Secretary Morgenthau
FROM
Mr. White HOW
1. Stabilization Fund's Gold Transactions
During December, 1942, the Stabilization Fund sold about
$32.1 million in gold to foreign countries to be earmarked for
their accounts with the Federal Reserve Bank of New York. Sales,
by countries, were as follows:
Country
Sales in millions of dollars
Argentina
6.0
Bolivia
2.1
Ecuador
2.5
Guatemala
2.8
Haiti
.2
Portugal
10.0
Switzerland
5.0
Venezuela
3.5
Total
32.1
In addition, the Fund purchased $2.5 million in gold from
the earmarked account of Uruguay.
In order to maintain its gold balance, the Stabilization
Fund purchased $22.8 million in gold from the Treasury General
Fund.
As a result of the above transactions, there was a net
decrease of about $6.7 million in the Stabilization Fund's gold
holdings to about $12.3 million as of December 31.
Regraded Unclassified
40
-2-
Division of Monetary
Research
2. Treasury Gold Stock
During December, the Treasury's gold stock decreased by
$17.2 million to $22,726.2 million as of December 31. Known
and estimated acquisitions were as follows:
Millions of dollars
Newly-mined domestic
1.8
Imports sold directly to mints
and assay offices
3.3
Miscellaneous (coin and scrap)
0.5
Total
5.6
The Treasury sold $22.8 million to the Stabilization Fund,
making a net decrease of $17.2 million.
3. Total Gold Holdings of the United States
November 30, 1942 December 31, 1942
Treasury Gold Stock
$ 22,743,411,716
$
22,726,242,881
Stabilization Fund Gold
19,090,888
12,313,103
Total
$ 22,762,502,604 $ 22,738,555,984
The decrease in the gold holdings of the Treasury and the
Stabilization Fund during December was $23.9 million.
Regraded Unclassified
41
JAN 6 - 1943
My dear Mr. President:
I - enclosing report on our exports
to some selected countries for the period
ending December 19, 1942.
Faithfully,
1s/ D. N. Bell
acting Secretary of the Treasury.
The President,
The White House.
Enclosure
By Mess. Sturgis 3:50 1/6/43
Extra copies to White's office
File in Diary
HDW HDW/efs 1/4/43
FILE COPY
Regraded Unclassified
SECRET
42
January 5, 1943
Exports to Russia, Free China and selected blocked
countries as reported to the Treasury Department
during the nine-day period ending
December 19, 1942
1. Exports to Russia
Exports to Russia as reported during the nine-
day period ending December 19, 1942 amounted to
$33,140,000. Military equipment accounted for
$11,781,000 and included 6 light bombers, 24 one-
engine P-40 fighters and 21 tanks.
2. Exports to Free China
Exports to Free China as reported during the
period under review amounted to only $2,000.
3. Exports to selected blocked countries
Exports to selected blooked countries are given
in Appendix A. Most important were exports to
Portugal amounting to $172,000.
ISF/efs
1/5/43
Regraded Unclassified
SECRET
43
APPENDIX A
Summary of United States Experts to Selected
Countries as Reported to the Treasury Department
from Export Declarations Received
During the Period Indicated V
(In thousands of dollars)
Total
Total
9-day
10-day
Domestic Exports
Domestic Experts
Peried ended
Peried ended
Aug. 1, 1942 to
July 28, 1941 to
Dec. 19,1942
Dec. 10,1942
Dec. 19, 1942
July 31, 1942
S. S. R.
$ 33,140
$30,635
$ 617,056
$ 742,941
ree China
2
822
110,641
97,720
win
1
-
771
2,858
itserland
1
1,290
6,920
11,537
Jem
-
2
2,628
18,056
artugal
172
590
2,158
9,743
rench North Africa 3/
-
-
2,088
6,305
reasury Department, Division of Menstary Research
January 4, 1943
Many of the export declarations are received with & lag of several days or more.
Therefore this compilation does not accurately represent the actual shipment of
a particular period.
Includes Mercece, Algeria and Tunisia.
wete 1/4/43
Regraded Unclassified
APPENDIX B
SECRET
Exports from the U. s. to Free China and U.S.S.R.
44
as reported to the Treasury Department
July 28, 1941 - December 19, 1942 w
(Thousands of Dollars)
Experts to
Exports to
Pree China
U.S.S.R.
July 28, 1941 - Jan. 24, 1942
. 32,758
e 98,902
1942
Jan. 26 - Jan. 31
6,938
9,608
Feb. 1 - Feb. 10 2/
4,889
13,315
Feb. 10 - Feb. 20
4,855
26,174
Feb. 20 - Feb. 28 3/
2,921
28,119
Mar. 1 - Mar. 10
2,879
32,509
Mar. 10 - Mar. 20
8,058
28,556
Mar. 20 - Mar. 31 4/
2
42,435
Apr. 1 - Apr. 10
4,836
51,698
Apr. 11 - Apr. 20
5.335
66,906
Apr. 21 - Apr. 30
2,827
50,958
May 1 - May 10 5/
296
28,652
May 11 - May 20
1,872
18,000
May 21 - May 31
W
2,533
26,180
June 1 - June 10
3,399
12,764
June 11 - June 20
2,707
53,799
June 21 - June 30
1,664
49,919
July 1 - July 10
7,900
35,657
July 11 - July 20
590
33,940
July 21 - July 31
3,066
35,669
Aug. 1 - Aug. 10
208
14,970
Aug. 11 - Aug. 20
192
23,325
Aug. 21 - Aug. 31
2,850
112,492
Sept. 1 - Sept.10
855
24,339
Sept.11 - Sept.20
11
44,434
Sept.21 - Sept.30
902
30,947
Oct. 1 - Oct. 10
1,885
14,564
Oct. 11 - Oct. 20
30
55,083
Oct. 21 - Out. 31
w
-
45,701
Nov. 1 - Nov. 10
233
53,144
Nov. 11 . Nov. 20
2,032
45,867
Nov. 21 - Nov. 30
296
88,415
Dec. 1 - Dec. 10
822
30,635
Dec. 11 - Dee. 19
2
33,140
Total
#110,641
$1,360,816
1
These figures are in part taken from copies of shipping manifests.
Beginning with February 1, figures are given for 10-day period
instead of week, except where otherwise indicated.
3
8-day period.
11-day period.
51
Due to changes in reporting procedure for the Department of
Commerce, this report is incomplete for the period indicated.
6/ 9-day period.
Treasury Department, Division of Monetary Research January 4. 1943
ISF/efe 1/4/43
SECRET
45
APPENDIX 0
Principal Exports from U. s. to U. 3. 8. R.
as reported to the Treasury Department
during the nine-day period ending
December 19, 1942
Value
Unit of
(Thousands
Quantity
Quantity
of dollars)
TOTAL EXPORTS
$ 33,140
Military Equipment ($11,781)
Ammunition
-
-
3,566
Aircraft
2,374
Light bombers (2 eng. A-20)
No.
6
Fighters (1 eng. P-40)
Pursuit and Interceptor
No.
24
Aircraft parts and accessories
-
-
1,797
Military tanks
1,691
Medium tanks (M4A-2)
No.
16
Medium tanks, n.e.s.
No.
5
Firearms
798
Anti-aircraft artillery 90 - guns
No.
4
37 me. Mit aircraft guns
No.
16
20 mm. Oerlikon navel artillery guns
anti-aireraft
No.
40
Explosives
Lb.
1,659,330
534
Ordnance combat vehicles
458
Seout ears
No.
502
All other
563
Non-military goods (821,359)
Motor trucks,motorcycles, auto
replacement parts and marine engines
-
-
3,971
Industrial electireal and agricultural
machinery and parts
-
-
2,858
Regraded Unclassified
46
APPENDIX C (Continued)
Page 2
Value
Unit of
(Thousands
Quantity
Quantity
of dollars)
Meat products
-
-
$ 4,139
Food products, n.e.s.
-
-
1,794
Iron and steel manufactures and
semimanufastures
-
-
2,956
Metals and manufactures, n.e.s.
-
-
2,055
Rubber and leather manufactures
-
-
1,371
Wool and cotton
e
-
999
All other
1,236
Treasury Department, Division of Monetary Research January 4. 1943
EFM/efs 1/4/43
Regraded Unclassified
47
JAN 6- 1943
My dear Mr. Secretary:
I an enclosing report on our exports
to some selected countries for the period
ending December 19, 1942.
Sincerely yours,
/s/ D.H. Bell
acting Secretary of the Treasury.
The Honorable,
The Secretary of State.
Enclosure
By Mess. Sturgis 3:50 1/6/43
Extra copies to White's office
File in Diary
HDW/efe
1/4/43
HDW
FILE COPY
Regraded Unclassified
SECRET
48
January 5. 1943
Exports to Russia, Free China and selected blocked
countries as reported to the Treasury Appartment
during the nine-day period ending
December 19, 1942
1. Exports to Russia
Exports to Russia as reported during the nine-
day period ending December 19, 1942 amounted to
$33,140,000. Military equipment accounted for
$11,781,000 of the total.
2. Exports to Free China
Exports to Free China as reported during the
period under review amounted to only $2,000.
3. Exports to selected blocked countries
Exports to selected blocked countries are given
in Appendix A. Most important were exports to
Portugal amounting to $172,000.
ISF/efs
1/5/43
Regraded Unclassified
SECRET
49
APPENDIX A
Sumary of United States Experts to Selected
Countries as Reported to the Treasury Department
from Export Declarations Received
During the Peried Indicated V
(Im thousands of dellars)
Total
Total
9-day
10-day
Domestic Exports
Demestic Exports
Period ended
Period ended
Aug. 1, 1942 to
July 28, 1941 to
Ded, 19. 1942
Des. 10,1942
Dec. 19, 1943
July 32. 1942
8. 8. 1.
$ 33,140
$ 30,635
8 617,056
8 742,941
free Chim
2
822
110,641
97,720
in
1
-
771
2,858
witgerland
1
1,290
6,920
11,537
weden
2
2,628
18,056
Cortugal
172
590
2,158
9,743
(rench North Africa z/
-
-
2,088
6,305
reasury Department, Division of Monetary Research
Jamuary 4, 1943
Many of the expert declarations are received with a lag of several days e mere.
Therefore this compilation does not accurately represent the actual shipment of
a particular period.
Includes Moresse, Algeria and Tunisia.
m/ste 1/4/43
Regraded Unclassified
SECRET
APPENDIX B
50
Exports from the U. 3. to Free China and U.S.S.R.
as reported to the Treasury Department
July 28, 1941 - December 19, 1942
(Thousands of Dollars)
Exports to
Exports to
Free China
U.S.S.R.
July 28, 1941 - Jan. 24, 1942
$ 32,758
1942
8 98,902
Jan. 26 - Jan. 31
6,938
9,608
Feb. 1 - Feb. 10
4,889
13,315
Feb. 10 - Feb. 20
4,853
26,174
Feb. 20 - Feb. 28
3/
2,921
28,119
Mar. 1 - Mar. 10
2,879
32,509
Mar. 10 - Mar. 20
8,058
28,556
Mar. 20 - Mar. 31
w
2
42,435
Apr. 1 - Apr. 10
4,836
51,698
Apr. 11 - Apr. 20
5,335
66,906
Apr. 21 . Apr. 30
2,827
50,958
May 1 - May 10 5/
296
28,652
May 11 . May 20
1,872
18,000
May 21 - May 31
w
2,533
26,180
June 1 . June 10
3,399
12,764
June 11 . June 20
2,707
53,799
June 21 - June 30
1,664
49,919
July 1 . July 10
7,900
35,657
July 11 - July 20
590
33,940
July 21 - July 31
3,066
35,669
Aug. 1 - Aug. 10
208
14,970
Aug. 11 - Aug. 20
192
23,325
Aug. 21 - Aug. 31
2,850
112,492
Sept. 1 - Sept.10
855
24,339
Sept.11 - Sept.20
11
44,434
Sept.21 - Sept.30
902
30,947
Oct. 1 - Oct. 10
1,885
14,564
Oct. 11 - Oct. 20
30
55,083
Oct. 21 - Oct. 31
w
-
45,701
Nov. 1 - Nov. 10
233
53,144
Nov. 11 - Nov. 20
2,032
45,867
Nov. 21 - Nov. 30
296
88,415
Dec. 1 - Dec. 10
822
30,635
Dec. 11 - Dec. 19
2
33,140
Total
$110,641
$1,360,816
1
These figures are in part taken from copies of shipping manifests,
Beginning with February 1, figures are given for 10-day period
instead of week, except where otherwise indicated.
32
8-day period.
11-day period.
Due to changes in reporting procedure by the Department of
Commerce, this report is incomplete for the period indicated.
9-day period.
Treasury Department, Division of Monetary Research January 4, 1943
ISF/efe 1/4/43
Regraded Unclassified
SECRET
51
APPENDIX 0
Principal Exports from U. s. to U. s. B. R.
as reported to the Treasury Department
during the nine-day period ending
December 19, 1942
(Thousands of Dollars
TOTAL EXPORTS
8 33,140
Principal Items:
Military equipment
11,781
Motor trucks, motorcycles, and replacement
parts and marine engines
3,971
Iron and steel bars, rods, sheets, wire,
tools, ets.
2,956
Meat products, n.e.s.
1,599
Canned sausage
1,550
Copper, brass and bronse
1,335
Industrial machinery and parts
1,291
Food products, n.e.s.
1,141
Electrical machinery and apparatus
1,088
Canned pork
990
Rubber and manufactures
804
Aluminum, sine, nickel and other non-ferrous
metals and alleys
720
Wool and manufactures
646
Leather and manufactures
567
Relief supplies
471
Dried 088 products
460
Agricultural machinery and parts
459
Chemicals and related products
433
Cotton and menufactures
355
Tallow and lard
195
freasury Department, Division of Monetary Research January 40 1943
EFM/efs 1/4/43
Regraded Unclassified
52
NOT TO BE RE-TRANSMITTED
COPY NO. B
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. Z
Information received up to 7 A.M., 6th January, 1943.
1. NAVAL
Although all ships of second part of the latest
Russian convoy have not yet reached port owing to weather conditions
it seems that none has been lost by enemy action.
MEDITERRANEAN. One of H.M. Submarines has not repeat
not replied to signals and must be presumed lost. Another of H.M.
Submarines shelled a small schooner laden with petrol and took 2
prisoners on the 27th, Two days later she twice torpedoed a 1500
ton ship off the east coast of TUNISIA,
2, MILITARY
TUNISIA. 2nd. Our tanks made a reconnaissance with
artillery support to the east of BOU ARADA. Little opposition was
met. Four of our tanks were bogged and lost. 3rd. Now reported
that French withdrew from FONDOUK after inflicting casualties,
RUSSIA. German attacks at VELIKI LUKI have been
repulsed with heavy loss to the enemy, Partisans in the MINSI Area
have destroyed two German garrisons, On the Middle Don the Russians
have captured MOBOZOVSKAYA on the STALINGRAD-PLIKHAYA railway and
TSIMLYANSKAYA on the DON, In the CAUCASUS they have captured NALCHIK
and the towns of PROKHLADNEVSKI and KOTLYARNEVSKAYA and taken much
booty.
3. AIR OPERATIONS
FRENCH NORTH AFRICA. 4th, United States light and
medium bombers attacked KAIROUAN Railway Yards and a locality 82
miles south-southwest of TUNIS. At ght MALTA Wellingtons effect-
ively bombed the docks and railway centre.
BURMA. Between the 1st and 4th Allied aircraft bombed
MONYWA airfield, a railway bridge near MANDALAY and at night the
railway yards at MANDALAY,
53
January 7, 1943
Meeting in Vice President's Office
January 7, 1943
2:30 P.M.
Present: Vice President Wallace
Secretary of Agriculture, Wickard
Mr. Hendrickson and Mr. Cassels of Agriculture
Mr. Stettinius and Mr. Cox of Lend-Lease
Mr. Acheson of State Department
Mr. Gaumnitz of B.E.W.
Mr. Byrnes of Stabilization Board arrived late
Mr. White of Treasury Department
Mr. Cassels submitted a report on Principles and Procedures for
the Allocation of United States Food Supplies, a copy of which is
appended.
Much of the ensuing discussion was taken up with the problem as
to how Secretary Wickard was going to answer questions that were
going to be put to him by the Appropriations Committee as to (a) why
we were sending foodstuffs to England under Lend-Lease when England
had sufficient money to pay for some of it, and (b) why send food to
England on Lend-Lease when England in turn sells it to her own
citizens, and (c) why shouldn't England get beans from Canada instead
of the United States if Canada had a surplus supply.
It was pointed out that the decision to keep British balances
within $600 to $1,000 million would make it possible for Secretary
Wickard to base his decisions on whether or not to send food on
criteria other than British dollar position. Mr. Byrnes and Secretary
Wickard were skeptical whether that answer would be adequate for the
Committee. Mr. Acheson suggested that one effective answer might
be that England was giving us a good deal of reciprocal Lend-Lease
supplying our troops in U.K. and Australia with food and services at
no cost to the United States. Mr. Byrnes thought that would be an
excellent answer.
It was agreed that the answer to the question of sale by Britain
of food in England could be answered somewhat along the lines that
the British themselves had answered it in the British White Paper.
It was agreed that Secretary Wickard was correct in feeling
that if Canada had any surplus beans, U.K. ought to get them in
Canada rather than get them on Lond-Lease in the United States.
The question was raised whether at the Committee hearings the
Committee should be informed of the policy established by the
Regraded Unclassified
54
- 2 -
Administration keeping British balances within $600 to a billion
dollars. Mr. Byrnes felt that if it were so stated Congress would
incorporate it in legislation and might say that Secretary Wickard
could not send any food on Lend-Lease 50 long as U.K. had a billion
dollars of gold and dollar assets. Mr. Byrnes wanted to know if we
would object to the inclusion of that in legislation. Mr. Cox and
Mr. Acheson both felt it would be very unwise to place any such
strict tations in any legislation. Mr. Byrnes thought it would
be difficult to avoid having the limitations added to the Appropria-
tion bill if we were to say what the Administration policy was to keep
U.K. within that range. Mr. Stettinius thought that we better find
out before the Lend-Lease hearing whether he could make that state-
ment with respect to the $600 to 52 billion figure. It was decided
that Treasury and State would talk the matter over and let them know.
Mr. Hendrickson wondered whether it was appropriate to submit
a memorandum by this group to the President touching on food policy
inasmuch as there WSS a food Advisory Committee already set up. It
was agreed that it would be appropriate to send the Committee report
to this food Advisory Committee for their information and that the
report would not be submitted to the President.
The report of the other subcommittee concerned with the expand-
ing of the production of food was then submitted. The report is
appended and it was decided to treat that part in the same manner as
the one on Allocation of United States Food Supplies.
Mr. White left the meeting at 4:15 P.M. but the meeting did not
adjourn until a quarter to five.
H. D. White
Regraded Unclassified
55
COPY--
1/6/43
For Administrative Use Only
Principles and Procedures for the Allocation of U.S. Food Supplies
(Submitted to Mr. Stettinius' committee on food distribution policy
January 7 by the subcommittee" appointed January 5.)
A. Principles
The following principles have been implicit in food policy decisions that
have been made, although the total supply situation and the limitations on
shipping available to date have meant that, to B large extent, they have not
been brought into play S.B. the immediate determining considerations. From
now on, the circumstances will be different and many of the most important
allocation decisions will have to be guided directly by the application of
basic principles. These same basic principles should be applicable to the
allocation of shipping available for the transportation of food (as far as
shipping is transferable and port capacity is available) as well as to the
food itself. The principles, if properly established, should also be valid
as EL guide to policy in relation to post-war food relief programs.
1. The allocation of food to all claimante should be based on the
consideration of their relation to our central objective, the most
effective use in the war of the total food and shipping resources available
to the United Nations. Each decision will involve the consideration of
many inter-related elements and the balancing of many factors which will
have to be given different weighting in each case according to the
circumstances bearing on it.
. Members of subcommittee: J. Cassels, Dept. of Agri. (Chairman): H. White,
Treasury: A. Feller, OWI; 1. Rostow, State Dept.: 0. Cox and Byron Spence,
OLLA: E. Gaumnits
Present 88 liaison representatives: Capt. L. Morrill, Army: Lt. C. Becker,
Navy.
Regraded Unclassified
56
-2-
2. The needs for food and for the resources used in producing food
are BO great that it must be used with the greatest possible economy.
Allocations to all claimants should be conditional on the most strenous
possible efforts being made to eliminate waste, to confine the use of
food supplies to the meeting of essential needs, and to exhaust all
possibilities of securing food from other practicable sources.
3. Allocations on Lend-Lease account should not be modified or
influenced by any concern with the dollar balances or other foreign
exchange resources of the claimant countries since other means are available
for maintaining such resources to the extent necessary to insure the vigorous
prosecution of the war.
the armed forces of this country
4. (Requirements for the armed forces of the United Nations have
a preferred claim on U. 5, food supplies.)* Ao in the case of all other
allocations, these should be conditional on the greatest possible economy
in the acquisition, handling and use of food, If it becomes necessary to
reduce civilian consumption below the levels in prospect for 1943, the
stringency thus evidenced in the total food situation should lead to A
reconsideration of the consumption patterns and levels in the armed forces.
In regard to quantities of specific commodities supplied to the armed forces,
their claim to the types required in military operations will be given the
highest priority. With respect to other commodities, substitutions should be
made, 8.6 far as possible, to avoid accentuating particular shortages in other
uses.
The subcommittee was not in full agreement on the inclusion of this statement:
nor on whether, if included, it should relate to our own armed forces or to
the armed forces of the United Nations.
Regraded Unclassified
57
-3-
5. Requirements for the armed forces of our Allies; Food necessary
in order to provide for their fighting forces should also be given B.
preferred claim on available food supplies. If, however, the food for
the armed forces of any other country could be supplied by diversion
from its own civilian consumption, the claim on our supplies should be
treated 6.8 the equivalent of a claim for civilian consumption in the
foreign country.
6. Essential civilian requirements should receive positive, not
residual, protection. Public assurance of this should be given (the
form of that assurance being carefully considered from the public relations
point of view). Kinimum nutritional standards may serve as a basic bench-
mark and should be developed for this purpose, but other considerations must
be taken fully into account. Nutritional needs can be most economically
met by the consumption of products that yield the highest nutrient returns
for the resources used in producing them (as for example, through B. general
shift from feed to food crops) and adjustments in that direction should be
promoted, but there is 8 limit to the distance we can go in this anó the
progress in making the transition must proceed step by step. Minimum civilian
requirements will vary according to the consumption patterns that become
accepted as time goes on. To take many familiar foode away from consumers too
suddenly results, not only in an adverse psychological reaction, but also in
an injury to the nutritional status of the people since many of them will fail,
through ignorance or dislike, to make appropriate substitutions.
Regraded Unclassified
58
-4-
The minimum per capita levels (national averages) necessary to
protect civilian health and welfare will also vary according to the
distribution of food among consumers. Only when we have taken steps to
get more nearly equal distribution of essential food among our own people
will we be in a position to go to the limit in sharing with the peoples
of other countries. It should be part of our basic policy that we do
not take food from any of our own people who are worse off in respect to
the meeting of their essential food needs than civilians to whom the food
le sent. This means that we must extend rationing and introduce whatever
supplementary food programs are necessary to insure that people are not
prevented by the inadequacy of their incomes from securing the minimum
quantities of food they need. In order that individual food consumption may
be related as closely as possible to the actual urgency of the needs to be
met, differential retioning should be adopted wherever appropriate and
practicable. For example, the quantities of high calorie foods provided for
those engaged in heavy labor should be greater than for those doing office
work. (The application of this principle should be extended as far as
possible to the armed forces as well as to civilians.)
7. As long as civilian consumption in this country is above the
level necessary to meet the minimum nutritional needs of U. S. consumers,
allocatione to civilians in other countries should be based on comparisons
of the actual relative levels of consumption in the countries concerned
with relative levels that would be appropriate in respect to historic
relationships es modified by special circumstances. As between this country
Regraded Unclassified
59
-5-
and Canada for example, the appropriate level should probably be one of
parity. Approximately the same is true for the United Kingdom where
historic consumption levels were about the выше as our own. In the cases
of other countries, more analysis is needed to determine appropriate
relative levels.
Provision for war workers should be given a high preference rating.
In comparing the needs of civilians in other countries, the ваше
qualifications with regard to established consumption patterns and levels
as were referred to in connection with the essential needa of our own
population should be taken into account. In the choice of commodities to be
exported, the most suitable types for shipping (or for particular purposes
such as air raid reserves) should be provided 80 for as practicable.
8. Requirements for Reoccupied Areas: Certain minimum requirements
will be justified on the basis of strategic considerations which will put
them on n. par with the claims of the armed forces. These should be
determined in consultation with military authorities. Further requirements
may be justified on political grounds and will have to be determined in
consultation with the State Department. Additional amounts contributed
for humanitarian relief consideration should receive favorable, but
realistic consideration. Advance promises made on a scale so generous
that they cannot be fulfilled may be expected to bring resctions of & kind
the very opposite of what is desired. The advisability of limiting
advance commitments of this sort to assurances that relief will be
provided for children and nursing or expectant mothers should be considered.
Even within these limitations, the needs may be expected to exceed the
supplies we can make available. The time when they are greatest will
Regraded Unclassified
60
-6-
probably coincide with the time when a substantial amount of shipping can
be released for this type of cargo. In anticipation of the magnitude and the
urgency of these needs, it is necessary that vigorous steps be taken
at once to make advance provision for them,
9. Stockpile Recuirements: Appropriate policy in this regard can be
stated only in general terms. It involves the anticipation of future
requirements which are subject to many incalculable uncertainties. Some
of these uncertainties (e.g. crop yields) are subject to analysis in the
light of past experience while others can be guessed at only through the
informed judgments of those most familiar with all the circumstances.
Military and Naval authorities must be depended on for guidance on many
of these questions. These requirements, like all others, should be
subject to the condition that the supplies are managed with the greatest
possible economy. Studies are now under way to determine the extent to
which the great variety of risks involved can be pooled (in accordance
with good insurance principles) through the development of coordinated
general purpose contingency reserves. It is important that, 8.8 a nation,
we exercise the foresight and social self-restraint to provide adequately
for the needs that may be expected to arise in the future. The contingency
reserve program of this country should be coordinated with those of all
the United Nations and the most complete possible information should be
obtained and examined with respect to the total current and prospective
supplies available to the United Nations.
Regraded Unclassified
61
- 7 -
B. Procedures
The following procedures, which have been developed and followed
substantially in the allocation of food supplies among military, lend-lease,
domestic, civilian and other claimants, are now being formally adopted by
the Secretary of Agriculture in discharging the responsibilities placed on
him by the Executive Order issued December 6.
1. Each claimant agency is asked to state its requirements for advance
periods up to two years, These are collected by the Requirements and
Allocations Branch of the Food Distribution Administration, Department of
Agriculture, where they are brought together as preliminary data on over-all
requirements. Revisions on requirements are obtained at least once every
three months. The claimant agencies and the Departmental agencies operating
for them are as follows:
Army Requirements - War Department
Navy and Marine Corps Requirements - Navy Department
Veterans Administration Requirements - Veterans Administration
United Nations under Lend-Lease Agreements or Protocol - Lend-
Lease Administration and Food Missions of the respective nations
Caribbean, Alaska, Hawaiian and other United States territories and
possessions requirements - The Food Distribution Administration
of the Department of Agriculture and the Department of the Interior
or the War Department where the area is under martial law.
Other exports - State Department and Board of Economic Warfare
Rubber workers in the Amason Valley, South America Requirements -
Rubber Reserve Company
Civilian Requirements - Civilian Requirements Branch of the Food
Distribution Administration of the Department of Agriculture.
Lunches for School Children - Consumer Programs Branch of the
Department of Agriculture,
Regraded Unclassified
62
- 8 -
Considerations with regard to supplies, production possibilities and
relative costs of different types of products in terms of labor, strategic
materials and transportation are taken account of in the preparation of these
original estimates and in the subsequent adjustments made in them.
2. When consolidated, these requirements are reviewed in the light of
supply estimates (including periodic revisions of prospective supplies) and
determination is made of the residual amounts that would be available to
civilians if the stated requirements were met.
3. The civilian residual estimates are subject to examination by
nutritional experts and economists to determine the relationship of such
residual supplies to past consumption levels and to United States national
standards of nutrition. This analytic work is pointed up in the Civilian
Requirements Branch of the Food Distribution Administration of the Department
of Agriculture, assisted by an Advisory Committee on Civilian Nutrition of
which the Director of the Food Distribution Administration is Chairman,
11- If the analyses demonstrate that the amounts of related food groups
remaining for civilians are less than the quantities necessary to provide
adequate standards of consumption (a) the possibility of expanding production
of these commodities is analyzed by the Food Production Administration and
(b) the non-civilian claimant agencies are asked to reconsider and adjust
their requirements.
5. If such adjustments in production and requirements do not bring
supplies for civilians to an adequate standard, or if any developmente take
place to create continuous stringency in the market situation, (e.g., a reduction
in production or supplies; or excessive consumer buying as a result of higher
national income and employment) the commodity is declared a controlled commodity
Regraded Unclassified
63
- 9 -
6. When it is necessary to allocate a controlled commodity, the following
procedure becomes effective:
a. The Director of the Food Distribution Administration, consulting
with the Inter-Agency Allocation Committee of which he is Chairman,
recommends to the Secretary over-all allocations of available supplies to:
(a) the claimant agencies of the United States, including the civilian popu-
lation, War Department, Navy Department, Marine Corps, the Veterans Adminis-
tration and other agencies requiring food for use in or by the United States;
and (b) foreign claimants including Russia, United Kingdom and other countries
receiving Defense Aid, and friendly nations.
When this allocation is made, two procedures are established: one with
respect to allocation of food among claimant agencies of the food reserved for
use in or by the United States; another for the allocation of export food
supplies among foreign claimants:
(i) The Food Distribution Director, consulting with the Inter-
Agency Allocation Committee of which he is chairman, will recommend to the
Secretary allocations of supplies among the civilian population, the
Army, the Navy, the Marine Corps, the Veterans Administration, territories
and possessions and other agencies. On the basis of these recommendations,
the Secretary allocates subject to policy direction of the President.
(11) When food supplies are determined to be available for
export to friendly nations or for Defense Aid, the availability
report is transmitted to the Combined Food Board. (At present, the
requirements for Russia are determined, subject to the protocol
provisions, by direct negotiation with the USSR Food Mission). On
Regraded Unclassified
64
- 10 -
the advice of its commodity committees, the Combined Food Board will
recommend to the Secretary allocations as between foreign claimants
including the United Kingdom, the Fighting French, China, the Poles, the
Greeks, the Jugoslavs, reoccupied areas and friendly nations. (When
provision can be made for the representation of Russia on the Combined
Food Board, their requirements can be handled through the same international
machinery). Taking into consideration these recommendations, the Secretary
allocates the supply for export, after obtaining the advice of the Food
Advisory Committee and (on reference) the combined Chiefs of Staff, subject
to policy direction of the President.
C. Summary of General Recommendations
1. The whole food distribution program should be put immediately on a
stringent War economy basis.
2. All requirement estimates should be systematically and critically
re-examined on the basis of all known facts about t he total supply
situation and in the light of the basic principles established as a
result of the conferences for which this memorandum has been prepared,
More factual information and more explicit statements as a basis for
establishing the relative urgency of needs should be required from
all claimants.
3. Specific consideration should be given to the urgent needs of Russia
and the extent to which the assistance we are giving in the form of
food supplies could be increased. This should include an examination
of limitations imposed by the shortage of shipping or the congestion
of port facilities and a study of the possible means of overcoming
such limitations. The Russian claims should be ovaluated in relation
to those of all other claimants including, not only the British and
Regraded Unclassified
65
- 11 -
other foreign countries, but also those of our own civilian
population.
4.
A critical examination should be made of the relative levels of
civilian consumption in this country, in the United Kingdom and in
Canada with a view to mein Thing them in the most equitable and
appropriate relations to one another.
5.
Nutritional studies and analyses basic to the establishment of
appropriate standards of adequacy for civilians in this country under
varying circumstances should be undertaken at once. Policies based
on these should be formally established as soon as possible and
programs instituted to bring about the consumption adjustments
required.
6.
Rigorous control techniques should be set up to insure that allocations
are adhered to within as narrow limits of tolerance as are practicable.
7.
Rationing plans, adjusted as far as possible to take account of
variations in individual needs, together with supplementary food
programs (school lunches, subsidies on necessaries, stamp plan, etc.
should be developed and put into effect on the scale and with the
speed required by the stringency of the current situation and the
prospects ahead,
8.
The building up of reserves should be pushed on with foresight and
determination.
9.
The procurement and stockpiling programs of various government agencies
should be effectively coordinated.
Regraded Unclassified
66
- 12 -
10. A strong, frank and comprehensive program of public education with
regard to the food situation, the reasons for controlled distribution,
and the vital importance of the objectives to be attained through
this rigorous management of food supplies should be undertaken at
once. This should include a vigorous campaign against all forms of
food waste.
11, The urgency of the over-all need for food should be reflected in the
production, processing, storage and transportation phases of the total
program and should be made the basis for securing necessary materials,
manpower and finances for carrying out the whole program effectively.
Regraded Unclassified
67
- 13 -
D, Considerations relating to the presentation of the request for Lend-Lease
appropriations.
On this matter the subcommittee reached no final agreement. The general
feeling seemed to be that Russia might have a legitimate claim to more food
than is provided for in the present estimates. A conclusion on this
fundamental issue could only be reached after a much more thorough factual
investigation than we could give to the questions involved. Mr. Cox called
attention to the omission of certain items (e.g., lemons, vitamins, seeds)
from the list of commodities covered by the appropriations. Subsequent
inquiry indicates that these were included under more general categories or,
as in the case of seeds, were provided for in another appropriation.
Question was also raised as to whether the funds requested for Russian ship-
ments would be sufficient to pay for all that could be sent in the next six
months if shipping were available at the rate of 165,000 tons per month (the
estimated rate for January) and the cargoes were made up of products with the
highest values per ton. Subsequent inquiry indicated that with commodities
equal in value per ton to those being sent to the U. K. ($495) the money
needed would amount to $490,000 as against the appropriation request of
$810,000.
It was also suggested that, regardless of the relative quantities that
might actually be shipped to Russia and the United Kingdom, there might be
an advantage in presenting the request for appropriations in terms of
larger quantities for Russia and correspondingly reduced quantities for
Britain. The subcommittee recognized that funds would probably be appro-
priated more readily for Russian requirements than for British, but had
no basis for judging the consequences of such a change in the figures on
the British Food Mission even if they were to be assured that the funds
would be transferable in the actual carrying out of the program.
plant lc-ef 1/12/43
Regraded Unclassified
COPY
1-8-43
68
recommendations OF INTERDEPARTMENTAL CONSITTEE TO CONSIDER
PROBLEMS RELATING TO 1943 FOOD PRODUCTION PROGRAM
January 11, 1943
Manpower
The committee recommends:
(1) That the War Manpower Commission and the Department of Agriculture
cooperate with the Office of Civilian Defense in developing &
community by community program to mobilize for use in agriculture
the labor resources now available in non-farm communities adjacent
to farming areas,
(2) That support be given to the Department of Agriculture's request
for funds to DU used for payment of transportation and subsistence
of sessonal workers, those recruited within this country as well
ao those coming from foreign countries.
(3) That existing labor on small farms where land resources are avail-
able for increased production be nade effective through the exten-
sion of credit or other facilities needed for the increased pro-
duction of crop or livestock products.
(4) In order to clarify a number of issues in the labor supply situa-
tion it is recomended that farm manpower needs, potential labor
supplies, and the effects which standardization of wages would
have on the supply and mobility of lanor be analyzed as quickly
as possible and specific steps D6 taken to deal with the situa-
tion.
Farm Machinery and Fencing
Due necessary farm machinery SIV. Sencing materials must be made available
to handle the required increases in food production. Although the Depart-
cent's recent request for an increase in the manufacture of new machinery
from 23 percent of 1940 to 40 percent and in repairs from 135 percent to
107 percent may be on as high a level 35 can be manufactured for early
season use, the need for further increases, especially of harvesting
machinery, should be analyzed. The Department should make request for
materials to manufacture additional machinery of the specific types that
further analysis indicates will be necessary to meet the increased goals.
Production Programs
(1) The committee recognizes the difficulties involved in making major
changes in the BAB program for 1943 because of commitments already
made and production plans now in the process of development. However,
Regraded Unclassified
69
- 2 -
it is recommended that the program for 1944 be developed in terms
of direct incentive payments for the commodities most needed in the
war effort and to limit through marketing quotas or other devices
comundities that are less essential in food and fiber production.
(2) The committee is concerned about the legislative restrictions on the
sale of farm products held by the Commodity Credit Corporation and
recommends that attempts be made to lift these restrictions where
they pertain either to the quantity or price at which a commodity
is sold.
(3) The committee questions whether the 1943 milk production goal will
be attained under present price support and production programs.
the Committee endorses the Department's intention to re-examine the
dairy program for the purpose of devising effective means of main-
taining dairy production. The O.P.A. representative on the committee
wished to be recorded as stating that it was his understanding that
the present dairy program would remain in operation for approximately
six months.
(4) In discussing the dairy program, the committee considered the need
for adequate income incentives to obtain desired production of speci-
fic conmodities. The comittee recognized that in communities and
areas where additional income incentives are needed to obtain more
adequate production and where increased price supports are limited
by price ceilings; the three following alternative lines of action
can be followed:
(a) Try to obtain as large an output as possible under present
prices but be prepared for the production of supplies under
6001 levels.
(b) Adjust price ceilings upward and accept the effect of these
adjustments on cost of living.
(c) Provide funds for direct production payments to encourage the
desired increases in production.
There are several farm commodities on which decisions must be made
concerning which of these alternatives is to be followed. The milk
problem seemo to be the most important of the commodities affected
and a policy decision should be reached as soon as possible.
(5) It is recommended that the Department of Agriculture consider a pro-
gram to apply the insurance principle to crops for which increases
are requested, so that growers of new crops or farmers who incur
financial risk by materially increasing output of any product will
be assured of compensation at least equal to the out-of-pocket
expenses incurred.
Regraded Unclassified
70
- 3 -
(6) To insure an adequate volume of vegetables for consumption, the com-
mittee endorses the Victory Garden and Farm Garden Programs and
recommends that they be further expanded.
Committee Membership:
Office of Economic Stabilization - Donald Russell and Edward F. Prichard
Board of Economic Warfare
- Edwin W. Gaumnitz
Office of War Information
- James Allen
War Hanpower Commission
- William Haber and Arthur Stuart
Office of Price Administration
- A. C% Hoffman
Sureau of the Budget
- R. C. Patterson
State Department
- Dewey Anderson
Lend Lease
- John L. Pratt
Treasury Department
- George C. Haas and Edmund M. Daggit
Office of Civilian Defense
- James M. Landis
War Production Board
- M. Lee Marshall
Department of Agriculture
- E. D. White, H. B. Boyd, John O. Walker,
Russell S. Kifer, and Sherman E. Johnson,
Chairman.
Regraded Unclassified
71
1948. : I
Dear Mr. Elknes
The Secretary - approciated your
letter of December 20, congratulating his
upon the Treasury campaign in commection
with the recent financing. Be 10 away
from the office because of illness, and
I all therefore acknowledging your letter,
and expressing Me thanks for year courtesy
in vriting his as you md.
sincerely yours,
(Signed) H. S. Klotz
N. 8. Klets,
Private Hearstary.
Mr. Abran 1. Mikma,
40 Wall Street,
New York, New York.
GEF/dbs
File in Diary
Regraded Unclassified
72
ABRAM 1- ELKUS
40 WALL STREET
NEW YORK CITY
December 30, 1942
Personal and Private
Hon. Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
Dear Henry:
I want to congratulate you on your overwhelming
success in raising the $9,000,000,000 loan for the Govern-
ment. Before it ended it was $12,000,000,000. Never was
such a loan raised by any government at one time and cer-
tainly not at 80 low a rate of interest. I felicitate you
again on the great success of your efforts.
My daughter, Katharine White, was Co-Chairman of the
Victory Bond drive in Monmouth County. She lives in Red
Bank where I have my Summer home and she has been very busy
raising funds. for the various bond issues.
With kindest regards to Mrs. Morgenthsu and yourself,
I remein
Yours faithfully,
Regraded Unclassified
73
TREASURY DEPARTMENT
WASHINGTON
January 7, 1943
MEMORANDUM FOR MRS. KLOTZ:
Herewith are two papers which the Secretary
asked me to give you for transmittal to him at
home, as follows:
(1) A memorandum showing the present
status of the Treasury Star Parade
program; and
(2) A draft of a letter to be signed
by the Secretary, congratulating
and thanking our field organization
for the sales results achieved
during the month of December.
GRAVES.
FORVICTORY
BUY
STATES
STAMPS
TREASURY DEPARTMENT
74
INTER OFFICE COMMUNICATION
DATE January 7,
1943
TO
The Secretary
FROM
Mr. Graves
The status of the Treasury Star Parade programs follows:
1. Recordings have been made for broadcasts
through Friday, February 5th. The making
of additional recordings has been suspended.
2. If the Treasury Star Parade is to be con-
tinued without interruption, it will be
necessary to resume the recordings not
later than Thursday, January 14th.
As I think you know, the Treasury Star Parade is now
being broadcast by 840 radio stations and the recordings
are broadcast a pproximately 2,520 times per week. They
have been well received both by the radio stations and
by the public. I am strongly of the opinion that we
should arrange for the continuation of this feature
without interruption.
Regraded Unclassified
75
January 7, 1943
TO THE WAR SAVINGS STAFF:
The sale of $725,000,000 worth of B Bonds
in December is a tribute to the War Savings Staff
and to the patriotism and good sense of the
American people.
December marked the culmination of a year
of great achievement for the voluntary savings
program. During that year $6,000,000,000 of $
Bonds were purchased as a result of your efforts.
In many ways, savings in E Bonds represent
the most useful money that comes into the Treasury.
They not only contribute to meeting the costs of
war but because they come largely out of current
income, they reduce the pressure on prices and thus
help to keep down the cost of living and the cost
of the war.
Morsover the sale of these securities to
millions of individuals outside the usual invest-
ing public creates an important factor for stability
in our economy and a priceless partnership between
the people and their government.
Congratulations and my most sincere thanks
for your splendid cooperation upon which I shall
continue to rely in the year ahead.
(Signed) Henry Morgerthan, Jr.
Secretary of the Treasury
Handed to Thanks 1/11/43
File in Diary
Regraded Unclassified
76
January 7. 1943.
My dear Mr. Valmfield:
Since the Secretary is away from the
office, I am acknowledging your note of
November 27, which forwarded so his a copy
of the pumphles reprinting a breadeast
in regard to Mrs. Reesevelt's visit in the
Houses of Parliament while she Vas abroad.
I know that Mr. Morgenthau will much
approciate your courtesy is sending him
this leaflet, and thank you for 1% on his
behalf.
Sincerely yours,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
His Excellency.
V. V. Vakefield,
House of Comman.
London, England.
GEF/dbs
File in Diary
Regraded Unclassified
77
o
27th November, 1942.
Dear M.Morgenthan,
You may have a few
minutes to spare one day in
which case you might care to
read the enclosed leaflet of
a broadcast which Elliot made
to North America following our
taking Mrs. Roosevelt round the
Houses of Parliament.
With all good wishes,
www.kepild
Regraded Unclassified
78
Mrs. Roosevelt's
Visit
3rd November, I942
"TRADITION AND CHANGE"
BY
THE RIGHT HON. WALTER ELLIOT, M.C., M.P.,
Chairman of the British-American Parliamentary Committee.
North American Service: Broadcast on Thursday/Friday,
5th/6th November, 1942, 00.80 and 04.00 G.M.T.
W
HEN I had the privilege of showing Mrs. Roosevelt over
the Houses of Parliament on Tuesday, as Chairman of
the British-American Parliamentary Committee, there were
two things which struck all of us who were present, and they
stood out like street-signs. The one was, You must have
tradition." The second was, " You must have change." How
A Reception was given to
to reconcile, how to marry these two great needs of our time, is
going to prove one of the biggest tasks before our two peoples.
Mrs. Roosevelt by the
Old nations and new nations-it's in some ways a figure of
British-American Parliamen-
speech, since a nation is the sum of the people in it, and the
average age of the British is not notably different from the
tary Committee at the
average age of the Americans. But it does correspond to a
certain reality. That reality is the force of tradition.
Houses of Parliament on
You feel it everywhere here, but especially when going
round the Houses of Parliament and the more so when going
Tuesday. 3rd November,
round with someone from the New World, the keen, active,
1942.
challenging, New World which has brought to birth a whole
roaring civilisation on the other side of the ocean, from the
grass-roots up, since the day before yesterday. The structure
of much, and the tradition of all, of the Houses of Parliament
is very old and very strong. Much of the structure of it has
been burnt and blasted anew in the blitz-but much of it
remains, stronger than ever. The tradition, in fact, is
growing every twenty-four hours. Here men worked-
representatives in a representative assembly-when Drake
went out to meet the Spanish Armada coming up the
Channel ; here men worked when Marlborough, Churchill's
ancestor, launched his army in the great counter-attack that
carried him right across Europe to the Danube ; here men
worked-and made an Expeditionary Force, and a Second Front
-when Napoleon held all Europe, from Madrid to Smolensk.
To all that can be added that here and hereabouts men worked,
while Hitler also began to reach across Europe from the Bay
of Biscay on his way to Smolensk-and men who can claim to
said, is that it is too small; and it is but an ante-chamber to
be not behind their forefathers either in daring or in resolution,
the Hall which I am going to build." It was left for other
or in hazards undergone.
centuries to fulfil that boast ; yet when, for instance, all your
The danger of all that is, that traditions may grow too
great lawyers, the Bar of America, came here a few years ago,
strong and choke change-for change in our era is going to be
and were entertained in Westminster Hall by the English Bar,
as essential as steadfastness itself.
with the Lord Chancellor at its head, practitioners both in
systems of law which drew so much from a common origin-
But these traditions, many of which are now part of the
one could not help recollecting the challenge of the Norman
inheritance of the whole world, are grand, are ennobling things.
King, and feeling that a. glint of prophecy, perhaps, illuminated
The first, and the greatest, is the blending of two peoples-of
the plans to which he had given sanction. You have to build
two cultures, Norman and English, with no rancour left behind.
big and plan bigger, to stand for a thousand years-and we
The history, the living history, of the buildings of Westminster,
have to build big and plan bigger, to-day.
the Houses of Parliament, begins almost immediately after the
Our visitor looked at these things but could not stay, for
Conquest-the Norman Conquest of William, the Conqueror.
we had much to show her. She passed up the steps on which
It comes into full swing with his son, who built the massive
Charles the First stood trial for his life, and lost. She passed
Norman walls of Westminster Hall-one of the greatest pieces
through the hall-now no longer used for debate or assembly-
of Norman architecture in Europe ; still standing intact, still
built over the site where a. former fire had destroyed an older
in active use. The courses of that masonry are older than the
House of Commons. That was the one where all the long
English language. Mrs. Roosevelt was able to walk across
debates took place upon the American War of Independence-
the floor and place her hand against the stones which were
which had heard the eloquent, closely-argued speeches of
hewn and laid when the workmen spoke Anglo-Saxon, and the
Burke, in favour of the Colonists of the Thirteen States ; and
architects Norman French. Neither could even have common
close by, had been Chatham's tremendous affirmation-" My
speech with the other nor could either have understood the
Lords, you cannot-you cannot-you cannot conquer
language which we speak to-day. It had not yet been born.
America." There was no time to spend, even on that-there
The new language, English, testifies to the spirit of friendliness,
is a great deal to see, in an hour at Westminster. But we are
of moderation, of toleration, of decency, which comes up, like
very proud of these things-the American case was nowhere
a mist from the riversides, over the face of England, changing
put better, or more strongly, than it was put from the benches
men's minds. All these qualities have their bad sides as well
of the British Parliament. And we had proved able to learn
as their good, their perils as well as their safeties But the
from our mistakes-as the Dominions can testify ; as indeed
liquidation of the Herrenvolk of that time, the absorption of
General Smuts had demonstrated a few days before, coming to
their very speech, so that nobody considers for a moment
teach; all of us anxious to sit at his feet.
whether to say or womanly" or 'feminine," because of the
We were racing on. Here, we freed all the slaves in the
Norman or English parentage of the two words (though those
Empire-by argument, by the Division Lobby. by Act of
two words represent the whole two streams that made up the
Parliament-the Slavery Abolition Act, 1888. Seven years it
clash of the Conquest,-that is a very great achievement;
took to operate, and twenty million pounds in compensation,
begun, continued, and carried through, in these very halls
twenty millions-twenty millions-you could do all that for
through which we were walking.
twenty millions, if nobody boiled over, if nobody began to
There were other aspects of history too, which came alive
shoot. That was all past history. We had to get on. We
as one moved. William Rufus, who planned and built these
were living in the present, working for the future. Mrs.
high heavy walls, was reproached by his Court because they
Roosevelt still had to meet the Members of Parliament. After
were so large. The only fault about this Hall, by God," he
all, the Members of Parliament are Parliament, not the stones.
adh
VISID
So we came to the burnt-out shell where Hitler had bombed
and wrecked the House of Gladstone and Disraeli, Joseph
one Courthope, who grew good timber, no great distance away.
Chamberlain, Lloyd George-and Winston Churchill. Here we
In 1920, certain beams had to be renewed they went back to
had continued to reform the Franchise ; here we had put
the same woods, and cut the neighbour oaks which were seed-
through the Insurance Acts and the Social Services here we
lings then and they bought them still from Courthope, the
had voted the building of eight battleships in a single year
same family, in the same lands. Difficult to shift, yet it has
here we had seen through the first World War from start to
advantages too Sir George Courthope sits for the Rye
finish here we had challenged the Nazis and all their works,
Division of Sussex, where his lands are-Rye, on the sea coast.
over Poland, and had heard the first sirens as Britain went to
You want men-and families-difficult to shift on the South
war again. It was burnt out like an empty kiln-bare walls of
Coast just now, looking across to Hitler's aerodromes.
brick and stone, open to the sky : ironwork of the heating
We looked down and at our feet was the tablet, which
system scattered forlornly about the shattered floor. Yet It
Mrs. Roosevelt bent over to read, stating that here, for seven
did not matter at all-not in the least-not any more than an
years, from 1788 to 1795, Warren Hastings, back from his
emptied kiln, or a fired gun. The House of Commons sits anew
governorship of India, was impeached for bad governing and
clsewhere in its new quarters already we can say we heard
stood his trial, and after all that enquiry was at last acquitted.
news of Libya, the repulse in Libya, the reel back to El
This is not the first time affairs in India have had repercussions
Alamein, and soon we shall say-of the attack in Egypt-the
on the course of events here. 1788-it is a long time ago.
attack in Libya-begun again. Till the old Chamber was
Mrs. Roosevelt was shown round the House of Lords by
destroyed, there was still a line woven into the carpet on the
Lord Simon, the Lord Chancellor, formerly head of the Simon
floor beyond which nobody must put a foot because, in the past,
Commission, who in his turn has given much thought to the
that marked the limits of a man's lunge with a sword, when all
subject. It is agreed by all that change is necessary still
men carried swords, and feelings in debate ran high. Down-
remember, that there is a vast store of knowledge in and around
stairs in the cloakroom were, still, loops below the hat pegs,
this building which should no more be neglected than the
in which these same swords could be hung-though they only
statistics of rainfall, and deep borings into rocks, when a great
carried umbrellas. And still we value these symbols, just as
hydro-electric enterprise is to be founded however enthusiastic
we value the power to clash our doors in the face of the
we may be to bring new light and power to millions.
messenger from the House of Lords, and inspect him through
So we went upstairs again and Members gathered round,
a grating in the door, lest he bring gun-men with him, as once
a visitor did, three hundred years ago. And all this we shall
who had come to greet Mrs. Roosevelt, and we asked our
distinguished guest to accept a small gift, the fruits of some
want to reproduce in any new Chamber that we build.
shopping by some of our ladies, when she had been too busy to
It was this that led Aneurin Bevin, and some of the other
shop for herself. Two small pieces of Georgian silver-silver
Labour Members, to argue, as we walked through Westminster
from the time of George the Third-and if there could be
Hall, that tradition here was too strong, resistance to change
anything more unlikely to George the Third than that the
too great. All of us have felt that uneasiness the uneasiness
Parliament House should be burnt out by men flying through
in its old skin that a crab must feel before it casts its shell
the air from Germany, it could only be that a President's wife
from the United States should be treated as our honoured guest
before it can bring off the miracle and renew its life again-
when it still has to get through the soft-shell period ahead-
therein-and that the gift we should choose to make, and she
without disaster.
should be glad to receive, to commemorate her visit, would be
part of the work of his silversmiths in London.
We looked up at the great timbers of the roof. Six
hundred years ago they had cut these oaks from the woods of
di
Regraded Unclassified
Two silver George III pieces were presented to
Mrs. Roosevelt in a case, in which was the following
inscription on a silver plate underneath the crest of
the Palace of Westminster :-
Presented to Mrs. Franklin Delano Roosevelt
by the Members of the British-American Parliamentary Committee
on the occasion of her visit to the Houses of Parliament
on November 3rd, 1942.
TREASURY DEPARTMENT
01:01
1943 JAN 6 AM 7 50
SECRETARY OF TREASURY
OFFICE
Portschen Press, 2 Carmelite Street, E.C. 4.
79
JAN 7 1943
is dear Mr. Secretary:
Reference is made to Cable No. 3222 of December 27,
1942 from General Eisenhower requesting additional Treasury
personnel to work on property control and exchange, monetary
and fiscal matters in North Africa.
For your information I an attaching a copy of a letter
and enclosure I have sent to the Secretary of State advising
that we are prepared to furnish additional personnel. In
detailing these men to North Africa this Department is
drawing heavily upon its available supply of technical non
who are en aged in similar work here.
In our opinion, as the scope of our occupation
operations expand into other areas the need for technical
will be very great. While we will continue to try to
neet any further denands for the services of other non in
this field, I strongly urge that steps be taken by the Mar
Department to take advantage of Treasury experts already
In the araed forces. In this connection I as enclosing &
first list of nen already in the armed forces who fall
within the above category. It would appear that these don
are needed now in North Africa and, in addition, they would
be receiving valumble experience for the larger operations
which are bound to follow.
Very truly yours,
151 DwBell
Acting Secretary of the Treasury.
The Honorable
The Secretary of lare
Enc.
AFL:nrd - 1/2/43,
Regraded Unclassified
80
JAN 7 1943
1ty dear Mr. Secretary:
I refer to your letter of December 7, 1942 and ay reply
of December 17, 1942 relating to civilian personnel assigned
to duty in North Africa in connection with the allitary
occupation of territories in Europe and North Africa.
In Cable No. 3222, December 27, 1942 from General
Lisenhower (copy furnished your Department by the war
Department), it is stated that six additional Treasury repre-
sentatives are needed diately to work on property control
and exclunge, monetary, and fiscal mattern with Dubois, Taylor,
and Bermstein. In the same cable Shirphy repeats this request
to your Department.
The Treasury Department is prepared to meet this request
Initially by sendin the nen whose names appear on the attached
list. r. Harold Glasser whose ne 10 appears first on the list
is Assistant Director of Monetary Research and is particularly
thellfied to handle the inflation and taxation problems and also
is failliur with property controls and exchange, monetary and
fiscal matters. Mr. U. L. Soffean 10.080 name appears second
on the list is Assistant Director of Foreign Funds Control and
is a specialist on this and related subjects. In accordance
with your letter of December 7, 1942 and RT reply of Dece ber 17,
1042, We expect that Reasra. Classer and Hoffman will be given
the 28.00 status as that accorded Mr. TruBois.
with reference to the other Preasury regresentatives
named or the attached list, It is expected that they will
retain in all respects their present status R.S employees of
this Department and that they will work under the direction
OE, and be responsible to, Mossrs. Classer, DuDois and Hoffman.
nder these circumstances there will be no need for their
reporting directly to the Treasury Department and, of course,
Regraded Unclassified
81
- 2 -
they will be given diplomatic passports and their activities
will be under the general supervision of Mr. Murphy, the
Chief Civil Affairs Officer.
Very truly yours,
1st DwBell
Acting Secretary of the Treasury.
The Honorable,
The Secretary of State.
ENC.
AFLinrd:bbk - 1/4/43
Regraded Unclassified
82
LIST OF TREASURY MAN TO BE DETAILED TO NORTH AFRICA
1. Harold Glasser
2. Michel L. Hoffman
3. Joseph H. Murphy
4. Gardner Patterson
5. Edwin F. Rains
6. James J. Saxon
Been 5,1943
Regraded Unclassified
83
LIST OF TREASURY PERSONNEL NOW IN THE ARMED FORCES OF THE UNITED STATES
mo SHOULD BE CONSIDERED FOR THE SPECIAL WORK IN NORTH AFRICA
ileme
Address
Timons, Lt. B.E. Lane
Army (assigned to BEN), c/o American imbussy,
Landon, England.
Clay, Lt. Eugene H.
Amy Air Forome, 411 Coral Reef Hotel, Miani, Fla.
Hicks, Cadet Jacas Earl
Reserve Training Class, Barracks 3 (Nev. Class
Sect. 2 Ali) Groton, Connecticut.
Towacn, Major Norman E.
Military Intelligence, Washington, D. C.
Raidon, A/C Neil D.
Classification 3qdrn., San Antonio Avistion
Cadet Center, San Antonio, Texas.
Edelman, Ensign Albert I.
U.S. Coast Guard (R), c/o Capt. of Part,
San Francisco, Calif.
Oliver, Ensign Henry
U.S. Naval Reserve (now stationed in Norfolk, Va.)
tiken, Lt. Richard P.
Naval Operations, Havy Dept., Constitution Ave.,
Washington, D. C.
Wolf, Ensign Robert
U. 8. coast Guard (R), % Capt. of the Port,
Penana City, no.
Kotlar, Pvt. Harry
Army Air Forces, No. 32434077, 766th School 3qdm.,
Buckley Field, Cole.
Carre, Lt. Chester n.
U. S. Naval Air Station, quonset Point, R.I.
Rosen, Sergeant Martin
Fort Benjamin Harrison, Indians.
January 4, 1943.
Regraded Unclassified
84
PARAPHRMIE OF TELEGRAM RECEIVED
FROM:
Algiers
TO:
was Department
DATED:
Desember 27, 1942
seen
FOR STATE AND TREASURY SIGNED EISYNHOWER
from
MURPHY AND BERRETEIN.
At least 6 more Treasury representatives, not
counting the man for Tengiers, are needed right away
in the division of ojnil affairs to work with Bermstein
Taysor and Dubois in handling matters regarding mometary,
fiscal, enchange end property centrol work. It is sug-
gested that an economist who knows inflation and tage
ation problems and sen such as Richards, Sexer, Reffman
and Reymond Murphy be sent.
It is further suggested that Spiegel be reassigned
to Treasury and be sent to London in as such ne he would
like to make a change. Cables to Acora and Oran should
be sent in order to arrange for proper transportation
priorities no that through earriage may be assurred and
thereby enabling everyone to arrive at Algiers first.
All phases of the American staff, including Treasury
functions, must be augmented immediately.
The Lend-Lease Administration and the Board of
Verfere are requesting non, proferably with
a knowledge of French. It is requested that ve be
furnished with the names of the mem by cablegram and
the date of their departure.
(No Signature)
Regraded Unclassified
85
(Dr. White's office has original)
Regraded Unclassified
86
Jan. 7, 1943
Dear Mr. Claytons
This is to maknowledge receipt of your letter of
lesember 30, 1942, setting forth the disbursements made
by R.F.C. subsidiaries for purchases from Britdsh Empire
sources during the year 1942.
The information is appreciated and should prove
helpful.
Very truly yours,
(SGD) D. W. BELL
Acting secretary of the Treasury.
MF. W. L.e Clayton,
The Assistant Secretary of Connerse,
Weshington, D. C.
Takirl 1/5/43
Regraded Unclassified
1
0
THE ASSISTANT SECRETARY OF COMMERCE
STATE
WASHINGTON
December 30, 1942
Dear Mr. Secretary:
Complying with your recent request for information concerning
purchases by the RFC subsidiaries from British Empire sources in 1942,
I submit the following:
Metals Reserve Company
Actual to December 19,
$81,000,000.
estimate thereafter
Defense Supplies
Actual to November 30,
85,000,000.
Corporation
estimate thereafter
Rubber Reserve Company
Actual to November 30,
39,000,000.
estimate thereafter
Total
$205,000,000.
The figures given represent actual disbursements for material received
since January 1, 1942, to the dates indicated and estimates of receipts
thereafter up to December 31, 1942.
In certain cases the values given are f.o.b. steamer or plane
at port of export; in other cases, the figures include transportation
charges to United States port of import where the contract 18 on a
c.i.f. basis. Since in many of the latter cases, the goods are trans-
ported by British vessels, it is perhaps fair to assume that the figures
given represent a true picture of exchange made available.
The principal items composing the above imports are: wool from
Australia, $74,000,000; aluminum from Canada, $35,317,000; lead (Australia
and Canada principally) $18,000,000; manganese (South Africa and India,
principally) $14,000,000.
In addition, we paid dollars to Empire sellers for Turkish chrose
(about $2,500,000.); for New Caledonia nickel (about $4,000,000.) and
for Belgian Congo diamonda (about $1,500,000.). These purchases are not
VICTORY
BUY
TOTED
FTATES
The Honorable
WAR
BOXES
-
The Secretary of the Treasury
Regraded Unclassified
included in the total of $205,000,000. given above.
please let se know and I will be glad to furnish them.
If there are any further particulars you would like to have,
Sincerely yours,
MClayton
W.L. Clayton
Assistant Secretary
Regraded Unclassified
89
TREASURY DEPARTMENT
OFFICE w ⑉ SEGRETARY
January 7. 1943
COMPINSIFIAL
Received this date from the Federal Receive
Bank of New York, for the confidential informa-
ties of the Secretary of the Treasury. compila-
tion for the vesk ented December 30, 1948, showing
dollar disbursements out of the British Empire and
French accounts at the Federal Reserve Bank of
Sev York and the mane w which these expenditures
vere financed.
(Init.) E.M.B.
1mc:1/8/43
90
C
0
P
Y
FEDERAL RESERVE BANK
OF NEW YORK
January 6, 1943
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. D. White
I am enclosing our compilation for the week ended
December 30, 1942, showing dollar disbursements out of the
British Empire and French accounts at this bank and the means
by which these expenditures were financed.
Faithfully yours,
/=/ L. V. Knoke
L. V. Knoke,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
Copy:imc:1/8/43
STATESTS OF BETTING
(In Millions of Dollars)
let Saled Isomber 30. 19/2
BANK OF DOLUD (BRITISH
PRANCE
DEBITS
CREDITS
DEBITS
0230378
Proceeds of
Incr,
Net Incr,
Gov't
Sales of
(+) or
Gov't
Proceeds
(=) or
Total
Expendi-
Other
Total
Securities
Other
Decr. (-)
Total
1
Other
Total
of Gold
Other
Dear. (-)
PERIOD
Debits
tures(s)
Debite
Credital
Gold
(Milicial)(b)
Credita(c)
Debits
have (o)
Debits
Credite
Sales
Credite
in $ Pain (A)
First year of NN
1,793.2
605.6
1,187.6
1,828.2
1,356.1
52.0
420.2
+ 35.0
866,3
425,8(f)
49.7
109530
900.2
195.1(1)
+229,11
War period through
December, 3940
2,792.3
1,425.6
1,356.7
2,793.1
2,109.5
108.0
575.6
+ 10.8
878.)
421.4
456.9
1,098.4
900.2
198,2
+220.1
Second year of *****2,203.0
1,792.2
410.8
2,189.8
1,193.7
274.0
722,1
- 13,2
38.9
6.8
36.1
8,8
-
6,0
- 30.1
Third year of marrad
1,235.6
904.8
330.8
1,361.5
n.s
5.5
1,334.2
+125.9
18.5
.
18.5
44
I
4.4
- 14.1
1942
sept. 3- Sept. 30
56.1
37.1
19.0
81.6
-
0.5
81.1
+ 25,5
10.1
-
10,1
0.4
.
0.4
- 9,7
Oct, 1- Oct, 28
46.7
27.4
19.3
57.5
-
-
57.5
+ 10.8
-
-
-
C.O
-
Co
- 0.3
Oct. 29 - Dec. 2
02
23.2
11.5
72.3
-
-
27.3
+ 37.6
0.1
-
0.1
0.3
-
0.3
+ 0,2
Dec. 3 - 3 Dec, 30
200
L.
17.1
11.
-
-
51.9
+21.5
-
-
-
-
-
I
I
NEEX ENDED:
112
-
-
13.7
+ 6.5
-
1
I
I
-
-
-
Tf
17.5
-
-
1.5
+ 5.8
-
I
-
1
-
#
I
in
-
-
6.4
+ 1,9
I
-
1
-
,
I
-
14.2
-
-
16,2%
1
+ 23
-
-
-
I
I
-
I
Average Weekly Expenditures Since Outbreak of War
Transfers from British Purchasing Comission to
France (through June 19, 1940) $19.6 million
Bank of Canada for French Account
England (through June 19, 1940) 27.6 million
Week ended December 30, 1942
-
willion
England (since June 19, 1940) 32. million
Cumulation from July 6, 1940
162.7
sillice
"Pus monthly breakdown see tabulations prior to April 23, 1941
**For monthly breakdown see tabulations prior to October 8, 1941.
***for monthly breakdown see tabulations prior to October 14, 1942.
(See attached sheet for other footnotes)
Regraded Unclassified
Duggiy Natur Overat, and Matery of Blopping,
Instate for - ₫ Destrict Purchasing Britdak MY Matatry, British Supply Board, Ministry of
z
Entimated Agree beard en transfers from the Bene Tack Agency of the Bank of Montrall, which apparently represent the
processo of official Brittick sales of Amriem securities, including these effected through direct negotiation. In addition
early miss of the var, although the receipt of the proceeds at this Bank cannot be identified with any socuracy. According
to the official calling, liquidation of securities for private British account occurred, particularly during the
of our securities through December, 1940 narmated to $334 million,
to data supplied by the British Treasury and released by Secretary liargenthas, total official and private British liquidation
s
Includes about 085 million received during Ostober, 1939 free the accounts of British authorised banks with New York banks,
presuarely reflecting the requisitioning of private dollar balances, Other large transfers from such accounts since October,
1939 receipts. apporently represent the sequisition of proceeds of exports from the sterling area and other currently accruing dollar
(d) Reflacts changes in all dollar holdings payable on demand or naturing in one year.
(a) Instades payments for account of French Air Commission and French Purchasing Commission,
(f) Adjusted to elizinate the effect of $20 million paid out on June 26, 1940 and returned the following day,
(g) Includes $6.0 million held for credit of U. S. armed forces abroad
2.2 million deposited by British Ministry of Supply
2.0 million transferred from the Commonwealth Bank of Australia,
Regraded Unclassified
of GARADIAN AND ACCOUNTS
(Is Millions of Dollars)
Ented
Ducember 30, 3342
BANK
OF
CANADA (and Camdian Dovertment)
COMMO The BANK OF AUSTRALIA (and Australian Dovernment)
DEBITS
CREDITS
DEBITS
CREDITS
Transfers
to
Transfers from Official
Transfers
Proceeds
Official
of
British A/C
Net Incr.
3
(*) or
Proceeda
Net Incr.
Official
Total
British
Other
Total
Gold
of
For Own
For French
Other
Decr. (-)
(+) or
PERIOD
Total
British
Debita
A/C
Debite
Credits
Other
Sales
A/C
Total
A/C
Gold
Credits
in 5
A/C
Other
Decr. (-)
Debita
Debite
Credits
Sales
Credite
First year of ware
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
477.2
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
+ 4.5
Second year of
460.4
-
460.4
462.0
246.2
3.4
123.9
88.5
+ 1.6
72.2
16,7
55.5
B1.2
62.9
18.3
+ 9,0
mird year of
525.8
0.3
525.5
566.3
198.6
7.7
-
360.0
+ 40.5
107.2
57.4
49.8
112.2
17.2
95.0
- 5.0
1942
Sept. 3- Sept, 30
46.3
-
46.3
53.6
13.2
-
-
60.4
+ 7.3
28,0
20.5
75
18,1
-
16.1
- 9.9
Oct, I - Oct, 28
44,9
-
44.9
51.5
16,6
-
-
34,9
+ 6.6
14.3
12.0
2,3
14.6
-
14.6
+ 0,3
Oct. 29 - Dec. 2
YZ
E
3.7
45.0
11.6
t
-
5452
+ 21,5
7.6
5.0
2.4
9.3
-
0.3
+ 1.9
Dec. 3- Dec. 30
12.2
I
OA
2.3
-
.
AS
I
1.2
74.1
E.U
6.2
11.7
I
11.7
- 2.6
WEEK ENDED:
Dec. 9
11.0
-
11.0
15.1
2.6
-
-
12.3
0.5
El
n.s
8,3
-
8.3
+ 7.8
10
11.4
-
11.4
13.1
0.1
-
I
33,0
+1.7
R.2
8,0
0.2
0.1
-
0.1
- 8.1
23
12.1
1
12.1
33
Il
33
-28
L.
1.1
1.0
-
1.0
- 0,4
30
13.70
1
13.7
12.4()
If
12.4(e)= 1.3
4.0
2.0
2.0(d) 2,3
I
236
- 1.7
Weekly Average of Total Debite Since Outbreak of Tax
Through December 30, 1942 $
8.5
willion
the anothly breakdown --- tabulations prior to April 23, 1941.
offer monthly breakdown see tabulations prior to October 8, 1941.
confer monthly breakdown --- tabulations prior to October 14, 1942.
(a) Reflects changes in all dollar holdings payable on demand or enturing in one year,
(b)Does not reflect U. S. Treasury 0111 transactions.
(d) Includes $ 1.5 million cost of silver purchased to be sinted into Australian coins.
(c) Includes $11.8 million deposited by War Supplies, Ltd.
(a) Includes 2.0 Allian credited to Australia For of
irer of Ur ted MADGE applied against U.S. currency and Treasury checks negotiated,
94
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
January 7, 1943
MEMORANDUM TO THE SECRETARY:
Representatives of the Procurement Division, the
General Counsel's Office, and Bureau of Internal Revenue
attended 8. conference sponsored by the War Department
Price Adjustment Board and held in Cincinnati, Ohio,
December 20-22, 1942, to clarify the objectives and
unify the activities of the Departmental Renegotiation
Boards.
It is estimated that there are approximately
175,000 war contracts subject to renegotiation. As
of a recent date 4,170 contracts have been assigned
to the various Boards on the basis of predominant
interest but settlements with only 56 contractors
have been reached by war procurement agencies. The
machinery for renegotiation is now fairly well es-
tablished and it was indicated at the meeting that
in the near future agreements will be concluded at
a steadily increasing rate.
It is our thought to give prompt and special
attention to the review of certain contracts involving
possible need for renegotiation.
Clifton E. Mack
Director of Procurement
FORYICTORY
BUY
VEITED
STATES
BONDS
STATE
Regraded Unclassified
95
HEL
Chungking
This telegram must be
paraphrased before being
Dated January 7, 1943
communicated to anyone
other than a Governmental
Rec'd 11:44 8,00, 0th
agency. (BR)
Secretary of State,
Washington.
35, January 7, 5 p.m.
Following for the Secretary of the Treasury from
Adler.
Weekly Economic TF 81 (SECTION ONE)
One. Prices. Chungking October and November:
wholesale general 7,180 and 7,470, food 4,740 and
4,940; retail general 6,540 and 6,760, food 4,760 and
5,160
The November figures represent increases of 19, 22,
13 and 14% respectively, on September.
In last few months Munwing prices have gotten way
out of line with prices in the rest of the country, the
retail general index for November being over 14,000
(farmers Bank January-June 1937 Equals 100) or just
about double that for June. PEOPLE in Kunming (which I
visited last week for four days to clear up some out=
standing board problems with the USAF)
are
agreed
that available price indexes
Exaggerate actual level of prices in Kunming which is
nevertheless
96
⑉2⑉, 1/55, January 7, 8 Dalla, from Chungking.
nevertheless substantially higher than Elsewhere
partly as a result of heavy Central Covernment military
Expenditures. Runming has fair quantities of foreign
luxury and semi-luxury goods for which fantastic rioss
are being asked. Unfortunately the problem of Central
Government control is difficult Especially as it is
felt that a number of Provincial Government officials
are implicated in the hoarding of and profittering in
foreign goods and Central Government is chary of offend-
ing Provincial Authorities at this juncture when
Central Government troops in Yunnan are facing Japanese,
Arithmatical average of retail price indices of 14
leading citiza of free China (Farmers Bank January-
June 1937 equals 100) for September, October and
November; general 5,640, 6,210, and 6,640, food 4,890
5,310 and 5,710. November general index just about
treble that for January.
Two. Note issue; October CIT dollars 31,226 million
November CH dollars 33,381 million. .linister of
Finance's corrected figure for September in CN dollars
28,737 million.
Three. Sale of United States dollar backed
savings certificates to End of 1942 CN dollars 221.5
million. There has been a relatively substantial increas
in salts
97
-3-, 35, January 7, 5 Dalla, from Chungking.
in sales in last two months due partly to more active
campaign by banks. Considerable public interest is
being shown in proposal described in my TF 74 and I should
appreciate reply to questions raised in TT 75.
Four. Central Bank over-sold position; November
United States dollars 414,000 and sterling 69,000
December United States dollars 700,000 and sterling
122,000.
Five. Kunming black market rates at End of year:
United States currency 1749; Indian rupees 16-16.50;
Burna rupees 14.50 15.50.
SECTION TWO.
OnE. An ambitious program of price control endorsed
by PEOPLE'S Political Council and Kuomintang Central
Executive Committee is to 8° into Effect January 15
under supervision and control of National Mobilization
Council, Prices of 8 commodities, wages and transporta-
tion rates are to be fixed with November 30 of last
year as standard and prices of food and salt to bE chief
clements in determinating of prices. Headquarters are
to be in Chungking with fine branch offices in Chengtu,
Manhsign, Kunming, Mengyang and Sian. Provincial and
municipal government authorities are to bE responsible
for price control as it is Extended Elsewhere. Doubt
Exists in
98
-4-, 35, January 7, 5 from Chungking.
exists in informed quarters a 8 towhether the new price
control regulations will be more Effective than
previous experiments. The Commodity Administration
previously chiefly responsible for the enforcement of
price control was liquiliated DECEMBER 25 for failure to
achieve results.
Two, 1943 budgetary new regulations not yet com-
pleted. It is Expected that they will call for Expendi-
tures of Chinese dollars 35 to 36 billion and revenues of
Chinese dollars 18 to 20 million. Dr. Kung admits he
will bE lucky if Expenditures do not EXCEED above
figure. Various government departments are strongly
opposing retrenchment. on Generalissimo's order esti-
mates of n litary expenditures are being based on an
army of 43 million
nen
and
not
6 million as in 1942; this is not expected to Entail any
reduction in actual number of solditrs though it my
adversely Effect number of front line troops. Generalis-
simo has also ordered curtailment of number of Government
officials which so far has been applied largely due to
strvants and minor Government officials.
GAUSS
MRM
Regraded Unclassified
99
Co.
13
NOT TO BE RE-TRANSMITTED
BRITISH MOST SECRET
U.S. SECRET.
OPTEL NO. 8.
Information received up to 7 a.m., 7th January, 1943.
1. NAVAL.
Convoy to North Russia has now arrived complete.
No ships were sunk by enemy action. On the 2nd U.S. Motor
Torpedo Boats attacked 8 Japanese Destroyers off
Guadalcanal, They torpedoed one and possibly two others.
2. MILITARY.
LIBYA. 4th. Fezzan Area. Locality about 75
miles east of Mourzouk surrendered to Fighting French
Forces, 110 Italians and about 100 native prisoners
captured together with arms and war material. 5th.
Heavy rain in several areas. Signs of enemy working on
his positions south east of Gheddahia.
TUNISIA. 5th. Ou troops captured some enemy
positions on the high ground 15 miles west of Mateur, The
enemy is reported to have withdrawn to the east of Fondouk,
RUSSIA. The Russians continue to advance in the
Middle Don and Caucasus sectors.
3. AIR OPERATIONS.
WESTERN FRONT. 6th. 2 aircraft are missing from
anti-submarine patrols in the Bay of Biscay.
FRENCH NORTH AFRICA. 5th. U.S. Heavy Bombers
attacked Sfax two ships were hit, a Cruiser was probably
hit and the power station set on fire. Allied heavy and
medium bombers successfully attacked Sousse Harbour and
Kairouan airfield. Spitfires carried out two sweeps
inflicting casualties 5/1/2.
BURMA. 4th. 3 U.S. heavy bombers attacked Rangoon
a 15,000 ton transport was hit and set on fire.
100
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 14
Following is supplementary recume of operational events covering the
period 31st December to 7th January, 1943.
1. NAVAL
NORTH&RN WATERS. A homeward convoy from RUSSIA has reached home
entera, strong cover was provided by H.M. Ships. This convoy was not sighted by
the enemy.
Pocket Battleship LUTZOW and Cruisers HIPPER, KOLN and NURNBERG are
in MOOR NORWAY. Repairs to TIRPITZ which have been proceeding at TRONDHEIM since
October now believed complete. SCHARNHORST in the BALTIC also believed fit for
service. New Cruiser SEYULITE at BR.M2N being dismantled.
SUBMARINE WARFARE. Four promising attacks by aircraft in week
ending 6th January, otherwise quieter though there has been U-boat activity in
the MADKIRA-CANARIES Area.
TRADE. Imports In convoy to UNITED KINGDOM work ending 2nd, 351,000
tons of which 177,000 oil.
ITALIAN FLEET. or 12 REGOLO Class Cruisors proposed construction
of 5 only undertaken, 1 completed, 2 almost complete and 1 being converted to
aircraft carrier. New type escort vessel resembling ORSA class torpedo-boat been
developed of 36 laid down, 2 finished, 13 fitting out end 21 on slips. or 35
effective fleet Destroyers, 12 repairing and 18 employed on North African convoys
loaving only 5 for Fleet purposes.
2. MILITARY
LIBYA. Enemy positions in WADIZEMZEM runs approximately Southwest
from coast few milso north of BUERAT which enemy has evacuated crosses GHEDDAHILA
BOUND JEM Road (15 miles south of GREDDAHIA) and then turn westward. Our patrols
have pushed forward to enemy line but observation limited by poor visibility due
to severe dust storms. No major changes during period. Remaining 8th Army con-
tinues its concentration in the forward area.
FRENCH SORTH AFRICA. Activity on both sides still cainly confined
to patrolling. Allied build up forward area continues. Extra mechanical trans-
port landed from recent convoys greatly assisting trunsportation over long lines
of communication. Northern Sector. 1st Army now being held mainly by infantry
formations with armoured division on right flank. Effect of rain and mud in this
sector cannot be over-emphasized. Centrol rnd Southern Sectors. South of PONT DU
FARS 3 weak French Divisions holding rough and hilly ground and United Statos light
forces operating In area of GAFSA against increasing enemy patrol activity. French
ability to withstand amoured attack is small owing to obsolete equipment, but
Allied anti-tank detachments are being sent to join them. During past week
strength of enemy local attacks in the contral sector has increased.
FAR EAST. BURMA. CHIN HILLS. Jaganeso reported demolishing befores
-nd constructing road blocks on road KALEMYO-TAMU (55 miles north of KALEMYO).
AIR OPERATIONS
WESTERN FRONT. Day. 1 large scale raid on ST. NAZAIRE by United
States hoavy bombers which dropped 268 1,000 nound high explosive bombo. Night.
Bud weather restricted operations to tro reall ottacks on ESSEN and one on DU 827-
DORP but 293 see mines laid.
FRENCH NORTH AFRICA. Axis orto on North and East Tunisian Coast
frequently attacked in daylight and occwsionally at night. Good results also
against inland objectives and airfields especially in southern suctor of front.
Peristent determined efforts by enemy against our base at DONE against which a
total of 275 aircraft sent, On 10 occasions formations of heavy fighters, fighter
bombers or dive bombers tried to penetrate our fighter defences, 7 large scale
ruids dispersed or driven off and only 50 aircraft of total succeeded in slipping
through. Even BO damage to shipping was heavy,
Regraded Unclassified
101
- 2 -
RUSSIA. Russian aircraft operated by day and night against enemy
in KOTELNIKOVO and ELISTA' areas and in the area occupied by German 6th Army they
also raided railways at SALSK, MAIKOP and KRAPITKIN.
4. EXTRACTS FROM PHOTOGRAPHIC AND INT LLLIGENCE REPORTS ON RESULTS OF AIR ATTACKS
ON ZNEMY PERRITORY IN EUROPE.
DUISBURG. Photographs 28th December show new damage items due to
raid 20th/21st including foundry, rolling mille and 6 works engaged on heavy en-
gineering, warehouses at docks, exchange theatre, county court and main Post Office
all damaged.
ST. NAZAIRE. Daylight raid 3rd. Photographs show 16 hits on rail-
way truck, U-boat pens hit at least ônce, largo crater in roof floating dock
containing ship, submerged one end, two small naval craft building have disappoared
Only debris left. Following buildings damaged - boiler plates shop, submarine
stores, torpedo store, Customs House, goods station and several sheds.
5. HOME SECURITY
Estimated civilian casualties week ending 6 A.M., 6th - killed 53,
missing 2, seriously wounded 83.
Regraded Unclassified
10/-A
OFFICE OF STRATEGIC SERVICES
WASHINGTON, D. C.
January 9, 1943
My dear Mr. Secretary:
By direction of the Joint Chiefs
of Staff, The War This Week is being discon-
tinued, and I am sending you herewith the
final number.
Sincerely,
William J. Donovan
Director
Attachment
The Honorable
The Secretary of the Treasury
Washington, D. C.
102
NUMBER 65
SECRET
OFFICE OF STRATEGIC SERVICES
THE WAR
THIS WEEK
January 1-7, 1943
Printed for the Board of Analysts
Copy No. 6
The Secritary of the Treasury
Regraded Unclassified
DECEMBER 31-JANUARY 7, 1943
SECRET
THE WAR THIS WEEK
On the Eastern Front the Russian Armies again made
substantial advances this week. The capture of Velikie Luki
exposes the flank of the German forces protecting Smolensk.
The Russians have made fresh gains in the Caucasus, perhaps
aided by voluntary German withdrawals. At the same time
the Soviets are fanning out over the Kalmyk steppes and
moving steadily forward in the area north of the Don.
With the rainy season extending through February, the
stalemate in Tunisia may last another month or two and
until such time as our air and mechanized forces can operate
without serious handicap. The lull likewise continues in
Tripolitania, where it may be several weeks before the
British are in a position to resume the offensive. Meanwhile
the Allied situation in North Africa is still complicated by
the Giraud-DeGaulle issue, which bristles with difficulties.
In the Far East, only one small pocket of Japanese resist-
ance remains in the Buna region. From the Vladivostok
area come reports that the public fears a Japanese attack
before spring.
The Russian Triple Advance Continues
Soviet gains on three fronts this week have again given
evidence of solid offensive strength, but have made somewhat
less progress than press reports would lead one to believe.
The most important advances were on the central front,
where the capture of Velikie Luki and the current drive
against the nearby rail junction of Novo Sokolniki represent
the farthest westward penetration in force of the Red Army
1
SECURT
since 1941. It is incorrect to say, however, that the fall of
N
this latter place would seriously disrupt rail communications
for the German forces before Leningrad. Should the Rus.
sians interdiet the railroad (mostly single-track) from Vitebak
through Novo Sokolniki to Leningrad, the enemy could still
E
use the single-track line from Tallinn and Narva east, and the
5
$
railway (mostly double-track) from Vilna and Pskov north
A
On the other hand, those who maintain that the Russians
0
have breached no essential part of the Nazi winter line an
perhaps being over-cautions. The Germans, itais true, have
always held the spareely-settled area between Smolensk and
Staraya Russa comparatively lightly, and Velikie Luki was in
no sense a key strong point like Rahev. But, with its fall,
the flank of the German forces guarding Smolensk is now
exposed, and the invaders in this area are apparently in 1
more dangerous position than they were at any time laft
winter.
Second only to these gains in importance have been the
Russian advances in the North Caucasus. By the capture
of Malgobek, Mosdok, Nalchik, and Prokhladnaya, the Red
Army has put pressure on both sides of the German salient.
It appears probable that Soviet progress farther to the north
has induced the Nazis to withdraw voluntarily from their
more advanced positions. Since the Germans failed to
reach Groznyi and the Georgian Military Highway, their
long salient east of Maikop has become simply an ensum-
Estum
TRATEGIC HIGHWATS
brance. A shorter line protecting Maikop itself-perbaps
@ 8
E IN
running north from Armavir to Salsk and the Manych River-
might well be preferable.
But with the victors of Kotelnikov fanning out across
steppes to Leninskii, Elista (capital of the Kalmyk A. 8.
SEA
8. R.), and Priyutnoye, the Russian drive south of the Don
SOUTH RUSSIAN FRONT
DECEMBER 2 JANUARY à
1 ! -
I
is beginning to threaten Salsk itself. This third Soviet
advance has been moving faster against comparatively alight
opposition than has the fourth advance on the northern front
2
BRA OF AZOV
THE
FAR
Regraded Unclassified
SECRET
between Millerovo and the Volga. North of the Don, the
capture of Chernyshkov and Tsimsylanskaya has indicated
that the cautious advance and consolidation which form the
necessary preliminary to the assault on the main centers of
German resistance in the Donets Basin, are making satis-
factory progress. Despite the adequate net of railways avail-
able to the Soviet forces in this area, observers from the front
report that the Red Army must retrack many of these lines,
and that supply problems remain the chief limitation on
further advance.
From German reports of air attacks on Soviet concentra-
tions around Gelendzhik on the Black Sea, the press has
drawn the conclusion that a further Russian drive directed
at the Kerch Peninsula is about to begin. Such an attack
would be the logical completion of the encircling operations
now in progress throughout the southern front. Should
Rostov fall, the Kerch Strait would be the most practicable
avenue of escape for the German divisions in the Caucasus.
The Black Sea shore in this area has a mean temperature of
about 33 degrees in January-an indication that the Strait
is usually unfrozen. Evacuation operations in these waters
would be under constant danger of attack from Soviet air-
craft and advance units of the Black Sea fleet. On the other
hand, an offensive north from Gelendzhik would face critical
logistic difficulties, since the Russian forces in this area-
practically isolated from the bulk of the Soviet Army of the
Caucasus-could receive supplies and reinforcements only
from the Trans-Caucasus, by way of the Black Sea railroad
and coastal highway.
Moscow in Winter
The people of Moscow are now comparatively well-clothed,
well-fed, and in good spirits, according to a confidential and
very reliable report from the Soviet capital, dating from
3
BUY
TATES
WAR
nomes
CMF
STAMES
Regraded Unclassified
SECRET
SECRET
just before Christmas. Food is more plentiful than it was
conditions and mountains limit the use of Allied mechanized
early in the autumn, and ration norms are being fulfilled,
equipment and seriously hamper air operations. Thousands
although prices may have gone up slightly in the peasant
of tons of wire netting must be brought up, and even then
bazaars where the inhabitants supplement their ration cards.
forward air forces operate under great difficulties. Rainfall
Supplies of fur coats and caps and felt boots (issued against
tables indicate that the rainy season will last through Febru-
cards) are apparently plentiful. In fact, our report continues,
ary and into March. The amount of rain indicated by press
the population seems better clothed than during the period
reports in the last few weeks, however, would appear to be
1934 to 1938. Stockpiles of wood and coal brought in from
abnormal.
the neighborhood of the capital are much in evidence.
Supported by aircraft operating from developed bases in
While in September many factories were idle, now almost
Tunisia and Sicily, enemy forces hold a strong perimeter
every factory chimney is smoking. Although the curfew and
defence. From their positions at Mateur and in the hills
blackout of buildings are still in force, dim lights are now
east of Medjez el Bab (where the principal fighting is taking
permitted in the streets-which are more crowded than in
place), they control the few main roads available for attack
September, but still much less crowded than before the war.
on the Tunis area from the west; and the Allies are not yet
The cheerfulness of the population sometimes rises almost to
in a position to attack this area from the south. To protect
gaiety-in striking contrast to the period 1934-38. In this
this southern flank the enemy is steadily working small forces
connection, our report concludes, it is of some importance
west from Kairouan. French forces, increasingly active in
that the Government does not permit refugees to go to Mos-
the sector from Pont du Fahs south, have this week repulsed
cow, and evacuees can return only if they will engage in essen-
Axis attacks on Fondouk and Pichon, points west of Kai-
tial work. Hence, most people now in the capital possess
rouan.
ration cards and the right to purchase in closed shops. As &
Allied air forces in Northwest Africa, Malta, and Libya
comparatively favored group of essential workers, the inhabit-
have cooperated effectively to pound enemy ports and ship-
ants of Moscow apparently do not feel the very real food short-
ping in Sicily, Tunis, Sfax, Sousse, and Gabès. To move
age existing in the Soviet Union as a whole.
supplies to Tunis, Italian destroyers are being used as trans-
ports as well as for escorts, and the enemy has apparently
The Halt in Tunisia
laid mines to protect IL channel for shipping to Tunisia.
The factors of weather and terrain that stalled operations
Enemy aircraft have repeatedly attacked the port of Bône
in northern Tunisia in December may postpone decisive action
and the Allied air base at Biskra.
for perhaps another month or two. Even after the Allied
command has worked out its immediate problems of organi-
Halt in Libya
zation, supply, reinforcement, and air support, boggy ground
In Libya, too, the front appears to be stabilized, with no
will severely restrict operations. The recent torrential rains
expectation of a British attack in the near future. The enemy
have apparently flooded the valleys leading into Tunis from
has dug in with mines and wire along a line running roughly
the west, most important of which is the Medjerda Valley,
from the salt marsh behind Bouerat el Soun toward Gheddahia
the route of the Allied advance in November. Wet ground
and then southwest along the Wadi Zem Zem (see map, The
4
5
Regraded Unclassified
SECRET
SECRET
War This Week, December 17-24). This line is held by the
Vichy members of his Imperial Council-Chatel, Noguès,
depleted Afrika Korps, with two fresh Italian divisions and
and Boisson. After the removal of these governors, the
remnants of other Italian units believed to be in the rear,
National Committee would be ready to enlarge its membership
British armored patrols are in contact with the enemy, but
to include pro-Ally leaders from North Africa.
it may be several weeks before the Allies have brought up
In other words, De Gaulle apparently believes that a
forces and accumulated sufficient supplies in the forward
political agreement must precede any military arrangement
area for another major offensive. In his distribution of forces
with Giraud. For this reason, according to advices from
and organization of communications, General Montgomery is
London, the Fighting French leader has not complied with
apparently establishing centers of strength well to the rear
Giraud's suggestion that the former send an emissary to
as insurance against the debacle that has followed previous
North Africa, and has intimated that he wishes to see Giraud
British drives into Libya.
himself. A statement issued on New Year's day from De
In the eastern Mediterranean the Axis is reported to be
Gaulle's headquarters summarizes the whole position: "Com-
strengthening the obstacles and wire around airfields in
plete military cooperation requires political and administra-
Crete, and reinforcing Rhodes with coastal artillery, new
tive unification under a provisional central organ. If not,
fortress walls, etc. Over the past several months pill boxes
we would have the paradoxical result that a great many
and defenses have also apparently been built in Bulgaria,
Frenchmen would be fighting by the side of the Allies with-
along the Turkish border.
out any French interest being represented during the war
or at its end. Such a state of affairs would represent a
De Gaulle and Giraud
backward step from the present situation in which the
Amid a confusing variety of broadcasts and press reports
French National Committee has concluded with the United
of a projected meeting between De Gaulle and Giraud, and
Nations a series of specific agreements of which some have
2% series of pleas for unity emanating from all sides, the
& political character.
American public has remained bewildered as to the specific
That the British public is in general sympathy with this
points at issue between two thoroughly admirable professional
program is apparent in editorials printed in journals as far
soldiers, both of whom have a long record of patriotism and
apart as the Times and the Manchester Guardian. The
opposition to the Axis.
former, in commenting on the appointment of Harold Mac-
De Gaulle has the advantage of a fairly close-knit organi-
Millan as Minister Resident in North Africa, has stressed
zation and a clear program. The Fighting French apparently
the need of "Allied advice and Allied tact" in helping the
view their leader as the incarnation of their country, and one
French to reconcile their differences, and has suggested that a
whom Giraud and all patriotic Frenchmen should recognize
"fusion" between Giraud and De Gaulle would be preferable
as their political chief. Fighting France, the De Gaullists
to a mere "friendly understanding." The Manchester Guard-
feel, is the provisional government of the nation, which should
ian has characterized the "complete eradication of Vichy
logically have its seat in Algiers. Giraud can well lead its
influence in French North Africa" as a "question of principle"
armed forces, but only under the orders of the Fighting
with the De Gaullists, while emphasizing that "specialized
French National Committee, and only after a purge of the
6
7
Regraded Unclassified
SECRET
SECRET
training in technical or administrative duties" has made
Shortly after Darlan's death, General Barrau, the military
Fighting France a far more significant governing body than
chief at Dakar, handed in his resignation, and further changes
the present Imperial Council in North Africa.
in the administration and in the army are apparently in the
Giraud's position
offing.
Similarly at Alexandria, the Admiral's death occasioned a
Giraud's advantages lie in the practical cooperation already
change of feeling among the officers and enlisted men of the
established with the Allied forces in the field, and in his "legal"
French ships interned there, who now express & desire to serve
position as heir of Vichy through Darlan. Since the latter's
with the United Nations. The chief remaining difficulty
death, however, the Imperial Council has apparently decided
seems to be the legalistic one of effecting a transfer of allegiance.
to dispense with any further references to Marshal Pétain,
and its constitutional position is now confused. In short, the
Fortification of the French Mediterranean Coast
key to Giraud's weakness and strength would appear to be
Press reports of the evacuation of civilians from a zone
the middle position he occupies between ex-collaborationista
three to five miles deep along the whole French Mediter-
and the enthusiasts in the De Gaulle camp.
ranean coast corroborate confidential despatches detailing
Each party to the current controversy, our reports con-
German efforts to fortify this shore in depth. The protection
clude, is burdened with adherents whose attitude blocks co-
of this vulnerable flank was obviously one of the chief
operation with the other side. With Giraud, there are
reasons behind the occupation of the Vichy zone, and since
Noguès and Boisson, timeservers whose equivocations and
that event, fortification activities have proceeded apace.
indecision, even after the Allied landings, have disgusted pro-
Furthermore, faced with the resistance of French labor
Ally elements. Around De Gaulle are grouped many poli-
against Laval's program of "volunteering" for work in the
ticians who have perhaps exaggerated the indispensability of
Reich, and the danger of spreading sabotage and underground
their own organization and who hope to play an important
activity in Germany, the Nazis have apparently made a
role in a liberated France; the bitter attacks on Boisson
virtue of necessity: many of these workers they have rerouted
broadcast by the Brazzaville radio, have, for example, proved
to the Mediterranean. Observers point out, however, that
a real embarrassment to the Fighting French National
similar fortification projects in Norway have met with wide-
Committee. The removal of antagonistic elements on both
spread resistance, and forecast the same sort of situation in
sides may be a necessary preliminary to French unity.
southern France.
Evidences of Unity
Spanish Neutrality
In Dakar, the death of Darlan seems to have significantly
Spain has indicated to Germany that will maintain her
strengthened popular hope for unified action. Reports from
sovereignty by force if necessary, according to diplomatic
local observers point out that the assassination aroused little
advices. This neutrality policy is reported to have the back-
comment, and that, aside from a few die-hards in the military,
ing of all but certain elements of the Falange. It is to be
administrative, and business communities, there exists
publicized by a volume entitled the Iberian Bloc, which will
general desire for cooperation among all Frenchmen in exile.
consist of recent addresses by Salazar, Jordana, and others
8
9
BUY
VIA
Regraded Unclassified
SECRET
SECRET
at Lisbon. Presumably as a result of this moderate reorien-
Changes in Yugoslav Government in Exile
tation of Spanish policy, Germany has shifted her Ambassador
Last week's reorganization of the Yugoslav Government
to Madrid, replacing Eberhard von Stohrer (whose ascend.
in Exile appears to have a double significance: General
ancy was great in the days of Suñer) with Hans Adolf Von
Michailovich has been strengthened and the Partisans
Moltke. The latter has recently served in the Foreign Office
rebuffed, while the other changes seem to foreshadow 8
in Berlin. Earlier, as German Minister to Poland, he nego-
shift in policy with regard to the United States. Up to
tiated the German-Polish Agreement of 1934 and enjoys a
last week the Cabinet of the Yugoslav Government in Exile
reputation for strength and dexterity.
consisted of Premier Slobodan Jovanovich, General Mi-
General Patton's arrangement to call on General Orgaz in
chailovich as Minister of War, and two representatives from
Spanish Morocco was gratifying to the Spanish, and may help
each of seven Yugoslav political parties-sixteen in all. In
to shape a settlement with regard to the frontier. Confidence
the present reorganization one man apiece has been dropped
as to the security of Moroccan supply lines would enable the
from six of these seven parties, leaving a Cabinet of ten men.
Allies to divert forces from this area into Tunisia. Organ
The Navy and Air Force have been added to Michailo-
has appeared anxious to avoid any difficulties, but officials
vich's command-a gesture of no military importance, which
in Spanish Morocco have shown nervousness as to the security
nonetheless signifies the continuing confidence of the Govern-
of their regime. Arrests of Spanish Republicans and Allied
ment in Exile in Michailovich. It also implies a rebuff to
sympathizers have increased lately, and numbers of Spanish
the Partisan forces, with whom he is at odds, but who are
and native soldiers have apparently been skipping across the
now generally believed to be the most effective opponents
border to the French Zone.
of the Axis in Yugoslavia.
Momcilo Nincich, Minister of Foreign Affairs, Radical
Shipping Concentration at Genoa
Party, has been dropped, and his duties taken over by the
The transfer of substantial tonnage of French shipping
Premier. The Radicals are an authoritarian group, who
from the Riviera to Genoa is believed to have been under-
strongly favor & Greater Serbia. The Yugoslav Minister in
taken to remove it from ports where danger of sabotage WM
Washington, Constantin Fotich (who has intimate connec-
considerable. The shift coincided with the movements to
tions with the German-sponsored Nedich Government in
La Spezia, Livorno, and La Maddalena of several heavy
Belgrade), has been one of the most extreme members of the
units of the Italian fleet; but observers feel the redistribution
Radical Party, and has been the target of unfavorable criti-
of fleet units was dictated by the Allied air offensive, rather
cism from those who favor a restored United Yugoslavia.
than by any immediate major convoy movement from
Nincich has been Fotich's strongest backer, and some ob-
Genoa. Presumably an expedition against such an objective
servers see Nincich's departure as clearing the deck for the
as the Balearies would be preceded by a similar concentration
future removal of Fotich, and his replacement by & proponent
of cargo and warships; but no such operation appears to be
of United Yugoslavia.
planned.
As if in compensation for the loss of the reactionary Nin-
cich, the Government has in each case chosen for dismissal
from the Cabinet the more liberal of the two representatives
11
10
Regraded Unclassified
SECRET
Secret
from the other parties. The others to go are all pro-Yugo-
slavs of varying shades and include no fewer than three men
in the Buna-Cape Endaiadere area. A small remaining
now in the United States: Bogoljub Jeftich (Yugosiav Na-
pocket of Japanese resistance is being surrounded at San-
tional Party), Director of the Yugoslav Information Center in
ananda. On Guadalcanal the isolated Japanese land forces
New York; Sava Kosanovich (Independent Democratic
are under pressure from American forces in the vicinity of
Mt. Aesten.
Party-Serbs living in Croatia), a liberal, who wants a
democratic regime for the future Yugoslavia; and Franc Snoj
In addition to the considerable concentration of Japanese
shipping at Rabaul (reported on January 2 to include some
(Slovenian Clerical Party), a Conservative, opposed to the
Slovene Partisans. These changes, and notably the dropping
18 warships, 53 merchant vessels, and 21 small vessels)
there is reported & marked increase of shipping in the Buin-
of Nincich, lead some observers to guess that these men may
also have been relieved of their duties in preparation for a
Faisi and in the New Georgia Island areas where 26 vessels,
including 6 heavy cruisera or battleships, 5 light cruisers,
change in Yugoslav policy in the United States.
2 destroyers, and 6 cargo ships were sighted on January 3.
Meanwhile, southwest of Munda and later north of Guadal-
Anti-Zionist Demonstrations in Damascus
canal, 8 Japanese destroyers were attacked by Allied planes
The latent tensions aroused in the Arab world by the
and effectively intercepted subsequently by United States
Zionist issue have caused demonstrations in Syria. Axis
torpedo boats which prevented troop landings on Guadal-
agents and the Axis radio, keynoted by the former Mufti of
canal and destroyed supplies cast offshore in watertight
Jerusalem, have long exploited this problem; but the imme-
containers. Allied air activity continued over Lae and
diate cause of the present protest was the Proclamation
Salamaua, Vangunu Island, Wewak, Madang, Rekata Bay,
(published in the New York Times December 7) signed by
Munda, Gasmata, and Rabaul, the most severe Allied air
62 Senators and 181 Congressmen petitioning for the estab-
assault on Rabaul leaving some 50,000 tons of Japanese
lishment of the Jewish National Home. In Damascus, Arab
shipping ablaze and sinking. Intense enemy activity was
groups gathered, fired a shot at the shield of the British
observed on airfields at Kavieng, north of Rabaul, at Timor,
consulate, and left a protest averring that the memorandum
and in general to the north of Australia.
heightened Arab fears that the Allies may not uphold their
Complications in the Advance on Burma
announced principles. Shops were closed and large crowds
Operations in Burma have been inconclusive. Allied planes
attended political speeches. The Palestinian students at the
have attacked airdromes and Japanese rail, inland water and
American University were reported by authorities to be
seagoing transport from Myitkyina to the Gulf of Martaban.
"terribly upset;" and the disturbances apparently spread to
Meanwhile, in their two pronged movement down the Mayu
Homs and Hama.
River towards Akyab, the British left column has advanced
Japanese Shipa Move As Buna Falls
upon the Japanese who are again evacuating the Rathedaung
area. At Akyab, some twenty miles south of Rathedaung, n
In New Guinea, Allied ground forces supported by tanks
Japanese garrison of some 3,300 is constructing beach defenses
have completed destruction of organized Japanese resistance
and increasing its air activity. The Japanese in the Mayu
12
13
Regraded Unclassified
SECRET
SECRET
Peninsula and along the entire west coast have disappeared,
Mission was satisfied with its treatment in Washington,
and the British have advanced there to within some thirteen
General Hsiung Shih-hui stated to the press that his country
míles north of Akyab. In addition to supply difficulties, the
"should never be satisfied unless our enemy is completely
British have encountered the complication of developing com-
defeated."
munal strife between Burmese Moslems and Buddhists, the
latter having attacked British light craft in the Mayu River.
Defense Preparations at Vladivostok
Morale of the Indian civilian population at Calcutta
The Chinese, while not counting upon it, have expressed
appears to have deteriorated under impact of nuisance
hopes that expansion of hostilities into the Soviet Far East
would accelerate plans for activizing the Asiatic continental
Japanese air attacks. It is reported that great numbers
war fronts as a base for offensive operations which they feel
including skilled industrial workers, have quit the city, and
that the rate of operation for the port, the jute, engineering,
unprepared to initiate alone. In this connection, it is re-
and munitions industries has fallen respectively to 60 percent,
ported that there is considerable precautionary military
activity in the Vladivostok area, and popular discussion
80 percent, 50 percent, and 50 percent.
there indicates that development of hostilities before the
Chinese Military Mission
advent of spring is freely anticipated. Nevertheless, sea-
Despite British warnings as to the limited significance of
borne transport from North America to the Asiatic mainland
their activity in Burma, the Chinese look there with anxiety
continued during November in Russian bottoms which passed
and expectation. Airborne freight into China has increased,
unmolested through the Strait of Laperouse. Fourteen
and opening of regular traffic through the northwest and
freighters cleared and thirteen entered Vladivostok alone.
Soviet Central Asia is under negotiation, but the Chinese
Appointment of Stahmer to Tokyo
believe that fulfillment of China's exacerbated supply re-
quirements can come only by the reconquest of northem
Japanese activity in the southwest Pacific serves the
Burma. Some Chinese dissatisfaction with their share in
strategic interests of her European Axis partners less directly,
the planning and scheduling of this enterprise was indicated
at the moment, than would development of an active, or
in the announcement that the Chinese Military Mission to
potentially active, front in the Soviet Far East. General
the United States would be withdrawn. Headed by General
Eugen Ott, in Tokyo since Hitler's advent to power in 1933
and Ambassador there since 1938, has been replaced by Hein-
Hsiung Shih-hui, who is a member of China's National
Military Council and highly regarded in Chungking mili-
rich Georg Stahmer, who was in Japan when the Tripartite
tary circles, the Mission arrived in Washington on April 13,
Alliance negotiations were concluded. Stahmer, a trusted
Nazi and close associate of Ribbentrop, moved without pub-
1942. Chungking has explained that the Mission would
licity in Tokyo, but was known to have been particularly
visit London and may be called home to report, but has not
active within the Department of Home Affairs, where he
been withdrawn permanently. Colonel W. T. Tsai will N°
main to represent China in ways called for by war councils
offered advice upon Nazi techniques of social repression and
established contacts with the younger officers and Japanese
in Washington. Before leaving the United States, the Mis-
sion will visit production plants. Asked whether or not the
youth organizations, notably those of Nakano and Hashimoto
15
14
Regraded Unclassified
SECRET
SECRET
whose activist influence upon Japanese foreign policy is estab-
lished. Japan's acceptance of Stahmer's appointment may
foreshadow intensification of political and economic mobili-
zation at the expense of moderate elements inclined towards
APPENDIX I
a defensive mentality within Japan and possibly closer CO-
THE GERMAN COMBAT PLANE POSITION [
ordination of anti-Soviet elements in both countries. Ger-
The year just past has seen a notable deterioration in Germany's
many's dissatisfaction with Japanese inactivity has been
supply of combat planes. Production has fallen slightly; losses have,
evident.
on the whole, run well ahead of output; and the number of planes tied
up in the factory repair pool has remained high. As a result, the
Toledano and the Tin Strikes
Luftwaffe's total combat strength has been reduced from 10,060 in
Responsibility for securing better wages and working
January, 1942 to 8,585 in November, and the number of planes cur-
conditions for Bolivia's striking tin miners was publicly
rently available for service at the front has dropped from 7,660 to
6,210.³ Moreover, Germany's ability to recover is now open to
placed upon the United States this week by Lombardo
serious question: this winter there will be no lull in aerial warfare
Toledano, President of the Latin American Confederation of
allowing her production to regain a comfortable lead over wastage.
Labor. In telegrams to Vice-President Wallace and to
President Peñaranda of Bolivia, Toledano denied that fifth
The Question of Quality
column activities lay behind the strikes and ascribed them
In terms of quality the Luftwaffe faces a problem almost as grave.
instead to abominable conditions at the mines and to the
Germany's last major change-over in plane models occurred in the
winter of 1940-41. Now it confronts the necessity of developing new
owners' intransigence.
and more powerful aircraft capable of meeting at any height the
Since the United States is Bolivia's sole customer for tin,
challenge of an increasing number of Allied fighters specialized to
Toledano argued, and since Mr. Wallace, as head of the
excel within definite altitude ranges. These Allied planes will have
Board of Economic Warfare, can determine contract condi-
the tactical advantage of being able largely to choose or to refuse
tions for such purchases, why should not the Vice-President
battle-to their own liking. In answer, the performance of the Focke-
Wulf-190 and the production of the Messerschmidt-109-G will have
compel Bolivian producers to earmark for improvement of
to be stepped up.
the workers' lot a definite part of the price paid for tin?
Unfortunately for the Luftwaffe, one of its most important engines,
Toledano's telegrams carry somewhat more weight in view
the Bayrische-Motorenwerke-801, is reportedly still plagued with
of his recent visit to Bolivia, and his successful collaboration
"bugs" limiting the use of ita maximum power; output of the new
at that time in averting a strike at the Potosí workings.
Daimler-Benz-605 engine is apparently only just past the experi-
mental stage; and the Me109-G itself may yet have some structural
weaknesses. Further, although Germany has undoubtedly under-
taken a vast amount of the experimental work necessary for the
development of more modern planes equipped with more powerful
I Based on statistical studies by the Research and Analysis Branch of the Office of Strategic Servions.
I "Total strength" is considered as the sum of first-line planes (Induding Initial equipment, plus Imme-
liste reserves), planes in Reserve Training Units, plane stored and to transfi, planee allocated to Opera-
Linnal Training Unita, and planes under repair at the factory. The "total available for combat" are tirst-line
(Nane, plus RTU's and reserves stared and in transit.
16
17
BUT
MAR
Regraded Unclassified
SECRET
SECRET
engines, it is doubtful whether present shortages of skilled labor will
TABLE 1.-Distribution of German combal-type planes-Continued
permit these to be produced outside of existing plane factories. And
if produced inside existing factories, output of the new models could
Total
Grand
Initial
Imme-
Reserve
Stored
Open-
available
First
only be obtained at the cost of old-model production during the
Date (end of month)
total
for com-
line
equip-
diate
training
tional
Factory
ment
reserve
units
and in
training
repair
bet
transit
units
pool
period of re-tooling.
1942
Figures
January
10,000
7,600
4,100
4,100
600
2,000
1,000
-
The accompanying table presents an estimate of the Luftuaffe's
Pubruary
10,520
1,305
4,200
4,200
600
3,505
1,400
438
March
10,725
8,125
4,320
4,320
500
3,705
1,000
500
total combat strength and its distribution among various categories
April
10,890
8,705
4,400
4,370
90
600
3,785
1,600
-
of availability.
May
10,455
6,1M
4,800
4,560
240
600
2,755
1,000
700
June
10,120
7,695
4,800
4,570
200
500
2,295
1,000
RIA
TABLE T.-Distribution of German combat-type planes
July
9,560
7,000
4,800
4,730
a
800
1,600
1,000
goo
August
8,780
6,280
4,700
4,700
550
1,040
1,000
1,000
September
8,258
5,705
4,625
4,700
-278
550
TM
1,500
1,000
Total
Grand
available
Initial
Imune-
Reserve
Blored
Open-
October
8,065
5,508
4,200
4,590
-200
550
615
1,800
1,000
Date (end el month)
First
total
line
equip-
diste
training
reserves
tional
Fully
November
0,585
6,210
4,460
4,510
-30
600
for com-
1,100
1,500
E72
bat
ment
mservo
units
and in
training
repair
transit
unlis
pail
1939
Method
August
6,600
4,600
4,330
3,250
1,070
200
September
1,000
A.MA
4,745
4,400
2,320
1,080
145
October
1,000
The tabulated estimates, it will be noted, differ in greater or less
MM
6,385
5,195
4,480
3,200
1,000
715
November
1,040
IN
6,278
degree from those drawn up by either the Air Ministry or the Ministry
5,820
4,500
3,650
1,110
1,200
December
1,080
75
7,585
0,390
4,040
3,510
1,180
1.730
1,130
of Economic Warfare. Since these variations result primarily from
11
1540
the methods of computation respectively employed, rather than from
January
8,240
n,980
4,720
3,570
1,120
2,200
1,100
100
any discrepancies in information, B. word may be necessary on the
February
9,945
7,645
4,800
3,630
1,170
March
2,845
1,300
⑉
procedure adopted by the Office of Strategic Services, In general,
0,580
8,345
4,900
3,710
1,190
3,445
April
1,200
-
10,300
8,900
6,400
4,210
1,190
it can be said that our study has emphasized the over-all schematic
May
3,560
1.280
III
9,405
7.435
A,600
4,400
June
1,200
1,835
1,830
a
pattern of a monthly time-series, rather than disparate, though
5,995
6,635
A,000
4,500
July
1,200
1,085
1,300
LOW
9,170
7,485
A,800
4,430
August
1,370
200
1,110
et
well-supported, estimates for isolated dates or periods of time. It
1,385
8,965
6,690
5,200
4,430
770
330
Bepartaber
1,100
1,150
LIM
will be best to discuss this in relation to specific problems.
8,280
5,632
4,600
4,400
October
200
360
670
1,200
1,45
8,655
6,00%
4,600
4,400
November
200
390
1,015
1,250
1,4%
9,000
6,440
4,800
December
4,400
400
420
1,220
1,000
1,350
Production
9,530
6,005
5,000
4,400
000
450
1,453
1,350
LM
oss estimates of German aircraft production rest neither upon
1041
research into factory capacity, as do those of the MEW, nor upon
January
10,215
7.715
5,230
tabulation of planes identified 68 having been produced at certain
February
4,400
530
480
2,000
1,400
1,380
10,970
March
8,400
5,470
4,400
1,070
sto
2,640
1,400
-
factories, which appears to be the core of the Air Ministry's cal-
11,720
April
9,520
5,730
4,420
1,310
640
8,250
1,100
R
11.795
culations. The first method is believed here, on the basis of OSS
May
0,895
5,760
4,420
1,340
670
3,265
1,150
-
12,005
June
9,860
5,800
4,420
1,380
600
8,490
1,000
m
estimates of wastage and other requirements, to credit Germany with
11,870
July
0,670
5,890
4,540
1,350
600
3,180
1,600
DOB
11,200
August
8,800
too many planes, whereas the Air Ministry's system seems to award
5,500
4,540
1,360
000
2,400
1,600
-
10,570
September
8,020
A,350
4,540
RELO
000
2,070
1,600
8
them too few. Instead of relying upon these techniques, the OSS puts
9,500
October
0,750
4,550
4,540
10
noo
1,600
1,600
1,18
9,165
November
6,390
its trust in a deductive production curve constructed on statistical
4,400
4,800
-100
500
9,335
1,300
1,600
1,1%
December
6,680
4,200
4,350
-100
600
1,815
1,600
1,05%
foundations, which, while not specifically related to either operational
9,535
6,985
4.050
4,150
-100
600
2,285
1,000
1,000
or engineering intelligence, fita somewhat better the available data
on wastage and strength.
18
19
1
Regraded Unclassified
SECRET
SECRET
This deductive curve leans heavily upon the principle that after
subsequent stage of mass-production, but that the rate of expansion
departmental work in a new industry has been completed and pro-
thereafter tapers off sharply as production approaches its upper limits,
duction models have been agreed upon, expansion is rapid in the
The operation of this principle is easily discernible in the growth of
the armament industry in Germany in 1939-40 and in the United
joint
CORP
2000
000
DOB
States today.
The OSS curve reaches its high point in the full of 1941 and declines
o
N
slightly thereafter as the full effect of "comb-outs" for the Army on
o
the Eastern Front begin to be felt in aircraft production. Up to that
#
point, however, output is shown as having increased at ita maximum
.
absolute rate from the start of the war-a gain of 50 additional planes
r
-
each month. The accompanying chart compares this OSS estimate
$
with those of MEW and the Air Ministry.
4
al
Wastage: Combat Losses
ESTIMATED GERMAN COMBAT AIRCRAFT PRODUCTION
Office of Streragic Services
F
,
Any estimate of the Luftwaffe's strength will naturally be drawn
a
.
up in terms of B basic equation, in which production over time less
o
wastage (and other deductible factors) over time equals strength at a
-
y
terminal period of time
(
Production
Wastage
Time
Strength
One
Time
-
1941
e
component of "wastage" is combat losses. Consistent data on Ger-
Air Ministry
=
man combat losses has come primarily from two sources: the Air
-
Ministry's Weekly Intelligence Summary, for losses in the West;
.
Ministry of Eemanic Worfere
é
and the Russian and German communiqués, for losses in the East.
,
OSS practice in handling AMWIS data is to assume that all planes
o
listed as "destroyed" are indeed total losses, and that half of those
M
listed as "probably destroyed" were actually destroyed. The other
o
5
half of the "probables" and all those described as "damaged" are
4
treated among "operational losses" or among planes under repair.
e
1940
As for communiqués from the Eastern Front, the discrepancy
e
2
between German admissions and Russian claims is 60 great as to
4.
render each type of information by itself valueless. It has been found,
a
however, that Russian admissions of their own plane losses, adjusted
a
F
to summaries covering several months each, fall about midway
#
between Russian claims and German admissions. They provide in
.
practice a fairly reliable measure of the Luftwaffe's losses in the
o
5
isso
Russian theater, because (a) at the very least, Russian loss-admis-
A
sions indicate the scale of activity on the Eastern front; (b) those admis-
sions are not likely to be greater than losses actually suffered, nor are
mystem
ESCO
sod
they likely to be larger than those known to have been inflicted on the
1300
Germans; (c) there is no reason to believe, in any event, that actual
20
21
SUY
SECRET
SECHET
Russian losses would be grenter than German losses, for Russian nurial
Factory Repair Pool
operations have not been so intense 0.5 those of the Luftwaffe nor are
their planes considered seriously inferior to those of the Germans.
Clearly, planes damaged badly enough to need repair in the rear
areas will not be available for combat service for & lengthy period.
Operational Losses
Two months has been taken as the time consumed by sending planes
Plane losses incurred in connection with combat missions are by
damaged in Western Europe, the Balkans, Poland, etc., to factories in
no means completely covered by pilots' reports of craft shot down or
the rear, repairing them, testing them, and returning them to the
probably destroyed": planes crack up while taking off or landing
front-three months for those damaged on the Eastern and Medi-
at home fields, or when forced down at inaccessible points. Since
terranean fronts.
these losses, while not directly of a combat character, result from
Allocations to Training
operations against the enemy, they are a function of the intensity
of air warfare and can be estimated accordingly as a proportion of
The necessity of using tactical planes in training represents a further
actual combat losses.
drain on the supply of combat craft available for immediate service at
OSS computations of these operational losses are based in part on
the front. Although replacement pilots are instructed by means of
RAF experience over England during recent months. The RAF
basic, primary, and advanced training aircraft, they require a certain
found that the number of planes destroyed incidental to enemy action
period in which to become familiar with the planes they will fly in
amounts to some 30 percent of combat losses, while planes badly
first-line squadrous. These planes must, of course, be replaced when
damaged in action or incidental to action amount to an additional 27
destroyed, damaged, or worn out, and additional units furnished
percent of battle losses. Moreover, of these 27 percent, the RAF
whenever the size of the training group is enlarged.
believes that some 30 percent returned by forward echelons for repairs
Searcely any data is available on the number of such planes engaged
at the factory are not, in fact, repaired at all, because of shortages of
in this operational training in the Luftwaffe at the outbreak of the war-
parts, labor, etc. If these unrepaired planes are added to those
Some sources have asserted that the Germans allocated relatively few
destroyed incidental to enemy action, then operational losses are
planes to this use, perhaps because they miscalculated the war's dura-
equivalent to 38 percent of combat losses.
tion or perhaps because they shared that excessive optimism which
These operational losses, of course, vary according to the flying
possesses most airforces before entering a war. Nevertheless, the
seasons and the front in question. The Luftwaffe is believed to have
OSS has assumed that Operational Training Units (OTU's) began the
suffered as high as 60 percent of combat losses in winter and as low as
war with a supply of 1,000 planes, raised that to a peak of 1,600 in
30 percent in summer. In Russia, however, where factory repair
May, 1941, and have maintained it at about 1,500 since then.
shops are remote, and in the Mediterranean theater, where sand-
In addition, other planes are withheld from consistent duty at the
storms and other operational hazards are found, an all-year propor-
front by their allocation to Reserve Training Units (RTU's), newly-
tion of 50 rather than 38 percent seems probable.
formed combat squadrons stationed at advance airfields but ordinarily
In addition to these losses connected with enemy action, Aying
held in reserve. RTU's were first organized by the Luftwaffe in July,
accidents take a certain toll of planes as they are moved behind the
1940, when the rate of pilot wastage incurred in the Battle of Flanders
lines from base to base, or from factory to front, and as pilots are sent
showed that a link was needed between the OTU's and the operating
aloft on training flighta. In lieu of any specific data, OSS has assumed
squadrons. Apparently, 300 planes were diverted from the OTU's to
that flying accidents subtract 2 percent of first-line strength each
form these new unite; by May, 1941, they had been increased to 600,
month.
In estimating the number of planes that the Luftwafe has had to
allocate to the OTU's and RTU's each month, wastage has been
broadly calculated at 6 percent of strength per month for the RTU's
and 8 percent per month for the OTU's. It has been assumed, more-
over, that after the initial transfer of planes from OTU's to RTU's,
22
23
Regraded Unclassified
SECRET
SECRET
growth in the latter force was provided by allocation of planes avail-
able for operating squadrons or of planes drawn from stored reserves.
Stored Reserves
APPENDIX II
OSS's figures on the Luftwaffe's stored reserves are arrived at by a
OTTO HABSBURG IN THE FOREIGN-LANGUAGE PRESS
process of elimination: from our estimate of Germany's total combat
plane strength we subtract the number of first-line planes and their
Discussion which followed publication of the Secretary of War's
immediate reserves, RTU's, OTU's, and planes tied up in the factory
letter of November 19, welcoming the aid of a Military Committee
repair pool. The resultant quantity is believed to be the number of
headed by "Otto of Austria" for the recruitment of an Austrian unit
planes stored and in transit. If, in turn, our month-to-month esti-
in the United States Army, has died down in the standard English-
mates of stored reserves correspond-as they do-to the whole body
language press-partly as a result of Secretary Stimson's assurance
of available intelligence on that item, and to the "historical probabili-
that aid from other sources would be equally welcome. In the
ties," the correlation will tend to prove the soundness of our basic
foreign-language press, however, comment on the subject continues
calculations.
to be voluminous and intense.
Stored reserves, if we consult Table I, are seen to grow from the
During the month which has just closed, the newspapers of nearly
outbreak of the war to a peak in April, 1940; nor has this been accom-
every Central European group in the United States have dealt
plished at any sacrifice of first-line strength or OTU's, With the
repeatedly with the "Otto affair" and the fillip presumably given to
Battle of Flanders, however, a rapid decline seta in, reaching a low
an eventual Habsburg restoration in Central Europe. Czech and
point in September, 1940, after the "daylight phase" of the Battle of
Slovak newspapers were perhaps the most persistent; but the Carpatho-
Britain. By the spring of 1941, a long period of relatively low
Russian, Hungarian, Rumanian, Ukrainian, Russian, and Greek
wastage has brought total strength and stored reserves to a new high,
papers maintained a running discussion, too. The Italian press was
but the succeeding attack upon the Soviets reduces stored reserves
particularly agitated, not only because of national opposition to the
once more to a low level by the end of October, 1941. Though this
Habsburgs on historical grounds, but also because plans for raising an
depletion is partially made up by April, 1942, resumption of the
Italian military legion, long discussed, gave Italian liberals a special
Russian campaign and increased pressure by the RAF and USAAF
interest in the matter.
drags the level of stored reserves down to a minimum by the end of
September, 1942.
Indifference in Some Quarters
Thus, it would appear that OSS estimates for German stored
Certain papers ignored the issue, possibly more because they
reserves correspond closely with the fluctuating conditions of the war
considered the Habsburg issue unimportant than because they
in the air. The exactness of this correlation stimulates further con-
hesitated to make their true opinions clear. Thus, Hungarian-
fidence in the reliability of the estimates on which those figures were
language papers-notably the Cleveland Szabadsag and the Pittsburgh
based.
Magyarsag-which previously had supported Tibor Eckhardt B.B.
representative of the Hungarian national interest, seemed unwilling
to oppose Otto, though still not wishing openly to support him. The
same reason may have accounted for silence on the part of the Russian
Tearist paper Rossiya and the formerly pro-Fascist Italian papers,
such as the New York Il Progresso and the Philadelphia n Popolo
Italiano.
I Based en 6 memorandura prepared in the Foreign Nationalities Branch of the Office of Strategic Services.
25
24
DOV
Regraded Unclassified
SECRET
SECRET
growth in the latter force was provided by allocation of planes avail.
able for operating squadrons or of planes drawn from stored reserve.
Stored Reserves
APPENDIX II
OSS's figures on the Luftwaffe's stored reserves are arrived at by a
OTTO habsburg IN THE FOREIGN-LANGUAGE PRESS'
process of elimination: from our estimate of Germany's total combat
plane strength we subtract the number of first-line planes and their
Discussion which followed publication of the Secretary of War's
immediate reserves, RTU's, OTU's, and planes tied up in the factory
letter of November 19, welcoming the aid of a Military Committee
repair pool. The resultant quantity is believed to be the number of
headed by "Otto of Austria" for the recruitment of an Austrian unit
planes stored and in transit. If, in turn, our month-to-month esti-
in the United States Army, has died down in the standard English-
mates of stored reserves correspond-as they do-to the whole body
language press-partly as a result of Secretary Stimson's assurance
of available intelligence on that item, and to the "historical probabili-
that aid from other sources would be equally welcome. In the
ties," the correlation will tend to prove the soundness of our basic
foreign-language press, however, comment on the subject continues
calculations.
to be voluminous and intense.
Stored reserves, if we consult Table I, are seen to grow from the
During the month which has just closed, the newspapers of nearly
outbreak of the war to EL peak in April, 1940; nor has this been accom-
every Central European group in the United States have dealt
plished at any sacrifice of first-line strength or OTU's. With the
repeatedly with the "Otto affair" and the fillip presumably given to
Battle of Flanders, however, a rapid decline seta in, reaching a low
an eventual Habsburg restoration in Central Europe. Czech and
point in September, 1940, after the "daylight phase" of the Battle of
Slovak newspapers were perhaps the most persistent; but the Carpatho-
Britain. By the spring of 1941, a long period of relatively low
Russian, Hungarian, Rumanian, Ukrainian, Russian, and Greek
wastage has brought total strength and stored reserves to a new high,
papers maintained a running discussion, too. The Italian press was
but the succeeding attack upon the Soviets reduces stored reserves
particularly agitated, not only because of national opposition to the
once more to a low level by the end of October, 1941. Though this
Habsburgs on historical grounds, but also because plans for raising an
depletion is partially made up by April, 1942, resumption of the
Italian military legion, long discussed, gave Italian liberals a special
Russian campaign and increased pressure by the RAF and USAAF
interest in the matter.
drags the level of stored reserves down to 8 minimum by the end of
September, 1942.
Indifference in Some Quarters
Thus, it would appear that OSS estimates for German stored
Certain papers ignored the issue, possibly more because they
reserves correspond closely with the fluctuating conditions of the war
considered the Habsburg issue unimportant than because they
in the air. The exactness of this correlation stimulates further COD-
hesitated to make their true opinions clear. Thus, Hungarian-
fidence in the reliability of the estimates on which those figures were
language papers-notably the Cleveland Sabadaag and the Pittsburgh
based,
Magyarsag-which previously had supported Tibor Eckhardt aa
representative of the Hungarian national interest, seemed unwilling
to oppose Otto, though still not wishing openly to support him. The
same reason may have accounted for silence on the part of the Russian
Tsarist paper Rossiya and the formerly pro-Fascist Italian papers,
such B8 the New York Il Progresso and the Philadelphia n Popolo
Italiano.
Based 00 . memorandum prepared to the Foreign Nationalities Branch of the Office of Strategic Berricas.
25
24
muy
Regraded Unclassified
SECRET
SECRET
Several other papers dismissed the incident as unduly inflated.
The nationalistic Polish Nowy Surial declared that the letter to Otio
as in the case of the editorial printed in all Himmler papers for the
of November 19 had been no more than B. faux pas, and that there
week of December 10, it was said that the American Government,
was no sense in magnifying the incident and broadcasting it as 8
"whether right or wrong," had given Otto 8 definite role to play.
menace to Europe and democracy. The Hungarian New York daily
Any protest, said Otthon, was bound to cause a "painful impression"
at the State Department.
Nepsata, which is under the samo ownership as the Nowy Swist,
took a comparable attitude, minimizing the significance of Otto's
The Catholic press has not as a whole supported Otto. Although
somo non-Catholic papers (the Czech Scornost, December 10; the New
role. The Nepszava has been a strong supporter of Eckhardt and in
York Yiddish-language Day, December 2) have been inclined to see a
thought to be pro-monarchist. The controversial Slovak weekly,
connection between the letter to Otto and Myron Taylor's visit to the
Slooak D Amerike, which is said to be inspired by Magyar sympathica,
Vatican, Catholic papers have looked unfavorably upon any suggestion
also belittled the affair. This paper, however, almost automatically
that the Habsburg empire be restored (cf. the Polish Nowing Polskie,
opposes every stand maintained by pro-Benes organs.
November 25; the Czech Narod, November 29, December 6; and the
In all the cases just mentioned, special reasons appear to have
Slovak Katolicky Sokol, December 2). However, some indications of
motivated the odtiors. A few instances may also be noted, such as
Habsburg support are to be found in the Polish Deiennik Chicagoski
that of the independent Polish daily published in Buffalo, Dziennik
(December 10) and the Hungarian Magyarek Vasarnapja (Decem-
Dla Wezystkich (December 3) in which, with apparent disinterest,
ber 4). In the former case the journal seems more concerned with
the importance of the incident was judged to have been exaggerated.
attacking the "Jews and socialists" who have protested against Otto
than in supporting Otto himself.
The Main Line
With these exceptions, however, the foreign language press has kept
Arguments Opposing Otto on Historical and Nationalistic Grounds
up unbroken stream of discussion. Comments of foreign national-
A large part of the foreign language press which speaks for Central
ity writers have been reinforced by reprints of articles by Dorothy
European nationalities bases its opposition to Otto on traditional
Thompson, Freda Kirchwey, and Representative Celler, as well as of
aversion to Habsburg domination, Occasionally, Otto's supposed
material which has appeared in PM and the Daily Worker. Cross-
assertion of leadership is taken to apply only to Austria (ef. the
fertilization has also been resorted to, one foreign-language group
Slovak Slovenska Obrana, December 8); but in the vast majority of
reprinting the arguments of another (of. the article by Count Sforza
cases Otto's ambitions are believed to include the lands of the former
reprinted in the Czech New Yorkske Linty, December 10). In these
Austro-Hungarian Empire. Czech-, Slovak-, and Ukrainian-language
ways the heat and volume of the comment has not been allowed to
papers are perhaps the most violent in their denunciations. The
diminish.
Yugoslav press in the United States has been too preoccupied with
The substance of the discussion may be classified under three heads.
internal Yugoslav matters to give to the Habsburg issue the attention
which might have been anticipated. Yet through all papers speaking
Arguments Favoring Otto's Ascendancy
for the Central European nationalities runs an avowed determination
In general, as has been pointed out above, the papers which might
not to submit again to the old imperial rule.
have been expected to support the Habsburg claims have tended either
to remain silent or to cloak their approval under the assertion that
Arguments Opposing Otto on Ideological Grounds
anti-Habsburg elements were showing undue alarm. There has been
Arguments objecting on ideological grounds to any trafficking with
little outright expression of support. Nevertheless, the Himmler
Otto are to be found in all sections of the foreign-language press. In
chain of Associated Hungarian Weeklies, as well as the Chicago
these discussions the letter of November 19 to Otto is usually linked
Otthon and the Cleveland A Jo Pasztor-all papers of the Hungarian
to arrangements with Darlan and other "figures of the Right," and it
extreme Right-have expressed some degree of approbation. Usually,
is asked whether such procedures are congruous with the Four Free-
26
27
Regraded Unclassified
SECRET
SECRET
doms and with democratic ideals. This type of argument is naturally
most prevalent in papers of the Left, particularly in Communist
papers-witness the artícles in the Hungarian Magyar Jovo, the
Rumanian Romanul American, the Ukrainian Ukrainski Shehodenni
Visti, etc, Communist papers of nationalities not directly affected
APPENDIX III
by 8. possible Habsburg restoration reveal a similar ideological pre-
THE FOOD SITUATION IN FRANCE
occupation. Thus the Lithuanian Communist Vilnis (December 14)
and the Finnish Tyomies (December 3) significantly break the silence
The increasingly grave shortage of food which confronts France
which the remainder of the press of these national groups have
today can be traced primarily to Vichy's mismanagement of supply
maintained respecting Otto.
and distribution and to requisitions imposed by Germany. Only
secondarily can the problem be attributed to the British blockade or
to deficiencies in fuel, labor, or agricultural machinery.
Domestic Supply
France's shortage, in other words, is not one inherited from the pre-
war years: the French food economy was normally independent of any
basic agricultural imports, with the exception of fodder and vegetable
oils. Other items such as rice, tropical fruits, and coffee were secured
from abroad; but, though useful, they were by no means indispensable.
Domestic production then-had it been distributed equitably,
efficiently, and completely to the French population-would have
sufficed to give the average citizen even after the invasion a passable
diet, regardless of the blockade. For, aside from the year 1940, when
military operations interfered rather severely with sowing and her-
vesting, French agricultural output has never fallen dangerously
below pre-war levels. The fodder-deficit imposed by the blockade,
it is true, brought a reduction in the number and weight of livestock
and a corresponding drop in supplies of meat and dairy products
available to the consumer. Shortages of labor, fuel, and farming
machinery did not help matters, either. But none of these restrictions
caused any disastrous fall in the supply of food products potentially
available to Frenchmen.
Requisitions
Much more important than variations in domestic output or the
effecte of blockade were the requisitions imposed by the German
authorities. During the crop-year of 1941-42, the Germans exacted
from the French some 550,000 tons of wheat, and from the crop of
1942-43 they are expected to requisition about 850,000 tons-which
may amount to nearly 15 percent of the French yield. German
1 Based on memorands prepared to the Research and Analysis Branch of the Office of Strategic Services,
28
29
AGT
-
WAR
works
Regraded Unclassified
SECRET
SECHET
requirements of meat are expected to reach in 1942-43 about 15 per.
cent of French production, and-a fact even more important-soms
the extremely meagre rations. Farmers who withheld their products
20 percent of France's fats and oils will go this year to the invaders.
began to increase their own consumption and dispose of the surplus
These requisitions bear all the more heavily upon the French food
on the Black Market. Consequently, instead of acting 65 an irregular
economy because they are collected, not from the Black Market, but
supplement to the official distributive system as in Germany, the
from supplies which would otherwise be available for rationing.
Black Market has developed in France into a major channel of supply.
Since its prices are, however, exorbitant, only well-to-do persons can
It should be pointed out, however, that these requisitions-crucial
avail themselves of its supplies. Thus, inequalities of distribution,
as they were-never assumed the proportions familiar to other
instead of being mitigated by governmental controls, B8 is usual in
countries conquered by the German armies. Remaining within the
wartime, have been accentuated.
broad limits of "normal contributions" which the victor exacts from
If injustice were the only result of this system, it would be bad
the vanquished, the German demands have not, at least until now,
enough. But the system tends as well to lower agricultural produc-
had the character of a systematic drive to undermine completely the
tion still further. Profitable ns selling on the Black Market may be,
economic life of France and to deprive its inhabitante of the minimum
the handling of large quantities of goods in an illegal way-par-
means of subsistence.
ticularly when they are bulky-is extremely inconvenient, if not
The reasons for this German decision to abstain in France from I
prohibitive. More and more producers, therefore, are inclined to
"Polish" policy of extermination and spoilage are political, economic,
grow only as much as they need themselves, plus whatever quantities
and psychological. The idea of French collaboration loomed large in
can be sold without too much risk on the Black Market.
all concepta of the "New Order." Integrating the economic resources
Additional dislocation of the food economy is provided by the
of France into the German war effort became, very shortly, part and
(ailure of Vichy to secure an interregional equalization of the available
parcel of the German blueprint of total European mobilization.
food supplies. Division of France into two zones, obstructionism by
Finally, the general German attitude towards the "cultured" French
the German authorities, and a shortage of transport facilities were,
was always markedly different from the contempt and batred which
of course, mainly responsible for the breakdown of interdepartmental
they felt for the lesser nations of eastern Europe.
traffic; but the Vichy government certainly proved unable to use
whatever freedom of action had been left to it. The consequence of
Vichy
its impotence was the creation of artificial surpluses in some depart-
The appalling mismanagement of the French food economy by the
ments and of acute shortages in others. The result of this was, in
Vichy government provides an essential background against which
turn, to facilitate German requisitions and to help disorganize the
reductions of imports, declines in output, and requisitions by the
internal distributive system.
German authorities assume their proper proportions.
A decline in the quantity of available consumer goods and the
What the Frenchman Gets
inflationary process set in motion by exaggerated payments to the
Under the impact of all these factors, the food position of France has
German occupation authorities could not, perhaps, have been pro-
deteriorated very considerably. In pre-war France an average citizen
vented by Vichy; but it was the almost complete breakdown of that
consumed about 3,100 calories daily, which were contained in some
government's price-fixing system which vastly aggravated the food-
99 grams of protein, 67 grams of fate, and 470 grains of carbohydrates.
supply problem. Runaway prices for consumer goods made farmers
Instead of this undoubtedly high norm, French nutritional specialista
balk at delivering their products at officially decreed prices. In fact,
have accepted as a subsistence minimum for an average consumer not
deliveries had to be enforced by police power and became virtual
involved in heavy labor, a figure of 2,000 calories, which should be com-
requisitions.
posed of 66 grams of protein, 38 grams of fata, and 330 grams of car-
As 8 result, the volume of foodstuffs available for distribution
bohydrates. If we compare this minimum with the ration obtained on
through officially approved channels was not sufficient to fill even
cards by "normal consumers" (category "A"), which consiste of 1,100
30
31
Regraded Unclassified
SECRET
SECRET
calories daily, contained in 33 grams of protein, 19 grams of fate, and
220 grams of carbohydrates, we find that the daily caloric deficit
amounts to 900 calories. Carbohydrates show a deficit of some 33
percent, while proteins and fate are short by 50 percent. More
APPENDIX IV
striking than any, however, is the deficit of animal protein: the con.
sumer receives only a third of the theoretical minimum.
"TWO ENEMIES"
Even if we take into consideration that about 200 additional calories
can be obtained in workers' canteens, restaurants, and similar places,
One month ago, The War This Week published 88 an appendix B.
the remaining deficit of 700 calories a day is critical enough. These
memorandum on "Polish Politics in the United States" (December
700 calories can usually be obtained on the Black Market-but only
10-17, 1942). The following account of a lecture given by Waclaw
by the few who can afford it. For the rest, severe malnutrition and
Spiewak in New York City on December 18 is presented as a vivid
heavy loss of weight are inevitable.
footnote to that article's discussion of rightist sentiments among
The position of consumer groups whose physically-exacting occups-
Polish exiles. The substance of Mr. Spiewak's lecture, as reported
tions entitle them to higher rationing categories is hardly more favor-
from B. reliable source, reveals how intense the feeling against both
Germany and Russia has become in some Polish-American circles.
able. Although their rations may permit a calorie intake of about
Waclaw Spiewak is an American citizen who returned to this
2,000 or even 2,400 calories daily, their physiological requirements
country in July, 1942, after taking part in the Polish underground
lie between 3,500 and 4,000 calories daily. Their deficit is, therefore,
movement. He told his audience, described as deeply sympathetic,
proportionately about the same, and a sharp decline in their efficiency
that Poland's "two enemies" were Germany and Russia. Poles
and productivity appears quite as probable.
could never forgive Russia, be said: "no treaties will have any
significance." Although this could not be said "before the Ameri-
cans," it was ridiculous to argue about Poland's eastern boundaries.
"Poland must get more. Russia must repay us."
For Germany Mr. Spiewak foresaw nothing but vengeance. "We
do not care about public opinion. We are going to murder German
children in their cradles
Every German is born a Hitler
Poland will do a lot of killing
No overseas tribunal will be able
to interfere."
That this was an occasion of consequence and the speaker a man of
some standing in Polish American circles is suggested by Peter Yolles'
presence as chairman. Mr. Yolles, an editor of the New York Nowy
Swiat, mouthpiece of the Matuszewski group, characterized Mr. Spie-
wak's address ns"a voice from the heart." He warned the assembly
that London and Washington were planning for Allied occupation of
all liberated territories in order to forestall the possibility of a "bloody
vengeance." The Polish underground, be urged, should be so organ-
ined as to be able to act "properly, rapidly, and effectively" before
Allied occupation could interfere.
Mr. Spiewak introduced himself not as n politician but as & soldier
preoccupied with Poland's struggle. He charged that Polish labor had
Based on a memorandum prepared la the Foreign Nationalities Branch of the Office of Strategio Bervices.
32
33
Regraded Unclassified
SECRET
been indifferent to the German threat in 1939, but said that experience
of life under the Nazis had welded all Poles together. Although post.
war Poland would be a democracy, Mr. Spiewak was convinced that
it could not afford "too much babbling and experimentation." The
Ukraine, he said, would be "free" and would "line up with us,
This is already in the making." Lithuania would also be free and
"in union with us."
Sikorski he respected as a soldier, Mr. Spiewak declared, but the
exiled Government would have to give way to a "revolutionary govern-
ment" in post-war Poland. He defended the pre-war Government,
saying that "Minister Beck straightened out Polish politics
The
Generals did everything in their power, but they were not allowed by
the Allies to mobilize all their forces."
34
#, 4. GOVERNMENT PRINTING OFFICE: 1943
BUY
VIITED
STATES
WAR
AONDS
are
STAMPS
Regraded Unclassified
103
Jan. 8, 1943
Mr. Sullivan
Secretary Morgenthau
I do not want to wait to have my hand forced by
Senator Vandenberg, and I think there should be 8.
forgiveness of taxes for the widow of a soldier or
sailor killed in action. I want an answer on Monday,
and if it needs legislation I want the legislation
ready by Monday.
I would also like to have a review on what happens
to the taxes of a soldier or sailor.
See Sullivans memo - 1/11/43 -
Regraded Unclassified
104
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
January 8, 1943.
MEMORANDUM ON THE CABINET MEETING
The President said he had nothing to report.
Mr. Hull said he had nothing other than the usual French
complicated situation involving the DeGaulle and Giraud interests.
The President said he would like to discuss that matter for a
moment and give his opinion on the matter. He was quite well
aware of the fact that the French and the British do not agree to
this view. He said there is no constitutional representative of
the French people in North Africe, and most people who view this
situation do not seem to realize this es 8. military occupation.
General Eisenhower is in fact the Governor of that territory.
When he entered this territory he found Admiral Darlan in command.
He was, of course, in effect made prisoner. He made certain over-
tures under which he said he would cooperate and do all in his
power to get the Frenchmen to cease fighting if certain things
were done. In order to save lives General Eisenhower agreed, but
all Admiral Dorlan was was an agent of General Eisenhower. He did
not in any sense represent the French people. Under this scheme
Derlan set up some sort of a governing council, but here again
they were only aiding Eisenhower. General Giraud is in exactly
the same boat, in his opinion.
The British feel that the Fighting French, hended by De Gaulle,
have never left the French Government, as the representatives of
Vichy did. They have continued on as part of the original constitu-
tional Government of France and therefore they deserve to be recor
nized as representatives of the French people and should be placed
in charge. The President does not agree with this view and cannot,
he says, recognize De Gaulle as the hend of this territory. Further-
more he does not want anyone of the character recognized as head of
the French Government unless they are the constitutionally recognised
representative of the French people.
There was quite a discussion between Biddle, Byrnes, Landis
and Stimson as to the constitutionality of the President's position.
I think they all agreed as 19. general principle that he wes right,
but there were some stops which should have been taken but which
had not been taken to make this position clear. One of those is that
PVICTORY
it has not been made clear to the people of this territory that this
BUY
UNITED
STATES
WAR
BORDS
ARS
TAMES
Regraded Unclassified
100
- 2 -
ia a military occupation and that General Eisenhower is in fact
in charge of the territory and that whoever is appointed to govern
1a no more than an agent of him. I believe they were all in accord
that all actions taken should be in line with these principles.
I had nothing to report.
Mr. Stimson anid that at the last Cabinet Meeting someone
raised the question as to who was to get title to the manufacturing
plants that are being constructed throughout the country for the
manufacture of war materials. It was indicated that the Secretary
of the Treasury raised this question. He read quite a memorandum
prepared by Bob Patterson which said that the Government plants were
being financed by the Defense Plants Corporation and that title was
in the Government in that case. In those cases where private capital
in used, I believe he said the Government was paying for the plants
through the price of the materials and there was some indication,
although not clear to ne, that the Government got the plants at
the end of the period. All of the papers in the case were turned
over to Francis Biddle for study.
Mr. Biddle cold that the Byrd Committee WBS raising some
questions about the acquisition of property by the Army, particu-
larly the large hotels and large areas of land. One of his men
hed been called to testify but he instructed him to say that he
was only carrying out what he WRB ordered to do by the War Depart-
ment and he had nothing to do with the policies involved.
Then he said he wanted the Cabinet to know that Clarence
Cannon, Chairman of the Appropriations Committee, had gone to Hoover,
head of the F.B.I., to suggest that he provide the Appropriations
Committee with e corps of investigators to go through the various
Governmental Departments to see whether or not there was any waste.
He said the Committee was determined to do it and thought the F.B.I.
WAS the proper agency. Hoover said he could not make any commitment
on it until he discussed the matter with the Attorney General, The
Attorney General gold he immediately turned it down. He thought it
would be very bad having F.B.I. agents going through the departments
investigating their procedures and methods of spending appropriated
money. He said he did tell Mr. Cannon, after having discussed the
matter with the President, that he would designate an F.B.I. man to
set up such an organization for the Committee and after the organi-
zation was completed he would withdraw the F.B.I. man and somebody
else could take charge.
Mr. Knox and Mr. Wickard had nothing.
The President said he had heard a great deal about a plan to
spend $100 million of Government funds to crevent A shortage of lumber.
Regraded Unclassified
106
- 3 -
There was quite a discussion of it and there seemed to be some misunder-
standing and Mr. Donald Nelson said he had looked into it quite carefully
and found it was absolutely necessary to build up a stockpile of lumber;
that sessonal purchases of it drained the market and there are acute
shortages of it at certain times of the year. He wanted to assure the
producers that this lumber would be taken off their hands, and further-
more, by putting it in stockpiles it would get the necessary seasoning
that is advisable for its use. The President said to work out some
program, but he didn't want them to use his emergency fund for this pur-
nose.
Mr. Jones, after he had heard the discussion on the question of
purchasing or getting title to Government plants, went out of the room
and telephoned to his office, He said he finds in the aluminum, mg-
nestum and rubber plants which he is financing through RFC, there are
no options on the part of private concerns to purchase these plants.
In the case of the plant to produce octane gas, he said there is A form
of option, but it is favorable to the Government. He said in con-
nection with the construction of some of the steel plants there are
options but they are of very little value and he doubts if they will
over be taken up after the war. In the case of the Kaiser plant which
cost $90 million and the case of the Provost, Utah, plant which cost
0125 million, there are no options whatever. He said after the question
FGB raised last week he directed that a complete survey be made of the
plants being constructed with Government money. He would have that
within E few days and would furnish a copy of it to the President, He
has convinced, however, after looking into it some, that the Government
had not been "sold down the river."
Secretary Ickes, General Fleming, Mr. Blandford, Mr. Nelson,
Mr. Byrnes and Mr. McNutt had nothing to report.
DWB
Regraded Unclassified
107
January 8, 1943.
Meeting in Mr. White's Office,
January 8, 1943,
10:00 A.M.
Present: Dr. Clark and Mr. Plumptre, for the
Canadian Treasury,
Mr, White and Miss Kistler, for the
United States Treasury.
Dr. Clark stated that the Canadian gift to the United Kingdom had
run out about Christmas time and that the contemplated Land-Lease arrange-
ment cannot be put into effect until at least January 27, 1943, when
the Canadian Parliament reconvenes and legislation can be introduced.
The proposal now being considered is a Lend-Lease arrangement with all
Sterling Area countries with no strings attached except perhaps such
minor ones as a provision for the return of some articles like ships.
Certain other conditions might be imposed, such as the transfer to Canada
of British interests in war plants in that country, amounting to $200-$250
million, but Dr. Clark stated that the present plan was not to take over
any more of U.K. investments in Canada, He replied, in answer to a question
of Mr. White, that the United Kingdom still held about $1.5 billion of
investments in Canada, He explained that the proposal is still in the
early stages of discussion and that modifications of present plans might
be made before legislation is finally enacted.
Dr. Clark explained that the United Kingdom was now paying gold to
Canada and would do so until legislation could be introduced or a state-
ment of policy made by the Government to the Canadian Parliament; in
either case he thought the arrangement would be made retroactive to Jan-
uary 27. He reported that Canada had already received #25 million of
gold out of an estimated $150 million that U.K. will have to pay to Canada
during the five-week period ending January 27. He said that it was estimated
in December that the United Kingdom deficit with Canada during the first
quarter of the year would be $380-$385 million.
Under questioning by Mr. White, Dr. Clark stated that the Canadian
officials felt that eince they had once gone to Parliament for legislation
on Canadian financial arrangements with U.K. and gotten legislation for
the gift arrangement, they did not feel that they could go back to the
pre-gift situation of accumulating sterling without at least informing
Parliament of their intentions, something, of course, which they could not
do until it reconvenes at the end of this month.
Dr. Clark explained that although the billion dollar gift had been
made to the United Kingdom it had been used to meet the deficit of all
the Sterling Area countries with Canada with the net result that the other
members of the Sterling Area paid sterling to the United Kingdom for the
108
- 2 -
net surplus of goods they had received from Canada, and which Canada
had paid for out of the gift appropriation. He said that at the time the
gift W&B made, Canadian officials felt that they did not know enough
concerning the financial arrangements between the United Kingdom and
other Sterling Area countries to attempt to make separate arrangements
with each of them. The plan now being contemplated by the Canadian
Government is to generalise Lend-Lease arrangements fully and to make
arrangements with any of the United Nations, with the intention of
making Canadian production surpluses available to any of them to the
extent Ganada's capacity permits. He stated that the Canadian Government
contemplates dealing directly with the various members of the British
Empire and that to date Canadian war production has gone principally to
the United Kingdom, Australia, India, New Zealand, Egypt (for U.K.
account), Russia and South Africa.
Dr. Clark stated that the Canadian Government had no intention of enter-
ing into reciprocal Lend-Lease arrangements. He explained that they pur-
chase sterling from the British Government to feed, shelter and purchase
locally to the extent necessary the equipment needed by Canadian troops
overseas. He said that this year sterling expenditures made for Canadian
troops in the United Kingdom were running at B rate of $175-$200 million
per year and that, on the assumption of active warfare in Europe, the
Canadian Government estimates that they will spend $640 million for this
purpose during the fiscal year 1943-1944. He explained that Canada kept
only a small working balance in sterling. He told Mr. White that the
records of Canadian expenditures in the United Kingdom for Canadian Armed
Forces were kept on a strict accounting basis, that it had always been
considered wise on both sides to do 80, He explained, however, that no
attempt had been made to keep detailed and exhaustive records but rather
the efforts had been directed toward working out a per capita rate for
food, shelter, etc. Dr. Clark asked whether Mr. White thought there was
any point in having Lend-Lease agreements which will be signed with various
countries to include anything more than a conmitment on the part of the
second country to do the utmost possible to further the war and to take a
liberal attitude toward post-war problems. Mr. White reviewed the atti-
tude which Treasury officials had taken when they were working on at draft
of the Agreement with the United Kingdom.
Dr. Clark inquired concerning the desirability of continuing Canex
requisitions-that is, requisitions filed by the United Kingdom for U.S.
material to be transferred to Canada for her own use in compensation for
Canadian expenditures on U.K. account in the United States, He would
prefer to drop them and indicated that they were of minor proportions.
He said that together with the components made available to Canada under
Lend-Lease for inclusion in goods being produced in that country for U.K.
account, they totalled only $53 million to date.
Regraded Unclassified
109
- 3 -
Dr. Clark raised the question concerning the desirability of re-
funding the Canadian U.S. dollar obligation which is now callable as
against retiring it. Mr. White then reviewed the manner in which the
matter had come to our attention and stated that, in his opinion, there
were three disadvantages to retiring the issue: First, there are the
possible adverse political repercussions arising from the fact that we
are aiding Canadian dollar position; secondly, there is the desirability
of retaining foreign exchange resources in view of the uncertain condi-
tions after the war; thirdly, there are advantages to be derived from
once having successfully refunded an issue at a lower rate of interest
in case further loans have to be raised. Mr. White suggested to Dr.
Clark that he ought to talk with Mr. Bell about the bond issue. Dr.
Clark said he would be glad to. Unfortunately he had to leave that
afternoon and Mr. Bell was unable to see him that day.
Mr. White said that Mr. Berle had told him he was going to speak
to the Canadian Government last week about a proposed International
Stabilization Fund. Mr. White asked Dr. Clark if he would care to have
any of his technical men examine the draft outline for the International
Stabilization Fund and to give their reaction and make any suggestion they
would care to do, at an informal level. Dr. Clark seemed pleased to do so,
Dr. Clark submitted the attached memorandum setting forth his pro-
posal for the suggested range of Canadian gold and dollar balances.
T. M. Kistler
Regraded Unclassified
Handed
to
Surgestions as to a reasonable roserve of U.S.
dollar exchange to be maintained by Canada.
1. It is belleved that It vould be decirable for the United
States and Canada to reach. an ne to what should
be the marnitude of the reserve of old and U.S. dollar
balances which Canada chould sool: to maintain, having
regard to the interests of both countries.
It is suggested that minimum and maximum figures
might well do agreed upon. In that case it would be the
understanding that if Canada's reserves tended to fall
below the agreed minimum, the United States would be
willing to increase her purchases of war supplies in
Canada, in accordance with the principles of the liyde
Park Declaration. Conversely, if Canada's reserves
tended to rise above the agreed maximum, Canada would
be willing not only to accept reductions in U.S. orders
for war supplies being placed in Canada but also to con-
tribute free to the United States (either for her own use
or for assignment to other United Nations through the
Munitions Assignment Board) finished war supplies manu-
factured in Canada as a result of orders placed by the
United States through War Supplies Limited.
In considering the appropriate magnitude of a U.S.
dollar reserve to be maintained by Canada, the following
general considerations are believed to be important:
(a) The high degree of vulnerability of Canada's
international trading position. (Her foreign
trade is very large in relation to her size and
national income. Her economy is geared to export
markets to an extent that 1s matched by few other
countries. To & very large extent also her
exports consist of agricultural products and
basic raw materials and, at the first blast of
depression, are apt to fall off rapidly because
of Regraded classified
-2-
of Leclines in volume and more drastic declines
in prices. In revious major depressions, drastic
docronses in excert receipts have imediately
enorged, Ville the cost of imports unsed to a
considerable extent on hachinery and capital
equipment las tended to keep up for a time, with
a consequent serious strain on Canada's balance
of payments).
(b) Canada's heavy external indebtedness, now owing
largely to the United States. (In recent years
Canada has had to find from $200 to 250 millions
U.S. to meet Interest and dividend payments payable
to U.S. Investors. In addition, it must be
remembered that the investment markets of the
countries are ao closely interrelated that
securities move back and forth across the
boundary line with great freedom and in enormous
volune - in 1937 the total of this trade was $6000
millions, If confidence in Canada's currency or
financial position is impaired, capital may flow
out quickly in very large volume not only in the
form of marketable socurities but also in the form
of withdrawal by U.S. parent companies of surplus
funds hold by their Canadian subsidiaries or
branches).
(c) Canada's probable post-war reconstruction needs.
(We hope to have post-war a much higher rate of
general economic activity as compared with pre-
war conditions. Even if the U.S. follows a policy
of expansion, the character of the trade between
the two countries is such that the balance of
payments could be heavily against us in the early
post-war years).
(a) The/
egraded classified
-3-
3
(d) The desirability of being able to restore parity
of exchange, oliminate varlous restrictions and
maintain a liberal tommercial policy. (In addition
to the normal problems of post-war reconstruction,
Canada will desire, and it will be in the interest
of the U.S. that she should be in a position, to
return to the pre-war parity between the Canadian
and U.S. dollars; to remove exchange control, the
10,7 War Exchange Tax, heavy excise taxes on certain
commodities and other restrictions on imports from
the U.S., and the prohibition on pleasure travel
in the U.S., all of which Canada has had to impose
during the war in order to conserve her scanty
reserves of U.S. dollar exchange; and generally
to resist successfully any internal, sectional
pressures attempting to force the solution of
an exchange problem by reactionary trade policy
or by exchange control' or depreclation).
In the light of these general considerations, we may
approach the concrete problem of what should be a
reasonable magnitude for Canada's exchange reserve by
reviewing a number of historical situations:
(a) At September 15, 1939, Canada's official and
available private reserves of old and U.S.
dollars were $390 millions, made up as follows:
Official Spot
Regraded Unclassified
illions of
Official Spot Position
U.S. dollars
Foreign Excilance Control Board and
Bank of Canada old
205
Foreign Exchange Control Board, Bank
of Canada and Dominion Government
U.S. balances
56
Total official spot position
261
Private Spot Position
Corporation balances (oxcluding minimum
working balances
1
85
Individuals' balances 2
/
23
Chartered banks' excess cash reserves 3
21
Life insurance companies excess cash 4
--
Total private spot position
129
Total spot position 5
390
(b) The size of the exchange reserve possessed by Canada
just before the war, 88 shown above, was much smaller
than that maintained by Canada in the years preceding
the great depression. In this connection the following
extract from Professor A.F.W. Plumptre's "Central
Banking in the British Dominions" (published in 1939)
is pertinent:
"Although/
1
Data from tabulation of Form M (issued by Foreign
Exchange Control Board) less estimated minimum
working balances of $20 millions (roughly 1941/42
average)
Data from tabulation of Form M.
Impossible to determine banks' minimum cash require-
ments accurately; amount shown represents sales by
banks to F.E.C.B. during first month of control.
Canadian life insurance companies showed an excess of
U.S. assets over U.S. liabilities at end of 1939 but
no reliable estimate is available as to their excess
cash reserves.
Does not Include U.S. currency in the hands of
individual residents Y amount unknown.
Regraded Unclassified
-S-
"Although Canada's long torm foreign indebtedness
has been greatly reduced in the years 1933-8,
the short term international position of the
financial system has by no means been restored to
that of ten r twelve years ago. The change is
shown in an accompanying table. At the end of
1338 ti.e net short term international assets of
the system were less than half the amount eleven
years earlier. In the event of a new severe
depression, entalling falling income from exports
and difficulty in indeting foreign debts, it seems
dosirable to have at least as large a reserve of
internat onal assets as was available before the
last one. 11 (mage 421).
Net Short Term Foreign Assets of Canadian
Banking Systom, December 31, 1927.
$ 000,000
Net foreign assets of chartered banks:
293,4
Gold of chartered banks
In central gold reserves
21,2
In Canadian vaults 2
48.1
Elsewhere
28.5
Gold of Dominion Government (at $20.67
per OZ.)
127.7
518.9
December 31, 1938.
Net foreign assets of chartered banks
8.7
Foreign exchange of Bank of Canada
28.4
Gold of Bank of Canada (at $35 per oz.)
185.9
223.0
Without deducting liabilities on letters of
credit.
2
Includes also holdings of subsidiary ooin
which in Canada usually amount to some $5
millions.
To Professor Plumptre's comment there might be
added the further comment that in spite of what now seems
like a large exchange reserve held in 1927 (and just prior
to the end of the last major business boom), a falling
trade position and an outflow of funds to the New York
market brought weakness and some depreciation in the
Canadian dollar during 1929, followed by acute weakness
and substantial depreciation in 1931 and 1932 when the
United Kingdom went off gold and Canada's balance of
payments showed serious worsening.
(c) By the middle of 1941, Canada's reserve had dropped from
390 millions at the outbreak of war to $265 millions.
Regraded Unclassified
⑉6⑉
6
The following table shows the position at June 30,
1941:
June 30, 1941.
(millions of U.S. dollars)
Foreign Exchange Control Board gold
137
Foreign Exchange Control Board -
U.S. balances
72
Dominion Government - U.S. balances
46
Total official spot position
255
(d) As a result primarily of the working of the Hyde
Park agreement and of capital movements, the drain
on Canada's reserve which had amounted to 142
millions (U.S.) in 1941 was checked and then
reversed in 1942. Preliminary figures for the
past year show a gain of approximately 133 millions,
bringing the official reserve up to 310 millions as
at December 31, 1942, made up as follows:
Docember 31, 1942.
(millions of U.S. dollars)
Gold held by Foreign Exchange Control
Board and Dominion Government
154.9
u.s
held by Foreign Exchange Control
Board and Dominion Government
163.6
Total official spot position
318.5
(e) The following table snows the net impairment of
Canada's U.S. position, the liquidation of U.S.
assets and the Increased purchases by U.S. investors
of Canadian assets, by various periods since the
outbreak of war up to December 51, 1942. (The table
was prepared about the middle of December last and
consequently the figures used for the year 1942 are
estimates which may vary slightly from the figures
as finally dotermined):
Regra Unclassified
Net Impairment of Canada's U.S. dollar position and indebtedness
Year
Total
Sept. 16, 1939
Total
2nd
1942
July 1,1941
Grand
to
Year
lst half
Sept. 16, 1939
half
(esti-
to
Total
Dec. 31, 1939
1940
1941
to
1941
mate)
Dec.31, 1942
(estimate)
June 30, 1941
(millions of U.S. dollars)
1: Depletion of Liquid
Reserves
(a) Official
-45
-24
75
6
68
-131
-63
37
-57
(b) Private
91
-
128
3
- 2
1
129
Total
- 8
67
75
134
71
-133
-62
1
2. Liquidation of other U.S.
assets.
(a) Sales and redemptions of
U.S. securities
13
27
11
51
13
21
34
85
(b) Other liquidational
2
8
5
15
4
11
15
30
Total
15
35
16
66
17
32
49
11$
3. Total depletion of U.S.
of
assets (1/ and 2/)
7
102
91
200
88
-101
-$3
181
4. New capital inflow
(a) Purchases of Canadian
securi ties by U.S.
investors
4
7
12
23
19
113
132
(b) Other investments Total
1
6
5
13
155
9
25
34
5
13
18
36
47
28
138
166
5, Total impairment of position
202
and indebtedness
12
115
109
236
116
37
138
6." Capital payments 3
6
38
15
59
se
I
12
22
6
77
94
177
34
104
93
7. Net impairmen of position
15
46
and indebtedness
Regraded Unclassified
-0-
8
des sales and redemptions of foreign.U.S. dollar securities
F. than U.S.), repayment of principal on mortgages, loans
ale of direct investments abroad.
audes borrowings from non-rosidents, direct investment in
ada, and transfers of non-rosidents' bank accounts to Canada.
ncludes security redemptions, principal repayments and small
ounts of ca ital outflow allowed on c impassionate grounds,
It is important to note from the proceding table that in
addition to losing 2 millions of her liquid U.S. dollar
reserves since the outbreak of war, Canada has also lost
approximately 115 millions of other U.S. dollar assets and
in addition has increased her indebtedness to the U.S. by
approximately :109 millions net during the same period. In
other words, there has been a total net impairment in her
position and indebtedness vio-a-vis the U.S. of approximately
$296 millions.
1, With the above Mistorical and statistical background, we are
now in & position to make concrete suggestions as to the
magnitude of an appropriate U.S. dollar reserve for Canada,
having in mind the best Interest of the two countries.
One alternative might be that Canada should be
allowed to return to the position at September 15, 1939,
when she had gold and U.S. dollar balances of $390 millions,
or about 72 millions more than at December 31, 1942. It
should bo noted, however, that the present cash position has
been sttained only at the expense of our capital resources to
EL net extent of about $224 millions. On the other hand it
would be unrealistic to suggest that we should be allowed to
recoup ourselves for this loss by building up our liquid
resources to EL corresponding extent; we must be prepared to
accept some increase in our not debt to the U.S. as a result
of the war.
A second alternative might be based on the argument
that, as it was during the spring of 1941 that the Hyde Park
discussions took place, Canada might be asked to accept a net
impairment of position up to, say, mid-1941 on the ground that
after that date it was the goneral intention that the Myde
Regraded Unclassif
-9-
9
Farlo errangements should.obviate any further substantial
impaiments of Canada's U.S. capital resources, on this
basis, We would have to make up B. not impairment in
position and indebtedness of $1.99 millions, which added to
our actual liquid reserve of $318 millions at December 31,
1942, would mean total liquid resources of 437 millions.
The average of the two alternative approaches outlined
above works out at $414 millions. It is therefore
respectfully suggested that consideration be given to
agreeing upon a range of $400 to 430 millions, Bearing
in mind that under certain circumstances an annual exchange
loss of $150 millions is by no means improbable and that
one of $200 millions or even more is Quite conceivable,
liquid reserves of the magnitude hore suggested are no more
than sufficient to give Canada a breathing spell of là or
2 years if things do not go well in the post-war years. The
reference to such Д period assumes that desperate measures
have to be taken before exchange reserves reach the
vanishing point.
It is also suggested that consideration should be given
in agreeing upon 'a suitable exchange reserve, to the
desirability of leaving out of the calculations for
operating purposes any cash which may later be accumulated
through net sales of securities in the U.S. - either
Canadian or U.S. securities. (By net sales is meant gross
sales of securities minus redemptions or purchases, leaving
other capital transactions out of account for the salce of
simplicity). Behind this suggestion 10 & question as to the
wisdom of Canada borrowing in order to maintain hor liquid
position. There is also behind it the conviction that EL
minimum cash reserve of $400 millions does not fully take
into account the vulnerability of Canada's international
position and her probable post-war reconstruction needs.
There 10 also the further fact that we will have to deal
with/
Regraded Unclassi
119
-10-
10
with a number of maturing Dominion bond issues in the
near future, such for instance as the $30 million issue
due January 15, 1944, and callable on or after January
15, 1943, and the 76 million issue due August 15, 1945,
and callable on or after August 15, 1943. These issues
might be retired in part with funds accumulated by the
ordinary market sales by U.S. or Canadian securities to
the U.S.
Regraded Unclassified
120
O trunte anymal 1/11/43 to
,
121
JOINT WAR PRODUCTION COMMITTEE
CANADA AND UNITED STATES
UNITED STATES SECTION
WASHINGTON, D.C.
Social Security Building
January 8, 1943
Dear Mr. Secretary:
The Joint War Production Committee of Canada and the United
States has secured estimates of payments to be made to Canada for munitions
by the United States War Department, Navy Department and Maritime Com-
mission during the third quarter of the fiscal year 1943. It is expected
that these payments will amount to almost $190,000,000.
Details of this estimate are presented in the table below:
Payments to be Made to Canada, January 1 to March 31, 1943
U. S. War Department
$119,793,001.14
U. S. Navy Department
6,746,000.00
U. S. Maritime Commission
61,500,000.00
TOTAL
$188,069,001.14
At an earlier date (November 1), the Economics and Statistics Branch
of the Canadian Department of Munitions and Supply estimated the value of
war production in Canada for the account of the United States at approxi-
mately $151,500,000 (U.S.) for the same period. There is, of course, no
reason to expect an exact correspondence between these estimates. Pay-
ments may not be made at exactly the time the munitions are delivered.
Furthermore, additional contracts have been awarded to Canada by the War
and Navy Departments in recent months.
Since Canadian munitions are now tentatively assigned for 8 period
three months in advance of the date at which assignments are made, the
schedules of deliveries of Canadian munitions to the United States are now
less subject to wide error than was true at the time our last report to
you was prepared. For that reason the above estimate is probably more
accurate than the one made at the beginning of the second quarter.
Sincerely yours,
Gilbert MacKay
Captain, Army of the United States
Executive Director, J.W.P.C.
The Honorable
The Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
MINUTES OF BOARD MEETING
121
January 8, 1943, 11:00 A. M.
East Wing, White House
Present: The Director (Presiding)
Mr. Wickard
Mr. Jones
Miss Perkins
Mr. Bell (Acting Secretary of the Treasury)
Mr. Eccles
Mr. Smith
Mr. Henderson
Mr. McNutt
Mr. Patton
Mr. O'Neal
Mr. Green
Mr. Murray
Mr. Flanders
Mr. Gordon (Chairman, Canadian Wartime Trade
and Price Board)
Mr. Gordon, present at the invitation of the Director and Mr. Henderson, dia-
cussed the Canadian price control program.
The success of Canada in controlling the cost of living, says Mr. Gordon, has
been demonstrated by the fact that since the institution of general maximum price
ceilings in 1941, there has been only 2 percent increase,
The government's ability to hold down the cost of living, according to Mr.
Cordon, has been due to a number of factors, but primarily to a willingness to pay
subsidies in order to hold essential items in the cost of living index. In these
essential items, the government has held rigidly to the 1941 price levels, resorting
first to a profit "squeeze" at all levels of distribution. If this is inadequate,
subsidies are used.
The government has also embarked upon an extensive program of simplification
and standardization, which has reduced the necessity for subsidies. There has, Mr.
Gordon stated, been some degradation in the quality of consumer goods, but this has
not seriously affected the standard of living.
Subsidies have, said Mr. Gordon, been used in agricultural field, particularly
with respect to milk and butter, thereby reconciling the need for increased agricultur-
al products with the government's objective in stabilising the cost of living.
Regraded Unclassified
- 2 -
121-B
Mr. Gordon also pointed out the important contribution made to the enforcement
of price control by organizing consumer groups to police prices, All women's organ-
isations and consumer organizations have been mobilized to support the government's
program. Individual consumers are urged to keep record of prices paid for essential
commodities and to compare these with the legally established price ceilings. Local
rationing boards have been designated by the mayors of the various communities, and
in many places the mayor is the chairman of the board. This has insured local con-
trol and local support in dealing with purely local problems.
In answer to questions from various members of the Board, Mr. Gordon stated
that fiscal policy mist also be relied upon to support the price control program.
Substantial tax increases and compulsory savings have been imposed by the Canadian
Parliament. Forty percent of the government's expenditures are covered by taxation,
but there is still a substantial and dangerous inflationary gap.
Canada has experienced considerable difficulty in dealing with the distribu-
tion of manpower, especially agricultural labor. In order to release manpower for
more essential work, the government has attempted to eliminate various non-essential
civilian activities. This is now leading to the concentration of essential civilian
production into a selected number of plants, further releasing manpower for more
essential occupations.
Mr. Gordon's remarks were followed by a series of questions from many of the
Board members, all dealing with various aspects of Canadian economic policy.
The meeting adjourned at 1:15 P.M. to meet again on January 22 at 11:00
A. M.
Regraded Unclassified
122
marled by 1900 n
January 8, 1943
My dear Dean Jackson:
I am delighted to learn from your letter
that the Treasury can continue to have the
services of Dean Harriet Elliott and it goes
without saying that it is entirely agreeable
to me that she visit the College for three or
four days each month.
Miss Elliott has been rendering invalu-
able service to the War Bond Division of the
Treasury. I have also called on her, from
time to time, to advise us on other Treasury
activities. I appreciate that by letting us
have Miss Elliott, you and the College are
making a real sacrifice and if we were not
at war I would not ask you to do this.
With very kind regards, in which Mrs.
Morgenthau joins me,
Sincerely yours,
(Signed) H. MORGENTHAU JR.
Dean W. C. Jackson,
The Woman's College of
The University of North Carolina,
Greensboro, North Carolina.
Regraded Unclassified
123
THE WOMAN'S COLLEGE
OF
THE UNIVERSITY OF NORTH CAROLINA
to Mr. Fils
OFFICE OF DEAN OF ADMINISTRATION
GREENSBORO. NORTH CAROLINA
December 22, 1942
The Honorable Henry J. Morgenthau, Jr.
The Treasury
Washington, D. C.
My dear Mr. Secretary,
With reference to the services of Dean
Harriet Elliott, let me say that I have written to Dr.
Odegard in response to his letter what I wish to say
to you directly, namely, that we are glad to continue
Miss Elliott's leave for her services with you.
Naturally, we are much gratified to know of the success
that she has made, In agreeing to her continued leave
I am not making any concession as to how greatly we
miss her services here. The measure of her success
with you is evidence of the loss we sustain when she
is away from us.
As between these evident opportunities and
responsibilities of here there can be no choice, of
course, and the Government has the right of way, We
have made a tentative arrangement for Miss Elliott to
visit the College for three or four days once a month
and I hope that this arrangement will be acceptable to
you.
Please permit me to extend my best wishes
to Mrs. Morgenthau as well 8.6 to yourself.
With high regards, I am
Sincerely yours,
W. C. Jackson
Dean of Administration
WCJ;ml
Regraded Unclassified
124
January 8, 1943.
Dear Mr. Harrison:
Since the Secretary 10 away from the
office because of illness, 1 - nohnovledg-
ing your letter of December 20, expressing
your congratulations on the recent financing,
and extending your New Year's greetings.
Just as seoa as Mr. Morgentham is back at
his desk, I shall be gind to bring your
letter to his attention, and I wast to thank
you for 11 on his behalf.
Sincerely yours,
(Signed) H. S. Klotz
H. S. Note,
Private Secretary.
Mr. George Norrican,
51 Nadison Avenue,
New York, In York.
GEF/dbs
File in Diary
Regraded Unclassified
125
FIFTY ONE MADISON AVENUE
NEW YORK
Personal
December 30, 1942.
My dear Henry:
Just a line to congratulate you on the
drive recently concluded. It was a grand job
and a great record and I know you must be happy
about it.
And to my congratulations may I add all
sorts of good wishes for the New Year.
Faithfully yours,
Europ Harriser
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Department,
Washington, D. C.
Regraded Unclassified
126
0
0
THE
P
AMERICAN BANKERS
Y
ASSOCIATION
22 East 40 Street, New York, N. Y.
January 8, 1943
Mr. Harold Thomas
Vice Chairman of the Board
Advertising Council, Inc.
Treasury Department
Washington, D. C.
Dear Mr. Thomas:
The members of our committee were glad to talk to you Wednesday regarding the
survey which you are making for the Secretary of the Treasury on the respective
functions and operations of the Wer Savings Staff and the Victory Fund Committee.
The banks of the country are tremendously pleased with the results of the
December campaign and we extend our sincere congratulations to the entire
Treasury organization for the outstanding success achieved in this drive.
We are now looking forward to the 1943 financing and are anxious to make it as
successful as possible in every respect. For that reason we are glad to comply
with your request for a memorandum reflecting our thoughts on the organizational
procedure essential to a task of such magnitude.
We have found considerable confusion in the various parts of the country regard-
ing the authority and responsibility of the War Savings and Victory Fund organ-
imations. It ie our opinion that each group has an important part to play in the
financing program but wa believe it 1a desirable and necessary that clearer lines
of demarcation be drawn regarding the functions of each organization.
This comment is made solely in the interest of the war financing effort and does
not in any way reflect on the qualifications or achievements of either group.
Bankers, as you know, are very heavily represented on both committees. We want
to see as much money as possible raised outside the field of commercial banks
and we will give active support to all groups engaged in this undertaking.
We believe that the Victory Fund activities are most successful when they take
the form of drives. There drives should not exceed four a year, with three
weeks allotted each drive.
Too, we are convinced that the Mar Savings program is most effective when main-
tained AS a continuous year-round educational and sales activity.
Regraded Unclassified
127
Mr. Harold Thomas 1/8/43
Under such an arrangement the Victory Fund drives would occupy 12 weeks out of
the year and the other 40 weeks would be allotted to the Not Savings Staff,
During the period of the Victory Fund drives, there should be 8. minimum of ac-
tivity, publicity, and solicitation by the War Sevings group. In this way the
impact of conflicting activity would be eliminated. This was not true during
the recent drive.
In December intensive efforts were put forth by some War Savings Committees
while the Victory Fund group was making strenuous efforts to achieve its goal.
The two groups working within the same area produced confusion in the public
mind and contributed little to the primary objective of selling the maximum
amount of Government securities to the public.
During the time the Victory Fund committees are not engaged in a direct drive,
they should devote their attention to the constructive work of quietly
strengthening their organization and educating their committeemen regarding the
objectives and sales techniques involved in each campaign. In other words, when
the Victory Fund group 1a engaged in an all-out drive, the Wer Savings organiza-
tion should lend its support but not attempt to claim public attention for its
own special sales activity. The same holds true for the Victory Fund group
during the periods in which the War Savings staff is engaged in its particular
efforts.
Re 48 bankers are keenly aware that we are presently engaged in the greatest
financial undertaking that has confronted the Government. It is therefore of
the utmost importance that these two groups work ES smoothly 68 possible not
only in Washington but throughout the country. They should coordinate their
efforts to B. point of maximum efficiency. And by this we do not mean actual
consolidation of the two groups for it does not appear that such a move et this
time would be desirable.
In order to get the key men in both the Mar Savings and Victory Fund committees
sware of the situation, we believe that the Secretary should have a meeting with
them in Mashington and outline a program such as WEI have indicated here,
It was the consensus of opinion of our committee that there should be some in-
dividual designated by the Secretary to have full charge of the sale of all
Government securities. This person should have jurisdiction over both the Mar
Savings and Victory Fund organizations, with authority to direct their activi-
ties in every respect and at all times, This 1s believed necessary in order to
coordinate the two groups that their work will be complementary and not antago-
nistic.
We shall be glad to talk to you further about this problem if you desire. We
appreciate the courtesy shown us not only by the Secretary and the Under Secretary
but by the directing heads of both the BET Savings Staff and the Victory Fund
Committee.
Sincerely yours,
/e/ W. L. Hemingway
W. L. Hemingway
President
Regraded Unclassified
128
Analysis of Exposure to Payroll Savings Plans
January 2, 1943
Total number
Number exposed
in the
Percent
to payroll
country
of total
savings plans
(estimated)
exposed
Part A - Summary by Number of Organizations Exposed
I. Business organizations
(1) Firms with 5,000 employees or more
470
473
(2) Firms with 500 to 4,999 employees
99
5,705
5,841
98
(3) Firms with 100 to 499 employees
25,540
28,965
88
(4) Subtotal - large firms
31,715
35,279
90
(5) Firms with less than 100 employees
136,098
*
*
(6) Total Business organizations
167,813
*
#
II. Governmental organizations
+
#
III. Grand total
167,813
*
#
Part B - Summary by Number of Employees Exposed
I. Business organizations
(1) Firms with 5,000 employees or more
8,645,091
#
#
(2) Firms with 500 to 4,999 employees
7,976,317
*
+
(3) Firms with 100 to 499 employees
5,771,051
a
«
(4) Subtotal - large firms
22,392,459
#
«
(5) Firms with less than 100 employees
3,288,589
#
#
(6) Total business organizations
25,681,048
32,900,000
78
II. Governmental organizations
(1) Federal Government
2,376,067
2,800,000
85
(2) State and local governments
1,422,459
2,900,000
49
(3) Total governmental organizations
3,798,526
5,700,000
67
III. Grand total
29,479,574
38,600,000
76
Treasury Department
January 8, 1943
Excludes proprietors, agricultural firm employees, military personnel, employees on WPA or NYA CCC
members, self-employed, casual workers and persons in domestic or service. projects,
. Data not available.
Regraded Unclassified
129
Firms Employing 100 Persons or More Participating in Payroll Savings Plans
(As reported by the War Savings Staff's State Administrators)
January 2, 1943
:
:
Firms employing 100 - 499 persons
Firms employing 500 persons or more
:
:
Total
Number
Percent
:
:
Total
Number
Percent
number
of firms
of total
State
:
number
of firms
of total
of firms
with payroll
with payroll
:
of firms
with payroll
with payroll
(estimated)
savings plans
savings plans
:
:
(estimated)
savings plans
savings plans
:
330
256#
78
Alabama
68
670
99
72
72
100
Arizona
14
14
100
134
97
72
Arkansas
18
18
100
795
727
91
Northern California
132
131
99
1,246
1,124
90
Southern California
158
155
98
142
137
96
Colorado
31
31
100
692
582
P4
Connecticut
165
155
94
63
59 -
94
Delaware
23
230
100
190
177
93
District of Columbia
52
52
100
355
217
61
Florida
49
144
90
418
392*
94
Georgia
126
126+>
100
33
33
100
Idaho
11
11
100
2,182
2,101
96
Illinois
503
498
99
789
708
90
Indiana
165
146
90
214
178
83
Iowa
47
40
85
299
288
96
Kansas
25
25
100
296
242
82
Kentucky
52
50
96
330
300+
91
Louisiana
55
55%
100
168
160
95
Maine
55
55
100
405
350
86
Maryland
111
111
100
1,429
1,207
84
Massachmsetts
336
327
97
1,317
1,021
78
Michigan
287
287
100
440
99
Minneaste
81
B1
100
117
104
89
Mississippi
37
37
100
975
736
75
Missouri
142
140
99
49
49
100
Montana
4
4
100
144
139
97
Nebraska
29
29
100
27
21
78
Nevada
5
5
100
170
149
88
New Hampshire
32
32
100
1,189
994
84
New Jersey
199
198
99
42
41
98
New Mexico
5
5
100
4,257
3,983
94
New York
936
912
97
554
489
88
North Carolina
141
138
98
20
20
100
North Dakota
o
o
2,051
1,764
86
Ohio
505
487
96
325
303=
93
Olrlahoma
56
56*
100
310
295
95
Oregon
55
55
100
2,311
100
Pennsylvania
638
625
2,311
98
352
305
87
Rhode Island
85
78
92
170
158»
93
South Carolina
99
99°
100
26
26
100
South Dakota
5
5
100
517
432
Blu
Tennessee
92
88
96
1,008
7340
73
Texas
125
124#
99
44
EL
100
Utah
10
10
100
74
69
93
Vermont
12
12
100
367
346
94
Virginia
111
111
100
452
370
82
Washington
74
74
100
314
220a
70
West Virginia
:
77
77*
100
680
496
73
Wisconsin
154
154
100
23
23
100
Wyoming
4
14
100
2
20
100
Alaska
3
30
100
52
49
94
Railroads
115
109
95
28,965
25,540
88
Total
6,314
6,175
98
Treasury Department
January 8, 1943
Data are for December 26, insamuch as no January 2, report was received.
Regraded Unclassified
130
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 8,
1943
TO
Secretary Morgenthau
FROM
Mr. Heas 901
Subject: Recent Changes in Prices and Yields of Government
Securities.
During the week ended last night, prices of Govern-
ment securities were strong with advances ranging up to
13/32 in the case of the taxable 2-1/4's of 1952-55. All
sectors of the market participated in the rise except the
shorter-term partially tax-exempt bonds and the 1943
maturities of taxable and tax-exempt notes. Prices of
issues in these categories were generally firm, however.
The regular weekly offering of bills was awarded at
an average rate of 0.357 percent, slightly less than the
average rate of a week ago. Yields of outstanding certifi-
cates either showed no change or declined.
The comparison of present prices and yields with those
prevailing on September 1 in Table II shows that prices of
practically all taxable notes and bonds are currently above
their levels of that date, while prices of most tax-exempt
securities are lower. Yields are generally lower now than
on September 1 except in the case of the longest-term par-
tially tax-exempt issues.
As explained in previous memoranda of this series,
Table III, which compares yields on the basis of the
September 1 pattern of rates -- 1.e. allows for issues
"rolling down" the curve -- gives the best comparison of
the real change in the market since that date. Reference
to the last column of this table will show that the taxable
market is now slightly stronger and the tax-exempt market
slightly weaker than on September 1.
Purchases of Government securities by the Federal Reserve
System totaled 3355 millions during the week. This amount
included $341 millions of bills and $14 millions of partially
tax-exempt issues. Sales aggregated 8381 millions, and con-
sisted of $361 millions of bills, $6 millions of the taxable
2-1/2's of 1967-72 and $14 millions of partially tax-exempt
bonds. Bill maturities totaled another 844 millions so that
the net decrease in the portfolio was $70 millions.
Attachments
Regraded Unclassified
131
Table 1
Price and Yield Changes of United States Securities
December 31, 1942 to January 7, 1943
(Based on ROAD of closing bld and asked quotations)
I
Prices
Tields
Security
:
Dec. 31, 1942
Jan. 7, 1943
:
Change
Dec. 31, 1942
Jan. 7. 1943
:
Change
(Decimals are thirty-seconds)
(Perosnt)
TAXABLE SECURITIES
Bills
Average rate last Issue
,
-
-
.36
.36
.00
Certificates
5/6%
2/1/43
-
-
-
.36
-35
-,01
.65
5/1/43
-
-
-
,52
.58
-.02
7/8
8/1/43
-
.
-
99'
89'
,00
7/5
11/1/43
-
.
-
.78
.78
,00
7/8
12/1/43
-
-
-
.83
.80
-,03
Taxable Notes
3/4%
3/15/43
100.02
100.02
.00
.41
-,02
1/6
9/15/44
99.21
99.26
+.07
.96
.53
-,13
1-1/4
3/15/45
100,04
100.10
+.06
1.19
1,10
-,09
1/4
12/15/45
98.31
99.09
+.10
1,11
1.00
-,11
1
3/15/46
99.03
99.12
*.09
1.29
1.20
-,09
1-1/2 12/15/46
100.01
100.08
+.07
1.49
1.43
-.06
Taxable Bonds
25
3/15/48-50
101.07
101.15
+.08
1.75
1.70
1-3/4
6/15/48
100.07
100.12
+.05
1.71
1,68
-.05
2
6/15/49-51
100.20
100.27
+,07
1.90
1.06
-.04
2
9/15/49-51
100.16
100.23
+.07
1.92
1,69
-,03
2
12/15/49-51
100.14
100.20
+.06
1.93
1.90
--03
2
3/15/50-52
100.10
100.18
+.06
1,95
1,92
-.03
2
12/15/51-55
100.07
100.16
+.09
1.97
1,94
-.03
2-1/2
3/15/52-54
103.20
103.30
+.10
2,07
2.03
-.04
2-1/4
6/15/52-55
101.08
101.21
+.13
2.10
2.06
-,04
2-1/2
3/15/56-58
103.05
103.17
+.12
2.22
2.19
-,03
2-1/2
6/15/62-67
100.06
100.14
+.06
2,49
2.47
-.02
2-1/2
12/15/63-68
100,15
100.18
+.03
2.47
2.47
,00
2-1/2
9/15/67-72
100.24
100.30
+.06
2.46
2.45
-.01
TAX-EXEMPT SECURITIES
Sholly Tax-exempt Notes
1-1/8%
6/15/43
100.11
100.10
-,01
-35
,40
+.05
1
9/15/43
100.15
100.15
.00
.32
,31
-,01
1-1/8
12/15/43
100.24
100.24
.00
+33
.32
-.01
1
3/15/44
100.23
100.24
+.01
.40
.36
-,04
3/4
6/15/44
100.13
100.16
+.03
.47
.40
-,07
1
9/15/44
100.25
100.30
+,02
.48
.44
-,0%
3/4
3/15/45
100.16
100.20
+.04
,52
.46
-.06
Partially Tax-exempt Bonds
3-3/8%
6/15/43-47
101.10
101.08
--02
.42
.49
+.07
3-1/4
10/15/43-45
102.00
102.00
.00
.67
.63
-.04
3-1/4
4/15/44-46
103.06
103.06
.00
-74
-72
-.02
&
12/15/44-54
106.05
106.04
TO"-
.80
.50
.00
2-3/4
9/15/45-47
104.25
104.25
.00
-95
-94
-,01
2-1/2 12/15/45
104.14
104.14
.00
-97
.96
-,01
3-3/4
3/15/46-56
106.17
106.17
.00
1,03
1.02
-.05
6/15/46-48
106,21
106,21
.00
1.03
1.02
-.01
3-1/8
6/15/46-49
107.01
107.01
.00
1.04
1,04
.00
8-1/4
10/15/47-52
113.29
114.00
+.03
1.24
1.22
-.02
2
12/15/47
103.30
104,05
+,07
1.18
1,13
-.05
2-3/4
3/15/48-51
107.06
107.09
+,03
1.31
1.29
-.08
R-1/2
9/15/48
106.14
106.16
+.02
1.32
1,31
-.01
2
18/15/48-50
103.20
+,08
1,36
103.20
1.38
-.04
3-1/8
12/15/49-52
110.11
110.14
4.03
1.55
1.33
-.02
2-1/2
12/15/49-53
2-1/2
105.30
106.04
+.06
1.59
1.56
-.03
9/15/50-58
2-3/4
6/15/51-54
106.10
106.14
*,04
1.82
1,61
-,01
107.30
9/15/51-55
4.06
1,74
108,04
1.71
-.03
110.01
1.75
8-1/4
1,74
12/15/51-53
110.05
+,04
-,01
104.19
104.30
+.11
1.69
1.65
-,04
2
6/15/53-55
B-1/4
6/15/54-56
103.05
103.15
+.10
1.67
1,64
-,03
2-7/8
104.23
105.00
+.09
1,79
1.77
-,02
3/15/55-60
B-3/4
109.02
109.11
4.09
2,03
2.01
-,02
2-3/4
6/15/50-63
108.10
108,18
4,08
2,05
2.03
-,02
108.12
2.11
8-3/4 12/15/60-65
105.20
4.06
2,09
-,02
108.31
109.07
4,08
2.15
2,13
-,02
Treasury Department, Perision of Research and Statistics.
January Tr 1943,
Regraded Unclassified
132
Table II
Price and Yield Changes of United States Securities
September I, 1942 to January 7, 1943
Issues outstanding on both dates only
Based on oren of closing bid end asked cootetions)
1
1
Prices
Yielda
Security
:
Bent. 1, 1942
=+
:
Jan. 7, 1943
1
-
=
1
Change
Sept. 1, 1942
Jan. 7, 1943
Change
(Decimals are thirty-meconds)
(Percent)
TAXABLE SECURITIES
VIID
Averuge rate last IDQUE
-
.
-
47
+36
-101
Nertificates
5/0%
2/1/43
-
-
-
-52
-35
-17
7/4
8/1/43
-
-
-
.76
.68
-.08
Insuble Notes
1/4"
3/15/43
100,03
100.02
-.01
-57
,41
-.16
3/4
9/15/44
99.17
99.28
+.11
.98
-63
-.15
9/4
18/15/45
99.01
99.09
4.06
1.05
1.00
-,05
1
3/15/46
99.05
99.12
+.07
1.24
1.20
-.04
1-1/7
12/15/46
100.05
100.08
+.03
1.46
1.43
-.03
Insable Bonds
7/15/40-50
101.05
101.15
*.10
1.75
1.70
-.08
,
6/15/49-51
100.11
100.27
+,16
1,95
1.86
-.09
9/15/49-51
100.08
100.23
+.15
1.96
1.89
-.07
FY
18/15/49-51
100.06
100.20
+.14
1.97
1.90
-.07
12/15/51-55
100.02
100.16
+.1%
1.99
1.94
-.05
161/2
3/15/52-54
103.23
103.30
+.07
2.07
2.03
-.04
11-1/4 6/15/52-55
101.00
101.21
+.15
2.12
2.06
-.06
1/2
3/15/56-58
103.03
103.17
+.14
2.23
2.19
-.04
1-1/2
6/15/62-67
100.13
100.14
+.01
2,47
2.47
.00
P-1/2
9/15/67-72
101.06
100.30
-.08
2.44
2,45
+.01
TAX-EXEMPT REQURITIES
Bolly Tax-exaunt Notes
1-1/c%
6/15/43
100.20
100.10
-,10
-33
, HO
*,07
L
9/15/43
100.22
100.15
-.07
-33
-31
-.02
1-1/6
12/15/43
100.30
100.24
--06
.39
.32
-.07
1
3/15/44
100.25
100.24
-.01
.49
-36
-.13
1/4
6/15/44
100.14
100.16
*.02
.50
-40
-,10
1
9/15/44
101.01
100.30
-.03
.49
.44
-.05
1/4
3/15/45
100.16
100.20
+.04
.55
-46
-.09
[ertially
Tax-exempt Bonde
1-3/8%
6/15/43-47
102.05
101.08
-1.00
.50
.49
-.01
3-1/4
10/15/43-45
102.28
102.00
-.28
.66
.63
-.03
3-1/4
4/15/44-46
103.28
103.06
-.22
.83
.72
-.11
L
12/15/44-54
106.29
106.04
-.25
.94
.60
-.14
2-7/4
9/15/45-47
105.08
104.25
-,15
-99
.94
-.05
104.14
-.17
.96
.96
.00
2-1/2
12/15/45
104.31
3-3/4
3/15/46-56
109.00
108.17
-.15
1.15
1.02
-.13
6/15/46-48
106.31
106.21
-.10
1.11
1.02
-.09
3-1/8
6/15/46-49
107.01
-.12
1.12
1.04
-.08
107.13
4-1/4
114.28
114.00
-.28
1.24
1.22
-.02
10/15/47-52
2
12/15/47
104.09
104.05
-.04
1.16
1,13
-.03
3/15/48-51
107.10
107.09
to:-
1,37
2-3/4
1.29
-.08
106.16
-.12
1.31
1,31
.00
2-1/2
9/15/48
106.28
2
12/15/46-50
104.06
103.28
-.10
1.30
1,32
*.02
3-1/8
12/15/49-52
110.19
110.14
-.05
1.56
1.53
-.05
2-1/2
12/15/49-53
106.04
-,05
1.56
106.09
1.56
-.02
2-1/2
9/15/50-52
106,20
106.14
-.06
1.62
1.61
-.01
2-3/4
6/25/51-54
106.12
108.04
-106
1.72
1,71
-.01
110.15
110.05
-.10
1.74
9/15/51-55
1.74
.00
2-1/4
-.03
1.66
12/15/51-53
105.01
104.30
1.65
-.01
2
6/15/53-55
103.15
103.15
.00
1,65
1.64
-.01
P-1/4
6/15/54-56
105.13
105.00
-,13
1,74
1.77
4.03
2-7/8
3/15/55-60
109.11
-.23
1.97
110.02
2.01
*.04
2-3/4
9/15/56-59
109.10
105.16
-.24
1.99
2.03
+.04
2-3/4
6/15/50 63
109.15
108.20
-,27
2.05
2.09
4.04
2-3/4
12/15/60-65
110.02
109.07
-.27
2.09
2.13
*104
Treasury Department. Division of Research and Statistics.
January 7, 1943.
Regraded Unclassified
Table III
Yield Changes of Government Securities Relative to September 133 1, 1942 Pattern of Rates
September 1, 1942-Jamary 7. 1943
Issues with 3 months or more to run outstanding on both dates
(Sased on woan of olosing bid and naked quotations)
Estimated
Estimated
Security
Actual yield
Actual yield
as of Sept.1
Change In
change in yield
change in yield
a.e of Jan. 7
actual yield
required to
relative to
maintain Sept.1
Dept. 1
pattern of rates
pattern of rates
TAXABLE SECURITIES
Bills
Average rate last issue
-37
.36
-.01
.00
-.01
Certificates
778%
8/1/43
.76
.68
-.06
-,14
+,06
Taxable Notes
3/4%
9/15/44
.98
.83
-.15
-.08
12/15/45
-.07
3/4
1.05
1,00
-.05
-.07
4.02
1
3/15/46
1.24
1.20
-.04
-.07
+.03
1-1/2
12/15/46
1.46
1.43
-.03
-.06
+.03
Taxable Bonds
2%
3/15/48-50
1.78
1.70
-.08
-,05
-.03
2
6/15/49-51
1.95
1.86
-.09
-,03
-.06
2
9/15/49-51
1,96
1.89
-.07
-.03
-,04
2
12/15/49-51
1.97
1.90
-.07
-,03
-,04
2
12/15/51-55
1.99
1.94
-.05
-.02
-.03
2-1/2
3/15/52-54
2.07
2.03
-.04
-,02
-,02
2-1/4
6/15/52-55
2.12
2.06
-.06
-,02
-.04
2-1/2
3/15/56-58
2.23
2.19
-.04
-,01
-.03
2-1/2
6/15/62-67
2.47
2.47
.00
-,01
+.01
2-1/2
9/15/67-72
2.44
2.45
+.01
-,01
+.02
TAX-EXEMPT SECURITIES
Wholly Tax-exempt Notes
1-1/8%
6/15/43
-33
.40
+.07
-.07
+,14
1
9/15/43
-33
.31
-.02
-,07
+.05
1-1/8
12/15/43
.39
.32
-.07
-.06
-.01
1
3/15/44
.49
.36
-.13
-.05
-.08
3/4
6/15/44
.50
,40
-,10
-.05
-.05
1
9/15/44
.49
,44
-.05
-.04
-.01
3/4
3/15/45
.55
.46
-.09
-.03
-,06
Partially Tax-exempt Bonds
3-3/8%
6/15/43-47
.50
,49
-.01
-.10
+.09
3-1/4
10/15/43-45
.66
.63
-.03
-.09
+,06
3-1/4
4/15/44-46
.83
.72
-.11
-.05
-.03
&
12/15/44-54
.94
.80
-.14
-.07
-.07
2-3/4
9/15/45-47
.99
.94
-.05
-.06
+.01
2-1/2
12/15/45
.96
.96
.00
-,06
+.06
3-3/4
3/15/46-56
1,15
1.02
-,13
-.05
-.08
3
6/15/46-48
1.11
1.02
-.09
-.05
-,04
3-1/8
6/15/46-49
1,12
1.04
-,08
-.05
-.03
4-1/4
10/15/47-52
1,24
1.22
-,02
-.05
4,03
2
12/15/47
1.16
1,13
-,03
-.04
+,01
2-3/4
3/15/48-51
1.37
1.29
-,08
-.04
-.04
2-1/2
9/15/48
1.31
1.31
.00
-.04
*,04
2
12/15/48-50
1.30
1.32
+.02
-.04
*.06
3-1/6
12/15/49-52
1.5m
1.53
-.05
-.03
-.02
2-1/2
12/15/49-53
1,58
1.56
-.02
-.03
+.01
2-1/2
9/15/50-52
1.62
1.61
-.01
-.03
+.02
2-3/4
6/15/51-54
1.7#
1.71
-.01
-.03
+.02
3
9/15/51-55
1.74
1.74
.00
-.03
+.03
2-1/4
12/15/51-53
1.66
1.65
-,01
-.03
+.02
2
6/15/53-55
1.65
1.64
-,01
-.02
+.01
2-1/4
6/15/54-56
1.74
1.77
+.03
-.02
+.05
2-7/8
3/15/55-60
1.97
2.01
+.04
-.02
+.06
2-3/4
9/15/56-59
1.99
2.03
+.0m
-.01
+.05
2-3/4
6/15/58-63
2.05
2.09
+204
-.01
+.05
2-3/4
12/15/60-65
2.09
2,13
+.04
-,01
+.05
Treasury Department, Division of Research and Statistics.
January 7, 1943.
Regraded Unclassified
134
MEMORANDUM FOR THE SECRETARY.
January 8, 1943.
Mail Report
This week saw 8. great up-swing in fan mail, and
the subject of taxes far out-balanced any other. In
the same way, the Viotory Tax dominated this section
of the mail very nearly to the complete exclusion of
general income tax.
There were many specific inquiries which required
factual replies. These letters were more evenly
divided between Victory Tax problems and general income
tax cases. So far as comments went, however, the mail
brought repeated protests against the Victory Tax,
against methods of collection, and against specific
examples of unfairness or apparent discrimination.
The last of the week brought reactions to the
Westbrook Pegler article. There were so many comments
that separate pages are given in the following abstracts
to: Victory Tax Unfavorable, Including Support of Pegler;
and Protests Against Pegler's Statement. Every mail
brought copies of the clipping without any letter or
the name of the sender. There were frequent marginal
notes such as, "The Secretary should read this."; "Shame!"
and so on. Including these anonymous mailings, the
proportion of communications pro-Pegler was easily
10 to 1.
There were 8. number of letters protesting the col-
lection of the Victory Tax on any part of the 1942
salary, forwarded by Senators, Members of Congress, and
the White House.
Scattered through this mail were B. number of pro-
tests from conscientious objectors, plaintive letters
from small businessmen, eto.
There were 20 letters favoring B. pay-as-you-go
plan, about half specifically approving the Ruml Plan.
Regraded Unclassified
135
- 2 -
Memorandum for the Secretary.
January 8, 1943.
Six letters opposed this general idea. There were 51
communications containing questions regarding future
tax measures, and 8. number of miscellaneous suggestions,
both for collection and for modification of the law,
Many taxpayers suggest 8. discount for payment in full
on March 15. The spending tax and excess profits tax
on individuals received scattered endorsements, while
the sales tax is opposed 3 to 1.
The Bond mail brought out no new point of view.
There were a number of warnings that exorbitant taxes
would force the writers to sell their Bonds. 25 Bonds
were submitted for redemption, 4 coming from Patchogue,
New York. Only 3 correspondents reported instances of
excessive cashing of Bonds, 2 of these coming from
Philadelphia. Three letters approved the elimination
of the Bond ownership certificate. A number of persons
reported unintentional overpurchase of Series E Bonds.
In several cases the trouble was brought about by the
receipt of Bonds as Christmas gifts. Bond collecting
has entered 8 new phase as 8. hobby, since B few persons
have written of thar plans to collect Bonds issued in
each of the 48 States.
Complaints reached & new high -- 65 in all. The
War Department still figures in more than 50% of these
"kicks".
In the general mail the subjects of inflation and
Government economy were rarely mentioned. Seven letters
outlined plans for prepayment for post-war purchase of
durable goods. There were scattered protests of charges
for cashing Government checks; the usual lottery letters,
frequent suggestions for penny seals; and many ideas
about new coins.
During December, mail forwarded from the White House
took a decided drop. There were 535 letters sent us,
of which 264 could be taken care of in this Division.
The mail in general reflected the same subjects -- the
Victory Tax, requests for help in securing War Bonds, etc.
The lowest December was that of 1939, with 346 letters,
the highest, the December following Pearl Harbor -- 833.
Gabratte E Fortual
Regraded Unclassified
136
General Comments
A. K. Samelian, Rochester, Minn. This letter is
being addressed to you because I believe you will
comprehend its message better than any other official
I could send it to. When in Robert College I had the
pleasure of hearing your father speak in chapel. As
a little boy, he had impressed me as 8. fine man and
through all these years my opinion of him has not
changed at all. I am an Armenian, born and raised in
Bulgaria. Since 1919 I have lived in the United States.
I became 8. citizen in 1926. I have taught in public
high school three years. I have 8. Masters degree from
Northwestern University, and have had fifteen years of
retailing experience. # # * I have specialized in
Economics and Sociology and have been an ardent student
of politics.
If you need my services, I shall be
glad to hear from you.
Bruno J. Antolini, Rutherford, N.J. I have followed
with great interest your comments recently published
in the newspapers on the question of "Post-War Install-
ment Buying", as suggested by Mr. Nugent. Your objec-
tions to this plan seem to me to be very sound. Because
of these objections, I am taking the liberty of enclosing
herein a copy of & letter addressed to Senator Wagner,
and dated February 11, 1942, -- incidentally, receipt
of this letter has never been acknowledged.
Irving D. Bernstein, N.Y.C. It seems to me that
there is one source of copper not yet touched and that
is the untold quantity of foreign coinage now in
possession of American citizens. This coinage is of
the fractional variety and is seemingly practically
valueless. I know that the few coins in my possession
are of little monetary value. # I would be more than
willing to donate these to our Government for whatever
use could be found for the non-ferrous metals they
contain. In addition, I am certain that thousands of
Regraded Unclassified
137
- 2 -
other citizens would be glad to perform the same
service. *** Many of these foreign coins are triple
the size of our smallest currency value. It is sug-
gested that our Post Offices be used 8,8 the collection
centers, and transmit these coins to the Treasury
Department direct. Though small quantities have
little or no value, the collection of large quantities
should be safeguarded. The Post Offices would seem
to be the logical candidate. # # #
J. A. Hamilton, Mannington, W. Va. Enclosed I am sign-
ing over to you 8. very small check from B. small farmer
in a small community in & small state, not in 8. spirit
of 8. grouch, but I thought it was B. better tire than
that or I would have tossed it upon the village junk-
pile. It would necessitate a 15-mile trip to the bank
to get it cashed, which I cannot afford at this time
of year. (Check for $0.20) I enjoy farming when I can,
but owing to my advanced years, low blood-pressure and
lack of help, I am afraid I shall not be able to B.C-
complish much this year.
Philip E. Hamilton, Attorney-at-Law, Beaver Falls, Pa.
You may not realize it, but it would be much better to
stop the O.P.A. before the O.P.A. stops the U.S.A. At
the rate things are now progressing, it will not be long
now until asinine administrators will have the affairs
of this country in B. state of absolute chaos. Possibly
that is what seems desirable to official Washington.
R. H. Freeman, Cash Economy Wholesale Grocery Company,
McKenzie, Tenn. We have your letter of December 28,
postmarked from Chicago, wanting to know all about our
Bond sales for December. We appreciate the enormous
task you are faced with but, Mr. Morgenthau, you have
no idea the work that is imposed upon us by the various
Governmental Agencies, with all sizes of questionnaires
and inventory information and almost everything else
one can conceive of. We are good Americans and are not
Regraded Unclassified
138
- 3 -
in particular bellyaching, but man alive, if this thing
would be run some way or other without all of these
questionnaires and inquiries, we sure would appreciate
it. We are going to string along, though, and be a
good soldier, and when we do not like our lot, we will
simply have to kick up about it. You have got B. big
job and you have our sympathy, but, for Heaven's sake,
don't ever get the idea that we fellows out in the
field have any gravy train. Understand the Treasury
Department is vital and essential, but looks to us
like a lot of these other Bureaus and Agencies are just
a plain hell of 8 come off. We are good Democrats and
went straight down the line for Franklin D. three times,
so if we had 8. hand in helping him in, we believe that
we have the right of expressing an opinion.
Regraded Unclassified
139
Favorable Comments on Bonds
Mrs. Thomas A. Baggs, Washington, D. C. Ithes occurred
to me that it might not be 8. bad idea to have some kind
of a War Savings Stamp equal to the value of what it
generally takes to finish up a book of stamps to pur-
chase 8. Bond, viz: $2.50. With that lump sum in 8.
stamp, it might make the purchase more immediate. *
Have had my brain at work on the name for the stamp
along the idea of "finisher upper" or "now-a-bond"
neither of which are of course suitable. But maybe one
of your bright advertising young men could think of
something. + Is this not in line with your campaign
to make people finish up their books as announced in
this morning's paper?
Oscar A. Bigler, Long Beach, Calif. It is self-evident
that an income tax must be paid out of the income on
which it is levied. Part of my 1942 income was paid
to me in War Bonds. I therefore plan to pay my 1942
income tax with cash and Bonds, in proportion to the
amount of each which I received as income. Since I
understand that the Bonds will not be acceptable in
payment of income taxes, I will be compelled to convert
the requisite amount of them into cash. # I believe
that most taxpayers would hold their Bonds if they did
not have to report them as income until they were con-
verted into cash. Another way to make the Bonds more
attractive would be to permit the payment of income
taxes in Bonds, in proportion to the extent to which
the taxpayers' incomes had been received in, or con-
verted into, such Bonds. The method used to make the
plan operative could be similar to the one used in the
case of the $25,000 salary limitation. First, Mrs.
Roosevelt would suggest the plan in her "My Day" column.
Mr. Roosevelt would then express his approval of her
judgment by ordering Mr. Byrnes to make it effective
immediately. This would prevent the irritating delay
which might retard constructive action if the plan
were submitted for Congressional debate and approval.
Regraded Unclassified
140
5
Tom. C. Gooch, The Daily Times Herald, Dallas, Tex.
I want to congratulate you on the great success of
your Bond issue. I believe one of the reasons is
that the people have great faith in you and your
organization. # I believe that your understand-
ing of the public mind and your organization, with
men like Guy Helvering and scores of others, is the
answer to your success in a very difficult post.
E. L. Winnett, Beverly Hills, Calif. Somewhere in
your files you should have 8. record that the under-
signed subscribed to purchase & certain amount of
Stamps and Bonds. As one of the Minute Men, I entered
my own subscription, but the purchases are far behind
schedule. # # # Since Pearl Harbor I have spent at
least one day a week on Air Raid duties. # * My
family doesn't hoard and they all saved rubber at the
expense of shoe leather long before the gas rationing
went into effect. # I practice law and devote no
little time to gratuitous advice to men in the armed
forces and defense workers. 4 # For twenty years I
worked in E large machine manufacturing plant, closely
connected with transportation. # # # I entered the plant
as 8. factory helper and left as general manager. This
was five years ago when I decided to return to the law,
which I had given up in order to join the Canadian Army
in 1917. During my years in this plant I worked both
in the office and in the plant itself. I became
familiar with bench work, stockroom organization,
saleamanship, estimating, drawing contracts and speci-
fications, cost accounting and labor contacts and
relations. With the war, my specialized practice of
business law almost ceased to exist. Naturally, I
made application for employment in the many new Govern-
ment Departments. I filled out form after form. In
addition, I have made application for work in various
defense plants; also filling out the usual forms. To
date, every one of these applications have been turned
down. $ # * They all contain the same vital question:
"Have you ever been arrested?" Unfortunately, I am
obliged to say, "Yes". Some years back, during the
Regraded Unclassified
141
- 6 -
height of my prosperity, I managed to be arrested 8.
number of times. The hometown police, most of whom
I knew by their first names, did not hesitate to "tag"
me whenever I set out to paint the town red. # # *
Today I found out for the nth time that another applica-
tion form had been pigeon-holed. Hence, on my small
law practice, I cannot buy Bonds. In the interim I have
acquired another aptitude. I have become a form expert
and am constantly filling out forms for those who, as
they put it, "might as well take a fling at one of these
Government jobs. It can't do any harm". # # # I note
that nearly all of these applicants are successful.
I have not had a drink for El number of years. I hold
an honorary appointment as special coordinator of the
County Inebriate Court. I conduct classes on alcoholism
and have helped innumerable defense workers and Govern-
ment employees of high and low rank to overcome the
liquor habit. I have acquired prestige enough along
this line to be asked to address medical societies. * #
I am sincere in saying that I regret my inability to
meet my pledge, but you may be assured that I consider
that as an obligation to my country which will be ful-
filled at the first opportunity. It is not an exaggera-
tion to say that at the present time, rent and groceries
are B. decided issue in my household.
Regraded Unclassified
- 7 -
142
Unfavorable Comments on Bonds
Quinn Rhoads, Sacramento, Calif. On December 1,
I went to work for Morrison-Knudsen Company, Inc.,
General Contractors, on contract #758, Sierra Ordnance
Depot, Herlong, Calif. On December 12, I was called
into the office, along with other workmen, and told
that I could not work for Morrison-Knudsen "another
minute" unless I bought B. $25 Bond every two weeks.
I was told by a representative of the company that
the Government was behind the "pressure" and Morrison-
Knudsen was forced to discharge those who refused to
buy Bonds, or the company could get no more contracts
from the Government. I refused to buy Bonds under
pressure and was discharged at once. Since your office
is responsible for the sale of War Bonds, it is up to
you to do some explaining. (Morrison-Knudsen address,
P.O. Box 2468, Reno, Nevada.)
Mrs. Betty Knight, Empire Mutual Insurance Company,
Phoenix, Arizona. # # # I am one of the millions who
listened to the exhortation over the radio, in the
press, by word of mouth to Buy Bonds -- Buy Until It
Hurts. And why not? What better investment is there?
And for those of us who are not fortunate enough to
serve our country in E. tangible fashion, by joining
the armed forces, the purchase of Bonds offers 8 way
to do our bit. # # * So I started to save my nickels
and dimes, first through the purchase of Defense Stamps
and then converting them into Victory Bonds. Finally,
few days before Christmas, I had accumulated $18.75
in Stamps and money, and started proudly forth to one
of the local banks. $ # * After standing in line for
at least a half hour, when I finally inched my way to
the cashier's window, I was greeted with the doleful
news -- "We are all out of Bonds. Sorry". ***
I wasn't ready to quit. Surely, I said to myself, the
Post Office, a branch of the United States Government,
will be able to take care of me, but again I was mis-
taken. I was told by the clerk at the Post Office
Regraded Unclassified
143
8 -
that because part of my purchase price consisted of
$5.00 in Defense Stamps, and the remainder in cash,
they could not sell me a Bond. I wended my way back
to my office, sadder and wiser. Then I decided to tell
my story to you in hopes that steps would be taken to
make a recurrence of my frustration impossible.
Miss Cora Campbell, Boulder, Colorado. A month ago
I wrote to the U. S. Treasury, asking how our error
in buying too many Series E Defense Bonds could be
rectified. No answer received, up to this date. Are
there not enough clerks in Washington to answer more
promptly?
David W. Zwibel, McKeesport, Pa. Enclosed is the let-
ter you sent me December 8, 1942. Almost a month has
gone by now and I have heardnothing from the War Bond
Division, War Department. They have not acknowledged
my letter or communicated with me in any way. I am,
of course, more interested in receiving my Bonds than
their communications. Will you please bring my case
to the attention of Mr. Morgenthau, or must I write the
White House?
E. F. Hartley, Manager, The Greenfield Times, Greenfield,
Ohio. We have donated more advertising space to the
war cause than any paper in the State of Ohio, con-
sidering the size of the town. We have backed and
put over every Government drive, and are very proud of
our Bond sales. With E. population of 5,560 in the town-
ship, our sales are hovering around the million dollar
mark. Do we get credit on our income tax report for
these donations? Government agencies have not been
fair to the smaller newspapers. Advertising and public-
ity are very essential to the war effort, and after all,
it is the local papers and homefolks that put over the
various drives in their communities. Due to the limited
number of business houses, and the scarcity of merchandise
local advertising has dropped off 70%. 4b 44 # We are un-
able to get sponsors for Government advertising. It is
Regraded Unclassified
144
- 9 -
true that we have three factories employing approximately
1,500 people, but only one doing war work, and they are
not sponsoring any advertising. The burden has fallen
upon this paper, and 30 far we have done a good job.
Can we continue? We don't know -- paper allotments are
being cut, and we have sent three men to the Army and
due to lose two more key men via the draft within next
few weeks. Replacements cannot be made.
Anonymous (Connecticut), quoting the phrase, "As one
American farmer writing to another", says, There is
only one farmer, and he is the one who depends on his
farm for living and profit. You are not a farmer, Mr.
Morgenthau. You hold 8. high Government, well-paid
position, so don't try to tell someone who really knows
farming the hard way. The United States took both my
sons (draft), and large quantity of my crops of past
season remain in ground, no help to harvest. Looks now
as if I had better do as lots of other farmers are doing,
go to work in a factory. I did not even break at par
past year. My profits and some of costs are still in
the ground -- rather expensive fertilizer."
Edith A. Catlow, Chatham, N.J. There is a rumor abroad
in the land that War Bonds listed in the name of the
purchaser only, cannot be included in one's estate and
passed on to the beneficiary under the will, but will
finally revert to the Government. I suspect that this
is sabotage, as such 8 practice on the part of the Govern-
ment would be decidedly dishonest. Will you kindly write
me to the effect that this rumor is not true? # #
*
Regraded Unclassified
- 10 -
145
Favorable Comments on Taxation
Mrs. Howard H. Welker, Ashland, Wisconsin.
Why
not compel possessors of free railroad transportation
to add the value thereof, when used, to their taxable
income? The travelling many of these people do is
disgraceful, and an imposition on those who have a
legitimate reason for using our overburdened trans-
portation system. For example, one person, employed
in Chicago, takes a train almost every Saturday night,
spends Sunday in northern Wisconsin, and returns in
time for work on Monday morning, and that week-ender
is only one of scores who do likewise. The fare in
that one case is around $20 for the roundtrip. At that
figure, the annual expenditure for 20 trips is $400 at
least (and more than that are made by the employee I
refer to) -- 8. not inconsiderable sum to be added to
the taxable income if that could be done. Railroad
employees bitterly resent any suggestion that they are
no more entitled to free rides than a clerk is entitled
to free groceries from his employer's shelves, or 8.
hoister on the dock to free coal. They insist that
their free transportation is a part of the "wage" which
they earn. So be it! That merely proves my point.
The travelling they are doing without paying fares is
a thing of value, according to the mileage covered.
Why should not such fare be computed and added to the
wage-receipts and taxed as any other income earned?
The tax thus derived by the Government would be quite
8. sizeable one, and I'll venture the guess that much
congestion on the railroads would be relieved were such
a ruling promulgated. ###
E. E. Buchanan, Jr., Elmira, N. Y. I want to compliment
you for eliminating Form 1000, Ownership Certificate.
It is 8. pleasure to see action and not talk. It is a
patriotic duty to cut red tape -- please keep the good
work up -- don't stop here.
Regraded Unclassified
- 11 -
146
Unfavorable Comments on Taxation
C. W. Martin, Greencastle, Ind. I travel con-
siderably and during the last three weeks have had
an opportunity to get a fair cross-section of the
United States East of the Mississippi, and the im-
pression I gain of the Treasury's certain difficulty
in collecting the money to which the new income tax
law entitles it, makes me sick. A vast number of
people who are fairly well informed, and know what
the law is, have no intention of filing 8. return, on
the fairly sound theory that you can't put everybody
in jail. Another large body of people who have B. right
to pay income tax under the new law are entirely igno-
rant of its provisions, have no record of their income,
and have no way of raising the money to pay the tax,
even if they knew the amount. I am 8. Republican, and
would not be averse to seeing this Administration
embarrassed, but on no account would I see it embar-
rassed at any cost to the Country, and though I have
ample income tax notes, and to spare, to pay my own
taxes due in 1943, I am morally certain that your
financial house of cards is going to come down around
your ears unless you can prevail upon Congress to im-
mediately enact some form of legislation that will
collect the money you have & right to, before it gets
into the hands of the taxpayer himself.
William Ernest Hocking, Professor of Philosophy,
Harvard University. The mounting income taxes are
being met for the most part by people of mounting in-
comes.
*** There is, however, 8. class of people whose
incomes are not mounting, and that class deserves 8
moment of your thought. I am referring to the class
of teachers, scholars, religious leaders, to some ex-
tent artists -- in general, those who have given their
lives to intellectual or artistic pursuits with the
prospect of B. bare living in ordinary times. It is
their satisfaction to constitute a good part of the
flame of a civilization while they are active, and to
transmit the spark of genius to the young. When they
are hit either by inflation or extraordinary taxes,
they have no defense. # # # Some of them, especially
Regraded Unclassified
147
- 12 -
those about to retire, will face an old age of actual
physical hardship. # # There is no reason, however,
why some one of them should not call attention to their
plight, and raise with the administration the question
whether it wishes the operation of 8. just general rule
to bear so hard upon this class of public servant.
Winfield L. Shaw, Bradford Farm, New Boston, New Hampshire.
About three years ago I took the liberty of writing you
to express the hope that the Treasury would try to avoid
"heads I win, tails you lose" characteristics in its
tax legislation. At that time, I was concerned at the
trend widened in the Capital Gains and Loss Sections.
Now I am writing you again in an effort to help by re-
porting what seems & rather violent protest. You do
not know of my past record as one of the earlier Labor
managers in America, but I could show you evidence that
I have been B. pioneer in much of what the New Deal stands
for. * # % I have just spent a week in Boston, have
talked with many business leaders and men and women in
various walks of life. # It was the unanimous opinion
that the sections of the 1943 tax law relating to trusts,
trustees, powers of appointment, were very badly drawn.
There was utter confusion everywhere. No one could say
whether Congress or the Treasury should be blamed for
the unfairness of this legislation. * + # However, every
one felt that even if Congress had drawn the law they
had probably worked under the guidance of inexperienced
lawyers from the Treasury Department. + +> # Trusts and
trusteeships are inherently long term -- run back for
many years -- were often drafted in best of faith -- for
purposes which even a radical would consider praise-
worthy. # # I found the best and most progressive
legal firms frankly telling clients the law, as written,
was badly drafted -- evidently by persons with little
experience in trusts and trust law -- hence, lawyers
frankly unable to interpret new law or its application,
unable to secure help from the Treasury. Clients angry
and jittery -- protesting advice to delay, pending
clarification. Trustees resigning right and left.
Lawyers admitting it unwise for any one to accept
trusteeships. the # One woman, aged 58, after being
forced to resign as a possible future co-trustee with
Regraded Unclassified
148
- 13 -
Trust Company, and after learning that her entire
estate might be wiped out at her death by two trustee-
ships # + said, If the new deal wants to create a
socialistic economy, I don't object to trying it out.
But why upset all the plans of our generation for
Social Security under a different system -- and made in
good faith. This legislation should have been drawn
to cover trusts created after January 1, 1943". ***
A. B. Guthrie, Jr., President, Lexington Public Forum,
Lexington, Ky., in sending copy of letter to the
Kentucky Internal Revenue Office, explaining that he
cannot separate records of two months, because of form
in which turned over to him, says: I am enclosing a
copy of G. letter sent to me by the Kentucky Internal
Revenue Office, together with my reply to it. No further
recital of the circumstances seems necessary, since the
letters are self-explanatory. I do want to say, though,
that this senseless insistence on red tape and the high-
and-mighty attitude, herein reflected, of public servant
toward the public must be offensive to all good Americans.
Fred E. Moore, Jr., First Vice President, Lenape Pressing
and Forging Company, West Chester, Pa. During 1942 we
were one of the many defense plants who said, "Let's
win the War and stop talking about tax reserves". We
took this attitude because the Army, the Navy, the Mari-
time Commission, Lend Lease, and other Government Agencies
pleaded with us for greater and still greater production.
But greater production meant more square feet of factory
space and more machines. # # Well, the increases in
floor space and the machines took the lion's share of
profits and the money that we should have set aside for
tax payments. Please, do not think that we regret our
actions. We feel proud of our accomplishments, but
what bothers us now is how to pay the taxes. If & "pay-
as-you-go" plan is to be incorporated, we simply couldn't
stay in business and pay two years' taxes in one. In
fact, we'll be down to pork and beans to pay the 1942
taxes. Isn't there some way to help the defense plants
that gave their all for Victory? Why not let us
Regraded Unclassified
149
- 14 -
figure out our 1942 tax bill and if we are a defense
plant, deduct the ratio between plant improvements
and total profit? For example, if we made $100,000
profit and our improvements were $100,000, there would
be no tax to pay. If our improvements were only
$25,000, we would have a 25% tax deduction, etc. This
would have theeffect of helping those who helped Uncle
Sam, and it would help all companies in proportion to
their all-out War effort. The concerns that sat tight
and ignored the pleas for greater production would
be without tax relief. * * *
Regraded Unclassified
150
- 15 -
Unfavorable Comments on Victory Tax,
Including Letters Agreeing With Westbrook Pegler.
Walter W. Baese, West Allis, Wisconsin. The attached
article by westbrook Pegler expresses my thoughts far
more clearly than I could say them myself. If you have
not already read this article, would you kindly read
same, and tell me if this is Democracy at its best,
and if it is, is it worth fighting for? The return to
the Treasury from this petty larceny will be peanuts
compared to the loss of respect and the tendency to
recoup the steal by means fair or foul in future tax
returns. I would greatly appreciate an explanation
of the difference in principle of Hitler's methods of
confiscation and your arbitrary ruling. I presume in
times like this, that it is necessary for me to add that
I am an American citizen, which in a way, gives me the
somewhat doubtful privilege of asking embarrassing
questions from public officials.
H. L. Adler, Fresno, Calif. I have been studying the
provisions of the new Victory Tax law. *** I am amazed
that you are making the same mistake in regard to those
remittances as you did in connection with the Social
Security Act -- that is, employers to remit only quarterly.
With several thousand small firms closing monthly (and
several hundred thousand scheduled to, by July 1 next --
the Government's own estimate) you people have not con-
sidered how many of those never will remit the deductions
they forced their employees to submit to. You will lose
all such, and the fault will lie in Washington. ***
So long 8.8 each employer deducts these amounts each
week, or each two weeks, he should also be compelled to
remit promptly at the end of each such period. ***
Every such employer, knowing in advance that he must
close within a short time, will pay on his most pressing
obligations with whatever funds he has available, and if
the Victory funds happen to be the only ones at the im-
mediate moment, he will use them, and, at the end of
that quarter, you will be "out of luck", and wholly to
blame. ***
Regraded Unclassified
- 16 -
151
Justus A. Deahl, Route 4, Tunnelton, W. Va. According
to this evening's broadcast by Lowell Thomas, the 5%
Victory Tax is to be taken from all payments of money
received in January - even though some twenty million
laborers in this country are taken advantage of. You
realize that all laborers are paid twice monthly and
that all money they earned since December 15th will be
taxed 5% above the twelve dollars per week. Surely
Congress never intended this procedure. The masses of
us understand that we will have to pay the Victory Tax
on all money earned after December 31, 1942. # *
George Kimble, Jamaica, N. Y. # # It would seem that
any pay received after December 31, 1942, would be sub-
ject to 5% Victory Tax, *gardless as to when, or for
how long & period of time this was payment for.
Now, I happen to receive a pay check on or about January
15, 1943, for the whole month of work of December, 1942.
Why must I pay for one whole month which is not assessed
to those on 8. weekly pay schedule? the I do not be-
lieve that there are any persons who object to paying
B. tax, but they all insist on fair treatment. We are
asked, and justly so, to buy Bonds, conserve, pay taxes,
donate and sacrifice, and work long hours, but we insist
on fair treatment.
A. W. Peterson, Comptroller, University of Wisconsin,
Madison, Wis. I take the liberty of writing to you in
the absence of President C. A. Dykstra, who would want
you to know personally about the confusion that has been
created by the ruling of the Treasury Department regard-
ing the collection of the new Victory Tax on salaries
earned in December, 1942, but not paid until January,
1943. # # Practically all State of Wisconsin employees,
except those employed at the University, will have re-
ceived their December salaries prior to January 1, 1943.
University employees receive their checks after the
first of each month only because the mechanics of pro-
cessing payrolls make it impossible for the State
Treasury to issue all State checks before the end of
the month. If the Victory Tax is collected from one
Regraded Unclassified
152
- 17 -
group of employees on December earnings and not from
others, only because the mechanics of processing pay-
rolls happens to delay the delivery of checks, there
is obvious unfair discrimination. ***
The following comments are from a copy of a letter ad-
dressed to Congressmen Leonard W. Hall by the West
Hempstead Civic and Taxpayers Association, Franklin
Square, Long Island: In view of the proposal of
Secretary Morgenthau to undertake to collect, at the
source as provided by law, the 5% tax on all wages
earned during the closing days of the present year,
if not actually paid until after December 31, we are
today writing the Treasury Department to condemn this
arbitrary interpretation of this law, and we hope the
Congress will act at once to stop Mr. Morgenthau in
his tracks. # *
Herman Heintz, North Tonawanda, N.Y. I had served 36
years with this city, Police Department, retiring in
1938 with a pension of $990 per year. This so-called
Victory Tax of 5% is grossly unjust in my case, and
hundreds of other retired police officers in this state.
We are only receiving one-half of our former salary,
and our part of this Victory Tax should be only one-
half of the 5%. During our last period of depression
myself and others of our Police Department were forced
to contribute back to our City Welfare Department, 15%
to help those that were unemployed and on relief in our
city. Today, men that were on city relief are drawing
from $70 to $90 per week. To those men the Victory Tax
is deemed 6. just tax, but for retired members, especially
police of ficers whose sworn duty always was to enforce
City, State and Federal laws, the 5% is unjust -- it
should be only 21%.
Regraded Unclassified
153
- 18 -
John H. Levering, Philadelphia, Pa. *** I reside in
Philadelphia and am 8. Pharmacist, doing a day's work
in different stores. Some of the stores are located
in Philadelphia, but to complicate matters, the other
stores where I work are located in Camden, N.J. - -
another Revenue District. The pay I receive is less
than $12 in any one store, but the total amount is
more than $12 per week. Where shall the Victory Tax
be paid? When shall the Victory Tax be paid? Then
once in awhile it is true for just one week, the total
amount in one store may be more than $12. No doubt
each Collector will rule differently. May I have 8.
definite ruling that will settle all difficulties that
are bound to arize? My thought is for me to pay the
Victory Tax myself, monthly, between the 1st and 10th,
at the Philadelphia, Pa., Post Office. Let the New
Jersey Collector of Revenue Keep Out. % #
A. S. Hedigler, San Anselmo, Calif. The ruling on
1943 tax assessments on December, 1942, wages paid
after December 31, is a wholly unwarranted and aggra-
vating imposition on both taxpayers and collection
agencies. I am expressing this opinion to our Senstors.
Rembert Gilman Smith, Tulsa, Okla. Re: Westbrook
Pegler. You should do one of three things: 1. Prosecute
Pegler and the papers that carried this article for
libel, and prove the falsity of his charge. Privilege
to criticize public officials does not include the right
to call them thieves if they are not. 2. Return to all
taxpayers the amounts they paid on earnings in 1942, the
law applying only to earnings beginning on January 1,
1943. 3. Resign your office. # # It gives me great
grief, and anxiety for my children and my grandchildren,
to witness the moral sabotage now being perpetrated by
officers of the present Administration.
Regraded Unclassified
- 19 -
154
Letters Attacking Westbrook Pegler
Copy of letter addressed to Westbrook Pegler by Nathan
Burn, Brotherhood of Railway end Steamship Clerks,
Jersey City, N. J. -- Before you turned from an anti-
Axis to an anti-Administration fighter, I used to enjoy
reading your columns. Then you found it profitable
and enjoyable to become a leading Tory, and 80 you have
used your talents to vilify, magnify out of proportion,
and to distort the truth so as to destroy confidence
in our leaders and institutions. Your column of Jan. 2
is an example. At 8. time when people must be educated
to the need for sacrifices, you call the Victory Tax
8 plain case of larceny, because of a fancied error of
judgment on part of the Treasury Department in taxing
wages earned in 1942, but payable in 1943. Speaking
from my own knowledge of the application of this tax,
wages earned in the second half of December, 1942,
which are payable on January 11, 1943, will not be sub-
ject to the Victory Tax. # # * I suggest that you cease
sniping at the United States Government and declare war
on the Axis instead.
Harry Geballe, San Francisco, Calif. I take the liberty
of enclosing an article by columnist Westbrook Pegler.
# * As 8. self-respecting citizen of this Republic,
and a supporter of its Government, I trust I am safe
in assuming that neither you nor your Department will
allow such assertions to go unchallenged. I would deem
it a distinct favor if I could be advised of what action
is taken. With my best wishes for the coming year and
assurances of my highest regard.
W. L. Hand, President, Hand Products, Pell Lake, Wis.
Will you please tell me how it is possible for 8. man to
sign his name to an article such 8.8 the enclosed, at B.
time when the rest of the people all over the country
are doing everything possible to try and keep our people
Regraded Unclassified
155
- 20 -
united? # # * Why is the not just as much of a saboteur
as some of the ones being prosecuted for less? # # #
If we have done wrong in taking this 5% Victory Tax the
last week or so of 1942, let's show some reason why we
have done it, if we are within our rights. Let's
prosecute Pegler at once. Why do we have to stand for
him causing so much idle talk? # * * Our F.B.I. certainly
does not have to go very far in this case to find 8. man
that scorns our Government. In all my life, this is the
first time I have ever read anything in the daily press
that was as brazen as this article. * * If I were in
any city in the United States and heard a man make a re-
mark like this, I would at once call the F.B.I. head-
quarters and report him; at that, only one would hear it.
However, this man makes it and probably seventy-five
million people read it and believe me, it hurts. #
#
Let's don't let him call our Government thieves when our
soldiers, sailors and marines, and our citizens are all
living in the best country on earth and we all seem to
enjoy it, except him.
Regraded Unclassified
156
JAN 8 - 1943
Dear Dr. Kung:
I would like to express BY appreciation for
the kind invitation to visit China contained in
your letter of November 11, 1942. I am looking
forward to the time when a decrease in the pres-
sure of duties and activities permitsme to visit
your country, in which I have always been deeply
interested.
with regard to your request for suggestions
which would better your efforts to maintain the
soundness of your finances, the Treasury is
prepared, as in the past, to cooperate fully
with your Ministry.
As you know, the Treasury has been confer-
ring with Mr. Hsi Te-mou on matters which you
have raised.
with best wishes for the New Year.
Yours sincerely,
(Signed) H. Morgenthan. Jr.
Secretary of the Treasury.
Dr. H. H. Kung,
Minister of Finance,
Chungking, China.
287 HDW
ISP/efs
1/5/43
FILE COPY
Regraded Unclassified
157
MINISTRY OF FINANCE.
NATIONAL GOVERNMENT.
CHINA.
PERSONAL
Chungking,
November 11, 1942.
The Honorable Henry Morgenthau, Jr.,
Secretary of the U.S. Treasury,
Washington, D.C., U. S. A.
Dear Mr. Secretary,
It has been a pleasure for me to re-
oeive your personal letters on various convenient
occasions and I wish to thank you for your thought-
fulness.
I read the news with interest that
you had made a trip to England recently in con-
nection with Allied war efforts. I am wondering
when it will be our good fortune to have you
visit China, as you know it takes but a few days
by plane to get here from America. Should you
decide to have a little change of air or a person-
al investigation of the conditions here, I need
not tell you how warmly you will be received by
us.
We are appreciative of the sympathetic
and generous assistance you have given to China.
I shall welcome any advice or suggestions which
Regraded Unclassified
158
MINISTRY OF FINANCE.
NATIONAL GOVERNMENT.
CHINA.
- 2 -
The Honorable Henry Morgenthau, Jr.
you think will further better our efforts to
maintain the soundness of our finances.
I am taking this opportunity to men-
tion to you that Mr. Hsi Te-mou, who is now in
Washington, is & representative of both the
Ministry of Finance and the Central Bank of
China. I hope you will make use of his services
because he is familiar with the present economic
and financial conditions in China.
With best regards.
Yours sincerely,
E. H. Kun
BECEIARD
Insured Thesent
S.S. 2030
to actività
dossess Я
Regraded Unclassified
159
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 9
Information received up to 7 A.M., 8th January, 1943.
1. MILITARY
TUNISIA. 6th. Enemy counter attacks forced British units to
withdraw to their former positions from the ground above JEFNA and from other
positions on high ground west of MATEUR which had been captured on the 5th.
RUSSIA. In the Middle and Lower DCN Sector the German forces
contained in the salient in the great DON Send are being increasingly threatened
by Russian advance on their Northern flank near MOROZOVSKAYA which has reached
n point on the reilway 15 miles further westwards and on their Southern flank by
an advance about 40 miles westward of TSIMLYANSKAYA. An early withdrawal of these
forces is therefore probable.
2. AIR OPERATIONS
WESTERN FRONT. 7th/8th. 22 bombers were sent to ESSEN. Landing
reports not yet received.
FRENCH NORTH AFRICA 5th. 10 JU 88's bombed an airfield at
YOUKS LES BAINS. Some petrol and stores were destroyed. 5th/6th. Liberators
hombed the harbours at TONIS and SOUSSE. 6th. Escorted U.S. Bostons and Marauders
made three attacks on a military camp and ruilway yards at KAIROUAN. Hurricane
bombers effectively attacked gun batteries near MATEUR. At night Wellingtons
bombed and started large fires at SOUSSE.
SICILY. 7th. Spitfires successfully bombed the Licata Sulphur
Factory. Factory buildings, a railway and other buildings were hit.
LIBYA. 6th. 3 out of 30 M.E. 109's which attacked & landing
ground near TAMET were destroyed by anti-aircraft fire.
Regraded Unclassified
PESTRICTED
Sinveu of Intelligence
160
OFFICE CF WAE INFORMATION
M-2/09
Bullstin of Intelligence Projects
Number: =
201
Fortnight - January 8, 1943
Studies completed December 24 - January A
Subject
Dascription
1. Report from the Nation (Confidential)
A summary of findings of people's
reactions to all phases of the war
sinus Pearl Harbor,
2. The Public Looks at Manpower
A nationwide survey of public re-
Problems, (Confidentiel)
actione to the manpower problem,
covering attitudes toward labor
obortages, employment of woman and
aliens in var production Indus-
tries, government control In vital
areas, and the general conception
of the U. S, public ae to the
problema involved in effective pros
ocution of this phase of the WAP --
their satisfaction with or oriti-
clam of the present system.
3. Was Information and the Changing
A study of changes in attitudes
Outlook toward Russia and
*oward Russia and England with re-
England. (Confidential)
lation to their knowledge About 18
var and in terms of the changing
tide of events during the past sey
eral months.
4, Public Opinion After Two Weeks
A measure of the change in attitude
of Nationwide Gasoline Bationing.
of people after initiation of the
nationwide mileage rationing pro-
gram to discover the degree of
acceptance of 1+, with specialized
interviews in critical areas where
there had been considerable opposi
tion before its institution. (Re-
ported in Intelligence Report #561
5. Manpower Stabilization Agreement
A survey of labor attitudes toward
in Detroit. (Confidential)
the new stabilization agreement
established in Detroit. (Reported
in Intelligence Report #56)
X-8461
Regraded Unclassified
161
2-
5 -
M-2620
6. An Experiment in Protecting.
A description of the techniques used
studing Hearing Completion (Cont'&)
in developing e set of Instructions
(Confidential)
TOP Mar Ration Book No. 2 ta meet
3. An Investigation of the dogree TO which the public Teela surfeited with
the problem of obtaining maxima
war-related radio program.
public understanding.
4. A trend report on related attitures toward the var,
5, à andy designed to hring up to date previous information on public obstacles
is numbers of Division's Invelli-
Compilation of people's reactions to
to the ecoeptance of the mileare rationing program.
Interials on Food Retion-
the whole problem of food rationing,
6, Prport on public reactions to the food retioning program.
ins. (Confidential)
their satisfaction or dissatiafaction
7. Baport on American attitudes about the United Rations.
with ito present handling, their
a. Report DE public reactions to the Provident's address to Congress.
general acceptance of the plan, (Po.
1. Proor resetion and treatment of the Vice Prepident's recent appeches, of the
ported In Infelligence Report 1961
Provident' press conference on post-var plans, of the President's address to
18, Navagepor Comment on casoline
Analysis of preas treatment of the
10, Report Congress, from floid representatives on resctions in STAAB to the
its clarelant, Detwort,
subject of gacoline rationing in for
Prevident's ageech.
Indianapolis, St, Louis (Com
specific areas with a yiew to compan-
11. An analysis of the efficacy of the redio program, beand en the
ing remotions in two cities where
sunitoring of Philadelabie radio stations,
opposition to the program visa strong
yo, two otties where there vale general
acceptance. (Reported in Intelligence
Continuing Services
Espart (56.)
% Intelligence Report (weekly - Confidential)
1. Editorial Reaction to Cocoline
Media analysis of reactions to the
2, Weekly Media Report. (Reatricted)
Rationing fred Delinber 1 to
whole program of graoline rationing
5. United Nations Intelligence Dignot (weekly - Confidential)
December 15. (Coufidential)
during title period. (Reported in
** United States Statements (verily For Administration the
Intelligence Report W55)
2. Summary and Atalysis of Feature Motion Pictures (verily - Reatricted)
5. Rewaredle and CWI Compulate und Programs (Monthly - Rectricted)
10, Confidence in "Washington"
An analysis of the nature ané extent
(Confidentlal)
of criticism directed en the Covern-
smill conduct of domontic affuire to
determine the degree to which dis-
constitutes general
Requeste for thene reporto should be mile in writing to Mied V, L.
distructs
Station, Room 5427, Social Security Building, or last toleghone to
extraction 71248 [Nations] War Agencies). Where ngtza copied are
/ collection of recent runora ob the
not available, the mater file copiès my be referred to within
ii, HUMBER on Manpower. (Confi-
current manpower problem, the short-
the central offices, Bureou of Intelligence, Bose 5427.
dental)
agrin which and attiltudes toward
1% handling.
12. Participation in the
A atudy of people to buying habita in
Program. (Confinantial)
commention with the War-Savings Prom
exam, their reacona for purchase of
VISI bonda and stampe, the antivations
behind their purchases, along with
etudy of the untapped potential
for promulgation of future
Studies Nearing Completion
1. A. report. un the shipbuilding Industry, dauling with labor attitudes and
2. A study on public understanding of the Government's anti-inflation program.
the causen of absentraism.
x-8461
%-8461
Regraded Unclassified
162
1.8.43
INTELLIGENCE REPORT 57
INTERNATIONAL III \ 5 A OF A A THE 3 N a $ V 1
% I W 1 1 $
OFFICE OF
WAR INFORMATION
BUREAUOF
INTELLIGENCE
COPY No.
7
Henry Morgenthau, Jr
Regraded Unclassified
CONTENTS
Page
EDITORIAL ATTITUDES
I
Prescription for Congress
I
White Paper
3
Prophecies
:
3
POPULAR REACTIONS
4
Size of The Army
4
Man power Mobilization
5
Prime Problem
7
DEVELOPING SITUATIONS
8
Enforcement of Nationwide Mileage Rationing
8
The Fuel 011 Program in Operation
9
Regraded Inclassified
EDITORIAL ATTITUDES
PRESCRIPTION FOR CONGRESS
Editors have become somewhat uneasy about the Intentions of the new
Congress they helped to elect, They want the Legislature, rather than
the Executive, at the helm of the ship of state. But they do not want
to see the ship wrecked again on the rocks of Isolationism.
As members of the 78th Congress gathered at Washington, news pages
blossomed with think-pleces predicting that a coalltion of Republicans
and conservative southern Democrats would wrest control of national
affairs from President Roosevelt. Congressional Investigations of New
Deal programs and policies were forecast. Leading New Dealers, It was
prophesled, would be called up on the congressional carpet,
within limits, this sort of heckling seems entirely agreeable to the
press. Many newspapers reasoned, as did the Kansas City Star, that "This
new Congress is going to Washington with the opportunity and duty of re-
establishing a badly disturbed balance in national government. It will
have the opportunity of re-establishing popular respect for the legis-
lative branch of that government."
The phases of Government policy which commentators most frequently pre-
scribed for congressional action were fiscal affairs and regulation of
labor. The press, during the last week, vehemently renewed Its demand
for modified taxation. The Ruml plan, or some variation on the pay-as-
A summary of investigation and analysis
you-go theme, came in for a fresh round of applause.
conducted for certain OWI officials, is-
sued for OW I and the interest of other
Governmental expenditures and the size of the federal bureaucracy were
members of the Government.
set forth by numérous commentators as fit subjects for congressional
pruning. Senator Byrd's strictures on extravagance were roundly en-
The period covered by this report is the
week of December31 through January6, ex-
dorsed. The press looks forward rather gleefully to a stringent con-
ceptwhere otherwise specifically stated.
gressional audit of all Government outlays.
- -
Regraded Unclassified
Much aditorial comment also urged a congressional crsck-down on labor
WHITE PAPER
and a general overthrow of the Administration's "pro-labor" policy.
The State Department's White Paper was received with a puzzled shak-
The Cleveland Plain Dealer charged that the Administration has "held
Ing of editorial heads, Almost all commentators agreed that It made
out consistently against any legislation restricting the rights of
the Pearl Harbor disaster seem more mysterlous than ever, As the
organized labor... and despite the lip service It has paid to over-all
Christian Science Monitor put 11, "The White Paper does not explain
wage cellings Its agencies find excuses almost dally for authorizing
Pearl Harbor, If anything, It makes that disaster less comprehensible,
wage Increases."
especially for Americans who supposed that their leaders did not cal-
There was some fear, however, this the new Congress might go too far
culate on a Japanese attack so far from Japanese bases and At so
along these desired lines. The Scripps-Howard papers declared: "Some
strong B point as Pearl Harbor."
members will seek not merely to correct the errors and excesses of an
There was some division of opinion among the commentators over the
executive branch too long and too strongly dominant, but to deprive
extent to which the White Paper vindicated State Department policy.
the President of necessary powers. Others will want not morely to
Some felt that the document proved that our diplomats had adequately
correct the errors and excesses of organized labor, but to hametring
warned our soldiers. Others argued, on the other hand, that It re-
unions; to destroy price controls and risk disastrous Inflation In the
vaaled only a clumsy Inability to understand the plain Implications
name of helping the farmer; to make political capital out of public
of Axis behavior. Almost all were perplexed by American unprepared-
dissatlsfaction with flaws In the administration of essential ration-
ness In the face of such abundant information about enemy Intentions,
Ing programs; to encourage public resistance to necessary sacrifices."
PROPHECIES
There was even greater fear that the Congress might not confine Its
opposition to the domestic domain. Warning against congressional
Commentators were Inclined to chide Admiral Halsey for tempting fate
abridgement of the reclprocal trade agreements program, the Baltlmore
by the outright prediction of victory In 1943 which he made last week.
Sun pointed out that "We shall have need for instrumentalitles of this
The Baltimore Sun observed, "All sorts of people have been making all
kind in the post-war world, for when hostilities cease and the work of
sorts of predictions ever since the war began, Now and then one la
reconstruction begins, It will be necessary to provide for the full-
justified by the event; but the characteristic feature of prophecy In
est possible exchange of goods and services between the nations."
general, with regard to this war, has been Its prevelling Insccuracy."
Considerable apprehension was aroused by rumors that "isplationIsts"
The prevailing judgment was that the American public lacks the stamina'
In the new Congress might attempt to overthrow the President's lend-
to withstand good news. As the St. Louis Post-Dispatch put it, "With
lease powers, which expire In June, "Lend-lease," warned the Phila-
many citizens, such words will Inevitably have an affect just the op-
delphia Record, "Is one of the major weapons counted upon to fortify
posite of that on the distant fighting men, eager to get back to their
the peace, AS well as win the war."
homes, These confused citizens will ask themselves why, ++ the war
will be won so soon, must they deprive themselves of things they have
The prevailing feeling among editorial commentators appears to be a
always had - why rationing, why discomforts, why war bonds, why the
dealre to have the President checked but not to have him checkmated.
Victory tax. The entire war effort can be seriously jeopardized and
Regraded Unclassified
the war Itself prolonged if any such attitude becomes widespread."
Interviewing of a national sample In late October and early November
But though they decried official optimism as a tonic for the public,
within a fortnight after atatements by Secretary Stlmson and General
the commentators were patently optimistic themselves, They listened
Marshall outlining the Army's present and projected size,
to the recent speeches by Germany's Hitler and Japan's Tojo and Found
them, on the whole, very good for our side, Edwin L. James, writing
The size of the Army on October 14, as announced by Secretary Stimson,
in the New York Times, sald of Hitter that "his bombastic declaration
was 4,250,000. Only about one-fifth of the public was able to esti-
of Friday was entirely lacking In algnity; It is an allbi, followed by
mate Its numbers with any accuracy. Two-flfths were unwilling to
a feable promise of eventual victory made at a time when the Russlan
hazard even a guess.
armles were Inflicting a heavy defeat on his armles In the East and
ABOUT HOW MANY MEN DO YOU THINK THERE ARE IN OUR
while an African second front was growing In power and potentiality."
ARMY NOW? JUST YOUR BEST GUESS.
General Toja's address was treated somewhat more cautlously. Commenta-
Less than 3,000,000
10%
3,000,000 to less than 4,000,000
19
tors took up the General's assertion that the "real war Is starting
4,000,000 to 4,250,000
13
Over 4,250,000 and less than 5,000,000
e
from now on." Some sald this Indicated that the Japanese would hance-
5,000, and over
17
Don't know
42
forth be on the defensive. Such Interpretations were frequently AC-
companied, however, by cautions similar to that expressed In the
There was equal uncertainty concerning the projected size of the Army
Loulsville Courler Journal: "The Japa will not surrender they must
for 1943. Secretary Stlmson had announced a figure of 7,500.000 to
be exterminated There Is little reason for the hopeful vlaw that
be reached by the end of the year. One-flfth of the people Inter-
the end of the confilct is in sight, It has hardly begun."
viewed anticlpated an Army of 10,000,000 or more. And, again, nearly
Although most newspapers expected 1943 to be a year of allled offen-
two-flfths were unable to offer any estimate.
alvas and seemed extremely hopeful about their outcome, they were
FROM WHAT YOU HAVE HEARD, ABOUT HOW LARGE AN ARMY
WOULD YOU SAY WE ARE NOW PLANNING TO BUILD BY THE
careful to avoid predicting victory within the year's apan, They
END OF 19437
conscientiously cautioned their readers against overconfidence,
Less than 7,000.000
11%
while themselves exuding It In almost every paragraph.
7,000,000 to less than 7,500,000
13
7,500,000 to less than 8,000,000
12
8,000,000 to less than 10,000,000
8
10,000,000 and over
19
Don't know
37
POPULAR REACTIONS
MANPOWER MOBILIZATION
SIZE OF THE ARMY
The public appears to be thinking In terms of a large Army, but It Is
even more keenly aware of the need for maintaining a labor force ade-
The public, as A whole, is not well informed either as to the current
quate to America's role as the "arsenal of democracy." As previous-
size of the United States Army or as to the rate at which its expansion
ly reported In these pages, the public is more prone to favor expan-
Is planned during the next year. These conclusions emerge from the
sion of the labor force than to favor expansion of the Any at this
time,
- a
Regraded Unclassified
GRANTING THAT BOTH OF THESE THINGS ARE IMPORTANT,
WHICH ONE is MOST IMPORTANT FOR US TO DO RIGHT
receptivity to some over-all plan for the federal mobilization of
NOW INCREASE THE SIZE OF OUR ARMED FORCES OR
TACREASE - THE NUMBER OF WORKERS IN WAR JOBS?
manpower. Any specific national service act would, of course, an-
counter opposition from the groups and Individuals directly affected
Increase eize of armed forces
22%
40
by It.
Increase number of workers
Both equally Important
25
13
Don't know
Manpower controls would have to be accompanied by clear explanations
of their effectiveness In advancing the war effort and by firm 15-
Sentlment for expanding the labor force, even at the expense of the
surances to labor that the customary freedoms and collective bargain-
armed services, was particularly strong among those who were dis-
ing procedures would be fully restored after the emergency.
satisfied with the progress of production. Among people who felt
that our war production program was proceeding "only fairly well"
PRIME PROBLEM
or "poorly", 47 per cent considered It more Important to Increase
the number of war workers than to build up the Army. Only 37 per
Trial tabulations of a Gallup Poll, the results of which have not yet
cent of those who believed production to be proceeding "very well"
been released, indicate that the American public tends to approach
made a similar choice.
present and future problems largely In economic terms, A, mational
sample was asked to give free answers to the question, "Aslde from
A Gallup Poll conducted In December indicates that about two-flfths
winning the war, what do you think Is the most Important problem fac-
of the public now thinks "there is a shortage of workers to war plants
Ing this country today?" The answers, grouped under general cate-
in Inls country." More than half of the public serms disposed to
gorles In the table below, show that people were much more prone to
support drastic governmental allocation of the available manpower
think In terms of economic, than In terms of political, readjust-
supply:
ments.
DO YOU FAVOR OR OPPOSE GIVING THE GOVERNMENT THE
To solve the economic situation, to
RIGHT TO TELL WORKERS WHERE TO WORK AND AT WHAT
JOBS? (Gallup Poll, December)
bad depression, to get the war paid for
prevent Inflation, to prevent another
without serious effect on our currency
14%
Favor
56%
Oppose
35
To make a lasting peace a permanent
Don't know
9
12
world peace
About a third of the public, however, belleves that the Government
Food shortage here and abroad problem
of producing more food - stepping up
already has authority to undertake this sort of manpower allocation.
10
agriculture
DO YOU THINK THE GOVERNMENT HAS THE RIGHT AT THE
Preservation of our democracy, to have a
PRESENT TIME TO REQUIRE A PERSON TO TAKE ANY JOB
more Ilteral democracy, to malntain our
ANY PLACE IN THE COUNTRY? (Gallup Poll, December)
present form of government during the
readjustment period, to save our nation
from bureaucracy, to prevent dictator-
9
Yes
32%
ship, to avoid fascism
No
49
Don't know
19
Conditions after the war, reconstruction
e
Considered together, these findings suggest considerable popular
of the world, atc.
7 -
6
Regraded Unclassified
The present labor problem - the manpower
IF PEOPLE HAVE A CHANCE TO GET MORE GASOLINE THAN
shortage - scarcity of farm labor -
THEY'VE BEEN ALLOWED, 00 YOU THINK THEY SHOULD?
proper distribution of manpower
8%
OLD
NEW
A Job for everyone after the war, to pre-
RATIONED
RATIONED
vent future unemployment, to be sure the
AREA
AREA
men In the services get jobs after the
war
7
E.N.
W.N.
Central
Central
South
West
Should
18%
19%
22%
17%
33%
To put through social reforms - Improve
Should not
77
70
70
77
62
situation of the poor - - reduce raclal
Don't know
5
II
B
6
5
discrimination
4
That denial of the need for mationwide gasollme rationing Is an Impor-
Winning the war la the only important
problem, there Is no other problem
5
tant factor In Influencing people to condone evasion Is indicated by
the fact that:
Other answers
17
18 per cent of those who do consider nationwide
Don't know
12
gasoline rationing necessary, but
54 per cent of those who do not see the need for
nationwide gas rationing. think people should
take advantage of opportunities to get more gas
than they have been allowed.
with large sections of the population In some areas unconvinced of the
DEVELOPING SITUATIONS
necessity for mileage rationing, and with both widespread anticipation
of chiseling and a strong tendency to condone it, the difficulties fac-
ENFORCEMENT OF NATIONWIDE MILEAGE RATIONING
Ing enforcement are obvious. They can be overcome only by persistent
Informational efforts to clarify the purposes of the program and by firm
The Amarican public is still far from fully convinced elther as to
assurances that enforcement will be effective and equitable.
the need for nationwide mileage rationing or as to the efficacy with
which the rationing program is being enforced, In the parts of the
THE FUEL OIL PROGRAM IN OPERATION
country which have had considerable experience with gasoline ration-
Ing, a fifth of the people are still unconvinced that It is necessary
Now that winter and a fuel all shortage are actually upon them, Ameri-
on a national scale, A third of the people In the newly rationed
cans are adjusting to the situation with considerable Ingenuity, But
states doubt the need for such a program.
recent letters from social workers and other regular correspondents of
the Bureau Indicate that they are not denying themselves the luxury of
About half the population throughout the country, moreover, believe
a certain amount of grumbting, and In some parts of the country there
people are trying to get more gasoline than the mileage regulations
is real anxiety about the months ahead.
Allow them, Depending on their section of the country, from one-fifth
to two-fifths of all persons eyen refused to say that people should
Shutting off rooms and using supplementary heating wood, gas, coal,
not take advantage of a chance to get more gasoline than rationing
electricity - are the most common measures for beating the fuel all
allots them,
shortage. Many people are also keeping temperatures lower and Install-
- 9 -
8
Regraded Unclassified
log Insulation or weather stripping. Other expedients Include: dressing
with them saparately?"
more warmly, keeping shades and curtains drawn, turning off the heat
when leaving the house or going to bed, leaving windows shut at night,
Any aspect of the administration of fuel all rationing which sug-
providing less hot water In apartment houses.
gests Insptness or bungling la subject to bitter sttack. Fallure to
revise population quotas since 1940 has perhaps caused greatest anger.
Relatively few people have heeded the admonitions of Government spokes-
In Norfolk, whose population has nearly doubled since 1940, it is
men to convert all stoves and furnaces to coal. Some who have wanted
reported that there was a near riot about a month ago when people
to do so have been balked by shortages of lator or equipment. For low
were first told that there was a certain deadline for securing ker-
Income people the cost Is prohibitive. If the gravity of the altuation
osene rationing cards and then Informed that there was an Inadequate
had Been better appreciated, however, some correspondente believe that
supply of the cards.
more people would have found a way to change over, In aplte of ob-
stacles.
The "highly theoretical nature of the formula which leaves no dis-
cretion to local boards" also gives rise to some criticlsm. One
The crisis Is creating some new problems. The care of old people, In-
correspondent writes:
valida and children, In homes which are too cold some or all of the
time, is perhaps the gravest, Low Income groups are resorting to
"There is considerable confusion as to how quotas
were reached. Some people report little reduction
"perking the kids" with neighbors In some Instances, A few commun -
In oll, others report large reductions. Nobody
seems to know why they got what they got,"
tles have opened public buildings to take care of families without
sufficient heat,
There are also some complaints that rationing is not administered In
such a way as to assure equality of sacrifice. A few people maintain
In scee places, too, there Is real discomfort, and even suffaring, and
that "the big fellows" - Government buildings and the larger hotels
considerable analety about the future. In New England the situation
and apartment houses - are still estravagant In their use of fuel.
Is especially acute. The people In low-Income groups, who depend on
range oll-burning stoves for their heat, are reported to be suffering
There was recognition that people's complaints about rationing arise
most, New Englanders generally face the rigors of deep winter with
In part as a result of their natural Irritation over the discomfort
apprehension. Throughout the nation there Is widespread anxiety about
It entells. The Government, the correspondents felt, should Issue
the danger of colds and pulmonary infections.
more material emphasizing the fact that the present situation Is
regrettable, but unavoidable, and stressing the relation between
There Is some disposition to put the responsibility for this feared
compliance with regulations and winning the war.
wave of Illness upon the Government, In general, there Is a good deal
of grumbling. Many people have the feeling that wise anticipatory plan-
ning could have eased the present situation. The unfinished plpe line
is frequently referred to, People maintain that the present crisis la
partly the result of the Government's placemeal attack on economic
problems. "If fuel 011, gasoline, price control and transportation
are all parts of the same problem," one person asks, "why do we dest
- Il
- 10
Regraded Unclassified
Supreme Court of the United States
glany cres
Mashington,D.C. D.
Dra Henry-
Isuare a deasted friew-
and
Lave long Keesion. "
was Kend of you to dene with
the gutter press's reference bang
brother and 9 for beling
meabout ch. Ene gard N.
164
BUY
WAR
NAVY DEPARTMENT
EXECUTIVE OFFICE OF THE SECRETARY
WASHINGTON
January 9, 1943
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Henry:
I an, sorry you are still knooked out. We missed
you at dinner the other evening.
I know you would be interested in talking with
Lemaigre-Dubreuil who was Murphy's opposite number in
making all the arrangements for the North African expe-
dition. He is a curious fellow. A conservative business
man of wealth who was the President of the French Tax
Payers League. As such, he fought all our friends like
Herriot, Daladier and Blum, but that has not prevented
him from playing a most patriotic role. He is taking
the plane back to North Africa on Monday or Tuesday and
is, of course, eager to meet you before he leaves.
If you should be well enough to leave your
house I would be delighted if you could have tea with
him at my home either today or tomorrow, Sunday. Will
you let me have a word? My private telephone number is
ADams 1234.
Good luck to you.
Bill
WM C. BULLITT
Regraded Unclassified
165
Jan. 9, 1948
Mr. Paul
Secretary Morgenthau
Would you please let me have your reaction to the
following suggestion: That the Government forgive any
member of the armed forces for that amount of his net
income tax for 1942 which exceeds one-third of his pay.
I would also like to suggest that if any member of
the armed forces is killed in action during 1943 his
family should not have to pay any income tax for 1942.
Please let me have a memorandum on these two sugges-
tions promptly.
Intlinans memo of 1/11/43 referred to
Pank for consideration. 1/16/43-
Followed up mith Hayr 8/35/43-
Fib Panl talked to Kijs - is apposed to suggestion
4/1/43-
Regraded Unclassified
166
January 9, 1943.
MEMO RANDUM
TO:
Secretary Morgenthau
FROM:
Mr. Schwarz
00
SUBJECT: President's Budget Seminar, Saturday, January 9,
1943 - 10:30 A.M.
In his Budget Seminar today President Roosevelt said
that his new objective was to pay for one-half of the war
costs out of current Government receipts rather than one-
third, 88 would be the case on the basis of present legis-
lation. He called for taxes and savings, or both, to
provide those receipts. Asked if he thought that addi-
tional taxes should come primarily from individuals rather
than from corporations, the President replied he would not
say that.
The President said he had wanted to be more specific
on the matter of increased taxes and increased savings,
but felt that these goals could be attained in a number
of ways. He declared that the present system of voluntary
savings was working well and, in answer to questions, said
that a spendings tax might be snother possibility for
increased revenue and savings. He asserted that he could
not go into that tax very fully because there were several
forms of it and that Dan Bell only the other day had re-
ported that 8. brand new form of spendings tax was being
discussed. The President said he is still opposed to B.
sales tax, but then added that he sometimes wonders in
our present system of excises whether we don't have B.
general sales tax with exemptions.
The President agreed with the interpretation of his
call for making taxes on large incomes fully effective 8.8
being directed at the loopholes provided by tax-exempts,
depletion reserves and community property laws.
-o00-
Regraded Unclassified
167
Page 1
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
167
Column A shave Federal Insure
Marketable Insure:
sperations Ln willions of
Market purchases 1/
Special stin-lay certificates 3/1
dollars as follows:
Market sales
Net Incruss,
Calem I show grien theages is you
+6
Not decrease
for all overities ascapt certificates.
Direct Maturities purchases free Treasury
1
1
for carilficates, Selain 3 above
Field changes is decisals.
STRICTLY CONFIDENTIAL
last Week
Nonday
Tuesday
Velnestay
Thursday
Priday
Seturday
Inter
fair West
Dec. 26
29
X
31
As. 1
full Vest
Description
2
Monday
Tranker
Tednesday
Terriday
Priday
Saturday
A
3
&
1
A
3
1.
-
A
-
à
1
à
Jan. la
1
5
6
T
Full New
E
à
9
-
à
I. hasary
5
A
E
&
El
A
y
A
E
&
3
+86.7
+86.4
+176.5
+175.6
Markwiable Isemes:
Holitay
*118.6
+643.8
-19.0
-2.)
-1.5
-75.3
Market purchases
-33.0
-127.1
+16.8
Market sales
17.5
-58.4
+153.4
-131.1
-15.3
-37.4
-60.1
-123.6
+318.8
Direct purchases free Pressury
-33.2
-20.7
-10.3
-379.0
--65.6
Maturities
Special one-day certificates;
-04,3
-----)
+71.7
48.1
+109,4
*100.3
Not change
+65.6
+451.1
5989.0
Total net Increase (+) or decrease (-)
-114.3
-52.6
Velandary report of total pertfolle
-109.5
+120.2
+04.6
+27.1
-104.5
-
6032.0
II. Tumble securities
+16.7
452.8
+164.3
Bills all lesses contined
+175.6
+118.6
+598.0
+15.0
-2.3
-1.5
Market parchases
-75.3
+16.8
-33.0
-127.1
+2.0
Market sales
+150.5
+44.9
1
-131.1
-54,6
+37.1
+304.7
-465.6
-116,0
Maturities
-26.4
-20.7
7
-10.3
-359.1
+71.7
+50.5
$57.2
*100.3
+05.6
+405.3
Tetal 241 Increase (+) ur decrease (-)
-114.3
-52.6
-106.9
+124.1
-24.2
+26.8
-58.7
Certificates
-5.4
-5.0
+10.4
5/ml A - 2-1 43
*2.8
+3.0
-.015
$5.8
.65 C - 5-1 43
-.02%
,01%
,02%
+7.6
+7.6
7/8 1- 5-1 kg
.02%
-9.2
+9.2
7/8 I - 11-1 43
-.02%
-.02%
-.01%
.01%
-.01%
-.03%
I/S
I - 12-1 43
-.01%
-.01%
.025
Special ana-day certificates
-.018
.015
-.045
Treasury notes
11
3/4 1- 3-15 is
+2
+2
"
3/4
D - 9-15
+2
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V
+1
+1
of
# 10
1-1/4 0 3-15 15
+3
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vi
+?
+3
+1
# 11
3/4
+3
, 12-15 45
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-1
$
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+3
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12
1
A 3-15 46
4
+10
+)
+1
1-
+1.5
+1.0
+1
+2.5
# 13
1-1/2 12-15 46
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+2
&
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Treasury bests
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+1
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#
+13
7
+1
?
-4
=
$ 37
2-1/2
- 6-15 62-61
+1
4
+12
&
+2
+)
=
+3
*1
+12
1 36
2-1/2
- 12-15 63-64
2
+1
+6
4
*1
+3
7
-10
3 39
8-1/2
- 9-15 67-72
+1
$
+)
*1
-1.6
es
-1.0
-5-6
of
Dearacted securities
+1.0
+1.0
07
EFC 1-1/85 7-15
01
RN 1
1.
A-15
+1
+1
:
COC I-1/8 G - 2-15
+2
#1
+)
+5
+1
y
All temble securities
Marketable Insurer
+45.7
-80.3
+173.3
$175.6
-118.6
0634.9
Warket perchase
+1.6.#
+2.0
*53.4
4150.5
-15.0
-2.3
-1.5
-15.3
-33.0
-127.1
Market sales
44.9
-131.1
+37.1
-54,6
+304.7
-120.6
Direct purchases from Treasury
-27.4
-20.7
-10.3
-364.7
-$5,6
--65,6
Returities
-
Special can-day certificates:
-
Net change
+TL.7
-18.0
+106.2
+100.3
+05,6
441,6
first net (+) be Secrease (-)
-114.3
-52.6
-111.5
$123.1
424.2
+05.6
-104.3
Office of the Secretary of the Treasury. Division of Research and Subtotics.
T Original fliguin revised.
Lass than $50,000,
y Purchases and salse Penerted as of day of transaction and at day of delivery. transactions after la o'clock are included 18 the sert day.
U Transactions are estered as of the day following that la with they apply. signature are got available mill the following moreing.
Regraded Unclassified
168
168
Page 2
FEDERAL RESERVE OPERATIONS IN GOVERNMENT SECURITIES
Column A above Federal Reserve
sparations is millions of
Market purchases 1/
Golumn 2 slave price changes la 32als.
dallars as fallows:
Market sales 1/
Returities
STRICTLY CONFIDENTIAL
last Fest
Menday
Tunnday
Thursday
Triday
Baturday
fale Neek
Dec. 25
a
&
Full Yesk
Index
31
les. 1
Description
Monday
2.
furstay
theretay
Priday
Insurtry
&
=
A
,
A
3
&
19
Jan. h
A
1
&
5
1
6
7
.
Fall Work
&
,
,
1
,
A
.
III. recritive
4
»
A
1
à
3
4
,
A
3
-1
Soliday
Treasury notes
-1
If a
1-1/85 6-15 43
-1
+1
13
1
C - 9-15 43
=1
V-1
DI
6
1-1/8
B - 12-15 43
7
-1
e
+1
5
1
1. 3-15 to
-1
-1
+1
=
,
E
3/4
A - 6-15 *
+1
+1
» 7
1
C - 9-15 $
+1
F
41
13
+1
+1
I ,
3/4
+1
A 3-15
45
&
2
+1
2
+1
-
+1.0
7
+1.2
Preasury bonds
+2,2
7
3
1
+1.0
3-3/05
-
6-15
43-47
7
+1.0
+3.0
7
7
1 2
3-1/4
- 10-15
43-15
+.7
03.7
A
%
+1.0
A
41.5
*Y
3
3
3-1/
- 4-15 44-46
+1.2
9,2
+1.3
-1
-1
e
-
-
- 12-15
+.1
+,1
+5.5
+2.0
7
3 5
2-3/4
- 9-15
45-47
v.P
-1
+.2
-1
+7.9
-)
3 5
2-1/2
- 12-15 w
3 7
3-3/4
- 3-15 46-56
IN 8
3
- 6-15 46-48
b 9
3-1/8
- 6-15 45-hg
-1
-1
a
10
4-1/4
- 10-15 47-52
+1
-2.0
#1
+1
-1
-2.0
&
+1
=
of
11
2
- 12-15 47
+1
-5.5
-
+3
8-3/4
=1
13
- 3-15 48-51
-11.3
+7
+1
a
e
15
2-1/2
- 9-15 M
+3
+1
+1
e
16
2
- 10-15 46-50
of
+1
4
=
&
20 EXP
3-1/8
- 12-15 69-52
+6
+1
+1
+1
+1
4
+1,0
+1.0
21
2-1/2
- 12-19 49-53
+1
+3
=@
+1.0
+1.0
. 23
2-1/2
-1
- 9-15 50-52
5
+1
2
1
3 24 3
2-3/4
- 6-15 51-54
-1
=
+1
+3
11
+1
35
3
- 9-15 51-55
a
+2
+1
+1
+1
+1
+1
Y
3
26
2-1/4
- 18-15 51-53
A
-
5
+
*10
-1
-1
M
30
2
- 6-15 53-55
+2
+3
+
+1
M
3 31
11
2-1/4
+1
- 6-15 54-56
7
2.
+2
$
-1
YR
+2
3
32
2-7/8
- 3-15 55-50
7
+4
+3
+1
4
-1
=
+2
+3
3
3%
2-3/4
+1
- 9-15 56-59
+7
+3
+g
+1
-1
+2
4
.
35
2-3/4
5
- 6-15 58-63
+2
+2
-1.0
F
-1
3
-1
+1
+1
36
2-3/1
- 12-15 60-65
+1
-1.0
+6
+3
3
-1
-1
+2
of
securities
a 1
000 3/16 7 5-1 43
o 9
THE 1-3/8
. 2-1 lab
=
-1
+,7
*.7
-1
0
-
PRO
- 3-15 lik-bg
+1
-1
-1
+1
o
y
me 3-1/4
- 3-15 -
+1
7
1
4
9
7
-1
+,9
+1.0
-1
+1.9
7
,
3
A - 5-1 these
-1
+1.0
+.1
-1
o
in
BOLO 1-1/2 6-1 105-47
+1,1
7
+1
Be
+1
i
30 tax-exempt securities
+6,1
+3.2
19.3
Market purchases
+5.5
+5.0
+2.9
Market sales
4.4
2
+14,1
-3-5
-3-0
Materities
-5.1
-14.3
+6,1
+3.2
+9.3
Total net Increase (+) or decrease (-)
-
+2.0
-2.9
4,4
1.3
-.2
Office of the Secretary of the fresenry, Division of Research and Statistics.
T Original figures revised.
. Lass than $50,000.
y Purchases and unles recorded as of day of transaction and not day of delivery. Transactions after la s'elect are Included is the next day.
Regraded Unclassified
CONFIDENTIAL
169
UNITED STATES SAVINGS BONDS - SERIES E
Comparison of January 1943 sales to date with sales during the
same number of business days in December and November 1942
(At is sue price in thousands of dollars)
:
January
:
Cumulative sales by business days
Date
:
daily
:
January
:
December
:
November
:
January as
:
sales
:
:
:
:percent of December
Anuary 1943
1
$ 12,810
$ 12,810
$ 4,116
$ 5,164
311.2%
2
2,812
15,621
8,605
9,272
181.5
Is
15,400
31,021
18,647
20,460
166.4
5
16,107
47,128
58,337
31,309
80.8
6
22,045
69,173
74,984
53,076
92.3
7
32,523
101,696
121,408
62,326
83.8
8
35,518
137,214
133,295
96,366
102.9
ffice of the Secretary of the Treasury,
January 9, 1943.
Division of Research end 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 edd
to totals.
Regraded Unclassified
CONFIDENTIAL
170
UNITED STATES SAVINGS BONDS - SERIES F AND G COMBINED
Comparison of January 1943 sales to date with sales during the
same number of business days in December and November 1942
(At issue price in thousands of dollars)
:
January
:
-Cumulative sales by business days
Date
:
daily
:
January
:
December
:
November
:
January as
:
sales
:
:
:
:percent of December
anuary 1943
1
$ 2.716
$ 2,716
$
197
$
303
1,378.7$
2
319
3,036
527
1,115
576.1
4
3,101
6,137
3,214
7,846
190.9
our
5
8,683
14,820
17,161
14,720
86.4
6
3,608
18,428
29,464
31,425
62.5
7
11,298
29,726
46,986
34,030
63.3
8
17,886
47,612
49,858
43,940
95.5
ffice of the Secretary of the Treasury,
January 9, 1943.
Division of Research and Statistics.
curce: 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
18
171
BRITISH air COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO
With the compliments of Dritish Air Commission
who enclose weekly Statement No. 85 covering
Aircraft Flight Delivery as et January 5, 1943.
The Honourable Henry Morgentheu, Jr.
Secretary of the Treasury
WASHINGTON, D. C.
January 9, 1943.
Regraded Unclassified
REF. NO. D-55
65
-
T
19/3
BAC
BAC
BAC
BAG
BAG
BMC-L/L
L/L
1/2
1/1
Adidas
1.2.
And.
A.3.
L/L
SECRET 172
MOST SECRET
THE
LIB,
M
All
TAX
n.
ROST.
HALF.
8278.3
B2AD
8253
B25C
3261
TRANS,
TOTAL
WITED
20
%
174
258
239
240
278
53
55
75
3
90
4
1,485
WIDDLE BAST
5
%
92
47
R
268
AFRICA
111
m
remove
72
72
ABUTRALIA
27
27
SINGAPORE
9
9
-
42
3
165
230
16
16
RIDGE
56
54
NAME
11
4
15
PUBLIC SINVICE (serigned at Montrol) 7
LOST # SEA (in flight)
1
5
2
1
8
1
?
20
CRITISH
1
1
21
U. S.
GYBRALSER
3
3
2a reste V.S. (via So. Atlentic)
18
38
Included or Cremland
2
3.
,
b resto Bast
2
27
2
1
X
h reste Smith Africa
24
14
h sente Presteen
10
20
I I s
5
1
1
1
6
2
be verio take
1
1
2
(ea reste)
16
16
Retablishment
2
1
15
4
19
35
Montreal (s rente)
2
1
9
16
21
3
2
2
2
14
1
73
Others
1
2
,
CASHOO AFTER REPORT
2
,
14
5
19
7
2
2
6
43
to serio Montrol (in 5.5.)
1
5
3
9
Goulten, No.
1
1
2
Ricel or Neet Palm Booch
2
5
11
2
20
ha recie Mismi or 1.2.3.
1
1
2
4
8
Detredt
3
13
58
4
6
if
ha reto Detroit
4
4
8
Nestwillo or Hespits
5
#
50,
5
5
2
83
h resto Nutrille or Muspite
,
3
Dallas
1
1
Long Death or Neveratle
9
1
,
13
Klischeth City
21
21
Edification Centage
a
1
1
x
la reste Med. Centers
Special Daty
2
2
1
2
4
name
U*0*
Valor repair
1
2
4
10
52
CRASHED III v.s.
TXS
2
5
18
1
4
at
X
I'm
*
DIVERIND to vs.
50
20
200
20
TOTALS
20
165
325
295
660
344
743
178
21
"
*Inalading - instructored to U.S. after dalivery to U.S. PLANNING 4 AIRFRAME SUPPLY, BRITISH ATR
Regraded Unclassified
REF. NO. D-55
BAG
BAC
1/1
1/6
I/L
1.2.
1.1.
1/1
SECRET 172
MOST SECRET
.III
PAR
TOTAL
R
96
174
258
239
240
278
53
55
75
3
90
4
HIDDLE KAMP
5
z
92
47
R
266
NW AFRIGA
111
m
71
71
27
27
ADMINISTRATIVE
9
,
42
3
165
120
16
16
ninez
56
$
11
4
15
at Nontrol) 7
3
30
MR 19 - (In flight)
1
s
1
1
8
1
1
1
1
21
D. S.
DRITISH
OTHER
,
1
1 á a 1
10
XII
w Greenland
2
1
,
h rete Nittle Bast
2
29
2
1
$22
h reste South Africa
14
14
be reste Treatment
20
10
take - -
5
1
1
1
8
2
h state -
1
1
1
(m seste)
16
26
Retablishment
2
1
15
4
19
35
{ ! 1
2
1
,
16
21
,
2
2
2
X
1
73
Others
1
2
,
I
AFTER EXPORT
2
,
14
5
19
7
2
2
6
w
b reste (in U.S.)
1
5
,
9
Bealton, Do.
1
1
2
3 1 1 b
2
5
11
2
20
be reste Hand or U.P.B.
1
1
2
4
a
Detwodt
,
19
98
4
6
at
as reste Detroit
4
4
Subtwille e Memphis
5
I
50
5
5
2
63
h resto Featwille or Somple
3
3
Dallas
1
1
Lang Booth or
9
1
3
13
Klischeth City
21
21
Holification Contern
24
1
1
%
to reste Nod. Centers
1
1
2
Special Daty
2
2
1
2
4
11
Valor repair
1
2
4
7
GRASHED IN v.s.
2
5
18
1
4
2
7
39
DIVERTED TO v.s.
50
20
200
20
1510
TOTALS
20
165
225
295
660
344
743
198
21
$
119
25
122
32
3,265
Including - transferred to U.S. after delivery to U.S. PLAINING & AIRPRANE SUPPLY, BRITISH ADE COMMISSION, Regraded Unclassified
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
Box 680
TELEPHONE REPUBLIC 7860
BENJAMIN FRANKLIN STATION
WASHINGTON, D.C.
January 9, 1942.
Dear Dr. White,
I enclose copies of a statement of British gold and
dollar exchange assets and of an estimated balance of payments of
the sterling area for the next three months. They are generally
on the lines of those presented to Congress in February, 1942, though
with some changes of lay-out and comment. It is my understanding,
which I will be glad if you will confirm, that while these statements
may be communicated to Congressional Committees in executive session,
they will not be published or receive any public use. This was the
position as regards the previous tables.
The following are some comments which you may care to
have.
AVAILABLE DOLLAR ASSETS
1. Gold. Previous tables excluded from the figure in the table
(a) gold in Paris and gold held in Ottawa as guarantee
for insurance company liabilities;
(b) the Belgian gold; and
(c) "scattered gold", which was separately mentioned in a
notation to the table.
It seems to us right to continue to exclude (a) and (b).
But the conception of scattered gold is now rather obsolete. It
dates from the days when the main use of our gold holdings was to
ship them to the U.S. to buy dollars, so that we classed it as avail-
able or scattered according to the relative possibilities of shipment
to this country. The term "scattered gold" therefore includes gold
held in London, and dates from a time when we held hardly any gold
there. Now we holdfairly large amounts; on December 31 we held 842
millions in London and $30 million in other places described ES
"scattered". It hardly seems justifiable to include these amounts
in a separate notation.
White,
2148,
Exited States Treasury,
Buskington, D.C.
Regraded Unclassified
-2-
We therefore propose that the distinction should
be abandoned and that scattered gold should be included in the
figure in the main table. On the other hand, we would wish to
include a notation of the direct gold liabilities which we have,
particularly ES some of the more distant ones will fall due at
a time when the "scattered gold", which is not now all truly
available (as is implied by the caption) will be available.
2. Official dollar balances, We wish to include E: notation
of the sight dollar liabilities represented by registered accounts,
as this has in recent months become far more important. At January
31, their amount was only $7 million; now it is $53 million, mainly
owing to the presence of United States forces in the United Kingdom.
I take this opportunity of reminding you of the following
large items which have contributed to the increase in our dollar
balances, apart from the normal incomings and outgoings:-
(Millions of Dollars)
Sale of wool stockpile
70
Sale of aircraft taken off B.A.C.
contracts for U.S. use
80
Sale of shipyards
14
Sale of other facilities
100
Sale of securities
17
Instalment of R F.C. Loan
40
321
These items account for more than the whole increase in our dollar
balances, and all but $90 millions of the increase in our gold (in-
cluding scattered gold) plus dollar balances, as is shown by the
following table:-
(in Millions of Dollars)
January
31
December 31
1942.
1942.
Increase
Gold (including scattered)
465
688
223
Official dollar balances
55
243
188
TOTAL
520
931
411
3. U. S. Securities. No fresh overall valuation has been
made. $17 million have been sold, as stated above. This would leave
n. figure of $126, but we have increased the figure upwards to $135
to allow for the recovery of markets which has taken place and to
include some securities originally pledged against RFC Loan but not
needed for this purpose.
Regraded Unclassified
OTHER DOLLAR ASSETS
1. Private dollar balances, The notation which I have inserted
is, I think, self-explanatory. Va had pushed down our authorised
dealers' balances to & figure of 47 million dollars on January
31, 1942. Since then we have gradually let them rise to $73
million on December 31, 1942. This being BO, it may not be thought
fair to maintain the previous notation. On the other hand, the
authorised dealers' balances were previously at an inconveniently
low figure, and probably could not in any case have been hold
there with prudence, for a reason which is I think too technical
to put in the table; the registered accounts (which as stated
above increased over the period by $46 million) are sight dollar
labilities of the authorised dealers, and they needed greater
dollar reserves in their hands if they were to deal conveniently
with these liabilities.
You will presumably, es on previous occasions, supply 9. figure
for private balances from your own date. "his is likely to show
an increase over previous figures corresponding to the increase
in authorised dealars' balances.
Note to the table. This is I think self-explenatory and takes
the place of a corresponding note to the balance of payments table
in the previous Bet. It is, I think, better placed here.
Balance of payments.
As last time, we do not think it. prudent or useful to estimate
more than three months ahead.
BALANCE OF PAYMENTS - EXPENDITURES
Item A.1. This is calculated as before, namely estimated payments
during the quarter, 053.7 million, less estimated receipts, $21.7
million. "he figure of $113 million for payments falling due after
March 31 includes $78 willion for French reimbursement.
Item C. This includes $129 million to Canada; 1.e., the 8150
million which we have undertaken to pey less the amount which we had
already paid before the end of the year. The balance of "46 -illion
less the $20 million shown under head C of "Dollar Receipts" sa
receipts from outside the United States comes to much the same as
the net figure of $25 million shown AE item C of dollar expenditures
in the last table. If you prefer, for the saice of uniformity, to
combine the two figuren in this table into a single net expenditure
figure of $155 million, We shall have no objection.
Regraded Unclassified
BALANCE OF PAYMENTS - RECEIPTS
Items A.3 and B.2. The data which we have received from London
are in a rather different form from those which we used in the
last table. Last time we showed a heading c: "unidentifiable
receipts of Empire countries" and added the following footnote;
"This 10 a residual item. It may represent in part capital items,
but probably reflects also such items BB gifts." We now have a
separate figure for U.K. unidentifiable receipts, but for the rest
of the sterling area an "other items" heading, which we are told
are largely unidentifiable. It would be possible, and true, to
add the same footnote to Item A.1 (b), but it also applies to an
unknown part of Item B.2. It 18 very much A question of prefer-
ence how one presents this, on which we will be glad to be guided
by your views.
FOOTNOTES TO THE BALANCE OF PAYMENTS TABLE
The footnote on gold is self-explanatory.
Ae regards the second footnote, We would prefer for obvious
reasons of security not to disclose these figures. The same reasons
which make us prefer to keep them secret - namely their dependence
on operational movements - also make any estimate unreliable. But,
for your own information, our estimate for receipts from requirements
of U.S. Forces is 835 million for the United Kingdom and $60 million
for the rest of the sterling area.
You may equally care to know for your own information that our
receipts on account of the requirements of local currency of United
States Forces during 1942 were about $250 million. This was one of
the main offsets to the loss of dollar-earning power which we have
suffered through Japanese aggression (this loss we.. fully up to my
estimate of 6 year ago). A second important offset we.s the striking
reduction in the dollar expenditure of the sterling area, owing to
shipping difficulties and increasingly stringent import restrictions
and in part to the extension of lend-lease; the dollar expenditures
of the whole area fell from $775 million in 1941 to about $475 million
in 1942, which latter figure is very close to the rate of expenditure
which we estimated for the period February through April, 1942. The
third important offset consisted of the non-recurrent accruals of
dollars to which I have referred above.
The overall picture, when compared with that last presented to
Congress, la one of an improvement in our gold and dollar position.
This makes it the more important to stress that this is only one
side of the picture, and that in India, South Africa, Egypt, the
Peninsula and South America we have been liquidating our sosete and
increasing our liabilities at a rate far greater than the improvement
in our gold and dollar position. This position was, I believe, very
fully explained to you when you were in London. A recent large lia-
bility which we have had to undertake, in addition to these more
Regraded Unclassified
deferred payments to which I. have just referred, is the payment
of $150 million to Canada.
If you want any further elucidations, or if you wish
to discuss the figures and their presentation, Playfair and
Allen are at your disposition.
Yours sincerely,
HPhillips
Encls.
F. Phillips.
Regraded Unclassified
CONFIDENTIAL
Estimated Dollar Expenditures and Receipts of
British Empire, excluding Canada and Newfound-
land January 1, 1943 to March 31, 1943 (1)
(In millions of dollars)
Dollar Expenditures
A. Payments to the United States by the United Kingdom:
1. On British Supply Missions commitments (including
administrative expenses) - net
32
(In addition $113 will fall due after March 31,
1943 on B.S.M. commitments now outstanding)
2. For shipping, interest, film remittances, etc.
40
3. For other goods and services, urgent or ineligible
for Lend-Lease
50
122
B. Payments to the United States by the rest of the
Sterling Area (principally Empire countries)
75
C. Payments to areas outside the United States
175
Total dollar requirements
372
Dollar Receipts
A. Receipts from the United States by the United Kingdom:
1. From merchandise exports
20
2. From shipping and interest
15
3. From other items
(a) Readily explicable
20
(b) Unidentified
50
70
105
B. Receipts from the United States by rest of
Sterling Area:
1, From merchandise exports
70
2. Other items
25
95
C. Dollar receipts from outside U.S.
20
Total dollar receipts
220
Total dollar deficit of Sterling Area
(principally British Empire), January 1
to March 31, 1943
152
Total dollar requirements
372
Regraded Unclassified
-2-
Note:
(a) In presenting these figures, the British Treasury made
the following statement with respect to the acquisition
of gold:
"No close estimate of our probable purchases of gold
can be made even for the current quarter. The output
of gold in the Sterling Area is likely to decline to
an extent depending on the demand of man power and on
the availability of mining plants and stores."
(b) The foregoing estimates exclude receipts rising from
purchases of local currency for the requirements of the
U.S. Forces in the Sterling Area.
(1) These figures also include the gold and dollar
expenditures and receipts of non-British members of the
Sterling Area - namely, Egypt, Anglo-Egyptian Sudan,
Iraq, Belgian Congo and Ruandi-Urundi, Iceland, the
Faroe Islands, and Fighting French territories in Africa
and Oceania, Syria and Lebanon. The net dollar
expenditures and receipts of these areas are small.
Regraded Unclassified
CONFIDENTIAL
British Gold and Dollar Exchange Assets
as of December 31st, 1942
(wreent mère noted, these are British Treasury figures)
(In million of dollars)
AVOILABLE GOLD AND DOLLAR
1. Gold
688
(Foreign countries hold sterling funds carrying
supellic rights of conversion into gold amounting
to understantely =190 willion)
2. Official dollar balances
243
(Uni-en states registered Sterling accounts,
enrrying the FLynt of conversion into dollars
on dewind, evounted et November 30, the latest
evailable date, to 253 dillion)
3. U.S. Securities
135
(or these securities the British estimite that
only "80 million are readily marketable)
Total - ovsilable gold and dollar assets
1066
OTHER DOLLAR ASSETS
1. Private dollar balances
(This figure 1s taken from U.O. Treasury data.
The Brittsh state that dollar basinces in the
hands of British banks active as authorized
dealers in "oreign exc.inge increased by 26
million between January 31, 1942, when they
were reduced to an sutrewely 10 Level oving
to the strfrgency of the coller osition, and
December 31, 1942).
2. Assets cledged am inst R.P.C. lown
500
n.e. securities
205
Direct 1. vest ents
295
3. Branches of Unitish insurance compentes
200
(she emin- of these comminies are essi/ned
to A.M.C. Iosn)
4. Trusts in 11.5. Held for U.K. beneficiaries
290
(These trusts are established under United Status
law and Hence the assets my be unavailable to the
Sritiso document. lo other lith the direct
investments aledged or to he seainst the
R.F.G. Lonn, including oranches of British insur nce
case nice where extrings 1.7'e assigned to T.F.C. loan,
and -ith Vircose and TOIN and illianson, they
account for the eitimate of 3900 million submitted
to Congress 1: Jun ry, 1941. There are in addition
5010 50,11 Invest ente in D.S. enter rises which,
because of typer sive, the British regard as
virtally unsol-hie).
Regraded Unclassified
-2-
Note:
In connection with the foregoing data, the British state:
"British holdings of gold and United States dollars are
not held specifically against our liabilities in the
United States, but constitute a partial cover for
obligations and responsibilities of great magnitude and
worldwide character. Gold currently acquired differs from
our original stocks in that it can be acquired only by
further increasing our overseas indebtedness. Thus the
recent increase in our holdings has been accompanied by
a very much greater increase in our overseas liabilities. n
Regraded Unclassified
182
NOT TO BE RE-TRANSMITTED
BRITISH MOST SECRET-
COPY NO.
13
U.S. SECRET
OPTEL NO. 10.
Information received up to 7 a.m. 9th January, 1943.
1. NAVAL.
One of H.M. Anti-submarine trawlers was torpedoed
off Algiers on the 7th. 20 survivors were picked up.
2. MILITARY.
RUSSIA. In the lower Don sector the Russians have
penetrated 40 miles West South West of Tsimlyanskaya are making
progress astride Stalingrad - Tikoretsk railway and have
captured Zimovnaki on the railway 65 miles North East of Salsk,
In the Caucasus they are now within ten miles of the Railway
junction of Georgiyevsk.
3. AIR OPERATIONS.
WESTERN FRONT. 8th. 9 F.W. 190's attacked Torquay.
Three persons were killed.
8th/9th. 127 aircraft were sent
out. Seamining 84 (3 missing), Duisburg 14 (3 missing)
Leaflets 2.
FRENCH NORTH AFRICA. 6th/7th. Wellingtons dropped
17 tons of bombs on Bizerta harbour. Bombers also attacked
Tunis and Sousse where a ship was hit. Enemy aircraft damaged
four fighters on the ground at Maison Blanche,
7th. Escorted U.P. Marauders
bombed the airfield and barracks at Gabes starting many fires
and U.S. Bostons attacked enemy troop concentrations at
Kajrouan. Enemy casualties 4 1 1, Allied 5 lost. U.S.
Lightnings reported a general Westward movement of troops and
M.T. the whole distance between Tripoli (L) and Medenine.
TRIPOLITANIA. 7th. Hurricanes attacked M.T. moving
moving Westward between Zliten and Castelverde (33 miles ESE
of Tripoli). M.E. 109's attacked our lending ground South of
Tamet. Enemy casualties 1 3 1, ours 1 Spitfire.
SICILY. 7th. 10 U.S. Liberators bombed Palermo
harbour.
Regraded Unclassified
183
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 11
Information received up to 7 A.M., 10th January, 1943.
1. NAVAL
3 tankers in convoy to the MEDITERRANEAN were torpedoed 1200 miles
southwest of GIBRALTAR yesterday. During the k ending 8th January 5 ships were
torpedoed and sunk - 1 British tanker in the W. Atlantic, 1 British and 1 Polish
ship in the Trinidad area, and 1 British and 1 U.S. ship in the South Atlantic.
In air attacks on BONE Harbour 6 British ships were damaged, 2 of which are reported
to be total losses. The British tanker reported torpedoed in attacks on outward
bound convoy but proceeding, has returned damaged to ROTHSAY. 1 Dutch and 1 Greek
ships were reported overdue at their destinations.
2, MILITARY
LIBYA. At midday 8th southwest of BOUERAT a considerable body of enemy
M.T. with armoured care and tanks began moving west-southwest and by 3 p.m. about
1,000 M.T. were reported moving in the direction of EL FASCHIA 35 miles southwest of
GHEDDAHIA. At last light 600 M.T. were seen stationary 25 miles northeast of EL
FASCHIA. In the FEZZAN Fighting French have occupied BRACH and GATRUN about 100
miles respectively north and south of MOURZOUK.
RUSSIA. The Russians have repulsed several counter attacks northwest
and southwest of VELIKI LUKI. The German forces in the selient in the Great Don
Bond have probably been withdrawn. The hussians have made considerable progress
westward from ELISTA. In the CAUCASUS they are pursuing the Germans on a wide
front and are approaching BUDENOVSK and GEORGIEVEK.
3. AIR OPERATIONS
WESTERN FRONT. 9th. Ventures offectively attacked the steel works at
IJMUIDEN and Mosquitos bombed the railway centres at ROUEN and MONS. 7 enemy air-
craft crossed the South coast.
9th/10th. 179 aircraft were sent out - Boa mining 128 (4 missing),
ESSEN 51 (3 missing). Weather at ESSEN was excellent and the attack is considered
successful.
FRENCH NORTH AFRICA. 8th. Escorted 0.8. heavy bombers attacked
BIZERTA, FERRYVILLE and TUNIS, and medium bombers attacked objectives southwest of
SFAX and in the SOUSSE and KAIROUAN areas.
At night Malta Mosquitos machino gunned M.T. on the SFAX-GABES Road.
Enemy oscualties 12 destroyed, ours 6, nil, 1,
LIBYA. 8th. Enemy fighter bombers sttacked 1 of our landing grounds
near TAMET. Casualties by Spitfires and anti-aircraft 4, 4, 2.
At night Malte Wellingtons dropped 24 tons of bomba on road junction
south and east of TRIPOLI (L).
Regraded Unclassified