Volume 635, May 19 – May 23, 1943

DIARY Book 635 May 19 - 23, 1943 Regraded Unclassified - A - Book Page Advertising See Financing, Government: War Savings Bonds - B - Board of Economic Warfare Meetings, March 11 and May 6 - - minutes for - - 5/19/43.. 635 66 a) Discussion of 1) Axis shipping in Mediterranean 2) Lend-Lease--BEW agreement 3) Blockade report by Winfield Riefler 4) Swedish trade discussed by Riefler 5) Switzerland, Spain, and Portugal - situation discussed by Riefler Meeting 5/20/43 - agenda for 79 a) Policy on civilian relief in the blockade area 80 b) Latin American gold mining - modification of export policy for. 84 Burgess, Randolph See Financing, Government: War Savings Bonds (Organization Plans) - C - Chiang Kai-shek, Madame See Foreign Funds Control China See Foreign Funds Control Correspondence Mrs. Forbush's mail report - 5/21/43 148 - D - Deferments, Military Surrey, Stanley S.: Six-months' stay to be requested by HMJr - 5/19/43 57 - F - Financing, Government 32% Treasury Bonds: $1.4 billion callable not later than June 15 for payment on October 15 a) HMJr-Bell conversation concerning - 5/19/43 33 1) Red Cross drive, Community Chest, etc., discussed War Savings Bonds: Advertising: Conference: present: HMJr, Bell, Gaston, Graves, Gamble, Smith, LaRoche and Rogers - 5/19/43 3 a) Space allocation to Treasury, absenteeism, and black markets discussed b) Over-all authority for allocation discussed.. 7 Regraded Unclassified - 7 - (Continued) Book Page Financing, Government (Continued) War Savings Bonds (Continued): Payroll Savings Plan: Treasury participation - 5/19/43 635 58 Progress report by Graves - 5/22/43 211 Organization Plans: See also Books 630 and 634 HMJr's conversation with Sproul in New York reported to Treasury group - 5/21/43 100,107 a) Perry Hall and Dick Patterson discussed b) Gamble not acceptable to Sproul c) Ransom-HMJr conversation (Sproul present) - 5/22/43 188 1) HMJr suggests conference in Washington with full Board and as many presidents as possible 192 2) Discussion with Bell 205 a) Burgess reported as standing back of HMJr 206 (See also Book 636, page 106) b) Burgess' letter - 5/25/43: Book 636, page 152 Sproul's letter commented on by Eccles - 5/21/43 144 National Director of Sales: Eccles asks for conference with HMJr before announcement - 5/22/43 210 a) Discussion by HMJr (in New York) and Bell: See Book 636, page 7 Conference; present: HMJr, Bell, Gaston, Sullivan, White, Paul, Thompson, and Gamble - 5/25/43: Book 636, page 93 a) Bell-Eccles talk reported 1) FDR-Eccles conference discussed 2) Gamble as Sales Director discussed: Book 636, page 106 b) Gamble reports on New York talk with "Lew" Pearson and Bayard Pope: Book 636, page 98 1) Sproul's present position discussed 2) Clearing house associations as liaison between Treasury and Federal Reserve discussed: Book 636, page 103 1) List of associations and locations: Book 636, page 196 c) New York City War Savings Staff plan: Book 636, pages 101 and 145 d) Bell-Bartelt-Gamble set-up proposed by HMJr: Book 636, pages 110 and 120 Sproul's illness discussed by HMJr and Eccles - 5/25/43: See Book 636, page 185 Head, Walter W. (Chairman, Treasury War Finance Committee, St. Louis District): Resignation offered in view of plans for new set-up - 5/25/43: Book 636. page 205 Doaradod - 1- - (Continued) Book Page Foreign Economic Operations See Occupied Territories Foreign Funds Control China: Madame Chiang Kai-shek's finances discussed in Paul memorandum - 5/21/43 635 159 (See also Book 636, page 86 - 5/26/43, and Book 641, page 65 - 6/11/43) - G - Gamble, Ted See Financing, Government: War Savings Bonds (Organization Plans) - H - - Hall, Perry See Financing, Government: War Savings Bonds (Organization Plans) Head, Walter W. See Financing, Government: War Savings Bonds (Organization Plans) - J - Jewish Refugees See Refugees, Jewish - L - Lend-Lease U.S.S.R.: Second Soviet Protocol status of materials and equipment as of May 1, 1943 161 United Kingdom: Federal Reserve Bank of New York statement showing dollar disbursements, week ending May 12, 1943 - 5/20/43 93 - N - Nugent, Rolf See Postwar Planning - 0 - Occupied Territories Foreign Economic Operations: Coordination to be discussed in Office of Director of the Budget - HMJr-Wayne Coy conversation - 5/19/43 31 a) White to represent Treasury 011 Refinery Equipment (Russian) See Procurement Division Old-Age and Survivors Insurance Trust Fund Redemption of 3% obligations to meet benefit payments: Opinion asked of Board of Trustees - 5/19/43 41,46 *See also Book 643, page 284-A - 6/21/43 Regraded Unclassified - P - Book Page Patterson, Richard See Financing, Government: War Savings Bonds (Organization Plans) Pearson, "Lew" See Financing, Government: War Savings Bonds (Organization Plans) Pope, Bayard See Financing, Government: War Savings Bonds (Organization Plans) Post-war Planning Nugent, Rolf: Discussion of post-war planning and place therein of liquid savings - 5/20/43 635 88 - R - Refugees, Jewish Apostolic Delegate thanked for assistance of the Holy See - 5/19/43 72 Revenue Revision Soldiers' and sailors' relief under House and Senate pay-as-you-go bills outlined by Paul - 5/19/43 55 FDR's discussion of situation at Cabinet reported by Bell - 5/21/43 137 FDR-Paul-Bell discussion reported to HMJr by Paul - 5/22/43 176 Ruml. Beardsley Removal from National Resources Planning Board and adviser to Nelson Rockefeller discussed by FDR and HMJr - 5/19/43 50 a) Hopkins asked to remind FDR - 5/27/43: See Book 637, page 125 - S - Soldiers See Revenue Revision Sproul, Allan See Financing, Government: War Savings Bonds (Organization Plans) Sports Discussion at Cabinet meeting - 5/21/43 139 Surrey, Stanley S. See Deferments, Military - T - Taxation See Revenue Revision Treasury Department See Financing, Government: War Savings Bonds Regraded Unclassified - U - Book 635 U.S.S.R. See Lend-Lease - W - War Savings Bonds See Financing, Government 1 May 19, 1943 9:30 A. M. Robert Doughton: All right, thank you. How are you? HMJr: Fine. You did a swell job there the other - yesterday - - the other day - yesterday. D: The boys did pretty well, didn't they? HMJr: I should think 80. In - in baseball, three strikes are out, aren't they? D: How is that? HMJr: In baseball, three strikes are out. D: Yeah. That's what I said, three times you try and sink them they won't come up. HMJr: Yeah, yes, and I feel very happy. I think you did a wonderful job on the floor. D: Do you think 80? HMJr: Yeah. D: Well, did you read my speech? HMJr: I sure did. D: They've got one word in there, got "reject" where it ought to be "accept", but I'll correct that. HMJr: Yeah. D: Well, you can't - I did the best I could. HMJr: Well, nobody could do any better. D: Well, I thank you. I thank you. Well, the President's letter was very helpful and your boys were helpful, everybody - and the leadership did fine. Rayburn and McCormack, they cooperated fine. HMJr: Yeah. D: We had fine team - well, we had 80 many boys away, you know. HMJr: I know. Regraded Unclassified - 2 - 2 D: And it was a wonder we beat them at all. HMJr: Yeah. D: But we have - I'm glad we knocked them out, and I appreciate your calling me and we're ready to go along the best we can now. HMJr: Well, God bless you. D: Thank you. They're coming down - Paul and his crew are coming down this morning to go over the - some of these amendments 80 we'll know what we're talking about. HMJr: Good. D: Well, all right. Thank you for calling. Goodbye. HMJr: All right. Regraded Unclassified 3 May 19, 1943 10:00 a.m. FINANCING - (Advertising) Present: Mr. Bell Mr. Gaston Mr. Gamble Mr. Smith Mr. LaRoche Mr. Rogers H.M.JR: Well, now, Rogers, is this meeting at your request or Mr. LaRoche's? MR. ROGERS: It was a joint request when we asked for it in the beginning. I know what the idea was - what we would like to talk with you about. I will let Chet do it. MR. LA ROCHE: What we wanted to do was report to you on our activity with the newspapers of this country, and it is a report on the basis of about three or four months' work on the part of myself and other members of the Council. The problem goes back to the radio allocation plan when the Treasury had a great deal of time because it had the most pressing problem. H.M.JR: Also the best people - also a good staff. MR. LA ROCHE: That is right, and then there followed, as you know, many other requests from other departments. OWI, at that time, was under MacLeish. Finally the adver- tisers said, "If the Government cannot combine these re- quests and rate the importance of these things, then there is no order - each thing defeats itself because there is so much conflict. We don't see where the end is - where our time is being taken up every day by aggressive groups after our time. Regraded Unclassified 4 - 2 - So at that time we said to MacLeish, "Let's pool the whole job, organize it, or we will all lose - we will lose the support of the advertisers." As you know, that was worked out, and I think to every- body's satisfaction. Now, last summer we noticed in making our studies of the amount of space contributed by the newspapers and adver-. tisers to the Treasury job, that as soon as & well-organized, clean-out job came along from somebody else, whether it was a local job or a job from us or OWI requesting space for the absenteeism problem, or what not, if the thing seemed impor- tant locally and if it was well presented, the space was withdrawn from the Treasury and allocated to this new problem. Now, on top of that, we find that locally the advertisers and the newspapers are beginning to fret and worry and say, "Well, where is the end of this? First one group comes around saying that absenteeism is vital - or something - rationing, or black markets. And then we know the Treasury thing is vital. Now, we are getting hundreds of requests a month for space. Now, how do we organize the thing? Which is most important?" Now, that kind of effort - that kind of pressure on these fellows makes them lose their concern and interest, and makes them fed up with the whole thing. So as 8. result of that, I went out to Chicago, and I have been up to Boston, Philadelphia, and Detroit, and other cities, and have sent Allen around - he has been up in Port- land and Hartford - been around two months - also worked with the top newspapermen like Tripp, Friendly, and the rest of them. We feel very definitely, first of all, that we will be able to get probably more support for the war effort to explain the problems of the war to the people from the news- papers than from almost any other medium. I mean by that that the radio method is pretty well organized. There is not much more stretch in that - not Regraded Unclassified 5 - 3 - much more that you can get. Outdoor is doing about all that it can do. In magazines the effort there has got to come, and the support has got to come, from the conversion of present advertising. That is coming along fairly well. The maga- zines themselves are contributing a page & month in virtu- ally every issue and that will probably be on inflation, and to that extent ought to help our whole effort. So the big amount of space can come from the newspapers themselves and local advertising. There is seven hundred million dollars' worth of available space there, in total, which is far bigger than any other source that there is. Now, we find this, that the newspapers will be able to get, I believe, two or three pages & week from adver- tising, and if necessary they will contribute the rest, I think, to make the equivalent of about three pages & week of space. That is our present effort. We have been up to Portland, as I say, and we were in Pittsburgh yesterday, and our talks with the newspapers - we bring the newspapers, radio, and Outdoor - all three have local mediums - into the meeting, suggest to them that there be a sponsorship by leading citizens of the whole effort so that no one medium will get all of the credit and that this space be allocated in terms of the problem that you first anticipate the need - get the space of one section of advertisers maybe for six months, then go get the rest of the space for another six months, in- stead of going out every month and asking for this and that and the other space. Now, I believe that within the next two or three months we can have this country pretty well organized - at least two hundred cities - with their reservoir of space available there for the needs of the Government. Now, our concern is that the Treasury Department doesn't feel - "Well, now, we ought to have those three Regraded Unclassified 6 - 4 - pages; we ought to have all of it." Up in Hartford they went out and got two pages a week - both of the newspapers. H.M.JR: The Treasury? MR. LA ROCHE: They went out and got it for the Treasury. That space will not stick for the Treasury. First of all, it is too much. You have done the town to death. It would be wasteful - it would be criticized. You don't need that much support there. Anyway, even if they get it for the Treasury, these other things come along - they are new, they are pressing, they are important. That question of absenteeism - of nutrition - 8. fellow up there like Wilson of Pratt and Whitney will say, "That is a local problem; devote some of the space to that." And the newspapers will. So it is better to have an understanding and stake out a proper amount that you feel is satisfactory, and also do the job for the other pressing problems. H.M.JR: In other words, our boys have been pretty good in getting space. MR. LA ROCHE: Very good. They have been good and OWI has not done anything, really, or done very little. MR. ROGERS: That is right. MR. LA ROCHE: If OWI puts on & man, then you are going to have competition, but we don't want that. We want to be together in the thing. We want to have an organized effort. H.M.JR: Well, now, one thing, Mr. LaRoche, which isn't quite clear in my mind - and don't misunderstand what I am going to say - just on the question of organi- zation, has OWI sort of turned us over to the Advertising Council? Now, just where does the authority begin and end? It isn't quite clear in my mind. Regraded Unclassified 7 - 5 - MR. LA ROCHE: The authority is in the hands of the local groups and the local committee, whatever it may be - or the newspapers almost more than anybody else - which goes back to Tripp, which goes back to the Council under Mike Cowles' organizing effort, and goes back here. MR. ROGERS: You are thinking of the definite alloca- tion. MR. BELL: It doesn't begin and end at all. MR. ROGERS: You are thinking of the definite alloca- tion and who makes the decision. H.M.JR: Supposing I agree and then I feel I am being chiseled, who do I kick to - you or this fellow (Rogers)? MR. GAMBLE: As it is set up, if the plan were success- ful, when it once got into operation it would be an OWI allocation plan. MR. LA ROCHE: I am not 80 sure of that. MR. GASTON: There are two ends to it, Mr. LaRoche: One is the coordination of the Government requests and then on the other end comes the decision of the men who can grant the requests or modify them to suit their own - they are running their own publications. It is not a question of order. It is & question of one coordination - coordination on the Government end and coordination on the other end. H.M.JR: For instance, I have been amazed - I don't even know where it comes from - to see all these pages of the Washington newspapers right now for the Treasury. MR. GAMBLE: There were forty thousand ads run in the Second War Loan in the daily newspapers of the United States. Of those forty thousand ads, one-third of them were Treasury ads that originated in the Treasury; two- thirds of those ads were ads that originated in the communities as a result of the War Bond work that had been done there. Regraded Unclassified 8 - 6 - MR. LA ROCHE: Local solicitation to make them put up the money. H.M.JR: I am talking about right now - this week. MR. GAMBLE: Those are coming from the War Savings organization and they are the follow-up of the Second War Loan advertisements built around family income and the pay-roll savings, and the continuous program of the sale of War Bonds. Those originated in Washington. H.M.JR: That is what LaRoche has run into. MR. GAMBLE: That is right. I might add, we have in four cities this plan in operation on our own, which is nothing but a Treasury plan, and we have three cities all ready to start, Philadelphia, Chicago, and New York, where we have gone out and sold, as you know, Chet, through the advertisers of the newspapers in New York. This plan is in operation. I think you sat in on some of the meetings - at least, some of your people did - and we have a plan where we sell advertisers on a fifty-two-week plan of sponsoring the War Bond advertisement. We have in several hundred cities today a fifty-two- week plan; not the advertisers' plan, but where individual advertisers have agreed to buy and sponsor War Bond adver- tising on a fifty-two-week basis. I think one of the big complications is, what are we going to do in those cities where papers have gone out and signed individual advertisers on fifty-two-week sponsorship of some type of War Bond advertising. I have a list of them. H.M.JR: My question hasn't been answered. MR. LA ЮСНЕ: Who is running this thing? ALL right, let's answer that question. This whole effort is not being run by anybody. The Advertising Council is probably the most active group of people in the general over-all philo- sophy and effort, but you are running an effort of your own here - the Treasury Department. You are going out and getting a certain amount of space. That is point one. Regraded Unclassified 9 - 7 - Point two is, OWI is considering doing the same thing - considering the possibility of putting on & newspaperman who will go out and get space. H.M.JR: By gawd, if they come over to take mine there is going to be hell to pay. That is what they all do - the first thing they do is - what is the name of this fellow that we have? MR. ROGERS: Bridge. H.M.JR: That will be the first one they want. MR. LA ROCHE: All right, Mr. Secretary, remember that Mike Cowles suggested this idea of getting the news- papermen together, bringing them in with you and organizing this thing to get this space. H.M.JR: That is what I am coming to. We will keep coming back to the point. Just as a lateral thing, I was asking you where the hell does this Allied Newspaper Coun- cil come into this thing? MR. LA HOCHE: The Allied Newspaper Council, at this moment, is the servant of the Treasury Department, con- cerned with getting space for the Treasury Department. That is its present concern. Now, we are trying to look ahead a little bit. They will be requested, probably - they have not been requested yet - by OWI to concern themselves, too, with space for these other problems. So we are saying to you, "This is coming up; let's discuss the matter. How are we going to approach it? Is it better to have Don Bridge when he sells the fifty- two pages for the Treasury say, "In addition, you should have fifty-two pages for these other problems, or should OWI put 8. man in who, after Don Bridge gets fifty-two, goes out and says, "You ought to have fifty-two pages for these other problems"? Regraded Unclassified 10 - 8 - How do you want to operate this thing? H.M.JR: We still come back to my original question. Who is going to run the thing? Is it going to be the Advertising Council, the Allied Newspaper Council, or the OWI? MR. LA ROCHE: Let's look at our experience - who runs the radio allocation plan? That is run by and given direction by the OWI - they allocate the space. They have formed the pool there, and through agreement on the part of all of us, we say, "All right, you apportion these subjects." Now, you are not going to have the same problem or the same answer - it will not work in the case of the news- papers. Why? In the case of the radio allocation plan, that is the allocation of commercial radio space by adver- tisers who say, "All right, we will give you a minute or two or three minutes in our show." When you come to the newspapers, though, they have far different feelings about the Government and about the political situation. Some of them say to us, "Look, if this is for the present Government in Washington, we will have nothing to do with it. If it is for the people, if it is to help everybody, all right, we will go along." We say, "This is in the interests of the people. Sure, you have to have instructions from the Government as to what they think is the most important thing; you can pay attention to it as you wish, or not. That is up to you. So you do have 8. different problem there on the part of the newspapers than you run into on radio. H.M.JR: So it is not 80 easy. MR. GAMBLE: May I ask a question which may throw a little light on it for the Secretary? I am not now speak- ing against the plan, but I read the plan Mr. Allen wrote. H.M.JR: Who is Mr. Allen? Regraded Unclassified 11 - 9 - MR. GAMBLE: Advertising Council man. MR. LA ROCHE: Assigned to this job. MR. GAMBLE: He works very closely with the OWI. He stated in his plan that it is entirely possible the Treasury might come out of this operation with as high as thirty percent of the continuing advertising. Now, isn't it true that if they came out of it with thirty percent it would, in all probability, be a considerable reduction from what the Treasury is now getting? MR. LA ROCHE: I would say yes if it is the present amount of advertising in most of the cities, but if it is thirty percent of 8. much larger amount, it conceivably could be bigger. H.M.JR: Let me ask you this. I always remember the story - I don't know whether it is true or not, but it is a good story to illustrate it. When Old Gold started out they started in some town in New England and took a State and then they spread out through New England; in other words, they tested the thing. MR. LA ROCHE: What they were doing was getting local distribution before they went national. It is not & test. H.M.JR: Locally before they went national - couldn't this thing be tested before we all commit ourselves? MR. LA ROCHE: There isn't any test you can make that would be new over and above what we are now doing. It is being tested all the time. The basic idea of getting local support has been tested. We know there is the support. H.M.JR: What you fellows are saying to me, except you are being a little polite about it - I am not used to being dealt with so politely-- (Laughter) MR. LA ROCHE: Not trying to be polite - we are trying to get at the problem. Regraded Unclassified 12 - 10 - H.M.JR: Well, we have got something going pretty good right now. OWI has been asleep at the switch. It looks like we might be in kind of a clash because we have some of these people tied up for fifty-two weeks, and that sort of thing. It is a question of getting together. MR. LA ROCHE: Yes, a question of having order. Let me speak for Mike Cowles; he hasn't been asleep at the switch. The pressing problem that we faced when Jim went over there, and when we discussed this thing, was to get the space for the Treasury. The definite problem was here and it was imminent, and the other problems were not 80 pressing. You discussed the matter with him and we set up this Allied Newspaper Council. We got that space. Now these other things are coming up, they are getting pressing, and they are beginning to take shape - like absen- teeism, and those things. Now, we have available ten thousand dollars that Mike has assigned to the Advertising Council to prepare copy for these various subjects - absenteeism, inflation, and so forth. The material will go out. I am simply saying to you that if there isn't order, if it isn't understood, all those requests - eight or nine will go out and blanket your effort, and in the end you will have trouble getting space because you get into & com- petitive situation, then, where OWI is after this space with the local groups. We say, "This is more important," and we all lose out. We annoy the source of this stuff so much they say, "The devil with this thing. We are not going to cooperate. I say, what we need is a plan. H.M.JR: I can answer you without consulting anybody. I feel this way: Right now, let's say, we have the edge on you, but in the long run it isn't good for the country and it isn't good for the war effort to have this confusion; and I think that the thing to do is to all pool our efforts so that the thing which is the most critical at the time gets the boost. Regraded Unclassified 13 - 11 - Now, I am going on this assumption, that the Adver- tising Council and OWI will agree that when we have a national drive, which will be two or three times a year - not more than that-- MR. BELL: Right. H.M.JR: ...that that is the most important thing because we have got to get the money. Now, I will be in the market, 30 to speak, two or three times a year at the most, and when that is on, if we understand each other, that comes first. MR. ROGERS: Oh, sure, no question about that. MR. LA ROCHE: That is right. H.M.JR: Then I think we should with the other little things - not little, but we ought to get support to a lesser degree on some of our things, like pay-roll deduc- tion, which is good, when inflation and that sort of thing comes in the picture; but they shouldn't be dropped out of the picture. MR. LA ROCHE: No, no. MR. ROGERS: That is right. H.M.JR: But I don't think pay-roll deduction should dominate newspaper advertising fifty-two weeks of the year. On the other hand, I think there should be continua- tion of the support for the advertisers for that because everybody agrees it is good. Now, you people have treated me right; I have got confidence in you. We got wonderful support during the drive - OWI and the Council - everybody. So I think the easiest thing on & thing like this is just to tell whoever is going to work it out to work it out with Ted Gamble. I am just laying down how I feel about it. But in the long run this constant confusion - that Washington doesn't know what it wants - hurts everybody. Regraded Unclassified 14 - 12 - MR. GAMBLE: I think everybody is agreed on that. Fundamentally, we all think the same about it. We are all for coordination and for doing the job intelligently. I think we do have some differences in opinion which can be worked out. H.M.JR: They have got to be worked out, but just as long as I say I am in favor of working it out - for the time being we have the edge, but I am willing to give it up and pool our interests as long as these fellows feel this, that when we have a drive on, that is number one. MR. GAMBLE: Then, so long as we can protect those plans where good volunteer citizens and merchants them- selves have entered into an agreement to do a job for the Treasury - we want to handle individual situations like that delicately. MR. LA ROCHE: I don't see any effort to go back and take that space away. MR. GAMBLE: Not go into St. Louis where they have these magnificent plans-- H.M.JR: Look, Ted, there is no use arguing about it. I think the thing is - you don't want to be bothered with this, Herbert. MR. GASTON: No, I don't. I wanted to suggest some- thing about copy, though, in this same connection. H.M.JR: Go ahead - but if it is agreeable to you, Bell - is it? MR. BELL: It makes sense to me. H.M.JR: It is all right with you? MR. BELL: Yes. H.M.JR: Let's tell Ted - you have got full authority to go ahead and settle it, and I don't want to hear about it again. I don't want to hear about it. Regraded Unclassified 15 - 13 - MR. GASTON: I think that is fine. What I wanted to say is this: There is & great field here for coordination of copy. It isn't a question of just saying 80 much to inflation, or 80 much to OPA en- forcement, and so much to bonds, and 80 on, but you have here a coordinated campaign addressed to the public. What you can do is you two can fit in and you can carry in a series of ads a list of the things, & group of things - how the individual can serve - including in every ad all of the different ends to it. And then you can vary your appeal in the individual ads. That is, you can concentrate, make your lead be on one thing one time and another another time, but keep grouping the things together to give evidence of a Governmental coordination on the problem. MR. LA ROCHE: That will be done. A lot - the present problem on inflation, for example, the various things you can do to stop inflation. H.M.JR: I hope that Stuart Peabody will be transferred from food on your Council to Treasury. MR. LA ROCHE: That has been done. H.M.JR: Good. That is fine. And then he has agreed, except when he has to make 8. field trip, to come down a day a week. MR. LA ROCHE: He has been assigned to the Council to this job - Treasury job. H.M.JR: That will mean that the previous man wasn't fired, but I understand he has other interests. MR. LA ROCHE: Thomas - we have other things for him to do. H.M.JR: His own business. MR. LA ROCHE: He has a problem, but he is going to help me more on the general management of the whole situation. Regraded Unclassified 18 - 14 - H.M.JR: He was entirely satisfactory. MR. LA HOCHE: A very able man. H.M.JK: Then you will take another look at Mr. Lemmon, won't you? MR. LA ROCHE: Yes. H.M.JR: And I will be perfectly frank, I am not too happy - I don't know whether you know this, Bell, that Mr. Lemmon is paid twenty thousand dollars 8. year by Sterling Products to be contact man between the Advertis- ing Council and the Treasury. MR. BELL: No, I didn't know that. I don't know Mr. Lemmon very well. H.M.JR: I have never been too happy about it. But again, Gambie, I give you full power on that to act with these people. That was something Stuart Peabody worked out, or was it you? MR. LA ROCHE: Thomas and myself. Thomas pays the twenty thousand dollars - hs gives us the man. It is hard to say, "Look, we don't want him." Lemmon is a good man but he is not a good man here, and Thomas is doing this for good will - as B. gesture - as a helpful thing. Well, if he isn't helping, if he isn't creating good will, he is wasting his money. He had better save it. H.M.JR: I don't think, necessarily, they agree with me. MR. GAMBLE: No, I don't agree with you. Mr. Hill came down here himself when they offered the services of Lemmon, and he said that they would like to make a contri- bution. They weren't trying to find a way to do it, but that certainly-- H.M.JR: Is it 8 contribution? Regraded Unclassified 17 - 15 - MR. GAMBLE: It is a contribution. H.M.JR: Does Lemmon make a contribution? MR. GAMBLE: Yes, I think that both Stuart and Mr. Robbins changed their opinion of Mr. Lemmon. MR. LA ROCHE: He is a good, orderly, experienced advertising man without a very forceful personality, and he doesn't have a lot of ideas, but he has-- MR. GAMBLE: Stuart told me yesterday he felt differ- ently about Lemmon now than when he came here. MR. LA ROCHE: I could get a better man for twenty thousand dollars. H.M.JR: I will leave it with you and Peabody. 'MR. GAMBLE: All right. I talked to Mr. Hill at the time - president of the company - and they had no strings attached to Mr. Lemmon. H.M.JR: I want Fred Smith to know what is going on, but this isn't his field. MR. LA ROCHE: He will be after a raise now when he hears that. (Laughter) We look to Peabody now, or Thomas, or the Council Board, as the Treasury contact. Now, we look to our agency for the quality of the work. We look to Lemmon for orderly management, watching the detail and seeing that things are followed through. We do not look to him as the adviser - as the man in charge. He is 8. detail man. MR. GAMBLE: If we didn't-- H.M.JR: I shouldn't look twenty thousand dollars in the mouth, what? (Laughter) Regraded Unclassified 18 - 16 - MR. LA ROCHE: No, I think it would be better, Mr. Secretary, if we had a man that everybody said, "Well, he is fine. H.M.JR: He doesn't spark. MR. LA ROCHE: No. H.M.JR: But, now, we don't have the Advertising Council man, your Washington representative - he doesn't come in to a meeting like this. MR. GAMBLE: That is why Lemmon was hired, Mr. Secre- tary, to do this. H.M.JR: But they have a good man down there. MR. LA ROCHE: We have a very able man. He will come to any meeting you want. H.M.JR: I would like to meet him. They say is is a good copy man. He sparks, doesn't he? MR. LA ROCHE: Yes. H.M.JR: What is his name? MR. LA ROCHE: Ted Ripley. MR. GAMBLE: I was speaking of Allen. H.M.JR: What else have you fellows got? MR. LA ROCHE: That is about all. H.M.JR: That clears the deck? MR. LA ROCHE: That clears the deck. H.M.JR: Bell? MR. BELL: No. Regraded Unclassified 19 - 17 - MR. GAMBLE: I think we will start this, Mr. Secretary, with a meeting of the Allied Newspaper Council, and have Mr. Tripp down. H.M.JR: Listen, I don't want to hear about it. It is your responsibility. Regraded Unclassified 20 May 19, 1943 10:35 a.m. FINANCING (Distribution of Second War Loan Booklet) Present: Mr. Bell Mr. Gaston Mr. Gamble Mr. Smith Mr. Tickton Mr. Lindow Mr. Banyas H.M.JR: What I want is - and, Gamble, get a piece of paper because it is going to be your responsibility - I want the advice of these people. I want to take this booklet (indicating booklet entitled "The Story of America's Greatest War Loan") - Dan, have you seen it? MR. BELL: No. MR. SMITH: It is wonderful, it is grand. (Laughter) H.M.JR: Incidentally, who helped you on it? MR. SMITH: Banyas' group worked all night on it, and Lindow and Tickton worked with me on it from the time we left the meeting until three o'clock in the morning. H.M.JR: Well, if you haven't seen it, it is a little story on the drive. Number one, I want every bank - every member of the FDIC - the president of every one of the banks, about fifteen thousand of them - to get this. That is number one. Regraded Unclassified 21 - 2 - What I want to ask, Bell, is, should I get B. mailing list from Leo Crowley and shoot it from Wash- ington or should I ask the forty-eight State chairmen of War Bonds to distribute it to the banks? You take, for instance, the Bank of America - it isn't just for Mr. Giannini to get it. I want the six hundred branches to get it. How do I do that? MR. BELL: Well, you can send it to the Federal Reserve banks and ask them to send it to everybody on their mailing list, which means all of the banks and all their branches and all the financial institutions, insurance companies, and everybody else buying Govern- ment securities. They have a list of about twenty thousand. H.M.JR: A list of about twenty thousand? MR. BELL: Twenty or twenty-two thousand names they have on their list. H.M.JR: A list developed for us? MR. BELL: That is right. Every time we put out a circular on financing it goes to that list, and every bank is on that list. H.M.JR: Would that be the branches, too? MR. BELL: Yes. H.M.JR: For instance, Marine Midland branches? MR. BELL: Sure, all the branches. H.M.JR: How would we do that? MR. BELL: We would send that through the Public Debt Service to each bank - Federal Reserve bank. H.M.JR: Would you do that? Regraded Unclassified 22 - 3 - MR. BELL: Yes, I will do that. H.M.JR: It would be better for you to do it than Gamble. MR. BELL: Yes, if it is going through Public Debt. H.M.JR: I am very anxious that it go out promptly, Dan. MR. GAMBLE: You want twenty thousand? There are only thirty thousand ordered on the original order. That is all they can multilith at one time without changing the plates, but we can have them probably by tomorrow. We can have part of them today. MR. BELL: This week, is that - whenever they are ready we can send them out that night. MR. GASTON: Don't you want your workers in the organization to get them just as soon - certainly not later than the banks get them? H.M.JR: Well, that is the purpose of this meeting. Bell says he wants - can you find out exactly? MR. BELL: Yes. I am not so sure they shouldn't go to everybody who worked on the last campaign, the committees, and so on. H.M.JR: I think they should. MR. SMITH: I think so, MR. BELL: We could probably use your thirty thousand by telling the Federal Reserve people that you want it to go to everybody on their mailing list who would normally get Treasury financing circulars, as well as to go to all of the committees and their workers in the last campaign. H.M.JR: How many would that be? Regraded Unclassified 23 - 4 - MR. BELL: I don't know. MR. GAMBLE: I think you had better make it to the leaders because if you don't you will get into a distribution problem. MR. BELL: There must have been a million workers in the last campaign. H.M.JR: Could you do this for me? I don't think you want a million copies of that, do you? MR. GAMBLE: No. That is when you get into difficulties. If it goes into the hands of important people, the important workers-- MR. BELL: You could give it to the committee chairmen. MR. GAMBLE: That is right, and that is where we should stop it. H.M.JR: Supposing you do this - supposing you telegraph the Federal Reserve presidents and say that we have this bulletin and we want it to go to each bank and each branch of each bank and each important worker-- MR. BELL: Each person who headed a group or committee. H.M.JR: Right, and ask how many they would like to have and to send you back a telegram. MR. BELL: Today. H.M.JR: Answer you today, that we would like to get as wide a distribution as possible. (Mr. Tickton, Mr. Lindow, and Mr. Banyas entered the conference.) Regraded Unclassified 24 - 5 - H.M.JR: We are just discussing this excellent bulletin that I understand you people did overnight - something like that. I want to thank you all. I think if you would send a telegram, Bell - I am repeating myself - to the Federal Reserve bank presidents saying that we want every important leader who had any- thing to do with War Bonds - every bank and branch bank in that community - say, "We have this bulletin; how many do you want?" Then you can let Gamble know and he can order them. MR. BELL: All right. H.M.JR: But if you have thirty thousand now, I can tell you you ought to have a hundred thousand. MR. GAMBLE: That is right. MR. BELL: How many have you got now? MR. GAMBLE: Thirty thousand run off. The plates permit the running off of thirty thousand without changing. MR. BELL: The plates are worn out at thirty thousand? MR. GAMBLE: Yes. H.M.JR: You had better order another set - two more sets. MR. GAMBLE: Three runs. H.M.JR: But I am very anxious, for very special reasons, that this thing get out just as promptly as possible - very anxious. MR. GAMBLE: The ones going out today - last night and today - are going to publishers and editors and commentators. The publishers and editors are Regraded Unclassified 25 - 6 - being confined to the daily newspapers. I think we could add to that the weekly newspapers. I think we should send a small supply only to each one of the forty-eight State administrators, together with a letter, in addition to the Federal Reserve dis- tribution. H.M.JR: I would like the farm press to get it. There are not very many of them. I mean just for old times' sake. And then Miss Chauncey has a list of the Cabinet and heads of Executive agencies in town. I would like it to go to them. And when it goes to the Fed - I am not sure but that every member of the Fed Board here should get it. MR. GAMBLE: What would you think of doing some- thing that might put a little different complexion on this - if we sent them to each one of the State ad- ministrators and asked them to write letters to Congressmen and enclose a copy? H.M.JR: Wonderful. MR. GAMBLE: It would stop this idea of Government - somebody raising hell with us. H.M.JR: Smart. How do you like it? MR. BELL: No. I would stay away from the Congress. H.M.JR: You don't like the bulletin? MR. BELL: Yes, I like this. I thought you meant the suggestion. H.M.JR: You don't like this bulletin? MR. BELL: Yes. I didn't like the suggestion. I think we ought to stay away from Congress. Regraded Unclassified 26 - 7 - H.M.JR: O.K., we will take Bell's advice. MR. SMITH: How about the committees that you made your presentation to before the drive? Wouldn't you be expected to send this to them? H.M.JR: Well, let John L. Sullivan take this up and call on Mr. George and Mr. Doughton and ask them whether it would be good or bad to distribute this, and John make a little speech - do it by hand. Let John do that. Anybody got any other ideas? MR. GAMBLE: We were having a meeting on it at eleven-fifteen. Have you any ideas, in addition, on this distribution that I can clear with you? H.M.JR: No, this is a new deal. You are re- sponsible. Don't come back at me - to hell with it. You have the decision. It is your responsibility to do it, but do it promptly. And, remember, my policy is I don't check up on people. Do it. I haven't time to check up. I haven't got the time to be con- sulted. O.K. Regraded Unclassified 27 May 19, 1943 My dear Mr. President: I am sending you herewith "The Story of America's Greatest War Loan" which I hope you will find interesting. Yours sincerely, (Signed) H. Morgenthan. " The President, The White House. Copies in Diary Regraded Unclassified 28 THE STORY OF AMERICA'S GREATEST WAR LOAN A Report by Secretary of the Treasury May 25, 1943 Regraded Unclassified 1 DURING THE THREE WEEKS between April 12 - May 1, the American people invested 18 BILLION, 500 MILLION DOLLARS in the future of their free country. This was the most tremendous financing task in the history of the world. I feel that the people should have the facts about this successful undertaking. It will make them proud -- but more than that, it will give them a better understanding of the even greater tasks yet to be done in financing the most expensive war in history. Before the war the Axis boasted that Democracy's armies would be weak, and flabby. Now they know better. And now the people on the home fronts all over the world realize what kind of people they are fighting. They know that you and I and all of our neighbors are in this war to the finish. The fact that we sold 18 billion 500 million dollars in the Second War Loan is proof enough. WHAT THIS PROVES We exceeded by more than five billion the goal we set for ourselves. This is a measure of our enthusiasm and patriotism. The result proves many things. It proves that the American people stand solidly behind their Commander in Chief, that they recognize this as their war, and they are willing and eager to finance it. It proves, also, that the American people are not go- ing to sit back and wait for any forced savings plan in order to finance this most expensive war in all history. This, I might add, is vitally important to me, CARE Regraded Unclassified 2 3 I believe in the American people; I believe that they The real battle 1e still ahead of us. All that we will go to the very limit of their capacity if only learned in this Second War Loan Drive, all the enthu- they understand the urgency of the situation. siasm that we gained, will be useful in the bigger From reports that have come to me from all over the job that we still have to do. country, and as a result of what I saw and heard on a eeven-thousand-mile trip from which I recently re- THERE IS NO EASY WAY turned, I have come to some definite conclusions as to the reasons for our success. It seems to no that There is no automatic and easy process for winning the explanation is found in the spirit of the Ameri- battles on the home front any more than there is an can people and their deep-rooted determination to automatic and easy process for winning battles in fight this war through to victory. the field. The war must be won and the war must be financed by the voluntary. united effort of the THE WAR SPIRIT SELLS BONDS whole American people. What success in financing means to our fighters When the people really become aflame with the war is illustrated by a conversation I had recently with spirit, all the other problems seem to solve them- the Chief of Staff. General Marshall came over to selves. Labor and management get together: produc- the Treasury to have lunch with me and. before he tion rises to an all-time high; and bond sales go left. he said: up automatically. That checks with what all our figures tell us, "Mr. Secretary. I want you to answer & ques- tion for me and to answer it with complete War spirit, labor-management relations, production, frankness. Can we military leaders plan to and bond sales all go hand in hand. fight this war in an orderly way -- in the surest and most effective manner -- or must Military terms to describe this Second War Loan vic- we take extraordinary risks for fear the tory -- and it is a victory -- are only partly appro- money will not hold out!" priate. There can be no comparison between the self- denial needed to finance the war adequately and the My answer was: suffering and death which our fighting men must face. "General, the American people will take care Yet, there is a close relationship, a very definite of that. What they have done in this similarity between the war on the home front and the Second War Loan Drive -- the money they have war on the fighting front. Neither is won in asingle produced and the spirit they have shown -- engagement. On both fronts the war must go on through is proof enough for me that they will not let a succession of gains until the final and complete our fighters suffer from lack of support un- victory is won, We can speak of this success in the til we achieve complete victory. no matter Second War Loan Drive only as a victory in a minor how long that may be. nor how much it may engagement. It is like the taking of 8. single forti- cost." fied point while the main battlefield and the main forces of the enemy still lie ahead, That was my answer to General Marshall. : know it is the answer of the American people. Regraded Unclassified 5 HERE IS WHAT HAPPENED MUCH OF THE MONEY for our Bond Drives comes from IN THE SECOND WAR LOAN insurance companies and other corporations. They are looking for sound investments and they know that there is no sounder investment than a U. S. Bond. Here in the record for these organisations: IN THE SECOND WAR LOAN (as in the first, last December). some of the money was borrowed from com- mercial banks. We didn't give them all they wanted but limited them to set amounts. Here are the banks' purchases: INSURANCE COMPANIES ----- AND CORPORATIONS $928il COMMERCIAL BANKS $58 $5{Bil 1st War Loan Goal Actual Sales, Dec. 1942 2ND War Loan Apr. 1943 Excludes Dealers and Brokers 1st War Loan 2ND War Loan Dec.1942 Apr. 1943 Regraded Unclassified 6 7 BUT THE MOST IMPORTANT of all sources of funds is INDIVIDUALS. In selling War Bonds to indi- THE PEOPLE HAVE THE viduals we have made great progress, although, of course, much remains to be done. Here is a record MONEY TO FINANCE THE of our sales to people in the December Drive, com- pared to our goal and actual sales in the Second War WAR Loan: When the Government buys war material, the money goes to the public in the wages, salaries and profits of the people who make and sell the war goods. In other words, when we spend billions on the war, the name billions become income to people and businesses. INDIVIDUALS THE QUESTION IS: Who gets the money - and how much of it can we expect to get for War $3&Bil: Bonds? Some of it goes to corporations and some of it to individuals. Our own economists and consulting economists point out that the bulk of the money which we must get in 1943 from individuals must come from those people earning less than $5,000 net. The average worker-- the shipyard worker, the machinist. the woman war worker, the white collar employee -- these will have 7/8 of the current income after taxes, As our drives continue, more and more of our money will have to 1st War Loan come from these people, until every person receiving Goal Dec.1942 Actual Sales, income above the barest subsistence level will have 2ND War Loan to pitch in. Apr.1943 Regraded Unclassified 5 9 Look at the total incomes of the country and where WHERE THE MONEY IS the money goes in the chart below. You can see that savings are going into War Bonds in growing amounts, and that present goals call for further increases. ½ of all the income ½ of all HOW PEOPLE USE THEIR INCOMES the income War Bonds Sovings WORKERS ALL OTHER Insurance a Other UNDER $5,000 Taxes A YEAR Living Expenses We know that all the people who are making reason- able wages and salaries are putting a certain amount Lost First Second 4 Months 4 Months 4 Months into life insurance, into savings bank deposits, and 1942 1943 1943 are paying off debts. Knowing how much of the total (Estimated) amount of savings is being invested this way, we can estimate the amount of savings which will be left in the hands of individuals. This is the money, not used for the necessities of life, nor invested in life insurance, nor used for the payment of debte, that will supply the funds with which to buy War Bonds. We aimed to get 55% of the amount of this money accumulating in the first 4 months of this year (in place of the 478 which was 80 invested in the last half of 1942), but because of the success of the Second War Loan, we actually secured 60%. Our tentative program calls for aiming at 65% in the present 4 months and at 75% in the last four months of the vear. Regraded Unclassified 10 11 RRRRR 50,000.000 PEOPLE OWN WAR BONDS 5/6 Of all people employed HAVE BOUGHT BONDS Although we are a long way from being able to say If you only consider the 60,000,000 people who have "The job is done", I think we should be proud of the jobs, or who are in the armed services, you find fact that BO many American people have bought War that five out of every six are War Bond holders. Bonds. If you count every person in the U. S. -- the working people and the housewives, the children and infants, the lame, the halt and the blind -- we can say that almost half the entire population of the country own at least one bond. 1 Regraded Unclassified 12 13 How did all these bonds get distributed? Mostly by volunteer workers -- workers who became bond sales- men and spent spáre time, day and night, serving their country on the Home Front. In all, there were DURING THE 2ND more than 1,000,000 people "in the service" for the WAR LOAN drive. They have done an admirable job, and to them the nation owes & great debt. 22,700,000 $25 BONDS WERE SOLD AND 4,600,000 $50 BONDS 1 The Second War Loan has been one of the most tremen- 10 out of every 1,000 men and women in the U.S. were dous transactions in history. For one indication, look at the fact that 33 million E bonds -- "people's VOLUNTARY BOND SALESMEN bonds" we call them -- were sold. These can be pur- During the 2ND War Loan Drive chased only by individuals, who are limited to & $3.750 investment in this particular bond during any one year. Of the 33 million E bonds, nearly 27 mil- lion were of $25 and $50 denomination. Regraded Unclassified 14 15 A QUICK LOOK AHEAD-- WE HAVE ALREADY HOW WE MUST GET THE BORROWED 25 BILLIONS 100 BILLIONS NEEDED THIS YEAR FOR WAR THIS YEAR Already during 1943 we have raised, through the sale of War Bonds, about $25 billions. The armed forces know how much equipment and man- power it will take to beat back the Axis during 1943. Your Treasury also knows how much money will That means that we now know we can count on having $55 billions of the $100 billions we will need. That be required to supply the armed forces with equip- leaves $45 billions that will have to be raised, some ment to feed and clothe the men, to take care of of it through new taxes, the rest of it through the lend-lease requirements and other war expenses. sale of War Bonds. The Treasury also has a plan for getting the huge amounts of money that will be needed. WE WILL ALSO NEED TO RAISE WE WILL GET 45 BILLIONS MORE 30 BILLIONS Part of this $45 billions will come as a result of THROUGH TAXES IN 1943 the regular purchases of War Bonds, ronth by month, through payroll savings. Part of it will come from people who realize that we must not wait for drives Under the present tax laws, we know we will get at to buy extra bonds, The rest of it we will need to least $30 billions. I have no doubt that we will secure through special drives. I am confident that need, before the year is out, to ask for new taxes, the American people will continue to oversubecribe to increase the amount of money we will get this way. our war loans and make the voluntary way work. That Devising taxes in wartime is a serious problem, be- will be one of the best ways we have of showing the cause it is 80 difficult to deal equitably and justly Axis how wrong they were when they said that the done. with all the people. But I am sure that this can be American people could not stand up in & crisis, that our democratic ways would collapse when the going got tough. The chart on the next page shows our program for 1943 -- what has happened so far, and what is yet to be done. Regraded Unclassified 16 17 In the first This 4 months Therefore represents of this year, we must 100 we sold still raise billions more than 7 billions this year 25 billions before the 45 billions The cost of War Bonds. Second in new taxes of the War Loan and L-Z420-20 THE -0.1m WAR -2 war Compaign. additional during 18.5 billions sales of 1943 in the War Bonds. Second Wor Loan. Under present tax laws we will Borrowed get 30 in First billions 4 Months from taxes ammo Present Present Toxes Taxes Regraded Unclassified THE 2ND WAR LOAN BROUGHT 90% OF THE MONEY RAISED DURING ALL DRIVES IN WORLD WAR I You may be interested to know how the Second War Loan compares to drives that were held during the first World War. There were five War Bond drives between May 1917 and May 1919, and as a result a total of $21 billions was raised. These drives required 18 weeks of concentrated work. In our 3-week Second War Loan we raised 18, billions, or 90% as much as in the five drives of World War I. Amounts Raised World Wor I $21 Bil. $ S $ S (5 Drives) $ S S $ $ S 2ND Wor Loan $18% Bil. S $ S S $ $ $ $ $ Time To Do It World War I 5 Drives - 18 Weeks 2ND War Loan I Drive- 3 Weeks Regraded Unclassified 29' May 19, 1943 11:05 A. M. HMJr: Henry talking. Sam Rayburn: Yes, Henry. HMJr: I just wanted to tell you what a swell job I thought you did yesterday on that tax bill. R: Well, my gosh (laughs) it was close enough, but I told them we'd doubled our majority from the last time. We had four the other time and eight this time. HMJr: (Laughs) R: It sure was tough going, but the boys acted mighty nicely. HMJr: Yeah. R: When you can pull a thing like that with only - losing only seven of your - in over two hundred Democrate, you're doing pretty darn well. HMJr: Well, I thought you did - I thought you did extremely well. R: Now, Henry HMJr: Yes. R: We just can't go over to the Senate with our backs bowed. We've got to try to get something, haven't we? HMJr: Can't do what? R: I say we just can't t go over - our boys just can't go over to the Senate with our backs bowed, and .... HMJr: No. R: and .... HMJr: No. R: sock - sock - BOCK - we ought to try to work something out on this, don't you think? H: Well, they're up there now with Doughton, my boys are Regraded Unclassified - 2 - 30 R: I see. HMJr: and Doughton 1s of the frame of mind that - he's asked the boys -- this is just between us really -- to tell them what we think is best R: Uh huh. HMJr: and he - he hasn't done that now in a long time R: Yeah. HMJr: and Paul and the rest of them are right up there now.... R: Well, that's fine. HMJr: and I think - we - you - you got - - we've got to have something concrete. R: That's right. HMJr: Isn't that right? R: That's right. HMJr: Yeah. R: Yeah. HMJr: And that - - I - I haven't heard Doughton in such - 80 happy in a long time. R: (Laughs) I see. Well, we all - all of us did a pretty good job, I thought. HMJr: Well, I know you did, and I want to say "Thank you." R: Well, thank you, Henry. Goodbye. Regraded Unclassified CC - Mr. White 31 May 19, 1943 3:02 p.m. Wayne Coy: Mr. Secretary? HMJr: Speaking. C: Wayne Coy. HMJr: Go ahead. C: How are you, sir? HMJr: Fine. C: There has been a great deal of discussion for the last several months about foreign economic operations HMJr: Yeah. C: and a great deal of conflict and difference of thinking about the thing HMJr: Yeah. C: by various agencies. HMJr: Yeah. C: We - we're getting together a group of people tomorrow from the agencies involved to - to talk the thing over, and see if we can't all of us agree upon the thing 80 as to eliminate those conflicts and be able to offer to the military a unified program from the civilian agencies of the Government. HMJr: Yeah. C: I wondered if you couldn't send us a couple of people over that can talk about that thing. HMJr: Sure, I can send Harry White. C: Harry White? HMJr: Yes. Regraded Unclassified 32 - 2 - C: It'd be 2:00 o'clock tomorrow in Room 252. That's the Director's office. HMJr: He'll be there. C: The other agencies coming are Lend-Lease, B.E.W., State Department, and Governor Lehman's organiza- tion. HMJr: Well, White represents me with B.E.W. and with the State Department and with Lend-Lease. C: Yeah, fine. HMJr: So he's the logical person. C: Fine, and thank you very much. HMJr: Thank you for asking us. C: All right. Regraded 33 May 19, 1943 3:15 p.m. FINANCING Present: Mr. Bell MR. BELL: There is callable not later than June 15 for payment on October 15, 1943, a billion and four hundred and one million dollars of three and & quarter percent Treasury bonds. We have to give four months' notice, and I assume we ought to get ready to call them at that rate of interest, coupon, three and a quarter percent. We wouldn't be justi- fied in carry it over. They mature in 1945, which is two years from October 25. H.M.JR: The answer to Mr. Bell is yes. MR. BELL: We will have to do some financing in July in order to carry through to September. We will have to do probably & two and a half billion dollar certificate or note or bond issue in July, and that would carry us into the first of September with five hundred and twenty- eight million dollars, which is very low. The first week in September is kind of bad, because you cross Labor Day. The second week is bad because-- H.M.JR: You are really making me think today. MR. BELL: I just kind of want to lay some plans 80 that I can get you thinking about it a little, and at the same time I want to do some work on the organization problem, get busy with everybody else, and get up some dope for you. H.M.JR: Monday is the 6th - Labor Day. Regraded Unclassified 34 - 2 - MR. BELL: The better day would be the 13th, which would be the following Monday, and then we run through to October 1, I think. H.M.JR: On the drive? MR. BELL: Yes. Peabody agrees with that, because the first week is bad. That means that we have to have a little more money than the two and & half. If we get & withholding tax and I can work out the monthly payment, we may get some money in August. If I cer't work out the monthly payment, and they go on a quarterly basis, you won't get your income taxes until October. They have three months in which to file a re- turn and one month to pay it after they file a return, which is bad. That leads me up to this, which these fellows have been pressing me a little about, and that is this Davies organization or Charlie Taft's organization - I don't know which it is. It coordinates all of these relief drives for the President. They want October for that other fund, and I told them I would have & conference with them just as soon as I could. They said they would like to have it next week. I told them I would if I could. H.M.JR: Review this thing for me again. I didn't get it the first time. MR. BELL: You mean the financing? H.M.JR: Yes. MR. BELL: If we have two and a half billion dollars bank financing in July, and assuming that we carry along our Treasury bill program, that means going to 8. billion dollars in June - & billion dollars 8. week - we will have five hundred and twenty-eight million dollars going into September. Now that is hardly enough - that is no more than two days' expenditure - to run us until the thirteenth. Regraded Unclassified 35 - 3 - H.M.JR: We could make the other thing three billion. MR. BELL: That is right. These expenditures are on an ascending scale, and they haven't been going up very fast. We may pick up some money there. It may be that if the withholding tax goes into effect on July 1 and I can get it on a monthly payment basie, which I am trying to do, instead of on a quarterly basis, that will give us some money in August which will make the five hundred million maybe a billion, see? H.M.JR: Now let me ask you this: September is an income tax date, isn't it? MR. BELL: It will be normally. If we get 8 withhold- ing tax, you will take it in under the withholding. H.M.JR: Well, Mr. Bell, I would rather do my financing in October. MR. BELL: You would? H.M.JR: Yes, sure. MR. BELL: That means quite 8. bit of bank financing, which seems to me might look a little bad to the public. H.M.JR: I am not worried about that. Now, last time the Red Cross did it in March, didn't they? MR. BELL: Yes. H.M.JR: I don't want income tax and-- MR. BELL: We did it in December, which didn't inter- fere an awful lot. We certainly will have & withholding tax, won't we, before September? H.M.JR: Do we get the benefit of it? Regraded Unclassified 36 - 4 - MR. BELL: We won't get the benefit of it, but it will take the - well, if we can work out this arrangement we have, we will get the benefit of part of it. H.M.JR: This is the first time - not the first time - I put a direct Federal Reserve phone and switched it from the Federal Reserve to the Customs House, where I will be, so I can pick up this phone and talk to you just as easy, and I can talk to you from there to here. Let this thing soak in. I will be taiking to you the next couple of days. What drive is this, anyway? MR. BELL: The Community Chest drive, and I understand they tentatively had assigned to them by the President the month of October. H.M.JR: They all got to give way. MR. BELL: Aldrich said the Treasury wants October. H.M.JR: Aldrich is it? If I knew it was Aldrich I would do just what he didn't want. MR. BELL: He was cooperative on this. H.M.JR: My inclination is October. MR. BELL: Would you want part of September and Octo- ber? I hate to see so much bank financing in the meantime. It looks like we are back on the old basis. H.M.JR: You are going to have to do it anyway. MR. BELL: But you are going to do a lot if you go to October. H.M.JR: Let's say we take September. Could you get by December? MR. BELL: It all depends on what the goal is. I was hoping we could go to January. Regraded Unclassified 37 - 5 - H.M.JR: I definitely want to go to January. MR. BELL: That is what I want to do. That means that you have bank financing in January, and bank financ- ing probably in November. H.M.JR: Dan, don't ask me to make up my mind today. MR. BELL: I am not definitely asking you, but I have to talk to these people. They have to get out their literature. H.M.JR: Tell them you will let them know by the end of next week. MR. BELL: They have to lay their plans. H.M.JR: By the end of next week you can force me to make a decision. MR. BELL: Rouse will be here the first of the week to talk about this Treasury bill program that we tentatively agreed will go up to a billion. He questions whether we want to go to a billion, but he is coming down to talk about it. H.M.JR: I want to talk with you and Haas and those fellows. MR. BELL: I will have to have some conferences on that next week. I don't suppose we can have an Open Mar- ket Committee meeting on it. They didn't meet the last time on the thing. The other thing I would like to be discussing when this other thing is over - be thinking about - the series E Bond is worrying me quite 8. bit - the volume. There were thirty million pieces of securities issued in the month of April - up to the 8th of May - and that is a volume which is beyond anything that we can handle. We are accumulating 8. little out in Chicago. Regraded Unclassified 38 - 6 - H.M.JR: Way behind? MR. BELL: Well, they are not way behind - they have to be four months behind because they have to get these things all over the country and put them into sequence. H.M.JR: I think the E Bond thing is the greatest thing that has happened. MR. BELL: Yes, but when you come to registering thirty million pieces in a month it is really a job. I am wondering-- H.M.JR: That is just during the drive. MR. BELL: I have talked to you before, and you haven't been willing to do it. Would you think that we might again discuss just inscribing the bond and not registering it like we do tax notes? H.M.JR: I don't know whether I am familiar with that. MR. BELL: A man goes in and buys a bond and it just has his name and address written across it. That isn't registered in the Treasury. The only record of it is on the bond. Of course, the agency that issues it will have a record, but we won't have a registered account of it - that is, like we do now. It isn't protection, because there can be forgeries which we might not always catch. H.M.JR: Again you are putting a lot - I didn't know you were going - this is all heavy stuff you are putting to me today. MR. BELL: Yes, and I can't delay 8. lot to begin thinking about it. H.M.JR: I would like to know what it costs - what it costs per bond. MR. BELL: How much per bond? Regraded Unclassified 39 - 7 - H.M.JR: Yes, to print the bond, register it, and all that. MR. BELL: It isn't 80 much the cost; it is the man- power. Do you know what we do in Chicago? H.M.JR: I would like to know how many man hours - I would like some facts. MR. BELL: We take the person in and train him. We have women working as mechanics in Chicago at the office. H.M.JR: I would like some facts, the man hours, and everything else that goes with it. MR. BELL: That is quite a job. I can get up something for you. H.M.JR: Get me up something. If you get anything out of me today, you are good. MR. BELL: Well, I don't want to get up against the gun and have to do something over night. I am getting to the point where the volume is too big. H.M.JR: All right, I would like some facts. Give me the man hours and that kind of stuff. MR. BELL: You have six thousand people in Chicago. If you want man hours, you really have them. H.M.JR: You have to give us some "horse" figures. MR. BELL: We can't get anybody out there that is trained. Everybody we take in has to be trained. H.M.JR: I will be sympathetic to simplifying it. I don't want to say yes now. Regraded Unclassified 40 - 8 - MR. BELL: A lot of them recommended we knock out the twenty-five-dollar bond. That certainly would take some sales away. I think maybe if we would inscribe the thing - it gives away some of the protection, there isn't any doubt about it, but that would answer a lot of problems. H.M.JR: Yes, sir. MR. BELL: You asked me the other day-- H.M.JR: You are getting along fine. (Laughter) MR. BELL: Yes, just where I was when I came in. (Laughter) You asked me the other day to get some work started on getting from the county chairmen the kinds of schemes they use to sell these bonds. I haven't gotten very far. Peter Odegard wrote up three pages of questions, and I had Peabody and George Haas' shop look it over. They have come to the e onclusion that theso questions can't be answered and tabulated. It is too big & job. A man has to answer all kinds of questions. I just want to tell you that that thing has been delayed. They think we ought to talk to Likert and sort of combine it. H.M.JR: Don't let the thing drag on. MR. BELL: I wanted to tell you that I haven't done anything - haven't accomplished anything. That is the reason for the delay. H.M.JR: Peter Odegard would slow it down. MR. BELL: He wrote the questions. H.M.JR: Why not turn it over to George Haas? You don't need Likert; turn it over to George Haas. MR. BELL: I did, and this is the conclusion that they and Peabody came to, that we have to get Likert in on this. Regraded Unclassified 41 - 9 - There is 8 letter that goes out to all of the people who have been giving us statistics on the holdings of securities in the last two years. That thanks them and asks them to continue it, and it is sent to Loans and Currency instead of to Haas. H.M.JR: Is that what you want? MR. BELL: That is what Haas wants. They didn't do any of the work, anyhow. (Draft of letter to be sent to seven thousand banks and insurance companies signed by the Secretary, copy attached.) H.M.JR: You got some action on that. (Laughter) MR. BELL: Here is the Third Annual Report of the Board of Trustees of the Old-Age and Survivors Insurance Trust Fund. That is quite 8. document. I don't know whether you recall it or not, but at the meeting of the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund Committee we agreed that we would redeem, as we needed cash to meet benefit payments, the three percent obligations held in that fund rather than redeeming them and refunding them into two and 8. half obligations. H.M.JR: Don't explain it; let me sign it. MR. BELL: No. We did, anyhow. Now, the rate of interest - average rate on the public debt - has dropped down to one and seven-eighths, which is pretty damned low for this fund. We now have three hundred and seventy-eight million of these three-percent obligations, and they all mature on June 30. Now, I want to hold those and take the current cash that comes in and use it for benefit payments, and invest any excess in the special one and seven-eighths. Then this is a poll vote with your committees. H.M.JR: Is it all right? MR. BELL: I think it is fair to the Trust Fund. Regraded Unclassified 42 - 10 - H.M.JR: Gawd help you. I don't know what it is, but if it is wrong-- (Laughter) (Letter addressed to President of Senate and Speaker of House, dated January 2, 1943, transmitting report signed by the Secretary. Letters to Arthur J. Altmeyer and Frances Perkins signed by the Secretary, copies attached.) MR. BELL: Well, you have got a vote of the committee. The Office of Strategic Services wants to send two Treasury representatives to Turkey, and they want them to work with somebody over there to get information out of the Balkans. They cleared it with the State Department, and the reason they are asking the Treasury to do it is they think the Treasury people would have 8. better stand- ing, and it wouldn't look so funny to have them as it would, say, to have a military attache, or somebody like that. Now, Harry and Luxford have discussed this with the State Department, and I discussed it with this man and told him to give us some more facts. They agree that it ought to be done. Do you have. any objection to sending two Treasury people? Harry says he thinks he can dig up the two people if you agree. H.M.JR: Do I sign it? MR. BELL: Just mark it O.K. to show that you have seen it. (Memorandum dated May 14 addressed to Mr. Bell initialed by the Secretary, copy attached.) Regraded Unclassified 43 SECRET May 14, 1943 Mr. D. W. Bell Messrs. White and Luxford Re: Office of Strategic Services proposal ro Turkey In connection with the above matter, DG suggest that we recommend to the Secretar that we go along with the 0.8.5. proposal providing one of the two Treasury "repro- sentatives" is actually a Treasury man. In this connection, John W. Gunter of the Division of Monetary Research is available for such an assignment and has indicated his willingness to go. lie think that It is in the Department's interest to have a man in Turkey at this time and that this opportunity should not be neglected. As you know O.S.S. is most anxious to have E. proupt answer and this matter should be discussed with the Secretary as soon as possible. AFL:nrd - 5/14/43. Regraded Unclassified 44 Dear Mr. Altacyer: as a meeting of the Beard of Trustees of the Federal Old-Age and Survivers Insurance Trust Fund, of which you are a number, hold is the effice of the Secretary of the Treasury on December 7. 1939, the Board agreed that investments after January 1, 1940 for account of the Part would be nade is special public debt issues with rates of interest provided for under the Social Security Act amendments of 1939, and that is order to meet benefit payments the Treasury would redeam the 35 obligations of the lengest naturity hold in the Fund and by this mothod grainally reduce the volume of 3% special obligations held is the Fund. This policy has been purcued since establishment of the Fund on Jenuary 1, 1940, as the result of which the 3% special Treasury abli- gatiens hold by the Fund have been reduced to $378,200,000 as of April 30, 1943. These notes nature on June 30, 1943. In the mean- time the average interest rate en the outstanding public debt has been reduced and the special obligations issuable to the Fund may now bear a rate of only 1-7/85. In view of this situation 10 is recommended that the policy adopted en 7. 1939 be changed; that benefit payments be paid free taxes currently collected and appropriated to the Fund, and that the balance of such appropriations to the Fund be invested in special obligations or market issues as my be determined advisable by the Secretary of the Treasury in accordance with the practice here- tefere fellowed is making such investments. is lieu of calling a meeting of the Beard of Trustees for the approval of this recommendation, I - pelling the members by letter and % shall be gist if you will indicate on the attached carbon of this letter whether you approve this recommendation. Very truly yours, Secretary of the Treasury and Managing Trustee of the Federal 01d-Age and her- vivers Insurance Trust Fund Nomerable is ther s. Altmoyer Chairman, Social Security Board Vachington, D. c. WHich 5-14-43 Regraded Unclassified 45 Dear I should like to take this opportunity to thank you for your continued cooperation in furnishing the Department with statements of your holdings of Government securities each month since 4 original request of March 1941. The survey of ownership of Government securities based upon your reports and similar reports from banks and insurance companies generally has been of inestimable value in planning the tremendous war financing operations which the Treasury Department has had to undertake. This survey will be handled in the future through the Idvision of Loans and Currency of the Bureau of the Public Debt instead of the Division of Research and Statistics. Sub- sequent requests for information will be forwarded to you from that Division, and I - sure you will continue to extend the same splendid cooperation afforded us in the past. The schedule for May 31, 1943 is enclosed and it will be appreciated if you will complete this schedule and return it at your earliest convenience in the enclosed envelope which re- quires no postage. Sincerely, Secretary of the Treasury Mr. 184 President National Now/York, How York Enclogament MFBimd 5/18/43 Regraded Unclassified 46 Regraded Unclassified My dear Madem Secretary: At & meeting of the Beard of Trustees of the Federal 014-Age and Survivers Insurance Trust Fund, of which you are a suber, hold in the office of the Secretary of the Treasury on December 7. 1939, the Beard agreed that investments after January 1. 1940 for account of the Fund would be made is special public debt issues with rates of interest provided for under the Social Security set amendments of 1939. and that in order to meet benefit payments the Treasury would redeem the 38 obligations of the lengest naturity held in the Pund and W this mothod gradually reduce the volume of 3% special obligations held is the 7ead. This policy has been purcued since establishment of the Fund on January 1, 1940, as the result of which the 3% special Treasury obli- gations hold w the Fund have been reduced to $378,200,000 as of April 30, 1943. These notes nature on June 30, 1943. In the new time the average interest rate on the outstanding public dobt has been reduced and the special obligations issuable to the 7ml May nov bear & rate of only 1-7/84. la view of this situation 10 is recommended that the policy adopted on Recember 7. 1939 be changed; that benefit payments be paid from taxes curren)ly collected and appropriated to the Fund, and that the balance of such appropriations to the Test be invested in special obligations or market issues as may be determined advisable by the Secretary of the Treasury in accerdance with the practice here- tefere followed is making such investments. 2a lieu of calling a meeting of the Beard of Trustees for the approval of this recommendation, I - polling the members by letter at I shall be glad if you will indicate on the attached carbon of this letter whether you approve this recommendation. Very truly years, Secretary of the Treasury and Managing Trustee of the Federal Old-Age and her- vivers Insurance Trust That Homorable Frances Perkins Secretary of Laber Vashington, D. c. WTH:mlb 5-14-43 47- May 19, 1943 3:57 P. M. HMJr: Hello. Don Gustin: Yes. HMJr: Mr. Gustin? 0: Yes. HMJr: I was anxious to talk to Senator Hayden, but I'm going out of town in & couple of minutes and I think he'd like to have this message. Hello. G: Yes. Uh huh. HMJr: Would you tell him that Mr. Gaston and I have de- cided to send over the name of Wirt Bowman for collector at Nogales, Arizona? G: Yeah. I'll certainly tell him that, Mr. Morgenthau. HMJr: And I know he'll be pleased. G: All right, sir. Thank you 8. great deal. HMJr: You tell him that. G: I'll do that. Goodbye. Regraded Unclassified 48 May 19, 1943 3:59 P. M. HMJr: Hello. Operator: Senator McFarland. HMJr: All right. Hello. Sen. Ernest McFarland: Hello. HMJr: Senator McFarland? McF: Yes. HMJr: Morgenthau. McF: Oh, yes, Mr. Secretary. HMJr: Senator, I think you'll be pleased to know that Mr. Gaston and I have decided to send the name of Wirt Bowman over at the White House for collector of customs at Nogales. McF: Well, that's very nice of you, Mr. Secretary. I sure appreciate it. HMJr: I - I thought you'd like to know about it McF: Well, that's very nice of you. HMJr: ....and.... McF: Say, incidentally, before you leave the line HMJr: Yeah. McF: I'm very much interested in your - in your banking - international banking plan. HMJr: Are you? McF: I've - I had kind of drafted out a little rough draft of one myself HMJr: Yeah. McF: which wasn't nearly as complete, of course, 8.8 yours HMJr: Uh huh. Regraded Unclassified - 2 - 9 McF; but - but to me that ie one of the most important things that should be made in our post-war plannings. HMJr: Why, I'd love to sit down with you sometime. McF: Well, I - - I would like to do that. If - they can all talk about policing the world. HMJr: Yeah. McF: and all of that, which 1e HMJr: Yeah. McF: now understand, I am not opposed to that. I - - I think that we've got to do some form of policing HMJr: Yeah. McF: but, 88 you well know, the real cause of the war 18 - 18 that there is - is commerce of one nature or another HMJr: Yeah. McF: and and that - that scheme of an international bank should, if worked out properly -- and I know you've given it a lot of study HMJr: Yeah. McF: it should eleminate some of the causes of the war, and HMJr: Well, Senator, when you've got time you might - would you drop by some morning on the way up to the Senate? McF: I'll - - I'll do that. HMJr: And any time that is convenient for you. McF: That's very nice. I'll be glad to. HMJr: Thank you, Senator. McF: Thank you very kindly. HMJr: Goodbye. Regraded Unclassified 50 May 19, 1943 MEMORANDUM About 6:30 last night I called un Harry Hopkins and reminded him that on the train going up to Hyde Park a month ago with the President he said that he would see that Ruml was removed as being a member of the Advisory Committee of the National Resources Board and also 88 a member and advisor to Nelson Rockefeller. He admitted that he had forgotten all about it, and he said he would 20 right at it. And I want to watch him to see if he does anything, and if he doesn't I'll remind him again next week. Regraded Unclassified 51 MA 1 8 1943 My dear Senator Connally: Because I have been out of town a good deal lately, I am necessarily somewhat belated in writing you to express my appreciation of your support of our opposition to the Ruml-Carlson amendment to the House tax bill. Incidentally, I enjoyed reading your speeches in the Record, particularly the first speech in which I think you were at your very best. Sincerely, (Signed) H. Morgenthan. Jr. Hon. Tom Connally, United States Senate. Copies in Diary By Mess. Short 10:52 5/19 Regraded Unclassified 52 MAY 19 1943 My dear Senator LaFollette: I am writing a short note to express our appreciation in the Treasury of your gallant fight against the Ruml-Carlson amendment to the House tax bill. Your speech at the close of the debate was the clearest exposition of the issues involved that could have been made, and people who were in attendance in the gallery tell me that it must have had of good deal of influence on the voting. Sincerely, (Signed) H. Morgenthau, Jr. Hon. Robert M. LaFollette, Jr., United States Senate. Copies in Diary By Mess. Short 10:52 57 Regraded Unclassified 53 MAY 19 1943 My dear Senator Byrd, I was very much interested to note that you spoke at great length, and I am told very effectively, against the Ruml-Carlson amendment to the House tax bill. I need hardly tell you how much the Treasury appreciates your support in this critical matter. Sincerely, (Signed) H. Morgenthau, Jr Hon. Harry F. Byrd, United States Senate. Copies in Diary By Mess. Short 10:52 5/19/43 Regraded Unclassified 54 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO Secretary Morgenthau May 19, 1943 FROM Randolph Paul In view of your interest in tax relief for members of the armed forces, especially those dying in the service, I believe you will be interested in the attached summary of the provisions of the House and Senate bills in this regard. The conferees will, of course, have to decide what final provisions will be adopted. BP Attachment Regraded Unclassified 55 Soldiers' and sailors' relief under the House and Senate pay-as-you-go bills Both the House and Senate bills contain relief provisions for members of the armed forces. Each bill contains two types of relief; (1) for those dying in active service; and (2) for all members, an additional exemption for service pay. On recommendations from the Treasury, the Senate bill eliminated certain inequities from the House bill. 1, Relief for those dying in active service Under the House bill all income taxes unpaid by a member of the armed forces at date of death were abated. The Senate bill made three changes: (1) it abates only the taxes which became due and payable after the date of induction or the date of the Selective Service Act, September 16, 1940, which- ever 18 later; (2) it abates only that part of the taxes attributable to earned net income and does not abate the taxes attributable to unearned income; and (3) it provides for & refund of any taxes which were paid, if such taxes would have been abated had they not been paid. The House bill made no provision for refunding taxes paid before death and thus discriminated against those servicemen who kept up their tax payments, Furthermore, the House bill would have extended relief for as many years as the servicemen were delinquent in their taxes, whereas, under the Senate bill, the relief does not go back beyond the taxes due and payable after the Selective Service Act, 2. Additional exemption for service pay Personnel below the grade of a commissioned officer now receive an additional exemption of service pay of $250 for & single person and $300 for a married person. Both the House and Senate Bills raise the amounts of this additional exemption and both Bills make the additional exemption available to all members of the armed forces, irrespective of rank. The House Bill increased the additional exemption for service pay to $3500 which amount is however reduced by the per- sonal exemption. This additional relief was made retroactive to all service pay received after December 31, 1941. The Senate Bill made two changes in the House Bill: (i) it lowered the additional exemption to & flat amount of $1500 which however, 18 not reduced by personal exemption; and (2) the additional relief is made applicable only to taxable years beginning after December 31, 1942. Regraded Unclassified 56 - 2 - The relief under the House Bill discriminated against married persons since the additional exemption was to be re- duced by the personal exemption. Since the personal exemption 1s higher for a married person than for a single person the amount of the additional relief under the House Bill for a married person 1s less than for a single person. The relief under the Senate Bill continues the present more favorable treatment of 8. married person as compared with a single person. May 19, 1943 Regraded Unclassified 57 May 19, 1943. Dear Mr. Surrey: I have just been informed that your draft status has been changed from 3A to LA and that, unless some action is taken to prevent it, me will have to anticipate the probability that you will be inducted into the armed forces soon. It would be farthest from my thoughts to wish to deprive you of the honor of military service while our country is at war, but on the other hand I be- lieve you would want to serve in the pout where you can be most useful. It is my judgment that for the time being and until this year's tax legislation is completed that post is the one you 70W occupy, Tax Legislative Counsel to the Treasury Department It would be totally impossible to replace Vor quickly with anyone having anything like adoquate experience in this field, and the situation is further compli- cated by recent losses in your division which have denuded it of experienced men. I have therefore determined to ask your draft board to defer you on occupational grounds for a period of six months and it is my hope that you will, even at sacrifice of your own inclinations and desires, consent to remain and to carry on your present work for at least that period. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Mr. Stanley S. Surrey Tax Legislative Counsel Treasury Department Washington, D.C. Initialed CC to Thompson Regraded Unclassified 58° TREASURY DEPARTMENT FISCAL SERVICE BUREAU OF ACCOUNTS WASHINGTON OFFICE OF THE COMMISSIONER May 19,1943 TO THE SECRETARY: Participation of Treasury Department employees on Pay-roll Savings Plan April 1943 Number on roll 73,844 Number participating 70,215 Percent 95.1% Gross monthly pay roll (including overtime) $15,629,533 Monthly allotment for bonds 1,647,271 Percent 10.5% Your employees are doing all right. Departmental Chairman FORVICTORY BUY UNITED STATES WAR BONDS AND STAMPS Regraded Unclassified 59 May 19, 1943 Ted Gamble Secretary Morgenthau I think you ought to begin to build your organization, and I wish you would talk to me about it. If there are any particularly good men in the field, I wish you would bring them in as your assistants. I think you ought to have two or three very strong assistants. Please speak to me about it. Panished Regraded Unclassified 60 May 19, 1943. Dear Stuart: Now that your status has changed from that of a full-time worker on war financing in the Treasury to the role of adviser 05 special prob- lems that will be coming up from time to time, I want to express my very real gratitude for the fine help you gave to the Treasury and to me during the Second War Loan Drive. Às Head Advertising Specialist you have handled the difficult matters with which you had to deal in & thoroughly efficient way. I appre- ciate greatly the fine loyalty and devotion you displayed, which have made it a continuous pleasure for all of us to work with you. I am happy that you are able and generously willing to continue to give us the benefit of your advice and experience. Sincerely, (Signed) H. Morgenthan, 39 Secretary of the Treasury. Mr. Stuart Peabody The Borden Company Copies in Diary 350 Madison Avenue New York, New York. (initialed CC to Gaston) Regraded Unclassified 61 May 19, 1943 Dear Mr. Edson: In reviewing the activities of all those who helped us in the promotion of the Second War Loan, it is apparent that no one did more enthusiastic and effective work than the representatives of the Press and Feature Services here in Washington. We are grateful to you, and I would appreciate your passing on to your staff our sincere thanks. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. Peter Edson, Newspaper Enterprise Association, 1013 Thirteenth Street, N. W., Washington, D. C. Copies in Diary SPeabody:ik Regraded Unclassified 62 May 19, 1943 Dear Mr. Wilson: In reviewing the activities of all those who helped us in the promotion of the Second War Loan, it is apparent that no one did more enthusiastic and effective work than the representatives of the Press and Feature Services here in Washington. We are grateful to you, and I would appreciate your passing on to your staff our sincere thanks. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. Lyle C. Wilson, Chief of Bureau, United Press Association, National Press Building, Washington, D. c. Copies in Diary SPeabody:ik Regrade Unclassified 63 May 19, 1943 Dear Mr. Miller: In reviewing the activities of all those who helped us in the promotion of the Second Mar Loan, it is apparent that no one did more enthusiastic and effective work than the representatives of the Press and Feature Services here in Washington. We are grateful to you, and I would appreciate your passing on to your staff our sincere thanks. Sincerely, (Signed) H. Morgenthau, 39. Secretary of the Treasury Mr. Paul Miller, Chief of Bureau, Associated Press, Evening Star Building, Washington, D. C. Copies in Diary SPeabody:1k Regraded Unclassified 64 May 19, 1943 Dear Mr. Ralph: In reviewing the activities of all those who helped us in the promotion of the Second War Loan, it is apparent that no one did more enthusiastic and effective work than the representatives of the Press and Feature Services here in Washington. We are grateful to you, and I would appreciate your passing on to your staff our sincere thanks. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. Henry D. Ralph, Room 1224, National Prese Building, Washington, D. C. Copies in Diary SPeabody:ik Regraded Unclassified 65- May 19, 1943 Dear Mr. Helms In reviewing the activities of all those who helped us in the promotion of the Second War Loan, it is apparent that no one did more enthusiastic and effective work than the representatives of the Press and Feature Services here in Washington. We are grateful to you, and I would appreciate your passing on to your staff our sincere thanks. Sincerely, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Mr. William P. Helm, United States News, 2201 M Street, Northwest, Washington, D. C. SPeabody:1k Copies in Diary Regraded Unclassified 66 BOARD OF ECONOMIC WARFARE OFFICE OF EXECUTIVE DIRECTOR WASHINGTON, D.C. May 19, 1943. The Honorable, The Secretary of the Treasury. Dear Mr. Secretary: Enclosed are the minutes of the meetings of the Board of Economic Warfare which were held on March 11 and May 6, 1943. If there are any corrections which you care to suggest, please let me know. Sincerely yours, Milo Perians Executive Director Enclosures Regraded Unclassified Minutes of the Meeting of the Board of Economic SECRET Mariare 67 Held March 11, 1943 at 10:00 a. m. A meeting of the Board of Economic Warfare was held in the Vice President's Office in the Capitol Building at 10:00 8. m. on March 11, 1943. Those present at the meeting were: The Vice President, Chairman of the Board Mr. R. P. Patterson, representing the Secretary of War Itr. Adlai Stevenson, representing the Secretary of the Navy Mr. L. A. Wheeler, representing the Secretary of Agriculture Itr. Wayne Taylor, representing the Secretary of Commerce Mr. Arthur Van Buskirk, representing the Administrator, Lend Lease Administration Also present at the meeting were: Mr. E. G, Collado, State Department Mr. Harold H. Neff, War Department Dr. W. Y. Elliott, War Production Board Mr. E. M. Burnstein, Treasury Department Mr. John McClintock, Office of Coordinator of Inter-American Affairs Dr. Herbert Feis, State Department Mr. Milo Perkins, Board of Economic Warfare Mr. E. W. Gaumnitz, Board of Economic Warfare Mr. A. F. Luxford, Treasury Department The Vice President announced that he was leaving for South America on March 16 and would be away for about six weeks. He suggested that during his absence regular Board meetings not be scheduled but if necessary meetings would be celled by the Executive Director at the request of any Board member. Axis Shipping in the Mediterranean The Vice President requested Mr. Perkins to comment on the report, "Sum- mary of Axis Shipping Situation in the Mediterranean", copies of which were made available at the meeting. Mr. Perkins pointed out that a con- tinuation of the rate of sinkings would mean the virtual elimination of Axis shipping in the Mediterrenean in about three months. "hile total elimination of Axis shipping was of course not to be expected, discussion served to emphasize the importance of drestically reduced shipping, per- ticularly on the obility of the Axis to maintain troops in North Africa. Lend-Lease- REW Agreement Mr. Perkins stated that he end Mr. Van Buskirk wished to report on the pro- gress made between the Office of Iend Lease Administration and the Board of Economic Warfare with reference to verious problems of administration involving the two agencies. He referred particularly to the February 16 letter signed jointly by himself and Mr. Stettinius, copies of which had been made ovailable. Regraded Unclassified 68 griefly, he stated that the agreements between the two agencies had served to clarify Juriedictional questions. It per indicated that the division of countries BE between Land Lease and 7. =. ". vms made primarily on the could appreciate the interest of the Department of Welculture in connection basis of relative volume of Lend Lease and commercial shipments, although with any development of food supplies in n foreign country. on the one the countries in which there THE active fighting were generally regigned hand with n.n. increasing general food shortage, It was important that this to Lond Leose at present. It was pointed out that through an arrangement government take 00 strong 5. position os possible in the development of foreign with the Top Production Foord one of the two agencies presents the program food supplies. It was also recognized that there might be criticlam of pro- for exportation to the "or Production woard, including exports under Lend grans directed towards the development of foreign food supplies by those Jasse on sell 05 thom by private exporters. It vos emphasized that over- interested in the production of compating domestic food Items. all country programs were now being developed on a bosis similar to that which has been in effect IUP Latin American countries with joint review of Wheeler stated that the Department of Agriculture was not hesitating in country programs. The necessity for closer screening and coordination or the support of food developmental work wherever prootical. It was elso commity programs and shipping programs made it desirable that country Auggested that full consideration should be given to the possibility of de- information be more comprehensive under the greement between Lond Lense veloping and procuring food supplies even though the shipping situation would and 7. Arrangements were being made for foreign personnel with not allow immediate shipment, such action of course so be limited to como- both agencies boing represented where both were involved in shipment. dition which could be stored. Ur. Yes Tuckirk stated that reciprocal oid, mentioned in the third part- There HEB considerable discussion of the effect on production of the apporent groph of the Memorandum of Agreement of February 16, 1943, wis still n policy of the Combined Boarde in recommending division of the world as be- subject for further discussion. Rr. Porkins pointed out that from 30m tween Great Britain and the U. S. for procurement and developmental purposes, points of view It was desirable in countries where Lond-Loase WSB being both for food end non-food items. urtended that payments for importe be handled by Reverse Lord Taese. A danger, homever, in such precedure was that the foreign government would Several members indicated their fueling that such division of area tenãod to then Dond to booome the procurement agency and middle be inclined to be result in less aggressive action then would be the caso otherwise. Dr. loss aggrossive thon would be the case with purchases boing mide directly Elliott stated that more aggressive action would probably be secured if by U. 3. representatives, U. % representatives were stationed in countries which had been ellocated to the British for procurement purposes. Dr. Elllott also stated that Mr. Elliott redood the question no to payment for goods which MeΓo stock- trade was more and more B matter of barter, DO that it WBB important that pilod in a foreign country where produced, questioning the desiribility of precurement and dovelopment be closely related to supplies being shipped such payment. from the U. S. This Fould of course mean a close programming of supplies AS botwoon Lend Lorse and the Boord of Economic "arfore for those countries Mr. Wheoler mised the question of whether the acmo division of countrice which received e part of their goods under Loud Lease. For North "frica for the purpose of the dotormination of requirements and presentation to It. Ven Buskirk pointed out that through the North African Sconomic Board the ", P. 9. eas in offict =1th refurence to food end niso reised the on which both Land Leeso and B. E. 11/- were represented the situation we question 05 to the position of the Foreign Relief and Rehabilitation such that both development and supplies could be closely coordinated. Hr, Division of the Department of State, Answoring 15, Thoolor, Mr. Porkins Whaeler doubted whether the North African organization would met the pro- stated that the division of countries with reference to food Was the arma blom, suggesting that 5 trading company which could both buy and soll would is for other materials, It who also indicated that the Relief and Be- be necessary. Other nombers of the Boord, however, thought that problem acbilitation Division had thus far presented DO requirements although the could be handled through the U. 3. Commercial Company. status of that Division and its relationship to requirements WIS not cloor. Mr. Von Ruskirk stated that shipments to North Africe had boon limited to Itr, Fois stated that the quostion of procurement and development es prize those Items and quantities pproved by Genorel Eisenherer's stoff, He crily a natter of internel U. 5. organization. It von his feeling that the assugnd that the Roliof and Rohabilitation Division would be concerned U. S. bed been somewhat Incking in aggressiva action in sono countries ro- porticularly with the distributive phases in the North Africon gres, gardless of whether those countries had boon allocated to the British for procurement and development purposes. Re pointed out that North Africe wes Mr. Perkins also pointed out, with reference to North Afrion, that the now open to the U.S., that West Africa had boon open for constime, and that in volume of foodstuffs produced end procured would be dependent in part upon the Bolgium Congo the U. S. had boen party to en arrangement for the stimule- the shipment of consumer goods to that area. If consumer goods were in- tim of cobelt production. Re therefore observed that failure to secure aggres- portant, it would of course require e close cooperation in the handling of bo sive action wes quite definitely immobility on the part of U. S. agencies rather purchases within the area and shipments to the aroa. Mr. Derkins stated that M + Regraded 69 SECRET then = matter of being foreclosed by ellocation of territory to the gritish. Minutes of the Meeting of the Board of Economic Warfare Dr. Elliott stated that his generalization was bnsed on specific instances not Held May 6, 1943 at 10:00 B. n. thome instances léd him to believe that where the Pritish were designated as sole purchasers, efforts to increase production were possive. He referred A. meeting of the Board of Economic Warfare man held in the Vice President's to pyrethrum, sisol, and shellne. Mr. "heeler stated that the territorial office in the Canitol Building at 10:00 n. m. on May 6, 1943, allocation problem had also been one -1th which the Combined Food Doord had struggled nd stated that he would like to seo some procedure worked out under Those present: thich any they designated 38 sole purchaser would not be open to criticism for lack of aggressive Action by the egency not Mosignated. The Vice President. Chairman of the Board Mr. Dean Scheson, representing the Secretary of State to, Fois indicated that in the enso of Spain, Portugal or Turkey concurront Mr. Harry White, representing the Secretary of the Treasury action has boon secured on e coordinated basis end Dr. 3111ott sugmitted Mr. R. P. Patterson, representing the Secretary of War that the possibility of extending that type of arringoment abould be explored, The Secretary of the Navy The Secretary of Agriculture The 7100 President suggested that it might be desirable to heve e sub-con- Mr. Wayne Taylor, representing the Secretary of Connerce mitter report on the problems involved in oros clloration, including a ro- Kr. Nelson A. Rockefeller, Coordinator of Inter-American Affairs empitulation of the ponsibilities of dovelopment and produrement, na wall Pr. Donald M. Nelson, Chairman, Tar Production Board ne to suggist the procedure to be followed in determining -llocations. Mr. Pernhard Knollenberg, representing Administrator. Administration Lend Lease The menting adjourned nt 11:05 1, N. In addition, the following persons were present: Mr. Winfield Riefler. Board of Economic Tarfare Kr. -. L. Clavton, Department of Commerce Mr. Adlai Stevenson, New Department Mr. Harold H. Neff. "Tar Department Mr. Herbert Feis, State Department Mr. Mr. John Lockwood, Office of Coordinator of Inter-American Affairs L. A. Wheeler, Department of Agriculture Mr. William Ratt, Tar Production Board Mr. John W. Pehla, Treasury Department Mr. John Lovitt, State Department Mr. Henry Labouisse, State Department Mr. Milo Perkins, Board of Boonomic Marfore Mr. E. -. Goumnitz, Board of Economic "arfare Mr. W. T. Stone, Poard of Economic "arfar" The Vice Warfare. American Embassy in London, who has been -orking report. closely President announced that Fr. Tinfield Riefler, our Minister of Economic on blockade matters was present and prepared to make n progress reviewed briefly the background of blockade work -ith reference nursurd Mr. Riefler within the blockade area. statine that the nolicy and the to the neutrals that of securing maximum supplies for the United Nations indirectly. had minimum been of assistance and supplies to the Axis directly or Regraded Unclassified 70 Sweden Mr. Riefler referred to the Board resolution of last November 12 relating to trado with Sweden. In conformity -ith that resolution U. S. representa- tives had been abrond checking into the factual material. Be stated that the authorities in Sweden had made data freely available and that unon the completion of that work Smedish representatives were invited to London for the purpose of negotiating n. new agreement with the British and U. 5. re- prosentatives. In general the objective of the U. S.- n. K. authorities FRE to reduce as for as possible Swedish assistance to the Axis, increase or maintein assistance to the U. S. and 11, K. The U. S. pronosal is in the direction of supplying so-called basic rations in return for the com- nlete elimination of Swedish credit to Germeny, a limitation of iron ore shipments on B. ratio basis with the conl received from Germany, B. reduction of Swedish exports to any other of the blocknded countries to the minimum absolutely necessary for barter purposes, and a. stoonnge or reduction of the German tronsit traffic. Mr. Riefler reported that on the matter of German transit traffic the Smeden have agreed that rether than having tt included in the formal agreement they would prefer to have it understood that the rest of the agreement be based on the elimination of German tran- sit traffic. In the event that it were not mliminnted, -6 -ould be at 11- berty to modify the agreement. In response to questions, Mr. Riefler nointed out that the Gothenburg traffic -RE atooned by Germany After Smeden being pressed by the U. S. and Britein agreed to release two Norrecion shine et Gothenburg. Mr. White pointed out that the decision in that case rested finally with Germeny. Mr. Riefler noted, horever, that Smeden VVLE in effect under n. double block- ade, no that while both Germen end the United Nations had certain negative noter, neither me in a position to control Smith trade completely. It -as generally agreed that Seeden "P.S be no means P. from sgent, -BE attempt- ine to avoid Germen invasion. but -no dependent on both Gormany and the United Nations for certain sunplins. end -DA in - -osition to bergain -ith- in limits of nossibly 15 to 20%. It FREE "1en aeroed that Garman leverage FRE greater then that of the United Netions. Mr. Riefler pointed nut that from - United Nations standmoint. adventages have been geined from Sreden during the Inst your. 1. Ptx since the Germen invasion of Normy, the Smodes have metrolled the Smedish const end have convoyed their orn vessels -ith German shipe no longer allowed to join the convoy, the Sredish natrol apporently being directed nt the possibility of n sudden Germen invasion. Without the oil -hich PRS going to S-eden for use of the Sredish Navy, Sreden -ould be stopped from F. continuation of its netrol. Furthermore, Sreden - increasine its outrut of military sunnlies, which supplies pore being used entirely by the Swedish Army end Nevy. Ac- turlly the Swedish armed forces has been built un to about 600,000 men- It is recognized that while Sreden -no in no position to successfully reaint -2- Regraded Unclassified 71 German invision, on the other hand an attimnted invosion "ould undoubtedly ba not -1th resistance. Mr. Ricfler nointed out also that If Germany had Switzerland foressen the developments of the last year in Studen Germany "ould undoubt- odly have occupied Steden following the Normation commaign. with reference to Switzerland, Mr. Riefler stated that in 1941 the British had limited shipments to Switzerland through the blockade to food and fod- Discussion developed that trade -1th Smeden - of some importance. Cortain der and had atternted to secure an agreement limiting Swice products eo- itoms not Important from e tonnage bosis -ero of considerable importance, ing to Germany. mainly, arus and machinery. In 1942 we entered the negotin- norticularly such items e.g bell benrings and share narts for Sendish souin- tione through the Blockade Committee. Our objectives were the same no sent. Mr. Nolson nointed out that -hile the 11. S. -ne no- supplying Eng- those of Britain in attempting to secure a reduction of arma and machinery. land -ith n. rejor nartion of ite machine tools and carts, the procurement of ronnir parts from 5-medom for Smedish machines in England FRE of consid- Last June - began to cut supplies although we did continue to allow certain emble innortance in relieving U. 5. industry. Mr. Ratt Also indicated products to go through the blockade, securing rainly machine tools which that -hile the United States could sunnly various tynes and sizes of bone- were going to Ruscia, Britain and the United States. In terms of tonnage inge It -ould add to the domentic burden. "e had not secured B very lerge volume. It PVLE nutrond that Germany The of course procuring naterials, principally In July it anneared that the negotiations very making progress. Am negotia- would by in Gormany's interest. iron and steel thich "ore of grunt importance And any increase in summly tions proceeded, however, it became apparent that the Swins, however, were stalling. In December negotiations were broken by the 5-1ns leavine London and returning to Switzerland. In January of this year Germany asked for en Mr. Porkins reviewed the notion of the 200rd ot its monting in November, increase in materials from S-itzerland and the S=1=0 refused, negotiations At which tine e orogram had born outlined under rhich my mero to attennt being broken off. About thre- meeks MRO Germany reduced the coal sunply to grin the objectives reviewed by Mr. Hofler in his Introductory state- going to S-itzerland and it then andenred that the Swies proposed to com- nent and in return for which me -0In to nerve to the summly of so-called nlete deliveries on old German contracts, "mgree to n ner rate of sunnly bneic retions. The matter and been referred to the Chiefs of Staff, the somerhas less then the rate contained in the old agreement and grant new had agreed that TO should proceed -ith Itrms A to 1. of that November oro- credits in return for German =ssurances in regard to coal shipments. A. posel. be but that the Chiefe of Streff had surgested that no further oil should review of the pronosal disclosed that under it the Snise would increase AC- turl deliveries over deliveries last year. As A result of the DPF develop- horever, two tenkers of oil had been Allo-ed to en -ithout concessions shipped until definito concessions had been secured from Studen. Finally, nent B. note has been prepared for delivery to the Shise protesting the beving me hour received, rithough followine the relense of the tankers, it proposed agreement -1th Germany and informing the Swine that All nevicerts na traffic in me out by the Comman so that TO "nte in ~hout the anne monition found impossible for the Maragien whing to mil, And the Gothenburg end export licenses *ill be suspended 14 drys after presentation of the note nending clarification of their relationships -ith Germany- no military successes stom and the meltion of Germany became SAME November no for FLA negotiations - concerned. At the time Discussion developed the fact that Switeerland FRE summlying things of neter- worker, it sononred thet the Y. 5. pressure should be incroased. relatively With 101 mlue to Gerrany, that goods going through the blockede -are of innor- tonce and that certain suppline which - mere moeiving from S-itzarland diminished, strengthened Studish mosition, the prohebility of Garman invesion would n. be "ord of grant importence. The only direct leverage "ne that of food supplies. Mr. Pehle stated that Treasury had great difficulty in determining the fl- ment There from me some discussion of the nossibility of attentine noncial manimulations of the 5-1ss und enge receiving little cooneration -ith the Stips in clarifying the credit situation. difficult nov. Into that oron. It TRE Report, however. that it would be forene Studen -1th reference to assistance takens should United to got n Nations' cormit- It FBS cloar that the situation -1th reference to Switeerland 18 -ore- then to got n. commitment thich "mild be Sinding. it has been at any time. with the next move being un to the S-ies. however, Mr. lines previously outlined, this owinion not of nlone There the general feeling there should be e continuation necotintions Sprin and Portugal any traffic Patterson narticularly notine that the Amy being unanimous Mr. Riefler pointed out that the blockede problem -1th reference to Spain -1th Stoden no long na it -no giving Any support "no opposed to Germany, to and Portugal FREE much less pressing than =1th Sreden and Sritzerland. The trade with these countries is registed under sugnly-purchase agreements -hich have been reasonably antisfectory. These programs are designed to secure those goods which Are preemoting from the enery, euch no -olfram, -3- Regraded Unclassified skins and moolen goods and those needed for supply reasons by the United Nations and on the other hand to furnish for political and military reasons goods needed to maintain FL minimum wartime economy. He pointed out parti- cularly the importance of "olfram to Germeny and also that with reference to Spein and Portugal the objective "PS to reduce German credits. Last fell it appeared that progress VIP.S being made on the credit problem but upon German occupation of all of France, Spain continued its credits. At the present time the situation looks somewhat better. There TAS some dis- cussion of the volume of goods being redeived from Spain relative to the volume being supplied, the ratio for the last half of 1942 being quite favorable in terms of dollars. Mr. Patterson raised the tion 88 to the control of betroleum being supplied and Mr. Riefler indicated that he believed control "as ouite satis- factory. Mr. Feis raised the question RS to the completeness of the statistical in- formation on oil. It "as also developed that Salazar of Portugal "RS a particularly hard bar- gniner who mas interested in his country, greatly concerned with its Dosi- tion and somerhat resentful because it was not possible for him to build un stocks for price control purposes. With reference to Snain, it "ES indicated that while Franco "AS pro-German, Germeny had not been delivering promised supplies, so that the position of those elements in Snain favorable to the United Nations PAS being strength- ened by supplies being made available through the blockade. The meeting adjourned at 11:40 A. M. -5 Regraded Unclassified 72 MAY 19 1943 Your Excellency: I an very happy to learn of the interest the Holy See is taking in the plight of the Jewish people in Europe. I as confident that your continuing interest through the difficult times ahead will alleviate a great deal of human suffering and misery. With kindest personal regards, I remain Most sincerely yours, (Signed) Henry Morgentheu, Jr. To His Excellency, The Most Reverend Anleto Giovanni Cicognani, D.D., 3339 Massachusetts Avenue, Northwest, Washington, D. C. JLS:eh TS Regraded Unclassified 73 DEPARTMENT DELEGATION 3339 Massachusetts Avenue UNITED STATES OF AMERICA Washington. Д.С. N° 581/42 May 15, 1943 TAIS NO. SHOULD or PREFIXED TO THE ANSWER My dear Mr. Secretary: Mr. Myron Taylor recently presented to me a copy of a memorandum written by a certain Doctor Erwin Taussig on the conditions prevailing among interned Jewish civilians in Italy, informing me at the same time that the memorandum had also been forwarded to you on the request of the writer. Since the memorandum suggests the intervention of the Holy See, both to impede the deportation of these unfortunate people to Poland, and to obtain their transfer to other terri- tories in the Near East, Africa or South America, I wish to assure you that the Holy See 1s constantly using its good offices on behalf of these victime of the war and of racial persecution. In fact, late in December 1942 His Eminence, Cardinal Maglione, Secretary of State, asked me to assure Rabbi Rosen- berg of New York, in response to an appeal of the Union of Orthodox Rabbie of America and Canada, that the Holy See was continuing to do everything possible for the Jewish people of Germany. More recently, in March 1943, the Royal Yugoslav Embassy in Washington presented the sad case of 15,000 Yugoslav Jews interned in Italy, and in imminent danger of transfer to Poland, About the same time Mr. Taylor, on request of Doctor Stephen 8. Wise, asked the intercession of the Holy See on behalf of Jewish internees. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury Regraded Unclassified 74 Late in March I received Rabbis Silverstone, Kalmanowitz, and Metz, and in conformity to their request, as on each of the previous occasions I communicated with His Eminence Cardinal Maglione, stressing the need for immediate and effective action to impede the deportation of Jewish internees from Italy. On at least four different occasions, in these last few months, I have received responses from His Eminence assuring me, and asking me to inform the interested parties, that the Holy See has done and continues to do everything in its power to alleviate the suffering and distress of these people, and to prevent their falling into even worse circumstances. While His Eminence has not given me detailed accounts of the measures taken, I can assure you that every elightest opportunity 1s seized to help these unfortunates. Of course the transportation of these people to other countries meets with many difficulties, but in this field too the Holy See has effectively helped and facilitated the emigration of many Jewish refugees from Europe. I have written the foregoing that you might be apprised of the humanitarian work that the Holy See has done in the past, and will strive to do in the future for all victims of the war and of racial prejudice. If any case should come to your attention, wherein the assistance of the Holy See may be of good service, please do not hesitate to call upon me and I shall cooperate to the fullest. With the assurances of my highest consideration and of my deep personal regard, I beg to remain Yours very sincerely, G Archbishop of Laodicea Apostolic Delegate Regraded Unclassified 75 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Secretary Morgenthau May 19, 1943 TO FROM Frances McCathran CONTROVERSIAL ISSUES BEFORE CONGRESS 1. Tax: Pay-As-You-Go - By a vote of 202 to 194 the House yesterday turned down Representative Knutson's motion that House conferees be specifically instructed to accept in a joint conference with senators the Senate-approved Ruml Plan. This third House defeat for the Ruml Plan lets Representatives Doughton, Cooper, Disney, Dingell, Knutson, Reed, and Jenkins, the conferees, go to conference without their hands tied and free to work out a compromise on the differing House and Senate versions. Much of the House debate yesterday centered around whether the President intends. to veto the Ruml Plan, if it is sent to him. Representative Doughton claimed the President's statement that he could "not acquiesce" in skipping a. whole year's taxes could mean only that he had every intention of vetoing such a measure, but Representative Knutson replied equally heatedly that this phrase could mean the President, while not agreeing, would let the bill become law without his signature. But whether the House was convinced by Doughton's argument or not, general consensus of opinion is that the influence of the President's letters to Representative Doughton and Sena- tor George swung enough of the "borderline cases" to the Majority party to deal what is generally believed to be the knockout blow for the Ruml Plan. But although the leading conferees from both the House and Senate, consistently opposed to skipping a full year's taxes, will probably see that the Ruml Plan does not emerge from the conference, chances of a compromise may be equally deadlocked for, as Edward Ryan observes in the Washington Post this morning, "there is no clear majority for anything. The joint con- ference is expected to meet on the problem after the Senate Finance Committee has voted on the Reciprocal Trade Agree- ments Act, which they are expected to do some time today. 2. Deficiency Appropriation Bill - Issues which have come in for much criticism, both outside and inside Congress, are now embodied in certain clauses of the 134-million dollar Regraded Unclassified 76 urgency deficiency bill, which was passed yesterday by the House and sent to the Senate. One of its most controversial amendments, sponsored by the Kerr Subcommittee, denies the payment of salaries, and thus Federal employment, to Lt. Governor Robert Morse Lovett of the Virgin Islands, and Dr. Goodwin B. Watson and Dr. William Dodd, Jr. of the FCC, on the grounds that all three have been members of organizations serving as "fronts" for communistic activities. Secretary Ickes, however, defends the record of Dr. Lovett and the FCC has come to the support of its two employees. Another amendment to the deficiency bill prohibits the Presi dent from using any of the emergency funds, provided in the act, for the expenses of either the Farm Security Adminis- tration or the National Resources Planning Board, both of which have been the targets of much Congressional criticism. Note - "The fight that is steadily growing" between the Ad- ministration and Congress is discussed in Merlo Pusey's column "Wartime Washington" in today's Washington Post. Regraded Unclassified 77 SECRETARY OFFICE OF TREASURY 1943 MAY 20 PM 1 47 TREASURY DEPARTMENTNOR TO BE RE-TRANSLITTED COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL NO. 164 Information received up to 7 a.m., 19th May, 1943. 1. WILITARY TUNISIA. Total number of prisoners counted to date now 224,200 BURMA. ARAKAN. 16th/17th. Our Raiding Parties landed at Jap* anese occupied MAUNGDAW and encountered strong opposition. 18 out of 20 Japanese were killed in attempting a bayonet charge. 2. AIR OPERATIONS WESTERN FRONT. 17th/18th. Out of 8 Torpedo Hampdens sent out 3 sighted and attacked a convoy off FRISIAN ISLANDS. 2 ships were later seen in the vicinity with the decks awash and smoking heavily. 2 Hampdens missing. 18th. 12 Bostons attacked ABBEVILLE Airfield and 8 Typhoon Bombers POIX Airfield. 5 Typhoons missing. 18th/19th. Aircraft despatched - Seamining - 17, Intruder 27, Anti Shipping - 2. 12 Enemy Aircraft operated against LONDON, 1 F.W. 190 was destroyed by a Mosquito. TUNISIA. Between 14th and 16th inclusive, a total of about 30 enemy aircraft attacked BONE. ITALY. 16th/17th. Wellingtons dropped 38 tons on the Seaplane base at LIDO DI ROMA where hangars were set on fire. 17th/18th. Mosquitos car- ried out effective Intruder Patrols over Southern ITALY. BURMA. 16th. Mitchells attacked Railway Installations in the MANDALAY Area and 17 escorted Vengeance bombed Wireless Station on AKYAN Island. 3. HOME SECURITY 18th/19th. LONDON. Single Bomba were dropped in 6 outer sub- urbs and at 2 places in ESSEX. No serious incidents reported and 80 far only 2 reported killed. Regraded Unclassified 78 m May 20, 1943 MEMORANDUM FOR THE SECRETARY From: Mr. Blough In accordance with your instructions, I attended the meeting of the Joint Federal-Council of State Governments Committee on Taxation in Chicago Monday, May 17, 1943. More than half of the State members were present. A representative was present for the Bureau of the Budget. The subject discussed was the Gulick-Groves report made to you on Intergovernmental Fiscal Relations. The principal interest centered on the three-man board or authority recommended set up as a permanent agency pro- moting intergovernmental fiscal relations. State members of the Committee on Taxation seemed to feel that the three-man board idea was not a practical approach and that, at least for the time being, it would be better to try to accomplish the same objective through the Committee itself. An executive committee of five will meet in Washington in the next few weeks to decide on what organization and procedure to recommend as the most practical way of putting into effect increased Federal-State cooperation. I hope you will be able to see the Committee for a short time while they are here. I was asked to convey to you the assurance that the State people are in real earnest to accomplish something substantial and to take the question of Federal-State relations out of the faulty stage. I assured them that this end was the one you desired to see accomplished, I have some private doubts as to how much they really want to see accomplished. Some resentment - I believe not justified - was expressed at certain language contained in the report which was felt to cast a derogatory light on the Council of State Governments and its activities. This matter has been entirely smoothed over and certain minor verbal changes are being made in the report to meet the objections. RB Regraded Unclassified 79- AGENDA FOR THE BOARD OF ECONOMIC WARFARE MEETING TO BE HELD MAY 20, 1943 AT 10:00 A. M. ROOM 201, SENATE OFFICE BUILDING 1. Discussion of report on "Policy on Civilian Relief in the Blockade Area." Report attached. 2. Discussion of report entitled, "Modification of Export Policy for Gold Mining in Latin America." Report attached. Regraded Unclassified 80 BL-89 CONFIDENTIAL Copy 8 BOARD OF ECONOMIC WARFARE Blockade and Supply Branch Blockede Division POLICY 01° CIVILIAN RELIEF IN THE BLOCKADE AREA CONFIDENTIAL May 3, 1943 Regraded Unclassified 81 Conclusions THE and of Economic Warfare in pursuing the following Nic, nil wellef shipments to and within the blockede crea: 1. Except under certain existin arren events P- proved by the United States Government, no relief ship- tents involving the passage of goods through the blockede for distribution in any occupied country are permitted. Should strong evidence appear, ct any time, that shipments under such existing arrange- rents are proving of direct or indirect aid to the Enery, such shipments are not ,cruitted. 2. Relief shipments to neutral countries, for dis- tribution solely within such neutral countries, are permitted through the blockade, with the ap- proval of United St tes blockade authorities, only if adequate provision is tade for selection of those who ore to get the relief on the basis of need alone, end only in the absence of any strong evidence that such shipments are proving of direct or indirect aid to the enery. 3. Purchases end shipments of relief goods within the clocknde croo are permitted only with the approval of the United States blockade authorities, And only on the following conditions: that distribution is rode on the by sis of need alone and is properly safe- guarded; the the Enery vill derive no direct or indirect benefit therefrot; that those shiptonts do not conflict with the ;rocurement or preseption opor- stions of the United Nations; and that the relief is aborm to be of ,ositive value in prosecutin the yer. 6. The Acecutive Director of the Board, in cooperation with officials of other United States agencies, is teking steps to work out the plication of these principles in specific cases, and to ensuro the adoption and effectivo administration of an Anglo- American policy Llong the above lines. Regraded Unclassified 52 EXISTING POLICY AND PROBLEMS 1. Shipments Through the Blockade to Enemy or Neutral Territories Up to the present time, the joint policy of the British and United States Governments has been to prohibit shipments throu h the blockann to enemy or neutral countries of goods to be used for civilian relief. The only exceptions to this policy have been (1) the relief plan annoved by both governments in August 1942 for Greece, and (2) the International Red Cross medical aid program. The justification for making an exception in favor of Greece was the belief that the enemy could afford to permit civilians in that country to starve because of the absence of any significant resources in Greece which require a healthy working population. It was believed, therefore, that civilian reliof in Greece, which would not relieve the anomy of a burden it otherwise would carry, could be basod on principles different from those upplying to the other occupied countries. Shipmonts of limited quantitios of modical supplies, distributed under caroful safeguards in the occupied countries, have boon pormitted under the supor- vision of the Intornational Red Cross. During rocont months, the British and Unitod Statos Governments have boon undor groat pressuro to pormit an on- largoment of roliof shipmonts through tho blockado, principally for the civilian populations in Norway and Bolgium. The rocom- mondation mado above would provont such roliof oporations at present. Although thero are strong humanitarian roasons for pormitting rolief shipments through the blockado, it appoars Modical supplies are dofined as drugs of humanitarian application strictly and sololy, oxcluding products con- vortible to other usos or whose uso in modical practicu could not be dofined as humanitarian in offect. Tho rulo at prosont appliod pormits the shipmont through tho blockado to occupied torritorios of modical products which, it is bolioved, can bo of no matorial assistanco to the Enomy if diverted from tho intondod rocipionts and which the Enomy would not bo likoly to próvido in any case. Thus, navicorts aro not granted for bandages or cotton wool, blankots, and other toxtilo matorials, nor for oily and fatty substances, nor for critically valuable drugs, such as quinino, or for vitamins. Regraded Unclassified 83 - 2 - - 3 - :ortain that such shipments would result in direct benefits to the enemy and involve n fundamental breach in the block- 3. Recontly a now proposal for the shipment of ado, particularly since any permission granted to one refugee roliuf supplies from Turkoy to Yugosluvin government for such a relief progran would probably have to for civilian ruliof Via prosented to the be extended to all others. U. S. Government by the British Government, which had, in offoct, given its approval 2. Shipments Within the Blockade Area to to this plan. Neutral or Enemy Territories Cortain shipmunts from otto part of the blockudo aroa to Intrablockade relief shipments have been carried on for another may hovover, bo contrary to United Nations interesto Botte time. The British Government has taken the principal unless it is shown that such relief exports will not intorforu responsibility for approval, on the assumption that surplus with the procurement and proumption oporations of the British and United Statos Governments in the noutral countries and that food supplios of indigenous origin in neutral countries are generally available to the enemy in any caso and that this New distribution of the Poliuf supplies in oncer countries will Le Die least harmful method of conciliating the jovernments= 60 properly safoguarded ao that the Enomy will not derive any direct Sonofit. Bocause the funds available for procurument in-exilo which have prossed strongly for some rulief action. Thus, nmong the approved intrablockado roliof programs are and proumption in noutral countries are strictly limitod and the following: in may cases, in fact, insufficient to achieve dosired objuc- tivos, the uso of dollars or pounds for such rolief shipounts ay seriously interfere with United Nations purchasing activi- 1. The Bolgian Government in allowed Mes. In 50.10 cases, also, the foodstuffs or other materials 250,000 pounds sterling a month for cont from a neutral country to enemy territory for civilian the purchase in Portugal of foodstuffa (elief may tend to replace goods which the enemy would other- which are shipped in sealed cars to line supply to these populations in its own interest. In Bolgium and distributed there under addition, a proper solection of the commodities used in such supervision of the Bulgian Rod Cross. relief programs night enable the British and United States Ninety-oight percont of the shipments Governmenta to make their procuption operations more offective, consist of fish in brino and the bal- trius achieving a double objective. For these reasons, no un- ando of nuts and driod fruits, all qualified approval is ¿ivon to relief shipmonts from one part products indigenous to Portugal. of the blockade area to another. 2. Uno pound parculs are sent by mail from 3. lleed for Coordinating Policies and Portugal to individuals in various occu- Decisions of the British and United States Governments piod countries. The contonts of the par- cola are surdinos, nuta and dried fruits Civilian rolief programs necessarily have grave economic of Portugueso origin. The British Govern- implications. Thare in the danger that the blockado, much is mont has approved proposals for the becoming incroasingly offortive in woakoning the military power componditure of 3,000 pounds storling a of the Sucary, may be an rolaxed 10 to injure United Nations month for such parcola by oach of the anto esta. At the BILLO (100, the British and Initod States following governments: Bulgium, Mothor- Govermients facu strong prosence from the (overnmonts-in-oxils, lands, Morway, Poland, Czochoslovakia, which engue that roliof shipments will save the livos of and Drive Frunch. ayapathisors and hidden allies within the Enomy's stronghold, Under those circumstances, whatever policius or docisions are Similarly, the United States Government formlated on rolief quations 45 they uffect the blockado has approved the exponditure in Portugal should involve the joint rusponsibility of the British and of $12,000 a wonth oach by the Bulgian United States Governments. Unloss this is dono, the govern- Embassy in the U.S.A., the Joint Distri- may bo ablo, as in somo instances Ln tho past, bution Committoo for Poland and the to place upon the Unitod Status Government the solo rosponsi- Polish Amorican Council. bilit- for refusing thuir roliof proposals, just as bufore the United States ontorud the war the British Government was hold privarily responsible for a rigorous blockade policy. Regraded Unclassified 84 SECRET REPORT TO THE BOARD OF ECONOMIC WARFARE ON MODIFICATION OF EXPORT POLICY FOR GOLD MINING IN LATIN AMERICA 1. ECUADOR Document Security Section BOARD OF ECONOMIC WARFARE 30289 Day 20, 1943 8 Regraded Unclassified 85 PROPOSED RESOLUTION OF THE BOARD OF ECONOMIC WARFARE EAT 20, 1943 "WHEREAS special circumstances surrounding gold nining in the Province of El Oro, Republic of Ecuador, make it desirable that the rigid export policy with respect to gold mining abroad of February 11, 1943, be relaxed for the balance of 1943 with respect to Ecuador; "AND WHEREAS special cooperation on the part of the country and company involved have reduced the requirements to only 170 tons of supplies from the United States for the balance of 1943; "NO" THEREFORE BE IT RESOLVED that the Board of Economic Warfare permit the exportation of these 170 tons of supplies to the South American Development Company for the maintenance of re- duced operations in the Province of E1 Oro, Ecuador, for the balance of the year 143; "AND BE IT FURTHER RDSOLVED that these supplics be shipped from the United Statcs at the carliest possible moment, but in any case, prior to October 1, 1943." Regraded Unclassified CONSIDERATIONS SUPPORTING PROPOSED RESOLUTION 86 CONCERNING EXPORT POLICY FOR GOLD LINES IN ECUADOR. MAY 20, 1943 Juneral Statement The gold mines involved are located in the Province of El Oro, Republic of Equador, and are the propurty of the South American Development Company. The Province of El Oro is the southcrnmost region of Eoundor, and was the territory invaded by Peru in the "border incident" leading to the loan of à largo part of the territory proviously claimed by Ecundor. Subsequent to the scttlement of the dispute, and because of the dovastation wrought in the Province of El Oro, the United States Government undertook large scule rchabilitation work in El Oro, which work is now in progress. The ontire Province of El Oro is oconomically dt- pendent upon the mining activities of the South American Development Company. Some 20,000 people are directly affected, aside from the agri- cultural developments under the auspices of the Coordinator of Inter- American Affairs. The closing down of the minus there would therefore result in severe uncaployment and create serious coonomio distross. However, in addition, the scone of the Province 0.8 the theatre of war in the recent border incident magnifica the importanec of the region. The Government of Equador has apcoifically indicated its grave concern over the possible repercussions from ocssation of employment there, which would foroc the inhabitants to sock work clscwhere and thus virtually depopulate the Province, opening the way for another "border incident". The fear is very real, and apparently is not without founda- tion. The Requirements After several confortness, the representatives of of the the South American Development Company end the Loundor Gold Minus Government of Loundor agreed to ravise their list of requirements downward, and have submitted n. ro- visod list covering only BOMO 170 tons for the bulance of the year 1943. Their previous requirements ran between 1,500 And 2,000 tons E. year. They believe therefore that B reduction to 170 tons represents a nevere "outting to the bone" and WC agree with their stand. The ingineers and others qualified to pass upon the nutter con- our in the contention th t this reducts requirements to an absolute mini- mum for baro maintenance. Company and Government officials wished to to on re- cord that the yearly requirements, on a minimum basis, were 500 tons a year, and expressed the hope that somo way night be found for meeting those requirements in 1944 and 1945. Regraded Unclassified ECUADORE.N GULD LINING Gold Mining, Ecundor -2- 87 Supported by: Lotter from ,r. Olaf Ravndel, Assistant Chief, Division of Exports The Recommundation In view of the conditions as explained, and the and Requirements, Department of State, to Colonel Zieglor, Chief, vory special considerations surrounding the open- up rations Branch, dated Larch 24, 1943, which ronds, tions of the gold mines in Educator, particularly the proportics of the South American Dovelopment Company at E1 Oro "There is enclosed horewith a list or supplica for the Provinec in Ecucdor, WC recommend that the Board pass the resolution South American Development Company's mine situnted Lt to furnish 1/0 tons of supplies to the mince at El Oro, Loundor, for the Portovolo, Province of El Oro, Coundor, with n. gross weight belonec of 1943; and that the action taken be communicated immediately of 372,633 pounds consisting of matorials fully n-nu- to the Government of Lounder and the South American Development Company ractured, packed and ready for shipment. The Department so that appliention might be nado immediately for supplies needed. recommends that - departure be made, in this purticular onse, from the established policy of not granting shipping space for supplies consigned to gold mines, in view of the importance of this nine to the economy of the Province of D1 Oro. This recommendation 1a in no way to constitute procodent and la made purcly on the grounds of urgunt need and the fact that the matorials have been liconaed, manu- factured and are ready for shipment." Letter from 11. L. Batt, Vice Chairman, Yes Production Board, to i.P. Huctor Lazo dated Eny 11, 1943, which render "Confirming our telephone conversation with regard to the requirements of the South American Development Company, the Whr Production Board will not object to your recommendation and will nike every offort consistent with other claims to supply the small cmounts of material ne dcd." Letter from Mr. Melson Rookefoller, Coordinator of Inter-Andricen Affaire to life Henry / Wallow, Chairman, Bourd of Economic dated ky 12, 1943, which render "This Office has been informed th t =t the next meeting of the Bor.rd of Economic Thefere consideration will be given to the export of scrtin supplies for the South Imprican Development Company's gold mine in El Oro Province, Rounder. Tic have been advised by the South Amorican Development Company that they have requested five hundred tons of equipment per year consisting of dynomito fusts, cynnide, end cortain replacement parts for mining machinary. "As you are aware. WC have followed closcly the gold mining situction in c. number of the other American Republics in vi.w of our responsibility for such entrgency rohabilita- tion programs 28 might bc required in cooparation with the other governments in the event of widosprood unemployment due to occaption of gold mining operations. We are informed that five thousand workers are dircctly employed in the gold mine in El Oro Province and istimates t.s to the number of Regraded Unclassified -2- people dependent on this employment run from ten to fiftcen thousand. It has boon the objective of our Office to do everything possible to assist in maintaining the conomic and social stability of the other American Republics because of its importance to the offective cooperation of the Governments of these countrics in the prosccution of the war offort. "In this connection, the policy of this Office with regard to work rolief programs in countrics where gold mining operations may 00080 duc to look of replacement parts W.S expressed in our mcmorandum of January twonty-scventh to Mr. Hoctor Lazo, r.nd this policy will be followed if required in the cr.sc of Ecundor. There sooms to bc little question that the closing of the gold mine in El Oro Province would cause severe unemployment and crcato coonomic distress which might assume serious proportions. "If the Board of Economic Worfare should decide that the supplies requested by the South American Development Company ere to be shipped to Ecucdor, there would be no nood for this Office to undertake, in cooporation with the Ecundorern Government, a work relief program in the mining area. Should the decision bc reached that no equipment is to bc shipped to Eoundor, this Office is prepared to initinte such work relief programs GS may be required upon reccipt of necessary documentation from the Depart- mont of State, the Board 01 Economic Warfere, the War Production Board, and the Var Shipping Administration, C.S indicated in our statement of policy on January twenty- seventh, if the necessary funds are provided by the Congross in connection with our 1944 approprintion." 1943 MAY 18 AM SECRETARY OF TREASURY 301330 Regraded Unclassified 88 FROM: MR. SCHWARZ'S OFFICE TO: The Secretary OWI does not clear these Nugent talks because his job is not considered on a policy-making level, even though he has been allowed to discuss policy. Maxon of OPA says he will call our attention to future Nugent copy. I am attaching clippings on NAM opposition to Nugent's proposal. @ @5/v0 Regraded Unclassified 89 NEW YORK Herald Tribune MAY 19 1943 stokers and similar goods as soon Liquid Savings as production is resurned and it will be impossible to supply the Held Post-War total demand immediately. Unless something la done to limit de- mand, especially for consumers' Prosperity Key durables, the danger of inflation during the immediate post-war period was De treater than dur- ing the war. O. P. A. Aid Tells Retailers "On the other hand, there will Funds Could Bring Long be a tendency for most people to treat their war-time accumula- Period of Good Trade tions as reserves for rainy days, Special to the Herald Tribune sid age and dependents' protec- COLUMBUS, Ohio, May 18.- tion, and to confine expenditures to their current incomes," Mr. The tremendous fund of liquid sav- Nugent asserted. "To the extent Ings that is being accumulated now that this occurs, we are likely very could, "If properly channeled into soon after the war to face prob- consumption, produce a long period lems of chronic deflation similar of unparalleled peace-time pros- to those experienced during the perity," Rolf Nugent, director of 1930's. The rate of saving. hav- the Office of Price Administration's Ing reached levels close to 50 per credit policy office. told today the cent of total income payments, is second war-time conference of the Credit Management Division of the unlikely to fall back to pre-war level." National Retail Dry Goods Associa- What is needed. Mr. Nugent said. tion, meeting here in the Deshler- is & method of earmarking part of Wallick Hotel. our accumulating liquid savings "By the end of the war," Mr. for post-vear spending and offreg- Nugent said, "American families ulating The timing of thest EX- will have larger cash balances and penditures so that they do TO: all other liquid assets than ever be- come at /once. fore." "The plan of Installment sell- He quoted estimates by V. 8. ing for post-war delivery which I Woytinsky of the Social Security developed for the Office or Price Administration, which indicated Administration," he continued, that liquid savings of individuals "would help to relieve the Influ- will exceed $320,000,000,000 by the Lionary pressure un war time end of the war, victory is achieved prices, Increase the backing of in Europe in 1944 and in the Far post-war demand for consumers East In 1946. goods, and regulate the flow of "Besides," Mr. Nugent said, this demand. There may be bet- "families will be more nearly out ter ways of accomplishing these of debt than at any time during objectives. If so, they should he the last thirty years. Installment found and put into effect promptly, sales obligations, except for a few "Military victory will represent types of goods for which there is only the completion of the first continuing supply, will of the battle for the Four virtually disappeared; personal Preedoms. Even after we have de- loan debt will have been cut to feated the Fascist forces on the small proportions and all other battlefield. victory will not have forms of Individual debt will have been won until we can show that been substantially reduced." democracy can deal 45 effectively "These favorable circumstances as other political systems with the will not in themselves assure a problema of maintaining full pro- stable post-war prosperity," he duction and economic security. added. "On one hand, some part The war has brought about un- of our accumulated purchasing precedented distortions in nur power will undoubtedly come into economy. Effective peace-time l'e- the market for goods very progint. adjustments will require foresight, ly after the war, Millions of peo- clear thinking and bold and à pie will want to replace worn-out orous action." automobilian, refrigerators, wash- Ing machines, radios, oil burners. Regraded Unclassified 90 NEW YORK Herald Tribune MAY 20 1943 Installment Sales Plan For Post-War Era Scored The board of directors of the National Association of Manufac- turers announced yesterday its agreement with the opposition by Treasury Secretary Henry Morgen- thau jr. to various proposals of installment selling for post-war delivery, including the Nugent plan. The basic reason for the board's announced stand is the belief that any of the numerous "installment- selling-in-reverse" ideas would compete directly with the sale of war bonds. Members sald that in their opin- ton any such undertaking would tend to stifie the development and sale of new products after the war, would require double selling ex- penses. They said the program would result in increased sales after the war. The board also raised the ques- tion of who is to assume the risk of a possible sharp increase in the post-war price level. Regraded Unclassified 81 The New York Times. MAY 20 1943 OPPOSES USE OF BONDS FOR POST-WAR SALES N. A. M. Says It Would Stifle Creation of New Items The Nugent Plan and all other similar proposals of installment selling for post-war delivery were sharply condemned yesterday in a statement by the board of direc- tors of the National Association of Manufacturers. Four basic rea- sons for opposing this type of post-war selling were listed as fol- lows: (1) It would not result in more sales after the war; (2), the tendency would be to stifle the de- velopment and sale of new prod- ucts: (3), It would require double selling and double expense, and (4), It is in direct competition with the sale of war bonds. "When the public invests in war bonds it can devote the proceeds after the resumption of normal production to the purchase of any goods or services, which is not the case with future-delivery install- ment certificates under the Nugent and other plans. "There la also the question of who in going to assume the risk In case of a sharp post-war infla- tionary increase in the price leveh" Regraded Unclassified 32 NEW YORK Herald Tribune 20 S.E.C. Warns of Inflation Trend In Study of Individuals' Savings Unusual Proportion of Public's Income Still Going Into Currency and Demand Deposits, Agency Says; Reduction in Indebtedness Shown Special ta the Hereld Tribune public continued to put into cur- PHILADELPHIA, May 19-If rency and demand deposits," the the present pattern of Individuals' 8. E. C, analysis said. savings persists, with a high pro- "Additions to cash on hand and portion of income continuing to to checking accounts, amounting to $4,300,000,000. again consti- go into currency and demand de- tuted the largest component of posits, "the control of inflationary individuals' savings. From the be- tendencies will become increas- ginning of 1942 to the end of ingly difficult," the Securities and March, 1943. money in the hands Excahange Commission warned to- of the public (currency and de- day in making public an analysis mand deposits) increased by the of the volume and composition of unprecedented sum of $15,500,- saving by individuals in the 000,000, an increase of more than Enited States covering the first 50 per cent since December, 1941. quarter of 1943. "In view of the magnitude of The analysis showed that while the item. it may be well to recall the total savings by individuals in that additions to cash on hand the first quarter of 1943 declined somewhat from the high point and to checking accounts do not reached in the fourth quarter of constitute saving in the same sense as Increases in holdings of 1942, reflecting a small decrease In Income after taxes, neverthe- securities. or saving in other liquid less, after paying the largest tax forms. While part of the growth bill in history, individuals added in currency and demand deposits $4,800,000,000 to their cash and undoubtedly represents a rela- deposits. largely cash on hand and tively permanent form of saving, in checking accounts. and another provision for future At the same time they pur- payment of currently acuruing chased $2,600,000,000 in govern- taxes, there remains a consider- ment bonds, added $800,000,000 to able portion which represents only their equity In private insurance. n. temporary accumulation of mostly life Insurance, and reduced funds not eadmarked for Invest- their indebtedness other, than ment. that may at any time be murtgages, by $700,000. diverted Into consumption and ["The most significant feature of other channels. If such funds con- the pattern of saving during the tinue to grow at the present rate, first quarter of 1943, as in prior the control of inflationary tend- quarters, was the unusually high encies will become increasing:- proportion of Income which the difficult." Regraded Unclassified 33 TREASURY DEPARTMENT OFFICE OF THE SECRETARY May 20, 1943 CONFIDENTIAL Received this date from the Federal Receive Bank of Nov York, for the confidential inform- tion of the Secretary of the Treasury, compilation for the week ended May 12, 1943, showing dollar disbursements out of the British Empire and French accounts at the Federal Reserve Bank of New York and the means by which these expenditures were financed. Int. EMB Regraded Unclassified C 34 0 ? Y FEDERAL reserve BANK OF NEW YORK May 19, 1943 CONFIDENTIAL Dear Mr. Secretary: Attention: Kr. H. D. White I an enclosing our compilation for the week ended May 12, 1943, 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, /s/ Robert G. Rouse Robert G. Rouse, Vice President. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosure copy:kma:5/20/43 Regraded Unclassified BANK OF ENGLAND (BRITISH GOVERNMENT) DEBITS CREDITS Gov't Transfers to Proceeds of transfer let Incr PERIOD Expendi- Official Sales of from Offi- Other or Decr.(-) (-) Total Total Other Total Securities cial Aus- Total tures Canadian tralian Credits in $ Funds Debite Credits 10 Gold (Official) Debits (a) Account Debits Credits 3 Account (o) (d) (e) (e) (d) First year of war (g) 1,793.2 605.6 20,9 1,166.7 1,828,2 1,356.1 52.0 3.9 416,2 + 35,0 866,3(f) 1,095.3(f) +299.0 Mar period through 2,782.3 1,425.6 20.9 1,335.8 2,793.1 2,109,5 108.0 14.5 561.1 + 10,8 878.3 1,098.4 +220,1 December, 1960 Second year of war (h) 2,203.0 1,792.2 3.4 407.4 2,189.8 1,193.7 274.0 16.7 705.4 - 13.2 38.9 8.8 - 30.1 Third year of war (1) 1,235.6 904.8 7.7 223,1 1,361.5 21,8 5.5 57.4 1,276.8 +125.9 18.5 4.6 - 14.1 1942 % Sept. 5. Sept. 30 56.1 37.1 - 19.0 81,6 - 1, 0,5 20.5 60.6 + 25.5 10,1 0.4 - 9.7 Oct. 1- Oct, 28 46.7 27.4 - 19.3 57.5 - - 12,0 45.5 + 10.8 - 0.3 + 0.3 Oct. 29 - Doc. 2 96.6 35.5 61.1 83.7 - 5.5 78.2 - 12,9 0.2 0.3 + 0.1 - - Dec. 3 = Dec. 30 30.4 13.3 - 17.1 51.9 - + 21.5 - I - 8,0 43.9 - 1963 Dac. 31 Feb. 3 168.6 20.9 125.0 22.7 58.9 - 6.0 50.9 -109.7 - - - - 17.8 15.0 105.8 + 33.6 - Feb. 4 - Mar. 3 87.2 37.7 31.7 120.8 - - - - Mar. L- Har. 31 35.3 12,9 - 22.4 64.4 - - 5.0 59.4 + 29.1 - - - Apr. 1 - Apr. 28 37.0 16.3 a 15.1 - 20.7 87.4 - 72.3 + 50.4 - - - WEEK ENDED: Apr. 21 5.8 2.3 - 3.5 9.0 - 2,1 6.9 + 3.2 - 1 - If 28 12.3 P.4 - 3.9 14.6 If и 14.6 * 2.3 I If - - May 5 6.8 4.7 a 2.1 17.8 I - 1.0 16.8 + 11.0 - - - 12 65.0(1) 59.7(j) - 5.3 24.8(k) I - 12,0 12.8(k) - 40-2 IN - E Average Weekly Expenditures Since Outbreak of War See attached sheet for footnotes. France (through June 19, 1940) $19.6 million England (through June 19, 1940) $27.6 million England (June 20, 1940 to March 12, 1941) $54.9 million England (since March 12, 1941) 23.1 million (a) Includes payments for account of British Ministry of Supply Masion, British Supply Board, Control, and Ministry of Shipping, (b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the proceeds of official British sales of American securities, including those effected through direct negotiation, In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation of our securities through December, 1940 amounted to $334 million. (c) Includes about $85 million received during October, 1939 from the accounts of British authorised banks with lieu York banks, presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October, 1939 apparently represent current acquisitions of proceeds of exports from the starling area and other accruing dollar receipts. (d) Reflects net change in all dollar holdings payable on damand or maturing in one year. (e) For breakdown by types of debita and credits see tabulations prior to March 10, 1943. (f) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day. (g) For monthly breakdown see tabulations prior to April 23, 1941. (h) For monthly breakdown see tabulations prior to October 8, 1941. (1) For monthly breakdown see tabulations prior to October 14, 1942. (1) Includes $55.0 million paid to U. S. Commodity Credit Corporation; total represents largest weekly expenditure since November, 1940. (k) Includes $8.6 million deposited by British Ministry of Supply, and $1.1 million transferred from New York accounts of British authorized banks. Regraded Unclassified ACCOUNTS of Dollars) BANK OF CANADA (and Canadian Government) COMMO 714, DEBITS CREDITS DEBITS Transfers Transfers from Official Transfers S Proceeds British A/C Net Incr. to Official of (+) or Official of € Total British Others Total Gold For Own For French Other Decr.(-) Total British Other Total Gold Other Dec. (-) PERIOD Debite A/C Debita Credits Sales A/C A/C Credits in Punch(c) Debits A/C Debite Credite Sales Credits in First year of war (a) 323.0 16.6 306.4 504.7 412.7 20,9 38.7 33.4 + 181.7 31.2 3.9 27.3 36.1 30.0 6.1 + 6.9 Nar 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 + 6.5 Second year of war(b) 460.4 - 460.4 462.0 246.2 3.4 123.9 88.5 + 1.6 72.2 16,7 55.5 81.2 62.9 18.3 + 9.0 Third year of war (c) 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 - - 40.4 + 7.3 28,0 20,5 7.5 18.1 - 18,1 - 9.9 Oct, 1- Oct, 28 44.9 - 44.9 51.5 16.6 -' - 34.9 + 6.6 14.3 12.0 2.1 14.6 - 14.6 + 0.3 Oct, 29 - Dec, 2 56.5 - 56.5 80.8 14,4 - - 66.4 + 24.3 10,2 5.5 4.7 9.4 - 9,4 - 0.8 Dec, 3- Dec, 30 48.2 - 68.2 43.9 2,9 - - 41.0 - 4.3 14.1 8.0 6.1 11.7 - 11.7 - 2.4 1943 Dec. 31- - Feb. 3 52.5 - 52.5 217.1 - 125.0 - 92.1 + 164.6 16.2 8.0 8.2 17.3 - 17.3 + 1.1 Feb. 4- Mar, 3 35.1 - 35.1 101.2 - 37.7 - 63.5 + 66,1 15,9 15.0 0.9 16.0 - 16.0 + 0.1 MAIA 4- Har, 31 36.2 - 36.2 51.6 - 1, - 51.6 + 15,4 7.1 5.0 2.1 6.7 - 6.7 - 8.6 Apr. 1 - Apr. 28 29.0 I 29.0 39.6 If - A 39.6 10,6 28.4 25.7 1,3 19.3 - 19.3 + 2.9 & WEEK ENDED: Apr. 21 10.5 - 10.6 11.5 - - - 12.5 + 0.9 - 0.3 I 0,3 - 1.- 28 6.1 - 6.1 4.0 - - - 4.0 - 1 0,1 0.2 - 0,2 - 0.1 key 5 6.7 - 6.7 22.8 - - - 22.8 + 3.0 241 20 3.3 - 3.1 + 0.3 12 56.5(n) - 56.5(m) 12.3(4) - 1 - 123(f) 14.2 12.0 12.0 - 12.8(h) - 12.9(b) + 0.8 Average Weekly Expenditures First year of war 6,2 million. (a) For monthly breakdown see tabulations prior to April 23, 1941, Second year of war 8.9 million. b) For monthly breakdown see tabulations prior to October 8, 1941. Third year of war 10.1 million. c) For monthly breakdown see tabulations prior to October 14, 1942. Fourth year of war (through May 12, 1043) 9.8 million. (d) Reflects changes in all dollar holdings payable on demand or maturing in one year. e) Does not reflect transactions in short term U. 5. securities. (f) Includes $ 4.7 million deposited by War Supplies, Ltd. Tel Includes 350.0 million paid to U. S. Treasurer, in reimbursement for goods required for Conada through facilities of Lend-Lease Administration. Caradian errorditures Partle Pep week larrest recorded for war period. million cald for credit of U. S. Army. 98 PARAPHRASE OF TELEGRAM SENT TO: American Mission, New Delhi, India DATE: May 20, 1943, 1 p.m. NO.: 254 Reference is made to the Mission's no. 347 of May 17 at 1 p.m. It is suggested that the New York Times text be used instead of that which Gregory held as several changes were made in it before publication. HULL (FL) eh:copy 5-28-43 Regraded Unclassified OFFICE SECRETARY OF TREASURY 99 1903 MAY 21 PM I 02 NOT TO BE RE-TRANSI.ITTED EASURY DEPARTMENT COPY NO. 13 BRITISH MOST SECRET U.S. SECRET OPTEL NO. 165 Information received up to 7 a.m., 20th May, 1943. 1. NAVAL One of H.M. Destroyers yesterday captured the enemy Hospital Ship KONSTANZ, north off PANTELLERIA and sent her into MALTA for search and investigation. 2. ILITARY BURMA. 18th. A party of Japanese advancing northwards from BUTHIDAUNG was reuted by our troops with 27 enemy casualties. 3. AIR OPERATIONS WESTERN FRONT. 19th, 103 U.S. Fortresses dropped 230 tons on KIEL and 55 others dropped 123 tons on FLENSBURG. Bombing results were generally good. 6 Fortresses on KIEL missing. 19th/20th. Aircraft dospatched: BERLIN - 6, Intruders - 33, Leaflets - 5. 10 enemy aircraft operated over South- east ENGLAND, a few of which penetrated to the GREATER LONDON Aroa. 1 F.W. 190 landed at MANSTON airfield, cause unknown. SARDINIA. 17th/18th. Wellingtons dropped 30 tons on ALGHERO town and airfield. SICILY. 18th. 40 escorted Fortresses dropped 98 tons on TRAPANI, hitting 6 ships. PANTELLERIA. 18th. Medium and fighter bombers dropped 87 tons hitting docks, jetties, small craft, barracks and grounded aircraft. BURMA. 18th. 94 Bomber and Fighter Sorties were flown against enemy objectives near AKYAB and along the ARAKAN Coast. Regraded Unclassified