Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
28277308
label
Volume 652, July 28 – July 31, 1943
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
28277308
sourceUrl
contentType
document
title
Volume 652, July 28 – July 31, 1943
citationUrl
collections
Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
28277308
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
a8831009d7f9a8d6
ocrText
DIARY
Book 652
July 28-31, 1943
Regraded Unclassified
- B -
Book Page
Board of Economic Warfare
"Japan's War Sconomy, 1943": Revised copy of report -
7/28/43
652
83
Minutes of discussion of
a) Portugese trade
74
b) Swedish situation
74 revers
side)
c) Appropriation for Board of Economic Warfare
76.80
d) Wooden vessels
77
Budget
Revision of budget figures discussed by Treasury group -
7/28/43
1
- C - -
China
Exchange situation for U.S. dollar notes reviewed in
American Embassy. Chungking, cable - 7/30/43
242
Correspondence
Mrs. Forbush's mail report - - 7/30/43
233
Crowley. Leo
Salaries (various, discussed by Treasury group - 7/28/43
16
a) O'Connell memorandum on simultaneous employment in
private corporation
210
- F -
Financing, Government
War Savings Bonds:
3rd War Loan Drive:
FDR asked to launch with movie people - - 7/29/43
204
Ford Motor Company
See Revenue Revision
- G -
Government Employees
Simultaneous employment by private corporation O'Connell
memorandum - 7/28/43
210
- I - -
Italy
See Occupied Territories
- J -
Japan
See Board of Economic Warfare
Regraded Unclassified
- K -
Book Page
Kiplinger Tax Letter
See Revenue Revision: Pension Truste
- L -
Lend-Lease
Eleventh report, for period ending July 3B1. 1943
652
248
United Kingdom: Aircraft despatched, week ending
July 20, 1943 - British Air Commission 3 report - 7/29/43
224
- 0 -
Occupied Territories
United Nations Relief and Rehabilitation / Administration:
Lack of planning discussed by Treasury &group - 7/29/43
144
a) Italy: Exports of coal and cotton -- Bernstein
memorandum 7/29/43
214
1) Discussion by Treasury group -- - 8/3/43:
See Book 653, page 105
2) Ickes' reaction discussed - 8/23/43: Book 653,
page 108
b) Italian foreign trade - Bernstein memorandum -
7/29/43
216
c) Financial planning discussed by HMMJr and Hull
168
d)
m
If
n
" HMMJr and Patterson (War)
171,175
Exchange transaction profit discussed by Treasury group -
7/29/43
152
- P -
Pension Trusts
See Revenue Revision
Portugal
See Board of Economic Warfare
Post-War Planning
Currency Stabilization: American proposal for International
Stabilization Fund - Senators and Congressmen on committees
concerned given resumé of steps - 7/28/43
62
- R -
Revenue Revision
Pension Trusts: 1942 provisions discussed 1 by HMJr, Paul.
Surrey, and Fred Smith - 7/28/43
34
a) Senator Taft's proposition reportedd
b) Peul memorandum
44
c) Excerpts from Kiplinger Tax Letter
46
Regraded Unclassified
- S -
Book Page
Spain
Financial Attache at American Embassy, Madrid: Difficulties
outlined in memorandum to HMJr - 7/29/43
652 222
Stabilization Fund
Gold transactions for 3 months ending June 30, 1943 -
7/31/43
254
Sweden
See Board of Economic Warfare
- T - -
Taft, Robert A. (Senator, Ohio)
See Revenue Revision: Pension Trusts
- U - -
United Nations Relief and Rehabilitation Administration
See Occupied Territories
- W -
War Savings Bonds
See Financing, Government
Regraded Unclassified
12
July 28, 1943
9:00 a.m.
GROUP
Present: Mr. Bell
Mr. Paul
Mr. Gaston
Mr. Gamble
Mr. Smith
Mr. Haas
Mr. Blough
Mr. Charles Bell
Captain Kades
Mr. Bernstein
Mrs. Klotz
H.M.JR: Dan, let's start the morning with something
unpleasant. Did you see the release of the Bureau of the
Budget?
MR. BELL: Yes.
H.M.JR: The summation?
MR. BELL: Yes. It isn't out yet, is it?
H.M.JR: Yes, but you had a chance to clear it?
MR. BELL: Yes, sir, I went over it. I thought it
was a pretty good statement. The only question was a
quote from last year's budget regarding taxes and savings.
I told Harold that I hoped in discussing it with the press
that they wouldn't get into this discussion of enforced
savings. He said that - he called me back later and said
that they decided not to have the seminar this year, that
the President was just going to hand it out and not discuss
it, so there wouldn't be any discussion of the enforced
savings.
Regraded Unclassified
2
- 2 -
H.M.JR: He even cut it down, as I read it this time -
increased revenue in taxes or savings--
MR. BELL: He didn't say anything about amount.
H.M.JR: That part of it was rather weak.
MR. BELL: I didn't think it was a bad statement.
As a matter of fact, I thought it was a pretty good state-
ment.
H.M.JR: But you had a chance--
MR. BELL: Yes. There is very little change in the
figures, except the revenue is up about five billion
dollars. There is very little change in the expenditure
figures.
H.M.JR: That makes & difference in the net.
MR. BELL: Yes, sir, the deficit is down to about
seventy instead of seventy-six, as I recall, including
the corporations.
H.M.JR: I remember when Aubrey Williams and Harry
Hopkins got out 8. statement that the Government would
have to be always on the basis of spending something like
nine billion dollars and you and I thought it was terrible.
(Laughter)
MR. BELL: It scared us to death. (Laughter)
H.M.JR: What has happened to Aubrey Williams?
MR. BELL: He was still head of the National Youth
up until the time it was abolished. I have an idea he
is in education somewhere.
MR. GASTON: Isn't he doing some liquidating work
with a skeleton staff on National Youth?
MR. BELL: Maybe; I don't know.
Regraded Unclassified
3
- 3 -
H.M.JR: When Sullivan is away like this, is anybody
from the Office of the Secretary supervising Procurement?
MR. CHARLES BELL: That was 8. rather recent arrange-
ment. We have supervised Procurement from an administrative
arrangement right along. Cliff clears with us, generally.
H.M.JR: When Sullivan goes nothing happens?
MR. BELL: I have been signing the mail, and Joe
O'Connell has been looking over most of it. There hasn't
been very much.
H.M.JR: Charlie?
MR. CHARLES BELL: I think we will take the equivalent
of another whole floor in the Washington Building for the
War Bond group. They are right crowded in the three floors.
I got in touch with some of Reynolds' men yesterday.
H.M.JR: Why don't you go with me when I go over with
Gamble, and then when we get through we can look around?
I haven't got much to do - kind of worried. (Laughter)
MR. CHARLES BELL: I think air priorities between
here and New York will be discontinued. The difference
in time only amounts to about an hour. It breaks up
transcontinental flights when they do grant it.
H.M.JR: Do we ask for many?
MR. CHARLES BELL: Not a whole lot, very few.
MR. PAUL: They told me the other day that they
didn't give them between New York--
MR. CHARLES BELL: No, sir, have to go all the way
through the War Department to get them.
MR. PAUL: In other words, when you are in New York
you have to send to Washington to get a priority.
H.M.JR: It is all right with me,
Regraded Unclassified
4
- 4 -
MR. CHARLES BELL: We are trying to get a priority
three for the bond drive throughout--
MR. BELL: Sometimes it comes in handy when you want
somebody to come down from New York quickly and they want
to get back that evening.
H.M.JR: There is one thing that is disturbing me
on the war bond drive. Now, last night - this is the
second night - around six or six-thirty - that Mr. Burgess
called me. As a matter of fact, I was resting last night
and he woke me up. When the hell is Randolph Burgess
going to get organized?
Now, night before last he wanted a man on a house-to-
house canvass.
Last night he wanted the president of General Foods
to do something else. Good heavens, he has been up there
for almost two months. I mean, when are they going to
quit shopping around for people to head things up?
MR. GAMBLE: I think they are pretty well up in their
organization. They are moving pretty fast in some phases
of their work.
We have ordered delivered to New York - started
delivery yesterday - the first materials they wanted for
pay-roll savings. They are going to solicit five million
people.
H.M.JR: My feeling is that they are not organized.
MR. GAMBLE: I think his community - the one phase
of his work that seems to be bothering him the most is
this community activity. He hasn't completed the organiza-
tion of that. That is what he wanted Barton for was this
community division.
H.M.JR: Will you get him a message not to tie him-
self up late tomorrow afternoon? I may drop in on him,
because I am worried about New York. I mean, when they
Regraded Unclassified
5
- 5 -
begin to look around for a man to organize house-to-
house canvass on the 27th of July and then they want
another man to head up industry, my gawd - they haven't
even got the industry thing headed up.
MR. GAMBLE: They have that headed up, Mr. Secretary.
H.M.JR: No, no, he called me last night - they are
going to use my name - what was the man's name?
MR. PAUL: Francis.
H.M.JR: No.
MR. SMITH: Chester.
H.M.JR: Chester.
Now, if they haven't got industry headed up and they
haven't got the house-to-house, I don't think they can
be in very good shape.
MR. GAMBLE: They have organized an additional
division. The pay-roll is under Stevens - Jack Stevens -
and that is all organized.
H.M.JR: Yes, but that isn't the important thing -
that isn't so important for the drive as the house-to-
house.
MR. GAMBLE: They are going to canvass these people
in plants - five million people.
H.M.JR: Don't let's kid each other. You keep
telling me everything is going so wonderfully.
MR. GAMBLE: I think it is, as a matter of fact.
H.M.JR: I am going to make a few spot checks if you
don't mind.
MR. GAMBLE: That is good.
Regraded Unclassified
6
- 6 -
H.M.JR: If there is no Cabinet tomorrow, I may
make one tomorrow; I am not sure, but I may. I don't
get the feel. Are others as far behind as New York?
MR. GAMBLE: No. As a matter of fact, New York -
what they are trying to do is to get people - such names
that they can use to generate a lot of excitement and
enthusiasm in New York when this drive starts.
What Burgess wants, I think, is a lot of brass hats,
to be real frank about it, that can help him pull the
press from the time he gets underway. Actually, the
people who are going to do most of the work are working
now and have been working for thirty days.
H.M.JR: You don't mind my challenging you?
MR. GAMBLE: Absolutely not. I will be delighted
to have you do it.
H.M.JR: The last time I was there I was 80 dis-
couraged that I didn't want to go back again.
MR. GAMBLE: The worst that could happen to us would
be that you would improve them - step it up a little bit -
so it wouldn't hurt even if they are in good shape. (Laughter)
H.M.JR: Well, anyway, if that is the worst, what
would be the best that I could do? (Laughter)
Did I clear you?
MR. CHARLES BELL: Yes.
H.M.JR: You?
MR. BELL: That currency story that you asked McCloy
to clear was cabled to Eisenhower, and he cabled back that
he didn't want anything given out on it yet. He said he
would cable back when he wanted it given out, and he would
try to have it released in three places simultaneously,
London, Sicily, and here.
Regraded Unclassified
- 7 -
H.M.JR: Could I have a piece of that currency?
MR. BELL: Yes, I am getting it for you today and
tomorrow - for you and the President.
MR. GASTON: In the meantime an officer over there
in the War Department told Harry Eaton that they
printed some currency here in lira denominations and
shipped it to Sicily. He has that in his foreign letter
out today.
MR. BELL: Does he know it is a censored story?
MR. GASTON: They told him that over at the War
Department without any restrictions about his printing
it.
MR. BELL: It is a censored story. The AP has had
it for a month.
H.M.JR: I think you ought to call up McCloy and
tell him that. Will you do that?
MR. BELL: Is it out yet?
MR. GASTON: It is, in a rather obscure way, but
it is out.
MR. BELL: There was something in last week's paper.
It came out of London that such currency had been printed.
MR. GASTON: Kingsley Wood told about the arrangement,
about the lira and its value in relation to the pound
and the dollar.
H.M.JR: Just so he knows - incidentally, I am glad
I asked Smith to rewrite that little story about the
small-sized bond; in the New York Times it was nicknamed
"the economy bond," which was very nice.
MR. BELL: I hope it doesn't reduce our appropriation.
(Laughter)
Regraded Unclassified
8
- 8 -
H.M.JR: That is all right. It is good publicity.
That is the kind we need around here.
MR. BELL: That is all I have.
H.M.JR: Mr. Blough?
MR. BLOUGH: I have nothing.
H.M.JR: Have you seen those things - my exhibit?
MR. BLOUGH: I have not seen the tail end of the
exhibit - the last third. I want to see that when it
is opened.
H.M.JR: It is open to you; you had better see it.
They brought in one on the Blough business which I
couldn't understand.
MR. BLOUGH: Then I will have to see it by all means.
(Laughter)
H.M.JR: Still, the thing isn't there - if I get time
today I would very much like to sit down with you, and
that is on this dismissal wage business. There is nothing
there.
MR. BLOUGH: Let me look at it. I have sort of lost
touch with it.
H.M.JR: That would come in on conversion of plants,
Chuck. I think there ought to be something - we ought
to somehow or other right now begin to build up a reserve.
MR. PAUL: We are working very hard on that; we have
the SEC working on it, and we have Blough's office working
on it. We have B. preliminary study of it.
H.M.JR: Well, nobody has shown it to me.
Regraded Unclassified
S
9
- 9 -
MR. PAUL: It just came through - the first preliminary
study. I didn't think you wanted to see that. I will send
it in to you. It just came through yesterday.
H.M.JR: Where did you meet me when we talked about
that whole thing? Was it in the country?
MR. BLOUGH: No, it was in the hospital.
H.M.JR: That was two or three weeks ago.
MR. BLOUGH: That is right.
MR. PAUL: But we could put six months on that. It
is a vast problem.
H.M.JR: Yes, but I am interested. You have got to
get those things to me, please.
MR. PAUL: I just got one yesterday. I will send it
in to you. It is the whole problem.
H.M.JR: I just didn't want Blough to sit back on his
12
three meat meals a day and go to sleep on it. (Laughter)
MR. PAUL: Nobody is going to sleep on that problem.
H.M.JR: I still say I would like to see it.
MR. BLOUGH: The least you could do would be to improve
the situation, Mr. Secretary. (Laughter)
H.M.JR: On the strength of that I will give you one
point. (Laughter)
MR. BELL: Meat point? (Laughter)
H.M.JR: I don't know - I am a little long on canned
goods. (Laughter) What would be the best I could do for
you? (Laughter)
MR. BLOUGH: I haven't thought that far. (Laughter)
Regraded Unclassified
10
- 10 -
H.M.JR: The best you could do is, between you and Paul
and Chuck, to give me something on the dismissal wage. That
would be the best. (Laughter)
MR. PAUL: I was thinking of the whole broader problem.
MR. BLOUGH: This memorandum is not on dismissal wage,
but on the postwar.
H.M.JR: I would like it to head up with Mr. McConnell
and Kades, who is working on that exclusively for me. You (Paul
are not the only fellow, you know, working on this in the
Treasury. There are about four other groups in the
Treasury working on it. They are coordinating the thing.
MR. PAUL: They are always welcome to all my data.
H.M.JR: How many other groups?
CAPT. KADES: George and Harry have a man working on
one phase of it - not in regard to the dismissal wage,
however, but in regard to contract cancellation.
H.M.JR: Anyway, get it. How will I get it, Paul?
MR. PAUL: I will send in this memorandum to you.
It is on my desk. It just came to my desk yesterday.
H.M.JR: I don't know whether you got word that Mr.Hull,
at my request, sent a cable to the Consul in Martinique.
MR. BERNSTEIN: We were informed of that. Something
has happened since then--
H.M.JR: Excuse me - they turned us down in Martinique.
They said we couldn't see the bank accounts down there.
I called up Mr. Hull and asked him if he wouldn't do some-
thing about it.
MR. PAUL: When is your man getting back?
MR. BERNSTEIN: He isn't coming back for some time.
Regraded Unclassified
11
- 11 -
We have just sent him a list of names to lookinto to see
whether he can get specific information on them.
Mr. Secretary, you suggested yesterday that something
might be done on the licensing program. I spoke to Mr.
Paul's staff and to Mr. Pehle's staff, and they say they
do now have a problem of a licensing program for Martinique,
and before putting any program like that through, we will
present it to Mr. Paul today and present it to you.
H.M.JR: That is right; and then let's sit on it.
MR. PAUL: I thought you were accusing me of sitting
on it. (Laughter)
H.M.JR: Let's let Paul and you (Bernstein) and Pehle
come in and see me. I am very much interested in that
Martinique business. I have got nothing to do today.
MR. PAUL: When would you like to see us?
H.M.JR: Any time you are ready.
I asked Mr. Hull for a copy of the cable he sent to
the Consul.
MR PAUL: I would like to see you, if possible, be-
fore ten-thirty. I have an exciting conference scheduled
with Mr. Stam at ten-thirty. (Laughter)
H.M.JR: You can see me right after this because I
am going over to War Bonds.
MR. HAAS: I have nothing.
CAPT. KADES: I have nothing.
H.M.JR: Got 8. letter for me on meals at hotels?
CAPT. KADES: Yes, sir. I am clearing it with--
H.M.JR: With whom?
Regraded Unclassified
5
12
- 12 -
CAPT. KADES: With Joe O' 'Connell and Randolph.
MR. GAMBLE: We would like to bring in about fifteen
or sixteen more of these States. We would like to bring
them in at a time when it would be convenient for you to
spend time with them.
H.M.JR: The middle of next week?
MR. GAMBLE: Wednesday or Thursday?
H.M.JR: Fine.
MR. GAMBLE: That is all I have.
H.M.JR: It had better be - Wednesday would be the
best day.
MR. GAMBLE: Fine, we will make it Wednesday.
MR. PAUL: I sent you a story yesterday afternoon -
rather late in the afternoon - published in the St. Louis
Post Dispatch, in which I call your particular attention
to - since it presents a mystery as to how those things
get out - almost the exact language of a letter to you is
quoted.
H.M.JR: About what?
MR. PAUL: From the President on that Illinois labor
situation. I signed the memorandum about quarter of six
yesterday, 30 I don't know whether - I remember we called
you up - Mrs. Klotz - and we didn't dare leave it on any-
body's desk.
H.M.JR: How do you think it gets out?
MR. PAUL: I don't know.
H.M.JR: You don't know?
MR. PAUL: No, I haven't any idea.
Regraded Unclassified
13
- 13 -
H.M.JR: You looked kind of like a wise old owl.
(Laughter)
MR. PAUL: I really haven't the slightest idea. But,
of course, the Justice Department thinks we let it out.
H.M.JR: Well, I refused to see any newspapermen.
Were you here when Biddle talked to me? He said that the
newspaperman that he had seen said so and so, He saw &
whole slew of newspapermen.
MR. GASTON: Yes, he has seen a lot of them. What he
talked about was something he said you said at the press
conference, which you didn't say.
H.M.JR: But he is quoting a newspaperman.
MR. GASTON: As saying you said that at a press con-
ference.
H.M.JR: I think that is kind of dead - the controversy
between us is dead - because he had lunch with the President
and right after that he transferred the thing to the Criminal
Division. Evidently he was told--
(Mrs. McHugh entered the conference and handed to the
Secretary a memorandum from Mr. Paul dated July 27, 1943,
and attached St. Louis Post Dispatch clipping.)
H.M.JR: Would you mind pointing the part to me?
MR. PAUL: It is right at the beginning. It is almost
an exact quotation - two words left out.
H.M.JR: Well, for your peace of mind, if you are
suspicious of me--
MR. PAUL: No, I am not; I don't know a thing about it.
H.M.JR: Well, I can tell you that it is not in this
office because there have never been important leaks out
of this office. But this has been over with Justice Byrnes -
this memorandum.
Regraded Unclassified
14
- 14 -
MR. PAUL: That might explain it.
Of course, it might come out of Justice because Mr. Roth
used to work over there and he says you can get anything
out of there by going around and looking on people's desks
any time you want to.
H.M.JR: That has been over there with Justice Byrnes.
He said it was in his desk and locked up when I called his
secretary, finally, to get the thing back. I said, "I
don't know whether you know"--
He said, "Yes, I know just where it is." He said, "I
know all about it.
It doesn't worry me; my conscience is clear, and you
can tell that to anybody.
MR. PAUL: I have been saying that there isn't any
leak here.
H.M.JR: You can keep saying it and still go to heaven.
(Laughter) And that is the worst that could happen to you.
(Laughter)
:
MR. PAUL: I am afraid there are other reasons why I
might be excluded. (Laughter)
MR, SMITH: Nothing.
H.M.JR: Herbert?
MR. GASTON: Elmer is writing B. memorandum on that
McConnell thing, but what happened in the Bureau was that
his return was approved; there was no additional tax and
no refund.
H.M.JR: Somebody told me he got 8. refund.
MR. GASTON: No additional tax and no refund - so Elmer
told me over the phone.
H.M.JR: It was approved?
Regraded Unclassified
15
- 15 -
MR. GASTON: He contested the additional tax asserted
by the Bureau. The Bureau's claim of additional tax, as
I understand it, was denied. He was not given any refund,
but it was left as it was on the basis of the return on the
tax he had already paid.
MR. PAUL: Is that the controversy that has been
going on for some time?
MR. GASTON: Yes.
MR. PAUL: I represented him in that controversy.
H.M.JR: Alvord represents him now.
MR. PAUL: He called me in because he was dissatisfied
with Alvord. I was his private advisor.
MR. GASTON: You ought not to say anything about it
at all, had you, Randolph? (Laughter)
MR. PAUL: I am telling you so you will know the worst.
(Laughter)
H.M.JR: Would you - I am going to say this - would
you take a look, Mr. Paul, the General Counsel, at the
statute of the FDIC and see whether you can both be on
its payroll and also receive compensation from an outside
source. You can't in the Treasury, can you?
MR. GASTON: By permission of the Secretary.
H.M.JR: I thought as a Government employee you can't
receive-
MR. GASTON: You can't have any other Governmental job
in any other unit of Government. You can only take such out-
side employment as doesn't interfere with your work and is
approved by the Secretary of the Treasury.
H.M.JR: No, that isn't it.
MR. PAUL: We ought to check both.
Regraded Unclassified
16
- 16 -
H.M.JR: I thought there was something in the statute -
maybe it is Civil Service--
MR. BELL: There is something in the more recent regula-
tions that prohibits Government employees from taking out-
side employment, but that was during the days of unemploy-
ment.
MR. CHARLES BELL: No one can take an outside job in
the Department without your approval.
MR. BELL: That is an internal regulation. There is
a report in the paper that Leo resigned from the Gas Company.
H.M.JR: Yes, but that isn't the point. The point is
that as late as '42 - now, this is Madison, Wisconsin,
Capital Times, Crowley received from the Standard Gas and
Electric, seventy-five thousand, Federal Deposit, ten thou-
sand dollars, and a paper company, four thousand six hundred
and ninety dollars.
MR. GASTON: We didn't get the '42 returns, but the
returns up to '42 - the '39, '40, and '41 check absolutely
with the Wisconsin returns.
H.M.JR: Now, look under the mail contracts. lie took
forty dollars from the Pan American Airways--
MR. PAUL: Those were director's fees.
H.M. JR: Yes, but under the mail contracts, isn't
there something about a Federal employee taking money from
a company that has B. postal contract?
MR. PAUL: I don't know, but forty dollars would be 8.
venial sin, wouldn't it? Maybe it is only one fee.
H.M.JR: But I still say, isn't there something about
a Federal employee taking conpensation from a company that
has a Post Office contract to carry the mails?
M.R. PAUL: I don't know.
Regraded Unclassified
17
- 17 -
H.M.JR: May I give you this? (Clipping from
Madison, Wisconsin, Capital Times handed to Mr. Paul.)
MR. BELL: That is probably confined to Postal
employees.
H.M.JR: Just look at it because I want to help
Leo, you see. (Laughter)
MR. PAUL: We will go into that in that same altruistic
vein. (Laughter)
Regraded Unclassified
July 28, 1943
18
11:02 a.m.
HMJr:
Hello.
Operator: Mr. Norman Cann is acting.
HMJr:
All right. Hello.
Operator: Go ahead.
HMJr:
Hello.
Norman
Cann:
Good morning, Mr. Secretary.
HMJr:
Good morning. Look, Cann, on this notice that is
going out signed by Helvering - notice to federal
income tax payers
C:
Yes.
HMJr:
I'm not satisfied with it.
C:
You don't like it?
HMJr:
I don't like it.
C:
What in particular don't you like, Mr. Secretary?
HMJr:
Well, a lot of things. The point 18 that - uh -
I want it done over.
C:
All right.
HMJr:
Now, how far along 1s it?
C:
Well, it's been in the press, Mr. Secretary, I think
sometime, but I'd like to check on that and see.
HMJr:
Well, Charlie Bell will watch it on the administrative
end for me and Fred Smith on the public relations and
I'm going to give these two men the authority to repre-
sent me on this thing but I want the thing done over
and Mr. Smith will take it over. See? So you had
better call back Charlie Bell and let him know how
far along it is.
C:
All right, I'll do that right away.
HMJr:
And you'd better stop it.
C:
All right.
Regraded Unclassified
19
- 2 -
HMJr:
Whatever it is, you'd better just stop it.
C:
All right.
HMJr:
Will you do that?
C:
Yes, sir.
HMJr:
And, I don't know - I'm going to ask Bell - Charlie
Bell - to work out with you a formal order whereby
all publicity that goes out of Internal Revenue will
have to clear through this new set-up of mine.
C:
Uh huh.
HMJr:
See?
C:
All right, sir.
HMJr:
We'll just have to do that.
C:
All right.
HMJr:
I mean, I can't get excited all these times.
C:
Uh huh. Well, now this particular matter 1s the
one that I sent over, I think, yesterday to Mr. Blough.
HMJr:
Mr. who?
C:
I sent it over to Roy Blough
HMJr:
Well, he
C:
and he had been out of the city
HMJr:
Well he wouldn't - he wouldn't know anything about it.
It's - to bring these things to the attention of the
people in a manner that, if possible, that they will
like it. Well, anyway, I want the thing - I want the
publicity going out of the Treasury all centralized.
C:
Well, I'll be glad to talk to Charlie Bell right away.
HMJr:
Okay. He's in my office now.
C:
All right, sir.
HMJr:
But in the meantime hold it up.
C:
All right. You bet.
Regraded Unclassified
20
July 28, 1943
2:24 p.m.
Operator: Go ahead.
HMJr:
Dan.
Daniel
Bell:
Yes, sir.
HMJr:
This isn't swfully important but it might be sometime.
That telegram to Bruce Barton - I didn't know it went
out.
B:
oh, you didn't?
HMJr:
No.
B:
Well, I was told by Burgees that you said call down
and get one out.
HMJr:
No.
B:
Huh?
HMJr:
No. What I said was, as I remember it, I said, "Talk
to Gamble to remind me"- uh - not on a telegram - I
didn't know he'd asked for a telegram.
B:
Well, he said he was just talking to you and he said
that you told him to call down here and get Ted
Gamble. Well, he couldn't get Gamble - he got me....
HMJr:
I know, but
B:
and said it was all right to send a telegram out.
HMJr:
Well, frankly, I don't remember it, but if that's
what you say, that goes
B:
That's what he told me. I don't say that's what you
said but that's what he told me.
HMJr:
Okay.
B:
That was about 6:30
HMJr:
Yeah.
B:
last night. However
HMJr:
Well, night before last.
Regraded Unclassified
21
- 2 -
B:
What?
HMJr:
It was the night before last.
B:
No, this was last night.
HMJr:
Last night?
B:
Last night he called me just as I was - put on my
hat to go out the door and said, "I want to get this
telegram out tonight.
HMJr:
No - no, last night he called me about the head of
General Foods.
B:
Didn't he say anything to you last night about Bruce
Barton?
HMJr:
No.
B:
Well, that's funny, because it was last night that I
sent the telegram.
HMJr:
Well, I may be confused.
B:
He said he had just got through talking to you
HMJr:
That's true.
B:
and that he told you - you told him to call Ted
Gamble and get the telegram out last night. It was
important that he get on the job today.
HMJr:
Well....
B:
That's the way I got it.
HMJr:
Well, anyway - uh....
B:
Is something wrong?
HMJr:
Well, no. I was just trying to - no - I - - he got me
last night at the house about a quarter past six....
B:
Yeah.
HMJr:
and talked and then - did was it after . - when
did he call you?
B:
Right after that.
Regraded Unclassified
22
- 3 -
HMJr:
I see.
B:
It was about six thirty when he got me.
HMJr:
When he talked to me last night, the only thing that
he mentioned that I can remember was about Chester
Colby.
B:
Uh huh. Well, he didn't mention Chester Colby to me
at all - mentioned nothing but Bruce Barton.
HMJr:
Okay. It's - if he'd asked me would I do it, I'd
have done it, but I - I couldn't remember it and
that's why I'm calling you.
B:
Well, apparently, he'd been in touch with Bruce
Barton as you had told him in the morning. You see,
you discussed it at the staff meeting yesterday
morning
HMJr:
That's right.
B:
....and Bruce Barton apparently wanted a telegram
from you asking him to help
HMJr:
I get you.
B:
and
HMJr:
Well
B:
I guess Burgess thought it was very important -
he even tried to find his home address 80 he would
get it last night.
HMJr:
Well, I guess I'm slipping.
B:
(Laughs) No, I don't think 80.
HMJr:
All right.
B:
Maybe he slipped - something over on us.
HMJr:
It's possible.
B:
Yeah.
HMJr:
It's in a good cause.
Regraded Unclassified
- 4 -
23
B:
Well, I hate to do those things but I thought he
was just through talking to you
HMJr:
Well, my memory
B:
and I didn't want to bother you because I didn't
think it was very important to bother you about.
HMJr:
As I remember it, he only talked about Colby
B:
Uh huh.
HMJr:
but it's all right. Okay.
B:
Well, I - - if it had been important, I'd have called
you, but I didn't think it important enough to call
you on it.
HMJr:
Thank you.
B:
Okay.
Regraded Unclassified
24
July 28, 1943
3:30 p.m.
MARTINIQUE BANKS; LOAN TO THE NETHERLANDS GOVERNMENT
Present: Mr. Paul
Mr. Bernstein
MR. PAUL: On this Martinique problem, you asked what
steps we could take. I have a written memorandum here,
but I suppose it is better to discuss it. (Memorandum to
the Secretary dated July 28, 1943 attached.)
The first and probably most effective action you can
take would be to stop payment for the expenses of a ship
now about to sail from Puerto Rico. Now, that would be
fraught with major political implication, and I am bound to
say to you, since you asked me, that that is probably the
most effective step you could take. If you did, you
probably would have to get in touch with State. They
certainly would be apprehensive about using this weapon,
but at least the possibility of using it could be used as
a basis for discussing the matter with State.
Now, there are other specific things you could do.
One thing would be to stop licenses on the operation of
French banks - Martinique banks - in the United States.
You might refuse to permit the French to provide
North African funds to Guiana for the purpose of procur-
ing food and supplies; and, finally, you might--
H.M.JR: I will get that from the memo. What I
would suggest - is it Feis handling Martinique?
MR. BERNSTEIN: He handled it with us. He is the one
we have done business with.
H.M.JR: Who contacts him from the Treasury?
MR. BERNSTEIN: Mr. White has in the past, but it may
be that Mr. Paul has on these matters.
Regraded Unclassified
25
- 2 -
MR. PAUL: I met him for the first time Tuesday.
H.M.JR: Wouldn't this be something that White's
alternate would do?
MR. PAUL: I should think SO. I should think he should
to it.
MR. BERNSTEIN: I would be glad to.
H.M.JR: If we agree as to the procedure - diplomatic
procedure within the Treasury - (Laughter) I would suggest
that you (Bernstein) call up Herbert Feis and say that I
am quite exercised about this thing, there is a ship sail-
ing, you see--
MR. PAUL: That part - that particular remedy has to be -
you have to be pretty prompt about it or we have to let it
go, because we have practically licensed the thing now.
H.M.JR: When would it sail?
MR. BERNSTEIN: It is ready to sail at any moment
and we practically have to take a positive step immediately.
We would have to explain to State why we are holding it
up.
H.M.JR: I know. I would call up Feis and simply say -
I wouldn't get mixed up in North Africa. We can concentrate
on the thing direct to Martinique. Say that we would like
to bring it to his attention, the idea that pending their
giving permission to gointo the bank, we would like to do
any one of these things, only if it meets with State Depart-
ment approval.
MR. PAUL: If it doesn't--
H.M.JR: Then forget it.
This cable to Martinique that we talked about yesterday,
if those things didn't clear the Treasury the same day - I
wrote Mr. Hull a letter on this thing asking him to send a
cable to Winant; Acheson calls me up today - twenty-four
Regraded Unclassified
26
- 3 -
hours later - "It will go out promptly." But such a thing
as clearing - now, if it went last night, it would be on
Winant's desk this morning.
MR. PAUL: Did you know that they had offered the
Area Directorship of Italy to my partner, McCollester,
yesterday afternoon?
H.M.JR: You told me--
MR. PAUL: That was France, at that time. The Italian
man is out now and they are in & bad hole on Italy and they
wanted him to take it.
H.M.JR: For the whole of Italy?
MR. PAUL: Yes.
H.M.JR: What was his position - what would it be?
MR. PAUL: Area Director . - sort of an economic czar.
H.M.JR: Colonel?
MR. PAUL: No, he is civilian.
H.M.JR: Is he fitted for it?
MR. PAUL: I think he is ably fitted for that type of
job. It is largely a diplomatic job.
H.M.JR: Is he going to take it?
MR. PAUL: I don't know.
H.M.JR: Does he speak Italian?
MR. PAUL: He reads Italian and speaks French. That
is why they had him for French, first.
H.M.JR: The man they had in Italy fell down on them?
Regraded Unclassified
27
- 4 -
MR. BERNSTEIN: They had two men in mind, I believe.
MR. PAUL: Welles was unable to get away because
McNutt grabbed the other fellow in his university. They
couldn't get McNutt to give him up.
MR. BERNSTEIN: I think Graham was the other man they
had in mind. Graham didn't want to leave the Board.
H.M.JR: Graham would be wonderful.
MR. PAUL: McCollester would be wonderful.
H.M.JR: All I want to say is, "Here are ways of bring-
ing pressure. We would like to do it, but only if the State
Department would approve."
If they don't want to do it, to hell with them.
MR. BERNSTEIN: At a later stage we are going to have
an opportunity to press down on Martinique because they are
bound to come to us for general licenses for their banks
to avoid this repetitious licensing. We can hold them
off then.
H.M.JR: I think I would wait now to see the kind of
cable Mr. Hull sent.
MR. PAUL: I have another thing in which you are
interested, Bernie. That is this Dutch business. (Memo-
randum to the Secretary dated July 23 attached.)
The Dutch people want to borrow three hundred million
from the Government and use as collateral the assets of
private citizens of the Netherlands in this country.
We don't want to do it because it involves political
implications, among which was practically the recognition
of that Government.
H.M.JR: That has been brought up before.
Regraded Unclassified
28
- 5 -
MR. PAUL: We started to talk about it.
H.M.JR: No, I mean it goes back months.
MR. PAUL: Yes. One of the things that Harry parti-
cularly wanted you to know, apart from the memorandum
that goes in the file - he didn't want this to go in the
file - the agreement to such a proposal would undermine the
Treasury's position with respect to blocked assets of all
occupied countries and would substantially weaken its
influence and work of postwar reconstruction and financial
settlements.
Adoption of the State Department's suggestion that the
assets be vested in the APC would take those assets out of
the Treasury's control and, for all practical purposes,
would give the State Department complete and independent
authority over the assets.
Such a step would also have the effect of transferring
to Crowley the power and influence arising in the control
of the assets.
They have plenty of funds through their central banks.
We don't believe that that is their real purpose - sort of
an oblique attack.
MR. BERNSTEIN: They have a billion dollars in gold
and dollars.
H.M.JR: Well, I go along with you fellows.
Regraded Unclassified
29
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 28, 1943
TO
Secretary Morgenthau
FROM
Randolph Paul
You have asked what measures Treasury can take for the
purpose of inducing the Government of Martinique to cooperate
in furnishing Treasury with information concerning gold held
in Martinique and funds held in Martinique for the account of
persons in France.
The action that would probably be most effective in
producing immediate concern on the part of the Government of
Martinique would be to stop payment for the expenses of a
ship now in Puerto Rico and about to depart for Martinique
with a cargo of Lend-Lease food supplies for the Island.
While stopping payment would be effective in producing
immediate concern on the part of the Martinique authorities,
it would, of course, be fraught with major political consider-
ations since obviously food is a very touchy item in our
relations with Martinique. State would doubtless be very
apprehensive of using this weapon and it is recommended that
this possibility not be utilized except perhaps as an excuse
for discussion with State.
Other specific measures which could be employed to
bring pressure on the Martinique authorities would be the
following:
(1) Withholding licenses authorizing the
operation of the accounts within the United
States of the principal banks in Martinique; and
(2) The refusal to permit the French to
provide North African funds to Guiana for the
purpose of procuring food and supplies in Brazil.
Regraded Unclassified
30
- 2 -
Actually, in view of the fact that Martinique is
under the control of the French Committee in North Africa
and since probably the final decision will have to be
made in Algeria, the pressures which we have the power
to exert are not confined to transactions with Martinique.
Rather they involve all the pressures we can bring against
North Africa and these are very great.
On the other hand, such pressures may only be exerted
with the consent of State Department and therefore the real
issue is to what extent State is prepared to exert pressures
to achieve cooperation in Martinique.
AM
Regraded Unclassified
31
July 23, 1943.
MEMORANDUM TO THE SECRETARY:
The Netherlands Government has submitted 1 proposal to
the State Department and to the Treasury that the Notherlands
Government be permitted to pledge privately owned Netherlands
assets in this country for the purpose of securing & loan of
$300 million from this Government to be used to finance post-
war rehabilitation and reconstruction in the Netherlands.
Certain additional sums may also be requested to cover current
budgetary expenses.
In order to permit the pledging by the Netherlands Govern-
ment of privately owned Netherlands assets in this country as
collateral, the adoption of one of the following measures would
be necessary:
(a) Recognition by this Government of the validity of the
Netherlands vesting decree.
(b) Issuing directive licenses compelling the transfer of
the assets to the Netherlands Government.
(e) Vesting the assets in the A.P.C., to be held by him
as collateral.
The State Department does not want to recognize the validity
of the Netherlands vesting decree but is considering proposing
that the funds be vested and held in custody subject to agree-
ments entered into between the State Department and the Nether-
lands Government.
It is our view that the proposals should be rejected by the
Treasury for the following reasons:
1. The Netherlands Government (according to its own memo-
randum) already holds enormous resources in the form of gold,
dollar balances, and foreign exchange amounting in all to more
than $1,050 million, of which more than $900 million is in the
form of gold and dollars. These funds are held in the name of
Regraded Unclassified
32
- 2 -
the Governments of the Netherlands, the Netherlands Rast Indies,
the Netherlands West Indies and Surinam, and the central banks
and other official agencies of these areas. This is in addition
to the privately owned Notherlands assets held in this country.
In view of the fact that the total budgeted expenditures
of the Netherlands Government for 1943 - including military and
naval expenditures - total only $65 million, it is obvious that
these resources are, to say the least, more than adequate for
all of the needs of the Netherlands Government without touching
the privately held funds in this country of Metherlands nationals.
It has been said by the Notherlands Government that the gold
and dollar assets of the Central Banks are not available for use
by the Netherlands Government because they are held for reserve
purposes. It should be noted that the British and other Govern-
ments have not hesitated to use the resources of their central
banks for war purposes. Clearly the funds of official govern-
ment institutions should be tapped by the Netherlands Government
before calling on us to deliver to them the assets of private
nationals of the Netherlands.
Moreover, the credit of the Netherlands Government is such
that she would have no difficulty in placing orders for post-war
delivery with only 8. small down payment, particularly if she is
willing to subject such orders to post-war priority requirements.
2. For this Government to lend $300 million to the
Retherlands Government would require the borrowing by the Treasury
of an approximately equal amount. It would be difficult from the
popular point of view for the Treasury to justify to buyers of
Car Savings Bonds the use of their savings to provide B. Government
holding the enormous assets of the Netherlands with additional
funds for expenditure in the post-war period.
3. The vesting of assets in this country of Netherlands
nationals would generally be regarded as the beginning of a
process of vesting all blocked balances and securities. Un-
doubtedly, some banks would feel that such prospective action
Impairs their reserve position and this In turn would affect
their attitude toward bond subscriptions. Further, such action
would involve the Treasury in much otherwise avoidable litigation
with American creditors as well as Notherlands nationals. The
Regraded Unclassified
33
- 3 -
Treasury ought not to exercise its extraordinary powers on such
8. matter unless the action contributes directly to the war
effort, which clearly the Netherlands proposal does not do.
4. The vesting of these assets at this time would require
a large and unjustified expenditure in time and man ower on
the part of this Government. When a reconstituted Netherlands
Government has been established in the Netherlands it will have
full power to enforce its own decrees and will be able at that
time to obtain effective control over the dollar and other
foreign exchange assets of its nationals with comparative ease.
The undesirability of using our limited manpower resources to
vest these assets at this time is further increased by the fact
that the Netherlands Government, according to its own statement,
desires these funds for its postwar reconstruction program.
On the whole, it appears to us that the proposal made by the
Netherlands Government is not for the purpose of obtaining funds,
of which they have plenty, but rather of strengthening the
position of the present government in exile by giving it control
over the enormous assets held in this country by private
Netherlands citizens.
(Initialed) R.B.P.
Suit Now
Approved:
1943.
7/23/43
Regraded Unclassified
34
July 28, 1943
3:45 p.m.
PENSION TRUSTS; FORD MOTOR COMPANY
Present: Mr. Paul
Mr. Surrey
Mr. Smith
(Memorandum dated July 28, 1943, handed to the
Secretary, copy attached. Copy of ticker release also
attached.)
H.M.JR: Just tell me about this.
MR. PAUL: Last year, 1942, new provisions were
put in the bill about pension trusts. During the course
of the consideration of the bill by the Finance Committee,
a subcommittee was appointed consisting of six people.
Taft was on that committee.
At that time a problem which later arose was not
anticipated or thought of by us or by the committee, or
by anybody else. It involved higher mathematics in
actuarial statistics.
When the law was passed and we started to write
the regulations We called in experts and consulted with
the people most interested. We had a lot of conferences.
We also called in an expert on the actuarial end, because
our Government actuary couldn't give us enough time.
We finally worked out the regulations, and there
was one point involving how much benefits to give people
over three thousand dollars a year if they excluded
from the operation of the trust people under three
thousand.
(Mr. Smith entered the conference.)
Regraded Unclassified
35
- 2 -
MR. PAUL: We decided that the policy of the
statute which said there should be no discrimination
made it such that we could not allow people over three
thousand, in the case of trusts, which didn't take in
anybody under three thousand.
H.M.JR: What do you mean by a trust?
MR. PAUL: Pension trust. We couldn't allow them
any greater benefits proportionately than people under
three thousand got under social security.
Taft - when we were at the later stage in an advisory
way we consulted with George, and he suggested, "Why not
call together this little group of last year, which we
did. Taft took a violent position in this group meeting.
The group never took a position, so it isn't true to say
that we issued anything in defiance of anybody.
H.M.JR: Wouldn't it be the simplest way if you
came to the press conference tomorrow and tried to
explain it to them?
MR. PAUL: I think it would be either good to do it
that way, or I think 8 better way, since the subject is
rather highly technical, would be for Surrey and me to
have a separate press conference with them.
H.M.JR: What do you think?
MR. SMITH: I don't think - I think it ought to be
all in one press conference, because it is highly tech-
nical; and if they are in this kind of press conference
I think they are more likely to ask questions that will
clarify it in their own minds. We don't want to try to
clear this up with a technical discussion. Taft isn't
very technical; he just says that we are nuts.
MR. PAUL: Then I think in such a conference you
either should have Surrey and me or just Surrey, because
Surrey has been studying this problem for months.
Regraded Unclassified
36
- 3 -
H.M.JR: Let's have Surrey.
MR. PAUL: I haven't the slightest doubt of the
validity of our interpretation, and I know where all
the pressure comes from. There is an organized racket
in the United States, and they are high-pressuring
Taft.
H.M.JR: What is the organized racket?
MR. PAUL: It is to sell pension trusts to large
corporations so that they get 8 deduction and the Govern-
ment pays the expense.
H.M.JR: Why not say so? Why not call a spade a
spade?
MR. PAUL: That is what it is. In fact, I have
been - recently I have had Sam Klaus make an investigation
in preparation for the fall when I anticipated there
would be trouble about this, burrow around and get at
some of the dirty work being done.
: MR. SURREY: You couldn't go too far in that, though,
because part of it is a racket and part of it isn't &
racket. In other words, you will have to be careful. A
lot of these pension trusts - the great bulk of them -
were in existence for some time. These particular ones
that Senator Taft is concerned about came into existence
in the last few years.
MR. PAUL: Particularly in '40 and '41.
MR. SURREY: And partly as a result of the Social
Security Act stopping at three thousand dollars and
partly taxes. as 8. result of the very high rates of corporate
H.M.JR: Surrey, you came to one of my press con-
ferences and you did a very good job. You have from now
until tomorrow morning. Let him do it. Don't call any
names until you can back it up twice.
Regraded Unclassified
37
- 4 -
MR. SURREY: I don't suppose we are free, are we,
to give out what went on at the Senate Committee meeting?
MR. PAUL: We can deny Taft's--
H.M.JR: Sure.
MR. SURREY: Vandenberg directly disagreed with
Taft on the law.
H.M.JR: He started this thing.
MR. PAUL: Vandenberg came in on account of the
Hudson Store in Detroit.
H.M.JR: What was this meeting - was it an executive?
MR. SURREY: An informal meeting of only the Treasury
staff, the Senators, and the Joint Committee staff.
H.M.JR: Sure, they all fight dirty. If Vandenberg
was in there and disagreed, I would say SO.
MR. PAUL: Taft got so mad he started to leave the
room, and Vandenberg made him come back.
George never expressed a view.
H.M.JR: This is something that Taft personally is
interested in.
On the other hand, Taft - it keeps the Republican
National Committee from doing a job on us. Sure, bring in
Vandenberg.
MR. SMITH: If you don't think Vandenberg will back
up on you.
MR. PAUL: He won't on the correctness of the inter-
pretation. He may disagree with you on the policy.
MR. SURREY: The peculiar thing was Senator Taft said
that we were dead wrong on the law, but we might be right
on the policy. If the law just weren't written 50
Regraded Unclassified
38
- 5 -
explicitly we could not put that policy into effect.
Vandenberg said, "You are right on the law."
H.M.JR: I would tell them the story. It makes a
nice gossipy, newsy story.
Fred, do you agree with me?
MR. SMITH: I think so; I think it makes something
nice for the boys to have. It will make it worth coming
for once. (Laughter)
MR. PAUL: You know we don't control the Kiplinger
press, don't you? The last Kiplinger Letter said that
these regulations were eminently fair and reasonable.
H.M.JR: All right. You (Surrey) be here.
MR. SMITH: You don't think there would be any - I
don't know whether this is wise or not - business of
calling Vandenberg beforehand and asking him to double
check it.
MR. PAUL: No. Then you will get into all sorts
of qualifications. He expressed himself; let's stand
on what he said.
MR. SURREY: George is not in town, is he?
MR. PAUL: He wasn't the last I heard.
H.M.JR: I would say that as long as this was kind
of an informal meeting I will introduce - as long as
Senator Taft feels that it is beholden upon him to
explain what is in this, why not have both sides of the
story. "And this is what took place, and Mr. Taft was
very much in the minority, from what I gather.
MR. SURREY: I think he was on the legal point,
which was the only one on which he forcibly expressed
himself.
Regraded Unclassified
39
- 6 -
H.M.JR: He said we are doing something illegal;
he is being very dirty. What can he come back and say
in rebuttal?
MR. SURREY: I don't know what he really can say.
The problem never came up. If it had come up, it is hard
to say what they would have done. The Senator is con-
servative and they might have ruled against us. On an
open debate - full debate - I think our position is a
fair position. Everybody should be treated fairly and
equally in these plans.
Senator Taft's position gives a minority in the plan
much greater benefits than the great majority. These pay-
roll plans he is concerned about cover on the average
about four percent of the employees, those earning over
three thousand dollars.
H.M.JR: I don't pretend to understand it, but if
you and Paul - don't try - I will get it tomorrow at the
press conference. Paul says he wants you to do it, 80
that is all right with me.
MR. SURREY: I explained it once before to AP and
others; they weren't interested at that time.
H.M.JR: Do you read Kiplinger?
MR. PAUL: When it is in my favor. (Laughter)
They say, "Reasonably and well-drawn, generally fair."
H.M.JR: I told you all the story about Cabinet -
Biddle was going to unmercifully for McNutt on this
question of the draft. Then I said - he said he was un-
fair, he was dishonest, he cheated - I mean, practically
everything - and McNutt was taking it. I don't know why.
Finally I said - it was the question of classification of
an important job - what do they call that?
MR. SURREY: Key.
H.M.JR: "On the key jobs," I said, "as far as Treasury
was concerned we had complete satisfaction. I thought it
was only fair to Mr. MoNutt to say so, whereupon Ickes
said, "We don't want to hear from anybody who is satisfied
with McNutt." (Laughter)
Regraded Unclassified
40
- 7 -
MR. SMITH: What does he mean there about the
Internal Revenue Commissioner considering whether
private pension funds provide better benefits to some
employees than the Social Security Act?
MR. SURREY: The statute gives to the Commissioner
the authority to ascertain which trusts are discriminatory
and which trusts are not discriminatory; you have to
satisfy the Commissioner of Internal Revenue on that point.
It is a clear delegation in the statute.
MR. SMITH: Then what you will do tomorrow is just
keep this discussion on the basis that you have inter-
preted the law right. If Taft doesn't like it and wants
to do something about it in Congress, that is something
else again.
MR. PAUL: They can always change the law.
MR. SURREY: I think most of the people on the outside
who were concerned with the answer we gave think we can
give the answer under the law. We can also give some
other kind of answer. Our hands are free to go either way.
The question is a matter of policy which way we go.
H.M.JR: What is the next thing?
MR. PAUL: You wrote me a letter about--
H.M.JR: Does it concern either of these gentlemen?
MR. PAUL: No.
(Mr. Smith and Mr. Surrey left the conference.)
MR. PAUL: You asked me if we could - how about
turning over the information on the Ford Motor?
H.M.JR: Yes.
MR. PAUL: I would think that was a very inadvisable
thing to do at this time, particularly for this reason:
Regraded Unclassified
41
- 8 -
There are two reasons. We have just gotten out the TFR-
500 questionnaire on foreign-owned property of American-
owned corporations, and everybody in the country is looking
under the bed. They will say, "Now you are getting that
really for this purpose of turning it over to some Congres-
sional committee." If it served any great purpose - but
balancing one thing against another, I think we ought to
stall on it until we get some of these other things done.
H.M.JR: Don't forget about it.
MR. PAUL: Yes, if you decide on that ground I don't
need to give you the other.
H.M.JR: O.K.
Regraded Unclassified
42
SENATOR TAFT ANNOUNCED THAT WHEN CONGRESS RECONVENES HE WILL
INTRODUCE A JOINT RESOLUTION TO DECLARE INVALID RECENT TREASURY
REGULATIONS WHICH HE SAID "NULLIFY" TAX EXEMPTION FOR EMPLOYES'
PENSION TRUSTS OF MANY LARGE COMPANIES.
TAFT ALSO PROPOSED TO PREVENT THE INTERNAL REVENUE COMMISSIONER
FROM CONSIDERING WHETHER PRIVATE PENSION FUNDS PROVIDE BETTER
BENEFITS TO SOME EMPLOYES THAN THE SOCIAL SECURITY ACT.
TAFT SAID THE TREASURY REGULATIONS WERE ISSUED "IN DIRECT
DEFIANCE" CF AN OPINION GIVEN TO TREASURY EXPERTS BY THE SENATE
FINANCE COMMITTEE THAT CORPORATIONS COULD DEDUCT, FOR INCOME TAX
PURPOSES, THEIR CONTRIBUTION TO PRIVATE PENSION FUNDS. THE
COMMITTEE FELT, TAFT SAID, THAT THE DEDUCTION SHOULD BE ALLOWED
EVEN WHERE EMPLOYES EARNING LESS THAN $3,000 A YEAR DO NOT
BENEFIT BY PRIVATE PENSION FUNDS.
7/28-GE1214P 10-0
ADD TAFT
TAFT SAID THE 1942 REVENUE ACT "MADE EXTENSIVE AND DETAILED
PROVISIONS REGARDING PENSION TRUSTS TO REMOVE ABUSES WHICH
EXISTED." BUT, HE SAID, THE ACT PROVIDED "EXPRESSLY THAT A
TRUST SHOULD NOT BE INVALID MERELY BECAUSE IT EXCLUDED EMPLOYES
RECEIVING $3,000 AND LESS, IF IT INCLUDED SUBSTANTIALLY ALL
Regraded Unclassified
43
- 2 -
EMPLOYES RECEIVING MORE THAN THAT AMOUNT."
"SOME TREASURY OFFICIALS DECIDED, HOWEVER, THAT THEY WOULD
HOLD SUCH A TRUST TO BE INVALID IF IT TREATED THE EMPLOYES IN
THE TRUST BETTER THAN THE SOCIAL SECURITY ACT TREATS THE EMPLOYES
RECEIVING LESS THAN $3,000 A YEAR," HE SAID.
7/28--GE1217P CT
Regraded Unclassified
44
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
July 28, 1943
TO
FROM
Randolph Paul
The particular aspect of the regulations with which
Senator Taft is concerned relates to private pension plans
which exclude employees nót earning more than $3,000 a year.
In conformity with the statutory requirement and policy
that pension plans can not discriminate in favor of officers,
stockholders, supervisory or highly compensated employees,
the Treasury regulations require that the benefits accorded
by the private pension plans for those earning over $3,000
should not be proportionately greater than the benefits re-
ceived under the Social Security Act by the employees under
$3,000 excluded from the plan. The policy adopted in the
regulations is merely in keeping with the $3,000 dividing
line adopted by employers in creating such private plans, since
the employees under $3,000 are excluded on the ground that
they receive benefits from the Social Security Act.
The Treasury Department believes that the regulations
promulgated by it are entirely in accord with both the spirit
and the letter of the pension trust provisions adopted in the
1942 Act. As a matter of statutory interpretation the question
is hardly open to debate. As & matter of policy every effort
was made to deal with 8. difficult problem in accordance with
the policy of Congress 8.8 it was expressed in the Act.
Officials of the Treasury Department informally discussed
these regulations before their promulgation with some members
of the Finance Committee who composed the subcommittee
designated last year to study the pension trust problem. This
was an advisory conference. While Senator Taft did express
views in the course of this discussion contrary to the views
held by officials of the Treasury as respects legal interpreta-
tion of the statute and not the merits of the proposed policy,
the members of the subcommittee as a group did not indicate
Regraded Unclassified
45
- 2 -
that the regulations were contrary to the statute. There
is no direct or indirect defiance of any opinion given to
Treasury experts by the Senate Finance Committee.
It is unfortunate that Senator Taft has raised the
question of legislation before any opportunity was granted
to ascertain the effect of the regulations in practice. The
Treasury Department announced at the time that the regulations
were issued that compliance with the regulations did not
require any particular formula and that each pension trust
would have to be considered on its merits without reference
to any preconceived formula. Until those employers interested
in the question of pension trusts have had an opportunity to
consider their trusts with representatives of the Treasury
Department, it is difficult to see how any judgment can be
formed as to the effect of the regulations upon existing
plans.
You may be interested in the comment on these regulations
in the recent Kiplinger tax letter.
Hot
Regraded Unclassified
Excerpts from Kiplinger Tax Letter
of July 24, 1943
Regulations covering pension provisions have now been
issued. This is main reason for making fresh check.
Plans which have been pending before Internal Revenue
Bureau should be re-examined by the employers in light of
these regulations. Make whatever changes may be necessary.
Don't wait for the Bureau to challenge any questionable
features or provisions.
Reasonable, well-drawn, generally fair
these are the
terms many tax specialists use in discussing the new pension
regulations. This doesn't mean that everyone is fully satis-
fied with every detail.
Treasury wanted a much tighter law, to ry to make
more certain that only honest-to-goodness bona fide pension
plans were benefited, but Congress enacted less rigid law,
relying on administrative officials to do the main job of
policing pension plans.
Fear that Treasury would try to "legislate" in the
regulations has turned out, say many experts, to be unwar-
ranted. On most points, the regulations seem to follow the
intent of Congress, despite the fact that the statute it-
self was loosely drafted
permitted finagling.
NO DISCRIMINATION in the operation of the pension
system.
this is just about the cardinal principle.
There must be no discrimination in favor of the share-
holders, officers, or higher-paid employes. It must be a
bona fide pension plan created by an employer "for the ex- #
clusive benefit of his employes or their beneficiaries.
Plans which in effect are "deferred salary plans" for
key men: Gov't is "after" these systems, wants tosee that
they don't benefit from the preferential tax treatment pro-
vided under the law.
"Plan" implies & permanent setup, not a temporary
arrangement. This point is specifically made in the regula-
tions.
point that such abandonment will be carefully checked
Abandonment of plan "in a few years": Regulations make to
Regraded Unclassified
- 2 -
be certain the plan was dropped ONLY by business necessity.
If it was dropped by employer for any other reason, gov't
will contend this is evidence that the plan was not bona
fide from the time of its creation. Such a contention by
the gov't would, of course, involve charges of "fraud."
Here are some further points on employe-pension regula-
tions, some additional interpretations:
FORM of plan is less important than its EFFECT in opera-
tion. For example, a plan might meet certain provisions set
out under the law, and on its face NOT be discriminatory.
But if plan inactual operation turns out to be discrimina-
tory, it will not be tax-exempt.
A plan which turns out to be a subterfuge for the dis-
tribution of profits to shareholders will not be approved,
even if other employes who are not shareholders are covered
by the plan. It will not qualify as a plan for the EXCLU-
SIVE benefit of the employes.
Contributory plan which is too burdensome on low-paid
workers will be considered as discriminatory in favor of
the high-paid workers. This will be true even if the plan
is offered to ALL the employes.
Plan must provide "definite actuarially determinable
benefits. This is the key
to make sure that deferred-
salary-payment proposals don't slip by as employe-pension
systems.
Former employes may be covered by a plan and still be
OK
the plan still accepted as one for exclusive benefit
of employes.
Also workers temporarily on leave
in armed forces,
for example.
Plans which supplement the regular social security
program may qualify as "acceptable plans but
there are some
strings attached.
Benefits must be based on "total-benefit basis"
which includes amount received under social security. This
means that TOTAL benefits must be proportionate
per-
centage-wise. This means a private system which supple-
ments the social security program must be correlated and
Regraded Unclassified
- 3 -
integrated with the social security pension benefits.
This is the provision about which there is the most
objection. It is contended that Treasury "departed" from
the intent of Congress.
A pension fund must be for the exclusive use of the
employes or their beneficiaries in order to qualify under
the tax law provisions. It must be "impossible" for the
fund to be used for any other purpose.
Advance gov't approval of your pension plan is not a
must. If you feel certain that your plan qualifies under
the existing law and the regulations thereon, you may wait
for gov't OK in due course.
But it's probably safer to get the Bureau of Internal
Revenue to give you a ruling on your pension plan now.
Copy of pension regulations may be obtained by getting
in touch with your internal revenue collector. Ask for T.D.
5278.
Regraded Unclassified
TREASURY DEPARTMENT
49
INTER OFFICE COMMUNICATION
DATE
Scoretary Morgenthau
July 28, 1943
Randolph Paul
Attached hereto is a preliminary statement on
special postwar reserves. I call your particular
attention to page 14 which discusses allowances which
may be paid to employees who are discharged at the
termination of the war.
RST
If you wish me
to read this and similar
menios please walk
them in in person
10mg
Doaradod
A
S
TNC.
Y
50
E1
9051 51
1943 JUL 28 PM 3 55
BINGHAMTON NY JUL 28 1943 259P
E.
G
HENRY MORGENTHAU JR
R
A
CONFIRMING YESTERDAYS CONVERSATION GANNETT NEWSPAPERS SHOW PRACTICALLY
NO DECREASE IN EMPLOYEE WAR BOND COMMITTENTS SINCE JULY 1ST FOR
INSTANCE BINGHAMTON NO DECREASE ELMIRA AN INCREASE HARTFORD TWO
E
CANCELLATIONS TOTALLING ONLY FIVE DOLLARS WEEKLY OUT OF THREE
Si
HUNDRED BOND BUYING EMPLOYEES AND SO ON AM MAILING SOME INTERESTING
OBSERVATIONS ON TOPIC REGARDS.
FRANK TRIPP.
Regraded Unclassified
THE BINGHAMTON PRESS - July 26, 1943
Pay-Go Tax Brought Loud Grouns
At First but 'Pain' Is Forgotten Now
l'ac-officials:
le take what
get
but
Industrial Executives
Say
JOHN L BARTON. IBM Chairmal
iviably we cldn't have
to hash IL +31
of the War Production Advisor
over again next
March--it's No
Committee (which has under is
Complicated Why
don't they col-
Most Everybody
supervision . subcommittee on bond
lect the tax and
HE done with IL
puchases) Generally, the 20 per
Yes,
I'll
continue
to
purchase
the
Is Happy
cent withholding tax has no effect
sarge amount in bends as before.
on brind purchases. We feel that
GARPIELD M. McKENZIE, war work-
our employes are aware of the
of, 23 Rotary Agenue Makes
withholding tax in budgeting their
It easter for . joi of people: don't
By GEORGE W. TETHERLY
expense and that и is a much im-
have to plan ahead so far. I've
Singhamton Press Staff Writer
proved method in comparison with
heard no complaints It cub down
the annual or quarterly payments
on my pay but A won't affect my
Low whistles and loud groans
As definite proof of this. IBM em-
purchase of bonds I think people
evoked by the new withholding
ployes are investing more than 10
understand but Sope that the cost
per uent of their STORE pay each
of living doesn't rise higher.
Las were the order of the pays
work and 96.5 per cent of the
EDWARD L PERRY. motion pictate
people here are in the payrell
day not 10 long ago when Uncle
operator. 100 South Washington
allotment plan.
Street-1 think II's . good plan If
Sam's tax-digging steamshovel
GEORGE W. JOHNSON. president.
it helps win the war I've heard
Endicott Johnson Corp.-1 think the
no complaints and I don't belieye
started working on John Q. Pub-
plan is o. K. with our people.
the sale of bonds will be affected:
lie's wage check on a weekly 20
There might have been some grum-
1 know II won't cut down on my
per cent basis.
filing at first but I believe now the
purchase et them.
taxes are accepted as a "must"
Fervent resolutions were heard
GLEN L HOOVER, City of Bingham-
Our people here have accepted it
ton Pire Marahal, 10 Stune Street-
the length and breadth of the
in the same good grade as every-
Valley of Opportunity that prom-
thing eise, They realize 'axes
ji doesn't make much difference
how the tax will be collected. I
must the heavy and are acting ac-
ised curtaliment of the purchase
cordingly As far " I know, bund
think, however, that the sale of
of everything from chewing gum
sales have not been affected and
bonds will be affected Mul on the
I believe they're going to continue
other hand I believe they won't be
to War Savings Bonds.
to go over with . bang,
cashed in to pay quarterly income
Like having a row of teeth
laxes and for that reason those who
LARENCE HOTCHKISS, president.
pulled. however, the public "got
buy them from new on will hang
Stew Manufacturing Co-There
on to them.
used to it" after Uncle Sam M
were a few who el Brat didn't un-
derstand the plan but now that it's
MRS ROBERT CLEARWATER. 184
dentist pulled dollars from sub-
in operation, I think they like the
Clinten Street, war worker-1 guesa
sequent pays,
new method of tax collecting.
1
in all the same when you get H
Grumbling Dies
haven't heard any complaints
all Agured out but anti in all I'm
in favor of the eld way of collect-
It appears that the grumbling
PAUL TITCHENER, president. K. H/
une I've always regarded income
Titchenger Co-The reaction to the
tax as a bill and planned accord-
has died down: that most weekly
plan has been favorable here.
ingly, Now when the pay check
wage-earners, after noting the des
There were some questions because
comes in it looks swfully small
ductions on their wage checks\,
of some of the confuring provisions
It seems to have a psychological
of the tax law, and because it's an
reaction. I don't believe the ux
three pay days in a row, have be-
entirely different. There has been
- affect bond sales except those
come used to the idea.
no effect on bond sales as yet.
where incomes are small. I've heard
Maybe pay-as-ywu-go isn't very
JAMES A. McGARRITY. treasurer,
of some who plan to cut down un
different from paying in four
Veil-Ballou Press-Workers here
their insurance because of the sew
have accepted the new tax as -
tax.
installments after all. They feel,
matter of course. Our bond sales
E. F. CARNS. policeman, 10 Pagree
after they alopped la think.
here haven't fallen off-in fact they
Street-li) o. K. with me, After
It's the same old tax they used
increased the week before the tax
a couple of weeks time I don't
went into effect.
know it's gone I've heard no
10 pay in from one to fout In-
Spokesmen for two plants said:
serious complaints and I don't be-
stallments,
lieve it'll cut down on the sale of
And they don't appear to be
AGPA-ANSCO DIVISION-There has
bonds. I know n won't with me.
been nn complaint about the new
thinking about cutting duwn on
FRED o. BLAKE shop foreman, 4
tax here. Vers, very few cancella-
Amsbry Street-The new tax plan
the purchase of War Bonds.
tinns of finnds purchased under the
has it's good and bad points. But
Complaints apparently came
payroll deduction plan have been
under the new plan by the time
chiefly from those employes-
reported.
the end of the year comes, you
TINK AVIATION DEVICES. INC - We
really know what you have. If we
were overpaying their taxes
have heard no complaint concern-
aren't taxed more 28 time goes on
dightly because their wages fell
HE the pay-ar-you-go tax plan.
I guess everyone will get accus-
IF, the lower portion of a with-
Bund sales are holding up well de-
tomed to it. As for as bonds are
holding bracket. An extreme ex-
spite the deductions
concerned those who are smart will
ample was this, altributed to a
Here are some typical comments
keep on buying them. After all
weekly wage-earner:
from the men and women who
they're doing themselves . (avor
more than they are the govern-
"My salary gois into a higher
are bit by the tax AX. They were
ment.
brarket by just A few cents As
selected at random by the Inter-
FRANK M. DEWEY. Binghamton
a result. I'm paying the Govern-
viewer:
Savings Bank secretary, 48 Davis
Street-I think must people agree
ment $80 a year too much Of
JOHN if WILKINS. mechanic, 51 51.
the new plan is a good Idea.
course, I get credit on my taxes
John Avenue- feel I can stand it
be hard un sume people to ger
If it. helps the war effort. It doesn't
along mn less. but it seems to me
at the end of the year: but 1
make much difference although
[
moit everyone will gel used to the
can't eat credit I want my
think the new way makes it easter
idea and approve and IT's better
money.
to pay. I think it will be felt most
than having to pay out on a heavy
by those people whose wages are
annual tax. At for as hands an
Credits Next March
very low.
concerned, I believe the country "
Nevertheless, the tax collector
MRS F D SILVERMAIL, clerk, 51
sold on gelling behind the war di
Michell Avenue-1 (ne) we have
fort and believe that bonds are the
has observed, the wage earner
best investment of them all because
will be glad to have those credits
there's nothing to worry about A
next March, particularly if has
them.
income is to be higher this year
than it was in 1942.
Aside from this point. however,
new seem to be satisfied
Take it trom officials of Triple
Villas industries and the general
public
Regraded Unclassified
52-
July 28, 1943
Dear Mr. Schenok:
I want you to know that I appreciate
the loan of Mr. Coor Deab to the Treasury
Department. I all sure that he will be a
valuable addition to our ver hond group.
It was very generous of you to lend
him to us, and you can count it & real
service to the var effort.
Sincerely,
(Signed) d. Morgenthau, /
:
Mr. Micholas schenck
President
Loen's, Incorporated
New York, New York
riamy
F3:gr
7-28-43
Regraded Unclassified
TO:
53
Secretary Morgenthau
Dear Mr. Boss:
I did not write the
attached. I also have a weak
stomach.
I shall, however, rewrite
it and return to you with a box
of Bicarbonate of Soda attached.
Fred Smith
Room 2901
Regraded Unclassified
54
THE SECRETARY OF THE TREASURY
WASHINGTON
July 27, 1943
Dear Mr. Schenck:
This note is just to let you know how
appreciative I am of your courtesy in
releasing Mr. Oscar Doob so that the Treasury
Department may have the benefit of his
valuable services during the momentous days
that lie ahead.
I am not unmindful of the sacrifice you
are making in depriving yourself of Mr. Doob's
able assistance, but I am sure that you can
add this splendid gesture to the list of your
other outstanding endeavors to help in the war
effort.
Sincerely yours,
Mr. Nicholas Schenck
President
Loew's, Insurporated
Too time a weak h
we ch down
Frating New York City
Regraded Unclassified
55
WAR FOOD ADMINISTRATION
WASHINGTON
OFFICE OF THE ADMINISTRATOR
July 28, 1943
Dear Henry:
I want to thank you for your letter of recent
date with enclosure, which I have read with
much interest. I found that part of the cable
to which you made particular reference es-
pecially interesting.
Cordially yours,
Administrator
Hon. Henry M. Morganthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
Treasury Department
56
Division of Monetary Research
Date
19
To:
Honorable Tom Connally, Chairman,
Committee on Foreign Relations,
Exes: United States Senate.
This letter was also sent to the following
Senators on the Committee on Foreign Relations:
*Walter F. George
*Robert F. Wagner
Elbert D. Thomas
Frederick Van Nuys
James B. Murray
Claude Pepper
Theodore Francis Green
Alben W. Barkley
Robert R. Reynolds
Joseph F. Guffey
Guy M. Gillette
Bennett Champ Clark
Carter Glass
James M. Tunnell
Hiram W. Johnson
Arthur Capper
bbert M. La Follette, Jr.
Arthur H. Vandenberg
Wallace H. White, Jr.
Henrik Shipstead
Gerald P. Nye
James J. Davis
# Included with another Committee
Treasury Department
57
Division of Monetary Research
Date
19
To:
Honorable Sol Bloom,
Chairman, Committee on Foreign Affairs,
PRIX.
House of Representatives.
This letter was also sent to the following
Representatives on the Committee on
Foreign Affairs:
Luther A. Johnson
John Kee
James P. Richards
Joseph L. Pfeifer
Pete Jarman
W. O. Burgin
Wirt Courtney
Herman P. Eberharter
Thomas S. Gordon
Howard J. McMurray
Will Rogers, Jr.
J. William Fulbright
Mike Mansfield
Charles A. Eaton
Edith Nourse Rogers
Robert B. Chiperfield
John M. Verys
Foster Stearns
Karl E. Mundt
Bartel J. Jonkman
Frances P. Bolton
14
James W. Wadsworth
Charles L. Gerlack
Andrew C. Schiffler
Treasury Department
58
Division of Monetary Research
Date
19
To:
Honorable Andrew L. Somers,
Chairman, Committee on Coinage,
Exex:
Weights and Measures,
House of Representatives.
This letter was also sent to the following
Representatives on the Committee on Coinage,
Weights, and Measures:
John J. Cochran
Compton I. White
Dan R. McGehee
Eugene Worley
John Lesinski
Louis J. Caposzoli
Augustine B. Kelley
William L. Dawson
Chauncey W. Reed
August H. Andresen
Hugh D. Scott, Jr.
Richard P. Gale
William H. Stevenson
0
Joseph Clark Baldwin
Ranulf Compton
Frank L. Sundstrom
Homer A. Ramey
Treasury Department
59
Division of Monetary Research
Date
19
To:
Honorable Henry B. Steagall,
Chairman, Committee on Banking and Currency,
*xxxx
House of Representatives.
This letter was also sent to the following
Representatives on the Committoe on Banking
and Currency:
Brent Spence
Thomas F. Ford
Paul Brown
Wright Patman
William B. Barry
A. S. Mike Monroney
James A. Wright
John H. Folger
H. Streett Baldwin
Brooks Hays
LaVern R. Dilweg
Roger C. Slaughter
Maurice J. Sullivan
Merlin Hull
Jesse P. Wolcott
Charles L. Gifford
Fred L. Crawford
Ralph A. Gamble
Robert W. Kean
Jessie Sumner
Frederick C. Smith
John C. Kunkel
Thomas Rolph
Henry 0. Talle
B. J. Monkiewics
Treasury Department
60
Division of Monetary Research
Date
19
To:
Honorable Walter F. George,
Chairman, Special Committee on Post-War
From: Economic Policy and Planning,
United States Senate.
This letter was also sent to the following
Senators on the Special Committee on Post-
War Economic Policy and Planning:
*Alben W. Barkley
Carl Hayden
Joseph C. O'Mahoney
*Claude Pepper
Scott W. Lucae
Charles L. McNary
#Arthur H. Vandenberg
Warren R. Austin
Robert A. Taft 1/
* Included in Senate Com. on Foreign Relations
1/
Included in Sen. Com. on Banking and Currency
Treasury Department
61
Division of Monetary Research
Date
19
To:
Honorable Robert F. Wagner,
Chairman, Committee on Banking and Currency,
Exem: United States Senate.
This letter was also sent to the following
Senators on the Committee on Banking and
Currency:
=Carter Glass
*Alben W. Barkley
John H. Bankhead, 2d.
Francis Maloney
George L. Radcliffe
D. Worth Clark
Sheridan Downey
Abe Murdock
Burnet R. Maybank
James G. Scrugham
John L. McClellan
Charles W. Tobey
John A. Danaher
Robert A. Taft
John Thomas
Hugh A. Butler
*Arthur Capper
Joseph H. Ball
C. Douglass Buck
* Included in Senate Com. on Foreign Relations
73
25
JUL 28 1943
My dear Mr. Chairman:
When I appeared before the Committees of the Senate and the
House of Representatives last April, I informed you that the tech-
nicel experts of the Treasury, in consultation with the technical
experts of other departments, were studying the problem of how to
avoid competitive currency depreciation and how to facilitate the
stabilisation of currencies after the war.
As you know, I wrote to the Finance Ministers of all the United
and Associated Nations directing their attention to this problem. I
enclosed a preliminary draft of a proposal for an International Sta-
bilisation Fund and requested the Finance Ministers to submit this
draft to their technical experts for study. I also invited then to
send their experts to Washington to discuss with us the feasibility
of international monetary cooperation along the suggested lines.
During the past two months we have held informal discussions
with the technical experts of nearly thirty countries. On the basis
of these informal and preliminary discussions, a newly revised ten-
tative draft proposal has been prepared, a copy of which I as send-
ing to the members of the Senate and House Committees before whom I
appeared in April to explain our tentative proposal.
I should like to emphasise that the proposal for an Interne-
tionel Stabilisation Fund is still in the preliminary and informal
stage. lie expect soon to discuss with representatives of banking,
business and other groups the various proposals that have been put
forward for preliminary consideration.
I shall keep the Congress fully informed of the progress we
are making in our discussions on international monetary coopers-
tim. When preliminary discussions have been completed and before
an official conference is held, I intend to appear before the ap-
propriate Committees of the Cangress to advise with them on what
is being done and what is proposed to be done to secure the 00-
operation of the United and Associated Nations in facilitating the
stabilisation of currencies and the restoration and balanced growth
of international trade.
Regraded Unclassified
63
- 2 -
In the meantime, I shall be available to any Congressman or
Senator who wishes further information on the proposal for an In-
ternational Stabilisation Fund.
Sincerely yours,
1.1 H.Margenthan Dr.
Secretary of the Treasury.
Honorable Andrew L. Somers,
Chairman, Committee on Coinage,
Weights and Keasures,
House of Representatives.
Enclosure.
3
HDW/EMH/mb
7/21/43
Regraded Unclassified
64
OFFICE
BOARD OF ECONOMIC WARFARE
WASHINGTON, D. C.
July 28, 1943
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
In order to complete the Board records, there are
enclosed a revised copy of the report, "Japan's War
Economy - 1943" which was sent to you prior to the Board
meeting of June 3, 1943, copies of the minutes of the
Board of Economic Warfare of July 1 and July 15, 1943, and
some suggested modifications to the minutes of several of
the Board meetings.
Sincerely yours,
E.W. Gaumnitz
Enclosures
Regraded Unclassified
65
Mr. Dean Acheson suggested the following restatement of
the minutes of the meeting of the Board of Economic Warfare held
on August 18, 1942. The paragraph to which reference is made is
the third paragraph on page 2, (Mr. Acheson stated
would be called.")
Mr. Acheson stated that the action now pro-
posed was the submission of the draft plan to the
President for his instruction as to whether the plan
was along lines which met with the President's
approval, also as to whether and when any further
action should be taken to develop it, He pointed
out that both the Vice-President and the Secretary
of State wished to discuss this matter with the
President, and that the present question did not
relate to action but to whether any members of the
Board objected to the plan as drafted. He pointed
out that, if and when the President wished to go
forward with such a proposal, it would be necessary
to discuss the matter with the Russian, Chinese
and British Governments and, if they were in accord
with the general idea, to discuss it then with cer-
tain other of the United Nations and finally with all
of them.
Regraded Unclassified
66
Mr. John Lockwood suggested the following restatement of
the minutes of the meeting of the Board of Economic Warfare held
on November 27, 1942. The paragraph to which reference is made
is the second full paragraph on page 2 following Food, ("Mr. Rocke-
feller opened
coal and 011.")
Mr. Rockefeller opened the discussion by saying
that in general the food problem in the other American
Republics was a matter of transportation, both ocean-
going and internal, involving such questions as trucks,
tires, railroads, coal and oil.
Mr. John Lockwood suggested the following restatement of
the minutes of the meeting of the Board of Economic Warfare held
on November 27, 1942. The paragraph to which reference is made
is the fifth paragraph on page 2 following Food, (Mr. Rocke-
feller stated
development programs.")
Mr. Rockefeller stated that his office was
attempting to develop added local food supplies in
the Central American area, not only for consumption
by the local people, but for sale to the armed forces.
The Coordinator's Office is guaranteeing a fixed price
for certain foodstuffs being grown in Costa Rica which
is considered an exportable surplus.
Mr. John Lockwood suggested the following restatement of
the minutes of the meeting of the Board of Economic Warfare hold
on November 27, 1942. The paragraph to which reference is made
is the first part of paragraph on page 3, last sentence, ("Approxi-
mately 4,000
Amazon area.")
Approximately 5,000 people are now employed, the
majority being laborers engaged in a variety of
activities ranging from drainage to the construction
of water supply and sewage systems, hospitals and public
hoalth conters. The ratio of American technicians to national
techniciens is in excess of one to twenty-five; all laborers
are nationals.
Regraded Unclassified
67
Mr. John Lockwood suggested the following restate-
ment of the minutes of the meeting of the Board of Economic
Warfare held on December 17, 1942. The paragraph to which
reference is made is the seventh full paragraph on page 3,
("Mr. Rockefeller stated
.opened to criticism. ")
Mr. Rockefeller inquired as to the use of Lend
Lease funds in connection with the construction of the
highway across Hispaniola and in connection with other
supplies to Puerto Rico. He said that recent state-
ments in the press had indicated that in Puerto Rico
there had been some criticism of the methods of supply-
ing that Island.
Regraded Unclassified
68
Mr. John Lockwood suggested the following restatement of the
minutes of the meeting of the Board of Economic Warfare held on
December 31, 1942. The paragraph to which reference is made 1s the
fourth full paragraph on page 3, (Mr. Rockefeller stated
significant by itself.")
Mr. Rockefeller stated that it was very difficult
to obtain reliable statistics from Bolivia.
Mr. John Lockwood suggested the following restatement of the
minutes of the meeting of the Board of Economic Warfare held on
December 31, 1942. The paragraph to which reference is made is the
third full paragraph on page 4, (Mr. Rockefeller stated
was satisfactory.")
Mr. Rockefeller stated that in October of 1941 a nine men
mission had been sent to Bolivia. That Mission's report indi-
cated that food valued at around $6,000,000 was imported into
Bolivia and recommended an increase in domestic food produc-
tion. During the spring and early summer of 1942, the Coordi-
nator twice inquired of the Embassy at La Paz whether there
wes any shortage in food production and in each case received
replies indicating that there was no important shortage.
Mr. John Lockwood suggested the following restatement of the
minutes of the meeting of the Board of Economic Warfare held on
December 31, 1942. The paragraph to which reference 15 made is the
last part paragraph on page 4, and the first part paragraph on page
3, (m/r. Rockefeller said
extended to Bolivie.")
Mr. Rockefeller said that his office was prepared
with its health, sanitation, nutrition, and disease control
program, which has already been inaugurated in Bolivia, to
carry on such constructive work as is deemed appropriate
by the Bolivian and U. S, Governments. The agreement covering
such fields of activity was signed on July 16, 1942 between
the Institute of Inter-American Affairs and the Ministry of
Labor, Health and Social Welfare.
Mr. John Lockwood suggested the following restatement of the
minutes of the meeting of the Board of Economic Warfare held on
December 31, 1942. The paragraph to which reference is made is the
second full paragraph on page 5, ("Mr. Rockefeller stated
might be considered.")
Mr. Rockefeller stated that if the problem was
one of better distribution of food 80 as to get increased
production, possibly the serving of well-balanced meals,
65 was done at Cerro de Pasco, might be considered.
Regraded Unclassified
69
Mr. Bernhard Knollenberg suggested the following restatement
of the minutes of the meeting of the Board of Economic Warfare held
on December 31, 1942. The paragraph to which reference is made is the
sixth full paragraph on page 7, ("In this connection
would
be difficult.")
In this connection, Mr. Knollenberg stated that
bauxite and mahogany were two items the purchase of
which on a cash basis would be difficult to explain
publicly.
Regraded Unclassified
70
Mr. John Lockwood suggested the following additional
paragraph to the minutes of the meeting of the Board of Economic
Warfare held on January 14, 1943, to be inserted after the
second full paragraph on page 3.
Mr. Rockefeller pointed out that upon appropriate
documentation that both materials and shipping space
would not be available for the export of gold mining
machinery to Colombia and Nicaragua and upon further
documentation that resultant cessation of gold mining
operations would create unemployment which would have
an adverse effect upon the stability of the countries
in question, his Office would work out, with the
Department of State, such cooperative programs as
might alleviate serious unemployment.
Regraded Unclassified
71
The following modification of the minutes of the Board of
Economic Warfare held on May 6, 1943 is based on a letter from
Mr. R. P. Patterson and a suggestion from Mr. Adlai Stevenson.
The paragraph referred to is the last paragraph on page 3,
("There was general
any support to Germany.")
There was general feeling there should be a
continuation of negotiations along the lines previously
outlined, this opinion not being unanimous however,
Mr. Patterson particularly noting that the Army was
opposed to any traffic with Sweden as long as it was
giving any support to Germany, Mr. Knox stating that
he was opposed to further shipments to Sweden until
concessions actually had been received, and Mr. White
stating that he favored increased Swedish concessions.
Regraded Unclassified
72
Mr. John Lockwood suggested the following restatement
of the minutes of the meeting of the Board of Economic Warfare
hold on June 3, 1943. The paragraph to which reference is made
is the last part paragraph on page 4 and the first part paragraph
on page 5, ("Mr. Rockefeller pointed out
with U. S.
paternalism.")
Mr. Rockefeller pointed out that the monopoly in
Mexico was created by the Mexicans as a matter of their
policy. This would not be changed by either the accep-
tance of the Cyanamid proposal or that suggested by the
Alien Property Custodian. He had recently returned from
Mexico and indicated that, as a result of his conversa-
tions there, he believed that the Mexicans were very
sensitive to action by the United States Government
which would seem to tell them how they should run their
own affairs. He pointed out that the Mexicans, having
determined that they wanted B. monopoly, had freely entered
into negotiations resulting in the Cyanamid proposal which
appeared to be satisfactory to the Mexicans. He feared
that for the United States Government now at this stage
to offer a new proposal might be resented by the l'exicans
as American interforence.
Mr. Rockefeller also stated that he was somewhat
puzzled on one point. As he understood it, the essence
of the situation was that the United States Government,
through the Alien Property Custodian, was prepared to
underbid Cyanamid. He presumed that the United States
Government must be taking this position because the
Cyanamid proposal violated some foreign economic policy
of the United States and the Alien Property Custodian
proposal would aid that policy. But he was not clear as
to what that foreign economic policy was. He thought
that this policy should be clearly defined and made
known so that foreign governments, government agencies
and private concerns, such as American Cyanamid, might
know where they stood and what were the rules in accord-
ance with which they should act, Without such a dofini-
tion of policy he folt that the not result of a transaction
such as this would be simply to have the Government's
temporary control over certain large firms used to
underbid and eliminate private companies from business
which could be legitimate if the private companies knew
what the rules Waro. He further stated that in the absence
of such cloar policies the trunsaction night appoar to the
Mexicons as simply a caso of United Statos Government pater-
nalism in their own affairs.
Regraded Unclassified
73
The Minutes of the Meeting of the Board of Economic
Warfare of June 17, 1943 should be corrected to show
Mr. John Lockwood of the Office of the Coordinator of
Inter-American Affairs instead of Mr. John Lockwood,
representing the Administrator, Lend Lease Administration.
Regraded Unclassified
SECRET
74
Minutes of the Meeting of the Board of Economic Warfere
Held July 1, 1943, at 10:00 a. m.
A meeting of the Board of Economic Warfare was held in Room 201 Senate
Office Building at 10:00 a. m. on July 1, 1943.
The meeting was attended by the following members of the Board:
The Vice President, Chairman of the Board
Mr. Dean Acheson, representing the Secretary of State
Mr. Harry White, representing the Secretary of the Treasury
Mr. Charles Fahy, representing the Attorney General
Mr. Adlai Stevenson, representing the Secretary of the Navy
Mr. Leslíe Wheeler, representing the Secretary of Agriculture
Mr. Wayne Taylor, representing the Secretary of Commerce
Mr. Nelson the Rockefeller, Coordinator of Inter-American Affairs
Mr. William Batt, War Production Board
Mr. E. R. Stettinius, Administrator, Lend-Lease Administration
In addition, the following persons were present:
Mr. John Lockwood, Office of Coordinator of Inter-American Affairs
Mr. Harold Neff, War Department
Mr. Herbert Feis, Department of State
Mr. John Lovitt, State Department
Mr. Henry Labouisse, State Department
Mr. Randolph Higgs, State Department
Mr. Melvin Fagen, Board of Economic Warfare
Mr. H. K. Fleming, Board of Economic Warfare
Mr. E. W. Gaumnitz, Board of Economic Warfare
Mr. W. T. Stone, Board of Economic Warfare
Portugese Trade
tá
With reference to Portugal Mr. Stone stated that there had been in exist-
ence a supply purchase agreement with the U. S. and the United Kingdom which
had expired June 30, so the question of B. new agreement was raised. He stated
that we had been securing tungsten from Portugal and that apparently reasona-
ble cooperation had been forthcoming. Recently, however, it was learned that
the Portugese government had entered into an agreement with Germany, permitting
the purchase of certain "free" tungsten. Previously Germany had been securing
approximately 75 per cent of the free tungsten. The new agreement between
Portugal and Germany was made without consulting the United States or United
Kingdom authorities and probably covered a year, although we have not seen the
agreement. It was indicated that Dr. Salazar, the dominant influence in Portu-
gese trade policy, was apparently attempting to treat both Germany and the
United Nations on about an equal basis. Mr. Stone pointed out that U. S. and
U. K. secure around 65 per cent of the total tungsten production of the present
time and that the German-Portugese agreement roferred to the. so-called free
tungsten.
Mr. Stone also stated that Dr. Salazar had announced that Germany would
get 45 to 60 percent of the sardine catch which placed the U. S. in a peculier
Regraded Unclassified
75
3
position, since we in effect enable the procurement of patroleum used for
British are to be free of any obligations to make basic rations available to
fishing und also the procurement of steel plates used for trawlers.
Sweden.
The problem in connection with a now agreement was how far we are able
to prezs for concessions,
(4) Miscellansous concessions. The Swodish Government also agrees to un-
Mr. White's thought was that with a changed war situation, the U. S.
dortake not to replace any ship lost in the course of trade with onemy torri-
should press for additional concessions. Mr. White stated that Treasury NOS
tory, not to allow the number of its ships In this traffic to incroase, to
exploring a "gold" question which night be of come use on conjunction with
provide full statistics on trade, not to ruduce prices on exports to the enery,
negotiations where the movement of gold NBS involved. In effect the propo-
not to purnit an increase in prices of goods received from unamy torritory
oul was that gold would not be accepted unless title were clear, Previously
without a corresponding rise in its own prices, to restrict its exports to
such a proposal probably would have been ineffective since Germany had ample
Argentina to certain products approved by the United States and to mointain
deedit, At the present time, however, there were indications that this ait-
all of its commitments under the agreement, even though the Gothonburg traffic
option to changing 50 that Germany would be forced to pay in gold or goods.
la stopped.
A refunel on our part to take gold except title were clear might force inter-
modiate countries to require German payment in terms of goods.
The Governments or the Unitod Statos and the United Kingdom agroo to the
Nr. Stone indicated also that the Joint Chiefs of Staff had been consulted
following: First, to pormit Sweden to import in hor own vossols by October 1,
some time BRO 0.0 to whether there were any military reasons why me should not
1943 a total of 120,000 tono of potroleum products as the your's justa, such
pross for more concessions from Fortugal and that the Joint Chiefe had suggested
products to be exclusively for the use or the urred forces and to be subject
that the negatiators proceed cautiously.
to adequato control to provent diversion. Agreement on this point was author-
Mr. Stevenson suggested, however, that possibly the situation had now
ined by the President in communications to the Secretary of Stato under date
changed 30 that this point should be checked again.
of June ? and 11, 1943. The basis for this comitment is the dosire to annist
the Swedish armed forces to be in a position to resist possible military action
Sweden
by Germany in rotaliation for the Swadish ban on military traffic. Secondly,
to maku available cortain "basic rations" which have boan approved by the Con-
Reporting on the Swedish vituation, Mr. Stone stated that the Governments
bined Boards. Third, to permit a sixth ship in the Gothonburg traffic monthly.
of the United States and Great Britain had reached an agreement In principle
There was considerable discussion of the report with a number of weaknossos,
with the Swedish Government on trade relations during the current year and 1944.
boing pointed out mainly by Mr. White, Mr. Neff and Mr. Stovenson. These
This agreement, negotiated in accordance with the President's directive of
indicating the doubtful valuo of the agreement to the United Statos,
November 30, 1942, represents is substantial achievement of the objectives out-
WOTE sumarized by Mr. "hite as follows: Basicully, Sweden was not making largo
lined in the Board's resolution of November 12, 1942. The major points of
concessions. With reference to oxports to Germany, such reductions were small
the agreement were outlined na follows:
in 1943 and while reductions appoared material for 1944 it was pointed out that
much reductions could be expected without any agreement, that the magnitudo of
(1) Reduction in exports. For 1943, exports from Sweden to enemy terri-
the reduction was over-stated since 1942 exports which wore used as a basin in
tory to be at least 13 per cent less by value than 1942. For 1944, total
the calculations were abnormally largo. In addition, Mr. Thito noted that
exports to be limited to 700,000,000 kroner, which to 30 per cent below the
there who domo avidence that the Swedes had violated thoir agreements in the
1942 level. Exports of iron are La 1944 to be in the ratio of two tons of ore
last wur, word violating the agroement now in affect, and were in fact viola-
for one ton of coal received from Gernany, with total exports of iron ore 11mi-
ting while the present nogotiations were in process. Thorefore, thore was no
tod to 7,500,000 tona for the year, This limitation would represent a reduc-
reason to expoct compliance in the future. Further, it appeared that the Swodes
tion of about 13 per cent from the 1942 level. In addition, exports of certain
voro recoiving imports approximating 60 por cont of normal, exporting negligible
specific compdities such as iron and steel manufacturors in 1943 are not to
juantitios of goods to the United Nations but at the samo time exporting in
exceed exports in 1942. In 1944, exports of iron and stoel manufacturers,
increased quantities to Germany. With reference to the goods baing allowed
chemicals, lumber and pulp und papor and cortain other Important commodities
under badie rations, thoro wore included itoms of great value to Swedon, includ-
are to be limited to 75 por cont by value of 1942 exports. With some exceptions
ing, but not limited to oil. Mr. White also stated that as the war progressed
all oxports of arms, munitions and souns of transport are to be eliminated.
Ewoden would bocome moro and moro depondent upon the United Nations and therefore
the V. S. nogotiators should be in a position to exact matorial concossions and
(2) Credits. Except for limited crodits to Finland, no new credits to be
thore was no reason why 5. weak position should be takon,
grunted by Sweden to Germany or associated countries.
In response to questions 55 to whether further action on the part of the
Board was dosirable and whether the proposed agrooment would bo referred to the
(3) Wilitary traffic. Unloss Sweden gives notice by August 1 that such
Chiefs of Staff, Mr. Achoson indicated that the terms of the proposed agreement
action in impossible, all energy troop and military traffic across Swedoa to be
appeared to be within the broad terms of the Board resolution, that the petro-
discontinued by October 1 and non-military goods traffic to be limited to
loun question had been before the Chiefs of Staff, that the broad outline had
180,000 tons annually. If the Swedes do not close the traffic, the U. 3. and
the approval of the President and that any further difficulties were to be re-
Regraded Unclassified
SECRET
Minutes of the Meeting of the Board of Economic Warfare
76
Held July 15, 1943 at 10:00 c.m.
solved by the Secretary of State. It appeared to Mr. Acheson, therefore, that
the negotiators had accomplished the objectives and that the agreement repre-
sented a real advance. He stated further that that position RGS also held by
the U. K. authorities, by the negotiators, and-by the U. S. Ambassador to Eng-
A menting of the Board of Economic Warfare was held in Room 201 Senate
land. The Vice President suggested that the views of the several agencies,
office Building at 10:00 a.m. on July 15, 1943.
purticularly those of Treasury, War and Navy be brought to the attention or the
Conrotary of State.
The meeting was attended by the following members of the Board:
The meting adjourned at 11:30 B. B.
The Vice President, Chairman of the Board
The Attorney General
Mr. Adla1 Stevenson, representing the Secretary of the Navy
The Secretary of Agriculture
Mr. Wayne C. Taylor, representing the Secretary of Commerce
The Coordinator of Inter-American Affairs
Mr. William Batt, representing the Chairman, Mar Production Board
Mr. Bernhard Khollenberg, representing Lend Lease Administration
In addition, the following persons were present:
Mr. Herbert Feis, Department of State
Mr. Percy Douglas, Office of Coordinator of Inter-American Affairs
Capt. A. M. Peabody, Office of Coordinator of Inter-American Affairs
Mr. Harold H. Neff, War Department
Mr. Kormit Roosevelt, Jt., State Department
Mr. Monroe Oppenheimer, Board of Economic Warfare
Mr. W. L, Clayton, Department of Commerce
Dr. Milo Perkins, Board of Economic Warfare
Sr. E. Caumnits, Board of Economic Marfare
The Vice President stated that the first matter for discussion und the
recent legislative action in connection with the B.E.W. appropriation and
asked Mr. Perkins to review the situation.
Mr. Perkins distributed copies of the amendment to the B.E.W. appropriation
bill and a copy of his letter to Mr. Cannon, Chairman, House Appropriation
Committee. Mr. Perkins reviewed the legislative history briefly, stating
that the House hourings were in great detail, following which the House
passed the appropriation bill carrying the full amount of $36,150,000 as
requested. The Senate Committee hearings were rather short. Apparently
there was discussion in the Senate Committee on an amendment requiring the
approval of three cabinet officers on expenditures of B.E.W. funds abroad.
This idea was later modified to require majority approval of the members
of the Board on all its economic programs and policies and such an amend-
ment was presented to the Sanate. On the floor, Senator McKellar intro-
duced an amendment inserting the word "general" before the term "economic
programs". That amendment, however, was defeated.
Mr. Perkins stated he then wrote Mr. Cannon pointing out that the effect of
the amendment was to give veto power to the B.E.K. over W.P.B. with refer-
ence to operations on imports as well as exports, and that the Senate re-
jection of the word, "general" opened the possibility that the General
Accounting Office night take a very narrow interpretation to the amendment
requiring that the majority of the Board approve all individual export
licenses, all individual import contracts, and all economic warfare analysis
work abroad specifically.
Regraded Unclassified
7
- 2 -
The Conference Committee reinserted the word "generol" and it was accepted
by both Houses with no discussion.
Mr. Perkins also pointed out that the anendment was not operative until
August 15.
Hr. Perkins proposed that the Board arrange to neet on the twenty-second,
prior to which time he would attempt to have drafted and circulated pro-
posed broad policy resolutions with supporting data. He pointed out, how-
over, that while resolutions covering broad policy night serve the letter
of the law and enable operations to continue, the intent apparently went
beyond the letter.
To meet the spirit of the law, he therefore suggested that following the
filing of resolutions covering broad programs and policies that members
bring up specific programs and policies for additional reviow. He pointed
out that to ask the Board to pass on every purchase contract under the va-
rious directives now operative, and on every license would be an adminis-
trative nightmare. It were his suggestion that each Board member be free to
ask for the presentation of material bearing on any spot problem, however.
Ho stated that he interpreted the amendment to moon that the Congress
recognized the Board as a Board, from which it would be possible to secure
complete judgmant and policy direction on foreign economic programs.
There was general acceptance of the approach outlined by Mr. Perkins. In
the general discussion the point was made that while previously the Board
was advisory in character with the administrative power in the hands of the
Vice President, under the amendment it was necessary that a mijority of the
Board approve general policies and programs before administrative funds
might be erpended abroad.
It was also notud that majority approval would require six members an the
Board wes now constituted. It was also cloar that Board nembers might ap-
prove general policies and programs without necessarily being present at
meetings of the Board and that alternates were empowered to act.
It was also suggested that 6. representative of the General Accounting Office
be consulted in drafting the resolutions. It was also agrood that approved
resolutions be filed with the Department of State, and should be available
to Board members. The Attorney General expressed it as his opinion that
this was E routine provision of the law.
There vas also discussion of the desirability of making the resolution avail-
able to the chairmen of the House and Senate Appropriation Committees, but
because of military security, this matter was left for further consideration.
Wooden Vessels
The Vice President indicated that lir. Rockefeller was ready to report on the
wooden vessols program.
b. Rockefekler referred to the Board action requesting the Coordinator's
Office to undertake # general program of constructing, purchasing, and opera-
Regraded Unclassified
78
- 3 -
ting wooden vessela under a thousand tons to relieve the shipping situation.
Pursuant to those general instructions, the Coordinator's Office had ac-
quired and operated wooden vessels, and had worked closely with War Shipping
Administration on the matter of additional constructions. His office had
canvassed the possibilities of construction in South America and very
briefly the results of that canvass were that there was no place except
Mexico where such vessels could be constructed. He stated that a written
report had been submitted to the Board. Mr. Rockefeller also stated that
upon its inception the Maritime Commission had not been interested in the
wooden vessol program. Some three months ago, however, the War Shipping
Administration had agreed to take over vessels previously acquired and to
operate such vessels. His Office had therefore transforred the vessels to
the War Shipping Administration, retaining only the job of construction. He
stated also that War Shipping Administration had agreed to the transfer of
any vessels which might be constructed.
Presently, however, he had received a letter from Admiral Land recommending
the discontinuance of any further construction of wooden vessels because of
improved shipping conditions. Prior to the receipt of the letter, but fol-
lowing conversations with Admiral Land, Mr. Douglas of his office had pro-
ceeded to Mexico for the purpose of checking the possibilities of cancel-
lation of construction contracts,
In view of the report, and Mr. Rockefeller's further statement that it
would take ten to twolvo months to construct additional vessels, it was
agreed that the program should be discontinued,
The moeting adjourned at 11:20 s.m.
Attachments: Copy of Appropriation Amendmont
and copy of letter to Mr. Clarence Cannon
Regraded Unclassified
9
Amendment to the Bill as passed
X
K
X
(2) No part of any funds appropriated or made available
horein to the Board of Economic Warfaro shall be used after
August 15, 1943, directly or indirectly for the procurement of
services, supplies, or equipment outside the United States
except for the purpose of executing general economic programs
or policies formally approved in writing by a majority of the
Board and such writing has been filed with the Secretary of
State prior to any such expenditure.
X
X
H
Regraded Unclassified
30
0
P
Juno 30, 1943
Hon. Clarence Cannon, Chairman,
House Appropriations Committee,
House of Reprosentatives.
Deur Mr. Cannon:
We focl that wo must express grave concern over the
Conate amendmont to our appropriation. From sn administrativo
point of viow, we are not in favor of it sinco it Givos the
Board of Economic Varfare what amounts to voto power over the
far Production Board. As things now stand, we oporato our
imports work under directives received from the War Production
Board and also recoivo allocations from the War Production
Board on a largo number of matorials for oxport. If this
appndment in adopted, tho Board of Economic Warfare will be
enpowered by logislation to over-rido the War Production
Board if it dosiros to do BO.
As the amendment now stands, we are frankly uncortain
as to what it moans.
As you know, it was not adopted by the Senate with the
word "Conoral" bofore the words "oconomic programs and policios".
Schator McKellar, as you know, triod to have the word "Acnoral"
included,
If the General Accounting Offico word to make = narrow,
Limitod interprotation, it night mean that we could not pay
for norvices, supplies or oquipment unless e majority of the
Board approved ull our individual export liconses, all our in-
dividual import contracts and all our Economic Warfare analysis
work abroad. This, of course, would bo impossible from an op-
orating point of view. The logislativo history in the Bonato is
bnd, from our standpoint, since an offort vos mdo to introduce
thoword "genoral" and the word VR18 subsequently deleted.
Regraded Unclassified
81
- 2 -
I fool that 1/0 can do a much more officient job if the
emendment is not adopted in the conforence roport. If it is
adopted, I would hope the House Conforens could cithor re-
inscrt the word "gonoral" or eliminato the words "oconomic pro-
grans", in which caso only policios would bo subject to Board
approval.
Tho Vice President prosidos over regular mootings of the
Board of Reonomic Farfare which ore hold overy two wooks when
the Vico Prosident is in town. I furnish the completo list of
much noetings to the Senate Conmittoo on Appropriations. The
Board, no n Board, is chormously holpful in our work on specific
policy mattors as they ariso from time to timo, but obviously
our operating responsibilities nro too vast for day-to-day manage-
mont by a majority of the Board.
Wo are dooply concerned about the amondment an it now
stands and I hope you will understand the spirit in which wo are
calling this mattor to your attention,
Sincorely yours,
Exocutivo Diroctor
Regraded Unclassified
82
TO HOLDERS OF EP 60 "JAPAN'S WAR ECONOMY - 1943"
A number of important corrections have been
made in this report. Please destroy the original
text but do not destroy the maps and charts
attached to it: the maps and charts should be
used with the present version.
Regraded Unclassified
83
EP-60
CONFIDENTIAL
Copy No. 152
BOARD OF ECONOMIC WARFARE
Enemy Branch
JAPAN'S WAR ECONOMY - 1943
CONFIDENTIAL
March 1943
32-2242
Regraded Unclassified
84
Summary and Conclusions
The position of Japan's'war economy may be summarized
86 follows:
1. During the past twelve years, Japan has continuously
accumulated stockpiles of combat armament, Wastage of these
supplies has been relatively small even since December 7, 1941.
Thus, Japan has on hand the equipment to support offensive ac-
tion on & large scale for a considerable period of time. Japan's
capacity to produce war materials, however, is less than that
of the chief belligerents - Britain, Russia, the United States,
and Germany.
2. Japan now holds the raw materials required to expand
its productive system, but lacks the shipping and processing
capacity to exploit these resources fully, Japan is handicapped
by (a) deprivation of former imports of processed materials,
(b) certain technological limitations, and (c) the growing
losses and attrition imposed by the war. These handicaps limit
the rate at which Japan can increase its industrial processing
capacity, including that required for turning out ships and
combat armament.
Thus, Japan's economic difficulties are not due to an
inability to maintain current levels of production, but rather
to the limitations Japan faces in its effort to achieve. .a
large-scale expansion of production. Yet such a large-scale
expansion is required if Japan is to retain its present relative
position in the face of the growing power of the United Nations.
3. The ability of Japan to keep pace with the growing
strength of the United Nations, depends mainly on the intensity
of the military and naval interference which is exerted against
Japan. The extent of such interference will determine whether
Japan can (a) continue to build up armament reserves; and (b)
proceed with the organization of basic industrial capacity in
order to secure a large-soale expansion of production. To date
the greatest single retarding factor in the latter respect has
been the sinking of Japanese merchant shipping. Sinkings have
exceeded launchings during the past six months. To meet this
threat, Japan has already undertaken a program which will rapidly
increase the tonnage under construction. In spite of this pro-
gram, if the current rate of sinkings is maintained, Japan's
shipping position will deteriorate throughout the remainder of
1943, but launchings will approximately equal sinkings by the
end of the year.
4. Because of (a) the lack of sufficient industrial equip-
mont, (b) the threat to Japanese shipping, (c) the expanding power
Regraded Unclassified
85
Table of Contents
of the United Nations, and (d) the possibility of the defect of
Gormany, Japan has docidod to contor attention on the resources
Page
of the Inner Zono (Japan Propor, Koroa, Manchuria, North China
and Formose) rather than on the resources of the Outer Zono
I. TRANSPORTATION:
(Control China and the southorn regions). Cortain dovolopments -
notably of oil - are nocessarily boing carried out in the south,
1. Summary
1
But it 500ms cloar that Japan is putting osido the opportunity
2. Shipping
1,3
for Inrgo-seclo development of the nowly conquored aroas in
3. Land Transport
4,8
order to concontrato on intonsivo dovelopment in the Innor
Zone, oven though this choice involvos an oconomic sccrifico.
II. RAW MATERIALS AND BASIC INDUSTRIES
The greater the intonsity of United Nations' notion in the
1. 011
8,14
For Enst and the wonker the position of Gormany, the groater
2. Stael
14,21
will be the trond toward (a) a stockpiling of stratogic materials
3. Other Raw Materials
22,27
from tho Outor Zono to strongthon the Innor Zono and (b) tho
development of those industrial plants and those row matorials
III. ELECTRIC POWER
which will provide the highost possible nonsure of solf-
sufficiency within tho Inner Zono. Loss of the Outor Zono
1. Surmary
28
would deprivo Japan of a major source of rur matorials; but if
2. Capacity
28
this loss wore postponed until 1944 or Intor, the stockpiling
3. Powor Available During 1943
28,31
program, combined with expansion of Innor Zono capacity, would
4. Pover Supply Aross
32
have ronched o stage adoqunto to cover sovprol years' requiro-
5. Prospective Incroases in 1943
32,33
monts.
IV. CONSUMER GOODS PRODUCTION
The grontost wookness of the Inner Zono lics in its con-
1)
contrated industrial troos, both in Jopan Propor and Manchuris,
1, Food
35,40
2. Clothing
40,41
The industrial contors of Japan Propor, in particular, are
highly inflammable, A program for the docontralization of
3. Fuel
41,42
4. Local Transportation
42
cortain stratogic industries; undor way for somo timo past and
5. Housing
42,43
now boing accolorated, will partially oliminato this wonkness.
6, Standard of Living and Industrial
Rotontion of the principal arcas of the Innor Zono - and
Efficiency
43
continued development of their resources - is indisponsable to
7. Black Markots
43,14
the Japenoso ver oconomy.
8. Conversion of Consumer Goods
Industry to War Production
44
V. COMBAT ARMAMENT
1. Summary
45
2. Tochnical Efficioncy and its Effect
on the Production of Combat Armanont
45,55
3. Aircraft Production in 1942 and 1943
55,58
4. Tanks and Trucks
58,61
5. Ordnance
62,63
VI. MANPOWER
65
1. Summary
2. Industrial Requirements
65,67
68
3. Military Requiroments
68
4. Labor Reserves
5. Industrial Expansion
68,69
6. Training Programs and Labor Mobilization
69,70
Regraded Unclassified
36
Table of Contonts (Cont'd)
Pago
VII. PROBLEMS OF WARTINS ECONOMIC ADMINISTRATION
1. Summary
71
2. Naturo of the Administrative Struggle
71,72
3. Packground of the Crisis
72,73
4. Administrative Differentiation:
Outer Zone versus Innor Zono
73,74
5. Administrative Problems on the Home
Front
74,79
Control Associations
74,76
Planning Bourd
76,77
Diroct Government Control of
War Industries
77,79
The Japanose stoppod publishing data
on most of the subjects treated in this row
VIII. FACTORS AFFECTING JAPAN'S FUTURE ECONOMIC
port soveral years ago, Japanoso periodicals,
POLICIES
such as the Oriontal Economist, have supplied
somo matorials as late as 1940-1941. However,
1. Economic Factors Affocting Offonsive
the bulk of the factual data was dorived from
Policios
80,81
specialized studies propared by BEW analysts
2. Continental and Island Air Bason to
over the past year.
Consolidato Japan's Economic Position
82
D
3. The Prospective Increase in Japan'a
Economic Potential during 1943
82
4. The Economic Position of Japan as
Compared with Other Major Powers
52,84
The data on oil contained in this roport
IX. THE CONCENTRATION OF JAPAN'S ECONOMIC POTENTIAL
have boon furnished by the Potroloum Division.
IN THE INTER ZONE
1, Processing Capacity
05,06
2. Iron and Stool
86,87
3. Coal
87
4. Other Economic Potontial
88
5. Stockpiling of Row Matorials from Innor
Zono
89,91
I. APPENDIX (Charts)
Administrative Organization of Japan's War-
Timo Economy
Production of Forrous Raw Matorials, Iron and
Stool in Japan and Occupied /reas
Japanose Requirements for, and Production of
Notals Available to the Japanoso, by Producing
Regions, 1943
Regraded Unclassified
87
I. TRANSPORTATION
Summary
Shipping is the most important limitation on Japan's program
for economic expansion. It is the only aspect of Japan's economy
which has as yet been significantly impaired by the United Nations.
Japanese shipbuilding will expand throughout the current year, but
if the present rate of sinkings of Japanese ships continues, the
rates of new construction and sinkings will not balance until the
end of 1943.
Rail transport is also under strain in all parts of Japan's
new empire. Additional economic expansion in Japan Proper will require
that new rolling stock, replacements, and repairs be increased before
the end of 1943, Japan's hope of building & continental rail line
from Manchuria to Singapore is not likely to be realized this year
due to Chinese interference; the rail lines connecting Indo-China,
Thailand and Burna are going forward and will be completed unless
halted by action of the United Nations.
An in the case of all other belligerent countries, transpor-
tation is a most important present and prospective economic weaknoss
of Japan,
Shipping
Shipping, A Basic Weakness. Japan must nove by sea a major
percentage of iron oro, coking coal, and bauxite for munitions out-
put, over sixty percent of its petroleum and about seventy percent of
the coal for power production. Japan must also nove troops, munitions,
and supplies to the Greater East Asia sphore fighting fronts, largely
by water.
To meet the growing strain on shipping, Japan is (1) shifting
coastwise cargo movements in Japan, Manchuria and China to rail, and
extonding rail linos in Indo-China, Thailand and Burma (these lines
are as yet incomplete); (2) increasing production of minerals in Japan
Proper and in nearby areas of the mainland to replace supplies formorly
obtained from the southern regions; (3) increasing the self-sufficiency
of North China, Manchuris, and Koroa (which will not only lossen the
depondency on supplios from Japan Proper, but will also reduce the volume
of tonnago required from Southoast Asia); (4) building up heavy in-
dustry on the Asiatic mainland to savo the shipping of iron ore and
coal to Japan; (5) devoloping local self-sufficiency, sepecially with
respect to foodstuffs and other civilian noods throughout the ontire
Greater East Asia Sphore, including Japan; (6) adopting a program for
rapid oxpansion of shipbuilding during the current year, of steel and
wooden ships; (7) converting wooden craft to the carriage of basio com-
moditios, and (8) such other measures as building up electric power
lines which save shipmente of coal, using rafts to transport timbor,
accelerating timber outting and charcoal building in Honshu to roduce
waterborne novement, and drastic limiting of passenger car services
to allow railways to earry more bulk in freight.
Regraded Unclassified
88
-)-
-2-
Shipping Noods in 1943. Of the 4,920,000 gross tons
In spite of those dévelopments present tonnago is quite
available at the and of 1942, about 1,250,000 gross tons are
inadequato for the full exploitation of the aroas under Japan's
noodod to sorvico army and navy neods in the South Pacific and
control. By the end of 1942 Japon TOS barely able to artisfy
Southoantern Asia. This leaves 3,670,000 gross tons available
minimum basic requiroments.
for ossential non-military requirements. Japan's needs are
estimated to be:
It should bo notod, howover, that if the southern cross
TO sovered from Japan 30 that Japanoso shipping is driven
Southeast Acia, Philippines, N.E.I.
book to the roletively short linos of communication betwoon
Region
900,000 gross tons
Jepon, Koroa, Manchuric and China, the present available ton-
Japan Coastal Services
1,500,000 gross tons
nago would be ontirely adequato providing it were not subjected
Manchuria, Korea, and China
1,500,000 gross tons
to hoovier losses.
Total estimated requirements
3,900,000 gross tons
The Shipping Position on January 1, 1943. On January 1,
1943, it is ustimeted that the total tonnago avoilable for
Thus by the end of 1942 Japan could not fully met its
military and commorcial transport vos about 5,000,000 gross
nseds from the steamers then on hand and was forced to utilize
tone, which the c. docreaso of somo 500,000 (TOSS tons from the
wooden tonnage. It is estimated that about 600,000 gross tons
amount oveilable on July 1, 1942. These figuros may bc broken
of wooden ships, equivalent in carrying capacity to some 200,000
tono of steel vessels, were pressed into service. Some further
down as follows:
anounts have since been added, but the possibilities of finding
additional amounts are now relatively small.
Japan's Shipping Tonnicgo Position
(gross tons)
Shipping Position on July 1,1943. New construction of
steel ships aims at 1,000,000 gross tons for the Japanese fiscal
Tonnago ovailable Docomber 1, 1941 (vessols of
year 1942/1943, but actual construction during 1943 is likely to
100 gross or over, including those under
be only about 630,000 gross tons, To this figure should be added
Ohinoso and Monchurian flags but excluding
an increase of perhaps as much as 00,000 gross tons salvaged.
fishing craft, bergos, ctc.)
6,700,000
Important additions of wooden tonnage should be made through the
Now Construction to January 1, 1943
320,000
new construction program after the middle of the year, but totals
Axis and Frunch tonnago available
250,000
to date have been small, An a rough estimate, Japan may add
Alliod tonnago captured
250,000
about 300,000 gross tons to its shipping floot in the first half
Vossols reised and repoired
60,000
of 1943 while suffering a loss of about 600,000 gross tons. The
apparent gap can be covered in good part by the various expedients
Total merchant morino bofore subtracting
listed on page one, and as shipbuilding should increase rapidly
losses
7,600,000
in the latter part of 1943 1t in possible that Japanese shipping
will be little worse off at the end of the year than it is now.
Vesscls sunk by Alliod action
1,600,000
Ordinary marino losses
70,000
In order to achieve this balance, Japan is supplementing
Vessels scriously damaged in the wer
450,000
its output of steel vessels by an extensive program for the con-
Vosscle loid up for ordinary ropeirs
400,000
struction of wooden vessels in all areas under Japanese control
Vossols onptured which do not ndd to Japanese
in which such construction is possible. Large timber resources
shipping potontial (1.0. in casontial local
of good quality are available for this purpose. Although little
trado, otc.)
80,000
can be expected from this source in the next for months, by the
Forries, flocting connories, etc., not suitable
end of 1943 it appears probable that large numbers of new wooden
for ordinary commorcial uso
80,000
vessele (most of then sailing vessels) will be operating along
the Asiatio coast and in the coastal trade of Japan Proper, It
Total lossos including vessols
is impossible to make any close optimate as to the tonnage that
unovailable for 180
2,600,000
can be turned out in this way but between 400,000 and 650,000 tons
of new wooden construction appears probable. This would be
Tonnago available January 1, 1943 for militory
equivalent to 130,000-210,000 tons of steel vessels.
and cesential commercial uso
4,920,000
Regraded Unclassified
89
-4-
-5-
The Plan for a Continental Rail Line. There is clear
Land Transportation
evidence that Japan has been thinking in terms of the possibility
of developing a continental rail line extending from Manchuria
Jocan Proper. Because of the mountainous character of
to Singapore. Assuming the successful seizure and protection
Japan, very few rivers can be used for trunsport; nor 1a there
of sections of this overland route still in Chinese hands it
a sufficient number of overland highways or trucks to make
would be possible for Japan to complete, within one to two years,
overland trucking of significance, except as feeders to rail
the gape in a rail line extending from Manchuria in the north
terminals. Electric and steam rail lines, therefore, carry
to Singapore and Burma in the south. There would be only one
virtually all of the overland passenger and freight in Japan.
transshipping point on the line: at the Indo-Chine border where
By far the most important single line extends from Tokyo by
the standing-gaugo lines of China, Manchuria and Korea would
way of Nagoya, Ocaka, and Kobe to Shimonoseki and thence by a
join the mater-gauge railways of southeastern Asia. The four
recently opened tunnel to the island of Kyushu through Moj1
gaps in the proposed system at present are (1) about 125-200
and Fukuoka to Nugasaki, If this line were crippled at any point
miles of new track which are needed to connect Burma and
It would seriously hamper Japan's war effort.
Thailand; (2) completion of a bridge across the Mekong River;
(3) the 300 mile section between Dong Dang, Indo-China, and
Practically all of the lines in Japan Proper are narrow-
Liuchou, China which is already partly graded; and (4) the
gauge (316") which restricts both speed and tonnage,
dismantled nections of the Hangchow-Changsha or Hankow-Chang-
chow lines (in areas now under Chinese control), Completion
Present Condition of Equipment. There has been a tendency
of this system would offer two important advantages:
to neglect rail repair and replacements in favor of war produc-
tion since July 1937, This fact, coupled with the great in-
(1) It would be possible to continue to provide in-
crease in traffic due to war operations, has resulted in a
portant supplies to far distant outposts (though in con-
steady deterioration of equipment. The present rail facilities
siderably reduced volume) even if the Japanese sea lanes
of Japan are adoquate for minimum needs but cannot be expanded
were dominated by the United Nations,
except at is considerable cost to war production. At present
Japan, like Cormany, must give priority to rail facilities if
(2) It would provide B flexible system of land transport
weaknesses, that are reaching a critical stage, are to be over-
for servicing B, series of air bases extending down the Asiatic
come, There has been an increase in the number of locomotives
coast for the purpose of protocting sea borne traffic by land-
and freight cars since 1937, as the attached tables indicate,
based air power,
but the current program for transforring more coastal shipping
tonnago to railroads will demand a continued expansion of rail
It does not appear probable that any of the Chinese section
facilities through 1943.
can be completed during 1943.
Continental Rail Facilities Under Japanese Control, The
New Lines in Southeast Asia. Jupan 1s in a better posi-
rail lines of Korea, Manchuria and North China are the most in-
tion, however, to complete within G. year a meter-gauge rail
portant in the Japanese occupied areas. These areas, together
system covering Indo-China, Thailand, Burma and Malaya which
with Japan Proper, contain over 60 percent of the total rail
can offer an alternative to sea transport in the area most
transport under Japanese control. Rail lines in Korea and
distant from Japan Proper.
Manchuria, long under Japanese management, are the most effi-
ciently operated of the continental rail lines in "Greater East
Reports indicate that Japan 1s now constructing a line
Asia". Hero again, however, (1) the emphasis on war production
to complete the 125 to 200 mile gap between Burms and Thailand.
at the exponse of maintenance and repair, (2) the heavy domands
The 140-185 mile gap between Saigon and Pnon Penh had probably
mado upon those linos under the stress of war, (3) the possible
been closed by the end of 1942, with the exception of a bridge
need for shifting rolling stock to China (due to the war and
over the Mekong River itself, by laying light track over a good
guarilla warfare), and (4) the considerable expansion of rail
highway between the two cities. This would mean that supplies
lines without a proportionate expansion of rolling stock have
could be transferred to rail lines in nortbern Indo-China at
combined to cruate a situation in which losses through fighting
Haiphong for transport to Japaness troops in any conter in South-
or bombing could quickly become serious despito the adoquate
east Asia, The volume would not be large, possibly only 100,000
distribution of rail lines in the area,
tons a month each way, but the advantages would be considerable,
The transfer of vital minerals and foodstuffs from Burna und
Thailand overland to Saigon and Haiphong greatly reduces the strain
on shipping in the hasardous waters around the Malay Peninsula.
Regraded Unclassified
TABLE 1
Railroad Transportation
(Tentative Estimates for 1943)
Region
Number of
Gauge
lhumber
Number
Number of
Metric
Miles
Incomotives
Freight Cars
Fassenger
Tonnage
Cars
Capacity
(in millions)
Japan
15,475
3'6"
6,000
110,000
16,000
170
4,235 (1937)
73,184
(1937)
11,209 (1937)
122 (1937)
Korea
2,850
4'8}"
650
7,580
2,430
30
315 (1937)
3,444 (1937)
754 (1937)
Formosa
2,225
Narrow
400
Manchuria
6,875
4'8"
2,850
39,200
3,250
72
Occupied China
a/5,200
4'8'"
1,062
14,230
980
23
Indo-China
1,800
meter (main lines)
235
3,650
400
1.268
Theiland
2,075
meter
277
3,833 (1939)c/
370
1.667
Malaya
1,068
meter
173
5,150
500
1.8 (long
tons)
Burma
2,058
neter
.113
9,602
1,156
4
Philippines
850 (Gov't) Harrow
483
4,400
1.547
2,300
Manila Ry. only
Netherlands East
Indies
2,850
Standard
1,278
27,140
3,614
10.5
Lines and equipment under Japanese control.
b
Estimates of civilians goods only moved in North China.
It is reported that Japan provided Thailand with 90 "now" locomotives and 300 freight cars.
TABLE 2
Automotivo Transportation
(Tentativo Estimatos)
Number of Trucks
Number of Buses
Number of Passenger
Rogion
Miles of Auto Roads
(Non-Hilitary)
Cars
Japan
5;390 (concrote)
107;500 (gravol)
50,000
29,800
106,000
460,000 (dirt)
Koron
19,155 milos
3,500
2,500
2,250
'100 meadam
10;000 improved
1,242
1,368
1,390
Formosa
6;400 all year
Manchuria
23,750 sonsonal uso
7,650
3,400
3,600
only
Occupied China
(no data)
3;450 Asphalt
Indo-China
13,750 Gravol
4,866
2,000
18,045
1;800 Macadam
2,500 Gravel and
5,150
770
6,000
Thailand
unimproved
5;800 Improved
12,800 Dirt and un-
9,841
2,224
32,873
Malaya
improved
4;400 Main
Burma
2,800 Rural
3,004
4,330
13,875
2;900 Improved
9,000 Unimproved
15,664
4,339
33,895
Philippinos
Bocause of fuel shortage, number in actual use probably not over 25,000
of
Figures to be supplied later.
Regraded Unclassified
91
-8-
-9-
II. RAW MATERIAIS AND BASIC INDUSTRIES
3. Technical Problems. Of these, the most serious is in
the manufacture of high-grade lubricants,
Summary
Crude Oil Production. Specific information on Japanese
Generally speaking Japan's raw materials supplies far ex-
cil-producing activities in the East Indies subsequent to the
ceed the capacity of the shipping and manufacturing industries
occupation is still lacking. Estimates by oil experts, however,
to develop them, The supply of fibers, which is partially
indicate that Japanese production in the East Indies has already
deficient, is an exception to this statement.
reached substantial amounts and should expand steadily in 1943.
These estimates are based on the known potentialities of the East
Steel production has been given a high priority for 1943
Indian oil fields, the extent of the demolition, and the drilling
and will probably expand by about ten percent during the current
equipment available to the Japanese. They show that crude oil
year. Rolling mill capacity in the bottleneck in this industry.
production in the East Indies may be expected to increase from
011 production will probably expand more rapidly this year not
on annual raté of 39,500,000 barrels on November 1, 1942 to
only because of the reopening of oil producing areas in the
60,000,000 barrels on July 1, 1943. The following tables,
Netherlands Indies but also because of the expansion of synthetic
giving a detailed summary of Japan's over-all position in
oil plants in Japan and Manchuria,
essential potroleum products for 1943, are based on the above
rates of East Indian oil production.
Insofar as shipping will permit, an increasing trend to-
ward the stockpiling of strategic raw materials from South-
TABLE 3
eastern Asia in Japan Proper may be expected,
Japan's Estimated Oil Position in 1943
011
(In 1,000 barrels)
Estimated production and consumption of essential petro-
leum products by Japan during 1943 indicate a comfortable sur-
Stocks on
plus, The figures (comprising aviation gasoline, motor gasoline,
Hand 1/1/43
fuel oils and lubricating oils) may be summarized ns follows:
(Including
New Supplies
Total
Consumption
Stocks on
coptured
All sources
Supplies
(Total economy)
Hand
stocks)
1943
1943
1943
1/1/44
(Barrels)
Product
Total production
High Octane
11,600
3,660
15,260
3,660
11,600
68,110,000
Gesoline
Total consumption
50,660,000
Surplus
17,450,000
Motor Gesoline
6,000
21,020
27,020
5,800
21,220
Actual or prospective difficulties, listed below, considerably
modify this fevorable picture.
Total Gasoline
17,600
24,680
42,280
9,460
32,820
1. Transport. It is estimated that present tanker
Fuel 011s
25,700
41,950
67,650
39,000
28,650
tonnage is barely able to handle the essential requirements
indicated by the above consumption figure. The present rate of
Lubricoting 011s
1,480
4,430
2,200
2,230
2,950
sinkings is also thought to be higher than the ostimated rate
of new tanker construction and if continued will lead to a very
critical situation during 1943,
Total Products
46,250
68,110
114,360
50,660
63,700
Crude Oil
2. Storage. Extensive demolition of storage tanks in
Equivalent
51,150
75,500
126,650
56,000
70,650
the East Indies area was effected. This factor might impose
further limitations on the production figure given above,
Regraded Unclassified
92
-10-
-11-
TABLE 4
Barrels
Japan's Entimated 011 Production by Sources, 1943
Estimated East Indies
production, 1943
54,700,000
(In 1,000 barrels)
Natural fuel oil
12,036,000
Quantity to be refined
42,664,000
Jepan &
Japan, Koron,
Estimated 1943 refinery
Product
Formosa
Kerafuto
Monchuria
Manchuria
East Indies
output in East Indies:
Barrels
(crudo)
(crude)
(shalo oil)
(synthetic)
(crude)
Totals
Pladjoe refinery
15,000,000
High Dotone
Lutong refinery
7,200,000
Gasoline
-
-
360
Belikpapan refinery
3,500,000
400
2,900
3,600
Total
25,700,000
Motor Gesoline
520
-
1,200
6,300
13,000
21,020
East Indian crude oil to be
920
-
1,200
6,660
15,900
refined, 1943
42,664,000
Total Gesoline
24,680
To be refined in the N.R.I.
25,700,000
East Indian arude to be refined
16,964,000
Fuel 011n
1,150
550
1,750
5,500
33,000
41,950
in Japan
Lubricating 011s
530
-
500
1,480
Refinery capacity in Japen
34,000,000
200
-
Required for local production
7,000,000
Total Products
2,600
750
2,950
12,160
49,400
60,110
Available refinery capacity
in Japan for imported crudes
27,000,000
Crude 011
Equivalent
2,850
900
3,500
East Indian crudo to be rofined
13,300
54,700
75,500 k
16,964,000
in Japan
a
Includes substitute products at follo ing equivalents (in barrels); coke
Apparent excess refinery
capacity in Japan during 1943
10,036,000
and gas (1,410,000); benzol (1,000,000); alcohol (500,000).
Includes 250,000 barrols of substituto lubricating oils.
The Pladjoe refinery is the crucial factor in the above
Refining Copocity. The abovo production ostimatos assumo
tabulation. Reports on the current status of this refinery are
that Japan has sufficient refinery capacity to process the large
conflicting. To meet the production quotas assigned (Tobles 3
anticipated East Indian output of crude potroloum. Prosent
and 4), the Pladjoo refinery would have to have reached & pro-
catimates indicate that this capacity is ovoilable and in opern-
1943 and a rate of 18,000,000 berrols by July 1943. By the
cessing rate of some 12,000,000 barrols por year as of January
tion with a considerable excess crpacity in Jopen not in uso,
The ostimatos are os follows:
latter date the Japaneso will have had some 15 months in which
to completely rehobilitato the refinery. Denolition at Belikpepon
end Lutong is reported to have boon completo, but these plants,
process the above total in 1943. Under war conditions very which simple
too, are now considered to be in operation at rates which will
refining oquipment can suffice to process the fuel oils
form the largest part of total consumption.
Regraded Unclassified
33
-13-
-12-
TABLE 5
In fuel oils, Japan will be entirely dependent on East
Indies production by March 1, 1943, except for the limited
Japan's Estimated Consumption of 011 Products by Uses, 1943
amounts produced at home. For the supply of those bunker and
(In 1,000 borrols)
Dioscl oils, a large East Indian output of the scale here
anticipated is essential.
Morchant
In gasoline, Japan is woll fortified by large stockpiles
Product
Navy
Army
Marine
Civilian
Total
of motor and avintion gas accumulated bofore the war started,
If necessary, production of high octane gasoline can be in-
High Octano Gasolino
1,520
2,140
-
-
3,660
creased by hydrogonation of part of her excess stocks of motor
gosoline. The Pladjoe refinery, moreover, had a capacity of
Motor Gosoline
-
4,880
-
1,000
5,000
625,000 barrols por your of 100 octnno fuel, Capacity of this
plant for 92 octano fuel, on which Japanese planes are reported
Total Gasolino
1,520
6,940
-
1,000
9,460
to operate, would be rated at about 780,000 berrels a your.
Fuel Oila
27,000
-
7,000
5,000
39,000
In high-grodo lubricuting oils, Japan's position is less
strong. The stockpile hold at the outset of the war is not
Lubricating 011s
870
470
300
560
2,200
sufficient to cover the noods of a protracted conflict. It 1a
not cortain that Japan possesses the specialized knowlodge
Totals
29,390
7,410
7,300
6,560
50,660
necded to mako the high-grado oils required for evintion and
motorized equipment, although German tochnicians may have filled
this gop. East Indian crudos are not vory adoptable to the
moking of lubricants; in normal times, virtually no lubricating
According to these estimatos, Japan would be expected to uso
oils were made from these crudes. It would soem therefore that
50,660,000 barrels of gnsolines and oils in order to satisfy
Japan will have to depend heavily on its hydrogenation equipment
full requirements during 1943.
to supply high-grade lubricents in the amounts required for a
long wor, or else change to the use of inferior lubricants with
The effectivo tonnago capacity of the Japanese tankor
consequent inforior performances. The best clue to this potential
floet during 1943 may bo roughly ostimated at 350,000 tons.
wookness should be supplied by analyses of lubricant samples
This ostimato allow for sinkings and damago, replacoments, and
from captured enemy equipment.
assignment of 12 tankors to the activo floots. On the basis of
12 voyages por year por ship, the offective carrying copacity
Consumption and Transport. Assuming that production goals
would be 4,200,000 tons, or approximately 30,000,000 barrols.
were not in accordance with the above astimates, Japan would
still be faced with a formidable transport problem. Large
Tho basic transportation problem is opproximately ns
amounts of orude oil, aggregating nearly 17,000,000 barrels in
follows:
1943, must be carried from the East Indies to Japan. for ro-
fining. In addition, considerable quantities of the gasolines
1. The movement of the ostimated 17,000,000 barrols of
and fuel oils used by the Japanese navy, army and merchant marine
crudo from the Indies to Japan for refining;
must be shipped from Japan or the East Indies to the fighting
fronts. Table 5 shows an estimated breakdown of consumption
2. Movoment of oil products from refining conters to
by principal usos,
various points of consumption in the Japon, Koron,
Manchuria, North and Control China area;
3. Supply of floot units and fighting forces in the
southwost Pocific and other outlying bases and
military. aroas from the production conture in the
East Indics; and
4. To fill other minor and local noods in the Occupied
Arcas.
Regraded Unclassified
94
-14-
-15-
It is now estimated that Japan(s existing tanker tonnage
is just about able to meet these basic or essential require-
coking coal and ferro-alloys must be obtained from sources
ments, and not more. There had been carlier reports that the
outside Japan proper, Cargo vessels were available, howover,
tanker fleet vas not fully employed, suggesting that the move-
in adequate volume for these shipments at the beginning of
ments of oil were not cecurring on the scule required by the
1943. Rolling mill capacity is, therefore, taken as the
above consumption estimatos. However, present indications are
primary limiting factor in the following detailed ostimate of
that the full tonnage is being used, and it is further thought
basic capacity and output in the industry:
that if tanker 105H08 continuo at the present rate Japan's oil
consumption will be limited by a tanker deficiency in 1943.
TABLE 6
Stool
Estimate of Japan's Basic Stool Capacity and Output, 1943
Japan's Stool Position. During 1942, Japan's steel pro-
Utilized
Capacity
duction reached an estimated rate of 8,750,000 ingot tons and
(metric tons)
6,300,000 metric tons of open-hearth and electric furnace steel
for finished products. This output is not 50 small as to pre-
1. Iron Ore
15,750,000
19,250,000
vent Japan from engaging in extensive military operations, but
it in small enough to restrict over-all ability of the Japanese
2. Metallic Iron in Oro (av. 45-1/2
to produce vessels, munitions and other heavy equipment and to
percent of Item 1)
7,073,000
8,760,000
expand production facilities,
3. 5 percent Loss in Concentrating
353,000
Production rates and capacities attained during 1942
may be estimated as follows:
4. Total Fe from Iron Ore
6,720,000
Production
Capacity
5. Sponge Iron (For use in electric
furnaces - see item 14)
-
400,000
400,000
(metric tons)
Pig Iron
6,160,000
8,269,000
6. Blast Furnace (In terms of pig
Gross Stool Ingote
8,750,000
9,526,000
iron product)
6,320,000
Semi-Finished Steel,
Total
6,300,000
6,300,000
7, Coke Charge in Blast Furnaces
6,320,000
11,715,000
Alloy Steols
1,200,000
Cast Iron
800,000
800,000
E, Blest Furneco Losses (2-1/2
percent)
-
160,000
The primary limitation on Japan's steel output is pro-
ceasing capacity. Particularly serious is the lack of rolling
9. Iron Content of Pic Iron Total
6,160,000
8,269,000
mill capacity, which holds the production of finished steel
below the point at which it could be maintained by current open
10, Foundry Pic Iron (For iron cast-
hearth and oloctric furnace capacity and by blost furnace
ings--see item B below)
- 1,000,000
capacity. The latter in the order named, are secondary bottle-
necks which must be removed to pormit the further expansion
11. Pig Iron Available for Stoel Making 5,160,000
of the iron and stool industry 08 projected. Raw matorials of
all ossential types are available to Japan in ample quantities
12, Scrap Supply to Upon Hearth
for present noeds and in sufficiont amounts to pormit on increase
Purnaces (40 percent mix)
+ 3,440,000
of 25 percent in iron and stool output. Manpower is adequato
for existing neods and for a moderate expansion, although any
13, Total Fe in Open Hearth Furnace
considerable plant expansion would probably have to overcomo n
Charge
8,600,000
shortngo of skillod labor and tochnicians, Transportation ro-
presents a potential wonkness, Largo amounts of iron oro,
14. Total Fe in Electric Furnace
Charge (from item 5)
400,000
Regraded Unclassified
95
-16-
-17-
TABLE 6 (Cont'd)
in the abovo tablo will be available to Japan. This addition
will account for nowly-commissioned mills, for small but un-
Utilized
Capacity
known capacity in Japanese Navy yards, and for the increased
(metric tons)
effectiveness brought about by strict rationalization of pro-
duction, giving a total rolling-mill and steel-casting
15. Total Fe Charged to Steel Furnaces
9,000,000
capacity of about 7,000,000 netric tons, To supply its roll-
ing mills and foundries operating at this rate, Japan would
16, Loss Melting Losses (Approx. 3
require an open-hearth and electric furnace capacity of
percent)
- 250,000
9,722,222 metrio tons of gross stoel ingots, a figure slightly
above estimated ingot capacity in 1942, which is placed at
17. Gross Steel Ingots (Open-hearth
9,526,000 metric tons. By expanding all of the foregoing to
and electric)
8,750,000
9,526,000
the point where present blast furnace capacity could be used,
Japan could produce almost 12,000,000 tons of gross stool in-
18. Less Cropping Losses (20 percent)
-1,750,000
gots and about 8,500,000 tons of steel for finished articles.
The following table shows dotails of empacity and projected
19. Gross Open-hearth end Electric
construction:
Furnace for Finishing Stoel
TABLE 7
Processea
(Rolling Nill Steel 6,700,000)
(Cast Steol
300,000)
7,000,000
Iron and Stool Furnaces and Primary Rolling Millo
Summary of Copacities
20, Loss in Finishing (10 percent)
- 700,000
21. Opon-Hearth and Eloctric Furnaco
Totals as
As scheduled An plannod
Steel for Finished Products
6,300,000
6,300,000
of 1937
through 1941 to 1943-44
(motric tona per year)
Recopitulation
A. Total Stool (shects, platos, shapes,
Blost Furnace Capacity
(P1g Iron)
3,332,000
8,269,000
9,849,000
rods, castings, etc.) for Uso in
Manufacturing Finished Articles
6,300,000
Steel Furnace Capacity
(Ingota)
7,068,000
9,526,000
10,766,000
B. Total Cast Iron for Use in Finished
Articles (from Itom 10 above,
allowing 20 percont loss)
+ 800,000
800,000
Primary Rolling Capacity
(Slabs, billets,
C. Total Stool and Iron
7,100,000
blooms)
4,930,000
6,030,000
7,446,000
Coke Oven Capacity
During 1943, rolling mill capacity will continue to be the
(Coke)
----
14,519,000
----
principal limitation ori Japan's stool production. Schoduled
construction calls-for the completion of an additional
1,400,000 tons of rolling mill capacity up to 1943-44. This
Raw material supplics now under Japanese control are
expansion will necessarily be attained at a slow rate and there
more than adoquate to maintain production of 6,300,000 tona of
ere dofinito indications that the construction of now rolling
finished steol and 800,000 tons of cast iron. For the essential
mill capacity has lagged behind other phases of the Japanese
raw materials, Japan's position is estimated as follows:
iron and stool expansion program. In 1943, perhaps an additional
700,000 tons of roiling mill capacity beyond the figuro shown
Regraded Unclassified
-19-
36
-10-
1, Iron Ore, Japan will utilize only about
7,100,000 tons of iron (metallic content) of the
3,760,000 available in the next twelve months,
The latter figure could be increased still fur-
Remarks and
qualifications
ther by more intensive exploitation of Philippine
and Malayan iron ore reserves.
Production can be expanded
2. Scrap. Most of the 3,440,000 tons required will
be obtained from mill croppings and recovery
if needed.
Production is potentially
far in excess of needs but
93 percent comes from the
Philippines
Supplies are potentially
ample, but if production
in the Celebes (more than
70 percent of total) were
interrupted, the situation
would be critical.
Tungsten position assured
indefinitely assuming
continued access to
Burma, and, by smuggling
and currency manipulation,
to Free China.
Since the tungston supply
is amplo, the molybdenum
situation becomes unim-
portant,
(2,650,000), final handling of steel products
(630,000), conquered areas and stockpiles (160,000).
3. Coking Coal. Total coke oven facilities under
Japanese control would supply more than 14,500,000
tons of coke, of which an estimated 80 percent,
Japan's Estimated Supply Position with Respect to Ferro-Alloys, 1943
Appraisal
of Japanese
position
Stable
Improving
but not
secure
Improving
but not
secure
Improving
Strong
or about 11,715,000 tons, would be suitable and
available for pig iron production. This much coke
would support en output of 12,400,000 metric tons
of finished steel.
4. Limestone and 6leansing Agents. Adequate supplies
(Reference is to the entire area now controlled by Japan)
Estimated
stocks
on hand
1/1/44
291;500-
327,500
43;000-
68,000
6,500
18,800
potential
2,210
of ferro-manganese and ferro-silicon, and apparently
of fluoraper are available.
5. Ferro-alloy Ores. Supplies and stockpiles are
TABLE 8
sufficient to maintain a 20 percent alloy-steel
ratio for all present and projected levels of
Estimated
Consumption
1943
70;000-
100,000
15;000-
30,000
10,000
6,000
1007
steel production. Details of Japan's position in
this crucial field of the alloys are given in the
following table:
Estimated
New Supplies
1943
91,500
43,000
potential
12,500
14,800
potential
150
Estimated
stocks
on hand
1/1/43
300,000
or less
30;000-
40,000
4,000
10,000
or moro
2,460
or less
Metal
Manganese
(metric tons m)
Chromium
(metric tons Cr)
Mickel
(metric tons III)
Tungston
(metric tons
60% Wo3)
Molybdenum
(motric tons Mo)
Regraded Unclassified
-20-
97
-21-
Since large amounts of iron ore, pie iron and coking
Romarks and
qualifications
Othor forro-alloys can sub-
stituté. All but about
16 m.t. will como from
the Bawdwin Minos which
are not secure from damage.
Productivo capacity poten-
tially ample and stocks
on hand equal at least 4
years' supply. Tungsten
coal, and virtually all the ferro-alloy ares, have to be
brought to Japan Proper by sea routes, cocan transportation
can substitute.
is a critical factor in maintaining the levels of steel pro-
duction already reached, If southern ores are to be fully
utilized, estimated tonnagos to be carried for current levels
of production are as given in the following tables. Cargo
vessols currently available are believed more than adequate
to handle these tonnages. Further substantial losses of merchant
shipping, however, would make it necessary for Japan either to
limit very strictly its other uses of shipping or to increase
Appraisal
of Japanese
Position
iron ore production in the Inner Zone and Central China.
Insocuro,
but unime
portant
Improving
TABLE 9
Shipments of Iron Ore and Pig Iron to Japan
(in motric tons)
TABLE 8 (Continued)
Japan's Estimated Forro-Alloys Supply Position, 1943
Estimated
on hand
From
Ore
Oro Concentratos
Pig Iron
stocks
1/1/44
16-
166
900
Malaya
1,400,000
Philippines
1,300,000
Yangtze Valley
600,000
100,000
Consumption
North China
500,000
Estimated
Manchuria
260,000
1,000,000
1943
600,000
100
150
Korea
2,000,000
Totals
4,060,000
2,000,000
1,700,000
,
Shipments of Coking Coal for All Purposes
Within the Empire
Estimated
New Supplios
1943
116-
From
To
Motric Tona
266
400
North China
Japan
4,500,000-5,000,000
Karafuto
Japan
1,500,000-2,000,000
North China
Manchuria
and Korea
1,000,000
Estimated
on hand
In manu-
7,000,000-3,000,000
stocks
1/1/43
factures
only
At least
650
Recapitulation
Commodity
Tonnage
Shiplonds
(5,000 tons average)
Iron ore and pig iron
7,760,000
1,552
.7,000,000-8,000,000
1,400-1,600
(motric tons
Vanadium
(Motric tons
Coking cool
Motal
108
Ferro-clloys
14,760,000-15,760,000
3,060-3,260
Cobalt
Co)
(A
Regraded Unclassified
-23-
98
-22-
Other RAW Materials
Estimates in the accompanying chart which pictures Japan's
Inadequate supplics
No known
additional
sources
available
Jute
Cotton
Wool, Wood
pulp for
staple
fiber and
rayon
raw materials position are made with reference to the needs
of Japan's war economy as represented by the industries of
Japan, Korea and Manchuria. In connection with foodstuffs and
fertilizers, only the noeds of Japan Proper are considered,
Ferro-Alloys. The ease with which ferro-alloys can be
substituted for one another tends. to make Japan's general
ferro-alloy situation relatively secure, There are, however,
Deficioncy
to be ro-
lieved by
smiggling
Mercury
Antimony
Platinum
Diamonds
at least three weak points apart from the general factor of
shipping. Some 93 percent of the chromium production available
to Japan is concentrated in the Philippines; a relatively small
area in the Celebes produces over 60 percent of the nickel
supply; and nearly all of Japan's cobalt must come from the
Bawdwin Mine in Burma. In addition, while tungsten supplies
are potentially far in excess of needs, and tungsten has been
Summary of Japan's Supply Position with Respect to the Basic Baw Matorials
Depondent
offered to Germany by Japan, the two chief sources of supply,
on adequate
stocks
Molybdornum
Copper
Asbortos
Free China (by emuggling), and Burma, cannot be considered
entirely secure.
Non-Ferrous Motals, Sources of bauxite, alunite and
aluminous shale are potentially sufficient to meet the needs
of Japan's capacity for producing finished aluminum. All of
Japan's bauxite, however, must be shipped over long distances;
2
TABLE 10
(at the beginning of 1943)
options
Adocuato Supplies
but dopon-
dont on
shipping
from the
Outor Zone
Menganose
Nickel
Chromium
Cobalt
Bauxite
aone 60 percent of the total production is concentrated in the
Load
Zine
Coal
Potrolcum
Sugar
Salt
Abaca
Sinal
Bintan-Singapore area. Production of magnesium in Japan and
Manchuria is potentially far in excess of needs.
Production of load and sino is potentially in excess of
needa, but in both cases the shipping factor is important, and
the slowness with which production at the Bawdwin Mine is ap-
Surplus
parently being restored will probably create a tight situation.
within Occu-
pied Aroas
available
for export
Although stocks of copper are sufficient for several years, assum-
Tungsten
Tin
Sugar
Abaca
Sisal
Kapok
Silk
ing a continued production of new supplies at the estimated rate
for 1943, eventual depletion of the stockpile is believed to be
inevitable. Aluminum is, however, a possible substitute in nany
important uses provided fabricating capacity can be expanded to
take care of the resulting increase in requirements.
Stocks of percury are very large, but proven production
Adoquato
within the
Inner
Zono
available in Japanese Asia is innignificant. Japan is known
Iron oro
Vanadium
Alunito, etc.
Magnisium
Silver
Arsonic
Fluorspar
Graphito
Vica
Sulphur
Nitrogen
to be making strenuous efforts to prevent the depletion of
stocks by the development of deposits of cinnabur in North
Borneo, and by smuggling from Free China and blockage running
from German Europe. Japan's position with respect to both
antimony and platinum is uncertain. Unless antimony can be
smuggled out of Free China, supplies appear to be inadequate.
Commodity
group
Iron ore
and forro-
alloys
Non-forrous
motals
Fucls
Miscollanoous
non=motallic
minorals
Matorials
basic\to
Chemical
Industry
Raw Fibers
Regraded Unclassified
-24-
39
-25-
Inadequate supplies
No known
additional
sources
available
Organic
fortilizers
Nitrates
Phosphates
Production of plotinum in Japeneso Anic in insignificant, and
Japan is thereforo clmost totally dependent on smuggling and
Potash
on stocks of unknown sizo,
The available production of tin is many times Japan'a
requirements. It is believed that Japan in making efforts to
run tin through the blockade to Germany in exchange for nercury,
mchine tools, and other materials in which Japan in deficient.
Deficiency
to be ro-
lioved by
smiggling
Requirements for silver are highly flexible. Japan can
probably use as much CB can be conveniently had, but this notal
in not essential. There in a substantial production within the
home islands. Japan has been a regular exporter of orsenic
in the past.
TABLE 10 (Continued)
Summary of Japan's Supply Position with Respect to the Basic Raw Materials
Miscellaneous Non-Metallic Minerals. Japanese require-
Dependent
on adequato
stocks
Vegetable
tanning
materials
nonts for fluorspor are flexible and Japan should have no
difficulty in mooting them, Production of graphite, both
amorphous and crystallino, is believed ample, Production of
mica in sufficient only if the Korean deposits can be made to
yield enough of the high grade nocessary for critical uses.
(at the beginning of 1943)
If not, Japan will bo dependent on smiggling for high grade
mica. Production of asbostos is only about one-fourth of needs,
Mequate
but dopon-
from the
Outor Zono
but Japan has stocks sufficient for sevdral years. It is
denti on
shipping
bolioved that Japen faces n shortago of industrial dismonds un-
Leather
Lumber
less they can be smugglod in, but in all except a fow critical
usos ortificial abrosivos probably onn be substituted,
Adoquate supplies
Materials Bosic to the Chemical Industry. Although salt
production in Japanese-controllod areas can probably be expanded
to meet Japan's needs, it is possible that at the present timo
Surplus
within Occu-
pied Areas
for export
A shortage of salt due to the shipping situntion may be a somo-
available
what limiting factor in the production of such basic chemicals
Rice
Toa
Fats and
Bristles
Quinino
na caustic goda and soda nsh. In addition, Japan facos the
Oils
Rubber
nocossity of building stocks of anlt against the possibility
of c drop in production because of unfavorable wonther condi-
tions, Supplies of augor for the production of alcohol are
potentially ample, but in view of the shipping situation, Japan
is known to be ming efforts to uso domestically ovoilable
storchos for alcohol production in ordor to allovioto the
Adequato
within the
necessity for importing sugar, There in, however, o substantial
Inner
Zone
Soybeans
sugar surplus in somo of the occupiod regions, and somo of this
Fish
Whoat
may bo available to Gormany if it can be run through the block-
ade, Sulphur production in Japan Proper in adoquate. Production
of nitrogen is probably adoqunto for military uses, but c.
shortago of nitrogon for fortilizers has been reported, Supplios
of cool for the manufacture of colco ovon by-products are suffi-
Commodity
ciont assuming adoquato shipping.
Staple
foodstuffs
Fertilizors
Miscellaneous
Regraded Unclassified
100
-27-
-26-
reported. The shortage of fertilizers will probably not be
Rav Fibers. In the past a large part of silk production
critical unless Japan loses access to the surpluses of foods
has been for export purposes. Production has been allowed to
in the regions now under its control, but Japan may be faced
docline somewhat since the outbroak. of the par, There is still
with the necessity of choosing between allowing home production
a surplus, however, some of which will be used to substitute
of food to fall to a possibly dangerously low level, and using
for other textile fibers in which Japan is short, and some of
shipping space that could be more economically used in trans-
which may be run through the blockade to Germany. The
porting food itself, to transport fortilizers from the occupied
Japenese situation with regard to cotton and mool is very
regions.
tight, possibly critically 50, Kapok will be mixed with these
fibers, and will be made to substitute to some extent in padded
Miscellaneous. Supplies of bristles potentially avail=
clothos, but it is believed that Japan will have serious
able to Japan from Manchuria and North China are about ten times
difficulty in moeting even essential consumer needs in somo of
the requirements.
Some my find their way through the blockade
the occupied territories. Consumption of kapok mill be increased
to Germany. The supply of hides and leather is probably adequate
many times because kapok can be substituted partially for cotton
for minimum military and essential civilian needs. Stocks of
and wool, but it is believed that there will still be a surplus
vegetable tanning materials are sufficient for several years but
available for Axis Europe.
it is believed that new supplies are not sufficient to prevent
the steady deterioration of the stockpile. Supplies of chrome
With the loss of imports of high grade pulp wood from
tanning materials are believed to be adequate assuming continued
Scondinavia, the United States and Conada, Japan will face some
access to chromium in the Philippines.
difficulty in making enough satisfactory rayon and staple fibers
from the 10m quality wood and reed pulps how available, Of
Japan now controls most of the world's production of
hard cordage fibers, abaca and signl, Japan will have amplo
quinine and rubber, and at least some of the surplus of these
supplies, beth for itself and for possible trade with Gormany,
products finds its way to German Europe through the blockade as
providing they can be shipped. Of juto and other fibers suit-
payment for goods needed by Japan from Germany.
able for bagging, Japan may face a shortage which may impode
its ability to transport such products an grains and sugar.
Staple Koodstuffs, Japon is nearly sclf-sufficient in
most of the foodstuffs basic to its normal dict. Soyboons
and whoat, in which Japan tends to be somewhat doficient, are
available in Manchurin and North China. Japan has abnormally
large stocks of rico on hand at the present timo in addition
to potentially very substontial imports from occupied creas.
Although crop yields in Japan Proper are declining at present
=
as o rosult of shortages in agricultural menpower and fertilizors,
it is unlikely that Japan will allow any considerable doplotion
of stocks, Of ton Japan has on exportable surplus which may be
avoilable for trado with Germany. Japon also has a surplus of
fats and oils which likovise are desperately neoded by Gormany.
Fortilizors. Japan facos a continuing shortage of almost
all important fortilizers, The amount of self-supply manures
is expected to doeline because of the look of experienced man-
power for mking compost. Of commercial organic fortilizors--
acyboan cake, other oil cakes, fish mato, pupao miste, and bone
noal-tho only kind of which thore is a normal supply is soy-
boan coke, and this is not bolioved to be susceptible of much
oxpansion. Shorteges of all important chemical fortilizers,
camoniun sulphato, colcium cynnimido, sodium nitrato, phosphoric
acid fortilizers, and potash fortilizors have boon reportodly
Regraded Unclassified
101
-20-
-29-
III. ELECTRIC POWER
An estimated summary of the over-all position of the
Summary
electric power industry in Japan's Inner Zone (exclusive of
North China) is given in the following tables:
Japan's electric power output sooms adoquate to handle
TABLE 11A
the current lovel of production, although reserve capacity
become critically low during the winter months. As levels
of production are raised, however, shortages will develop
Estimated Installed Generating Capacity
in the Inner Zone
in somo areas, especially during the winter. Stocks of coal
at steam plants in the Tokyo-Osaka-Nagoya area have boon ex-
January 1, 1943
coedingly low; operation of thoso plants "is critically de-
pendent on in unrostricted transport of coal supplies.
(In millions of kilowatts)
Moderato expansion of electric power facilities, limited
Hydro
Steam
Total
to about 10 percent in 1943, can probably be achieved, In
caso of nood, a considerable portion of stoam gonerating plants
in China, the Philippines, and Southeastern Asia aggregating
Japan Proper (including Xerafuto)
7.00
6.20
13.20
somo 1,500,000 kilowatts of installed capacity could be noved
Northern Islands
0.30
0.23
0,53
Northeastern Honshu
0.30
0.07
0.37
to Jacan.
Tokyo Power Supply Area
3.30
2.00
5.30
Capacity
Osaka Power Supply Area
2,10
2.00
4.10
0.67
0.90
The total rated capacity installed in the Inner Zonel/
Southwestern Honshu
0,23
Shikoku Island
0.17
0,13
0.30
was approximatoly 17 million kilowatts as of January 1, 1943.
Kyushu Island
0,60
1,10
1,70
Of this total, 9.3 million kilowatts wes installed in hydro-
electric genoraling stations and 7.7 million kilowatts in stear
Formosa (Taiwan)
0,33
0,07
0.40
olectric stations. Japan Propor contributed 13.2 million
kilowatts, Koroa 2,0 aillion, Manchurin 1.4 million, and
Korea (Chosen)
1.40
0,60
2.00
Formosa 0.4 million.
Manchuria (Manchukuo)
0.55
0.85
1.40
Power Available During 19/3
9.28
7.72
17.00
The Innor Zone will produce a gross of 75 billion kilo-
watt-hours of eloctric energy Buring 1943, unloss drought is
serious and idospread, shipmonto of coal are interfored with,
or important plants are dostroyed by norial attack. Over two--
thirds of this energy will be produced by hydro-clectric
gonorating station. Practically all of the remainder will be
produced by stoam oloctric stations.
Actor allowing for transmission and distribution losses,
a not of about 64 billion kilowatt-hours of cloctric energy will
be available for utilization by the Japanoso war industrios und
other consumers, Approximately 14 billion kilowatt-hours will
be uso: by the chemical industry; 8 billion by the iron and steol
industry; 6 billion by the non-forrous motals industrios; 7 bil-
lion by the transportation and coal industries; 14 billion by
other stretogic industrios; and the remaining 15 billion by other
ossential civilian and governmentel usors.
17
North China, with approximately 200,000 kilowatts of installed
capacity, is not included in this summary.
Regraded Unclassified
-31-
102
-30-
TABLE 11C
TABLE 11B
Estimated Requirements for Electric Energy, 1943,
Estimated Production of Electric Energy
by Principal Classes of Consumers in the Japanese Empire and Manchuria
in the Inner Zone
during the year 1943
Electric Energy
Requirements
(In billions of kilowatt-hours)
Class of Consumer
(in billions of
kilomatt-hours)
Hydro
Steam
Total
Chemical Industry
14
Japan Proper (including Karafuto) 38.15
17.69
55.84
Nitrogen fixation (plus calcium carbide
Northern Islands
1,50
0.92
2.42
produced for acetylene and other purposes)
9.0
Northeastern Honshu
1.65
0.28
1.93
Other chemicals (caustic soda, chlorine, etc.)
5.0
Tokyo Power Supply Area
10.15
4.00
22,15
Osaka Power Supply Area
11.55
4.00
15.55
Iron and Steel Industry
8
Southwestern Honshu
1,15
3.02
4.17
(Mining iron ore, producing iron and steel,
Shikoku Island
0.85
0.52
1.37
and fabricating heavy iron and steel products)
Kyushu Island
3.30
4.95
8.25
6
Non-ferrous Metals
Formosa (Taiwan)
1,80
0.21
2.01
Aluminum, including the production of alumina
4.5
Other metals; sinc, mugnesium, copper, etc.
1.5
Korea (Chosen)
8.40
2.40
10.80
3
Coal
Manchuria (Manchukuo)
3.30
3.40
6.70
(Mining, transporting and loading coal)
51.65
23.70
75.35
Transportation
(Principally for electrified railways)
4
Less 15 percent Transmission and Distribution Losses
64.00
14
Other Strategic Industries
(Including paper and pulp, shipbuilding, ordnance,
machine tools, aircraft, etc.)
Other Essential Civilian and Governmental Uses
15
Total
64
Regraded Unclassified
103
-33-
-32-
for the facilities which are normally used in the production
Power Supply Areas
of electric power facilities, will be the principal factor
limiting the expansion of Japan's electric power industry.
In general, the hydroelectric stations are scattered in
mountain regions throughout the entire area. In Japan Proper
The production of eloctric energy in 1943 will be limited
these stations are quite numerous; although most of them are
by the amount of water which will be ovailable for the genora-
relatively small, their total generating capacity is substantial.
tion of hydromloctric energy, and by the amount of coal which
In Formosa, Korea, and Manchuria, the hydroelectric stations are
will be available for the operation of the storm electric
usually large.
stations. A total of approximately 20 million tons of cool
will be required to operate the steam eloctric stations during
The principal steam electric generating stations are con-
1943 at on average of 3,000 hours per kilowatt of copacity.
centrated in Central Honshu Island on the water fronts of
of this total, approximately 10 million tons will have to be
Kawasaki, Amagasaki, and Nagoya, or located near the coal mines.
shipped considerable distances to the Tokyo and Osako power
Until recently. the steam electric stations at Kawasaki,
supply areas.
Anagasaki and Nagoya were used principally for the purpose of
supplying electric energy during the winter months when there
In addition to the power fecilities of Japan's inner zono,
are shortages of water for the hydroelectric stations. However,
there are 1,500,000 to 2,000,000 kilomtts of generating
& number 08 large "base load" steam electric stations were
copacity installed in thermal atotions of territorios occupied
reported to have been installed in these areas during the past
since 1936, A considerable proportion of this capacity could
three years. The steam electric generating stations which are
be noved from the Ynngtzo Valley and the southern regions to
located near otal fields are usually "base load" stations.
the Innor Zone.
The Inner Zone is divided into B number of electric power
supply areas, both by natural obstacles and by lack of uniformity
in the frequency used. The Tokyo power supply area is the most
important with approximately 30 percent of the total generating
capacity. The Osaka-Nagoya power plant supply area is second
with 24 percent; Korea is third with 12 percent; and Kyushu
Island is fourth with 10 percent. The remaining generating
capacity is distributed throughout the six other supply areas,
each area containing generating capacity representing between 2
to 8 percent of the total capacity installed in the Japanese
Empire and Manchuria.
Prospective Increases During 1943
If rent materials and plant facilities were available,
Japan doubtless could increase its generating capacity to the
extent of about 10 percent a year, but whether in fact they
will be available remains in doubt. The probability is that
if expansion of generating equipment is undertaken, it will be
only at a sucrifice of other war equipment.
A 10 percent increase in electric power facilities during
1943 would require approximately 400,000 motric tons of steel
ingota, 60,000 tons of iron, and 10,000 to 60,000 tons of conper,
depending on the amount of aluminum and steel which the Japanese
are able to substitute for copper. Compotition for scarce
metale by the shipbuilders and other war industries, and also
Regraded Unclassified
104
-35-
-34-
goods industries to war production that are in use in other
IV, CONSUMER GOODS PRODUCTION
belligerent countries,
These include: (1) a heavy tax program and n system of
Summary
forced saving in order to out down consumer buying power;
(2) the adoption of a gradually expending ration system; (3)
Consumer goods rationing in Japan began five years ago,
the stoppage of nonessential industries; (4) the passage of laws
but deficiencies of supply are not, as yet, critical. Food
strictly governing prices and providing severe penalties for
stocks are adequate (but provide little variety) and in nome
black market and similar operations; and (5) the creation of
respects reserves are above normal. The carry-over of rice,
a system of priorities governing the use of transportation,
for example, is over twenty-five percent higher for the current
electrical power, and other service industries.
year than it was during 1941-42 and is nearly four times the
carry-over of 1940-41. By American standards the normal
In order to analyze the impact of wer economy on con-
Japanese diet has never been "balanced", however, being deficient
sumers' goods consumption, it is necessary to consider the
in fats and proteins, This deficiency has been intensified
chief consumer goods groups separately.
during the past three years.
Food
The lack of cotton end wool has been partially offset by
low quality staple fiber garments which provide neither warmth
Food, representing the greatest single expenditure group
nor durability. Leather shoes for civilian use are severely
in Japan, TOB rationed first. Japan's ability to supply its
rationed, but the masses of the Japanese are accusioned to
population with food hinges primarily on supplies of rice and
wooden Rgeto" and rice straw sandals, Hence, the rationing of
fish, Wheat and other grains, sugar, and soybeans pro next in
leather represents little or no hardship, Shortages of char-
importance.
coal and other household fuels have had a detrimental effect.
on health, porticularly in the northern oreas. As in most
Formers in Japan are required to sell rico, other cercels,
worring countries, local transportation for nar workers is
boens, green vegetables, and other products through govern-
inadequate. The over-crowding of local busses and electric
ment channols and at § fixed price. They can put nsido for
lines and the frequent breakdowns in bus service are a signifi-
themsolves only the amount of onch product which corresponds
cont drain on the strongth of Jupenese labor, The offort of
to the rations allowed to the city population. Prices poid by
workers to moet this difficulty by noving into industrial
the government are no low that in somo 00/108 the former cannot
centers has caused acute housing shortoges in porticular cross.
afford to transport his produce to tomi,
All of these conditions have contributed te D significant
Rice. Rico in the best single indux of Japan's food posi-
decline in health. In spite of the government's effort to
tion, Rico production in Japon and Koroa is bolow the anount
curb thom, there has also been an extensive growth of "black
required for domostic consumption under the present rationing
markets" which tend to disrupt retion and price controls.
system. The major factors in the doclino of rice production
are (1) the roduction in the quantity of available fortilizors;
Japan has not yot reached the limit beyond which additional
(2) the divorsion of form labor into nor industry, and (3)
conversion of consumer goods industries to me production connot
unfavorable weather in several recent years. Japanese agricul-
be nado, but 1s rapidly approaching that limit. The bulk of
turo is adjusted to an intensive application of labor per unit
the future expansion of per industry cannot come out of the
of output. The mochanisation of agriculture would offset the
conversion of present consumer goods industries to war produc-
docroase in labor but such mochanization is impossible under
tion but must be ottained through the exploitation of the notr
present conditions,
resources which Japan has ocquired,
1/
Other information, obtained from Japaneso prisoners ceptured
The grodual conversion of consumer goods industrics to wer
production bogan CB carly as 1931 and was shorply increased in
rioo, According to this information, each former in forced
in the Solomons, indicates different regulations applying to
1937. Betwoon the beginning of the nor with China in July 1937,
to Doll to the government only a cortain quoto of his rico,
and the attack on Poorl Harbor, Docember 7, 1941, Japen adopted
fixed on on nerongo bosis. BEW Wookly Notos on Current
prectically all of the drustic mossures for convorting consumer
Economic Information, March 17, 1943.
Regraded Unclassified
105
-36-
-37-
Government control over the rice. market has been
TABLE 12
gradually tightened in recent years. Following a serious
shortage of rice which occurred in Japan in the late fall of
Supply of Rico in Japan Proper
1939 owing to heavy wartine consumption, the people were urped
(In 1,000 metrio tons)
to voluntarily reduce consumption, and the polishing of rice
was reduced to 70 percent, In April 1940, the first local
Carry-Over
Production
Imports
rationing system wont into effect in Kochi, Shikoku. During
Rice Year
from
during
Inports
from
the late summer and fall of 1940 the mixture of wheat, barley,
Nov, 1-
previous
previous
from
foreign
buckwheat and even beans with rice was enforced by the local
Dot, 31
year
year
colonies
countries
a
Total
officials in various areas, In April 1941, rice rationing
MGS put into effect in Tokyo, Osaka, and Kobe, with allownoes
1934-35
2,403
7,581
1,904
11,888
ranging from 570 grams per day for extra-heavy workers down
1935-36
1,453
8,403
2,076
11,932
to 300 groms for persons over 61 years of age not ongaged in
1936-37
1,171
9,848
1,737
12,756
manual labor,
1937-38
1,099
9,699
2,233
13,031
1938-39
1,242
9,633
1,430
12,305
In the opinion of recent residents in Japan, the ration
1939-40
n
585
9,067
512
1,769
11,933
of rico to families with sovoral children is not sufficient
1940-41
585
8,921
1,170
2,047
12,723
and signs of undernourishment aro noticenble, Wealthy families
1941-42
1,682
8,043
1,755
1,609
13,089
are obtaining rico in the black. markot.
1942-43
2,194
9,067
731
1,204
13,016
One purpose of the strict rationing of rice is to in-
cronso Japan's stockpilo, As a result of heavy imports from
a
The average imports for the first five years were about
Southonstorn Asia, Japan now possesses over fiftoon million
29,248 metric tons annually,
koku (brown rico - one koku equals 322.4 lbs.) which is nearly
Some authorities believe that this crop anounted to
double the normal carry-over.
8,482,000 metric tons.
Some authorities believe that this crop amounted to not more
The tables on the following pago indicato recent changes
than 8,804,000 metric tons. "Official" and other reports
in Japan's rice position.
vary. from 9,169,000 to 9,871,000 metric tons,
d
After 1938 figures are estimates,
Other Grains. Whoat, burloy and naked barloy are the
principal subsidiary grains grown in Japan. Although for
bolow rico in importance, they aro almost oqual to all of the
boans, potatoos, fruits, end vegotables combined as a source
of food for the people, Although whon't production rose in
1940, the pook your, to a total of noarly double the 1932
figure, two factors have tended to provent the civilion
population from obtaining all the thoat they require, (1)
the necessity of supplying Manchurio with substantial amounts
of flour (somo flour is also shippod to Chine), and (2) the
obnormally heavy domostic demand which has boon largoly due to
insufficient rico supplios, and to higher than usual consump-
tion by the armed forces.
The distribution of the subsidinry grains in controllad
by the government. All production in excess of the former's
notual requirements must be sold to the government. These
supplies ero distributed to the consuming areas on à monthly
basis. A limitod number of citics have individual rationing
Regraded Unclassified
106
-38-
-39-
TABLE 13
tickets for bread, but in Tokyo and aome of the large cities
this system has not boon extended to the consumer, Throughout
Rice Dessand in Japan Proper
1941, the octual distribution of flour was running far bohind
the schedule allotment dates. Americons who roturned in
(In 1,000 motric tons)
August 1942, reparted that long broad queuos could bo soon out-
sido of all bakerios.
Carry-over at
Fish. The fish supply deponds entirely on outaido
Year
Exports
end of yeer
Consumption
Total
factors, such as the ovailability of vossols, fuol,and labor
and the lack of intorforence from oncry naval forces, The
1934-35
116
1,453
10,319
11,880
shortago of fish-reported by all obsorvers-is ottributed to
1935-36
80
1,171
10,680
11,931
shortage of oil, military domand for vesscle, and the govern-
1936-37
95
1,099
11,563
12,757
mont's prico policy (1.0. officially fixed prices were too
1937-38
85
1,242
11,703
13,030
low to induco fishormon to transport goods to towns). The
1938-39
111
594
11,600
12,305
government is urging the population to replace fish with
1939-40
73
585
11,275
11,933
potatocs and vegotables.
1940-41
73
1,682
10,968
12,723
1941-42
73
2,194
10,822
13,016
The retioning system for fish who introduced in Tokyo
1942-43
73
2,267
10,676
13,016
on February 5, 1942. At that time only about 100 to 200
metric tons of fresh fish por day were available, against a
normal demand for 600 tons, Sales wore restricted to 30 monno
After 1938, figures are estimates,
por family every other day (1 mommo oquals 0.132 cuncos). In
subsequent months supplies have increased to about 500 tons
per day and daily purchases of 30 mommo por family have boen
permitted since March 30, 1942.
TABLE 14
Soyboans. Soyboans are at present scarco in Japon, due
Estimated Imports of Rice into Japan
to reduced output in Manchurin, lock of adoqunto transporta=
by Country of Origin
tion, hnd heavy domand of the arned forcus. Scybonns are boing
rationed, but dotails of tho system are not available,
(in 1,000 metric tons)
Sugar. The sugar supply for the Empire is sufficient.
But production in Fornces has boys reduced in favor of rice
while the problem of transportation from Fornosa and the
Country
southern areas has caused the curtailment of consumption in
1940
1941
1942
1943 (Expected)
Japan Proper. Sugar was the first foodstuff rationed on a
national basis. Rationing was introduced in the six major
Burma
468
497
cities on June 1, 1940 and WAS extended to the prefecturos In on
73
73
Thailand
278
July 1, The quota varios in the different localitios.
541
585
219
French Indo-China
468
Tokyo all porsons are allowed 0.6 kin (one kin equals 1,323
731
804
585
China
556
278
pounds) per month, In the country it is 0.4 kin. Special
146
146
allotments are granted to infonts and for special econsions.
Total
1,770
In Juno 1942 the sugar ration was doubled from 0.6 kin
2,047
1,608
1,023
to 1,2 kin per month per person. About 600,000 tona of sugar
wurd avoilable in the Philippinos at the timo of thoir cepture.
There were also alightly loss than n million potential tons in
the form of unhervostod sugar cane.
Regraded Unclassified
107
-40-
-41-
Monts. The domostic consumption of monts was increasing
The Japanese situation with regard to cotton and wool is
prior to the wor, but ment in now very scarce, Transport
critical. With the loss of imports of high-grade pulp wood
difficulties aro said to have caused imports to docroase, and
from Scandinavia, the United States and Cenada, Japan faces dif-
a shortago of foods for onimals probably is another unfovorable
ficulties in miking enough actisfactory rayon and staple fibers
foctor. With the excoption of a small uppor class group, however,
from the low quality wool and reed pulps now ovailable. Pro-
meat constitutes a very minor item in the Japanose dist. In
duction of silk has been allowed to decline; there is still a
rural aross it in octon only on unusually important fostival
surplus, however, come of which can be used to substitute for
days,
other textilo fibers of which Japan is short.
ERES. Egg consumption per copito was ostimated to be
Antioning of textile goods wont into effect on February 1,
about 50 per annum. Most recent information indicatos that nn
1942. Coming under the restrictions was proctically all cloth-
evorago of one °EE por Japancao houschold (about five porsons)
ing of cotton, wool, silk, rayon and other fibers, including
por wook 1s allowed.
all kimonos, socks, stockings, hand-suits, underwear, sport
clothos, neckties, socks, stockings, handkerchiefs, towels,
Eggs thus constitute on insignificant item in the present
blankets, soying threads and related items.
Japaneso diot.
Rationing is carried out under the point system, Ench
Milk. Production and consumption of milk has increased
person, including childron, receives a card entitling him
during the past docado but consumption in the urban conters
to purchase 100 pointe worth of clothing in cities, and 60
has now boon rationed. It is only available to small childron
points in rural districts; each article has a specified point
and invalida and through doctors' cortificatos. Roduced milk
value. The ticket is to last for a year. Only 50 points
production in Inid to a shortago of animal food.
could be used to July 31, In January 1943, new regulations
mere issued, reducing the available quota. The Ministry of
Solt. A salt shortago has oxisted for 0 000 time in spito
Commerce and Industry explained this nove by the fact that to
of domostic production and imports from China and Manchuria.
avoid maste, many people returned thoir ration cardo unused.
The cottont of the shortage is ovidenced by the fact that table
If this is true, the conservative spending on the part of
salt W&B put under the rationing system on January 1, 1942.
consumers may be attributed to the fact that ration cards were
The ration 1a 200 grams por person por month,
issued in excess of the supply of clothing now available for
distribution. The change probably is intended morely to shrink
Ton. The domostic output of toa avorages about fifty
the ration down to the available supply,
porcont moro then consumption, It socime probable that the
corongo planted in ton will bo roducod to increaso the area
Wearing apparel and clothing materials are soid to be
available for more assential foods,
inferior in quality, and not always possible to obtain,
Other Itoms. Buttor, odible oils and fats are very
Leather and rubber boots are also retioned. Cards have
difficult to obtain in Japan in spito of the hugo potential
been issued only to those to whom footwoor is essential for
of supplics in the occupied countrics. Fruits and vegotables,
their work, Boot repairs are difficult on account of o
although oxtromoly scarco in big cities, are not rationed,
shortage of solo leather.
but are sold to first comors na long ca they last,
Fuel
Clothing
An examination of the supply of textilo fibors points
perted by most observers. The shortage of charcel is felt
Shortages of charoool, coke, coal, wood and god are ro"
to a scarcity of most of those materials from which clothing
keonly in Japanese houscholds on it in the londing fuel for
is mado.
domatic uso, primerily for cocking, sccondarily for heating
purposes.
Regraded Unclassified
108
-1,2-
-43-
Regulations effective from April 1942, provided that a
The building of new houses is severely restricted, The
family of three, living in a house with a floor space of 20
government has undertaken to build low-cost houses in a number
nate (360 square feet) should receive six bales of charcoal
of cities, As every effort is being made to save raw materials,
a year, or about one-half of moderate needs, (One bele of
it in estimated that the type of house now constructed saves
charcoal weighs about 25 pounds), Available reports suggest
from 25 to 70 percent in matorials as compared with the older
that the anount of charcoal made available to households during
houses.
the winter of 1942-43 WID only helf the already restricted
amount supplied in 1941-42, There is a great demand for wood
Standard of Living and Industrial Efficiency
to help out the fuol supply, but it 1= very difficult to get,
olthough it is not retioned.
On the basis of all available information the conclusion
may be drawn that while there are no indications of critical
Gas has been rationed since October 1941. New rntioning
food shortages at present, the amount of food available is not
regulations mero issued for the five months beginning January 1,
equal to the amount the Japanose people normally consume.
29/2: They were to allow c. household with a singlo member four
There are some evidences of malnutrition, empocially among
calorios; 10.5 calories when there are five membors to n
children and poor people, particularly in cities. On the other
houschold, Extra quotas wore to bo allowed for sick persons.
hand special rations are given to heavy workers and extra-heavy
workers.
To conserve cloctricity for the munitions industries, a
drivo was mado during the winter of 1941-42 to roduce privato
Excossivo hours, the employment of young and inoxperienced
consumption by socus of heavy surchargos on the monthly bill.
personnel, and inadoquato dict have contributed to rising
accident ratos, In the year 1939-40 a survoy mado by the Labor
Arbitrary notion to reduce consumption of oloctric power in
Bureau of the Wolfare Ministry of the accidents among 2,200,000
homos has also been takon in some instancos,
workers in 8,000 factorios, disclosed that 590,000 or 27 porcont
of the total wro moro or loss scriously injured and 749 word
Local Transportation
killod, This may be compared with the accident rato of 15.5
Busses and trucks are in a run-down condition, The fow
percent in 1937 and of 21 percent in 1938-39.
busses and trucks that aro oporating are crowded and overloaded.
Detorioration in public hoalth in reflocted in the [TOW"
Private ours, excopt for the uso of officials and the military,
have disappocred, The unsatisfactory condition of motor
ing number of tuborcular patients, Insofer as this is rolnted
vchicles is attributed primerily to the necessity of substituting
to tho dict, it probably in the rosult of the roduction in
the consumption of protoin foods such 00 fish or soyboan, A
other fuels for gosolino. The mijority of trucks, taxis and
busses wro boing operated on charcool, wood, coal burnors, end
report in 1937 statod that thore word 1,200,000 potionts in
1937 when the doath rato vos 120,000 a year. In 1938 there wro
gamoline, with o cortain porcentage of alcohal and propone goo.
1,500,000 patients and 148,872 donths, e reto 50 percent higher
Approximately 30 percent of the units oquippod with charcool,
than in 1936, The scrious inronds of the disease in the
wood, and coal burners are out of oporation as c result of the
industrial field is indicated by the number of tuborcular workors
shortago of fuol,
sent home=92,000 in 1937, 110,000 in 1938, and 140,000 in 1939.
Moro than helf of the tuborcular workers were botwoon the ages
The inconvenience and the elomoss of transport to and
from work in a drain on the strongth and moralo of Japenose
of 15 and 23, The government's conscrn over houlth conditions
lobor.
is apparent from a recent broadcast stating that 80 percent of
the budget of Yon 132,000,000 of the Wolfare Ministry for 1943-
44 will be dovoted to an anti-tuborculosis campaign.
Housing
Block Merkets
As transportation by train, bus, street-car, and taxis
become difficult, many Japehose who proviously lived in the
suburbs tried to novo into Yokohama. This resulted in c scrious
Notwithstanding the government's offorts to control the
shortage of housing.
distribution of daily neccosition, black markets aro wido-
sprond in practically all commodities. Prices in the block
markets are excrbitant, The black markets are obviously patron-
1zed extensively by the soll-to-do, but evon thoir standard of
Regraded Unclassified
109
-1/-
-45-
living is lowered as shortages deprive them of many of their
V. COMBAT ARMAMENT
accustomed luxuries.
Summary
Conversion of Consumer Goods Industry to War Production
Processing capacity constitutes the principal limitation
Japan is rapidly approaching the limit beyond which
on the production of combat armament. It should be noted,
additional transfer of equipment and labor from consumer goods
however, that stockpiles of combat armament, which have con-
industries to war production will actually reduce the efficiency
sistently been accumulated during the last twelve years, and
of war production.
the large quantities of machine tools that have been imported
since 1935 help to compensate for technical limitations on the
Non-essential industries have been out of production for
mass production of war supplies.
over two years and there are very few points in ossential
consumer goods industries at which additional cuts can be applied
Alloy steels will be produced in substantial amounts in
without creating extremely severo shortages.
1943, but their quality, in many instances, is inferior to the
best western products. This deficiency will prevent optimum
utilization of the alloy steel output. Uneven quality of high-
speed and other alloy steels will also affect the performance
of cutting tools adversely and thus slow down production.
Inexperience in designing and manufacturing the finer
types of machine tools and bearings, as well as efficient jigo
and fixtures, has been n. retarding influence in the general
application of mass production to the armanonts industry.
These limitations will chiefly affect aircraft and trucks
and armored vehicles. The production of aircraft will probably
not exceed 10,000 planes of all types during 1943. Approximately
60,000 trucks and armored vehicles will be produced during the
current year but probably no more than 4,000 tanks. The pro-
duction of the latest modol anti-aircraft and anti-tank guns
will also be somewhat limited by technical difficulties. For
other types of ordinance however, processing capacity does not
constitute a serious bottleneck.
The Technical Efficiency of Japanese Industry and
its Effect on the Production of Conbat Arnament
The tochnical officiency of Japaneso industry, measured by
reduced unit costs and increased unit output per worker in-
creased very considerably in the docade 1930-1940. The textile
industries, the paper and coramic trades, the basic mining
industrios, the production of steel, many branches of chemical
manufacture, the metal and engineering trados, and a wide range
of manufactures wore increasingly nodornized during this poriod.
In mining, tochnical processos were refined, mechanical conveyors
replaced hand labor, larger and more efficient equipment was
substituted. In manufactures, there was a marked concentration of
Regraded Unclassified
110
-46-
-47-
output in large and well-equipped planta at the expense of
Alloy and Tool Steels, Shortages of alloy stools,
traditional production in a multitudo of very small workshops,
perticularly high speed steels, have undoubtedly proved a
Of particular importance was the development of many kinda of
serious hindrance to Japanese motal and machinory manufacturers.
machine tools which not only fostered the use of machinery
It in not that Jopan has lacked on alloy steel industry, but
but mde possible significant progress in the standerization
rather that this industry has developed relatively slowly:
which 10 necessary for the adoption of mass production tochniques,
TABLE 15
Increasing Belf-Sufficiency. In these years Japan took
measurable strides toward industrial self-sufficiency. In
Expension of Special Stocl Industry in Japan, 1926-1930
1932, Japan becamo B not exportor of steel. The range of
(tons)
manufactured products was stendily increased and their quality
was rapidly improved. The heavy industries, which are basic
Total Special Steel
to industrial strongth, fully shared this progress. Japanose
Year
(crucible and electric furnace)
Alloy Steel
foundrios recched a lovel of development which onabled then to
supply the lorgest and nost elaborate of iron and stool castings.
1926
10,000
The domostic stool industry bogan to produce a wider range of
1928
16,000
alloys. The anchinory and machino tool industries undertook
1932
69,740
20,000
the manufacture of moro complicated typos. Hoilors end prino
1933
139,561
49,000
movers of all kinds, espocially steam turbines, were manufactured
1934
208,790
56,000
in quantities adequate to meet virtually all home demands.
1935
241,649
66,000
Importe of boilor tubes were reduced, and Japanese technical
1936
316,475
76,000
skill increased to a point which made possible the design and
monufacture, of power plants of the highest pressure and
temperature. Industrial labor also became more skilled and
Since 1936, many now electric furnaces have boen installed.
the Higher Technical Schools graduated many now specialists
Production in the Japanose special stool industry may be expected
for Japan's growing industries.
to reach 750,000 tons in 1943. Because of wor domands, it will
consist almost entirely of alloy stools, By utilizing sone open
Renaining Technical Weaknesses. To cotimate the signifi-
hoarth furnace capacity for the same purpose, Japen will commend
cance of recent technical progress in Japanese industry, it in
e total probable production of 1,200,000 motric tons of alloy
necessary, however, to 500 industry in proper perspectivo, By
stoel during the coming year, Analyses of captured Japanese
western standards, the Japanese position suffors from the feet
armament material show that mild or carbon stool is sometimes
that industrialization in Japen began within the past sixty
used where American practice would dictate the use of alloy
years. Although remarkable progress has boon mado from the low
steel, It appears probable that, because of inferior quality,
lovols of fiftoon years ago, Jepanese industry is not 28 yet
part of the production cannot be used whore high performance
obroast of western industry in mothods or efficiency. Produc-
is vital,
ing units in Japan's large-scale industries are smaller than
those in the West, and are loss highly spocialized. As long as
There is abundant evidence of the difficulty which the
inports word available, Japan still roliod on foreign countrics
Japenose have exporienced in loorning the tochniques necessary
for high-quolity spocial stools and for the critical machino
for the production of new alloy stools. "Domostic alloys lagged
tools in procision production. Japan's motor industry was nover
far bohind imported Gorman and other alloys in quality and there
substantial; henco facilition for the manufacture of motorised
are no good roosons to assumo that this deficiency Was mado up
military equipment cre inadoquato, The trained labor supply
since July 1941." (Dispotch from Ambossador Grow on exchange
in insufficient in all fields in which production has beon
M.S. "Gripsholm", August 18, 1942). "However, bear in mind that
expanded. Rolying on the West, Japon has nover boon responsible
every timo wo triud to domonstrato any mochinos in Japan, the
for important tochnical innovations in industry. As a result,
tools and antorial to be mechined wore of on inforior quality."
Japan's war-tino oconomy suffors from definito deficioncios in
(Lettor from lb. W. P. Lots, Landis Tool Company to Mr, Toll
both the quantity and quality of tochnical equipment as indicated
Borno, Exocutivo Diroctor, National Machino Tool Buildors'
in the following discussion,
Association, March 25, 1942).
Regraded Unclassified
-48-
111
-15-
It is not that the techniques cannot be acquired but that
several years met elapse before they are completely mastered,
TABLE 16
An expansion in alloy steel production since 1936 of the
dimensions indicated magnifies the difficulties involved, Mean-
Japent Production and Import of Machine Tools, 1929-1938
while, with 80 small a total output of stool, the Japanese cannot
afford to discard entirely batches of steel which do not measure
(in unit values)
up to specification, nor can they stop production until uniform-
ity of composition in the various types of alloy and tool steel
Production
Importa=
Exporta-
Production
is attained. As a result, poor grades of tool steel are often
Value
tion
tion
Demand
as percent
employed, Inferior tools directly affect the speed and hence
Your
Number
(1000 Yon)
(1000 Ten)
(1000 Yen)
(1000 Yen)
of demand
the quantity of armanent production. It is necessary either
to reduce the speed of cutting in machining parts, or to
1929
464,252
5,586
interrupt production more often to replace tools. Whichever
1930
32,737
4,437
alternative is adopted, output suffers.
1931
114,756
3,943
3,070
220
6,793
58.05
1932
33,654
8,198
Another deficiency in Japanese metallurgical practice
1933
50,103
15,503
16,247
566
31,104
49.71
affecting armant production is the great lack of uniformity
1934
330,863
23,459
21,433
1,189
43,701
53.68
in carbon content of high-grade steels made in Japan. This makes
1935
72,425
30,176
18,296
1,941
46,531
64,85
it very difficult to obtain a uniformity in heat-troatment,
1936
36,503
18,865
4,907
50,461
and results in a varied degree of strength, hardness and
1937
50,000
5,798
machinability after the material is treated, Although this lack
approx.
of uniformity does not affect the accuracy of parts as machined,
1938
9,570
it takes 0 constant toll of cutting tools in the machining pro-
cess when they encounter metal of greater strength and hardness
than that for which they are designed,
Machine Tools, In Japan units valued at less than $100
TABLE 17
are classified as mochine tools. Many of these obviously can-
not be power-driven cutting and grinding mochinos that work
Inpanese-produced Machine Tools
on motal, Hence, many machines included in the following tabu-
Intions do not figure in the mass production of arms, munitions,
(in unit values)
tanks, aircraft, motor vehicles, and other war equipment.
In presenting value figures as an indication of the degree
Dollars
of self-sufficiency of the Japahese machine tool industry, thd
Year
Yen
(Average annual exchange rates)
following explicit reservations must be made, (1) The value of
the average machine tool nado in Japan is considerably below
that of the average imported machino tool. (2) The number of
1929
12
6,
Japanese machines represented by a given monotary value in much
1930
135
68.
greator than the number represented by Imported machino tools.
1931
34
17.
(3) The majority of machino tools produced in Japan are of the
1932
238
71.
standard, low production, and non-precision types, whereas the
1933
306
77.
majority imported are of a critical typo, as far as their im-
1934
71
21,
concerned, portance to the monufacturing industries of the country in
1935
415
124.
Even on the quantitative side, there are further reserve-
tions to be mdo, The percentage of Japanese solf-sufficiency
in mohine tools was soid by Japaneso authorities to have dropped
from 72 in 1936 to 50 in 1937, when demand jumpod to on index
figure of 180 on the base, 1936 = 100, In 1938, on the samo base,
Regraded Unclassified
112
-50-
-51-
demand is said to have risen even nore sharply to en index
For comparison, the following table is useful:
figure of 710, as Japan nttempted to swing ita armament in-
dustries into msss production. Although no figures were issued
for production in 1930, it appears probable that the Japanese
TABLE 19
industry could supply only one-eight to one-quarter of the
indicated demand. An further evidence of the dependence of
Additions to the U.S. Machine Tool Inventory, 1932-1942
Japanese industry on imported machine tools, the results of 4
reliable investigation of 12 machinery factories made in 1937
Inventory
may be cited. They show the number of homemade machine tools
Year
Production
Exports
increase
in use as against foreign-made:
1932
$
22,000,000
8 8,705,000
a 13,295,000
Home-Made
Foreign-Made
1933
25,000,000
6,476,000
18,524,000
1934
50,000,000
16,056,000
33,944,600
819
768
1935
85,000,000
22,820,000
62,180,000
Lathes
Drilling Machines
207
277
1936
133,000,000
34,047,000
98,953,000
Milling Machines
79
256
1937
195,000,000
52,136,000
142,864,000
Planors and Shapers
399
851
1938
145,000,000
83,269,000
61,731,000
Grinders, etc.
399
851
1939
200,000,000
101,247,000
98,753,000
1940
430,000,000
224,741,000
205,259,000
Total
1,631
2,347
1941
775,000,000
191,034,000
583,966,000
1942
1,400,000,000 (approx)
The evidence of value figures 1a also useful in indicating
roughly, on the quantitative side, the present Japanese position
in machine tools as compared with, for example, the United States,
In the following table, Japanese production and import figures
The preceding tabulations show that in the period 1932-40,
have been combined on the basis of average annual rate of exchange.
the Japangse machine tool inventory increased about $236 illion
Certain modifications have been made to conform to export
of which 3112 million (or less) were Japanese production and
3125 million sere imported. By contrast, during this period,
statistics from supplying countries:
the United States machine tool inventory increased $735 million--
than three times as much, If estimates are added coyering
TABLE 16
more 1941 and 1942, the Japanese increment probably did not exceed
$80 million, (imports ceased), while the United States inventory of
Additions to the Jepanese Machine Tool Inventory
Japanese
Japan, For 1943 a further Japanese expansion of some 20 percent
expanded by about $1,000 million, or more than 22 times that
Impo: to from United Statos,
Total,
Year
production
United Kingdom, and Germany
rounded
be estimated. Thus, if Japanese production reached, say,
may 035 million in 1941 and $45 million in 1942, production this year This
1932
$ 2,300,000
$ 1,890,326
$ 4,100,000
1933
3,850,000
3,733,347
7,600,000
may roughly with the figure Y 200,000,000 got as
be expected to run between $50 million and $60 million. the goal
1934
6,350,000
6,571,656
13,000,000
compares of the expansion program to be achieved in 1941, The weight of
1935
8,080,000
4,965,989
13,000,000
evidence, including repeated references from Japanese sources to
1936
12,150,000
6,090,999
15,000,000
the difficulties encountered by this program makes a two-year
1937
15,674,000
16,465,746
32,000,000
delay in achieving its objectivo a reasonable assumption.
1938
(apprax)
18,000,000
34,585,662
53,000,000
The Problems of Precision in Machine Tools. In sircraft
1939
(approx)
(approx)
and to a losser degree in tanks, guns, and automotivo
21,000,000
26,000,000
47,000,000
engines equipment, it is necessary that parts bc finished to a tolorance are
1940
(apprax)
(upprax)
49,000,000
of not 0,001 inch. For cortain parts, the limitations efforts
25,000,000
24,000,000
much smallor, over The Japanese have usually failed in their limits.
1941
930,000
to produce machines that will operate within such close
Regraded Unclassified
113
-52-
-53-
As has been indicated, Japanese tool makers, to a great extent,
confined their product to a limited variety of sizes and types
between a. carbon stool cutting tool and a tungston carbide
of second-grade standard machine tools, such as are used in
outting tool is the difference between fifty feet and 300
this country in gerages, jobbing shops or repair shops. They
feet per minute. The Japanese have little exporience in the
have always had trouble with gear-making, depending almost
manufacture of these higher spood cutting tools. Although
entirely upon the United States for gear cutters, hobs and
imported machine tools were equipped with high speed outting
broaches. Although in those fields there have been many
tools, these outting tools are perishable and the Japanese had
Japanese attempts to make durable outting tools capable of
no opportunity to accumulate stocks. Thus, the rate of produc-
producing satisfactory parts, those efforts met with little
tion of their best power-driven machine tools will depend to &
success. The failures were in notallurgy and in the geonetry
large extent on their ability to attain production of effective
of outting. Thus, one of the principal bottlenecks in the auto-
cutting tools.
mobile industry and in producing circraft engines occurs in the
Anti-Friction Bearings. The importance of ball and roller
number of gear-cutting machines available.
bearing production was very belatedly recognized in Japan, with
the result that reliance on foreign bearing products increased
The present Japance supply of imported machines permite
with the growth of home production in machinery, automobiles,
of no substontial expansion of made production methods. More-
and airplanes. In 1940-41 it was estimated that, as a result
ovdr, the upkeep of machines in operation is notoriously loss
of strenuous offorts by the army and navy, total Japanese
officient in Japan than in wostorn countries. Under the nost
anti-friction bearing production of all types (roller and ball)
favorable circumstances, bofore the Japanese machine tool in-
was about 55,000 per day. In addition to this, 5KF was furnish-
dustry would be capable of replacing worn-out machines or
ing Japan with approximately 10,000 pieces per day. Under
equipping new plants without substantial loss in officioncy,
present schedules in the Japanese automotive, airplane and
a minimum of several yours would have to clapse. It will not bo
machine tool industry, it has been estimated that 65-70,000
within the probable duration of the prosent mr, in the opinion
units per day would be needed, inclusive of service replace-
of many Amorican ongineers,
ments, It would appear that this over-all quantitative
requirement is boing not, The above estimates are, of neces-
Mass Production Tochniques. Another critical bottleneck
sity, approximations, but they point to an output probably
that would exist in the Japanese automotive end aviation in-
sufficient to cover the number of pieces necessary, not only
dustries if major changes were made in the direction of mass
for production purposes, but also for replacements. The
production output, La the inability of the Japenese to make 11go,
quality of the output, however, is a different matter.
fixtures, and dies, and C lack of tool facilities for producing
them expeditiously. Not only are tool-muking facilities linited,
Anti-friction bearings fall roughly into two categories:
but thore in a dearth of trained personnel that can design
precision and ordinary bearings. The manufacture of even
such equipment and work to the exacting clearances required.
ordinary bearings of good quality is a complicated and diffi-
If a woll-dosignod fixture requiring n minimum of time to trans=
cult job. The manufactures of fine procision bearings, whose
for the work in used, production can be maintained at a modnum,
tolerances are on the order of two to eight ten-thousandthe
but if this fixture or J1g in of poor design, the production
of an inch, is an art which has been mastered by only a few
copacity of the machino will be affected accordingly.
firms in the world. It is particularly difficult to produce
precision bearings in either very small or very large simos.
It is also necessary to emphasizo the importance of
Although SKF carried in stock in Japan from 1,800 to 2,000
porishable outting tools and hund machinos. Regardless of the
types, the Japanese, in order to step up their over-all pro-
high productivity of a power-driven anchine tool when proporly
duction, decided to concentrate on popular sizes running up
operated and equipped, such a machine will provo no more
to 100 mm., but not including the small bearings required for
officient than the outting tools with which it is provided. For
such equipment BB magnetos, signal apparatus and the like. It in
example, n. machine may be capable of vory high spoods and foods
believed that any attempt on their part to make all the sizes
resulting in rapid production, but 15 ,low-grade cutting tools
required would roduce thoir over-all production below their
or poorly hoot-treated tools instead of tungsten carbide tools
estimated quantitative requirements. Aa late as October 1941,
uro used, than the spoods and foods aus t be out to conform to
the low-grado tooling. In torms of production, the difference
Regraded Unclassified
114
-55-
-54-
the Japanese automobile industry was very hard pressed for lack
shortcomings of industrial personnel. The increasing demands
of industry have resulted in a sovere shortage of almost all
of several special bearing types, then not even in production,
kinds of trained labor, The Japanese are skillful artisans
and under able supervision become officient industrial workors.
The Japaneso were unsuccossful in their last minute
Facilities for training now workors while maintaining full
efforts to accumulate any reservo stocks of bearings. Although
industrial production are limitod, however, and in the absence
shipmonts from Swoden via Spain and Italy have undoubtodly run
of a tradition of mass production the difficulties involved
the blockade, those could supply only a fraction of the Jupancee
are magnified, It takes longor to develop competent workers.
noed for fino bearings. la of 1941, Japaneso stockpiles of
There in an ospecial shortage of supervisors at the shop fore-
bar stool for races soomed sufficient for two yours' require-
man level, Moreover, the supervisory class as a whole in loan
monts, but this stock covered only the popular on which
efficient and less competent than are the workers. Japanese
the Japanose manufacturing industry has concentrated, Much
technical engineers are frequently highly trained, but more
had to be secrificed to sike the smllor-sized bourings.
specialized than those in the West and hence less versatile.
Even in the same industry they cannot be shifted so easily
Japanese stool for both roces end stool balls is inferior;
from one branch of production to another. Foreign technicians
it is interesting to noto that both the Japanose Army and Navy
especially German and Swedish advisers who may be present in
specified imported stool in those obtogorios. Another factor
Japan, will find difficulty in duplicating their European
which will militato against makeshift arrangements in that
practice because Japan is relatively so such newer to modern
results have been poor when domostic bhlls have boon used with
industrial technique.
imported races, or with races made from imported stool, This
18 because the imported stool is hardor than the domostic stool
The strict casto system prevailing in Japanase indus-
going into the ball,
try constitutes another obstacle. The mechanic with more
than average technical knowledge cannot be advanced to a
Not only aro the Japaneso faced with the dual problem
position of authority. The technical engineer is provented
of mintaining simultanoously G quintitativo and divorsified
from obtaining the practical experience required to qualify
production, but they have yet to overcome scrious tochnical
him for the position of supervising a factory. Management is
obstacles impoding thoir production of fine procision bohrings.
frequently uninformed on technical problems. There is thus a
As early no 1940 they had begun to replace procision boorings
wide gap between the technical and practical sides in the
with ordinary boorings wherever this NCB possible, An on
management of Japanese industries. This gap is an important
examplo, in the mohino tool field, procision boarings in the
reason for the inefficiency so often noted in the management
goar baxes word roploced with ordinary boarings. Probably
of Japanese industries, and in the present critical period its
tochnicions from Cormany or Swoden aro assisting the Japanese
effects are another limiting factor in the expansion of
in thoir offorts to overcome those difficulties. Without
armament production.
additional oquipment, howover, it is hard to 500 how much pro-
gross can be mdo,
The following sections deal with the present position
and future potential of the Japanese areasent industries in
In the opinion of experienced bearing onginoors, Japan's
view of limitations indicated in the preceding pages.
ball and roller borring industry is for bohind the West in rcs-
poot to copacity, tochnique, und precision machinory and on that
Aircraft Production
account constitutos a most sorious problem in the Japanese W.F
conomy. This bottionock is further aggravated by lack of
Analysis of data concerning the Zero type single seater
incilition for production of stool bolls above ono-half inch
fighters indicates that initial production was started in B.
in sizo and topored as well DE cylindrical rollors. Japaneso-
single plant late in 1940. The production rate appears to
mado bell bearings as a general rulo have a lifetine only about
have climbed by stages to a peak at the end of 1941 of about
ono-third that of first class foreign products,
60 planes per month. At this point a second plant came into
production but the initial producer appears to have begun a
Industrial Personnel. The tochnological problems indicated
process of converting ovur to & new mödel of the same type,
above are vory sorious obstacles to the expansion of production
The loss of production during this conversion procoss was
in the Japenose armanent industrics, They are aggravated by the
not Milly componsated for by the production of the added
facility and the combined rate during the socond quartor
Regraded Unclassified
115
-56-
-57-
was below that prevailing at the close of 1941. The third
quarter, however, began to show the effects of the combined
adaptations prodominato, This is not always or necessarily a
effort and by the end of 1942 the Zero single seater fighters
sign of weakness, however, for some of the results have boon
decidedly efficient.
were being produced at the rate of about 150 per month, with
an additional 35 Zero planes of the float type,
Organisationally, the Japanese have tondod to favor con-
tralization of assembly within relatively few companies, but
It is believed that the Japanese have had relatively
dispersal of production of components and sub-assomblies among
greater success in achieving fair production rates in single
a great number of companios, At the same time, and probably
engine fighters than in other types. Such evidence as there
as part of the same general plan, there has boen A. relatively
is at hand suggests that difficulty has been encountered in
high dogree of standardisation of plane design, For instance,
the production of multi-ongined bombers, and the apparent
the famous Zero-type fighter is usod as a land-based fightor,
reluctance of the Japanese in the field to risk bomber losses
as a ship-borne fightor, and as a float-type fighter.
to an extent comparable to their frequency free use of
fighters tends to confirm the evidence on production.
The present organisation of the aircraft industry in
Japan is directly the result of government planning and direction.
Output. Latest available information leads to the
From early paternalism toward the industry, the government has
following preliminary estimatos for the Japanese aircraft
rapidly advanced to outright control.
industry for 1943:
In 1939, 14 companies, headed by Mitoubishi Heavy Indus-
Fighters
Other Operational Types Non-Operational Types Total
tries and Nakajina Airplane Mfg. Co. were licensed by the govern-
ment for the manufacture of aircraft, airframes, engines and
2,400
4,100
3,250
9750
components, In August 1939, the government granted the Kanega-
fuchi Spinning Company permission to establish a fifteenth
These estimates assume that the fighter plane production rate
company - the Nippon Kokusai Koku Kogyo K.K. In addition to
during 1943 will remain approximately at the level attained
these private companies, the Japanese government assembles,
late in 1942, and that some of the difficulties that appar-
repairs, and produces components at a. number of Army and
ently held down bomber production in 1942 have by now been
Naval arsenals,
overcome.
In 1939 the Japanese Government enforced the National
Development and Organization of the Industry
Mobilisation Law adopted March 24, 1938, and assumed control
of the aircraft industry. In December 1941, the Aircraft
The Japanese aircraft industry is comparatively young.
Mamufacture-Ordinance was revised, and in addition to govern-
Lacking experience it has relied upon foreign technical
ment control over the manufacture of aero-engines, airframes
assistance for development, at first principally French and
and propellers, the new plan included control over all marsi-
British, and later American and Gorman. Lacking strong sup-
facturers carrying on production of parts,
porting and related industries, it has had to develop these
concurrently.
At present there are probably well in excess of 200
companies contributing significantly to Japanese aircraft
Japanese aircraft and aircraft ongine design reveals the
production, 209 companies are reported as regularly regis-
heavy dependency upon foreign technical knowledge that has
tered members of an industrial association formed in late
characterized the growth of the industry. Imitations and
1942 of concerns producing aircraft and parts for the Army.
At least 140 companies and 175 factories have been identified
by intelligence sources as produ#ing planes or components
for the Japanese arned forces.
Regraded Unclassified
116
-58-
-59-
production of tanks above 16 tons soons doubtful, although
While Japanese aircraft production is definitely
experimental models are known to exist, Current fighting
greater and nore advanced than was generally recognized
is not of such a nature as to cause Japan much loss of tank
before Pearl Harbor, continuing expansion will be possible
strongth. Losses to dato in tanks, except possibly for those
only if many difficulties are overcomo, No single, out-
on transports which were sunk, have been negligible. The
standing bottlenecks are known to oxist, Production limi-
wastage imposed by large-scale and long continued land con-
tations appear generally to be those arising from the
flict, however, would place a heavy strain on Japan's motor
problems involved in the development and expansion of mass
vehicle industry.
production in a highly technical industry without the sup-
port of well-establishod industries in rolated and support-
Production. In March 1941 an estimated 175,000 auto-
ing fields:
mobiles wore under license or in military service in the Japanese
Empiro. However, not more than 75,000 to 100,000 of these
Tanks and Trucks
were in operation during 1941, owing to fuel shortage and
other economic difficulties. Under those conditions, trucks
outnumbered cars by perhaps three or four to one, Estimated
Japan's automotivo industry, like its airplano in-
motor vehicle production in Japan during recont years is
dustry, is of comparatively recont dovelopments. Signifi-
shown in the following table:
cant progross in domostic output was not achieved until
after 1937-38. By 1940 total production of motor vehicles
TABLE 21
is ostimated to have reached 23,525 units, of which 23,450
were trucks, Included within this latter figure would be
Motor Vehicle Production in Japan
Japan's output of armored vehicles,
Year
Passenger Cars
Trucks
Total
Cycle Care
Based on estimated capacity, total production of
1932
675
675
---
trucks and arnored vohicles is not believed to have ox-
1933
191
1,617
1,808
---
cooded 50,000 units for 1942 or likely to exceed 60,000
1934
35
1,915
1,950
895
units in 1943. The number of armorod vehicles included
1935
30
1,780
1,800
5,000
within this total 1a not known. The Japanese army, how-
1936
460
2,848
3,308
6,423
evor, is thought to have 85 mechanized divisions, supported
1937
650
3,280
3,930
10,500
by 15 units of special tank brigado forces. Those divi-
1938
500
6,600
7,100
10,000
sions and tank brigade units would require 4,400 light and
1939
300
18,500
18,800
modium tanks and 7,300 motorcycles with side cars, in addi-
1940
75
tion to trucks and cars.
23,450
23,525
The combined requirements for tanks and other motor
It may be expected that the rapid progress in automotive
units are not excessive and are probably within the capacities
production achieved by Japan up to 1940 has since continued,
of the Japanese motor vehicle industry. It would appoar, how-
although the volume of production is still relatively small.
ever, that the Japanese army is not heavily mochanized in com-
Large s tockpiling of accessories and spare parts, accomplished
parison with the forces engaged in continental Europe, Quantity
prior to the Anglo-American "freezing" regulations of July 1941,
would help to counteract the difficulties net by the industry
in being thrown solely upon its own resources after that dato.
The following table summarizes the capacity and possible out-
put of the industry in 1942-43, estimated on the basis of an
uninterrupted flow of materials and parts to meet stoady
production under wartime pressure.
Regraded Unclassified
117
-61-
-60-
TABLE 22
Military Requirements. Noods of the Japenose cray for
armored vohicles, indicated in Toble 23 are ostimated on the
Estimated Output of Motor Vohicle Industry, 1942-1943
basis of 85 divisions. It is not known whother all 85 divisions
are completely equipped with the vehiclos included in the table,
Estimated
TABLE 23
Companios
Product
Estimated
Possible Production
Capacity
1942
1943
Estimated Japanoso Requirements in Arnored Vohiclos
Typo of Vohicle
Number Noodod for 85 Divisions
Nissan Jidosha Kaisha
Standard, Trucks
25,000
15,000
17,500
Nissan Jidosha Kaisha
Small Scout Cars
4,000
2,400
2,800
Tanks - 4 ton
1,020
Toyoda Jidosha Kogyo
Standard trucks
25,000
15,000
17,500
Tonks - 8 ton
425
Tokyo Jidosha Kogyo
Military trucks
500 gallon tank trucks
425
and tanks
8,000
4,800
5,600
Trucks - 2 ton
28,645
Mitsubishi Jukogyo
Armored vehicles
Automobilos
3,315
and tanks
6,000
3,600
4,200
Motorcyclos (with sido cars)
7,310
Kawasaki Jukogyo
Heavy armored cars
2 whool carts (500 lbs. capacity)
70,890
and tanks
600
360
420
2 whool horse anbulances
14,180
Ishikawajina Dockyards
Tractors, tanks and
Radio trucks
425
Company
trucks
5,400
3,240
3,780
Ikogai Company
Armored cars and
Spocial Tank Brigado
tanks
5,000
3,000
3,500
Niigata Iron Works
Military trucks
Type of Tank
Number Nooded for 15 Unite
and tanks
2,000
1,200
1,400
Manchuria Motor Car
Diesel ongine
Light tenks - 8 tons
795
Company
trucks
1,500
900
1,050
Modium tenks - 16 tons
1,410
Total
82,500a/b/ 49,500g/ 57,7504/
Rocapitulation (Tenks and Spocial Motor Units)
To be considered 100 percent caracity.
Special Tank Brigado
Total
A higher figure, arrived at through calculations based on known
For 85 Divisions
For 15 Unita
supply of key machinery, is given in BEW report E0-81. March 25,
1943
Tonks - 4 ton
1,020
1,020
Based on 60 percent capacity oporation.
Tanks - C ton
425
795
1,120
Based on 70 percent capacity operation.
Tenks - Modium - 16 ton,
1,410
1,410
Rodio and Tank trucks
850
850
The above table doos not furnish 6. broakdown on Japan's
production of armored vehicles, information on which 1a not avail-
Honvy Motor Power Units
4,400
Motor cyclos (with sido cars)
7,300
able, Howover, it is believed that the automotive industry sup-
Required Total
11,700
plice Japan's full output of these vehicles, loaving the arsenals
to mount the guns and special equipment. Estimated production of
23,000 trucks in 1940 was probably sufficient to cover Japan's
military requirements at that time.
Regraded Unclassified
118
-62=
-63=
TABLE 24
Ordnance
Tontativo Estimatos of Japanese Allocation of Carbon and
Procedure for Making Estimates. Due to the secrecy
Alloy Steels for 1943
with hich Japon proceeded with its rearmament program after
(Metric Tons of Rolled and Forged Steel)g/
1937 very little is known of the extent to which munition
plants have been expanded and increased in number. There-
Carbon
Alloy
fore, indirect mothods of estimating ordnance production
capacity have to be employed. The mothod followed in drawing
Total Stoel Production
5,400,000
1,350,000
up the estimates modo in the attached tables was, first, to
ascortain how much carbon and alloy stool Japan can allot in
Civilian uses
2,625,400
362,600
1943 for ordnanco end comunition after meeting all other osson-
Power Installations end Construction
230,400
57,600
tirl minimum requirements. The tontotivo ostimates crrived
Railroods
645,000
5,000
at by this method disclose that Japan has evailable roughly
Machinory, machine tools, mining,
2,774,600 motric tons of carbon stool end 987,400 motric tons
shipyord, plent, herbor and other
of alloy stool for all ortogorius of militery end noval ordnence
construction, public services,
in 1943. Including the noods of vital industries, 53 percent
agriculturo, etc.
1,750,000
300,000
of Japan's total rolling mill stool production is sllotted to
militery purposes. (Table 24).
Militery uses
2,774,600
987,400
of
Noval ships and guns (308,000 S.D.T.)
202,182
191,675
It is tentatively estimated that in 1943 Japan will be
Merchant ships (620,000 GRT)
423,502
3,530
able to incrocso its production of ordnence and ommunition by
Planes (10,000 plus engine replacements)
3,300
57,670
at lonst 20 percent over 1942 end 162 percont over 1937.
Tonks, trucks, tractors, troilers,
(Table 25)
general service care, motorcycles
and spero parts
200,000
120,000
Allocated to Novy and shipping
programs (other then ships)
433,175
246,649
Allocanted to Army end Air programs
(othor then planos, tonks, trucks
etc.)
1,512,441
367,576
à
Rolling mill steel production is ostimated to be 70 percent of ingot
stool production.
b.
In addition to this figure there is available upwords of 1,000,000 M.T.
of cast iron for Fcivilion uses".
The amount of steel available for militory purposes in 1943 counts
to over 53 percent of Japan's total steol production. According to
a report of the B.M.E.W. dated October 20, 1942 Germany allotted 60
percent of its steol production for military purposes. The United
Statos, in the second quarter of 1943, cllotted 46 percont of its pro-
duction for all militory purposos. The merchant ships construction pro-
groms of oll throe nations are included in the nbovo ostimatos.
di
It in ostimated that 1,000,000 N.T. of carbon stool and 500,000 M.T.
of alloy stool of the total horo allocated might bo allotted to guns,
bomba and comunition. This allotment may be compared with the
5,600,000 M.T. the B.M.E.W. ostimatos Germony allocated for ordnance
in 1942.
Regraded Unclassified
TABLE 25
Estimates of the Amount of Steel in Japan Available for Milita Purposes, 1937-1942
(Metric Tons of Rolling Mill Steel)
:
: Percentage
:
:
:
:
:
:allotted for all:
:
Amount
:Percentage of
:
:
: military and :
: devoted to
: increase in
:
:
:
: naval purposes :
:expansion of ;armamont pro-
: Total
: and categories Amount consumed :armaments
: duction each
Year:Carbon Stool
Alloy Steel
:
Production
:
of ordnance.
of
in China "ar d/
:
:
year
:
:
:
:
:
:
1937:
4,101,300
:
308,700
: 4,410,000
:
40.5
:
500,000
: 1,288,000
:
-
:
:
:
:
:
:
1938:
4,221,000
:
469,000
: 4,690,000
:
47.2
:
700,000
: 1,512,000
:
17.4
:
:
:
:
:
1939:
4,410,000
:
490,000
: 4,900,000
:
48.6
:
700,000
: 1,680,000
:
11.
:
:
:
:
:
1940:
4,515,000
735,000
: 5,250,000
:
45.5
:
430,000
: 1,960,000
:
16.6
:
:
:
:
:
:
1941
4,648,000
:
952,000
: 5,600,000
:
43.6
:
200,000
: 2,240,000
14.2
-79-
:
:
:
:
:
1942:
4,900,000
: 1,225,000
: 6,125,000
:
48.4
:
200,000
: 2,765,000
:
23.4
:
:
:
:
:
Total allotted for military purposes from 1937 to January 1, 1943 (exclusive of
losses in the China Var), in motric tons of rolling mill steel
11,445,000
a
Includes morchant and naval ship construction.
Rolling mill steel production is ostimated to be 70% of ingot stool production.
After deducting basic noeds for civilian economy; railroads, mining, industry in general, electric powor
facilities, etc. estámatod to bo an average of 2,800,000 motric tons of rolling mill stool a year.
di
Based on a statomnt made by Major-Goneral Sato, Chief of Military Affairs Soction of the War Ministry in
a speech on March 10, 1942 as reported in the Japan Timos and Advortiser to the offect that the China Tar
had consumed up to that time 20% of the steel allocated for military purposes.
male labor. These transfers can be made as follows:
tions,in others through the substitution of female labor for
in some cases through a net reduction in the civilian occupa-
this increase, transfers can be made from civilian occupations,
It is estimated that during 1942 Japan will require an
with increasing efficiency.
three millions.
VI. MANPOWER
additional 615,000 persons for its war industries. To effect
Industrial Requirements
power recruitment, training, and allocation will be handled
in the field for many years, and it may be assumed that man-
been completely unified, official controls have been operating
While administrative control of manpower has not yet
but there will still remain female labor reserves of about
cations, Japan's male labor supply will be about exhausted,
comb-oute from civilian occupations. After these re-allo-
and to enlarge its arned forces by about 495,000 through
increase employment in war. industries by about 615,000,
It is expected 'that in 1943 Japan will be able to
Summary
-65-
11
Regraded Unclassified
-66-
-67-
120
TABLE 26
Transfers of Manpower to War Industries, 1943
Female
37,450,000
25,253,000
12,197,000
32.6
6,800;000
121;000
193;000
1;883;000
1,800;000
400;000
425,000
475;000
100,000
1
Estimated Releases
Estimated Increases
Regraded Unclassified
Industries
Jan. - Dec., 1943
Jan, - Dec., 1943
(in thousands)
(in thousands)
Males Females Total Males Females Total
37,504,000
14,453,000
23,051,000
61.5
6,700;000
635;000
359;000
6;587;000
2,200;000
850;000
1,825;000
25;000
300,000
3,570,000
War Industries
1943
Metals, Machinery
(Estimates)
Male
Shipbuilding,
Ordnance
370
185
555
Chemicals
48
12
60
4,000;000
1;250;000
2,250;000
500;000
400,000
3,570,000
Total
418
197
Total
74,954,000
39,706,000
35,248,000
47.0
13,500;000
756;000
552;000
8;470;000
615
Mfg. & Bldg.
Building
50
50
Ceramics
25
25
12
12
Clothing
5
20
Food & Drink
25
25
25
25
Lumber, Woodwork
55
5
60
Paper, Printing
65
10
75
Textiles
27
106
133
Other Mf'g.
13
12
25
265
153
418
7
Japanese Population and Labor Force 1930 and 1943
Female
32,059,850
21,356,847
10,703,003
33.4
6,397;042
45;546
41;046
1;430;430
1,464;195
78;979
352;348
697;116
82,701
113,600
I
25
Elect. & Gas.
7
1
8
22 TABLE
Distribution by Industries and the Number in Armed Forces
100
(Japanese Census)
32,390,155
12,816,518
19,573,637
60.4
7,743,065
501;078
210;174
4;269;151
3;013;903
1;028;595
1,448;803
84;203
488,265
206,400
580,000
Total
38
45
1930
Male
Agriculture
100
100
100
Commerce
380
380
80
80
Professional &
Administrative
25
25
25
25
1;107;574
781;319
570,966
320,000
Other Civilian
64,450,005
34,173,365
30,276,640
47.0
14,140;107
546;624
251;220
50
200
Total
5;699;581
4,478,098
1,801;151
580,000
Occupations
150
Total
655
50
705
205
205
Grand Totals
920
203
1,123
425
440
865
Total Population
Unoccupied
In Labor Force
or Army
Percent in Labor Force
Farming
Marine
Mining
Industry
Commerce
Transport
Public Service
Domestic
Miscellaneous
Unemployed
Armed Forces
121
-60-
-69-
Military Requirements
alightly--between 10 and 20 percent--as compared with produc-
tion of producers' goods which increased by more than 150
Far Department estimates for the numbers engaged in the
percent. Anong the producers' goods that expanded most were
those in the iron, steel and rachinery industries where the
armed forces of Japan 86 of December 31, 1942, are as follows:
index in 1940 stood at 341 percent of the level of 1931-1933.
Army (including Army Air Corps)
2,750,000
The exhibit on Private Factory Employment (Chart I)
Navy (including Naval Air Force)
325,000
shows the steep curve of increase in the war industries be-
Total
3,075,000
tween the beginning of 1937 and the middle of 1939, Employ-
mont in the machine trades increased over 100 percent; in
According to estimates in the foregoing table, some
tools and instruments, over 85 percent; in shipbuilding,
920,000 males can be released from civilian employment in
metal work, vehicles, over 50 percent; in fortilizer, over
1943. Of these, some 425,000 will be needed to increase
40 percent. Whereas recruitment in the metal industries,
the employment in war industries, thum leaving 495,000
for example, in 1933 had been at the rate of 5 to 6 percent
available for the arred forces. The addition of this number
a year, by 1938 it had reached nearly 30 percent a year; over
to those already in the armed forces at the end of 1942,
the same period of time the rate of recruitment in the machine
gives a total of 3,570,000 for 1943. Estimates of casual=
and tool 'manufacturing industries had jumped from 4-5 parcent
ties for the past i'ive years have averaged 200,000 a year.
to 45 percent; in shipbuilding and conveyance manufacture from
Assuming that casualties for 1943 will be not from last
1-2 percent to 25 percent per year.
year's conscripts, and that these, in turn, will be replaced
up to about 300,000 by the annual male increment to the popu-
During this period of sweeping industrial conversion,
lation, the 495,000 new nales released from industry would
rapid and critical adjustments had to be made, Serious short-
represent a potential not increase to the Japanese armed
ages of nanpower appeared, particularly in skilled labor and
forces,
technicians. The facilities of technical schools proved en-
tirely inadequate to meet the demand. In 1938, 44,000 jobs
Labor Reserves
were offered to the 7,500 graduates from "A" Class Engineering
Schools . The discrepancy in the engineering field between
Males. Male labor is believed to be fully utilized.
trained men and positions offored was evident as far back as
Estimates of Japanese population and employment show that
1933; by 1937 the domand was already more than 4 times greater
the labor force already contains in excess of 1,000,000
than the supply.
male workers under 15 and over 65 years of age.
Training Programs and Labor Mobilization
Fomales. An employable reserve of about 3 million
women was bolieved to oxist at the close of 19/2. Japan
Since that time, however, Japan has taken stops to organ-
may draw on about 110,000 from this roserve to replace
izo manpower and to train and allocate it for naximum officiency
males in the coming year. To replace those, in turn, there
in war, The first step, after registration of all civilians in
will be the annual increment of about 300,000 from the
August 1938, was the passage of an Ordinance compelling the train-
growth in population. Of those, nany will never ontor the
ing of technicians and skilled workers. Under this Ordinance all
labor market, A continuing reserve of about 3,000,000
important private industries were required to give 2 to 3 year
women in 19.3 soons, therefore, to be likely,
training courses following detailed government prescription and
under close government supervision. In addition to these, govern-
Industrial Expansion
ment training schools were also set up to meet the need,
Largo withdrawals for military service during and
Soon thereafter, employment of all workers in war industries
after 1937 coincided with a tremendous expansion in heavy
was restricted and made dependent upon consent of the government
industry. Botwaon 1931 and 1940 the general index of
employment offices, Then followed, botween July 1939 and Septem-
industrial production (all industries) increased 100 per-
ber 1940, the National Civilian Conscription Act, making males
cent, Production of consumers' goods incroased only
between 15 and 50 in designated (war) industries subject to labor
Regraded Unclassifie
-70-
-71-
122
assignment by the state; the Ordinance restricting the
employment of young and juvenile workers (male 12-30,
VII. PROBLEMS OF WARTIME ECONOMIC ADMINISTRATION
fenales 12-20), rationing the supply by quotas and, giving
preference to war industries; and the Ordinance to stop
Summary
labor turnover, which instituted a universal system of work-
record passbooks as a means of forcing labor market stability.
During the latter half of 19/2 & continuous series of
Later, an industrial manpower directorate was created under
readjustments in' economic administration reflected Japan's
the Labor Service Readjustment Ordinance, enforced on January 10,
efforts to meet the demand for greatly increased arms pro-
1942. Employment and dismissal of workers in key industries,
duction. In January 1943 radioal proposals vesting much
and assignment of training school graduates, were placed under
greater powers in Premier Tojo wore submitted to the Diet
control of the director of & National Employment Instruction
in ordinance form. By February, while the ordinances were
Institute established by this Ordinance,
still being railroaded through the Diet, a specific program
affecting the key industries from which greater production
By now, Japan's training and apprenticeship program
is required in the current stage of the war was being d'-
has been in effect nearly four years. The first class of
fectuated.
graduates, trained in skills and technical knowledge, joined
the active labor force in March 1942. This program should
Five so-called "main" or "nucleus" industries--aircraft,
provide an increasing number of the skilled workers which
shipbuilding, iron and stool, coal mining, and the light
effective prosecution of the war requires.
setals--havo been given priority status with respect to
materials, labor, capital, power, and transport facilities.
In manpower organization, the early difficult adjustments
Operational authority over these key industries is being
have been made, Needed transfers have been effected from non-
centered in the Cabinet under Tojo's immediate direction.
essential to essential production; from agriculture to war in-
This program of "planned production" thus involves a radical
dustry. Administrative control of nanpower is still not unified,
contralization of administrative controls previously divided
since the National Employment Institute lacks control over (1)
between the Cabinet Planning Board, the Ministries, and the
military conscription, (2) agriculture and allied occupations,
Industrial Control Associations,
(3) government personnel, and (4) designated Welfare-Ministry
occupations. Official controls operate in all spheres, however,
Difficulties in administrative coordination which pre-
and it may be assumed that manpower recruitment, training and
vailed in 1942 will be largely remodied under this now system.
allocation will be handled with increasing efficiency.
Production in the key spheres of iron and steel, coal, ship-
building and aircraft will thereby be accelerated in 1943, thus
adding a further increment to Japan's economic potential.
Nature of the Administrativo Struggle
At the beginning of 1943 the Japanese were engaged in
a radical overhaul of their system of economic administration,
looking towards more centralized state control and operation
of industry. Tojo himself, representing the Army, was seeking
direct operational authority over the basic war industries,
including iron and steel, coal, and chemicals. Resistance
to this effort by the industrial leaders had created a minor,
and probably temporary, crisis in wartine administration,
Underlying this struggle W&B a crisis in war production,
mainly arising from the encrmously increased tasks laid upon
Japanese industry. The basic problem of vastly expanding
shipping and ermanents production against relatively inflexi-
ble limits of plant equipment, machine tools, and trained
Regraded Unclassifie
123
-72-
-73=
personnel had passed into an emergency stage. These concrete
Activities in the nowly occupied territories had to be
difficulties in the production sphere were intensified by A
guared into this domostic program. Only the barost minimum
lack of effective centralization in the administration of
of capital goods equipment could be allotted to the exploita-
Japan's wartimo economy. Administrative powers word scat-
tion of the southarn regions, Developmental projects had to
tered through a half doson Cabinet Ministries, inadequately
be strictly adapted to the immediate requirements of Japan's
coordinated by the Cabinet Planning Board. A unified policy
homo industry. Economic activity in the south was therefore
was thus lacking at the top, within the Cabinet itself.
mainly directed toward the rapid extraction of certain key
Under such conditions it was impossible for the Cabinot to
minorals and agricultural products in which Japan was dofi-
give centralised diroction to a newly organized set of In-
cient and for which equipment and labor power were largely
dustrial Control Associations, which exercised semi-autonomous
available on the spot, Machinery and tools were supplied
powers within the field of industrial management and operation.
to relatively few enterprises, among which the most vital
were oil processing, extraction of a few of the key metals
The program submitted to the Diet by Premier Tojo in
(lead, zine, chrone and nickel), and possibly shipbuilding
January 1943 was mainly designed to ovorcome this administra-
at Hongkong and Singapore,
tive disunity. Under the program, Tojo will be given author-
ity to issue aconomic directives to any of the Ministrics and
Administrative Differentiation: Outer Zona yo, Inner Zone
to transfer administrative functions from one Ministry to
another. Tojo will thereby be empowered to assign to B. single
These factors sat the pattern for the najor changes in
Ministry, probably the Ministry of Commerce and Industry,
Japan's administrative structure which have occurred during
contralized authority over the management of the key war in-
the war. Careful limitation of offort was required in the
dustries, To facilitate this transition, the industries so
south, rapid expansion was nseded in the north.
affocted will be directly taken over by the state, under
powers conferred by the National Mobilimation law.
Outor Zone. The military governments in the south
have reticulously regulated the dogreeof exploitation per-
An internal struggle of considerable proportions is
mitted by the Japanese business interests and carefully
occurring while the now system is being put into effect. Once
limitod the flow of trained personnel into this area.
the change is made, homover, it may be expected that a much
Establishment of the Groater East Asia Ministry on November 1,
more effective administration of wartime production will result.
1942 was essentially aimod at confirming the rigid control
During 1943 this improved administrative system will materially
over oconomic policy in the Outor Zono (mainly the southern
assist Japan's efforts to increase production, thus adding B
territorios) alroady boing exercised by the local military
new increment to Japan's var potential.
administrations. The Army was determined to prevent a flood
of private investors and entreprenours from swooping over
Background of the Crisis
the southern regions. It was koonly aware that no compre-
honsive long-torm development of the DOW southern conquesta
The full scope and magnitude of the economic problems
could be corritted while the issue of the war was still un-
confronting Japan have emorged only during the past six months,
decided, It. was intent on ono aim--subordination of exploi-
The initial tasks of the war, primarily involving conquest of
tative and developmental activities to the requirements of
Southeast Asia and the Southwest Pacific archipolagoes, were
war,
successfully accomplished by utilisation of the stocks of
finished munitions and the hipping tonnage accumulated during
The local southern military administrations could not
previous years. In the summer of 1942, with the beginning of
of themsolvos assure the attainment of this aim. Authority
the United Nations' countor offensives in the Solomons and
over the broad lines of Ministerial policy in Tokyo had
New Guinea, much groater oconomic tasks had to be faced.
to be obtained. The Groator East Asia Ministry, vested
with over-all administrative powers in occupied torritories
On the homo front, industrial production had to be raised
and dominated by the Army, was established in order to nail
to new lovels. The output of basic industry, especially iron
down this authority and nalco it socure. Jurisdiction of
and steel, coal, alumimum and copper, had to be increased.
this Ministry extended to Manchuria, Occupied China, South-
Industrial processing capacity had to be rapidly expanded in
cast Asia and the Southwost Pacific, 1,0., the territories
conbat armament (notably aircraft) and shipbuilding.
Regraded Unclassified
-74-
-75-
124
occupied since September 18, 1931. The old-line Ministrics
were designated by the competent Minister and could be removed
retained authority over the pro-1931 Japanese Empire (Japan
if they acted against the "public interest", In most branches
Proper, Korea, Formosa, Karafuto, and the Mandated Islands).
of industry, however, private cartels had previously existed
and the newly appointed presidents of the Control Associations
The Innor Zone. The actual economic line of division,
were drawn virtually in toto from the loading executives of
it should be emphasized, diffore from this formal administra-
these organizations. Each Control Association was placed
tivo line of division. The essential Innor Zone, which Japan
under the authority of a competent Minister of State; most
must retain at all costs if its war economy is to function
of the Associations were responsible to the Minister of Com-
effectively, includes Japan Proper, Karafuto, Korea, Manchuris,
merce and Industry, the Minister of Finance, the Minister of
North China, and Formosa,
Communications, or the Minister of Agriculture and Forestry,
(See Chart in Appendix). Over-all production schedules,
The central problem of wartins economic administration
drafted by the Cabinst Planning Board, wore assigned to the
did not lie in the southern territories. It lay rather in
Control Association by the competent Minister. Each Asso-
the Inner Zone and particularly on the home front in Japan
ciation was then responsible within its field for control
Proper, where the munitions industry is largely concentrated.
of production, the supply of funds, material and labor re-
Here the task of mising productive capacity to new levels
quired, and the allocation of schedules among its member
has proved complex, as indicated by a steady series of
enterprises.
administrative readjustments. The year 1942 was marked by
the formation of Control Associations in all fields of
This streamlining of economic administration had ob-
economic activity and by the increased powers assigned to
vious advantages It helped to simplify the problem of
the Cabinet Planning Board, These dovices for unifying and
scheduling production under emergency wartine requirements.
centralizing the administration of war-time production were
Cabinet Ministers or members of the Cabinot Planning Board,
still inadequate, In January-February 19/3, as already
in framing schedules and assigning quotas, were able to deal
indicated, several basic industries were being subjected to
with broad over-all fields of industry, headed by a small
government control and operation, while Tojo was seeking Diet
group of business executives in the Control Associations,
approval for a set of unprecedented powers designed to can-
Ultimate responsibility for production, once the schedules
centrate full authority over wartine economic administration
were fixed, was placed on the Control Associations.
in his hands. A complex group of administrative problems
lay behind this series of readjustments.
On the other hand, in actual operation the system
revealed important drawbacks. It represented a compromise
Administrative Problems on the Home Front
botween the Army and big business which toned down the
former's demand for strict government control, The Control
Japan's war economy is planned and administered not by
Associations were organized essentially on lines proposed
special agencies but by the Cabinot hoaded by General Hideki
by the business monopolies (the Zaibatsu). They retained
Toje. (See Chart). Over-all programs are initiated by the
a large degree of autonomy in management. The various
Cabinet Planning Board but are subject to Cabinet aporoval.
Ministers holding oconomic portfolios, moreover, might
Assignments of production schedules to the Control Associations
be inclined to give greater weight to the views of the
are made by the competent Ministers. In order to make clear
Control Associations than to the demands of the Army.
the difficulties which have arisen the roles played by these
Under these conditions, it in difficult to 8.85055 the
agencies must be examined in reverse order: (1) the Control
extent to which a "business-as-usual" attitude may have
Associations, (2) the Planning Board, and (3) the Ministries.
prevailed in the Control Associations.
The Control Associations. Since the autumn of 1941, the
More significant was the lack of effective contraliza-
greater part of Japanese industry has been marshaled into
tion of administrative authority. The Planning Board drafted
semi-official cartals, The ordinance empowering this program,
the over-all production schedules, but these schodules had
known as the Major Industrial Organizations Control Ordinance,
to be approved. and formally assigned to the Control Associa-
was approved on September 1, 19/1, By June 1942 Control Asso-
tions by the Ministries. Three difforent Ministries (Commarce
ciations had been formed for each key industry such as coal,
and Industry, Communications, Agriculture and Forestry) were
iron, machinery and chemicals. Presidents of these Associations
Regraded Unclassified
125
-76-
-77-
involved in this process, while ordnance and naval ship-,
The serious problem existing at the end of 1942 was first
building were-handled by factories directly controlled by
met by an attempt to strengthen the powers and coordinating in-
the Army and Navy Ministries. The differing jurisdictions
fluence of the Planning Board, A Committoe for the Increase
of the Planning Board, the Ministries, and the Control
and Strengthening of Emergency Production was set up within
Associations created possibilities for delay and friction.
the Cabinet in November. It was composed of representatives
The semi-autonomous powers of the various Control Associations
from each Ministry and its chairman was Ldeutonant-General
permitted competition for raw materials and manpower which the
Teichi Suruki, chief of the Planning Board, The Committee
several different Ministries could not themselves control.
was empowered to formulate and put into execution plans to
increase emergency production of stratogic commodities, This
These serious limitations on efficient administration
program was to be achieved by adjusting and unifying the ad-
of war production did not immediately become apparent. An
ministrative duties of the various Ministries with respect to
indication of the difficulties encountered was the fact that
labor, matorials, transportation, vital consumption goods and
in May 1942 the aluminum industry was subjected to full state
the enterprises concerned with same, To facilitato application
control. Details in this case are lacking but, judging from
of the program, regional Deliberative Coordinating Councils
later developments, the operational autonomy of the industry
based upon local administrative areas and composed of mombers
was abrogated in favor of direct administration by a government
of the various district offices of each Ministry were established,
department, presumably the Ministry of Commerce and Industry.
The first neeting of the new Committee was hold in mid-December
1942, when plans wore discussed for improving the distribution
Toward the end of 1942 B. more serious, and nuch more
of matorials and onhancing productive capacity. By this time,
general, crisis in the administration of the war economy
however, it had alroady become apparent that the now Committee
developed. By this time the necessity for a large-scale
would not be able to met the demands of the situation. Much
expansion of munitions production to meet the demands of a
more radical moves, revealed at the Diet session in January,
long war had become urgent. The weaknesses of the existing
word already being prepared, Those moves had been foroshadowed
system of economic administration had neamwhile become so pro-
on November 20, when the aircraft industry was placed under
nounced that drastic changes were seen to be necessary. At
diroct administrative authority of the War Ministry.
the outset the problem was tackled through the Cabinet Planning
Board,
Direct Government Control of Key Industrios. Important
stops in the direction of full stato control of certain key
Planning Board. The Cabinet Planning Board was, in effect,
industries (in addition to aluminum and aircraft) were an-
an instrumentality of the Army, designed since 1937 to function
nounced at the end of January. The industries involved word
as an economic general staff and industrial mobilization agency.
iron and steel, coal and chomicals. In the latter case it
But, though its powers had gradually increased, especially
was stated that the Commorce and Industry Minister would con-
through assumption of the authority to draft over-all production
solidate "167 modium and small (chemical) enterprises into
schedules, the Planning Board had never been able to set anide
a
cooperative and strong enterprise," and would "carry
the ultimate control over the national economy exercised by
on B. comprehensive management contored around a largo-scale
the various Ministries. It considered bills drafted by the
factory with superior facilities and techniques". These
Ministries, prepared opinions on such bills, and could itsolf
movos ovidently envisaged unrestricted government appointment
draft-proposed legislation, but its actions were not binding
of the exocutivos in the industrics concerned as woll as
on the government. In all cases, its recommendations had
wholesale invasion of the sphoro of management and operation.
first to obtain Cabinet approval before being put into effect.
Such EL program, applied to the great iren and stool and coal
It had largely influenced the drafting of the National Mobili-
industries, was far different from the caso provided by the
sation Law in 1938, but in 1940-1941 its program for outright
relatively small and compact aircraft industry.
state control of industry had been set aside in favor of the
Control Associations' system proposed by the Japan Federation
To put this radical program into offect, Promior (and
of Industry and the Japan Chambers of Commerce. In recent
War Minister) Tojo evidently falt that UVUD groater adminis-
years, its most important function has been the drafting of
trative powers had to be placed in his hands. To this end,
production schedules-which, however, were subject to approval
two ordinances were framed and submitted to the Diot for
and enforcement by the Ministries,
approval.
Regraded Unclassified
126
-78-
-79-
1, The first ordinance has not been outlined in detail.
1. They will be brought under Tojo's supervision
It is morely stated that it will give Tojo "a position one
through his new ordinanco powers,
stop above the other Ministors". This revolutionary don-
stitutional innovation is apparently nocessitated by reason
2, A schedule of production increase will be worked
of the economic directives ho will honceforth be empowered
out by the Planning Board.
to send to the various Ministors.
3, This schedule will no longer be tondored as "advice"
2. In rogard to the second ordinanco, it in stated:
to the Ministry concerned. Instead, Tojo will be able to
"The control of Japanese war production, which at present
order the competant Ministry to carry out the program.
1d apportioned among the Ministries, will ba consolidated
and put under the supervision of the Promior." To do this,
4. In offectuating the program, the competent Ministry
the ordinance will ompower Tojo (1) to take ovor special
will be empowered to co8pt materials, labor, capital, power,
powers diroctly with rogard to labor, transport, materials,
transport facilities, and living necessitios (for the factory
power, and capital; and (2) to transfer Ministerial powers,
or nine workers).
1.6., to order the Commarce and Industry Ministor, for
example, to tako over powers hold by other Ministries.
5. The competent Ministry will assuno much more direct
administrative control over the "nuclous" industrios. It
Those draft ordinancos, along with the proposals to
will be able to spooint new directors, expand the industry,
take over key industries, have given rise to an internal
consolidate member units, sto., as it 8003 fit.
strugglo of considerable proportions. The ons-week post-
ponement of the Diet session was apparently nado necessary
Under Tojo's now powers, as expressed in this system of
by the opposition which had developed to Prenier Tojo's
"planned production" the centralization of authority ever 000-
demands for increased economic powers. It scens unlikely
nomic administration proviously lacking will be obtained. This
that the opposition will be able to prevent approval and
factor should materially increase efficiency of production during
enforcement of the now program laid down by Tojo. The in-
the coming year, especially after the immediate orisis over the
ternal struggle thus precipitated may have the temporary
readjustment has passed.
effect of slowing down production rather than increasing it,
especially as the issue runs no deop. The Army can in no
sense bureaucratizo industry completely; it does not have
the trained men to do such & vast job. It can only tako
over supervisory and managorial authority, working through
the Ministries and the Cabinet Planning Board, Such authority
may be so extensive that the resentment of the business leaders
will be reflected in the productive sphere. On the other hand,
the Army ovidently thinks it can got improvement by forcing
& much groater and more direct measure of stato control. to
in provious instances it is likely that, onco a docision is
reached, the businoss loaders will accept the situation and
work with the Army effectively.
By mid-Fobruary, even bofore the ordinances had gained
Diet approval, the new program vas being put into offect.
A group of five industries--the so-called "main" or "nucleus"
industrios--had been set apart for special treatment. These
were the aircraft, shipbuilding, iron and: stool, coal mining,
and light netal industrios, For such industries (and for
others expected to bo added to the list) a program of "planned
elementa: production" is to be appliod, involving the following major
Regraded Unclassified
127
-00-
-01-
VIII. FACTORS AFFECTING JAPAN'S FUTURE ECONOMIC POLICIES
Virtually all of India's iron and steel are produced in
the Tata Iron and Steel Works at Jambhedpur and in the Bengal
Steel Corporation's plant at Burnpur,
Japan in in the addet of a transition from a policy
of expansion and conquest to a policy of consolidation and
The principal mico deposits now available to the United
defense. This shift is not due to a present weakness or to a
Nations are at Hazaribagh just north of this district. The
prospective decline in Japan's economic war potential, In
only jute producing region and the world's largest jute mami->
fact, it in probable that Japan's capacity to produce combat
facturing industry is nearby, northeast of Calcutta, The
armament will expend throughout 1943. It is due rather to the
principal iron ore deposits and the principal coal fields are
fact that Japan's relativo position appears to be weakening
immodiately south of this industrial triangle. From the point
because of (1) the expanding power of the United Nations
of view of Japan the processing capacities (particularly the
(particularly in respect to naval construction in Japan as cop-
stool and munitions plants) are more important than the raw
pered to that of the United States), (2) to tho apparent
materials. The obvious advantage of depriving the United
weekening of the German position, and the possibility of a
Nations of the only remaining important industrial base in
defeat of Germany which would leave Japan alone against the
Asia is also a significant consideration.
world,
Siberia. The immodiato economic inducoments to offonsivo
action in Eastorn Siberia are rolatively unimportent. Honce,
These future considerations are influencing current
if action is taken in this area, it will probably be due to
Japanese oconomic policy. On the one hand Japan in making
proporations to hold on to areas presently possessed as long
military rather than economic considerations.
as possible; on the other hand, provision is being nado against
On the other hand, it should be notod that the coonomia
the possibility that these aroas cannot be hold. Japon 10,
base for offorsive action against Siboria (in torms of stock=
therefore, attompting to build the nost completo oconomier)
piles, arsonals, stratogic rail lines and port facilities) is
self-sufficiency possible within an inner sone of defense.
the most powerful in any eron outsido of Japen Propor. It
should also bo noted that Japan's present inports from Korea
Economic Factors Affocting Offonsive Policios
end Manchuria requiro over sixtoon clocrances a day from ports
in these creas. Those ships carry less than ono-helf of a full
This analysis should not be interpreted to moch that Japan
cargo on their return voyage from Japan, thus making it possible
lacks offonsive power at the present time, It neans rather that
to ship non, munitions and supplies to Koren and Manchurie
militery fectors have bocome relatively more importent and
without increasing the need for now tomage. Honco, an n11-out
oconomic factors loss important in the dotormination of Japan's
offensive against Siboria would not interfere with Japan's
offensivo policy now that the noodod raw materials are in
oconomic program 88 scriously na the size of these operations
Japanoso hands.
would imply.
China, Insofer as oconomic considerations do influence
From an economic point of view the opposing considerations
policy, however, it my be said that the strongest inducoment
are that Japon's two groatest oconomic weaknesses are shipping
to offensive action lies in an offort to defont China. China is
and the groat Japanose industrie] conters, both of which are
the key to the coonomic consolidation of Japan's position, if
threatened in CADO of Action against Siborio. In considering
not to its further expansion. The complete defect of China
offensive action in this cron, Japan would thus neod to balance
would roduce the oconomic drain which guorilla worfare and the
the military advantages against the possible oconomic disadvent-
maintenanco of n Inrgo activo army in China entrils. It would
ages of submarino action against Japenose shipping and bonbord-
also make possible c. much more offoctivo exploitation of the
mont of Japaneso industries. The nnswer would depend upon the
resources of China which Japen already possesses.
repidity of Japan's occupation of the constal aron from which
Russia must employ those tootics.
India. The scoond most importent oconomic induccment to
offonsivo action is in northocatorn India. The trianglo formed
by Calcutta, Jamshodpur and Burnpur constitutos the industricl
heart of India. Throe-fourths of all wer production including
nearly all of the munitions planta are located hero.
Regraded Unclassified
128
-82-
-03-
Continental and Island Air Bases to Consolidate
Japan's Economic Position
Japanese offensive during 1942, there has been a tendency to
swing to the other extreme. Japan's basic economic capacities
Under existing conditions there 10 a logical trend from
are considerably smaller than those of any other mier
sea power to land based air power as a basis for the consolidation
belligerent power with the exception of China. Table 30 provides
and defense of Japan's present empire. Such a system would be
a basis for comparison in the three landing catogories of steel,
made up of a network of air bases extending down the Asictic
coal and electrical power. The great superiority in the basic
Coast and dotting the islands of the Southwest Pacific, Ita
economic strongth of the United Nations is not moaningful,
complete development would require an inland rail transport
however, until it is embodied in combat armanent and the
system extending along the Asiatic coast from North China to
capacity to transport it, A comparison between Japan and the
Singapore arranged so as to give maximum support to such air bases,
United States alone indicates how rapidly Japan will be out=
It would also require a sufficient dovelopment of machine shops,
distanced in these respects during the current year. It is esti-
productive facilities and assembly plants to provide the equip-
matod, for examplo, that the United States will construct over
ment necessary for their mointenance,
19,000,000 deadweight tons of now shipping during 1943 whereas
Japan will probably construct not moro than 650,000 gross tons
To complete such a program would require a greater economic
(approximately 1,000,000 deadweight tons). The total aircroft
offort than Japan ann make in 1943. Many steps have boen and
production in Japan during the current year will approximato
can be undertakon, howover, which will yield immodiate advantance
9,000 planes of all types whoreas the United States will produce
that make thom worthwhile. A program of this sort tends to
approximately 100,000 planos, Similar differences are to be
emphosize the importance of offensivo action in China in order to
found in naval construction, tanks and trucks, and ordnance,
consolidate Japan's continental position and to malco it possible
to develop a gdnuino continental rail system from Manchuria to
The following factors, however, largoly offset those
Singaporo.
adventages of the United Nations:
The Prospoctive Increase in Japan's Economic
(1) Four to fivo times as much oconomic potential in boing
Potential During 1943
devoted to the European theatre os is boing devoted to the For
Eastern theatre of action.
Japon possesses raw materials in quantitics potentially
sufficient to employ from two to three times the present volume
(2) The shipping of the United Nations is insufficient to
of Japaneso shipping and processing capacities,
make available combat armament fully effective at those points
where it is required.
Bocause of limitations in these latter respects, howover,
the actual overall incroase in Japanese productive capacity
during 1943 vill be only 0 small fmaction of this potontial.
docado, Hence, evon if Japan were forced to a much higher lovel
(3) Japan has been stockpiling combat armanent for over a
of var activity, a considerable period would elopse bofore
It is ostimated, for exemple, that the stool and the power
roliance would have to bo placed upon current production.
output of Japan will increaso only by about 10 percent during the
current year. Sinco most of this increase is dovoted to combat
(4) Japan has achieved goographic positions both on the
armomont, however, increases in the production of for matorial
continent and in the island ordas of the matern Pacific -hich
vill bo considerably greatur. The production of aircreft pro-
system. The hocrt of this system and the essential elements of
give moximum protection to the heart of the Japenese oconomic
bably vill increase about 25 percent, tonks and trucks 16 por-
cont, ordinances 22 percent, locomotives 10 percent and fraight
Japen's war potential are concentrated in a northern Innor Zono,
care 15 percent,
embracing Japon Proper, Koroa, Manchuria, North China and
Formosa.
The Economic Position of Japan as Compared
With Other Mcjor Ponors
Prior to the attack of Poarl Harbor Japan's oconomic
potential was under-ostimated, but because of the powerful
Regraded Unclassified
129
-85-
-84-
TABLE 28
IX. THE CONCENTRATION OF JAPAN'S ECONOMIC POTENTIAL
IN THE INNER ZONE
Estimated Curront Annual Production in Throo Koy Industrics, in
Unitod Statcs, United Kingdom, U.S.S.R.,
Japan, Axis Europe, 1943
Japan is concentrating on a long-term program designed to
make the inner zone self-sufficient for wer purposes. There
Electire Porte
is a popular impression that the occupation of the rich rew
Stool Ingota
Coal
(1,000,000
materials area in Southeast Asia led to a suspension of this
Country
(1000 motric tons)
(1000 motric tons)
kilomit
hours)
program. On the contrary, the raw materials in the inner zone
have been exploited more intensively. The building of synthetic
Japan
7,200
59,500
55,840
oil plants, the utilization of aluminum shale, end the extrac-
tion of iron oro, for example, have all been promoted in order
Japan, Korca, Manchuria
end North China
9,000
103,000
75,350
to increase self-sufficioncy in this area. At the same time
U.S.S.R.
14,000
90,000
22,500
the dovelopment of basic processing capacity alroady contered
U.S.S.R. (Pro-1941)
20,500
171,000
58,500
here has been carried on as rapidly as possible.
Axis Europe
40,000
611,000
135,000
As a result of these policios the continental oreas near
United Kingdom
12,000
250,000
31,000
Unitod Statos
82,600
603,500
237,000
Japan (Korea, Manchuria, and North China) have become a very
substantial part of Japan's total war oconomy, In the process=
ing industrics important in nor (perticularly iron and stool),
those arons have become 50 closely integrated with industry in
o
May now bo loss; last available figure is for 1938.
Japan Proper as to constituto an indisponsable part of the whole,
The following summary indicatos (1) the growing depondence of
Japan Proper on the other parts of the inner sone and,. (2) the
remarkable dogroo of solf-sufficiency which has now boon achieved
within the innor zono,
Processing Capacity
Well over 90 percent of the processing capacity of the
greater East Asia sphore is concontrated in the north. The con-
contration of wor industry in the Innor Zono in almost complete.
entirely in Japan Propor. A completo picture of tho industrial
Heavy industry, moreover, is no longer contorod álmost
plants in Manchuria and Koroa is not avnilable, but onough in
known to indicate a substantial incronso in Japan's dependence
on the continent's processing capacity during rocont yours.
This dopondence in most marked in the iron and stocl industry.
In other fields, such as the production of chomicals, the pro-
coasing of bauxite and alum sheles, the output of ordnance,
synthetic and shalo oil production, and assombly (and portial
manufacture) of cirplanos, tanks and trucks, Japan's relinnce
on the rost of the Inner Zone has also increased.
measure of the Manchurian-Koreon-Pormcean contribution to the
Figuros on cloctric power instellations offord a rough
Innor Zono's processing capacity. Of total installed capacity
of roughly 17,000,000 kilowatts, Japan Propor has 77.7 porcent,
Regraded Unclassified
130
-06-
-87-
while Korea, Manchuria and Formosa together have 22.3 percent,
Approximately 9,000,000 tons of pross steel ingota were
(If these figures are noopeted as an index of processing capacity,
produced in 1942. Steel fúrnaco capacity (open hearth and
nearly one-quartor of the Inner Zone's processing now takes
electric) is also somewhat larger than the 1942 output. Excess
place outside Japen Proper.) In 1937 Korea, Manchuria and
capacity in much less than in the case of blast furnace
Formosa possessed considerably loss than 20 percent of the power
capacity, however. Of the 9,000,000 tons of gross stool ingots,
installations.
Japan Proper supplied 00 percent, Manchuria 16.7 percent, end
Korea 3.3 percent,
Iron and Stool
During 1943 rolling mill capacity will continue to be the
As a rosult of the pressure to increase iron oro oxtraction
min limitation on stool production. Some increase will be
and to expand blest furnace capacity in the Innor Zono during
attained, but at a slow rate. by the end of 1943 the present
recont years, virtual independonce of outsido supplios has now
annual rate of 6,300,000 tons of stool for finished products
been assured. A summation of production ratos ronched by Japan's
may possibly have reached a rate of 7,000,000 tons. or the
iron and stool industry in 1942 may be expressed in c. serios of
6,300,000 tons output, Japan Propor supplied 00.4 percent,
four figures: iron oro utilization (16,000,000 tons); pig iron
Manchuria 16.1 percent, and Koron 3.5 percent. (This breakdown
production (6,200,000 tons 2/); gross stool ingota (9,000,000
excludes on additional 600,000 tons of cost iron),
tons);semi-finishod stool (6,300,000 tons 2/1. (Boo the chert
of Production of Forrous Row Materials, Iron and Stool in the
In summary, the processing capacity of the iron and steel
Appondix),
industry is concentrated almost 100 percent in the Inner Zone.
Only iron oro, and that in small amounts, comes from the Outer
The only possible Innor Zono shortago in this acrice would
Zone, Under pressure the steel industry could disponse with
be in the iron oro, of the 16,000,000 tona of crudo are utilized
these southern ores and still maintain production at current
at this rate, the Innor Zono would supply at lonst 13,000,000
or oven considerably increased rates.
tons, It may woll have supplied an oven greater proportion. The
amount tdll incroase this year. In caso Japen vero forced to
In this industry, Japon Proper is honvily dependent on
roly sololy on the iron oro resources of the Innor Zono, the
the continental parts of the Inner Zone. Manchuric, Koroa end
required cmounts could be produced, Moonwhile, imports of Control
North Chino supply 93.5 percent of the Innor Zono's 1mon oro,
China, Malayan or Philippino iron ore facilitate the transition
43.5 porcent of to pig iron, 20 percent of its gross stool
to complete Innor Zono self-sufficioncy. Not lack of iron ore
ingota, and 19.6 percent of its somi-finished stool,
but lack of rolling mill capacity is the limiting factor in Jupen's
stool qutput. Tho iron oro comos almost ontircly from the 2
Coal
continent, Of the 13,000,000 tons of iron oro allottod to tho
Innor Zono in 1942, Japan Propor supplied only 6.5 percent. The
A third basic oconomic index is cool. The Innor Zono
other 93.5 percent was produced by Koroa, Manchuria, and North
supplies virtually the whole of the Greater East Asia sphere's
China,
output of conl-that is, roughly 100,000,000 tons out of a total
of possibly 112,000,000 tons, Japon Proper supplice 52,1 por-
An output of 6,200,000 tono of pig iron NOS cotimated for
cent, the rest of the Innor Zone 41.4 percent, end the Outer
1942. (There was also an additional 400,000 tons of spongo iron).
Zone only 6.5 percont.
Blast furnaco capacity of the Innor Zono, however, has alroady
boon developed to the point et hich it could ocsily roach pig
In this connection, it should bc noted that Japan's total
iron output of 6,000,000 tons, Manchurian-Koreon blast furnace
consumption of coking cool is supplied by the Innor Zono.
capacity is boing stoodily actonded, indicating that the continental
Japen's dependence on the continental soctor of the Innor Zono
regions of the Innor Zono aro boing modo the pig iron conter of
is incroased by the fact that lergo amounts of coking coal are
the empiro. The idlo blost furnnco empacity which non exists is
dorived from North China, Also, moro then helf of the coko oven
in Japen Proper. The Innor Zono supplied virtually all the pdg
capacity is on the continent--Japen Proper supplying 45.8 percent,
irón of the Gronter Enst Asia sphoro in 1942. or the 6,200,000
Manchurin 49.9 percent, and Koroa 4.3 percent.
tons, Jopen Propor produced 56:5 porcent, Manchurin 30.6 percent,
and Xoron 12.9 percent,
Excluding an additional 400,000 tons of sponge iron
Excluding an additional 800,000 tons of cost iron
Regraded Unclassified
131
-09-
-88-
Stockpiling of Raw Materials from Outer Zone
Othor Economic Potential
Japan's dependence on the raw materials of the Outer
Zone, as already indicated, does not extend to coal, iron
Solt. Production of salt (basic for a number of important
ore, salt, or rice. In the case of many other southern ran
chemicals) is also largely concentrated in the Inner Zone, Out
naterials, homever, an extreme measure of dependency has
of an entimated 1943 consumption of 2,650,000 tons in Japan
existed. All evidence points to a deliberate policy since
Proper, the Inner Zone will contribute 85.7 percent, or this
the latter half of 1942 to reduce this dependency - (1) by
amount Japan Proper will supply 22.6 percent, and the rest of
continuing the development of the Inner Zone, and (2) by
the Inner Zone 64.1 percent.
stockpiling from the south where Inner Zone deficiencies
exist. In 1943, as the military position of Germany
Foodstuffs, The Inner Zone has been traditionally self-
deteriorates and as the pressure of United Nations' operations
sufficient in foodstuffs. Although the food supply has grown
increases on the periphery of the G.E.A. sphere, the Japanese
tighter in the last for years, the basic situation has not been
will intensify their efforts to fortify the Innor Zone in
essentially eltered. In 1943, estimated on the basis of a poor
theso respects, By the ond of 1943 they will already have
Korean crop, the Inner Zone will supply 91.8 percent of Japan
gone for in this direction.
Proper's consumption of the food staple--rice, Of this amount,
Japan Proper will supply 84.9 percent, leaving only 6.9 percent
Progross in this effort can be neasured by ostimating
the extant to which stockpiles accumulated in 1942-1943
to be supplied by Formosa and Korea. In a .normal year, Koroa
would supply a greater amount. There is -also a large stockpile
will carry the Innor Zono through 1945. A rough ostimate
of this kind yiolds the following results:
of rice in Japen Proper.
Transport. Should Japan be forced to withdraw into the
l. The supply of a number of raw materials has alroady
been assured through 1945. This list includes manganeso,
Inner Zone, its lines of communication would be greatly shortened.
tungsten, molybdenum, vanadium, coppor, and neroury. Inner
The shipping deficit be turned into a shipping surplus,
although heavier attacks from nearer United Nations bases might
Zone production of vanadium now covers requirements, while
molybdonum is covered by Inner Zone production and G large
make this result temporary. The Inner Zone, moreover, in
stockpile. Imports of manganese, timgston, copper, and mercury
provided with the bost lend transport facilities of the G.E.A.
plus Inner Zone production, have Alroady assured a supply through
sphere. It contains roughly 65 percent of the railway mileage
and more than 75 percent of the rolling atock of the vhole
1945.
sphere.
2. A second list would includo tin and rubber. Relatively
small amounts of these commodities have to be brought in from
TABLE 29
the south in 1943 to complete a stockpile adoquate to carry the
Inner Zone through 1945.
Concentration of Japan's Economic Potential
in the Innor Zone
3. Two groups of row materials present special problems:
Inner
Zone
Percent
Percent of Total Supplied by Innet
of G.E.A. Sphere
amounts in 1943 to cover needs through 1945. Alun shales in
Bauxito will probably not be imported in sufficient
Zone Excluding Japan Proper
Processing Capacity
woll over 90
possibly 25
while the large Koroan and Manchurinn magnesito deposits can be
the Innor Zone, however, represent A substituto for bauxito,
Iron Ore
well over 80
93.5
developed for the production of magnosium. Aluminum require-
Pig Iron
virtually 100
43.5
monts can be adequately net from those substitute materials,
Gross Steel Ingota
virtually 100
20.0
Semi-finished stool
plus the stockpile of bauxite that will exist.
virtually 100
19.6
Coal
93.5
41.4
Fibors (and analogous matorials) for clothing and other
Coko Oven Capacity
woll over 90
54.2
Salt
86.7
64.1
problem. There in an absolute shortago-in cotton, wool, hard and
usos present a more complicated and somewhat noro difficult
Rico
91.8
6.9
juto. Substitutes from the Outer Zono include kapok,
cordago fibors, hides and loather, and rubbor. Substitutes
from the Innor Zono include rayon, staple fibor, silk, hides
Recapitulation of indioce presented above
and leather, and furs, Although some difficulty is boing
In percentages of total consumption by Jepen Proper
Regraded Unclassified
-91-
132
-90-
In conclusion, it is cloar that the hert of Japen's
experienced (indicated by the 25 percent cut in the 1943
clothing ration for Japan Propor), it may be enticipated that
oconomic strongth lics in the north, Under the present end
the considerable range of substitutes /ill meet the problem,
prospective circumstances of the ver, the southern rogions
form littlo moro then a ren matorial appendage to the Innor
4. This leaves a small group of seven rav motorials which
Zono. They are repidly boing millid of their casily evailable
apparently cennot be stockpiled from the south in 1943 on a scale
end most cascntial supplics. Japen has boon in possession of
adequnte to carry through 1945. The list includes oil, load,
the southern cross long enough -- or will heve bocn by the and
sinc, nickol, chromium, antimony and cobalt. By the end of
of this yorr - to fortify its position in the north for c.
1943, hopover, et lonst ono your's stockpile of oil, antiminy
prolonged stand, Only defect in the Innor Zone end the breek-
and chromium, and close to one year's stockpilo of load, sino,
ing of Japan's grip on Manchuric and Koroo, therefore, will
offectively cripple the Japeneso wr oconomy,
nickol and cobalt, -ill cxist.
The oil problem deserves spocial montion. Intensivo
development of synthotics, shalo oil cnd crudos is stcodily
increasing the Innor Zono's production. 011 exports ostimato
that about 18,000,000 barrols will bc produced in tho Inner Zono
during 1943. Of this total, 10,500,000 barrols are from
synthotic procossos, 4,000,000 from natural crudes, end 3,500,000
from shole, The regional broakdorn shors 44.8 percent from
Japan Propor and 55.2 percent supplied by the rost of tho Innur
Zono. In this field, also, the degree of depondeneo of Japan
Propor on the rest of the Innor Zono is significant.
Japan's 1943 consumption of potroloum products is estimated
at 50,600,000 borrols, equivalent of 56,000,000 barrels of crudo
oil, The cotimated 18,000,000 berrols of crudo oil produced in
the Innor Zono accounts for necrly one-third of the total pon-
sumption, and nourly ono-quarter the ostimated cnnual fuel oil
requirements. Fithdrenal to the Innor Zono, hovover, would bring
a 1-rge doclino in Japan's oil requirements. For 1943 the
Japancao navy and norchant morino will consumo en ostimeted
36,690,000 berrols of potroloum products. This itom, in porticu-
lrr, would bo considerably roduced if Japan nes forcod back into
northern return.
Under those conditions, Japen Hould possoss en ostimated
16,000,000 borrols of domostic production, plus the stocks on
hand, As ostimated by the 011 Committo, the stockpilo of
potroloum products vill total 61,920,000 berrols on Janu-ry 1,
1944. It is porhaps unlikely that the -holo of this amount
-ould have boch transported to Japen by that timo, Novortholoss,
it probable that the stockpilo within Japen Proper, plus
the Innor Zono production, would then bo adoqunto to cover all
noods for at loast e your, with novel and scrohant merino
requirements at the present lovel, If Japan withdrows to the
Inner Zono in 1944, the domands of the Navy and Morchent Marino
for fuel oil my bo out by ono-half, Under there conditions,
Japen's supply of putroloum products in cll ortogories would bo
sufficient to Inst ct loast to yorrs.
Regraded Unclassified
133
ADDRESS OFFICIAL COMMUNICATIONS TO
THE BECRETARY OF STATE
WASHINGTON, D.G.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
Eu
July 28. 1943
My dear Mr. Secretary:
I have received your letter of July 27, 1943,
enclosing the text of a telegram concerning the
provision of raw materials in the form of lend-lease,
which you wish transmitted to Ambassador Winant and
have been glad to send the telegram with Mr. Acheson's
addition which you approved by telephone.
Sincerely yours,
w
The Honorable
Henry Morgenthau, Jr.,
FORVICTORY
Secretary of the Treasury.
BUY
UNITED
STATES
BONDS
-
STAMPS
Regraded Unclassified
Photostats to Messrs 134
Paul of Bunstin 7/28/73
DEPARTMENT OF STATE
OFFICE OF THE SECRETARY
WASHINGTON
July 28, 1943
Dear Mrs. Klotz:
Pursuant to our conversation yesterday, I
take pleasure in enclosing a paraphrase of a
telegram which Secretary Hull sent to the American
Consul General in Martinique today.
With kind regards,
Sincerely yours,
John F. Stone,
Office of the Secretary
Mrs. Henrietta S. Klotz,
Office of the Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
135
PARAPHRASE OF TELEGRAM SENT
JULY 28, 1943
American Consul,
Fort de France.
We fully appreciate the progress which with your
assistance Mr. Ball has made but Secretary Morgenthau
is deeply interested and wants very much for Ball to
examine the bank's books freely.
Ball's messages indicate to us that it may be dif-
ficult to make further progress through negotiations di-
rect with the bank managers without Hoppenot's active
support. He does not seem to understand this question's
importance from the point of view of economic warfare.
It is accordingly desired that you further endeavor to
convince him that for us to get complete cooperation is
in the best interest of the French as well as of our com-
mon cause. You might add to him that such cooperation
is offered normally without question and we accordingly
believe we are all the more entitled to this cooperation
in view of what we have done and will do in the future
to help him in connection with his present and future
economic problems.
Regraded Unclassified
136
PARAPHRASE OF TELEGRAM SENT
U. S. URGENT
TO:
AMEMBASSY, LONDON
NO.:
4523
DATE:
July 28, 1943, 2 p.m.
FROM SECRETARY MORGENTHAU FOR THE AMBASSADOR:
I am disappointed that I have not yet had reply from
you to By cable no. 4206 of July 10. At your earliest
convenience please personally see the Chancellor of the
Exchequer and tell him that I would like a "Yes" or "No"
answer to whether or not they will supply us during the
coming year with between $200,000,000 and $300,000,000
of raw materials in the form of lend-lease in reverse.
FROM THE SECRETARY OF STATE:
The British Ambassy tells us that it expects an
early reply which it seems to think will be favorable.
I should like a report on the situation tomorrow and I
agree that unless a favorable reply appears to be imminent,
you should stress the importance of early action. It is
not desired to prejudice a favorable reply by demanding
an immediate one, as the manner of presentation is left to
your discretion.
HULL
Regraded Unclassified
OFFICE
SECRETARY OF TREASURY
NOT TO BE RE-TRANSMITTED
1943 JUL 29 PM 12 04
COPY NO. 13
BRITISH MOST SECRET
TREASURY DEPARTMENT
U.S. SECRET
OPTEL No. 248
Information received up to 7 n.m., 28th July, 1943.
1. NAVAL
On 27th morning our light forces engaged enemy trawlers and mine-
sweepers northeast of CHERBOURG. 2 ships were left burning. Our forces sustained
some damage and there were 7 killed and 34 wounded.
On 27th/28th our light forces in the Channel were in action against
E-boats. No details yet available. F.W. 200 aircraft attacked a south bound
convoy from U.K. when west of LISBON 26th and followed up with 10 further at-
tacks morning 27th. A 9,500 ton ship was sunk (101 survivors) and 2 other ships
totalling about 15,000 tons have been damaged.
2. AIR OPERATIONS
WESTERN FRONT. 27th. Coke ovens at ZEEBRUGGE and 4 airfields in
Northern FRANCE, BELGIUM and HOLLAND were bombed. Fighters on escort duty, sweeps
and patrols inflicted casualties 16, 3, 6. We lost 2 aircraft.
27th/28th. 840 aircraft despatched - HAMBURG 787 (17 missing);
DUISBURG 3 (1 missing); Intruders 29; Seamining 6; anti-shipping 4; leaflets 11.
Proliminary report HAMBURG - weather clear, fires still burning. Markers placed
vary accurately, bombing concentrated and attack considered most effective. 2
enemy night fighters destroyed. 73 air crew personnel were saved in NORTH SEA
by air-sen-rescue operations during the 48 hours ended 0615 A.M. 28th.
SICILY. 25th. A Spitfire Squadron intercepted 30 escorted JU 52's
near MESSINA. 21 JU 52's and 6 fighters were destroyed. 1 Spitfire lost.
SARDINIA. 26th. Special Beaufighters sank a 1,500 ton enemy ship
in convoy and Warhawks destroyed 7 onemy aircraft. 2 Beaufighters missing.
CORRECTION
OPTEL 246 - 100 corrupt groups;
"Total of 693 tons were dropped on NAPLES in attacks covering B
period of 24 hours. Railway centre arsenal and oil storage area were all hit.
Continuous heavy attacks on communications and airfields in South ITALY and
SICILY in which considerable damage caused and many enemy aircraft destroyed both
on the ground and in the air.
Regraded Unclassified
138
July 29, 1943
9:00 a.m.
GROUP
Present: Mr. Bell
Mr. Paul
Mr. Gaston
Mr. Smith
Mr. Haas
Mr. Blough
Mr. Bernstein
Mr. Charles Bell
Capt. Kades
Mrs. McHugh
H.M.JR: Paul, with McConnell coming down here Monday,
I don't feel - I think O'Connell has felt he was his baby,
so to speak, while he was up in General Aniline Dye, but
now that he is coming down here to do an entirely different
job, I want McConnell to feel he is directly responsible
to me. Then if he wants legal advice, I think he ought to
go to you.
MR. PAUL: That is fine.
H.M.JR: That is all right?
MR. PAUL: Yes. The job he is doing has got some over-
lapping with tax reserves, and so on. we will all have to
work together on that end of it.
H.M.JR: That is right, definitely.
MR. PAUL: But so far as completely non-tax things,
he will come to us for advice.
H.M.JR: I mean, O'Connell has nursed him along--
MR. PAUL: They are very close friends by this time.
Regraded Unclassified
139
- 2 -
H.M.JR: I meant while he was doing General Aniline
Dye. That doesn't mean he can't go to O'Connell, but I
don't want O'Connell to feel he is responsible for him while
he is here.
MR. PAUL: I will see that that is straightened out.
H.M.JR: In other words, let your shop help - I think
it ought to start with you.
MR. PAUL: It is very agreeable to me because McConnell
and I get along as well as O'Connell and I.
H.M.JR: Good. Then he and Kades, being next to each
other, they will collaborate. Right?
CAPT. KADES: Yes, sir.
H.M.JR: Does that sound all right to everybody? I
don't want to - this sounds all right, but I think I would
like to sit down with you people and get a plan, what you
are going to do and after we have a plan, let's submit
it to everybody. (Indicating Mr. OConnell's memo of July 26)
CAPT. KADES: Mr. Secretary, this isn't our plan.
This is what McConnell said he thought he was supposed to
do.
H.M.JR: Now, I don't have to call him up on the phone
or anything to tell him I expect him down here? Is that
taken care of?
MR. PAUL: I understand it is all settled that he will
be here Monday. However, I will confirm it, and you won't
have to call. I don't know what arrangements there are in
Charlie Bell's office.
H.M.JR: Between Charlie Bell and Kades, they will see
he is made welcome.
Herbert?
Regraded Unclassified
140
- 3 -
MR. GASTON: I haven't anything. I made some inquiry
about that man whom you saw yesterday and didn't get 8.
favorable impression.
H.M.JR: We will forget him.
MR. GASTON: I turned him down.
H.M.JR: Good. What else?
MR. GASTON: I think nothing else.
MR. SMITH: What time, not before noon, would you like
to look at this tax - what is going to happen on the tax
thing?
H.M.JR: What time not before noon?
MR. SMITH: Yes.
H.M.JR: A little depends - I am holding open for this
general of the Tank Corps for two-thirty - I forget his
name - from Fort Knox, who has just returned from Sicily.
If they let me know, I am going to take him over to War
Bonds at two-thirty.
MR. SMITH: Could you just take & look at it after
you come back from War Bonds?
H.M.JR: Possibly.
Incidentally, this thing with Elliott Roosevelt went
so extremely well that I am going to take these people that
are fresh back from the front over and I think that any of
you - I will notify you if and when we go and anybody in
the staff group that would like to go over are welcome.
Elliott Roosevelt told me more - I got more information
about the war from Elliott than I did from his father, be-
cause he told me stuff I didn't know, as far as the war is
concerned, I mean. And according to this Colonel Fitzgerald -
this man that is back - he will tell us just how many tanks
Regraded Unclassified
141
- 4 -
we lost, how many tanks the Germans lost, and how well each
tank did. It is very interesting.
I think, if you wouldn't mind telling Ted Gamble -
because I said he was going to talk off the record and
I think there should be a Secret Service man at the door and
make everybody show a pass that goes in. I don't want a
reporter from Cissy Patterson showing up or something like
that. And I don't want to have happen what happened without
my permission, having a news photographer. I don't want
that.
MR. SMITH: All right.
H.M.JR: But everybody has to show their pass when they
go in - I mean that they are a Treasury employee. I don't
want the Washington war Bond people because I don't think
they have taken an oath. Do they take an oath?
MR.C.BELL: They take an oath of office, yes, sir, every
one of them.
MR. BELL: If they are on the roles they do.
MR. CHARLES BELL: Allegiance to the United States.
H.M.JR: But they will have to have identification.
What is the name of the chairman for the District?
MR. BELL: John Reilly.
H.M.JR: Would you have him there?
MR. BELL: Yes, I would.
H.M. JR: I only know, myself, I feel so distant from the
war, and so remote, and then these people come in and tell
you what happens and you get re-enlisted.
This colonel said he would be glad to tell you which
tanks are good because, "After all, you people are paying
for them." I mean, there is 8 nice attitude.
Regraded Unclassified
142
- 5 -
Next week we will have the general in charge of the
paratroops who landed in Sicily. He is going to come over
and give & talk. He left town, but he will be back and he
will come over. I know it is good for me. I think it is
good for them. It brings the war home to them.
I know the time I went down to one of these camps and
I took Doctor Daniels around with me. When I made that survey
at Camp Bragg, he said, "I have seen more of the war with you
in half & day than I have in 8. year. I don't know what is
going on; they never show me - never tell me." He said,
I have really seen something today.
Henry, for instance, in his regiment hadn't any idea -
he has never seen the Second Division. He doesn't know
who the corps people are. He has no idea - and they are
attached to a division and they never have any contact with
the division - have never seen them, don't know anything
about them, and never have anything to do with them. He
lives & life within his regiment.
MR. BELL: Are these people going to travel around
any, or just come to Washington?
H.M.JR: Who?
MR. BELL: The people you are now having.
H.M.JR: These people are just here - they are from -
I think they are right out of General Marshall's office -
people he sent to observe. I am doing this through General
Marshall. I am not planning to see people who travel, I am
just trying to put some war spirit into these War Bond
organizations.
MR. BELL: I think where you need it is in the States.
H.M.JR: Maybe somebody will get some ideas out of
this. I am going to try it again this afternoon. what I am
trying at the moment is to fire these organizations, you see.
Take this fellow in New York, or Ohio - let them
make a speech there - is that what you meant?
Regraded Unclassified
143
- 6 -
MR. BELL: Yes. I think - get a group together some
place and let them talk to them. It would be very good
just before the drive. There is where you want your fire.
H.M.JR: With your people - the salesmen?
MR. BELL: Yes.
H.M.JR: It may come out of it. At least I started
something, anyway. It is good for me. You were there?
MR. SMITH: Yes.
H.M.JR: Didn't he do a good job?
MR. SMITH: Very good job.
H.M.JR: He is a good speaker.
MR. PAUL: That sort of a fish always swims. (Laughter)
H.M.JR: Yes, but this boy is always good. He really
is good. He did it in a nice way, too.
MR. HAAS: I haven't anything.
MR. BERNSTEIN: That telegram from Secretary Hull
came last night and appears to be & very strong one.
H.M.JR: It came here first. I was overwhelmed. Let's
tell them.
Hull sent a telegram down to Martinique for me which
was B. pip, wasn't it?
MR. BERNSTEIN: I thought it was.
H.M.JR: Now, what else?
MR. BERNSTEIN: I tried to get Mr. Feis and he wasn't
in, but he is to call me back.
Regraded Unclassified
144
- 7 -
H.M.JR: To put more pressure on it?
MR. BERNSTEIN: Yes, sir.
H.M.JR: Now, I had dinner last night with Governor
Lehman and those of you who were there Monday heard what he
said - Paul reported it - I was shocked.
Here is the situation. I want to see what you people
think.
MR. PAUL: Nobody else but I was there, so it is news
to them.
H.M.JR: Well, the point is, let's assume that Italy
falls in our lap and they use eight million tons of coal a
year and a large amount of cotton - I forget how much --
MR. PAUL: Ten million of coal.
H.M.JR: He said eight last night.
MR. PAUL: He was low. They corrected him at the
meeting.
H.M.JR: Ten million tons of coal. Now, nobody - get
this, Dan - nobody in this Government has made any plans
that when Italy surrenders, how they can start up and get
the coal which Germany has been supplying them with, and
everything else that goes with it - the question of credits,
and so forth and so on.
Now, what I was thinking of doing - Governor Lehman
said there is some committee - which committee would that
go toy
MR. BERNSTEIN: There is a committee that handles all
these problems. This is Acheson's committee. But in addi-
tion to that, & group from Governor Lehman's office have
come around the last three days to the Treasury for help
in formulating & financial plan for the United Nations
Relief Organization.
Regraded Unclassified
145
- 8 -
So far it has been astounding that the men that the
Governor has sent have no notion whatever of where to start
or what to do on their plans.
H.M.JR: Who are those people? I don't think he knew
they were over here.
MR. BERNSTEIN: Yes, they have been over now for three
days and Pehle's people, Mr. White's people, and Mr. Paul's
people have been working with them. The men are Eugene
Staley, Veach - McDougal, their General Counsel, came yester-
day - Condliffe, and two or three youngsters.
MR. PAUL: Governor Lehman pointed out another thing
at this meeting. Not only is the condition as you describe it
with reference to Italy as one country - the supply situation
with respect to coal, cotton, and rayon is desperate as to
Italy, but in addition, any supplies to Italy, however
difficult they may be to procure from England or this
country, must be fitted into B. worldstrategy because you will
be into Greece before you know it, or Yugoslavia, or this
other country across from Italy - Albania - and no coordi-
nated plan - there is nothing being done.
And furthermore, not only do they have no plans
directly for Italy - no world supply strategy - but they
don't know which organization is going to take charge of
which country. They have no philosophy. The Budget man
says--
H.M.JR: His name is Smith. (Laughter)
MR. PAUL: No, Wayne Coy. Wayne Coy said--
H.M.JR: It is 8. hard name to remember, I know. (Laughter)
MR. PAUL: He never communicates with you when you try
to get hold of him. He said that his philosophy was that
countries like Italy would be taken over by the Lehman
organization - that Italy would have no government; whereas,
a country like Belgium, where there is an established
government, would be taken over by Lend-Lease.
Regraded Unclassified
146
- 9 -
Monday they were in the middle of the fight between
Lend-Lease and Governor Lehman's organization, which I
understand Lend-Lease lost.
MR. GASTON: State is coordinating, isn't it?
MR. PAUL: So the thing is - of course, the military
has been so far ahead of any contemplated schedule that
there is some excuse - but there is no excuse for not
having covered 8 lot of these problems.
H.M.JR: This is what I was thinking of doing, calling
up Cordell and simply saying, "Look, Cordell, here we are
on the verge of having Italy fall in our lap. What plans
have been formulated to resume peacetime trade?" That is
the language he understands.
MR. PAUL: Incidentally, at the last minute, Tuesday
of this week, the man that they had selected for Area
Director became unavailable.
H.M.JR: Welles was his name, and they have offered
it to your ex-partner?
MR. PAUL: McCollester.
H.M.JR: Is he going?
MR. PAUL: I don't know.
H.M.JR: Let me just call up Hull. We had one - as
a matter of fact, we haven't done badly this week.
MR. BERNSTEIN: Very good, SO far.
H.M.JR: He backed us up pretty well on my cable to
Winant.
MR. PAUL: Lehman has expressed himself quite frankly
at this meeting.
Regraded Unclassified
147
- 10 -
H.M.JR: Because, you see, if they would say to me -
give us - Bell and the rest of us - a chance - the way
I look at this thing, Dan, the Central Bank of Italy
used to be a good bank. It was well run. We could sit
down with those fellows - I remember particularly the
fellow they used to send to Paris, anyway - he was a very
able person - and establish credits for these people.
In a not very long time we could arrange credits for them
to go ahead.
MR. PAUL: we can cover that part of it, but the
physical supply - where is that coming from?
H.M.JR: Yes, but I mean, it should be joint with
England and ourselves. I mean, the English Treasury and
ourselves should be given the job of establishing credits.
Mr. BERNSTEIN: They wouldn't be getting credits,
Mr. Secretary.
(The Secretary held a telephone conversation with
Secretary Hull.)
MR. PAUL: Now hell will break loose. (Laughter)
H.M.JR: I will hear from Acheson, now. (Laughter)
I have been having a good time this week. I have got
the War Bond thing off my chest. Harry will be sore because
he will say, "While I am here the boss won't give me any
time. Just as soon as I leave town you begin to think about
some of my problems. (Laughter) but the answer is, I
have had a little time to think.
MR. BERNSTEIN: I don't think he has realized how
bad the situation has been.
H.M.JR: Who - Harry?
MR. BERNSTEIN: Yes, sir, on Lend-Lease and relief
because they only came to us on Monday.
Regraded Unclassified
148
- 11 -
H.M.JR: Did you hear his comment that "I thought
that you and the War Department were doing it"?
MR. GASTON: Yes.
H.M.JR: Do you think the old man really thinks that?
MR. PAUL: Of course, the truth is that what little
has been done has been done by his department and the War
Department.
H.M.JR: I had an amazing conversation with Acheson
yesterday. Do you people like me to gossip with you &
little bit?
MR. GASTON: Yes.
H.M.JR: Because I am thinking all the time.
Acheson called me up to read me this cable to Winant
on Lend-Lease in Reverse.
I said, "How are you, Dean?" - because this is very
indicative - and he said, "I am tired. You know, I am
tired. And for the first time in my life I find myself
blowing up. I get angry - I get cross at people."
He said, "I am just worn out."
The result is, he was charged with this thing and
he isn't forceful enough. He is a nice fellow. He is
an intelligent fellow; he is a sweet fellow and a decent
person, but he just can't drive this thing through.
Regraded Unclassified
149
- 12 -
MR. GASTON: They had a lot of stuff focused on
Dean at a time when it wasn't especially important,
and now this stuff is all coming to a head. I think he
has just got an immense amount of stuff that ought to be
in other hands
MR. BELL: I had breakfast yesterday morning with
Floyd Blair, vice president of the National City Bank,
and he mentioned this lack of planning, particularly in
the coal field for Italy. I told him that I thought the
Finletter Committee and Lehman were taking care of it.
He said he didn't think so.
Then the conversation got on to the Russian situation,
and he said that he knows a man in this country who is &
big coal dealer, handles the English coal and also the
Russian coal. Apparently he has been very close to the
Russians for & great many years and they trust him. Not
long ago they sent for him and told him that by January 1
they would be in the market again to sell coal.
H.M.JR: To Russia?
MR. BELL: Yes. And he said, "Well, you have got
me stumped." He said, Your mines are in the hands of
Germany; how do you expect to be mining coal by January 1?"
They said, "In thirty days we will have those mines."
He thought they were crazy, but in thirty days they
had the mines, and he said that they are going to be able
to market coal by January 1. He said they wanted him to
take charge of the sale of coal in this country.
H.M.JR: In this country?
MR. BELL: Yes. Now, that was sort of gossip over
the breakfast table. It didn't impress me very much. But
if that man has the connections that Floyd Blair says he
has, he may be a good man to get in on this coal.
MR. GASTON: Where are those coals?
Regraded Unclassified
150
- 13 -
MR. BELL: Some place around Orel.
(The Secretary held a telephone conversation with
Under Secretary Patterson.)
H.M.JR: Two minutes - ten minutes, there is the
situation. And if you told that to the world nobody
would believe it.
MR. GASTON: It isn't just the financial credits.
It is a question of where the supplies are going to come
from.
H.M.JR: It is interesting - two minutes - ten
minutes.
MR. PAUL: Mr. Bernstein has a point here.
MR. BERNSTEIN: Mr. Secretary, it is very much
more the fact that they haven't the least notion of how
much supplies, where the supplies are to come from and
who is to pay for them - this side - than it is the
Italians not having the money to pay, because presumably
the Italians will get funds from Army expenditures once
we are ready for trade, plus any exports from that area.
There won't be any severe shortage of funds in Italy for
paying for goods from this country, but no one has any
notion of where the goods are coming from here and how
much will be needed.
H.M.JR: Well, no, it is broader than that, Bernstein.
After all, let's say that you can do business with the
Central Bank of Italy. Somebody should be charged with
the responsibility of sitting down with those people and
saying, "All right, between England and the United States
we will work out arrangements whereby you can have so
many credits, and 80 forth, and so on.
MR. PAUL: If you have any conference like you sug-
gested, it might very well be that that problem will be
in the lap of the area director, whoever he may be.
Regraded Unclassified
151
- 14 -
MR. BERNSTEIN: There will be & Treasury man in
charge of finance under him, and presumably he would
carry it for the Treasury on the spot.
H.M.JR: I am not worrying about the area director;
I am worrying about - I would like to get the thing headed
up so that Hull will say he will do it or we should do it
or the Army should do it, or somebody does it. That is
all. But let me ask you this, Bernstein: Am I right
that this - that we are not issuing any more gold-seal
money in North Africa? Is that right?
MR. BERNSTEIN: That is right.
H.M.JR: Now, Dan--
MR. BELL: Probably they are using it in Sicily.
H.M.JR: But they are not using it there. Do we pay
our troops in North Africa - how do we pay our troops today?
MR. BELL: In francs.
H.M.JR: And those francs we get from where?
MR. BELL: Central Bank.
H.M.JR: Of what?
MR. BELL: Well, the Bank of Algiers if it is Algiers.
H.M.JR: And that is the way they dispose of their
dollars, is that right?
MR. BELL: We give them dollars for those francs. They
are piling up dollars in New York as a result of that.
H.M.JR: To their credit?
MR. BELL: Yes. That is the dollars they use to pay
for Lend-Lease to the extent of twenty-five million.
H.M.JR: What about this thing when I decided to go
joint account with the English on buying - black-market
Iranian money, wasn't it?
Regraded Unclassified
152
- 15 -
MR. BELL: Gold.
H.M.JR: Yes, the gold.
Now, somebody brought out the point that under the
law you have to pay U.S. troops in dollars. I couldn't
use that Iranian currency to pay our troops in--
MR. BELL: They are getting around that; they are
paying the equivalent of dollars.
MR. BERNSTEIN: At the official rate.
H.M.JR: They pay at the official rate?
MR. BELL: Yes.
H.M.JR: Who makes the profit?
MR. BERNSTEIN: The general fund of the Treasury
will get it, won't they, Mr. Bell?
MR. BELL: I don't think that has been quite decided.
That is what General Carter would like to do, continue to
pay the Army obligations at the official rate, and the
difference will be the Treasury's profit.
MR. PAUL: We had that problem up with respect to
China.
MR. BERNSTEIN: Last Saturday Major Patton from
General Carter's office came around to say that the Army
didn't care how we accounted for this exchange profit
provided they were on the same position as the British
Army.
I spoke to Mr. Waley, who assured me that the British
Treasury handles the exchange transaction and the exchange
profit goes into the funds of the British Treasury. The
Army buys the reals from the Treasury at the official
rate of exchange.
I then spoke to Major Patton, who was to send a cable
back to the commanding general in Iran, and he said the
Army would be satisfied with that arrangement.
Regraded Unclassified
153
- 16 -
H.M.JR: Say that again.
MR. BERNSTEIN: The Army said it wanted to be in the
same position as the British Army with respect to the
British Treasury. I spoke to Sir David Waley, who said
that in Britain the Treasury buys the reals for gold.
It is now on joint account with us. They then resell the
reals at the official rate to the British Army, and the
British soldiers get paid at the official rate.
The exchange profit from the gold sale goes into
the British Treasury. I told Major Patton that that was
the case in Britain, and he said the Army would be
satisfied to have that done the same way here.
H.M.JR: That takes care of that.
George, supposing you put your boys right away to
work on what was the peacetime import and export trade
of Italy and some of those countries around the Mediterranean.
Supposing you get whatever figures you have.
MR. HAAS: You mean that and the Balkans if they are
going in there?
H.M.JR: Yes. There wouldn't be any other figures
available, would there? Would we know what they got from
Germany during the war?
MR. BERNSTEIN: We have something, I think.
H.M.JR: Who has those?
MR. BERNSTEIN: I think we have 8 study already
prepared for this purpose on Italy's economic and finan-
cial position. We would be glad to show you that part
of it if you wish, or all of it. There is a section on
foreign trade of Italy.
H.M.JR: You have it?
MR. BERNSTEIN: Yes, sir.
Regraded Unclassified
154
- 17 -
H.M.JR: Let me see it. The sooner the better.
You be thinking, Dan - all of you - if we do go to
& meeting we ought to have some suggestions. O.K.
Roy?
MR. BLOUGH: I just want to report that that chart
which you mentioned yesterday wasn't on the wall apparently
was made, although it wasn't put on the wall. At least
it is available.
H.M.JR: Which one?
MR. BLOUGH: The chart on the refundable tax with
the allowances for spendings - I mean, for savings.
H.M.JR: Where is it now?
MR. BLOUGH: Mr. Banyas' office.
MR. HAAS: You saw it, Fred.
MR. SMITH: I remember now; Wes took that down when
Mr. Baruch was here because it was so com licated. I have
forgotten just why. He didn't want to go through it with
Baruch.
H.M.JR: When this meeting is over, I will go in there.
MR. BLOUGH: It isn't in there.
H.M.JR: You can get it down. You can go and get it;
and then you and Paul and Smith and Lindow - let us go
into it. Do you want to be there, George?
MR. HAAS: It doesn't make any difference. There
are some inconsistencies. As long as Wes is there it is
O.K.
H.M.JR: You be there, too.
Regraded Unclassified
155
- 18 -
MR. HAAS: All right.
MR. BELL: The Department of Agriculture is working
on 8 plan to--
H.M.JR: Why don't you get that organized now?
(Mr. Blough left the conference.)
MR. BELL: pay food subsidies through issuance
and redemption of coupons, stamps, or currencies, It is
practically currency that will circulate in the com-
munity.
H.M.JR: Who is going to do this?
MR. BELL: The Department of Agriculture.
H.M.JR: Did you know about it?
CAPT. KADES: No.
MR. BELL: That is the reason I am bringing it up.
They have been working with the boys up in the Bureau of
Accounts. The accounting end of it just came to my atten-
tion this morning. I think that Kades ought to get on
to it and sit in on those conferences. It is now in the
formative stage. They are planning to submit 8. bill to
Congress on it.
There has already been one bill introduced. They are
planning to report on that bill and make some suggested
amendments, coming around to this plan.
MR. GASTON: It cuts right across OPA authority,
doesn't it?
MR. BELL: I assume that it is part of the OPA program,
probably the Jones program, for paying subsidies.
I don't know enough about it to say how it will operate,
but they want us to handle the accounting through our
disbursing officer, and want the banks to handle coupons,
Regraded Unclassified
156
- 19 -
which is quite a problem from the manpower standpoint.
CAPT. KADES: I didn't know the Department of Agricul-
ture was working on it, but I knew about the bill. We
sent it to George, and I have an adverse memorandum on
it from George.
MR. BELL: They are trying to amend the bill 80 that
it will fit into their scheme.
MR. HAAS: We are trying to absorb purchasing power,
and this is creating more.
CAPT. KADES: George says it contributes to inflation.
MR. PAUL: Dick Gilbert has some other plan.
MR. BELL: I want Kades to sit in on these conferences.
H.M.JR: Will you do that?
MR. BELL: Yes.
H.M.JR: You (Kades) are appointed, just so you don't
get bored. (Laughter)
CAPT. KADES: There is no danger of that, Mr. Secretary
MR. BELL: We ought to send the President the state-
ment as to reduction in his salary, the withholding tax.
(Letter to the President signed by the Secretary.)
(Mr. Blough reentered the conference.)
H.M.JR: What is all this?
MR. BELL: That is just the file. That is just the
file on the withholding.
CAPT. KADES: When I saw Ezekiel I asked him specifi-
cally about any such proposal because of the bill. He
said they weren't working on that.
Regraded Unclassified
157
- 20 -
H.M.JR: How well do you know Mordecai?
CAPT. KADES: Not very well,
MR. PAUL:
We know him very well. (Laughter)
H.M.JR: The point - well-- (Laughter)
MR. CHARLES BELL: If we get it revised--
H.M.JR: Is this Bell finished?
MR. BELL: Yes.
H.M.JR: Now the other Bell.
MR. CHARLES BELL: If we get the last tax letter
down today to the Government Printing Office they promised
us August 15 as a delivery date. That is going to throw
us a little behind in getting the letter and the forms
out to the public, which you ought to know about.
H.M.JR: They have to do it quicker than that.
MR. CHARLES BELL: August 20 was the date. I know
how you feel about it. I put them down to August 14 or
15 - ninety-five percent. It is a physical impossibility
to get it out any sooner.
H.M.JR: Why get it out--
MR. CHARLES BELL: They got it out already into four
contracts throughout the country. They have had to make
those plates, and they are not going into a new contract.
H.M.JR: How far have they gone?
MR. CHARLES BELL: They have only printed up 8. handful
of the earlier letter. They haven't used any paper. There
has been no paper wasted on it so far.
H.M.JR: Will it cost more money to have it replated?
Regraded Unclassified
158
- 21 -
MR. CHARLES BELL: It isn't so much a matter of cost;
it is & matter of minutes.
H.M.JR: I would rather have a good letter late than
a bad letter early. I hope this will teach them a lesson.
MR. CHARLES BELL: This will give us a month before
the filing period.
H.M.JR: I say, I hope it will teach them a lesson.
MR. SMITH: They originally hadn't planned to get
any of this out until August 5.
MR. CHARLES BELL: That is true. August & was not
a proper date. The deadline was August 15. They were
going to start making deliveries August 5.
H.M.JR: Will you fix me an order to sign so this
sort of thing won't happen again?
MR. CHARLES BELL: I am going to fix that, yes, sir.
H.M.JR: The last day Sullivan was here he got all
excited because I said we would take a look at this
thing, and Horne had been there two days.
MR. CHARLES BELL: He is back this morning.
H.M.JR: Is he here for good?
MR. CHARLES BELL: No, sir, I don't think SO.
H.M.JR: What is the use of having him come in and
mess around for a day or two?
MR. CHARLES BELL: I understand he cleared this letter
for Norman Cann.
H.M.JR: That is the same way they cleared - remember
that other they cleared?
Regraded Unclassified
159
- 22 -
MR. SMITH: That wasn't the understanding we had.
The thing was to clear through Schwarz and through me.
Neither Schwarz nor I saw it.
MR. CHARLES BELL: I thought you (Smith) and I
would talk with Horne and have it out.
H.M.JR: You can't have a man here two days a week.
MR. BELL: That is all you can get him, I think.
H.M.JR: I would rather not have him at all, He
can't be so wonderful that in four days a month he can do
& job on taxes. Charley, I would much rather not have a
man at all; if he can't come here and be here steadily, I
don't want him. We can get somebody. A man dropping in
a couple of days a week to supervise the Internal Revenue
publicity is no good as far as I can see.
MR. GASTON: Guy Helvering has a vacant position
over there - this man McGrew left - fifty-six hundred
dollarsa year - and there is a spot for a good man. A
good man is needed in that spot. Am I right, Fred?
MR. SMITH: There is, yes.
MR. CHARLES BELL: That man would ordinarily come
under Fred Smith indirectly.
H.M.JR: Directly, or indirectly?
MR. CHARLES BELL: Indirectly. He comes up through
Chick Schwarz.
H.M.JR: Why not let's follow Gaston's suggestion
and get 8. full-time man and put him in there?
MR. GASTON: I think Guy has been kind of nursing
that job; he wanted to make an appointment. I think it
is too important; we need the man. We need a high-grade
man in that stuff.
Regraded Unclassified
160
- 23 -
MR. CHARLES BELL: I think if we had the man we wouldn't
need the order you speak of. I thought if we could
associate this order with Public Relations work solely
on items that deal with the population, we might be able
to fix it.
H.M.JR: Why not let's say we want to fill the
position?
MR. CHARLES BELL: We will go to work on that.
H.M.JR: That man would come under Schwarz, would he?
MR. CHARLES BELL: Normally, yes. He would come up
through you (Smith).
MR. SMITH: That is all right.
H.M.JR: Do we want this fellow Horne unless Sullivan
wants him around to write speeches for him? I don't want
anybody around for two days a month messing around with B.
thing as important as this.
MR. CHARLES BELL: As Danny says, I think Horne came
in pretty much on his own terms this time. He didn't want
to come back.
H.M.JR: Well, to hell with him.
MR. BELL: He is helping Sullivan more than--
H.M.JR: Yes, but don't let him mess around. I
wish you would find out whether he O.K.'d this letter.
MR. CHARLES BELL: August 15 is more agreeable to
you. than August 9?
MR. SMITH: Yes, that gives us a little more leeway.
H.M.JR: I want this thing buttoned up, and I think
we will do it the way Geston suggested.
(Letter to Lawrence Banyas regarding promotion
signed by the Secretary.)
Regraded Unclassified
161
- 24 -
H.M.JR: Can I do that?
MR. CHARLES BELL: Yes, sir.
H.M.JR: Legally?
MR. CHARLES BELL: Yes, sir.
H.M.JR: Why didn't we do it before?
MR. CHARLES BELL: I didn't get any orders.
H.M.JR: Why didn't you push for Banyas' increase?
He is under you, isn't he?
MR. HAAS: It is le gally all right, but we had to
put him in a different category. We now call him an
economist.
H.M.JR: But why don't you push for some of these
boys, George?
MR. HAAS: I have been pushing for him. Look at
his record. I brought him over here, and brought him in
at scratch. He is now, think, the highest priced man
in the Government for that kind of work.
MR. CHARLES BELL: We are kind of taking him away
from graphing and making him an economist, but he is
an economist.
MR. HAAS: That is--
H.M.JR: Is he an economist?
MR. CHARLES BELL: Yes, sir.
H.M.JR: Is that his history? (Indicating paper.)
MR. CHARLES BELL: No, sir, that is just the work
paper.
H.M.JR: He is an economist?
Regraded Unclassified
162
- 25 -
MR. CHARLES BELL: Yes, sir, graduate economist.
MR. HAAS: As 8 matter of fact, I think we - I am
giving so many promotions in that place I will have
trouble with Taber in the Appropriations.
H.M.JR: What?
MR. HAAS: I mean, we have given so many promotions.
You mentioned why don't we push - the record is excellent
from our point of view, but I am afraid the Appropriations
Committee may not think so.
MR. CHARLES BELL: I think it is a normal record on
both sides. I don't think anything has been done that
couldn't be justified.
H.M.JR: Who is chairman of the Treasury budget?
MR. CHARLES BELL: Schoeneman.
H.M.JR: Is this worrying him?
MR. CHARLES BELL: No, sir.
MR. BELL: Got an appointment down there for Mr.
Smith this morning from Boston - the president of the
New England--
H.M.JR: I have Gamble down for eleven. Where is
Gamble?
MR. BELL: I don't know. He will be here earlier
if you would like to see him. He came down on the night
train. I got Charley here to take a berth away from a
Secret Service man.
MR. GASTON: You took a berth away from a Secret
Service man? (Laughter)
MR. CHARLES BELL: We put him on a plane, though.
He was happy about it. (Laughter)
MR. BELL: We had to work fast.
H.M.JR: All right. I want to meet Blough and those
boys - give me until ten 'clock.
Regraded Unclassified
163
- 26 -
MR. BELL: He has to be in New York this afternoon,
and we promised to get him on the one o'clock train. He
really said at first he couldn't come.
H.M.JR: Give him a workover so he will say yes
when he comes in.
MR. BELL: I didn't say a word to him about what you
wanted to see him about. I just asked him if he would
come to Washington. He said he would do anything the
Treasury wanted him to do, which was a good start.
H.M.JR: Why don't you give him 8. workover between
now and eleven? Are you coming in with him at eleven?
MR. BELL: If you want me to.
H.M.JR: Is he your friend?
MR. BELL: I know him quite well. He comes in
every times he comes to Washington just to say hello.
H.M.JR: I would like Gaston in on this, too.
This is for chairman for Massachusetts.
MR. GASTON: What time will that be?
H.M.JR: Eleven. Why don't you (Bell), Gaston,
and Gamble get together on this fellow between now and
eleven to make it easy for me?
MR. BELL: Yes.
MR. GASTON: Yes.
H.M.JR: O.K.
Regraded Unclassified
164
JUL 29 1943 25
My dear Mr. President:
Arrangements have been made to comply with the
request in your letter of July 24, that future payments
of your salary as President be made subject to applicable
provisions of the Current Tax Payment Act of 1943 (Publie
Low 68 - 78th Congress), approved June 9, 1943.
Under the provisions of the above-centioned act
and regulations issued pursuant thereto, you are entitled
to an annual withholding exemption of $1,248, which leaves
a balance of $73,752 subject to the withholding tax of
2) percent. The consuted tax amounts to $14,750.40 per
anous which leaves a balance of $60,249.60 in your favor
or a net monthly salary of $5,020.80. The withholding tax
will be held in 8 special account by the Treasurer of the
United States for subsequent payment to the Collector of
Internal Revenue.
A statement showing the method of computation is
enclosed for your convenient reference.
/sithfully yours,
(Signed) H. Morgenthan, Jr.
The President,
The White House.
the Copies were
India starming Comp =
LLC tak
7/28/43
Sent by sr 11:35
Regraded Unclassified
165
I. DISTRIBUTION OF THE PRESIDENT'S
SALARY IN ACCORDANCE WITH HIS
LETTER OF JULY 24, 1943
Monthly
Annually
President's salary
......
$6,250.00
$75,000.00
To be paid to the
President
5,020.80
60,249.60
Withholding tax (see
below)
1,229.20
14,750.40
Total
86,250.00
$75,000.00
II. COMPUTATION OF 20% WITHHOLDING TAX
Gross salary
$6,250.00
$75,000.00
Withholding exemption ...
104.00
1,248.00
Amount subject to 20%
withholding tax
.......
6,146.00
73,752.00
20% withholding tax
.....
$1,229.20
$14,750.40
Regraded Unclassified
166
THE WHITE HOUSE
WASHINGTON
July 24, 1943
Dear Mr. Secretary:
In order to comply with applicable provisions of
the Current Tax Payment Act of 1943 (Public Law 68-
78th Congress), approved June 9, 1943, I an enclosing
a duly executed Employee's Withholding Exemption Certi-
ficate for use in connection with deductions from my
salary as President.
I would thank you to handle future payments of
my salary BO as to comply with the above-cited law.
Very truly yours,
Enclosure
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified
BM W-4
RY DEPARTMENT
EMPLOYEE'S WITHHOLDING EXEMPTION CERTIFICATE
U.
EVENUE Service (Collection
of Income Tax at Source on Wages)
No
(Print full name)
Address
The WITHOUSE
Social
(Print home address)
Security
No.
L
Cheel
box in the line below which applies to you on the date this form is filled in:
gried person living with husband or wife but claiming none of the personal exemption
(i)
ried person living with husband or wife but claiming half of the personal exemption
(2)
Ingle person (not head of a family) or married person not living with husband or wife (not head of a family).
(3)
tarried person living with husband or wife and claiming all of the personal exemption (spouse claiming
none of the exemption)
(4)
ead of a family (a single person or married person not living with husband or wife who exercises family
control and supports closely connected dependent relative(s) in one household)
(5)
II. Number of dependents receiving chief support from you who are either under 18 years of age or incapable of self
support because mentally or physically defective
I lare that the entries made herein are a true and complete statement as of the date indicated, pdf suant to the Internal
Revents Code and the regulations issued under authority thereof.
Date July 23
1943,
10-04590-1
(Signature) Ford
Regraded Unclassified
July 29, 1943
168
9:20 a.m.
HMJr:
Hello.
Operator:
Secretary Hull.
Cordell
Hull:
Hello, Henry.
HMJr:
Good morning, Cordell.
H:
What's going on?
HMJr:
Well, first may I thank you for the excellent telegram
you sent to your counsel in Martinique.
H:
Oh well, that was - you were entitled to anything ---
HMJr:
That was
H:
cooperation.
HMJr:
That was very helpful. Now, what I'm calling you up
about - it's been brought to my attention that if we
should be so fortunate as to have Italy drop in our
lap
H:
Yeah.
HMJr:
there are no financial arrangements that have
been thought through to permit her to resume her
peace time trade.
H:
Well, I wondered - I supposed you people and the War
Department had done that.
HMJr:
No. As near as I can find out, Cordell, it's all up
in the air.
H:
Is it?
HMJr:
Yes.
H:
Well, there ought to be a conference right away.
HMJr:
And
H:
The fact is, it's possible for all that Balkan country
to go into a state of anarchy or collapse or something,
you know.
Regraded Unclassified
- 2 -
169
HMJr:
Well, I think if you'll inquire, you'll find that the
people have been sort of looking to the State Depart-
ment and 1 can't find anything definite for any
country.
a:
Well, 1 will call my fellows in here at once
HMJr:
Yeah.
H:
and I've got Sol Bloom coming in right at the
moment
HMJr:
Yeah.
H:
but in the course of the next half an hour or SO
I'll get them in here and then let you hear from us.
HMJr:
Fine, and if I can be any help, please call on me.
H:
Yes, sir.
HMJr:
And, hello?
H:
Now this - Henry?
HMJr:
Yeah.
H:
The particular point here relates not to the value of
the lire and
HMJr:
Oh, no. I'm talking about - let's say that sometime
within the next month Italy should fall in our laps
H:
Yeah.
HMJr:
and they want to buy I understand their normal
purchases of coal are ten million tons a year
H:
Yeah.
HMJr:
and they need so much cotton - and they've been
getting their coal from Germany. Well, they want coal -
they want cotton. How are they going to get it and how
are they going to establish their credits?
H:
Yeah.
HMJr:
Now the credit part would be where we might be of some
help.
Regraded Unclassified
170
- 3 -
H:
Yes, I see.
HMJr:
And jointly with the English.
H:
Yes, I see.
HMJr:
1 haven't - nobody's asked me, and....
H:
Well, we here, you know, are not in charge of exports -
haven't been - the BEW, you know
HMJr:
Well, I think if you got into it and you care to have
me sit at your side
H:
Yeah.
HMJr:
I'd be more than pleased to do 80.
H:
Well, I'm glad you brought it up and I'll take it up
and see what about it.
HMJr:
Thank you.
H:
Yeah.
HMJr:
Thank you.
H:
Thank you.
Regraded Unclassified
July 29, 1943.
171
9:29 a.m.
HMJr:
Hello.
Oberator:
Mr. Patterson.
HMJr:
Hello.
Robert
Patterson:
Hello, Henry.
HMJr:
Bob.
P:
Yeah.
HMJr:
Can I talk to you in confidence?
P:
You bet.
HMJr:
Is there somebody on your wire.
P:
Nope.
HMJr:
Good. I just called up Hull and said this to him
that I was disturbed because I can't find that any-
body has planned once Italy has fallen in our lap,
to assist them with their peace time demand, such
as coal and cotton, you see?
P:
Yeah.
HMJr:
On the financial front.
P:
Yeah.
HMJr:
Well, he's - his answer was, "Well, 1 thought that
the Army and the Treasury had that in hand." So
I said, "Well, speaking for the Treasury, nobody
has discussed it with us and I know there is no plan."
So he said, "Well, that's terrible." So he said, "I'll
get my people together and...."
P:
The Army - the Army planned to this extent, Henry,
they will do supplementary feeding and medical supplies
HMJr:
Yeah.
P:
but beyond that - that's the limit of ours.
HMJr:
But look, Bob old man, supposing these people need BO
much coal - let's just use that as the example - see?
Regraded Unclassified
- 2 -
172
P:
Yeah.
HMJr:
They have been getting from Germany and you people
have got an army of occupation and there are no plans -
that, I know - and then you have an anarchy on your
hands - uh - do you know of any plan - anybody's plan
beyond what you Just said?
P:
No. I don't know of any.
HMJr:
The
P:
I know that the Army is charged with the distribution
of enough extra food
HMJr:
Yeah.
P:
to keep them on a - well not a fancy basis, but a
subsistence basis and also medical supplies. That's
as far as we go, I believe.
HMJr:
Well, out of - what do you do that out of - Army
appropriations?
P:
Yeah, we've got the - yes, I think 80.
HMJr:
Yeah.
-
P:
The distribution at any rate - our distribution officer
is in charge with that duty and we've put in ship tonnage
for it and we'll get that all right.
HMJr:
Well, if he calls a meeting, you certainly want to
be there, don't you?
P:
Yeah. The food - they say they don't need a full
ration - they've got cuite a lot of food. They need
certain things
HMJr:
Yeah.
P:
and we'll distribute those. You're particularly
concerned about coal, of course, and
HMJr:
No. I'm - let's say I don't care whether it's a
week or a month or three months - sometime certainly
within the next six months, they'll be - they won't
be fighting. Hello?
P:
That's right.
Regraded Unclassified
- 3 -
173
HMJr:
Now, they'll want to resume peace time trade.
P:
Yep.
HMJr:
They'll want to buy things.
P:
Yep.
HMJr:
And no - the point I make is nobody 1e charged with
the responsibility to assist them to make or arrange
for financial credits.
P:
Yeah.
HMJr:
That's what I'm talking about.
P:
Yeah.
HMJr:
Not to give them the stuff, but to help them buy the
stuff and pay for it.
P:
Yeah.
HMJr:
Seet
P:
Yeah. Of course, there are plenty of people charged
with the job of
HMJr:
That's it.
P:
getting coal. They may not have done any
planning on it but I suppose that Lend-Lease and
Board of Economic Warfare
HMJr:
Now, that's what Hull said.
P:
They would both be charging around in it, wouldn't
they?
HMJr:
Who? Yeah. Well, Hull said, "Well, that's OEM, etc."
Well, anyway, he's going to call a meeting and I
know you well enough that I can say this to you and
you're not going to tell anybody - I don't want you
to repeat it, you see?
P:
No.
HMJr:
But I want you to be thinking about it.
P:
Yeah.
Regraded Unclassified
- 4 -
174
HMJr:
I mean, I didn't want it known that I called you up
and said I'd just talked with Hull, you see?
P:
No, I won't.
HMJr:
But I wanted you to be thinking about it. I think
what will happen - he'll call a meeting either today
or tomorrow.
P:
Yep. Yep.
HMJr:
All right.
P:
Thanks, Henry, I'll be posted on it.
HMJr:
You and I seem to hit it off pretty well.
P:
Yeah. I think our minds agree generally.
HMJr:
Okay. Thank you.
P:
Good bye.
Regraded Unclassified
175
July 29, 1943
12:36 p.m.
HMJr:
Hello.
Operator:
Mr. Patterson.
HMJr:
Hello.
Operator:
Go ahead.
Robert
Patterson:
Hello.
HMJr:
Hello. Henry.
P:
Henry?
HMJr:
Yes, Bob.
P:
This 18 Bob. On Italy and coal.
HMJr:
Yeah.
P:
General Boykin Wright has talked to me some time
about it.
HMJr:
Yeah.
P:
He's in charge of our International Division.
HMJr:
Yeah.
P:
He says that the responsibility for coal for Italy
along with other supplies like food
HMJr:
Yeah.
P:
and medical supplies
HMJr:
Yeah.
P:
had been agreed upon as & military responsibility.
HMJr:
I Bee.
Pi
That 18, it's lodged with him and
HMJr:
Pardon me?
P:
It is lodged with him.
Regraded Unclassified
176
- 2 -
HKJr:
I see.
P:
There's only one complication in it.
HKJr:
Yeah.
P!
And that is that it has never been clearly settled yet
what part the British are to take and what part we're
to take.
HKJr:
I see.
P:
But 80 far 88 American agencies are concerned, the
War Department is the responsible agency for the
initial supply until something else 18 done and it's
to be deemed "military supplies."
HMJr:
I see.
P:
Procured, transported and issued like rations.
HMJr:
I see.
P:
And no plan immediate for repayment - that would be 8
matter of - to be settled by reparations
HMJr:
I see.
P:
or something like that but it would be delivered
to them without any arrangement for payment. The
plan is at present to give them 250,000 tone a month
which may be too small
HMJr:
Yeah.
P:
for the operation of necessary utilities and
railroads
HMJr:
I see.
P:
but the Btitish were supposed to pick up some
of that.
HMJr:
Yeah.
P:
The British are - they're having 8. meeting this
afternoon of what they call the Combined Civil Affairs
Sections.
HMJr:
Yeah.
Regraded Unclassified
177
- 3 -
P:
That's an agency of the joint - of the combined Chiefs of
Staff. It has British members and American members
AMJr:
I see.
P:
and McCloy presides at the meeting.
HMJr:
I see.
P:
I don't think the State Department has any plan
because - natural enough, it wouldn't have if this
16 due to the military responsibility to be dis-
charged by the War Department.
HMJr:
I see.
P:
Now, they - in view of the new political developments
over there, I think they've got to accelerate
HKJr:
Yeah.
P:
their plans. They had directed their people -
this was - oh - some weeks ago
HMJr:
Yeah.
P:
to be prepared on September 30th to make actual
shipments of all this stuff
HMJr:
I see.
P:
including coal.
HMJr:
Yeah.
P:
That - I presume, in view of what has happened, this
afternoon they'll probably direct that that be acceler-
ated.
HMJr:
I see.
P:
The real loose end in the thing, though
HMJr:
Yeah.
P:
is the part to be played by the British.
HMJr:
I see. Well, I didn't get the General's name who is
handling that.
Regraded Unclassified
- 4 -
178
P:
Wright.
HMJr:
General - what's his first name?
P:
Boykin.
HMJr:
Boykin.
P:
Wright.
HMJr:
And he's in charge at this end.
P:
Yes.
HMJr:
I see.
P:
Yes, he's in charge of the American end of it and
he's in command of the International Division here
of the Army Service Forces.
HMJr:
Well, then there isn't much for me to worry about.
P:
I'm sure - I'm sure there isn't - although I'm glad
you stirred it up.
HMJr:
Did I stir it up?
P:
Sure.
HMJr:
Well,
P:
You certainly did because I got h1m in and it was
evident that there were some unbuttoned things so
far as the British responsibility and the American
responsibility was concerned. The British, of course,
are not too well off on coal
HMJr:
Yeah. But now
P:
themselves and yet it's a much shorter haul and
a much quicker trip if they can supply it from there.
HMJr:
Well, now one other thing - as long as you've gone
this far - could you 88 your own idea or anyway you
want to do it, Lehman doesn't know where he's at on
this
P:
Yeah.
HMJr:
See?
Regraded Unclassified
179
- 5 -
P:
Yeah.
HMJr:
He has no idea where he's at.
P:
Yeah.
HMJr:
Could he be informed directly?
P:
Yeah.
HMJr:
That would be fine.
P:
Yeah. I'll tell him.
HMJr:
Good. Well, I'm glad I called you.
P:
Well, I'm glad you did, too.
HMJr:
Thank you, 80 much.
P:
All right, Henry.
Regraded Unclassified
180
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 29, 1943
TO
Secretary Morgenthau
FROM
Charles Bell pall
Norman Cann and Harold Graves feel strongly that they should be
given about five minutes this afternoon to explain certain possible
difficulties which may arise as a result of getting the redraft of letter
out nine days later than was earlier contemplated. They do not wish to
discuss the merits of the letter.
I feel that in the absence of Mr. Helvering, since they will have
to sign for him and acquiesce in the redraft, you might wish to grant
them the time requested. I have explained this to Fred Smith, who
indicated that he would like to be in on the interview if you grant it.
3 P.m. appt. arranged
by Chas Bell
Cann
Graves
Madmitten
TREASURY DEPARTMENT
3:02
1943 JUL 29 PM 2 35
Smith Chas Beef
SECRETARY OF TREASURY
OFFECE
aft.
Regraded Unclassified
181
July 29, 1943
3:00 p.m.
TAXES
Present: Mr. Smith
Mr. Gaston
Mr. Graves
Mr. Charles Bell
Mr. Cann
MR. CANN: Our problem is this, Mr. Secretary: As
a substantial part of the program of helping the taxpayers
get this declaration filed, as is customary we want our
deputies to get out into the towns and counties and small
places as they do, you know, in connection with the annual
filing of returns. That takes time.
Now, when we originally talked about the release
date for the declaration form we talked about the 15th of
August. When we got back to the shop, we got to discussing
it and realized how difficult it was going to be for the
taxpayers to get the form within that period of time, that
is, thirty days - get them filled out, get our deputy
collectors out to where they could render the assistance
that they ought to render.
We said the thing to do is to see if we wouldn't
get the Printing Office to step this thing up 50 we
could advance the date on which we would send out the
forms. So we contacted the Printing Office, and they
advised us that there would be forms out there so that
we could make distribution on the 5th day of August. I
called Sutherland on the phone and told him of the situa-
tion - told him that it was our thought that to be helpful
to the taxpayers we ought to advance this date of distri-
bution as rapidly as we could, with which view he concurred.
We then prepared our instructions - we have also
been - to the Collectors to that effect.
Regraded Unclassified
182
- 2 -
Then we have had numerous requests from the tax
services, from the trust companies, and other organiza-
tions, which handle large numbers of returns for taxpayers,
as to whether we couldn't release that form at an earlier
date. So with that thought in mind we did consummate it.
Now, we feel that entirely apart from the merits
or demerits of the doggoned notice we would be doing a
great deal more for the taxpayer, Mr. Secretary, if we
could use that time in helping him, by this advance distri-
bution, to accomplish through some other type of publicity
the points that we were driving at here and the points
which Fred has got in mind in his letter.
We do believe that as between the two things that
that period of time and the help our people could do is
worth a great deal more to the taxpayers than this
letter. That is the story.
H.M.JR: That is part of the story. It so happens
that Sullivan isn't here and Helvering isn't here, 50 I
come in contact with you, see. When you are going to
get out a letter like that that is so important, why
don't you clear it with my office?
MR. CANN: Mr. Secretary, the procedure agreed upon
was this, as I understand it: I was called over to a
meeting which was attended by Mr. Gaston, Mr. Sullivan,
Mr. Smith, Mr. Horne, which meeting, as I understand it,
was ordered by you, to work out a publicity campaign. I
attended that meeting.
H.M.JR: When was the date of that?
MR. CANN: Some time last week.
MR. SMITH: Week before last.
H.M.JR: It wasn't la st week.
MR. SMITH: Week before last.
MR. CANN: So I was told --
Regraded Unclassified
183
- 3 -
H.M.JR: Was this before or after I got excited
about the form?
MR. CANN: After.
MR. SMITH: This was immediately after the form was
accepted. We came in with the form, showed you what it
was, and you said, "Get together on the publicity."
MR. CANN: So I was told - or rather, we agreed as
a result of that meeting more or less this way, that Mr.
Horne would take charge of the publicity campaign attendant
to this declaration.
H.M.JR: Excuse me, was that your understanding?
MR. SMITH: He was to coordinate, but it was to
clear through Chick and me before anything went to the
public. And the letter, if I am not anticipating, was
specifically brought up, Norman, at that time. You said
that a letter was being prepared, and I said that we had
better see that, because that is the most important thing
we have in the whole procedure.
MR. CANN: All right.
MR. SMITH: I wanted that to clear over my desk.
MR. CANN: That may be so, Fred, but certainly
whether that is so or not, I was told to clear everything
with Horne.
H.M.JR: By whom?
MR. CANN: That was the understanding in the meeting.
H.M.JR: Let me get Mr. Gaston in here. We will wait.
Mr. Gaston entered the conference.)
Herbert, they are using your name in vain, so I
think you had better come in. What I am trying to find
out is how this letter going to forty million people got
by without coming to my office. He (Cann) is referring
to a meeting--
Regraded Unclassified
184
- 4 -
MR. CANN: I am referring to that meeting, Herbert,
that we had in John's office at which you were present,
Fred was present, I was present, John was present, and
Bill Horne. I think that was the group.
MR. GASTON: That is right.
MR. CANN: At that time you stated and laid down the
theme song for this, with which we all agreed, namely,
that we would attempt to make the appeal, that this thing
wasn't difficult but that it was an easy thing - relatively
easy - and We all agreed.
MR. GASTON: Wouldn't magnify the difficulties.
MR. CANN: That is correct, and We agreed that in
the coordinating of this thing Bill Horne was to be the
man that would do the coordinating.
MR. GASTON: I believe so, yes.
MR. CANN: I was to clear with Bill Horne. My
particular plea in that conference, you remember - the
thing that I was keenly interested in was that the tech-
nical material that would go into any publicity would be
cleared with the Bureau. That was really my plea.
MR. GASTON: That is right. I was left with the
understanding that the responsibility would be in there,
in John Sullivan's office, for any further clearance.
That would be my impression.
MR. CANN: So then we had a meeting that afternoon,
at which time Fred and I and Bill Horne and representatives
of the OWI were there.
MR. GASTON: But this first meeting was just a pre-
liminary discussion of timing, tactics, and the general
character of the appeal.
H.M.JR: Were you under the impression that if Bill
Horne O.K.'d it that ended it?
Regraded Unclassified
185
- 5 -
MR. GASTON: I wouldn't have anything to do with
that. We weren't discussing the final mechanics of the
clearing of this thing.
H.M.JR: That is the point he is making.
MR. GASTON: The point that Norman is making, as I
understand it, is that he would look to people over here
in Sullivan's office; in other words, he would look to
Horne to do any further clearance of the document that
was necessary.
H.M.JR: We had the same thing once before with
Horne. Horne isn't here, Sullivan isn't here - how can
you function? But I mean, if Horne said O.K. nobody
else had to see it? Fred Smith didn't have to see it?
MR. GASTON: That question wasn't even discussed.
MR. CANN: Let me go a little bit further on that,
Mr. Secretary, if I may. That afternoon - because Herbert,
after he got through and we reached an agreement as to
the type of publicity, and so forth, then it was adjourned
and we had the afternoon meeting.
In the afternoon meeting - OWI, Fred, Horne, and
myself - again it was agreed that Horne would coordinate,
but that it would go through Chick Schwarz, and then, I
suppose, through the OWI.
Now that, Mr. Secretary - of course, I think maybe
they were thinking in terms of publicity that might go But out
over the radio or possibly through the newspapers.
in any event, that was the agreement reached that afternoon.
So as far as the Bureau of Internal Revenue is concerned,
we would have cleared everything through Horne in the
absence of Sullivan or--
H.M.JR: He wasn't here. And you called up Roy Blough
and said, "Roy, I have sent this over. It doesn't make
any difference what you say; it is on the presses already."
Regraded Unclassified
186
- 6 -
MR. CANN: No, no.
H.M.JR: I got that directly from Roy Blough.
MR. CANN: May I clear that?
H.M.JR: He talked with you directly.
MR. CANN: That is correct.
H.M.JR: You said, "It doesn't make any difference
on Monday what you think; it is on the presses anyway."
MR. CANN: No.
H.M.JR: That is what he said, word for word.
MR. CANN: May I make a complete statement on that?
H.M.JR: Sure.
MR. CANN: All right. Mr. Blough was not here that
week.
H.M.JR: That is right.
MR. CANN: Mr. Shere was not here that week; Mr.
Surrey was not here that week.
Now, I had cleared with Horne. I wanted to clear
with them, and would have cleared with any of those men
if they had been here.
H.M.JR: They weren't all three out at the same time.
MR. CANN: Yes, I think they were.
H.M.JR: I think Surrey was here, because he was
working with--
MR. CANN: Surrey was out all last week, so far as I
know, on 8 vacation. Isn't that right?
Regraded Unclassified
187
- 7 -
H.M.JR: I don't know. Let's say you cleared with
Bill Horne. When did you clear with Bill Horne?
MR. CANN: That was Saturday afternoon.
MR. GRAVES: I think 80; I think it was Saturday
afternoon. Horne came down and spent an hour going
over this form with us and O.K.'d it.
MR. SMITH: Incidentally, on your original preliminary
report that you had there that had to clear with Horne
and Schwarz, I got left out of that; but even so, Schwarz
never saw that.
MR. CANN: If we follow the routine of clearing, which
we customarily do in the Bureau, Mr. Secretary, to the
Treasury - we route it, and then it is rerouted where it
is received to the people over here who it is going to.
H.M.JR: Who is it to go to over here? You see, I
have been doing Sullivan's work for the last two weeks.
MR. CANN: My definite understanding was that I was
to clear with Horne, and I naturally assumed that when I
cleared that if there was anything else to be done over
here it would be cleared from the Treasury man who received
it.
H.M.JR: I think that is a fair assumption that Horne
should clear it. Well, he didn't; but let me get down -
if this thing were a good thing - if I were satisfied, I
wouldn't give a damn if it hadn't been cleared with anybody.
There are two things. In the first place I am not
satisfied. There are forty million things going out, and
on this whole approach - anything going out of the Bureau
on this thing - I haven't been satisfied. In the final
analysis, no matter whose name is on it I have to face the
public on this.
I am not satisfied, and I want the thing - I brought
down the best man I could get. I can't work with a man
Regraded Unclassified
188
- 8 -
who appears here for two days every other week. I never
see the man. I don't even - I have shaken hands with
Horne once in my life. He is not going to pass on things
for me. Let's get this procedure thing first.
What I want the Commissioner to do - and I want him
to do it promptly - you have a fifty-six hundred dollar
vacancy over there, see, and I want a man put in there
who can do this kind of work and who will look to Schwarz
to clear his things in the Treasury. I put Schwarz under
Fred Smith, so that will take care of that.
MR. CANN: I might say, Mr. Secretary, that for a
long time - certainly since I have been over there, and
I think Chick Schwarz will bear me out - we haven't cleared
anything there except through Chick Schwarz.
H.M.JR: That is the way I want it.
MR. CANN: We never clear any publicity otherwise.
MR. SMITH: You mean clear it through or distribute
it through? We are talking about getting clearance on
these things before they are distributed.
MR. CANN: The Bureau of Internal Revenue for a long
time - it doesn't make any press releases over there.
They just don't do that.
MR. SMITH: I don't know about that.
MR. CANN: I do. They don't.
H.M.JR: Then, that is easy. But this vacancy - I
don't know how long - I want it filled.
MR. CHARLES BELL: That is McGrew's vacancy.
H.M.JR: As to procedure, Gaston and Smith or somebody
can make recommendations. You people can make recommenda-
tions and they will go to my Administrative Assistant for
final approval, but I want somebody in there soon.
Regraded Unclassified
189
- 9 -
If Mr. Horne can only come down two days a week or
every other week, he is no good to me. Nobody is any
good to me on a two-day-a-week basis.
MR. GASTON: There is this to be said about this
particular document--
H.M.JR: I had the same thing happen once before.
MR. GASTON: There wasn't any hard and fast arrange-
ment made as to clearance of this document at the pre-
liminary meeting at which I sat. I would suppose that--
MR. CANN: That is right.
MR. GASTON: I would suppose that Mr. Cann, if
Sullivan had tagged Horne with responsibility, would
look to Horne to make the clearance.
You have spoken about the procedure of press re-
leases. Of course, this isn't a press release, 50 you
would naturally expect a somewhat different arrangement
in which John Sullivan's office would be the point of
clearance, with which the Secretary wished them to clear.
H.M.JR: It doesn't necessarily have to go through
Sullivan's office.
MR. CANN: I was going to ask you that question.
H.M.JR: When he comes back, you (Bell) talk to
him. This is a public relations matter, and I want you
to draw a procedure for me. I want them to fill that
vacancy over there with a top-notch person who will be
working for the Bureau. Then when the thing is still in
a fluid state - where it goes to the public - that
person can clear directly with Schwarz.
Now, Sullivan can make whatever arrangements he
wants with Schwarz when he gets back. Schwarz is now
under Smith, so that takes care of Smith. But the stuff
should originate with the Bureau; and then if I don't
Regraded Unclassified
190
- 10 -
like it, it is up to them to get it to me before it is
on the presses. But We had better formalize this thing
in writing. Any question?
MR. GASTON: The only thing I was going to say -
the only thing very definite about this meeting was this,
that Norman Cann requested, and it was agreed to, that
nothing would be sent out from here without being cleared
with the Bureau.
H.M.JR: That is lend-lease in reverse.
MR. CANN: I just wanted to be sure we had a chance
to check the technical material.
MR. SMITH: That has to be done; there is no question
about that.
H.M.JR: Now you get a first-class publicity man
over in the Bureau. Get him just as soon as you can. He
will be there, and the thing will be written so it is
technically correct; it comes over here; it goes to
Schwarz, and it is up to Schwarz to see who in my office -
Sullivan is part of my office. But I don't want, frankly,
another publicity bureau under Sullivan like Horne. It
seems to me that the thing should be in the Bureau.
Get the people; give them all the help you can. If
we don't like it, we will say so - pass on the man - they
can take the initiative of finding somebody. Go out and
find somebody. If anybody in the room knows anybody
make a recommendation. But let's get an able man or woman.
Then we will give them all the help we can.
I think one of the mistakes is sort of running 8.
separate publicity bureau over here.
MR. GASTON: The routine they follow with me as to
releases that affect Customs or any of those people -
they usually dig up B. story or I may suggest it to them.
But they always submit it to me - Schwarz' office always
submits it to me for my O.K. before they put it out.
Regraded Unclassified
191
- 11 -
H.M.JR: Norman says that it is the way it is always
done. He will be for it.
O.K., Harold?
MR. GRAVES: Yes, sir.
H.M.JR: The only question is Sullivan's relation-
ship - where he comes in the picture. He will be back
Monday?
MR. CHARLES BELL: Yes, sir.
H.M.JR: You can talk to him. I don't want to go over
it a third time. I don't want a separate publicity bureau
there. The setup at this end is all right if it can get
to Schwarz.
As to that, are you (Graves) all right?
MR. GRAVES: That is right.
H.M.JR: Are you (Cann) all right?
MR. CANN: Yes.
H.M.JR: We will put the thing in writing.
As to this thing - I have listened to you - I am
going to turn you down.
MR. CANN: I am sorry. Would you like to say anything
on that, Harold?
MR. GRAVES: I would like to say that in my opinion
it would be much better to allow these declarations with
instructions to go out as planned on the 5th of August,
to be followed by distribution of this material through
whatever other means we can arrange, than to hold up the
distribution of the forms to forty million people.
H.M.JR: You mean hold up - can the thing go without
this? (Indicating letter)
Regraded Unclassified
192
- 12 -
MR. SMITH: Not without the letter.
MR. GRAVES: Yes, it can go. We had originally planned
to send the declaration forms with instructions which are
all in the make now, without this letter, which was a sort
of afterthought.
Now, if this letter is to be changed--
H.M.JR: It is, but let's say when it has been changed.
MR. GRAVES: When it has been changed it will mean
that instead of these tax blanks being ready to go to the
taxpayers on the 5th of August, they wouldn't be ready
until the 20th, and that is awfully close to the 15th of
September when the blanks must be filed.
I think it would be a gross mistake for us to delay
the distribution of those forms to get in this letter here,
which is not indispensable to an understanding of the form.
H.M.JR: What do you think of that?
MR. SMITH: I don't agree.
MR. GASTON: You would distribute the forms without
this letter - distribute the forms themselves, then
follow it with the revised circular of instructions -
to be distributed by other means?
MR. CANN: Let's be sure we understand that.
MR. SMITH: Here is the situation, though, Herbert,
on that: This form will then go with instructions -
just cold instructions - to forty-two million people, of
whom only fifteen have any interest in it. So you are
going to make twenty-eight million people sore when you
only need to make fifteen million people sore, to begin
with.
Consequently, if you send a letter - a decent, friendly
letter explaining right in the very first paragraph that
Regraded Unclassified
193
- 13 -
this only affects fifteen million of the forty-two
million people who are going to get it; and if you make
them feel pretty good when they get it right off the
bat, then you are not in the position of trying through
publicity and other devious means to tell them that we
are nice people.
Then the one direct way we have of reaching them -
just kicking them in the teeth practically--
MR. GRAVES: I think that very much overstates the
case. The instructions that are to go with the form
contain a very simple statement at the very beginning
as to who is required to file the declaration.
MR. SMITH: That is right, but it is all so cold,
so simple, and so unfriendly. That is the whole thing.
MR. CANN: Mr. Secretary, one point on that is that
for years, as you know, we have sent out our tax blanks
about the 5th of January. We send nothing with the tax
blanks.
H.M.JR: But you haven't had things like OPA and a
thousand other things to put the people in a state of
irritation. Heretofore we have been the only thing that
has irritated the people.
MR. SMITH: You didn't have a bond drive before,
either.
H.M.JR: You had all kinds of things.
Now the people - they have open wounds; they are
sore; they are mad.
You originally only intended to send these tax
forms out on the 15th?
MR. CANN: That is correct, Mr. Secretary, but like
I said--
MR. GRAVES: That was because of the delay in printing.
MR. CANN: When we found out we were to do it--
H.M.JR: Isn't there some way of getting this letter
out quicker?
Regraded Unclassified
194
- 14 -
MR. CANN: As I understand it, your people checked over
here on that.
MR. BELL: Get this letter out?
H.M.JR: Yes.
MR. BELL: No, sir, we can cut that time to the 15th
of August but not a day earlier.
H.M.JR: They are not all going to be finished on the
same day, are they?
MR. BELL: Ninety-five percent will be finished on the
15th of August.
H.M.JR: They won't begin to flow before that?
MR. BELL: They won't give me those dates.
H.M.JR: But they come off the press, I mean, as they -
they don't all come off the press in twenty-four hours.
MR. BELL: They will have two or three days before the
15th that they will start feeding this to the collectors'
offices, yes, sir.
H.M.JR: Won't it be more than that? I mean, this is
such a simple thing.
MR. CANN: We delivered this, Mr. Secretary, for the
first proof nine days ago.
H.M.JR: But I still say I have seen printing presses
work and the stuff begins to come off.
MR. BELL: Their date was the 20th. That is the date
they want. But we clipped them five days this morning
through the Public Printer.
MR. GRAVES: But. the trouble is that the printing
facilities being used by the Government Printing Office
Regraded Unclassified
195
- 15 -
also have to turn out these tax blanks and instructions
in very large quantities.
H.M.JR: I don't see why you can't begin to put
them in the mail. This (indicating letter to taxpayers)
goes with the form?
MR. CANN: That was the idea; it would go with the
form with the instructions.
H.M.JR: Where are they put together?
MR. CANN: Ten different locations.
MR. GRAVES: They are mailed from the sixty-four
collection districts.
H.M.JR: I mean, where do they sort of put them in
the envelopes?
MR. CANN: In the collectors' offices. They come
folded.
H.M.JR: Then they stuff them in?
MR. CANN: Right.
H.M.JR: As they begin to come off the press they
begin to be mailed.
MR. CANN: They will be doing that.
H.M.JR: I should think some of them would come off
the press by the 20th.
MR. CANN: Mr. Secretary, we ran into some difficulties
with the Government Printing Office on our March 15 filing.
You may have forgotten it. And to be honest with you, I
know we have got to get the forms out and I wouldn't want
to tell our collectors to--
H.M.JR: What is a person going to do with this once
he gets this?
Regraded Unclassified
196
- 16 -
MR. CANN: The form?
H.M.JR: Yes.
MR. CANN: The instruction on it is a simple statement.
As a matter of fact, we will freely admit to you we think
that the simplified form looked pretty good, so I think
they are not going to have any troubles with it.
MR. GRAVES: Many people who receive the form and the
instructions will begin to write letters to the collector
asking questions, and it is going to--
H.M.JR: You most likely won't agree with the statement
I am going to make now. We wouldn't have had the simplified
form if we hadn't raised hell about it.
MR. CANN: I think that is a correct statement.
H.M.JR: Do you think it is?
MR. CANN: I don't think it is. It is.
H.M.JR: Thank you for that. That is something.
MR. CANN: There is a long story about that. I am not
going to bore you with it. Some day I am going to tell you
about that, too.
H.M.JR: You most likely think I am going to be a littl
arbitrary, but I am going to say something and you might just
as well know how I feel. I think that the Bureau has got
to be "told" a little bit. Maybe that is all wrong, but
that is the way I feel. The little contact I have had the
last two weeks, unfortunately that is the way I have come
out. And leaving Fred Smith out of the picture - this
isn't Fred Smith - but the other people around me here -
Sullivan is away - feel the same way. You don't know
me very well. He (Graves) knows me. When I have something
on my chest, I say it.
MR. CANN: I like that, Mr. Secretary.
Regraded Unclassified
197
- 17 -
H.M.JR: I don't go around - Harold knows me very well.
MR. CANN: The only thing that I could say to that,
if it is referring back to the matter of the form--
H.M.JR: No, this is an accumulation. I have been
asking questions the last two weeks, see? And at the end
of two weeks with Sullivan away and the Commissioner away,
that is where 1 end up.
MR. CANN: Of course, Mr. Secretary, that probably -
to some extent I might say that that is some reflection on
me, and--
H.M.JR: I don't know where. I think it is the whole
spirit over there. I think that there is - I mean, there
is an isolation spirit over there.
MR. CANN: No, you are as wrong in that, Mr. Secretary,
as you can be.
Now, look, let me just tell you; for seven years -
you don't know it, but you have had me on one detail or
another - in that said seven years I suppose I have had
maybe five weeks away from the office. And I am not the
only fellow over there. I don't think there is 8 division
of the Government in Washington that has got the morale
the Bureau of Internal Revenue has got, and it is forty
and forty-five-year-old, and fifty-year-old people carrying
the load. There isn't an outfit that has got the pride,
and there isn't an outfit that is any more a part of the
Treasury than the Bureau of Internal Revenue.
I have heard that before, that there is a tendency
on the part of some to say, "There is the Treasury at the
end of Pennsylvania Avenue, but we are all by ourselves
down here, and to hell with that." But that isn't so.
That very definitely isn't so, and I think it is unfortu-
nate that you feel that way, because the hours that some of
our people have worked for you down there the last few
weeks without regard to themselves and their health, the
number of men here in the last - I suppose the last three
or four months that have retired - and it is attributable
directly to this extra burden that we have put on our folks.
Regraded Unclassified
198
- 18 -
I think what you say, unless you have some concrete
instances, which there might be, on the other side to
explain it, I really think that is unfortunate, because
you have just got the best bunch of folks in the world
down there. Their bond drive - their response to you
on that is outstanding.
H.M.JR: It is very good.
MR. CANN: On your Community Chest drive they always
lead the Treasury. On an overtime operation, we don't
bother with compensatory leave down there. We don't
have time to fool with it.
I will admit I am, as you know, very biased about
it - very proud of the Bureau. After all, twenty years -
but as I say, I just simply feel that what you say is a
reflection on me.
H.M.JR: I don't know - I wasn't being personal.
But that is the feeling I got. But I am from Missouri
and my mind is always open. I haven't any prejudices,
or anything like that, but I am certainly going to put
myself closer to the Bureau for a while.
MR. CANN: I wish you would.
H.M.JR: Until I have satisfied myself one way or
the other. I have been too removed - detached. Maybe
it is my fault.
MR. CANN: Can I ask you this?
H.M.JR: You can ask me anything you want to.
MR. CANN: What phase of the Bureau's work, or failure
in the Bureau's work, would lead you to that conclusion?
H.M.JR: I mean, I would have to name names. I don't
want to name names. It is & succession of incidences.
It may be my fault that I haven't - I have had too many
people between myself and the Bureau.
Regraded Unclassified
199
- 19 -
MR. CANN: of course, as I say--
H.M.JR: Let's just see, and let's go along now, and
I am going to ask you to do it my way, and I am asking you
to get somebody to fill that vacancy over there, and that
person can handle the public relations - deal with Schwarz.
Let's see how we get along.
I have got only one object in mind, and that is to
make the path between the Treasury and the public smoother.
That is what I am trying to do. When I see what has happened
to OPA and OCD and those other organizations like that, it
makes me sick. I don't want it to happen in the Treasury.
MR. CANN: Wouldn't you agree with me, Mr. Secretary,
that there has probably been less criticism on the part of
the public directed to the Bureau of Internal Revenue than
any organization in the Federal Government, and that more
commendatory remarks have been written about it?
H.M.JR: I couldn't say.
MR. CANN: All I can say is from clippings - the only
reference I can take is clippings.
H.M.JR: I will say that I think that considering that
you are the tax collector, that it is amazing how little
criticism there is. I will say that.
MR. CANN: We had an amusing letter the other day.
H.M.JR: Amusing?
MR. CANN: It was very critical of our circular to
employers.
H.M.JR: I don't know what you refer to.
MR. CANN: You saw the circular we prepared for em-
ployers. This letter was written by a gentleman in Jack-
sonville to you personally.
Regraded Unclassified
200
- 20 -
H.M.JR: I didn't see the letter.
MR. CANN: I know you didn't. It came over to us
directly. He congratulated us on writing, but he said
that it was the most terrible writing that had been
written since the beginning of time. So we were rather
proud of that employers' circular - employers generally
have written us letters more or less commending us upon
it, so we examined the paragraph in question and the
paragraph in question was the law as Congress wrote it,
word for word. (Laughter)
Your last word on this, Mr. Secretary, is not to
hold it up?
H.M.JR: My last word is just what I told you over
the telephone. I don't want that circular to go and I
want--
MR. CANN: I understand that, but do you want us--
H.M.JR: I want the circular and the forms to go
out together, please.
MR. CANN: All right.
Regraded Unclassified
201
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthmu
July 29, 1943
TO
FROM
Ted R. Gamble
As you know I have been conducting a series of meetings during the
past 45 days with the Office of War Information, the War Advertising
Council, the War Activities Committee and the Allied Newspaper Council,
In each instance the request for cooperation in the Third War Loan
has not only been granted but has been amplified as a result of
discussions with each of these groups.
We are working on an idea to spear-head this campaign so that
an infectious atmosphere of enthusiasm and excitement will be generated
throughout the nation.
This idea revolves around an entertainment World Caravan.
This Caravan will include 40 to 50 of the top motion picture
personalities. It also will include representatives of the legitimate
stage and will carry its own musical organization. In addition it is
contemplated that we might use speakers selected from our leading Congress-
men.
The cities have already been selected for this operation and will
include all of the large cities in the country, some 15 in all,
A secondary tour will visit the next 20 cities in size.
Listed among the personalities who have already made arrangements to
join this tour are:
James Cagney, Jean Arthur, Walter Pidgeon, Greer Garson, William
Powell, Judy Garland, Hedy Lamar, Fred McMurray, Fred Astaire, Norma
Shearer, Jeanette McDonald, Ray Milland, Edward 0, Robinson, Joan
Regraded Unclassified
202
Page 2 Continued
Ovawford, Marlene Deitrich, Orson Welles, Wallace Berry, Mickey Rooney,
verotiy Lamour and Spencer Tracy.
This is out a partial list, and we are informed by the Notion
Picture Industry that the major studios will, if necessary, close down
turing this tour in order to avail to us a complete roster of their
people.
We know from our experiences of last September that there is no
single device that we can use to better advantage for the kind of
campaign that we want to put over this September than an activity
such as this.
A3 a result of our conversations with O.W.T. and representatives
of Networks we are convinced that a most 1 pressive launching ceremony
c/ut be broadcast to the nation as a result of having this great pool
of talent concentrated in one spot.
I would like, therefore, to recommend to you that this Caravan
be brought to Washington and that our Third war Loan be laurched
here on the evening of Septe ber B, by the President of the United
States.
We would like for the President to officially launch the Thirt
War Loan in a short message as the feature of this broadcast. In
addition to giving us the kind of help which we feel is a vital
need for "Kicking Off" this monumental job, we would at the same time
be able to obtain invaluable newsreel shots and picture naterial for
Tige throughout the Campaign.
Regraded Unclassified
203
Page 3 Continued
I would like to make it clear to you that I have discussed
this program very carefully with all the groups involved and we
are agreed that a program of substance, dignity and sincerity
can effectively be wrought from such an occasion, As our whole
Campaign will stem for this activity, we would like to know as
soon as possible if the Commander-in-Chief can take part.
Regraded Unclassified
204
July 29, 1943
I called Grace Tully today and told her that
we would like to have the President launch the
Third War Loan Drive on the night of September 8th.
I told her that a great many of the movie people
are going to be helping us, and we could get any
ones he wanted to come over that evening, such as
Greer Garson, Judy Garland, Hedy Lamar, Norma
Shearer, Marlene Deitrich, Dorothy Lamour, etc.
I suggested that perhaps he would like to either
go on the air or else make a movietone. She said
she would ask the President about it and then
let me know.
Regraded Unclassified
204
July 29, 1943
I called Grace Tully today and told her that
we would like to have the President launch the
Third War Loan Drive on the night of September 8th.
I told her that a great many of the movie people
are going to be helping us, and we could get any
ones he wanted to come over that evening, such as
Greer Garson, Judy Garland, Hedy Lamar, Norma
Shearer, Marlene Deitrich, Dorothy Lamour, etc.
I suggested that perhaps he would like to either
go on the air or else make a movietone. She said
she would ask the President about it and then
let me know.
Regraded Unclassified
>
205
THE WHITE HOUSE
WASHINGTON
July 29, 1943
Dear Mrs. Klotz:
Will you let us know about
Dr. Welch, who is head of music at
Princeton and "Consultant to Secretary
Morgenthau" 88 reported in Seattle?
He 1s to speak in Seattle - 1s it
for War Bonds?
Sincerely yours,
Malima @ Thompson
Secretary to
Mrs. Roosevelt
Mrs. Henrietta Klotz
Office of the Secretary
If
Treasury Department
Washington, D.C.
Mrs. clotz
phoned Miss Thompson
8/6 7/31/13
206
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
July 29, 1943
FROM
Randolph Paul
I asked Carl Shoup of Roy Blough's office
to look at the hearings before the Ways and Means
Committee to ascertain Vinson's attitude, and he
has given me the attached har memorandum.
Regraded Unclassified
207
July 28, 1943
TO:
Mr. Paul
FROM: Mr. Shoup
In accordance with your suggestion I have looked through some of
the hearings before the Ways and Means Committee a few years ago to
ascertain the attitude of Fred M. Vinson, then a member of the Com-
mittee. I get the general impression that Mr. Vinson kept closely in
touch with technical developments, and to the business man who
appeared before the Committee he must have seemed an acute, even sharp,
questioner - - almost as a sort of "hatchet man" for the administra-
tion, although in a courteous manner. Mr. Vinson was adept at taking
to pieces anyone who came before the Committee with only & vague sense
of injustice, without specific facts at hand for his own business,
and without specific knowledge of the tax law. Nothing in the parts
that I have reread suggest any lack of sympathy with what were then
the administration's chief tax aims. This impression must be qualified,
however, by the fact that I have not gone carefully through every
section of the hearings. My: survey covered part of the 1936 hearings
and part of the 1938 hearings. It checks, however, with an impression
that I recall having obtained several years ago when I had occasion to
follow the hearings fairly closely.
ds
Regraded Unclassified
208
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE 7/29/43
TO
Mrs. McHugh.
FROM
The Secretary.
such
Last week I wrote Fred Vinson a letter asking why he
didn't give us a ruling on salaries above $5,000 and he answered
me, T believe, that he was weiting on two other departments. If
ve don't get an answer by next Monday or Tuesday, I went to write
Its ogain. Please see that Mrs. Klotz reminds me.
Regraded Unclassified
209
TREASURY DEPARTMENT
finished
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
July 29, 1943
FROM Randolph Paul
I am sending herewith a memorandum by Joe O'Connell 0'
regarding an employee of the Federal Government being at
the same time employed by a private corporation.
Rst -
Regraded Unclassified
210
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Mr. Paul
July 28, 1943
FROM Mr. O'Connell
There is no existing Federal law which precludes an
employee of the Federal Government from being at the same
time employed by & private corporation, or from accepting
compensation from such a corporation for services performed
for it. Of course, if the holding of the two positions
involved a conflict of interest there would be very strong
reasons of public policy for attempting to prevent it, but
there is no statute which addresses itself expressly to such
a problem. It is also obvious that if the private employ-
ment resulted in an interference with the performance of the
public duties there would be strong reasons for not continuing
the man in the public employ.
There is a general statute which provides that no Federal
employee may accept compensation from any private source for
services performed for the Federal Government. There are
several Attorney General's Opinions construing this general
statute from which it is reasonably clear that the private
compensation must have been for the purpose of paying the
man for the service performed for the Federal Government in
order to come within the statute.
There is no provision in the FDIC legislation which would
result in a different rule. The only prohibition contained
in that statute which touches at all on this sort of situation
is one which prohibits a director in FDIC from being at the
same time & director in any insured bank.
We have been unable to find any provision in the mail-pay
or other subsidy legislation which prohibits an air line company
from paying director's fees to a man in Government service.
In 80 far as the Treasury Department is concerned there
is & Treasury regulation which prohibits any Treasury employee
from engaging in any outside employment without the approval
of the Secretary. It is my understanding that such approval
has been given sparingly.
spes
Regraded Unclassified
211
JUL 29 1943
Dear Prentiss:
I know you are busily engaged in waging the fight
against inflation on many fronts. I also know that you
have always favored the elimination of special privi-
leges for any economic group.
Consequently, I feel justified in calling to your
attention the demoralizing effect on persons of modest
means of the present policy of allowing hotels and res-
taurants to serve rationed foods without requiring their
patrons to surrender coupons. In the case of certain
foods, such as meat, this policy discriminates in favor
of the well-to-do who can afford to supplement their meat
ration by eating out regularly.
I have always understood that the point ration
system was intended primarily to secure an equitable
distribution among all classes of consumers, rich and
poor alike, of those foods for which demand varies
widely or which are available in such small quantities
that an equal ration would be insignificant.
In theory, the system is designed to achieve a rough
measure of social justice. In practice, it is creating
a privileged class of expensive hotels and restaurants
which cater to a well-to-do clientele.
I doubt if anyone will seriously dispute the fact
that there are not enough hotels and restaurants to feed
industrial and white collar workers at prices which they
can afford to pay. Nor is there widespread acceptance
of the curious view (which I have heard advanced in de-
fense of existing OPA regulations) that eating food "off
the ration" at fancy prices is & form of recreation
which the Government should encourage.
Surely, it does not improve the morale of a worker who
has put in a full day's work in an office, at a store or
By Memeenger
Regraded Unclassified
212
- 2 -
factory, or in a mine or quarry, under tense and diffi-
cult circumstances, to know that if he wants roast beef
he can get it without surrendering & coupon, by paying
two or three dollars at a first-class hotel.
It is common knowledge that choice cuts of meat can
always be found on the tables of hotels and restaurants,
even when the shelves of retail butchers are bare. This
is perhaps the natural consequence of the OPA regulation
allowing hotel supply houses which fabricate primal outs
into roasts, steaks, and stews to charge 20% more than
the zone price. Of course, it might also result from
black market operations on the part of expensive hotels
and restaurants trying to satisfy patrons to whom high
prices are no obstacle. In any event, the present
system of rationing hotels and restaurants according to
the number of meals served, without regard to how much
meat the customers may have consumed at home, may well
discredit the ration system.
I realize that any solution of this problem involves
many administrative difficulties. But you and I know
how many of the most constructive measures of this Admin-
istration were originally condemned as administratively
impracticable and proved, when tried out, to be very
successful.
It is true that in England hotel and restaurant
customers need not give up coupons for meals. However,
the British Ministry of Food strictly regulates the
number and contents of courses of meals served, and
limits not only the price charged for meals, but also
their nature.
Perhaps applying the point ration system to hotels
and restaurants is not the sole solution. Perhaps the
answer lies in reducing the proportion of the available
civilian supply of meat allocated to hotels and restau-
rants. Or, perhaps hotels and restaurants charging more
than a specified price for portions of meat should be
deprived of choice cuts altogether.
Regraded Unclassified
213
- 3 -
I do not want you to think that I am wedded to any
particular solution, and I know that you must have con-
sidered suggestions from many sources. I feel, however,
that a re-examination at this time of this problem might
result in some preferable alternative which would iron
out inequities due to inequality of income.
Yours sincerely,
(Signed) H. Morgenthau, J₁
Secretary of the Treasury.
Hon. Prentiss Brown,
Administrator, Office of Price
Administration,
Washington, D. C.
CLK:rgs
7/28/43
Regraded Unclassified
214
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 29, 1943
TO
Secretary Morgenthau
FROM
Mr. E. M. Bernstein
Subject: Exports of Coal and Cotton to Italy
1. At a meeting of the Coordinating Committee for
Liberated Areas on July 27, General Hilldring informed
the Committee, including Governor Lehman, that the Army
was prepared to guarantee the supply of all import items
for Italy for 8. period of six months. During this period,
no civilian agency need be responsible for sending supplies
to Italy.
The Army arrangements will presumably follow the general
pattern already worked out in North Africa. The Army will
procure these goods with dollars in this country. Such goods
as the Army sells in Italy (as distinguished from what it
furnishes as relief, etc.) presumably would be sold against
Italian lira currency or credit, which it could then use
for the payment of troops or the procurement of supplies in
Italy. Under this arrangement, the question of the payment
of dollars by Italy need not arise.
2. When Governor Lehman assumes responsibility for
this work, this mode of financing could, of course, be
continued -- at least until more permanent arrangements are
formulated.
3. In the case of coal, the Army has made it evident
in North Africa that it considers coal to be primarily an
Army supply problem. Coal is vital for successful railroad
operation and for the maintenance of public utilities.
In North Africa, only that small proportion of coal that is
sold to industrial or other consumers is handled by civilian
agencies which recover dollars from the French in these
instances. In the case of Italy, coal 1s absolutely essential
for the maintenance of the power plants which manufacture
the electricity to operate the railroads and other industries
throughout Italy which are of primary concern to the Army.
Regraded Unclassified
215
- 2 -
Even after the six-month period of Army supply, the
Army presumably will continue to handle coal as it has
continued to do in North Africa. The Army presumably would
be paid for this coal by Italian lira currency or credit,
which it would be free to expend in the area for pay of
troops or local supplies. Should any part of the coal pro-
gram ultimately be turned over to one of the civilian agencies,
it can be financed as indicated in (4) below.
4.
The case of cotton will be handled the same as
other civilian supplies such as food, drugs, etc. After
the six-month period of Army supply 18 over, civilian supplies
for Italy will be handled by civilian agencies. In so far as
these supplies may be required for out and out relief purposes,
no charge will be effected. In so far as supplies are sold
to the Italians, the civilian agencies would presumably re-
ceive Italian lira currency or credits in exchange. OFRRO,
which will be the main recipient of such lira currency or
credit for such civilian supplies, may make such Italian
credits available to OEW for the purchase of goods within
Italy for export to the United States. OEW may be asked to
settle for such credits at the official rate of exchange in
dollars, thereby reimbursing OFRRO in the United States with
American currency or credits.
5. Because imported goods sold in Italy can be paid for
in lira currency and credits, the means are available for
financing Italian purchases of imported goods ithout making
special credit arrangements.
Regraded Unclassified
216
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 29, 1943
TO
Secretary Morgenthau
FROM
E. M. Bernstein
Subject: Italian Foreign Trade
Annual Volume of Merchandise Trade, 1937-1940
During the four years, 1937 to 1940, Italy's average
annual exports amounted to 8,304 million lire ($432 million)
and her average annual imports amounted to 11,839 million
lire ($616 million).
Although figures showing total exports and imports for
the years after 1940 are not available, it 18 reported that
Italy had an export surplus in 1941. This was probably due
to & shortage of imports of raw materials and food-stuffs
while at the same time Italy was increasing her exports to
Germany.
Distribution of Trade by Countries
In 1938 the principal sources of Italian imports were
Germany 26.7 percent, United States 11.9 percent, and
United Kingdom 6.5 percent. Germany's share in this trade
had been rising steadily since 1934.
In 1938 the principal consumers of Italian exports
were Germany 19.1 percent, Eritrea 12.6 percent, United
States 7-5 percent, and United Kingdom 5.6 percent. Since
1934 Germany's share in Italian exports had been rising
while that of the United Kingdom had been falling.
Table I shows the value of Italian merchandise trade
with ten principal colonial and foreign suppliers and
markets for the years 1934 and 1938.
Italy's trade with Germany increased in terms of
reichsmarks from 547 million in 1938 to more than 2,000
million in 1941. Prices of imports and exports, however,
increased by about one-third during the same period.
Regraded Unclassified
217
- 2 -
Principal Commodities Entering into Italian Trade
In recent years Italy's most important imports have
been coal and coke, and cotton, which in 1938 accounted
for 15.6 percent and 7.5 percent of Italy's imports.
Since the outbreak of war Italy has imported substantial
amounts of coal and machinery from Germany.
In 1938 Italy's chief exports were cotton cloth which
accounted for 6.4 percent of her total exports, citrus
fruits 5.2 percent, and dried fruits and nuts 4.9 percent.
Since the war Italian exports to Germany (aside from
labor) have consisted primarily of fruits, vegetables,
rice, olive oil, wine, silk fabrics, synthetic fibres,
and other manufactures. The Italians also provide the
German war machine with those few raw materials which are
available in their country - notably sulphur, pyrites,
mercury, hemp, flax and raw silk.
Table II shows the ten principal commodities entering
into Italy's foreign trade in 1934 and 1938.
Regraded Unclassified
218
TABLE I
Italy's ten principal foreign suppliers and markets, 1934 and 1938
(Value in millions of lire)
1934
:
1938
:
: Percent of
:
:
= Percent of
Country
: Value
: total value :
Country
: Value
: total value
A. Principal Suppliers
:
Germany
1,213
15.8
:
Germany
3,016
26.7
UNITED STATES
957
12.5
:
UNITED STATES
1,338
11.9
United Kingdom
707
9.2
:
United Kingdom
728
6.5
France
437
5.7
:
Switzerland
376
3.3
British India and Ceylon
353
4.6
:
Poland and Danzig
320
2.8
Switzerland
293
3.8
:
Argentina
274
2.4
Argentina
274
3.6
:
British India and Ceylon
269
2.4
Australia
234
3.1
:
France
254
2.3
Belgium-Laixembourg
229
3.0
:
Czechoslovakia
254
2.3
U. S. S. R.
220
2.9
:
Rumania
253
2.3
All other countries
2,758
35.8
:
All other countries
4,191
37.1
:
Total
7,675
100.0
:
Total
11,273
100.0
:
B. Principal Markets
:
Germany
833
15.9
:
Germany
2,002
19.1
United Kingdom
529
10.1
:
Eritrea
1,325
12.6
Switzerland
438
8.4
:
UNITED STATES
782
7.5
UNITED STATES
388
7.4
:
United Kingdom
587
5.6
France
353
6.7
:
Libia
526
5.0
Argentina
218
4.2
:
Switzerland
495
4.7
Libia
176
3.4
:
Argentina
405
3.9
Yugoslavia
140
2.7
:
France
328
3.1
Netherlands
134
2.6
:
Ethiopia
295
2.8
Hungary
130
2.5
:
Egypt
267
2.5
All other countries
1,886
36.1
:
All other countries
3,485
33.2
:
Total
5,225
100.0
:
Total
10,497
100.0
:
Italian dependency
Treasur
Department, Division of Monetary Rosearch
July Regraded Unclassified
219
TABLE II
Ten principal commodities entering into Italy's foreign trade, 1934 and 1938
(Value in millions of lire)
1934
1938
Percent of
:
:
Percent of
Commodity
Value
Commodity
Value
total value
total value
A. IMPORTS
Coal and coke
857 :
11.2
: Coal and coke
1,758 :
15.6
Cotton, raw
:
722 :
9.4
: Cotton, raw
828 :
7.4
Wool, in the grease, and washed,
:
:
: Machinery, apparatus, and parts
:
759 :
6.7
wool waste, and flocks
513 :
6.7
: Mineral oil, crude, and residues from:
:
Machinery, apparatus, and parts
371 :
4.8
:
the distillation of
657 :
5.8
Lumber, common, rough, squared, or
:
:
: Wool in the grease and washed, wool :
:
sawed
270
:
3.5
:
waste, and flocks
420 :
3.7
Wheat
185 :
2.4
: Wood pulp
393 :
3.5
Fish (except shellfish, caviar, etc.)
178
:
2.3
: Copper and its alloys, in ingots and :
:
Oil seeds
:
172 :
2.3
:
scrap
327 :
2.9
Hides and skins, raw, except
:
:
: Fish (except shellfish, caviar, etc.
244 :
2.2
furskins
:
171
:
2.2
: Lumber, common, rough, squared or
:
:
Mineral oils (except crude and
:
:
:
sawed
:
236 :
2,1
residues from the distillation of)
:
162
:
2.1
: Iron and steel scrap
:
233 :
2.1
All other
4,074
:
53.1
: All other
5,418
:
48.0
:
:
:
Total
7,675
:
100.0
:
Total
11,273
100.0
:
:
--
:
B. EXPORTS
Artificial fibers
299 :
5.7
: Cotton cloth
:
675 :
6.4
Citrus fruits
:
279 :
5.3
: Citrus fruits
:
540 :
5.2
Cotton cloth
:
260 :
5.0
: Dried fruits and nuts
:
511 :
4.9
Dried fruits and nuts
220 :
4.2
: Grapes and other fresh fruit, except :
:
Cotton yarns, except sewing thread
173 =
3.3
:
citrus
370 :
3.5
Cheese
153 :
2.9
: Artificial fibers
364 :
3.5
Wines and vermuth
:
146
:
2.8
: Machinery, apparatus, and parts
340 :
3.2
Hemp, flax, and other vegetable
:
:
: Wool cloth
304 :
2.9
fibers, raw, except cotton
146 :
2.8
: Wines and vermuth
283 :
2.7
Machinery, apperatus and parts
:
142 :
2.7
: Automobiles
264 :
2.5
Grapes and other fresh fruit,
:
:
: Hemp, flax, and other vegetable
:
:
except citrus
:
129
:
2.5
:
fibers, raw, except cotton
235 :
2.2
All other
:
3,278 :
62.8
: All other
6,611
:
63.0
:
:
:
:
:
Total
:
5,225
:
100.0
:
Total
10,497
100.0
:
Treasury Tepartment, Division of Monetary Research
July 29. 1943
Regraded Unclassified
220
Treasury Department
Division of Monetary Research
Date
July 29, 1943 19
From:
Mr. E. M. Bernstein
To:
Secretary Morgenthau
I spoke to Mr. Feis and he was very
sympathetic. He had seen Secretary Hull's
cable and he appeared eager to help get
cooperation for our man in Martinique.
He is going to speak to the European
division of the State Department and
inform us whe ther there would be any
objection to the Treasury's holding up
some general licenses for the Martinique
banks in order to induce them to cooperate
with the Treasury in investigating col-
laborationist financial dealings.
221
July 29, 1943
Memorandum of a Telephone Conversation with Mr. Feis
July 29, 1943
In accordance with Secretary Morgenthau's instructions I called
r. Feis and spoke to him of the Treasury's desire for the coopera-
tion of the State Department in facilitating Mr. Ball's investigation
of Martinique bank accounts and the inventory of the gold held in
Martinique.
Hr. Feis said he had seen the telegrams from Ball and the telegram
Secretary Hull had dispatched at the suggestion of Secretary Morgenthau.
I told Mr. Feis that the Secretary appreciated Mr. Hull's telegram.
I then mentioned to Mr. Feis the importance the Treasury attaches
to having Mr. Ball proceed with the investigation of the Martinique
bank accounts. If pressure would induce a greater degree of coopera-
tion from the Martinique authorities, the Treasury would like to exert
some pressure in a manner that would be in harmony with the objectives
of the State Department.
As a concrete illustration, I told Mr. Feis the Treasury would not
want to go so far as to deny licenses for the expenses of a ship now in
Puerto Rico which is about to depart for Martinique with Lend-Lease
food supplies. We know such action involves too great pressure. We do
feel, however, that by denying general licenses to Martinique banks and
by compelling them to act on a specific license basis, we could indicate
to them the desirability of cooperation with the Treasury in investigating
collaborationist financial dealings, without impeding the economic life
of the people of Martinique.
Mr. Feis told me it would be necessary for him to speak to the
European division of the State Department, and that he would let me
know their views.
E. 11. Bernstein
Regraded Unclassified
222
July 29, 1943.
IM
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
DiLucia has told me something of the difficulties
and handicaps he encountered 88 Financial Attache in
Madrid, where his primary responsibility was to furnish
information to O.S.S. Both Ambassador Hayes and Beaulac,
the Counselor of the Embassy, resented his coming and
threw. many difficulties in his path. They had not been
adequately instructed 8.5 to the work he was to do. He
had been authorized to direct the activities of a crew
of twelve men already in Spain, all but one of whom were
former American oil company representatives in Spain.
The twelfth man was Joe DaFine, a former Narcotics Agent
who had been sent over previously by O.S.S. DaFine gave
him effective assistance; the others did not. He says
that these oil company men told him frankly that they
were not going to do anything to prejudice the interests
of the American companies whom they had previously repre-
sented. Also they were used by the special oil repre-
sentative sent to Spain by the State Department to check
on the use made of oil imports to make investigations for
him. In these investigations they disclosed their identity
in such a way as to make them useless as undercover agents.
DiLucia found that the Embassy had been regularly
and periodically reporting to the State Department that an
invasion of Spain by Hitler was imminent. He made some
investigations 8.5 to the disposition of German forces in
France and became convinced that there was not the slightest
prospect of 8. German invasion and he 80 reported to Washing-
ton. Later the Embassy turned to predicting a Spanish in-
vasion of Portugal and DiLucia was asked by the Army to
check on this. He found that the state of the Spanish Army
as to lack of transportation, equipment, armament, shoes
and clothing was such that there was not the slightest
possibility of a Spanish invasion of Portugal and he so re-
ported. Again he tangled with the Embassy in endeavoring
Regraded Unclassified
223
- 2 -
to send B. cable stating that Franco was about to dismiss
Serrano Suner. The Embassy told him that his prediction
was absurd and that they had contacts through which they
would learn of such events if they were about to occur and
they knew that nothing of the kind was going to happen.
This prediction was stricken out of a cable he had offered
for transmission. He wrote the same information in a
letter and put it in 8. pouch addressed to O.S.S. Suner
was dismissed four days after he mailed the letter.
The British resented and still resent American intelli-
gence work on the continent and told DiLucia 80 quite
plainly.
There is & struggle for authority in the intelligence
field between the Army, the Navy, the State Department and
O.S.S. The F.B.I. gets into the picture occasionally
through sending men over ostensibly to investigate particu-
lar cases.
However, Dyar in Bern seems to have gotten along all
right. He is 8. very shrewd and diplomatic fellow with &
good deal of foreign service experience.
Nr
Regraded Unclassified
224
BRITISH air commission
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
PLEASE QUOTE
INFERENCE NO
With the compliments of British Air Commission
who enclose Statement No. 95 -- Aircraft Despatched
- for week ended July 20, 1943.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury
WASHINGTON, D. C.
July 29, 1943.
Regraded Unclassified
MOST SECRET:
225
STATEMENT NO. 95
Aircraft Despatched from the United States
Week Ended July 20, 1943
ASSEMBLY
BY
BY
FLIGHT DELIVERED
TYPE
DESTINATION
POINT
SEA
AIR
FOR USE IN CANADA
CONSOLIDATED
Catalina IV
U.K.
U.K.
1
Coronada GR I
U.K.
U.K.
1
Liberator GR V
Bahamas
Nassau
6
Liberator GR V
U.K.
U.K.
7
Liberator GR V
W. Africa
W. Africa
5
BREWSTER
Bermuda
Bahamas
Nassau
3
CURTISS
Kittyhawk
M.E.
Port Sudan
19
Kittyhawk
New Zealand
Auckland
10
Seamew
U.K.
U.K.
3
DOUGLAS
Dakota III
U.K.
U.K.
7
Dakota III
M.E.
M.E.
5
Dakota III
India
India
5
Dakota III
S'Africa
S'Africa
2
FAIRCHILD
Fairchild PT 26
Algiers
Algiers
10
GRUMMAN
Martlet V
U.K.
U.K.
7
GLENN MARTIN
Baltimore V
M.E.
M.E.
7
NORTH AMERICAN
Harvard
New Zealand
Auckland
4
VULTEE
India
Karachi
10
Vengeance
VEGA
Canada
Canada
3
(A) Ventura GR V
Ventura GR V
S'Africa
S.Afrifa
1 -
TOTAL 63
50
3
British Air Commission
Movements Division
(A) Including one exported week ended July 13.
July 24, 1943.
Regraded Unclassified
22L
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 249
Information received up to 7 a.m., 29th July, 1943.
1. NAVAL
On 28th Beaufighters escorting ships of the Home Fleet north of
SHETLANDS shot down two enemy aircraft. Aircraft from one of H.M. Aircraft Carriera
shot down two more. H.M. Sloop on BISCAY patrol 28th sank 5 Spanish trawlers
fishing in prohibited waters. The crews were sent back in a 6th trawler. Another
7,000 ton ship in the Southbound convoy off PORTUGAL has been damaged by air
attack but is still with convoy. On 28th evening homeward convoy was ropeatedly
attacked by 7 F.W. 200' 01'1 CAPE FINISTERRE. Two were shot down by escorting
Liberators and one was damaged by two aircraft catapulted from ships in the con-
voy. The pilots were rescued. No damage to ships in convoy.
2. AIR OPERATIONS
WESTERN FRONT. 27th/28th. HAMBURG. 2,313 tons dropped including
seven 8,000 lb. and 323 4,000 1b. H.E. and 1,209 tons of incondiaries. A good
concentration of marker bombs was well maintained throughout the attack and crews
had no difficulty in Identifying them. A/A fire intense at first but later seemed
overwholmed. Searchlights numerous but ineffective.
28th. Out of 302 Fortresses sent out 32 dropped 107 tons on a
fighter component factory at CASSEL. 28 dropped 62 tons on un aircraft assembly
factory near MAGDEBURG and 17 bombed other objectives with fair to good results,
23 Fortresses missing. Medium, Light and Fighter Bombers attacked industrial
objectives and airfields in the Low Countries and Northern France. Fighters des-
troyed 9 enemy aircraft for the loss of one.
28th/29th. Aircraft despatched - HAMBURG 4; DUSSELDORF 4; Sea-
mining 15; Leaflets 4; Intruders 8. Four enemy aircraft came in over ESSEX.
ITALY. 27th. 62 escorted medium bombers attacked the airfield
at SCALEA 110 miles southeast of NAPLES. 21 heavy bombers dropped 45 tons on
CAPUA airfield and 18 others bombed railway and other objectives east of NAPLES.
SICILY. 27th, 107 Light Bombers successfully attacked the port of
MILAZZO.
TREASURY DEPARTMENT
1943 JUL
PM
SECRETARY OF TREASURY
OFFICE
Regraded Unclassified
THE WHITE HOUSE
WASHINGTON
July 30, 1943.
AW HEN:
The weather is hot and I
am goin' off fishing.
I decline to be serious
"
n
even when you see gremlins
which ain't there
F. D. R.
filk
228
July 30, 1943.
My dear Dr. Wise:
In connection with your letter of
July 23, 1943 I know you will be interested
to learn that earlier this month we advised
the State Department that we were fully
sympathetic to the proposal of the World
Jewish Congress and the American Jewish
Congress for the evacuation of Jewish
refugees from Rumania. The Treasury is
prepared to take the necessary action to
implement this proposal.
Sincerely,
Secretary of the Treasury
Dr. Stephen S. Wise
40 West 68th Street
New York, New York
AFL:bbk
Retyped hkw
7-29-43
got ONE
Regraded Unclassified
229
My dear Dr. Wise:
In connection with your letter of July 23,
1943 I know you will be interested to learn that
earlier this month we advised the State Department
that we were fully sympathetic to the proposal of
the World Jewish Congress and the American Jewish
Congress for the evacuation of Jewish refugees
from Rumania. The Treasury is prepared to take
the necessary action to implement this proposal.
In this field, as in others, actions
speak louder than words. However, I do want you
to know that we too are deeply concerned regarding
the Jewish victims of Hitler and that we shall
continue to do everything we can, consistent with
our war effort, on their behalf.
Sincerely,
Secretary of the Treasury
Dr. Stephen S. Wise,
40 West 68th Street,
New York, New York.
AFL:bbk - 7/29/43
Mrs. WAS BMT
Regraded Unclassified
114 1 230 my
AMERICAN JEWISH CONGRESS
330 WEST 42nd STREET
NEW YORK CITY
STEPHEN S. WISE, PRESIDENT
CABLE ADDRESS 'CONGRESS'
CARL SHERMAN, CHAIRMAN, EXECUTIVE COMMITTEE
TELEPHONE LONGACRE 5-2600
NATHAN D. PERLMAN
}
VICE-PRESIDENTS
LEO H. LOWITZ
LOUIS LIPSKY, CHAIRMAN, GOVERNING COUNCIL
M. MALDWIN FERTIG, CHAIRMAN, ADMINISTRATIVE COMMITTEE
JACOB LEICHTMAN, TREASURER
Dr. Wise's personal address to
which replies should be sent is:
40 West 68th St., New York City.
July 23 1943
The Hon. Secretary of the Treasury
Washington D. C.
Dear Secretary Morgenthaus
At the White House yesterday I had the opportunity of discussing with
the President a proposal which Dr. Goldmann of the World Jewish Congress
and I had previously taken up with Secretary Welles. He stated at the
time that the matter would, of course, have to be discussed with and con-
sidered by the Treasury Department, and I believe that some officials of
your Department have had the matter under consideration and that before
this it may have come to your attention.
I explained the proposal to the President and he was entirely sympathetic
thereto and said that he would take it up with you either yesterday or
today. I feel that you too will understand that nothing is more urgent
than that any and all steps be taken to make possible the release of these
Jewish victims of Hitler from that situation which means death unless somehow
they be rescued. The officials in the Treasury Department will, of course,
have explained to you that not one penny of the funds to be held in escrow
in Switzerland will reach any representative of the Axis governments until
after the war shall have ended, and it may be expected that HOME of the
people with whom our friends in Europe are dealing will not even survive.
I know how deeply sympathetic you will be to any undertaking which may save
the lives of those otherwise doomed Jews, and I shall be very happy to learn
either from you or the President that the arrangement thus proposed and which
must, of course, have your sanction, has gained your support.
I enclose a copy of the letter which I have just sent to the President.
With most cordial greetings and hoping that Mrs. Morgenthau is much better
after her illness, always
Faithfully yours,
PRESIDENT
SSW:tw
enc
Regraded Unclassified
Dr. Wise's personal address to
which replies should be sent iss
40 West 68th Street, New York Cit
July 23 1943
The President
The White House
Washington D. c.
Dear Chiefs
It gave no deep satisfaction to find while with you yesterday that out of the
depth of your understanding sympathy with Hitler's victims you welcome the pro-
posal which 10 now before the State and Treasury Departments to permit funds to
be forwarded to Switzerland by Jewish organisations of our country. These
funds are, of course, to be held in eserow by our Government representatives
or such people as they say designate, and would not be handed over to officials
who may survive of the satellite powers until after the war. These officials,
with when the arrangements will be undertaken, will create such conditions within
the Hitler territories as shall enable sany Jane in those countries to survive,
to essape deportation and ultimately to como out of those countries, continued
residence in which would mean torture and death. The whole arrangement is to
provide especially for the saving of saay little children. So feel that these
funds say make possible the salvation of thousands of otherwise doomed beings,
especially in Roumenia, Slovakia and France, without, I repeat, not one pean J
falling into the hands of enemy representatives for the duration.
I an happier than I can say to think that this proposal, which deals in a
feasible and concrete way with an unspeakable situation, commende itself to
you, and that you will be good enough to discuss it with the Secretary of the
Treasury, whose subordinates are dealing with the problem.
I cannot make clear enough what it would seen to us, and indeed to all civlised
people, If you case again, and for the last time, uttered & solemn warning to
the representatives of the Bast regines in the Hitler conquered territories with
respect to the orines consitted against civilians, especially Jews marked out, as
you know, for slaughter as BO other people. Is not the recent annowncement of
the Commission on the Orines in the Passist countries a suitable occasion for such
varsing as is likely to have a deterrent effect, especiall , upon Masi officials
within the satellite states?
Faithfully yours,
PRESIDENT
SSWite
Regraded Unclassified
The New York Times.
232
JUL 30 1943
FORCE DISAVOWED
there has been no Indication that
any unified decision has been ob-
tained by the two statesmen.
BY PALESTINE JEWS
It in also reported here by re-
liable sources that Britain and
America after due consultation
with their Allies are on the verge
But Jewish Agency Official
of publishing a concrete statement
Warns Against 'Deeds of
concerning their proposed policy
regarding the Middle East and
Despair Before 'Injustice'
Palestine, where the war has
ended, any post-war application of
the Atlantic Charter looms.
POST-WAR ACTION URGED
In light of these circumstances
It La interesting that Mr. Shertok,
who has been conferring with Brit-
New Policy to Use Palestine
fah officials here, states: "With a
general retreat from the Idea of an
in Solving Jewish Problem
Arab federation as a political con-
Is Advocated
cept, problema of joint economic
development are coming to the
fore. Such development calls for
initiative and coordination. The
By C.L. SULZBERGER
question of coheston must be solved
By Cable to to New YORK TIMES,
by the Arab States themselves, but
CAIRO, Egypt, July 29-Moshe
example and drive the Jews can
Shertok, head of the political de-
supply in no inconsiderable meas-
partment of the Jewish agency in
tire. But to make that contribu-
Palestine, Issued & statement to-
tion on & proper scale they must
feel firmly established In Pal-
day saying that while the Jews of
estine."
Palestine had no intention of foro-
Tragic Experience Cited
Ing the fasue of settling their fate
Mr. Shertok and that now that
In that disputed mandated terri-
the war was moving toward a. con-
tory during the war. "It would be
clusion, problems of the post-war
wrong to conaider the Jewa Inca-
settlement were taking shape and
pable of deeda of despair if driven
"among these, the question of Eu-
to extremes of exasperation by a
ropean Jewry is one connected with
decision to preserve in what la to
the origina of the war and tragical-
them a eruelly unjust policy."
ly aggravated by its course. It La
Mr. Shertok said:
Idle to expect the remnants to feel
"Rumors are current about al-
mafe In Europe even after liquida-
leged Jewish intentions to fight
tion of the Nazi rule.
out the Issue by force. Nothing is
"The problem of Palestine per se
farther from the thoughts of the
also in on the post-war agenda.
Jews than to try to force the issue
The attempt to solve it by the
at all so long as the war lasts-
While Paper of 1938 under the
provided no adverse commitments
strains and stresses of that hapless
are taken in the meantime or of
period must be relegated to the
ever leaving on their own Initiative
limbo of the appeasement era. A:
the path of political negotiations
new solution la called for, conceived
in exchange for direct action.
In a spirit of comprehensive re-
"At the same time, realism com-
sponabilities and resting upon the
pela the conclusion that It would
leading United Nations.
be wrong to consider the Jews In-
"The new policy must aim at
capable of deeds of despair If
making the utmost of Palestine
driven to extremes of exasperation
for a solution of the Jewish prob-
by a decision to persevare in what
lem and paving the way for large-
la to them & cruelly unjust policy."
scale development of the Middle
Conferences Held
East
"The subject ta one of major
Mr. Shertok's statement follows
International responsibility for the
closely A series of meetings be-
fate of Jewry and the future of
tween Nuri as Said Pasha, Iraqu
the Middle East. The hour calls
Premier, and Nahas Pashs, Egyp-
for a bold and far-aighted ap-
tian Prime Minister, who, it is
proach. The turning point created
known, has been discussing possi-
by the war offers B. unique chance
bilities of formulating some joint
in history which It would be tragic
program to promote an Arab fed-
to miss."
eration after the war. Until now
Regraded Unclassified
233
MEMORANDUM FOR THE SECRETARY.
July 30, 1943.
Mail Report
The rut into which last week's mail fell was worn
a little deeper this week. The gist of the fairly
heavy receipts was that somebody had failed to receive
8 Bond, or had lost one, or couldn't understand why
his tax deduction had been so unreasonably high. There
were, of course, B. few constructive ideas about both
taxes and Bonds, but most of the communications took
such a negative turn that all of this week's excerpts
concerning these two subjects fall under the heading
"unfavorable".
Reaction to the withholding tax continued to be
almost entirely adverse, not only in our direct corre-
spondence, but also in that referred by the White House.
Most of the protests have come, however, from those in
the lower income brackets who have no quarrel with the
principle of the withholding tax, but with its impact
on their own incomes. Some persons insisted that they
are not subject to the tax, even though it has been de-
ducted; others explained that the amounts withheld are
incorrect; and others told of hardships that followed
its collection. Now and then there was a demand that
1942 payments already made in full be refunded.
Much of the Bond mail was connected with the
organization of War Finance Committees in the various
states -- especially cordial replies coming from those
invited to accept places on the Committees. Each week
brings several repetitions of the idea that noninfla-
tionary salary increases can be made possible through
the issuance of 8. special Bond not redeemable until
maturity. Although news that Bonds are to be smaller
in size has drawn very little comment, the change has
been heartily approved by those who have spoken of it.
Regraded Unclassified
234
- 2 -
Memorandum for the Secretary.
July 30, 1943.
A few country banks pointed out the injustices
done them when subscriptions to Treasury offerings
are closed the same day they are opened. One irate
writer said that he would buy no more Bonds until those
that have been inscribed "P.O.D." are corrected to read,
"payable on death to". Government wastefulness and
practices of O.P.A. stand first among the reasons that
have been advanced as to why sales to individuals will
lag in the Third Bond Drive.
The 48 Bonds submitted for redemption represented
a slight increase over last week's count. On the other
hand, complaints from personnel of the War Department
decreased even further, and were limited nearly al-
together to undelivered Bonds paid for during 1942.
Opposition to the new pennies ran high this week,
probably because of newspaper comment that the coins
are here to stay for the duration. Several asked that
they be dipped in acid or plugged before they are re-
leased by the Mint.
2.2.7 orbruck 2.27 shush
by Kay Peanon
Regraded Unclassified
235
General Comments
James Leong, San Francisco, California. I hope you
would not think me rude to ask you to take considera-
tion of the Mint problem, as I am only thirteen years
of age. My father has been running a lunchroom in
the Crocker First National Bank for & period of time.
But since you have put out the new pennies, many
people have tried, and succeeded, in putting these
new steel pennies in the so-called "kitty". Since
my father makes all his things himself, he loses 8.
lot. About four or five do this constantly, and there
is no other way of stopping this unless you, as
Secretary of the Treasury, make some way of dis-
tinguishing new pennies from dimes. I know this is 8.
serious problem, but consider many of these restau-
rants, cigar stores, etc., who are fooled every day.
* If you have read this far, I would thank you
very much and I would like very much for an answer.
Beautiful Lily, Brooklyn, N.Y. PEACE Again it is my
pleasure to be of assistance to Uncle Sam. Enclosed
please find U. S. Money Order for $200.00. This is
money I owed many years ago. I am unable to locate
the party so am carrying out the teaching of Father
Divine in giving the money where it will be used to
good advantage. I consider my first duty at this
present time is to help my country all I can. I thank
you to acknowledge this to Rev. M. J. Divine.
John I. Sloat, Cashier, Commercial and Savings Bank,
Winchester, Va. In connection with the offering of
7/8 Treasury Certificates of Indebtedness, Series D -
1944, as of July 22, we beg to call your attention to
the manifest unfairness in the limited time of the said
offering, as far as country banks are concerned. Rarely
does the mail from the Federal Reserve Bank reach this
institution until noon, or later, and the purchase of
Government Securities must be approved by the Board of
Regraded Unclassified
235
General Comments
James Leong, San Francisco, California. I hope you
would not think me rude to ask you to take considera-
tion of the Mint problem, B.S I am only thirteen years
of age. My father has been running a lunchroom in
the Crocker First National Bank for a period of time.
But since you have put out the new pennies, many
people have tried, and succeeded, in putting these
new steel pennies in the so-called "kitty". Since
my father makes all his things himself, he loses a
lot. About four or five do this constantly, and there
is no other way of stopping this unless you, 88
Secretary of the Treasury, make some way of dis-
tinguishing new pennies from dimes. I know this is a
serious problem, but consider many of these restau-
rants, cigar stores, etc., who are fooled every day.
++
+ If you have read this far, I would thank you
very much and I would like very much for an answer.
Beautiful Lily, Brooklyn, N.Y. PEACE Again it is my
pleasure to be of assistance to Uncle Sam. Enclosed
please find U. S. Money Order for $200.00. This is
money I owed many years ago. I am unable to locate
the party SO am carrying out the teaching of Father
Divine in giving the money where it will be used to
good advantage. I consider my first duty at this
present time is to help my country all I can. I thank
you to acknowledge this to Rev. M. J. Divine.
John I. Sloat, Cashier, Commercial and Savings Bank,
Winchester, Va. In connection with the offering of
7/8 Treasury Certificates of Indebtedness, Series D -
1944, as of July 22, we beg to call your attention to
the manifest unfairness in the limited time of the said
offering, as far as country banks are concerned. Rarely
does the mail from the Federal Reserve Bank reach this
institution until noon, or later, and the purchase of
Government Securities must be approved by the Board of
Regraded Unclassified
236
- 2 -
Directors of the average country bank. Since you
limit the offering to one day only, you therefore
play directly into the hands of the city banks, and
we small country fellows are left out in the cold.
Our subscription for fifty thousand dollars of these
Certificates is in the mail as of today; but announce-
ment of the closing of the offering has just come to
my desk, and we will be unable to secure the Certi-
ficates subscribed for. The country banker is called
upon to render, and is rendering a multitude of services
for the Government -- most of which carry no remunera-
tion -- and we feel that it is only fair and equitable
that we have a chance to compete with the banks in the
Federal Reserve cities who, for the most part, get the
jump on us by one day in any offering which the Govern-
ment may make to the banks, or to the public.
W. L. Lahman, Cashier, The First National Bank, Still-
water, Okla. We have supported our Government at all
times in purchasing our share of its Bond issues, and
had planned to subscribe for the above issue (7/8% one-
year Bonds) in a substantial amount, but understand the
subscription closed last night at midnight, the day of
offering. We feel that we should be given the same
consideration to subscribe as the banks in the large
cities. We know that these banks get advance informa-
tion. They have specialists watching the Bond markets,
and they get their mail early in the day. We are
fortunate to get ours by 2:00 p.m. One train 8 day is
not conducive to early mail delivery. * # # We believe
that closing these issues the day they are offered is
unnecessary and unethical, and is unfair to the great
bulk of country banks. ***
Allan Schecter, Erwin Adelman, Dick Kahl, Paul Dunn,
Detroit, Mich. Enclosed find check in the amount of
$2.25. This money was raised when The Filthy Four
Kobby Club had an Army and Navy Relief Show, which
Regraded Unclassified
237
- 3 -
was held in the garage of 2973 West Grand Avenue.
Please give this money to the Army and Navy Relief.
(Letter written in pencil and on paper which is
appropriate to the name of the boys' club.)
Flora Y. Hatcher, Washington, D. C. Some of us, as
citizens, are very much disturbed at what impresses us
as a slowness to devise sound methods of compulsory
lending to assist in controlling inflation. We do not
understand, Mr. Secretary, why you do not give leader-
ship and initiative to such a program. The voluntary
method, so far as helping control inflation is con-
cerned, appears (even to a lay person) to be a failure.
A required system of lending, devised on an income tax
method allowing exemptions for those carrying special
responsibilities, and for savings, such as insurance,
etc., would greatly aid in controlling inflation. You
would find the American people thoroughly in sympathy
with such a plan. Certainly it is to be preferred to
the unfair tax methods which place the real burden of
taxation primarily on the middle income and low income
groups. # # #
W. S. Gilman, Winter Park, Fla. (Suggestion re new
pennies.) Of course you do not remember me, but I shall
never forget you for the reason that you treated me
fairly when I was in trouble over my income tax. I am
glad to say that I am better off now. So I thought I
would offer a suggestion which would, I think, do some
good, and make you other friends. Just forget it was
not your own thought. I'll never brag about it.
People with poor eyesight are bothered by these new
pennies. Why not pay a compliment to our Chinese
friends and save metal and trouble by punching holes
in these pennies. The holes could be square, round,
or S-shaped. There could be one hole in the one-cent
piece, two in the two-cent piece, three in the three-
cent piece, or any number of ways that you could decide.
Regraded Unclassified
238
- 4 -
Unfavorable Comments on Bonds
Mrs. Milton H. Koch, Mt. Vernon, Iowa. In the last
letter I had from my boy, Samuel Stuart Koch, U.S.N.,
on the ill-fated Atlanta, was written on November 7,
and in it he told me he had bought a $50 Bond, and
I would receive it in January, and not to write about
it for awhile, but November 13 he went down with the
Atlanta. Now how can I get track of the Bond? I figured
it would be on record in your Department. Can you let
me know about it sometime soon? I'll be expecting an
answer soon. There should be a record somewhere of
his Bond. A shipmate told me he knew Sam bought one,
but he was killed so soon after, of course, I never got
any more mail.
Gertrude Schermeyer, Floral Park, Long Island, N.Y.
On or about January 5, 1943, I reported to the Division
of Loans and Currency, Chicago Branch, that I had
destroyed 3 Bonds by fire. I furnished them with the
numbers of two of the Bonds, but was unable to give
them the number of the third, a $50 Bond purchased
through a payroll deduction plan with the Metropolitan
Life Insurance Company. I received a reply, dated
April 23rd, from the Chicago Branch, stating I would
be further advised about duplicate Bonds. To date,
no reply has been received. It seems to me that when
a person is investing their money in Government Bonds,
there should be some way in which the owner may get
duplicate Bonds without such 8. delay -- 6 months.
#
H. William Nolde, President, Nolde Brothers, Inc.,
(Bakery), Richmond, Va. In reply to your letter of
July 19, please be advised that our auditor has been
on his vacation and just returned. He had enough
Government reports to make out to last thirty days.
We will give you this information as soon as we can.
We are buying Bonds every week, and doing everything
We can to sell more. It is almost impossible to keep
up the many reports we have to make out.
Regraded Unclassified
239
- 5 -
Unfavorable Comments on Taxation
Joseph G. Engert, Real Estate Investments, Chicago,
Ill. I have a constructive criticism of the method
used to collect the 20% withholding tax. I am an
employer and I dread the work required to deduct the
necessary sums from each employee, making deposits
monthly in stated banks, filing reports regularly, etc.
As a tax-paying citizen, I regret the cost of hiring
thousands of employees that will be necessary to
properly credit each taxpayer each month with each
deduction from his pay check. I believe I have & plan
which will make all this work unnecessary, and I am
submitting it to you for your consideration. Etc., etc.
J. J. Myler, Secretary-Treasurer, Neisner Brothers,
Inc., Rochester, N.Y. As you undoubtedly know, the
brackets in the current tax payment Act of 1943 are
worked out for the median of the wage bracket listed.
As a result, employees in the lower half of the bracket
are penalized, while those in the upper half are bene-
fitted. We operate 8. chain of veriety stores in sixteen
states. We have had many complaints of too much money
being withheld from the first group of employees, but
none from the second. The explanation that it will be
adjusted next March does not satisfy our employees.
They feel that more is being deducted than is necessary
and they have less money for their personal needs.
These employees are in the lower income groups, and we
are inclined to agree with them. # The withholding
tables in the law are unsatisfactory for the reasons
given. The straight 20% method would throw 8. consider-
ably greater amount of clerical work upon our present
short and busy staffs. Therefore, we ask your permission
to use the Wage Bracket Withholding Tables submitted
herewith for our employees.
Regraded Unclassified
240
- 6 -
T. S. Pendergrass, Business Counselor, Oakdale, Calif.
According to a report in the daily press the forms on
which the taxpayers are to file an estimate for their
1943 tax will probably be available by the first of
September. If this is the earliest date on which tax-
payers may receive these forms, and the accounting
firms are not able to render assistance to the taxpayers
under this muddled up tax law, I can assure you that
the pay-as-you-go program for 30,000,000 taxpayers will
prove an absolute failure. It will not be possible for
these forms to be filled in and filed in SO short a
time, and under the law, each of these taxpayers who
fails to get their declaration of estimate filed by the
15th of September will suffer the penalty prescribed
in the Act. * # #
Mrs. Farrar Burn, N.Y.C. We paid our income tax in full,
afraid we should never have it again if we didn't, since
we had saved for that. Now that we are making 50 much
less than last year, and since they are taking out 20%
of that, we are finding it tougher going than usual,
even for us, quite toughened to doing without. What
are the chances of getting half of our $730.64 back?
We sent you a check on January 27, 1943, from the San
Juan County Bank, Friday Harbor, Washington, through
the Collector of Internal Revenue, Tacoma, Washington.
Nowhere on your stamp, however, does it say "income tax
in full" so how on earth can it be proven that it was
the tax in full? + 4F
Thomas C. Hennessey, East Lynn, Mass. On March 1, 1943,
I paid an income tax of $192.06 to the Collector of
Internal Revenue at Boston, Mass. This amount paid
represented my taxes for the entire year of 1942. I paid
this amount thinking that whatever part was forgiven, an
equivalent amount would be refunded to me within a rea-
sonable time. Several weeks ago I wrote to the Collector
and there has been no reply. I later phoned their office
Regraded Unclassified
241
- 7 -
and was informed that there was nothing they could do
in regard to a refund as they had no authority from
Washington to do SO. I relied E. lot on this money to
help pay the taxes on my home, and also to keep my
regular purchases of U. S. Government Bonds continuing.
This action of the Internal Revenue in withholding my
money without my consent is very high-handed, and
wholly unwarranted, and further serves to decrease con-
siderably my war effort. It is hard to believe that
your office condones such conduct. # # #
Regraded Unclassified
242
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Chungking, China
DATE: July 30, 1943, 1:39 p.m.
NO.: 1337
The following information which WAB communicated to
us by B reliable foreign source WAB originally received
from A responsible Chinese who left Shanghai this year
in June.
1, A8 a consequence of the very restricted market
for United States dollar notes there 18 A large variance
in rate. The Chinese mentioned above required ten days
to dispose of 45,000 United States money, and the rate
in that time had fallen from CRB 70 to 1 to 62 to 1.
The rate fall to 51 to 1 after these sales and then rone
back AA for AR 59 to 1, However, the rate has been as
high AB 75 to 1. It appears that the Jananese Are not
interested in United Staten dollar notes and the informant
does not believe they take part in the buying and selling.
Europeana handle some of the transactions,
2. CRB 5000 18 the fixed orice coiling for gold per
ounce, but CRB 4800 M°8 the recent selling price (868
Embasay's 1149, July 10, paragraph 11). The informent
is not AWAre that the JADANESS are owners of Fold, although
at times they have old gold.
3. Altogether CRB 100 million has been sent to Chungking
from Shanphai to nurchase United States dollar savings
certificates for Chinese buyers, It is estimated by infor-
mant; he himself remitted CHB 50 million for the purchase
of certificates (telegram cited Above, perscreph 16).
4. CRB currency had increased in circulation by
June 30, 1942, from An estimated 100 million at the be-
Finning of the hostilities between Jenan and America to
about 500 million. FADI WillB then recalled from circula-
tion. Ry July 1, 1942 there WAR about CR3 two billion
in circulation after CRB 1,500 million had been exchanged
for fani three billion. The Japenese have used this favi
to nurchase from Free Chine and the guerilla preas such
articles
Regraded Unclassified
243
&
articles na cotton, teiwood, silk, 011, etc., in large
amounta. The Central Reserve Bank, Shanghai will give
merchants fani to purchase goods from these regions and
pell them to the Jacanese. About faoi two billion 18 still
in the Japanese hands the informant believes,
5, CRB 171.70 WAB the moet recent rate for favi
drafts on Chungking, sold in Shanphei, About ON 1.50 for
CRB 1 18 a lower rate which exists in Chungking because of
the long transit time, About CAR 1 for ON 1.20 18 the
Shanghai black market rate for feni because many persons
expect the renudiation of the CRB currency eventually and
therefore want fant on hend (telegram cited, paragraph 10)
Since April 1, 1943, on which date Chow PU Hai Nanking Finance
Minister admitted that TAB 400 million had been issued in
total, the informent believes that the issuence of CRB our-
rency has increased by approximately one billion per month.
This would mean that by August 1, 1943 the total issue would
be monroximately CRR nine billion. CN 8.80 to 9 for CRB 1
18 the present Chungking Peining rate.
6, Military yen has been withdrawn from circulation
in All parts of occupied China excent Hong Kong and 18840
has been stonced. It hAB replaced Hong Kong currency since
June 1943 At the rate of military yen 1 for Hong Kong 4,
which 10 the forced conversion rate. out of the monthly
18840 of CRB, 100,000,000 le being used to recall military
yen and the balance of ORB 600 million issued monthly 16
used for the maintenance of the Jananese Army stationed
in the areas of occunied China where CRB currency 16 used,
according to estimates. This area extends southward from
Peng Puenwhei (Trom there northward to the border of
Menchukuo 18 the FRB area) And CRF- 20,000,000 16 estimated
PR the total daily cost of the Jaranese Army.
7. The monthly budget for Narking Regime at present
18 approximately CRB 100,000,000, An increase over the
CN 25 million before Pear\ Harbor, This VP8 brought about
for the most part by the large increase in the numbers of
nupnet troops. The consolidated taxee contribute to this
hut tax revenue 1A very limited. Recause official ship-
mente by the JADANASE compri se the majority of the trade
the customs revenue 1A Also amall. Squeeze in the collec-
tion of revenue 18 rife.
Please give Treasury a parachrase at Adler's request,
ATCHESON
Regraded Unclassified
244
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTAL N 0, 250
Information received up to 7 A.M., 30th July, 1943.
1. NAVAL
One of H.M. Monitors was slightly damaged in an air attack at
AUGUSTA on 23rd/24th. Two enemy aircraft were shot down. The Monitor had five
fatal casualties. A tank landing craft was sunk by bombs off SYRACUSE on 27th.
The Northbound convoy was again unsuccessfully attacked yesterday by 7 F.W. 200'
in the Bay of BISCAY. 1 was destroyed by Beaufighters.
Reference OPTEL No. 229, paragraph 1. SHIPPING CASUALTIES. For
"One Norwegian ship sunk and one U.S. ship (still afloat) in convoy off mouth of
ST. LAWRENCE" substitute "One U.S. ship and one Norwegian tanker sunk in convoy
off mouth of AMAZON."
2. AIR OPERATIONS
WESTERN FRONT. 29th. 250 Fortresses went out. 90 attacked
shipbuilding yards and the naval dockyard at KIEL. Some cloud, poor visibility
severe A/A end strong fighter opposition. 32 attacked HELIGOLAND and 54 bombed
the Heinkel Fighter Assembly Factory at WARNEMONDE where weather was excellent
and good results obtained against average A /A and slight fighter opposition.
B Fortresses missing and 2 crashed into the sea. Escorted medium, light and
fighter bombers attacked 3 airfields and a power station in Northern FRANCE.
29th/30th. 837 sircraft sent out - HAMBURG 782 (28 missing);
DUSSELDORF 4; seamining 6; leaflets - Northern ITALY 9; leaflets - FRANCE 3;
Intruders 33 (1 enemy aircraft destroyed). At HAMBURG weather was good and the
attack is considered successful. The glow from fires still burning could be
seen on arrival. Defences had been considerably strengthened. 8 enemy air-
craft crossed the KENT Coast and 4 operated off shore. Beaufighters destroyed
1 M.E. 210.
MEDITERPANEAN. 27th. Beaufighters sank 3 small craft and
damaged 5 others in the ARGZAN and IONIAN SEAS.
29th. 410 Spitfires on enti-shipping patrols and sweeps scored
29, 1, 3 for the loss of 1. The 29 destroyed included 21 JU 52's.
Regraded Unclassified
245
NEW
YORK
Herald
Tribune
July 31, 1943
Dear Mr. Secretary:
When I wrote you a few
days ago I intended to send you the most
recent editorial on "Forced Savings" that
has been published in the Herald Tribune.
I can find no trace of any
one on the staff believing in them and the
record seems to show that the paper has al-
ways been in favor of the voluntary procedure.
Certainly that is the
opinion of our executives.
Sincerely yours,
taken Rays Rid
The Hon, Henry Morgenthau Jr.
Regraded Unclassified
246
NEW YORK
Herald Tribune
So far as corporation are concerned, It is
an accepted principle of war finance that
they should not be permitted to enjoy a
windfall as a result of a war boom. In pur-
suance of that principir American corpora-
tiens now pay 90 per cent of "heir war-time
Friday, June 11, 1943
profits (in addition to a large proportion of
their normal profits) to the government In
The President on Forced Savings
taxes. This is simple, it is logical and it is
The President's sudden and offhand es-
thoroughly just. Yet, for purely political
pousal at his press conference this week of
reasons the same principle has never been
a fiscal program embracing forced savings
adopted with reference to the taxation of
was, to put It mildly, in questionable taste.
Individuals, It has been urged by econo
It was a needlessly gratuitous and uncalled-
mists and editorial commentators from time
for repudiation of his own Secretary of the
to time (this newspaper has frequently
Treasury, who, as Mr. Roosevelt and every
pointed out the virtues of such a program),
one else knows, is a staunch believer in vol-
but Washington has invariably turned a
untary war loans and who has steadify Im-
Bahy eye upon the idea. The President has
prove the machinery in recent months for
frequently protested against doption of a
putting that policy on a successful basis.
sales tax because It would discriminate, in
Moreover, the President, It seems to us, Is
Its incidence, against those in the lower-
on the wrong side of this Issue, Why this la
Income brackets; but It does not seem to
so is illustrated by colloquy that occurred
have occurred to him that his proposal for
here on Monday of this week when Secre-
compulsory savings would place a wholly
tary Morgenthau held a press conference
disproportionate burden on those with Axe 1
to announce the new set-up of the war-
Incomés,
loan organization. One of the Interviewers
The point has been reached in the financ-
asked If it were true that the war-loan
Ing of the war where this vital distinction
officials and the Secretary of the Treasury
between those with fixed incomes and those
expected every ne to raise his war-bonds
enjoying windfalls as a result of the war
subscription to 25 per cent of his Income,
boom should be recognized. If we are to
W. Randolph Burgess, the new chairman of
turn to compulsory savings, then such forced
the War Finance Committee for New York
loans should be exacted, M, the excess-
State, said Dr at the government hoped to
achieve that as an average, but could not
profits tax 1a, in proportion to the increase
expect every worker to reach 1: "That,"
of individual incomes over a pre-war base
observed Mr. Morgenthau, "1s the advantage
period. That would be a political compro-
of the voluntary plan. A forced-savings plan
mise with the principle of excess-profits
would cut right across without making al-
taxation, but it would be equally effective
lowance for individual circumstances."
as an anti-inflation weapon; for It is this
This 15, of course, a vital distinction, par-
war-time increase in individual incomes
ticularly at this stage of the war effort when
that constitutes the "inflation gap," which
persons with fixed incomes are finding the
is talked about so much but about which so
strain of high taxes, the high cost of living
little that is realistic has been done.
and pay-roll savings subscriptions exceed-
ingly heavy, while millions of war workers
have nore money to spend than they ever
had before. The allocation of 10 per cent of
his salary for was bonds may mer a real
hardship to a person in the former eate-
gory, whereas three times that might be
little, If any, burden to & person whose in-
come has been doubled or quadrupled as a
result of the war.
Regraded Unclassified
247
TO:
Memo
Sir Ronald Campbell of the British
Embassy has an appointment with
Secretary of State Hull for 3:30 P.M.,
Monday, August 2, 1943, to hand Secretary
Hull a communication on reverse lend
lease with special relation to furnish-
ing of raw materials to the United States.
Monday
12:50 P.M.
7-31-43
Hull
Mr. Gray of Mr. Hear' office.
From: Ensign Westwater John
Regraded Unclassified
248
ELEVENTH REPORT TO CONGRESS
ON LEND-LEASE OPERATIONS
For the Period Ended July 31, 1943
Regraded Unclassified
ELEVENTH REPORT TO CONGRESS
ON LEND-LEASE OPERATIONS
For the Period Ended July 31, 1943
"The President from time to time, but not less frequently than once
every ninety days, shall transmit to the Congress a report of operations
under this Act except such information as he deems incompatible with
the public interest to disclose."
[From Section 5, subsection b of "An Act to Promote the Defense of
the United States" (Public Law No. 11, 77th Congress, 1st Session).]
Regraded I Inclassified.
CONTENTS
Chapter
Page
President's Letter of Transmittal
5
1. The Lend-Lease Program to Date
7
2. Lend-Lease in the Theaters of War
14
3. Lend-Lease and Food
26
Appendix
I. Lend-Lease Act
34
II. Fourth Lend-Lease Appropriation Act
38
III. Amounts of Lend-Lease Aid Authorized
40
IV. Status of Nations
41
3
PRESIDENT'S LETTER OF TRANSMITTAL
To THE CONGRESS OF THE UNITED STATES OF AMERICA:
I am transmitting herewith to the Seventy-eighth Congress
a report of operations under the Lend-Lease Act for the period
ended July 31, 1943.
In the month of July alone, lend-lease aid exceeded a billion
dollars. Lend-lease supplies are hastening the day of final
victory.
Sicily has fallen. The fascist dictator has been thrown out
of power. For the first time the United Nations forces
occupy part of the homeland of the enemy.
The subjugated peoples of Nazi Europe are now aware that
the European fortress is not impregnable. The great offensives
of the Soviet Army on the Eastern Front, the continued heroic
struggle of the Chinese, and the British offensives in other
areas, aided by lend-lease munitions and supplies, are having
their repercussions both on and behind the battle lines. Our
might and that of our allies is being felt in the Axis satellite
nations of the Balkans and Middle Europe, and in Nazi
Germany as well. From Hamburg on the North Sea to Ploesti
in Rumania, the people know from first-hand experience with
what crushing force the United Nations can strike.
Except for the responsible fascist leaders, the people of the
Axis need not fear unconditional surrender to the United
Nations. I have said that we shall bring food for the starving
and medicine for the sick in the areas liberated by the United
Nations. We have done so, under lend-lease, in North Africa.
We are doing so in Sicily. We shall continue to do so in
other areas, as they are liberated, to prevent economic break-
down and to aid the liberated peoples to produce and to help
themselves. We shall provide these necessary civilian sup-
plies in support of our military operations and as a matter of
5
simple humanity. The people of Axis-controlled areas may
be assured that when they agree to unconditional surrender
they will not be trading Axis despotism for ruin under the
United Nations. The goal of the United Nations is to permit
liberated peoples to create a free political life of their own
choosing and to attain economic security. These are two of
Chapter 1
the great objectives of the Atlantic Charter.
But until the day of unconditional surrender, the United
Nations will continue with the force of all their power to
THE LEND-LEASE PROGRAM TO DATE
hit the enemy. We are striking hard and ready to strike
harder. Greatly increased United States forces and greatly
increased lend-lease supplies are on the way to the battle
The munitions, food and supplies which we send abroad
fronts. The longer this war goes on, the stronger the United
as lend-lease aid constitute a relatively small part of this
Nations will become.
country's total war costs-an estimated 12 percent. The lend-
The United Nations are growing stronger because each of
lease program is, however, of fundamental importance to the
successful prosecution of the war by the United Nations. The
them is contributing to the common struggle in full measure-
other United Nations produce most of the munitions and
whether in men, in weapons, or in materials. Each is con-
other war supplies which they use, but lend-lease provides
tributing in accordance with its ability and its resources.
many weapons which they are not in a position to produce
Everything that all of us have is dedicated to victory over
themselves, food which augments their inadequate supply,
the Axis powers. The Congress in passing and extending the
and raw materials and industrial equipment which enable
Lend-Lease Act made it plain that the United States wants
them to expand their output of finished munitions and to
meet essential civilian needs.
no new war debts to jeopardize the coming peace. Victory
and a secure peace are the only coin in which we can be
Total Aid
repaid.
This report on lend-lease and reverse lend-lease activities
From the passage of the Lend-Lease Act on March 11, 1941,
to July 31, 1943, lend-lease aid-goods transferred and services
should be both an assurance and a warning to our enemies.
rendered-has totaled $13,973,339,000 (Table 1). Of this
The power of the United Nations is great. The will of the
amount, munitions were 50 percent, industrial products 21
United Nations is fixed. In this common war we fight as
percent, and food and other agricultural products 14 percent.
one man, for one victory-and we shall have it.
The remaining 15 percent consisted of shipping, ship repairs,
Franklin D. Roosevelt.
and other services, and the construction of plant facilities in
the United States for the production of lend-lease goods.
(Filed August 25, 1943, with the Secretary of the Senate and the
Chart 1 shows the amount of lend-lease aid for each month
Clerk of the House of Representatives as provided in Section 5-b of
through July 1943. In June of this year the monthly total
the Lend-Lease Act.)
reached the one billion dollar mark for the first time.
6
7
Regraded Unclassified
TOTAL LEND-LEASE AID
Lend-Lease Exports
Transfer figures are inadequate to show where lend-lease
Thousands of Dollars
goods have been sent, as the name of the country to which goods
are transferred does not always indicate to which of the war
Cumulative
areas they have gone. Lend-lease export figures give a better
July
June
May
Mar. 1941
1943
indication of the ultimate destination of the articles. These
1943
1943
through July
1943
are shown on a cumulative basis in Table 2 and by months in
Table 3. They are also shown on a quarterly basis in Chart 2.
Goods Transferred
1,018,026
954,009
715,699
11,901,972
Services Rendered
32,381
76,268
74,484
2,071,367
GOODS TRANSFERRED AND SERVICES RENDERED
Total Lend-Lease Aid.
1,050,407
1,030,277
790,183
13,973,339
Million $
Monthly
CUMULATIVE
1200
SINCE MARCH 1941
The above figures are exclusive of the value of goods consigned to United States commanding
generals for subsequent transfer in the field to lend-lease countries. The total value of such
(Millions of Dollars)
consignments to July 31, 1943 was $250,481,000.
1000
Goods
11,902
Table 1
Services
2,071
SERVICES
Total
13,973
800
Lend-lease exports of munitions in the past year were
600
equivalent to 15 percent of our munitions production in that
period. We sent to our allies under lend-lease in the year
400
ended June 30, 1943, 17 out of every 100 bombers we pro-
GOODS
duced, 25 out of every 100 fighter planes, 22 out of every 100
200
light tanks, and 36 out of every 100 medium tanks.
o
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jen
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mor
Apr
May
Jun
Jul
Aug
Sep
Oct
Nev
Dec
Redistribution of Materials
1941
1942
1943
Procurement of lend-lease materials is based on careful plan-
Chart 1
ning which takes into account the needs of our allies in relation
to the needs of our own armed forces and civilian population,
The export figures, of course, do not include shipping, ship
available shipping facilities, and other relevant factors. The
repairs and other services rendered, or plant facilities con-
exigencies of warfare frequently cause shifts in the needs for
structed in the United States and, as explained in the foot-
different articles, diversions of shipping from one route or from
note to the tables, they do not include all goods transferred;
one country to another and other unpredictable changes which
they do, however, give a substantially complete picture of the
require the redistribution of materials.
distribution of lend-lease goods.
In the case of munitions, which are procured and distributed
The relative amounts of military articles, industrial mate-
by the War and Navy Departments, such redistribution is con-
rials and agricultural products exported under lend-lease during
trolled by the Munitions Assignments Board, which deter-
the period from July 1, 1941, to June 30, 1942, and during
mines the use to which they can best be put in carrying out the
the period from July 1, 1942, to June 30, 1943, are shown in
world-wide strategy of the United Nations. For industrial
Chart 3.
547192°-43-2
9
8
Regraded Unclassified
materials and products, the Lend-Lease Administration early
LEND-LEASE EXPORTS-CUMULATIVE-MARCH 1941
this year created a Materials Redistribution Committee to
THROUGH JUNE 30, 1943
work with the lend-lease countries and with the Redistribution
Division of the War Production Board in putting to immediate
Millions of Dollars
war use such articles as cannot be shipped within a reasonable
time to the country for which they were ordered, or because
of the changing strategy of the war, are no longer urgently
required by that country.
WHERE LEND-LEASE GOODS HAVE GONE
United Kingdom
U. S. S. R. U.S.S.R.
Africa, Middle
East and Medi-
terranean Area
China, India, Aus-
tralia, and New
Zealand
VALUE OF EXPORTS BY QUARTERS
Other
Total
Million $
Quarterly
MUNITIONS
2500
Ordnance
192
70
133
103
52
550
MIDDLE AND
FAR EAST
Ammunition
374
246
218
163
53
1,054
AND OTHER
Aircraft and Parts
507
522
2000
249
196
188
1,662
Tanks and Parts
369
183
204
127
43
926
Motor Vehicles and Parts
143
316
183
147
35
824
1500
Watercraft
125
56
17
12
17
227
U.S.S.R.
Total
1,710
1,393
1,004
748
388
5,243
1000
UNITED
KINGDOM
INDUSTRIAL ITEMS
500
Machinery
260
188
73
78
10
609
Metals
425
302
110
131
16
984
Petroleum Products
310
15
43
62
5
435
o
Other
223
130
72
65
36
526
I
II
III
IV
I
H
III
IV
I
II
III
IV
1941
1942
1943
Total
1,218
635
298
336
67
2,554
AGRICULTURAL
Chart 2
PRODUCTS
Foods
1,213
373
57
30
27
1,700
Other Agricultural Products
317
43
4
19
2
385
Materials and supplies of all kinds are being redistributed,
steel being one of the most important items. Last fall a sub-
Total
1,530
416
61
49
29
2,085
stantial amount of steel destined for Great Britain was diverted
TOTAL EXPORTS
4,458
2,444
1,363
1,133
484
9,882
to American armament production because it could not be
moved on account of the shipping requirements of the North
The above figures and those in Table 3 do not include (1) articles transferred to foreign
African campaign. Also, approximately 250,000 tons of
countries but used in the United States, such as trainer planes for the instruction of United
finished and semifinished steel purchased for Russia are being
Nations pilots; (2) some ships which leave the United States under their own power; (3)
some goods consigned to United States commanding generals for subsequent transfer to lend-
redistributed to other lend-lease countries and to American
lease countries; (4) materials which have been transferred but not yet exported; (5) goods pur-
chased outside the United States and sent directly to lend-lease countries; and (6) some other
industry. This steel has been made available in part by the
items of relatively small amount,
The figures include the value of planes flight delivered which were not included in data
increasing need for food in Russia, which has required the
presented in previous Reports to Congress.
use of the limited shipping space for that purpose rather than
Table 2
10
11
Regraded Unclassified
LEND-LEASE EXPORTS-MONTHLY
for shipping the steel. Some of it consists of barbed wire, the
need for which has been reduced as a result of the Soviet
Millions of Dollars
Army's shift from the defensive to the offensive along large
portions of the fighting front. Another part is being re-
turned to American industry because improvements in the
United Kingdom
U. S. S. R. U.S.S.R.
Africa, Middle
East and Medi-
terranean Area
China, India,
Australia and
New Zealand
technique of manufacturing munitions have made obsolete
certain types of shell steel which had been procured for Russia.
Other
Total
KINDS OF GOODS EXPORTED UNDER LEND-LEASE
1941
1
1
Mar
1
1
4
6
JULY 1941 - JUNE 1942
JULY 1942 - JUNE 1943
Apr
9
5
1
1
16
May
26
6
1
2
35
Jun
Foodstuffs, etc.
Foodstuffs, etc.
30%
18%
Jul
49
19
1
3
72
Munitions
Aug
46
14
5
2
67
Munitions
56%
42%
Sep
74
8
2
2
86
Oct
141
12
12
1
166
Nov
107
10
18
2
137
Industrial
Dec
119
1
21
12
2
155
Items
26%
1942
Industrial
Jan
105
15
24
19
13
176
Items
Feb
79
55
27
21
12
194
28%
Mar
150
97
25
45
12
329
Apr
144
164
45
55
16
424
305
May
143
70
37
47
8
Jun
209
110
35
36
13
403
Jul
173
103
66
59
21
422
Aug
152
150
58
56
18
434
Chart 3
Sep
213
102
71
67
18
471
Oct
222
126
98
83
29
558
Expansion of U.S. Plant Facilities
Nov
199
191
95
56
16
557
Dec
208
167
111
98
21
605
In order to manufacture the munitions and supplies urgently
1943
needed by our allies, it has been necessary to expand production
Jan
180
157
91
72
18
518
Feb
215
184
44
49
30
522
facilities in the United States and an important part of this
Mar
311
202
105
67
69
754
expansion has been financed with lend-lease funds. There
Apr
363
233
111
69
63
839
had been allotted as of June 30, 1943, $869,500,000 of lend-lease
May
394
178
142
81
43
838
Jun
426
139
82
101
44
792
funds for this purpose, of which approximately $600,000,000
has been expended. In the postwar period these production
TOTAL
facilities will be a permanent part of our industrial capacity.
EXPORTS
4,458
2,444
1,363
1,133
484
9,882
(See note to Table 2)
Table 3
13
12
Regraded Unclassified
however, include munitions consigned to the American com-
manding generals in this area for transfer to the armed forces
of lend-lease countries. The value of such goods consigned
to June 30, 1943, amounted to $102,518,000 additional.
Chapter 2
1941
1942
Jan-June 1943
Ordnance and Ammu-
LEND-LEASE IN THE THEATERS OF WAR
nition
$33,267,000
$173,619,000
$144,163,000
Aircraft and Parts
2,022,000
114,283,000
133,002,000
Tanks and Parts
30,573,000
48,408,000
125,362,000
Motor Vehicles and
As the United Nations move forward against the Axis with
Parts
10,758,000
116,289,000
55,659,000
Watercraft
1,820,000
10,794,000
4,530,000
ever-growing strength, munitions, industrial materials and
Industrial Items
14,683,000
194,138,000
88,702,000
food flow from the United States to those places from which
Foodstuffs, etc
2,792,000
34,423,000
23,666,000
the most damaging blows can be struck at our enemies. Table
TOTAL
95,915,000
691,954,000
575,084,000
4 shows the value of lend-lease goods that were sent to the
main theaters of war in 1941, 1942, and in the first 6 months
Table 5
of 1943.
Military Aid
1941
1942
Jan-June 1943
Lend-lease aid to this area has been principally for use in two
campaigns. The first, which was designed to expel the Axis
Africa, Middle East,
forces from North Africa, ended successfully on May 8, 1943,
and Mediterranean
Area
$95,915,000
$691,954,000
$575,084,000
with the surrender in Tunisia. The second, which began on
U.S.S.R
545,000
1,349,170,000
1,093,892,000
July 10, 1943, with the invasion of Sicily, will conclude only
United Kingdom
572,620,000
1,997,328,000
1,887,951,000
with the unconditional surrender of Italy and Germany.
China, India, Australia
and New Zealand
52,218,000
640,711,000
440,010,000
Both of these operations have been in every sense a united
Other Areas
19,605,000
198,969,000
265,531,000
military effort. The forces of many nations-the United
Kingdom, Australia, India, New Zealand, South Africa,
TOTAL
740,903,000
4,878,132,000
4,262,468,000
Poland, France, and the United States-participated in the
North African campaign and lend-lease materials played their
Table 4
part. The British Eighth and First Armies were partially
equipped with lend-lease supplies, as were the soldiers com-
AFRICA, MIDDLE EAST, AND MEDITERRANEAN AREA
manded by General Giraud as well as the Fighting French
Lend-lease shipments to Africa, the Middle East, and the
who fought their way north from Lake Chad in the French
Mediterranean Area through June 30, 1943, totalled $1,363,-
Sudan. Equally vital to the campaign were the docks, naval
000,000. As shown by Table 5, nearly three-fourths of the
facilities, supply bases, air ferry routes and repair bases
shipments have consisted of munitions. This table does not,
developed in the Middle East with the aid of lend-lease funds.
14
15
Regraded Unclassified
Though British, Canadian and American troops have played
the major roles in the opening phase of the second campaign,
cial channels of distribution were disrupted and importations
the invasion of Sicily, forces of other United Nations, equipped
from the United Nations were essential.
in part with lend-lease weapons, will play an increasingly
Shipments of civilian goods to North Africa began in
important role in the Mediterranean area. Greek forces have
December 1942, when the British diverted a large convoy
already participated-units of the Greek Navy helped to
originally destined for Malta. Subsequently, it was agreed
prepare the way for the invasion of Sicily and the Greek Air
that the United States should supply approximately 30,000
Force has been bombing the island of Crete.
tons of civilian goods a month in addition to petroleum prod-
In accordance with our announced policy of supplying
ucts and coal. The British agreed to provide 82,500 tons of
weapons to the peoples of territories liberated from Axis
coal per month and other products that might be available
control, a French army of over 300,000 men recruited in North
from the British Empire.
and West Africa and supplied with lend-lease equipment will
Arrangements were made with the French authorities to pay
soon be added to the United Nations forces hammering at the
the United States for the civilian goods, and it is expected
Axis' European fortress. Several divisions have already been
that payments will be equivalent to the cost of civilian
equipped with new weapons and are now being trained in their
supplies shipped plus ocean freight. The distribution of the
use. French fliers have been brought to this country, where
supplies was planned so as to minimize profiteering by local
they will be trained in the use of American planes and furnished
merchants, and to maintain retail prices at levels prevailing
lend-lease planes with which to fight the Axis.
on November 8, 1942.
Shipments to South Africa have been primarily military
To coordinate the economic activities of the United States
equipment for the forces of the Union of South Africa, some
and Britain, General Eisenhower created the North African
of which have been fighting with the British Eighth Army.
Economic Board, which is constituted with British and
Approximately one-half of the military shipments consisted
American representatives as follows:
of planes for the South African air force. The remainder
(1) The Import Division, principally staffed by repre-
included guns, bombs and ammunition, and tanks and other
sentatives of the Office of Lend-Lease Adminis-
military vehicles. The nonmilitary shipments comprised
tration,
equipment and materials for South African war industries.
(2) The Procurement and Development Division, staffed
by representatives of the Office of Economic
Warfare,
Civilian Supplies for French North and West Africa
(3) The Financial Control Division, principally staffed
by representatives of the Treasury Department,
When the American and British armies landed in North
(4) The Coal Division, principally staffed by British
Africa in November 1942, they found a country in which
experts, and
wheat, meat, and fabricated goods were in short supply.
(5) The Relief and Welfare Division, principally staffed
The Nazis had permitted imports of some of the goods nor-
by representatives of the Office of Foreign Relief
mally brought from the continent, such as cotton textiles for
and Rehabilitation Operations.
clothing, leather for shoes, fabricated goods, and certain
The Lend-Lease Mission to North Africa, operating as the
foods. With the landing of American and British troops,
imports from Europe ceased abruptly. The regular commer-
Import Division of the North African Economic Board, has
supervised the distribution of most of the civilian goods.
16
547192°
17
Regraded Unclassified
Lend-lease supplies, consisting principally of milk for children
Negotiations for payment for these civilian supplies are now
and some of the food and clothing for the inhabitants of
being carried on with the French officials in Dakar and Algiers.
Tunisian cities, have been distributed free of charge by the
Office of Foreign Relief and Rehabilitation Operations,
U.S.S.R.
working as the Relief and Welfare Division of the North
African Economic Board.
Lend-lease shipments to the U.S. S. R. through June 30,
Up to June 30, 1943, the United States had shipped to North
1943, totalled $2,444,000,000. Aid has been supplied to the
Africa some 190,000 tons of civilian goods, valued at ap-
U. S. S. R. under agreements known as protocols by which
proximately $48,000,000. These have included such foods
we have agreed to make available specified quantities of
as flour, milk, sugar, wheat, and tea; seeds, soap, matches,
weapons and supplies during specified periods of time. The
cotton piece goods, clothing, spare parts for agricultural
first protocol, signed October 1, 1941, covered the nine-month
machinery and motor vehicles, and some materials to repair
period to June 30, 1942. The second covered the period
damaged utilities and buildings. We have already received
from July 1, 1942, to June 30, 1943. The third protocol,
from the French on account for these goods $25,000,000, and
which will cover the period from July 1, 1943, to June 30,
expect shortly to receive payment for the balance.
1944, is now under negotiation. Without waiting for this
The policy of supplying civilian goods to these areas has
protocol to be signed, we have continued to supply lend-lease
produced favorable results. Vigorous efforts have been made
aid. In July the tonnage of goods shipped to Russia was at a
to bring about a fair and equitable distribution of supplies,
high level and in August the volume is expected to be the
thereby discouraging hoarding and black market activities.
highest for any month since the program began.
Critical metals, concealed from the Germans, have come out
Table 6 shows lend-lease shipments to the U. S. S. R. by
of hiding and been made available to the United Nations.
categories through June, 1943.
With the help of supplies from the United States and Great
About 57 percent of the goods sent to the U. S. S. R. since
Britain, North Africa is being gradually restored to a state
the inception of the first protocol have been munitions such
where it will be self-sufficient in food and also produce a sur-
as airplanes, tanks and guns. We have sent more lend-lease
plus for export. Negotiations are now under way between
the North African Economic Board and the French authorities
1941
1942
Jan-June 1943
to supply a part of the food needs of our military forces sta-
tioned there and in contiguous areas from North African
Ordnance and Ammu-
production. The volume of such supplies will depend upon
nition
$75,000
$213,918,000
$102,279,000
the size of the harvest and the requirements of the civilian
Aircraft and Parts
300,641,000
220,577,000
Tanks and Parts
35,000
176,804,000
6,504,000
population.
Motor Vehicles and
Substantially the same course has been followed in French
Parts
149,092,000
166,824,000
West Africa, which includes not only the strategic Dakar area
Watercraft
11,020,000
44,886,000
Industrial Items
435,000
312,881,000
321,825,000
but is one of the most important edible oil producing regions
Foodstuffs, etc
184,814,000
230,997,000
in the world. Almost 20,000 tons of civilian supplies have
TOTAL
545,000
1,349,170,000
1,093,892,000
thus far been shipped to French West Africa. These have
consisted principally of cotton piece goods and rice substitutes.
Table 6
19
18
Regraded Unclassified
planes there than to any other country. Large quantities of
supplies for her transportation and communication systems
1941
1942
Jan-June 1943
have been sent to aid the movement of the weapons of war
over vast distances to her armies at the front. We have
Ordnance and Ammu-
shipped to the Soviet Union more than 100,000 tons of rails
nition
$30,761,000
$250,400,000
$284,806,000
and accessories. Quantities of automatic block signal system
Aircraft and Parts
13,330,000
267,762,000
225,719,000
Tanks and Parts
10,521,000
35,998,000
322,360,000
equipment for the U. S. S. R. are in production. We have
Motor Vehicles and
shipped more than 150,000 motor vehicles, over 600,000 miles
Parts
14,558,000
61,950,000
66,946,000
of telephone wire and approximately 190,000 field telephones.
Watercraft
6,003,000
45,906,000
73,011,000
Industrial Items
165,357,000
604,218,000
448,574,000
Shipments to the U. S.S. R. have also included thousands
Foodstuffs, etc
332,090,000
731,094,000
466,535,000
of tons of raw materials and machinery to help replace the
TOTAL
572,620,000
1,997,328,000
1,887,951,000
output of war plants in areas now occupied by the Nazis.
Included in these shipments have been aluminum, copper, steel
and large amounts of chemicals and explosives used in the
Table 7
manufacture of ammunition and bombs. We have purchased
a few existing plants in this country and shipped them to
of the shipments to the United Kingdom have been sent for
Russia with machinery for new ones as well.
this purpose. About 34 percent of lend-lease exports to Great
More than one-fourth of the tonnage of goods exported to
Britain has consisted of foodstuffs. In Chapter 3 the British
the U.S. S. R. has been food to maintain the fighting strength
need for our food is discussed in more detail.
of the Red Army. We have shipped more than 1,300,000 tons
The tools, machinery, and raw materials we send to the
of food, about one million under the second protocol alone.
United Kingdom are needed in the operations of war plants;
Elsewhere in this report the Soviet need for lend-lease food is
the petroleum products are required by the R. A. F. and the
described in more detail.
British Navy, as well as to maintain her industries. The out-
put of British war materials is tremendous and until the
UNITED KINGDOM
first quarter of 1942 was larger than the United States output.
While a large proportion of this production is retained for
Lend-lease exports to the United Kingdom through June 30,
use by the United Kingdom forces, part is furnished to Russia
1943, totalled $4,458,000,000. In addition, shipments of muni-
and part supplied to British Empire forces fighting the Axis
tions and other goods to the United Kingdom that were pur-
in the Mediterranean Area, India, and the Southwest Pacific.
chased for cash in the same period totalled $1,450,000,000. Of
The amounts shipped abroad are indispensable to the United
the lend-lease exports to the United Kingdom 42 percent were
Nations forces.
shipped in the first six months of 1943, as shown by Table 7.
To help get lend-lease supplies to the United Kingdom and
The United Kingdom has received approximately 45 percent
deliver the output of her war industries to United Nations
of all lend-lease exports, but only 33 percent of lend-lease muni-
forces fighting in other theaters, we have supplied approxi-
tions. Lend-lease shipments of industrial materials to the
mately $1,000,000,000 of shipping services and ship repairs to
United Kingdom are designed to help keep her arsenals, plane
the British.
and tank factories, and shipyards in operation so that they may
Shortly after Pearl Harbor it was agreed between the British
supply the United Nations forces. Approximately 27 percent
and ourselves that we would construct most of the merchant
21
20
Regraded Unclassified
ships needed by the United Nations. As a result, the United
Table 8, about 61 percent of these shipments were made in
States undertook the greatest shipbuilding program ever at-
1941 and 1942, and 39 percent in the first six months of 1943.
tempted by any nation. The size of our merchant fleet has
increased 250 percent since Pearl Harbor and is growing at
China and India
the rate of five new ships every 24 hours. In 1942 we built 746
Approximately 70 percent of lend-lease shipments to China
merchant ships; in the first seven months of 1943 we built
and India have been munitions. Those shipped to India have
1,023. Production of ships is proceeding at such a pace that
equipped the Indian Army with specialized instruments of war
we have had difficulty in supplying adequately trained and
which India's substantial armament industry is not able to
skilled crews to operate them.
produce. Those shipped to China have included airplanes,
While our merchant fleet has been growing, that of Britain
critical tools and materials to keep her airplanes flying, com-
has been dwindling due to sinkings and to the fact that she
munications equipment, and spare parts for trucks. Airplanes
has not built many replacements but has instead relied on us
lend-leased to China played their part in the June victory of
for production of merchant ships. The British, therefore, have
the Chinese Army on the Ichang front.
a reserve of experienced seamen. To utilize the services of
The amount of aid supplied to China has been restricted by
these men, we will charter to the United Kingdom about 15
transportation difficulties. Since the closing of the Burma
new ships a month for the next 10 months. These ships are
Road, shipments have moved principally by air transporta-
being chartered only for the duration of the war; title will
tion. Constant efforts are being made to develop new supply
remain with the United States Government, and the uses to
routes. In the meantime, preparations are being made in
which they may be put will be determined by the Combined
collaboration with the British for the time when these routes
Shipping Adjustment Board.
are opened. New equipment made available by lend-lease has
CHINA, INDIA, AUSTRALIA, AND NEW ZEALAND
been issued to the Chinese troops who retreated into India
after the fall of Burma, and they are being trained by United
Total lend-lease exports to these areas from March 11, 1941,
States Army officers in the use of this equipment. A program
to June 30, 1943, have been $1,133,000,000. As shown by
to train Chinese pilots, mechanics, and other technicians in
India and in the United States was launched some time ago
1941
1942
Jan-June 1943
and is constantly expanding.
Further, steps have been taken to make India a great supply
Ordnance and Ammu-
base for operations against the Japanese. Stockpiles of ma-
nition
$9,560,000
$165,106,000
$91,183,000
terial for China are being established there in increasing
Aircraft and Parts
7,995,000
96,779,000
91,370,000
quantities as transportation facilities become available. Raw
Tanks and Parts
1,934,000
100,264,000
24,296,000
Motor Vehicles and
materials and machine tools are also being sent so that India's
Parts
17,856,000
75,028,000
54,298,000
own production of munitions of war may be increased. Air-
Watercraft
68,000
2,849,000
9,154,000
Industrial Items
craft repair facilities are being equipped with lend-lease tools.
11,523,000
170,156,000
154,239,000
Foodstuffs, etc
3,282,000
30,529,000
15,470,000
Materials are also going to India to maintain and expand her
port facilities and transportation and communications systems
TOTAL
52,218,000
640,711,000
440,010,000
Table 8
23
22
so that munitions and essential supplies can be transported
must be shipped to our forces in the Southwest Pacific. An
quickly where they are needed, including strategic materials
agreement has been reached with the governments of Australia
for the United States.
and New Zealand under which a large portion of the output
of the canning and dehydrating plants equipped with lend-
lease machinery will be allocated to the United Nations forces
Australia and New Zealand
in that theater of war.
Approximately 61 percent of lend-lease shipments to Aus-
tralia and New Zealand have been munitions, including air-
planes, tanks, landing boats, guns, and ammunition. These
items are being used by Australian and New Zealand forces
fighting beside the Americans in New Guinea, the Solomons
and other parts of the Southwest Pacific. They have played
an important part in the recent victories in that area.
While munitions have made up the largest proportion of
lend-lease aid to Australia and New Zealand, shipments of
other items have been extremely important. These two coun-
tries are fast becoming tremendous supply bases for operations
against the Japanese. Increasing emphasis is being placed
upon the development of their natural resources, arsenals,
and transportation systems. Thirty-five percent of the goods
shipped to Australia and New Zealand from March 11, 1941,
to June 30, 1943, has consisted of machinery, tools, and raw
materials.
Plans are also under way to expand food output in Australia
and New Zealand, which have always produced exportable
surpluses of grains, meats, and dairy products, so that these
countries may supply an even greater share of the require-
ments for the United Nations armed forces in the Southwest
Pacific. Emphasis is being placed upon the production of
vegetables. Thousands of additional acres have been planted
in truck crops. Lend-lease agricultural machinery and seeds
have been shipped to facilitate planting, cultivating, and
harvesting. In addition, machinery for new canning and
dehydrating plants is being lend-leased to both Australia and
New Zealand so that these foods may be preserved for trans-
portation to the fighting forces at the front.
This program will of necessity benefit the civilian population
of the United States by reducing the quantities of food that
25
24
which the United Kingdom gets as lend-lease aid from the
United States represents less than 10 percent of her entire
requirements but this percentage is extremely important as it
constitutes the margin between having enough so that she
Chapter 3
can fight effectively and not having enough to carry on.
U.S.S.R.
LEND-LEASE AND FOOD
The Soviet Union's need for lend-lease food also is great.
About 40 percent of her most fertile cropland has at one time
Food is as essential to victory as are planes, tanks, guns, or
ships. It is being shipped to our Allies for use by their armed
AVERAGE MONTHLY VALUE OF FOOD EXPORTS
forces and by their civilians working behind the lines. Lend-
Million $
lease food is going principally to the United Kingdom and
100
OTHER
the U.S. S. R., which together have received 93 percent of all
lend-lease food shipments through June 30, 1943 (see Chart 4).
Deliveries are limited principally by our own restricted sup-
75
U.S.S.R.
plies and by the volume of available shipping space. So
critical is the Soviet Union's need that in some instances
50
munitions available for shipment from American ports have
been left behind to provide space in the ships for cargoes of
UNITED
food. Exports of food to North Africa have been decreasing,
KINGDOM
25
but large amounts of seeds for planting have been sent in order
to expand food production and diminish the necessity for
further food shipments.
o
1941
1942
1943
THE NEEDS OF OUR ALLIES
United Kingdom
Chart 4
For almost a century the United Kingdom has had to im-
another been under Nazi control. The Nazis now occupy
port a large portion of the food consumed by her population.
or for the third consecutive growing season one of Russia's
Prior to the war, she produced only 40 percent of her require-
richest agricultural regions, the Ukraine. In the summer of
ments. By plowing up and planting grasslands, parks, lawns,
1942, the Nazis also overran her second great agricultural
golf courses and other areas, and by converting her agricul-
region, the North Caucasus. The resulting shortages of food
ture to a total war economy, she has increased production
have been serious. Some Soviet factories could and did move
to 70 percent. The other 30 percent of her needs must, how-
to new locations behind the Urals, but land cannot be moved.
ever, be imported. The greater part of this 30 percent con-
Although the U. S. S. R. has made remarkable strides in
tinues to come, as before the war, from British dominions
developing new agricultural regions, she is not producing
and colonies and from South American countries. The food
nearly enough food to satisfy her minimum needs.
26
27
Regraded Unclassified
represent a relatively small percentage of our total food supply.
To meet Russia's needs, we have shipped hundreds of
In 1942, they amounted to only 6 percent. In 1943, it is likely
thousands of tons of wheat, flour, meats, sugar, fats, and oils.
that we will ship approximately 10 percent.
While these have been of material assistance to her war
While lend-lease exports have taken as much as 30 percent
effort, they have not been large enough to improve greatly
of our supply of some foods, for many items in short supply the
the diet of the civilian population. Russian rations limit
proportion has been less than 5 percent. For example, from
civilians to a woefully inadequate diet. Under rationing
January through June of this year we shipped 45,400,000
even the most favored worker is allowed less than 2 pounds
pounds of beef and 8,100,000 pounds of butter. While these
of meat per month. No milk whatever is provided in the
totals are large, they are unimportant in terms of total
large population centers for any group except children under
available supply. The beef was 1 percent of our supply for
six years of age. Butter is seldom available.
that period, an amount equivalent to two-tenths of an ounce
Because of Russia's urgent need for food, the composition of
per week for each person in the United States. The butter
shipments has changed-foodstuffs during recent months have
was only 0.7 percent of our production during that period,
constituted a much higher percentage of total exports to the
an amount equivalent to four one-hundredths of an ounce
U. S. S. R. than a year ago.
per week for each person in the United States. Table 9 and
Chart 5 show the percentages of our total supply of foods
French North and West Africa
shipped to our Allies as lend-lease aid during the first six
months of 1943, and the ounces per week per capita.
French North and West Africa have required small amounts
The domestic food situation must be viewed in the light
of lend-lease food. When British and American troops landed
of present conditions. Members of our armed forces are
in North Africa, supplies of foods normally imported, such as
eating more than they did as civilians. While the average
milk, sugar and tea, were extremely scarce. Supplies of foods
American civilian eats about 3½ pounds per day, the average
such as wheat, dried fruits and mutton, of which North
man in uniform cats about 5½ pounds. The resulting in-
Africa normally produces exportable surpluses, were inade-
creased consumption is equivalent to adding four to five
quate. The Germans had taken away a large percentage of
million persons to our population. Many Americans who
the 1942 harvest. As a result, wheat stocks were an esti-
are not in uniform are also eating more than they have ever
mated 100,000 tons below the amount necessary to carry the
eaten before. This increased consumption by many civilians
population through the 1942-43 winter.
is due in part to increased consumer income. It is also due
Foods were shipped to North Africa to tide the civilians
to the diversion of purchasing power to food from other
over until the 1943 crop could be harvested. With the aid
articles that can no longer be purchased.
of more than 400,000 pounds of lend-lease seeds, large crops
Exports of food have been relatively smaller during this war
were planted and are already being harvested. Today the
than in the comparable period of the first World War. In
flow of food to French North Africa is diminishing. No
1915, the first full year of the last war, our food exports
cereal products have been sent since the harvest in June.
amounted to $978,000,000. In 1940, the first full year of this
war, they were only $255,000,000. In 1916 and 1917, they
LEND-LEASE AND THE U. S. FOOD SUPPLY
amounted to $1,085,000,000 and $1,331,000,000, respectively.
In 1941 and 1942 our exports of food were $530,000,000 and
The current domestic food shortages have not been caused
$993,000,000, respectively. In 1918 exports were $1,990,-
to any appreciable extent by lend-lease shipments, which
29
28
LEND-LEASE FOOD EXPORTS IN RELATION TO SUPPLY
AND U. S. POPULATION
AMOUNT OF FOOD EXPORTED UNDER LEND-LEASE
PER CAPITA OF U.S. POPULATION
JANUARY-JUNE 1943
Exports in Percent
Exports per U.S.
of Supply
Civilian (Ounces
Ounces Per Week Per Copita
per Week)
0
2
3
4
BEEF AND VEAL
Year
Jan-June
Year
Jan-June
PORK
1942
1943
1942
1943
BUTTER
CHEESE
EGGS
All Meats
5.0
7.7
2.8
4.7
CANNED FISH
Beef and Veal
0.3
1.0
0.1
0.2
CANNED VEGETABLES
Lamb and Mutton
0.4
15.6
0.01
0.4
Pork
9.7
12.2
2.7
4.1
CANNED FRUITS
All Milk Products (Fluid Milk
DRIED FRUITS
Equivalent)
3.4
2.2
10.5
6.6
DRIED BEANS
Dry Whole Milk
6.1
15.0
0.01
0.02
Dry Skim Milk
23.0
41.8
0.3
0.6
Condensed and Evapo-
rated Milk
7.2
14.5
0.9
1.5
Butter
0.7
0.7
0.04
0.04
LEND-LEASE FOOD EXPORTS
Cheese
23.1
7.9
0.8
0.2
Eggs
10.0
11.2
1.7
2.1
IN PER CENT OF SUPPLY
Edible Fats and Oils
13.2
14.5
1.8
2.1
JANUARY JUNE 1943
Canned Fish
22.5
31.4
0.4
0.6
Canned Fruits and Juices
1.7
1.9
0.2
0.2
Per Cent
Dried Fruits
15.7
20.1
0.5
0.7
o
20
40
60
80
100
Canned Vegetables
0.8
0.8
0.1
0.1
Dried Beans
BEEF AND VEAL
5.0
13.0
0.3
0,8
Dried Peas
6.0
8.5
0.1
0.2
PORK
Com and Com Products
0.2
0.2
1.4
1.1
BUTTER
Wheat and Wheat Products
0.4
1.1
1.2
2.7
CHEESE
EGGS
CANNED FISH
Table 9
CANNED VEGETABLES
CANNED FRUITS
000,000, an amount somewhat greater than the estimated
DRIED FRUITS
value of exports this year. During the last war, however,
DRIED BEANS
cereals constituted a much larger proportion of food exports
than during the present war.
Production of foods in this country has increased substan-
Chart 5
tially in the last twenty-five years. Consequently, the drain on
our supply is less, in comparison with 1917 and 1918, than the
creased to 20.0 percent in 1918 and 24.4 percent in 1919. In
figures on value of exports would indicate. In 1917 we ex-
contrast, our exports of food were equivalent to 5.5 percent
ported 16.6 percent of our total food supply. The ratio in-
of our total supply in 1941, 8.0 percent in 1942, and it is
31
30
Regraded Unclassified
estimated that they will be equivalent to about 11 percent
Administration has tentatively allocated food produced from
of our 1943 supply.
July 1, 1943, to June 30, 1944, in the following manner:
All of the export figures for 1941, 1942, and 1943 include
Percent
direct purchase exports as well as lend-lease in order to show
To the civilian population
75
the total drain on our food supply, and also to make the
To the armed forces
13
figures comparable with those for the period of the first
To the Lend-Lease Administration for ship-
World War. None of the figures include food shipments to
ment to our allies
10
our armed forces abroad.
To U.S. territories and special needs
2
While these allocations mean that civilians will receive less
THE OUTLOOK FOR THE FUTURE
in the current year than they had in 1942-43, they will on the
Allocation of our food supply among competing claimants
average get as much food as was available annually in the years
is made by the War Food Administration. The War Food
1935-39. Table 10 shows the amount of food recommended
for allocation for civilian use in the year 1943-44 as a percent-
RECOMMENDED ALLOCATION OF FOODS
age of our average annual consumption from 1935 through 1939
FOR U.S. CIVILIANS IN 1943-1944
and as a percentage of 1942 consumption.
In Percent of Average Consumption in 1942 and 1935-1939
The demands upon our food supplies are likely to increase.
Our allies will continue to need lend-lease food until the end
Recommend-
Recommend-
of hostilities. The needs of other parts of the world will be
ed 1943-44
ed 1943-44
considerable after the war. The population of many areas
allocation as
allocation as
Commodity
liberated from Axis control will be in an undernourished, if
percent of
percent of
1942
1935-39
not starved, condition upon liberation. It will be some time
consumption
consumption
after hostilities cease before European and Asiatic agricultural
areas get back into normal production.
All Meats
83.6
90.2
Beef
75.1
83.6
Veal
90.4
87.6
Lamb and Mutton
57.5
62.2
Pork
94.5
100.3
Eggs
102.2
110.6
Dairy Products:
Butter
80.5
77.0
Cheese
60.6
70.6
Condensed Milk
79.4
101.4
Evaporated Milk
56.7
66.8
Dried Whole Milk
117.6
117.6
Dried Skim Milk
57.4
71.1
Canned Fruits and Juices
63.3
62.2
Canned Vegetables
79.7
104.2
Dried Beans
105.2
97.4
Dried Peas
138.4
104.9
Table 10
33
32
Regraded Unclassified
(2) To sell, transfer title to, exchange, lease, lend, or otherwise dis-
pose of, to any such government any defense article, but no defense
APPENDICES
article not manufactured or procured under paragraph (1) shall in any
way be disposed of under this paragraph, except after consultation with
the Chief of Staff of the Army or the Chief of Naval Operations of the
Navy, or both. The value of defense articles disposed of in any way
under authority of this paragraph, and procured from funds heretofore
appropriated, shall not exceed $1,300,000,000. The value of such de-
fense articles shall be determined by the head of the department or
Appendix
agency concerned or such other department, agency, or officer as shall
be designated in the manner provided in the rules and regulations issued
LEND-LEASE ACT
hereunder. Defense articles procured from funds hereafter appropriated
to any department or agency of the Government, other than from funds
Further to promote the defense of the United States, and for other pur-
authorized to be appropriated under this Act, shall not be disposed of
poses Be it enacted by the Senate and House of Representatives of the United States of
in any way under authority of this paragraph except to the extent
hereafter authorized by the Congress in the Acts appropriating such
America in Congress assembled, That this Act may be cited as An Act to
funds or otherwise.
Promote the Defense of the United States."
(3) To test, inspect, prove, repair, outfit, recondition, or otherwise to
place in good working order, to the extent to which funds are made
Section 2.
available therefor, or contracts are authorized from time to time by the
As used in this Act-
Congress or both, any defense article for any such government, or to
(a) The term "defense article" means-
procure any or all such services by private contract.
(1) Any weapon, munition, aircraft, vessel, or boat;
(4) To communicate to any such government any defense informa-
(2) Any machinery, facility, tool, material, or supply necessary for
tion, pertaining to any defense article furnished to such government
the manufacture, production, processing, repair, servicing, or opera-
under paragraph (2) of this subsection.
tion of any article described in this subsection;
(5) To release for export any defense article disposed of in any way
(3) Any component material or part of or equipment for any article
under this subsection to any such government.
described in this subsection;
(4) Any agricultural, industrial or other commodity or article for
(b) The terms and conditions upon which any such foreign government
receives any aid authorized under subsection (a) shall be those which the
defense.
President deems satisfactory, and the benefit to the United States may be
Such term" defense article" includes any article described in this subsection
payment or repayment in kind or property, or any other direct or indirect
manufactured or procured pursuant to section 3, or to which the United
benefit which the President deems satisfactory.
States or any foreign government has or hereafter acquires title, possession,
(c) After June 30, 1943, or after the passage of a concurrent resolution by
or control.
the two Houses before June 30, 1943, which declares that the powers con-
(b) The term "defense information" means any plan, specification,
ferred by or pursuant to subsection (a) are no longer necessary to promote
design, prototype, or information pertaining to any defense article.
the defense of the United States, neither the President nor the head of any
department or agency shall exercise any of the powers conferred by or
Section 3.
pursuant to subsection (a); except that until July 1, 1946, any of such powers
(a) Norwithstanding the provisions of any other law, the President may,
may be exercised to the extent necessary to carry out a contract or agree-
from time to time, when he deems it in the interest of national defense,
ment with such a foreign government made before July 1, 1943, or before
authorize the Secretary of War, the Secretary of the Navy, or the head of
the passage of such concurrent resolution, whichever is the earlier.
any other department or agency of the Government-
(d) Nothing in this Act shall be construed to authorize or to permit the
authorization of convoying vessels by naval vessels of the United States.
(1) To manufacture in arsenals, factories, and shipyards under their
(c) Nothing in this Act shall be construed to authorize or to permit the
jurisdiction, or otherwise procure, to the extent to which funds are
authorization of the entry of any American vessel into a combat area in
made available therefor, or contracts are authorized from time to
violation of section 3 of the Neutrality Act of 1939.
time by the Congress, or both, any defense article for the government
of any country whose defense the President deems vital to the defense
of the United States.
35
34
Regraded Unclassified
Section 4.
Section 8.
All contracts or agreements made for the disposition of any defense
The Secretaries of War and of the Navy are hereby authorized to purchase
article or defense information pursuant to section 3 shall contain a clause
or otherwise acquire arms, ammunition, and implements of war produced
by which the foreign government undertakes that it will not, without
within the jurisdiction of any country to which section 3 is applicable,
the consent of the President, transfer title to or possession of such defense
whenever the President deems such purchase or acquisition to be necessary
article or defense information by gift, sale, or otherwise, or permit its use
in the interests of the defense of the United States.
by anyone not an officer, employee, or agent of such foreign government.
Section 9.
Section 5.
The President may, from time to time, promulgate such rules and regula-
(a) The Secretary of War, the Secretary of the Navy, or the head of any
tions as may be necessary and proper to carry out any of the provisions of
other department or agency of the Government involved shall, when any
this Act; and he may exercise any power or authority conferred on him by
such defense article or defense information is exported, immediately inform
this Act through such department, agency, or officer as he shall direct.
the department or agency designated by the President to administer section
6 of the Act of July 2, 1940 (54 Stat. 714), of the quantities, character,
Section 10.
value, terms of disposition, and destination of the article and information
Nothing in this Act shall be construed to change existing law relating
so exported.
to the use of the land and naval forces of the United States, except insofar
(b) The President from time to time, but not less frequently than once
as such use relates to the manufacture, procurement, and repair of defense
every ninety days, shall transmit to the Congress a report of operations
articles, the communication of information and other noncombatant
under this Act except such information as he deems incompatible with the
purposes enumerated in this Act.
public interest to disclose. Reports provided for under this subsection
shall be transmitted to the Secretary of the Senate or the Clerk of the House
Section 11.
of Representatives, as the case may be, if the Senate or the House of
If any provision of this Act or the application of such provision to any
Representatives, as the case may be, is not in session.
circumstance shall be held invalid, the validity of the remainder of the
Act and the applicability of such provision to other circumstances shall
Section 6.
not be affected thereby.
(a) There is hereby authorized to be appropriated from time to time, out
of any money in the Treasury not otherwise appropriated, such amounts at
APPROVED, MARCH 11, 1941.
may be necessary to carry out the provisions and accomplish the purposes
of this Act.
(b) All money and all property which is converted into money received
On March 11, 1943, after affirmative votes of 407-6 in the House of
under section 3 from any government shall, with the approval of the Direc-
Representatives and 82-0 in the Senate, the President signed the act
tor of the Budget, revert to the respective appropriation or appropriations
extending the Lend-Lease Act for 1 year.
out of which funds were expended with respect to the defense article or
defense information for which such consideration is received, and shall be
available for expenditure for the purpose for which such expended funds
were appropriated by law, during the fiscal year in which such funds are
received and the ensuing fiscal year; but in no event shall any funds so
received be available for expenditure after June 30, 1946.
Section 7.
The Secretary of War, the Secretary of the Navy, and the head of the
department or agency shall in all contracts or agreements for the disposition
of any defense article or defense information fully protect the rights of all
citizens of the United States who have patent rights in and to any such
article or information which is hereby authorized to be disposed of and the
payments collected for royalties on such patents shall be paid to the owner
and holders of such patents.
37
36
Regraded Unclassified
hereby continued and shall be available until June 30, 1944: Provided, That
with the exception of the appropriation for Administrative expenses",
not to exceed 20 per centum of any of such consolidated appropriations may
be transferred by the President to any other of such consolidated appropri-
ations, but no such appropriation shall be increased more than 30 per
centum thereby: Provided further, That notwithstanding the foregoing pro-
viso (1) balances, unobligated as of April 30, 1943, and balances subse-
Appendix II
quently released from obligation, of appropriations contained in the fore-
going Acts for "Ordnance and ordnance stores, supplies, spare parts, and
FOURTH LEND-LEASE APPROPRIATION ACT
materials, including armor and ammunition and components thereof", may
be transferred by the President to and consolidated with the appropriation
Making supplemental appropriations to carry out the provisions of an Act to promote the
provided above for Agricultural, industrial, and other commodities and
defense of the United States, approved March 11, 1941, as amended, and for other purposes
articles", and (2) balances, unobligated as of April 30, 1943, and balances
subsequently released from obligation, of appropriations contained in the
Be it enacted by the Senate and House of Representatives of the United States
foregoing Acts for "Necessary services and expenses" may be transferred
of America in Congress assembled, That there are hereby appropriated, out of
by the President to and consolidated with any of the appropriations pro-
any money in the Treasury not otherwise appropriated, to enable the
vided above, except che appropriation for *Administrative expenses".
President, through such departments or agencies of the Government as
Section 2.
he may designate, further to carry out the provisions of an Act to promote
the defense of the United States, approved March 11, 1941, as amended,
Any defense article, information, or service produced from funds appro-
and for each and every purpose incident to or necessary therefor, the fol-
priated by this Act or prior Acts appropriating funds to the President
for the purpose of carrying out the provisions of said Act of March 11,
lowing sums for the following respective purposes:
(a) For the procurement, by manufacture or otherwise, of defense articles,
1941, as amended, shall be retained by or transferred to and for the use of
information, and services, for the government of any country whose defense
such department or agency of the United States as the President may
the President deems vital to the defense of the United States, and the dis-
determine, in lieu of being disposed of to a foreign government, whenever
in the judgment of the President the defense of the United States will be
position thereof, including all necessary expenses in connection therewith,
best served thereby: Provided further, That none of the funds appropriated
as follows:
in this Act shall be used for the payment of any subsidy on agricultural
Vessels, ships, boats, and other watercraft, including the hire or other
temporary use thereof, and equipage, supplies, materials, spare parts, and
products produced in the continental United States.
accessories, $1,552,659,000.
Section 3.
Agricultural, industrial, and other commodities and articles, $4,452,-
This Act may be cited as the "Defense Aid Supplemental Appropriation
623,000.
Act, 1943".
(b) For testing, inspecting, proving, repairing, outfitting, recondition-
ing, or otherwise placing in good working order any defense articles for
Approved June 14, 1943.
the government of any country whose defense the President deems vital
to the defense of the United States, including services and expenses in con-
nection therewith, $259,348,000.
(c) For administrative expenses, $8,999,000: Provided, That transfers
may be made from this appropriation to the consolidated appropriation
for "Necessary services and expenses" to the extent necessary to reimburse
such appropriation for transfers made pursuant to the Urgent Deficiency
Appropriation Act, 1943.
(d) In all, $6,273,629,000, to be available until June 30, 1944.
(c) Each of the foregoing appropriations shall be additional to, and
consolidated with, the appropriations for the same purposes, contained in
the same respective categories of appropriation in the Defense Aid Supple-
mental Appropriation Act, 1941, the Defense Aid Supplemental Appropri-
ation Act, 1942, and the Second Defense Aid Supplemental Appropriation
Act, 1942, and the appropriations contained in the foregoing Acts, are
39
38
Regraded Unclassified
Appendix III
Appendix IV
STATUS OF NATIONS
AMOUNTS OF LEND-LEASE AID AUTHORIZED
Lend-Lease Countries and United Nations
The amount of lend-lease aid that may be provided under the various
acts is summarized as follows:
Declared
Lend-Lease
Reciprocal
United
Eligible for
Lend-Lease
Nations
Lend-Lease Appropriations to the President
Country
Agreement
Lend-Lease
Agreement
Declaration
Aid
Signed
First Lend-Lease Appropriation
$7,000,000,000
Signed
Signed
Second Lend-Lease Appropriation
5,985,000,000
Third Lend-Lease Appropriation (Fifth Supp. 1942)
5,425,000,000
Fourth Lend-Lease Appropriation
6,273,629,000
Argentina
May 6, 1941
Australia
Nov. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. 1, 1942
Belgium
June 13, 1941
June 16, 1942
Jan. 30, 1943
Jan. 1, 1942
Total
24,683,629,000
Bolívia
May 6, 1941
Dec. 6, 1941
Apr. 27. 1943
Brazil
May 6, 1941
Mar. 3, 1942
Feb. 6, 1943
Transfers Authorized From Other Appropriations
Canada
Nov. 11. 1941
Jan. 1, 1942
War Department-Third Supplemental, 1942
Chile
May 6, 1941
Mar. 2, 1943
$2,000,000,000
4,000,000,000
China
May 6, 1941
June 2, 1942
Jan. 1, 1942
War Department-Fourth Supplemental, 1942
11,250,000,000
Colombia
May 6, 1941
Mar. 17, 1942
War Department-Fifth Supplemental, 1942
Costa Rica
May 6, 1941
Jan. 16, 1942
Jan. 1, 1942
War Department-Sixth Supplemental, 1942
2,220,000,000
May 6, 1941
Nov. 7. 1941
Jan. 1, 1942
Cuba
War Department-Military Appropriation Act, 1943
12,700,000,000
Czechoslovakia
Jan. 5. 1942
July 11, 1942
Jan. 1, 1942
Navy Department-Second Supplemental, 1943
3,000,000,000
Dominican Rep.
May 6, 1941
Aug. 2, 1941
Jan. 1, 1942
Departments other than War-Third Supplemental, 1942
800,000,000
Ecuador
May 6, 1941
Apr. 6, 1942
Egypt
Nov. 11, 1941
El Salvador
May 6, 1941
Feb. 2, 1942
Jan. 1, 1942
Total
35,970,000,000
Ethiopia
Dec. 7. 1942
Aug. 9, 1943
Oct. 9, 1942
Nora-In addition to the foregoing, Congress has with certain limitations authorized the
Fighting France.
Nov. 11, 1941
Sept. 3, 1942
leasing of ships of the Navy and merchant ships constructed with funds appropriated to the
French North &
Maritime Commission without any numerical limitation as to the dollar value or the number
West Africa
Nov. 13, 1942
of such ships which may be so leased. (See for example, Public Law 1, 78th Congress, approvs
Greece
Mar. 11, 1941
July 10. 1942
Jan. 1, 1942
February 19, 1943, and Public Law 11, 78th Congress, approved March 18, 1943.)
Guatemala
May 6, 1941
Nov. 16, 1942
Jan. I, 1942
Sept. 16, 1941
Jan. 1. 1942
Haiti
May 6, 1941
May 6, 1941
Feb. 28, 1942
Jan. I, 1942
Honduras
Iceland
July 1, 1941
Nov. 21, 1941
India
Nov. 11, 1941
Jan. 1, 1942
Iran
Mar. 10, 1942
May 1, 1942
Jan. 16, 1943
Iraq
Liberia
Mar. 10, 1942
June 8, 1943
Jan. 1, 1942
Luxembourg
May 6, 1941
Mar. 18, 1943
June 5, 1942
Mexico
(OVER)
41
40
Regraded Unclassified
Lend-Lease Countries and United Nations-Continued
Declared
Lend-Lease
Reciprocal
United
Eligible for
Lend-Lease
Nations
Country
Agreement
Lend-Lease
Agreement
Declaration
Signed
Aid
Signed
Signed
Netherlands
Aug. 21, 1941
July 8, 1942
June 14, 1943
Jan. 1, 1942
New Zealand
Nov. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. 1, 1942
Nicaragua
May 6, 1941
Oct. 16, 1941
Jan. 1, 1942
Norway
June 4, 1941
July 11, 1942
Jan. 1, 1942
Panama
May 6, 1941
Jan. 1, 1942
Paraguay
May 6, 1941
Sept. 20, 1941
Peru
May 6, 1941
Mar. 11, 1942
Philippines
June 10, 1942
Poland
Aug. 28, 1941
July 1, 1942
Jan. 1, 1942
Saudi Arabia
Feb. 18, 1943
South Africa
Nov. 11, 1941
Jan. 1. 1942
Turkey
Nov. 7, 1941
United King-
dom
Mar. 11, 1941
Feb. 23, 1942
Sept. 3, 1942
Jan. 1. 1942
United States
Jan. 1. 1942
U.S.S. R
Nov. 7. 1941
June 11, 1942
Jan. 1, 1942
Uruguay
May 6, 1941
Jan. 13, 1942
Venezuela
May 6, 1941
Mar. 18, 1942
Yugoslavia
Nov. 11, 1941
July 24, 1942
Jan. 1, 1942
42
... GOVERNMENT PRINTINE OFFICE. 1943
TREASURY DEPARTMENT
249
INTER OFFICE COMMUNICATION
DATE
JUL 31
TO
Secretary Morgenthau
FROM
Randolph Paul
We have just received cables from Ball in Martinique
indicating:
(1) That he is making & sample check on 15 boxes
of the Martinique gold.
(2) That he has examined the complete records of
the Credit Martiniquais and discovered no suspected
names or possible cloaking operations.
(3) That he has been in the B.N.C.I. and while he
has not been permitted to go over all the records, it
appears that the bank is very small and does not have
more than 70,000,000 French francs in deposits. This
is only slightly more than $1,000,000 in total deposits
(at 50-1 rate). He also has been told that the B.N.C.I.
has no securities or accounts over 10,000 French francs
for persons outside Martinique.
(4) That sufficient Banque de la Martinique records
have been examined "to feel sure that it holds no large
sums."
On the basis of the foregoing it would appear that Ball
has made some progress but that, of course, we have not obtained
everything we wanted.
It is recommended that we advise Ball that as soon as
he has completed the immediate assignment he is working on, he
should come back to Washington temporarily for the purpose of
making a report. At that time we can decide what further
action should be taken.
APPROVED:
hrt
Regraded Unclassified
250
P
Y
FROM: American Consulate General, Fort de France
TO:
Secretary of State, Washington
DATE:
July 28, 1943
NO.
228
CONFIDENTIAL
You are informed that work on 15 boxes, picked at
random has been begun. We will be finished Friday morn-
ing, at the rate of 7 per day. Sufficient Banque de la
Martinique records have been examined to feel sure that
it holds no large sums.
The foregoing is from Ball for the attention of
Randolph Paul, Treasury Department.
MALIGE
Regraded Unclassified
251
COPY
PARAPHRASE OF TEIEGRAM RECEIVED
FROM: American Consulate, Fort de France, Martinique
DATE: July 24, 1943, 11 a.m.
No.1
215
This is an urgent message from Mr. Ball for Randolph Paul
of the Treasury Department.
Malige and I saw Hoppenot on July 23. He again refused
after a long discussion to let us take inventory of gold. However, he
will permit me to open a number of boxes at random as tests. If this is
agreeable to you, suggest I do so and then return to Washington to discuss
the situation. Physical problem of inventory is not as easy as anticipated.
Any further pressure must come from Washington. In about .four weeks Martial
of the Bank of France is expected here and it is possible that we could
get him to press his bank for inventory, and the bank might in turn press the
committee at Algiers to allow our men to watch the proceedings. From the
viewpoint of security the storage place of gold appeared to be all right
when I saw it yesterday.
MALIGE
Regraded Unclassified
252
COPY
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Consulate, Fort de France
TO:
Secretary of State, Washington
DATE:
July 23, 1943
NUMBER: 214
CONFIDENTIAL
Ball sends the following for Randolph Paul, Treasury Department.
You are informed that Garcin, Director Credit Martiniquais, was visited by
Malige and me on July 22. Garcin was very cooperative and we were shown what I
think were the complete records of all the bank's accounts with the dates on
by
which the accounts were opened and closed. It was stated/Garcin that almost
all the accounts were local and since he knows the value of the assets of the
depositors in the bank he would have known it if any of the local people had
been acting as cloaks. The accounts numbered 5,000 and no suspected names
appeared. Names were picked out by me here and there to ask about and each
time the individual record of the account was shown to me.
The rumor concerning Laval's funds started, according to him, because of
the suspected interest in the bank on the part of Laval. Garcin raised the
problem of the banks here being able to discount with American banks bills
covering shipments to North Africa of sugar so that funds would be available
for purchases in the United States before the arrival in North Africa of the
merchandise. Garcin would like to know if the banks here would be allowed to
do this if the sugar was paid for in dollars.
MALIGE
Regraded Unclassified
253
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Consulate, Fort de France
TO:
Secretary of State, Washington
DATE:
July 22, 1943
NUMBER: 210
CONFIDENTIAL
Ball sends the following for Randolph Paul, Treasury Department.
You are informed that Malige and I saw the Director of BNCI, Charles, on
July 21. It was stated by Charles that there were no securities or accounts
over 10,000 French francs for persons outside of Martinique. Professional
secrecy was also used by him as a reason for not giving names. French law
forbids omnibus or numbered accounts. The bank's financial statement for
June 30, not published, and the total deposit record for the past year were
examined by us. Thirty million French francs was the original capital provided
by BNCI. The deposits ranged from a high of 79,000,000 French francs to
69,000,000 French francs as of the 30th of June. There were about 1500
individual accounts. This bank is the smallest of three and as other banks
do not want it here its activities are watched closely. For two years rumors
have been numerous here in a small circle concerning Laval's funds being
deposited in this bank. The number of accounts and the size of the bank seems
to negate this to some degree, but we shall continue the attempt to obtain
more definite proof pro or con. It appears that Charles is more willing to
cooperate probably due to the position held here by him.
MALIGE
CC - Messrs. Pehle, Luxford, DuBois, E.M. Bernstein, Taylor, Tomlinson,
Schmidt, Fox.
Regraded Unclassified
254
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 31, 1943
TO
Secretary Morgenthau
FROM
Mr. White HDW
1.
Stabilization Fund's Gold Transactions
During the three months ending June 30, 1943, the
Stabilization Fund sold approximately $199.0 million in
gold to foreign countries principally to be earmarked for
their accounts with the Federal Reserve Bank of New York.
Sales by countries were as follows:
Country
Sales in millions of dollars
Argentina
68.828
Bank of International
Settlements
.693
Bolivia
2.195
Brazil
36.908
Chile
3.570
Colombia
9.800
Cuba
10.000
Ecuador
.140
Iran
.500
Mexico
17.000
Portugal
9.975
Switzerland
8.978
Turkey
9.975
Uruguay
11.472
Vatican City
.997
Venezuela
8.000
Total
199.031
Regraded Unclassified
255
Division of Monetary
- 2 -
Research
In order to maintain its gold balance, the Stabil-
ization Fund purchased $195.3 million in gold from the
Treasury General Fund.
As a result of the above transactions, there was a
net decrease of $3.7 million in the Stabilization Fund's
gold holdings to about $10.5 million as of June 30.
2.
Treasury Gold Stock
During the June quarter, the Treasury's gold stock
decreased by $188.2 million to $22,387.5 million as of
June 30. Known and estimated acquisitions were as follows:
Millions of dollars
Newly-mined domestic
4.0
Imports sold directly to
mints and assay offices
2.1
Miscellaneous (coin and scrap)
1.0
Total
7.1
The Treasury sold $195.3 million to the Stabilization
Fund, making a net decrease of $188.2 million.
3.
Total Gold Holdings of the United States
March 31, 1943
June 30, 1943
Treasury Gold Stock
22,575,729,894
22,387,522,107
Stabilization Fund Gold
14,182,611
10,500,529
Total
22,589,912,505
22,398,022,636
Regraded Unclassified
256
Division of Monetary
- 3 -
Research
The decrease in the gold holdings of the Treasury
and the Stabilization Fund during the June quarter was
$191.9 million.
Regraded Unclassified
257
TO: Adise, Chungking, China.
FROMs Secretary of the Treasury.
SECRET -
Reference is made to your cable of TF 144 of July 29
and Treasury cable 967 of July 26, 1963.
1. You should subsit your resignation as from the day
you receive this massage.
2. The British in Washington have been informed of the above.
H
ISFeah 7/31/43
Regraded Unclassified
C
0
258
P
Y
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, Chungking, China
DATE: July 31, 1943, 5 p.m.
NO. : 997
URGENT - SECRET
Reference is made to your cable of TF 144 of
July 29 and Treasury cable 967 of July 26, 1943.
1. You should submit your resignation as from
the day you receive this message.
2. The British in Washington have been informed
of the above.
HULL
(FL)
Copy:bj:8-3-43
Regraded Unclassified
259
JUL 3 1 1943
TO: Adler, Chungking, China.
FROM: Secretary of the Treasury.
In connection with the U. Se Treasury certificates of
indebtedness purchased by the Stabilisation Board which
nature on August 1, 1943, please inform Dr. Kung that the
Treasury would be pleased to ebtain his assurance that no
private individual or institution shares in the income of
the Beard since unless such assurance is forthoming it will
be necessary to pay taxes on the income earned from these
certificates of indebtedness.
ISF:ah 7/31/43
Regraded Unclassified
260
TELEGRAHI SENT
RNK
July 31, 1943
This telegram must bE
paraphrased before being
6 p.m.
communicated to anyone
other than a Governmental
agency. (BR)
AMERICAN EMBASSY
CHUNGKING
998
FOR ADDER FROM THE SECRETARY OF THE TREASURY.
In connection with the J. S. Treasury certificates
of indebtedness purchased by the Stabilization Board
which mature on August 1, 1943, please Inform Dr. Hung
that the Treasury would be pleased to obtain his
assurance that no private individual or institution
chares in the income of the Board since unless such
assurance is forthcoming it will be necessary to pay
taxes on the income earned from these certificates of
indebtedness.
HULL
(FL)
FD:FL:JD. FE
Regraded Unclassified
261
PARAPHRASE OF TELEGRAM SENT
TO:
AMERICAN EMBASSY, CHUNGKING.
NO.1
1005
DATE:
JULY 31, 1943, Midnight.
FROM TREASURY FOR ADIER.
In reply to formal request from Dr. Kung that $200 mil-
lion be transferred from the credit of the Government of China
on the books of the Treasury to be used for the purchase of
gold, the following message has been transmitted to Dr. Kung
through Ambassader Wei Tae-ming:
"The Treasury agrees to the request of the Government
of China transmitted to me by Ambassador Wei Tao-ming that
$200 million be made available fromthe credit on the books
of the Treasury in the name of the Government of the Republic
of China for the purchase of gold.
"In order to avoid unnecessary raising of funds by the
United States Treasury, it is suggested that transfers from
the credit of the Chinese Government for the purchase of
gold be mde at such time and in such amounts as are allowed
by existing facilities for the transportation to China of
the equivalent amount of gold. Since it is intended that
this gold will be sent to China for sale to the public,
this procedure should not interfere with the program out-
lined in your message of July 23, 1943.
"On receipt of requests from the Government of China
that a specific amount should be transferred from the credit
of the Government of China on the books of the Treasury
and be used for the purchase of gold, the necessary action
will be taken to consumnate these requests. The details of
the arrangement will be discussed with Dr. P.W.Kuo and Mr.Hsi
Te-mou."
HULL
(FL)
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
OFFICE
BRITISH MOST SECRET
SECRETARY OF TREASURY
U.S. SECRET
1943 AUG 2 AM 9 14
OPTEL 251
Following for J.S. MCREASURY DEPARTMENT
Information received up to 7 Game 31 July.
1.
NAVAL
One of H.M. Submarines damaged a 2,000 ton North bound
ship off the Albanian Coast and on 29 probably sank a North bound
U-boat off the heel of Italy. A group of 3 U-boats was attacked
by aircraft and an escort group in the Bay of Biscay yesterday.
Supply U-boat 461 was sunk by a Sunderland and survivors picked
up, supply U-boat 411 was sunk by gun fire after being damaged
by aircraft and survivors were picked up. A very promising
attack with depth charges was made on a 750 ton U-boat. U.S.
aircraft also sank a U-boat off Recife yesterday.
2.
MILITARY
Russia, North of Orel the Russiansyesterday continued
to make headway. German counter attacks South and Southeast of
town were repulsed.
3.
AIR OPERATIONS
Western Front. 29/30. Hamburg. 2277 tons dropped
including 8 8,000 lb, 310 4,000 lb. H.E. and 1201 tons of
Incendiaries. Weather cloudless good visibility aport from some
haze and smoke from previous fires. Attock well concentrated fresh
fires started which merged into a conflagration covering large
area, many heavy explosions reported. 4 enemy aircraft were shot
down. 30th. In the morning 115 Fortresses dropped 242 tons at
the Fieseler Aircraft component and assembly factories at Cassel.
Fighters provided withdrawal support from the German Frontier.
Weather conditions were excellent and bombing was good in spite
of intense A/A and strong fighter opposition. Concurrently 38
escorted light and medium bombers attacked 4 airfields in the low
countries with good effect. During the afternoon escorted Venturas
and escorted Typhoon bombers successfully attacked Yninville power
station and Poix Airfield.
25 Allied Aircraft missing including 11 Fortresses.
5 Enemy Aircraft reconneitred over Kent and Hampshire and 2 flew
over Plymouth both being destroyed by Spitfires.
30/31st. Aircraft despatched. Remscheid 273 (15 missing)
Seamining 8, Intruders 35, Anti ship,ing 8, Remscheid contains
the Deutsche Edel Stahlwerke Steel Alloy Factory and a concentrated
attack on the town was carried out in clear weather.
Northern Italy. 29/30. 9 Lancasters of Bomber Command
dropped Leaflets over 4 cities and Lended in North Africa as
detailed.
Southorn Italy. 28/29. Wollingtons dropped 24 tons on
Naples Airfield and 38 tons on another South Zast of Naples. 2
Wellingtons missing. 29, 56 Fortressos attacked Viterbo Airfield
and Marauders dropped 31 tons on Aquino Airfield. 1 Marsuder missin
Sicily 28th, 83 Light Bombers attacked Regelbuto and
Centuripo.
Mediterraneon. 29th. Beaufighters attacked a convoy, a
7,000 ton ship was left sinking and a destroyer and Motor Torpedo
boat set on fire. One Beaufightor was shot down.
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 254
Following is supplementary resume of operational events covering the
period 24th to 31st July, 1943.
1. NAVAL
HOME WATERS. H.M. coastal forces have engaged enemy ships on 6 occa-
aions. One E-boat was destroyed and a considerable number of amall naval units and
merchantmen were damaged. Two of H.M. Canadian Destroyers took part in operations
against Spanish trawlers fishing in prohibited area in BAY OF BISCAY.
MEDITERRANEAN. Allied naval forces have continued to support and
supply land forces in SICILY. H.M. Coastal Forces have bombarded TAORMINA and
RIPOSTE. U.S. Destroyers and light craft are operating from PALERMO. H.M. end
Allied submarines have sunk two 2,000 ton merchantmen and two schooners, torpedoed
B. 7,000 ton merchantman, taken prisoners from an E-boat escaping from TRAPANI and
damaged a 2,000 ton merchantman.
SUBMARINE WARFARE. About 80 U-boats at ses In ATLANTIC and INDIAN
Oceans. Chief activity off WEST AFRICA, BRAZIL, EASTERN U.S.A., CARIBBEAN and
Eastern AFRICA. MEDITERRANEAN quiet. Week ending 25th, 7 ocean convoys arrived
destinations without loss.
SUMMARY OF ANTI-SUBMARINE ATTACKS IN JULY REPORTED UP TO NOON 28TH,
Number of attacks by shore-based aircraft 100; by carrier-borne aircraft 6, by war-
ships 43. Sunk and probably sunk - - by aircraft 20, by warships 10. Possibly sunk
by sircraft 3, by warships 5. Probably damaged - by aircraft 9, by warships 3.
Possibly damaged - by aircraft 6.
SHIPPING CASUALTIES. From 24th to 30th inclusive six ships were ru-
portad tarpedoed. One Dutch tanker sunk off CURACAO, one 0.5. tanker torpedoed in
West Atlantic but reached PUERTO RICO, 2 British ships in South Atlentic, one
British ship sunk in GULF OF ADEZI end one British ship (belated report) in the
INDIAN OCEAN. In addition, 4 British ships in convoy were hit by mircraft off
LISBON (2 sunk, 1 proceeding with convoy and 1 in tow), 1 British ship sunk by air-
craft in SYRACUSE Harbour and one British ship bombed in northern waters but reached
KOLA INLET. One British ship is reported overdue at BEIRA.
ENEMY SHIPPING. Period 16th - 30th June 11 enemy chips totalling
21,719 tons were sunk or captured including 6 shipo totalling 18,597 tone in MEDITE
RANEAN.
TRADE. Imports in convoy into UNITED KINGDOM wook ending 24th -
1,361,000 tons including 650,000 oil.
MILITARY
ITALY. At least three German Divisions believed in IMLY, two south
of NAPLES. No information yet of German military reaction to Italian political
situntion other than in press tolograms.
SICILY. Enemy while maintaining firm hold on their loft flank at
CATANIA are letting line owing slowly back to TROINA Area and to North Coast.
GERMAN DISPOSITIONS believed as follows - bulk 29th Panser Grenndior
Division on North Coast, 15th Panser Division right contre, Gooring Division left
centre, strong brigade group (which includes some 6 bettalions Parachutists operati:
in ground role) on left.
GENERAL. Thole of Southern and Western SICILY now in Allied hands.
Obvious at early stage Gormans intended forming nain defensive position on line
running from CATANIA northwestwards through TROINA to Coast. Axis reinforcements
and supplies continue stendily through ports and over benches, Casuulties 8th Army
to 27th (less airborne Division ) killed, wounded and missing - 6,139 including
Canadians.
8th Army. No appreciable change on front though indications Cermans
feeling affects of our air superiority. Fierce fighting occurred intersporsed with
losses to enemy. United Kingdom forces engaged in consolidating gains, regrouping
period of considerable patrol activity. German counter-sttacks repulsed with heavy
DITTAINO River and at some points petrols crossed SIMETO River. Further northward
and making local advances CATANIA Plain. Our forward positions are on line of
fiorce and confused fighting in extremely difficult country. Enemy tenks used in
counter-sttacks and places changed hande several timos be REY baing aded finally Unclassified secured
2 -
7th Amy. United States forces have swept all before them in advance
through west of Island. They are now engaged in occupying that area and are also
advancing eastwards.
BURMA. Increased patrol activity north of BOTHIDAUNG.
3. AIR OPERATIONS
WESTERN FRONT. Night, wook of record heavy attacks. 3,679 norties,
100 aircraft missing. 5 enemy fighters destroyed. 3 very heavy attacks on HAMPURG,
rosulta outstandingly successful. Damage so severe and widesproad that it cannot
yot be assessed, but known that damage to commercial and industrial targots is
anormous, including Blohm Voas and Howaldtsyerke submarine building yards. A single
vory successful attack on ESSEN when further severe damage caused to Krupps. In
these raids our losses under 3% of bombers sent out, One somewhat lighter attack
on REMSCHEID, details not yet known.
Day. Throughout the week strong formations of U.S. Fortrosses carried
out hanvy and widespread raids. Total of 1,242 aircraft despatched. 2 attacks on
HAMBURG increasing damage elroady caused by R.A.F. 2 successful attacks on CASSEL
causing damage to Fieseler Works and considerable damage to Spinnfessor Textile
Fectory. Successful attack on nore-engine works at Oscherswoben near MAGDEBURG.
Successful attack on HANOVER where large tyre factory was hit and severe damage to
shipbuilding yards. Other diversionary attacks on WILHELMSHAVEN, BREMERHAVEN and
WARNEMUNDE. R.A.F. attacked objectives in HOLLAND and provided large fighter escords
and diversionary sweeps. D.S. Fortresses also carried out two heavy attacks on tar-
gets in NORWAY. First on TRONDHEIM very successful, naval base damaged and sub-
marine and cargo vessel sunk. Second on Aluminium Works at HEROYA most successful.
In all these operations Allies lost 124 aircraft.
ENEMY. About 49 unemy circraft crossed our coasts during the week.
Seven wure destroyed.
MEDITERRANE.N. Allied attacks concentrated on enemy communications
end airfields in SICILY and SOUTHERN ITALY. One heavy attack on BOLOGNA Railway
Centre. Spitfiros twice intercupted escorted formations of enemy transport air-
craft, most of which were destroyed. One 1,500 ton ship tunk, one of 7,500 tons
loft sinking. 2 Destroyers and M.P.B. set on fire and number of small craft des-
troyed and damaged, In all these operations we lost 22 aircraft.
RUSSIA. Russian Air Force was actively engaged in supporting thoir
advance in ORIL Sector where there seons no doubt that they ere continuing to hold
their own in the air. The German Air Force activity throughout RUSSIA seems to have
been limited and it is possible that they may be having difficulty in recovering
from heavy wastage incurred during intensive operations at the start of their KURSK
offensive.
4. EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGENCE REPORTS OF ALLIED AIR ATTACKS.
COLOGNE. Accumulated devastmention now estimated at 60% of area on west
bank of RHINE and over 80% of Control City area. The nain business and shopping
centre has been ruined. Estimated over 63,000 house unito destroyed or uninhabitable
HULS. 32 days after latest raid only one out of 5 chinneys of syntheti
rubber plant was smoking and none of the cooling towers were working.
RUHR. Branch fuctories of Versinigto Stahlwerko at GELSENKIRCHEN,
BOCHUM and MULHEIM have all boon damaged, the Mulheim branch most severoly.
HAMBURG. Although early photographs were spoilt by smoke and all
parts of the city were not visible, 10 is clear that destruction is very great
and industrial damage extremely heavy.
HANOVER. 3 buildings of Continental Tyre Factory partly destroyed and
others demnged. This is German priority one factory.
ROME. Main railway station was unusable on 19th. Casuelties hoevy
among Italian and German airmon at airfields. Barracks at SAN LORENZO used by Gor-
mens na n. Headquerters was destroyed. Two districts without water owing to broken
squeduct. Much confusion among crowds at Trastevere Station 20th.
TURIN. Some fires still burning 3 days after attack 12th/13th oring to
water shortage. About 45 industrial concerns suffored and heavy damage nt SNIA VISCO
ortificial silk works.
BOLOGNA. Severe damage to marshalling yards, reilway junction and
permanent way.
TRONDHEIM. Photographs 24th show fives burning and hunvy damage to docks
quays and workshops. Flonting dock partly submerged, direct hit on one shipyard and
several small craft sunk or capsized.
HEROYA. Important damage to Magnosium, Aluminium end Nitrate works,
5. HOME SECURITY
No killed, one seriously wounded.
Regraded Unclassified