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Volume 784, October 20 – October 23, 1944
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Volume 784, October 20 – October 23, 1944
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 784
October 20-23, 1944
Regraded Unclassified
- C -
Book Page
Chase National Bank
See Foreign Funds Control
China
See Gold
Correspondence
Mrs. Forbush's mail report - 10/20/44
784
67
- F -
Foreign Funds Control
Chase National Bank: Saxon report on operations of this
and other branches of American banking and insurance
institutions in France - 10/20/44
82
France
American Banking and Insurance Institutions (Chase National
Bank, etc.): See Foreign Funds Control
- G -
Gold
China: $20 million of gold to be shipped to Assam, India,
for Chinese Government account shipping arrangements
requested of War Department - 10/20/44
86
a) War Department reply - 10/27/44: See Book 787,
page 189
b) War Department reply suggesting "by ship" -
11/11/44: Book 793. page 259
- L - -
Lend-Lease
United Kingdom
Federal Reserve Bank of New York statement showing
dollar disbursements, week ending October 11, 1944 -
10/20/44
87
Aircraft despatched, weeks ending September 29 and
October 6 - - British Air Commission report - - 10/20/44
92
- P -
Post-War Planning
Surplus Property, Disposal of: Final report of Surplus
War Property Administration made by W. L. Clayton,
Administrator 10/23/44
194
- S -
Surplus Property, Disposal of
Surplus War Property Administration final report:
See Post-War Planning
Regraded Unclassified
- 8 - (Continued)
Book Page
Switzerland
Banque Populaire Suisse: See War Refugee Board
- V -
Vanderpoel, Robert P (Financial Editor, Chicago Herald-American)
Thanked for assistance in War Bond speeches - 10/20/44 784
60
- W -
War Refugee Board
Switzerland: Banque Populaire Suisse - method of handling
currency bank notes, etc., when deposited by refugees
discussed in cable from American Embassy, London -
10/21/44
147
Regraded Unclassified -
Regraded Unclassified
Copy 10/21/97- to Prof Angell-
October 20, 1944
9:15 a.m.
AMERICAN DELEGATION ON BRITISH LEND-LEASE
Present: Mr. White
Mr. Acheson
Mr. Taft
Mr. Casaday
Mr. Angell
Mr. Collado
Mr. Currie
Mr. Cox
Mrs. Klotz
H.M.JR: I think, gentlemen, if it is agreeable to
you, the first thing I am going to take up, which I
haven't read carefully, is a letter from Mr. Patterson.
(Reading) "The attached paper addressed to the United
States Committee dealing with British requirements for
Stage II outlines the principles to be adhered to by the
War Department Subcommittees working with the British on
the military items in the British book.
"These principles are of course subject to your re-
view, but we believe that by adhering to them our Subcom-
mittees will arrive at conclusions on the various military
items listed by the British that will be satisfactory to
both."
And "Memorandum to the U.S. Committee Dealing with
'British Requirements for the First Year of Stage II':
"The War Department believes that the following
principles must govern the consideration of the statement
of requirements of the British Government in Chapter I,
'Munitions Program for 1945' of 'British Requirements for
the First Year of Stage II':
Regraded Unclassified
2
- 2 -
"a. Requirements must be those for British participa-
tion in approved operations against Japan which have been
established by the Combined Chiefs of Staff and for British
participation in occupation of Axis countries."
MR. CURRIE: That doesn't include the maintenance of
the forces in the Mediterranean.
MR. COX: Or the Middle East. And you will get into
some political coup by drawing distinctions between soldiers
in one part of the world and another.
H.M.JR: (Continuing) "b. Requirements being satis-
factorily established, they must first be satisfied from
equipment already in the possession of the British Govern-
ment, or reasonably obtainable by production from British
sources and not required for other approved military pur-
poses. As illustration, it appears that the present
strength of the R.A.F. is over twenty-five thousand heavy
bombers, more than four thousand medium bombers, more than
two thousand light bombers and over eleven thousand fighters."
Needless to say, this is entirely confidential.
"Many R.A.F. types are entirely suitable for the war
against our forces from the European theater with their
currently assigned aircraft in the majority of cases. It
is only reasonable that the R.A.F. should do likewise.
Similarly, it would seem that, for occupation and other
purposes, substantial amounts of first-line combat materiel
will not be required. In the light of the foregoing the
quantities requested by the British appear high.
"c. Such allocations as are made after satisfactory
establishment of net requirements as above set forth, can-
not be in the form of firm delivery schedules, but must be
subject to military urgency of the U.S. Army and U.S. Navy,
the entire situation being dealt with on the basis of monthly.
review by the regularly established military procedure
(Munitions Assignments Board). It is unthinkable that
commitments already assumed by our own forces and necessary
supply of these forces should be subordinated to form com-
mitments to satisfy British requirements.
Regraded Unclassified
3
- 3 -
"d. Allocations of U.S. material shall not be from
new production except as all existing combat-serviceable
stocks are exhausted.
"e. No allocations shall be considered which would
entail increase in existing facilities or which would re-
quire reopening of closed facilities."
Of course, I think if they need this stuff you have
got to get it. It is just too damned bad if they have to
start another factory.
"2. If the foregoing principles are accepted and
adhered to, it should be possible for military British -
U.S. sub-committees to resolve the British requirements
with U.S. availability in a very short period of time.
It is recommended that military sub-committees be appointed
to discuss the stated Navy, Army and Air requirements,
respectively."
Well, I don't think we could spend our time any better
than in discussing this, do you?
(To Mrs. Klotz) Did you have a copy made?
MRS. KLOTZ: Yes.
H.M.JR: Is there more than one? Will you ask for one
copy for State, one for FEA, and one for the Secretary?
MR. CURRIE: Did you intend to discuss that with the
British this morning?
H.M.JR: No.
MR. CURRIE: We ought to spend a little time consider-
ing what we are going to take up with the British this
morning.
H.M.JR: All right, Lauch, let's do this. This is &
very competent group present here today. If they would be
Regraded Unclassified
4
- 4 -
willing to take this and advise me before I leave at four
o'clock, so I can answer this - I think this has to be
answered today.
MR. ACHESON: Yes.
MR. WHITE: Why couldn't we adjourn after the British
meeting and then we will discuss it and make recommendations
to you after that, because I think you will want to discuss
this Page One which you promised you would let them know
about, and which raises some difficult questions.
H.M.JR: Yes, but this thing is disturbing because
it does not come within the spirit of the Quebec agreement.
MR. ACHESON: No, I think some of those things are--
H.M.JR: Bob Patterson said he would do this thing, and
he said there was nothing here. They are throwing a lot of
if's, and's, and but's around here.
MR. WHITE: I should imagine, Mr. Secretary, that this
could be within the spirit in this sense, that they should
never have asked for anything that didn't fall within this.
I am speaking of armaments, because if the armaments - it
isn't like industrial commodities which can save them
dollar balances. The answer is, if they don't need these
for these purposes, then they shouldn't be produced even
for themselves.
H.M.JR: Yes, but there are a lot of things.
MR. COX: It does affect the dollar balances indirectly.
If they have to produce, for example, thirty caliber rifles
for use in the Middle East and Mediterranean, that means
their productive capacity has to be used--
MR. WHITE: Their answer to that is they don't need
them for the Middle East.
H.M.JR: I think you have to keep this in mind, gentle-
men, that I don't think the Army really wants the English
Regraded Unclassified
5
- 5 -
in the Pacific, anyway, and if they can have them come
there with a tin sword and a lead helmet, and as ineffective
as possible, that would please the Army very much. So I
think you have to keep that in mind. They don't want them
and the less they give to them the more pleased they will
be.
MR. ACHESON: What is the attitude of the Navy?
H.M.JR: I haven't had a chance - Forrestal is coming
over for lunch. I will know better after that. But when
I had Patterson alone he was fine, but somebody has gone
to work on him.
Well, we will give you gentlemen copies so you gentle-
men can advise me on this thing.
Now, what was the thing that Lauch or Harry said they
wanted to bring up?
MR. WHITE: Page One, which Keynes, at the last meeting,
said he presumed if that were acceptable that would be
sufficient in lieu of the letter which you said you didn't
think was necessary.
H.M.JR: Just Page One or the whole business?
MR. WHITE: He just referred to Page One.
MR. TAFT: Those four items.
H.M.JR: Can we answer One in the light of Mr.Patterson's
memorandum?
MR. WHITE: I should think so, partly, because under
the principles which are stated in that letter, the Army
can do pretty much what they want.
H.M.JR: Harry, if once we give our word, we can't go
back on it. I don't see how we can answer One until we have
very carefully examined Patterson's letter.
6
- 6 -
MR. COX: Mr. Secretary, you have to go even beyond
that. One is an attempt to take the Quebec Conference
thing and everything in this book, practically, and
generalize them into things that they think are applicable in
the whole book. My judgment would be that it would be much
sounder to take large areas of the practical cases involved
and pass on them in the spirit of the Quebec thing, rather
than trying to come out with generalizations, because I
think you can formulate, with reference to specific problems,
statements of policy which can be used by the administrative
people that will be workable and also won't cause you as
much political difficulty.
H.M.JR: Do you people agree with White that One is
not in conflict with ratterson's letter?
MR. CURRIE: We have a slight change to suggest. It
is a pretty binding commitment near the end of One - "Also
to make possible the release of manpower for munitions
production in the U.K. to the extent explained herein."
We think if the "herein" was changed to "extent agreed
upon, that would male it satisfactory. We can't give a
blanket commitment that we agreed to all the releases
explained in this volume.
MR. WHITE: It seems to me, Mr. Secretary, that is
the kind of basic point that I thought you were going to
raise. You were going to permit them to release manpower
approximately to the extent which they have indicated here.
Now, how that release will be made possible, whether it
will be through the armament program or through some other
program, is a matter for decision, but I thought that that
was one of the principle--
MR. CURRIE: But the only point here, Harry, is
accepting the words, "to the extent explained herein,"
you are in a way accepting the whole program - if you
say "to the extent agreed upon."
MR. TAFT: Chapter Three has nothing to do with this,
though, it is only the manpower.
Regraded Unclassified
7
- 7 -
MR. ANGELL: This allows the British to interpret
themselves what the agreement means in terms of these
figures, and the manpower requirement which we are not able
to consent to.
MR. CURRIE: Agree in principle on the release of
manpower for production, but that is one of the principal
points of discussion.
MR. WHITE: One way to approach it is by ignoring this
first page entirely as Oscar suggested, and which appeals
to me. I don't know why we should have another commitment
on top of the first commitment. You are going to work and
when you reach the first obstacle then you can compare the
failure to agree with the Quebec agreement. That is one
way, and that is the way that seemed to me to be highly
desirable.
There is the other way they want, and which I think
they are fair in pressing - though from our point of view
I don't think we ought to agree - and that is to agree on
what the over-all policy is. They want to cut their pro-
duction back by twenty-six percent. That is what they
want to release.
Now, either we want to take the position we don't
know what the cut-back shail be - we want to avoid that--
H.M.JR: Harry, if you remember, they started out at
Quebec with & memorandum from the British Treasury, which
is available to you gentlemen if you would care to see it.
I haven't circulated it, but if you would like to see it--
MR. TAFT: It has been circulated; we have copies.
H.M.JR: We were going to do this thing on a strict
percentagewise basis, and I objected. I don't know - I
should know, but I don't know. Unallocated funds are left
in Lend-Lease. I mean, what they have asked for - supposing
they got everything they asked for here except that five
or six hundred million of dead cats, how much unallocated
funds are there left in Lend-Lease?
(Mr. Casaday enters the conference)
Regraded Unclassified
8
- 8 -
MR. COX: That is one of the judgments you have to make
before you can--
H.M.JR: But that is a known figure, isn't it?
MR. CURRIE: It depends on the continuance of the war
in Germany, Mr. Secretary.
H.M.JR: As of today, what are the unallocated funds?
MR. COX: About four million dollars, but you have
commitments against them for the Aussian program and other
programs. For the amount that could be allocated for this,
they would have to resurvey the whole thingand see what
they could knock out.
H.M.JR: Just to go back a minute, I am not an attorney,
but you take that sentence, "Also to make possible the re-
lease of menpower for munitions production in the U.K. to
the extent explained herein." I could term that a commit-
ment; therefore I would like to know what Dean thinks. I
would rather proceed and then if and when we reach an im-
passe we can examine it and apply the Quebec principle to
the impasse. What would you think?
MR. ACHESON: I think that is all right. I hadn't
understood that any commitment which was made at Quebec,
or would be made if you agreed to this paragraph, would mean
you would do it whether or not you could get the appropria-
tion from Congress. I assumed that this was an understand-
ing between the Executive Branches, and if you couldn't
get it from Congress then you couldn't carry it out. The
British would understand that.
H.M.JR: These various points will come out. Unfortu-
nately that point was never raised. The understanding was
this: They were asking - - I forget the figure in the Quebec
agreement--
MR. COLLADO: Six and a half.
Regraded Unclassified
9
- 9 -
H.M.JR: That, provided they could justify - this is
the way I understood it - Mr. Roosevelt was committing
himself to six and a half provided they could explain the
thing satisfactorily to this Committee. He was ready to
commit himself to the six and a half without any committee
or without any looking at it, but it was not raised - I
mean, nobody raised the question of whether we did or didn't
have the appropriation.
It was a pretty firm commitment, Dean. He really went
all-out, provided they could justify it. Have you read the
conversations back of it?
MR. ACHESON: I read two memoranda.
H.M.JR: One which I call an agreement, and the other
a memorandum of the conversations.
MR. ACHESON: Yes, and those are the things in our
telegram.
MR. TAFT: I am not sure what the Secretary means by
an agreement.
MR. 00LLADO: A short initialed piece, I think dated
the 15th, and behind it is a longer memorandum of conversa-
tions of the 14th.
MR. TAFT: The 15th doesn't really go into what you
agreed to.
MR. ACHESON: That memorandum of the 15th just sets
up the machinery.
H.M.JR: But the conversation of the 14th - the reason
we did it that way was we couldn't write an agreement;
therefore I suggested that we have an agreement and back it
up with a conversation because it was too difficult--
MR. CURRIE; I think this first point is important.
It is in accord with the Quebec spirit and I would have no
hesitation in putting myself on record for it, that we are
Regraded Unclassified
10
- 10 -
not insisting that the British make all the things they
can make before they ask us for anything. That is really
what this says. I was only objecting to our giving a com-
mitment at the beginning on all the rest of this document,
because that is something we will have to discuss and
something we will have to be mutually agreed upon. But
the principle we can accept.
H.M.JR: Well, I think you are raising these points -
I can answer. There is no question. The point is that the
British were very keen to take part in the Pacific war.
Then they are very keen to release enough workers for
munitions production, to put them to work manufacturing
goods that they can export. And then I would say the third
thing that they were anxious for was to increase the standard
of living - the food of their people. All of those things
are mentioned, all of them were agreed to. And I think
that is pretty much the way I understand it.
MR. WHITE: Mr. Secretary, 80 far as the written docu-
ment is concerned, unless you want to clothe it in other
conversations that did not appear in the written document on
the conversations, as I remembered it, there is not a firm
commitment as to amount.
I would like to read the key sentence, if I may,
Mr. Secretary. This is in the conversations: "The exact
needs would have to be re-calculated in the light of the
decisions on the military matters reached at the Conference."
That is with respect to munitions. "The non-munitions re-
quirements had been put at three billion dollars gross,
against which a considerable amount would be set off for
Reverse Lend-Lease. The President agreed that it would
be better to work on figures like these than on a propor-
tional basis."
In other words, the President agreed it would be better
to work on those figures, but there has to be a re-calcula-
tion in the light of the needs.
H.M.JR: But there is another sentence there somewhere.
Regraded Unclassified
11
- 11 -
MR. WHITE: Not where any amounts are mentioned.
There are many other important sentences.
H.M.JR: Isn't there something--
MR. COLLADO: The first sentence, Harry, talks about
a redistribution of effort.
MR. WHITE: Oh, yes. There is a statement there with
respect to the fact that there should be manpower released,
but it doesn't say how much. Churchill did want a propor-
tionate amount.
H.M.JR: May I see that a minute, please? The first
thing is just the thing that I said. "The President and the
Prime Minister said that when Germany was overcome there
would be a redistribution of effort in both countries.
The President indicated assent."
This is the thing: "He understood that munitions
assistance required had been calculated by the British at
three and a half. billion on the first year, on the basis of
strategy. The exact need would have to be re-calculated
in the light of the military matters. Non-military require-
ments would be put at three billion. The President agreed
it would be better to work on figures like this than on a
proportionate basis," but the President agreed it would be
better to agree on figures like these - which would mean
six and a half.
MR. WHITE: It depends on what you mean by working on.
H.M.JR: We were sent up to work on them.
MR. WHITE: But I gather that the working on of those
figures did not tie you to those figures.
H.M.JR: No, but he agreed that we would work on those
figures, the figures being six and a half.
MR. WHITE: I don't like to press the point too much, but
I thought the difference of opinion was that you were insist-
ing that the matter not be approached from a question of pro-
portions, but that their exact needs be the basis of discussion.
Regraded Unclassified
12
- 12 -
H.M.JR: If I hadn't been there the President would have
agreed to the six and a half on the spot. Then I suggested
that this Committee be set up to examine it.
MR. WHITE: That is right, which means - if I interpret
it correctly - because this was the basis of discussion
there - that meant that you have flexibility in plus or
minus.
H.M.JR: But we start with six and a half and then it
is up to them to justify.
MR. WHITE: As long as you are not tied down to the
figure, because this is the third time, Mr. Secretary, that
they have tried to tie us down to the figure.
H.M.JR: If there is anything unreasonable, it is out.
But that is the springboard. We can go above it, we can
go below it. That is all.
MR. ANGELL: Isn't that simply an expression of
preference for dealing in absolute figures rather than
percentages?
H.M.JR: That is right.
MR. ANGELL: There is no other commitment.
MR. COX: Mr. Secretary, as to these generalizations,
Patterson's letter and memorandum is one attempt to make it
more specific. I think you will also find there will be
a great many technical problems involved where you will
have to state it more specifically in final form than the
generalization is. For example, if they want some additional
rifles, and we have to add additional capacity, I would
assume that probably wouldn't be done because it is a non-
standard item and they may have capacity.
If you add the words, "to the extent agreed upon," that
is just another way of saying that when you get a piece of
paper with a lot of statements as to munitions, that is what
you have agreed on and that is what the administrative
people can follow.
Regraded Unclassified
13
- 13 -
But I think the guide is going to have to be a good
deal more specific than just the release of manpower, and
everybody assumes that under the Quebec understanding.
H.M.JR: I think this, unless some of you gentlemen
disagree, that we ought to ask them not to press for this
thing today, and wait until we get a little further along.
MR. ACHESON: I think you will have to do that, in
view of Patterson's letter. From what you have told us
about it, it seems to me that this is a fair statement
as to what the general understanding was in Quebec, subject
always to the fact that the President couldn't commit him-
self to provide more money than Congress has given him to
provide. All he can do beyond that is to say he will do
his best to get it.
H.M.JR: Unfortunately, that wasn't said, but I might
say it was implied. But I think the thing to do is to ask
them - "Please let's get started, and don't superimpose
anything on us other than what we have got, and if at any
time you feel that any of these committees are not living
up to the Quebec Conference, then is time enough to raise
it." Because this thing has been drafted by some very
clever, intelligent people, and there might be something
there that, speaking for myself - that I didn't detect.
MR. WHITE: In answer to Dean's comment, I think that
first paragraph does reflect the spirit of the conversations
with the exception of the one point which Lauch points out.
The President had agreed they should get the munitions on
Lend-Lease and that they should release manpower, but the
proportions, the exact amount of how much manpower, and so
forth, was not agreed upon by the President.
MR. CURRIE: I don't think we could accept, now, the
phrase "to the extent agreed herein."
H.M.JR: Well, we have all agreed.
MR. WHITE: I wanted to correct Dean's interpretation
of the conversation. I thought he said the first paragraph
Regraded Unclassified
14
- 14 -
reflects it. I say it does, with the exception of that
quantitative statement.
MR. TAFT: Mr. Secretary, on Number Three, I think
if you let that pass without saying anything about it at
this stage there might be some misunderstanding, because
I don't think that quite reflects--
MR. ACHESON: No, Number Three - at Quebec there was
a definite reservation about Lend-Lease goods and identi-
cal goods being exported which is not covered in Three.
H.M.JR: What page is that?
MR. ACHESON: That is the first page.
H.M.JR: Well, Mr. Taft, I thought that I was going
to say to them this morning, if we are in a hole, of
course, that this whole introduction, that we waive it for
the time being.
Mic. CURRIE: Mr. Secretary, our problem on the civilian
side of Lend-Lease is more difficult than the military side
because it is a question of more or less, and the more or
less on the civilian side depends partly on these other
considerations. It depends partly on their effect on the
dollar position, on the balance of payment, and on the ques-
tion of re-exports. These rather broad underlying assump-
tions are almost necessary for us to come out in the final
analysis with the civilian Lend-Lease program.
H.M.JR: Do you mean you want to discuss Three now?
MR. CURRIE: I think if we do discuss individual items
we will have to come back to this.
MR. WHITE: I think we ought to discuss it among our-
selves, but not with the British in this first stage.
H.M.JR: Could I do this for & minute - we will come
back to this. What I would like to get advice from you
people on is this. On the civilian side, all these very
Regraded Unclassified
15
- 15 -
important items, how do you people think we should proceed?
Do you want to proceed as a committee as a whole, and take
up all of these things, or do you want to split up food,
oil, shipping, or what would you suggest?
MR. ACHESON: May I say something before, which bears
on that? I think before we split up we ought to stay
together until we have gotten some general solution of about
two important problems which seem to me to settle almost
everything else in this civilian side of it. They come
from these central facts.
When you were speaking to us the first time we met,
and told us about the agreement at Quebec and the spirit
of the thing and what we were supposed to do, the question
was raised as to whether we should attempt to keep the
dollar balances at some particular point, and you said you
didn't think that was the spirit of Quebec, that we were
to go ahead on the general program, and if the balances
rose, that was something else.
H.M.JR: That is right.
MR. ACHESON: Now, the British have come in with a very
strict position which is that they are not going to claim
an increase in their balances, but that they don't want
a decrease. Now, if their figures are right - and you will
know more about that than we will, as to their respective
position - then anything you cut out of this program will
bring down their dollar balances and may bring them down
very severely. So we have a decision here of knowing what
to do in case some of the things they put forward aren't
feasible.
For instance, in Chapter Three, these dead cats that
you mentioned the other day, if you throw out those it
comes somewhere up to five hundred million dollars, which,
if their other figures are right, is very serious for them.
H.M.JR: May I answer this, because I have had a chance
to talk to them about that. It will only take a minute.
Regraded Unclassified
16
- 16 -
I have told them that the dead cats bother me very,
very much, and I realize their position, that if their
balances get below a true billion dollars - I mean the
offsets, and all of that sort of thing - no, I did not
say that. They were saying - I didn't make any comment -
they were saying that if they went below a billion dollars,
then they said they couldn't participate in a lot of
things they would like to, and things that we would ask
them to. And the only comment that I made was - I
listened very closely - was that I didn't know how, but I
thought it would be much easier to find five hundred million
fresh dollars from some place to assist them if the picture
was as they painted it, than to try to thrash out these
dead cats which they say they put in in order to help their
dollar position.
MR. ACHESON: Well, it does in this way, that if that
is the course that we are going to take--
H.M.JR: But I made no commitment. I just listened.
MR. WHITE: You asked one question I think Dean would
be interested in. You- asked them what they meant by that
statement. They said they might not be able to afford the
commitments they had for relief.
MR. ACHESON: That was spit up before, yes.
H.M.JR: "When you say you won't be able to partici-
pate, what do you mean?" They said, "Well, take UNRRA,
for example.
MR. ACHESON: What I was getting at is, if that is so,
and we are looking for some other way to deal with the
problem, that is going to affect decisions which would be
made in the civilian field somewhere else. Now, that raises
very much the question we were just talking about in connec-
tion with paragraph Three, exports. They have in some items
of raw materials. It seems to me there isn't much objection
to any of those items except possibly cotton, that we have
got to make up our minds about.
Regraded Unclassified
17
- 17 -
H.M.JR: You mean the re-export of finished goods?
MR. ACHESON: Yes. They are not going to have any
finished goods, and most of the other things they have are
not going to be particularly difficult, including the
rubber, which I think we could get around - but we have
a question on cotton. That is a political decision.
If you take cotton out, then there is another considerable
hole. How are you going to make that up? The whole basis
of their figures include some recovery of their export
trade. We have to have decisions on that.
Those are about the only two major points, and if we
could thrash those out in this Committee before we split
up--
MR. TAFT: You mean on the U.S. side?
MR. ACHESON: On the U.S. side, here.
MR. WHITE: You don't mean this morning. You mean
before we break up into small groups.
MR. ACHESON: Because if you have a small group that
goes off and works on petroleum, and it hasn't your instruc-
tions on this broad policy, they are going to come out with
a whole series of cuts all along the way which will bring
this a billion dollars short of the mark.
MR. WHITE: I would like to suggest another approach.
H.M.JR: Could you just wait a minute? On the over-
all - and I am not going to lose sight of the thing - I mean,
it is difficult to work it out, and I realise that, but
everything is difficult these days. The thing that I would
like to strive for, and the thing that I asked them, is this,
that when we get through whatever we are doing, that we
take England and put her back, at least start her back, on
the road to recovery. Now, that is the objective that I
would like to aim for. Therefore, to do this thing - well,
I don't want the Army or anybody else to be "persnickerty"
about this thing, because if each group is "persnickerty"
Regraded Unclassified
18
- 18 -
and says, "Well, we won't start a new factory," just as
a principle - now, it may be very important. It might
be some important secret weapon that couldn't be done
except in a new factory. I don't know, but it is perfectly
possible.
The objective, as I see it, is to start England back
on the road to recovery and a place in the sun. That is
the way I see the thing.
MR. COX: That is right.
H.M.JR: I realize it is a terrific job, but that is
what I look at as the mandate I am trying to carry out
with the help of everybody else.
MR. WHITE: I think there may be another approach
which may not be an aiternative, but it is a welding of
both approaches. That is, supposing the Army goes ahead
with their discussions on the basis such as they have -
that is what is decided; supposing they go through that?
They may end up with approximately what the British have
asked for, or they may end up with something like twenty-
five or fifty or some insignificant amount less. That avoids
the question of discussing the principle.
The same with the FEA. You go through the individual
items and see what is politically feasible; for example,
rubber, you can work that out. Take cotton, you may be
able to work out something on cotton along the lines that
Oscar suggested a few weeks ago. So you may go down to
each item and, pursuing the principles of the individual
item, you may end up with an amount which is so close to
the aggregate that you don't have to raise the question of
the general principle at all.
Then when you come to this Three, in which they want
to take special measures merely to augment their balances,
then that is a problem we will have before us, and which
we will have to discuss among ourselves. But I think it
is quite possible, Mr. Secretary, to proceed along the
lines of taking their program with the individual items and
Regraded Unclassified
19
- 19 -
then see where it is leading us, and then meet again in a
few days or a week to see whether it is leading to any
significant deductions.
We may find that the problem is a lot easier than ap-
pears on the surface. Whereas, if we start now to discuss
the general principles and if we give instructions to the
committees that you have got to have that magnitude, you
are almost telling them that there is no use of working,
accept it - just accept the principle as is. Their deci-
sion isn't final, Mr. Secretary. They have to report back.
H.M.JR: Harry, we have four minutes. Can't we tell
these people, without letting them know these various
doubts - simply say we are not prepared at this time to
accept this thing, that we would like to just leave it?
Isn't FEA prepared to take up some of these other things?
MR. CURRIE: I have already started our people on the
examination of all the individual items, from the point of
view of supply, lend-leasability, and so forth.
H.M.JR: I don't want to seem as though we were
stalling. Sir Robert Sinclair, who is here just for this -
aren't you people ready?
MR. TAFT: He is in the War Office, isn't he?
H.M.JR: Production, isn't he?
MR. COX: I think we are ready.
H.M.JR: I mean, without telling them of these doubts -
and then couldn't you gentlemen - because I am leaving this
afternoon for a couple of days - couldn't you people, at
this level - which is a very high level - discuss these
things? I am available on the telephone.
What do you think, Dean?
MR. ACHESON: I think that can be done if we are very
careful not to have these doubts come out at low working
Regraded Unclassified
20
- 20 -
levels, so we don't go backwards into the White Paper
and say, "Now we had better insist on the White Paper."
Then they are going to come back to you and say that the
spirit of Quebec is not all through this Government, and
you are going to be in hot water.
H.M.JR: I think this, Dean, that if the FEA will
be just a little careful and they can push those things
which they know they are all right on, and go slow on,
say, cotton--
MR. CURRIE: we can go a long way with them on the
individual items. When it comes to requests for reinstate-
ment of things that were knocked out last January, then we
have to come back for guidance.
H.M.JR: In the meantime, all of those things in
Chapter Three, I think, like tobacco and off-shore sugar -
they didn't bring up fish - I wonder why not?
MR. COX: Mr. Secretary, there is one major question of
procedure here I think ought to be discussed for a minute.
Tied in with this export thing they have put the basic raw
materials that go to war production, as I read this docu-
ment, in the military program. Now, I don't suppose you
want the Army to be discussing the steel and the cotton
that is used for military production purposes. In the
past the procedure has always been for FEA or its prede-
cessor, Lend-Lease, to take those up.
That is very closely related to the export question
because the stuff they propose to take on a cash basis to
export is only a minor part of the raw materials which
are expected to move under Lend-Lease. So I think it
might be wise to ask the Army to take that out and turn it
over to a civilian committee.
MR. WHITE: Why wouldn't it just be better to tip
off our Army on that, and when they come to those items, to
just state that, rather than raising it with the British.
MR. COX: That is all right with me.
Regraded Unclassified
21
- 21 -
MR. TAFT: That means that the Secretary ought to
speak to Mr. Patterson about it.
H.M.JR: (To White) You cail up.
I think what I am going to do - I have been very frank
with these people, and I think I will be equally frank and
tell them just where we are at, because this crowd, I think,
appreciates it.
MR. ACHESON: I think it is better.
H.M.JR: Now, as I understand it, when this meeting
is over you are going to meet somewhere else, and meet
at your own convenience as much as possible, and try to
thrash some of these things out.
MR. ACHESON: Yes, we will meet on this letter right
afterwards.
H.M.JR: Right. Then, if possible, give me something
to say to Mr. Patterson, because I assured them that we
would work as hard as we could on this.
Regraded Unclassified
22
Regraded Unclassified
OCT 20 1944
Dear Mr. Patterson:
This is in reply to your letter of October 19, 1944, with the
attached memorandum setting forth the principles which you suggest
might serve as guide for the military sub-committee's work.
We have carefully gone over the memorandum and believe that the
rules laid down in I, paragraphs A, 3, and E of the memorandum seem
to be too rigid to fall within the general understanding reached by
the President and Mr. Churchill at Quebec. I am not sure that it is
possible or desirable at this time to attempt so precise a formula-
tion for the determination of these matters or to meet the changing
needs of the war any more than it has been possible to do so in the
past. Broadly speaking, the general understanding was that the
British munitions requirements under Lend-Lease should be those
necessary for its participation in the war against Japan in accordance
with the strategical agreements reached at Quebec and to carry out
other obligations which would remain to the British elsewhere after
the collapse of Germany, which were only described at the Quebec
Conference as "reasonable needs". It was also understood that these
requirements were to be considered in the light of some reconversion
to civilian production in both countries.
My suggestion is that you examine the reasonableness of the
British requirements from this broad point of view without going
too far into guiding principles with the British and lat us know
your conclusions. It may be that there will be no serious differences
between the American and British military authorities. If there are,
we can thrash them out on the American side if and when they develop
and come to a decision in the light of the full facts which you will
be able to learn for us and of the other major factors referred to in
the Quebec conversations.
Sincerely,
(Wigned) W. Morgenthan, Jr.
Secretary of the Treasury
The Honorable Robert P. Patterson,
Under Secretary of War,
Yer Department,
Washington, D. C.
CONFIDENTIAL
10/20/44
23
HM JR gave copies of this letter
to State, FEA, and Angell on 10/20/44
Oct. 19, 1944
24
py to Dr. White with instructions to speak
to HM Jr about it tomorrow morning.
25
WAR DEPARTMENT
OFFICE OF THE UNDER SECRETARY
WASHINGTON, D.C.
TOP SECRET
October 19th, 1944.
Honorable Henry Morgenthau, Jr.,
Department of the Treasury,
Washington, D. C.
Dear Henry:
The attached paper addressed to the United States
Committee dealing with British requirements for Stage II out-
lines the principles to be adhered to by the War Department
Subcommittees working with the British on the military items
in the British book.
These principles are of course subject to your re-
view, but we believe that by adhering to them our Subcommittees
will arrive at conclusions on the various military items listed
by the British that will be satisfactory to both.
RLPP Sincerely yours,
Robert P. Patterson,
rpp:lm
Under Secretary of War.
enc.
TOP SECRET
Regraded
Unclassified
TOP. SECRET
26
WAR DEPARTMENT
OFFICE OF THE UNDER SECRETARY
WASHINGTON, D.C.
October 19, 1944.
MEMORANDUM TO THE U. S. COMMITTEE DEALING WITH "BRITISH REQUIREMENTS
FOR THE FIRST YEAR OF STAGE II"
Subject: War Department Comment on Munitions Program
of "British Requirements for the First
Year of Stage II"
1. The War Department believes that the following principles must
govern the consideration of the statement of requirements of the British
Government in Chapter I, "Munitions Program for 1945" of "British Require-
ments For the First Year of Stage II":
a. Requirements must be those for British participation in
approved operations against Japan which have been established by
the Combined Chiefs of Staff and for British participation in
occupation of Axis countries.
b. Requirements being satisfactorily established, they must
first be satisfied from equipment already in the possession of
the British Government, or reasonably obtainable by production
from British sources and not required for other approved military
purposes. As illustration, it appears that the present strength
of the R.A.F. is over twenty-five thousand combat type airplanes
including more than four thousand heavy bombers, more than four
thousand medium bombers, more than two thousand light bombers and
over eleven thousand fighters. Many R.A.F. types are entirely
suitable for the war against Japan. Tie are proposing, for the
war against Japan, to redeploy our forces from the European
Theatre with their currently assigned aircraft in the majority of
cases. It is only reasonable that the R.A.F. should do likewise.
Similarly, it would seem that, for occupation and other purposes,
substantial amounts of first-line combat materiel will not be re-
quired. In the light of the foregoing the quantities requested
by the British appear high.
g. Such allocations as are made after satisfactory establish-
ment of net requirements as above set forth, cannot be in the
form of firm delivery schedules, but must be subject to military
urgency of the U. S. Army and U. S. Navy, the entire situation
TOP SECRET
Regraded Unclassified
27
TOP SECR
being dealt with on the basis of monthly review by the regular-
ly established military procedure (Munitions Assignments Board).
It is unthinkable that commitments already assumed by our own
forces and necessary supply of these forces. should be subordina-
ted to firm commitments to satisfy British requirements.
d. Allocations of U. S. material shall not be from new pro-
duction except as all existing combat-serviceable stocks are ex-
hausted.
e. No allocations shall be considered which would entail
increase in existing facilities or which would require reopening
of closed facilities.
2. If the foregoing principles are accepted and adhered to, it
should be possible for military British - U. S. sub-committees to resolve
the British requirements with U. S. availability in a very short period
of time. It is recommended that military sub-committees be appointed to
discuss the stated Navy, Army and Air requirements, respectively.
PP#
ROBERT P. PATTERSON,
Under Secretary of War.
JOP. SECRET
Regraded Unclassified
copies to Profingle
Mr. Frank Lee.
10/21/94-
October 20, 1944
10:00 a.m.
BRITISH LEND-LEASE NEGOTIATIONS
Present: Lord Halifax
Mr. Acheson
Lord Cherwell
Mr. Taft
Lord Keynes
Dr. White
Mr. Brand
Mr. Cox
Sir Henry Self
Mr. Angell
Mr. Sinclair
Mr. Collado
Mr. Lee
Mr. Currie
Mr. Opie
Mr. Casaday
Mrs. Klotz
H.M.JR: Gentlemen, we have had a discussion here.
Unfortunately, forty-five minutes wasn't time enough to solve
everything, but we thought we could approach the thing
with absolute frankness and candor. Several things we
are quite bothered about and have not yet really cleared
the thing with ourselves.
This request that you made, this introduction here
on page one (refers to document on British requirements
for first year of Stage Two), sort of sailing orders for
all of the committees--we frankly haven't had time enough
to be sure that that is what we could accept. Therefore,
what we'd like to ask you is this, that for the time being
we postpone that and let the committees proceed. If,
while we are settling it--and I assure you we are going
to lose no time-some matter should come up that you feel
one of these sub-committees are not complying fully with
the spirit of Quebec, then there will be time enough to
do something about it.
But there are some things in here which bother us.
We are not prepared to say what they are, because that
would throw this meeting into a very lengthy discussion.
We are not in agreement among ourselves, and therefore we
feel it would be best to postpone the acceptance of it.
I don't want in any way to worry you. Everybody on the
American side is in full agreement as to the spirit of
29
- 2 -
Quebec, and when you try to spell it out in a document
to supersede another document, that is what bothers us.
As Lord Cherwell knows, when we tried to do a doc-
ument at Quebec, carrying out what Mr. Churchill and
Mr. Roosevelt had said, it was difficult enough. Now,
if you try to interpret that further, it just adds another
piece of paper. We want to go full speed ahead, but if
we try to go over every single word and every comma it
will slow us up.
So therefore, we are asking you to postpone our
acceptance of this for the time being. Would that be
agreeable?
LORD CHERWELL: Certainly we will wait until you
clarify the points, the divergence, if any.
H.M.JR: Well, I don't know that there will be any
divergence. I don't want to be misunderstood. Maybe
through my being too frank I will throw doubts into your
mind, but I assure you as to what was said in the
memorandum, back of what was said, everybody here and
everybody I have talked to is in agreement. But if you
begin to take a document and try to interpret that, it
bothers us a little.
Please don't read into anything I am saying anything
other than what I am saying. There is no news behind
the news!
The other thing is this. There are certain items
here, particularly in Chapter Three, that bother us
greatly. There are certain things that we haven't yet--
I am being completely frank--decided on ourselves. To
give an example, cotton. It bothers us consi derably. We
are not yet prepared to give you a solution. We are not
going to give you objections; we are going to give you
solutions.
Therefore, what we'd like to suggest is this: There
are many items that we can go ahead with at once. FEA
is prepared to proceed at once, without holding back at
Regraded Unclassified
30
- 3 -
all, giving us time to talk among ourselves so we can
find the solution to some of the things that you are
asking for. If you should press for some one particular
thing which we have not cleared in our own minds, the
FEA will simply say, "Well, let's just go slow on that."
But in the meantime, we among ourselves are going
to be talking and thinking and working very hard trying
to find a solution to everything that you ask.
Now, I think that that states the position as it is
this morning.
MR. ACHESON: I think that is right.
DR. WHITE: Yes, I think that is right.
H.M.JR: Would any of you gentlemen like to add
anything?
MR. CURRIE: I think that expresses it very well.
DR. WHITE: I think it is clear that they would
begin working with FEA now on their list of items.
H.M.JR: That very briefly is where we stand this
morning. Now, maybe I shouldn't have talked first, but
I told you the whole spirit here is to put all our cards
on the table and say that is where we stand as of today.
It may be that overnight you people may have some little
problems that you would like to put before us. If so,
we are prepared to listen.
LORD KEYNES: No, sir, I think that is a very good
plan. It would clear out of the way all the less diffi-
cult items, and then we shall be able to concentrate much
more on the others.
What do you think the best procedure would be for
getting rid of the less difficult items?
H.M.JR: Mr. Currie, please.
MR. CURRIE: I think if we might take that up in the
Regraded Unclassified
31
- 4 -
ordinary way, just as a new program comes in. Your supply
people get together with our British Empire Division and
the appropriate people in your Supply Division, and they
work in each item in terms of availability, Lend-Lease
availability, supply situation, and the normal consider-
ations.
LORD KEYNES: I think that is what we are hoping to
get away from. Clearly, that has to come at some point;
but what we want, first of all, is to get the principles
laid down, observing, as you say, the more difficult ones,
and then when we have got the overall principles
unquestionably it will have to be done as Mr. Currie
suggests.
But I think we should feel that our case as a whole
is rather falling into fragments if we were proceeding
on extreme details very often with officials who wouldn't
be cognizant of the case as a whole.
MR. CURRIE: This is merely suggested to save time,
I think, Lord Keynes. For instance, I don't anticipate
any great difficulties in the food program, but it is a
large program. I should think it would be helpful if we
could get those people started immediately to working
on that and seeing whether there are any difficulties
on supply grounds, availability, or Lend-Lease availability.
That would not prejudice the broader discussions of the
items that might be reinstated or taken out.
LORD KEYNES: Couldn't we have a sort of Steering
Committee, non-munitions committee, three or four on each
side, and then remit sections as we think they are ripe
for the detailed examination that you suggest? It seems
to me better that we should go through them together at
the first stages. Some of them might create very little
discussion before they were passed on; with others that
wouldn't be the case.
You see, the export consideration runs like a thread
through the whole thing. And it is very difficult to
remit it in detail to particular divisions unless we see
what pattern we are following in that respect right through.
Regraded Unclassified
32
- 5 -
DR. WHITE: Isn't there a solution to that, Lord
Keynes? The steering committee which you are suggesting
would seem to me very helpful, but possibly at a little
later stage--later in terms of days, not weeks. That
steering committee would function excellently to consider
those things about which there are serious doubts, in-
stead of attempting to thresh them through to their final
decision in the larger group that Lauch Currie is suggest-
ing. They could go to the steering committee at once.
There is no reason why there should be a time sequence--
all these groups can work together, but they can go ahead
and make a lot of progress and may find there is no
obstacle at all.
Now, the moment they meet such an obstacle, then
that is an appropriate item to be referred back to a
steering committee or to some other group, and then they
can go ahead with the others.
There wouldn't seem to be any advantage in foreseeing
difficulties before they actually appear, and I gather
that it is FEA's views that there are many items which
would not raise any question of principle at all, and
you may find there will be very few items.
LORD KEYNES: But isn't it rather a pity to have the
difficulties raised too low down? I am not thinking that
the steering committee would probably go into great
detail at first, but that it should be remitted to the
separate divisions from the steering committee, and possibly
with some sort of general orders. Otherwise, we are
exactly where we should have been without the machinery
that we hoped we were setting up now.
DR. WHITE: There is one thing that possibly isn't
clear, Lord Keynes, and that is that the Secretary indi-
cated that some of these matters of principle which you
are suggesting is the subject for discussion among the
American group and will go forward at the same time, and
as soon as some of those items are clarified they
will be taken up with you.
Regraded*Unclassified
h-1
33
- 6 -
LORD KEYNES: I don't believe this is right. I
think we ought to have this committee, which could be a
general clearing house between us. As we are talking
and as you are talking, various things will come up
which warrant being discussed on that level, rather than
between the separate divisions.
H.M.JR: I am not sure that I made myself quite
clear. Our trouble at this moment is that there are
several important things which we have not been able to
make up our own minds on. When we do come to a decision,
we would ask you gentlemen to meet with us again, because
I certainly propose to take part in the meetings myself.
As far as I am concerned, I would like this to be a steering
committee. I mean, I don t want too many committees.
Therefore, I am only talking about, maybe,a couple of days.
Cotton is as good an example as any. We felt that if we
were wrong, then we can just wait, that is all, but we felt
there were things like food and a number of other very
important items that Mr. Marvin Jones and his group could
be discussing.
Now, Marvin Jones hasn't seen this list; and the
sooner we get him the list, we felt, the quicker he could
get to work on it.
LORD KEYNES: I think food is a good example, but
you see in the case of food, I will give you an illustra-
tion of the sort of thing I have in mind. Our food
program is something we think we can best justify against
the background that the British civilian is entitled to
certain estimates, to use the Prime Minister's phrase.
And while perhaps three-quarters of our program is in
common form-I mean on the lines that we have been used
to lately--there are elements which would not be easy to
justify, except on the broader considerations.
Well, now, what I am a little afraid of is, suppose
this is remitted just in accordance with the ordinary
procedure, just what would have happened if there hadn't
been a meeting at Quebec? Then we should be getting the
case a little prejudiced without knowing why this food
program should be approached in a rather different spirit.
Regraded Unclassified
h-2
34
o
- 7 -
H.M.JR: Lord Keynes, let's just stick to food.
Let's be definite. What would you suggest that this body
here do in order to get the food program considered?
LORD KEYNES: Well, Mr. Secretary, I think it is
something we can very likely do here and now. Let us
say if you have gotten far enough in our own thought,
namely, that in remitting this to the Food Administration--
we should say that this is not exactly on all fours with
previous programs. It implies that we use considerable
quantity of stocks which we had to keep in stock during
the German war, but it is also governed by an over-riding
hope that in the course of 1945 there can be some easement
to the civilian population, and that having regard to the
various reasons under various headings given in this paper,
we all hope that the Food Administration will do its best
from that point of view, and should not look at it exactly
as they would have looked at it six months ago. I think
that is all we want.
H.M.JR: But who is going to say that?
LORD KEYNES: This committee, your side on this
committee if they are convinced.
H.M.JR: Is it your thought that this committee should
send for Mr. Marvin Jones and say that to him? I am trying
to find out what is in your mind.
LORD KEYNES: Bring him into the discussion and give
us an opportunity of discussing it with Mr. Marvin Jones.
Our Food Commission, of course, has been in daily touch
with him. And there will be a danger that all that would
continue just as it has continued, very usefully up to a
certain point for many months past, but we would not have
quite the opportunity to put to Mr. marvin Jones the case
as it is set forth in this document.
H.M.JR: I am not trying to be difficult, but I don't
quite understand. Is it your thought, for instance, using
Mr. Marvin Jones, for example, that he be invited to meet
with this committee and you people have an opportunity to
explain to him first?
Regraded Unclassified
h-3
35
- 8 -
LORD KEYNES: That is definitely one way. One way
would be to say, if you were satisfied, that this paper
had given reasons why some estimates were justifiable,
that you should communicate your prima facie view to
that effect and hope he would consider that program in
that light. If you felt that that was rather jumping
things and going too fast, that he should meet partly
with us and possibly apart from us, in order that we could
create that general atmosphere which we think is probably
vital--if various applications were looked at by those
considering them in detail--
MR. CURRIE: Mr. Secretary, I think there is a better
thought than using the word normal procedure. All I had
in mind was merely reciting the considerations of certain
things we will have to get from the technicians. I don't
mean for a moment that this program will be handled in
the ordinary Lend-Lease manner. I merely thought we could
make time by referring them right away to technicians.
I thought you were doing that in connection with the military
programs, not to take the place of our meetings in any
degree.
H.M.JR: Up to now I have taken the time to see the
head of each agency that this is going to go to. I mean,
it has been explained to each person; and while I haven't
had a chance to see Mr. Forrestal, he is having luncheon
with me today only to discuss Quebec. But I would be
delighted if the rest of these gentlemen would be, to
bring a succession of these people before this committee
and let both sides talk to them. It is quite agreeable
to me.
MR. WHITE: It might not be necessary, Mr. Secretary;
you might find that the food group might go right ahead.
It is only when they reach an obstacle that I think there
is room for discussion.
H.M.JR: No, I think what Lord Keynes would like, if
I understand him correctly, using again Mr. Jones--I happen
to know him and know what he does--is to invite him to
meet with the committee and sort of get both sides to tell
him what the idea is.
Regraded Unclassified
36
- 9 -
LORD KEYNES: Yes, that is what I think. You see,
there are some things to be said for getting the back-
ground right before you proceed to details. I am sure
that seventy-five or eighty percent of the details are
the same, but it is difficult to disentangle, knowing at
once which of the ones--
MR. CURRIE: My thought there, Lord Keynes, was that
if our people come back and say, "We think it is clear
sailing on all these items except your increasing your
carcass meat, for example, that is the point I think at
which we might profitably bring in Mr. Jones to argue
the point through. But it may be that question won't
come up, as Dr. White says.
LORD KEYNES: Well, suppose you take raw materials.
There we have drawn up our program on certain assumptions
about exports, and it is scarcely capable in any of its
parts, I think, of being discussed without reference to
that.
MR. CURRIE: I would agree heartily on that, and I
think that is something this committee would have to dis-
cuss at a very early stage.
LORD KEYNES: On the other hand, oil and shipping are
very good examples where your procedure would be very
straight forward. There, there is nothing but the regular
oil program.
H.M.JR: Might I suggest this, because this would
be easier for me personally? I won't be here tomorrow
because I am going to go up to hear the President speak,
but if you gentlemen wanted to meet tomorrow and then
would say which of these people you would like to have
come before the committee to instruct--you could have a
list and have these people come in tomorrow and have a
talk with them. I don't have to be here.
DR. WHITE: I think you could proceed more rapidly,
Mr. Secretary, if we have a little more time to thresh
through some of these very points which Lord Keynes is
raising.
Regraded Unclassified
37
- 10 -
As you indicated earlier in your talk, we are going
forward with that di scussion. Our own minds are not clear,
and it wouldn't be very helpful to bring anybody in until
we were going forward on that.
H.M.JR: Harry, I'd like to please them and I'll
proceed any way that they would like.
LORD KEYNES: Mr. Secretary, I think there is a
great deal in what Dr. White said. This document has
been in your hands a very short time, and it is quite
likely that we would make better speed if there is less
haste at this stage in trying to hurry you too much.
But when you have reached it, it seems to me there are
some sections we can hand over exactly as Mr. Currie was
suggesting. Probably a great part of food can be so
handled, subject to the qualifications which I was men-
tioning; oil, I think, raises nothing; shipping, the
program we have put in in the main part of the document,
I think, raises nothing.
But what is much more complicated, there are some of
our suggestions in Chapter Three that some items which
have not been reckoned eligible in the past might be
added to the list. I think that is the issue that arises
over shipping. The straight shipping list doesn't raise
any of the issues. You get the raw materials and
manufactured articles, then they are very much entangled,
I think, with the export issue.
H.M.JR: Well, the suggestion was made here this
morning that we ask the War Department if it would be
agreeable to them to pull out the raw materials from
under the way you put them in with the military, and have
them considered by the non-military. We don't know whether
the War Department will be willing to do that, but it
would be simpler if the raw materials were pulled out
and considered by the non-military committee in the first
instance.
But, Lord Keynes, to come back, the thing that
Mr. Currie had in mind was that if our food people could
just begin to get the basic information and familiarize
themselves with the thing, they'd be gaining that much time.
38
- 11 -
LORD KEYNES: I suspect that is right.
H.M.JR: Would that be agreeable to you, so that
the food and the other people would at least know what
this is? They haven't seen it. (Refers to document on
British Requirements)
LORD CHERWELL: There is a considerable measure of
agreement, as far as I can see, on topics that will in
no sense require decisions on the new principle, and
since Lord Keynes said oil, a good part of shipping, a
good part of food, could we begin there?
LORD KEYNES: There are two points I ought to mention.
The head of our Food Mission has been in London on leave
and wasn't coming back so promptly. We have telegraphed
him to come back urgently. He will be here
MR. BRAND: Well, he starts on Monday.
LORD KEYNES: The head of our Shipping equally was
absent from Washington. We have telegraphed him to come
urgently. He, I think, is probably crossing at this
moment. So in the case of shipping and food, for a few
days the Missions are in the hands of the second in
command and not the first.
MR. CURRIE: They need those days, anyway, Lord Keynes,
for home work.
LORD KEYNES: On the other hand, Mr. Brand was
recently head of the Food Mission.
MR. BRAND: I still remember something about it!
H.M.JR: Are there other things that you could start?
MR. CURRIE: I'd like to join Dr. White in a plea
for a little more time, because frankly on many of these
more difficult items, such as the request for reinstatement
or the considerations of the export policy with respect to
raw materials, we have not had an opportunity to have
American inter-agency meetings.
Regraded Unclassified
39
- 12 -
H.M.JR: Then did you withdraw your suggestion that
their food people should meet with your food people?
MR. CURRIE: When they are ready, but in the meantime
I have already taken the liberty of referring this to
our technical people.
H.M.JR: Let's put it a different way, Lauch. As
far as you have gone, is there any group right now other
than the Army and the Navy and the air people that
British representatives would be meeting with in the next
day or two?
MR. CURRIE: I doubt very much if anything could be
gained by that, Mr. Secretary. I think when these gentle-
men arrive our people will be in a better position.
LORD KEYNES: I think it looks as though we ought to
give you another two or three days without trying to
hurry you unduly.
LORD HALIFAX: It certainly looks that way to me.
H.M.JR: Well, we were trying to hurry. That was
our only object.
Is there anything we would want from them in the
next day or two?
MR. ACHESON: I think we need more time to work
together.
H.M.JR: Harry?
DR. WHITE: I think we need more time, and it is
only a matter of a few days, in which we may be able to
settle among ourselves for your consideration many of the
problems which would either completely eliminate the
necessity for joint discussion or considerably facilitate
subsequent joint discussion; otherwise, we would be
threshing through and thinking through the problems
jointly with the usual barriers to quick clarification.
Regraded Unclassified
40
- 13 -
MR. COX: Mr. Secretary, also to follow up the
point that Lord Keynes made, I think doing the work
inside the group before it goes into the normal machinery
of War Food, for example, we can present policy questions
here before you talk to Jones that present the central
issue. For example, flour has not previously been supplied--
at least not in this past year. It is scheduled in the
first Stage Two period.
Now, if you just let this go through the normal course
you get the same arguments that have been advanced before.
"Why don't you get your wheat from Canada and Australia
and make it up elsewhere?"
Similarly, you have increased in things like carcass
meat, which presents a policy question. Unless you
understood the basic underpinning, it wouldn't come out
the way you might expect, and I think a whole series of
those specific issues can be presented which point up
the policy questions involved.
But that will require a certain amount of work on
the technical level as well as on policy level.
MR. BRAND: You would still have to discuss those
questions in detail with the WFA.
MR. COX: Yes, but I gather Lord Keynes' point is
with enough of a sample here to indicate to Marvin Jones
what the policy questions are within the frame of reference
at Quebec, then he can instruct his people to view these
things in that light. Otherwise, you might get mixed up
in what purports to be a supply question.
LORD KEYNES: That is exactly what I was pointing
out. But I think what you are now suggesting would meet
us completely; that is to say, you should go on with your
own study of the document for two or three days. And
as Robert Sinclair suggests, perhaps the next thing we
might do would be to hold ready for a meeting of this
body with the military on Tuesday. They are going to
make a report, I understand, on Monday, and there might
Regraded Unclassified
41
- 14 -
be points arising out of that which we should want to
take up here as soon as possible.
MR. SINCLAIR: I think the War Department is
aiming to be in a position to do that. Whether we should
succeed or not, I don't know, but there may, in any
event, be certain important questions of principle
arising out of those discussions.
H.M.JR: Mr. Patterson has already raised some. It
came in late last night. Well, frankly, after this meet-
ing we are going to sit down and consider them. He
raises some rather important questions as to principle.
So there is no use raising them now and worrying you
about them unnecessarily. They may be important and they
may not be important; but we at the moment are over-
whelmed but not downed!
Might I ask, didn't your military get off to a good
start yesterday?
MR. SINCLAIR: They started very quickly,
Mr. Morgenthau. The Army was in action at eleven o'clock
in the morning at the War Department, and they broke off
for about a couple of hours in the afternoon and went
on until a late hour last evening and started at eight
'clock again this morning.
The air people started at two-thirty in the afternoon
and contimued until about six.
H.M.JR: They didn't even stop for tea?
MR. SINCLAIR: I didn't get a report on that!
The Navy haven't got very far yet, sir. Admiral
Waller called on Mr. Forrestal, as you suggested, and left
with him a brief memorandum, and there was a brief dis-
cussion between him and Admiral Horne and one or two
others afterwards; but it was quite clear, I think I am
right in saying this, that the Navy Department were
anxious to have a great deal of detailed information
and an examination which looked as if it would take
Regraded Unclassified
42
- 15 -
considerable time. That is the first reaction we have
got.
H.M.JR: I have had three calls during the day for
additional sets, 80 I think they must have ten sets.
They are interested!
But I'll have lunch with Forrestal and I will tell
him that the Army is much better than he is!
Is there anything else that we would like to bring
up at this time?
MR. ACHESON: I have nothing.
MR. CURRIE: No, sir.
DR. WHITE: Nothing, sir.
H.M.JR: Mr. Taft?
MR. TAFT: I have nothing.
MR. ACHESON: There is one important thing: We
need three more copies of this document.
H.M.JR: We have plenty.
Now, how about our British friends? Is there some-
thing else at this moment?
LORD KEYNES: No, I think that is the best program,
the way you have laid it out. Then at such time as is
convenient to you next week, we could re-assemble either
in detail or in full.
H.M.JR: If I shouldn't happen to be here, Dr. White
is here. I don't want the thing to be held up because I
am not here.
LORD KEYNES: Perhaps it would be wiser if I got in
touch with Dr. White on Monday just in order to find out
Regraded Unclassified
43
- 16 -
how things are moving and whether there is any help
we can give.
H.M.JR: Fine.
DR. WHITE: I think it is very likely, in any event,
you will have a meeting the first of next week.
H.M.JR: My plans are a little bit tied up with the
President's, and that is why I am a little bit uncertain.
Other than that, my phone is always working. And, as I
say, you know everything that I know and I will continue
to work on that basis.
Regraded Unclassified
44
FOREIGN ECONOMIC ADMINISTRATION
OFFICE OF THE ADMINISTRATOR
WASHINGTON 25, D. C.
OCT 20 1944
Dear Henry:
I appreciate your letter of
October 17 sending me the copy of the British
requirements for the first year of Stage II.
I will, of course, consider this
material as most secret.
Sincerely yours,
Administrator
Leo T. Concerd
The Honorable Henry Morgenthau, Jr.
YSURARRI 301770 The Secretary of the Treasury.
SE 8 MA IS TOO A^CI
Regraded Unclassified
45
FOREIGN ECONOMIC ADMINISTRATION
OFFICE OF THE ADMINISTRATOR
WASHINGTON 25, D. C.
OCT 20 1944
Dear Secretary Morgenthaus
Thank you very much for your letter of
October 17 sending along for my information a copy
of the letter dated October 5, 1944 which you
received from the Under Secretary of War.
I agree with you that the letter eliminates
any misunderstanding that may have arisen as to the
role of the War Department in connection with the
work of the Lend-Lease Committee established at
Quebec.
Sincerely yours,
Ln Administrator Leo T. Green
301770
MAUSAHAT 70 YBATHROBE
The Honorable Henry Morgenthau, Jr.
Sc 8 MA The Secretary of the Treasury.
Regraded Unclassified
46
October 20, 1944
11:00 a.m.
HMJr:
Yeah.
General
Watson:
We never quit when we go after a thing.
HMJr:
Yeah.
W:
He says that the priority officer in Dallas
reports that he met that plane and arranged
for the party, including about nineteen, to
go on to Los Angeles that night.
HMJr:
No.
W:
On the instructions from the War Department
he met the plane and these fellows said that
he did it all.
HMJr:
Oh, those had been -- priorities had been
arranged, I guess, a month ago.
W:
Well, that's what he said.
HMJr:
Yeah, well, he -- he's claiming credit for
something he -- that -- I was there. He
never asked for me. I never saw the man.
W:
Well, that's what it -- it's not that he'd
seen you positively but he meant the party,
they claim, and arranged the thing. He claims
the credit for it.
HMJr:
Well ....
W:
And we're trying to track it down.
HMJr:
Well ....
W:
He reported the thing as
....
HMJr:
I think those priorities for those War Bond
people and I just happened to be on the same
plane -- I think you'll find they were made
over a month ago.
W:
They did? Well
....
HMJr:
Yes.
- 2 -
47
W:
....
how about your -- your four -- didn't he
take care of that ....
HMJr:
Uh ....
W:
.... that night?
HMJr:
Oh, yes, I -- I took care of that myself, but
I mean I don't know -- I wasn't concious that
the War Department had anything to do with it.
W:
Well, they claim that they did it.
HMJr:
Well, if they did
....
W:
I don't know.
HMJr:
If they did, God bless them.
W:
Yeah. Well, anyhow, those apples are wonderful.
HMJr:
Well ....
W:
Got some apples okay.
HMJr:
Anyway, we got there. Now, what
....
W:
Yes.
HMJr:
Well, what did he say about not having anybody
meet me in Los Angeles?
W:
Well, he didn't say. (Aside: Why didn't
somebody meet him in Los Angeles? Nobody ever
checked in with him in Los Angeles.) (Pause)
Well, they claim that the priority officer
there learned that your Coast Guard plane had
been repaired and they thought the thing was
fait accompli.
HMJr:
Yeah. Well
....
W:
Was it, or what?
HMJr:
Oh, I got back all right and
....
W:
Yeah.
HMJr:
But how the hell would they know that the Coast
Guard plane was fixed?
Regraded Unclassified
- 3 -
48
W:
I don't know but that's what I -- -- that's what
I'm trying to find out.
HMJr:
Well ....
W:
Why the thing ....
HMJr:
Anyway, let's ....
W:
Huh?
HMJr:
It's water over the dam, but the next I get
stuck, see
....
W;
Uh huh.
HMJr:
....
and I really need them
....
W:
Uh huh.
HMJr:
....
I hope that you'll see that they come
through.
W:
You bet they will.
HMJr:
I'll say this for them. They -- on a number
of other times, like my trips to Europe, those
were always arranged beautifully.
W:
Yeah.
HMJr:
This is the first time that anything has gone
wrong.
W:
All right, sir.
HMJr:
But the other trips to Europe were always
arranged beautifully and everything on schedule
and I suppose even the War Department can fall
down once.
W:
Yeah, you -- who do you attribute that to -- the
good part -- you mean -- you mentioned two officers
the other day ....
HMJr:
Oh, well, I was saying like people -- when, for
instance, like when Bedell Smith was there and
Colonel McCarthy was there, things always -- I've
always gotten wonderful service.
W:
All right. Well, we'll -- we'll watch that.
Regraded Unclassified
- 4 -
49
HMJr:
I mean ....
W:
I'm glad you -- I'm glad you told us what you
think because that's the only thing we want to
know, you know.
HMJr:
I mean they've taken such good care of me in
the past
....
W:
Yeah, I know.
HMJr:
.... that when they don't, then I feel neglected.
W:
All right. Well, you won't again.
HMJr:
If they'd done what you said, everything would
have been all right.
W:
All right.
HMJr:
But just for the future, Pa.
W:
All right. Fine.
HMJr:
Thank you.
W:
All right.
Regraded Unclassified
50
October 20, 1944
12:06 p.m.
HMJr:
Hello.
Lord
Cherwell:
Hello.
HMJr:
Morgenthau.
C:
Yes. Cherwell here.
HMJr:
Look, Mr. Baruch just left here.
C:
Yes.
HMJr:
Hello?
C:
Yes.
HMJr:
B. M. Baruch.
C:
Yes.
HMJr:
He says he knows you quite well.
C:
Yes.
HMJr:
And he will be giving you a call shortly and
he's very anxious to. help on this German
thing.
C:
Yes. Yes.
HMJr:
And so if he calls, I hope you'll have a chance
to see him.
C:
I certainly will.
HMJr:
He's very, very much in our corner.
C:
Oh, that's fine.
HMJr:
And feels that
....
C:
He has some influence, hasn't he?
HMJr:
Yes.
C:
Yes.
Regraded Unclassified
51
-2- - -
HMJr:
And I think he can have some influence in the
town here where we need it the most.
C:
Oh, that's fine.
HMJr:
And 80 I just thought I'd pass the word
along to you.
C:
Thanks very much.
HMJr:
Right.
C:
Good bye.
HMJr:
Good bye.
Regraded Unclassified
52
October 20, 1944
12:28 p.m.
HMJr:
Hello.
Operator:
Secretary Stimson has just left to go to the
station. Mr. McCloy is answering.
HMJr:
Has he left town?
Operator:
He's on his way out of town. He's on his way
to the station now.
HMJr:
Well, you leave word that I would like to talk --
who's answering?
Operator:
Mr. McCloy's answering.
HMJr:
No, just leave word that I am calling Mr.
Stimson and at his convenience I would like to
talk to him.
Operator:
All right.
HMJr:
See?
Operator:
Right.
HMJr:
I would like to talk to Mr. Stimson at his
convenience.
Operator:
All right. I'll tell him.
HMJr:
And if he's going home, which undoubtedly he is,
and he wants to call me on the farm tomorrow
around nine o'clock at Beacon 2-1-1, I'd be glad
to talk to him. from there.
Operator:
Right. I'll tell them.
HMJr:
Either at nine o'clock or a quarter of one.
Operator:
All right.
HMJr:
Either time but I'd like to talk to him.
Operator:
All right.
Regraded Unclassified
53
October 20, 1944
2:04 p.m.
Operator:
Operator.
HMJr:
Miss Tully, please.
Operator:
Right.
HMJr:
Hello.
Operator:
Miss Tully.
HMJr:
Hello.
Operator:
Go ahead.
Grace
Tully:
Hello, Mr. Secretary. How are you?
HMJr:
Fine.
T:
That's good. I just wanted to say that it's
okay for you to go up Saturday night- I've
told Dewey -- and also to return with them,
you and Mrs. Morgenthau.
HMJr:
Oh, wonderful.
T:
Fine.
HMJr:
Now, what about an appointment, dearie?
T:
That I haven't been able to -- as a matter
of fact I think the Boss said he wants to rest
on Monday, but if you want to get the speech
up to him, he may have an opportunity to read
it and maybe do something on it on Tuesday.
HMJr:
Oh, he's not going back until Tuesday?
T:
Well, I mean he could look at it here. I don't
know. I think the plan is to come back Monday
night, but I'm not positive about that.
HMJr:
Well, it won't be finished until Saturday night.
T:
Uh huh.
HMJr:
And I'll try to get it up to the country Sunday
anyway.
Regraded Unclassified
54
- 2 -
T:
He might have a chance to read it quietly but
I don't think he wants to do any work after he
gets through with the speech, and he's had to
work hard on this one. I think he won't want
to get into another one on Monday again.
HMJr:
Tell me on coming back with Mrs. Morgenthau,
you -- you take care of the reservations?
T:
Yes, I've told Dewey that you and Mrs. Morgenthau
would be coming -- returning with us.
HMJr:
Do I have to ask Governor Dewey now?
T:
Huh?
HMJr:
Do I have to ask
.....
T:
(Laughs) We've changed his name to "Edward" for
the campaign. I should have said "Edward".
(Laughs).
HMJr:
Are you alone?
T:
Yes, sir.
(Remainder of conversation not recorded.)
Regraded Unclassified
55
55
Oscar Oox
The President went
over the proposed
release that I
showed you this
morning and
decided that he
doesn't want to
use it ar this
time
10/20/44
105 From: Mr. FitzGerald
I
2219
56
0
October 20, 1944
The President announced that:
1. All the necessary military directives for use by the American
forces during the period up to the collapse or surrender of Germany were
worked out in definite form, agreed upon by all the interested agencies
of the United States Government and forwarded to the military command
months before my American soldier set foot in Germany.
2. The proolemation issued by General Eisenhower as Allied
Commander was based on the agreed pre-surrender plan for the occupation
of Germany, as were his orders for the abolition of the Nasi racial and
other discriminatory laws and Masi institutions.
2. The detailed plans for the unconditional surrender of Germany
0
have been worked out not only in the American Government but with our
allies.
4. The basic policy of this Government for the control of Germany
after its collapse or surrender has for several months been in the hands
of Mr. Winant, the American representative on the European Advisory Com-
mission, for discussion with our allies for the purpose of arriving at
agreed decisions related to the control of Germany in the light of the
destruction and conditions invited or caused by the Nasi leadership.
E If Ritler and his Masi leaders senselessly continue their
resistance, in view of the certainty of Allied victory, they will invite
increased destruction of Germany's industries and its economic system
by allied bombers and allied land forces. New, with land fighting on
Regraded Unclassified
57
- 2 -
German soil, the Nasi leadership, as illustrated at Aachen, is inviting
further and more devastating destruction by United Nations artillery and
other land force action. If, in addition to this destruction which the
Nasis are bringing on themselves, they wantonly follow a scorched earth
policy, the destruction of the German industrial and economic system will
be even greater and more complete.
6. We do not intend to destroy or enslave the German people; but
we do mean effectively to control their will, power and capacity to make
war again.
7. Based on this central principle, the available facts and the
alternative possibilities, depending upon the length of the war against
Germany and what the Nazis do to destroy their industrial and economic
system and other fundamental considerations, the allied governments will
be ready to apply their long-range plans with respect to Germany.
Regraded Unclassified
58
October 20, 1944
TO:
Mr. Gaston
FROM: Secretary Morgenthau
Mrs. Klotz has been trying to get
Mr. Barnes on the phone to find out where
I speak on October 27 and at what time.
They want me to find out from the
Speakers Bureau, but if they want me to
speak, it is up to them to find out when
and where.
I want you to get this information
from Mr. Barnes and I will call you
tomorrow morning, and if they want me to
speak, I certainly want the definite
information as to the time and place by
tomorrow morning.
HMJr/pm
Regraded Unclassified
59
Mrs. Wilson, James Barnes' secretary, phoned and said that
they do not have any of the details on the Secretary's speech.
She said that Mr. Lathrom of the Speakers Bureau, Democratic
National Committee, will contact Mr. Morgenthau, or if Mr.
Morgenthau is anxious to know the details, he can contact
Mr. Lathrom.
60
October 20, 1944
Dear Mr. Vanderpoel:
You were very helpful to me on my trip to
New Orleans and Los Angeles last week and I
want you to know that I appreciate it.
In reviewing the results and recalling the
speeches it seems to me that we accomplished
results very well worth while.
I shall look forward to seeing you again
soon.
Sincerely,
(Wigned) H. Morgenthan, Jr.
Secretary of the Treasury.
Mr. Robert P. Vanderpoel
Financial Editor
The Chieago Herald-American
326 West Madison Street
Chicago 6, Illinois
HEG/mah
Regraded Unclassified
ASSISTANT SECRETARY OF THE TREASURY
October 20, 1944.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
Attached is a letter to Vanderpoel.
I talked to him on the phone last
Tuesday. He doubted that he wanted to
come down here on a permanent basis
and said that he would do so only if
he thought he really could be more
useful in that way. I suggested that
he come down and talk it over. He
said he couldn't do that before his
assistant comes back, which will be
on Thursday of next week. It may be
that it will be easier for him to make
up his mind after election.
mr
62
ROBERT P. VANDERPOEL
FINANCIAL EDITOR
THE CHICAGO HERALD-AMERICAN
63
VANDERPOEL
War Finance Guiding
Philosophy Outlined
By Robert P. Vanderpoel
OCT
17
Financial
Editor
Secretary 1944 Morgenthau, in a series of addresses to
the men and women who have been the leaders in the
war finance efforts throughout the United States, out-
lined what might be termed the philosophy of the
Treasury Department.
Speaking first at Atlantic City, the Treasury secre-
tary emphasized the democratic manner in which the
war financing had been handled.
In the first place, the buying of bonds has been on
a purely voluntary basis. Compulsory or forced saving,
as advocated by many, was re-
jected by the Treasury Depart-
the manner in which interest
ment. Morgenthau said:
rates had been held steady with
"We have raised more money
a resulting saving of about four
than was ever raised by any
billion dollars annually to the
nation before and we have
taxpayers as compared with what
done It In the American way.
would have been the cost of the
More than 85 million individual
expanded federal debt under the
Americans have bought the
interest rates prevailing in World
bonds of their government for
War I when almost each new is-
purely patriotic reasons and
sue carried higher rates.
because they are the best in-
The expanded debt of the earlier
vestment in the world."
period cost the American taxpay-
Finance Democratized
ers an average interest rate of 4½
per cent as against 1% per cent
Morgenthau also emphasized
for the present war. In other
that while previously virtually all
words the cost percentagewise has
government financing was han-
been just one-third as much.
died by a few powerful houses
who practically dictated be
Small Holders Aided
terms to the government, this
had been changed so that all
At the same time the small
banks and investment firms are
American, investors who have
given the same treatment. This
played such an important part in
was part of the process of demo-
financing this was are in posses-
cratising federal finance - re-
sion of a security with & non-
turning control of It to the people.
fluctuating market value. They
Last Thursday, speaking at
will not find themselves in a po-
New Orleans, the Treasury Secre-
sition of having to liquidate at
tary described the part which
sharply reduced prices as many
war finance has played in the
did following World War I, when
stabilization program. He em-
the speculators and a relatively
phasized that as a result of
small number of wealthy investors
greater atabilization in this war
finally accumulated most of the
than in World War I approxi-
rather yield government
mately $70,000,000,000 had been
bonds at bargain prices, leaving
saved the taxpayers of the na-
the patriotic original owners dis-
tion.
illusioned and bitter.
The Treasury's part in stabil-
In conclusion Morgenthau in-
ization has consisted of collect-
dicated that stable interest rates
Ing as large a portion as possible
would be maintained following
of the expenses through taxes
the conclusion of the war. He
and borrowing as great & per-
also said that instead of the gov-
centage of the remainder as has
ernment attempting to sell large
been found feasible from individ-
issues of long-term bonds which
uals.
would tend to freeze the national
Costs Held Down
economy, the liquidity that is
part of the present arrangement
Finally, last Saturday, at Los
of a preponderance of short-term
Angeles. Morgenthau described
issues would be continued.
64
Herald CHICAGO DATE mm American
FROM are 120/10 or
326 W. MADISON ST.
EVENING AND SUNDAY
TELEPHONE
CHICAGO 6, ILL.
ANDOVER 1234
2
U
This is waste paper-saloaged from The Herald-American preasroom. Its use as stationery
saves manpower and eritical materials for the war effort.
= : 1
65
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct.20,1944
TO:
Secretary Morgenthau
FROM: Harold Mager the
The accompanying letter is for reproduction in Radio Handbook,
and for that reason is done in black type.
okner
Attachment
66
OCT 20 1944
20 THE RADIO STATIONS OF AMERICA:
The Sixth War Loan Drive, starting November 20, promises
to be the toughest assignment we've ever undertaken.
The overall goal has been set at $14,000,000,000; the
individual goal, at $5,000,000,000. Coming at a time when
some people on the home-froat mistakenly believe victory
already in our grasp, the Sixth Har Loan will require more
effort on our part than any drive to date. It will be our job
to keep before the public a picture of the long, hard road
ahead, first in finishing off the Nasis once and for all, and
then going hammer and tongs after the Japs. It will be our
duty to remind the people again and again that victory is not
yet ours.
It was with a great deal of pleasure that I learned that
the radio networks have each appointed & War Bond Committee
for this Drive; that all radio stations, large and small, have
formed a Radio Advisory Committee to deal with Bond promotion.
the Treasury appreciates the contribution of Radio to.
the success of previous War Loans, and is happy that it can
rely on your continuing support in the Sixth.
Sincerely,
(Signed) IL Morgenthau, 12.
Inclassified
Mus Kloty:-7 See Page # 6 " #9
67
MEMORANDUM FOR THE SECRETARY.
October 20, 1944.
Mail Report
The Sixth Bond Drive moved up to the front line
in this week's mail. Although there were several
slogans and other constructive ideas for the Drive,
replies to form messages sent by the War Finance
Division made up the bulk of the correspondence.
The first 75 telegraphic replies to the War Finance
messages were checked by this office, but subsequent
ones were delivered directly to War Finance, as the
volume made it impractical to handle them here.
However, we later received a number of confirmations
by mail, along with 90 original replies by letter.
Every communication pledged full support, even the
one which objected to the $75 quota per employee and
the two which protested against the cost of the tele-
gram.
Other bond mail ran according to form, especially
the many queries about the mechanics of handling bonds.
Of the few writers who commented on the over-the-counter
plan for cashing bonds, all were definitely hostile,
and usually demanded an explanation of the reason for
adoption. Though complaints about delays were twice
as numerous as they were last week, they still are
the merest fraction of what they were a few months
back. Only 37 bonds were submitted for redemption,
without a single reply to the redemption slip.
Tax matters may well be said to have been inci-
dental to the mail. Only 8 persons asked payment of
refunds long due them, and now and then someone asked
8. question about his obligations or suggested other
forms of revenue.
There was still some expression of interest in
the so-called Morgenthau plan for postwar treatment
of Germany. In a total of 25 communications, the
favorable exceeded the unfavorable 3 to 1, this ratio
having remained constant for the third week.
gertobush
Regraded Unclassified
68
Favorable Comments on Postwar Plan for Germany
Edgar C. Riebe, Port-au-Prince, Haiti. Permit me to
congratulate you upon your moral courage in outlining
the terms for what TIME is pleased to call "a Carthagenian
Peace" for Germany. I have talked with a considerable
number of our fellow citizens in and out of the Army,
as well as to numerous Frenchmen, and assure you that
they cordially and unanimously approve of your plan,
and that the terms to be imposed upon a defeated Germany
cannot be made drastic enough to suit them. #
Hitler did not create Germany, but Germany created
Hitler, and there will be others to follow him if we
permit it. Meanwhile, we are sacrificing thousands of
our youth in an effort to neutralize the results of our
deplorable error of judgment 25 years ago. Some months
ago I suggested an idea similar to yours to Lord
Vansittart and the latter wrote me textually that "it
just isn't practical politics
there is the fact
that no United States Government would look at such a
scheme, and I doubt whether any British Government would
do so either". Possibly he may change his mind after
considering your suggestion. # The objection made
to your plan that it will be used by Goebbels as propa-
ganda to encourage and prolong military resistance is
without merit, because the German has never recognized
anything except superior force and is by nature 8. wholly
regimented animal. Politically, he is an anachronism,
belonging to the XIII Century. After the fiendish
horrors of Lubin and Lidice, to mention only two, we
may never achieve poetic justice, but we can and should
impose & semblance of adequate reprisals. #
Ilie Catarau, Secretary General, Irredentist Association,
Carpatoalina, Havana. (Cablegram) # # # For century
Germany, through her industrial domination has fattened
her pigs with good Balcanic grain while the miserable
peasantry of the Balcans fed on moulded cornmeal and
salt. The subscribed Ilie Catarau, being morally
69
- 2: -
authorized in the name of leaderless Romanian people,
hereby fully sustains Your Excellency's plan for Germany
as only one efficacious to prevent future Teutonic
monstrosities. Furthermore, ethics hold that all
liberated nations, beseeching industrial commodities,
must look to their saviours.
Herbert Lee, Santa Cruz, California. No nation can
wage modern war thout a great industrial machine,
so distribute Germany's to the countries she has looted.
She is not to be trusted with firecrackers, so stick to
your guns, Mr. Secretary. And no loan should be made
by any Americans to Germany without your approval --
suggest such a plan.
Henry E. Dunning, Lynwood, California. Since the more
or less recent press reports of your suggestions in
respect to what should be the form of domestic economy
imposed on Germany after she is defeated, it has been
my wish to offer you my personal backingin your plan.
* * * Personally, I favor your plan and I would even
go farther and advocate a complete dismemberment of
Germany as a nation. Divide her up and give the sur-
rounding countries jurisdiction over the lands that
now constitute her boundaries. Racially, the people
of central Europe are so mixed up now that to add to
each adjacent country a few Germans would not constitute
such a problem. However, in lieu of such a radical step
as just proposed, your plan would be the next best
solution. It is hoped that you still advocate your
plan, despite the opposition it drew, and that we may
hear more of it in the future.
Augustus J. Richard, Remsen, New York. (Night Letter)
In view of the political abuse to which you have been
subjected because of your advocacy of the removal from
Germany of the means of production of munitions, you
Regraded Unclassified
70
- 3 -
may be interested in popular reaction to the proposal
in this rural, Republican, upstate, dairy farming com-
munity. I have been unable to discover any one in
these parts who is not convinced that the German
people while living together in Germany cannot be
trusted with the possession of such means of produc-
tion any more than a habitual criminal of the under-
world can be trusted with concealed weapons. Politics
does not enter into their consideration of this problem,
and their chief concern is lest some compromise arrange-
ment might be made whereby the Nazis would be given
access to facilities enabling them to repeat their
deviltry of recent years under some new demon's
leadership. # # # Like all races, however, the Germans
are capable of decivilization which is what has happened
to them. They must now be recivilized and I know of
no way to accomplish that except by education, beginning
in earliest childhood. That is going to take time, and
certainly while the process is in progress, they can
have no proper use for instruments of war or the means
for their production.
H. B. Johnson & S. M. Johnson, Jal, Mexico. We have
only just received "Time" magazine for October 2nd.
We do not know if your views on the conditions to be
enforced on the Germans are correctly stated in this
publication, but if they are, we wish to most strongly
congratulate you on them. You seem to be one of the
few men who know how the Germans should be treated.
Ralph L. Kline, Youngstown, Ohio. I desire most
heartily and emphatically to express my approval of
your suggestion of taking away German industry in the
main, as a peace condition. The only way to kill a
snake is to kill it! Germany must have a peace imposed
on her, and Japan too, that it will never be forgotten
so long as human memory survives. Neither can be
trusted in the slightest degree. Neither personal nor
religious reason figures in this opinion.
Robert Halvorsen, M.E., Brooklyn, New York. Please
add my voice to the thousands who wholeheartedly approve
your demand for "tough" economic terms against Germany.
Regraded Unclassified
71
- 4 -
Unfavorable Commentson Postwar Plan
for Germany
John Schmidt, Chicago, Illinois. # * I read in the
paper that you have a plan of your own to destroy
the German nation. Well, may I call your attention
to the fact that it has been reported in the papers
Germany's resistance at the front has become more
fierce since your plan has been announced, and this
means a far greater casualty list for our American
Army. As a patriotic citizen, as father of a dead
soldier buried in Italy, and as a Christian, I pro-
test most emphatically against your unreasonable
plan to punish and to destroy the German people.
I'm convinced the war would have ended sooner and the
lives of thousands of our fighting boys would have
been spared if that crazy plan of yours never would
have come in contact with the printer's ink.
Austin J. App, Ph.D., San Antonio, Texas. # # Today
I unexpectedly remembered the plan of the British poet,
Edmund Spenser for "pacifying the oppressed and
rebellious people" of Ireland. He proposed that
England send a huge force of cavalry and infantry into
Ireland and to hunt the Irish down like wild beasts".
He calculated further that cold, exposure, famine and
sickness, after two winters of hunting them down, could
be trusted to exterminate the remnant of this "oppressed
and rebellious people". After that, he argued, he be-
lieved the country would be peaceful. Now, I submit,
regretfully, that the poet Spenser's plan exceeds in
imaginative cruelty and atrociousness your plan for the
extermination of the Germans. I don't think you should
let him "get away with that". Inasmuch as you have
made such a good start in surpassing and exceeding
nearly the whole record of barbarous peace proposals,
I suggest that you try again and see whether you cannot
offer a proposal still more barbarous and bloodthirsty
Regraded Unclassified
72
- 5 -
and revengeful, one which in that respect could
nose out Edmund Spenser's, so that you might become
the undisputed titleholder of the world's most
atrocious peace plan, and so that, through you, all
of us Americans might share in that honor vicariously,
as we shared in the bombing of Rome.
Regraded Unclassified
Phoned Facton73
Herbert gasten 10/24/44-
- 6 -
Please work
into this
General Comments
10mg
Charles J. Katz, Katz, Gallagher & Margolis, Lawyers,
111 West Seventh Street, Los Angeles, California.
We are addressing this communication to you because
an extremely important question involving the
relationship between the Salary Stabilization Unit
of the Treasury Department on the one hand, and the
trade union movement on the other hand, is at stake.
*** As per the attached letter you will find that
an arbitrator acting under the terms of the collective
bargaining contract between the parties, has ruled
that all employees of this company were entitled to
straight time holiday pay for Christmas, 1943, and
New Year's, 1944. *** The Tenth Regional War Labor
Board has approved the award of the arbiter, and has
authorized the payment of this straight time holiday
pay to the approximately 400 employees of the company
whose wages are less than $5,000 a year. The Treasury
Department, on the other hand, has taken a contrary
position and has, in effect, reversed both the arbitra-
tor, (whose decision the parties agreed to accept as
final and binding), and the National War Labor Board,
and the Treasury Department has ruled that such pay-
ment cannot be made. ### Furthermore, the Salary
Stabilization Unit in Los Angeles has refused to
permit the Screen Cartoonists Guild to appear before
it in support of the award. *** The Guild has taken
the matter to Court, and is now met with the loud
claim by the Employer that it is the innocent victim
of two conflicting bureaucratic agency rulings and
does not know what to do to get out of its dilemma.
We think the situation is of such critical importance
to the entire trade union movement and to the need
for consistency in interpretation by the various
government agencies having jurisdiction over wage
matters, that we call it to your attention. ***
Regraded Unclassified
74
- 7 -
Favorable Comments on Bonds
The following telegram is from the Apex Hosiery
Company, Philadelphia, Pennsylvania, and is typical
of replies to telegram sent out by the War Finance
Division on October 15: "You can count on our whole-
hearted support and cooperation in order to assure
the success of the Sixth War Loan Drive. We have
come through during past Drives and will do so again.
Yours for Victory.
Regraded Unclassified
75
- 8 -
Unfavorable Comments on Bonds
Justina E. Diaz, Miami, Arizona. On July 20 my son,
Pfc. Antonio E. Diaz, was killed in action, accord-
ing to a telegram and subsequent letters received by
my husband, from the War Department. While alive,
my son bought through the same War Department some
War Savings Bonds which were delivered to me inscribed
as follows: "Antonio E. Diaz - 39860503 POD to Mrs.
Justina E. Diaz - 1-1875-12", one of which I tried
to cash at the local bank, but found that the bank
could not cash mine because the manager said I had to
apply to the Post Office where some kind of a "form"
would have to be filled out and sent along with the
bond to the Federal Reserve Bank at San Francisco,
California. I applied at the Post Office and was told
that they had no such form; that it would be necessary
to write a letter to the bank in San Francisco, includ-
ing the bond and a Death Certificate of my son.
Having no such Certificate and only the letters
mentioned in the beginning, I decided to quit trying
to cash the bond for the time being and ask you the
following question: Why can't the mother of a soldier
killed in line of duty have the same privilege as other
persons in having bonds cashed by local banks, provided
proof of death of soldier is readily given to the
certifying or paying official?
Nat H. Wolkind, St. Louis, Missouri. On February 23,
1944, the Great Lakes Theatre at 618 Main Street,
Buffalo, New York, received Bond #C-75503562 from
Mrs. Anna Wolkind to have the bond corrected to read,
"Mrs. Roy Wolkind", instead of "Roy Wolkind", as shown
on the original bond. The Great Lakes Theatre gave
Mrs. Wolkind a receipt approved by a Mr. Mason. On
October 2, we wrote the Great Lakes Theatre regarding
the bond and asked that it be returned, but we have
Unclassified
76
- 9 -
had no reply to date. Prior to that time, we contacted
the Federal Reserve Bank of New York, and they informed
us that they had no record of having received the bond.
At one time, Mr. Mason of the Great Lakes Theatre in-
formed us that the bond was sent to Chicago. From
February 23 to October 11 seems to be a great deal of
time to make a correction on a War Bond, and I am writ-
ing to you about this to see if there is any way it
can be traced. #
John F. Hix, Sr., Camp Pickett Exchange, Crewe, Virginia.
I have worked at Camp Pickett almost from the time the
camp was opened during which time I have bought $950
worth of War Bonds out of a rather small salary, buy-
ing them here and paying cash. This plan of paying
cash instead of having deductions made from my pay
check does not seem to satisfy those in charge of War
Bond sales, despite the fact that I have repeatedly
told them I prefer to buy in my own way, as I think
I have that right. I venture to say I have bought as
many or more bonds than anyone else in the camp, in
proportion to salary earned. Recently, however, I have
been made to feel that even my job may be threatened
if I do not comply with their request, which I defi-
nitely do not intend to do. Now I would like to know
your attitude in matters of this kind.
Phoned
C. A. Brown, President, The National Bank of Portsmouth,
Better gamble
Portsmouth, Ohio. I am today in receipt of an envelope
which contained five official U. S. Treasury posters
bearing the imprint of the U. S. Government Printing
Office-1944, 0-609248, and further identified WFD-949.
get off
These posters are headed "Nest eggs won't hatch unless you
a china
set on them!" I referred this poster to several farmers
and asked them what a nest egg is. Each of them told
egg and
me that a nest egg is a white china, glass, or porcelain
egg, or even a white door knob, or a whitewashed pebble
set wa
placed in the nest to induce hens to lay other eggs
beside it. Several of the farmers approached gave me
real me.
Jpn2
Regraded Unclassified
77
- 10 -
the same definition. I have also had it up with our
local farm representatives and they answered the same
as the others, each answering that nest eggs were
never known to hatch under any circumstances, and
suggested that the War Finance Division get in touch
with the Agricultural Department before putting out
posters of this kind. I am bringing this to your
attention, as doubtless the poster was designed by
someone not familiar with farm operations.
Al. K. Thomas, Vice President and Trust Officer,
Allison-East End Trust Company, Harrisburg, Pennsylvania.
Your posters, "Nest eggs, etc", came and we hung them
up. "Nest" eggs are dummy eggs in the usual farmer's
parlance and wouldn't hatch anyhow, no matter who sat
on them, what sat on them or how long they sat on them.
Please tell some farmer to get up the next poster.
Regraded Unclassified
78
- 11 -
Unfavorable Comments on Taxation
Congressman John Jennings, Jr., Knoxville, Tenn.
I have your letter relative to the interpretation
you placed upon the Revenue Laws and the conclusion
you reached that the disability pension paid
Joseph C. Jett, 2744 Tarleton Avenue, Knoxville,
Tennessee, is subject to payment of an income tax.
I feel this is a great injustice to Mr. Jett. He
is an old man of feeble health, suffering from a
heart ailment. Your ruling put him to bed and may
cost him his life. I hope you can consider this in
the light of his condition and the fact that what
he gets from the city of Knoxville is not payment
of services rendered, but a disability pension that
went into effect after he retired and contributed to
by all men of the police force.
Conn E. Huett, Madison, Illinois. When I filed my
income tax report in March 1944, I had my forms
filled out by an expert who figured I had 8. return
of $94.05. I have 6 children, 5 in school, and my
wife is under a doctor's care, and the school children
need shoes and other school clothes, and I have to buy
fuel, which costs money that I don't have. I pay $30
rent; insurance and other obligations added to feed-
ing my family. Keeps my nose to the grindstone on
the salary I earn. So if it is possible, I would
appreciate any return I have on my income tax.
Regraded Unclassified
79
KWANG PU CHEN
HOOM 1918
630 FIFTH AVENUE
NEW YORK
October 20, 1944
The Honorable Henry Morgenthau
Secretary of the Treasury
Washington, D. C.
Dear Mr. Morgenthau,
I arrived here on Tuesday after a pleasant, though
somewhat tiring trip, and was very happy to receive your letter
which had been kept here pending my arrival.
Some preliminary work in connection with the forth-
coming International Business Conference prevents my early
coming to Washington, but I will make the trip at the first
opportunity. It will be a great pleasure to see you again
after so many years, and I am looking forward to it.
With kindest regards,
then Yours sincerely,
TOO
Regraded Unclass
80
25
OCT 20 1944
Dear Dr. Kungs
I as in receipt of your letter of Catober 15, 1944.
40 you already know, I share your desire to conclude
the negotiations with respect to United States Army -
penditures in China on terms which will be autually
satisfactory to both our Governments, and shall be glad
to resume our discussions at your convenience after your
return from your trip. It is to be hoped that your trip
- sm not all work and that you had the opportunity to on-
the removal of your old associations in New England
and Chie.
with kindest personal regards and best wishes for a
complete and successful recevery,
Yours sincerely,
(Signed) a. Morgenthau. JR.
Secretary of the Treasury.
DE. 1. No Kung,
Walderf-Asteria Notel,
soun Street and Park Avenue,
New York, New York.
Mashe 10-19-44
Regraded Unclassified
MINISTRY OF FINANCE
NATIONAL GOVERNMENT OF CHINA
October 15; 1944.
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
Dear Mr. Morgenthau:
Upon my return to New York my doctors have
found that my present condition is unfit to undergo
a major operation. They have urged that I finish all
matters requiring my personal attention now so that
my mind will be at ease during hospitalization and
recovery.
Sometime ago I WAS invited to address the
Boston Conference on Distribution on October 17.
Owing to my preoccupation with official business in
Washington, I hesitated to make a definite commitment.
Since then I have received 80 many letters and tele-
grams from American friends and leaders urging me to
attend the Conference that I feel obliged to leave
for the Conference tomorrow. After the Conference
I shall proceed to Oberlin for an importent business
meeting dealing with Oberlin-in-Shansi College because
I am the Chairman of its Executive Board in China.
By the time I return from my visits to
Boston and Ohio I hope you will have been back from
the West Coast 80 that we can settle certain pending
matters between our two governments. Trusting that
you have had a pleasant and successful trip.
With best personal regards,
Yours sincerely,
THEY
H.
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Oct. 20, 1944
TO
Secretary Morgenthau
FROM
J. J. O'Connell, Jr., and H. D. White
TO BE READ
You will recall that several weeks ago we reported to
you that an examination of the correspondence between Chase,
New York, and Chase, France, from the date of the fall of
France to May 1942, disclosed that Chase, France cooperated
extensively with the Germans with full knowledge of Chase,
New York. On the basis of this report you approved our
sending Saxon of Foreign Funds to Paris to investigate not
only Chase but other branches of American banks which operated
in France under German occupation.
I am sure you will want to read Saxon's first report,
attached hereto, which confirms our earlier report to you on
this matter. Briefly, this report indicates that: (1) Ger-
man authorities strongly desired American banks to stay open
during their occupation of Paris; (2) Chase and Morgans appear
to have been very- anxious to stay open to protect their interests
for the post-war period; (3) official Chase memoranda include
repeated statements of the high esteem in which the German
authorities held these two banks; (4) Chase obtained substantial
deposits of German funds on its own solicitation and invested
such funds to produce additional income; (5) Guaranty and
National City chose liquidation rather than to continue opera-
tions under German occupation; Guaranty was apparently handled
rather roughly by the Germans.
Saxon recommends an inmediate and full investigation
of all branches or offices of American banking and insurance
institutions in France before they are allowed to resume
financial relations with the United States. If you agree
we will arrange to have additional professional and steno-
graphic assistance sent to Saxon in accordance with his request
to complete this project.
Attachment.
I Approve:
"Hh.
Hywhite
Regraded Unclassified
83
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Paris
TO:
Secretary of State, Washington
DATED: October 12, 1944
NUMBER: 235
SECRET
FOLLOWING FROM SAXON PERSONAL AND SECRET FOR THE SECRETARY OF THE TREASURY.
One. I have held conversations with Bertrand and Gadd, local Chase officials.
The correctness of the bank's attitudes and activities, including Neiderman was
stressed by them initially. However, Bertrand broke down and gave me some in-
formation of relations of the manager of Chase, Paris with the Germans when con-
fronted with their own written record of the attitudes and activities of the Bank
at Paris. Bertrand and Gadd Chase, Paris, counsel thereupon agreed to my request
to examine the Paris branch's records. I have already started this examination
and in offering facilities and records Bertrand and Gadd have been cooperative.
Two. Chapin has been informed by me on broad lines of inquiry. Since this
matter is being handled confidentially and as normal examination under the
authority of the comptroller of currency, the French have not been advised. The
military is not involved in this.
Three. It is indicated by initial evidence that German authorities strongly
desired American banks to stay open during the occupation of Paris. Neiderman
was informed by the German administrator of banks, Caesar, that at the end of the
war American banks would be of use to Germany. Chase and Morgans appear to have
been anxious to stay open since such action was felt by them to be in their best
interests. It is clear that a certain agreeableness of attitude and a certain
measure of cooperation with the German authorities were necessarily required to
fulfill this aim. I was informed by the managers of Chase and Morgans that they
wished to stay open so as to be in a position to continue operations without
Unclassified
84
- 2 -
difficulty after hostilities had ended. Liquidation was chosen by Guaranty and
National City. Guaranty, a straight branch of an American bank found this more
difficult than did National City which was a French company.
It is indicated by initial evidence because of refusal to collaborate with
the Germans, the Germans handled Guaranty roughly. The German authorities seem
to have treated Chase and Morgans more kindly. Pressure was exerted on Guaranty
by the Germans even at Vichy through the instrumentality of the French author-
ities. It is stated by Bertrand in a letter to the Chase head office of New York
that Michaud of Guaranty still refused to visit the office of the German adminis-
trator for banks in spite of insistent requests by the latter. Guaranty officials.
were repeatedly urged by officials of Chase to agree to the demands for informa-
tion from Guaranty to transmit to Chase full data on Guaranty foreign accounts.
0
When Chase was requested by Caesar to assume protective custody of securities
of National City and Guaranty, Chase refused and .suggested to him that the
official German organization take these accounts. This action was defended by
Chase on the grounds that the same position had already been taken by Morgans.
Chase states in another document that the present basis of its
relationship with the authorities of Germany is as satisfactory as the modus
vivendi worked out with German authorities by Morgans. Chase anxiously sought
and actually obtained substantial deposits of German funds from Caesar, according
to its own records, which funds were invested by Chase in French treasury banks
to produce additional income. Repeated statements by Caesar of the high esteem
in which the German authorities held Chase and Morgans are contained in official
memoranda of Chase conferences with Caesar. It was stated by Caesar that he was
0
glad to see that his directives were being followed by Morgans and that it was
operating almost normally. One American bank officer described Chase as Caesar's
beloved child.
Regraded Unclassified
85
- 3 -
Activities on my part are limited to Chase, Paris at the present time. As
soon 8.6 transport facilities and security conditions permit Chase officials will
bring to Paris the records of Chase Chateauneuf. It is possible that an examina-
tion of the records of the Paris office can be completed in several weeks. Con-
siderable time will be required to examine Chateauneuf as it is more extensive.
Furthermore, since it is necessary to see the picture of the other American banks
principally through conversations, I am not able to devote full time to Chase, Paris.
It is requested that you send Rains, Murphy and Wolfensen as named as soon
possible. We also urgently need stenographers. In arranging transportation and
accomodations for civilian personnel, the blessing of the War Department would be
helpful. This cable is agreed to fully by Hoffman.
Four. All banks in New York which have or had offices, banks or branches in
France should be requested to make all reports received through State or other
channels since liberation available to you at once. Detailed confidential reports
supported by dócuments regarding situation of American banks in France during last
four years have been requested from Paris offices by me. The manager of Morgans
has promised to discuss with his colleagues at Morgans this request made by me.
Five. An immediate and full investigation of all banking institutions in the
United States which have or had banks, branches or offices, insurance should be
undertaken before any is allowed to assume financial relations with the United
States. Responsibility of Treasury is clear and strong in the interests of (a)
trading with the enemy statutes, (b) office of comptroller of currency and (c) the
international financial relationships of the United States Government.
Six: It is stated by Chase and Morgans that throughout occupation the three
British banks also continued to function actively in Paris. The relationship
between the British banks and the German authorities has been sharply criticised
by certain local banking people.
CHAPIN
Regraded Unclassified
86
OCT 20 1944
Dear General Carters
As you know, the Treasury through the services provided
by the Mar Department has from time to time shipped gold to
Assem, India, for the account of the Government of China.
Recently, the Treasury completed arrangements with China
as & result of which $20 million of gold has been transforred
to China's carneried gold account in New York, this gold to
be shipped to China,
I should like to request, therefore, that arrangements
as in the past be made to ship this $20 million gold to Assam,
India, either by con or by dr, in shipments spaced over an
appropriate period of time.
Sincerely yours,
(Wigned) K. Mezgenthau, Jr.
Secretary of the Treasury
Major General 4. H. Carter,
Army Service Forces,
Fiscal Director,
Room 45 - 448, Pantagen Building,
Wer Department,
Arlington, Virginia.
10/18/14
Regraded Unclassified
87
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
October 20, 1944
CONFIDENTIAL
Received this date from the Federal Reserve
Bank of New York, for the confidential information
of the Secretary of the Treasury, compilation for
the week ended October 11, 1944, showing dollar
disbursements out of the British Empire and French
accounts at the Federal Reserve Bank of New York
and the means by which these expenditures were
financed.
EmB
Regraded Unclassified
88
FEDERAL RESERVE BANK
OF NEW YORK
October 19, 1944.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. D. White
I am enclosing our compilation for the week ended
October 11, 1944, showing dollar disbursements out of the
British Empire and French accounts at this bank and the means
by which these expenditures were financed.
Very truly yours,
/s/ H. L. Sanford
H. L. Sanford,
Assistant Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington 25, D.C.
Enclosure
COPY
Regraded Unclassified
ANALYSIS OF BRITISH AND FRENCH ..CCOUNTS
Strictly
(In Willions of Dollars)
Wook Ended October 11, 1944 Confidential
BANK OF EROL'ND (BRITISH GOVERNMENT)
BANK OF FR/NCE
DEBITS
CREDITS
PERIOD
Gov't
Procods DI
of
Trans crs
Not Incr.(+)
Not Incr. (+)
Total
Expondi-
Official
Socurities
from
Other
or Decn (-)
Total
tarps
Canadian
Other
Total
Official
Total
or Docr. (-)
(Official)
(U)
Australian
Credits
in $ Funds
Debits
Har Tears (a)
Dobite
Credits
Account
Debita
Credits
Gold
in 3 Funds
(b)
Account
- (c)
(d)
(o)
First
(0)
1,793.2
605.6
(d)
20.9
1,166,7
1,828.2
1,356.1
52.0
3,9
416.2
+ 35.0
866.3 (f)
1,095.3 (f) (1)
2,203.0
+ 299.0
Second
1,792.2
3.4
407.4
2,189.8
1,193.7
274.0
16.7
705.4
+ 13,2
38.9
8,8
Third
1.235.6
- 30.1
904.8
7,7
223.1
1,361.5
21.8
5.5
57.4
1,276.8
+ 125,9
18.5
4.4
- 14.1
Fourth
764.0
7
170.4
280.9
1,072.3
-
0.5
155.1
916.7
+ 308.3
10.3
Fifth
1,0
1,197.7
61.4
835.9
1,369.6
- 9.3
-
-
253.0
1,116.6
+ 171.9
-
-
-
1944
September
151.0
19.9
50.4
80.7
56.5
-
-
1.0
55.5
- 94.5
-
-
-
1945
January
,
June
July
August
Wook Ended
September 20, 1944
65.2
1.9
50.4
6.9
23.4
-
-
-
23.4
- 41.8
-
-
-
September 27, 1944
69.2
5.5
-
63.9
18.3
-
-
-
18.3
- 50.9
-
-
-
Entober 4. 1944
15.4
6.3
-
9.1
1.9
-
-
1.0
6.9
- 7.5
-
-
-
October 11, 1944
59.4 (1)
3.5
-
55.9(1)
10.7 (b)
-
-
-
10.7(h)
- 48.7
-
-
-
Average Vookly Expend turos Since Outbrdak of Mar
Soc attached shoot for footnotos.
Franco (through Juno 19, 1940) $19.6 million
England (through June 19, 1940) 327.6 million
England (through Juno 20, 1940 to Harch 12, 1941) 354.9 million
England (since Harch 12, 1941) 22.1
million
Regraded Unclassified
(a) Includes payments for account of British Ministry of Supply Mission, British Supply Board, Ministry of Supply Timber
Control, and Ministry of Shipping.
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
of our securities through December, 1940 amounted to $334 million.
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation
(c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,
prosumably reflecting the requisitioning of privato dollar balances, Other large transfers from such accounts since October,
1939 apparontly represent curront acquisitions of procoods of exports from the storling area and other accruing dollar
receipts. See (k) below.
(d) Reflects net change in all dollar holdings payable on domand or maturing in one year.
(e) For broakdown by typos of dobite and crodits 800 tabulations prior to Harch 10, 1943.
(f) Adjusted to eliminate the offect of $20 million paid out on Juno 26, 1940 and roturned the following day.
(g) For monthly broakdom 800 tabulations prior to April 23, 1941; October 8, 1941; October 14, 1942; Soptember 29, 1943; September 6, 1944.
(b) Includos $ 4.8 million apparently representing current and accumulated dollar proceeds of sterling area services and
merchandise exports.
(1) Includes $ 50.1 million representing cost of gold purchased for export.
Regraded Unclassified
WATESTS OF CANADIAN AND AUSTRALIAN ACCOUNTS
Strictly
(In Millions of Dollars)
Nork Endad October 11, 1944. Confidontial
BANK
OF
CANADA (and Canadian Government)
11
,
OF DISTRICTA (and-Amstralian Government)
DEBITS
CREDITS
n
CREDITS
Transfers
Transfors from Official
Fransfort
to
Procoods
British A/C
Net Incr.
to
Proceeds
Net Incr.
Official
of
(+) or
official
of
(+) or
PERIOD
Total
British
Others
Total
Gold
For Own
For Fronch
Other
Decr. (-)
Total
British
Other
Total
Gold
Other
Door. (-)
War Years (a)
Debite
N/C
Debits
Credits
Sales
A/C
A/C
Crodite
in:
Pundo
[ebits
A/C
Debits
Credits
Sales
Credits
in Pends (c)
31.2
36.1
30.0
6.1
+ 4.9
First
323.0
16.6
306.4
504.7
412,7
20,9
38.7
32.4
+181.7
3.9
27.3
Socond
460.6
-
460.4
462,0
246.2
3,4
123.9
88,5
+ 1.6
72.2
16,7
55.5
81,2
62.9
18,3
+ 9,0
-
49,8
112.2
17.2
95.0
- 5.0
Third
525,8
0,3
525,5
566,3
198.6
7.7
-
360.0
+ 40.5
107.2
57.4
Fourth
723.6
-
723.6
958.8
47.1
170.4
-
741.3
+ 235.2
197.0
155.1
41.9
200.4
-
200.4
+ 3.4
Fifth
849.3
1,0
848.3
958.5
38.1
61.4
-
859.0
283.3
298.6
252.5
46.1
287.7
-
28727
- 10.9
1944
September
24.5
0,1
24.4
91.8
-
50.4
-
41.4
67.3
5.8
1,0
4.8
7.3
-
7.3
+ 1.5
October
November
December
1945
January
February
March
.
April
4ay
June
July
Lugust
Wook Endod
September 20, 1944
2.4
-
2.4
56.8
50.A
-
6.4
+ 54.4
0.1
-
0,1
1.7
-
1.7
+ 1.6
-
16.9
5.1
- 11.8
1.3
-
1,3
0.8
-
0.8
- 0.5
5.1
-
16.9
-
-
Saptember 27, 1944
-
14.9
16.8
-
-
-
16.8
+ 1.9
E
1.0
2801
0.5
-
0.5
- 2.3
October 4. 1944
14.9
-
5.8
30.6(a)
30.6(d)
24-8
-
-
-
3.1(a)
-
3.2(s)
+ 3.1
-
October 11, 1944
5.8(c)
-
-
-
Average Weekly expenditures for
First yoar of war
6,2 million.
(a) For monthly broakdowns 500 tabulations prior to: April 23, 1941; October 8, 1941;
Second year of war
8.9 million.
October 14, 1942; Soptomber 29, 1943; September 6, 1944.
Third year of war
10.1 million.
(b) Reflocts changes in all dollar holdings payable on domand or moturing in one year.
Fourth year of war
13.9 million.
(c) Doos not reflect transactions in short torm U. S. socurities.
Fifth year of war
16.1 million.
(d) Includes $ 26.7 million deposited by War Supplies, Ltd.
Sixth year of war (through) October 11, 1944
7.6 million.
and
$ 3.8 million rocoived from New York accounts of Canadian chartered banks.
(e) Includes $ 3.0 million received in connection with expenses of our armed forces
abroad.
Regraded Unclassified
92
BOND
BRITISH air COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
EASE QUOTE
FERENCE NO
With the compliments of British Air Commission
who enclose Statements Nos. 157 and 158 --
Aircraft Despatched - for the weeks ended
September 29th and October 6th respectively.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury
WASHINGTON, D. C.
October 20, 1944.
Regraded Unclassified
93
STATEMENT NO,157
Aircraft Despatched from the United States
Week Ended September 29, 1944
BRITISH/U. S. SECRET
ASSEMBLY
BY
BY
FLIGHT DELIVERED
TYPE
DESTINATION
POINT
SEA
AIR
FOR USE IN CANADA
CONSOLIDATED
Liberator GR VIII
U.K.
U.K.
5
Liberator B VI
M.E.
M.R.
1
Liberator B VI
India
India
14
Liberator GR VI
U.K.
U.K.
1
Liberator GR VI
India
India
2
Liberator B VIII
U.K.
U.K.
1
Liberator B VIII
M.R.
M.E.
4
GLENN L. MARTIN
Marauder III
M.E.
M.E.
8
DOUGLAS
Boston V
U.K.
U.K.
1
Boston V
M.E.
M.E.
4
kota IV
U.K.
U.K.
4
kota IV
M.E.
M.E.
3
Dakota IV
Canada
Canada
1
BOEING
Catalina IV B
U.K.
U.K.
6
WACO
Glider
India
Calcutta
20
STINSON
Reliant
U.K.
U.K.
1
REPUBLIC
Thunderbolt
India
Karachi
12
Thunderbolt
U.K.
U.K.
2
BEECH
UC 45 Becchcraft
India
Karachi
7
UC 45 Beechcraft
Algiers
Algiers
7
UC 45 Beechcraft
U.K.
U.K.
1
NORTH AMERICAN
Mustang
N.W. Africa
Casablanca
31
Mustang
U.K.
U.K.
3
CORNELL
Argus
Algiers
Algiers
35
NOORDUYN
arvard
U.K.
U.K.
10
GRUMMAN
Wildcat (less engines)
U.K.
U.K.
4
Wildoat
U.K.
U.K.
2
VULTEE
Vengeance
U.K.
U.K.
20
Total: 155
54
1
Movements Division, British Air Commission
October 6, 1944
mmb
Regraded Unclassified
94
BRITISH/U. S. SECRET
STATEMENT NO.158
Aircraft Despatched from the United States
Week Ended October 6, 1944
#
ASSEMBLY
BY
BY
FLIGHT DELIVERED
TYPE
DESTINATION
POINT
SEA
AIR
FOR USE IN CANADA
CONSOLIDATED
Liberator B VI
India
India
7
Liberator B VI
Canada
Canada
3
Liberator GR VI
India
India
2
Liberator B VIII
M.E.
M.E.
2
Liberator GR VIII
U.K.
U.K.
3
Liberator GR VIII
Bahamas
Nassau
1
NORTH AMERICAN
Mitchell III
U.K.
U.K.
7
Mustang
U.K.
U.K.
9
DOUGLAS
Boston V
U.K.
U.K.
1
Boston V
M.E.
M.E.
20
Dakota IV
U.K.
U.K.
3
Dakota IV
India
India
15
Dakota IV
S. Africa
S. Africa
1
BOEING
Catalina IV B
U.K.
U.K.
5
RELIANT
Stinson
Trinided
Trinidad
8
Stinson
U.K.
U.K.
11
Stinson
India
Cochin
1
REPUBLIC
Thunderbolt
India
Karachi
45
VOUGHT-SIKORSKY
R-4-B Helicopter
U.K.
U.K.
4
Corsair
India
Cochin
6
Corsair
U.K.
U.K.
17
BEECH
UC-45 Beechcraft
India
Cochin
5
UC-45 Beechcraft
India
Karachi
8
WACO
Glider
India
Karachi
40
Glider
India
Calcutta
20
GRUMMAN
Hellcat
India
Cochin
1
Hellcat
U.K.
U.K.
2
Wildcat
India
Cochin
5
Wildcat
U.K.
U.K.
4
CURTISS
Kittyhawk
Australia
Sydney
12
1
Regraded Unclassified
95
- 2 -
STATEMENT NO. 158 (cont'd)
ASSEMBLY
BY
BY
FLIGHT DELIVERED
DESTINATION
POINT
SEA
AIR
FOR USE IN CANADA
TYPE
VULTEE
Sentinel
India
Karachi
20
U.K.
U.K.
28
Vengeance
NOORDUYN
Harvard
U.K.
U.K.
14
** Meteor
U.K.
U.K.
1
Total: 253
75
3
* Aircraft shipped by sea week ended September 29 not October 6.
Please note: Aircraft shipped by sea in Statement No.157 is for week ended October 6,
not September 29 as reported.
** Being returned after exhibition in U.S.A.
Movements Division
British Air Commission
October 13, 1944.
mmh
File V-17
Regraded Unclassified
96
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMERICAN EMBASSY, QUITO
TO:
Secretary of State, Washington
DATED:
October 20, 1944
NUMBER:
1015
SECRET
The Foreign Office of Ecuador states that it has
received no specific request for the clarification of telegram
under reference in 813 from the Department of the thirteenth of
October and is at a loss to understand the cause of difficulty
in interpreting the Ecuadoran Consulate's note of the twelfth
of May as its cable instruction seems perfectly clear of the
eighth of May. From the Consulate at Geneva the only communication
received by the Foreign Office concerning the protection of
individuals in Germany claiming Ecuadoran nationality was a letter
of the twenty fifth of May asking "some opinions and advice". On
the seventh of September the Foreign Office replied by airmail
letter which presumably has not reached Geneva as yet.
Yesterday the Foreign Office transmitted a wire to
Ecuadoran Consulate at Geneva in substantially the terms below:
(in paraphrase) "Repeating instructions issued to you previously
to arrange for the Government of Switzerland to ask that German
officials respect rights of persons protected by papers and documents
of Ecuador. Take action to acquire action by the Swiss Government
at once. In addition, in this connection, you are asked to contact
the American diplomatic representative.
SCOTTEN
DCR:MLG
10-23-44
Regraded Unclassified
97
DU-271
PLAIN
London
Dated October 20th, 1944
Rec'd 8:16 p.m.
Secretary of State
Washington
9033, Twentieth
TIMES reports that British airman, who was assisting
Bolish resistance forces in Warsaw and whose occasional
messages before surrender were reported in Embassy's earlier
telegrams, is now known to be safe. It publishes following
brief message which has now been received from him: "The
Germans are giving no help to Polish population evacuated
from the capital. Medical supplies are very short, and
badly wounded people are to be seen lying by the roadside.
Tens of thousands of the citizens are sleeping in the open
fields. Food is short. The Germans are rounding up all
men from 16 to 40 years of age and sending them to Reich."
TIMES also contains following brief item by a Polish
correspondent in London: "An official announcement disclos-
ing new German atrocities against population deported from
Warsaw has been issued by the Polish Government in London.
It says in part: 'The Germans have arrested males between
the ages of 16 and 40 and have deported them in the direc-
tion of Germany. Some were separated from the rest and
directed straight to the infamous death camp of Oswiecim.
Up to October 14, 12,400 of those deported from Warsaw had
been sent there and are now threatened with death. On
October 7 the Germans began mass execution of Polish prison-
ers in Oswiecim by means of poison gas either in gas cham-
bers or in motorvans.' A report from Poland has been
received concerning a rising in Oswiecim Camp. It says
that on October 7, when mass executions of political prison-
ers began, the Polish prisoners who were in a majority in
the camp, attacked the Germans. In the course of the unequal
struggle, during which the Germans machinegunned the barracks,
the Poles succeeded in killing 6 German executioners. More
than 200 Polish prisoners perished in the fight."
WINANT
EEC
Regraded Unclassified
98
CABLE TO AMPOLAD FOR MYRON TAYLOR, CASERTA, ITALY
In view of reliablel reports that imminent deportation
and extermination threaten Jews in Budapest and other parts
of Hungary under German control, variously reported to number
between two and three hundred thousand, you are requested
urgently to approach the Pope with the suggestion that he
broadcast a public appeal to the people and chergy in those
parts of Hungary, urging them to aid to the utmost of their
abilities the temporary concealment of Jews and to oppose
their deportation and extermination.
In doing so please indicate that in Board's opinion
it seems unlikely that approaches to local authorities will
accomplish purpose and that a public appeal by the Holy See
to people and clergy appears to the Board to offer the best
chance of keeping these hapless people alive.
2:30 p.m.
October 20, 1944
Regraded Unclassified
99
EL-190
PLAIN
Rome
Dated October 20, 1944
Rec'd 4:31 p.m.
Secretary of State,
Washington.
556 556, Twentieth
FOLLOWING FOR M. LEAVITT AMERICAN JOINT DISTRIBU-
TION COMMITTEE NEW YORK FROM ARTHUR GREENLEIGH
REURTEL October 6th have completely cleared
subject debt repayments with finance subcommission
and am hereby requesting remittance five million lire
for immediate repayment in accordance with terms
your cablegram. Letter follows regarding remainder.
KIRK
CAW
Regraded Unclassified
100
CABLE TO AMERICAN CONSULATE, JERUSALEM, FROM WAR REFUGEE BOARD
Please deliver the following message to Melech Neustadt,
Yehuda Halevi 40, Tel Aviv, from Poale Zion Organizations:
QUOTE YOURS SEPTEMBER 23RD RECEIVED THROUGH WAR REFUGEE
BOARD. PERMISSION FOR YOUR ENTRY INTO RUMANIA BEING
RAISED WITH OUR STATE DEPARTMENT. WILL KEEP YOU ADVISED
UNQUOTE
2:15 p.m.
October 20, 1944
Regraded
101
PLAIN
Lisbon
Dated October 20, 1944
Rec'd 11:31 a.m., 21st
Secretary of State,
Washington,
3203, Twentieth, noon
FOR LEAVITT FROM PILPEL JDC 95, WRB 227.
Referring our regular 83 carload foodstuff from
Istanbul destined Theresienstadt unable continue be-
yond Bulgaria. Passman Jerusalem through Kezzler re-
quested Inter-Red Cross distribute food immediately
instead holding it for possible future shipment
Theresienstadt.
NORWEB
BB
102
PARAPHRASE OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
AMERICAN LEGATION, STOCKHOLM
DATED:
October 20, 1944
NUMBER: 2111 (Repeated to London as 8720)
SECRET
See London's 8907 of the eighteenth of October,
repeated as 587 to Stockholm. FEA and the Department agree
in recommendation of END and MEW with regard food parcel
shipments to Jews interned in Germany.
HULL
SWP:WHM:amg
Paraphrase
DCR;MLG
10-21-44
Regraded Unclassified
103
CABLE TO MINISTER HARRISON, BERN, FOR MC CLELLAND FROM WAR REFUGEE BOARD.
Please deliver the following message to Mrs. Fanny Hirsch,
Comite Refugies Intellectuels, 7 Rue Gautier, Geneva, from Dr. Fred S.
Weissman of Selfhelp of Emigres from Central Europe, Inc.:
QUOTE RECEIVED YOUR MESSAGE OCTOBER 12. SORRY REQUESTED
PERMISSION SUPPLY ESCAPED HUNGARIAN JEWS NOT POSSIBLE. AT
PRESENT CANNOT HELP PEOPLE ALREADY SAFE IN SWITZERLAND. FOR
OTHER SOLUTION CABLE NAMES OF YOUR TEN HUNGARIAN PROTEGES
WITH NAMES AND ADDRESSES OF THEIR RELATIVES OR FRIENDS IN
AMERICA. WAITING FOR YOUR SUGGESTION REGARDING RESCUE WORK
BEFORE MAKING FURTHER REMITTANCES. UNQUOTE
THIS IS WRB BERN CABLE NO. 229.
11:30 a.m.
October 20, 1944
104
CABLE TO MINISTER HARRISON, BERN, FOR MCCLELLAND FROM PEHLE
For your information the Swiss Minister in Washington recently
asked the Board how his government could be of any help in the
serious Jewish situation in Hungary and at Oswiecim and Birkensau.
He was advised confidentially of the steps which have been taken
by the Swedes. He has promised to notify his government of this
and to suggest to the Swiss Government that it take action parallel
to that taken by the Swedes.
Please support this matter to the extent possible.
THIS IS WRB BERN CABLE NO. 230
3:45 pame
October 20, 1944
Regraded Unclassified
105
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Bern
TO:
Secretary of State, Washington
DATED:
October 20, 1944
NUMBER:
6950
CONFIDENTIAL
With reference to Legation's message dated October 12,
No. 6793, confirmation was contained in Swiss note dated October 19 to the
effect that transmission of contents of Department's message of October 6,
No. 3435, to Hungarian officials was requested by Swiss Legation, Budapest.
Cable from Swiss Legation, Budapest, informs that evacuation of houses in
O
Budapest in which Jews live was started and that it is reported they will
be moved to camps located on the outskirts of the city. Non-interned
foreign Jews are equally subject to this treatment.
HARRISON
DCR:GPW
10-21-44
106
GEK-113
Bern
This telegram must be
paraphrased before being
Dated October 20, 1944
communicated to anyone
other than a Government
Rec'd 12:10 p.m.
Agency. (SECRET))0)
Secretary of State
Washington.
6951, October 20, 9 a.m.
FOR WRB FROM MCCLELLAND
FOR UNION OF ORTHODOX RABBIS FROM STERNBUCH:
We have received trustworthy information from
France that internees removed from Vittel this spring
were subsequently deported from France to east in two
0
groups which left toward middle and end May respectively.
Please request Paraguayan Government take necessary
steps through Spanish Embassy at Berlin to determine,
if possible, present whereabouts fate these people.
Former Swiss federal councillor Musy at our
request has declared his readiness go to Berlin and
attempt locate and rescue these Vittel deportes."
HARRISON
BB
Regraded Unclassified
107
GEK-114
Bern
This telegram must be
paraphrased before being
Dated October 20, 1944
communicated to anyone
other than a Government
Rec'd 12:32 p.m.
Agency. (SECRET 0)
Secretary of State,
Washington.
6953, October 20, 11 a.m.
FOR WRB FROM MCCLELLAND
FOR VAAD HAHATZALA EMERGENCY COMMITTEE FROM
STERNBUCH:
We contacted Griffel with regard his departure
plans and will give him financial support if necessary.
Meantime Klarman arrived Bucharest. We transmitted his
information to ITA New York. Concerning Oswiecim
and other concentration camps we contacted Papal
Nuncio who promised energetic intervention by Pope.
Direct contact with these camps impossible. We are
sending food parcels by Intercross as we have already
done for Theresienstadt. Szmuelowicz confirmed twelfth
October receipt of Swiss francs 85,010.
Situation Slovakia very bad. Almost all Jews
Bratislava deported to Theresienstadt and Poland.
Rabbi Weise Mandel remained Bratislava. We sent a
special delegate to France and Belgium in order to gather
exact information about deportees and liberated people.
WSB
HARRISON
00: Miss Chauncey (for the Sec'y) Abrahamson, Aksin, Cohn, Drury,
DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack,
Pehle, Files.
Regraded Unclassified
108
KEM-304
This telegram must be
Bern
paraphrased before being
communicated to anyone
Dated October 20, 1944
other than a Government
agency. (SECRET 0)
Rec'd 9:35 p.m.
Secretary of State,
Washington.
6964, October 20, 6 p.m.
Numbered Paragraph Two (Department 3496, October 13,
WRB 213) communicated to Swiss with request that
information contained therein be utilized to extent
possible in expeditiously protecting bearers of Ecuadoran
documentation in Hungary, pending further action by
Ecuadoran Government in connection formal representation
its interests in Hungary by Switzerland.
Legation wishes observe with reference numbered
Paragraph Three that Switzerland has shown greatest
reluctance in taking action on matters involving interests
of any country not officially represented by it in the
enemy country concerned, such official representation
being predicated on formal request to Swiss Government
by the country seeking representation. This consideration
led Legation to make suggestion contained final paragraph
its 4518, July 14, 6 p.m. Legation notes in connection
reference to its 6219 September 20 in numbered
Paragraph Three Department's 3496 that Swiss representation
of Nicaraguan interests was based on formal request
conveyed Department's 3141 September 11, 8 p.m.
HARRISON
WMB
Regraded Unclassified
109
BAS-343
This telegram must be
Ankara
paraphrased before being
communicated to anyone
Dated October 20, 1944
other than a Government
Agency. (RESTRICTED)
Rec'd 11:38 p.m.
Secretary of State,
Washington.
2008, October 20, 1 p.m.
FROM KATZKI FOR PEHLE, WAR REFUGEE BOARD.
ANKARA'S NUMBER 168
Reliable information has been received in Istanbul
from Sofia that upwards of 6,000 Jews, mainly Hungarians,
between the ages of 16 and 60, were liberated by the
Allied armies when they occupied Bor, Yugoslavia, near
Nish. These men had been laboring in a copper mine,
5,000 for 15 months and 1,500 since June 1944. Several
hundred men previously had been evacuated with the
German armies to erect fortifications in Belgrade. The
Russian authorities have advised the liberees that they
are free to travel wherever they wish. 900 have declared
themselves ready to join Allied armed forces, 700 more
were willing to join but were too weak physically to do
so. The remainder comprised youths too young or men too
old to take up arms.
The foregoing is for your information. It is to be
noted that although the liberees have been advised
that they may travel wherever they wish, no arrangements
have been made elsewhere for their reception. They
cannot remain in Bor according to information received.
STEINHARDT
WMB
REP
Regraded Unclassified
1944 The attached (reference cable to Moscow replaces cable timed 4:15 p.m., October 19, 110
Department's 1812 of July 28).
CABLE TO AMBASSADOR HARRIMAN, MOSCOW, FROM WAR REFUGEE BOARD.
Kindly refer to Department's 1812 of July 28.
The Department considers it desirable to inform the Soviet
Government of the following. The Department has been advised
that discussions have recently taken place on the Swiss border
between representatives of the Jewish groups in Budapest,
accompanied by reputed Gestapo agents, and Swiss citizens repre-
senting the Swiss Jewish community in an effort by the latter
group to forestall, if at all possible, the continued deportation
and extermination particularly of Jews' from Hungary and Slovakia.
The Swiss citizens involved àn these discussions have acted in the
belief that lives can be saved and precious time gained by pro-
longing discussion pending the solution of the problem by military
action. No commitments have been made or authorized. American
Jewish groups are being kept informed of the discussions and Moscow
will be further advised of any significant developments.
11:30 a.m.
October 20, 1944
Regraded Unclassified
The
1944 attached (reference cable Department's to Moscon 1812 replaces of July cable 28). timed 4:15 p.m., October 19, 110 111
CABLE TO AMBASSADOR HARRIMAN, MOSCOW, FROM WAR REFUGEE BOARD.
Kindly refer to Department's 1812 of July 28.
The Department considers it desirable to inform the Soviet
Government of the following. The Department has been advised
that discussions have recently taken place on the Swiss border
between representatives of the Jewish groups in Budapest,
accompanied by reputed Gestapo agents, and Swiss citizens repre-
senting the Swiss Jewish community in an effort by the latter
group to forestall, if at all possible, the continued deportation
and extermination particularly of Jews from Hungary and Slovakia.
The Swiss citizens involved an these discussions have acted in the
belief that lives can be saved and precious time gained by pro-
longing discussion pending the solution of the problem by military
action. No commitments have been made or authorized. American
Jewish groups are being kept informed of the discussions and Moscow
will be further advised of any significant developments.
11:30 a.m.
October 20, 1944
Regraded Inclassified
112
AVH-649
PLAIN
Moscow via Army
Dated October 20, 1944
Rec'd 7 p.m. 21st.
Secretary of State
Washington
4019, Twentyfirst
PROH RER October 20 devoted 11 inches to Tass
report quoting from Stockholm NY DAG describing alleged
anti-Soviet emigrant organization of refugees from the
Baltic states and criticizing part allegedly played by
Swedish Government in fostering activities of this
organization. Article states that about 30,000
refugees from Baltic have arrived in Sweden. They need
assistance and must be returned to their homes when
period of peaceful reconstruction begins. Basic problem
is Fascist group among Baltic emigrants. Article asserts
that 6 or 7 thousand Estonians of Swedish extraction were
evacuated to Sweden and that other Estonians and Latvians
were sent to Sweden in accordance with plans of Baltic
organization. It asks how the Swedish Government which
recognized de facto and de jure union of Baltic States
with Soviet Union could permit cooperation of Swedish
authorities in organizing transfer of population from
Soviet territory.
Final paragraph of quotation reads in translation
as follows: "After the liberation of Estonia some kind
of a 'national' government suddenly appeared. The
Estonian people took no note of this government but the
Swedish press advertised it as a political reality.
Thenceforth nothing further was heard of this govern-
ment but we found out that one of the employees of the
American Mission has the same name as one of the
Ministers of this 'government'. It is stated with
absolute definiteness that this is one and the same
person. It would be highly desirable to receive the
explanations of the American Minister Johnson on this
matter. For it is a question of relations with the
great ally of the United States. Let the American
Minister also state whether it was known to him that
one of
Regraded Unclassified
113
-2- #4019, Twentyfirst, from Moscow via Army
one of his employees donated more than 900,000 Swedish
crowns for the establishment of the Baltic organization
in Sweden. We must assume that this was unknown to the
Minister, and we hope that our communication will
arouse him to undertake an investigation and to find
out that certain of his 'officials' are concerned in
these affairs".
Repeated to Stockholm.
HARRIMAN
DU
Regraded Unclassified
114
NOT TO BE RE-TRANSMITTED
OFFICE
SECRETARY OF TREASURY
COPY NO.
"
1944 OCT // 1116
SECRET
OPTEL No. 341
TREASURY DEPARTMENT
Information received up to 10 a.m., 20th October,
1944.
1. NAVAL
MEDITERRANEAN. 16th/17th. Crastal reconnaissance
reported probable demolitions Genoa.
17th. 5,000 men, 400 M.T. and 1,000 tons stores
landed Piraeus. Harbour facilities adequate, power light and
water available, Patras, Preveza and Kalamata opened for relief
shipping.
18th. Garrison of Santorin surrendered to one of
H.M. Cruisers.
19th/20th, Two of H.M. Destroyers drove ashore and
destroyed an enemy destroyer west of Skiathos.
2. MILITARY
WESTERN EUROPE. U.S. troops have advanced about
1,000 yards into Western outskirts Aachen. U.K. troops have
made local advances south and east of Venray and Canadian troops
have advanced up to 2 miles westwards in area south of Scheldt.
ITALY. North of Rimini-Cesena road a firm bridge-
head has been established across Pisciatello and leading infantry
have reached the Mesola (runs N.E. from Cesena). Progress also
made towards Cesena and good progress across the Savio in area
N.W. of Mercatio.
BURMA. 17th/18th. British patrols entered Tiddim
unopposed.
3. AIR OPERATIONS
WESTERN FRONT. 19th. 945 escorted U.S. heavies
employed Pathfinder technique in dropping 1314 tons Mannheim,
711 tons Mainz, 154 tons A.F.V. station near Mainz, 70 tons Karls-
ruhe. 10 bombers, 7 fighters missing. About 550 fighter bombers
and fighters (2 missing) operated in battle areas, 72 locomotives,
112 vehicles destroyed. 511 aircraft carried supplies to con-
tinent.
19th/20th. Aircraft despatched:-
Stuttgart
582 (6 missing)
Nuremburg
270 (2 missing)
Wiesbaden
48
Dusseldorf
6
Bomber support 117 (1 missing)
MEDITERRANEAN. 17th/18th/19th. 227 tons dropped on
Vinkovci railway centre (90 miles W.N.W. of Belgrade) with good
results.
18th. 28 medium bombers and 263 fighter bombers
and fighters attacked communications in Italy and targets in
battle area.
4. HOME SECURITY
19th/20th, 18 flying bombs plotted. Regraded Unclassified
that 9 are this 115
information to
October 21, 1944.
Suy m phone
10/21/44.
Memorandum
TO: Secretary Morgenthau
FROM: Mr. Gaston
You are to speak in New York on the evening of
Friday, October 27, at a dinner to be given by Business-
men for Roosevelt, Inc.
The ce: Starlight Roof, Waldorf Astoria Hotel.
Dinner: 7:00 P.M. Your speech to begin 9:30 P.M.
Length of speech: 20 minutes.
Radio: Local station or stations, one-half hour -
9:30 to 10:00 P.M., following National hook-up
for the President, 9:00 to 9:30 P.M.
I obtained the above information from a Mr. Latham,
in the Speakers' Bureau of the Democratic National Com-
mittee, whom I called after talking to Jim Barnes.
While the dinner hour is set at 7:00 P.M., I assume
it will not start before 7:30. As indicated above National
hook-up time from 9:00 to 9:30 has been obtained for the
President and after he concludes you are to follow him on
a local hook-up. At some time in the evening, presumably
before the President speaks, Joe Davies is to address the
audience but without any radio. The President is to be
introduced probably by Andrew Higgins, New Orleans boat
builder. I was unable to learn by whom you are to be in-
troduced.
While the sponsors of the dinner are arranging thirty
minutes of local radio time, from 9:30 to 10:00, following
the President, I was told by Latham, when he called me back
yesterday evening, that twenty minutes would be about right
for your speech and that the Committee would arrange to
use up the other ten minutes in some way. When I first
Regraded Unclassified
116
- 2 -
talked to him in the afternoon he told me that you were
to have thirty minutes, contrary to my original informa-
tion obtained from Miss Michener that yours was to be a
fifteen minute speech. I told Latham that if the radio
time was thirty minutes your speech certainly should not
be longer than twenty-five to allow time for introduction
and closing. He agreed to that and then when he called
me back later he suggested that we make it twenty minutes.
The Starlight Roof accommodates about a thousand
people and it is expected that it will be filled.
The man who is making the arrangements for the
dinner on behalf of Businessmen for Roosevelt, Inc. is
Lawrence Liebson, Plaza 8-2453.
Regraded Unclassified
Sent to Hip in n.9. -
Prepared for the
117
10/21/44-
THE ECONOMIC BILL OF RIGHTS Prendent-
This evening I want to talk to you about the future
which I feel is in store for the American people and to
outline to you my plans for meeting here at home the
problems of peace.
For the second time in twenty-five years America has
proved her capacity to meet the challenge of total war.
Twice in twenty-five years we have amazed the whole world-
and ourselves - with our daring conception of what America
could do when forced to war. We have astonished a grateful
world by the stupendous number of planes, tanks and guns
rolling off our assembly lines; with the bridge of ships
we have erected across the oceans; by the overwhelming
force with which America has turned the scales of battle.
Thus has America met the challenge of war - with
boldness, courage and determination. Thus has America
become the symbol - the world over - for the dynamic
force of a free people fighting for a free world.
But what of the peace-time problems here at home
which will follow the successful conclusion of this war?
Is America prepared to meet the challenge of these peace-
time problems as it has twice met the challenge of war?
will we approach the problems of peace with the same
boldness of conception, the same courage and determination
as we have approached the problems of war?
Regraded Unclassified
118
- 2 -
In the answer to these questions lies the future of
America. To anyone who has faith in America the answer
is clear. The American people are prepared to meet the
problems of peace in the same inspiring way that they have
met the problems of war. The American people are resolved
that we shall insure that the youth of this nation will
never again be called upon to fight in another war. And
the American people are equally resolved that when our
boys return home from this war, they shall come back to
the brightest possible, the freest possible, the finest
possible place on the face of this earth - to a place
where all persons, regardless of race, color, creed or
place of birth, shall live in peace, honor and dignity -
free from want - and free from fear. To do otherwise
would betray the faith of every soldier, every worker,
every businessman, every farmer in this country who is
giving his best for America.
In determining the course of action we should pursue
after the war, it is well for America to pause and take
stock of her capacities. For America's capacities should
be the measure of America's future.
America's known capacities are not difficult to
calculate. We are now producing goods and services to
the gigantic total of $200 billion a year with 52 million
workers and 12 million soldiers. In simple language that
Regraded Unclassified
119
- 3 -
means that today America is producing nearly twice as
much as she had ever produced before the war. But an
enormous part of the goods and services we are producing
today does not find its way into the American home. No,
it represents the ships, the guns, the planes and tanks
we are using to fight this war.
But I know, and you know, that, if we can produce a
huge flow of ships and guns and planes and tanks, we can
also produce an abundance of houses and cars and clothing
and provide education and recreation and the other good
things of life for all Americans.
And I know, and you know, that when our boys return
home from the war and are again able to put their power
into the stream of peace-time production, America's
capacity to produce will be even greater than it is today.
Yes, much greater than today oven when we remember that
some of our returning soldiers will prefer to resume their
education; that some older people will begin a retirement
delayed to participate in war work; and that many women
will give up their jobs in favor of home-making. Making
full allowance for these groups, the fact remains that
America will have the capacity after the war for producing
houses, cars, clothing, education, recreation and all of
the other good things of life on a scale that staggers the
imagination, That is what America can and will do if we
have the courage and vision to give her the chance.
Regraded Unclassified
120
- 4 -
But to accomplish this task of utilizing our full
productive capacity year after year, it is childish to
think, as some would suggest, that we can depend upon the
accumulated backlog of demand for 6 million automobiles,
3-1/2 million vacuum cleaners and 7 million alarm clocks
and so on! Why an America geared to that limited
conception of the future will find itself faced with
millions of unemployed. In fact that kind of thinking
sounds to me as though our doughboys returning from this
war would have to face the prospect of peddling alarm
clocks this time instead of apples.
I say to you here and now that we cannot set our
sights to a level which we have long since passed. The
same people who set their sights too low for war are now
asking the American people to set their sights too low
for prosperity. They do not grasp the strength and the
spirit of America.
Nor do any of us think for & minute that there is
any quack remedy or cure-all that can be automatically
applied. The sober facts are that genuine progress will
be achieved only through concrete plans and a real effort.
I made plain my views on this subject to Congress in
January of this year. In that message, I set forth eight
self-evident economic truths. I said then and I say now
that these economic truths represented a second Bill of
Rights under which a new basis of security and prosperity
Regraded Unclassified
121
- 5 -
can be established for all - regarless of station, race
or creed.
America led the world in establishing political
democracy. It must load the world once more in
strengthening and extending political democracy by firmly
establishing economic democracy. Let us not forget the
painful lessons of the rise of Fascism. Let us remember
that political democracy is at best insecure and unstable
without economic democracy. Fascism thrives on domestic
economic insecurity, as well as on lack of or divided
resistance to external aggression. Fasciam is not only
an enemy from without, it is also potentially an enemy
from within.
We now must establish an Economic Bill of Rights not
only out of common decency, but also to insure the
preservation of our political freedoms. We must accord
to this Economic Bill of Rights the same dignity - the
same stature - in our American tradition as that we have
accorded to the original Bill of Rights.
Lot us therefore affirm this Economic Bill of Rights -
and keep affirming it - until it is as familiar and real
to us as our political Bill of Rights.
The Economic Bill of Rights as embodied in my message
to Congress last January is:
Regraded
122
- 6 -
The right to a useful and reminerative job in the
industries, or shops or farms or mines of the nation;
The right to earn enough to provide adequate food
and clothing and recreation;
The right of every farmer to raise and sell his
products at a return which will give him and his family
a decent living;
The right of every businessman, large and small, to
trade in an atmosphere of freedom from unfair competition
and domination by monopolies at home or abroads
The right of every family to a decent homes
The right to adequate medical care and the opportunity
to achieve and enjoy good health;
The right to adequate protection from the sconomic
fears of old age, sickness, accident and unemployment;
The right to a good education.
But the achievement of this American Economic Bill
of Rights will not come of itself. These rights will not
come to those who merely sit and wait. Nor will they come
through morely pious repetition. Our forefathers had to
struggle for our political Bill of Rights; we will have
to struggle for our Economic Bill of Rights. If we are
going to make those Rights a. living reality we must map
out a vigorous and concerted course. We must set as our
coal the implementation and fulfillment of the 8 self-
evident truths which together constitute our Economic
Bill of Rights.
123
7 # #
The key to making this Economic Bill of Rights a part
of the American way of life is as self-svident as are the
rights themselves. The key is the wholehearted recognition
by all our people of the simple fact that in America the
future of the American worker lies in the well-being of
American private enterprise; and the future of American
private enterprise lies in the well-being of the American
worker. The greatest single thing that this war has demonstrated
on the home front is that when the American worker and the
American businessman and the American farmer work together
as one team, there are no limits on what America can accomplish.
But to work together as a team, however, there must be
a common goal. In this war that goal has been the defeat
of our enemies in the shortest possible period of time.
In the peace to come the goal must be the well-being of
America - and that is synonymous with the well-being of
every American.
As I outline to you tonight my program for making
each of these economic rights a part of our way of life,
you will note this striking fact, namely, that to the
extent that private enterprise grows in strength, the
Economic Bill of Rights grown in reality - and to the
extent that the Economic Bill of Rights grows in reality,
American private enterprise grows in strength. Thus, all
the measures which are proposed in this program for the
Regraded Unclassified
124
- 8 -
implementation of the Keonomic Bill of Rights are at the
same time designed to make American capitalism and private
enterprise work in the same great manner in peace as it
has worked in war.
When I enunciated this Economic Bill of Rights last
January I said that after this war is won we must be
prepared to move forward, in the implementation of these
rights, to new goals of human happiness and well-being.
I asked the Congress to explore the means of implementing
these rights and stated that from time to time I would
have more to say on the subject.
Tonight, I want to discuss this Economic Bill of
Rights with all of you. I want to outline how the
adoption of concrete measures to implement these rights
represents the very foundation of American prosperity
in the years to come.
And I also want to emphasize what the implementation
of these rights will mean to our service men and women.
They have given America the opportunity to work out its
destiny as a free nation in & free world, The America to
which they return must be a land of economic opportunity
in which they will find full opportunities not only for
jobs but for economic advancement and independent
enterprise in industry, commerce, agriculture and the
professions. A grateful nation can do no less for her
returning service mm and women. The G, I. Bill of Rights
Regraded Unclassified
125
- 9
which became law in June of this year, following a series
of recommendations which I made to the Congress, is only
designed to fulfill the special needs of our non and women
in the service. The Economic Bill of Rights is designed
to fulfill the needs which they value most, yes, the needs
which they value more than life itself - the needs of
America.
I
The first sconomic right is "the right to a useful
and reminerative job in the industries, or shops, or
farms or mines of the nation."
To assure the full realization of this right to a
useful and remunerative job, an adequate program must
provide America with 60 million productive jobs. We must
have more jobs than workers; not more workers than jobs.
Only with more jobs than workers can every man be
guaranteed a job with good wages and decent working
conditions. This requires private enterprise working at
expanded capacity.
This necessary expansion of our peace time productive
capacity will require new facilities, now plants and new
equipment.
It will require large outlays of money which should
be raised through normal investment channels. But while
private capital should finance this expansion program, the
Government should resognize its responsibility for sharing
Regraded Unclassified
126
- 10 -
part of any special or abnormal risk of loss attached to
such financing.
Therefore I propose that the Government guarantee
the lender against all special and abnormal risks which
may be involved. This will provide new and expanding
industry with plenty of private credit at reasonable
interest rates. Through this program we will morely be
extending to the financing of old and new business the
principles which have proved so successful in our
experience with the V Loans, T Loans and the Federal
Housing Administration loans.
A comprehensive investment program dedicated to
expanding the peace time productive capacity of America
is the very opitome of the American way of raising our
standard of living. We build the plants for greater
production 80 that all of us may share in their greater
output. But greater output is not our only benefit from
this plant expansion. In fact, our benefits also include
the wages paid to the labor employed in building these
plants, in constructing the machinery to be used in the
plants and in operating the plants after they are creeted.
These payments as wages all contribute to the nation's
buying power so that as a nation we will have more money
with which to buy the goods produced by these expanded
plants.
Regraded Unclassified
127
- 11 -
As a matter of fact a comprehensive investment program
of this character could make possible $20 billion of new
private investment each year. Why, just the job of
building these plants and the machinery for them would give
America 5 million more jobs a year than we had in this work
before the war. And this does not include the workers who
would be needed to operate these plants after they are built.
In a nutshell, then, if we are going to have
remunerative jobs for all, we must have an expanded private
industry capable of hiring millions more men. I propose
that the Government do its part in helping private
enterprise finance this expansion of our industrial plant.
It will be privately owned, privately operated and privately
financed but the Government will share with the private
investor the unusual and abnormal financial risks which
may be involved in getting started.
But, in providing jobs for everyone, we shall not only
have to increase demand for our industrial and agricultural
production here at home; but also abroad. Some parts of
our industrial and agricultural production demand a high
level of foreign trade to be efficient and prosperous.
This is particularly true in our heavy equipment industries
where our war demand will fall sharply but whose output
will be needed by other countries for reconstruction and
Regraded Unclassified
128
- 12 -
development. The foreign demand for such farm commodities
as cotton, tobacco and wheat will also be great if other
countries have the opportunity to buy. We therefore must
take steps, in cooperation with other countries to see
that international trade and investment is resumed promptly
on a sound basis.
This Administration has pioneered in the direction of
international economic collaboration with its reciprocal
trade program and the establishment of the Export-Import
Bank. It has again taken the lead in suggesting internation-
al monetary stabilization and sound international
investment measures - measures that are a fundamental
prerequisite to healthy foreign trade and commerce. It
was for the purpose of working out concrete measures of
this character that I convened the United Nations Monetary
and Financial Conference at Bretton Woods last summer. At
the Bretton Woods Conference, forty-four countries agreed
upon plans for an International Monetary Fund and an
International Bank for Reconstruction and Development.
The International Monetary Fund, when approved by
Congress, will aid the nations of the world in establishing
sound currencies. It will clear the channels of foreign
trade of discriminatory restrictions and controls so that
there can be a genuine expansion of world trade.
Regraded Unclassified
129
- 13 -
with the help of the International Bank, American
capital can play a great constructive role - and a
profitable role - in the development of the economies of
other countries. It will provide us with enormous post-
war foreign markets. For our greatest markets are in
prosperous, industrialized countries.
But America will not be merely a seller of goods
abroad. A truly prosperous America - an America with jobs
for all - will be a tremendous buyer of raw materials and
products from abroad. It will be an America constantly
enlarging the scope of our reciprocal trade agreements.
It will be an /merica with the time and money to spend on
tourist travel abroad as well as at home. It will be an
America from which other countries can afford to buy more
because they are selling more.
With Congressional approval of this program and with
our program of jobs for all in this country - - the foreign
trade of the United States can be trebled after the war.
This increase in our foreign trade should mean 3 million
more jobs after the war than we had before the war.
Nor are the benefits of increased foreign trade and
investment confined to increasing our prosperity. I want
to emphasize that such cooperative measures for expanding
international trade and investment are at the same time
the economic foundation for a lasting peace. A prosperous
world will be a world free of both economic and political
Regraded Unclassified
130
- 14 -
aggression.
......
There is one further phase of this program of providing
jobs for all which must be made an integral part of any long
range program. That is the task of seeing to it that there
are not just jobs for all next year - or for the year after
that. No, we are talking about jobs for all as a permanent
part of our American way of life.
But it is inevitable, however, that an economy of free
enterprise like ours will have some fluctuation in the
number of jobs it can provide. Adjustments in employment
are an essential part of an expanding free economy. And
for these minor fluctuations, we provide unemployment
insurance. But we must not allow such fluctuations ever
to deteriorate into panic or depression. We cannot again
be caught in that vicious downward spiral of unemployment,
wage cuts and stagnated business.
I say to you that whenever the number of gainfully
employed in this country falls below 57 million, your
Government must and will take prompt steps to see that
new jobs are made available to keep the total from falling
significantly below that figure. This is the floor below
which we must not allow employment to fall.
The basic function of your Government in taking care
of any such slack in jobs is to 500 to it that private
enterprise is assisted until it can absorb this slack.
Regraded Unclassified
131
- 40 -
This is entirely possible. During the war the federal,
state and local governments have found it necessary to put
aside the construction of roads, buildings and public
facilities to the value of many billions of dollars. We
have a need, too, for vast programs of the type exemplified
by TVA.
Some of this construction will have to be undertaken
immediately after the war. A good deal of it, however,
can be postponed so that its construction could be timed
with periods when the volume of employment that industry,
commerce and agriculture can offer begins to fall. We
must have a reservoir of planned and approved federal,
state and local projects ready to be tapped. And when
employment falls below this floor of 57 million jobs, this
reservoir of planned and approved public works should be
opened up to provide more jobs and take up the slack.
Such useful and essential public works should not
produce Government or "relief" jobs, however. No, they
should produce private jobs. This is possible if we
insist that this construction be done by private firms
under contract with the Government; private firms employing
labor at the prevailing rate of wates and under standard
labor conditions.
This assurance of a reserve of private jobs, through
constructive public works when needed to take up the slack,
will have a profound effect on the whole direction of our
Regraded Unclassified
132
. 16 -
economy. In fact, the knowledge that Government accepts
this responsibility of maintaining a floor under jobs will
act as an immense stablizing force on the whole economy.
II
The second economic right is "the right to earn enough
to provide food and clothing and recreation."
America must remain pre-eminently the land of high
wages and efficient production. Every job in America must
provide enough for a decent living.
During the war we have been compelled to hold down
wage increases that might have provoked runaway inflation.
With all the arms and war materials we were producing,
there was only a limited amount of consumption goods
available. Increasing wages without increasing the amount
of goods available to the consumer would have been an open
invitation to inflation. By resorting to drastic price
and wage control measures, I am proud to report that
America is succeeding in holding the line against inflation.
However, the end of the war, even the end of the war
in Europe, will change this picture. Then there will be
more goods available for America to buy and it is only
good common sense to see that he working man is paid
enough to buy these goods.
The gains made by labor during the war must be
retained in full. After the last war, as part of the
process of returning to "normaloy", the old guard of the
Regraded Unclassified
133
- 17 -
Republican Administration adopted the slogan "labor must
be deflated." This won't happen again. This time we must
make sure that wage rates are not reduced when the wartime
demand for labor is diverted into peace time channels. We
must make sure that the labor market is not broken by un-
employment and wage slashes.
I can say now that so long as I am in the White House,
American labor can be assured that there are not going to be
any wage cuts that 1 can stop. What is even more important
1 am going to see that when the worker's hours are out back
to peace time levels a real attempt is made to adjust wage
rates upward.
And I propose that wages should be constantly increased
as the productivity of industry is increased. An expanding
American economy can continue to expand only if the
increased productivity is divided equitably between business
and the worker. In fact - you know, and I know, that unless
the worker does get his share of America's increased
production in the form of increased wages and unless
business gets its share in the form of increased profits -
neither will prosper and all will lose.
But an increase in wages is not the only benefit the
American worker should secure from increased productivity.
He should also benefit in the form of shorter hours of
work, in the form of increased leisure and opportunities
for healthful recreation. Thus increased wages and shorter
hours go hand in hand in solving prosperity the American
way.
Regraded Unclassified
134
- 18 -
There is one further aspect of the wage-carner's
problem that I want to touch on tonight. That is his
aspiration for an annual wage or guaranteed annual income
from his job. It is a terribly important part of any real
attempt to implement America's Economic Bill of Rights.
The size of the wage-earner's pay envelope is important -
vitally important to American prosperity. But we all know
that it is equally important to know how many pay envelopes
he gets during a year. I want to see him get a guaranteed
minimum annual wage and I think the time has come for
America to begin tackling this most difficult problem.
Now this goal cannot be attained overnight. It cannot
be achieved in a manner to harm business. Nor can it be
achieved with the same speed in every business.
But we can start on the job of giving labor an annual
wage. We can do a lot if we all will only agree that it
is a problem business and labor must solve and if we all
approach the problem with & genuine desire to succeed.
And Government must do its part too. It must aid business
in stabilizing its labor needs so that the burden of an
annual wage will not be uneconomical. This in my opinion
is the American way to bring about the annual wage and I
have confidence in the American way of doing things.
III
The third economic right is "the right of every
farmer to raise and sell his products at a rate which
will give him and his family a decent living."
Regraded Unclassified
135
- 19 -
American farmers now have by far the largest farm
income in history. This is their due roward for the
greatest agricultural production in history. We must
assure the farmers that there will always be a market for
all their output at good prices. Concretely I propose to
maintain an adequate floor on farm prices and thereby
assure the farmer against the dangers of falling prices
for his products. Our farm program must be one of
expansion rather than curtailment. With jobs for all at
good wages and with foreign markets greatly expanded, the
farmer will be able to sell at good prices all that he can
raise.
But this is not all. The farmer's income must have
stability. To that end, I propose to establish a
comprehensive federal crop insurance program which will
secure the farmer against the hazards of crop failure.
To this must be added concrete steps to raise the standard
of living on the farm and in the rural areas. We need a
complete program of new and modernized homes and farm
buildings. We must press forward with rural electrification
and improvement. Only in this way can we bring to the rural
communities modern facilities for decent and healthful living.
IV
The fourth economic right is "the right of every
business man large and small to trade in an atmosphere of
freedom from unfair competition and domination by monopolies
at home and abroad."
Regraded Unclassified
136
- 20 -
Where this Administration is to be distinguished
most sharply from some others is in its refusal to curry
favor with big business or entrenched monopoly. Our
Economic Bill of Rights like our political Bill of Rights
is based on freedom of enterprise - freedom of enterprise
not merely and exclusively for the few, but broadly and
inclusively for the many. The political Bill of Rights
insured the destruction of special prerogatives and
privileges. The Economic Bill of Rights will insure the
destruction of special economic prerogatives and privileges.
No special class of business deserves to be the spoiled
darling of government. This Administration has been mindful
from its earliest days, and will continue to be mindful, of
the problems of small business as well as large.
We must break through the barriers of monopoly and
international cartels that stand in the way of a healthy
expansion of free enterprise. Against these real enemies
of free enterprise we shall continue unremitting warfare.
We must overcome the monopolistic frame of mind which
thinks of business in terms of restricted output at high
prices per unit. We must pass on to workers and consumers
the benefits of technological progress and large scale
production. Free enterprise in the American tradition can
flourish only by doing & large volume of business at a
small profit per unit.
Regraded Unclassified
137
. 21 -
My Administration is determined to protect free
enterprise against monopolies and cartels through continued
vigorous enforcement of the anti-trust laws. Private
enterprise yields its full advantage to the consuming public
and to other business only when it is genuinely free and
competitive. Beware of that sinister enemy of free
enterprise who pays lip-service to competition but also
labels every anti-trust prosecution a "persecution."
Our economy has important new expanding sectors in
air transport, frequency modulation, television, synthetic
rubbers and fibers, plastics, and many other fields. These
new expanding areas in particular must be kept free of the
constricting hand of monopoly. There must be a place in
them - as everywhere in our economy - for enterprising
small firms. It is from these new and small firms that
the great industries of the future will grow. We need
new industries, new firms to have industrial progress and
shall not permit them to be stifled by monopoly.
V
The fifth economic right is "the right of every family
to a decent home."
Concretely, I propose that we adopt a housing program
looking toward the construction through private enterprise
of 2 million housing units a year and ridding this country
of its urban and rural slums. We need to build at least
Regraded Unclassified
138
. 22 -
15 million now housing units if we are to eliminate all
our slums and sub-standard dwellings. The right to a home
is meaningless when that home is a hovel. We cannot afford
slums.
A well-housed America must have modern homes - homes
with all the latest electrical and mechanical equipment
which will eliminate the drudgery of household work. We
must be & land of homeowners, and to that end we must assure
every family an opportunity for home ownership by making
certain that there is available private credit on terms
which will reduce the down-payment and out by one-third
the monthly cost of buying homes.
New residential construction and the modernization of
America's homes alone can provide jobs for 4 million people
a year. This is 2 million more than the maximuma amount
engaged in such work prior to the war.
VI
The sixth economic right is "the right to adequate
medical care and the opportunity to achieve and enjoy
good health."
As Selective Service has revealed, too large a
proportion of our younger men now fall below reasonable
health standards. This is a warning signal to America
with respect to the state of health of all segments of
our population. This condition calls for immediate and
drastic action.
Regraded Unclassified
139
- 28 -
We cannot permit the health of our people to be
impaired by poverty or lack of medical and hospital
facilities. I say to you that your Federal and State
Governments have just as much responsibility for the
health of their people as they have for providing them
with education and police and fire protection. Health and
adequate medical and hospital care are not luxuries. They
are basie necessities to which all are entitled.
we must see that medical attention is available to
all the people. But this health program must be achieved
in the American way. Every person should have the right
to go to the doctor and hospital of their own choosing.
My program calls for the Federal and State Governments to
work hand in hand in making health insurance an integral
part of our Social Security program just as old age and
unemployment benefits are today. And these health
insurance benefits must be adequate to provide private
medical and hospital care for every person in the United
States.
We need more hospitals and doctors. I propose that
we make sure that such facilities are available and that
we build hospitals in every community, rural and urban,
that does not now have such facilities for all of its
people.
Regraded Unclassified
140
a 24 -
Never again can we afford the waste of poor health
in America because of poverty or inadequate facilities.
And I say to you now that this program will prove in the
long run to be a saving to America.
We must not be content to provide medical attention
for people after they become sick. We must implement and
extend our knowledge of preventative medicine. To the end
that we shall be much better able to attack diseases and
to prevent illness, I propose that the Government appropriate
needed funds to finance a greatly expanded program of medical
research in private and public institutions.
VII
The seventh economic right is "the right to adequate
protection from the economic fears of old age, sickness,
accident and unemployment."
We must assure people who are disabled and temporarily
unemployed that they will be taken care of adequately. We
must assure them that they will not be in want because of
loss of income during this period of compulsory unemployment.
Tie cannot neglect these groups without incurring serious
dangers to the stability of our whole economy.
But we should be wary of those who only pay lip-
service to the principle of Social Security but have
a sorry reputation when it comes to delivering on their
promise. In 12 years of Republican Administration this,
the richest country in the world, fell far behind other
Regraded Unclassified
141
- 25 -
industrial nations in the development of Social Security
legislation. Every step in the establishment of our
social security system has been fiercely resisted by the
Republican Old Guard. Even now while advocating the
extension of social security in vague, vote-catching terms,
the Republican party evades all major concrete steps to
expand Social Security. The Republican candidate for the
Presidency, some weeks ago, made his formal obsisance to
the need for Social Security by limiting his remarks to a
few piddling generalities.
Meanwhile, for more than a year, there has languished
in Congress a carefully-drawn, comprehensive Bill to extend
the coverage and increase the benefits of Social Security.
I refer to the Wagner-Murray-Dingell Bill, introduced into
Congress by three liberal Democrats. It gives effective
universal coverage and provides benefits for old age,
unemployment, medical care and disability. Yet no prominent
Republican - in or out of Congress - has raised his voice
in support of this Bill. That in my mind is the tip-off
of what America can expect when the "chips are down."
Being introduced in wartime, when we have been
concerned about restraining consumers' demand rather than
expanding it, the Wagner-lhirray-Dingell Bill will need to
be revised to suit our postwar world - revised in both its
scope and method of financing.
Regraded Unclassified
142
- 26 -
A broader program will be needed after the war. old
age insurance should be adequate to provide all of our
older men and women with the means for decent living. Our
present old age benefits are definitely inadequate. I
propose that we immediately establish the principle of
giving & minium Federal old age pension of $60 per month
to every person who has reached the age of sixty. This
minimum $60 per month pension should be available to every
man and woman over the age of 60 who makes application.
If both husband and wife are over sixty, this will mean
a monthly income of $120 per month. It should be deemed
to be a right, not a charity, a right springing from the
years of service each person delivers to the sum total of
a better America.
This social security program will, of itself, by
adding to the spendable purchasing power available to the
people and by placing a floor on consumption, add from
two to three million jobs a year.
VIII
The eighth economic right is "the right to a good
education."
We must have an educated and informed America. Even
now most of our rural areas and some of our urban areas
are poorly provided with schools. Our teachers are
underpaid. Our schools are badly understaffed. We need
more schools and at least one-half million more teachers.
143
27 0 I
Through Federal aid to poorer communities for the develop-
ment of locally controlled educational programs, we propose
to equalize and extend educational opportunities throughout
the land. We propose to provide facilities for technical
and higher education for all qualified young men and women
without regard to their financial means. In this America,
the pioneer of free education, the right to technical and
higher education should be as universal as the right to a
secondary school education.
This is the program that will bring to reality our
Economic Bill of Rights. It is a program that will provide
jobs, economic security and rising standards of living for
all Americans - - regardless of race, color or creed. Our
democracy can be & living force only if it means the good
life for all the people.
The millions of more productive jobs that this program
willbring are jobs in industry. They are jobs based on
the expanded demand for the output of our economy for
consumption and investment. And this program need place
no real burden on the Federal budget, notwithstanding the
reduction in taxes which must come after the war. On the
contrary, a program of this character can provide America
with a national income of $200 billion. with & national
income of this magnitude it will be possible to reduce the
tax rates still further on personal incomes, on business
profits, and on consumption, and still collect enough tax
reverned to meet the needs of the Government, including
orderly retirment of the national debt.
144
- 28 -
This, my friends, is our immediate goal, once final
victory over our enemies has been achieved.
Bow there will be, I an sure, those who will say that
the goal which I have set for you is fantastic. These are
the persons of limited vision and blunted imagination.
These are the same persons who said I was dreaming when I
declared in 1940 that the American people would produce
50,000 planes in one year. In fact the American people
produced over 100,000 planes in one year. These persons
also labelled 8,000,000 tons of shipping in one year &
dream. The American people actually produced
tons.
45,000 tenks was supposedly another dream. In fact WO
produced
. And these are also the same persons who
scoffed at the idea that America could in less than 4 years
build the greatest Army, the greatest Navy and the greatest
air force in all the world. Do these Monday morning
quarterbacks have that great faith in the American people,
and in their way of life, which is required in order to
understand the meaning of America?
And yet these name great visionaries who see but dimly
into the future have excellent hindsight. As the great
events of history march forward, while they look back,
they are at least able to recognize what has passed them
by. Only than do they shake their heads wisely and
proclain that of course it must be 80. They have soon it
with their own eyes. Thus, for example, they say, and I
Regraded Unclassified
145
- 29 -
an quoting:
"Of course, 100 need security regulation.
of course, we need bank-deposit insurance. of
course, we need price support for agriculture.
Of course, the farmers of this country cannot be
left to the hasards of a world price while they
buy their goods on an American price. Of course,
we need unemployment insurance and old age pensions
and also relief whenever there are not enough jobs.
Of course, the rights of labor to organize and
bargain collectively are fundamental."
I suppose that after this program to which my
Administration in pledged has become an accepted part of
our way of life, the battle-cry of the hindsight artists
will go something like this. They will say that of course
the right to & useful and remunerative job in the industries
or shops or forms or mines of the nation in self-svident;
of course the right to earn enough to provide adequate
food and clothing and recreation is self-evident; of
course the right of every farmer to raise and sell his
products at a roturn which will give him and his family
a decent living is self-ovident; and of course this and
of course that. Oh, I forgot - there is one more "of
course" that they will adde They will say "of course,
we could have done it better."
146
- 30 -
I an confident, however, that the great majority of
the American people share the same great faith in
America and in the American way of doing things which I
have expressed tonight. We know our way and the road
ahead is straight and broad although there are many hills
which we must climb. The program which I have set forth
is only the first milestone, for the capacity of the
American way of life in the years to come is beyond the
vision of man. The American system of free enterprise
is the best the world has ever known and through it we
can obtain, God willing, the best that this world has to
offer.
Regraded Unclassified
147
RECERPT FROM
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, London
TO:
Secretary of State, Washington
DATED:
October 21, 1944
NUMBER:
9068
CONFIDENTIAL
PRIORITY.
The following for WT is transmitted.
Three. Nussbaumer in a letter dated October 5 has in an informal
manner brought to the attention of the British Commercial Counselor the
case of the Banque Populaire Suisse which faces a situation that is
difficult because of the conflicting instructions issued by the Federal
Department of Justice and Police of the SEC. When they enter Switser-
land all refugees must surrender to custom officials any currency they
may carry, all valuables, and bank notes, and many of them carry dollar
notes and sterling. At. the Bangue Populaire Suisse these notes are
deposited under the control of the Federal Department of Justice and
Police which instructs the Banque Populaire Suisse to convert amounts
sufficient to secure their existence in boarding houses and hotels where
they are lodged, into Swies france. Suggesting a monthly maximum of
$200 or 50 pounds per person in order to avoid hardship to refugees, the
Banque Populaire Suisse has inquired whether they may continue to buy
such dollar notes and sterling from refugees. Should this be agreed to,
the problem would come up of how the Banque Populaire Suisse could dispose
of the notes in view of the fact that they are forbidden by SBA to resell
on the market, and repatriation in some manner, either now or later, against
free dollar or sterling credits, or delivery to the Legations, is suggested
by Nussbaumer, Reply is proposed by MEW that they do not intend to con-
done such transactions with refugees, neither do they intend to provide
any means by which the Banque Populaire Suisse could secure value for
the notes in view of the fact that any arrangement would merely involve
import of the notes ultimately into the United States or the United Kingdom,
and there is legal prohibition against this. British authorities here
believe that they must keep intact the general policy for the treatment of
their notes abroad, although this may work hardship on refugees. Since the
introduction of exceptions would have a tendency to lead to a series of
administrative difficulties, and regulations, the Embassy agrees with this
view.
Four. Information has been received by NEW that Germany possesses
very large emounts of French franc notes, and dealings in Switserland in
148
French franc notes deem to be reaching such proportions as to cause &
reat deal of anxiety in Bern to the French Financial Attache there.
Suggestion has already been made to Nussbaumer by the British Legation
that measures to be taken by SBA which are similar to those measures for
dollars and sterling notes, and the Embassy and MEW are of the opinion
that in any action which the French are able to take, they should
be supported strongly. MEW is taking up this matter with the French
authorities. This problem, the Embassy wishes to point out, may soon
come up in connection with Dutch guilder notes and the Belgian franc,
and we are of the opinion that, when they initiate action, similar
support should be given to these governments.
WINANT
10-26-44
Regraded Unclassified
149
CABLE TO AMERICAN MISSION, PARIS, FROM WAR REFUGEE BOARD.
Please deliver the following message to Albert Guigui, Confederation
Generale du Travail, Paris, from Sheba Strunsky of the International
Rescue and Relief Committee:
QUOTE ASK YOU PLEASE APPOINT IMMEDIATELY AFTER CLEARANCE WITH
RENE ACCEPTABLE FRENCHMAN AS TEMPORARY REPRESENTATIVE OUR COMMITTEE
FOR PARIS. INFORM US SOONEST POSSIBLE UNQUOTE
2:50 p.m.
October 21, 1944
Regraded Unclassified
150
0
GEM-681
This telegram must be
Jerusalem
paraphrased before being
communicated to anyone
Dated October 21, 1944
other than a Governmental
agency. (RESTRICTED)
Rec'd 8:02 pame
Secretary of State,
Washington.
158, October 21, 4 p.m.
Meileeh Neustadt requests the Refugee Board to
transmit the following message to David Wetheim,
Paole-Zion and Louis Segal Jewish National Workers
Alliance, 45 East 17th Street, New York.
"Jarblum already in Paris succeeded there establish
Jewish representation including all circles also con-
sistory and shatfanim. All expressed positive attitude
Palestine. Their program similar to your Jewish conference
through encountering again difficulties on the part of
Paris consistory. 80,000 Jews passed through D'rancy
deported. Jarblum dealing with governments commission
for repatriation departed et cetera. Asking Stephen
Wise should charge him officially by cable deal this
matter. Rudel now at Stockholm (?) help Hungarian Jews
arranged 5,000 Swedish protection passport further 4,000
ready next few days giving almost full next deportation."
PINKERTON
RR
151
MRQ-795
PLAIN
Lisbon
Dated October 21, 1944
Rec'd 10:08 a.m., 22nd
Secretary of State,
Washington.
3211, October 21, 1 p.m.
FOR LEAVITT FROM PILPEL JDC 96 WRB 228.
In response Consulate's cable State Department
informed Consulate here that Resnik's application
for a validation to proceed Italy via North Africa
was denied.
Perlman advises October 6 that projected
evacuation of 650 from Yugoslavia suspended after 29
persons arrived Italy. Perlman hopeful evacua tion
may be resumed and advises that Heathcote Smith re-
quested 300 Palestine certificates for this group.
Jewish agency here advises Palestine certificates
authorized 2000 France, 1000 Switzerland, 200 Belgium,
mostly for children.
NORWEB
CAN
Regraded Unclassified
152
CABLE TO MINISTER JOHNSON, STOCKHOLM, FOR OLSEN, FROM WAR REFUGEE BOARD.
Please deliver the following message to Rabbi Wilhelm Wolbe,
11 Olefsgotten Strasse, Stockholm, from Rabbis AronnKotler and Abraham
Kalmanowitz, of the Vaad Hahatzala Emergency Committee:
QUOTE GREATLY DISTURBED DEVELOPING HUNGARTAN SITUATION.
LAST HOURS FOR RESCUE OF UNFORTUNATES HELD BY GERMANS. URGE
YOU CONFER WITH DR. EHRENPRIES. EXPLORE EVERY POSSIBLE AVENUE
OF RESCUE. ADVISE IF FUNDS NEEDED. CABLE US WHAT DONE FOR
RESCUE RABBIS WASSERMAN AND GRODZINSKI. TAKE ALL STEPS,
MONEY PASSPORTS AND LIKE TO SAVE THEM UNQUOTE
THIS IS WRB STOCKHOLM CABLE NO. 118.
2:10 p.m.
October 21, 1944
Regraded Unclassified
153
CABLE TO HARRISON, BERN, AND MC CLEELAND FROM WAR REFUGEE BOARD AND
DEPARTMENT.
Reference is made to Secretary'Hull's statement of October 10, 1944,
reported in the Radio Bulletin of
For your information, Governor Thomas E. Dewey, Republican candidate
for President, issued the following statement on October 19, 1944:
"Information comes to this country from unquestionably
reliable sources that the Nazis, trapped and knowing that they are faced
with inevitable defeat, are now resorting to the known gangster terror
device of threatening to exterminate their very victims Poles,
-
Jews and other non-German nationals --now imprisoned by them in
their horrible concentration camps inparts of Poland and other
countries still occupied by the Nazis.
"The civilized world is now in a position in unmistakable
terms to warn the Nazis --military commandess, members of the
German Goverment, their aiders, abettors and supporters -- that
certain and inevitable justice awaits them for these brutal and
wanton murders if their schemes should be carried out.
"I am happy to mote that our State Department has issued a
warning that 'if these plans are carried out those guilty of such
murderous acts will be brought to justice and pay the penalty for
their heinous crimes.' American public opinion will fully support
the statement issued by our Department of State."
You are requested to convey the contents of the foregoing statements
to the appropriate authorities and to use all possible means to give
Regraded Unclassified
154
the statements the widest publicity through any channels that may be available
to you.
Repeat to: Steinhardt and Katzki, Ankara
Johnson and Olsen, Stockholm
Norweb and Dexter, Lisbon
Hayes, Madrid
Winant and Mann, London
THIS.IS BERN CABLE NO. 231
11:45
10/21/44
Regraded Unclassified
155
0
CABLE TO MINISTER HARRISON, BERN, FOR MC CLELLAND FROM WAR REFUGEE BOARD.
Please deliver the following message to Rene Bertholet, Waserstrasse 14,
Zurich, from Sheba Strunsky of the International Rescue and Relief Committee:
QUOTE THANK YOU VERY EXCELLENT REPORT STOP WE CABLED GUIGUI
INNERQUOTE ASK YOU PLEASE APPOINT IMMEDIATELY AFTER CLEARANCE
WITH RENE ACCEPTABLE FRENCHMAN AS TEMPORARY REPRESENTATIVE OUR
COMMITTEE FOR PARIS STOP INFORM US SOONEST POSSIBLE END INNERQUOTE
UNQUOTE
THIS IS WRB BERN CABLE NO. 233.
2:57 p.m.
October 21, 1944
Regraded Unclassified
156
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
Regraded Unclassified
American Embassy. Mossow via Army
TO:
Secretary of State, Washington
DATED:
October 21. 1944
NUMBER:
4020
CONFIDENTIAL
This morning I received a visit from the Swedish Minister with
respect to the Tass report regarding Estonian emigre activity in
Sweden which was the subject of my cable immediately preceding.
The Swedish Minister explained, by way of background to the
appearance of this item, that for a long time the Government of
Sweden had been making attempts to arrange for the removal from
Estenia to Sweden of all Swedish speaking elements in order to
eliminate a possible source of conflict with the Seviets. Last
summer there had been an exchange of cerrespondence between the
Seviet Government and the Government of Sweden concerning one
shiplead of these people who had come to Visby and representations
about the fact that the ship was permitted to return to Estonia
were made to the Swedish Government by the Seviet Government.
Certain Estenian refugees in Stockhelm had called & press
conference somewhat later in the summer intending to announce
that an Estonian National Government was being established to
achieve the restoration of the independence of Estonia. Advanced
information on this had been received by the Government of Sweden
which strongly warned them that activity of this type would not
be tolerated on Swedish territory. The Swedish Government had
spontaneously taken this action without any suggestion from the
Seviet Government. The warning had sufficed to put a step to
this activity and nothing further had been heard of 18, although
it had not prevented the appearance at the time of one or two
press reports on the subject.
A total of about 25,000 people had come to Sweden from Notemia
and other Baltic countries, principally from Estonia, in connection
with recent German military defeats in that area. 8,000 of these
had been Baltic Stedes and the remainder mostly Estonians, although
sexe Lithuanians and one or two thousand Letts were included.
No information was possessed by the Ninister on the specific
matters which the IZVESTIA despatch discussed. The Minister vas
inclined to believe that the Seviet Gevernment meant the publishing
of the item to be a warning that 10 was paying close attention
157
- 2 -
to these recent refugees in Sweden and that irredentist or
anti-Sovict activities by them would not be passed over in
silence, and would be keenly resented here. I am in agree-
ment with this view and I believe it probable. in view of our
unvillingness to recognize the incorporation of the Baltie
states into the Seviet Union, that the mention of our Legation
is meant to be a hint to us that they would view with particular
suspicion any connections with Baltic nationalist groups on our
part. For my own background I would be glad to have an explans-
tion for whatever substance there may be for the obviously dis-
terted and misleading report which Tass quoted in the event the
matter is raised in conversation.
The foregoing usesage is repeated as No. 3 to Stockholm.
KENNAN
DCR: IDB:MLM 11-9-44
Regraded Unclassified
158
DEPARTMENT
OUTGOING
DIVISION OF
OF
COMMUNICATIONS
STATE
TELEGRAM
AND RECORDS
DOG
October 21, 1944
This telegram must be
parsphreetd before hxing
4 p.m.
communicated to enyone
other than a Government
Agency. (SECRET 0)
AHENBA98X
CHUNCHING
1365
FOR MR. PRIEDMAN FROM TREAS RX
YOU that the blanket license (our A-193, ( LIALSON) September
1. Your (2). You are instructed to
inform COMMUNI
AND RECORDS OR
1944 OCT 25. His. AMOIO AM
DIVISION OF
2)
DEPARTMENT OF STATE
supplies a supplementary procedure without effecting
the status of the general licenses.
(Reference your 1666 of October 9)
2. Your (2). Treasury does not wish to give an
informel opinion on the matter for obvious reasons and
would prefer Chinese Government not to raise the matter
at this time.
3. For your information, Treasury has transferred
$20 million of gold on earnark to Chinese account with
Federal Reserve Bank of New York from the $200 million
Chinese credit on the books of the Treasury.
STETTINIUS
(Acting)
(GL)
CONFIDENTIAL
FMA:CL:ST
For security reasons the
10/21/44
text of this message must
be closely guarded.
Regraded Unclassified
SECRET
COPY NO
159
NOT TO BE RE-TRANSMITTEE
OPTEL No 342
Information received up to 10 A.M. 21st October 1944.
1. N.VAL
A strong gale contined to sweep the East ATLANTIC and coasts of
the British Igles, scattering convoys and causing delay end damage
to shipping. On 18th, aircraft from a British Aircraft Carrier
located TIRPITZ at TROMSO and attacked two Mirfields in the neigh-
borhood destroying one and probably two more German dircraft. On
14th a British Submorine probably sunk C. 2,500 ton ship off BODO,
Aegean On 15th Carrier-borne aircraft in VOLO area destroyed
four armoured cars, three ermunition wagons, 27 lorries,
and 20 dher vehicles; they lso sunk on ammunition ship and set d
Coaster on fire. On 17th they successfully attacked Caiques, barges
and locomotives.
East Indies On 15th and 15th/16th British ships of the Eastern
Fleet bombarded the NICOBAR ISLANDS. at the same
time medium and five small ships sunk and fires started among
horbour installations. At least eight Japanese aircraft shot down,
four of our cricraft missing.
2 MILIT.RY
Western Europe In the SCHELDT pocket U.K. troops have enlarged
the original bridgehead over LEOPOLD CANAL in
advance of two to three miles and have reached ARDENBURG, Canadians
contine to advance westwards and pocket now reduced to about half
original size.
North of ANTWERP U.K. and Canadian troops yesterday morning
opened G new attack which is progressing well. On the right, village
of LOENHOUT captured and our troòps have crossed main -NTWERP-BREDA
road while on the left our forward troops are on the line of the
ROOSENDAL CAN.E about 3 § miles south of ESSCHEN.
In VENRY sector Germuns forming up for counter attack disporsed
by artillery fire. A.CHEN now reported clear and official estimate
puts prisoners at over 10,000.
Italy 8th Army have made good progress during the past two days,
and have occupied CESENATICO. Further inland New Zealand-
ers have reuched the SAVIO about five miles North of CESEN. which is
now clear of enemy. On 5th .rmy front several important hill features
have been opstured, righting continues severe.
Russia Russions have captured BELGRADE and wiped out the enemy
garrison.
Burma FALAM and HAKA occupied by our troops.
3. IR OPERATIONS
Western Front 19th/20th. 2,425 tons on stuttgart and 901 on
NUREMBURG; both attacks through cloud. 20th.
496 fighters (3 missing) supported land forces HOLL.ND and N.V. GERMANY
and attacked transport, 838 aircraft attacked reilways East ..nd West
of the RHINE, dropping 825 tons and destroying or drmaging 26 loco-
motivos and 380 railway coaches. German casualties 24:5:25 in the air
and 2:0:1 on the ground. Ours 18 aircraft missing. 160 aircraft
carried supplies to the Continent, returning with passengers and
wounded.
Mediterraneen. 19th. 211 medium and light bombers and 620 fighter
bombers attacked communications Northern ITALY
with good results. The modium bombers scored 2:3:1 for four missing.
20th. 576 escorted heavy bombers from MEDITERR.NEEN attacked oil
targets REGENSBURG 134 tons and BRUX 309, three railway centres and
an airfield Southern GERMANY 357, and three aero-engine and armament
works MILAN 185. Results provisionally reported fair to good.
12 Bombers, 5 fighters missing.
German Activity 6 flying bombs plotted.
Regraded Unclassified
First Draft- Waldons 160
astoria
DRAFT
10/83/44 Hans "Writter by
We are told that under the Roosevelt Administration business
has been in the dog house, and we are led to believe that profits
have languished, venture capital has gone into hiding, stockholders
have practically been reduced to selling apples on the street,
and that it took a war finally to pull' us out of the depression.
As I have watched the corporation income reports come into the
Bureau of Internal Revenue, I knew that this just wasn't so,
and I think nearly all of you can verify this in the case of your
individual businesses.
As a great American used to say "Let's look at the record,"
for this is the only way one can sift solid facts from unsub-
stantiated rumors. Let's ignore for the moment the rise in
business activity and profits since the war began, and see what
the published Internal Revenue reports have to say about business
earnings in the first 7 years of this Administration, up through
1939. During this period we had two huge tasks to accomplish:
first, to halt the deflationary trend which had been under way
since 1929, which all efforts of the previous Administration had
failed to stop; second, to develop a balanced and expanding
economy, based on maintaining a high volume of purchasing power.
This was designed to increase employment and incomes and to
raise the entire level of business activity, while preventing
a repetition of the speculative unbalance which had developed in
1929.
Regraded Unclassified
161
- 2 -
Looking back over this 7-year period, when the Administration
halted the precipitous deflation of the early '30s, and built
up steam in a cold boiler to start industry on the upgrade,
I feel that business shared bountifully in the resulting rise
in national income. Time may have dimmed the memory of the dark
days of the depression, but let's go back and look at a few
figures. In 1932, the last year of the previous Administration,
corporations reporting to the Bureau of Internal Revenue showed
an aggregate deficit of $4,115,000,000. The great steel industry
went almost out of business, with an operating rate averaging
only 19.7 percent in 1932, and U. S. Steel showing a deficit of
$71 millions. In the month when the Roosevelt Administration
took office, the steel rate was down to 15.7 percent.
National income payments in 1932 dropped to $47 billions,
and by March 1933 the annual rate had sunk almost to $42 billions.
Shortly after the new administration took office and began a
constructive expansion program, the national income started rising.
By the end of the year, income payments were back to a $51 billion
level. With the rise in purchasing power, retail trade immediately
began to increase, and a general improvement spread over the
country, in which business fully shared. The steel rate started
to climb, employment began to increase, people began to spend
more money, and the improvement became cumulative. In 1937, and
again in 1939, the national income rose above $70 billions. I
watched total corporate net income climb from the deficit of over
162
- 3 -
$4 billions in 1932 to a profit of over $6 billions in 1936 and
1937, with the 1939 figure just under $6 billions.
Let's look at the published figures for some of our largest
corporations, which rumor says are particularly frowned upon by
the present Administration. While total income payments to
individuals increased 50 percent from 1932 to 1939, gross sales
of the U. S. Steel Corporation in 1939 were nearly three times
those of 1932, sales of General Motors Corporation more than
tripled, while sales of DuPont Corporation and General Electric
more than doubled in this period. The combined earnings of these
four giant corporations totalled $358 millions in 1939, as
contrasted with a combined deficit of $31 millions in 1932.
During this 7-year period, contrary to unfounded rumors,
stockholders fared fully as well aa wage earners and salaried
workers. Published Internal Revenue reports show that corporations
paid out 48 percent more in dividends in 1939 than in 1932.
For comparison, total incomes of individuals in the form of
salaries and wages increased 47 percent in that period. Nor
were these dividend payments at the expense of corporation re-
serves, for the reports show an actual increase of 30 percent
in surplus and undivided profits of all corporations in the
same period.
But, some of you may say, business might have done even
better. I wonder if you aren't thinking back to the 1929 era
for comparison, without considering that the whole world level
Regraded® Unclassified
163
- 4 -
of prices, prior to the war, has been on a much lower basis
than in 1929, and without regard to the speculative unbalance
which temporarily buoyed up business in the 1929 period.
The objective of a balanced economy does not, it is true,
provide for the speculative profits associated with excessive
stock market booms and price inflation, which make no permanent
contribution to the economy. Even though the few who hope to
profit from such abnormal conditions want nothing done to limit
their chances for a "killing," I am convinced that most of us
have far more to gain if depression losses of jobs, homes, and
savings can be avoided. Our objective 1s to avoid such periods
of unhealthy expansion and their aftermath of depression, while
seeking to maintain balanced conditions at the highest level of
employment and business activity that can be sustained.
In line with this objective, we in the Treasury have conducted
our fiscal operations for financing the war in such & way as to
minimize the postwar burden of the public debt, and to promote
stability and balance in the postwar economy. (1) Interest rates
on our borrowings have been kept low, averaging about 1-3/4 per-
cent in comparison with 4-1/4 percent in the First World War.
This reduction not only will save about $4 billions in the
postwar Federal budget, but will place business in a more favor-
able position in postwar financing costs than after the last
war. (2) Our concentration on non-negotiable Series E bonds,
assured against price depreciation, for sales to small investors
seeks to avoid & repetition of the market instability caused by
Regraded Unclassified
164
- 5 -
frightened liquidation after the last war, and to impart to
holders a sense of security which will encourage free spending
of incomes for postwar goods. (3) Securities sold to commercial
banks have been concentrated in short maturities, placing the
banks in a very liquid position and facilitating the substantial
shifts in location of deposits which are probable after the war.
(4) Securities sold to corporations have consisted almost
entirely of short-term or demand obligations, thus protecting
postwar corporate reserves by making them readily available
when needed without dislocating the Government security market.
(5) Prices of marketable Government securities have been
stabilized, and confidence in the general level of interest rates
has been maintained, thus enabling business corporations and
other investor groups to make their postwar financing plans
with assurance.
The achievement of the American industrial machine during
this war has brought despair to our enemies and has amazed even
our allies. Not only have we accomplished the seemingly 1m-
possible in producing enormous numbers of planes and ships, and
munitions of all kinds, but we have done it without serious de-
privation of our civilian economy. Could that have been possible
without the firm business foundation and well-balanced economy
developed in the years before the war?
- 6 -
165
0
The objective of high employment and a high level of business
activity in a balanced economy means working together for a
larger pie which all can share, instead of quarreling over who
shall have the largest piece, until no pie 1s left, as in 1932.
This can be accomplished, and can only be accomplished, by
all working side by side toward that goal.
Economic data for selected years, 1929 - 1943
Index of
Corporation
Dividends paid,
Surplus and
National
Total
Calendar
department
compiled net
cash and assets
undivided
Steel operating
income
retail
year
store sales
payments
sales
profits,
other than own
profits of
rate, percent
(1935-39=100)
after taxes
stocks /1
corporations
of capacity
(Millions of dollars)
(
Millions of dollars
)
1929
82,857
48,459
117
10,676
8,520
60,699
88.8
1932
47,414
12
75
- 4,115
3,886
45,664
19.7
1933
46,271
24,517
73
- 1,353
3,127
44,792
33.4
1934
52,916
/2
83
2,374
4,859
48,986
37.4
1935
58,563
32,792
88
4,688
5,941
48,828
48.7
1936
68,055
38,338
100
6,580
7,379
48,043
68.4
1937
72,351
42,150
107
6,554
7,514
58,524
72.4
1938
66,166
38,053
99
3,271
5,013
57,669
39.6
1939
70,829
42,042
106
5,946
5,747
59,149
64.5
1943
142,270
63,818
168
98.1
1
Includes dividends paid to other corporations.
2
Not available.
166
Regraded Unclassified
Sales and earnings for large corporations for selected years
(Millions of dollars)
: General Motors Corp. :
: General Electric Co. :
: E.I. DuPont de Nemours Co.:
U. S. Steel Corp.:
:
Total
:
:
Net income
:
:
Net
:
:
: Net sales and :
Net
Net
:
:
Gross
:
Net
Net
:
: net
:
:available for :
: billed
:
:
:other operating:
income
:
:
sales
:
sales
income
:
:
income
income
:
:
dividends
:
: sales
:
:
:
revenues
:
:
:
:
:
:
1929
1,504
248
415
67 3/
5/
78
1,494
198
591
1932
432
2/
147
14
123 6/
26
357
- 71
- 31
1939
1,377
183
305
41
299
93
904
41
358
1943 3,796
150
1,358
45 4/
613
70
1,973
63
328
Gross sales and earnings (gross sales to customers plus inter-company sales plus transport company and
miscellaneous gross earnings).
2/ Less than 1 million dollars.
/ After general reserve of $3,081,290.
4/ After general reserve of $18,500,000 for post-war contingencies and adjustment.
5/
Not reported.
6/ Approximate.
167
Regraded Unclassified
Selected business series in 1933, by months
Series
Jan. : Feb. : Mar. : : Apr. : : : May : : : June : : : July : Aug. : Sept. : Oct. : Nov. : Dec.
Income payments,
unadjusted /1
3,919
3,426
3,435
3,559
3,621
3,865
3,999
3,731
3,994
4,363
4,076
4,283
Income payments,
annual rate /1 43,824 43,140 42,360 42,696 44,136 45,780 46.356 47,520 49,116 49,452 49,764 51,180
Department store
sales /2
68
67
63
72
73
73
75
82
75
76
73
77
Steel rate, per-
cent of capacity
17.8
20.8
15.7
24.3
34.5
46.2
55.4
50.0
41.3
36.4
27.4
31.5
Millions of dollars.
Seasonally-adjusted index, 1935-39=100.
168
Regraded Unclassified
169
Net income in selected industries for
1929, 1932 and 1939
(Millions of dollars)
Calendar
:
:
Class I
:
Wholesale and
Manufacturing
year
:
:
railroads
:
retail trade
1929
4,537
897
694
1932
-1,616
-139
-787
1939
2,946
95
648
Source:
Manufacturing and trade figures from Statistics of Income;
railroad figures from Interstate Commerce Commission.
Regraded Unclassified
170
NEW
YORK
Herald
Tribune
OCT 1944
There is no secret formula for
redemptions. Remember, these
81,000,000 Persons Saving
making masses of free men and
bonds are bought by indiv juals
women do what their common
who cannot plan their futuri with
sense and their natural loyalties
precision and who must and. will
$33,687,000,000 War Bonds
do not prompt them to do. There-
meet human emergencies dat of
fore, the Treasury has refused to
resources available to them. The
Join in the demand for a compul-
more of these bonds we buy the
Bruere Praises Patriotism of People and Cites
sory saving system. It has insisted
more we shall have to regard them
that sound selling of war bonds
as our emergency reserves because
Voluntary Investment Made in Short Period
must be made to willing buyers,
we shall have less of other reserves
aroused to action and thoughtful-
available, or indeed none at all.
of Three Years and Five Months
ness by advertising and personal
The experience of savings banks
persuasion, but not compelled. It
is that as many as 25 per cent of
By Henry Bruere
promises that bonds that cannot be
those persons who open savings
President Bowery Savings Bank and Liaison Officer Between the
kept will be redeemed. To make
accounts close them within a year
United States Treasury and the Mutual Savings Banks
that promise good it has recently
after opening. One half of these
authorized the banks of the coun-
hope-to-be savers close their ac-
No civilian effort to help win the war has matched the popular
try to cash bonds offered for re-
counts within four years. Never-
support of the war financing program. Vn a purely voluntary basis,
demption at stipulated values after
theless, the amount of money in
with no more suasion than is customs/ily used in charity drives,
81,000,000 "persons from May,
proper Intification of the her
savings banks increases steadily
Interest Rate Is Factor
although large sums are with
1941.- to September, 1944, have
of the bold.
bought and kept $33,687,000,000,
drawn by some savers at the same
Because they are not transfera-
Now. with this broadening of re-
current redemption value, of war
time as new deposits are made by
ble they are essentially individual
bonds. This is the brilliant accom-
demption facilities, will there be a
others, which is natural and due
term savings. Because they are
plishment of the American people
rush for redemptions? In some
to the very purposes for which
redeemable at will the term of the
in the short period of three years
places. immediately after the new
savings are undertaken.
Investment up to the ten-year
and five months.
procedure was established, there
maximum is entirely optional with
Deposits Exceed Withdrawals
Only to measure the size of this
were lines of persons in and outside
the buyer of the band.
achievement, comparison with
banks asking for their money back.
Here is 8 single comparison be-
To Induce him to hold his bonds
America's leading savings pro-
Perhaps there had been postpone-
tween/the conduct of sayings de-
veral strong incent are given
ment of normal redemptions in
posito and war bond buyers: In
grams is appropriate.
4
the buyer. First,
there is the
these places until the promised new
the first nine months of 1944 15
For over a century, an increas-
ceptional
rate
of
Interest for
facilities actually were in opers-
per cent of the total deposits in
ing army of agents has been edu-
government issues, which on E
tion. Perhaps there was local un-
New York State savings banks were
cating the American public in buy-
bonds rises from 0.67 per cent on
employment. We have no accurate
withdrawn, but current deposits
ing life insurance. During most of
bonds cashed at the end of one
explanation of these crowds at par-
exceeded current withdrawals by
the life span of the present war
year to 2.90 per cent if held for
ticular places. But we do not be-
56 per cent. In the same months
bonds, that is, the three years end-
ten years. Second, there is the in-
lieve the demand will spread or
sales of E bonds exceeded redemp-
ing Dec. 31, 1943, the life insurance
dividual buyer's sense of responsi-
continue if the public maintains
tions (withdrawals) by 369 per
onles of the United States
bility to help his country, which is
the same responsible attitude to-
cent and the amount redeemed
adde
to their reserves $3,600,000.-
a powerful factor in this war, es-
wards its part in financing the war
amounted to only 8 per cent of the
000,
bringing their total assets to
pecially when virtually every fam-
in which its young men are so
total outstanding. There is noth-
$37/
00,000,000. just $4,000,000,000
Ily has its young men in foreign
brilliantly and heroically fighting
ing to be alarmed about Irere: up
more than E. F and G bonds sold
lands fighting under the Stars and
as it has shown in the past.
to now at all events. But, of course,
since May, 1941, and still out-
Stripes. Third. there is the knowl-
Let us look at the facts for a
the amount of redemptions will
in-
standing.
edge that investment in war bonds
moment, 50 that we shall not ex-
crease in proportion to current
Grow as Repository
is without risk because the credit
aggerate what is taking place and
sales as the total outstanding vol-
Throughout northeastern United
of the United States will be kept
therefore cause burtful uneasiness.
ume increases. It may Indeed in-
States, where mutual savings
inviolate. Fourth, and this is what
It may be good to simplify the
crease even in proportion to cur-
banks have flourished for a cen-
we need at this time to reflect
record a bit without distorting it,
rent sales. if we lose our jobs. or
tury and a quarter and where per-
upran, is the fact that the bond
so that we can more easily remem-
have pressing need of these sav-
haps 50 per cent of the wealth of
byfer can get his money back at
ber the essential facts as compiled
ings, especially at income tax pay-
the United States is held, there has
giy time he wishes, although, in-
by the Treasury. Let us take the
ment dates.
been accumulated by small savers
/leed, he is asked to lend it to his
little bond, the E bond, which is
Those who look at the whole
in the savings banks about $12,-
country for a ten-year term.
bought by the person of smaller
picture and are in a position to
500,000,000.
In providing that war-bond
means and therefore is the more
give advice. such as all bankers,
War bonds, particularly the
ers could get their money back at
likely to be cashed in. From May.
most employers and labor leaders.
Series E (the ten-year apprecia-
any time the Treasury took leaves
1941, to Sept. 30, 1944, sale() of
should remind war-bond buyers
tion bonds), have in a remarkably
from the experience books of sav-
E bonds (the "people's bond")
that they are the main prop in the
short time become the fastest
ings banks and life-insurance com-
amounted to $26,800,000,000 (tysue
whole war financial structure be-
growing repository of savings in
panies.
price plus increments). In that
cause they give the widest base to
America. This accomplishment is
When you buy a life-Insurance
same period $3,500,000,000 were
the great financial strong point
due to the patriotism of the Amer-
policy you know you will have a
which we must build and keep in-
lean people and to the energy and
cash-surrender value after a short
redeemed, representing 13 per cent
tact to win the war.
intelligence with which these
period. This value has been one
of sales made. Therefore, you see,
of the most important aids in
about 87 per cent of sales have
Some Lock Money Up
highly superior securities have
been marketed.
selling life insurance, because it
stuck as true investments. That is
Bond buyers have helped them-
War bonds have two unusual
encourages the insured to buy the
a good record, and It may be im-
selves avoid silly and irresponsible
characteristics which distinguish
greatest amount of protection that
proved as the public comes more
spending by locking up money in-
them from all other types of secur-
his reasonable expectations of in-
to regard the holdings of war
vested in far bonds for tel. years.
Ity/ (1) they are not transferable
come permit.
bonds as a pledge of support to its
That is fine. constructive and pa-
and
(2) they may be redeemed on
When you open a savings ac-
fighting forces as well as a good
tricke. They have graspid for
investment.
and at any time up and in-
count you know that you can get
themselves and their dependents
maturity, beginning sixty
your money when you need it.
We should not expect to see the
this most favored opportunity for
date after issue.
That is a chief reason for having
volume outstanding increase with-
investment in which they get a
such an account.
tout an increase in the amount of
Regraded Unclassifie
171
NEW
YORK
Herald
Tribune
OCT 22 1944
rate of return of almost 1 perjcent
more for a ten-year lending than
the government pays in the open
merket when it sells regular Treas-
my bonds for that term in $1,000
to $1,000,000 denominations.
We have in buying E bonds sent
word to every soldier and sailor
that we stand behind him to sup-
ply the implements without which
he cannot fight nor win.
Based on al the foregoing. isn't
it right to conclude that instead of
taking a cynical, critical or carping
attitude when we hear that war
bonds are being redeemed we re-
member that a certain amount of
redemptions is inevitable and that
it actually stimulates sales to have
redemption made easy? Let us
remember that we are creditors of
Uncle Savm and when we redeem
a "bond we call his note and say.
Give me my money back. no mat-
ur how much our fighting meil
ned it-it's not my business to
fhance this war."
Regraded Unclassified
172
NOT TO BE TRANSMITTED
COPY NO.
11
SECRET
PERSONAL
OPTEL 343
Information received up to 10 A.M. 22nd Oct. '44.
1.
NAVAL
Aegean. On 18th/19th our Naval Forces sank the
torpedo boat SOLFERINO off the Sporades; this was the last
heavy escorting vessel remaining to the enemy in the Aegean.
2.
MILITARY
Western Europe. 21st. Aachen garrison has
surrendered to the First U.S. Army. North of Antwerp 49th
U.K. and 4th Canadian Armoured Divisions of First Canadian
Army made good progress Northwards against moderate resistance.
2nd Canadian Corps also made further progress towards Breskens.
Italy Some progress astride Adriatic Coastal road
and in the Cesena Area; a bridgehead over the Savio has been
established and reinforced. Some progress also towards Forli.
Balkans Russians have reached points 12 miles East
of Satul Mare; 20 miles North East of Debrecen; 30 miles North
of Szeged; the Danube West of Szeged and 30 miles South of
Lapovo.
Finland The Finns have reached Sodankyla and have
made further progress North West of Rovanieme.
3.
AIR OPERATIONS
Western Front. 21st. 75 escorted Lancasters - 1
missing dropped 447 tons on Coastal defences flushing in good
visibility. 1,194 Fighters and Fighter Bombers - 6 missing
operated over Holland and North West Germany; Railway lines
cut in 69 places and 209 units rolling stock destroyed or
damaged. German casualties 23:2:4.
Coastal Command aircraft attacked shipping at
Haugesund, South West Norway; two medium ships set on fire.
Mediterranean. 20th 870 aircraft - 1 missing
attacked railways etc. in the Italian battle area; 23 bridges
successfully attacked and 189 railway and other vehicles
destroyed or damaged.
4.
HOME SECURITY
21st/22nd. Seven flying bombs plotted of which six
crossed Coast and three reached London.
Regraded Unclassified
173
-
approx
A wonderful speech-
Especially the conclud-
ing couple of pages-
This is the kind
of thing the people are
waiting to hear, I think
IX combines Force Blness
and - liberal outlook
(which will please labor)
with enough mobertion
to satisfy the small
business more -
All in all, with -
couple of winor changes-
I Think iTs swell!
(goan Thorgesther).
Regraded Unclassified
morgenthow from A. H. S.
174
MEMORANDUM for: MR. JAMES
Will you be good enough to ask Ray Daniell to see
General Eisenhower, if possible, and ask him whether the
publication of Morgenthau's plan for deal ing with Germany
had any effect upon the fighting spirit of the Germans
and resulted in the loss of American life. Personally,
I don't believe it did but I understand Dewey has claimed
it. Naturally, if Eisenhower would make & statement
about 1t, it would help my friend Henry to sleep better.
Even if he won't say it for publication, it would be
fine if he would let us have a private report which I
could pass on to Mr. Morgenthau.
A.H.S.
October 23, 1944
Regraded Unclassified
175
from E. L. JAMES
MEMORANDUM for Mr. Sulzberger
I asked Daniell about the Morgenthau plan.
I noticed this in the World-Telegram tonight.
&
October 24, 1944.
HA
New York Woi
Copyright, 1944. by New York World-Teley
Local Forecast: Tonight occasional light showers and
RD
VOL. 77-NO. 97-IN TWO SECTIONS-SECTION ONE,
NEW YORK, TU
EW PHILIPP
QuitGoadingNazis,
British Sto
Gls Tell Home Folk
Into Key D
By ROBERT W. RICHARDS,
United Press War Correspondent.
WITH THE U. S. 26TH DIVI- Goebbels had told them the U.S.
Transport
SION BEYOND ATHIENVILLE,
Army had withdrawn from circu-
France, Oct. 23 (Delayed) -The
lation 60,000 American-German
home-front talk about stern treat-
phrase books because it consid-
Battle for Esca
ment for a defeated Germany has
ered the selected phrases "too
inspired fanatical, bitter-end re-
friendly." Goebbels merely printed
Junction of N
sistance among German front-line
a clipping-presumably from an
troops, in this sector at least, and
American newspaper reporting
At's Hertoge
the GIs are a little bitter about it.
the alleged withdrawal of the
Sometimes the American dough-
phrase books, with the simple no-
BULLETIN.
boys who are fighting and dying
tation: "See, this is what the
By the United Press.
in the constant mud this side of
Americans think. They want to
the Moselle wish people back home
WITH BRITISH FO
hate you and they want you to
would quit announcing what they
Date them."
HOLLAND, Oct. 24.-
think must be done with Ger
Ish 2nd Army opene
The Morgenthau Plan.
many. Some soldiers with whom
attack 12 miles south
I spoke today think It might to
Treasury Secretary Henry Mor
togenbosch this aftern
better to win the war first.
genthau's plan for Germany,
These boys said that every time
which, as we get It, broadly advo-
By J. EDWARD MU
someone at home advocates extra
cates reducing the Reich to an
United Press War Cori
drastic measures for postwar Ger-
agricultural country, also is get-
SUPREME HQ. AEI
many the German newspapers
Oct. 24.-British assat
grab the stories and exploit them
ting under the skins of the front
stormed into the key Du
to the full. Consequently many
line German troops. Many cap-
port center of 's Hert
German soldiers who were in &
tives voluntarily ask the Ameri-
today and Berlin repos
mood to surrender change their
cans for a fuller explanation of
American reinforceme:
minds and fight to the bitter end.
Mr. Morgenthau's plan.
moved
Captives Ask About It.
German prisoners who filed Into
the American lines during the last
three days bore out that impres-
sion. The Nazi captives spoke
chiefly of three things which, they
said, were making their comrades
continue the dogged fight:
Propaganda Minister Joseph
(Continued or
Regraded Unclassified
177
Read by Mr. Gaston and Dr. White
d retd as per Secy's instructions.
178
THE NEW ORLEANS ITEM
October 23, 1944.
CLAYTON FRITCHEY
EXECUTIVE EDITOR
Dear Mr. Morgenthau:
Even though our visit was such & short one, I enjoyed very much
seeing you again and getting all the news.
Speaking of public reaction to your position on post-war Germany,
you might be interested in seeing a letter that appeared on the
Item editorial page. I am enclosing it.
During the ride to the airport you may recall my saying that I had
worked out a formula for adjusting the Gallup Poll, in order to an-
ticipate the probable Electoral College vote. Without exception
Gallup has been from three to six percent off on his presidential.
elections, and this error has invariably swollen the Republican total.
I think it is absolutely safe this year to assume that Gallup will be
at least two percent wrong on the Democrats in every state. I have
just taken his last state-by-state poll and added two percent to the
Democratic total in each state, with the following result:
Roosevelt -
34 States
-
375 Electoral votes.
On November 8 you can check up and see how good a prophet I am.
I hope Mrs. Morgenthau is much better and that you will have an
opportunity of coming back for a longer visit before very long.
With best wishes,
Most sincerely yours,
C
F
;
J
Clay
ORGINIARD
number
RD
DABE
20
The Honorable Henry Morgenthau, Jr.,
The Secretary of the Treasury,
Washington,
D.
C.
Let gastin & White
read & return
Jhmn
Regraded Unclassified
Letters From Item Readers
(Please be tirlef. Sion your
name, A pseudenym will
be
used
if
you
179
Rob: We'd be glad to print your letter, and
men's minds that the servicemen are just ci-
-
ma,
ome comment (whether or not this would
vilians in uniform to help them as much as
8
be
gnswer" is a matter of definition) If you
anyone else.
1
had signed it. But while the frequently use only
Thank God there are only a few like those
initials or a preudonym in the published version of
two.
r
a communication, this is only when the original
MRS. G. I. JOE.
x
bears the full signature identifying the writer.
d
Miss M. W.: If you can prove what you say
"Criminals Should Be Punished"
of
about the SPCA, your communication should have
To editor of "Calling Mr. Morgenthau:"
11
gone to the District Attorney, so that the organiza-
When giving our opinions of what should be
d
tion can be prosecuted: If you can't prove it, you'd
done to the Germans as a nation we should
S
simply be putting us on the spot if we printed it
look at it from a historical standpoint and
...and we don't believe "every one in New Or.
ask ourselves who has started the most wars
n
leans" knows-or even thinks-what you say is
in Europe. You will find that the Huns or
8
correct.
-The Editors.
Germans have started practically all of them
-even before Julius Caesar and Jesus were
What Of Army-Navy Relief Funds?
born.
The Germans are criminals as a nation. Do
There seems to be quite a controversy over
you not punish criminals? No, We give them
"Service Man's Wife's" medical service by
great rewards for taking other people's prop-
some of your readers.
erty and committing murder and raping. Then
The statement sent to you by someone
why not reward the German nation? You
signing himself "Senior" has or says in part,
know none of the Army camps or armor cost
Service Man's Wife was told that since her
us anything-it's all free. Our men and boys
husband was not present in this city she
in the service are just on a vacation. None
was not entitled for her or her baby, to
of them is getting killed or wounded. Either,
of
military medical service.
it's all. just fun to have a war every 25 years.
or
That is not the understanding I had with
What has the nation of Germans as a
5:
the officers who explained Army and or
whole since 1920 contributed to industry be-
Army and Navy emergency relief to me at
sides war armor and implements for death
on
camp.
and destruction? We have gotten along nice-
1
Evidently "Service Man's Wife" did not
ly up to now without the Germans' help. Is
apply to the right persons or the Army per-
that not proof you are wrong when you say
sonnel who advised her so did not know or
we need German industry?
by
1
didn't want to take the pains to help her to
do the aid to which she is entitled. I and
X
W. H. McDEVITT.
almost all members of the armed forces
Skullcracker
contribute regularly to the Army and Navy
I live in New Orleans now, but still get
rgency Relief Fund and if the case of
d
vice Man's Wife" is true, I shall cer-
my home paper, and I see there where they
ask this one: "If a dozen eggs cost 15 cents,
tainly stop my meager contributions.
how many can you buy for a cent and a
I would appreciate your checking my un-
quarter?' And they give the answer as 20. I
derstanding of the Army and Navy Relief
5
don't get it. Maybe some of your other read-
Ass'n.
ers will. I would really like to know.
5
PVT. EDWARD D. WERNICH.
MICHIGANDER.
Lafayette, Louisiana,
40
We make it twenty and four-fifths etcs, but sup-
To Critics Of Service Men
pose that in Michigan it is difficult to buy four-
While waiting in a crowded doctor's office
fifths of an egg. Anyway, Math never areas our
the other day I could not help but hear a con-
forte.
versation by two men.
All I can feel toward men like them is
King Solomon- And King Skelly
"pity" to think they have no more respect
for the men who are fighting to keep this
I wonder if Mr. Skelly could be induced to
country free so they can carry on just such
lend me 43 of his 63 inspectors for one day
a conversation.
to inspect the 5800 block of S. Johnson St.
I didn't hear the beginning of the con-
I think if he would that at least 34 of the 43
versation, but when one made the remark that
would agree with me that the block needs
the only thing the servicemen here were
black-topping badly.
fighting was a bottle of whisky or beer. Of
And while on the subject of inspectors,
course they also exchanged a few shady
Mr. Skelly is to be congratuled: Solomon, in
stories about servicemen they had heard of.
all his glory, never had, that many inspectors
One of the men had his hand bandaged and
at one time in the entire 40 years of his reign.
he bragged he got it in a fight. Of course both
DR, E. A. JURGELWICZ.
men were too old to be in service, but I
wonder otherwise how much they are doing
to win this war. I bet neither of them knows
Our Lone Star Ally
what it is like to have your home broken up,
I see where U. S., Britain, Russia and China
to have men out of your family in different
were represented at the Dumbarton Oaks
parts of the world fighting, and not a street
clambake. But what about Texas? All the
fight either.
Texans assure me not only that they are our
I wonder what would become of our country
allies, but that they're winning the war for
if all of us had this nice feeling toward our
us. Won't they demand a voice in postwar
servicemen.
security?
Of course I presume it never entered those
LAKE CHARLES.
180
Prepared by: Mr. Deggit
Mr. Chevreux
Reviewed by: Mr. Murphy
Miss Michener
181
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE Oct. 23, 1944
TO
Secretary Morgenthau
FROM
Mr. Murphy Hzm
Subject: The Business Situation,
Week ending October 21, 1944.
Summary
Reconversion: The interim program for limited civilian goods
production has shown some signs of improvement recently,
with applications of manufacturers for production under
the spot authorization order approximating 500 weekly.
As of October 1, 2,562 applications had been filed and
441 approvals granted, with the latter figure rising to
about 750 by midmonth. Thus far, however, production
under the program has been confined largely to small
household articles and other items of relatively minor
importance in the general economy.
Employment: Due largely to a decrease in employment in
munitions industries and the return of students to
school, total nonagricultural employment declined in
September and Was about 1,100,000 less than a year
earlier. However, unemployment dropped to a new low
during the month. Some war industries are still
suffering from manpower shortages, although WMC officials
report an. improvement in the over-all manpower situation.
Prices: The relaxation of many WPB orders upon the defeat of
Germany is likely to weaken the OPA price control ma-
chinery to some extent. Discussions concerning the 00-
ordination of policies between the two agencies are now
in progress. During the past week commodity prices have
shown little net change, with the Dow-Jones futures index
and the BLS spot index of 28 basic commodities moving a
trifle higher.
Stock market: Stock prices have moved in a very narrow range
recently, with the Dow-Jones average of 65 stocks at the
close on Saturday virtually unchanged from levels of 2
weeks earlier. Second grade railroad bonds, however,
have risen steadily in recent weeks, and now stand at
the highest level since 1937.
Regraded Unclassified
182
- 2 -
Progress of interim reconversion program
The prospect of a more prolonged German resistance has
stimulated somewhat greater interest in the WPB's spot authori-
zation program for civilian goods production. Shortly after the
program was announced in mid-August, hopes for an early end of
the war in Europe increased rapidly, and in this atmosphere
many business men were disinclined to embark on stop-gap recon-
version measures. However, this attitude appears to be chang-
ing and applications for production under the spot authorization
order are now being made at a rate of about 500 per week. Up to
the beginning of this month 2,562 applications had been filed,
of which 441 were approved. By mid-October the number of approv-
als had been increased to more than 750.
Considerable regional variation was shown in approvals for
production under the program up to October, with the Dallas WPB
regional office, for example, reporting 63 clearances in con-
trast to only 10 in the Detroit area and 7 in the Seattle area.
The effectiveness of the program in facilitating the shift to
peacetime production will be determined by the kind as well as
the quantity of goods produced. Thus far many small finished
goods, such as kitchen utensils and other household articles,
have figured prominently in the items approved. While their
production will serve to alleviate civilian inconveniences and
help to cushion the effects of war contract cut-backs, the
scope of the program will have to broaden considerably before
it becomes a major factor in the economy.
Reconversion time-table for automobiles
In view of the great importance of the automobile industry,
considerable interest has been shown in estimates of the time
needed to reconvert the industry to peacetime production. The
Automotive Council for War Production last week published an
estimated time-table for automobile reconversion, which envis-
ages a greater time interval than most automobile executives
have previously indicated. The Automotive Council divides the
reconversion program into 3 periods, 8.8 follows: (1) Precon-
version: During this period, covering an estimated 6 months,
tools and materials will be ordered, and engineering and testing
begun. (2) Reconversion: This period 1s expected to. cover at
least 3 months, during which plants will be cleared of Government-
owned equipment, and automotive production equipment installed.
(3) Production: Assembly of passenger cars would start in this
period, with 3 months required to reach the partial production
program now contemplated. Under the foregoing schedule, about
9 months would elapse before assembly of the first passenger
car 1s started, and approximately 1 year would be required to
attain limited volume production.
183
- 3 -
However, it would seem that some of the work contemplated
in the first and second periods could be carried out more or
less simultaneously, thus shortening the total time interval.
It will be recalled that Chairman Sloan of General Motors re-
cently stated that reconversion would require about 6 months if
started at once and a shorter time if started after January 1.
The Ford Motor Company announced post-war plans last week, and
while nothing was said about the length of the reconversion pe-
riod, it was indicated that the company plans to spend more
than $150 millions on reconversion and expansion.
Some war production hampered by labor shortages
In the face of prevailing concern over reconversion prob-
lems, WPB officials still find it necessary to make appeals to
speed up certain war production programs. Within the past few
days Messrs. Krug and Batcheller of the WPB asserted that, while
only about 10 percent of the whole program is lagging, shortages
of heavy trucks and tires threaten to delay V-Day in Europe. In
addition to the items mentioned, they also reported shortages in
big shells, bombs, batteries and one type of tank. Moreover, in
connection with the war in the Pacific, the No. 1 priority mer-
chant vessel now under construction is so far behind schedule as
to give rise to serious concern, according to press statements
quoting prominent authorities. While other factors have con-
tributed, the dominant factor in the production lags has been
the man-power shortage.
At the beginning of October the WMC added 3 areas in Ohio
and 1 in Utah to the acute labor shortage classification, and
dropped only 2, thus raising the number of acute labor shortage
areas to 70. Nevertheless, WMC officials last week were reported
as viewing the general manpower situation with greater optimism.
Among other factors has been a reduction in labor turnover, with
the quit rate in manufacturing industries showing a noticeable
decline in the last 2 months.
Due largely to the return of students to school and a further
decline in employment in munitions industries (chiefly due to
cutbacks in aircraft and shipbuilding) total nonagricultural em-
ployment decreased in September and was about 1,100,000 less than
a year earlier. However, the armed services increased by about
2 millions since & year ago, and unemployment dropped to a new
low during September.
Stock prices move in narrow range
After rising in the early part of the month, stock prices
in the past 2 weeks have moved within a narrow range in rather
dull trading. (Bee Chart 1.) At the close on Saturday the
Dow-Jones average of 65 stocks was virtually unchanged from
the level of 2 weeks earlier, with small gains in railroad and
utility stocks offsetting a fractional decline in industrial
Regraded Unclassified
184
- 4 -
stocks. Second grade railroad bonds have risen steadily in
recent weeks and have been an outstanding feature of the securi-
ties markets, probably in reflection of diminished expectations
of imminent peace in Europe. Reference to Chart 2 will disclose
that the Dow-Jones average of second grade railroad bonds now
stands at the highest level since 1937. It will be noted that
railroad and industrial stocks also have more than recovered the
ground lost in the early part of September, but the gains have
not been as great as in second grade railroad bonds.
Commodity prices show little change
Commodity prices showed little net change last week. The
Dow-Jones futures index made a small advance following a decline
in the previous week, but Moody's spot index was slightly lower.
(See Chart 3.) Meanwhile, the BLS index of 28 basic commodities
moved a trifle higher due to a moderate rise in steer prices.
The easing tendency in cotton prices which has followed the
sharp rise on news of the parity purchase program near the end of
September, continued last week. Grain prices, however, made small
to moderate advances, with rye particularly strong. Heavy flour
buying by the Government helped support wheat prices, while ex-
pectations of a substantial distiller demand for rye for the
anticipated liquor-making holiday in December tended to raise rye
prices.
The CCC held discussions with industry advisory committees
last week concerning the method of operation of the wheat and
cotton export subsidy programs. While the details of the programs
are still to be worked out, press reports indicated that agreement
had been reached on the general principles. Under these programs
the CCC will absorb the losses entailed by the difference between
the world prices for wheat and cotton and the domestic prices.
In the week ended October 14 the BLS general index of whole-
sale prices declined 0.1 percent following slight increases in the
three previous weeks. (See Chart 4.) Seasonally lower prices for
fruits and vegetables, together with a decline in the grain markets,
was responsible for the decline in the index. At 103.8 percent of
the 1926 average, the index is 0.9 percent higher than & year ago
and is 38.4 percent above the pre-war August 1939 average.
Relaxation of WPB orders may weaken OPA price control
The relaxation and elimination of a major part of the WPB
orders following the defeat of Germany will tend to weaken the
OPA's ability to control prices in the reconversion period, chiefly
185
- 5 -
through releasing limitations on demand. During the war the
WPB has implemented the OPA's price control machinery in several
ways, including: (1) restricting the demand through limitation
orders and inventory controls, (2) reducing the number and variety
of various manufactured items by setting standards and speci-
fications, (3) directing the production of many items of apparel
within the low to medium price ranges, and (4) increasing the
output of copper, lead, zinc, and other minerals by the use of
subsidies for high cost production.
Officials of the WPB and the OPA are reportedly discussing
the probable effects of the elimination of various WPB orders, and
committees have been appointed to study specific commodity fields
and regulations. It is likely that some of the WPB orders which
strengthened price control will be continued, particularly those
applying to the production of lower-priced clothing.
Hog slaughter lowest in more than 2 years
Hog slaughter in recent months has fallen below that of last
year, following the record levels attained earlier this year. In
September federally-inspected slaughter was at the lowest level
in 25 months, dropping 15 percent below August and about the same
percent below September a year ago. (See Chart 5, lower section).
While hog slaughter has increased somewhat from the low point
reached in the week ended September 9 and will continue to expand
seasonally during the next few months, it 1s expected to fall
substantially below that of last year. The 1944 spring pig crop,
now beginning to be marketed, was 24 percent smaller than the 1943
crop.
Hog prices, after hovering around the support levels for
several months, rose sharply to ceiling levels near the end of
July and have remained there ever since. (See Chart 5, upper
section).
The WFA has been making relatively small purchases during
the past four months, except for some large purchases of canned
pork around the middle of August. (See Chart 5, lower section).
Present plans call for very large Government purchases during
the next few months, which will largely offset the seasonal in-
creases in production, and keep civilian supplies rather small.
Cold storage holdings have been reduced considerably in recent
months and are now slightly below those of a year ago.
Slaughter of cattle and calves in September, on the other
hand, were 14 and 42 percent, respectively, above last year's
levels. A large portion was of grass-fed cattle. Thus while
Regraded Unclassified
- 6 -
186
prime fed steers have been selling at peak prices in recent
months, prices of grassers have shown an easing tendency. The
armed forces will continue to take a large proportion of the
higher quality beef in the next few months.
Hurricane damages Florida citrus crop
While it is too early to assess the damage to the prospec-
tive record Florida citrus crop caused by the hurricane last
week, trade estimates of the losses range from 20 to 40 percent.
The Department of Agriculture is making a survey, and their esti-
mate of the damage should be available soon. Opinions differ as
to the effect of the hurricane on the Cuban sugar crop. While
one estimate indicated a loss in the province of Havana of as
much as 200,000 tons, or about 4 percent of the prospective Cuban
crop, other estimates indicate that the accompanying beneficial
rain may actually have increased the total crop.
Materials supplies improve
In reflection of the general easing in materials supplies,
the WPB recently issued its fourteenth and final issue of the
Material Substitutions and Supply List. At that time 42 ma-
terials were removed from Group I, which includes materials of
which the supply is insufficient for war and essential industry
demands. On the other hand, 17 materials were added to Group I,
including small and medium castings, wire rope, paper, soft coal
and some chemicals. Moreover, it was indicated that some ma-
terials are expected to be in short supply after the end of the
war in Europe. A partial list of these anticipated scarce ma-
terials includes: tin, sisal, cattle hides, kapok, manila,
anthracite coal, kraft container-board, paper and products,
pyrethrum, natural rubber and cotton broad woven fabrics.
The Conservation Division of the WPB; which has had primary
responsibility for compiling the Materials Substitution and Sup-
ply List, is being abolished as of November 2, since it is felt
that the declining amount of conservation work remaining to be
done can be handled by other WPB divisions. However, it has been
made clear that conservation and salvaging of paper, tin cans and
rags is still necessary, and civilian organizations have been
asked to intensify rather than relax their efforts along these
lines.
Premium prices for metals under discussion
The WPB recently held discussions with the copper, lead and
zinc industry advisory committees covering a reconversion program
involving a reconsideration of the premium price plan for copper,
lead and zinc, and of foreign purchases and subsidies. In regard
to the outlook for copper, the view 1s expressed that after the
Regraded Unclassified
187
- 7 -
end of the war in Europe a surplus of copper would result if
present subsidy rates are continued. It is doubtful, however,
if the subsidy could be eliminated entirely without resulting
in inadequate supplies of copper for civilian use.
Department store sales rise
Stimulated by the October 16 deadline on shipments of
Christmas packages to Army personnel overseas, department store
sales in the week ended October 14 rose to the highest level
since last December and were 16 percent above the corresponding
week in 1943. (See Chart 6.) A gain over year-earlier levels
of the same proportions was shown in the week ended October 7,
which compares with a cumulative increase of 9 percent in the
year's sales to date.
Despite the passage of the peak in gift buying for overseas
shipment, preliminary reports from the New York City area indi-
cate that department store sales showed a further gain over
year-earlier levels last week.
In connection with the index of department store sales
shown in Chart 6, it should be noted that the Federal Reserve
Board recently revised the series to comprise a larger number
of reporting stores in recent years, and to adjust the figures
to conform to the more comprehensive monthly index. As now
computed, the weekly index is made up of reports from 451 large
and medium-sized department stores, including a selected group
of retail outlets of mail order firms.
Regraded Unclassified
Chart 1
188
STOCK PRICES, DOW-JONES AVERAGES
Daily
1944
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
4
II
=
es
2
.
IS
23
30
6
13
20
27
3
IO
17
24
I
8
15
22
29
5
12
ID
26
3
ю
17
24
DOLLARS
DOLLARS
155
155
30 Industrial Stocks
150
150
145
145
140
140
135
135
130
130
125
125
20 Railroads
44
44
42
42
40
40
38
38
36
36
28
28
15 Utilities
26
26
24
24
22
22
20
20
SHARES
Volume of Trading
SHARES
Millions
Millions
2
2
I
I
0
o
4
=
-
25
2
9
IS
23
30
6
IS
20
E7
3
IO
17
24
I
8
IS
22
29
5
If
.
26
3
IO
17
24
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
1944
Office of the Secretary of the Trunty
- of - - -
P-144-L-2
Regraded Unclassified
SECURITY PRICES
Selected Reilroad and Industrial Indexes. August 1939-100
1936
1937
1938
1939
1940
1941
1942
1943
1944
PERCENT
PERCENT
220
220
20 Railroad Stocks*
200
200
Letest Figures
"
180
Oct 21
180
160
160
140
140
10 Second Grade
Railroad Bonds*
120
120
100
100
80
80
*
30 Industrial Stocks
60
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
1936
1937
1938
1939
1940
1941
1942
1943
1944
-
Dow-Jones overages converted to August 1939 base.
189
Chart 2
Office of the Secretary of the Treasury
Division of Research and Statistics
P-283
Regraded Unclassified
COMMODITY PRICE INDEXES IN U.S.
1943
1944
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
PERCENT
(Moody)
PERCENT
Daily
(Dow-Jones)
270
104
267
103
264
102
261
101
258
100
Moody's Index
255
in U.S.
99
December 31,1931=100
252
98
249
97
246
96
Commodity Futures
243
(Dow-Jones)
95
1924-26-100
240
94
237
93
234
92
231
91
228
90
225
4
a
-
25
-
.
5
22
29
5
12
19
26
4
=
a
25
-
a
a
22
29
6
a
20
E7
3
10
IT
24
I
-
IS
=
29
5
N
-
26
2
9
IS
DEC.
23
30
89
7
M
as
JAN.
=
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
Chart 3
1943
OCT.
1944
130
Office of The Secretary of the Treasury
Super of - - -
P-148-L-1
Regraded Unclassified
WHOLESALE COMMODITY PRICES
1943
1944
PERCENT
PERCENT
WEEKLY
1926-100
106
106
105
105
104
104
889 Commodities. B.L.S.
103
103
102
102
28 Basic Commodities. B.L.S.
101
101
100
AUG
OCT
FEB.
100
JUNE
DEC.
APR.
JUNE
AUG.
OCT.
DEC.
1943
1944
SELECTED BASIC COMMODITIES
Percentage Change December 6, 1941 to Oct 13 and Oct. 20, 1944
PERCENT
+100
Rosin 102.4%
+80
Barley 68.5%
191
Flexseed 67.3%
+60
Corn 56.9%
+40
Hoge 45.7%
Wheat 41.6 %
Steers 327%
Lard 28.8%
Cotton 243%
Butter 18.8%
+20
Print Cloth 10.3%
Coffonseed Oil 8.7%
Super 7.1%
Wool Tope 3.9%
0
Hides 0%
Tellow -4.1%
-20
Dec.6.
Oct13,
Oct.20,
1941
1944
1944
Office al the Secretary of the Treasury
- el - and
P-282
Regraded Unclassified
HOG PRICES COMPARED WITH HOG SLAUGHTER
AND U.S.D.A. PURCHASES
1942
1943
1944
SEPT
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
DOLLARS
DOLLARS
Per 100 Lbs.
Par 100 Lbs.
16
16
14
14
Price of Live Hogs"
12
12
10
10
MILLIONS
THOUSANDS
OF HOGS
OF LBS.
(U.S.D.A.
(Sioughter)
Purchases)
1400
1200
Slaughter
240
27 Centers+
200
1000
160
800
120
600
80
400
U.S.D.A. Purchases,
40
200
O
O
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
1942
1943
1944
* Chicago good to choice. 180-200 pounds
132 Centers beginning week ended April a
Source: Department of Agriculture
Office of the Secretary of the Treasury
Division of Research and Statistics
P-248-1
Chart 5
192
Regraded Unclassified
Chart 6
193
DEPARTMENT STORE SALES
1935-39 - 100, Unadjusted
PERCENT
PERCENT
320
320
Weekly
300
300
280
280
260
260
240
240
220
220
1944
200
200
1943
180
180
160
160
140
140
120
120
1942
100
100
80
80
JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
Office of the Secretary of the Treasury
Division of Research and Statistics
C-390-C-I
Regraded Unclassified
194
OFFICE OF
THE ADMINISTRATIVE ASSISTANT
TO THE SECRETARY OF THE TREASURY
October 23, 1944
To:
Mrs. Klotz
From: Charles Bell
Mr. Olrich seemed very eager that the
Secretary read this voluminous report of
Mr. Clayton's, covering his activity with the
Surplus War Property Administration from the
beginning up until now, I think particularly
because it is complimentary to the Procurement
Division. I have read most of the report, and
while it is complimentary to Procurement, it is
likewise complimentary to other agencies.
0
CHARLES S. BELL
TELEPHONE 332
ROOM 3424
195
OFFICE
OF
FO
VICTORY
TREASURY DEPARTMENT
BUY
STATES
WAR
WASHINGTON 25
BONDS
AND
STAMPS
STATE INVOICE THE
October 20, 1944
MEMORANDUM TO THE SECRETARY
There is enclosed for your information a
draft of a proposed Final Report of the Surplus
War Property Administration on its activities
under Executive Order 9425.
The report is very complimentary to the
Treasury Department, and although quite lengthy,
I think it is worth your reading.
E.L. Olrich
Assistant to the Secretary
Regraded Unclassified
196
OFFICE OF WAR MOBILIZATION
SURPLUS WAR PROPERTY ADMINISTRATION
OFFICE OF ADMINISTRATOR
611 VERMONT AVENUE NW.
WASHINGTON 25, D. C.
October 12, 1944
To the Members of the Surplus
War Property Policy Board
I enclose for your comments a draft of a proposed
Final Report of the Surplus War Property Administration on its
activities under Executive Order 9425. I would much appreciate
it if you could have your comments and suggestions in my hands
by Friday, October 20, 1944.
As you will see, the report contemplates a rather
voluminous appendix. Since this has not yet been assembled,
and since you are all familiar with most of the documents which
will appear in the appendix, the draft Report is being sent
without an appendix in order to save time.
No. L. CLAYTON
Administrator
OCL 12 N a 29
DEbt
Draft of October 3, 1944 197
SURPLUS WAR PROPERTY ADMINISTRATION
Report to the Director of War Mobilization
as to activities under Executive
Order No. 9425
With the enactment of the Surplus Property Act of 1944 on
1944, the supervision and direction of the disposal of surplus Government-
owned property was placed in a new agency created by Congress. This action
terminates the activity of this Administration. It is therefore appropriate
to submit a report of the activities of this Administration during the
slightly more than 7 months since its creation.
Executive Order No. 9425
Executive Order No. 9425 was signed by the President on February 19,
1944; a copy appears in the Appendix to this report. It was designed, with-
out creating a new selling agency, to coordinate the activities of existing
agencies in the disposal of surplus property in order to avoid the chaotic
market conditions, and the competition between Government agencies selling
similar property, which prevailed for a period following the last war.
The means adopted was the establishment in the Office of War Mobilization
of a Surplus War Property Administration, headed by an Administrator who was
assisted by a Surplus War Property Policy Board composed of representatives
of fourteen interested Overnment agencies. The Administration was given
general supervision and direction of the handling, interagency transfer and
disposition of surplus war property, and was directed, insofar as it deemed
feasible, to assign specified types of property to named Government agencies
for disposition.
"Surplus war property" was defined in the Executive Order as meaning
any type of property in the possession or control of a Government agency
which is in excess of its needs and which is determined, subject to the
authority of the Office of dar Mobilization, to be surplus by such agency.
It is noteworthy that this definition was not restricted to property ac-
quired for warpurposes.
Baruch-Hancock Report
Executive Order No. 9425 followed by four days the submission to the
Director of "ar Mobilization of the famous "Report on War and Post-War
Adjustment Policies", by Bernard M. Baruch and John M. Hancook. Because
its recommendations were so closely followed in the Exccutive Order, and
because they have formed the basis of much of the action taken by the Ad-
ministration, there is reproduced below so much of Summary Index of Recom-
mondations in the Baruch-Hahoock Report as relates to surplus property:
"1. Tho Director of Mar Mobilization to name a Surplus Property Admin-
istrator in the Office of War Nobilization with full authority for handling
every aspect of surplus disposal.
198
Report to Director of War Mobilization
-2-
"2. A Surplus Property Policy Board, the Administrator as Chairman
with full and final authority, and with these agencies represented: Yar,
Navy, Treasury, Reconstruction Finance Corporation, Maritime Commission,
War Production Board, Bureau of the Budgot, the Food Administrator, the
Attorney General, Federal Works Agency, State Department, and Foreign
Economic Administration.
"3. Four major outlots to handle actual disposal, each in a clearly
defined field, with no overlappings:
(a) Consumer Goods to the Treasury Procurement Division.
(b) Capital and Producer Goods, all types of industrial property,
to a single corporation within the Reconstruction Finance
Corporation, consolidating present R.F.C. subsidiaries.
(c) Ships and Maritime Property to the Maritimo Commission.
(d) Food to the Food Administrator.
"4. All of these agencies, as well as any other agencies called upon
to handle special disposal problems, to follow policies laid down by the
Administrator in consultation with the Policy Board.
"5. The Surplus Administrator to report to Congress as soon as pos-
sible on legislation neoded, basing his recommendations on actual experience
with the problem.
"6. Our own suggestions as to the broad policies that the Surplus Ad-
ministrator may wish to follow are summed up in ten basic principles,
1. Sell as much as he can as early as he can without unduly dis-
rupting normal trade.
2. Listen to pressure groups but act in the national interest.
3. No sales, no rentals to speculators; none to promoters.
4. Get fair market prices for the values with proceeds of all sales
going to reduce the national debt.
5. Sell as in a goldfish bowl, with records always open to public
inspection.
6. As far as practicable, use the same regular channels of trade
that private business would in disposing of the particular
properties.
7. No Government operation of surplus war plants in competition
with private industry.
8. No monopoly; equal access to surpluses for all businesses;
preference to local ownership, but no subsidizing of one part
of the country against another.
9. Scrap what must be scrapped but no deliberate destruction of
useful property.
10. Before selling surplus equipment abroad, assure America's own
productive officiency on which our high wages and high living
standards rest.
"7. The Surplus Administrator to bo a man of proven exccutive capacity,
business sagncity, unquestioned intogrity, and great courage to fight off
the solfish interests who will be sooking to exploit those surpluses.
Regraded Unclassified
Report to Director of War Mobilization
199
-3-
"8. The facts on all sales to be open to public inspection, with
regular reports from each disposal agoncy to Congross.
"9. All of the disposal agencies to make offective use of Industry
Advisory Committees.
"10. The disposal agencies to lease as well as soll, to exchange proper-
tios, to sell on credit--but leasing must not bocome a hidden dovice for
Government ownership or subsidies.
"11. The Army and the Navy to examine their inventories of the most
critical civilian itoms to 500 what can be safoly released during the war for
the civilian economy without hurting the war.
"12. Surplus Administrator to study how to centralize the handling of
roal property, also, to explore the possibilities of beginning to liquidate
Government holdings.
"13. The closest cooperation between the War Production Board and the
Surplus Administrator so that controls do not necessarily hinder disposition
by unduly limiting potential buyers, particularly in assuring prompt disposal
of small quantities of surplus materials.
"14. The Surplus Administrator and the disposal agencios to have available
to them in carrying out their policies the entire field forco of all of the
various agencies, including the Services.
"15. Surpluses to be offered in lots of such sizo as to pormit businesses
of all sizos to participate.
"16. The Attorney Genoral is placed on the Policy Board because of the
importance of preventing monopoly in disposal.
"17, The Bureau of the Budgot is on the Board to develop policy for
pormanent good housekeoping of Government properties.
"18. The memborship of the Surplus Property Board to be mado up of men
who will carry out the docisions that are mádo.
"19. The broad functions of the Surplus Property Board are summarized
in the chaptor on Surplus in the addondum."
Basio Philosophy and Principles.
Givon the background of the Exccutive Order and the Baruch-Hancook
Report, and bofore prosenting a detailed history of the Administration's
activities, it is matorial to outline a fcw of the basic problems which
confronted the Administration, and to outlino the principlos by which it
was guided in sooking thoir solution,
Report to Director of War Mobilization
200
-4-
War and Post-War Surpluses. It is of course a fundamontal that any
large disposal program, both for the sake of the general public interest and
for the sako of the financial success of the disposal program itsclf, must be
so conducted as not to break markets or otherwise dislocate the economy. At
the outset, howover, the Administration was confronted by the groat diffor-
ence in this respect between the problem of disposing of surplusos in wartime
and that of disposing of them after the war. While the war is on, there is
and will be an onormous demand for almost all typos of goods, restricted only
by the necessary War Production Board restrictions on production for civilian
use. During that period disposal of surpluses at a rapid rate has a beneficial
effect on the economy, with the added advantage that current sales will re-
duco the quantities which will overhang the market after the war. At that
time the problem will be quite different, and as large surpluses appear the
quostion of whether or not to sell, and at what rate, will become a difficult
one bocause of its potential effect on the market for now production.
Surpluses a National Asset. The necessity to avoid market disruption
does not, however, means that surpluses should bo frozen until they rot,
become obsolete, or their values are dissipated in torago charges. No
greater disservice could be done to the economy in general or the taxpayor
in particular than to fail to realize on thoir value and their economic
usefulness, or to leave them indefinitely and unproductively overhanging the
market. The Baruch-Hancock Report has this to say on the subject:
"The problems that lic b ofore us are difficult but soluble. Lot no one
feel that procious surpluses will bear down upon us and destroy us, that vast
amounts of metals, raw materials, ships and airplanes will smother us a nd
engulf us. These are assets of tremendous value. They will be real forces
not alone in making the peace but in opening to the whole world, and there-
fore to us, vast opportunities."
Donations and Price Preferences. The Executivo Order created no now
powers of disposal, though it mado transfors of existing powers from one
agency to another. The Administration has consistently folt, both ns a
matter of legal power and as a matter of administrative policy, that it
was no part of its function to authorize either donations of property of
value or salos at loss than fair market value. Authorization of such notion
is tho exclusive province of Congress. The Agministration can take into
account, by giving first opportunity to purchase at fair, valuo, the legiti-
mate interests of such potential purchasers as Fodoral agencies, State and
municipal Governments and non-profit institutions, and formor owners of lands
taken by the Government for war purposes. This it has done in the absence
of an overriding need for disposal of tho property in somo other channel;
more it can not do without Congrossional direction.
Docentralization and Coordination. The Excoutive Order olearly con-
templates that the notual handling and disposal of surplus proporty bo carried
on by oxisting Government agencios. The practical oxigencies of the situation
also diotato that salos shall normally be ande in the region whore the
property is located. It follows that the Administration is a small organ-
Regraded Unclassified
Report to Director of War Mobilization
201
-5-
ization, supervising and directing the disposal activities of numerous agoncies
having even more numerous regional offices, In such circumstancos, effective
coordination requires first, that no more than one agency shall be charged
with disposal of any particular type of property (however many other expert
agencies it may consult in the process), and second, that the total number of
agencies conducting substantial disposal activities shall be kept to a mini-
mum, consistent with the ability of the designated agencies to handle the
disposal task assigned to them.
Methods of Distribution. Because of the great variety of typos of
property, the differing quantities of each, the varying domands therefor and
the particular practical problems attendant on each, it has been impossible
to develop any uniform formula or mothod of dispos-1. Even so fundamental a
principlo 0.8 that different agonoies should not be selling the same type of
property in the commorcial market at the same time, for instance, has had to
be departed from in the case of contract termination inventories, because of
the practical exigencies of the urgont problems of plant cloarance, storage
and transportation. Tho guiding principle has boen to obtain the widest pos-
sible distribution of surplus property, at fair prices and in quantitios small
enough to give small purchasers equal opportunity to compete with larger pur-
chasers, and making efficient use of commercial channels of trade so as to
avoid the expense and administrative cumbersomenoss of putting the Government
into the rotail business, as well as tho resultant Government competition with
private business.
Organization of the Administration
In view of its supervisory and policy-making function, the Administra-
tion has been able to keep its staff very small; it has a total of 55
officers and employees, including all stenographic and clerical personnel.
The organization has in effect consisted of three parts- a small cen-
tral administrative nucleus, a group whose primary function is to deal with
the principal owning and disposal agencies and a group of experts concentrating
on particular important aspects of surplus property disposal.
The central nucleus consists, in addition to the Administrator, of the
Deputy Adm nistrator, the Genoral Counsel, the Executive Assistant to the
ministrator n. nd their respective assistants. In addition this group in-
cludes the Secretary to the Policy Board and the "irector of Information.
The principal members of the S econd group are the Assistant Adminis-
trators in charge of relations betwoen the Adm nistration and Reconstruction
Finance Corporation, the War Department and the Foroign Economic Administra-
tion, respoctively. A similar function with respect to the disposal of
morchant vossols by the Maritime Commission has boen performed by Mr. Howell
Smith, an advisor serving without titlo or compensation. The Administra-
tion's olose relations with the other principal owning and disposal agencios
have been largely conducted by the Administrator, the Deputy Administrator
and the Executivo Assistant to the Administrator.
Report to Director of Mar Mobilization
202
-6-
The functions of the third group are indicated by their titles. It
consists of the Directors of the following Divisions: Aviation Division,
Machine Tool Division, Communications Division, Scrap Metal Division, State
and Local Governments Division. Also in this group are the Economic Analyst
and the Accounting Consultant.
The personnel which the Administration has obtained has been of con-
sistently high caliber. The nature of its functions is such that they cannot
be successfully performed except by top-flight experts. Because of the
obvious post-war continuation and accentuation of the surplus property prob-
lem, it has been a very difficult task to attract persons with the essential
qualifications. For that roason there are still gaps in even the small or-
ganization which was planned, and the Administration has been consistently
short-handed. For instance, no Assistant Administrator in charge of relations
with the Procurement Division of Treasury Department has yet been pointed.
But for the cooperation of the armed services in assigning personnel to the
Administration, and in some instances roleasing them from active duty, the
Administration's personnel difficulties would have been even more serious.
Relations with Other Agoncies and Branches of Government
Since most of the Administration's functions involved dealings with
other parts of the Government, important aspects of those dealings are covered
elsewhere in this report. Certain of those relations are treated separately
here, however, as indicative of the manner in which the surplus property prob-
lem is interwoven with the problems of other agencies.
Policy Board. The Surplus War Property Policy Board is an integral
part of the Administration, made up of representatives of other interested
Government agencies. For a considerable period it met weekly, and thereafter
bi-weekly with occoasional postponements when immediate pressure of business,
particularly appearances of the Administrator before Congressional committees,
80 required. In addition, numerous committees of the Board, which are ref-
erred to elsewhere in this report, performed hard and extremely valuable work.
The Board was a genuine working Board, whose discussions and advice had great
influence in shaping the policies of the Administration. While no formal
votes were taken, and while it was sometimes a practical necessity to take
notion first and report to the Board later, the Administration knows of no
major step taken to which a majority or even a substantial minority of the
Board was opposed.
War and Navy Departments. In addition to the representation of the
armed services on the Board and numerous committees of the Board, and to
the supervision by the Administration of their disposal of contract termin-
ation inventories, described below, a close relationship generally has been
maintained. The armed services of course are and will be the predominant
sources of surpluses for disposal. The primary task of dotermining what is
and what is to become surplus necessarily must be theirs. This involves not
only an enormous problem of inventory control and analysis, but the prepara-
tion of estimated requirements for future war needs, post-war stand-by
programs and post-war needs of the military establishment, The Administration
has, however, performed a valuable function in stimulating both the search
for present surpluses and the early prosecution of studies which will permit
intelligent planning as to the disposal of future surpluses.
Report to Director of War Mobilization
203
-7-
Department of Justice. The Attorney General has been a most helpful
member of the Board, and headed a committee which made a thorough study of
all the many statutes in effect which bear upon the powers of Government
agoncies to dispose of surplus property. Considerable negotiati on has taken
place with the Antitrust Division of the Department, with a view to clearing
with the Department the proposed procedures for the use of Industry Advisory
Committees by the disposal agencies, in order to protect the members of such
committees from antitrust prosecution arising out of their participation in
committee work. Finally, the Department's Federal-State Relations Section
has been of great assistance in discussions of possible methods, discussed
below, for establishing an organized means of disposing of surpluses so as to
fulfill the needs of State and local governments and nonprofit institutions.
"ar Production Board. Close relations have been maintained throughout,
particularly with the Redistribution Division of the War Production Board,
which has been of assistance to the owning agencies in finding purchasers
of termination proporty, and whose head served as chairman of the committee
on termination price policies, discussed below. Matters of domestic and
foreign civilian I" quirements, stockpile requirements, planning in connection
with termination, reconversion and plant disposal, the needs of small busi-
ness, and numerous others have been the subject of frequent consultations.
Bureau of the Budget Executive Order No. 9425, while it terminated
the responsibility of the Bureau of the Pudget for supervising the transfer
of surplus property between Government agencies, did not affect its respon-
sibility for developing improved methods of inventory and inventory control
by the agencies. These activities have continued, in cooperation with the
Interdopartmental Committee on Proporty Utilization, and in addition both
the Buroau of the Budgot and the Interdepartmental Committoo have been
helpful in commenting on the Administration's regulations in their applic-
ation to the non-war agencies of Government. Regulations furthering the
normal pencetimo function of the Bureau of the Budget in supervising perman-
ent property management and Federal "good housekeeping" were in preparation
when the uncertainties created by tho pendency of H.R. 5125 rendered their
postponement appropriate.
Congress. A great deal of the time of the Administration has been
spont either in preparing or in presenting testimony before Committees of
Congress. Among the Committees before which the Administrator has appeared
by invitation, in some cases soveral times, are the following: Sonato-
Military Affairs, Post "ar Economic Policy and Planning, National Defense
Investigating Committee; House of Representatives- Banking and Curroncy,
Military Affairs, Expenditures in the Executive Departments, Post-Var
Economic Policy and Planning.
Regraded Unclassified
204
Report to Director of Mar Mobilization
- 8 -
While some of this testimony related to specific pending bills, and
a considerable amount of it related to the Administration's activities under
the Executive Order, a great deal of it, as requested by the various com-
mittees, concerned the question of overall legislation on the subject of
surplus property disposal; copies of some of the statements made on this
subject will be found in the appendix.
The .dministrator consistently testified that while overall legis-
lation would in the long run be both desirable and necessary, current dis-
posal problems could be adequately handled without legislation. He ex-
pressed the view that sound recommendations for legislation could best be
made After a considerable amount of experience had been had with the actual
practical problems of disposal.
Farly in May 1944, however, the Administration was advised by Senator
Janes E. Murray, that he intended to have overall surplus property legis-
latior presented for the active consideration of Congress not later than
early June. He requested the detailed recommendations of the Administra-
tion on the subject, and at the same time made similar requests of numerous
of the Interested Executive Agencies.
In view of the time schedule thus imposed it was determined by con-
sultation between the Administration and various of the Executive Agencies,
with the approval of Senator Murray and of the Chairmen of the Post Tar
Economic Policy and Planning Committees of both Houses, to convene a com-
mittee of Executive Agencies, under the Chairmanship of the Administrator,
in order to formulate specific legislative recommendations, This procedure
was similar to that which proved helpful to Congress in connection with the
Contract Settlement Act of 1944. The Committee in that connection having
been under the Chairmanship of Mr. John M. Hancock.
The committee to recommend surplus property legislation contained
representatives of the following agencies: Mar Department, Smaller War
Plants, Navy Department, Reconstruction Finance Corp., Justice Department,
war Production Board, Foreign Economic Administration, U. S. Maritime Com-
mission, Treasury Department, War Food Administration, and Surplus War Pro-
perty Administration. This committee met frequently, and a small drafting
committee appointed by it met daily, for a period of nearly three weeks. On
June 2, 1944, its recommendations, in the form of a proposed statute, were
forwarded to Senator Murray and to the Chairmen of the two Post-Car Com-
mittees.
On June 16 and 20, 1944, joint hearings of the two Post-Mar Com-
mittees were held, at which were present by invitation members of several
other interested committees of both Houses. At these hearings the Adminis-
trator testified at length in explanation of the legislative recommenda-
tions which had been submitted and representatives of substantially all
the agencies which had participated in the formulation of the recommenda-
tions also testified, with the exception of Smaller Lar Plants Corpora-
tion there was substantially complete unanimity in support of the recom-
mendations presented.
Regraded Unclassified
205
Report to Director of Tar Mobilization
-9-
It is unnecessary in this report to go into further dotail with respect
to the legislative history of the Surplus Property Act of 1944, which is a
matter of public record. It suffices to say that the Administration put
itself at the disposal of the Sonato Committee on Military Affairs and the
House Committee on Expenditures in the Executive Departments, which respec-
tively were considering overall surplus property logislation, and expressed
its views and the views of the Committee of the Executive Agencies at longth
and in detail. The original rocommendations forwarded to the Congressional
Committees on June 2, 1944, were the result of great thought, labor and con-
sideration of all bills then pending before Congress. While as the Adminis-
trator had repeatedly testified, it would have been proferable had more time
beon allowed before definitivo rocommendations had to be mado, nothing in
the subsoquent legislative proceedings has altered the view of the Adminis-
tration that the rocommendations mado on June 2, 1944, could have formed the
basis of & sound and workable statute.
Price Folicies for Disposal of Contract Termination Inventories
Then the Administration took office, the quantities of surplus finished
armolos, whether consumers' goods or capital equipment, which urgently re-
quirel disposal, were not so great ns to present an immodiate pressing prob-
leu. Às a result of rapidly changing war conditions and technical advances,
however, increasing numbors of procurement contracts were being terminated
in whole or in part by the armod services and the Maritime Commission.
Each such termination resulted in the immobilization, in the plants of
both primo contractors and subcontractors of several ticrs, of property in
which the Government had an interst -- either a direct proporty interest or
a direct financial interest because of the Government's obligation to pay
for the proporty and its right to take possession of it.
It was recognized to be imporative that this scattered mass of property
be promptly disposed of, both in the interest of clearing the contractor's
plant to enable him to got on with his noxt job and in the interest of
putting the property itself promptly into productive use in a markot which
was prodominantly one of short supply. Moreover such expoditious disposal
could, as a practical matter, be carried out only by the contractor under
the supervision of the representatives of the procuring agency who were
prosent at the contractor's plant and familiar with the contract and the
property.
It was brought forcibly to the Administration's attention that dis-
posal of termination property was not progressing with the desired speed.
This was due to a number of causes, but the most prominent appeared to be
an apprehension on the mrt of contracting and terminating officers that
they would be criticized if they sold property, whatever its sales value,
for substantially less than its cost, and a lack of clear and definable in-
structions to such officers prescribing the disposal policies under which
they might properly operate.
Regraded Unclassified
Report to Director of Var Mobilization
206
-10-
While in some of its aspects this was not strictly a surplus property
problem, the interested agencies felt that its solution required action by
one contral agency so that competition between agencies would be avoided and
termination officers would have-confidence that they would have full support
if they carried out the enunciated policies. The matter being closely allied
to the Administration's problems with respect to surplus property, the Joint
Contract Termination Board delegated to the Administration all its authority
over the subject matter, and the Administration proceeded to act.
A committee was appointed under the Chairmanship of Colonel C. R.
Baxter, head of the Redistribution Division of the War Production Board,
the other agencies represented being the War and Navy Departments, Rocon-
struction Finance Corporation, the Procurement Division of the Treasury
Department, the Department of Justice and the Bureau of the Budget. The
Committee's report wns thoroughly analyzed and discussed by the Policy
Board and resulted in the issuance on April 21, 1944, of the Administra-
tion's "Statement of Policies to be Followed by Government Agencies in the
Sale of Contract Termination Inventories", together with an explanatory
letter from the Administrator to the major procuring agencies; a copy of
these documents appears in the Appendix to this report.
The problem was to encourage boldness and initiativo on the part of
termination officers in the disposal of termination inventories, while at
the same time imposing reasonable safeguards against sales at improvidentially
low prices, with resultant speculative profits. A corollary purpose was to
encourage sale to persons who would themselves consumo the property in war
or essential civilian production, or in repair or maintenance activities
in connection therewith. Further complications were inhorent in the fact
that a very substantial proportion of most termination inventories consists
of somi-processed or somi-fabricated material, most of which, however great
its cost, has no realizable value except as scrap. The decision to scrap
matorial on which a great deal of labor has been expended is often difficult
to make, but it is essential that it be made and made promptly, since the
retention of such material in the hope of an eventual sale for some purpose
other than scrap merely aggravates the already serious problems of plant
clearance, storage, and transportation.
The policies originally issued on "pril 21, 1944 have been the subject
of frequent roview and re-examination. The tempo of solos of termination
inventories has very substantially increased, but so has the backlog result-
ing from the incroasing number of terminations and cutbacks. The original
policies have been amended in material respects, all such amendments boing
relaxations of limitations on sales imposed by the original Policy Statement,
even though that original statement was distinotly on the liberal side;
copies of such amendments appear in the Appendix.
Additional amendments were under consideration and study by the Baxter
Committee at the time the Surplus Property Act of 1944 was enacted.
Establishment of the Basic Surplus Disposal System
(Regulation No. 1)
Executive Order 9425, in addition to its general charging of the Admin-
istration with the supervision and direction of the disposal and interagency
transfer of surplus property, gave clear indications of the scheme under
which this duty was to be carried out. In addition to granting general
Regraded Unclassifie
Report to Director of War Mobilization -11-
207
auth rity to act through, and utilize the services of, other agencies, it
directed the /dministration, SO far as it decmed feasible, to assign speci-
fied general categories of property to named agencies for disposition.
It was thus clearly not contemplated that the Administration
should itself act as a central sales organization, but that several existing
agencies should be used as disposal agencies. Equally clear, however, was
the implication that the number of those agencies should be kept small and
manageable, and that sales of any one type of property should be centralized
in a single agency in order to avoid both overlapping organizations and
inter-agency competition.
Regulation No. 1, which became effective on May 15, 1944, as to
surplus property of the armed services and the Maritime Commission, and on
August 1, 1944, as to that of all other agencies, is largely an implemen-
tation of this basic theory. Its issuance, however, had to be preceded by
an exhaustive consideration of such basic problems as the following:
1. In what instances do the practical problems of disposal dictate
the designation of disposal agencies other than those named in the Executive
Order, or the grant of disposal authority to the "owning agency" -- i.e. the
agency already in control of the property?
2. When property has been determined to be surplus and reported
as such, what are the relative duties and responsibilities of the owning
and disposal agencies for such things as care, handling, storage, trans-
portation and property accountability?
3. Administratively, what agency shall make the final determina-
tion, with respect to any particular piece of property, as to the existence
of legal authority to dispose of it and as to the nature and extent of any
legal restrictions on that authority?
4. How can the categories of property to be assigned to each dis-
posal agency be accurately described, SO that owning agencies will know to
what agency to report specific property and purchasers will know what agency
sells it?
5. How are the disposal agencies to be organized regionally, and
how are they to handle the mechanics of inventorying, reporting and listing
for sale surplus property reported to them?
6. What forms should be used for the reporting of surplus property
so as to give the disposal agency information sufficient for sales purposes,
with a minimum of unnecessary work by the reporting agency?
The solutions to these problems embodied in Regulation No. 1, as
supplemented, have thus far proved sound and workable in actual operation.
Minor revisions were under consideration when the Surplus Property Act of
1944 was enacted, and major revisions will be necessary as the result of
that Act. It is the Administration's opinion, however, that not only is
the basic disposal system established by Regulation No. 1, and now func-
tioning, consistent with the Act, but its continuation without fundamental
change was contenplated by Congress.
Regraded Unclassified
Report to Director of War Mobilization
-12-
208
Detailed Discussion of Various Activities
1. Procedures for Reporting Surpluses
The procedures for reporting surplus property were provided by the prepar-
ation of prescribed standard report forms, along with the assignment of
responsibility for disposition of property among the different disposal
agencies. A Report of Surplus Property (Forms S.W.P.A.-1 and S.W.P.A.-1a)
was prescribed for use in reporting surplus personal property. Instructions
for the preparation of this form are given in S.W.P.A. Regulation No. 1.
This report form superseded Form No. 812 formerly prescribed by the Procure-
mont Division of the Treasury Department. A Report of Purplus Roal Property
(S.W.P.A.-5) was prescribed for reporting real property other than industrial.
In the caso of surplus personal property rising from contract terminations,
the proscribed Report of Surplus Property is used only as a cover shoet for
the inventory sheots prepared by the contractors and submitted by the owning
agencies to the disposal agencies. The contract termination inventory sheets
wore designed to aid both in the rodistribution of surplus property among
Government agencies and in the disposal of such property by the authorized
disposal agencies. 44 revision of these inventory sheets was recently com-
pleted, to be effective about October 1, 1944, so as to make the forms better
meet the noods of (a) the contractors, (b) the officers in the contracting
agencies engaged in effecting contract settlements, and (c) tho disposal
agencies.
Às recommended to the Administrator last March by the Committee on
Redistribution, Handling, and Disposal of Surplus Property, specification
sheots developed by the War Production Board to describe important commod-
ities and items of equipment are being expanded into a complete hand-book
covering all classes of commoditios and oquipment, so that reports of sur-
plus proporty to disposal agencios will be accompanied by sufficient specif-
ications or descriptions expressed in commercial termsand in details comparable
to those used in ordinary purchase and sale operations, to furnish the dis-
posal agencies with the data required to arrange for disposition. This
"Hand-Book of Standards for Describing Surplus Property" is in process of
compilation by the War Production. Board; the first two sections of a total
of twenty-two sections are now at the Overnment Printing Office and it is
anticipated that all sections will be issued prior to the end of this year.
Inventorios of Owning and Disposal Agencies. The Federal Government's
Standard Commodity Classification was prescribed by the Administration for
use by the disposal agencies in establishing and maintaining inventory
rocords of surplus personal property. The use of the Standard Commodity
Classification provides a practicable means of classifying the property
reported to the different disposal agencies in a uniform, clearly understood
manner which will provide sufficiently detailed identification of the prop-
erty for a general inventory system, although further monsures are necessary
in many cases to record and summarize the numorous dotails nocessary for
disposal activities. The numerical system incorporated in the Standard
Commodity Classification is particularly advantageous under punched card
accounting procedures. While the inventory records of the disposal agencies
Regraded Unclassified
Report to Director of Mar Mobilization
209
-13-
record various details as to quantities, descriptions, condition, total cost
(and appraised value in the case of the confirmed inventory of the Treasury
Department's Procurement Division) and cortain other data, the periodic sum-
maries and reports of surplus property prepared for administrative control
and analysis reflect only monetary amounts.
In S.W.P.A. Regulation No. 1, owning agencies were urged to establish
as promptly as practicable and maintain their inventory records in accordance
with the Standard Commodity Classification. The adoption of this recommenda-
tion would facilitate the preparation of reports of surplus property in the
form desired for handling by the disposal agencios. However, it is recognized
it is not practicable at present for the Var and Navy Departments to make sub-
stantial changes in their inventory practices. The owning gencies are ro-
quired, however, to use the genoral segregations (two digit major groups) in
the proparation of Reports of Surplus Property.
Since the maintenance of the inventory records according to the Stand-
ard Commodity Classification requires an extensive numorical coding in the
disposal ngoncies of the items included in Reports of Surplus Property, such
coding is greatly facilitated by an alphabetical reference to the appropriate
numerical codos. While Volume II of the Standard Commodity Classification
lists alphabetically about thirty-five thousand items, it was recognized that
this list should be considerably expanded to nid in the uniform classifica-
tion of surplus property by the various gencies and regional offices main-
taining inventory rocords. At the request of the Administrator, a technical
committee on the Standard Commodity Classification was organized by the
Bureau of the Budgot to expand the alphabetical list, particularly to cover
important itoms likely to bocome surplus and to make any necessary revisions
of the classification which might now seem desirable. Considorable progress
has been made in this connection and a moro detailed index of some forty-five
thousand additional commodity items is nearing completion.
In order to secure uniform reporting by owning agencies and uniform
coding by disposal agoncios, the technical committee has decided to prepare
special tables converting soven stock ontalogs of the Navy and Mar Depart-
ments into terms of the Standard Commodity Classification. As soon ns the
editors and coders complete their work on the alphabetical indox, they will
be shifted to the job of preparing conversion tables for some 385,000 items
in these stock catalogs.
Reports by Disposal Agencies to S.W.PA. A system of monthly reports,
Forms S.V.R. 6 to 10, has boen propared and prescribed for uso by the dis-
posal agencies in reporting the progress of thoir acquisitions, dispositions,
and invontorios. These reports are tontative in cortain respects and changes
and additions will doubtless be necessary. The oporations of the disposal
agencies are boing currently summarized from tho data obtained by those re-
ports for the póriod since June 1, 1944, the month following the first ef-
foctive date (May 15, 1944) of S.W.P.A. Regulation No. 1. The summary for
the month of August, 1944 appears in the Appendix to this report. These
summarize the activities of the disposal agoncios both for the month of
Regraded Unclassified
Report to Director of War Mobilization
210
-14-
August and for the three months ending "ugust 31, 1944. The following state-
mont summarizes the activities of the disposal agencies for the period May 31,
1944 to August 31, 1944:
General Summary of
Surplus Property Reported to Disposal agencies
May 31, 1944 to August 31, 1944
Balance
On Hand
Reported to:
5-31-44
Declarations
Disposal
Aug.31, 1944
(thousands of dollars Reported Cost 1/)
Roconstruction Finance Corp. 43,460
250,075
32,362
261,173
Proc. Div. of Treas. Dopt.:
Confirmed Inventory
30,221
43,109
26,269
47,061
Transit "ccount
-
30,475
-
30,475
Total
30,221
73,584
26,269
77,536
Maritimo Commission
-
9,375
291
9,084
War Food Administration 2
-
702
564
138
For oign Economic Adm.
-
2
-
2
Total, all Disposal Agencios 73,681
333,738
59,486
347,933
1 Appraised value for confirmed inventory of Proc. Div. of Treas. Dopt.
Own surplus S tocks included only for month of August.
Reports by Owning Agencies. The various owning agencies are in the
process of determining excess and idlo proporty which will, to somo extent,
subsequently bo declared surplus and available for disposition. A total of
$691,000,000 for such proporty was in the process of screening and redis-
tribution or was boing hold idlo in standby condition but not yot doclared
to be surplus as of August 31, 1944 ns indicated by the following table:
Excess Proporty of Owning Agencies in Process
of Scroening and Idle Pro porty in Standby
Condition Not Yet Doclared to be Surplus
(Excess property includes proporty which has been determined to be in
excess of noods of a particular bureau, technical service, command, regional
area, or program, but not yet determined to be surplus to the needs of the
War, Navy, or other owning or sponsoring department or agency.)
Owning Agency
Approximate Cost
Dofonso Plant Corporation
$243,909,000
Maritime Commission (including War Shipping
Administration)
30,347,000
War Food Administration
5,700,000
Foreign Economic Administration
1,512,000
War Department
396,791,000
Navy Department
12,803,000
Total
$691,062,000
Regraded Unclassified
Report to Director of Mar Mobilization
211
-15-
Total Disposals in 1944
As illustrativo of the magnitude of the surplus problem even prior
to the end of any phase of the war, the following figures are presented
showing dispositions of property by the two principal owning ngencies and
tho five principal disposal agencies from January 1, 1944 to August 31, 1944,
Reconstruction Finance Corp.
$84,000,000
Treasury Procurement
80,000,000
Maritime Commission
19,000,000
Foreign Economic Administration
2,000,000
Tar Food Administration
41,000,000
"ar Department
249,000,000
Navy Dopartment
25,000,000
$500,000,000
The a bove figures are in part estimates, and are incomplete in that they
exclude certain sales of facilitios and interagency transfors which would
materially increase the total.
2. Consumers' Goods
Assignments
Consumers' goods, except food, were assigned to the Procurement Division
of Treasury as the government disposal agency, in accordance with Executive
Order 9425, February 19, 1944. Later, the Procurement Division was also desig-
nated disposal agency for a small number of capital and producers' goods, as
indicated in Exhibit 1 to STA Regulation No. 1. The assignment of certain
non-consumer goods wns made to Treasury-Procurement, rather than to Roo n-
struction Finance Corporation, in order to take advantage of the previous
experience and existing stoff of the Procurement Division.
The problem of disposing of surplus government property is not new to
the Procurement Division. Under Executive Order 9235, August 31, 1942,
providing for the offective conservation and use of all types of Foderally-
owned property, the Procurement Division establishod e new branch for this
purpose and set up 11 rogional offices throughout the country and one in
Tuerto Rico.
When the Surplus War Property Administration was established early in
1944, the Procurement Division therefore was already organized and disposing
of surplus property, though not on a scale commensurate with the anticipated
war surpluses. For some time, moreover, the principal disposal function of
the Procurement Division consisted of redistributing, within the government,
civilian typos of surplus proporty that originated largely in the civilien
agencies. Since 1943, however, highly diversified types of surpluses origin-
ating largely in the war agencios have flowed to Procurement Division for
disposal. reover, commercial channels, rather than Government agencies,
have become the chief market for surplus property.
Regraded Unclassified
Report to Director of war Mobilization
212
-16-
Organization
The Procurement Division materially expanded its organization and person-
nel after Surplus War Property Administration was established and is instal-
ling a new, and more adoquate, system of inventory control in order to cope
with the growing problem of disposal and to anticipate the impact of the ces-
sation of hostilities in Europe.
The Office of Surplus Property was established in the Procurement Div-
ision and a staff of men from the field of business, with considerable experience
in marketing consumers' goods, was added to the Washington Office. Personnel
skilled in accounting, control, and operating, were also added, and the region-
al offices were over-hauled with a view to improving their oporations.
The figures below show the extent to which the organization has grown
within a few months. Even greater growth would have occurred if it had been
possible to find the necessary personnel.
Number of Employees
Offico of Surplus Property, Treasury Procurement Division
March 1
June 1
September 1
Washington Office
124
149
201
Regional Offices
1,982
2,334
2,845
TOTAL
2,106
2,483
3,046
In rovamping the previous organization and adding to personnel, the
Office of Surplus Property attempted to place itself in such a position that
it could work efficiently and have the confidence of the business channels
through which surpluses are distributed. Eight merchandise and salesdivisions
("urniture, Machinery, General Products, Automotive, Hardware, Textiles and
Wearing Apparel, Medical and Surgical, and Paper and Office Supplies), were
established with a deputy director in charge of sales and placed under exec-
utives with wide experience in these fields. A similar pattorn is being
followed in the regional offices.
An Operations Division, whose responsibility is the control of property
and reports, coding, appraisal, warehousing and transportation, works closely
with the Sales Division in order to coordinate the physical handling and move-
ment of property with the transfer of ownership.
A third major Division at the Washington Office is responsible for a
number of staff functions, such as personnel, research, publicity, trade
relations, and relations, ith oth r Government agencies.
Summary of Disposal Progress
Surplus proporty hold by the Procurement Division on August 31, 1944,
the Intest date for which dnta are available, totalled approximately 78
million dollars. More than one-half this amount, or 44 million dollars
(appraised value), represented surplus in the so-called "confirmed" inventory,
Regraded Unclassifie
Report to Director of War Mobilization
213
-17-
which consists of proporty that has been classified and appraised for dis-
posal. The "transit" account, consisting of property that has not yet been
classified and appraised, amounted to 31 million dollars (cost), and the
small remainder, or 3 million dollars of property, represented miscellaneous
old accounts.
During the 3-month period, June-August, immodiately following issuance
of SWIA Regulation No. 1, the Procurement Division received doclarations of
surplus property from the owning agencios, chiefly the War Department, that
totalled 74 million dollars. Dispostions of surplus property in the same
period amounted to 26 million dollars (appraised value), nearly three-fourths
of which represented sales. The remainder was almost entirely transfers to
government agencies.
Inasmuch as acquisitions exceeded dispositions during the period, the
amount of surplus property for which the Procurement Division has disposal
responsibility, although still small, rose appreciably and was three times
greater on August 31 than it was 3 months earlier. Morcover, nearly two-
fifths of the property held on August 31 was in "transit" account, awaiting
classification and appraisal. The Procurement Division recognizes that the
two problems, the rapid growth in inventories and the size of the "transit"
account, represent a challenge to the ingenuity and resourcefulness of the
disposal personnel to improve current procedures in order to meet the more
acute problem of surplus disposal anticipated after Germany falls.
Surpluses ready for disposal by the Procurement Division on sugust 31,
consisted of a wide variety of products, those classes exceeding 2 million
dollars each (appraised value) boing, surgical and medical supplies ($5,600,000)
motor vehicles and parts ($4,200,000); furniture and fixtures ($3,200,000);
miscellaneous parts ($2,400,000), leather ($2,200,000); metal industry products,
except machinory ($2,200,000) and apparel, except footwear ($2,100,000).
The disposition of motor trucks has been one of the leading activities
of the Procurement Division in recont months. Approximately 6,265 motor
vehicles were on hand August 31, compared with 27,495 trucks that have been
declared as surplus to the Procurement Division, 21,230 having boon distrib-
uted. Many more are shortly expected to be declared surplus.
Generally, trucks have been disposed of quickly after being inspected
and listed for disposal. Because of the acute shortage, particularly among
farmers who need trucks to move their crops, the Procurement Division has
placed surplus trucks on the market as quickly as possible.
Distribution of trucks geographically was made according to information
obtained from the Office of Defense Transportation indicating those areas most
critically in need of truck transportation. Sales were made in such areas
throu hundrods of dealers. An effort was made to limit sales to not more
than 5 trucks por doaler, although special circumstances sometimes made it
advisable to vary this. Sales average less than 2 trucks por doaler por
month.
Regraded Unclassified
Report to Director of War Mobilization
214
-18-
Many other leading inventory items were far more difficult to move,
for example, furniture and fixtures, consisting largely of used bed mattreses;
and fabricated textile products (except apparel), consisting in large part of
mosquito nets and bars, and comforters. It is evident that merchandise which
is in usable condition and for which civilian shortages are prevalent move
quickly, whereas items that are in poor condition and are not in short civil-
ian supply may require months of resourceful morchandising before distribu-
tion is possible.
Sales Policies and Procedures
The principal problems involved in disposing of most consumers' goods,
the Procurement Division has found, consist of determining (a) the outlet or
trade channel to be utilized, (b) the size of the lots in which the property
should be offered, and (c) the method by which the property should be priced
and the sale executed. Thus far, these determinations have been made largely
by considering the particular conditions of each case and making decisions
accordingly.
(a) Channels of Trade. The Procurement Division has operated under the
policy established by SWIA that regular tr cignada chool: herly used,
although disposal by other means may be advisable in special cases. Proporty
could be offered to the manufacturer, wholesaler, retailer or consumer, or
any combination of these. For practical reasons, however, the Procurement
Division of Treasury makes no sales directly to tho consuming public. Instead,
it sells through established manufacturers, wholesalers, dealers, and ex-
porters, who in turn, sell to other distributors or consumers located through-
out the United States and in foreign countries. The consuming public, both
here and in foreign countries, thus acquire U.S. Government-owned surplus
consumer goods through the customary retail or dealer outlets.
No attempt has been made to establish Government-owned and operated
retail outlets. To establish and perfect a sales organization of sufficient
size and scope to deal with each citizen or consumer desiring to purchase
the hoterogeneous products vailable, appeared to be an undertaking that was
almost prohibitive in cost and certainly not feasible at this time. Even
if it were possible to develop such an organization, it would be inadvisable
because Government retail outlets would duplicate existing distributors, and
possibly drive them out of business.
The Procurement Division also does not sell surplus consumers' goods in
the United States diroctly to foreign nationals. This. policy is consistent
with that established for domostic sales. After consulting with represen-
tatives of the State Department and Foreign Economic Administration, the
Administrator recommended to the Procurement Division of Treasury that a
disposal agency should not doal directly with foreign importers, inasmuch as
such action would place the disposal agency in the position of an exporter
and thus be in direct competition with United States exporters. No objection
Regraded Unclassified
Report to Director of War Mobilization
215
#19a
was found, however, to Treasury's dealing with an agent, or branch office,
of a prospective foreign buyer, if the agent were situated in the United
States and could handle the details of export clearance and shipping.
Customarily, the Procurement Division offers the merchandise to the
manufacturer when the product is one which has to be reworked or altered in
somo important respect, when its value lies in the component materials to be
reclaimed from it, when service in connection with the sale is important and
must be rendered at the manufacturer level, when brand reputation might other-
wiso be jeopardized, when quick and equitable distribution can best be ob-
tained by this method, or when sale to distributors and doalers might be so
disruptive as to cause unemployment at the monufacturing level.
The wholesaler is approached when conditions such ns those just cited
are not present and when the property is a type usually distributed through
such channols. The retailer is approached when the property is the typo
which the retailer usually buys direct from manufacturers.
Generally, the larger the avilable surplus, the gronter is the likeli-
hood that all three levels of trade will be approached.
(b) Lot Sizes. In conformity with the policy of Surplus War Property
Administration, the desire to enable small concerns to participate in the
marketing of surplus property has been the principal factor governing the
determination of the lot sizo. The practice, therefore, has been to offer
consumors' goods in lot sizos which have been established for small businesses
by trade custom, although not always in such small lots as to be necessarily
attractive to the smallest rotailers. It has seemed desirable to cater to
the smallest rotailers of consumers' goods through thoir wholesalers. With
respect to certain producers' goods, for example, trucks and construction
machinory, the property may not be offered in lots but in single units.
(c) Pricing and Methods of Sale. The Procurement Division has oper-
ated within the framework of standard practices and policies ostablished
by the Office of Price Administration and Surplus War Property Administration
when determining the prices at which consumers' goods are to be sold. It
has adhered to the policy included in SWIA Regultion No. 1, Section VI, that
a reasonable test of the market is a nocessary prerequisite to any sale in
order to obtain the full market value of surplus proporty.
Furthermorby, the Administration has oncouraged the Trocurement Division
to cooperate closely with the Office of Price Administration on pricing prob-
lems, not only for the purpose of ascertaining the maximum permissible price,
but also to utilize the experience and extensive price information of the
Office of Price Administration in establishing the appropriate sales prices
to accept. Conversely, an effort is boing made by the Procurement Divi-
sion to furnish the Office of Price Administration with more information on
surplus commodities, so that transactions in such surpluses may be removed
more rapidly from price control regulations whenever possible. (OPA ceiling
prices and other limitations specifically relating to the prices and sales
of surplus war goods were covered by OΓA in Supplomentary Order 94, August 2,
1944, entitled "Sales by Government Agencies and Resales by Certain Buyers.
Regraded Unclassified
Report to Dircctor of Wer Mobilization
216
-20-
Auctions, sealed bids, and nogotiation have all boon used by the Tro-
curoment Division in making sales.
The auction method has been employed infrequently, but is adopted where
the type of property is customarily sold by this method. For examplo,
thousands of horses have been sold by auction. It has also boen employed
where large quantities of heterogenoous proporty must be put on sale because
buyers cannot be attracted by other methods of sale.
No strict sot of guides is availablefor governing whether the mothod of
ocnled-bid or negotiation shall be used in a particular instance. Among the
factors weighed in making such a decision are:
Opportunity for all interosted parties to participate in the
purchase of tho property.
Total not return to the government from the sale of the property
involved.
Speed of disposal necessary.
Existence or non-existence of a recognized markot price for the type
of property involved.
Quantity of the property available for disposal.
Existence or non-existonce of a known market for the property.
If the proporty is to be sold by negotiation, the appraised value may
be significant, for it often bocomes the price at which the property is
offered to prospoctive purchasers. The appraised value may be subjected to
check, however, by an actual test of the onpnoity of the market to take orop-
erty at various prices.
The sonled-bid method has been used far more than the other two. This
mothod has an appealing element of fairness about it and seems to be tho
"safe" method to use to insure all interested buyers an opportunity to partic-
ipate. Actually this method is not attractive to many potential buyers and
it does not ease tho problem of equitable allocation when there are more
bidders at coiling prices than there is property to bo distributed.
Recently thoro has been greater omphasis on the negotinted-snlo method
because, if carefully employed, it can result in distribution as equitable
as the sonled-bid method, and because it may bring a higher price and in-
volve loss expense. Also, it has the marked advantage of spood at a timo
when every effort is being exerted to see to it that morchandise in short
supply reaches the hands of consumers as quickly as possible. Finally it
probably results in a higher return to the Government. It is recognized,
howover, that the negotiations should be sufficiently wide in coverage as
to assure an adequate test of the market.
217
Report to Director of War Mobilization
-21-
3. Aircraft, Aircraft Parts and Aeronautical Equipment
Aircraft, aircraft parts and aeronautical equipment will probably con-
stitute the rgest single surplus property group, judged in terms of quantity
and original cost. Today's aircraft surpluses are primarily (1) war-weary
combat planes, (2) obsolete types and (3) trainers. The lar gest portion are
trainers, many of which could be spared by the military air services as they
attained full strength.
Surplus Aircraft Advisory Subcommittee
In March, shortly after the issuance of Executive Order 9425, a Sur-
plus Aircraft Advisory Subcommittee was appointed and Mr. L. Telch Pogue,
Chairman of the Civil Aeronautics Board and member of the Surplus Tar Property
Policy Board, was designated Chairman. The purpose of the Subcommittee was
to prepare a report recommending the policies to be applied in disposal of
surplus aircraft. In addition to the Civil Aeronautics Board member, repre-
sentatives of State, War, Navy and Commerce Departments, the Reconstruction
Finance Corporation, the Foreign toonomic Administration and the Bureau of
the Dudget were included on the Committee.
The Committee had the benefit of the best technical advice and studies,
including the research incident to a report on surplus aircraft disposal by
the Harvard Graduate School of Business Administration under B. ar Department
contract and completed on June 26, 1944. À copy of the Harvard Report appears
in the Appendix to this report.
Although the "Pogue Committee" did not submit its final report until
July 18, it followed the practice of furnishing the Administrator with pre-
liminary suggestions from time to time. As a result of one of such prelimi-
nary suggestions, the Aviation Division of the Surplus "ar Property
Administration was established early in June.
The Working Committee
Following another preliminary recommendation of the "Pogue Committee,
an interdepartmental Working Committee was appointed, advisory to the Direc-
tor, Aviation Division. The membership of this Committee is representative
of the same agencies as those represented on the "Pogue Committee" with the
exception that the Bureau of the Budget has been eliminated and the "Yar Pro-
duction Board has been added. The working Committec moots regularly overy
week, and keeps complete minutes of its meetings, whichare available for
examination.
The Working Committee is the medium through which the various actions
of the Administration in the disposal of surplus aircraft are coordinated
with the various interested departments and agencies. The Committee has beon
of breat value in working out policios and procedures to be recommended for
adoption by the Administrator. The function of allocation of aircraft types,
for which the domand is high in rolation to the supply, has been assigned to
the Director, Aviation Division, and the Working Committoe.
218
Revort to the Director of Var Mobilization
-22-
"Pogue Committee" and "Harvard" Reports
The "Pogue Committee" Report, which is both summarized and reproduced
in full in the Appendix to this report, is similar to the "Harvard" Report
in its major conclusions. Both emphasized the great significanco of air
power to our national security and the importance of preserving, as a na-
tional asset, the capacity of our permanent aircraft manufacturing industry
for dosign, development and production of modern aircraft. Both stressed
the necessity for orderly and prompt disposal of surplus aircraft through
normal channels of trade wherever possible in order to avoid disruption of
employment and industry. In the &stablishment of policies governing dis-
posal of surplus aircraft, the Administration has boon largely guidod by
these two excellent reports.
Organization
The organization of surplus aircraft disposal is shown in the chart
which appears in the Appendix. This chart explains the relationship which
has oxisted botween the Administrator, the Director, Aviation Division, the
working Committee and the two disposal agoncies handling aircraft, namely,
the Reconstruction Finance Corporation and the Foreign Economic Administration
(a) Aviation Division. The Director, Aviation Division, is assisted by
an Assistant Director, a Spocial Assistant in Charge of Public Relations and
a Ter Department liaison officer. It is contemplated that a second Assist-
ant Director will bc appointed in the near future, and the Navy Department
has indicated its willingness to assign a liaison officer. A research ana-
lyst may be added to the staff at a lator date.
(b) Reconstruction Financo Corporation. The surplus aircraft disposal
activities of the Reconstruction Finance Corporation have boon assigned to
the Dofense Plant Corporation which has set up a special division for this
purpose known as the Surplus Far Aircraft Division.
Great omphasis has been placed on dccontralization in the administra-
tion of the aircraft disposal program. Reconstruction Finance Corporation
has availed itsolf of the tochnical services of the Civil Aeronautics Admin-
istration, both in the Washington office and in the field, to establish sales
centers and storage depots at various points in the contincntal Unitod States.
Since the first of August tho Air Transport Command has been forrying air-
craft into these centers and depots at an increasing rate, and as of Septem-
bor 21st, 6,476 aircraft had been delivered into the actual custody of the
Surplus Tar Aircraft Division.
The small and more readily saloable aircraft, consisting principally
of liaison airplanes, are placed in the salos contors, located at the sitos
of proviously cxisting fixed-base operations. The Division has ontered
into "Agreements for Storage and Service" with somo 34 operators for the
maintenance and protection of aircraft assi nod to thom. Then aircraft
reach those bases they are immodiately inspocted to dotormine condition,
219
Report to Dircotor of "ar Mobilization
-23-
and an inventory of equipment is prepared under the direction of a Civil
Aeronautics Administration supervisor at the center. After inspection the
coiling price, as determined by the Office of Price Administration, is
establishod, and the airplano is listed for sale cithor by dircct purchase
at the coiling prico or by sealed competitive bid. In the sale of military
aircraft for civilian use, propor certification by the Civil Aeronautics
Administration is essential, and in this the Civil Aoronautics Ad inistration
has boon most cooporative in conducting flight tests to dotermino eligibility
for an approved type cortificato. Thirty-fivo models thus far have been
cortified as accoptable.
All other airplanos, including those subject for the time boing to
allooation as potontial transports or utility cargo types and those con-
sidered loss readily soleable, are boing placed in the storago depots, lo-
oated principally at fields financed by the Dofense Plant Corporation. The
Division has ontored into a "Field Storage Contract" with a contractor at
such storage depots on a cost-plus-a-fixcd-feo basis for the storngo of air-
craft under the supervision of a Civil Acronautics Administration supervisor.
S in the case of salos conters, all aircraft aro inspocted, and the oquip-
ment is inventoried, na soon as possible after arrival.
(c) Forcign Economic Administration. The Forcign Toonomic Administra-
tion has an organization problem which, in many respects, is moro difficult
than that of Roconstruction Financo Corporation. The Roconstruction Finance
Corporation can and does employ tho services of the highly developed U. S,
aoronautical industry through the use of agency contracts. It is far more
difficult for the Foreign Loonomic Administration to find roliable agents
in the foreign field, and it is also difficult, in the faco of the present
manpower shortage, to obtain the strvices of competent tochnical supervisory
personnel for assignment to the many foreign posts which will come under the
Foreign Economic Administration's jurisdiction. It is probable that its
activities will have to be goly limited to receiving surplus doclarations,
engaging in market surveys and perfecting plans until partial demobilization
makes available personnol to perform the many mcchanical and tcchnical func-
tions of surplus disposal abroad. Monnwhile, it will be necessary to depond
on the owning agencies (Army and Navy) for most of those mechanical and tooh-
nical functions.
Purchase and Sales Procodures.
The following paragraphs sugregate purchase and sales proceduros into
the difforent classos of acronnutical matorial which are specified in the
Harvard and "Poguo Committee" reports.
Class 1--Thotical Aircraft
It has boon catablishod, through nn exchango of lettors with the Soo-
retary of "ar and Navy, that the requirements of friendly foreign nations
for tootical aircraft will bo mot, during the war, before surplus doolara-
tions are mnde. Therefore, airoraft in this.ostogory will be salcable for
flight use in only a few instances to most spocialized, industrial or Dri-
220
Report to Dircctor of "ar Mobilization
-24-
vato requirements. The disposal agencies have been instructed to clear any
such sales with the Director, Aviation Division, who in turn will request
Yar and Navy Department approval of salos of tactical aircraft in the United
Status and State, Var and Navy Department approval of forcign sales.
It is contemplated that most Class À airoraft will be promptly roolas-
sified to Class E (unabsorbed surplus) to bo dismantled and disposed of for
non-flight purposes.
Class B--Transports
At the present time the domand for transports greatly oxceeds the
supply. An allocation procedure has boon ostablishod to assuro that such
planes as are available are sold to the individuals or organizations who
have the greatost need for them and ospocially to thosc who are making con-
tributions to the war offort.
The allocations procedure established for surplus aircraft hns been
coordinated with that established by the "ar Production Board with respoot
to new aircraft and by the Munitions Assignment Board with respoct to air-
oraft produced for use by the military services of tho United Nations. A
Memorandum of Understanding which describes, in dotail, the entire procodure
appoars in the Appendix to this report.
Class C--Porsonal Aircraft
Planes in this ontogory suitable for privato flying are offored, in the
United States, for competitivo bidding "where is", "as is", or are sold on
an outright offor of the OPA coiling price. It is contomplated that somo of
the the planos in this Class will be set asido for foreign salo at fixed
pricos approximating thosc boing received for similar planes in this coun-
try. The competitivo bid mothod of sale is not regarded as adaptable to
foreign sale.
Trainer planos are not boing generally offored for sale at this timo.
In accordance with the rocommondations of tho"Pogue Committoo; they are
being hold off the markot with tho thou ht that they may ultimately be made
available for organized training programs, several of which are currently in
the planning stage. For example, it is considered likoly that many return-
ing servicemen who have loarned to fly at government expenso will wish to
maintain pilot ratings on aircraft powered with onginos in the highor horse-
power brackets. Most of those mon could not afford to fly anything larger
than n. light plane of the "grasshopper" type, if they had to buy the plane
or rent it at a prioc which included amortization of original cost. It
has been suggested that surplus training planos should be distributed to
airports throughout the country at nominal cost and mado available for use
by ox-sorvice and roservo pilots nt rentals which take into account only
notual operating and maintenance expense.
221
Report to Director of nr Mobilization
-25-
Class D--Aircraft Equipment and Component Parts
The disposal agencies are currently drafting agency contracts through
which it is hoped the services of the manufacturers can bc employed in dis-
tribution of itoms in this category. (Army and Navy ontalogues list botwoon
500,000 and 600,000 different classifications.) The manufacturers are fa-
miliar with the multitudo of arts which they have monufactured. They have
a continuing interest in scoing that thoso components and parts are proporly
distributed in a condition to ronder satisfactory service, The contracts
will provido for payment by the disposal agencies of the manufacturer's
out-of-pocket expenses. The mnnufacturer will roceivo a commission on such
sales P.S are mndo and commissions to distributors will also be authorized.
Class E--Unabsorbod Surplus
It has been estimated that ns many 0.6 30,000 schools and colleges
throughout the country may dosire neronautical equipment for classroom use.
in educational distribution committoe has beon formed by the Dircctor,
Avidtion Division. The Chairman of the Committee is Lt. Col. H. E. Poling,
Assistant Chief, Disposal Section for Field Operations, Air Tochnical Sorv-
icc Command, Wright Field, Dayton, Ohio. Through the medium of this com-
mittoo the thoughts of many organizations interosted in educational
distribution have been brought togother and a final plan of distribution
is in the procoss of proparation. Thore is also the possibility that a
substantial demand will develop for aircraft parts and acronautical equip-
mont to surve non-acronautioal purposes. Whilo it is not likely that those
itcms which have been built at grent expense under emergency conditions to
serve a special purposo will have much monctary value whon adapted to serve
purposes difforent from those for which they woro built, noverthcless they
represent the fincst Amorican design and workmanship and it is considered
highly probable that many of them will have substantial use value in indus-
try, in tho home and on the farm.
In order to dotormino the domand for nircraft parts and equipment to
servo oducational and non-aviation uses, the Surplus Mar Proporty Adminis-
tration and the Reconstruction Finance Corporation asked the Army Air Force
to disassemblo a war-woary B-24 bombor. This was done and the parts were
displayed in an oxhibit which was first loonted at Patterson Field, Dayton,
Ohio, and later at Haine Print in the District of Columbia. The exhibit
vms viowed by members of Congress, educational and scientific organization
The principal organizations attonding the oxhibit have been asked to submi
ronorts and it is hoped that those will bo holpful in indicating the do-
mand for airoraft parte and equipment to servo non-flight purposes of all
types.
When the demand for aircraft in cach ontogory for flight uso, for
aducational, exporimental and memorial purposes, and for non-avintion pur-
poses has boon ovaluated, it is contemplated that sufficient supplios will
be sot asido in storage dupots to. moot this demand for n roasonable poriod
222
Report to Director of far Mobilization
-26-
of timo. (Tho "Foguc Committoo" report suggests that a reasonable poriod
might bc throe years following the cossation of hostilities.) It is antic-
ipatod that the maintonanco of supplies to moot the domand extending beyond
that time will result in a substantial not cost to the taxpayer which can-
not' be justified. Therefore, it is contemplated that the surplus which is
not required to mcot demands over a reasonable poriod of timo should be un-
hositatingly scrapped.
At the present timo noither of the disposal agonoios is equipped to
undertako the scrapping of surplus aircraft. This procodure is currently
being handled by the owning agencios under authority granted by Surplus
"ar Property Administration. The Foreign Economic Administration has boon
authorized to report back to the owning agency for salvage and scrap all
combat aircraft declared surplus in oversons thonters.
Pricing Policy
Regulation No. 4, governing tho pricing of aircraft by the disposal
agencios, was issued on Suptomber 21, 1944; a copy appoars in tho Appondix.
For those fow surplus military aircraft (Class A) suitable for spe-
cinlized industrial or private use, the Regulation sots only minimum prices.
They must not be sold at less than the ostimated salos value of salvagenble
spare parts plus the scrap value of unsalvageable residue.
Prices of Class B niroraft--transports--aro rolated to the lowest
manufacturing cost of the planes manufactured in groatest quantity during
the first six months of 1944. The applicant is given tho option to buy
outright, to lease or to purchase on a terminable installment plan. The
purposo of making planos available on a lease or tor inable installment
plan was to remove the necessity for those in urgot nood of transport cquip-
mont to tio up, in obsoloto aircraft equipment, largo sums of moncy which
could better be used for the purchase of now aircraft as soon as they bc-
como available. It was also folt that this "pay-as-you-go" method of dis-
posal would rosult in a wido uso of surplus transport aircraft during the
initial postwer poriod and that the aggregate rentals roceived might, in
the long run, cxocod in amount the procceds that could bc obtained from
direct salo.
Planes suitable for private flying (Class c) arc to be offored in the
United States for compotitivo bidding or sold upon an outright offer of the
OPA coiling price. Foreign salos at fixed pricos comparable to those boing
received in the United States are authorized. The quantity of aircraft
suitable for private flying is small inasmuch ns rolatively fow have bcon
built since the beginning of the war and the supply has diminished greatly
through attrition.
Primary trainors may be sold under the competitive bid mothod or at
fixed prices for which certain minimums are specified.
Regraded Unclassified
223
Report to Director of Var Mobilization
-27-
Tho Regulation provides that Class D itoms--nircraft equipment and
component parts--bc sold whenever practicablo through normal channels of
trado in accordance with establishod trado proceduros.
The disposal agencies are authorized to soll, loase, lond or donato
Class E property--unabsorbed surplus--to non-profit oducational institutions
to the extent of the authorizations which they or the owning agencies have
boon granted by Congress, on a warranty that they will not be rosold for
flight usc.
SURPLUS INVENTORY
As of Septomber 27 the rmy and Navy had reported as surplus to the
Roconstruction Finance Corporation, aircraft, aircraft cquipment and com-
ponent parts estimated to have cost 227,000,000. Included in this total
wore 9,348 planos and 784 gliders. A complete itomization follows:
Regraded Unclassified
224
Roport to Director of War Mobilization
-28-
SUMMARY OF SURPLUS AVIATION PRODUCTS, 9-27-44
Units
Group
Type
Approx. Cost
Porcentage
(9348)
I.
AIRPLANES
$ (206,295,070)
90.94
1797
A. Light Trainers or Linison
5,100,487
(2.47)
3445
B. Primary Trainors
42,526,487
(20.61)
2124
C. Basic Trainors
51,810,750
(25.11)
426
D. Multi Engino Trainors
24,122,159
(11.70)
(676)
E. Light Combat, Observ., Adv. Tr.
(50,958,414)
(24.70)
47
(1) Fighters
5,619,674
400
(2) Light Bombers (2 ongine)
35,918,702
40
(3) Light Bombers (1 ongine)
2,348,797
116
(4) \dvance Trainers (1 ongine)
4,744,243
73
(5) Observation
2,326,998
(185)
F. Modium Bombers
(28,581,455)
(13.85)
184
(1) Modium Bombers (2 ongino)
28,231,455
1
(2) Patrol Bomber (Flying Boat)
350,000
G. Heavy Bombers
108
H. Utility Cargo
1,263,490
( .61)
12
I. Light Transports
405,415
( .20)
10
J. Medium Transports
1,035,680
( .50)
K. Large Transports
3
L. Rotary Aircraft
433,533
( .22)
11
M. Aerial Targets
57,200
( .03)
784
II.
GLIDERS
2,120,063
.93
85
III.
LIGHTER THAN AIRCRAFT
707,880
.31
1566
IV.
ENGINES
14,840,580.86
6.55
1
V.
LINK TRAINERS
3,696
VI.
PARTS AND COMPONENTS
(2,772,785.85)
1.22
A. Airframe Assemblies and Parts
72,300.13
B. Engine Parts and Accessorios
51,309.03
C. Propellor Assomblies and Parts
2,897.40
D. Aircraft Armanent Equipment
1,206,804.80
E. Electric Equipment for Engines
483,692.96
F. Airplane Lighting Fixtures
73,507.91
G. Misc. Mircraft Parts and Equipment
882,273.62
436
VII.
GROUND AND REPAIR EQUIPMENT
95,361
.04
254
VIII
personnel EQUIPMENT
23,391.65
.01
GR.ND TOTAL
226,858,828.36
100.00
Regraded Unclassified
225
Report to the Director of War Mobilization
-29-
In addition to the above, approximately 5400 Class C planes originally
purchased from private owners by the Defense Plant Corporation for use in the
Civil Aeronautics Administration's War Training Service Program have become
surplus. Because they belong to the disposal agency, under authority of SWPA
Regulation No. 2, they have not been declared surplus. More than 5000 of those
planes have now been sold,
Of the planes declared surplus by the military services, approximately
500 had been sold as of October 1. Those were all in Class C. With one excep-
tion, no sales in any 0 ther class have boon made, pending the working out of
necessary dotails of the policies and procedures under which the disposal agon-
cies are to operate. Such details are nearly completed.
Às yot no aircraft, aircraft equipment or component parts have been
reported ns surplus to the Foreign Economic Administration. This condition is
not expected to be of long duration, however, and with the ond of hostilitics
in Europo it is probable that a very large number of combat aircraft will be
declared surplus.
Public Relations Program
It is of the utmost importance to propare the public mind for the re-
slization that vory little monetary rocovery can be derived from the large
numbors of aircraft which have been constructed for the purpose of winning the
war. The problem would be relatively simple if all of the surplus aircraft
were was -weary. On the contrary, at the ond of the war brand new aircraft and
equipmont will be surplus in groat quantity. Production cannot suddenly be
br ught to a full stop and inevitably groat quantities of aviation matorial
will be built for which there will bc no usc.
It must also be made clear that the retention of roserves of aircraft
built for this war can only create a falso sonse of security. These planes
start to bocome obsoleto from the day they are built and the sccurity of the
nation cannot be preserved with obsolete aircraft.
The public rolations problem, where surplus aircraft disposal is
concerned, is highly technical. It has received special attention from the
Surplus Tar Proporty Administration and from the War and Navy Dopartments.
From the outset it was realized that an aggressive information program and 00-
:rdination of the nublic rolations activities of the agoncies most concerned
with surplus aircraft disposal wore imporative. To that ond the Dircotor,
Aviation Division, SWPA, appointed a Spocial Assistant for Public Rolations.
In addition, a Special Committee on Public Rolations with representatives from
the disposal agencios, the Office of War Information, and the War and Navy
Dopartments has boon appointed to work out = detailed program and to coordinate
its execution.
Regraded Unclassified
Report to Director of War Mobilization
226
-30-
4. Machine Tools and Producers' Goods
Machine Tools
When the war in Europe began, there were approximately 900,000 machine
tools in the entire United States. At the present time, this Government alone
owns between 500,000 and 600,000 machine tools, a very large proportion of which
will eventually become surplus. Since this represents over 25 years' normal
prewar production of the machine tool industry, and since that industry has it-
self greatly expanded during the war, the scope and importance of the disposal
program are obvious.
Relatively few machine tools have yet been declared surplus. On August
22, 1944, 5,287 had been declared surplus and 4,485 disposed of, leaving 802
on hand. The great bulk of these were owned by Defense Plant Corporation,
which in this instance is a very substantial owning agency as well as being
the disposal agency. Only 300 machine tools had been declared surplus by the
armed services, and most of these were old tools bought second-hand. Excess
tools listed by the armed services with the War Production Board, but not yet
declared surplus, amounted to only 11,467.
The major problem is thus yet to come, as most of the Government-owned
machine tools are still in war production. Cooperation between Government and
industry on reconversion plans has been vital for some months, however, and an
important part of each manufacturer's plans should be a decision as to how much
of his machine tool needs he will fill out of surplus property and how much out
of new production.
The administration, in addition to encouraging negotiations on this
subject on the earliest possible date, issued a specific price formula for the
sale of standard general-purpose machine tools, so that manufacturers can an-
ticipate exactly what their equipment will cost if bought from the Government.
This policy is being adhered to by all agencies negotiating sales of machine
tools, which is important since negotiations are taking place, and should take
place, while the machine tools are still in use in war production, and hence
before they have become surplus and been reported to the disposal agency.
h copy of SWPA Regulation No. 3, establishing this price policy, appears
in the Appendix to this report, It was issued upon the joint recommendation of
the War Department, the Navy Department and Reconstruction Finance Corporation.
Its most noteworthy feature is a 5-point differential whereby the manufacturer
who is now using the tools, knows their condition and knows whether they have
been properly maintained, must pay a higher price than an outside purchaser.
With the approval of the Administration, Reconstruction Finance Cor-
poration has adopted a liberal credit policy to encourage purchases of machine
tools by small business. This policy permits sales with a 15% cash down pay-
ment, the balance payable in monthly installments over a five-year period at
4% interest.
Regraded Unclassified
227
Report to Director of War Mobilization
-31-
When the Surplus Property Act of 1944 was onacted, rice formulae
for other categorios of nachino tools, and procedures for expediting the sale
of machino tools and other production equipment, were under active considera-
tion.
Cutting Tools, Parts and Supplies.
After considerable study, a committee of the interested agencies has
submitted to the Administration a plan for the disposal of surplus outting tools,
which is of sufficient general interest to be summarized hore although it has
not yet been put into operation.
Large quantities of outting tools are and will continue to become sur-
plus, largely n.s a result of contract terminations. Cutting tools are procision
articles in which small differences in quality, condition and spocifications
have n gront effect on sales value, and exact and expert knowledge is needed
for a full anvrociation of these factors. For that reason, inexpert disposal
would result both in large spoculative profits and in a dislocation of the
market for new outting toels. The purpose of the plan is to render those
results impossible, to :duoc the maximum roturn for the Government and to
maintain an orderly relationship between surplus disposal and now production.
Under the plan, any outting tool manufacturer desiring to do so may
become an agent of Dofonso Plant Corporation, the disposal agency for surplus
outting tools. Cutting tools becoming available for disposal (either as a re-
sult of contract tormination or of boing determined to bo surplus by an owning
agency) will then be sent direct to the agent who manufacturered them. The
agent will inspect, inventory, store and do whatever is necessary to put the
tools in first class condition at tho expense of Defense Plant Corporation.
Hc will divide the tools into three categorios - standard cutting tools, semi-
spocial cutting tools, and spocial outting tools. He will then proceed to sell
the Govornment-owned cutting tools on a percentage relation with the tools that
he manufactures himsolf. Sales will be made through regular distributing chan-
nols at the same rices that the agent-manufacturer charges for his Jwn tools.
On sales of Govornment-owned tools, the agont-manufacturer will receive 2
commission specified in the agency contract.
Subject t: the approval of the Attorney General, this plan has been
approved by the Administration and by the Office of Contract Settlement. No-
gotintions for similar plans aro in progress in connection with the disposal of
radio tubos, and have beon considered for such products as abrasive wheels,
ball and roller boarings, and others.
Chomicals
Chemicals in general have bcon in two extrone groups, namoly, materials
in very active demand and short supply, the salo of which is largely controlled
by War Production Board allocations, and matorials for which, under prosent
conditions, there is relatively littlo civilian demand. The Inttor group in-
Regraded Unclassified
228
Report to Director of War Mobilization
-32-
cludes a large number of materials for which either no demand exists under
normal conditions, or which are available in quantities far in excess of normal
civilian consumption and requiring developments of new uses. Because the al-
location and control of chemicals in the War Production Board is concentrated
in Washington, and because of the technical nature of the material, the sale
of surplus chemicals has also been concentrated in Washington and is being han-
dled by the division of Defense Supplies Corporation which handled stockpile:
operations of this nature.
Steol
Steel and other common metals are handled under a recently devised
procedure by Metals Reserve Company, involving local sales coupled with a plan
for nationwido information and shifting of stocks from one area to another.
Two difficulties have been encountered in the disposal of surplus motals -
first, the natural desiro of purchasers to acquire necessary supplies from their
regular sources, and second, the unbalanced supply and demand in various lo-
calities.
The first of these difficultics has been accontuated by the limitation:
upon uses necessary under wartimo conditions, and particularly because of man-
power shortages. Because of these conditions, in many casos the only persons
allowed to purchase are also allowed to fill their requirements from primo
sources. Sinco in most cases matorial is available from primo sources at the
present time, end sinco there is relatively little profit incentivo because of
taxos and renogotiation, the allowable purchasors are not anxious to acquire
the surplus matorial regardless of prioc. As e result, in many casos the only
buying interest has been from doalers, who are primarily interested in purchas-
ing on a relatively long-term speculative basis rather than to fill immodiate
requirements. It has socmed inadvisable to broak the market to at level attrac-
tive to such speculative buyors, since with the rolaxing of limitations which
may be expected in the not too distant futuro, a market will oxist which will
return to the Government a far greater value than would bc available by sales
today.
The geographic dislocation which presented a considerable obstacle to
salos is boing overcome by a procedure which ostablishos a central inventory
with Murray Cooke's agent in New York, who performs two functions, bringing
togother inquiries from one locality and supply at another, and buycrs to whom
nationwide offerings are of logical interest. Bocause of the tremendous number
of different possible doscriptions, the establishment of a central inventory was
difficult, and required considerable time. However, it is believed that the
present oporation will rosult in a steadily increasing salos which will be fur-
ther increased by the development in the field offices of technically skilled
personnel to handle the material.
Other Producers' Goods.
Of the other producers' goods assigned to Reconstruction Finance Cor-
poration, the majority are either of a nature which requires local sales bo-
cause of transportation costs, or are in acutoly short supply, and present
relatively little sales difficulty except that rosulting from the various regu-
Regraded Unclassified
229
Roport to Director of "Tar Mobilization
-33-
Intions governing their use. Fibers, for example, are in the latter class, and
because of thoir nature, can be sold readily but roquire considerable techni-
cal knowledge to obtain the greatost value. Coal is primarily the subject of
local salos, since it cannot be moved oconomically except in rare instances.
Lumber also must be sold locally. Petroloum products are either readily sala-
blc or, as in the case of somo of the materials r eported to date, of such un-
usual spocifications as to be unknown to the civilian trade, and requiring the
development of substitute uses.
5. Industrial Plants
The Government has furnished facilities, to which it has title, to
a proximately 2,367 privately operated industrial plants. Of these, complete
plants owned by the Government approximate 772 in number, 600 represent
"Scrambled" construction facilitios, and 995 represent machine tools and pro-
duction equipment located in privately owned plants.
Excluding 11 instances in which contractors have exercised options
to purchase plants, in strict conformity with tho terms of such options, only
17 plants have been doclared surplus. Of these one has boon sold, 5 have boon
reclaimed by the owning 3. gency and withdrawn from surplus and 11 are for sale.
Thus, as in the case of machine tools, the roal problem of disposal
of surplus industrial plants is ahoad, but it is vital in tho interests of re-
conversion and roemplo that prompt and intelligent planning take place as
long in advance as possible.
The armed services are completing internal surveys to determine what
plants should be retained in stand-by condition, what plants are noeded as a
war reservo, and what machine tools and production equipment will be needed for
such programs as the modernization of arsenals and the like.
Defense Plant Corporation is making survoys of each plant owned by it
which include (a) a dotailed ongineoring report describing the plant, the typo
of construction undertaken, and such customary information as arcas, floor
loads, clearances, bays, etc.; (b) details of cost, photographs, maps, plot
plans and plant layouts; (c) detailed description of cach item of equipment
showing manufacturer, type, condition, ago, prico, location, etc.; (d) infor-
mation on taxos, housing, power, water, sewors, transportation, etc.; (e)
information regarding availability and cost of necessary raw materials; (f)
information showing whother the facilitios deviate from building codes, whother
they are single purpose or multiplc purpose, whether thoy are scrambled or
capable of independent operation, nd whother they are capable, from a physical
stendpoint, of poncotimo operations.
Such surveys are completed for over 75 per cent if the projects and
are well under way for tho balance. DPC is also making cost comparisons both
in construction and operation between difforent plants in given fields and
betwoon different products that are compotitive or potentially SO.
Regraded Unclassified
230
Report to Director of "Yar M,bilization
-34-
In bricf, Defonso Plant Corporation proposes to take each plant in
vari us fields, such 0.8 aluminum, magnesium, alcohol, etc., and determine
what reduction in costs, what new or cheaper sources of raw material, power,
etc., what now outlots for its product, what supplementary facilities, what
improvements in transportation and its c.st, otc., will bo required to onable
the plant to justify. itself in the post-war market.
Studios are being made of over-all industries nd the position of
Government plants in the industry in order to determino for the country at
large and for particular rogions, pre-war and current capacities and produc-
tion, present stockpilcs, the condition and types of private and Government
facilities, the financial position of present oporators, the availability of
other possible oporators, and, other relevant factors.
The possibility of converting some of the largor plants into multiple
tenancy or small unit manufacturing, is also under study. Judging from prior
efforts along this lino, both in this country and in England, such operations
have usually b en successful where transportation was good, and where they were
adjacent to largo consumer markets. Most Government-swmod plants are not so
located.
In current negotiations for the salo of industrial plants, the price
has boon detormined on what would be today's reproduction cost of the plant,
eliminating such war-tine factors ns overtime, delays in holding labor while
waiting for matorials and excess cost f laying founcations during the winter,
as distinguishod from the more normal mothods of construction. This gives the
present material and labor cost under normal construction methods. Doprocia-
tion is noxt doducted, thon there is doducted the cost of whatever changes are
necessary in the plant to make it suitable for pcace-tino operation. The ro-
sulting figure is the basic prico.
6. Nonindustrial Roal Estato
Exccutivo Order No. 9425 designated the Reconstruction Finance Cor-
poration (or its subsidiaries) as the agency to dispose of surplus industrial
real property, but was silont as to the agency which should dispose of other
roal property, including surplus agricultural land. The Administration was,
therefore, faced with the necessity of dosignating the disposal agency for
surplus agricultural and other types /f surplus land.
Accordingly the Administrator appointed en Interdepartmental Roal
Estate Committee under the Chairmanship of Col. John J. O'Brion, Chief of the
Real Estate Department of the Army Corps of Engineers. The members of the
Committee and the Agencios they represented wore as follows:
Col. John J. O'Brion, Chairman
War Dopartment
Mr. Robert J. Hayes
National Housing Agency
Mr. Louis Boan
Roconstruction Finanoc Corp.
Mr. W. E. Roynolds, Commissioner
Public Bldgs.Admin., FWA
Mr. John J. Courtney
Navy Department
Mr. Joel D. Wolfsohn
Dopt. of Interior
Mr. Soth D. Sims, Asst. Socy. of
Dopt. of Agriculture
Mr. John Carmody
Maritime Commission
Regraded Unclassified
231
Report to Director of War Mobilizati:
-35-
The purpose of the Committee was to recommend to the Administrator an agency
which in its opinion should be designated as the disposal agency for surplus
agricultural and similar lands and to recommend policies under which such land
should be sold. The Committee hold five meotings - May 29, June 5, Juno 12,
June 23, and July 28. The final report of the Committee recommended two
agencies, Public Buildings Administration and the Reconstruction Finance Cor-
poration, with the decision between the two left to the Administrator. Other
recommendations concorning policies were also included in the report. A copy
of the minutos of the five mootings appear in the Appondix to this report.
After further consultation and deliberstion the Administrator chose
the Reconstruction Financo Corporation as the disposal agency for roal ostate
other than industrial, for the reasons set forth in the Committee report. The
Reconstruction Financo Corporation immodiately bogan formulating plans for carry-
ing out the program, which it submitted to the Administrator. This was followed
by the issuance by the Administration of Surplus war Property Supplement No. 1
to Regulation No. 1 and Regulation No. 2 which portains principally to the dis-
posal of surplus land other than industrial. Copies appear in the Appendix to
this report.
The policies set forth in Regulation No. 2 were based upon the roc-
ommondations of the Intordepartmental Roal Estate Committee. They emphasize
first, the granting to former owners f a prior right to repurchase their prop-
crty at its fair market value, and second, thoisale of agricultural land in
family-sized parcels to persons who will livo on and cultivate the land, and who
will not assomble small tracts into large ones for spoculative pruposes.
Acting under paragraph A Section II of Regulation No. 2, the Recon-
struction Financo Corporation set up a Surplus Roal Estate Advisory Committee,
the membership of which represented other Government Agencies and Devartments
under the Chairmanship of Col. M. J. O'Byrne of the Roconstruction Finance Cor-
poration. The Committee, in addition to the Chairman, consisted of the follow-
ing:
Mr. R. G. Church
Public Buildings Administration
Major R. H. Fabian
War Department
Mr. À. S. Koch
Civil Acronautics Administration
Mr. N. M. Littcll
Department of Justice
Mr. Soth D. Sims
Department of agriculture
Mr. John T. Courtney
Navy Department
Mr. Loon H. Keyserling
National Housing Agency
Mr. Joel Devid Wolfsohn
Department of Interior
This Committee has been actively considering the problems of nonindustrial land
disposal, though all sales were stopped when it became apparent that tho Sur-
plus Property lot of 1944 V uld require a completo revision of oxisting rogula-
tions on the subject. Substantially no real estate has in fact bocn sold.
The problem of disposing of Governmont-wmed imporovonents on loased
lands was encountered. The Army alone had about 20,000 loases, generally con-
taining the obligation of resteration of the loased lands. It was decided that
Regraded Unclassified
232
Report to Director of Tar Mobilization
-36-
the Army should continue disposing of Government-owned improvements (other
than industrial) on leased lands and letters to the War Department authorizing
it to do so and outlining the mothods were forwarded under date of July 17th
and August 22nd, copies of which appear in the Appendix to this report.
On August 28th members of the Surplus Roal Estate Advisory Committee,
representing agencies which might be interosted in acquiring for their own uso
any of the surplus land, wore sent a list and requested to clear with their
agency, within a 21-day period, as to whether any of such land was dosired for
their use.
To date twonty-four items of roal ostato have been declared surplus
to the Reconstruction Finance Corporation comprising 71,432,350 acres of land
which, with the original cost of acquisition and the cost of the Government of
betterments placed on the land, amounts to $4,692,817,77.
7.F od
The War Food Administration W.S dosignated by SWPA Regulation No. 1
as the disposal agency. for foods; this assignment complied with the designation
in Executive Ordor 9425. While this assignment was made in Regulation No. 1,
that Regulation originally became offoctive only as to the surplus war proporty
of the War and Navy Departments and the Maritimo Commission. By Supplement No.1
to Regulation No. 1, the offcctivoness of the Regulation was oxtended to surplus
property of the War Food Administration as of lugust 1, 1944.
Not only do tho various whing agoncies, such as the Army and Navy,
turn over surplus food to War Food Administration for disposal but War Food
Administration itself constitutes an owning agency if largo stocks of food. But
War Food Administration has variod respensibilities in disposing of foods; it
sells foods ns a result of normal inventory turn-over and also as part of its
price stabilization program.
Thore was no catogory of salos within WFA which corres endod with the
Surplus War Property Administration dosignation of "surplus to its needs." It
was therefore necessary for War Food Administration to determine within its own
organization just what stocks available for salo came within a definition of
surplus rather than of inventory turn-over or of price stabilization. Accord-
ingly, during August it set up a procedure wheroby a designation is made within
WFA when food stocks are released for salo to indicato whether they constitute
surplus. This determination is made basod upon the origin of the food stocks.
This system was instituted toward the end of August and WFA is now engaged in
roonsting its records upon the same basis going back to May 15, 1944, when SWPA
Regulation No. 1 became effective.
War Food Administration has been selling surplus stocks of food dc-
clared to it by the other owning agencies, but such declarations have not pre-
sented a large disposal problem to date.
Regraded Unclassified
233
Report to Office of War Mobilization
-37-
8. Morchant Vessels
SWPA Regulation No. 1, effective May 16th, 1944, designated the
Maritimo Commission as the disposal agency for "ships and small watercraft",
excluding "ships under the cognizance of the Navy Department which fall into the
categories of combat ships or naval auxiliaries, other than those based on com-
morcial designs or susceptible of commercial usage."
For practical and administrative roasons the Maritimo Commission has
divided surplus vesscls into two disposal groups; (small) vessols up t) and in-
cluding 1000 gross registered tons, and (large) vessels over 1000 gross regis-
tered tons.
No largo vessols have yot been declared surplus and it is improbable
that such vessels will be doolared surplus prior to the end of the war. It is,
however, abundantly evident that a substantial surplus of large vessels will
eventually cxist. The problem of disposal of such surplus large vessels has
been studied and considered carefully and an outline plan for orderly andief-
footive disposal has bcen prepared. Disposal of the surplus of large vossols
has sorious international as woll as domostic implications.
Within security limits full information and data of vessels under
their ownership and control have been continuously available from the Maritime
Commission and War Shipping Administration.
The War Department and Navy Department have been requested to submit
data as to the number of vessels of each general type that they own, which will
eventually become surplus, that are 'based on commercial designs or are sus-
coptible of commercial usage', and if possible their general location, to onable
development of psalplans in advance of otual declaration of such vossels as
surplus. This, and additional specific information ns to oach type of vessel,
is necessary to dotermine which types are sucoptible of commercial usngo.
Studies wore also contemplated of the adaptability of vossels of
peculiarly military tyno, such as landing craft, to commercial usage.
Surplus small vessel disposal has been in progress since the inception
of SWPA Regulation No. 1.
Since May 15, 1944, up to September 7th, 1944, 361 snall vossels have
boon doclared surplus, in the following sequence:
May 15th to June 30th, 1944 - 22 vessels
July 1st t) July 3lst, 1944 - 35 vesscls
Aug. 1st to Aug. 31st, 1944 - 229 vessels
Sept. 1st to Sept. 7th, 1944 - 75 vossols
Regraded Unclassified
234
Report to Director of War Mobilization
-38-
Of the vessels declared surplus, the following 12 vessols have boon
disposed of:
OFFICIAL
SALES
PURCHASE
NAME
NUMBER
DISPOSITION
PRICE
PRICE
AMELIA
224429
To Former Owner
$12,500.
$28,957.
If
11
"
PRINCETON HALL
19,055.
29,172.
236146
"
If
19
KETCHIKAN
21,970.
41,000.
241095
11
If
11
BABY ROSE
26,000.
60,542.
RELAXER III
118860
19
"
"
13,000.
28,645.
MY KAY IV
239337
"
a
11
7,500.
28,000.
239142
11
"
"
K TIE D
20,000.
50,500.
MARIE
236927
Returned to Owner with aymont for uso of 3,500.
236433
-
If
If
11
"
If
"
"
ADIOS
3,000
230454
If
"
If
11
If
If
R
H
STERLING
4,000
BEBE
Sold to Owner
$1.00
$1.00
RESOLU TION
1J633
Transferred to U.S.M. C.
Disposal of all vosscls of 1000 gross registered tons or less has
boon nado by the War Shipping Administration in accordance with the provisions
of Public Law 305 - 78th Congress, approved May 18th, 1944. Procedure under
the law requires reasonable notices to former owners of vossels, which creates
a lapse of approximately two months after declaration of small vossels as sur-
plus, before they can be advertised publicly for disposal to other than the
formor owner.
9. Communications Equipment
Actual salos of surplus communications equipment, through doclara-
tions to disposal agencies, have been comparatively small. These surpluses
havw boen entirely from the Army, and 8° far no declarations have been made
to the Reconstruction Finance Corporation by the Navy, Maritime Commission,
or other departments. The largest doclaration by the Army is some $13,300,000,
cost value, of vacuun tubes. Noarly half of those tubes have been returned
to original manufacturers for disposal under contract agreement and will be
primptly sold for Government account. The Apray has also declared surplus about
$270,000 of wired and wireless communications A" aratus, comprising a large
number of items. Disposal of this equipment has been delayed, pending discus-
si ns with manufacturers. The Treasury Procurement Division, which proviously
sold all Arny surpluses, has continued to dispose of domestic receiving sets
and ographic equipment, as they become surplus or obsolete.
The Army Signal Corps has been very active in its efforts to locate
and doolare surplus communications equipment, and both it and the Army Service
Forces have been most cooperative. The Signal Corps, in addition to directive
work from Washington, has established surplus property divisions in each of its
depots in this country, and pressure is being ut on these divisions to dis-
cover and declare any excess stocks.
Regraded Unclassified
235
Report to Director of War Mobilization
-39-
The larger amounts of surplus in the communications field have, so
far, resulted from the termination of contracts, although none of these sur-
pluses has been declared to the Reconstruction Finance Corporation. The Signal
Corps, at present, is endeavoring to clear terminations through having prime
contractors dispose of resulting inventory claims. Component parts are used
on other contracts, or sold, and the balance of materials sold for rouse or
scrap. Eventually, component parts will be returned direct to the original
manufacturor; as contracts, discussed below, are signed.
Several months ago, some manufacturors had inventorios rosulting
from terminated contracts standing undeclared for many months, some running
for as long a time as sixteen months. This was a natural result of pressure
to get out nooded war supplies and an unwillingness to sacrifico any tino in
inventorying cancelled orders. The Administration had discussions with a
number of manufacturers regarding terminated contracts, as woll as disposal
of surpluses, putting emphasis on the prompt clearance of cancelled orders.
Settlemont of inventory claims ften rosults in the discovery of component
parts still badly noeded for war production. The War Production Board has
recently put in stronger screening mothods, to enable the prompt recovery of
needed component parts from terminated contracts. Manufacturers now aprear
fully to appreciate the importance of a prompt clearance of cancelled orders,
and the Office of Contract Sottlement, as well as the armed services, are
following the situation closely, 80 that usoable parts may go into now con-
tracts or be returned to manufacturers, and prompt disposition made of the
balance of materials.
Much of the Administration's work has been concerned with making plans
for disposal of the large surpluses to be expected with the completion of oper-
ations in the European theater. It seoms likely that communicati ms surpluses
at that time will largely result in this country from terminated contracts and
a reduction in depot st oks; and in Europe, from fixed installations, any ox-
cessive reserve stocks, and heavier, bulky materials which it may be decided
unwise to novo to other theators, such as poles and possibly lond-covered cable.
Other uscable equipment is likely to be shipped to, or reserved for use,in,
other thoaters.
The Reconstruction Finance Corp.has devel pod a contract for consign-
ment of surplus communications equipment in this country to tho original manu-
facturers, who W uld act as agents in disposal for the Government. These con-
tracts would make it possible to dispose of surpluses in an orderly manner,
without having unuseable quantities dumped on the markot at no time through
auotion or ther salos nethods. It would put the materials into the hands of
the people who should know most about them, and who should be in the bost po-
sition to find markets oithor for the original or somo substitute use of the
product.
The contract provides that the manufacturer would accept the return of
all of his products which the Government desired to return to him on a consign-
ment basis, and that he would not 0.8 agent in checking, tosting, roconditioning
(if needed), and storing, all at cost, and receivo a small commission for sell-
ing. The ratio of salos of such Government stocks, to the manufacturer's own
Report to Director of War Mobilization
236
-40-
stocks, is left open, as in some instances it may be possible for the manu-
facturer to move all of the Government stock before he is in a position to
produce his own product, and in other instances it may be necessary to soll
a much smaller percentage of Governmont-owned stocks, in order to allow the
manufacturer to keep his factory in operation and employ labor. It is thought,
however, that these manufacturors should soll the Government stock at least
as fast as their own.
The contracts will be followed very closely to make sure that the
Government's interest is being protected, and where manufacturers contend that
thore is no possible sale for certain equipment, other opinions must be obtain-
ed from independent sources. The Signal Corps of the army has expressed itself
as highly in favor of the contracts and will cooporate fully with the Recon-
struction Finance Corporation in returning component parts and completed oquip-
mont to agreed manufacturers. A number of such contracts have boon signod, and
others were under discussion when the Surplus Proporty Act of 1944 was ennoted.
There are a number of types of communications equipment for which it
will bo difficult or impossible to find a markot, other than scrap. Cortain
types of radar oquipment will probably fall in this classification. A manu-
facturer naturally hositates to agree to take back such material to handle,
store, and oventually scrap. It was the Administration's plan, in such cir-
cumstances, after obtaining independent opinions, to dispose of those equip-
monts where they stand, without incurring any further loss to the Government
through packing and transporting.
The difficulty of planning for disposal of surpluses-is incroased by
the wide variety of ostimates recoived on the am unts and various typos to be
expected. There soems to bo agreement, howover, that certain types of radio
and radar, vacuum tubes, field wiro, and certain dopot reserve stocks and
parts, will furnish some of the principal surpluses of o mmunications oquipmont.
A further delay arises from the fact that somo f this equipment, especially
radar, is still carried in the secret category, which hinders efforts to con-
sider possible alternate commercial uses. Discussions have boon hold with the
Mar Shipping Administration, the Civil Aeronautics administration, and the
Association of American Railways and other organizations, as to the potontial
uso of cortain of these surpluses whon, as, and if they arise. The War Pro-
duction Board and the Foreign Economic Administration have lists of organiza-
tions which have asked for licenses to have manufactured, or to export,
various types of communications oquipment, and those possible outlets are
boing kept informed. There is a largo accumulated demand, at the present time,
for many types of radio equipment from Government departments, such 0.8 Shipping.
Forostry, and Park Services; State and Municipal Dopartments, such as Police
and Fire, and truck, bus, and taxi services. If, as is anticipated, the
large surbluses of such equipment will not come until the war onds with Javan,
then there may be groater difficulty with disposal, as manufacturors will be
partly on a reacetime production basis, and rapidly making obsoloto the more
oxpensive and honvier tynes of Army-Navy equipment.
No decision has boon announced on ultimate disposition of lend-
leaso communications equipment, large quantities of which have been shimped
abroad. The size of our poacetime Army and the requirement of military train-
ing for all young men, are also undecided quostions. Universal military train-
in6 would require substantial amounts of communications apparatus for training
and for maintenance. It is possible that the Navy may dooido to soll radio
and radar equipment, or S me of it, with any ships disposed of after the war.
Report to Director of War Mobilization
237
-41-
It may woll be decided, also, to maintain wired and wireless installations,
which we have undoubtedly made on islands of the Pncific, where they do not
come under allied govern ont control. Should all of those factors work against
the declaration of surpluses, thon the problems of surplus disposal would be
substantially reduced.
There has 80 far been no surplus communications equipment reported to
the RFC by the Navy. Any surpluses which have occurred have probably been due
to obsolescence, caused by the rapid development of the communications art dur-
ing the w.r, and it is understood that in such cases the Navy has been able to
dispose of them through utilization of parts, without assistance from the Rocon-
struction Finance Corporation. In this connection, it is interesting to note
that the Navy awarded a contract to a manufacturer to disassemble a large number
of a cortain type of set. Somo valuable and badly needed parts were thus ro-
covered. This plan presents interesting possibilities for types of surplus com-
munications equipment for which no markot can be found, provided rocovories
warrant the dismantling costs. The Navy is storing component parts takon over
from terminated contracts or obsoloto oquipment, in a centralized warehouse,
and is understood to bo using them on some now contracts and for maintenanco.
No surplus communications equipment has thus far been declared from
foreign theators. It has been the plan that these surpluses would be declared
through Washington, rather than in the foreign theators. In the European
theater thore will undoubtedly be fixed installations of wired circuits, tele-
phone and tolograph, central offices, carrier equipment, and radio stations.
Planning for disposal of such surpluses is necessarily in its infancy, in view
of the many uncertainties involved (including the possibility of large movements
of equipment to the Far Eastern Theator), but was under way when the Surplus
Property Act of 1944 was enacted.
10. Scrap
The Scrap Metal Division has been active primarily in connection with
the policies governing sales of scrap bocoming available for disposal as the
result of contract terminations, since this field has produced the most impor-
tant problems in connection with the scrapping of property and probably will
continue to do 50.
In addition to frequent meetings with the interested Government
agencies and with representatives of the various scrap industries, periodic
field inspections have been made at private plants and installations of the
various owning agencies, in order to have first-hand information as to the
problems encountered and the effectiveness of the Administration's policies
in solving them.
Two major changes rolating to sales of scrap have been made in the
Administration's price policies for the sale of contract termination inventor-
ies, on the recommendation of the Scrap Metals Division. The scrap warranty,
originally required to be obtained from all persons buying at scrap prices,
has been made optional with the owning agency in sales on competitive bids
and romains mandatory only in nogotiated sales. In addition, because of a
market condition rosulting from oversupply, Regulation No. 5 has boonissued
Report to Director of War Mobilization
238
-42-
fixing minimum prices on sales of aluminum scrap, and establishing procedures
for the storage of aluminum scrap which cannot be sold at those prices. Copies
of those documents appear in the Appendix to this report.
Other amendments relating to scrapping procedures and sales were
under consideration when the Surplus Property Act of 1944 was ennoted, and a
small handbook for the guidance of termination officers in making sales of
scrap was in preparation.
11, Preparations for Foreign Disposal
On March 16, 1944, the Administration's Committee on Redistribution,
Handling and Disposal of Surplus Property (Clay Committee), following the dos-
ignation of disposal agencies set out in Executive Order 9425 of February 19,
1944, recommended:
"Foreign Economic Administration -- Except in ctive thenters of
military or naval operations, the Foreign Economic Administration
will be responsible for the redistribution and disposition of all
surplus property located outside the continontal United States and
its territories and possessions, which the Foreign Economic Admin-
istration is prepared to dispose of or to store and maintain, pend-
ing disposition.'
On April 14, 1944, the Administrator appointed Mr. Leo Crowley,
Administrator of the Foreign Economic Administration, as Chairman of a Com-
mittee to study the various problems involved in the foreign disposal of sur-
plus war proporty and to recommend procedure and policies to the Administration.
The Departments of State, War, Navy, and Treasury, and the War Production Board,
named represontatives to serve on this Committee. Mr. Crowley appointed a grou:
of four well-known business mon to advise him and the Committee on the type of
problems involved in foreign disposal of surplus property. On May 12, 1944,
this Business Mon's Advisory Committee rendered its proliminary rep rt, a copy
of which appears in the Appendix to this report.
Thoreafter, tho Crowley Committee on foreign disposal of surplus war
property hold regular weekly meetings for the purpose of studying the Business
Men's Advisory Committee report and making its own policy recommendations,
which were completed on August 2, 1944, a copy appears in the Appendix.
During this period, SWPA Regulation No. 1 was issued assigning to
the Foreign Economic Administration for disposition, all surplus war proporty
of whatsoever nature located outside of the Unitod States, its territories and
possessions. Thus the Foreign Economic Administration was named 0.8 Foreign
Disposal Agency for surplus war property located abroad doolared by the War
and Navy Departments and the Maritime Commission after May 15, 1944, and by
all other government agencies after August 1, 1944.
In the monntime also, Mr. Froderick Pope, who was in London, inves-
tigated for Surplus Tar Property Administration the Intest British plans for
disposing of their own surplus war property, including a study of various dis-
239
Report to Director of War Mobilization
-43-
posal questions of common unterest which might arise, Mr. Pope returned to
the United States in June 1944, and submitted a full report on surplus property
disposal plans in Great Britain dated June 1, 1944, a copy of which appears in
the Appendix.
The Business Men's Advisory report of May 12, 1944, recommended that
foreign disposal of surplus be organized in a section of the Foreign Economic
Administration with no other responsibilities, the chief of which should be
responsible solely to the Administrator of the Foreign Economic Administration;
that foreign disposal of surpluses be handled through a Government corpora-
tion, with clear-cut direct lines of authority and responsibility. With this
understanding, Mr. Crowley appointed Commander Roger Hyatt on June 2, 1944,
to take complete charge of FEA surplus disposal activities, responsible dir-
ectly to Mr. Crowley. Commander Hyatt promptly set about the task of re-
cruiting and setting up such a vertical organization to carry on this wide-
spread and important function; but due to the unavailability of capable men,
and to differences of opinion within the Foreign Economic Administration,
Commander Hyatt was unable to perfect the type of organization which had been
planned. On July 28, 1944, Commander Hyatt resigned and returned to the Navy.
Meantime certain foreign surplus disposal problems have been handled
on a day-to-day basis by various members of the Foreign Economic Administra-
tion's organization. However, the Foreign Economic Administration expects to
organize internally in time to handle the large war surpluses which are likely
to be declared after the cessation of hostilities in Europe.
Members of the Foreign Economic Administration and Surplus War Property
Administration staffs have collaborated in the preparation of & conprehensive
set of working instructions. which were sent to all FEA field disposal officers
abroad on September 25, 1944. These field instructions, a copy of which
appears in the Appendix to this report, are so drawn as to reflect the policies
and principles set out in SWPA Regulations and the recommendations of the
Committee on Foreign Disposal of Surplus Viar Property and include preliminary
instructions as to accounting, inventorying, reporting, etc.
The basic policies set forth in the instructions for over-seas disposal
of surplus property include the following:
1. United States Government agencies shall have priority in right
to purchase surplus property at fair market value.
2. Thereafter, surplus property located abroad shall be made
available for relief and rehabilitation purposes, provided that
the price at which the goods are sold or transferred to the
relief organization is equal to the net realization expected
to be obtained for similar goods sold through commercial channels
or on the open market.
3. In other sales, the original U. 8. manufacturer or his authorized
representative abroad will receive preference, in case of equal
prices and terms.
Report to Director of Tar Mobilization
240
-44-
4. Every offort shall be made to maintain the customary
channels of trade and wherever private exporters or
private commercial houses abroad can handle surplus
war property in accordance with the over-all policy,
arrangements shall be made for them to do SO.
5. The Foreign Disposal Agency shall make arrangements with
foreign trade and exporters' associations in the U. S.
for regular and continuing contact and exchange of ad-
vico and suggestions, using industry committoes or similar
method of contact.
6. The Foreign Disposal Agency, in order to discourage the
return of surplus goods to the United States, shall make
sales to buyers abroad who will uso the goods in their own
business over-seas, or whose normal or probably outlets will
be outside of the United States.
7. Over-sons disposition shall be for cash United States dollars
unless other terms are expressly authorized from Washington.
8. Where it is impossible to arrange with foreign governments
to assume under reciprocal aid approved claims or unpaid
obligations of the United States, surplus property may be
used to settlo such claims, where a net benefit to the United
States can be so obtained.
To date, the major owning agencios abroad, namely the Army and the
Navy, have withhold declaration of surplus in any quantity to the Foreign
Economic Administration, pending establishment by the Foreign Economic Ad-
ministration of organization and procedure for disposition of surplus prop-
erty located abroad (W.D. Circular 283 of July 8, 1944), and pending official
desi nation of its offices to which surplus should be declared. Meanwhile,
foreign disposal of surplus property has proceeded in limitod degroo by the
Army under SWPA regulations and under authority granted by the Military
Services to the various Theater Commanders. It is evident that for some time
the owning agencies will have to continue disposing of surpluses located
The Administrator has filed with the FEA a formal request for a
general export liconse for surpluses located in the United States, to be
applicable to as many foreign countries of destination as the State Depart-
ment will approve. A general export liconso for government surpluses would
eliminato many of the present impodiments and delays now oncountorod in
attempting to dispose of burdensome surpluses, without endangering domostic
requirements for war production, which would still be protected by Ear Pro-
duction Board Regulations. The State Department has heartily endorsed this
proposal for a general export license for surplus property as boing within
the foreign trade policy of the United States. Negotiations toward this
241
Report to Director of War Mobilization
- 45 -
end have been proceeding with Foreign Economic Administration since August 9,
and substantial progress has been made.
Thanks to the cooperation of the War Production Board, an arrangement
is in effect whereunder approved requirements of all foreign programmed
commitments will be supplied out of surplus property wherever practicable,
Under present conditions, this reduces the impact of such foreign requirements
on United States war production facilities, materials and manpower, and at
the same time furnishes a satisfactory outlet for surplus property. The re-
quirements of the Fourth Russian Protocol are now being processed by Recon-
struction Finance Corporation and Treasury Procurement Disposal Sections and
by the War Production Board Foreign Division toward this end. The Army and
Navy have also cooperated by agreeing to furnish any materials which they
can spare at the moment, on the understanding that the Army and Navy would
receive adequate priority in case such materials need to be replaced in
military stocks at any time,
Exploratory conversations with the British and Canadian Authorities,
under the guidance of the State Department, are getting under way, for the
purpose of avoiding any unnecessary conflict in disposal of United States
Government surpluses in foreign countries, with particular reference to
surpluses which our Armed Forces may declare in Canada, in Great Britain or
in the other areas of the British Empire. These discussions are designed
to include procedure for disposal of property re-possessed by the United
States Government under terms of Article V of the Lend-Lease Agreements.
Specific negotiations for the sale to the British Government of Lend-Lease
machine tools located in England are under way.
12. Preparations for Disposal to State
and Municipal Governments and Tax-
Supported Institutions.
Early in March the Administrator created a Division to carry out
the recommendations of the Baruch Report with a view to planning and organ-
izing in advance the sale of surpluses to the tax-supported entities.
Policy
As stated on page 4 of this report, it was necessary to formulate
general overriding policies which would assist the tax-supported entities
in acquiring out of surplus as much of the goods they desired to buy as
possible. This attitude was taken because the Administration felt it could
not without specific direction from Congress either make donations or give
price preferences, however meritorious the particular applicant's case might
be. Therefore it was necessary in the interim to find other ways of assist-
ing the States and local governments in their acquisitions of surpluses.
One way of helping was to give this class of buyers a chance at the
goods before they were offered to the general public. The problem involved
here was not to tie up the goods for any longer period than absolutely
essential and yet accomplish this objective.
242
Report to Director of War Mobilization
- 46 -
The Procurement Department of the Treasury, which has acted as the
general Government disposal agency in the past, established the following
practice which grew out of years of experience: The Federal Government
agencies have always been given a first option to purchase any Government-
owned goods before these were disposed of to outsiders. The practice was
to give a twenty-one-day period in which the Federal agency interested
would determine whether or not it wished to purchase the particular mer-
chandise that was being offered for sale. The next step in this procedure
was to notify interested tax-supported entities which were adjacent to the
location of the goods. They were given an opportunity to acquire such
goods as the Federal Government departments did not claim and then the
residual balance would be sold to the public.
The Administration continued this procedure as its normal practice,
qualifying it, however, by providing that emergencies arising out of the
war and calling for prompt public distribution of goods would receive pre-
ferential treatment even though this might cut across the above procedure.
This has occurred in a few instances where it was essential that trucks be
sold immediately in re ions where the crops were being harvested.
Market Survey
Numerous meetings were held with the various types of tax-supported
bodies throughout the country in order to find out what their desires were
and what thoughts they had on how they should be treated in the acquisition
of surpluses. The War Production Board, Government Division, which has
functioned as allocator for the tax-supported entities during the war, rep-
resenting. their interests as a claimant for goods, was also extremely help-
ful in giving background and advice.
According to War Production Board statistics the tax-supported
entities comprise in total 187,585. This is exclusive of the eleemosynary,
charitable and certain non-profit institutions. Roughly, the potential market
consists of 200,000 buyers.
TYPES OF BUYERS:
I. Governmental Units:
A. U. S. Government
B. States
C. Counties over 50,000
D. Counties under 50,000
E. Cities over 100,000
F. Cities of 25,000 to 100,000
G. Cities of 10,000 to 25,000
H. Cities under 10,000
I. Townships
J. School Districts
K. Special Purpose Districts
Regraded Unclassified
Report to Director of War Mobilization
243
-47-
II. Institutions
A. Colleges, universities, professional schools
B. Schools for handicapped
C. Orphanages
D. Hospitals
E. Federal Penitentiaries
F. State Penal Institutions
Under Category I, the War Production Board estimates that 25%, or
37,913, are potential buyers of surpluses. In Category II, the estimate is
60%, or 5,294. The conclusion reached by the Government Division was that
only the larger subdivisions or institutions would be buyers of any con-
siderable quantities of any item. Therefore the problem is not only to
give the estimated 43,300 substantial buyers the opportunity to buy, but
also to enable the smaller units to acquire such merchandise as they might
desire.
Plans under Consideration
The goal was to reach these entities in the simplest manner and with
sufficient flexibility to enable the potential buyers to make their purchases
in the same manner as they normally buy from their regular suppliers. It
would be desirable to avoid to the greatest possible extent the necessity of
amending existing local ordinances. The one exception which seems to be
general throughout the country is the requirement that the entities must buy
on competitive bids submitted by prospective sellers. This, of course, is
impossible in the disposal of surpluses and in this respect State and local
laws and ordinances will probably have to be amended.
Eyen though the inventorying of the declared surpluses has been de-
centralized by the various selling agencies, nevertheless the vast quantity
of miscellaneous items which will become surplus is so great that the size of
any complete list or catalogue would render it unusable from the point of
view of the average buyer. In addition to this, the contents would not be
static but would change constantly as sales were made and new surpluses de-
clared. It was therefore believed that the only practical means of giving
tax-supported entities and local Governments full information would be to
have the matter handled by a central body representing the interests of some
grouping of tax-supported entities.
Possible solutions to the problem were widkly discussed. First, Fed-
oral Government Agencies that had special interest in urpluses were con-
sulted, such as the U. S. Office of Education, the U.S. Department of Public
Health, The Public Roads Administration, and others. At the same time,
permanent linison between this Administration and such Federal agencies was
put into being. The next step was to consult with associations representing
various types of tax-supported entities.
A preliminary meeting was had with the Executive Director and working
committee of the Council of State Governments and a general arrengement for
Regraded Unclassified
Report to Director of War Mobilization
244
-48-
mutual cooperation was discussed. À meeting was also arranged with the U. S.
Conference of Mayors which represents some 240 of the largest cities. Con-
tacts were established with the American Municipal Association, the American
Hospital Association, and other similar groups, At the Administration's sug-
gestion, the U. S. Office of Education set up a committee designed to repre-
sent all the elements of education in the country, Finally, representatives
of the Administration visited numerous municipalities and States, for dis-
cussions with various officials, particularly the municipal and State buyers
who are actively concerned with purchasing problems,
AS a result of those investigations the Administration reached the
conclusion that the best and simplest method whereby the tax-supported entities
could organize themselves would be at State level, In collaboration with the
Council of State Governments, a plan embodying the following two principles was
evolved:
I. In each State an agency would be formed, at State level, which would
act as a clearing house. It would receive from the selling agencies lists of
the goods that were available. By breaking down the detailed information into
predetermined classifications, the central agency could readily disseminate the
useful information to the various institutions in the State. On the other hand,
the central agency would gather together from all the political subdivisions and
institutions within the State their major anticipated requirements for surplus
property. In this manner available surpluses could be matched against require-
ments and the information quickly disseminated to the interested prospective
buyer, which could then examine the goods and close the deal with the relevant
disposal agency. Effectively operated, such a central agency would afford a
practical mechanism for granting a time preference to the States, political sub-
divisions and tax-supported institutions which would give them an opportunity
to buy the goods before they were offered for sale to the general public.
II. In order to permit the tax-supported entities, insofar as possible,
to purchase in accordance with their normal local regulations, credit would be
arranged by the Federal disposal agency, the procedure to be as follows:
After the purchaser had negotiated a purchase with the Federal disposal
agency, the order would be passed through the central State agency, which would
forward it to the disposal agency. That agency would carry out the sale in the
agreed manner and would not look for payment until the central State agency had
received payment from the political subdivision or institution which was the
actual purchaser. This would permit local authorities to inspect the goods re-
ceived in order. to ascertain that they conformed to the order, and would allow
payment to be made in the normal way in which that particular buyer did business.
The central State agency would also be empowered to act as an intermediary on
behalf of the buyer where disputes or misdeliveries arose.
The foregoing plan, though widely discussed, was still in the discussion
stage when the Surplus Property Act of 1944 was enacted. There appeared to be
general recognition of the desirability of some method of organizing the poten-
tial market represented by State and local Governments and tax-supported insti-
tutions.
Regraded Unclassified
Report to Director of War Mobilization
245
- 49 -
13. Space Control
In May 1944, the Administrator set up a Space Control Committee "to
formulate, coordinate, and supervise all policies and procedures relating to
the storage of surplus property awaiting disposition." The fundamental objec-
tives of the Space Control Committee are:
(1) To eliminate competition among agencies for available storage
space,
(2) To insure maximum utilization of all available storage space,
(3) To minimize packing, shipping, transportation and other handling
costs, and
(4) To store surplus properties in storage facilities in strategic
locations.
The central Space Control Committee is composed of representatives from
the Maritime Commission, Navy Department, Procurement Division of the Treasury
Department, Reconstruction Finance Corporation, War Department, Public Buildings
Administration of Federal Works Agency, and the War Production Board. There
are also nine regional subcommittees, with representatives from the same agencies
except for the last two. One subcommittee is located in each of the service
command areas of the War Department.
A representative of the warehousing industry is attached to each of the
subcommittees and consultants have also been named by the Association of Amer-
ican Railroads. The subcommittees maintain listings of all suitable storage
space and allocate space to the various Government agencies to meet their re-
quirements. In addition, large centrally located storage centers are being
developed, consisting of large areas of hardstanding space where the property
stored will be protected by fabricated shelters and large closed areas with
adjacent outside space, for use in those cases in which property can be made
available for outside storage.
Forms needed to carry out the program of the Space Control Committee
have been worked out. Three of these forms have been approved by this Adminis-
tration: S.W.P.A.-2, Storage Space Requirements; S.W.P.A.-3, Storage Space
Procurement Status; and S.U.P.A.-4, Surplus and Industrial Storage Facility
Status Report.
The regional subcommittèes during August 1944 have submitted nearly
sixteen million square feet of space for the consideration of the various agencies
against their requirements. Of these submissions, over six million square feet
have been accepted and negotiations for acquisition either have been completed
or are in process. The agencies have found that seven million two hundred
thousand square feet are not suitable to their needs. The current unfilled space
requirements at Atigust 31 amounted to five million two hundred forty-seven
thousand square feet.
Regraded Unclassified
Remort to Director of ar obilization
246
-50-
14. Budget and Dependitures
The Aministration has expended or e mitted itsolf for total over-
ating costs of 96,861.59 from February 19, 1944, through upust 31, 1944.
of this amount, 57,692.91 as expended or corritted in the period
Pobruary 19 to June 30, 1944, the and of the 1944 Mscal year, ns follows:
Account Ho.
Items
Amount
01
Personal Services
$33,411.29
20
Travel
407.50
04
Communications
1,383.71
06
Printing and Binding
457.00
07
Other contractual services
2,572.63
08
Supplies and materials
1,050.56
09
Office equipment
18,410.17
Total
57,692.91
or the above amount, 14,018.65 is represented by bills of the Rocon-
struction Finance Corporation for services furnished. These bills have not
boon submitted for payment to the rosent time. It is possible that the
total costs may be increased by approximately 1,000 revresenting obligations
not vot recorded.
All of these costs are charges & ninst the regular 1944 a vopriation
for the Office of ar Mobilization and the allosation obtained from the Ener-
only And for the President to meet she deficiency.
The ar Concios impropriation Act, 1965, provided 900,000 for the
Office of ar obilization. of this amount, 460,000 as carmarked for the
use of the administration.
Based on the rogram :: the office as 50 the beginning of the fiscal
year, an apportionment of this 680,000 as sought by quartors, as follows:
First uarter
116,210.00
Second uarter
110,400,00
Third Quarter
112,450.00
Fourth Quarter
120,940.00
Total
460,000.00
Actina on this recuest, the Burcau of the Thudget a roved the anp or-
tionnents for the first and second quarters, or a total of 226,510 for over-
ations through December 31, 1944.
As of ugust 31, 1944, the obli ations of the Administration totaled
39,168.88. The object of expenditores are shown below, a ainst detailed
objects budgeted for the first quartor ending Scutember 30, 1964.
Regraded Unclassified
247
Report to Director of ar Mobilization
-51-
0
First Quarter
Budget Allotment
Oxpenditures
7/1/44 - 9/50/44
7/1/26 - 8/31/41
01
Personal services (re_ular)
46,660.00
18,629.29
01
Personal services (excepted)
25,050.00
10,920.53
02
Travel
7,500.00
5,260.78
04
Communication services
6,000.00
1,500.00
06
Printing and binding
2,500.00
675.00
07.1
Special rojects
15,000.00
07.2
Other contractual services
2,500.00
1,444.90
08
Supplies and matorials
1,000.00
639.63
09
Office oquipment
10,000.00
98.55
Totals
116,210.00
39,168.68
The obligations md expenditures to ust 31 consisted of rocorded
obli ations amountin to 29,858.82, known unrecorded obli ations amounting
to 1,910.90 and estimated obli ations for services furnished by the Recon-
struction Pinance Corporation, amountin to 7,398.96.
Un to the resent time, obli ations are at approximately 50 of the
catimated rate for the first quarter. This amerent saving is due to dif-
ficulties in recruitment if crsonnel, the decision to dolay a project for
the study of varchousing and storing to n Inter date, the fact that the great-
er cart of the office equipment vas crocured from 10% funds, an? the fact.that
cortain functions have been staffed with three officers detailed from the my
and six "without compensation" employees.
A detailed breakdown of the crsonnel of the Administration on Aug-
ust 31, 1944 follows:
Executives:
On excepted funds
7
On Civil Service
7
.ithout Commensation
6
On ilitary Dotail from ray
3
Total xocutive
23
Socretarial, Clerical & Mossenger:
On excepted funds (2 temporary stonos) 2
On Civil Service
23
On Detail from R.F.C.
7
Total Secretarial, Clerical lessengers
32
Total \11 Personnel in 5'7'
55
Regraded Unclassified
Report to Director of "or Mobilization
248
-52-
A personnel ceiling of 60 persons, not including those serving ithout
commensation and on military dotail, as established by the Burcau of the
Budget. Since six crsons were servin_ ithout commensation and three on
military Actail from the Arry, the total personnel char cable a ainst the
coiling ms 46 on u,ust 31, 1964.
The 55 employes wore cuartered in three buildings. The id inistrator
and Denuty Méninistrator were in the Lafayotte Building, and ith their staff,
accounted for 31 persons. In the Commonwealth Building there were six 6020 oyes
dealin_ exclusively ith matters relating to aviation. In the Munici al Conter
Duil in,, thore erc 18 employees.
Regraded Unclassified
249
10/24
Original to Dr. White to bring in
with him at the 10:45 am meeting tomorrow
in the Secretary's office.
WAR SHIPPING ADMINISTRATION
WASHINGTON
ADMINISTRATOR
October 23, 1944
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
My dear Mr. Secretary:
After mailing my letter of October 11th the
Foreign Economic Administration informed us that they have no
data whatsoever on British needs during Phase 2. They attribute
this lack of information to instructions issued at higher levels,
which preclude the initiation of discussions with the British of
their requirements during Phase 2.
Since the Foreign Economic Administration is
not in position to enter into the joint discussion of the problem
with the War Shipping Administration because of the lack of this
basic information, we are unable to proceed with the preparation
of the estimates you require. We assume, however, that you will
consider with Mr. Crowley, ways and means of placing in the Foreign
Economic Administration's hands data on British needs BO that the
assignment which you have given us can be completed with a mini-
mun of delay.
Sincerely yours,
Eshand E. S. Land
Administrator
Regraded Unclassified
251
CABLE TO WINANT, LONDON, FOR MANN FROM PEHLE.
Reference WRB no. 12 to London (Department's 8467) of
October 13.
Procedure mentioned in foregoing message supersedes procedure
outlined in Department's 8488 of October 14 to Aarons. Treasury and
State are sending further message to Aarons which will specify procedure
I mentioned to you, namely, having JDC make payments to refugees in
United States and Palestine against reimbursement in lira by ACC.
Pressure from interested groups continues and I urge you to
do everything possible to expedite this matter.
THIS IS WRB LONDON CABLE NO. 16.
9:30 a.m.
October 23, 1944
Regraded Unclassified
252
KEM-209
Distribution of thue
London
reading only by special
arrangement. (SECRET w)
Dated October 23, 1944
Rec'd 12:57 a.m., 24th.
Secretary of State,
Washington.
9082, October 23, 5 p.m.
FOR PEHLE FROM MANN
Board should consult World Trade Intelligence
Division State Department relative to paragraph numbered
Three of telegram 9068, October 21 from London to
determine whether proposals made therein relative to
dealings in dollar and pound sterling currency will
adversely affect boards program in area concerned.
WINANT
JMS
Regraded Unclassified
253
Rome
Dated October 23, 1944
Rec'd 10:42 a.m. 24th.
Secretary of State,
Washington.
583, October 23, 3. p.m.
Following for Joseph Schwarts American Joint
Distribution Comittee New York from Arthur Greenleigh.
Have just received notice of opportunity to send
to Palestine from Italy nine hundred persons each
month for the next several months. Arrangements
being nade to fully utilise this opportunity. Have
simultaneously notified Lisbon of this and an
forwarding by letter more details. More necessary
than ever that financial exchange for those who
enigrate to Palestine be facilitated. Best wishes
from us both.
KIRK
RR
Regraded Unclassified
254
LC- 105
Jerusalem
This telegram must be
paraphrased before being
Dated October 23, 1944
communicated to anyone
other than a Government
Rec'd 7:50 p.m.
agency. (RESTRICTED)
Secretary of State,
Washington.
159, October 23, 5 p.m.
Meilich Neustadt requests that the following
message be transmitted to Dawid Weitheim Paole Zion
Organization, 45 East 17th Street, New York:
"Danger deportation Slovakian Jews all in con-
centration camps their situation bad. 1800 Jews were
freed from Novacky Camp by Partisans and at once
Chalutzim among them joined Partisans. According to
information from Hungary only few hundreds (?) have
been incorporated in camps under the protection of
Red Cross and Jewish community. Swiss and Swedish
offices in Hungary helping and protecting according to
their possibilities. After several weeks interruption
the Hungarian-Italian commando appeared Budapest end
of September. Our friends could intervene only for a
short time. They informed Red Cross and Pope. Our
friends in
Regraded Unclassified
255
0
-2- #159, October 23, 5 p.m., from Jerusalem
friends in Rumania inform pursue work enlarged scope
resuming newspaper TRIBUNA NOASTRA. In Bulgaria Jewish
Shatfanim try affix their seal on Jewish life they took
possession consistory. Our friend endeavor renew work
and safeguard Zionist interests. Reference Mereminsky
inquiry to Benguion on Bengurion collaboration with
Otetsch Estwen front now only possibility for whatever
political or organizational activity. Communists
Social Democrats, Peasant Party and Right Party
personalities participate this front. Party council
met at Paris decided publish Yiddish and French
weeklies, party activity also resumed Belgium. Re-
ceived cables Tatrak over Segal reference travel Rumania
presently journalists only allowed perhaps. TOG of other
newspaper appoint me its correspondent and then re-
commendation necessary to United States Legation
Instanbul and also Jerusalem viewing urging Turkish visa
also Palestine exit".
PINKERTON
WMB
Regraded Unclassified
256
CABLE TO NORWEB, LISBON, FOR DEXTER FROM WAR REFUGEE BOARD
Please deliver the following message to Robert Pilpel from the
American Jewish Joint Distribution Committee:
QUOTE FOR YOUR INFORMATION FOLLOWING MESSAGE WAS SENT TO SALY
MAYER ON OCTOBER 11;
SINGLE QUOTE REMITTING TO YOU $178,000 UNDER SPECIAL
LICENSE W-2106 TO BE UTILIZED IN CONNECTION HUNGARIAN
AND SLOVAKIAN SITUATION SINGLE QUOTE
WE ALSO SENT MAYER $45,000 FOR SHANGHAI UNQUOTE
THIS IS WRB LISBON CABLE NO. 109.
3:05 p.m.
October 23, 1944
Regraded Unclassified
257
RP-4
Distribution of true
Lisbon
reading only by special
arrangement. (SECRET N) Dated October 23, 1944
Rec'd 2:53 p.m.
Secretary of State,
Washington.
3225, October 23, 4 p.m.
WRB 229. UNITARIAN 355. FOR CHARLES JOX FROM
ELISABETH DEXTER.
Seven Spanish Republicans arrested yesterday.
General round up and deportations likely. Unless
Mexican visas authorised soon may be too late. Tele-
graph reply urgent.
NORWED
n
Regraded Unclassified
258
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, San Salvador
TO:
Secretary of State, Washington
DATED:
October 23, 1944
NUMBER:
341
CONFIDENTIAL
In a note backdated to October 17 but received only today,
former Foreign Minister Dravila, declares that his Government
authorizes the United States Government to compile lists of
persons claiming Salvadoran citizenship and without prior reference
to the Salvadoran Government to send them to the Swiss Government
in accordance with the Department's Circular Airgram of September 18.
GADE
DCR:MAS:EFR 10/25/44
Regraded Unclassified
259
CABLE TO AMEMBASSY, MADRID, SPAIN
The following is the substance of a cable received from Amlegation
Bern under date of October 19:
QUOTE I am informed that courier recently arrived Switgerland
from Bratislava reports that 300 to 400 Jews holding Latin American
documents arrested in Bratislava were first interned as result inter-
vention Central Jewish office at Mariathal near Bratislava. On or about
October 8 they were summarily transported, it is believed to Germany.
Courier declared that Slovak Government knows where they have been
taken. Apparently about 90 were bearers El Salvador nationality certifi-
cates balance Paraguayan passports. UNQUOTE
The Vatican is aware of this situation and may communicate to you
directly any additional information bearing on the matter.
Without, however, awaiting information from Vatican, you are requested
immediately to approach Spanish Government with the suggestion that as
protective power for Paraguay, it would be appropriate for Spain to take
immediate steps to protect the Paraguayan passport-holders among the
deportees from Slovakia. Specifically, it is suggested that Spanish govern-
ment may find it possible (a) to inquire of the German government of the
truth of the report that Jews from Slovakia in possession of documents
issued in the name of Paraguay have been removed to Germany or areas under
German control, (b) to inquire of the German government of the destination
of such persons, (c) to declare to the German government that such persons
fall under the protection of Spain as protecting power, and (d) to request
German government to afford Spanish authorities immediate facilities for
exercising such protection.
2:00 p.m.
October 23, 1944
Regraded Unclassified
260
CABLE TO AMEMBASSY, MADRID, FROM DEPARTMENT AND WAR REFUGEE BOARD
Reference is made to your 3488 of October 18 and appreciation is
expressed of your initative reported therein.
For your information, the following is the substance of a letter
written by Spanish Ambassador in Washington to representative of a Jewish
welfare organization on October 13:
QUOTE I am glad to inform you that I have just received
a cable from my Government directing me to tell you that, al-
though Spain has been daing all in her power to ameliorate the
Jewish present situation, is very pleased now to grant the re-
quest of the Vaad Hahatzala. To this effect, special instruc-
tions have been given to the Ambassador in Berlin to take with
all speed and interest the necessary steps tending to the de-
fense of the Jewry and to the special protection of the Spanish-
American Jews, emphasizing that this help is not only to be ex-
tended to those citizens of countries which have entrusted Spain
with their protection, but also to those of all other countries.
QUOTE I am also authorized to inform your Committee that
the Spanish Government has always made all possible efforts to
protect the Sefardites of Spanish nationality now interned in
German concentration camps) though, unhappily, not always with
the desired results. Nevertheless, it is gratifying to point
out that, due to the Spanish intervention, several hundreds of
them have been able to reach Spain in safety and to leave after-
wards in complete freedom for their other destinations. UNQUOTE
Please advise Department and Board whether such instructions mentioned
in foregoing letter have been issued and are being carried out,
2:00 p.m.
October 23, 1944
Regraded Unclassified
261
CABLE TO JOHNSON, STOCKHOLM, FOR OLSEN FROM WAR REFUGEE BOARD.
Reference Department's 1313 of July 1, Department's 1502
of July 28 and Department's 1576 of August 8, 1944.
American Relief for Norway has asked Board for report
on use of funds being remitted to you for this special project at
the rate of $10,000 per month. Please cable report to WRB.
THIS IS WRB STOCKHOLM CABLE NO. 220.
9:30 a.m.
October 23, 1944
Regraded Unclassified
262
PARAPHRASE OF TEIEGRAM RECEIVED
FROM:
AMLEGATION, Stockholm
TO:
Secretary of State, Washington
DATED:
October 23, 1944
NUMBER: 4314
CONFIDENTIAL
See your 4020, October 21, to Department re-
peated to Stockholm as No. 3 and your clear
unnumbered wire of the same date.
The message given below has been transmitted to
Moscow as 42, dated 23rd of October.
Attention Kennan:
The following is for your personal information:
Between the seventh of June and the twenty-fifth of September
under the auspices of the War Refugee Board certain rescue
operations in the Baltic were carried on. After that time opera-
tions ceased because position of Germans in the Baltic had be-
come so hopeless that the representative of the War Refugee Board
desired to protect himself against the possibility of tak-
ing part in the rescue of individuals who might be collaborators
with the Nazis. Individuals who contrived to escape to Sweden
from the Baltic countries through the facilities of the War
Refugee Board were refugees from German persecution although
there may have been anti-Russian persons among them. The total
of the entire operations affecting the three Baltic countries
was only 200,000 kroner most of which went for transportation
purposes. The NYDAG article which was reproduced in
untrue, speculative and provocative. No connection with the
so-called Estonian Government is had by any employee of the Le-
gation.
I have been informed by Madam Kollontay with whom
I have had a complete discussion of the matter, that a correction
to Moscow has been sent by her. The NYDAG article appears to
disturb her very much and she informs me that she has ad-
ministered a strong reprimand to the editor. Our belief here is
that the article was not inspired from Russian sources but is
largely tied up in a tangle of internal Swedish politics arising
from the efforts of the Swedes to bring Estonian Swedes here
concerning which you were informed by Swedish Minister. To
NYDAG article I have made no answer and I do not anticipate
making any comment or answer to it.
See my 4231, October 18, 1944.
10-26-44
JOHNSON
DCR:EMS
Regraded Unclassified
263
ORIGINAL TEXT OF TELEGRAM SENT
FROM:
Secretary of State. Washington
TO:
American Legation, Bern
DATED:
October 23, 1944
NUMBER:
3606
SECRET
To Minister Harrisen and McClelland.
Reference your 6839 to Department of October 13 concerning
Slovakia.
The fellowing is the text of a communication received from the
Apostalic Delegate in Washington under date of October 14:
QUOTE I have received the fellowing communication
from the Secretariate of State, Vationn City: The Hely
See has continued its efforts in faver of the Jews in
Slevakia. Accerding to the Apestelic Nunciature in
Bratislava, on October 5th the Minister of Fereign
Affeirs netified the German Legation that the Slevak
Government could not censent to the depertation of
Jews since they are under the protection of the Cen-
stitution and Laws of Slevakia.
QUOTE Likewise, Mr. Carel Sider wrote as fellows
to the Vatioan: Jews having American citizenship, who
have asked the protection of the Slevakian Government,
have been gathered tegether and are living in a castle
at Marianka where they are protected by Slovak police.
QUOTE Referring to your letter of September 21,
1944, I wish to say that the Secretariate of State 48-
sures me that your mesage for Dr. Tise has been trans-
mitted to the Apestelic Nunciature in Bratislava. UNQUOTE
Carel Sider is understeed to be a member of the Tise cabinet.
The "message for Dr. Tise" was a repetition of previous warnings of the
position this Government takes with respect to the deportation and other
persecution of Jews. "Jews having American citizenship" is assumed to
mean Jews helding passporte and other documents issued in the names of
American republics or etherwise claiming the nationality of an American
republic.
This is WRB Bern cable No. 226.
HULL
264
PARAPHRASE OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
American Legation, Born
DATED:
October 23, 1944
NUMBER:
3607
SECRET
FOR MCCIBELLAND FROM PEHIE.
For your information the Swiss Minister in Washington recently
asked the Board how his government could be of any help in the serious
Jewish situation in Hungary and at Oswiecin and Birkensau. He was
advised confidentially of the steps which have been taken by the Swedes
He has promised to notify his government of this and to suggest to the
Swiss Government that it take action parallel to that taken by the
Swedes.
Please support this matter to the extent possible.
THIS IS WRB BERN CABLE NO. 230.
STETTINIUS
(Acting)
Regraded Unclassified
265
CABLE TO MINISTER HARRISON AND MCCLELLAND, BERN, SWITZERLAND
Information and suggestion contained in your 6938 of October 19 are
appreciated. Vatican is being approached accordingly and has been asked
to communicate information to youldirectly.
Without, however, awaiting Vatican's reply, you are requested im-
mediately to approach Swiss government (alone or jointly with Salvadoran
representative, if his cooperation can be secured without delay) requesting
it as protective power for Salvador and certain other American republics to
take immediate steps to protect the persons concerned in line with Depart-
ment's 1181 of April 7, 1221 of April 10, 1921 of June 6, 2490 of July 21,
3180 of September 14, and all other communications regarding holders of
Latin American documents. Specifically, it is suggested that Swiss govern-
ment may find it possible (a) to inquire of the German government of the
truth of the report that Jews from Slovakia in possession of documents
issued in the name of Salvador and other American republics have been re-
moved to Germany or areas under German control, (b) to inquire of the German
government of the destination of such persons, (c) to dellare to the German
government that such persons fall under the protection of Switzerland as
protecting power, and (d) to request German government to afford Swiss
authorities immediate facilities for exercising such protection.
In view of large proportion of Salvadoran passport-holders among
deportees reported in your 6938, Salvadoran declaration communicated in
your 3871 of June 17 paragraph six will undoubtedly facilitate your task.
Amembassy Madrid is being similarly approached regarding Paraguayan
passport holders.
THIS IS WRB BERN CABLE NO. 236.
2:00 p.m.
October 23, 1944
Regraded Unclassified
266
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Bern
TO:
Secretary of State, Washington
DATED:
October 23, 1944
NUMBER: 7022
SECRET
Repeated to Rome.
The Italian Government has been informed by its Minister
in Bern that the Swiss Federal Council has agreed to admit into
Switzerland all Italian civilian and resistance group refugees
from the Dossola Valley. These refugees number more than 7,000
now. The reoccupation of Demodossola by Germans and neo-Fas-
cists was carried out with well-armed units following the plan
of Marshal Graziani. In number and equipment the patriots were
entirely inferior.
HARRISON
DCR:MAC 10/25/44
Regraded Unclassified
267
October 23, 1944
1 p.m.
Regraded Unclassified
AMEMBASSY,
ANKARA.
925
The cable below for Steinhardt and Kataki is WRB 120.
Reference your 1976 to Department, your 164 to WRB of
October 14.
The following is the text of a communication received from
the Apostolic Delegate in Washington under date of October 14;
QUOTE I have received the following communication from
the Secretarist of State, Vatican City: INNERQUOTE The Holy
See has continued its efforts in favor of the Jews in Slovakia.
According to the Apostolic Nunciature in Bratislava, on October
5th the Minister of Foreign Affairs notified the German Le-
gation that the Slovak Government could not consent to the de-
portation of Jews since they are under the protection of the
Constitution of Laws of Slovakia. END INNERQUOTE
Likewise, Mr. Carol Sidor wrote as follows to the Vatican:
INNERQUOTE Jews having American citizenship, who have asked the
protection of the Slovakian Government, have been gathered
together and are living in a castle at Marianka where they are
protected by Slovak police. END INNERQUOTE
Referring to your letter of September 21, 1944, I wish to
say that the Secretariat of State assures me that your message
for Dr. Tiso has been transmitted to the Apostolic Nunciature
in Bratislava. UNQUOTE
Carol Sidor is understood to be a member of the Tiso
cabinet. The QUOTE message for Dr. Tiso UNQUOTE was a repetition of
previous warnings of the position this Government takes with
respect to the deportation and other persecution of Jews.
QUOTE Jews having American citizenship UNQUOTE is assumed to
mean Jews holding passports and other documents issued in the
names of American republics or otherwise claiming the nationality
of an American republic.
STETTINIUS
(ACTING)
(GIN)
WRB :MMV #OMH
NE
OF
SE
10/20/44
NOT TO BE RE-TRANSMITTED
268
COPY NO.
"
SECRET
OPTEL No. 344
Information received up to 10 a.m., 23rd October,
1944.
1. NAVAL
AEGEAN. On 16th Coastal forces landed troops Lemnos.
Mudros captured next day. Germans withdrew by sea in a Siebel
Ferry, an E-boat and 9 caiques, four of which were driven ashore
and remainder suffered heavy casualties. Later the Siebel
Ferry and E-boat returned to fire on our positions ashore before
again withdrawing. On 20th carrier-borne aircraft bombed Kos.
Bad weather prevented unloading at Piraeus but it was resumed in
fine weather on 21st.
2. MILITARY
WESTERN EUROPE. Slight German withdrawals in ex-
treme western sector Nijmegen Bridgehead have resulted in local
gains between Lower Rhine and Waal. Strong British attack to-
wards Hertogenbosch launched 6:30 a.m. 22nd. Good progress
made and forward troops now within four miles of the town.
Attack northwards from Antwerp continued. Esschen occupied
fellowing an advance of over three miles. Canadians have cap-
tured Breskens and have entered the fort N.W. of the town against
light opposition.
ITALY. Heavy rain has swollen the Sevio preventing
passage of supporting arms to our troops across the river.
Heavy enemy fire is preventing bridging. Canadians have captured
Cervia and advanced a short distance beyond, South of Cesena
Indian troops have made gains westwards.
RUSSIA. In the Petsamo area Russians have reached
the Norwegian frontier. They have made considerable advances
north of Debrecen capturing Nyireghaza and also in Szeged area,
including capture of Sombor. West of Belgrade they have forced
the river Sava and advanced some 20 miles S.W. along the south
bank.
BURMA. Our forces have captured Mohnyin about 55
miles S.W. of Mogaung on the railway to Katha.
3. AIR OPERATIONS
WESTERN FRONT. 22nd. 97 escorted Lancasters bombed
Neuss - 522 tons - through cloud without loss. 1,017 U.S.
heavy bombers bombed M.T. Works at Brunswick - 388 tons, and
Hanover 447, and railway centre Munster - 864. Pathfinder
technique employed. 785 fighters (3 missing) provided support.
Four Fortresses lost in collisions. 595 fighter bombers and
fighters (3 missing) supported our ground forces. 22nd/23rd.
49 Mosquitoes attacked Hamburg. 39 heavy bombers laid sea mines.
MEDITERRANEAN. 20th/21st. 66 heavy bombers (5
missing) dropped 149 tons on Szombathely airfield Hungary. 21st.
Railway centres at Szombathely and Gyor very successfully at-
tacked by 104 Liberators without loss. 75 fighters destroyed
22 locomotives and damaged a considerable quanitity of rolling
stock N.E. of Budapest. 34 Mustangs (1 missing) shot down two
enemy aircraft and scored 37, 0, 17 on the ground in attacks on
two airfields Hungary. 573 aircraft (3 missing) attacked ob-
jectives in the battle area with excellent results.
Regraded Unclassified