[Minutes of the Advisory Commission to the Council of National Defense]
[From the U.S. Government Publishing Office, www.gpo.gov]
CIVILIAN PRODUCTION ADMINISTRATION BUREAU OF DEMOBILIZATION
MINUTES of fAe
Advisory Commission to tne
Council of National Defense
Historical Reports on War Administration Documentary Publication No.
CIVILIAN PRODUCTION ADMINISTRATION • John D. Small, Administrator
BUREAU OF DEMOBILIZATION G. Lyle Belsley, Director
James W. Fesler, War Production Board Historian
MINUTES of fAe
Advisory Commission to the
Council of National Defense
June 12, 1940, to October 22, 1941
Historical Reports on War Administration : War Production Board
Documentary Publication No. 1
UNITED STATES GOVERNMENT PRINTING OFFICE • WASHINGTON : 1946
HISTORICAL REPORTS ON WAR ADMINISTRATION: WAR PRODUCTION BOARD
Documentary Publications Series
No. 1. Minutes of the Advisory Commission to the Council of National Defense
No. 2. Minutes of the Council of the Office of Production Management
No. 3. Minutes of the Supply Priorities and Allocations Board
No. 4. Minutes of the War Production Board
No. 5. Minutes of the Planning Committee of the War Production Board
FOREWORD
In May 1940, when Germany began her westward offensive through Belgium and the Netherlands, the President turned to a long dormant statute for authority to organize a concerted attack on the economic and industrial phases of national defense. The Act of August 29, 1916, provided for a Council of National Defense and an Advisory Commission to that Council. Under the statute, the Council of National Defense consisted of the Secretary of War, the Secretary of the Navy, the Secretary of the Interior, the Secretary of Agriculture, the Secretary of Commerce, and the Secretary of Labor. The Council was to nominate to the President, and the President was to appoint, “an advisory commission, consisting of not more than seven persons, each of whom shall have special knowledge of some industpr, public utility, or the development of some natural resource, or be otherwise specially qualified, in the opinion of the council, for the performance of the duties hereinafter provided.”
The Council, which was established “for the coordination of industries and resources for the national security and welfare,” was assigned a number of duties by Congress. In addition to discharging specific obligations regarding domestic transportation, the Council was to direct investigations and make recommendations to the President and the heads of executive departments regarding “the mobilization •of military and naval resources for defense; the increase of domestic production of articles and materials essential to the support of armies and of the people during the interruption of foreign commerce; the development of seagoing transportation; data as to amounts, location, method, and means of production, and availability of military supplies; the giving of information to producers and manufacturers as to the class of supplies needed by the military and other services of the Government, the requirements relating thereto, and the creation of relations which will render possible in time of need the immediate concentration and utilization of the resources of the Nation.”
On May 28, 1940, the President announced that he was reviving the Council of National Defense and the Advisory Commission. On May 29 he approved rules and regulations of the Council of National Defense, which fixed the composition of the Advisory Commission, provided for a Secretary to the Council and to the Advisory Commission, and defined the duties of the Secretary to the Council. The President appointed the following as members of the Advisory Commission: William S. Knudsen, Advisor on Industrial Production; E. R. Stettinius, Jr., Advisor on Industrial Materials; Sidney Hillman, Advisor on Employment; Chester C. Davis, Advisor on Farm Products; Leon Henderson, Advisor on Price Stabilization; Ralph Budd, Advisor on Transportation; and Harriet Elliott, Advisor on Consumer Protection. Each advisor was individually in charge of and responsible to the Council of National Defense for investigation, research, and coordination in his designated fields. In practice, though, the Council of National Defense was inactive, and the advisors were responsible directly to the President.
The Secretary to the Council and to the Advisory Commission was William H. McReynolds, who was also Administrative Assistant to the President in charge of the Office for Emergency Management. Wayne Coy succeeded Mr. McReynolds in these positions in April 1941. Because of the failure of the statute to provide for a chairman, the Secretary presided at meetings of the Advisory Commission.
On December 20, 1940, the President announced his intention to establish an Office of Production Management. This intention was carried out by Executive Order 8629 on January 7, 1941. The new Office absorbed virtually all of the responsibility theretofore exercised by the Advisor on Industrial Production, the Advisor on Industrial Materials, and the Advisor on Employment. Although the actual membership of the Advisory Commission did not change, its functions continued to dwindle. On April 11, 1941, the President established the Office of
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Price Administration and Civilian Supply, which in effect was assigned the functions previously performed by the Advisor on Price Stabilization and the Advisor on Consumer Protection. On May 5, 1941, the President established the Office of Agricultural Defense Relations, which thereafter performed the work initially assigned to the Advisor on Farm Products. On October 21, 1941, the House and Senate agreed upon a resolution eliminating the Advisory Commission from the tax certification procedure, and this resolution received the President’s approval on October 30. As noted in the minutes of the Advisory Commission for October 22, 1941, this action abolished the only remaining active function of the Advisory Commission as a formal body. Consequently, meetings of the Commission were suspended indefinitely. The only member of the Commission whose responsibilities had not by that time been vested in another agency was the Advisor on Transportation. He and his staff continued to function as a division of the Office for Emergency Management until establishment on December 18, 1941, of the Office of Defense Transportation, which in effect superseded the Advisor on Transportation.
The minutes of the Advisory Commission to the Council of National Defense are now issued as the first of the series of documentary publications designed to provide a basic understanding of the historical development of the War Production Board and its predecessor agencies. It was President Roosevelt’s opinion, which President Truman recently reaffirmed, that “we need both for current use and for future reference a full and objective account of the way the Federal Government is carrying out its wartime duties.” This series, among others, represents an attempt to meet that need.
The minutes of the meetings from June 12, 1940, to April 23, 1941, were prepared by William H. McReynolds, and those of the meetings from April 30, 1941 to October 22, 1941, were prepared by Wayne Coy. The minutes are reproduced here in the form in which they were prepared and approved by Messrs. McReynolds and Coy, except that the lists of individual facilities acted upon under the tax certification procedure have been omitted, an asterisk being inserted to mark each such omission. Two minor additions have been made to assist in the use of this volume. The minutes of June 12 to August 23, 1940, carried no title line; this has been supplied by the editors in the same form used by the Secretary of the Commission after August 23, 1940. Documents referred to in the minutes from June 12 to August 23, 1940, were not identified by document numbers; the editors have indicated in brackets the numbers retroactively assigned by the Secretary of the Commission to those early documents.
Footnotes have been added to indicate briefly the content of documents referred to but not described in the minutes, to provide citations of Acts of Congress and Executive Orders, and to suggest corrections for typographical errors in the original minutes.
The minutes were prepared for publication under the supervision of James W. Fesler, War Production Board Historian, by Henry E. Edmunds, Chief, and Samuel B. Marley, Jr., and Marie C. Stark, Archivists, Historical Records Section, Civilian Production Administration.
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CONTENTS
Page
Foreword ........................................................... 11
Minutes
June 12, 1940...................................................... 1
June 21, 1940..................................................... 1
June 26, 1940.................................................... 6
June 28, 1940..................................................... 13
July 3, 1940....................................................... -17
July 10, 1940....................................................... 22
July 12, 1940....................................................... 28
July 17, 1940....................................................... 33
July 24, 1940....................................................... 36
July 26, 1940 ...................................................... 40
July 31, 1940 ...................................................... 44
August 2, 1940...................................................... 48
August 7, 1940.......................................... • •...... 51
August 9, 1940................................................. 37
August 14, 1940................................• •••............... 60
August 16, 1940................................................... 63
August 21, 1940................................................... 67
August 23, 1940................................................... 71
August 28, 1940................................................... 76
September 4, 1940..................................-................ 79
September 6, 1940................................................ 81
September 11, 1940................................................ 83
September 13, 1940................................................ 86
September 18, 1940................................................ 87
September 20, 1940................................................ 89
September 25, 1940................................................ 91
October 2, 1940.................................................. 94
October 4, 1940................................................. 96
October 9, 1940................................................... 97
October 11, 1940................................................... 98
October 16, 1940.................................................. 100
October 18, 1940 (Executive Session)............................... 102
October 23, 1940.................................................. 103
October 25, 1940............................................... 105
October 30, 1940.................................................. 107
November 8, 1940............................................. 109
November 13, 1940............................................... Ill
November 20, 1940............................................. 112
November 22, 1940.............................................. 114
November 27, 1940............................................... 115
November 29, 1940............................................... 116
December 4, 1940............................................... 118
December 6, 1940............................................... 120
December 11, 1940............................................... 123
December 12, 1940 (Executive Session).............................. 125
Minutes
December 18, 1940.......................................................... 126
December 19, 1940 (Executive Session)............................. 128
December 20, 1940.................................................. 129
December 20, 1940 (Executive Session)............................. 130
January 3, 1941................................................. 131
January 8, 1941................................................. 133
January 14, 1941 (Executive Session)....................................... 134
January 15, 1941................................................. 135
January 29, 1941................................................. 136
February 5, 1941.................................................. 139
February 12, 1941.................................................. 140
February 19, 1941.......................................................... 141
February 26, 1941.......................................................... 142
March 5, 1941................................................... 143
March 12, 1941...............r............................................. 144
March 19, 1941................................................... 146
March 26, 1941................................................... 147
April 2, 1941.................................................... 148
April 9, 1941.................................................... 149
April 16, 1941.................................................... 150
April 23, 1941.................................................... 151
April 30, 1941.................................................... 152
May 7, 1941.................................................... 153
May 14, 1941...................................................... 154
May 28, 1941...................................................... 155
June 11, 1941...................................................... 156
June 25, 1941...................................................... 156
July 9, 1941...................................................... 157
July 23, 1941...................................................... 158
August 6, 1941..................................................... 158
August 13, 1941.................................................... 158
August 20, 1941................................................... 159
August 27, 1941................................................... 159
September 10, 1941................................................. 160
September 17, 1941................................................. 160
September 24, 1941................................................. 161
October 1, 1941.............................................. 162
October 8, 1941................................................. 163
October 15, 1941................................................. 163
October 22, 1941................................................ 164
Appendix
Section 2 of the Act of August 29, 1914.................................... 165
Rules and Regulations of the Council of National Defense, May 29, 1940... 166
Index ..................................................................... 167
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COMMISSION MINUTES—JUNE 12, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, June 12, 1940, at 2:40 p.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. McReynolds, Executive Secretary
Mr. Sherwood, Assistant Secretary Mr. Fischer, Assistant to Mr. Budd Mr. Biggers, Executive Assistant to Mr.
Knudsen
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, General Assistant, Board of Governors of the Federal Reserve System V
Mr. McReynolds stated that the question to be considered at this meeting related to the office space to be occupied by the Commission and its staff. He said that yesterday the President forwarded a letter to the War Department requesting that the Department make available to the Commission as soon as possible 25,000 square feet of space on the second floor of the eighth bay in the Munitions Building at 20th Street and Constitution Avenue, that the space
was being vacated and would be made ready for occupancy shortly, that additional space would be provided in that building if desired, and that space would be made available in the Commerce Building if it should be found to be necessary. He also stated that arrangements had been made with the Chesapeake and Potomoc Telephone Company for the installation of a manual switchboard to provide telephone service to all of the offices of the Commission and that this would be ready in two or three days.
A discussion of the space made available to the Commission in The Federal Reserve Building disclosed the consensus that it would be sufficient to house the members of the Commission (except Mr. Henderson whose office would continue to be located at the Securities and Exchange Commission) and their immediate staffs and a general agreement was reached as to the allocation of the space.
Mr. Henderson stated that experience had already demonstrated the necessity for establishing a central office through which all requests of the Commission for information would be cleared, that a plan was being prepared, and that a tentative suggestion as to the organization of such an office would be presented to the Commission not later than Saturday, June 15, 1940.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Executive Secretary
COMMISSION MINUTES—JUNE 21, 1^40
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, June 21, 1940, at 10:10 a.m.
Present:
Mr. Stettinius
Mr. Knudsen (latter part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Executive Secretary
Mr. Fischer, Assistant to Mr. Ralph Budd
Mr. Bethea, Assistant Secretary, Board of Governors of the Federal Reserve System
Mr. Thompson, General Assistant, Board of Governors of the Federal Reserve System'
Mr. McReynolds stated that Mr. Knudsen had an engagement with the Director of the Budget in connection with authorizations for the industrial expansion plan built up by the Army as a part of the program of National Defense and for that reason was not able to be present at the convening of this meeting.
In this connection Mr. Henderson inquired whether such a plan was not a matter of interest to all of the members of the Commission and one on which they should have been advised, to which Mr. McReynolds responded that it was a matter which had been handled on the direct order of the President, that quick action was necessary and that the program involved the production of material primarily for the Army. Mr. McReynolds stated that the question of hew the program was going to be carried out and other problems which might arise in
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
connection with it were questions which would normally require consideration by all members of the Commission but that the question of the extent to which the President, as the Commander-in-Chief of the Army, was willing to ask Congress to go in authorizing funds in order to put the program in operation was something the President himself had been working on for a considerable time. He said that he was merely presenting the facts in order that the other members of the Commission would be advised of the consideration being given to the matter.
Mr. McReynolds then stated that he would like to discuss the question of the housing of members of the Commission and its staff in order that he might obtain a decision from the Commission as to the action he could take in the matter. He stated that it appeared that the size of the organization which it would be necessary for the Commission to build up would be so large that he did not believe there would be sufficient space in buildings in this section of the city to house satisfactorily the Commission and its staff. He said that there were under construction at the present time in the southwest section of the city two buildings containing 1,000,000 square feet of space into which it was proposed to move personnel of the Social Security Board, presently housed in Baltimore, Maryland; that he had stopped the plans of the Social Security Board to move into the buildings; and that he had asked Mr. Carmody, Administrator of the Federal Works Agency, to work on the proposition of housing the War Department in one building containing 800,000 square feet and the Advisory Commission in the other building containing 200,000 square feet. He stated further that, while such buildings were not to be finished until January 1941, it had been arranged with the contractor to have them completed within sixty days, and that he would like to have the opinion of the Commission whether it would be satisfactory for him to proceed on the basis outlined above. Mr. Henderson stated in connection with this matter that he thought it was going to be impossible in the future to work without all being together. Messrs. Stettinius and Hillman stated that they agreed with this position.
It was the unanimous opinion of the Commission that Mr. McReynolds should proceed along the lines outlined by him to obtain space in the smaller of the two buildings being constructed for the Social Security Board in order that the entire staff of the Commission may be housed in one building.
At this point Mr. Knudsen joined the meeting.
Mr. Davis stated that the problem he would like to present was one of field and functions of the members of the Commission. He referred to the meetings of the Commission with the President at which the President had defined the duties of each of the members of the Commission. The President on each occasion, Mr. Davis said, had stressed as one of the factors to watch, the relation between
agricultural prices and other prices and costs. Mr. Davis stated he was convinced that the unfavorable impact of the war was going to be primarily on the farmers who produce the most important staple commodities. For that reason, he said, the manner in which an order for raw materials is placed and the manner in which it is negotiated are of considerable importance to producers of agricultural products. He pointed out that there had been rumors recently with respect to the contracts let for woolen cloth and blankets which had led to inquiries by the press which were not very favorable in tone, and that he would like to know if some arrangements could not be worked out by the Commission by which his office could be advised of what was going on in the various fields under the supervision of the other members of the Commission.
During consideration of Mr. Davis’ question as to fields and functions of the Commissioners, Mr. Hillman stated that on the question of the letting of contracts he had prepared, and desired to present at this meeting, a memorandum with respect to negotiated contracts [Document No. I]1; that there were very few fields in which there is real competitive bidding; that in most cases there are agreed prices, even when the ordinary purchaser has to go into the market; and that he thought the Commission in its advisory capacity should develop a policy of negotiated contracts for the Government. He said that, from the point of view of labor, idle plants and labor should be utilized so that something constructive would be done when negotiations are had. With respect to the question of prices, he said, the Commission should be informed of the cost of labor, the cost
1 Memorandum, “Negotiated Contracts,” prepared by Sidney Hillman, no date.
It is the function of the National Defense Advisory. Commission to increase production of all commodities needed in national defense by competitive bidding or negotiated contract. The desired end may be accomplished by utilizing existing physical and labor resources. Since the American economic machine is operating at less than capacity, the policy should be geared toward the most efficient use of present resources and tbe development of maximum efficiency through attainment of favorable conditions of employment.
Such policies will avoid the delays consequent to building new plants and mobilizing a new labor supply for those commodities and services which can be provided by existing facilities; ease the burden of unemployment; make profitable those plants that are now operating at a loss; aid maintenance of favorable conditions of employment; lower overhead, making possible lower costs to. the Government; increase local tax income; and provide a moral stimulus for the people.
Procurement authorities should make special efforts to negotiate contracts with plants that have excess or unused capacity and are located in areas with reservoirs of unused labor.
Procurement officers should be guided by the following specific considerations:
1. Utilizing skills now employed on operations of unskilled or semi-skilled nature;
2. Removing semi-skilled and skilled labor from localities not affording sufficient opportunity for use;
3. Absorbing the older skilled workers not easily removed to new areas;
4. Maintaining favorable conditions of employment;
5. Revitalizing ghost towns the conditions of which are due to plant shutdown; and,
6. Saving time that would be required if existing facilities were expanded in specific areas.
Following these principles will result in:
a. Curtailment of relief expenditures;
b. Increased profits for plants not now operating at capacity; c. Lower overhead costs and lower costs to the Government; d. Increased local tax income in affected areas;
e. Reduction of the role of the speculator in contract fulfillment; and,
f. Revitalization of and increased opportunities for WPA and NYA employees.
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JUNE 21. 1940
of raw materials, etc., and should have some knowledge of the profits that are being made.
Mr. McReynolds stated that in connection with the questions raised by Messrs. Davis and Hillman, the Committee on Procurement, of which Mr. Stet-tinius was the Chairman, had discussed with the President yesterday a proposal that there be created the position of Coordinator of Purchasing through whom the purchasing units of the Treasury, War and Navy Department would operate and that Mr. Donald Nelson, Director of the Procurement Division of the Treasury Department, had been suggested for the position. He-said that such position would involve the responsibility for the distribution and the timing of the placing of orders, that the Coordinator would do no buying but would only advise the purchasing units when and how they should buy, and that the principles to be observed in negotiating contracts could be laid down as a policy of the Commission which would be carried out by the Coordinator. Mr. Stettinius added that Mr. Nelson would be attached to the Commission and be in a position to work effectively with the procurement officers of the Army and Navy.
Mr. Hillman said that in a policy of negotiated contracts the Commission should adopt policies which will give lowest prices and quickest delivery, take people off unemployment, prevent profiteering and protect the Government. He added that it should be made known to the general public that the Commission is actually protecting its interests as well as expediting its defense program.
Mr. Henderson stated that Mr. Davis and Mr. Hillman had raised separate and distinct questions. He said that Mr. Davis had inquired how each Commissioner was to be advised as to the activities of the others, so that all Commissioners could discharge their responsibilities fully and promptly, that some of the Commissioners’ activities began with studies they instituted, like priorities or financing plant expansion, but mostly through requests for clearances on contracts, both open bid and negotiated, and that it ought to be possible to work out a system whereby each Commissioner would be notified when a contract came over for clearance from the Army or Navy. Mr. Hillman had suggested, Mr. Henderson said, that negotiated contracts required the Commission first to adopt new policies to make sure that contracts, wherever possible, were let with the view of using idle capacities, and second, to adopt safeguards to protect the Government.
Mr. Henderson then stated that in following a system of negotiated contracts cost must be considered because the Government is contracting with a certain seller at a certain price, that there are many difficulties in determining what prices should be, and he did not know whether it was possible to arrive at a procedure by which the Government would always get the right price, but that if previous experience were taken as a guide, a good deal of im
provement can be had. He said that he believed the ideal thing would be to have a real competitive market, and that while there were many advantages for speedy procurement in negotiated contracts, when a negotiated contract system was undertaken many additional safeguards to prevent profiteering, favoritism and poor allocation of resources are necessary. He also said he recognized, from the state of many markets, that the conditions necessary to a smoothly functioning competitive market were not present and, therefore, he would not oppose negotiated contracts where the defense program greatly inflated the demand, and that in such cases he could support Mr. Hillman’s proposal for utilization of idle plants and labor.
Following a further discussion of the questions raised by Messrs. Davis and Hillman, Mr. Knudsen suggested that the Commission appoint a subcommittee to formulate and submit recommendations with respect thereto.
In accordance with Mr. Knudsen’s suggestion, Messrs. Stettinius, Henderson and Hillman were appointed a subcommittee, with Mr. Henderson acting as Chairman, to prepare a proposal as to clearances between the Commissioners and as to the principles to be followed with respect to negotiated contracts for the guidance of the Coordinator of Purchasing, a draft of which would be presented for consideration at the meeting of the Commission to be held on Wednesday, June 26, 1940. !
With respect to holding of regular meetings of the Advisory Commission, Mr. Davis stated that he did not feel that one meeting of the Commission each week was sufficient, and that he believed there should be a minimum of two meetings per week. There was general agreement with Mr. Davis’ suggestion and Mr. Fischer asked if the Commission could agree on definite days for its meetings at this time in order that Mr. Ralph Budd could be so advised.
At the conclusion of the discussion it was agreed unanimously that meetings of the Advisory Commission to the Council of National Defense should be held on Wednesday and Friday of each week at 11:00 a.m.
Mr. Stettinius stated that he would like to send to each member of the Commission, in addition to the weekly report of progress of his office, a two-page progress report, together with other information such as a copy of the procurement report submitted to the President yesterday and a copy of the report of Messrs. Gano Dunn and Leland Olds who have been constituted a subcommittee to advise the Commission on electric power problems. He also said that Mr. Charles W. Kellogg, Major Theron D. Weaver, Commander K. B. Bragg, and Mr. John C. Parker had been appointed as consultants to aid in the work of such subcommittee.
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Stettinius reported that meetings had been held this week with representatives of the various divisions of the Commission to consider the classification of industries, that Mr. Thomas B. McCabe, of his staff, had headed up the study, that industries were being divided into three major classifications with one man in charge of each classification, and that it was important that the office of each Commissioner follow the same classification in order that matters affecting specific industries may be routed to the man in charge. Mr. Davis stated that after he had an opportunity to examine the classification he might wish to raise a question as to the division of the Commission which should be responsible for questions relating to the food processing industries. Mr. Stettinius responded that he did not consider these industries as included among those for which his division was responsible, and suggested that the question be left for future determination after Mr. Knudsen and Mr. Davis had discussed it further.
A discussion of the depreciation and obsolescence of facilities in war time industries ensued and Mr. Knudsen outlined the plan which had been tentatively agreed upon by the Treasury, the Reconstruction Finance Corporation and him to be followed in meeting the situation. He stated that no new legislation was needed for the proposed plan and that no formal action was necessary by the Commission at this time.
In connection with the question raised by Mr. Davis with respect to each of the members of the Commission being kept advised of the activities, other than contracts, of the several members, Mr. Henderson stated that he assumed that this matter would be well taken care of by such persons as may be employed by Mr. McReynolds for that purpose. He said, however, that in the case of very important matters he felt the members of the Commission should feel free to bring them before the Commission without first clearing them in a routine manner. Mr. Stettinius agreed with the position taken by Mr. Henderson.
At the conclusion of the discussion it was understood that Mr. McReynolds would work out a plan by which each of the members of the Commission would be kept advised of the activities of the other members.
Mr. Hillman then referred to the fact that it had been stated in the newspapers that his views had been expressed before a committee in Congress with respect to the percentage of profit which should be made in the production of goods, and that he did not like to be embarrassed by having it said that he took a position on a matter with which he was not entirely familiar. Mr. Hillman then inquired of Mr. McReynolds whether authority had been given to anyone to make such statement and Mr. McReynolds replied in the negative. Mr. McReynolds said that he had had a number of requests for members of the Commission to appear before various committees of Congress on certain matters, that he had undertaken
to arrange with the Chairman of each committee making a request that the members of the Commission not appear before his committee, and that he would like to suggest that in the future before any member of the Commission appears before a committee of Congress as a representative of the Commission, even though the problem under consideration comes within his particular field of activity, the question of his appearing be considered by the Commission.
Following a further discussion of the matter it was understood that in the future when a member of the Commission is requested to appear before a committee of Congress the question of his appearance will first be considered by the Commission, and that with respect to the opinions expressed before a committee of Congress by certain members of the staff of the Commission regarding the limitations of profits, it was understood that Mr. Henderson would request Mr. Horton, Director of Public Relations for the Commission, to look into the matter in order to ascertain whether any action is necessary by the Commission.
Mr. Henderson referred to the fact that he had been visited by representatives of the oil industry with respect to contemplated requests from the Army and Navy for the furnishing of oil and the requirement of the Department of Justice that the question of the legality of each transaction under the antitrust laws be passed upon by the Department. Mr. Stettinius stated that the members of Mr. Henderson’s staff and his own staff working on such matters were of the unanimous opinion that there should be a blanket authority obtained from the Department of Justice but that the Department was not willing to grant such blanket authority.
Following a discussion of the matter it was agreed that Mr. Stettinius should discuss the matter with Mr. Blackwell Smith, a member of his staff, who, in conjunction with members of the staffs of the other Commissioners appointed for such purpose, would prepare a report on the matter for submission to the Commission at its meeting on Wednesday, June 26, 1940.
Mr. Henderson then stated that it was his feeling that there should be developed some studies on priorities, in which subject he believed the other members of the Commission would be interested, and that the question in his mind was how the study was going to be organized. Mr. Stettinius stated that the sul> ject of priorities was one included in the report of the Procurement Committee, of which he was Chairman, that the report contained a request that the Committee be authorized to proceed with a study of priorities, and that the procedure to be followed would have to be to have the Coordinator of Purchasing, who would handle the study and who would call in for a review of the whole question of priorities
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JUNE 21, 1940
those whom he desired, present a report on the matter to the Commission.
In discussing the above matter Mr. McReynolds raised the question as to the official status of the Coordinator of Purchasing and after a brief discussion of the matter it appeared to be the consensus of the members of the Commission that for all practical purposes he would be in the same category as a member of the Commission. It was understood that the Coordinator of Purchasing would be invited to attend all meetings of the Commission in the same manner as if he were a member of the Commission.
Mr. McReynolds stated that he was preparing a letter to each of the members of the Commission notifying him of the establishment of the central Bureau of Research and Statistics to be headed by Mr. Stacy May, and advising that all requests for statistical information desired by the members of the Commission from other departments or agencies should be made through the Bureau and not as independent requests of the members of the Commission. This practice, he said, would eliminate the duplication of requests by the Commissioners of the same departments or agencies for identical material. During the course of the discussion of this matter which followed it was the general consensus of the members of the Commission that, while members of the Commission themselves may request other departments or agencies for information, the operation of the central Bureau would be more efficient if in such instances the Commissioners would advise Mr. May that they had requested such information in order that, in the event a similar request were received by the Bureau from another Commissioner, such information would be available again without contacting the department or agency furnishing such information. Mr. Henderson suggested that after Mr. May had had a sufficient opportunity to organize his division it might be well for him to attend a meeting of the Commission for the purpose of outlining to the members of the Commission the functions of the Bureau and the procedure to be followed in obtaining desired information.
Mr. Stettinius said he would like to have recorded in the minutes of the Commission the understanding, which it was understood was in effect in all Government departments and agencies, that, when the Commission desires to negotiate for the services of an employee of another department or agency of the Government, permission should first be obtained from the head of such department or agency before negotiating directly with the employee.
Mr. Henderson then raised a question as to the problem of additional ship building facilities and stated that he felt a study involving the question of the extent of the potential expansion of shipping and what the demand for ships might be should Jbe
commenced as soon as possible. He said that this was a matter of interest to a number of Government departments and that there was a question in his mind as to whether the study should be initiated. Mr. Stettinius referred to the exhaustive studies of existing shipyards and what can be done to open new yards that had been made by the Maritime Commission and suggested that, in view of the fact that it was understood that the Maritime Commission was preparing a new program of expansion, it might be well to invite Admiral Emory S. Land, Chairman of the U. S. Maritime Commission, to attend the regular meeting of the Commission on either Wednesday or Friday of next week for the purpose of discussing the matter with him.
It was agreed unanimously that Mr. McR.ey-nolds should extend an invitation to Admiral Land to attend the meeting of the Commission on either Wednesday or Friday of next week, whichever date is convenient to Admiral Land, for a discussion of the above matter.
Mr. McReynolds then presented a letter addressed to Mr. Stettinius under date of June 20, 1940, by Mr. Nathan Straus, Administrator of the United States Housing Authority, transmitting the following draft of letter [Document No. 2] to Senators Wagner and Walsh and suggesting that, if deemed desirable, the letter be sent as an expression of the views of the Commission on the proposed legislation:
“The problem of housing facilities for industrial workers, to enable the rapid expansion of defense activities and to avoid large labor turnover, now faces us with an urgency even exceeding that in the years beginning with 1916. .
“Concerted studies of the facilities of existing agencies, in conformity with the policy of utilizing such agencies wherever possible have led to the conclusion that the United States Housing Authority could quickly meet this problem, with the aid of certain implementing legislation. Such legislation would provide housing to be undertaken only at the direction of the President to meet the needs of both defense workers and families of enlisted men, and has the subject of extensive conversations involving the War and Navy Departments, the United States Housing Authority and others. . . ,
“We cannot too strongly urge the immediate adoption, ot legislation to accomplish these objectives. Unless something is done and done quickly, there will be a serious retardment of the expansion of defense industries produced by the serious shortage of homes for workers.
“It is noteworthy also that the objectives of this proposed legislation embrace the development of durable community assets which can serve permanently as low-rent homes for slum dwellers, immediately the emergency is over.
A discussion of the matter ensued, at the conclusion of which Mr. Stettinius moved that the matter be referred to Mr. McReynolds with power to act.
Carried unanimously.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Executive Secretary
5
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
COMMISSION MINUTES—JUNE 26, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, June 26, 1940, at 11:00 a.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Also Present:
Honorable Robert H. Jackson, Attorney General of the United States
Admiral Emory S. Land, Chairman of the U. S. Maritime Commission
Mr. McReynolds, Secretary
Mr. Nelson, Director, Procurement Division, Treasury Department
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Smith, Legal Adviser to Mr. Stettinius Mr. Horton, Director of Public Relations Mr. Bethea, Assistant Secretary, Board of Governors of the Federal Reserve System
Mr. Thompson, General Assistant, Board of Governors of the Federal Reserve System
Mr. McReynolds stated that in connection with the matter considered at the meeting of the Advisory Commission on June 21, 1940, involving violations of the antitrust laws he had discussed the matter with the Attorney General of the United States who had said he would be glad to attend this meeting of the Commission in order to present the point of view of the Department of Justice in the matter, that Mr. Jackson was present for that purpose, and that before he presented the point of view of his Department it might be well for Mr. Smith, as chairman of the committee appointed at the meeting on June 21 to prepare a report on this matter, to present first the report of the committee. Mr. Smith said that he would like to read the following memorandum [Document No. 3] which embodied the condensed views of all of the members of the committee composed of Messrs. Ginsberg,2 representing Commissioner Henderson, Porter, representing Commissioner Davis, Brandwen, representing Commissioner Hillman, Eaton, representing Commissioner Knudsen, and Smith, representing Commissioner Stettinius :
“I. Assumption:
, That j oint efforts of competitors in industry outside of ordinary competitive action would be requested by the government to bring about the wide-
* Correct spelling: “Ginsburg.”
spread and effective action contemplated by the Commission. Basis:
Baruch writings, logic, few cases already. . Scope of this memo'.
Problems arising from new facts only and only to the extent that the government thinks important for defense.
“II. Reasons Stated By Business Representatives for Considering Steps At This Time To Protect Such Business Action When Requested'.
Widespread indictments have made industry wary.
Oil case (of course not involving defense) has been construed as issuing a warning:
Broad definition of price fixing all per se illegal. Reliance on non-statutory government sanction is valueless.
If Congress is to be approached, something should be started.
‘III. Business Position If No New Protection'.
Some of the Committee feel that decided cases and statutes give little aid, but two Members feel that three theories of law are available to afford substantial protection to desired action in connection with defense:
(1) No conspiracy exists in the sense of the antitrust laws where joint action is requested for defense —even though price is involved.
(2) The Chief Executive has sufficient power to protect cooperators as much as necessary in national defense.
(3) The Defense Act of 1916 can be invoked. The Antitrust Division of the Department of Justice leans to the first view.
‘IV. Alternatives:
1. Department of Justice solution:
Clear each actual case on the basis of a memorandum of an appropriate governmental agency or officer covering the importance of the course for national defense, on the private assurance to the Defense Commission of the Department of Justice that it will accept the judgment of such agency or officer.
Note'. A public announcement of the Department of Justice position is not now agreed to.
It is agreed that if the Attorney General should issue an opinion setting forth these views, the acceptability of this approach to the business community would be greatly enhanced, and the likelihood of any successful prosecution greatly diminished.
2. A statute making legal that action requested by an appropriate government agency or officer in the interests of national defense.
“V. Alternatives Balanced as a Practical Matter'.
1. Department of Justice solution:
Mr. Smith and others feel that the industry attitude would be at best:
‘We think that the oil case says that no cooperation to remove pressures from the market can be even considered as to reasonableness (whether the reasoning involves the national defense program or otherwise), and we think we are clearly notified that sanction other than by statutory machinery is worthless. Under these facts, we will do as requested nonetheless, because we feel it our duty; but—we think it unfair not to protect us by statute, considering all the premises.’
Of course, some industries, such as oil, may not go this far.”
6
JUNE 26, 1940
Following the reading of the memorandum, Mr. Smith suggested that the Attorney General might wish to comment on the matter without any discussion by him (Mr. Smith) of the memorandum of his committee.
Mr. Jackson stated that he thought the memorandum contained several large orders rolled into one proposition. He said there is no question that anyone who is asked to undertake the production of a certain item, or any other function of the national defense program, is entitled to be protected because of what he does and that he is entitled to reasonable assurance of protection, as well as protection, but that in the first place it is a very difficult thing to frame a general suspension of the antitrust laws that will come out of Congress with any acceptable definiteness, and that if this question is submitted to Congress it will open up the whole field of price controls, the question of profits in the defense program, and the whole economic situation, to discussion and amendment, and that, while he did not know what Congressional action would be taken, he did not believe it would be in the form submitted by the Commission. In the second place, Mr. Jack-son said, there are involved in any suspension of the antitrust laws consumers’ interests, labor interests and other interests which legitimately require protection and that it seemed to him that it would be much better for the Commission to proceed on a case-to-case basis. He stated that the Department of Justice had been met with the question of the purchase of rubber and that he had given to Mr. Jesse Jones, Federal Loan Administrator, a letter that he thought has been found acceptable to the rubber industry which would give them complete clearance as far as it can be done. He said that he knew of no case in which anyone had been prosecuted for complying with the request of the Government, that there was a great deal of talk that that had happened in the “oil cases” but that was not true, that that part of the National Recovery Administration Act dealing with this matter was held unconstitutional, that the oil interests knew it would be held unconstitutional and that there was evidence in some cases that steps had been taken to conceal from the Government certain things they were doing.
Mr. Jackson stated further that he had no feeling that a clearance on a case-to-case basis is not adequate protection, that if some industry feels that is the case then he should think the Commission would be in a better position if the industry itself rather than the Commission asks for the suspension because there are two fears in the United States at the present time which he had found, (1) that the United States will get into the war and (2) that we will get into a situation such as in 1914, 1915, 1916, and 1917 of runaway prices, ridiculous profiteering and that sort of thing, and that if the Commission sends a bill to Congress at the present time before it has encountered any real difficulty, he thought it was in
viting a head-on collision with that very reasonable sentiment which is against allowing a runaway situation in this country. He said that it seemed better to him, therefore, to deal on the basis of each individual case.
Mr. Jackson said, whether in the event legislation is obtained or not, he did not want his Department to take the responsibility of saying what is necessary for national defense, that if the Advisory Commission arrives at the conclusion that a certain arrangement is necessary for national defense, he is ready to take the decision of the Commission for that. He stated that he did not want any bill passed and that he would oppose any bill that places upon the Department of Justice the decision for what is necessary for national defense, that his Department is not equipped for that, but that in anything that comes to the attention of the Commission in which there is need for -clarification, the Department of Justice is ready to discuss the matter with the Commission in order to try and work the matter out and that that is about as far as he could go in the absence of specific problems. If the Department of Justice were asked now, Mr. Jackson said, as to whether it was expedient to modify the antitrust laws, he would make the answer “no”.
Mr. Smith stated that, while he hesitated to express any personal views on the matter, he would like to make two comments, (1) that he had every reason to believe from long association with the Department of Justice in various degrees, not so much with the Attorney General as with some others in the Department, that the Commission will get absolutely one hundred per cent fair cooperation in every respect and that he had absolute confidence in that, so that from that viewpoint there was nothing lacking at all and that it was merely a matter of the form of procedure, rather than of substance, of how two activities of Government can cooperate, and that (2) he was distinctly embarrassed by being the one having to talk for the proposition that some protection is necessary inasmuch as it was obviously better to have a specific problem before putting it up to the Department of Justice but that the reason the matter was being brought up at the present time was that after Congress adjourns it may be decided that such legislation is necessary, that it would then be necessary to await the reconvening of Congress and that the matter was being prematurely taken up from a practical point of view.
In referring to the “oil cases”, Mr. Smith said that such cases do not hold that the fixing of prices in connection with national defense is illegal inasmuch as the question of national defense was not involved. He said that the decisions in the “oil cases” went out of their way to set at rest the question of whether anything related to prices directly could be defended no matter how reasonable it was, that the Supreme Court tried to set out clearly that the principle of anything having a direct relationship with
7
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
prices was illegal unless it was sanctioned by legislation. Mr. Smith said that in the face of the defense issue it was impossible for him to feel that any protection can be expected under existing cases of cooperation on matters directly relating to prices but that any prosecution for cooperation in connection with prices would fail if faced by a clear-cut opinion of the Attorney General that the antitrust laws were not applicable.
Mr. McReynolds inquired if Mr. Jackson or any of the members of the Commission would like to add anything further to the discussion. Mr. Jackson said that he would be glad to deal with any specific thing the Commission cannot deal with, that he wanted to have a complete understanding between the Commission and the Department of Justice, that he did not want any conflicts or misunderstandings, or for the program of national defense to bog down because of any lack of cooperation between his Department and the Commission on the question of legislation.
Mr. Jackson said he thought that if Mr. Smith had presented to a committee of Congress the same statement he presented at this meeting, the question would come into the minds of the committee that if the antitrust laws are to be suspended on prices, by what device will the Government and the American people be protected, and that there was a much larger question in the case than the mere suspension of the antitrust laws. The most difficult case would arise, Mr. Jackson said, in the event of action by the Commission to obtain suspension of the antitrust laws on a clear violation of the statute, which violation was saved only by the fact that it is being committed in furtherance of the defense program. He said that in such cases he thought that not only good moral judgment but good legal judgment could be used under these circumstances in saying that this was not a conspiracy and he thought that was about as far as the statute could go except for the question whether there is authority in the Department of Justice to make that kind of an arrangement but that he had no doubt that it would be a complete case. If there was some way consistent with the public interest, Mr. Jackson said, by which the Department of Justice could be relieved of responsibility in such cases he would be glad to know it, that there is no doubt that in some of the arrangements which will be approved by the Department that later on they will see elements in them which they did not know they were approving but that he knew of no way to prevent that.
Mr. Smith suggested that if in each case a statement could be issued to the public by the Attorney General the approach to the problem would be greatly strengthened. Mr. Jackson said that he saw no reason why the public should not be advised as to what the attitude of the Department was and that he was perfectly willing to take the responsibility for that.
Mr. Stettinius stated that he thought it would be
helpful if the public could understand the reason for the action in each case.
Mr. Henderson said he thought such a practice was highly advisable. He stated that he agreed that an administrative procedure of certification by the Commission is certainly the best way in which to' handle the matter and he suggested that for the time being the Commission proceed on a case-to-case basis and if a multiplicity of cases arose then would be the time to consider, in the atmosphere of that particular time whether or not specific legislation is necessary and that from his past experience he certainly agreed that whatever the Commission suggested in the way of legislation would not be recognized if and when it was finally enacted by Congress. Mr. Henderson then stated that this brings up the question of how the Commission will determine its certification, that obviously there are certain tests and standards which it will have to apply because the responsibility will rest with the Commission for making the certification and that he believed a formal certification and approval will be necessary for the protection of the industry involved and the Attorney General against the possible raising of any questions in the future. Mr. Henderson said his suggestion would be that the Commission proceed on die basis suggested by the Attorney General, i.e., of clearing each individual case, and that the Commission address itself immediately to the problem of working out its own administrative procedure for passing on all such requests. He said he felt that such requests should be passed upon by the Commission as a whole rather than by one Commissioner.
Mr. Jackson said he thought the Commission would want to establish a policy of uniformity with reference to all certifications which it makes, that his Department had had some experience in the past with what is substantially the same thing and that there was a great tendency to be certifying on plans that are too general, that if immunity is going to be given to someone it is desirable for the protection of the Commission to have an explicit statement of what it is immunizing.
Mr. Henderson inquired whether the Commission did not want to give some consideration as to how it can be sure that the range of authority extended is being observed and suggested that that might be handled by reports or by audits through the contract section of the Treasury Department or by some other agency better equipped than the Commission will be. He stated that if this item is given consideration in a general review of the matter he thought that was all that can be required as a matter of protection. He said he felt certain that every case would at some time in the future be exhaustively reviewed by a committee of Congress, and Mr. Jackson said this would be so particularly if a period of runaway prices occurs in which case a Congressional committee will trace back every price increase possible granted somewhere, that this is an extremely delicate
8
JUNE 26, 1940
field to operate in and is one in which every man wants to protect his record with great care and know what he is certifying to.
Mr. McReynolds inquired whether it would not be desirable at this time to have the Commission agree on the appointment of a subcommittee of three Commissioners (Messrs. Knudsen, chairman, Henderson and Stettinius) to pass on such cases, it being understood that the subcommittee would prepare a request which would be sent to the Attorney General for an opinion that could be used for the purpose of notifying the public what the attitude of the Department of Justice would be with respect to handling such cases and would designate members of their staffs to work out an administrative procedure for clearing all cases which would be presented to the Commission for approval as soon as possible.
Mr. Knudsen raised the question whether, in following the procedure suggested by the Attorney General of clearing each individual case, each case would be cleared with the Attorney General before a contract is completed.
Mr. Henderson said in negotiating with manufacturers of certain desired items such manufacturers would say that they cannot do what they are being asked to do because it will be expressly or implicitly a violation of the antitrust laws and that then, through whatever procedure the Commission works out, a request would be made by the Commission of the Attorney General for a review of the action needed to be taken following which further negotiations could be carried on with the manufacturers. In this connection Mr. McReynolds called Mr. Knudsen’s attention to the assurance of the Attorney General that he would expect to rely implicitly on the judgment of the Commission in certifying that there was justification for a waiver of responsibility as the cases arise and that what the Attorney General wants is for the Commission to assume the responsibility of saying that in the face of national defense the action requested is necessary following which he will proceed to clear the case. Mr. McReynolds said that the Commission might delegate the chairman of its subcommittee as its agent to make the certifications to the Attorney General on behalf of the whole Commission, to which Mr. Henderson responded that it might be found that the other members of the Commission outside of the subcommittee would want to review each case.
Mr. Stettinius inquired whether the committee appointed at the meeting of the Commission on June 21, of which Mr. Blackwell Smith is the chairman, could not be requested to develop the suggested procedure.
At this point Mr. Hillman stated that it was his understanding that the Attorney General desired to have the certification of the Commission and not of one member of the Commission and that he felt each case should be cleared by the Commission as a whole.
Mr. Jackson then stated that his only doubt in connection with making a public announcement of the suspension of the antitrust laws in each case was that he thought the Commission would have more people asking for a certification to his Department.
Mr. Hillman stated that a system of negotiated contracts might cause runaway labor and price markets which would result in a dislocation of the whole labor supply, that the Commission should advise the public that it has an objective to protect the interest of the Government in formulating a program of national defense as speedily as possible, and that that will not be accomplished unless the public is taken into confidence and advised that negotiated contracts in certain fields will be of great help to the Commission in the performance of its duties because it is felt that in many cases the Government will get better prices and the general objective of a stabilized labor market and of reemployment at the same time will be gained by negotiated contracts. He said that he did not think that the Commission should believe that negotiated contracts will go into all fields, that the only way to try to control a serious labor market is through negotiated contracts where the Commission has the opportunity in certain places to say it would rather place a contract where there are available idle plants and idle labor and that he. believed a public statement to the effect that in the judgment of the Commission it will be necessary to do that will give both the Department of Justice and the Commission better protection.
Mr. Jackson suggested that when the Commission has worked out an internal administrative procedure for handling this matter and it is decided to make a public statement thereon, such statement be submitted to him for consideration before being released in order that both the Commission and the Department of Justice may be in agreement on such statement. He said that in concluding he would like to have it clearly understood that his feeling about the matter under consideration is not based on any feeling that the antitrust laws are sacred and should not be touched, that he had been advocating their amendment for three or four years as he did not believe they had accomplished a great deal for the people as a whole, and that he was not agreed that the antitrust laws are an antidote for runaway prices. He said that he would be glad to work with the committee appointed by the Commission to work out a procedure to be followed in these cases.
At the conclusion of the discussion it was understood that the committee headed by Mr. Smith, and otherwise composed of Messrs. Ginsberg,3 Porter, Brandwen and Eaton, in consultation with Mr. Budd and Miss Elliott, who have no lawyers attached to their immediate staffs, should formulate for presentation to the Commission as soon as possible a procedure to be followed by the
• Correct spelling: "Ginsburg.”
9
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Commission in the handling of all requests for a suspension of the antitrust laws.
At this point Mr. Jackson left the meeting.
Admiral Land was then called upon to discuss the question raised by Mr. Henderson at the meeting of the Commission on June 21 with respect to the problem of additional ship building facilities and the question of a proposed study involving the extent of the potential expansion of shipping and what the demand for ships might be.
Mr. Henderson stated that he would like first to outline for Admiral Land the background of the question presented by him. He said that at the last meeting of the Commission with the President, the President talked about the construction of some new types of ships that might go into shallower waters in some of the South American areas and that he (Mr. Henderson) said that it was obvious from what our program is going to add to the demand for transportation, from the potentialities of the inter-Americas’ trade that the President had under contemplation, of the allied buying, and the increase of civilian need for shipping, that we would probably have a strain on our shipping capacity and, therefore, it probably was better at this time to be considering what our shipbuilding capacity was and if it was not adequate to be taking steps while we can to have more ships built. This question, he said, was brought up at the last meeting of the Commission and Mr. Stettinius suggested as the first step that Admiral Land be asked to attend a meeting of the Commission to discuss the matter, perhaps with a view of instituting a survey of the potential increase in water shipping and whether or not the present ships could handle that and, if not, perhaps a recommendation towards getting some of the shipyards that are now redundant into shape and being ready for any expansion of a shipbuilding program.
Mr. Stettinius stated to Admiral Land that what the Commission would like to have him do at this time was to bring before it a picture of the shipbuilding facilities in this country and what might be done in the event of an expansion of shipbuilding inasmuch as the President thought that we should have a four or five thousand ton ship to serve wherever possible.
Admiral Land stated that there are fifteen private shipyards in the United States today, exclusive of New York, that they were all capable of carrying on as they are and that there are at least eight of them capable of expansion. He said that five of such yards are comparatively new. There are in addition to those yards, Admiral Land said, at least ten plants that were in existence during the World War but of which practically nothing remains, that there was one other plant at Mobile where they contemplate building ships which is in between, i.e., is not out of, or in, commission at the present time. He said that under present conditions, as seen by the Maritime Commission today, the proper way of increasing the
10
production is to expand the present plants where you have people to run them. There are two bottlenecks in the situation, Admiral Land said, (1) the shortage of skilled labor, and (2) the question of machinepr. He then referred to the small number of existing facilities available for the construction of the necessary machinery. He said there was a great idleness of shipbuilding on the Great Lakes. In connection with a proposed survey, Admiral Land said, the Navy and the Maritime Commission have up-to-date surveys which can be presented to the Commission at any time and which he would be glad to keep up to date for the Commission. He then referred to the Pacific and Alaskan areas with which the President is concerned and stated that a ship of the size suggested by the President, which he called an all-purpose ship, for use in such areas was very difficult to design but that it can be done and the design was being worked on at the present time. He said that the proposed ship was smaller than anything the Maritime Commission has and that ships of that size could be built on the Great Lakes without any trouble inasmuch as they have the men and machinepr to do the work. Mr. Knudsen commented at this point that he did not believe it would be possible to get out of the Great Lakes ships of the size proposed. Admiral Land stated that the west coast is in good shape now, that there are five yards in operation on the coast at the present time located at Tacoma, Oakland, San Francisco, San Pedro and just outside of Los Angeles. Admiral Land said the above is a brief statement of the shipbuilding picture as it exists today and that he would be glad to answer any questions or to obtain any additional information.
Mr. Henderson said that while we have the information with respect to the resources and capacity he did not believe anyone has under way a study of the estimate of what the additional demand is likely to be for shipping in terms of the defense program or in terms of the South American program and if that were something which we would have to know in six, nine or twelve months, we would want ships pretty fast and they cannot be built, or shipyards reconditioned, in that period.
Admiral Land stated that in such a case the Navy wants ships immediately and that ships of the Maritime Commission could be turned over to the Navy and the contracts of the Maritime Commission augmented and brought along in an orderly way.
Mr. Henderson then stated that his purpose in suggesting such a survey was to obtain a view of the future inasmuch as it seemed to him that there is bound to be an increased demand in shipping and that the Commission should try to estimate what that is likely to be. He said that he believed Mr. May, Director of the Commission’s Central Bureau of Research and Statistics, and Admiral Land’s organization could put into operation a rough kind of survey of the potential demands.
JUNE 26, 1940
Mr. Stettinius said he felt such a procedure would be very wise.
It was understood that Mr. Henderson would request Mr. May to institute a survey of the question of the potential expansion of shipping and what the demand for ships might be and that he would suggest to Mr. May that he contact Admiral Land’s organization in order that he can avail himself of the studies which have been made by the Maritime Commission dealing with the problem. /
In connection with the above matter, Mr. Knudsen inquired of Admiral Land whether the Maritime Commission was preparing a new program of expansion and Admiral Land responded that the program of the Maritime Commission started in 1938 with fifty ships to be built each year for ten years, that last summer sixty-seven contracts were let in thirty-five days so that as far as funds are concerned they are ahead of their program. He said, however, that Congress had since cut the appropriation of the Maritime Commission and as a result they were today over-obligated as to contracts and that the reason the Maritime Commission had not been pressing on its shipbuilding program for the last three months was because it does not have the funds.
At this point Admiral Land left the meeting.
Mr. Hillman said he would like to clear with the Commission the fact that the program for making available the necessary labor for the defense program while providing voluntary employment opportunities for those now unemployed and the necessary machinery for the voluntary training and retraining of workers has now been set up and is ready for operation. He said that the program would involve $17,281,340, which would be provided by the Works Progress Administration in the amount of $9,781,340 and the United States Office of Education in the amount of $7,500,000.
The program outlined by Mr. Hillman was unanimously cleared by the members of the Commission.
Mr. Stettinius stated that he would like to present to the Commission at this time, in the nature of a test case of the policy of bringing matters before the entire Commission for clearance, a recommendation [Document No. 6] which he proposed to make to the Army and Navy today relating to the building up of their stocks of 100 octane aviation gasoline. He said that the present domestic consumption of this relatively new synthetic product is approximately 4,000 barrels per day and our exports 15,000 to 20,000 barrels per day, as compared with needs in the event of a major war of 100,000 to 200,000 barrels per day, depending on the number of planes then available. In order for the Army and Navy to make such purchases, Mr. Stettinius said, it is necessary to have 100 octane aviation gasoline placed on the list of “critical” materials, and that he felt it was certainly an emergency item.
683775—46—2
During a discussion of this matter Mr. Henderson stated that there were certain points involved in this question which were within the scope of his duties as a member of the Commission which he would like to clear first and Mr. Davis inquired whether action on this matter could be suspended pending a report of the committee appointed by the Commission to prepare a draft of policy as to clearances between the commissioners and as to the principles to be followed with respect to negotiated contracts. Mr. Stettinius stated that this was a matter demanding immediate attention and that he would like to ask for the permission of the Commission to instruct the Army and the Navy to begin to build up their stocks of 100 octane aviation gasoline immediately.
The authority requested by Mr. Stettinius was unanimously granted.
During the discussion of the above matter Mr. Hillman left the meeting.
Mr. Davis referred to the agreement at the meeting on June 21, 1940, that regular meetings of the Commission should be held on Wednesday and Friday of each week at 11:00 a.m. and inquired whether, in view of the fact that the Board of Governors of the Federal Reserve System meets in the Board Room at 10:30 a.m. on Fridays, the Friday meeting of the Commission could be held in the afternoon.
It was agreed unanimously that the regular Friday meeting of the Advisory Commission to the Council of National Defense should be held at 3:00 p.m. on that day.
Mr. Stettinius stated that his office was preparing a two-page progress report showing the status of all matters being handled by his office which he proposed to distribute to the other members of the Commission on Wednesday afternoon of each week prior to his presenting such report to the President each Thursday.
Mr. McReynolds stated that during the course of this meeting he had received a telegram from the Chairman of the Defense Council of the State of New Jersey, requesting, at the suggestion of Governor A. Harry Moore of New Jersey, that his committee be granted an opportunity to discuss with the Commission the question of State cooperation in the national defense program, and Mr. McReynolds inquired whether the Commission desired to confer with the committee. He added that he did not see how any advantage could be gained by such a conference.
At the conclusion of a discussion of this matter it was agreed unanimously that the matter should be referred to Mr. McReynolds for disposition.
Mr. Budd stated that in presenting the matter he had in mind he wanted to say first that he felt that all of the members of the Commission recognize the fact that transportation comes clearly within that classification of items which requires that we use our
11
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
existing agencies and expand them if necessary to take care of our requirements. It was necessary, he said, that he know as far in advance as possible something about the load which is going to be placed on the railroads. He stated that it will be difficult to persuade the railroads to spend a lot of money unless he can indicate to them what they are expected to do in the next two or three years. Another thing of particular importance to the railroads, Mr. Budd said, is that they want in every way to avoid runaway markets for material and labor.
Mr. Budd then stated that the matter of a large mobilization has been brought up and in that connection he read the following memorandum [Document No. 4] :
“Mobilization of 300,000 troops would call for the use of 5,000 passenger train cars. The Railways do not have this number available. Mobilizations which are being arranged for August, 1940 involve a total of 125,000 men. All of the Railway equipment available will be needed for these movements.
“At least 2,000 additional cars should be provided by the time that the larger mobilization (300,000 men) would be undertaken. The Railways should not be called upon to provide additional special troop equipment because it is not adapted to ordinary commercial service and would not be used except for troops. Such cars are appropriately a part of the Army equipment.
“It is recommended that 2,000 Railway troop cars be provided by the time the military forces have been increased as contemplated. They can be produced at the rate of about five per day in each of four or five large passenger car shops. Such shops are located at Chicago, Illinois; Hammond, Indiana; Jeffersonville, Indiana; St. Charles, Missouri; Berwick, Pennsylvania; and Butler, Pennsylvania. Production could be begun in about five months. The cost would be estimated from $25,000 to $30,000 each for the cars that will carry troops, and $15,000 to $20,000 for bag-SaS^ cars. If 1,500 of the 2,000 cars are for carrying troops at $25,000 each they would cost $37,500,000 plus 500 baggage cars at $15,000 each which would total $45,000,000.
. Vi owners^’P these cars by the Government could be simplified and made economical by having them stored at convenient points throughout the United States where Railway Passenger Car Repair Shops are located and the necessary maintenance can be done by the Railways and Pullman Companies for the Government.
“The type of car recommended is a plain, sturdy, all steel car which will carry about forty-eight persons. The accommodations could either be three-tier standee bunks which would be made up when not in use, providing ordinary coach accommodations, or these cars could be equipped with coach seats only.
. Air-conditioning, is not recommended, although possibly it should have consideration.”
In connection with an inquiry regarding the transportation of troops in trucks in cases of mobilization, Mr. Budd stated that the Quartermaster General had advised him that in a large mobilization the Army does not want to rely on trucks to a very great extent, that sixty-nine per cent of the mobilization in Wisconsin in August of this year will be by rail and that he had been advised that that is about the percentage for summer mobilization and that it would be higher in winter mobilization. He said that the mobilization in the South last month involved 70,000 men and that 60,000 of them had been transported by trucks but that that was very unsatisfac
tory inasmuch as it took approximately seventy-two hours when they could have reached the point of destination by train in twenty-eight hours and that in addition the men were not all in good condition when they arrived by truck. The Army, Mr. Budd said, is agreed that this is the kind of a setup they want but they would prefer that the Army not have to spend the money necessary for the purchase of such equipment. He said he thought they were agreed that it is a perfectly reasonable thing to handle it in this way and that in terms of national economy the Government is the logical one to own such special cars. From the standpoint of the railroads, Mr. Budd said, he thought there is general agreement that this is the sound plan, that some few of the railroads seem to think they can furnish their proportion of the necessary equipment, but that the great majority of them do not feel they can. He said he thought it should be realized that the passenger cars which will be furnished in the mobilization this summer are the old cars that are passing out of existence and he did not think it is economy to put a lot of money into fixing them up and that certainly the new cars which will be purchased for commercial passenger use will not be the right type for this purpose.
Mr. McReynolds suggested that Mr. Budd confer with the proper persons in order to put such proposal in definite shape for a project from the Army, the proposal to include the estimate of the amount of use that would be made of the equipment, an estimate of the cost, a justification for the proposal, etc., which could be presented to the Commission for approval following which it could be submitted to the President for his approval.
Mr. Budd stated that while consideration could be given to the use of box cars for mobilization purposes it did not seem to him that in a defense program it is desirable to think in terms of moving men around in anything except suitable equipment.
At the conclusion of the discussion it was understood that Mr. Budd would prepare a proposal along the lines suggested by Mr. McReynolds which, if approved by the Commission, could be submitted to the President for his approval.
Mr. Henderson then suggested that perhaps Mr. Knudsen would explain to the other members of the Commission just what the Army program is and Mr. Knudsen stated that a large amount of time had been spent trying to determine the requirements for the Army, but that the Navy requirements seem to have been pretty well handled and were much further ahead. After making two or three attempts to show the requirements of the Army, Mr. Knudsen said, a program “A” had been agreed on which provides for the important items for about 1,000,000 men and the appropriations for this program have been passed and are now on the President’s desk for signature, or have already been signed, so that production under this program could now go ahead.
12
JUNE 26 AND 28, 1940
He said that the Army had another proposal which he had taken over to the President, that the President had gone through the whole schedule contained therein and omitted some items which he felt were not important and inserted other items which he felt should be taken care of following which the program was rewritten. Mr. Knudsen said he went to the White House on Tuesday and Thursday of last week with an estimate of the cost of such a program of approximately $7,000,000,000 of which amount $2,500,000,000 was asked for in cash and the balance in contract authorizations. He said the President then instructed him to take the matter to the Director of the Budget to have it placed in proper form in order that the appropriation asked for may be requested as soon as Congress reconvenes and that that is the present status of the program.
Mr. Henderson stated that there was great confusion as to what the program is and what it is likely to be and that it makes a lot of difference because some industries say they can take care of all the present plans but that if a larger program is to be had that that was another matter. Mr. Henderson said he did not believe that in general there is any real idea about the program and that that was his reason for requesting Mr. Knudsen’s explanation.
Mr. McReynolds then read the following draft of an Order Establishing The Office For Coordination of National Defense Purchases [Document No. 5]:
“Pursuant to authority vested in it by section 2 of the Act of August 29, 1916 (39 Stat. 649), the Council of National Defense, with the approval of the President, hereby establishes as a subordinate body to the Council an office to be known as the Office for Coordination of National Defense Purchases, at the head of which there shall be a Coordinator of National Defense Purchases (hereinafter referred to as the Coordinator). The Coordinator shall
serve as such without compensation but shall be entitled to actual and necessary transportation, subsistence and other expenses incidental to the performance of his duties.
“The Office for Coordination of National Defense shall, In cooperation with the Advisory Commission:
(1) establish and maintain liaison between the Advisory Commission, the several departments and establishments of the Government and with such other agencies, public or private, as the Coordinator may deem necessary or desirable to insure proper coordination of, and economy and efficiency in, purchases by the Government of supplies, equipment, munitions, and other material requirements essential to the national defense;
(2) determine the most economical and effective methods of purchase of repetitive items common to several agencies and to assign the purchase function to the agency or agencies best qualified to perform it, provided that the War and Navy Departments shall have authority for making purchases necessary for the national defense, subject to such coordination as may be required to establish priorities;
(3) collect, compile and keep current statistics on purchases made by Federal agencies;
(4) coordinate the research in procurement specifications and standardization now conducted by the different Federal agencies ;
(5) determine and keep current combined immediate material requirements of all Federal agencies, and estimate future requirements so as to facilitate purchases and to cushion the impact of such orders on the National economy;
(6) review existing laws and recommend to the President such new legislation and simplification of existing legislation as may be necessary to make Government purchasing more efficient and effective;
(7) investigate the necessity for and make recommendations to the President relative to the granting of priority to orders for material essential to the national defense over deliveries for private account or for export.
Donald M. Nelson is hereby appointed Coordinator of National Defense Purchases.”
No objection was offered by the members of the Commission to the draft of order.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—JUNE 28, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, June 28, 1940, at 3:15 p.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Henderson
Mr. Hillman (latter part of meeting)
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Sherwood, Assistant Secretary
Mr. Horton, Director of Public Relations Mr. Bethea, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, General Assistant, Board of Governors of the Federal Reserve System
Mr. McReynolds stated that in accordance with the action taken at the meeting of the Commission on June 21, 1940, with respect to the formulation of a plan by which each member of the Commission would be kept advised of the activities of the other members, he had assigned Messrs. Joseph Harris, of Northwestern University, and B. L. Gladieux, of the Bureau of the Budget, to the work of preparing such a plan which would operate with as little interference as possible to the general operations of the offices of the various Commissioners, and that he
13
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
would appreciate it if the members of the Commission would cooperate fully with Messrs. Harris and Gladieux in working out such a plan.
Mr. McReynolds said that the draft of Order4 Establishing the Office for Coordination of National Defense Purchases and appointing Donald M. Nelson as Coordinator of National Defense Purchases had been approved by the President and signed by the Secretaries of War, Navy, Interior, Agriculture, Commerce, and Labor, who comprise the Council of National Defense, and that he would like to take this opportunity to welcome Mr. Nelson into the official staff of the Advisory Commission.
Mr. McReynolds then read for the information of the members of the Commission the following letter [Document No. 7] addressed to him under date of June 27, 1940, by Mr. Nathan Straus, Administrator, United States Housing Authority:
“I called you a couple of times, but knowing how busy you are, perhaps it is just as well to put it in a letter.
“The amendments to enable the USHA to undertake necessary defense housing are embodied in Title II ofH.R. 98225, now before the President for signature. Without waiting for the signing of this bill, which will very much facilitate and speed up the defense housing program, loan contracts for projects have already been approved for
Pensacola, Florida Montgomery, Alabama and projects will be submitted to the President in compliance with emergency needs brought to our attention by Admiral Moreell in
Newport, Rhode Island Portsmouth, Virginia Corpus Christi, Texas Charleston, South Carolina within the next couple of weeks..
“The general course followed in respect to defense housing has been in line with the suggestions and recommendations made by you a few days after the Advisory Commission was appointed.”
In connection with this matter, Mr. Knudsen said he had been advised by the Navy Department of the need for certain projects, that two of the projects were to be located outside of the United States, and that inasmuch as facilities were available in the United States for taking care of the emergency needs of the Navy, he had taken it upon himself to contact Mr. Carmody, Administrator of the Federal Works Agency, to look into the matter.
At the request of Mr. Stettinius it was understood that copies of Mr. Straus’ letter would be sent to the members of the Commission.
During the discussion of the above matter Mr. Hillman joined the meeting.
It was then stated by Mr. McReynolds that a dinner in honor of Mr. Arthur M. Holcombe, who had been in Canada working for the Social Science Research Council in an effort to obtain information with respect to what Canada has done in various fields of activity, including its system of war administration, would be held at the Hay-Adams House on Tuesday, July 2, 1940, which would begin at
4 Tune 27, 1940. S F.R. 2446.
* Public Law 671, 76th Cong., 3d Sess., June 28, 1940.
5:30 p.m. and that he believed a discussion of such subject by Mr. Holcombe would be of interest to the members of the Commission. He added that he would like to have his office advised not later than Monday, July 1, 1940, as to those members of the Commission or their staffs who will attend the dinner.
Mr. Stettinius stated that last August, before the declaration of war in Europe, Mr. Dwight F. Davis, Chairman of the Brookings Institution, was asked to make a trip to England, that Mr. Davis spent three weeks with the staff of Honorable Joseph Kennedy, United States Ambassador to England, and interviewed everyone in England he could who was aiding in the formulation of war plans. He said Mr. Davis had written a highly confidential report on his trip, a copy of which was handed to the President and to the Secretaries of State, War, and Navy, and that he had a copy of the report which he would like to circulate to the members of the Commission for their confidential information in the event they are interested in the report.
Mr. Henderson said that he also was in possession of a copy of a report made in January of this year with respect to the difficulties with the economic setup in England which he would also like to circulate to the members of the Commission.
The members of the Commission expressed their interest in the two reports referred to above and it was understood that Messrs. Stettinius and Henderson would circulate the reports to the members of the Commission for their confidential information.
Mr. McReynolds reported that Mr. S. Cristy Mead, Secretary of the Merchants Association of New York, had called on him this morning and left with him some documents showing what the Association has done during the present war period. He said the Association is a very large organization and is very anxious to be helpful to the Commission in any way possible, and that he had advised Mr. Mead to submit directly to Mr. Knudsen in writing the tangible things that he thought his Association could do in the production field of national defense and that it could then be determined whether they could be useful.
Mr. Knudsen distributed to the other members of the Commission copies of the following report [Document No. 8] :
“Air Corps have furnished specifications for 4,247 planes and engines covering funds in Army Bill just passed. 500 training planes were placed with Stearman Aircraft Company, St. Louis, and 933 engines were placed — 500 with Continental Motor Corporation and 433 with Aviation Manufacturing Company.
“In Chemical Warfare Section rehabilitation of factory at Elwood arsenal was approved in the amount of $900,000.00. “In Coast Artillery, Engineer and Medical Corps, no action involving over $500,000.00 was reported.
“In Ordnance Department a number of items were placed as follows :
14
JUNE 28, 1940
2,634 Thompson Machine Guns.
1,279 Gun Carriages, of which 338 went to New York Safe & Lock Co.
391 to Aetna Standard Engineering Co.
550 to Koppers Company In addition, 600 Control Sets for 37 mm Anti-Aircraft Guns were placed, 300 with Breeze Corporation and 300 with Delco-Appliance. A supply order for T.N.T. was placed with DuPont.
"In Quartermaster Department, 1,054 Scout Cars and parts were placed with White Motor Company of Cleveland, also, about 280,000 pairs of shoes for replacements were purchased.
"In the Navy numerous ships were placed as follows:
9 submarines and 10 destroyers to our own Navy yards, and 13 submarines, 11 cruisers, 20 destroyers and 1 seaplane tender was placed with private yards and propulsion machinery was placed with Fairbanks Morse and General Motors Diesel for the submarines.”
He said that the report states in a few words what has been accomplished by his office during the last week, that he hoped to get a similar report to the Commission each week, and that if any of the members of the Commission desired to see the detailed contracts regarding the items set forth in the report they would be made available.
Mr. Knudsen then inquired of Mr. Biggers as to whether he desired at this time to make a report with respect to the plan to be followed in connection with depreciation and obsolescence of facilities in war time industries, which matter was referred to at the meeting of the Commission on June 21, 1940, and Mr. Biggers responded that the matter was still in a formative stage and he would like to postpone a report until the next meeting of the Commission. Mr. Stettinius said that, while he agreed with Mr. Biggers that no report should be made while the matter is in such a preliminary stage, he would be disappointed if by the middle of next week a final decision had not been reached and action taken on the matter. He said that this should be the number one “must” on the list of matters to be disposed of by the Commission inasmuch as it was holding up the work of the Commission by industry not knowing what kind of depreciation rates it can proceed on.
Mr. Biggers stated that in the consideration of such a plan the question had arisen as to the determination of the items to be included in the cost under cost plus contracts and also the question of what items of depreciation may be deducted for income tax purposes, that these questions he believed, had a very definite bearing on the prevention of price spirals, and that a blind handling of the income tax proposition will make all producers of goods include certain factors of safety in their prices and will tend to spiral prices. He suggested that such matter might be handled by the Treasury through the use of closing agreements.
At the conclusion of the discussion of the above matter Mr. Knudsen said a report on the matter would be submitted to the Commission at its next meeting to be held on Wednesday, July 3, 1940.
Mr. Stettinius then inquired whether copies of the minutes of the regular meetings of the Commission would be sent to the members of the Commission and Mr. McReynolds replied that copies would be sent to the members of the Commission and Mr. McReynolds replied that copies would be sent to6 them with the understanding that they would indicate thereon any changes which they may have to suggest, that the proposed changes would be discussed at a subsequent meeting of the Commission and the minutes then approved with such changes. He added that all minutes of the preceding meetings of the Commission had been prepared and that he now had before him the minutes of the meeting held on Wednesday, June 26, 1940.
Mr. Stettinius also inquired whether any record was being made of the meetings of the members of the Commission with the President and Mr. McReynolds replied that, inasmuch as the President will never permit a recording secretary to be present at such meetings, he had prepared a brief memorandum of each meeting which contains the date of the meeting, the names of the individuals in attendance, the matters discussed and any requests of the Commission made by the President and that he would be glad to furnish copies of the memoranda to the members of the Commission.
It was understood that the procedure set forth above with respect to the circulation and approval of the minutes of the Commission should be followed and that Mr. McReynolds would furnish to the members of the Commission copies of the memoranda prepared by him of the meetings of the members of the Commission with the President. Mr. Henderson then read the following preliminary report [Document No. la] of the committee (consisting of Messrs. Henderson, chairman, Hillman and Stettinius) appointed at the meeting of the Commission on June 21, 1940.
"At a meeting of the NDAC on June 21, Mr. Davis raised a question as to how each Commissioner was to be advised concerning fields, functions and activities of the others, so that each might discharge his responsibilities fully, promptly and smoothly. During the discussion which followed, Mr. Hillman suggested that the Commission recommend a policy as. to negotiated contracts, and he distributed to each Commissioner a memorandum headed ‘Negotiated Contracts* which he had prepared.
“Mr. Knudsen suggested that the two matters be referred to a committee, and your committee was assigned the task of preparing a proposal as to clearances between Commissioners, and as to principles and policies to be followed with respect to negotiated contracts.
“This is a large subject, and the discussion presented today is partial. This is necessarily so since the Coordinator of Purchases was named only yesterday.
“It is apparent that most of the work of the Commissioners originates from two main sources :
1. Projects, studies and proposals, initiated on their own motion by the Commissioners, arising, for example, from correspondence, visitors, and recognition of prob-
8 So in original. For intended wording delete one of the two phrases reading “the members of the Commission and Mr. McReynolds replied that copies would be sent to.”
15
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
lems requiring solution in fulfillment of assigned functions. (Examples: antitrust waiver, training requirements, ‘market basket’ barter, priorities, plant financing, etc.)
Comment: In most cases, as the Commission completes its own organization, these matters will come to the attention of other Commissioners through reports at Commission meetings and conferences with the President, and particularly by circulation of memoranda prepared by McReynolds’ new staff.
2. Contracts,—both competitive bidding and negotiated.
Contract Procedure
“1. As will be recalled, the President directed that the Army and Navy submit for clearance all important contracts.
“2. Such contracts are presently cleared through the office of Mr. Knudsen, but are generally presented to him for clearance after the process of negotiation is virtually completed. Consultation may be had beforehand if unusual difficulties are involved, but in most cases the policies and course of procurement can be shaped only through the exercise of a veto power, (this is meant to be descriptive, and not critical.)
“3. Thus far no similar procedure has been set up whereby all Commissioners may be advised or consulted with reference to government procurement, military or civilian.
“4. Even if such a clearance procedure were devised, it is doubtful whether it could be truly effective in terms of each Commissioner’s assigned responsibility. Speed is vital in the present program; it is at least disputable, under the present circumstances, whether speed should be sacrificed in order to safeguard the other interests entrusted to the several Commissioners. To exercise a veto, therefore, or otherwise to delay for renegotiation, at a time when essential agreement has already been arrived at between military officials and private producers, would be to assume the responsibility for a protraction of the defense effort.
“5. The responsibilities devolving on each Commissioner add considerations to procurement which are not present in normal peacetime purchasing. If all Commissioners are effectively to discharge their obligations with reference to procurement, it is clear that some new procedure is required which will afford each Commissioner notice of all current and impending transactions, even those which are already èrystallized, and an opportunity for direct or indirect participation in the early stages of negotiation of all contracts to be negotiated, or with reference to which definitive action has not yet been taken.
“6. Mr. Nelson, as Coordinator of Purchases, is charged with the responsibility for elimination of competition and overlapping among the several established procurement agencies and for coordination of the efforts of these agencies with the Advisory Commission. Since each Commissioner has special interests in different phases of procurement and has neither the time nor the staff for direct participation in all procurement activity, it seems apparent that these interests can be most efficiently protected, by promulgation of policies for consideration by the Coordinator of Purchases, such policies and principles being formulated in the first instance by individual Commissioners and submitted to the full Commission for consideration. Insofar as unforeseen circumstances force the procurement officers to deviate from these objectives or policies, clearance will be required with the particular Commissioners whose interests are adversely affected. If individual references become numerous it may prove helpful for each Commissioner to designate a representative with whom these matters could be cleared.
“Negotiated Contracts and Use of Idle Resources?
“Your committee suggests adoption of the following statement to the Coordinator of Purchases as the full Commission’s expression:
“The function of the National Defense Commission, is the prompt increase in the production of all commodities required for the national defense of the United States.. This end can be realized most effectively by utilizing the existing physical and labor resources of the country. A large portion of American industry is now operating at relatively low level. The capacity of the American economic. machine is considerably in excess of its present production. Our policy should be geared toward availing ourselves of the most efficient use of our present resources. Modern industrial experience has proven that maximum efficiency is most easily attained under favorable conditions of employment. At the same time we must plan for further increased output as the occasion will demand.
“Such policies, if effectively administered, will avoid the delays that are consequent to the building of new plant capacity and the mobilization of a new labor supply for those commodities and services which can be supplied with existing facilities. Such policies will ease the burden of maintaining the unemployed; make profitable plants that are now operating at a loss because of insufficient orders; help maintain favorable conditions of employment; lower overhead through fuller plant utilization and thereby make possible lower costs to the Federal Government; increase local tax income and provide a moral stimulus to the people of this country.
“If procurement authorities use negotiated contracts in making purchases, the criteria used in placing orders should be, as far as possible, the use of plants which now have excess or unused capacity and the selection of localities where there are reservoirs of unused labor, including areas in which farm labor surpluses exist, and adequate transportation facilities.
“In negotiation contracts, the guiding considerations of the procurement officers should be:
1. The opening of reservoirs of unused skills which are now employed on operations of an unskilled and semiskilled nature.
2. The provision of a semi-skilled and skilled labor supply in localities where the labor force has no opportunity for employment near their homes.
3. The absorption of older workers, with skill, who can not be easily moved to other areas.
4. The maintenance of favorable conditions of employment.
5. The revitalizing of ghost towns where all sources of income have dried up because of plant shutdowns.
6. The saving of time that would be required if existing facilities were expanded in specific areas.
“The use of these guiding principles should bring the following results:
a. Curtail expenditures for relief.
b. Increase profits to plants which are now running at less than efficient operating levels.
c. Lower overhead costs due to fuller operation and consequent lower costs to the Government.
d. Increase local tax income in communities where orders are placed.
e. Reduce the role of the speculator in Government contracts, thereby making it possible to maintain better standards of labor.
f. Revitalize and make productive the unemployed who have no other opportunities for employment except through the WPA and NY A.
“Further recommendation:
It was recognized by Commission members at the meeting last Friday that negotiated contracts would probably require added safeguards as protection against charges of profiteering, favoritism, etc. Your committee is at work on these matters, and after further consultation with the Coordinator of Purchases will submit additional recommendations later.”
16
JUNE 28 AND JULY 3, 1940
Mr. Stettinius inquired of Mr. Henderson as to what was meant by paragraph (e), “Reduce the role of the speculator in Government contracts, thereby making it possible to maintain better labor standards,” on page 6 of the report regarding the results which should be brought about by the use of the guiding principles set out in the memorandum, and Mr. Henderson replied in some detail.
At this point Mr. Budd left the meeting.
Mr. Hillman stated that, as a question of general policy, the principles regarding negotiated contracts contained in Mr. Henderson’s memorandum offered a sound policy. Mr. Nelson also agreed that this was a sound policy.
Mr. McReynolds then inquired whether the Commission desired to have the memorandum incorporated in its minutes as a statement of policy unanimously approved by the Commission.
Mr. Davis stated that he did not feel that the question raised by him at the meeting on June 21 with respect to the formulation of a plan whereby his office would be advised of what was going on in the various fields under the supervision of the other members of the Commission had been adequately taken care of, and that no attention had been paid by Mr. Henderson’s committee to developing a procedure for the clearance of information among the members of the Commission.
Mr. Henderson referred to the action of the Commission on June 21st in requesting Mr. McReynolds to work out a plan by which each of the members would be kept advised of the activities of the other members and stated that his comment on the report was intended to say that such plan would take care of the matter.
Mr. McReynolds said that he believed the plan being worked out by Messrs. Harris and Gladieux would take care of the question raised by Mr. Davis
and that he expected to be able to present their report at the next meeting of the Commission.
At the conclusion of the discussion it was unanimously agreed that that part of Mr. Henderson’s report dealing with negotiated contracts and the use of idle resources should be adopted by the Commission as a guide to be used by the Coordinator of Purchases in negotiated contracts and that action on the part of the report dealing with the question raised by Mr. Davis should be deferred until the submission of the report being prepared by Messrs. Harris and Gladieux.
Mr. Horton inquired whether the Commission desired that part of the report submitted by Mr. Henderson dealing with negotiated contracts to be prepared in the form of a press release which would be circulated among the members of the Commission for approval and released for publication in the papers of Monday, July 1, 1940. He said such a release would serve notice on those who are interested as to the policy of the Commission with respect to negotiated contracts.
Mr. McReynolds stated that while he believed it would be a good idea to get out such a press release, he would like to have the approval in writing of each member of the Commission before it is released.
Mr. Nelson stated that industry is inquiring about the policy to be followed by the Commission and that such inquiry could be answered by a statement as suggested.
It was understood that Mr. Horton would prepare a statement for release to the press with respect to the policy to be followed by the Commission regarding negotiated contracts and that it would be approved in writing by each member of the Commission before it is released.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—JULY 3, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, July 3, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Knudsen (latter part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr, Knudsen
Mr. Fischer, Assistant to Mr. Budd
Mr. Horton, Director of Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Mr. Davis
Mr. Biggers stated that just prior to this meeting Mr. Knudsen had been called to the White House and had asked Mr. Biggers to represent him at this meeting. Mr. Biggers said that a proposed amendment to the Internal Revenue Code covering allow
17
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
ances for income tax purposes for amortization of the cost of facilities used in defense industries had been worked out by members of the staffs of Messrs. Henderson, Stettinius, and Knudsen, and that Mr. Ginsberg,7 of Mr. Henderson’s staff, was preparing to present the matter at a later point in this meeting. He added that it was a question of getting a simple straightforward formula which will enable a sound and prompt write-off for tax purposes of the facilities that are created for the defense program, and for which there is no normal need, in such a manner as will be in the best interests of the economy and avoid the difficulties which followed the World War.
Mr. Stettinius stated that a meeting of the heavy armor plate manufacturers was held yesterday (Tuesday, July 2), that the capacity production of such armor plate at the present time amounts to approximately 40,000 long tons per year, and that for the next four years it would be necessary to increase the production of heavy armor plate from 40,000 tons to 75,000 tons per year. The requirements of the new naval program will range from 66,000 to 83,000 tons per year and should be practically taken care of by the capacity to be provided. Mr. Stettinius said there are four plants producing armor plate, Midvale, Bethlehem, Carnegie-Illinois, and Charlestown, West Virginia, and that Charlestown, West Virginia, a Government-owned plant, will probably make all the heavy plate sizes. He stated that all of the plants were ready to increase their production facilities and were only waiting to get a definite ruling on the amortization which may be taken on the additional facilities for tax purposes, and that every hour the question of amortization remains unanswered, delays the ability of the Commission to serve the Army and the Navy in the carrying out of their programs.
Mr. Ginsberg entered the room at this point.
Mr. Biggers suggested that any other matters proposed to be discussed at this meeting might be brought up at this time, but it was the general consensus of the members present that inasmuch as the question of depreciation and obsolescence was the most important question before the Commission at the moment, it should be disposed of first.
Mr. Henderson said that since this is a very important question, the Commission’s public statement in connection with it should be very carefully prepared, that the amendment should be regarded as an aid in carrying out the defense program, rather than as something that is being done for industry, and that if it could be presented in that light much of the criticism that might otherwise come from sources would be avoided.
Mr. McReynolds stated that the purpose of the proposed legislation is to provide a way that industry itself can do something to aid the defense program that otherwise would have to be done by the Government with funds from the Federal Treasury.
T In th® minutes of this meeting Mr. Ginsburg’s name is incorrectly spelled.
18
Mr. Hillman stated that he thought it was of the utmost importance that any statement presented to the public on this question should be prepared in such form that the Commission would not be called upon to issue other statements in explanation of its position.
Mr. McReynolds suggested that the statement was of a kind that should be carefully prepared by the Commission and submitted to the President for release at one of his press conferences.
Mr. Biggers said that he felt it was important that the matter should be cleared with the President and the Secretary of the Treasury, that any public notice of such plan should come from the President, and that no information relative thereto should be given out until after such release. The members of the Commission present indicated agreement with this position.
Mr. Biggers then made the statement that before presenting the proposed plan he would like to say that perhaps the most encouraging experience he had had in the time he has been working with the Commission has been the spirit and measure of cooperation between the three divisions (Messrs. Henderson, Stettinius, and Knudsen) in working on this complex and important problem on which there might well be difference of viewpoint and opinion. He also said that a number of persons had participated in the discussions, largely from the divisions of Messrs. Henderson, Stettinius, and Knudsen, and that there had been men with financial experience, some with experience in cost accounting and auditing, four extremely well qualified tax lawyers, and several men who have had personal experience with the aftermath of confusion, litigation, and loss that followed the handling of contracts during the World War. He added that the members of the committee had worked out a statement of its views of the fundamental considerations involved, and that Mr. Ginsberg had just redrafted the statement in a condensed form in the light of later discussions. At Mr. Biggers’ request Mr. Ginsberg read and commented on the statement referred to [Document No. 9] which was as follows :
“1. There can be no dispute that certain facilities will be required during this emergency period which will have little or no value at the termination of that period. The unknown factor of course was the length of the emergency. Our best judgment was that the emergency would last at least four years.
“2. We took four years as our base, therefore, and concluded that we should permit private investment to be amortized during that period. Since the first or second year of operation might yield little or no profit, we further concluded that the taxpayer should be given some leeway to allocate his deduction over the four years, adjusting the amount claimed to his gross earnings.
“3. If the emergency ended before the expiration of four years, we felt that in fairness the taxpayer should be allowed to allocate the cost of his new facilities ratably over the period between the incurrence of his cost and the end of the emergency.
“4. Although the four year period may seem short, it represents our best judgment, under present circumstances,
JULY 3, 1940
of the length of the emergency. The proposed plan, therefore, is logically related to the emergency. By hypothesis the new facilities will have little or no peacetime value, and if we chose a longer period, we would necessarily assume the risk of a larger number of future adjustments. As much as anything else, we were seeking definiteness and certainty. Because they did not afford this definiteness and certainty, we discarded other proposals which involved individual negotiation of amortization rates, and invested government departments with large measures of discretion.
“5. We felt that rapid amortization would not injure the revenue because we assumed the existence of an excess profits tax, and further assumed that taxes would probably enjoy an upward spiral. For this reason, we felt that many business men would undoubtedly prefer to amortize over a longer period than four years.”
Copies of a proposed amendment to section 23 of the Internal Revenue Code were then distributed to the members of the Commission and read by Mr. Ginsberg as follows:
"Sec.................Amortization of Cost of Defense
Facilities, Etc.
“(a) Section 23 of the Internal Revenue Code (relating to deductions from gross income) is amended by inserting at the end thereof the following:
"(t) Amortization of Cost of Defense Facilities Etc.
“In the case of buildings, machinery, equipment, or any other capital facilities (hereinafter referred to as ‘emergency facilities’) constructed, erected, installed, or acquired on or after January 1, 1940,* necessary or desirable in the interest of national defense, and during the continuance of the emergency declared by the President on September 8, 1939, the taxpayer may, at his option, deduct for amortization of the cost of such facilities, an amount equal to the cost thereof, which allowance the taxpayer may allocate over the first four year taxable period, or over any longer period which does not exceed the normal depreciation life basis, at a rate not exceeding 25% of such cost for any taxable year; provided, however, that the taxpayer may allocate his deduction over such four year period if the total deduction at the end of the second year does not exceed 50%, and the total deduction at the end of the third year does not exceed 75%, of such cost.
“This provision shall not apply unless prior to the construction, erection, installation, or acquisition of such emergency facilities the taxpayer has obtained a certificate from the Secretary of War or the Secretary of Navy that such emergency facilities are necessary or desirable in the interest of national defense during the emergency. If such emergency facilities have been constructed, erected, installed or acquired prior to the issuance of such certificate, the Secretary of War or the Secretary of Navy may, in his discretion, certify that such emergency facilities shall be within the scope of this provision.
“If the emergency declared by the President on September 8, 1939, shall be ended before the expiration of the four year period herein provided, the taxpayer shall, at his option, be entitled to allocate the cost of such emergency facilities ratably over the period between the incurrence of such cost and the end of the emergency.
“The amortization allowance herein provided shall be inclusive of depreciation but exclusive of any other allowable deductions provided for under the various Chapters and Subchapters of the Internal Revenue Code, and shall be allowed as a deduction in determining net income subject to income, excess-profits, and other taxes thereunder.”
Mr. Ginsberg stated that the date of January 1, 1940, contained in the proposed amendment was arbitrarily chosen, it being the view of the committee that such date should be one far enough back
* Changed to September 8, 1939.
to include any person who had constructed, erected, installed, or acquired buildings, machinery, equipment, or any other capital facilities in connection with the defense program and Mr. McReynolds raised the question whether January 1, 1940, was an early enough date to accomplish that purpose. Mr. Biggers stated that the accountants working on the question had strongly urged that the period go back to September 8, 1939, the date on which the President declared an emergency existed, and that the committee would have no objection to that date if preferred by the Commission. It was the general consensus of the members present that the effective date should be changed to September 8, 1939.
In connection with the second paragraph of the proposed amendment, Mr. Biggers stated that Mr. Knudsen suggested that inasmuch as a great many of the contractors will be dealing directly with the Army and Navy, the Commission consider whether either the Secretary of War or the Secretary of Navy should issue the certificate of need, but that the committee felt that since a number of contractors will be dealing with both the Army and Navy, and such procedure will require collaboration between the two departments, the certificate might be issued by the appropriate member of the Advisory Commission.
Mr. Henderson suggested that as a matter of good organization, it would be better to have the certificate issued by the Secretary of the Commission after a ruling by the Commission upon recommendation of the appropriate member of the Commission.
Mr. Davis inquired whether consideration had been given to the issuance of the proposed certificates by the Coordinator of Purchases, and Mr. Biggers responded that that was the alternative suggestion of the committee as he would have the advantage of knowing the needs of the Army and Navy as well as the needs of the British Government.
Mr. Henderson suggested that the issuance of the certificate could be a Commission action with the responsibility of clearing the matter for action by the Commission lodged largely with the Coordinator of Purchases. Mr. McReynolds said the procedure would have to be worked out carefully.
Miss Elliott inquired whether the certificate would constitute a permit to proceed with the expansion of plant facilities or whether it would relate only to the question of allowances for income tax purposes, and Mr. Biggers replied that usually the certificate would be issued before construction was started but presumably coincident with the negotiation of a contract with the War or Navy Department for materials for defense.
Miss Elliott then inquired whether the procedure with respect to the issuance of the certificates would allow time for consideration of the matter from the consumers’ viewpoint and Mr. Henderson said that the responsibility of getting the necessary clearance from the various members of the Commission in
19
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
order to avoid delays might well be lodged with the Coordinator of Purchases.
Mr. Stettinius inquired whether, in the event the members of the Commission were not unanimously agreed that a certification should be issued, a majority of the members would rule. Mr. Henderson said that question had been discussed previously and it was felt that if there were a disagreement, the only one to decide the question would probably be the President, and that if the matter would not be reconciled by the entire Commission before it went to the President, an expression of the Commission should be agreed on for presentation to the President. He said that he could understand how a majority rule could be followed if there had been no designation of special functions to the individual Commissioners, but that when there is such a designation, the majority opinion should only be a factor in the determination of the matter by the President. There was some discussion of the point but no decision was reached.
Mr. Biggers then inquired whether it was the consensus of the members of the Commission that the authority to issue certificates of need should be vested in the Commission and that the Commission should determine its own procedure.
Mr. Davis asked if the terms set forth in the proposed amendment promised to bring about substantial agreement among the several points of view, the Treasury on one hand, industry on the other, and the representatives of the Commission. Mr. Henderson said that the Treasury had been consulted on the general principles involved, and he believed that Department would offer no objection. He also said that in trying to arrive at a solution to the question, he had made a number of inquiries as to whether the amendment would be satisfactory to industry and that it was the unanimous opinion that it would meet with such approval although the feeling was expressed that a longer period than four years might be desired.
Mr. Biggers urged that before the matter is presented to the President, the Commission appoint a committee to discuss the entire matter with the Secretary of the Treasury as a recommendation of the Commission to the President inasmuch as it is a matter in which the Treasury is vitally interested.
Mr. Stettinius moved that Messrs. McReynolds, Nelson, and Biggers be appointed as a committee to discuss the matter with the Secretary of the Treasury as soon as possible.
Carried unanimously.
There then ensued a discussion as to the best procedure to be followed in obtaining the speedy enactment of the proposed legislation, and Mr. Stettinius said he felt it would be desirable if a public statement could be made advising that the Commission is seeking such legislation, as it would expedite the plans for expansion of defense facilities.
Mr. Biggers inquired whether the appointment of the above committee to discuss the matter with the Secretary of the Treasury implied the approval by the Commission of the proposed amendment with the suggested changes.
Mr. Stettinius moved that the proposed amendment be approved in principle with the understanding that the date “January 1, 1940” contained in the first paragraph would be changed to “September 8, 1939” and that “Advisory Commission to the Council of National Defense” would be substituted for “the Secretary of War or the Secretary of Navy” in both places in which it appears in the second paragraph, and with the further understanding that the amendment would be subject to such further changes in form as may be found necessary and would be resubmitted to the Commission for final approval.
Carried unanimously.
Mr. McReynolds stated that it would not be possible to see the Secretary of the Treasury until Monday, July 8, and Mr. Biggers said that steps could be taken to clear the matter through the office of the General Counsel of the Treasury before that time so that if an appointment could be made with the Secretary of the Treasury for Monday no time would be lost.
Miss Elliott inquired of Mr. McReynolds whether funds of the Commission were available to permit the employment of additional clerical personnel which could be assigned to the Department of Labor to work on the cost of living index compiled by that Department so that the index can be prepared on a monthly basis instead of a quarterly basis as at present. Mr. McReynolds said that additional personnel could be employed by the Labor Department and the Defense Commission billed for the cost.
Miss Elliott then stated that she would like to put out a special edition of the Consumers’ Guide, which is prepared by the Consumers’ Counsel of the Department, and inquired whether funds would be available for that purpose. Mr. McReynolds replied that the Commission would pay for the cost of printing the special edition.
Mr. Horton then distributed to the members of the Commission copies of a proposed statement for the press, which had been prepared in accordance with the action taken at the meeting of the Commission regarding negotiated contracts, and Mr. Stettinius suggested that the proposed statement be studied by the members of the Commission and considered at the next meeting of the Commission.
The suggestion made by Mr. Stettinius was unanimously agreed to.
Mr. Biggers then read the following memorandum [Document No. 10] addressed to Mr. Knudsen under date of July 2, 1940, by the Assistant Secretary of War:
20
JULY 3, 1940
“1. Reference is made to the proposed War Department program (copy attached) for increasing productive capacity for munitions, submitted to you under date of June 26, 1940.
“2. In order to expedite part of the program, it is requested the following items on the above mentioned program be cleared by the National Defense Commission:
"a. Rounding out existing Ordinance Depart-
ment Manufacturing Arsenals ...............$10,000,000
For the rehabilitation of existing plant and augmenting equipment in choke points at the following arsenals:
Watertown Arsenal, Watertown, N. Y.
Watervliet Arsenal, Watervliet, N. Y.
Frankford Arsenal, Philadelphia, Pa.
Picatinny Arsenal, Dover, N. >J.
Springfield Armory, Springfield, Mass.
Rock Island Arsenal, Rock Island, Ill.
"b. Rounding out Edgewood Arsenal, Md.... $ 2,800,000 For completion of loading plants, protective equipment plants, laboratory facilities and the necessary utilities pertaining thereto, including Steam, water supply, sewerage, electrical lines and railroads at the Chemical Warfare Service Arsenal, Edgewood, Maryland.
"c. Rounding out existing Quartermaster Manufacturing Depots ...........................$ 5,200,000
For the rehabilitation of existing plant and augmenting of manufacturing equipment at the following Quartermaster Manufacturing Depots:
Quartermaster Depot, Philadelphia, Pa.
Quartermaster Depot, Jeffersonville, Ind.”
Mr. Biggers said that Mr. Knudsen had approved the three items listed in the memorandum but that under the law the approval of the Advisory Commission is required.
Following a discussion of the matter, Mr. Henderson moved that the three items listed in the memorandum set forth above be approved, that the Secretary of the Commission be authorized to sign an approval for the Commission, and that, in order to prevent delay in obtaining the approval of the Commission on similar matters in the future, such matters be first submitted to the Coordinator of Purchases for clearance with the other members of the Commission and recommendation to the Commission.
Carried unanimously.
Mr. Davis raised the question as to. what was being done with respect to obtaining a Coordinator of Housing and in that connection cited a specific example at the Rock Island Arsenal of the lack of housing facilities. This matter was discussed and Mr. Hillman stated that as it was closely related to certain aspects of the labor problem on which he had been working, he would like to have a little more time to consider it and would suggest that it be taken up at the next meeting of the Commission.
During the discussion Mr. Knudsen joined the meeting.
It was understood that the question of housing would be considered at the next regular meeting of the Commission to be held on Wednesday, July 10, 1940.
Mr. Horton stated that the Council of National Wholesale Associations, an organization of about thirty widely representative wholesale associations, will hold a meeting in Washington on July 9, 1940, and he had received a request that a member or members of the Commission be present at the meeting. In that connection he suggested that it might be advisable if the members of the Association were invited to meet in the Federal Reserve Building for an informal discussion of what the Commission is doing.
Mr. Stettinius suggested that Mr. Nelson be asked to attend the meeting and review the work that is being done by the Commission.
It was agreed that Mr. Horton should take the matter up with Mr. Nelson.
Mr. Davis stated that he was convinced that there were still offices of the Commission located in the Federal Reserve Building which did not need to be here and which could be moved to the Munitions Building in order to relieve pressure here, that there has been criticism of the congestion in the reception room on the second floor which has been largely due to the number of salesmen and persons looking for work who are required to wait in the reception room, and that he felt that to meet this situation and in order to provide office space for Mr. Nelson and Mr. Owen D. Young, who had been appointed as a consultant to Mr. Hillman, Mr. Sherwood’s office might be moved to the Munitions Building.
Mr. Sherwood stated that steps were being taken at the present time to move to the Munitions Building the part of his office which handles applicants for positions.
As a result of the discussion which followed, it was agreed that that part of the personnel section of the secretary’s office engaged in interviewing applicants for positions should be moved to the Munitions Building as soon as possible and that Mr. Sherwood should continue to have an office in the Federal Reserve Building.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
21
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
COMMISSION MINUTES—JULY 10, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, July 10, 1940, at 11:10 a.m.
Present:
Mr. Stettinius
Mr. Knudsen (First part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Fischer, Assistant to Mr. Budd
Mr. Horton, Director of Public Relations Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Mr. Davis
Mr. McReynolds distributed to the members of the Commission a memorandum [Document No. 11]8 prepared by Messrs. Harris and Gladieux on a system of progress reporting and interchange of information within the Advisory Commission and stated that it was contemplated that such report would be circulated on Monday of each week. The opinion was expressed by some of the members of the Commission that it might be better to have the report circulated in the middle of the week rather than on Monday. A short discussion of the report ensued following which Mr. McReynolds stated that he did not feel that time should be taken at this meeting to discuss the report but that he would like to have the members of the Commission look it over prior to consideration at the meeting on Friday.
Copies of the weekly progress statement [Document No. 8a] prepared by the office of Mr. Knudsen were then distributed to the members of the Commission for their information.
Mr. Knudsen then stated that he had received from Assistant Secretary of War Johnson a memorandum dated July 8, 1940, transmitting a prelimi-
• Memorandum, “A System of. Progress Reporting and Interchange of Information within the Advisory Commission to the Council of National Defense,” prepared by Joseph P. Harris and Bernard L. Gladieux, no date.
Progress reports should be prepared under direction of each Commissioner and the Bureau of Research and Statistics for confidential circulation, to the President, the Secretary of the Commission, and the Commissioners. These reports should snow work completed, under way, and planned, meetings and conferences, and personnel information.
Each Commissioner should designate a chief assistant as liaison officer to prepare such reports. The liaison men and a representative of the Bureau of Research and Statistics should form a liaison committee for the interchange of information and debating of policies.
There should be a small staff in the office of the Secretary to edit the reports and prepare digests.
nary report [Document No. 10a] of a committee set up in the office of the Assistant Secretary of War to determine locations of plants in the War Department program for new productive capacity for munitions. The memorandum, he said, stated that specific recommendations regarding individual plant locations will be made as rapidly as the detailed studies can be completed and recommended that the report be reviewed by the National Defense Advisory Commission and suggestions made regarding any changes in basic principle that may be considered by the Commission to be desirable. The memorandum of the committee referred to in Mr. Johnson’s memorandum read as follows :
“1. In compliance with instructions in letter dated June 25, 1940, the following report is submitted showing the general geographical areas recommended for the location of plants included in the War Department program for the creation of additional munitions productive capacity.
“2. The following principles were accepted in determining the areas selected for the creation of new productive capacity:
(a) The objective of the rearmament program is to obtain munitions at the earliest practicable date. Subject to the following considerations, new productive capacity should be located where it can be got into production most expeditiously.
(b) Existing plants adaptable to munitions manufacture should be utilized to capacity and in general they will be in production before output is obtained from new construction. New factories to be constructed will, therefore, supplement rather than displace existing capacity.
(c) New plants should be located so as to compete as little as possible with the full and prompt utilization of existing capacity and so as to avoid adding any more than is necessary to the existing concentration in certain limited areas, of industry essential to the National Defense.
(d) New productive capacity to be created for munitions manufacture will have to remain in reserve status for many years and therefore should be of permanent construction. The cost, both of construction and maintenance, therefore should be considered in selecting locations. The availability of Government-owned land, housing, or other facilities may be a factor of importance.
(e) Specific plant locations to be selected by the Supply Branches concerned should be adjusted to the industrial areas outlined on the attached map in accordance with the principles above outlined.
“3. As a preliminary step, border areas of the United States,, as shown on the map herewith, were eliminated for strategic reasons. It is understood, however, that in the case of certain plants requiring large numbers of skilled workmen or contributory services not readily available within the strategic border line, as for example, certain metal working plants, exceptions to this limitation may be found advisable. Such exceptions should be decided individually on their merits.
“4. All plants in the President’s approved program for new capacity, exclusive of those for aircraft material, were listed by category. Related manufacturing operations in the several categories were grouped into 5 units, making each unit balanced as far as practicable.
. “5. On the map herewith, geographical areas were outlined most suitable to the industrial and technical requirements of the plants grouped in the respective units.
The selected areas are as follows: A — Chicago; St. Paul; Omaha.
22
JULY 10, 1940
B — Pittsburgh ; Charleston, W. Va. ; Cincinnati ; Cleveland.
C — Louisville; St. Louis; Kansas City.
D — Birmingham and T.V.A.
E — Little Rock; Dallas; Tulsa.
“6. Finally, the items of new construction deferred for action to 1942, or later, were checked into the several areas to assure that the program when finally completed would be in balance and uniformly distributed to the several areas.
“7. Specific plants included in the current program which are recommended for inclusion in the various areas are shown in Inclosure 2. This distribution is subject to change if further study shows this to be desirable.
“8. The above general distribution of plants in broad areas is intended to be preliminary to a detailed study of specific plant locations. Recommendations for such specific locations will follow at an early date. It will be noted that neither the location of new aircraft production capacity, nor of new Navy equipment plants, has been considered in this study. The program under discussion eventually should be coordinated with those mentioned.
“9. It is suggested that this preliminary study be referred to the National Defense Advisory Commission for review and comment In the meantime, the determination of specific plant locations will be actively pursued.”
Mr. Knudsen explained the report to the Commission and stated that it may be that in Areas “D” and “E” three or four additional plants will be felt necessary. He said the committee had tried to group the plants so that, for example, in a given area are plants that coordinate, such as powder, ammunition loading, and gun factories. The memorandum from the Assistant Secretary of War, Mr. Knudsen added, was being presented to the Commission for such action as it desired to take in order that Mr. Johnson may be so advised.
Mr. McReynolds suggested that, in view of the importance of this matter, it would be necessary for the members of the Commission to study it and that action should be deferred until the meeting on Friday, July 12, 1940.
Mr. Knudsen said that he thought that would be satisfactory as Mr. Johnson had asked for the approval and comments of the Commission.
Mr. Davis stated he believed every member of the Commission has a definite interest in the matter, and Mr. Stettinius said that inasmuch as the matter involved certain fields in which his division was interested from the standpoint of raw materials, he felt the matter was one which should be given a few days’ study before action is taken thereon by the Commission.
At the conclusion of the discussion it was understood that the matter would be studied by the members of the Commission and considered at the meeting on Friday, July 12, 1940.
Mr. McReynolds stated that the President had requested him to read to the members of the Commission for their information the following letter [Document No. 12] addressed to the President under date of July 3, 1940, by John M. Carmody, Administrator, Federal Works Agency:
“Apropos of the discussion at the Cabinet meeting Friday about shortage of skilled labor and the need for increasing
hours and working overtime, I think you may be interested in this statement which I have just received from Assistant Secretary of War Louis Johnson:
‘I am afraid that my remarks on the matter of shortage of skilled mechanics have not been fully understood. What I said was that when and if we got the new funds for national defense, then we would be faced with a shortage of skilled mechanics of greatest proportions.* “I am glad the question came up, because it has been the practice of many manufacturers, over a period of years, who have been opposed to progressive labor legislation, to cry shortage of skilled labor everytime there is the least rise in business.
“I realize I am not charged with managing the labor supply, but I do consider it my responsibility to be constantly on the alert for opportunities to transfer men and women from WPA to private enterprise as rapidly as possible. The training program now underway will expedite this movement, but there is no substitute for dynamic merchandising enterprise in the field of labor placement from WPA, any more than there is in any other business or social activity.
“The discussion of this subject, I think, will lead to a new interest in placement from the ranks of the unemployed.”
The letter was referred to Mr. Hillman as a matter coming under his jurisdiction, and, upon the request of Mr. Davis, it was understood that a copy of the letter would be sent to each member of the Commission.
The following memorandum [Document No. 13] addressed to Mr. McReynolds by the President under date of July 8, 1940, was then read:
“I am enclosing copy of letters written to Mr. Fred K. Hoehler and Miss Harriet Elliott. I think there are going to be so many such problems which are related to defense that we might as well have the coordinating handled within the Defense Commission. Miss Harriet Elliott seems to me to be the person for that job. Of course, no administrative work would be undertaken by the Commission and existing agencies would be used.”
The letter to Miss Elliott read as follows:
“I am enclosing a copy of correspondence between Mr. Fred K. Hoehler, Secretary of the American Public Welfare Association, and myself.
“There have been many matters come to my attention, such as the care of refugee children, all of which form some appropriate relationship to defense, therefore, I think you should act as the coordinating person in dealing with all of these matters. I am assuming, because of Mr. Hillman’s special interests, that anything concerning training would be referred to him and that you would work closely with him in regard to matters in which he has particular responsibility. Naturally, the whole Defense Commission should be consulted on matters of general policy.”
The letter to Mr. Hoehler was in the following form:
“I have your letter of June 11.
“It seems to me the proper place to coordinate those health and welfare problems that are related to defense is in the Advisory Commission to the Council of National Defense, and I have asked Miss Harriet Elliott to undertake the responsibility for coordinating these activities in so far as they relate to the defense program.”
Mr. McReynolds said that Mr. Hoehler had submitted to him a comprehensive memorandum setting forth a program in connection with this matter, and since practically everything involved in the memorandum was within the scope of the activities of the
23
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Federal Security Agency, he (Mr. McReynolds) recommended that it be referred to that organization for handling directly, but that the President felt it was a matter which should be coordinated through the Advisory Commission.
Miss Elliott stated that she had received the communication from the President quoted above and that she was going to have an unofficial conference with interested persons this afternoon to discuss the procedure to be followed in connection with the matter.
Mr. McReynolds called Miss Elliott’s attention to the fact that the President’s memorandum had stated that no administrative work would be undertaken by the Commission and existing agencies would be used, and stated that the Federal Security Agency and the division of the Department of Labor in charge of Miss Lenroot should be consulted to ascertain whether they could perform the administrative work in connection with this matter.
It was understood that copies of the correspondence quoted above would be sent to each member of the Commission.
Following the discussion of the above matter Miss Elliott said that she was preparing a statement which will explain in detail the operations of her division which would be distributed to the other members of the Commission when it is completed. She added, however, that she would send to the members of the Commission at this time a copy of a chart showing the functions of her division.
Mr. Biggers stated that on behalf of the committee appointed at the meeting of the Commission on July 3, 1940, (composed of Messrs. McReynolds, Nelson, and Biggers) to discuss with the Secretary of the Treasury the proposed amendment to the Internal Revenue Code covering allowances for income tax purposes for amortization of the cost of facilities used in defense industries, he would like to report that the committee, with Mr. Henderson, who was added to the membership of the committee at the request of the Secretary of the Treasury, met with the Secretary of the Treasury and reviewed for him quite completely and satisfactorily the Commission’s thoughts with respect to modification of the present income tax law to permit rapid depreciation of emergency facilities, that the Secretary of the Treasury indicated very definitely that he sympathized with the point of view of the committee and agreed with it in principle, that he asked the committee to have further conferences with the members of the Treasury staff who were interested in the matter, which had been done, and that the committee was now waiting action by the staff of the Treasury on the memorandum and amendment proposed by the committee which was considered at the meeting of the Commission on July 3, 1940. Mr. Biggers stated that it was his impression that the representatives of the Treasury were in general agreement with the proposal suggested by the committee.
Mr. McReynolds said that the staff of the Secretary of the Treasury met with Mr. Morgenthau yesterday morning and reported on their meeting with the Advisory Commission committee, that the Secretary of the Treasury had called in members of the Congressional committees through which the proposed legislation would have to clear and discussed the matter with them, that they were sympathetic toward the proposal, but felt that no action would be taken by their committees on the proposed amendment to the Internal Revenue Code, if it were sent to Congress as a separate item before the contemplated bill with respect to excess profits was sent up, that both bills were to be delivered to Congress on the day it reconvenes following the recess which begins tomorrow, and that there appeared to be no objection to the idea of having the proposed amendment handled as separate legislation if submitted at the same time as the bill relating to excess profits. He added it was the feeling of the members of the Congressional committees that the amendment would not be cleared by the committees without full knowledge in the committees of what was being proposed in the excess profits legislation.
Mr. Stettinius stated again that the delay in the passage of the proposed amendment was a very serious matter.
Mr. Henderson said that at the meetings with the Secretary of the Treasury and his staff, the committee pressed for handling the proposed amendment as separate legislation, that Mr. Morgenthau consulted with the Chairmen of the Congressional committees involved as to whether anything could be done about sending the amendment down before tomorrow, but it was their feeling that it should be sent to Congress with the proposed excess profits bill on the first day after the recession.9
Mr. Stettinius inquired whether it is not likely that extended debates and hearings will be held on the excess profits bill and Mr. Henderson replied that while the proposed amendment would go to Congress with the excess profits legislation, he was quite sure that a disposition of the proposed amendment could be obtained separately without waiting until the conclusion of the hearings and debates on the excess profits bill.
Mr. Biggers said he would strongly urge that the Commission concur in the suggestion of the Secretary of the Treasury and the members of the Congressional committees that the amendment to the Internal Revenue Code be submitted with the excess profits bill, provided it is understood that the amendment will be submitted with, but separate from, the excess profits bill so that its passage may not be delayed by the hearings on the latter bill.
Upon inquiry from Mr. Stettinius, Mr. McReynolds stated that the attitude of the Secretary of the Treasury is that he wants to support the Commission’s position, and, in the absence of contrary
• So in original; should read "recess.”
24
JULY 10, 1940
recommendations from his staff, he will concur in what the Commission proposes.
Mr. Stettinius inquired whether it would not be well to inform the President regarding this matter and to impress upon him the urgency of the amendment so that he will urge its prompt passage, and Mr. McReynolds stated that the President will be so informed when the Commission meets with him tomorrow.
At the conclusion of the discussion the members present indicated concurrence in the procedure outlined by Mr. Biggers.
Mr. Biggers stated that a very vital question had been raised by the aircraft industry by reason of the recent amendment to the Vinson-Trammel Act10 which limits to 8 per cent the amount of profit that may be made on the manufacture of airplanes, that after preliminary conferences with representatives of the industry and finding a wide divergency of viewpoint, it was felt necessary to request the principal representatives of the industry to come to Washington for a discussion of the matter, and as a result of such meeting, a memorandum had been submitted to Mr. Knudsen, which he has reviewed, and with his approval has been sent to Mr. Henderson. Mr. Biggers also said it was felt that the Commission should request the Secretary of the Treasury to take no action with respect to the promulgation of regulations in this connection until after the Commission has had an opportunity to study the matter and submit recommendations to the Treasury regarding it.
Mr. Henderson stated that he would like to recommend that, on the assumption that the Treasury is interested in the views of the Advisory Commission on items and elements of costs under contracts coming within the Vinson-Trammel Act, no formal promulgation of rules, regulations, and procedures be made until the Advisory Commission has had an opportunity to digest proposals coming to it from prospective contractors, particularly the aeronautical industry, and the Commission is in a position to make suggestions.
At the suggestion of Mr. McReynolds it was understood that Mr. Henderson would draft a letter to the Secretary of the Treasury along the lines suggested by him, which would be signed by the Secretary of the Commission and transmitted to the Secretary of the Treasury.
At this point Mr. Knudsen left the meeting to keep an appointment at the White House.
Mr. Henderson stated that in connection with the work of the committee which had been working on the proposed amendment to the Internal Revenue Code, it had become evident that several questions relating to new tax costs, amortization, and financing proposals are interrelated and that the Commission
10 Public Law 426, 76th Cong., 3d Sess., March 5, 1940.
is running a risk of a lack of uniformity in the treatment of these matters unless they are all considered together. He said that there was a tentative negotiation with the Reconstruction Finance Corporation as to Reconstruction Finance Corporation financing of plant expansion and that he understood from Mr. Biggers that there may be some modification of that as far as the place where the assumption of loss may be taken. He added that the proposed amendment to the Internal Revenue Code on which the committee of the Commission is working is one for the amortization of private facilities used in the defense program and there is a question whether the same rapid amortization in relation to taxation should be permitted for plants financed by the Reconstruction Finance Corporation, that there are also the questions of the Vinson-Trammel Act and the excess profits tax in which the Commission has a vital interest, and that the Secretary of the Treasury had indicated the other day that when his draft of the excess profits bill is ready, he would like to have, if possible, an opinion thereon from the Commission. Mr. Henderson added that related questions are the matters of Government-owned and privately operated plants, and prior negotiation of cost items so far as negotiated contracts are concerned, that it seemed to him that all of these questions tie in together, and that perhaps the committee working on the amendment to the Internal Revenue Code might be assigned the larger task of reviewing all of these things together. He said that the Army, the Navy, the Treasury, and the Advisory Commission all have an interest in such matters, but that the proper place for their coordination seemed to him to be in the Commission.
Mr. Biggers said he agreed with Mr. Henderson that this is a very definite and important responsibility of the Commission, and that the projected laws should be reviewed by some committee of the Commission, but he doubted that the hastily constituted committee was necessarily the proper agency. It seemed to him, he said, that the Commission may want to expand the committee in order that the viewpoints of all the Commissioners are represented.
Mr. Henderson recommended that Mr. Biggers’ suggestion be accepted, and members of the Commission indicated Ûieir divisions had an interest in the questions raised by Mr. Henderson.
Mr. Budd stated that he had assumed that where the enlargement or erection of a plant is undertaken, the necessary trackage, which is the only transportation factor involved, will be included as a part of intra-plant facilities in the amortization program, and Mr. Stettinius stated that this would have to be the case.
At the conclusion of the discussion Messrs. Henderson, McReynolds, Nelson, Biggers, and Carl E. Adams were appointed a committee to consider the questions raised by Mr. Henderson and to prepare a report with respect thereto to
25
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
be presented to the Commission as soon as possible.
Mr. Hillman stated that he would like to report as a matter of record that in the question of trying to prevent labor troubles he had asked Messrs. Stet-tinius and Knudsen and members of their staffs to aid him in bringing about satisfactory results in the prevention of possible strikes and that they have been exceptionally successful in that situation. Mr. Hillman then referred to several instances where labor troubles had been settled or were in process of being settled and said that this new pattern of getting outstanding persons in the industry involved and representatives of the labor groups to do the conciliation work was highly satisfactory, and that he intended to avail himself more and more of this procedure. He said that he believed in connection with this matter the Commission should prepare a statement for release to the press which would incorporate not merely a statement on negotiated contracts but a statement on the general policy laid down by the President that it is not expected that, in carrying out the national defense program, the Commission will break down social legislation designed to protect labor and consumers. He said that if it were not possible to obtain a clearance of such a statement at a regular meeting of the Commission, because of lack of time, he would suggest that it be referred to a subcommittee of the Commission, but that he felt strongly that the Commission should issue a public statement. He added that he felt such a statement should be drafted at least before the end of this week. In connection with Mr. Hillman’s statement Mr. Horton said he had Mr. Knudsen’s suggestions on the draft of statement on negotiated contracts which was distributed last week.
Mr. Hillman made the further statement that the question of housing for labor is becoming very aggravated in certain locations in the United States, that there is a danger of this situation resulting in increases in rentals which is unfair to labor and which may provoke demands for wage increases, which demands will spread to other industries and may result in demands for rent legislation. He felt that this situation should be met quickly and that the Commission should have a program of housing which he would like to see cleared before the week is over so that the Commission could say that if rents are raised the Commission will step in and supply the shortage and not permit local situations to create a problem in industrial relations between labor and management. Mr. Hillman added that he realized that the Commission could not attend to all of the problems before it in the time that was available and that he felt that in the circumstances this problem could be assigned to a committee.
In connection with the question of labor troubles, Mr. Budd stated that there are two or three places in the United States where there are threatened strikes in transportation. He said under the law
there is a way in which such controversies are to be handled, and he had assumed that the attitude of the Commission in those cases should be a policy of allowing the organization involved to proceed under existing law to handle negotiations to a point where, if there was a deadlock in such negotiations, there may be a fact finding commission and possible arbitration. He said that, as an individual, he may be able to have the railroads take some action through a joint committee that has been appointed.
Mr. Davis inquired as to the basis of the settlements referred to by Mr. Hillman in so far as they relate to wages and hours. Mr. Hillman said that the settlements had not been handled as a Commission matter, that what he and Messrs. Stettinius and Knudsen had tried to do was to bring a little more pressure on those involved in each case to get together for a settlement of their differences, and that in no case was a formula offered.
Mr. Davis said that it was difficult to see how three members of the Commission could be active in any disputes between employers and labor without it being an activity of the Commission. Mr. Hillman replied that it being his duty to aid in labor disputes, he had merely requested the help of Messrs. Stettinius and Knudsen in such matters, that he coordinated whatever forces there may be available to prevent strikes, and that representatives of industry can be most helpful in conciliation work. He said that if a good job is not done in conciliation work, we may be faced with the possibility of another board to settle or to prevent strikes, that in his discussions with members of the Commission and with the President he had said he thought it was highly inadvisable to shape a policy that would require another board, and that we should utilize every possible avenue for bringing about cooperation and understanding between labor and management and to let them settle the question between themselves.
Mr. Davis said the question in his mind was whether the result of such settlements is to secure in the higher paid labor brackets an increase in pay every time a strike is threatened. Mr. Hillman stated that his recommendation was not to attempt a general policy but to handle each individual case in the best manner possible under the conditions that the particular situation requires, and that that had to be left to the judgment of the persons handling the situation. He said that this practice does not call for a commitment to a general policy by the Commission but would bring into play every force looking toward a satisfactory settlement.
Miss Elliott inquired whether the time has come when the Commission should make a statement as to what its general policy is on this matter. She said she felt the Commission should let the country know what its general attitude is on the whole ques-toin of the standard of living in relation to wages, etc., and that if a statement with respect to nego-
26
JULY 10, 1940
tiated contracts is released, it should include also a statement of the general policy of the Commission in respect to this matter.
Mr. McReynolds suggested that any such statement should be cleared with the President before release. Mr. Hillman stated that he felt the statement should be ready by Thursday of this week.
At the conclusion of a discussion as to how the proposed statement should be cleared by the Commission, it was understood that Mr. Nelson, in consultation with Mr. Horton, would redraft the statement incorporating all of the suggestions of the members of the Commission and circulate it to each member of the Commission for his approval, following which Mr. Nelson would submit it to Mr. Early, Secretary to the President, for clearance by the President.
Mr. Stettinius then read the following memorandum [Document No. 14] prepared by Messrs. Gano Dunn and C. E. Adams of his staff :
“We were asked to make a report to this staff on July 8th incorporating our ideas with reference to the elimination of commercial waste, the reduction of normal consumption and the reclamation of essential defense materials in time of emergency and the action to be taken to create:
(1) Public sentiment to eliminate waste, to reduce consumption and increase reclamation, and
(2) Regulations, when and if necessary, to effect this. “We recommend that a committee be appointed of not more than three to study what was done in 1917 and 1918, to study and digest all the essential statistics bearing on what might and should be done, and to report to the full Commission as this is obviously a matter that concerns all divisions of the Commission.
“The committee suggested would not necessarily have to have their headquarters in Washington although statistical information would have to be furnished them from here.
“Caution should be exercised by the committee, when appointed, to the end that use be made of local and national organizations that are desirous of being helpful in connection with this entire matter. Failure to get started properly along this line might mean the creation of ill feeling that would place the success of the voluntary portion of the movement in jeopardy.
“We have definite recommendations to make with regard to the committee’s personnel.”
Mr. Stettinius said that he would strongly recommend that the Commission appoint a committee to study the entire question raised by the memorandum.
At the suggestion of Mr. Henderson it was agreed that copies of the memorandum should be sent to the members of the Commission for study prior to consideration of the matter at the next meeting of the Committee.11
Mr. Stettinius stated that, upon looking into the question of the possible aluminum shortage, it was discovered that if Congress did not promptly authorize a $65,000,000 expansion of the facilities of the Tennessee Valley Authority to furnish necessary power for the production of aluminum, the Tennessee Valley Authority would miss the flood waters for two years hence and the increase in facilities would
u Probably intended to read “next meeting of the Commission."
683775—46—3
be delayed for at least a year. He said that he and Messrs. Knudsen, Biggers and Dunn appeared before a Congressional committee yesterday in connection with this matter and that it would appear that the legislation would be passed before Congress recesses tomorrow. He said that this procedure had been followed with the knowledge of the President and Mr. McReynolds, and that he would like to apologize to the Commission for acting in this manner before presenting the matter to the Commission, but that because of the urgent nature of the situation, there was not time to bring the matter to the attention of the Commission.
Mr. Stettinius then read the following memorandum [Document No. 15] prepared by Mr. Gano Dunn under date of July 9, 1940, with respect to the creation of a National Inventors Council:
“Secretary Hopkins, on the recommendation of Under Secretary Noble and Commissioner of Patents Coe, and with the full concurrence of the President, is about to create a National Inventors Council. This proposal has been cleared in numerous directions including the National Defense Research Committee of Dr. Bush. Clearance for it is desired from the Advisory Commission to the Council of National Defense.
"Memorandum on the Function of the National Inventors Council
“The law12 passed a few days ago, giving for two years the right to the Commissioner of patents to withhold from publication patents on certain inventions useful to the national defense involves an examination of all patent applications which the Patent Office in the interest of national defense is undertaking to make. The National Inventors Council has nothing to do with this and does not encroach upon this field, although it is a sort of parallel activity. It is intended to cover the field of suggestions and ideas sent in in aid of national defense for which patent applications are not made.
“The Inventors Council would be composed of well known names in the field of education, industry, and research, appointed by the Secretary of Commerce. Mr. Charles F. Kettering, President of the General Motors Research Corporation, has agreed to accept the chairmanship of the Inventors Council. It is not intended to duplicate the examination of ideas now made by the Army and Navy Patent Boards but to aid and supplement it, and I am informed is heartily approved by them.
“It is true that it would create considerable additional work in the Patent Office, where office facilities will be supplied to it, but it is also true that there is at present a great deal of discontent on the part of inventors and individuals with ideas who feel that they are sent from one present agency to another and that their ideas do not receive adequate consideration by the Government. It is further true, following the experience of the Naval Consulting Board created during the World War, that only a very small fraction of the ideas submitted would be found useful. Nevertheless, such an Inventors Council would render a real service to the public and create good will toward the Administration, where ill will is now engendered. Letters constantly come in to the various Government agencies at present, complaining that there is no place to go for adequate consideration of new ideas.
“Even if the establishment of an Inventors Council should increase, as I think it will, the numerous crank suggestions and foolish ideas now sent in, it will at the same time receive many earnestly worked out ideas from good citizens, which may or may not be valuable, and will reassure them
11 Public Law 700, 76th Cong., 3d SeM., July 1, 1940.
27
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
that their Government is not. overlooking a single item that may contrit'’te to the national defense in these times of emergen.
“The public service element of the usefulness of a National Inventors Council is of sufficient value in my opinion to justify its creation, and if only a few valuable ideas should come out of it, it is worth the expense and trouble irrespective of these.
“The National Research Defense Committee under Dr. Bush, recently created to develop ideas that have been adjudged to be worthwhile, welcomes the creation of the National Inventors Council as an aid to its work.
“I recommend that you ask the National Defense Commission at its meeting at 11:00 o’clock tomorrow, Wednesday, morning, to give its approval to the National Inventors Council, of which I have undertaken to notify Under Secretary Noble in the event of favorable action.”
Mr. Stettinius said that he would recommend to the Commission that the creation of such council be approved.
At the conclusion of a discussion, upon motion by Mr. Stettinius, it was voted to approve the creation of the proposed council.
Mr. Hillman stated that there had appeared in the press during the last few days a number of statements credited to him with respect to a $500,000,000 program for the training of labor and that he would like it understood that such a recommendation had not been made by him and that he had tried to trace the source of the newspaper statements but without success.
Mr. Horton stated that on June 10, 1940, a meeting had been held in Atlanta of a group of about 300 individuals representing industries, banking, labor, etc., in the South and near Southwest ot which a committee was organized known as the Southwide Committee with Mr. R. L. Gould of Baltimore as Chairman, and that Mr. Gould had called to offer the services of the organization along the lines of collecting pertinent information in the territory represented or in other ways.
Mr. McReynolds stated that at the next meeting he will bring in a specific recommendation with respect to State and local cooperation in the defense program which would answer the question raised by Mr. Horton.
Mr. Davis inquired whether inasmuch as copies of
the minutes of the meetings of the Commission held on June 12, 21, 26, and 28, 1940, had been distributed to the members of the Commission and no changes had been suggested, these minutes could now be recorded as having been formally approved by the Commission. In this connection Mr. McReynolds suggested that if within ten days after the distribution of the minutes to the members of the Commission no suggestions are received, the Secretary be authorized to record the minutes as being opproved.
The minutes of June 12, 21, 26, and 28, 1940, were approved unanimously, and the Secretary was authorized to record approval of subsequent meetings of the Commission in accordance with the procedure suggested by him.
Mr. McReynolds then referred to the request received from the President of the United States some time ago that the Advisory Commission submit to him a recommendation on the report prepared by Mr. Lowell Mellett in connection with the problem of housing in connection with the defense program.
Mr. Stettinius suggested that solution of this question was the selection of a housing coordinator, the best authority on housing that could be found, to be attached to the Advisory Commission.
Following a short discussion, it was understood that the question of housing would be presented for consideration at the meeting of the Commission on Friday, June 12.13
Mr. Budd then stated that he had received a letter from William J. Wilgus, Ascutney, Vermont, under date of July 6, 1940, requesting that he be granted an opportunity to appear before the Commission to expound his views on transportation in relation to national defense.
It was agreed that the Commission should not set a precedent of granting requests of this kind and that Mr. Budd should arrange to discuss the matter with Mr. Wilgus.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
“ So in original. Should read “Friday, July 12.”
COMMISSION MINUTES—JULY 12, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, July 12, 1940, at 3:00 p.m.
Present:
Mr. Stettinius
Mr. Davis
Mr. Henderson (First part of meeting)
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Fischer, Assistant to Mr. Budd
Mr. Horton, Director to Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
28
JULY 10 AND 12, 1940
Mr. McReynolds stated that the regular weekly meeting of the Advisory Commission with the President would be held next week on Tuesday, July 16, at 2:00 p.m., instead of on Thursday, and that the meeting would also be attended by the members of the Cabinet who are in the city on that day and by the Assistant Secretaries of War and Navy.
Mr. Biggers stated that Mr. Knudsen had gone to New York today in an effort to complete negotiations with the Packard Motor Company and had just authorized him by telephone to release through Mr. Horton a statement that the directors of the Packard Motor Company had approved an arrangement for the manufacture of 3,000 Rolls Royce aviation motors for the United States Government and 6,000 for the British Government, and that contracts were being prepared covering this undertaking.
Miss Elliott reported to the Commission that the National Defense aspects of health and public welfare had been assigned by the President, to the consumer’s office in the Defense Commission and that this emphasizes and makes clear the fact that these are matters of importance in the National Defense Program. Miss Elliott requested that it be written into the record that the Defense Commission approves this policy.
Miss Elliott announced that for administration and coordination: public health and medical problems will be directed by Surgeon General Thomas Parran; problems related to children will be directed by the Chief of the Children’s Bureau, Miss Katharine Lenroot; questions related to social security and welfare will be under the direction of the Chairman of the Social Security Board, Mr. Arthur J. Alt-meyer; and problems of nutrition will be under the direction of Dr. M. L. Wilson, Head of the Extension Service in the Department of Agriculture. These four administrators, she said, will serve as a coordinating committee on health and public welfare problems and, in keeping with the general policy of the Defense Commission, the existing governmental agencies will administer this program.
There was unanimous agreement that Miss Elliott’s report should be accepted and incorpo-rated in the minutes of the Advisory Commission. Mr. McReynolds said that, in accordance with the understanding at the meeting of the Commission on July 10, the first order of business to be discussed at this meeting will be the question of housing as it relates to the national defense program.
Mr. Biggers stated that Mr. Knudsen had asked him to say to the Commission that inasmuch as his division is charged with the responsibility of construction, after most careful thought he had requested and obtained the services on a voluntary basis of Mr. W. H. Harrison, Vice President and Chief Engineer of the American Telephone and Telegraph Company, to take charge of the problem of construction, on the theory that what was .necessary was to have a man connected with his division
who knew construction in a national way but who was not in the construction industry. He said that the American Telephone and Telegraph Company has a continuous building program in nearly every State in the United States on which the company employs local contractors and architects, and that this situation gives Mr. Harrison knowledge of local problems in the construction industry. He added that an analysis of the problem shows that residential construction for . defense purposes and industrial construction to take care of the national defense needs are very closely related, that it was the thought in Mr. Knudsen’s division that for the present at least they should be handled together, that a survey of the question made in Mr. Knudsen’s division indicates that there are plenty of competent existing agencies to perform such construction work, that the question is merely one of ascertaining the need for housing at the right time and working through one or the other of the existing agencies to accomplish the desired expansion of the type of housing suited to the local situation, and that Mr. Knudsen would be glad to have Mr. Harrison add that responsibility to his industrial construction responsibility if that be the wish of the Commission and to handle it on that basis at least temporarily until it can be ascertained how the situation will develop, rather than to create an independent coordinator of housing. It was felt, Mr. Biggers said, that one thing to be considered is the effective use of the facilities of the construction industry, that in many cases the same contractors and the same labor would be employed in building industrial buildings as would be employed in the construction of housing, and that if the whole problem is under the purview of one man familiar with the problem, the work would be coordinated more effectively than otherwise.
Mr. Hillman stated that he believed the suggestion of the President to utilize existing agencies should be followed; that is, for the Federal Works Agency to construct the housing, for a subsidiary of the Reconstruction Finance Corporation to do the financing, and the Advisory Commission to certify the need for housing. He also said the problem is one of housing labor in places of expanding employment, that this is a problem affecting the labor supply and rents paid by labor rather than a problem of construction, and that as a matter of proper organization he thought the question was one which belonged in his division.
Mr. Biggers stated that it was fully realized by Mr. Knudsen’s division and by Mr. Harrison that existing agencies that were capable and seemed to be qualified and equipped to aid in the construction work and financing would be used, but that the problem of housing had been determined to be one of Mr. Knudsen’s problems and a crucial one because it took precedence in some cases over production.
29
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Stettinius suggested that the problem is a very broad one in its significance. In this connection he referred again to the report prepared by Mr. Lowell Mellett and submitted to the President on this subject and said that Mr. Mellett had consulted with Messrs. Jones, Carmody, Straus, and others, in the preparation of his report, that the matter involves not only construction and labor, but also the questions of financing, decentralization, new industrial developments, and rent control which affect the work of all of the members of the Commission, and that he was wondering whether it would not be wise for the Commission to give consideration to the recommendation contained in Mr. Mellett’s report that a coordinator of housing be appointed and be attached directly to the Advisory Commission.
Miss Elliott inquired whether the recommendation that a coordinator of housing be appointed meant that the coordinator would be connected with the office of one of the Commissioners or whether it would be set up as a separate office, to which Mr. Stettinius responded that it was his understanding that the position would have the same status as that of Mr. Nelson, Coordinator of Defense Purchases.
Mr. Davis inquired of Mr. McReynolds whether the President referred the Mellett report to the Commission as a recommendation, and Mr. McReynolds replied in the negative.
Mr. Henderson said he thought there were two problems involved in the housing question: (1) the question of organization which is related to how the Commission organizes its work, and (2) the question of housing. He said he agreed that the question is much broader than has been discussed to date, and goes far beyond the memorandum prepared by Mr. Mellett. He stated that every year since he has been in Washington the housing problem and its financing has come up, that he had had some contact with the problem, and that it perhaps touches more items in which the Commission is interested than any other thing not assigned to an individual member of the Commission. The question involves, Mr. Henderson said, problems of material, questions of shortages, questions of new and substitute materials for construction, and problems of construction, and there is no reason for considering actual construction problems independently of what the additional load on construction facilities is likely to be arising from the defense program. Mr. Henderson stated further that, everything considered, it seemed to him that this question is not something that can be assigned to an individual Commissioner but called for the creation of a position with a status more like that held by Mr. Nelson, and that he would like to see the report of Mr. Lowell Mellett accepted, the position of coordinator of housing created, and attention given by the Commission as to the directions to be given by it to the person selected for the position.
Mr. Davis referred to the various Fédéral and
U
State agencies concerned with housing and said it seemed to him the problem required a coordinator to stop the confusion which had been in evidence in the past and that, in view of the interest of all of the Commissioners in the matter, the coordinator should be attached to the Commission as a whole.
There followed a discussion of who might be selected to fill the position and of the report to be made to the President on the matter, during which Mr. Hillman expressed the opinion that the approaches to the problem suggested by Mr. Biggers and by him at the early part of the meeting were not adequate, that if all the aspects of the problem were considered it would be necessary to have someone to coordinate them, that it would take some time to get this program into operation, and that he felt it was essential that attention be given to the immediate questions of housing that are pressing for attention.
Mr. Davis then moved that the Commission recommend that a coordinator of housing be named as soon as possible and attached to this Commission as a whole.
Mr. Biggers stated that while he could see the logic of Mr. Henderson’s statement, he wished to express concern over the fact that he did not see where the Commission is leading to if it keeps on creating appendages to the Commission to handle specific subjects rather than being attached to one individual Commissioner.
Mr. Davis’ motion after being seconded by Mr. Stettinius, was carried unanimously.
In connection with the above matter, Mr. McReynolds stated that he thought the matter should be presented to the President when the Commission meets with him on July 16 and that in order to be constructive the Commission should recommend some individual for the position of coordinator of housing. Mr. Davis inquired whether this matter could not be left to a committee to canvass the field and submit three or four names to the President.
Miss Elliott stated that there were persons on the outside who felt that there should be no further additions to the staff of the Commission and in recognition of that situation she hoped the appointment of the housing coordinator could be made in such a manner as not to create the impression that it is the policy of the Commission to add one coordinator after another to the staff.
In accordance with the above suggestion Messrs. Hillman as Chairman, Davis, and Stettinius were appointed a subcommittee to suggest to the President a person for the position of coordinator of housing.
At this point Mr. Blackwell Smith, legal advisor to Mr. Stettinius, joined the meeting.
Mr. Smith stated that he had a one-page report prepared by the lawyers’ committee of the Commission (composed of Messrs. Smith, Chairman, Brand-
JULY 12, 1940
wen, Eaton, Ginsberg,14 Porter, and Ware) with respect to the clearance of antitrust matters and that he would like to read such report to the Commission. The report [Document No. 16] as read by Mr. Smith was as follows:
“The Lawyers’ Committee suggests for the consideration of the Commission some such procedure as the following:
“1. Obtain and release the opinion of the Attorney General on this general subject as soon as available.
“2. Provide an Administrator for Antitrust Matters, to be attached to the office of an appropriate person, to be decided. The possibilities include Mr. McReynolds’ office or the office of some one Commissioner. The Committee is not in agreement upon the person to whose office such Administrator should be attached.
“3. Assign to the Administrator the task of: .
(a) receiving and administering the handling of all requests for certification of importance to the national defense of action which might be in conflict with the antitrust laws;
(b) preparation of an adequate statement of the situation involved and the basis on which the proponent feels that certification should issue;
(c) the giving of practical notice to each Commissioner of the request and the basis for certification ;
(d) receiving requests for additional information or suggestions of safeguards or alternative possibilities considered important by any Commissioner for presentation to the Commission;
(e) clearance with the Department of Justice at a proper point before certification issues.’’
Mr. Smith stated that paragraph 2 of the report suggested the appointment of an administrator for antitrust matters and that it may be that the Commission would prefer that he be called an assistant or given some other name. It was the general consensus that such appointee should not have the title of administrator.
Mr. McReynolds stated that he thought such assistant should be attached to Mr. Henderson’s division and that after each matter had been studied by Mr. Henderson’s division, it would be presented to the Commission for clearance. During a. discussion as to whether such matters should be assigned to one Commissioner, Mr. McReynolds stated that the reason why he had suggested that it be handled by Mr. Henderson’s division is that his division has a natural interest in problems of this character and it would save the time of the whole Commission if his division had a chance to make an analysis before the matter is presented to the Commission as a whole. He also said he did not see how the Commission could escape responsibility for certification in these cases and that the Attorney General had indicated he would not be satisfied with anything less than that.
At the conclusion of the discussion Mr. Hillman moved that the report presented by Mr. Smith be accepted with the understanding that the word “Administrator” would be changed to “Assistant” wherever it appeared in the statement and that such assistant would be assigned to Mr. Henderson’s division.
** Correct spelling: "Ginsburg.”
Carried unanimously.
Mr. Smith stated that a by-product of his legal work in Mr. Stettinius’ division consisted of memoranda on matters which may be of interest to other members of the Commission and he would like to know if the members of the Commission would have any objection to his circulating such material. He also said that matters of lesser importance would not be circulated but would be available upon request for information.
It was agreed unanimously that the procedure suggested by Mr. Smith should be followed by him. At this point Mr. Smith left the meeting.
Mr. Davis then presented the following letter [Document No. 17] from the Chairman of the Board of Governors of the Federal Reserve System and suggested that the Commission authorize the exchange of information between the Division of Research and Statistics of the Board and the Defense Commission:
“In connection with its regular work the Board finds it extremely important to have as comprehensive data as possible for appraising the impact of the defense program on our economy, particularly with reference to its effects on monetary, financial, and fiscal developments.
“For this reason it would be greatly appreciated if the Defense Commission would place at the disposal of the Division of Research and Statistics of the Board for strictly confidential use such memoranda and data as may be worked up from time to time by the various research and statistical divisions of the Defense Commission and by the central bureau of statistics and research under the direction of Stacy May. Particularly it would be important to have information with respect to the progress of the defense program, its magnitude and timing, and what it means translated into terms of production, employment, and prices.”
Mr. Henderson said that he would like to urge strongly that Mr. Davis’ suggestion be approved. He also said that the work that the Board of Governors did in estimating what the net contribution of Government spending was, is perhaps the most useful single bit of information which people working on economic policy have had in the last several years, that in order that the work being done by the Board of Governors shall have the same usefulness it must know something of the timing of the defense expenditures, and that he felt that the Commission would be repaid if such information were given to the Board of Governors.
The exchange of information as suggésted by Mr. Davis was approved unanimously.
Mr. Stettinius stated that he would like to report that the effort which had been made by himself and Mr. Gano Dunn, of his staff, to get the Tennessee Valley Authority expansion bill approved had not been successful, that the failure to enact the legislation at this time may delay Tennessee Valley Authority service to the aluminum industry for one year, and that the only thing remaining is to start again as soon as Congress reconvenes with the hope that the program will not be held up a full year as now appears likely.
31
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Stettinius said that he was ready to approve in principle the plan [Document No. 10a]) with respect to the establishment of munitions plants submitted by the Assistant Secretary of War and presented at the meeting of the Commission on July 10 at which time action was deferred until, the matter could be studied by the members of the Commission. Mr. McReynolds inquired whether the Commission was ready to act on that matter and Mr. Fischer responded that Mr. Budd had some comments he would like to make and would prefer to have consideration of the matter deferred until the next meeting, if possible, but that if action were taken today, Mr. Budd would be governed by the position taken by Mr. Davis. Mr. Henderson said he would be absent next week and that if Mr. Davis were willing to approve the plan when it came up for action, he (Mr. Henderson) would be satisfied.
At the conclusion of a brief discussion it was decided to defer action on this matter until the next meeting of the Commission.
Mr. Henderson then read the following memorandum [Document No. 18] which he had prepared with respect to the publicity given to the national defense program:
“Some of the press comments about the prospects of increasing the tempo of deliveries of defense items, such as planes, tanks, etc., have been indicating the country is likely to judge the Defense Commission as to whether by October or November of this year there are definite signs of increase.
“Here is a public relations job of first order. This Commission knows that the tremendous problems involved in stimulating and re-directing productive facilities are not something for hasty decision, nor is the industrial process such that it can readily be adjusted for quickened production of special items.
“Two articles appearing in the newspapers of July 6th are helpful and others might be encouraged if the Commission so desires. One item (page 8, New York Times) is a review of an article by T. P. Wright, Vice President of Curtiss-Wright, and one of Mr. Knudsen’s assistants, concerning the plane prospect. Another (page 1, Wall Street Journal) is a Pittsburgh dispatch of an interview with A W. Robertson, Board Chairman of Westinghouse Electric, which detailed some estimates of the time required to get into production of shells, gun mounts, etc..
“It is impossible for the defense program to have any real dynamics until (1) the full appropriations are converted into requirements; (2) certain design questions relating, to planes, tanks, etc., are settled; (3) the question of amortization of costs of new facilities, etc. is determined. I see no reason why an honest statement of these obvious and necessary details should not be made and suggest that the Commission discuss the matter with a view to an organized discussion with the President.”
In connection with Mr. Henderson’s memorandum Mr. Horton said that several major undertakings were under way, that yesterday Dr. Meade reported in detail on the six weeks’ progress in the airplane program, and that Mr. Stettinius would hold a press conference tomorrow at 10:30 a.m. and report the work thus far accomplished by his division. Mr. Horton referred to the previous understanding of the Commissioners that interviews and press con
ferences would not be resorted to unless individual Commissioners or the Commission as a whole had something to say, and said there was a feeling that the time has arrived when the major question is, what is being done for national defense, and that this is the time for the Commissioners to state, in the nature of simple progress reports, what they have accomplished thus far. Mr. Horton made the further statement that such publicity and a statement why the defense program will take a long time to complete can not be confined to the newspapers and will primarily have to be done through the newsreels, radio, etc., that it has taken time to work out such a program but that it was expected that full cooperation of the different news media would be had. He added that one form which such publicity would take will be to have accredited newsreel and radio men visit the plants where the actual work is under way and have descriptions of such work broadcast and shown in the newsreels. In a discussion of this matter Mr. Horton said each Commissioner would be notified when press conferences were to be held and that copies of all press notices were being sent to the different offices.
Mr. Henderson left the meeting at this point.
Mr. McReynolds then presented the following letter [Document No. 19] dated July 10, 1940, from the Assistant Secretary of War and stated that the recommendation had been approved in behalf of Mr. Knudsen by Mr. Biggers and was now being presented to the Commission for its approval :
“1. Reference is made to the report forwarded to you under date of June 27th, entitled, ‘Proposed War Department Program for Increasing Productive Capacity for Munitions’. The Chief of Engineers has recommended the vicinity of the City of Cincinnati, Ohio, as the desired location of the new plant for searchlight mirrors, estimated to cost $520,000, included in the above report. Information regarding the exact site will be available in the next few days.
“2. Inasmuch as the funds are available and work can proceed promptly,, it is recommended that the favorable action of the Advisory Commission and of the Council of National Defense and the approval of the President be obtained for this item, as required by law.”
Mr. Stettinius stated that, while he thought the Commission should approve this request, the War Department should give the Commission at least 48 hours to check such matters before action by the Commission. In this connection Mr. Biggers suggested that consideration of that point be deferred until Mr. Knudsen can be present, and that the Commission act now on this matter in such manner as it saw fit.
At the conclusion of a brief discussion, the request of the Assistant Secretary of War was approved unanimously, with the understanding that the point raised by Mr. Stettinius would be considered at a meeting when Mr. Knudsen was present. Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary
32
JULY 12 AND 17, 1940
COMMISSION MINUTES—JULY 17, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, July 17, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Hillman
Miss Elliott
Mr. McReynolds, Executive Secretary Mr. Sherwood, Assistant Secretary Mr. Biggers, Executive Assistant to Mr.
Knudsen
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Fischer, Assistant to Mr. Budd
Mr. John Hamm, Assistant to Mr. Henderson Mr. Horton, Director of Public Relations Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
Mr. McReynolds stated that in connection with the appointment of a coordinator of housing as recommended in the report submitted to the President by Mr. Lowell Mellett, and approved by the Commission on July 12, 1940, he had talked at considerable length with Mr. C. F. Palmer, President of the National Association of Housing Officials, (who had been recommended to the President by the committee appointed by the Commission at its last meeting) with respect to his appointment to that position. Mr. McReynolds said that Mr. Palmer had not as yet given a final answer as to whether he would be available for the position but had returned to Atlanta and would telephone him in a day or two, but that he did not believe there was any doubt that Mr. Palmer would accept the position. Mr. McReynolds added that Mr. Palmer was very well pleased that the position of coordinator of housing is not to be separate from the Commission but is to be a subordinate to the Commission and had made the request that, should he accept the appointment, he would prefer, if possible, that no announcement be made to the public. It was Mr. Palmer’s opinion, Mr. McReynolds said, that if no announcement were made of his appointment, he would be able to do a better job in that he could make the necessary contacts with the various housing organizations to expedite the work without exposing himself to everyone with housing ideas. Mr. McReynolds added that if it were the feeling of the Commission that an announcement should be made, that of course would be done.
Mr. Knudsen inquired whether Mr. Palmer would be an independent member of the Commission, such
as Mr. Nelson, to which Mr. McReynolds replied that he would not, but would serve in the same capacity as a member of the Commission’s staff.
Mr. Knudsen then inquired whether the construction program was to start with houses or with plants and stated that it seemed to him that it should start with plants. Mr. Hillman said it was imperative to give consideration to the question of housing, that there were anywhere from six to twelve places at this time in need of housing before construction of plants could be started, and that this was true largely in the shipbuilding sections.
Mr. McReynolds stated that Mr. Palmer’s conception of the job is that on new housing projects and industrial plants he would receive his instructions from the Commission, that where there is a call for housing the question he would have to face would be to find out who would authorize the construction and who would do the construction work and financing them, etc.; in other words, seeing that the machinery was set going, and that he would like to do it as quietly as possible.
Miss Elliott inquired of Mr. McReynolds as to whose responsibility it would be to decide the type of housing to be constructed, that is, whether individual houses or barracks will be built and as to the place where the responsibility for such a decision will rest. Mr. McReynolds replied that he thought as a practical matter such responsibility should rest with the coordinator of housing, subject to any advice or suggestions from the Commission as to the type of housing project which should be constructed in various places. Mr. Knudsen stated in this connection that he hoped it would not be necessary to build barracks, and that in his opinion they should be constructed only in cases of necessity. He added that if funds of the Federal Government were to be used, houses should be constructed to take care of families. Mr. Davis stated that this seemed to him to be a question to be worked out by the coordinator with the appropriate housing officials.
Mr. McReynolds then referred to the memorandum [Document No. 11] submitted by him at the meeting on July 10 with respect to. the suggested system of progress reporting and interchange of information within the Advisory Commission and stated that he had received no suggestions as yet on the report. He said that it would be helpful if each Commissioner would designate a member of his staff as a contact man to work with Messrs. Harris and Gladieux in order that they may be able to have a staff meeting at least once a week and that he believed through that procedure the information service will function better, not only from the standpoint of the proposed routine weekly report, but from the standpoint of the reports of representatives of each Commission.15
“So inoriginal; should read "each Commissioner.’*
33
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
It was agreed unanimously each Commissioner would appoint a contact man for the purpose stated.
Mr. Knudsen referred to the press conference held by Mr. Stettinius on July 13 and inquired whether such conference would be a regular feature of the Commission’s activities. Upon being advised that it was not expected that they would be, Mr. Knudsen asked how many conferences would be held, and Mr. McReynolds replied that that was a matter for the decision of the Commissioner,16 but that it was generally felt that Mr. Stettinius’ statement had been well received and that similar conferences should be held from time to time.
Mr. Hillman stated that he felt that such press conferences should be held at appropriate frequent intervals, and that he believed the conference held by Mr. Stettinius had changed the reaction of the man on the street to what the Commission is actually doing. Mr. Knudsen suggested that at such conferences the work of the Commission should be discussed so that the public may know of the progress being made by the Commission as a whole.
Mr. McReynolds stated that he had had Mr. Guy Moffett working on the question of State and local cooperation on national defense and had now received a report from him with respect to this subject [Document No. 20]17 and that he would have copies made and furnished to the members of the Commission for study prior to consideration at the meeting of the Commission on July 24, 1940.
Mr. McReynolds then raised the question whether, in view of the fact that several members of the Commission would be absent from the city on Friday of this week, the regular meeting of the Commission would be held on that day.
It was agreed that a meeting should not be held on Friday, July 19.
Mr. Stettinius said that he would also like to clear with the Commission one small item of the Army and Navy Munitions Board with respect to the purchase of small supplies of waste silk, linen, and some small items within the cotton textile industry, that he did not believe there was anything important in these items, and that he would like to have them cleared in order that the Army and Navy Munitions Board might proceed.
It was understood that Mr. Stettinius should advise the Army and Navy Munitions Board of approval of these matters by the Commission.
’•So in original; probably intended to read “Commission.”
” Memorandum, “State and Local Cooperation in National Defense,” no date.
Because of the far-reaching effect of the national defense program, the creation of a Division of State and Local Cooperation within the office of the Secretary to the Advisory Commission is urged. It will' be the function of this Division to aid the organization of a State Defense Council and local defense councils in each state and to-coordinate the work of such councils. Such an organization would be invaluable for the collection and dissemination of information on the defense program as well as in the organization of the civilian population to meet emergencies which might arise.
The proposed organization of the Division of State and Local Cooperation and of the state and local councils is outlined in detail.
34
Mr. Stettinius then stated that certain members of his staff had been placed on the pay roll of the Advisory Commission without his written approval, and that he felt that as a matter of good organization no person above a clerical status should be added to the pay roll without the signature of the Commissioner in whose division he was to be employed. Mr. Sherwood stated that the person referred to by Mr. Stettinius had been placed on the pay roll at the request of Mr. Roy Jackson, Office Manager of the Raw Materials Division, in Mr. Stettinius’ office.
Mr. McReynolds said he thought the question raised by Mr. Stettinius was one of making each Commissioner personally responsible for his staff members by giving formal approval in writing of those persons he desired to employ.
Mr. Stettinius said he did not feel that the suggested procedure needed to apply to all employees, that he did want to approve personally the employment of persons who would receive salaries of $300 per month or over, that salaries under that amount could be approved by his office manager, that he felt each Commissioner should appoint a representative who would be authorized to add the names of persons to the pay roll who would receive $300 per month or less.
It was understood that the procedure suggested by Mr. Stettinius would be followed in the future. With respect to the request of the Assistant Secretary of War that the report [Document No. 10a] on the proposed location of new munitions plants be reviewed by the Commission and suggestions made regarding any changes in basic principle considered desirable, Mr. Stettinius said he had had the proposed plan analyzed by his staff and that he was ready to approve it in principle subject to certain adjustments as to locations of individual plants.
Mr. Fischer said that Mr. Budd had asked him to raise a question regarding the western boundary of the proposed areas which showed such boundary to be in the very center of the United States, and inquired whether this was an indication that no consideration is to be given to the location of plants west of that boundary. He added that Mr. Budd believed there are other western areas that should also be given serious consideration.
Mr. Stettinius stated that there will be exceptions to the plan as submitted, that he knew the matter had been carefully reviewed by the Army and Navy from the point of view of the sources of raw materials, labor supply, and consuming industries that take raw materials, and that it is possible that plants will be desired on the west coast.
Mr. Knudsen said this is a preliminary plan and that any suggestions of the Commission will be welcome, but that he felt the Commission could approve the plan in principle and allow the various situations to take care of themselves when they arise.
JULY 17, 1940
Mr. McReynolds said that he had taken for granted that this was merely a pattern for the general location of plants of the type mentioned and that of necessity there would be many exceptions to it because there are existing plants outside of the boundaries shown which are going to be utilized and in many instances supplemented, and that he would not oppose approval of this proposed plan in principle as a general plan for the locations for such plants.
Mr. Davis stated that he would like to make a statement on this matter and the problems it raises, and that in making such a statement he was assuming that the Army has all of the information and had studied all of the factors involved. He stated that his division is making a proposal to Mr. Stacy May’s division that it assemble all of the information that will be needed by the Commission in order to pass intelligently on questions of plant location, and that Mr. May would first check with the War Department to ascertain whether .they were in possession of all the information. He said that he was not willing to approve the dividing line that places all plants east of Kansas City. He referred to the various requirements of the west coast and stated that they must be taken into account in considering this mat-ter, and that if the forty-eight plants set forth in the areas shown on the map represent the total of Government plants to be built, he would not be willing to approve of it because he did not feel such plants should be concentrated on the east coast, particularly when it is just as important to have a defense of the west coast.
Mr. Knudsen stated that the general scheme is to take a set of plants and place them in one location, such as a power plant, a TNT plant, a shell plant, and loading plant, in order that they may be in working distance of one another, and that this plan was merely a forecast of what might happen in the future.
Mr. Davis then referred to what appeared to be an undue concentration of plants to be established in area “B” and inquired whether some of the plants in area “B” might not be placed in area “D” and whether approval of the principle of the plan by the Commission would foreclose the establishment of other plants in these districts.
Mr. Stettinius said the question raised by Mr. Davis was one of the availability of material, labor, and the consuming industries within the areas. He also said that in order to get the whole picture the plan should be considered with the plans of the Navy Department.
Mr. Knudsen said that he felt that there will be a reallocation of the plants and that this was not the final plan.
Mr. Hillman inquired whether the members of, the Commission who have an interest in the matter will be consulted before the plants are actually constructed or whether they will be approved by the
Army and Navy and the member of the Commission primarily interested in the matter. He stated that he felt there should be some procedure by which each of these cases comes to the attention of all of the members of the Commission who have an interest so that they may be in a position to offer suggestions.
Mr. Hillman’s suggestion was discussed and Mr. Davis inquired whether it would be possible to make a survey of all information available and to make sure that all such information is available to the War Department so that they may be in a better position to reach decisions.
Mr. Knudsen said that he felt that what was needed was a definite understanding as to the procedure to be followed by the Commission in matters of this character, and suggested that it be understood that in the future, before construction contracts are let, the individual members of the Commission interested will be informed as to the area in which the plant is to be placed so that they may make any suggestions they have to Mr. Knudsen.
This suggestion was agreed to unanimously.
Mr. Stettinius moved that the map submitted by the Assistant Secretary of War as to the location of munitions plants be approved in principle with the understanding that the west boundary line (in red) for the location of such plants is not to be considered as binding.
Carried unanimously.
Mr. Nelson stated that he had been trying to reach a clear understanding of his duties as Coordinator of National Defense Purchases in order that he might discuss his responsibilities with the respective Commissioners. He said that he was concerned about the relation of the industrial mobilization plan of the War Department, on which a great deal of work had been done for a number of years, to the preparedness program, the development of which is now under way, that it would appear that the preparedness program in effect abolishes the M-Day program of the War Department, and that he felt the Commission should give immediate consideration to the problem presented by that situation.
There followed a lengthy discussion of the scope and objectives of the M-Day program, its relation to the defense program, and the extent to which the two programs could be correlated, and at the conclusion of the discussion Mr. Nelson suggested that a committee of the Commission be appointed to study the M-Day program to decide as to its adequacy, and to make recommendations as to the extent to which the defense program fits into the M-Day program so that it may be determined what parts of the latter may be used.
In accordance with Mr. Nelson’s suggestion a committee composed of Messrs. Nelson as Chairman, Stettinius, Knudsen, and Hillman, was appointed to consider the matter and make a pre
35
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
liminary report to the committee18 at its meeting on Wednesday, July 24.
Miss Elliott stated that her division was planning to hold a meeting next week with representatives of from 100 to 150 extragovernmental civic agencies to discuss the question how they can cooperate in the national defense program, and that the suggestion had been made by the committee working on the meeting that it would be helpful if the individual members of the Commission would be willing to appear before the group for a few moments. Miss Elliott added that she had advised the committee that the Commission had expressed a desire not to be called in for meetings of this kind, but she would present the matter to the Commission for consideration.
In this connection Mr. McReynolds referred to the report of Mr. Moffett on State and local cooperation in the national defense program and inquired whether Miss Elliott had taken this into consideration. Miss Elliott replied that she had discussed the proposed meeting with Mr. Moffett and it was his thought that if it were shown that the organizations involved would be regarded as extragovernmental agencies, it would not conflict with his report, and that she planned to have a further conference with Mr. Moffett on the matter.
It was agreed that Miss Elliott would address a memorandum to the members of the Commission suggesting for their consideration a plan in “So in original; should read “the Commission.**
accordance with which they could visit the meeting.
Mr. Horton inquired if there was a plan in existence for setting up an organization chart of the Commission as a whole to which Mr. McReynolds replied that he planned to have a meeting of the liaison officers of the various divisions for the purpose of working out their first report which he thought would include an organization chart of each division.
Mr. Fischer inquired whether Mr. Knudsen’s weekly report of progress [Document No. 8b] was to be regarded as confidential or whether it could be given to the Association of American Railroads. Mr. McReynolds replied that all progress reports were strictly confidential and should not be released to anyone unless authorized by the Commission.
Mr. Fischer stated that Mr. Budd had requested the railroads to cooperate in a program of stock piling their coal so as to relieve the burden on transportation this winter, and that it was also proposed to encourage railroads to contact the users of coal to stock coal for the same purpose and that it was hoped the proposal meets with Mr. Stettinius* approval. Mr. Stettinius said it did and suggested Mr. Fischer discuss the matter with Mr. William L. Batt, Sr., Division Executive in the Mining and Mineral Products Division.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—JULY 24, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, July 24, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Knudsen (part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases (part of meeting) Mr. Biggers, Deputy Commissioner to Mr.
Knudsen
Mr. Fischer, Assistant to Mr. Budd
Mr. Horton, Director of Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
The minutes of the meeting of the Advisory Commission to the Council of National Defense held on July 3, 1940, were approved unanimously.
Mr. Knudsen stated that he had been working on the combined British and American airplane program and that he had an appointment at the Treasury at 11:30 a.m. today to endeavor to complete the matter and that he had asked Mr. Biggers to be present at this meeting to represent him. Mr. Knudsen then left
Mr. McReynolds referred to the appointment of Mr. C. F. Palmer, President of the National Association of Housing Officials, as Coordinator of Housing and said that a statement of his specific duties was being prepared and would be presented for approval at the meeting of the Commission on Friday, July 26, and that it was felt that such a statement was necessary in order that there may be a clear understanding throughout the Commission of what his responsibilities will be.
Mr. McReynolds stated that Mr. Davis had raised the question whether it would be appropriate for a member of the Commission to designate his first assistant as Deputy Commissioner. Mr. Davis said
36
JULY 17 AND 24, 1940
that he had raised the question because he felt that in order that he could be free to carry on his work as a member of the Board of Governors of the Federal Reserve System and a member of the National Defense Advisory Commission, it was necessary, as a matter of good organization, for him to have an assistant in charge of his entire division, that it was immaterial to him whether such person was designated as deputy commissioner or given some other title, and that he merely wished to raise the question.
The matter was discussed and Mr. McReynolds said as it was understood that the first assistants to Messrs. Budd and Henderson would attend the weekly meetings at the White House in all absences of the respective Commissioners, he saw no reason to question the designation of Deputy Commissioner for these assistants to the Commissioners.
Mr. Stettinius inquired whether it was the consensus of the Commission that a Commissioner could have one or more Deputy Commissioners and Mr. McReynolds replied that he felt that if the title of Deputy Commissioner is used, there should be only one, and that in any event there should be only one alternate who would represent a Commissioner at the meetings of the Commission and with the President, regardless of whether he was to be designated as a Deputy Commissioner or by some other title.
At the conclusion of the discussion, it was understood that the first assistant to each Commissioner would be designated as Deputy Commissioner.
At this point Mr. Nelson left the meeting.
Mr. McReynolds stated that after a study of the matter, it had been decided that under the present law the Commission has no authority to pay subsistence expenses of members of its staff beyond the $5.00 per diem authorized by the statute and that he had requested the Bureau of the Budget to prepare an amendment to the law that would permit the Commission to make reimbursement for actual traveling and subsistence expenses incurred by the staff. Mr. Biggers said there was some question as to whether members of the staff who were on a voluntary basis were entitled to claim per diem and Mr. McReynolds replied that anyone who is in Washington in a travel status may claim a subsistence per diem of $5.00 but anyone whose headquarters are in Washington is not entitled to make such a claim.
Mr. McReynolds then read the following letter [Document No. 21] addressed to Mr. Stettinius under date of July 17,1940, by Mr. Henry F. Grady, Chairman, Executive Committee on Commercial Policy:
“I am glad to inform you that the President has now formally approved the addition of the Advisory Commission
to the Council of National Defense to the membership of the Executive Committee on Commercial Policy.
“You will recall that you have already arranged for Mr. C. E. Adams to attend the meetings of the Committee informally, pending this action. For the purpose of completing the records of the Committee, I should appreciate your sending me a letter naming the official representative of the Advisory Commission to the Council of National Defense on the Executive Committee on Commercial Policy.”
Mr. Stettinius said that he would like to have Mr. Carl E. Adams, his Executive Assistant, continue to represent the Commission on the Committee but that Mr. Adams had found that attendance at the meetings would take more time than he would be able to devote for that purpose. Mr. Stettinius added that Mr. W. A. Harriman (Liaison Officer on transportation of raw materials) would be glad to serve on the Committee if it were desired by the Commission that he do so. Mr. Davis stated that Mr. Raymond C. Miller, Foreign Trade Specialist in his division who had represented the Export-Import Bank on the Committee is available for consultation or to be of help to the Committee or the members of the Commission in any way he can.
It was agreed that Mr. Grady should be advised that Mr. W. A. Harriman had been appointed by the Advisory Commission as its official representative on the Executive Committee on Commercial Policy, and that a copy of the letter to Mr. Grady should be sent to Mr. Harriman.
Mr. McReynolds stated that an analysis prepared by the Legislative Reference Service of the Library of Congress of the pending legislation would be furnished daily to the members of the Commission which would make it unnecessary for members of the staff of the Commission to perform that work. He stated that the procedure for following up legislation in which the Commission is interested was being worked on at the present time by Messrs. Smith and Gladieux in order that there may be a definite agreement with respect thereto.
Mr. Stettinius then distributed to the members of the Commission copies of the following memorandum [Document No. Ila] with respect to clearances of recommendations for action which he said had been worked out in his division and which is closely related to the activities of Mr. Nelson :
“Recommendations for definite action outside of the Division in which any executive is engaged, after such recommendations have been fully worked out, should always
(1) Be reduced to writing, with a practical statement of the basis in fact and otherwise, for the action requested ;
(2) Be cleared according to the organization chart through the appropriate Division Executive;
(3) Be submitted by the Group Executive, the Division Executive, or the Executive Assistant to the Economic and Legal Divisions for checking and initialing when, in the opinion of any of those three, such checking and initialing is necessary or appropriate ;
(4) Be transmitted to Mr. Stettinius by way of the Executive Assistant, Mr. C. E. Adams, except in those instances where personal presentation of the matter is necessary, in which cases Mr. Adams should be informed.
37
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
■ This includes recommendations for action by certain other Commissioners of the Commission as a whole.
NOTE: Recommendation for additions to or subtrac-. tions from list of articles requiring export licenses should be cleared through Mr. Harriman’s office before transmission to Mr. Stettinius as above. Recommendations for restrictions and granting of licenses, interpretations, etc. will not be transmitted as above except when Mr. Harri-■ man’s office considers it necessary.
“When the recommendation for definite action as above described has been approved by the Commissioner or his Executive Assistant, it should be transmitted at once by the office of the Commissioner, or his Executive Assistant, to Mr. Nelson, coordinator of purchases, for routing to the proper procurement agency of the Government and for follow-up.
“The above procedure should not be interpreted in any way so as to limit reasonable initiative and effective action and informal discussions among personnel of the Department. If it seems to thwart these prime necessities, the instances should be discussed with Mr. Adams.
“Further coverage of this and related subjects will be furnished as necessary.”
Mr. Biggers distributed copies of the weekly report of progress of Mr. Knudsen’s division and stated that the report had been prepared in more detail than preceding reports.
Mr. Stettinius stated- that the War Department has worked out a program involving the expenditure of $25,000,000 for the construction of a powder plant, and $9,000,000 for the construction of a TNT plant, that construction of the TNT plant had been approved by Mr. Knudsen, and that he (Mr. Stettinius) was ready to approve the construction of the powder plant if there were no objection on the part of other members of the Commission.
Mr. Hillman. stated that he was not being consulted on these building projects, that he was receiving numerous complaints from the building trades and others that they had not been consulted, that he would like to have some understanding in this connection.
Mr. Stettinius stated that the case referred to by him was presented to Mr. McReynolds by the War Department, that Mr. McReynolds notified, Mr. Knudsen and his (Mr. Stettinius) own division, and that his division is now willing to approve such matter but not without consideration by the Commission.
Mr. Hillman stated that his problem was one of not being advised or given an opportunity to consider the proposed contracts in order to make proper provisions regarding labor and that if labor troubles occur it will be the responsibility of other divisions because they haven’t given him an opportunity to look into the matter from the standpoint of the provisions affecting labor.
Mr. Stettinius suggested that a procedure be adopted whereby each Commissioner would be notified promptly of the proposed location of a plant so that he would be prepared to express his views. He said that so far as his division is concerned, he was ready to approve the construction of the proposed powder plant and would recommend it to the
Commission for approval. Upon inquiry Mr. Stettinius said the plant was to be located at Charlestown, Indiana, just north of Louisville, Kentucky.
Mr. Biggers stated that this case had been discussed by him with Mr. Hillman about six weeks ago, at which time the War Department had requested that the matter be cleared at once, that there was an internal problem between the Quartermaster Corps and the Ordnance Division as to who should have supervision over the building of plants, that in this particular case E. I. duPont de Nemours & Co., Inc., had been employed, because of their technical knowledge, to build the plant which had raised a strong protest from contractors, and that the War Department had since issued a regulation which was contrary to that procedure. He added that after considering the matter his division was inclined to the position that all such construction work should be done, in cases where Government funds are involved, under the supervision of the Quartermaster Corps as the contracting officer. There followed a discussion of the procedure to be followed in cases of this kind and Mr. Biggers said he would have someone from his division who is acquainted with the facts discuss the proposed powder plant with Mr. Hillman.
Mr. Budd stated that somewhere along the line in preparing plans and recommendations for projects of this kind location for plants must be chosen, and there are two things which enter into that choice; (1) the general economic welfare of the country, and (2) the question of transportation; He felt that an effort should be made to scatter factories throughout the country in the interest of general economic stability, and that it would not take long for his division to pass on the relative advantages of different localities if the division knew something of the raw materials that would go into the plant and the finished products coming out of such plant. He said that it seemed to him that there was some transportation advice which the War Department would like to have in the early stages, and that it is pretty late to give the department such information when the plan is submitted to the Commission for approval*
Mr. Stettinius said the problem is much broader than plants constructed by the Government and involves the construction of private plants as well, their location in relation to transportation, power, and many other factors. He added that he did not believe it would be very difficult to put into effect a very simple procedure under which each Commissioner would receive in advance the information necessary for his consideration of the problems iii his field which are involved in the location and construction of a particular plant.
Mr. Henderson suggested that the Secretary could prepare a report to the Commission as to what is under consideration by the War Department in this connection and how the Commission could be put on notice in advance so that each matter
38
JULY 24, 1940
could be cleared without delay with the individual Commissioners interested in the particular case.
Miss Elliott raised for discussion the question at what point her division should become interested in such matters. This point was discussed and there was general agreement that since the location of a plant may involve a number of questions affecting the consumer interest Miss Elliott’s division should have an opportunity to consider these questions in connection with plant location.
Mr. Davis said that he had been advised by representatives of two Government departments that, contrary to the belief of the War Department, it did not have all of the information that the Advisory Commission has indicated it feels should be available in the consideration of the questions of plant location, that he had asked the Division of Research and Statistics of the Advisory Commission to assemble the data available on this subject in all Government departments in order that an arrangement can be made With the proper persons in the War Department to check the information they have and to make any necessary additional information available to them. Mr. Davis added that if it were possible to get necessary available information into the hands of the War Department in the early stages, the Commission could then be sure that everything had been taken into consideration before the matter is presented to the Commission for approval and delays and misunderstandings could be avoided.
In connection with Mr. Davis’ statement, Mr. Budd said the indications are that the War Department does not always have all of the information they should have with respect to problems of transportation and that his division would be glad to furnish them any information it might have.
Mr. Hillman stated that he had been advised that under the terms of contracts let by the Navy Department unskilled labor is working 56 hours a week in districts where plenty of such labor is available, and under conditions where a two-shift arrangement would be advantageous, that he had not been advised of the matter, and that the problem before him was how he could justify 56 hours under a Government contract when labor in private industry was observing a 40 hour week. He said that he wanted to be sure that there are no labor troubles either under Government contracts or in private industry where the defense program would be affected and that in Government contracts there should be an understanding that a 40 hour week is a proper standard unless there is a scarcity of labor. After some further discussion of this point Mr. Biggers suggested that he would like to have Mr. Harrison, in charge of construction work in Mr. Knudsen’s Division, confer with Mr. Hillman on this subject, regarding which Mr. Harrison has some very definite and constructive ideas.
At the conclusion of the discussion it was
understood that a committee appointed at the meeting of the Commission on June 21, 1940, composed of Messrs. Henderson, Chairman, Stettinius, Hillman, and Mr. Biggers, would prepare a draft of procedure to be followed in all cases of the kind under discussion, which would be presented to the Commission for consideration as soon as possible.
The recommendation of the War Department covering the construction of the proposed powder plant was approved subject to a clearance by Mr. Hillman that the provisions affecting labor are satisfactory.
At this point Messrs. Nelson and Knudsen joined the meeting.
Mr. Stettinius stated that the program on the production of light armor plate is now complete, but that the various manufacturers will not begin operations until the question of the rate of amortization on the additional capital equipment required by the program has been settled and that anything the Commission can do as a group or individually to speed the immediate passage of the proposed amendment in Congress will be of great help. Mr. Stettinius added that he felt that this was the number one “must” matter in the defense program.
At the conclusion of a discussion of this matter it was agreed that Messrs. Stettinius and Henderson would draft a resolution which would place the Commission as a whole on record as favoring the enactment of the proposed amendment as a separate bill, and that they should be authorized to hand the resolution to the chairmen of the appropriate committees of the Senate and House of Representatives and to the President.
Mr. Henderson stated that he would like to report on the reported shortage in paper and pulp. He said that a meeting was held in New York yesterday with members of the industry which had been attended by Messrs. McCabe and Francis of Mr. Stettinius’ division and by Mr. George Renard, who is Secretary of the National Association of Purchasing Agencies, representing Mr. Henderson’s division. He said that Messrs. McCabe and Francis went over with the representatives of the industry their study of the capacity and the percentage of capacity that was being used, and Mr. Renard went over with them the question as to whether prices were not somewhat unreasonable and the prospects of holding what might be a dangerous situation and that the results were quite satisfactory. He said that the understanding had been reached that there was no actual shortage of pulp except in some special grades and that there was no immediate danger of a shortage developing, as additional capacity can be made available readily, that the export of pulp which increased recently, because of some demand from France and Italy, will probably decrease, and that the matter of export is really a Small matter. He
39
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
added that the rayon pulp being shipped to Japan is of a calibre which could supply the domestic needs if the United States reached a critical point. He said that the imports from Canada are increasing, that we will probably have a net of imports over exports, and that several of the large producers assured that no advantage would be taken of the psychological situation that may have been created with respect to a possible shortage and higher prices. He made the further statement that on the basis of the experience in this case he and Mr. Stettinius have generally agreed with respect to producers of important materials that as long as they do not try to take advantage of a situation and raise prices, the Defense Commission should not interfere, but if the situation is otherwise and the producers get out of line, everything that can be done to bring the situation into balance from the standpoint of supply and price will be done.
Mr. Henderson suggested that since this is an important price matter and it is known throughout the trade and various business channels that something has been done on the matter of pulp, he prepare a report which Messrs. Stettinius and Horton would be asked to review and which would indicate that the paper and pulp situation is fairly well in hand, for presentation to the President tomorrow.
He said such a report would be reassuring to the buyers and would also be indicative of the way in which the situation was handled, i.e., without coercion or punitive means but rather in an effort to take out of the situation the psychological factors, in order to keep prices in balance. He added that the statement could be used by the President as the basis of a release at his press conference.
It was understood that a report would be prepared by Mr. Henderson in accordance with his suggestion.
Mr. Horton referred to the question of State and local cooperation in the development of the defense program and stated that he was receiving rather urgent inquiries on this matter which indicated dissatisfaction and a feeling that the Commission is not indicating how the different agencies can cooperate in the defense program.
At the conclusion of a short discussion it was understood that this matter would be considered at the meeting of the Commission on Friday, July 26.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—JULY 26, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, July 26, 1940, at 3:10 p.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Palmer, Coordinator of Housing
Mr. Porter, Executive Assistant to Comis-sioner Davis
Mr. Fischer, Executive Assistant to Mr. Budd
Mr. Smith, Legal Advisor to Commissioner Stettinius
Mr. Ginsberg,19 Head Attorney for Commissioner Henderson
Mr. Horton, Director of Public Relations Mr. Carpenter, Assistant Secretary of the
» Correct spelling: “Ginsburg.”
Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
Mr. Henderson stated that within the last 48 hours there had developed an important matter regarding the antitrust laws, to which Messrs. Stettinius and Knudsen had requested him to give some attention in order that he might be prepared if possible to dispose of the matter today. He said it related to a prospective filing by the Department of Justice of four suits against certain petroleum producing, refining and shipping concerns and had been referred to Mr. Stettinius, inasmuch as it dealt with a raw material item, and that Mr. Smith had done some work on it.
At Mr. Henderson’s request, Mr. Smith stated that he had an arrangement with Mr. Arnold, Assistant Attorney General, under which Mr. Arnold would advise Mr. Smith when the Department was about to start a suit which it was thought would be important to the National Defense Commission or which would affect a national defense industry, and inasmuch as the present matter involved the oil industry, which is a matter within the jurisdiction of Mr. Stettinius, the matter had been referred to him and discussed by his Division with Messrs. Knudsen
JULY 24 AND 26, 1940
and Henderson. Mr. Smith said that one phase of the matter was a proposed omnibus suit which collects all of the complaints still outstanding and joins them together into a single equity suit, which alleges: (1) that the 22 major oil companies involved are unreasonable in themselves because through their domination of all phases of the industry, they create a system which leads to identical policies with respect to prices which restricts free and independent enterprise, and (2) that the 22 major oil companies have continuously entered into a series of conspiracies to control the prices of gasoline, fuel oil, lubricants, kerosene; etc. Mr. Smith made the further statement that in addition to the omnibus suit there are three test suits against individual companies based on the theory that the oil companies which, through subsidiaries or otherwise, own pipelines and receive profits from the operations of the facilities, are receiving in effect rebates on the oil that they ship through those pipelines, and that this is a violation of the Elkins Act20 requiring them to refrain from receiving such rebates. The total amounts involved in such suits, he said, would amount to over $1,000,-000,000 but that at the present time the Department of Justice would not try to collect the entire amount. He states that the relief asked for in the major suit is that the 22 companies and their approximately 300 affiliated companies shall be enjoined from such conspiracies and that they shall be required to divest themselves of their transportation and marketing functions, and that there are two issues involved, (1) the narrower issue of whether the use of the oil industry in connection with the national defense program would be seriously impeded if the suit were started immediately as planned, and (2) the broader aspect of to what degree, if any, the starting of the suit would undermine the broad program of cooperation from the oil industry as a whole in accomplish-ing objectives sought by the Commission.
Mr. Henderson said that this particular question was not provided for in the Commission’s procedure dealing with antitrust matters since this matter originated with the Department of Justice and that in the proposed procedure it was contemplated that such matters would arise from the Army or the Navy in which the expediting divisions particularly would find from the industry that some kind of cooperation was required which might raise a question under the antitrust laws. He said he had treated this matter in much the same manner as contemplated by the procedure and with the production divisions had looked into the question of what were the major things the Commission were going to look to the oil industry for. He outlined briefly the needs that the oil companies may be expected to fill in the defense program.
Mr. Ginsburg said that he had spoken to Mr. Hugh B. Cox, Special Assistant to the Attorney General, Department of Justice, and that he had been
*• 32 Stat. 847.
advised that the aim and purpose of thé suit was to separate the production from the transportation end of the oil industry. Mr. Ginsburg said he pointed out to Mr. Cox that the omnibus suit seems to go beyond that ; and that Mr. Cox concurred but felt that there was no necessary conflict between what they were trying to accomplish and what the Commission was trying to do and that there need be no embarrassment to production. -, Mr., Ginsburg - said that he inquired what would happen if the suits were postponed, and Mr. Cox replied that they would be under pressure to bring separate criminal prosecutions in a number of cases, so that from the point of view of cooperation of the industry it might not be well to postpone the proposed suit. He added that Mr. Cox felt there was moral commitment with respect to the filing of the*suit, that the matter had beeri discussed in Congressional committees and it was generally understood that action would be taken in a relatively short period. Mr. Ginsburg stated further that he had mentioned to Mr. Cox the psychological effect of such a suit and that he had explained that the effect might be bad inasmuch as the oil industry would be asked to cooperate at one point while this suit was being brought at another. He said he discussed the possibility of the suits being postponed for a short period, and that Mr. Cox agreed that postponement would not affect the position of the Department from the standpoint of the statute of limitations and that offhand he did not see how it would otherwise affect the Department’s position.
Mr. Henderson stated that independently of the question of the legal grounds for the suits there were three things involved, one of which was the question as to whether or not the bringing of these suits would interfere with the delivery of items ordinarily manufactured such as fuel oil and gasoline and that it was his firm conviction that it would not. However, he said, the Commission has a question as to the new special defense items such as toluol, synthetic rubber, high octane aviation gasoline and the special considerations of storage which are quite different from the ordinary functions of the Army and the Navy in the customary purchase of supplies, in connection with which there should be no difficulty. He stated further that the question was whether there would be a psychological effect which would interfere, that in each of these special cases the Commission is looking to industry for an extraordinary outlay of their own funds for the creation of special facilities, that there was no doubt in his mind but what industries dealing with the Commission would be reluctant to expand their operations with one agency prosecuting it and attempting to shrink its functions and another agency asking it to expand, and that .it was his very definite opinion that there would be a dangerous lag which would present serious questions to the Commission, he said. There was also the question of the effect of such a suit on business generally, and he had asked Messrs. Knudsen,
4Î
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Biggers, and Stettinius directly the question if they felt there would be a psychological interference or reluctance on the part of business, if at this stage we had this kind of Government action and their answer was unhesitatingly “no”. He said that for that reason he was prepared to take the responsibility for recommending that the Commission ask the Attorney General for a reasonable postponement of these suits, until the question could be further investigated and that he had prepared a letter to be signed by the Secretary of the Commission in accordance with that recommendation.
Mr. Budd stated that he felt the matter resolved itself into the question of the propriety of shippers owning their own transportation lines and Mr. Henderson concurred and said that it seemed to him that the filing of the omnibus suit would not only affect the oil but other industries in which there is a concentration of production in a relatively few hands.
Mr. Henderson then read the proposed letter [Document No. 3a] to the Attorney General which was discussed and amended to read as follows:
“This is in reply to an oral request for an opinion of the Advisory Commission to the Council of National Defense regarding the anticipated effect on the present rearmament program of certain suits which the Department of Justice shortly proposes to file. It is our understanding that these suits will be based on alleged violations of the anti-trust laws and the Elkins Act and will be brought against the major oil companies in this country and against several hundred of their affiiliated companies.
“Apart from the fact that the oil industry will be required, during the next several months, to furnish vastly enlarged and vital supplies of oil and oil derivatives to our army, our navy, and our air force, the industry, within recent weeks, has been asked to consider the construction of new facilities, including facilities for the manufacture of aviation gasoline; facilities for the storage of gasoline and other supplies; facilities for the manufacture of toluol, important in the production of high explosives; and facilities for the manufacture of synthetic rubber, requisite if we are to become more independent of foreign sources of supply. In the interest of national defense, therefore, as defined by this Commission and the War Department and the Navy Department, the oil industry has been called upon to cooperate with the government by investing enormous sums in new plant and equipment. This program, which is only part of our broader program for expanding industrial capacity through private capital, we regard as important.
“This matter has come to us at a time when all of our efforts are engaged in a vital defense program. Since we are not aware of any circumstances which will qualify or impair the government’s right of prosecution if the filing date of these suits were postponed for any short period, we ask that these suits be delayed until we have had a more adequate opportunity to appraise the situation.”
The letter as set forth above was approved unanimously.
Miss Elliott said if the above letter is made public it might be interpreted that the Commission is not interested in the matter from the standpoint of prices, but that is a situation which she as a representative of the consumer would have to face.
Mr. McReynolds read the following memorandum
[Document No. 22] addressed to Mr. Stettinius by Captain A. B. Reed, Liaison Officer between his division and the Navy:
"Loans or credits have been made to certain Central and South American countries for purchase of materials and equipment in the United States.
“A number of these countries have requested that certain equipment and materials be furnished in accordance with the above.
“From the lists that I have seen from one country it appears that if the articles requested are furnished in the amounts requested, that it will materially affect the plans of the Raw Materials and Production Divisions’ present planning unless they are considered.
"There is a conference scheduled to be held in the State Department Saturday morning (27 July) to consider ways and means of meeting these requests.
"It is suggested that the Advisory Committee to the Council of National Defense be represented at this conference.”
It was agreed that Mr. Nelson would attend the conference referred to in the memorandurti.
Mr. Nelson then referred to an inquiry which had been received from the British Government with respect to an order for 5,000 pairs of binoculars, and said that in reviewing with die Army and Navy the field of optical instruments required for military purposes, it developed that the instruments that would be required would require on the basis of present facilities about 30 years to produce, that something would have to be done to meet this situation, that it was planned to cbilect all the facts in this matter and turn them over to Mr. Knudsen, and that in order to accomplish this it would be necessary to call in representatives of the industry. He added that the problem was complicated by the existence of an indictment against companies in this field and that, with the approval of the Commission, he would like to tell the representatives that the Commission would favor some relief from these suits.
Mr. Henderson stated that he would try to have the report on this phase of the matter next week.
During the consideration of the above matter, Messrs. Smith and Ginsburg left the meeting.
Mr. McReynolds stated that he had asked Mr. Palmer to attend this meeting inasmuch as he had just entered upon his new duties, and that he would like the members of the Commission to be acquainted with what the duties of Mr. Palmer are. Mr. McReynolds distributed and read a statement he had prepared as to the authority and functions of Mr. Palmer in his capacity as Coordinator of Housing.
A lengthy discussion of the statement ensued during which Mr. Henderson stated that he was not satisfied with that part of the statement dealing with the relationship of the Coordinator of Housing with the Commissioners and that he thought the Commissioners should be given an opportunity to study such statement as he felt it was essential that the Commission give more than casual attention to the way in which the work of the Commission is organized.
Mr. Palmer stated that he had accepted his assign-
42
JULY 26, 1940
ment on the basis that he would handle housing problems for each Commissioner, as such problems entered his field, and that it would not be necessary for him to get majority approval of the Commission ; and that he felt that in his work with the various housing officials, it was going to be necessary for him to be able to make decisions which, after consultation with the Commission, would be final so that the various agencies could not have the decisions set aside. In this connection he read a statement for the press which he released at the time of his acceptance of his appointment. He made the further statement that he had been given highly satisfactory cooperation by the representatives of the Government agencies with which he had begun to work, but that a question had been raised in the War Department as to the nature and scope of his authority and for that reason he felt it was essential that his duties and responsibility be defined so that no delays would result. Mr. Palmer then referred to some of the housing problems which had already been presented and these were discussed, together with factors to be taken into consideration in defining Mr. Palmer’s duties. In this connection Mr. Palmer read a draft of statement which he had prepared of what he understood his duties to be.
During this discussion Mr. Budd left the meeting.
Inquiry was made whether it would cause any serious delay in the housing program if action on the statement were deferred until the next meeting of the Commission and Mr. Palmer replied that the program would be delayed just that much.
Miss Elliott suggested that the Commission request Mr. Palmer to proceed with his work on the basis of the ideas expressed at this meeting, with which there is general agreement, and that between now and the next meeting these ideas be put in writing and presented for adoption at the next meeting.
At the conclusion of the discussion it was understood that the following statement prepared by Mr. McReynolds would be adopted, with the understanding that a statement of principles for the guidance of Mr. Palmer in the carrying out of his duties as described in Mr. McReynolds’ statement would be prepared and presented for consideration at the next meeting.
"General functions
“The Defense Housing Coordinator will be attached to the office of the Secretary. He will be responsible for planning the defense housing program and for its prosecution through private industry and the appropriate Federal agencies concerned with the planning, construction, and financing of housing. He will explore the legislation relating to or affecting defense housing activities, in order to determine the direction of the program within the limits of existing legislation, and will recommend and be responsible for the drafting of any additional legislation that may need to be proposed, to insure a completely adequate program. It will be his_ responsibility, also, to channel and coordinate those activities of Federal agencies that will be concerned with defense housing, to the end that an effective and integrated program will result.
“He will be expected to anticipate housing needs that will arise as a result of defense activities and to see that necessary action is taken to avoid any housing shortage. From a survey of the general situation and the specific needs in an instant case, he will determine whether the construction of housing facilities is a job for private enterprise or a public agency and will work out with the public or private agency the plans for getting the job done and the terms and arrangements for its accomplishment. “Relationship with the Commissioners
“The Defense Housing Coordinator will enlist the aid of the several Commissioners in the matter of planning and prosecuting an. effective defense housing program. Any plans for erection or expansion of plants, or procurement of large stocks of materials will need to be studied in the light of. housing needs that may arise, as a result. Any information that will enable the Housing Coordinator to forecast the exact housing needs and make necessary preparations to see that these needs are supplied should be made available to him. In working out the plans for construction of housing facilities, the assistance of the Commissioner on Employment and Labor will be enlisted to insure that an adequate supply of labor is available and that satisfactory terms of employment are worked out.”
During the discussion of the above matter Mr. Biggers, Deputy Commissioner to Mr. Knudsen, entered the room and at the close of the discussion Mr. Palmer left.
Mr. Biggers stated that pending the report of the committee appointed at the meeting of the Commission on July 10 Mr. Knudsen’s division had adopted the procedure of sending the following memorandum [Document No. 19a] to the War Department in connection with recommendations from the Department relating to the location of plants:
“Subject: Location of Smokeless Powder Plant at Radford, Virginia.
“In accordance with the provisions of Public No. 667 (H.R. 1005S), the approval of the Advisory Commission is required and in making my report to them I am assuming, but should like your assurance, that your scouts who personally visited the site thoroughly investigated the situation and gave consideration to the following important factors: (1) acceptability of location to proposed operator; (2) availability of labor supply; (3) adequacy of housing facilities within motoring distance; (4) water and power supply; (5) transportation facilities, particularly rail and 5°ad.», (Q avoidance of undue concentration of defense facilities in one area and neglect of other equally practicable locations.”
Mr. Henderson reported that he and Mr. Stet-tinius had prepared a resolution placing the Commission as a whole on record as favoring the enactment of rapid tax amortization legislation in a separate bill. This was in accordance with the wishes of the Commission as expressed in the meeting of July 24th. A copy of the proposed resolution was turned over to the Secretary for the record but Mr. Henderson explained that on July 25, the day following the Commission’s action, the Assistant Secretary of the Treasury, John L. Sullivan, had told Messrs. Stettinius, Knudsen, and Henderson, in Mr. Knudsen’s office, that the President had asked him (Mr. Sullivan) to tell the Advisory Commission specifically that he did not want this resolution presented. Hence no action had been taken.
683775—4 6~~4
43
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
The text of the resolution which was prepared but not delivered is as follows: (Copy attached).
Mr. Biggers then reported that he had been assured that the consideration of the amortization bill as a matter separate from the excess profits bill has not been abandoned, if it is the judgment of the Commission that it should be so handled. He suggested that before such an opinion is expressed the Commission attempt to find another way to get prompt consideration of the amortization bill.
Mr. Biggers said Mr. Henderson had interpreted the action taken at the meeting on June 1021 to mean that the committee appointed at that time, consisting of Messrs. Henderson, McReynolds, Nelson, Adams
** So in original. Should read “July 10.”
and Biggers, was charged with the duty of studying the whole problem of plant expansion financing, that the minutes justified such interpretation but that he (Mr. Biggers) was not sure that had been the intention of the Commission.
It was agreed that the Committee should have this responsibility.
At Mr. Henderson’s suggestion it was also agreed that a press statement should be issued by the Commission relating to the paper and pulp situation.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary. ,
COMMISSION MINUTES—JULY 31, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, July 31, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Knudsen (latter part of meeting)
Mr. Davis
Mr. Henderson
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Lubin, Executive Assistant to Mr. Hillman
Mr. Horton, Director of Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors for the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
Also Present:
Mr. Robert H. Jackson, Attorney General
Mr. Henderson referred to the letter [Document No. 3a] approved at the meeting of the Commission on July 26, 1940, for transmission to the Attorney General, with respect to the proposed filing of suits by the Department of Justice against certain major oil companies and stated that Mr. Jackson, who had been absent from the city until yesterday, had asked an opportunity to discuss the matter with the Commission.
Mr. Jackson made a statement substantially as follows: The Department of Justice wants to cooperate with the Commission in all matters involving the defense program, and in the particular case under discussion, on the advice of the antitrust division
of his Department, the opinion of the Commission had been asked, so that in one sense the Department’s request was the reason for the Commission’s interest in the matter. The case is a very comprehensive one to disintegrate major oil companies in the United States, to require them to divest themselves of control of certain lines of effort, such as the control of pipelines and to confine their operations to producing, refining, or marketing so that they would not be integrated so as to control the production, refining, and distribution field. The case is in the nature of a test case, is a civil case and not a criminal one, and as he understood the situation, it has been somewhat influenced in the form it took by a request from the oil companies that the Department of Justice bring a civil action to settle controversies on the legality of their operations. The oil companies had not consented to the suit but regarded it as the lesser of two evils.
The situation is further complicated by the fact that for a long time representatives of the Department of Justice have promised independent producers that action would be taken by the Department. Newspapers representing independent interests, members of Congress and many other people are interested in the action. The action has been in preparation for a long time and there are hundreds of parties involved. If it were to be filed today, he felt it probably would occasion two or three days of publicity, two or three weeks of discussion in the newspaper columns, and then it would sink into an argument between lawyers and disappear from the newspapers, in two or three more years a decision would be obtained, and in two or three more years a final decision will be obtained from the Supreme Court of the United States. The case is distinctly a test case on the theory that the whole evolution of the oil companies brings them into violation of the antitrust laws.
The case had been presented to Mr. Jackson by
44
JULY 26 AND 31. 1940
the antitrust division of the Department of Justice and his authorization asked for the commencement of the action, it being suggested at the time by Mr. Arnold, Assistant Attorney General, that it first be taken up with the Defense Commission. There was some discussion of the matter with Mr. Stettinius by Mr. Arnold, and it was his understanding that there would be no objection to the suit on the part of the Commission. - < ;
(Mr. Stettinius interposed here to* say that Mr. Arnold had called him on the telephone about a month ago arid advised him of the proposed suit and about a week ago had called again to say that it was being submitted to the Commission for its opinion. He added that he had expressed no position in the matter to Mr. Arnold.)
Mr. Jackson advised Mr. Arnold that he would withhold his authorization to commence the action until the consent of the Commission had been received. He did not anticipate that the Commission would be able to say in 24 hours what their opinion was of this action. He was frank to say that it would take much longer than that to digest the Government’s complaint. However, he did not know at that time that there had been some commitment to the newspapers and others that the action would be commenced on Monday of this week, which obviously left an inadequate time for the Commission to reach a decision. The newspapers, having expected action on Monday, began pressing for information, and when he received the Commission’s letter he talked with Mr. Arnold and advised him time would be granted for Commission consideration of the matter. Mr. Arnold expressed the opinion that this was a good decision. He (Mr. Jackson) then left town, and the next morning he read in the newspaper that there was a conflict between the Department of Justice and the Advisory Commission regarding the case. The situation was one which might develop into an unpleasant one, and one that both the Commission and his Department should do all they could to prevent anything of that kind from happening. It would be possible to argue that the mere commencement of any suit, no matter how well founded, would be a bad thing, but he did not think he agreed with that for the reason that where you have situations of this kind, the psychological effect may be more helpful in the end than harmful. If we are not very careful, it might be implied that the Commission is trying to interfere with the antitrust laws, which is not the case.
The matter may be summarized as follows: The Department of Justice has asked the Commission for its opinion, and the Commission has replied that it will take some time to study the matter and obtain information on which to formulate an opinion which is perfectly reasonable because the Department does not want the.snap judgment of the Commission. It will be necessary to make that position public because, to his surprise, he had found the situation
is already public. Yesterday afternoon there were stories going to be printed which he tried to persuade the newspapers not to print by making a definite Statement that all that had been asked for by the Advisory Commission was for time to study thé matter. That should be followed by a statement by the Commission to the effect that the Department' of Justice on Wednesday, July 24, asked for thé opinion of the Advisory Commission aboiit the case in. its relation to the national defense program, that consideration of the question by the Commission would require time, and that the Commission had not considered the merits of the case. At the time this statement is issued by the Commission, a statement should be issued by the Department that no request had been made by the Commission for the abandonment of the case, but that the Commission had merely asked for time to give adequate com sideration to the question asked by the Department. While the Commission is going to face ultimately the question of what is to be done in connection with the case, that is something that can be decided in the light of future events, but there is an immediate public relations problem that can be solved by the issuance of the proposed statements. The whole matter could become very much distorted unless plain, straightforward statements were issued about it.
On the question whether the action should be brought in thirty, sixty, ninety, or one hundred and twenty days or longer, the Commission would be well advised if it looked into particular situations which might be affected by the suit. For example, he understood the Commission had some situations in which additional pipeline facilities may be desired. The proposed suit would enter into that question by asking the major oil companies to divest themselves of pipelines, and there would be some hesitancy on the part of companies involved to build pipelines with such a suit pending. That situation presents a real problem from the standpoint of national defense but does not necessarily mean that the suit should not be brought. If the suit is brought it may result in better control of the situation because a stipulation could then be made as to activities which would not be prohibited. Since it is known that the suit is pending, most of the adverse psychological effect is already in the picture and it might be better to bring the suit so that it will be clear what the issues are. The companies don’t know now what they will be charged with and the sooner the issues can be brought out the better it will be.
Mr. Jackson concluded with the statement that he would like to see the Commission authorize someone to work with him and his Department in the preparation for release of two statements which will make this situation perfectly clear.
Mr. Henderson explained to Mr. Jackson that the letter sent to him was couched in the language of how to meet this problem because the Commission could not make an immediate decision as to what
45
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
should be done but would need time for an examination of the whole matter. The Commission, he said, is in the midst of negotiations for not only the use of facilities already erected and for the ordinary products of the oil industries, but for the expansion of facilities for the production of special items such as 100 octane aviation gas, it would be impossible to say at this time whether the suit would interfere with the defense program as it relates to these products. He added that the question of synthetic rubber was being studied and it would be impossible to say whether a case as far reaching as the proposed one would have an effect on the production of that material, and that the same is true of storage and toluol. He said that these and other facts were in the minds of the members of the Commission when the letter was approved and that he believed carefully drawn statements by the Commission and the Attorney General as suggested by Mr. Jackson would greatly relieve the situation.
Mr. Stettiniiis emphasized that, in approving the letter to the Attorney General, the Commission had in mind the psychological effects that the suit might have on the attitude of industrial concerns generally toward cooperation in the defense program.
Mr. Jackson stated that the suits would be in the nature of trial balloons to see what the pressure will be, that the oil companies probably would request the Commission to prevent the suits, and that the Department would receive requests not to permit the oil companies to avoid the suits in the name of national defense. He said there is a real question of morale on both sides of the matter, that he did not know the answer but that he could see the problem. He did not think the oil companies would demand immunity before they would give their cooperation nor that the Department should be placed in the position of saying it will let down the bars which may result in price spirals and resentment and an opinion on the part of the public that the Department went too far. He felt this point is as important to the Commission as it is to the Department of Justice.
Mr. Budd said he thought that the keynote that should be followed is to keep everything going as near normal as possible throughout the country and not to interfere any more than necessary, and that he was not able to understand just how a postponement of the case would help very much. He added that if the Commission considers it on the basis of the merits of the case it will have to take the responsibility of deciding on the merits of the case whether it should be brought, and that it would seem to him that the only basis for a decision by the Commission is how the case is going to affect the national defense program.
At this point Mr. Knudsen entered the room.
Mr. Jackson discussed with Mr. Budd certain instances where the installation of additional pipeline facilities may be directly affected by the suits
after which he stated that he thought the important thing is whether there are specific situations which are insurmountable if the suits are brought, that the complaint charges that certain oil companies have become too large, that the Commission is now asking them to take another step in the production of synthetic rubber and other things while the Government takes the position that they have no business to do anything except the production, distribution, or refining of oil, that he believed there was a possibility of conflict, and that the matter needed to be studied particularly with respect to specific situations.
Mr. Budd stated that he had taken the position with respect to pipelines and other proposed expansions of transportation, that unless there is some specific reason for expansion, we are not going to give it any impetus or advantage under the guise of national defense as there is a surplus of transportation even in the areas where additional pipelines are proposed. He recognized, however, that the problem of synthetic rubber and other products may be more seriously affected by the suits.
Mr. Jackson stated that the questions presented by the suits should be settled but not at the expense of national defense, and if, after studying the proposed action the Commission is of the opinion that the suits should not be started at this time, he is going to accept the Commission’s judgment, that he thought the question of national defense is more important than the settlement of the theory on which the oil industry is to operate, and that what he would like to know is the actual effect of the suits on specific situations and if the Commission comes to the conclusion that in specific situations the action is going to injure them, then the Department of Justice will not start the action, but if it were merely a question of psychology, he would not pay much attention to that.
Mr. Stettinius suggested that Mr. Henderson be requested to work with the Attorney General in the preparation of a press statement for the Commission which would be presented to the Commission for consideration at the earliest possible time.
Mr. McReynolds stated that the Commission should find specifically how far requests of the Commission to the oil companies to engage in other business would be in violation of the antitrust laws-when obviously from the standpoint of production the oil companies can do the job better than others, and that before anything is done by the Commission, it should be informed in detail as to what further violations of the antitrust principle the oil companies would be required to subject themselves to if they complied with the requests of the Commission.
, At the conclusion of the discussion Mr. Stettinius’ suggestion that Mr. Henderson collaborate with the Attorney General in the preparation of a statement was approved unanimously. It was.
46
JULY 31. 1940
suggested in this connection that separate statements be issued by the Commission and the Department of Justice and that care be taken to make it clear that there is no conflict between the Commission and the Department on this matter. At this point Mr. Jackson left the meeting.
Mr. McReynolds referred to the passage of legislation permitting the construction of additional facilities by the Tennessee Valley Authority and stated that the Tennessee Valley Authority had drafted the following letter [Document No. 23] which they would like the Commission to address to them :
“The Advisory Commission to the Council of National Defense has determined that the construction of a storage dam and hydroelectric power plant on the Holston River near Jefferson City, Tennessee, the installation of two additional electric generating units at Wilson Dam, Alabama, the installation of one additional electric generating unit at Pickwick Landing Dam, Tennessee, the construction of steam electric generating facilities in the Authority s operating area, and the construction of transmission facilities needed to tie the foregoing generating facilities into the Authority’s power system and to carry the power therefrom to the market, all as contemplated and provided by H. J. Res. 58322 approved ...................... 1940, are
essential for national defense purposes within the meaning of said joint resolution.”
Mr. Stettinius stated that Mr. Gano Dunn, Consultant on his staff, who was working on the TVA matters had considered the suggested letter and had recommended that the Commission approve it, and that he (Mr. Stettinius) concurred in the recommendation.
Mr. Stettinius moved that the Commission approve the sending of the above letter.
Carried unanimously.
Mr. Henderson stated that, in connection with the committee appointed at the meeting of the Commission on July 10, the minutes of the meeting of the Commission did not indicate who was to serve as chairman of the committee appointed at that time, that his name had been listed first which implied that he would be chairman whereas it was the intention that Mr. Biggers should serve in that capacity and he would like to have the record changed accordingly.
It was agreed that Mr. Biggers should serve as chairman of the committee.
Mr. McReynolds then read the following letter addressed to the Commission under date of July 30, 1940, by the Secretary of War:
“Enclosed is a copy of Senate Bill 4164 being considered by the Senate Committee on Military Affairs. . This bill provides for selective compulsory military training and service, and has received the approval of the War Department.
“In view of the importance of the Advisory Commission’s part in the National Defense program, I would value highly an expression of the Commission’s views concerning the
a Public Resolution No. 95, 76th Cong., 3d Sess., July 31, 1940.
methods proposed in this bill for procuring the additional manpower for our defense.”
He then distributed copies of a statement [Document No. 24] which had been prepared by Professor W. Y. Elliott of Harvard University, who had been working on some special matters for Mr. Stettinius and others, which it was proposed to submit to the War Department for its use in presenting the proposed legislation to Congress.
Mr. Stettinius said that, while Mr. Elliott had been engaged in some special matters for his division, the proposed statement had been prepared by him on his own volition and was not officially a matter from the raw materials division.
There ensued a discussion of the statement at the conclusion of which it was approved unanimously by the members present in the following form:
“The Advisory Commission to the Council of National Defense is especially interested in seeing that the recruiting and training of manpower for our armed forces, which is admittedly as important an objective as the procurement of of weapons and equipment, should be accomplished in such a way as not to interfere with the full mobilization of the country’s economic power and industrial skill. The passage of a compulsory service bill in conformity with the principles now advocated by the War and Navy Departments will prevent the disruption of industry through the entry into military service .of many who would be more needed in industrial production because of special skills..
“It is not generally recognized that a selective system, under proper safeguards, has an important, function in preventing the drafting of skilled men for military service and in protecting the economic life of the country*. from disruption at a time when its maximum efforts may be most needed. Our experience in the last war and the experience of every country which has attempted to mobilize its manpower as well as its industry bears out this lesson. We are satisfied that the Act recommended to Congress by the War and Navy Departments and the regulations contemplated under it offer adequate safeguards against the mistakes which past experience has shown to be dangerous.
“Voluntary enlistment, especially if it is successful in raising the large number of men for the program contemplated by the army, has far greater dangers of disrupting the most necessary industries than has compulsory selective service. When men under the splendid impact of patriotic feeling leave their work in large numbers to enlist, there is nothing selective in the process. The most essential skills, lack of which may produce bottlenecks in machine tools or in the aviation industry, for example, may join the army by voluntary enlistment as soldiers and serve in capacities where these skills are not required.
“General Shedd has put it:
‘We must have a system which would procure men with the least practicable disruption of our economic structure; the least disruption possible of the supply of food, and of all things necessary to our national life.
‘These objectives cannot possibly be obtained, to the size that the Army must go, by any system of voluntary service. They can only be secured by some system of selective service.*
“A selective service act, based upon the lessons of experience and properly administered, is the best protection against the disruption of vital industries. It is the best and fairest means of distributing the task of defending the country in a way that will do equal justice to all and make unnecessary the enlistment of those who have dependents or who ought for other reasons to be given a deferred status.
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Upon inquiry by Miss Elliott it was agreed unanimously that the statement did not commit the Commission to any particular bill but only to the general principle of selective compulsory service.
Mr. Brandon23 asked that it be recorded in the minutes that in the absence of Mr. Hillman no action was taken on his behalf in this matter. At this point Mr. Sherwood, Assistant Secretary, and Mr. Frank Bane, Executive Director of the Council of State Governors, joined the meeting.
Mr. McReynolds stated that Mr. Blackwell Smith, Legal Advisor to Mr. Stettinius, had advised him that a problem had arisen in his Department concerning confidential information supplied by industry, that the question was whether an arrangement could be made with the Department of Justice similar to that made with the Army protecting information requested by the Commission from subpoena by the Department of Justice, and that the Department of Justice had sent over a draft of letter which the antitrust division of the Department was ready to sign and deliver to the Commission. Mr. McReynolds said that the draft of letter [Document No. 16a] had been considered by Mr. Smith’s department, and that he would like to obtain the approval of the Commission before the letter is transmitted to the Department of Justice for signature.
At the conclusion of the discussion the proposed letter was approved unanimously in the following form:
“In response to your request for some arrangement whereby material furnished to the Advisory Commission in confidence will not be subject to subpoena, the Department ofJustice is prepared to make the following undertakings:
“1. The Department of Justice will not cause grand jury subpoenas to be directed to members of the Advisory Commission or its staff or other Government agencies acting at the instance of the Commission calling upon them to produce documents, memoranda, and compilations which have been prepared by persons at the request of the Advisory Commission and submitted to the Commission in confidence
M Correct spelling: “Brandwen.”
for use in connection with the national defense program.
“2. The Department of Justice will not attempt to subpoena copies of such memoranda, documents, or compilations which remain in the files of the person who prepared them.
“It is understood that the undertaking set forth in paragraph 2 is confined to memoranda, documents, or compilations prepared for the Advisory Commission at its specific request, that is to say to documents, compilations, or memoranda which would not exist if the person concerned had not complied with the request of the Advisory Commission. It is also understood that nothing in this letter impairs in any way the right of the Department to subpoena books of account, records, correspondence, documents, etc., not specifically prepared for the Commission, and that no books of account, record, document or correspondence shall be immune from subpoena merely because it was used in preparing information for the Commission.”
Mr. McReynolds stated that in connection with the report [Document No. 20] on State and local cooperation in national defense prepared by Mr. Guy Moffett, he had requested Mr. Frank Bane to head the unit in the Commission’s organization which will handle direct cooperation with State and local organizations desiring to aid in the defense program, that Mr. Bain24 will consult with all of the Commissioners in carrying out his duties, and that he (Mr. McReynolds) would like the Commission’s attitude on this matter.
There ensued a discussion of the report prepared by Mr. Moffett at the conclusion of which Mr, Bane was requested to prepare a draft of program on State and local cooperation which would be presented to the Commission for consideration at a meeting at which the draft would be the special order of business.
In taking this action it was expressly understood that it did not constitute approval of the Moffett report as some of the Commissioners had reservations with respect to certain things in the report. Thereupon the meeting was adjourned.
Wm. H. McReynolds
Secretary.
24 Correct spelling: “Bane.”
COMMISSION MINUTES—AUGUST 2, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, August 2, 1940, at 3:10 p.m.
Present:
Mr. Stettinius
Mr. Knudsen (latter part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott (latter part of meeting)
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Fischer, Executive Assistant to Mr. Budd
Mr. Horton, Director of Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
The minutes of the meetings of the Advisory Commission to the Council of National Defense held on July 10, 12, and 17, 1940, were approved unanimously. i
48
JULY 31 AND AUGUST 2, 1940
Mr. McReynolds stated that he had received inquiries with respect to the Civil Service status of employees of the Commission, that so far as the law is concerned and the appropriation of the Commission, the Commission is in the same status as any other Department subject to Civil Service, but that the President had issued an Executive Order25 granting authority to the Commission to employ experts when persons with the proper qualifications are not available from the Civil Service rolls. Mr. McReynolds added that care should be taken to consult the register of the Civil Service Commission, and he would advise the Civil Service Commission that unless it could furnish promptly persons with qualifications satisfactory to the Advisory Commission, it would have to take advantage of the exemption granted by the Executive order and employ experts without reference to the Civil Service.
In connection with a discussion of the question of plant location, Mr. Hillman stated that he thought it was a mistake that a general statement of the policy of the Commission with respect to negotiated contracts has not been issued.
Mr. Henderson stated that he had met with Mr. Nelson on this subject, that Mr. Nelson addressed a letter to each Commissioner requesting suggestions as to the contents of the statement, and that a reply had been received from only one Commissioner.
Mr. Stettinius suggested each Commissioner send a memorandum on the matter to Mr. Nelson as soon as possible so that a report may be submitted to the Commission not later than Wednesday of next week.
Miss Elliott joined the meeting at this point.
Mr. McReynolds stated that pending the consideration of the question of negotiated contracts and plant location, Mr. Biggers had arranged with the War Department to furnish to Mr. Nelson as promptly as possible information relating to Army and Navy contracts and that Mr. Nelson will see that the information is sent to the members of the. Commission so that they may participate in suggestions for the location of plants. Mr. Nelson said information on one such case went to the Commissioners this morning with the statement that it would be acted on at the meeting on Wednesday of next week.
Upon inquiry as to why a meeting had not been called of the committee appointed to study the question of a press release on negotiated contracts, Mr. Henderson replied that, as chairman of the committee, he had consulted with Mr. Nelson and had reached the conclusion that before a committee meeting was held, the suggestions of the Commissioners should be available. Mr. Henderson also suggested that on Monday, August 5, he would undertake to have prepared for consideration on Wednesday of next week at least a partial list of standards.
Mr. Davis said he would like to prepare and sub-
“ Executive Order 8257, September 21, 1939.
mit to the Commission a tentative suggestion with respect to the policy to be followed relative to plant location insofar as the Commission can influence that phase of the matter. He referred to the statements made repeatedly by the President that his idea with respect to the location of defense facilities was the same as that of the members of the Commission, i.e., that such facilities should not be concentrated in the eastern half of the United States. Mr. Davis added that he did not believe the idea of decentralization of plant locations is being fully carried out.
Mr. Fischer said that general information with respect to proposed plant sites, i.e., that it is to be located near a certain city or in a certain State, is not of much value to his division for the reason that, in order to pass on the desirability of a location from the standpoint of the transportation problems involved, it is necessary to know what are the railroad and other transportation facilities to and from the actual site, that the information which had been furnished by Mr. Nelson had served only as a leader to the information that the division had to develop before a decision could be reached, and that the further investigations made with the division would be conducted in as confidential manner as possible so as not to embarrass any negotiations that might be under way with respect to the site.
At the conclusion of the discussion it was understood that each Commissioner would try to give to Mr. Nelson a memorandum not later than Tuesday, August 6, with respect to his views on the principles to guide the negotiating officer in the making of such contracts, and that Mr. Nelson would report to the Commission at the meeting on Wednesday on the entire question of the standards to be followed in negotiating contracts. Mr. Stettinius suggested that hereafter the Friday meetings of the Advisory Commission be held at 11:00 a.m. instead of at 3:00 p.m.
This suggestion was unanimously agreed to.
Mr. Hillman referred to the discussion at the meeting on July 26 with respect to the duties of Mr. Palmer as Coordinator of Housing and said it was his understanding that Mr. Palmer would make no decision in any case until he had discussed the matter with the interested members of the Commission. He added that he was interested in a number of projects on which he had not yet been consulted.
Mr. McReynolds stated that it was his understanding of the discussion at the July 26 meeting that Mr. Palmer was authorized to go ahead on a few of the pending cases that involved housing for some of the Army and Navy projects on which action is desired, and that any member of the Commission who desired to would present to the Commission for consideration a statement of the standards which would determine the policy that Mr. Palmer would follow in his negotiations.
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Hillman said that he was not interested in the question of who should construct housing but that he was interested in the location and availability of housing from the standpoint of its effect on labor problems, and that he desired to be consulted in the first instance in every case so that he can give consideration to the problems involved before too many commitments are made. Mr. McReynolds replied that he would be glad to see that Mr. Hillman is consulted in every housing project before any commitments are made, that he would so advise Mr. Palmer, and that he had already requested Mr. Palmer to consult with Messrs. Hillman, Davis, and Henderson and Miss Elliott on any questions that were of a controversial character.
Mr. Nelson stated that the War Department had prepared a draft of press release relating to the informal preference agreement which had been substituted instead of priorities, that he had gone over the release with Mr. Henderson, that it had occurred to him (Mr. Nelson) that the Commission, rather than the War Department, should issue the release, and that if that was the feeling of the members of the Commission he would suggest that he and Mr. Henderson be authorized to prepare a press statement which would be submitted to each member of the Commission for approval before being released.
Mr. Nelson’s suggestion was approved unanimously.
Mr. Henderson reported that in accordance with the action taken at the meeting of the Commission on Wednesday, July 31, he had worked out with the Attorney General a statement concerning the proposed suits against certain major oil companies, that it had been suggested by Mr. Horton that the statement of the Advisory Commission and the Attorney General be a joint one in order to avoid any possibility of separate statements being interpreted as indicating a difference between the Commission and the Department and that this suggestion had been followed. The statements [Document No. 3b] referred to by Mr. Henderson read as follows:
“In view of the current reports regarding the proposed action of the Antitrust Division against certain oil companies, the Department of Justice today made public statements by Attorney General Robert H. Jackson and by the National Defense Advisory Commission.
“Attorney General Jackson’s statement follows:
“The Antitrust Division of the Department of Justice on Wednesday, July 24, 1940, recommended that I authorize the commencement of a comprehensive civil suit against twenty-two major oil companies and their subsidiaries and affiliated companies comprising a large part of the oil industry of the United States. This suit seeks to force these companies to divest themselves of certain types of properties, such as pipe lines and tankers and marketing facilities, and to disintegrate companies so as to separate transportation and marketing from the production of oil.
“It is obvious that the supply and transportation of oil now have relation to the national defense. Assistant Attorney General Arnold recommended that the matter of
commencement of the action be taken up with the National Defense Advisory Commission to ascertain its opinion as to the effect on the national defense program. I directed that this be done before determining whether to authorize the commencement of the action, and on last Friday, July 26, 1940, the matter was presented to the Commission.
“The action has been the result of a long history of litigation, the relief demanded is extensive, and the bill of complaint is lengthy. The Commission has requested time to inform itself as to the effect of this action on the national defense interest before furnishing the Department of Justice its views. This request of the Commission for time to inform themselves before giving their approval to this action was obviously reasonable and has been granted. In addition to the complex nature of the action itself, I am informed that there are specific problems relating to pipe-line transportation, the manufacture of synthetic rubber and other matters in which the Commission may find that defense requirements can be met only by the investment of additional sums in properties as to which this action seeks divestiture.
“The Commission did not want to render a snap judgment, nor did I want a snap judgment from the Commission. Specific problems may need additional information from this Department as to the effects of this action and as to how the specific problems co'uld be handled.
“I have conferred for an hour this morning with the members of the Defense Commission. I have received no other request from the Commission than for adequate and reasonable time to give an intelligent answer to the questions this Department has asked of it. It has not sought nor suggested the abandonment of the action in this or any other case. Its opinion has not been and would not be sought in any case that did not appear to affect national defense. No decision will be made as to whether this action will be authorized until the Commission is in a position to report its effects on the national defense. “The following is the statement of the National Defense Advisory Commission:
“The National Defense Advisory Commission on July 26 considered for the first time the proposed action by the Anti-Trust Division of the Department of Justice to dissolve the major oil companies of the United States.
“It was apparent, on its face, that this suit, if successful, would require substantial changes in the entire economic set-up of an industry considered basic to the national defense. Such a proposal can be appraised intelligently only if subject to careful study in relation to defense requirements.
“The Commission by unanimous agreement advised the Attorney General that it will require time to explore defense needs in connection with the oil industry and the possible effect of the proposed action on such needs. The Attorney General, in a conference today with the Commission, stated that he desired a detailed opinion on this matter from the Commission and that he would allow time necessary for its preparation.
“Neither the Commission nor any individual member has expressed any opinion or made any request of the Attorney General except for time necessary to consider the effect of the proposed action and, of course, no requests will be made until the detailed opinion is complete.” Mr. Horton stated that it is planned to present from the Board Room of the Federal Reserve Building over the four networks on Thursday, August 8, 1940, between 9:30 p.m. and 10:00 p.m., a question and answer radio program with the members of the Advisory Commission and three commentators from the networks participating. He said that the questions and answers for the program were being prepared in consultation with the liaison officers of
50
AUGUST 2 AND 7, 1940
the members of the Commission, and that it was suggested that the Commissioners submit such questions as they feel should be answered during the program. Mr. Horton added that this was the first time such a program has ever had the services of all the principal networks simultaneously on a program.
Miss Elliott stated that for two days she had been meeting with about one hundred people representing national organizations, about eighty-five of them the presidents of such organizations, at which the functions of the Advisory Commission were discussed. She said that the meeting had been called primarily to consider questions which the persons attending might raise about the work which lay people could do in the development of the defense program, that the meeting had divided into five conferences and reports of the individual conferences were made which will be summarized and put into final form, that the Commission might be interested in knowing that without exception there seemed to be agreement that the Commission was moving in the right direction and functioning properly, and that the Commission acted wisely in setting up the office of Mr. Frank Bane to be in charge of State and local cooperation in national defense work.
At this point Mr. Knudsen joined the meeting.
Mr. Biggers stated that the committee composed of Messrs, Biggers, Henderson, McReynolds, Nelson, and Adams, had two matters on which to report and that inasmuch as Mr. Henderson was more familiar with both of such matters, he would ask him to make the report.
Mr. Henderson stated that on the question of bank loans on Government contracts thé committee had found it highly desirable to propose an amendment regarding the assignment of claims against the United States, that fortunately the Federal Reserve System has made a study of this question and had drafted a proposed bill, that he had had some discussion with Mr. McKee, a member of the Board of Governors of the Federal Reserve System, following which he (Mr. Henderson) talked to Senator Harrison who suggested that Senator Barkley might be willing to introduce the bill in the Senate after it had cleared with the Bureau of the Budget, and that he had talked with Senator Barkley this morning and it was agreeable to him to proceed along these lines. Mr. Henderson added that it was the unanimous recommendation of the committee that the Commission approve the proposed amendment [Document No. 25] and that the committee be authorized to take it up with the Bureau of the Budget.
The recommendation of the committee was approved unanimously.
Mr. Henderson reported briefly on the progress being made toward the consideration by Congress of the amortization bill and the repeal of the Vinson-Trammel Act as a separate matter from the excess profits tax bill.
Thereupon the meeting was adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 7, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, August 7, 1940, at 11:10 a.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Executive Assistant to Mr. Knudsen
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
Mr. Biggers stated that Mr. Knudsen had appeared before a subcommittee of the Committee on Ways and Means of the House of Representatives yesterday morning in connection with the proposed excess profits bill and particularly with reference to the proposed amendment to the Internal Revenue Code covering allowances for income tax purposes for amortization of the cost of defense facilities. He said that Mr. Knudsen had been asked certain detailed questions with respect to the excess profits bill to which he had replied that he had not had an opportunity to study the bill and inquired whether Mr. Biggers could appear before the subcommittee on his behalf, which he had done yesterday afternoon. Mr. Biggers said he had cleared the matter of his appearance before the subcommittee with Messrs. McReynolds, Henderson, and Nelson, members of the committee studying the question of amortization, in view of the existing policy of the Commission that the appearance of any member of the Commission or its staff before a committee of Congress be first cleared by the Commission. Mr. Biggers,
5Î
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
after reviewing a provision proposed to be inserted in the amendment, stated that a contract was being drafted that provides that whenever the Government direcly or indirectly pays for the cost of newly created facilities through the price of the product or otherwise, that then at the end of the emergency the Government would be in a position to suggest to the contractor that if he desired to retain the facilities for his own private use he may do so on the basis of an arbitrated figure representing the value of the facilities to the contractor, and that if the contractor did not wish to retain them the Government would take over such facilities and retain them if they were located on separate land or dismantle them if they impeded the contractor’s normal operations. He said that all of the members of the committee had agreed this was a logical procedure. He said that he had made the statement that it was the considered judgment of the Commission that if such provision were left in the proposed amendment, then no private capital would ever be used for the creation of facilities under such circumstances, and that this would result in all of the financing of defense facilities being done by the Government through the Reconstruction Finance Corporation, and at the end of the emergency all of the newly created facilities would be owned by the Government and the Government would have deprived itself of the opportunity to use reserves of private capital for such purposes. Mr. Biggers added that if his statement was the view of the Commission, he thought it would greatly facilitate matters if the Commission would confirm such statement.
Mr. Henderson said that he felt the procedure to be followed was for the Commission to receive a report from its committee and adopt that as a Commission policy following which the subcommittee of the House Ways and Means Committee by a unanimous decision would adopt such statement as its policy for the reason that the proposal had no place in the tax law since it was not a tax matter and that it should be left to the negotiating and contracting authorities and that a form of contract provision would be supplied by the subcommittee to the contracting authorities.
Mr. Biggers stated that the subcommittee desired to have a copy of the rules which the Commission has tentatively formulated for the guidance of contracting officers in order to protect the Government in the manner in which they desire to be protected and that he was wondering if the Commission would be willing to delegate to its committee authority to draft in proper form the views of the Commission on this question and its proposal with respect to contracts and to transmit that to the subcommittee of the House over the signature of the Secretary of the Commission.
Mr. Davis inquired whether all the members of
the committee of the Commission are willing to approve such proposal for submission to the subcommittee of the House of Representatives, and Mr. Biggers replied in the affirmative.
Thereupon Mr. Davis moved that such matter be referred to the committee consisting of Messrs. Biggers, McReynolds, Henderson, and Nelson, with power to act.
Carried unanimously.
Mr. Biggers stated that representatives of forty-two States had held a meeting this week to discuss ways in which the States could be of help in the development of the national defense program, and that he had prepared a letter, which had been approved by Mr. Knudsen, requesting that the States undertake to make a report to the Commission with respect to the location in the respective States of defense facilities. He said that the letter had been circulated to the members of the Commission with the expectation that it might be presented by Mr. Bane or others to the meeting while it was in session. Mr. Biggers stated that Mr. Davis had felt the matter should not be handled in such manner without first consulting with Mr. Bane and had requested that the matter be discussed at the meeting of the Commission today.
Mr. Davis stated that he felt that inasmuch as a separate unit of the Commission had been established to coordinate State and local aid in the defense program, the Commission should not undertake to make a direct request of the States before consulting with Mr. Bane.
Miss Elliott inquired if the proposed letter dealt solely with the location of plants or with the whole question of what the Commission feels State and local organizations can do in aiding the development of the entire defense program and stated that if the letter suggests the ways in which the States can be helpful, her division would like to have an opportunity to make suggestions as to other matters of interest to the consumers and that she felt the statement should include other things than military preparation and activities.
At the conclusion of the discussion it was understood that Mr. Biggers would discuss this matter with Mr. Bane before presenting it to the Commission for approval.
Mr. Stettinius distributed to the members of the Commission a confidential report on 100 octane aviation gasoline [Document No. 6a] and requested Mr. Robert Wilson, Group Executive of the Petroleum Section of his Division, to outline to the members of the Commission the proposed plan for the purchase of a reserve supply of such gasoline. The recommendations contained in the report were as follows:
i™1, purchasing of a reserve stock of 7,500,000 barrels of 1UU octane gasoline. (Based on minimum estimate of 100 days war requirements)
Storage at outset in tanks of producing companies. (Cost of about per gallon per year).
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AUGUST 7, 1940
“3. Army and Navy construct storage facilities for about half this supply.
(a) That part near Coast to be underground.
(b) Purchase and store ethyl fluid nearby.
(c) And install facilities for its addition.
“4. Ask for bids on 100 octane now on competitive basis.
“5. Cost of above program estimated at $58,500,000.
(a) And carrying charges about $1,500,000 per annum.
. “6. That R.F.C. finance entire operation through a subsidiary company.
“7. That main training places for Army and Navy provide storage facilities for a month’s supply of 91 octane and purchases stepped up in near future to take advantage of present unprecedentedly low prices.
“8. That any company willing to build a new blend-stock plant be given the necessary approval to give it the benefit of the proposed 5-year amortization basis for new plants important to the defense program.”
A copy of the report, together with the following summary thereof, was also distributed by Mr. Stet-tinius:
“1. Our tactical planes are designed to use 100 or higher octane gasoline.
“2. In absence of definite requirement figures, report based on an absolute minimum estimate of 75,000 barrels a day in war effort for our own military needs.
“3. Military consumption now less than 4,000 barrels a day and exports running about 10,000 barrels a day.
“4. Fortunately, capacity at 10/1/40 will be 40,000 barrels per day and several thousand barrels per day more is definitely projected.
(a) Now made by 14 different companies in 20 different plants.
(b) Excess capacity is shut down or product diverted to other uses.
“5. At least 100 days’ supply based on probable maximum war demand should be held as reserve stock.
(a) Hence, recommended accumulation now of 100 days’ supply based on estimated minimum of 75J000 barrels per day demand.
1. Even with a 100 day supply, in a war effort, a shortage would develop within 4 to 5 months.
2. And, under normal conditions, average of ten months required to build a plant.
“6 and 7. Storage at outset would have to be largely in tanks of producing companies (charge of about per gallon per year).
(a) Army and Navy should, therefore, construct storage facilities for about half of the recommended reserve stock.
1. Emphasis on outlying bases difficult to service.
2. Even so would mean less than a month’s wartime demand at point where war might concentrate.
(b) Storage near coast should be underground and in units of large capacity.
(c) Stored without tetraethyl lead to prevent deterioration.
(d) But store ethyl fluid nearby and install facilities for its addition costing about $2,000 each.
“8. Should ask for bids now on a competitive basis for 100 octane.
t (a) Begin buying 15,000 to 20,000 barrels per day.
“9. Estimated cost of minimum purchase and storage program about $58,500,000.
(a) Carrying charges about $1,500,000 per annum.
(b) Cheaper than creating equal insurance through building large amount additional manufacturing capacity.
“10. Reasons for prompt undertaking of plan.
(a) Necessary protection against a possible early emergency.
(b) Salvage blended stocks which would otherwise be lost for defense purposes.
(c) Easier now than later because when plane program complete, training program will largely utilize output of plants.
(d) Once stock accumulated, can consider producing still higher octane gasoline.
(e) Will decrease amount of additional plant construction needed.
“11. If difficult to purchase at reasonable prices, should be put on export license list (already done).
“12. Army and Navy representatives favorably inclined to this program but do not have funds available.
(a) Alternatives are:
1. President's special fund.
2. R.F.C. through a subsidiary company.
(b) In view of amount involved and advantage of handling through a single agency recommend doing through a R.F.C. company.
“13. Training program contemplated will step up tremendously the requirements for 91 or 92 octane gasoline and total civil and military demand for fiscal year 1942 will be around 4 times present commercial production. This will decrease blending stocks and base stocks available for making 100 octane and emphasizes again need to build up 100 octane stocks while some surplus capacity is available.
“Specific recommendations for building up large 91 stocks not ready.
"But do recommend now that main training places for Army and Navy aviators provide storage facilities for a month’s supply and purchases somewhat stepped up in near future as such gasoline now available at unprecedentedly low prices.
“14. Above program decreases but does not obviate need for additional plant capacity..
(a) Capacity for synthetic blending stocks will barely cover 1942 peacetime needs.
(b) Also location and nature of present plants make them vulnerable to war.
(c) Certain technical considerations with respect to utilization of even higher octane fuels make expansion desirable from military angle.
(d) Cost will be large.
(e) Definite recommendations to be ready in a few weeks.
(f) But now recommended that any company willing to build a new blend-stock plant be given the necessary approval to give it the benefit of the proposed 5-year amortization basis for new plants important to the defense program.”
At the conclusion of the discussion Mr. Henderson moved that the report as submitted be approved by the Commission and that negotiations be entered into with the Reconstruction Finance Corporation for the purpose of financing such operation.
Carried unanimously.
Mr. Wilson then left the meeting.
Mr. Stettinius then presented the following memorandum [Document No. 26] with respect to the purchase of mica:
“1. From funds available under Public 1172® purchase
for stock-pile. Mica splittings ................................. $2,145,000
Block (sheet) Mica................................. 1,355,000
Total ......................................$3,500,000
“2. Specifications.
(a) Splittings — 5,000,000 pounds; detailed in memo; the various types conform with 1939/40 consumption.
1. Suggest gradual purchases through normal trade channels (importers).
(b) Block — 1,061,000 pounds.’
M 76th Cong., 1st Sess., June 7, 1939.
S3
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
“3. Domestic mica should be kept available for trade purposes and not incorporated in reserve stocks at this time.
“4. Purchases to be made by Procurement Division of Treasury.
“5. A man thoroughly familiar with mica should be employed to take care of this purchasing.
“6. It is believed above purchases plus present industry stocks plus domestic production will provide sufficient security for a two-year emergency.
“7. Approved by Army and Navy Munitions Board.
“Note’. Munitions grade mica is very difficult to obtain, will have to be done very carefully and may, therefore, take time.”
Mr. Henderson moved that the Commission interpose no objection to the recommendation of the Army and Navy Munitions Board.
Carried unanimously, with the ’understanding that all similar future cases would also be called to the attention of the Commission.
Mr. Stettinius than presented the following memorandum [Document No. 27] prepared by Mr. Thomas B. McCabe, Special Assistant to Mr. Stettinius, with respect to industrial classifications :
“On June 14 Dr. Yntema and I were appointed by the Industrial Materials Department a committee to make an industrial classification. It seemed desirable to determine what classifications were being used by Mr. Knudsen and other Divisions of the Advisory Commission to make sure there was no overlapping of responsibilities. Furthermore, for the purposes of the Central Statistical Department, it was necessary to have well defined industrial classifications in each Division. It was essential for Mr. Leon Henderson in studying prices that he know in what Division a certain product was placed in order to take up with the proper responsible head in that Division the problem he desired to solve. Likewise, the same was true for Mr. Sidney Hillman on any questions he had in regard to a labor problem in any particular industry.
“At the suggestion of Mr. Stettinius, I contacted Mr. Biggers and Mr. Henderson and asked if they would appoint representatives from their departments to sit with Dr. Yntema and me ip making and determining the proper classification of industries for Mr. Knudsen’s and Mr. Stettinius’ Divisions. Mr. Biggers appointed Mr. Knight and Mr. Henderson appointed Mr. Bishop, and these men, together with Dr. Yntema and me, devoted most of Monday afternoon, June 17, to this subject, bringing in a representative of the Central Statistical Board of the Government for consultation. He suggested we use the ‘Standard Classification of Industries in the United States’ as prepared by his Board, which we decided to do.
“The first afternoon we determined the general classifications for Mr. Knudsen’s and Mr. Stettinius’ Departments and following this conference I contacted Mr. Hillman and Governor Davis and asked if they would appoint representatives in their Divisions to sit with us Tuesday afternoon, June 18. Mr. Hillman appointed Mr. Hinrich and Governor Davis appointed Mr. Porter. These last two named men sat down with the group which met on June 18 and spent several hours on this classification problem.
We completed the industrial classifications except for two manufacturing divisions, namely, ‘Food and Kindred Products’ and ‘Tobacco Manufacturers.* In view of the difference of opinion on these two divisions of industry, it was decided to refer the question of where they were to be placed to the Advisory Commission for a decision, and I was given to understand that it was the Advisory Commissions decision that Agricultural Production was to be under Governor Davis, but that no decision was made on Tobacco Manufacturers.*
The mimeographed industrial classification as attached
is the one which was prepared by our Committee on June 19 and was subsequently distributed to each member of the Advisory Commission to the Council of National Defense. Since it was circularized there have been several suggestions for changing the various classifications. Each suggestion was taken up with the Divisions of the Commission affected and after conferences it was mutually agreed that the original classification should not be changed. Last week Mr. Knight of Mr. Knudsen’s Division met with me to consider several suggested changes affecting Mr. Knudsen’s and Mr. Stettinius’ Division, but it was agreed that no changes be made except in Classification Number 25, ‘Furniture and Finished Lumber Products’, which Mr. Knight felt belonged in Mr. Stettinius’ Division. This classification is being considered but as yet no decision has been made to make the change.
“It seems advisable that the Advisory Commission to the Council of National Defense should formally approve the industrial classification as per copy attached since it has been generally accepted by the various divisions since June 19. It has had the unofficial approval of the Commission members but formal approval is recommended. I would like to suggest also that the Advisory Commission to the Council of National Defense appoint a permanent committee to continue to study the industrial classifications, to receive suggestions fbr changes and to be empowered with the authority to make changes in the classifications when there is a unanimous opinion among the members of the Industrial Classification Committee for such changes. In granting this authority, the Advisory Commission should have it understood that where there is a difference of opinion among the members of the Industrial Classification Committee, the question should then be referred to the Advisory Commission for final approval.”
At the conclusion of a discussion of the memorandum, upon motion by Mr. Henderson, the recommendation contained in Mr. McCabe’s memorandum regarding the appointment of a permanent committee to study the industrial classifications was approved unanimously, the committee to consist of Mr. McCabe, Dr. Yntema, Mr. Knight, Mr. Bishop, Mr. Hinrich, and Mr. Porter.
Mr. Hillman stated that as a result of conferences held with the Secretary and Assistant Secretary of War and the Chief of the Ordnance Division of the War Department and representatives from the arsenals, it was agreed that all labor on such arsenals should be placed on a three-shift basis per day with a maximum of forty hours per week, with the understanding that they would be paid time and a half for overtime. He said that such a procedure would present an opportunity to increase production to the maximum and places such contractors in a better position with private industry who are also in a forty hour week, and that such construction would require approximately 9,000 additional skilled mechanics and as many or more unskilled mechanics. He said that there had been a real improvement in employment service throughout the country, that over 700,000 additional people had registered with the employment agencies, which made a total of approximately 5,737,000 applicants now registered for employment. He added that the number of placements by such employment agencies last month was the highest ever reached and that he estimated that the $10,000,-000,000 spending program will provide employment
54
AUGUST 7, 1940
for over 4,000,000 people. Mr. Hillman also said that he felt it could be said that real reemployment could be looked forward to within the next twelve months.
Mr. Hillman stated that in the youth training program under way about 70,000 persons had enrolled in the vocational schools in the last few weeks and that good arrangements had been made for the rural employment program. He added that he felt very good progress is being made throughout the training program.
Mr. Hillman reported that he had appointed a policy committee consisting of two members of the American Federation of Labor and two from the Congress of Industrial Organizations to aid in the straightening out of jurisdictional questions that might arise between the two organizations.
Mr. Nelson stated that he had arranged a meeting for some time next week to be attended by such members of the Commission who desire to attend with certain individuals in the War Department who are selecting the plant sites in order that there might be a discussion as to the reasons for the selection of such sites and in order that the members of the Commission may offer suggestions to be followed in the selection of plant locations.
In this connection Mr. Davis stated that he had sent out to each member of the Commission a tentative outline of a statement of policy with respect to plant location requesting their suggestions on such statement with the idea of building up a general statement of policy of the Commission with respect to plant location.
Mr. Davis referred to the broadcast which has been arranged to take place in the Board Room in the Federal Reserve Building on August 8 at 9:30 p.m. and stated that he felt that any such undertaking as this should be first approved by the Commission before they are completed. Mr. Horton outlined the reasons why such broadcast was being undertaken and stated that the broadcasting companies had tentatively agreed to carry a progress report of the work of the Commission on the three major networks sometime during the course of the evening on Sunday of each week. He said that such report would be an ordinary press release prepared for release at 6 p.m. on Sunday. Mr. Hillman stated that he thought the Commission should endeavor to place before the public all possible information with respect to the activities of the Commission.
Miss Elliott stated that in view of the above discussion she would like to report that last Thursday she had met with 100 presidents of national organizations, at which time, she had discussed informally the functions of the Commission and the manner in which it proceeds. She said that she was amazed at the number of persons who were unaware of the workings of the Commission as expressed by those in attendance at such meeting. Miss Elliott added that copies of her informal remarks would be distributed to the members of the Commission as soon as pos
sible, and that it was her feeling that the people of the country are desirous of knowing more in detail how the Commission is functioning.
Miss Elliott then presented the following memorandum [Document No. 28] on the cost of living which had been prepared by Dr. Caroline Ware, Assistant to Miss Elliott:
"Comparison of Cost of Living, March 15th and June 15th
“All Items +.7 per cent
Food ................... -f-2.8
Clothing.................. —0.2
Rent ..................... +0.1
Fuel, Electricity, Ice... —2.0
House Furnishings.... —0.5
Miscellaneous ............ —0.2
Comparison of Cost of Living, June 15th and 1935-39, Average 100.5 per cent
98.3
101.7
104.6
98.6
100.1
100.6
“These figures give no basis for the assumption that an an upward spiral in living costs had started as of June 15th. The principal increase was in food. This increase is partly seasonal, although a number of foods have experienced a more than seasonal increase. Note, however, that food in general is still below the 1935-39 average, although some specific foods are well above that average. A negligible increase in rent has occurred. Rents, however, are substantially above the 1935-39 average.
“These figures are for 33 (in case of food, 51) large cities. With the exception of foods, where increases occurred in all but one of the cities covered, some cities showed increases in a particular item, while others showed decreases.
“Our Economics Division is analyzing the data item by item. For example, overalls have gone up in a third of the cities and so far our people have found no justification for the increase noted.
“Hereafter, we expect that the Cost of Living Index will be collected and reported on a monthly basis. We hope to work out a method of releasing the monthly index which will give a basis for interpreting the significance of the increases or decreases which may be noted.
“It is important to avoid a hysterical ‘buy now, the price is going up’ situation. In this, we are counting on retailer cooperation.
“About three weeks ago, David Craig of the American Retail Federation noted a string of radio advertisements covering such things as men’s clothing, sporting goods, refrigerators, all saying this price was about to go up. He addressed a letter to Neville Miller, President of the National Association of Broadcasters, asking the broadcasters to agree to refuse scripts with this line. Mr. Miller is taking the matter up at the Broadcasters’ Convention in San Francisco, this week.
“In order to forestall unwarranted price increases, it is necessary to get to the increases before they reach the retail level. We are working on a plan with the American Retail Federation whereby the retailers will work through their trade associations and through manufacturers of the particular products, or their trade associations, to prevent such rumored increases. Where they do not get a satisfactory response themselves, they will report to us and Miss Elliott can then inquire the reason for the projected increases.
“We are calling a conference of retailers on August 29th, out of which we hope to derive such a working arrangement.”
In connection with the above memorandum Mr. Budd stated that it seemed to him that all of the members of the Commission were anxious to avoid the starting of upward spirals and that it is going to be important when figures are given out which do show slight increases that there be some interpretative statement released with them which will be so
55
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
far as possible reassuring to the public. Miss Elliott agreed with the position taken by Mr. Budd.
Miss Elliott stated that in relation to the responsibility of her division to local communities she had been receiving a few complaints from certain towns indicating that there had been increases in prices of meats, etc., and that she had taken the position that, while the Commission cannot give consideration to individual cases scattered throughout the country, it seemed to her that inasmuch as these were purely local situations, they should be brought to the attention of the State Councils of Defense.
Mr. Davis stated that he would like to ask the Commission at some meeting to set aside a particular time to consider the basis from which comparisons start and it was the general consensus that this would be a desirable procedure.
Mr. Budd stated that during the last week the only unusual thing in transportation was the mobilization of the first, third, and fourth armies. He said such mobilization involved about 200,(XX) men, and it was successfully carried out beginning August 3 and ending on August 6. He added that 4,687 cars and 225 trains were used in such operations, that most of them had moved on schedule to the point of destination where there had been some delay in unloading arrangements. He stated that on the whole such operation was well carried out and that the War Department had reported preliminarily that they were very well satisfied. Mr. Budd added that the second army begins mobilizing on August 11.
He added that over the last week end he had been in Cleveland for a meeting with railroad representatives and handlers of oil and coal and that such movement is practically up to the maximum.
Mr. Budd stated that in connection with the location of plants, he believed the Commission should take some cognizance of the growing agitation for placing plants in the western part of the United States, and instead of letting such complaints accumulate, it should answer them in the beginning. He said that during the last week he had had a good deal to do with the location of sites and had conferred with the officer in the War Department selecting some of them. He added that his discussion had convinced him that what had been done with respect to the location of plants was exactly right and that if it were possible to sit down with the Senators and Congressmen from the western half of the United States and explain to them some of the things which had been explained to him, he might stop them from using the question of plant location as a political
matter. He said that the statement of the War Department officer had one great weakness which did not affect the result at all, and that was that in the matter of sites for plant locations, not one had been inspected in the west. Mr. Budd suggested that in order to stop the agitation and confine it to proper bounds as applying to plants that probably can be located in the west, such officer should inspect sites in the west in order that he could be more specific as to why such sites could not be selected.
Mr. Hillman stated that he felt it was a mistake that the Commission has not made public a statement of policy with respect to negotiated contracts and that the Commission should make a statement to the country that it is the intention of the Commission to utilize first all existing plants but that it is going to spread out and build plants in all sec-•tions of the country. He said that he felt the committee appointed by the Commission to prepare such statement should get it out as soon as possible in order that the country may be advised of what the Commission is doing and that he believed better cooperation would be obtained if such a statement were issued.
Mr. McReynolds stated that Congresswoman Rogers had introduced a resolution yesterday undertaking to request the President to make a weekly report to Congress of the activities of the Council of National Defense and its Advisory Commission. He stated that the President had sent the matter to him for reply, that he had been advised that this was a privileged resolution and might be brought up for consideration at any time, and that he had been requested to appear, or to have somebody appear before the committee holding the hearings on the resolution. Mr. McReynolds stated that Mr. Sherwood had attended the hearing and advised that the information which would be given to Congress was the same as was being given out from day to day by the Commission in the form of press releases because the Commission considered that the public was entitled to have all of the information available with respect to the Advisory Commission, and that it seemed rather ludicrous to have the President transmit a weekly report to Congress on something that had already been given out to the press. He added that apparently after Mr. Sherwood’s statement the resolution had been tabled.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
56
AUGUST 7 AND 9, 1940
COMMISSION MINUTES—AUGUST 9, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, August 9, 1940, at 11:10 a.m.
Present:
Mr. Stettinius
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant- Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Horton, Director of Public Relations
Mr. Carpenter, Assistant Secretary of the Board of Governors of the Federal Reserve System
Mr. Thompson, Administrative Assistant to Commissioner Davis
Mr. Stettinius distributed a confidential chart [Document No. 29] with respect to the danger points in strategic industrial materials and the action being taken with respect to supplying the needs for each material. He also outlined the purpose of the statement and said that detailed information on any one of the items shown thereon may be obtained from his office.
Mr. Hillman stated that it appeared to be desirable for the Bureau of Conciliation of the Department of Labor to increase its staff to carry on additional work in the interest of national defense, but that there were no funds available to the Bureau for such an increase, which presented the question whether the additional employees needed should be added to his staff and their salaries paid from the Commission’s funds or whether an additional appropriation could be made available so that the men could be placed on the Bureau’s pay roll. He added that such additional conciliators were needed badly inasmuch as there were not enough to serve the needs of national defense.
Mr. McReynolds replied that he felt the proper procedure would be for the Bureau of Conciliation to request additional funds through the Bureau of the Budget for this purpose, which request would be supported by the Advisory Commission, but that if the funds were not forthcoming Mr. Hillman may find it desirable to add the necessary men to the staff of his division.
At this point Mr. Biggers entered the meeting.
Mr. Nelson said that prior to this meeting he had submitted to the members of the Commission memoranda with respect to the location of a machine gun plant in the vicinity of Utica, New York, and a manufacturing plant for tanks in the vicinity of Detroit, Michigan, and that no objections had been received from the members of the Commission. He
said that while the proposed location of the machine gun plant at Utica did not fall within the principles which were to be followed in selecting plant locations or within the area prescribed by the strategy group of the War and Navy Departments, it was still felt that the plant should be located at Utica because of the number of trained people already living there which would enable the work to get under way quickly. He stated further that the proposed location of the manufacturing plant for tanks was considered of great importance by Mr. Knudsen, that he had given a great deal of attention to it, and that while it did not fall into the pattern for plant locations it was regarded as urgent.
Mr. Davis stated that he assumed that the reason for establishing plants at such points was because of the presence at these places of skilled labor, that he believed both of these cases were clearly outside of the pattern he desired to see followed, but that he had come to the conclusion that there was no basis for objection to their location at such points if there was an urgent need for them. He added, however, that he was hopeful that the Commission will soon formulate a statement of policy regarding plant locations so that cases of this sort will have to be justified as exceptions to that policy.
In this connection, Mr. Nelson referred to the meeting to be held on Tuesday, August 13, with representatives of the War and Navy Departments charged with the responsibility of choosing plant sites, at which the factors to be considered in the determination of the location of plant facilities would be discussed.
There being no objection the locations of the two plants referred to were approved unanimously.
Mr. Fischer, Deputy Commissioner to Mr. Ralph Budd, joined the meeting at this point.
Mr. Nelson stated that yesterday a draft of press release with respect to priorities was sent to each member of the Commission and that he is anxious to obtain the approval of the Commission of such statement in order that certain specific cases may be given attention.
At the conclusion of a discussion of the proposed statement, it was approved unanimously with the understanding that certain minor questions of form raised by members of the Commission would be cleared with them before the statement is released.
Mr. Henderson stated that the committee working on the proposed statement for release to the press on negotiated contracts met yesterday at which time it was agreed that, using the suggestions of the Commissioners as a basis, Mr. Nelson would prepare a draft of the guiding principles to be followed in negotiated contracts and plant locations.
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Henderson then referred to a suggestion made by him at the meeting of the Commission on June 21 that after Mr. Stacy May, Director, Bureau of Research and Statistics, had had a sufficient opportunity to organize his Bureau, it might be well for him to attend a meeting of the Commission for the purpose of outlining the functions of the Bureau and receiving such instructions as the Commission may wish to give him.
It was understood that the Secretary would request Mr. May to be present at the meeting of the Commission to be held on Friday, August 16, 1940, for the above purpose.
Mr. Henderson said that with respect to the proposed suit of the Department of Justice against 22 major oil companies in the United States for alleged violations of the antitrust laws, he would like the record of the Commission to show that Mr. M. Quinn Shaughnessy, Assistant Director of the Registration Division, Securities and Exchange Commission, had been asked to study the complaint of the Department of Justice in these cases and to advise the Defense Commission as to the probable effect of the proposed suits on the defense program.
Mr. Henderson added that he would like to have the Commission authorize the Secretary to transmit a letter to the Attorney General advising of the action of the Commission in designating him (Mr. Henderson) as the member of the Commission in charge of carrying out the procedure suggested by the lawyers committee of the Commission and approved at the meeting on July 12, with respect to antitrust matters. He said that he had notified both the Attorney General and Assistant Attorney General Thurman Arnold of his designation.
It was understood that Mr. Henderson would prepare a letter to the Attorney General advising him of the above action of the Commission which would be transmitted over the signature of the Secretary.
Mr. Henderson made the further comment that last week Mr. Arnold, Assistant Attorney General, had notified him that the Smoot Sand and Gravel Company of Washington, D. C., had been saying in response to his inquiries in connection with alleged monopolistic practices of the Company that they were entitled to protection by the Defense Commission and that he (Mr. Arnold) was referring the representatives of the Company to Mr. Henderson. He added that no representative from the Smoot Sand and Gravel Company had called on him with respect to this matter.
Mr. Henderson then called attention to certain articles which appeared in the newspapers this morning relating to a grand jury investigation in New York of ten industries vital to national defense, and said that it was his understanding that the proceeding was instituted in the early part of July, that at that, time no particular attention was
given to the proceeding by the press, that the specific attention of the press had been called a few days ago and that the newspapers had then built up the stories which appeared in the papers today. He said that he would like the Commission’s record to show that officially no information regarding the grand jury proceeding has been brought to his attention. He added that the question involved revolves around the foreign ownership of patents, that this was one of the items assigned to the antitrust division by the temporary National Economic Committee, and that since that time Mr. Borkin, whom Mr. Henderson had employed as a member of the staff of the National Economic Committee to investigate this problem, has been continued with the antitrust division of the Department of Justice and is still making inquiries, and because of that relation fie (Mr. Henderson) was familiar with the fact that there have been inquiries made into a number of materials. He concluded with the statement that he would like to canvass this matter a bit further and if possible make a report of the effect, if any, on the defense program, at the meeting of the Commission on Wednesday, August 14.
Mr. Hillman referred to the newspaper publicity which had been given to recent labor troubles and which he felt was creating the impression that certain industrial concerns were sabotaging the defense program. He said the efforts to correct this impression should not come from the Commission but from the organizations which are being charged with failure to cooperate so that if there is no basis for such statements that can be shown, and if there is the necessary corrective steps can be taken.
Mr. Horton stated that he felt this situation might possibly be met indirectly by the Commission by a statement showing the amount of contracts which Mr. Knudsen has cleared and the percentage of those contracts which are in process or materials for which are being engineered to put them in process.
Mr. Hillman referred to the labor difficulties of the Boeing Aircraft with respect to which he had attended a meeting in Mr. Knudsen’s office with representatives of the company involved, at which time the understanding was that the representatives preferred to handle the matter locally rather than from Washington, that it was also the understanding that if such matter could not be settled locally Mr. Hillman would be given an opportunity to straighten it out, but that up to this time the matter had not been settled and that he had heard nothing from the representatives of the company so that if the threatened strike takes place he felt it would be the complete responsibility of the company.
Mr. Stettinius submitted a brief report on the situation relating to the supplies of magnesium which indicated that the supply for the next two or three years would be adequate. In connection with this matter Mr. Henderson referred to the possible
58
AUGUST 9, 1940
effect of antitrust investigations on the supply of magnesium and stated that the demand from industry for this material might be greater were it not for restrictions on the supply.
Mr. Hillman stated that the housing situation is getting more aggravated and that he believed the Commission would have to give much more support to Mr. Palmer, Coordinator of Housing, in order to obtain money for the construction of needed housing. He said that reports are coming in that workers will not stay in certain localities because of the shortage of housing, that attention should be given to this situation as it is definitely interfering with the labor supply in these places.
Miss Elliott stated that she had just employed Mr. John Cassels as Administrative Assistant and that in her absence from the meetings of the Commission Mr. Cassels would represent her division.
Miss Elliott inquired as to how much she can ask the Government agencies through which she is working to do in the health and welfare work without additions to their personnel and whether money for additional help would be supplied from defense funds or otherwise. She added that until it is known what the State agencies are going to do in the health and welfare program the existing Government agencies should not be asked to do too much, but that these agencies were presenting greatly enlarged programs for adoption. Mr. McReynolds suggested that Miss Elliott ask the agencies to request additional appropriations for such work, inasmuch as the President said that an administrative agency with respect to the health and welfare program should not be established in the Commission, and that the existing agencies should proceed through the Bureau of the Budget to obtain supplementary funds and only in emergencies should the Commission undertake to supplement the budgets of such agencies.
Mr. Fischer reported that Mr. Budd had appointed Mr. Charles Gordon, General Manager of the Urban Transportation Organization, as consultant on urban transportation, and that Mr. Gordon would confer on all matters dealing with expansion of transportation in urban centers.
Mr. Biggers stated that the committee of which he is chairman and which is working on taxation and financing has completed a draft of the contract provisions which it is believed are desirable for the protection of Government interests in plants financed directly or indirectly with Government funds, that these provisions have been cleared in principle with the War Department, and that, through Mr. McReynolds, the committee was attempting to clear them with the Comptroller General and also the Navy Department this afternoon so that that important element in the whole contract procedure is well under way. It was understood that copies of the draft of contract provisions would be sent to the offices of the Commissioners.
Mr. Biggers stated that his committee had also drafted a letter to Congressman Doughton [Document No. 9a] setting forth the Commission’s viewpoint with respect to the demolition provision which had been injected in the amortization bill and which the committee though27 should not be included in a tax law but should be left to be made a matter of contract in each case. He said while there was a question whether the Congressional Committee proposed to include the provision in the bill, he felt the letter should be sent so that the position of the Commission would be on record. Mr. McReynolds then read the following proposed letter to Mr. Doughton :
“After most careful consideration, the Advisory Commission to the Council of National Defense unanimously and urgently recommends to your Committee that Section (i) of the proposed amortization or accelerated depreciation Bill be stricken therefrom.
“The Commission is in full accord with the Treasury Department and your Subcommittee in the objective of most adequately protecting the interests of the United States Government with respect to its direct or indirect contribution toward the creation of new facilities to meet the emergency defense needs. The Commission believes, however, that this can be best and most practically accomplished through the medium of standard clauses in the form of contract.
“A committee of the Commission has been working on these provisions for several weeks past, and its recommendations have been approved by the Commission. They are being submitted today to the Secretaries of War and the Navy and to the Office of the Comptroller, for their approval, and if you desire we should be glad to have a member of the Commission present, and explain to your Committee these protective contract provisions.
“The Commission feels that protection of the Government’s interest through contract provisions is logical and proper, but that to introduce such provisions by amendment to the tax law is illogical and cannot result in equitable application to all the different situations which will develop.
“The Commission is convinced that inclusion of such provisions in the proposed tax measure will tend to defeat the very purpose of the bill and thereby impede the defense program.”
There being no objection, letter was approved unanimously for transmission by the Secretary. Mr. Biggers stated that his committee on amortization had made a very preliminary and hurried survey of the provisions of the excess profits tax bill and felt that there are several provisions in the bill that would be inequitable in their result when applied to certain types of industries, particularly new companies or companies that have not had favorable records of earnings in recent years and may now be called upon to expand to meet defense needs. He said that such companies would include airplane manufacturing companies and most of the heavy goods industries which have not had anything like normal earning records, and that his committee would like authority to appoint a subcommittee to make a careful study and report to the Commission at its meeting on Wednesday, August 14, on the effects of the bill on the defense program. He also recommended that Mr. Marion B. Folsom should be designated as chairman of the subcommittee.
* So in original; should read "thought.”
66377S—46—4
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Mr. Henderson stated that if the present draft of the bill is accepted because of its simplicity and the more carefully worked out plan of the Treasury is rejected, the result in his opinion would be as outlined by Mr. Biggers and companies that had had very high rates of earnings in the years taken as a basis for computing excess profits taxes would have to have extraordinary levels of earnings before the law would apply to them while other industries that began during the depression or in the middle thirties and were growing would be penalized. He added that he was definitely in favor of Mr. Biggers’ suggestion that a subcommittee be appointed to study the entire bill. Mr. Stettinius said that he would favor the suggestion that Mr. Folsom be appointed chairman of the subcommittee.
Mr. Hillman raised the question whether the Commission is not going too far out of the field which it was designed to cover and Mr. Henderson replied that he did not believe that is true in this particular matter but that as a general principle
he thought we should deal only with the matters specifically charged to us. Mr. Hillman said he would like to examine whether the proposed law affects national defense so directly that the Commission could legitimately claim an interest in the matter, and that he felt the Commission should be careful not to go beyond its appointed field so as to avoid any feeling on the part of other Government bodies that the Commission is taking over the functions of other branches of Government. Mr. Henderson pointed out in this connection that the Treasury had asked for the views of the Commission on the tax bill.
At the conclusion of a further discussion of this matter it was understood that a subcommittee headed by Mr. Folsom would be appointed for the purpose suggested.
Thereupon the meeting was adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 14, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, August 14, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. Horton, Director of Public Relations Mr. Folsom, Assistant Division Executive, Mining and Mineral Products Division Mr. Thompson, Administrative Assistant to Mr. Davis
Mr. Biggers stated that pursuant to the action taken at the meeting of the Commission on August 9, 1940, authorizing the committee on taxation and financing of defense facilities to appoint a subcommittee, with Mr. Marion B. Folsom as Chairman, to study the excess profits tax bill and to consider any of its features which in the judgment of the subcommittee have a bearing on the defense program, Mr. Folsom and his subcommittee had reviewed their report with the full committee this morning and there
was some doubt in the minds of the full committee as to whether the proposed excess profits tax bill was a matter which the Commission should consider as suggested by Mr. Hillman at the last meeting of the Commission. He added that it was the unanimous opinion of the committee that the report of the subcommittee should be presented to the Commission and that he had asked Mr. Folsom, to attend the meeting to submit the report on behalf of the committee.
Mr. Folsom then read the following recommendations [Document No. 30] regarding excess profits taxation proposed by the subcommittee of the Committee on Ways and Means of the House of Representatives :
“An excess-profits tax, as its name implies, should apply to the earnings of a corporation in excess of normal earnings. Theoretically, if earnings are not above normal, no tax would be paid. Thus, such a tax can not be considered primarily as a revenue-producing measure but as a method by which the Government captures part of any excess-profits which may be earned.
‘‘The chief difficulty in divising28 a fair excess-profits tax arises in connection with the determination of normal earnings. No one type has yet been devised, which will not cause serious inequities. The two types generally proposed are: (1) one in which the tax is based on earnings in excess of the average earnings over a base period and (2) one in which the tax is based on earnings in excess of a stated return on invested capital. In the proposed plan recommended by the Ways and Means Subcommittee, a corporation is given the option of these two methods. In general, this choice will overcome many of the inequities which either plan alone would entail. In the proposal as submitted, however, there are still certain features which would cause inequities.
28 So in original minutes though not in the original document quoted; should read “devising.”
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AUGUST 9 AND 14, 1940
“The Advisory Commission to the Council of National Defense considers it important, in order to remove the more serious of these inequities, that the following changes be made:
“1. The proposal provides that, in case the corporation elects the average earnings method, the credit to which it is entitled in determining excess-profits will be the average earnings for the four-year period, 1936-1939. For many industries, this period cannot be considered as normal, and for most companies, at least one of these four years was much below normal. The period might also include, for many companies, a year of deficit or of low earnings due to extraordinary circumstances, such as floods. If the corporation were permitted to use the average profits for any three of the four years, many of the inequities arising from the*use of this base period would be overcome. The Commission, therefore, recommends that the credit under this option be the average earnings for any three of the four years, 1936 to 1939 inclusive.
“2. If the taxpayer elects the invested-capital option, the credit to which it is entitled is based upon the percentage of the return on the invested capital during the four-year base period with a maximum of 10% and a minimum of 4%, except that on the first $500,000 of invested capital the minimum is 6% instead of 4%. If a corporation had earnings during the base period, of less than 4% of the invested capital, the credit would thus be 6% of the first $500,000 and 4% on the balance. For large companies, this credit would closely approximate 4% of invested capital.
“This provision would work hardship particularly upon companies in the durable goods industries which, in general, have not received a fair return on invested capital in recent years. The credit allowed in the excess-profits tax of 1918-1921 was 8% of the invested capital. Because of change in interest rates, there may be justification for some reduction from the 8% level but a 4% rate is unreasonably low. The Commission, therefore, recommends that the $500,000 limitation be removed and that the minimum credit under the invested-capital option be fixed at 6% of the entire invested capital.
“3. The proposal as submitted does not permit consolidated returns for affiliated corporations. Under the Revenue Acts of 1918, and subsequent years, consolidated returns were required for both excess-profits tax and normal income tax purposes. But since 1934, consolidated returns have not been allowed, except in the cases of railroads. Until that time, it had always been considered sound to treat a group of affiliated corporations as a single business unit for tax purposes on the theory that it was a single enterprise in fact. In recent years, due to Federal income tax provisions, some affiliated corporations have been merged, but many corporations still find it necessary to have separate corporations because of State laws and for many special business purposes. Further decentralization of industry would make separate corporations more necessary.
“Failure to permit consolidated returns increases the administrative problems both for the taxpayer and for the Treasury. Since the rate of taxation may vary considerably as between the different affiliated companies, many complications will arise in connection with inter-company transactions. Cases may frequently arise in which affiliated companies which might be thrown into the higher excess-tax brackets, although the company, as a whole, may not show any increase in earnings over the normal period. The Advisory Commission, therefore, recommends that consolidated returns be permitted for both excess profits and normal income tax purposes.
“4. There are certain other changes in the proposed plan which the Taxation and Finance Committee of the Commission feel should be made and certain provisions added, such as a provision for treatment of exceptional cases; allowance of credit for foreign income and excess profits taxes; provisions for merged or dissolved corporations, etc. These are technical but important points and some of them may be incorporated in the bill when drafted.
If the Taxation and Finance Committee were given the opportunity to examine the draft and found that these points were not covered, they could be brought to the attention of the Ways and Means Subcommittee for their consideration.”
Mr. Folsom discussed the proposed changes in the excess profits tax bill and stated that he felt such proposed legislation should be of interest to the Commission because of the many statements already given out by the press that the Commission has gone on record with Congress that it desires such tax program ; that business had urged that very careful consideration be given to the proposed tax measure; that it was not fair to business or the taxpayer to rush through a tax measure with very little consideration; and that Congress was rushing through such legislation with the statement that the Commission desires this be done. Mr. Folsom added that the Commission must take the responsibility for rushing such proposed legislation through. Mr. Folsom stated that in each case where a company is called upon to aid in the defense program, its attitude will be quite different if it believes there are serious inequities in the bill defined for defense purposes.
Mr. Henderson stated that he was convinced that the direct relationship to the defense program of the proposed excess profits tax bill is not clear and therefore the Commission should not take action on the report but should receive it as an excellent statement of what some would regard as the inequities in the proposed bill and consider it as useful information for the assistance of the Commission.
At this point Mr. Folsom left the meeting.
Mr. Hillman stated that he was absolutely convinced it would be a grave error for the Commission to take any position at all with respect to the proposed excess profits tax bill, whereas he definitely believed a position had to be taken by the Commission on the proposed amendment regarding amortization of defense facilities inasmuch as such amendment is definitely connected with the defense program, and he felt that when a company is asked to construct additional facilities the Commission should make such amortization possible. He said with respect to general tax matters he did not see how the Commission could possibly consider them within the purview of its duties and not be subject to criticism by Congress and the public at large.
Mr. Knudsen said it was his feeling that inasmuch as the Commission cannot proceed with its work until the question of amortization is decided, and the fact that the president has stated that the proposed amortization amendment should be joined with the excess profits tax bill the Commission should urge the passage of the entire bill in order to obtain the benefits of the amortization amendment which . cannot be had otherwise.
Mr. McReynolds stated that he agreed with Mr. Knudsen as to the urgency of disposing of the amortization question but that it seemed to him that the Commission would be getting into a field other
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than its own if it began to deal with the excess profits tax bill.
Mr. Henderson suggested that the Commission raise with the President at its meeting tomorrow the question when it can reasonably expect the passage of the proposed amortization amendment and impress on the President the Commission’s feeling regarding the urgency of its passage and to open up again for discussion the question of the separability of the excess profits tax bill and the proposed amortization amendment.
Mr. Davis stated that in a hurried review of the proposed report submitted by Mr. Folsom his objection to the report is the fact that it is based on the plan of the subcommittee of the Ways and Means Committee and ignores completely the Treasury plan. He referred to the fact that the Commission has gone on record as favoring the conscription of men under a plan which would pay them $21 per month and he believed that the Commission would be subject to severe criticism if it endorsed by inference the program suggested by the report
At the conclusion of the discussion it was understood that the question with respect to the passage of the amortization provision would be brought up at the meeting of the Commission with the President tomorrow.
Mr. Stettinius stated that he wished to inform the Commission that he was going to hold a meeting this afternoon with Mr. Jesse Jones, Federal Loan Administrator, to discuss the following subjects:
(1) A $50,000,000 loan from the Reconstruction Finance Corporation for 100 octane gasoline stock piling;
(2) A $7,000,000 loan for the movement of the wool stock pile from Australia to the United States; and
(3) The first preliminary approach on the financing of synthetic rubber production which will probably involve Reconstruction Finance Corporation financing amounting to approximately $30,000,000.
In connection with item number three above, Mr. Stettinius said it may be possible to get the industry to finance synthetic rubber without Reconstruction Finance Corporation aid but that it was more likely that it will be necessary to obtain Reconstruction Finance Corporation financing. Mr. Stettinius stated further that a complete report with respect to synthetic rubber plants will be available to the members of the Commission the latter part of this week and unless the Commission sees some objection he would like the report to be made public, because there has been so much publicity with respect to this matter that he felt it would be a good thing to get the true facts before the public.
Mr. Stettinius stated also that he was to meet with Secretary of the Treasury Morgenthau this after-
noon to discuss the question of exporting steel scrap, about which there has been a tremendous amount of misinformation, and that he hoped such meeting would enable them to clarify the whole issue with respect to steel scrap. He added that his judgment at the moment is that it will probably mean the complete stoppage of all exports of scrap steel. He said there are some danger points in the price of scrap steel and that one of the surest ways of keeping the price down is to stop exporting and that the exportation of essential scrap steel necessary for Great Britain could be licensed.
At the conclusion of a brief discussion it was the general consensus of the members of the Commission that the report on synthetic rubber should be made public.
Mr. Henderson referred to the matter of the grand jury investigation in New York of ten industries vital to national defense which was discussed at the last meeting of the Commission, when it was understood that he would make a canvass of the matter and present a report at the meeting of the Commission today. He said he would like to report that he had had a very extensive talk with Assistant Attorney General Thurman Arnold and his staff and advised him that the Commission was interested in the defense angles of the grand jury proceedings and while the Commission did not want to ask for confidential material, it would like to know which companies were immediately involved and to be kept advised with respect thereto, and that Mr. Arnold agreed to that procedure. He said that he had also had a conference with Mr. Cox, Chief Trial Attorney for the antitrust division of the Department of Justice, and established a working relationship with him with respect to such procedure. Mr. Henderson stated that it is a special session of the grand jury discussing matters particularly relating to patents and will probably be in session another month. He said the matters under consideration by the grand jury do not cover all of the items mentioned by him at the previous meeting of the Commission, that it probably affects a special situation on carbolide, a special airplane fabric used in commercial, rather than military planes, bentonite, and magnesium. He said the magnesium matter was being held in abeyance and there is some doubt as to whether the whole case will get before the grand jury. He added that he had arranged with Messrs. Arnold and Cox that all matters coming from them will clear through him and that he would like to have the same arrangement with the other members of the Commission.
Mr. Henderson referred to the action taken at the meeting of the Commission on July 26 with respect to the statement of the functions of the Coordinator of Housing and stated that inasmuch as the revision of such statement had seemed to
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devolve upon him, he had sent to each of the other Commissioners a suggested draft of general functions of the defense Housing Coordinator which departs but very little from the statement as originally presented. He said that the revised statement does one thing which he felt was quite necessary, that is, it establishes the fact that the operations of the Coordinator of Housing are subject to approval of the Commission.
At the conclusion of a discussion of the statement it was understood that the members of the Commission would give consideration to the revised statement prepared by Mr. Henderson and submit such changes as they might have to suggest to Mr. McReynolds, with the understanding that the statement would be presented for formal approval at the meeting of the Commission on Friday, August 16, 1940.
Mr. Nelson reported that the general statement on negotiated contracts and site locations had been written and that he hoped to circulate it tomorrow in order that it may be discussed at the meeting on Friday.
Mr. McReynolds stated that Mr. Ginsburg of the staff of Mr. Henderson had called him on the telephone and stated that certain disbursing officers in the War Department had taken the attitude that they would not be able to proceed with negotiated contracts in the light of policy considerations other than price, on general supply contracts on the theory that under such negotiated contracts the costs might be larger; that they had taken the attitude also that the Comptroller General might question such contracts and wanted to know if the Commission could obtain an Executive Order on such matter. Mr. McReynolds stated that he had called the General Counsel for the Comptroller General who had advised that under the law no question would be raised on this matter.
Mr. Hillman stated that he was obtaining the services of Mr. C. R. Dooley to work in connection with the training program and that then the entire program will be more or less completed. He added that
reports on vocational training were highly satisfactory and that in some places hundreds of people had been taken into private industries.
Mr. Hillman reported that he was going to talk to the President with respect to the question of how much money he thinks the Commission should spend in the entire training program, that he did not believe the matter should be brought to the Commission unless it were felt desirable by the Commission, and that it was his intention to clear the matter with the President as a matter of policy whether we should spend the money. Mr. Hillman stated that it appeared from preliminary surveys that full employment would probably be had before the expiration of twelve months.
Miss Elliott stated that she had sent out invitations to approximately 100 retailers to attend a meeting on August 29, 1940, in order to discuss the method of cooperating with them in regard to prices.
Mr. McReynolds stated that he had requested Mr. Gladieux to consider the matter of the relationship of the public roads program to the national defense, and that Mr. Gladieux had studied the matter and addressed a memorandum [Document No. 31] to him under date of August 5, 1940, recommending that, because of the vital interest in this matter of the divisions of Messrs. Stettinius and Knudsen, in addition to that of Mr. Budd, both the division of industrial production and the division of industrial material designate a representative to be responsible for coordination with the Public Roads Administration and in general to serve in a liaison capacity with this agency.
In accordance wth the recommendation contained in Mr. Gladieux’ memorandum, it was understood that Mr. Harrison, representing Mr. Knudsen’s division, and Mr. Harriman, representing Mr. Stettinius’ division, would be appointed for such purpose.
Thereupon the meeting adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 16, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, August 16, 1940, at 11:10 a.m.
Present:
Mr. Knudsen (latter part of meeting)
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Adams, Executive Assistant to Mr. Stettinius
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. May, Director, Bureau of Research and Statistics
Mr. Thompson, Administrative Assistant to Mr. Davis
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Mr. Henderson referred to the presence at this meeting of Mr. May, Director of the Bureau of Research and Statistics of the Commission, and stated that when the assignment of functions was made by the President to the various Commissioners and in the announcement which he gave to the press there was no expansion of the directive of the Commission. He said that price stabilization, as he thought he had received it from time to time from the President, dealt with the balance in the economy under stress of a defense or war effort, that it seemed to him that since there were no separate staffs or bureaus created, the decision with respect to organizing in order to obtain information rested with each Commissioner, and that there was very clear emphasis by the President that already existing agencies should be utilized. Mr. Henderson stated that under his designation it seemed that one of the things in particular that he had need for was an analysis of the requirements of the defense program and some estimate of the resources available for meeting those requirements as they were superimposed on the ordinary demands of die economy, and that he began to make arrangements with existing agencies for assistance in this connection, that as the organization of the Commission progressed it was found that other Commissioners would require approximately the same information, particularly basic information, and that in the early days there was complete confusion particularly at a time when access to the very valuable reports of the Army and Navy Munitions Board was desired. He said that the matter became quite acute, especially in Mr. Stettinius’ Division, that it had been recognized that unless some procedure were worked out for gathering such information, there would be an enormous amount of duplication, that his Division and Mr. Stettinius’ Division had considered at that time how they might unite their efforts in obtaining such information, that other Commissioners became interested in the matter, following which it became the feeling of the Commission that a bureau could be organized which would serve all of the Commissioners, and that Mr. May was invited to leave the Rockefeller Foundation to organize and head such bureau. He said that no one at that time knew what the demands would be of the individual Commissioners and that when the organization of such bureau was approved it was understood that after Mr. May had had a sufficient opportunity to organize his division, it might be well for him to attend a meeting of the Commission for the purpose of outlining to the members of the Commission the functions of the bureau and the procedure to be followed in obtaining desired information, and that Mr. May was present at this meeting for that purpose.
Mr. McReynolds stated that at the time of the creation of the Bureau of Research and Statistics Mr. May was placed under the supervision of the
Secretary’s office because he was to serve all of the Commissioners, but that it had seemed to him that the kind of activity to be carried on by Mr. May was basically under the jurisdiction of Mr. Henderson and that it was his original suggestion that the Bureau of Research and Statistics be attached to Mr. Henderson’s division and still be a service organization to all of the Commissioners. He then raised the question whether it would not be entirely appropriate and probably result in the better functioning of the bureau if it were under the supervision of Mr. Henderson, rather than the Secretary.
Mr. Henderson stated that that question was considered at the time the Bureau of Research and Statistics was organized, and that it was his feeling at that time that, although he needed the material on price stabilization, he did not believe a bureau such as this which would serve all of the Commissioners should be set up under the direction of one Commissioner.
At this point, Mr. Horton, Director of Public Relations, joined the meeting.
Mr. Henderson suggested that before the Commission discusses how Mr. May should report to the Commission it should hear a report from him as to what his office is doing at the present time.
Mr. May expressed his gratitude to the members of the Commission for permitting him to appear at this meeting because he desired to report to the Commission as to what his bureau had been trying to do and that he was very much in need of the Commission’s guidance in carrying out his functions. He said that it was perfectly clear to him that his bureau was a service unit set up to give the several divisions of the Commission, plus the offices of Mr. Nelson and Mr. Palmer, Coordinator of Housing, and he presumed the committee of research headed by Dr. Vannevar Bush, whatever the Commission feels an organization such as his should be giving and that he would like to have a clear definition of what was expected of his unit. He said he believed his division at times would get into some difficulty in conscientiously trying to comply with a request made by one Commissioner which carries his office over into what another group such as the Army or the Navy believes should be their jurisdiction and that he had no particular wish to get into such difficulty.
At this point Mr. May referred to a report, [Document No. 17a] copies of which were distributed to the members of the Commission present, with respect to the activities of the Bureau of Research and Statistics. He said after organizing his office he began to get two types of questions immediately, one set of questions for either spot information as to where certain things could be found immediately or questions which required assembling of information and most specifically a very detailed knowledge of who had the best information on a
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given subject which could be gathered over a period of a few days or a week at most. Mr. May then illustrated the types of questions which were asked in this connection.
At this point Mr. Knudsen joined the meeting.
Mr. May said that on the question of spot information, his office had been able to regulate itself, inasmuch as requests for such information can generally be answered immediately from statistical tables or through collaboration with other Government agencies. He stated that the Librarian of the Library of Congress had practically set up his unit as a division of the Library through which, for the first time, the Commission might have full access to the legislative reference service. Mr. May stated that the second type of question his office had been handling is one which he believed moved his office into the area where there are the most questions and in which he was very definitely in need of guidance. He said that he had been asked at various times to have a member of his staff consider an economic analysis question which was usually in. connection with the history of price regulation during the last war, or what Canada has been doing about the problems of amortization, priorities, or price regulation, and that in answering such questions his office was entering into an area where he was making economic analyses of policy questions. He added it was very difficult to say to a particular division of the Commission, that he did not feel his office should answer such questions because they were matters within the jurisdiction of a Commissioner and that in such area he thought they had on occasion gotten into fields beyond the scope of the duties of his office. Mr. May stated that he was sure that if the Commission would work out a set of directions to be followed by the Bureau of Research and Statistics as to when it should or should not, or under what directions it should, work on problems in that area, it would simplify their position very much.
Mr. Hillman inquired whether the matter lent itself to direction and stated that he believed that what was needed was to have someone who attends the meetings of the Commission and knows what is going on charged with the responsibility of reviewing any information released by the Bureau of Research and Statistics and that whether such responsibility should be that of the Secretary or Mr. Henderson would have to be decided by the Commission.
At this point Mr. Davis inquired whether there was any reason why the Director of Research and Statistics should not attend the meetings of the Commission and observe directly what is going on.
Mr. Henderson said that he raised the question originally as to whether the Commission was not getting pretty well expanded in the matter of attendance at Commission meetings, that his original concept on this matter was that he had thought that the basic information, the securing of spot informa
tion and large statistical jobs, were what the Com-mission desired of the Bureau of Research and Statistics and if that were the case he did not feel attendance by the director at meetings of the Commission was necessary, but that if the function oí the Bureau included analyses of economic policy matters, he felt the director should be present. He stated that until that question is decided he would like the matter of Mr. May’s attendance at Commission meetings to be postponed.
Mr. May stated that his division had been started with the thought that it would not build any staff more than necessary for a clearance function and to do the jobs they were advised were basic jobs and could not be turned over to other Government agencies because they were private jobs for the Commission. He said that one job was an attempt to put together the over-all requirements that the Commission was trying to meet, which seemed like a very simple and easy translation of some of the material on which the Army and Navy had been working for twenty years but that it had been something oí a monumental job on which his office was just turning out a first over-all picture which he believed would be of value to the Commission. He referred to the difficulties which had been encountered in making the over-all capacity studies of what the Army and Navy requirements are and stated that the results until a few days ago had been very negligible but that each Commissioner now has a copy of the full requirements of the Army and the Navy.
Mr. Henderson inquired of Mr. May whether he felt the new procedure of having a representative of each Commissioner on a liaison committee of his office was a better working arrangement and Mr. May replied that it was working well and will work better now that pertinent material is in the hands of the Commissioners. He said it was difficult for the representatives of the Commissioners called in to make constructive suggestions without having studied the material.
Mr. Henderson stated that he felt the. over-all capacity studies are the most important single job the bureau has for the Commission and he thought it called for a type of technical skill in analysis and organization of the information that is vepr difficult to get. He said it was the first time the United States has ever looked at what its major requirements are and whether we have the capacity to fulfill such requirements.
Mr. Henderson then stated that he would like to study the purposes and outline of the duties being performed by the Bureau of Research and Statistics as presented by Mr. May and consider what the recommendations of the Commission should be both in the matter of assignment of tasks and the question of his responsibilities so that the Commission may adopt certain principles directing the functions of the Bureau of Research and Statistics.
At the conclusion of the discussion it was unani-
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mously agreed that a committee consisting of Messrs. Henderson, Chairman, Stettinius, Davis, and Nelson, in consultation with the economic advisers to the various Commissioners, should prepare a statement of the scope and functions of the Bureau of Research and Statistics for consideration at an early meeting of the Commission. Mr. May withdrew from the meeting at this point. Reference was then made to the statement of the general functions of the Coordinator of Housing which had been distributed by Mr. Henderson at the meeting of the Commission on August 14, at which time it was agreed that the statement [Document No. 7a] would be considered and formal action taken thereon at the meeting today.
At the conclusion of a discussion the proposed statement was approved in the following form: “1. The Defense Housing Coordinator will be attached to the office of the Secretary and will exercise his authority under the general direction of the Commission.
“2. Generally speaking, he will be responsible for planning the defense housing program and for its prosecution through private industry and the appropriate Federal agencies concerned with the planning, construction, and financing of housing. Thus it will be his responsibility to channelize and coordinate those activities of Federal agencies that will be concerned with defense housing, to insure an effective and integrated program. Among other matters, the Defense Housing Coordinator will be expected to anticipate housing needs that may arise as a result of defense activities and to take whatever action may be necessary to avoid any housing shortages. He will determine, after survey, whether the construction of necessary additional housing facilities should be undertaken by private enterprise or by public agencies, and in appropriate cases, he will assist such public or private agencies in formulating the plans, terms, and other conditions and arrangements for such construction. He will, in addition, review plans for erection or expansion of plants or for the procurement of large stocks of materials in the light of housing needs which they may create.
“3. Any information that will enable him to forecast the exact housing needs and make necessary preparations to see that these needs are supplied should be made available to him.
“4. In those instances where the costs of housing construction or of remodelling to meet the needs of the defense program are to be borne in whole or in part by a Federal agency (whether by subsidy or loan), the need for such housing and the standards of constructions shall be certified by the Commissioner responsible for consumer protection. Standards of construction shall include (1) those factors in construction which affect costs and thereby rents and (2) those factors which affect liveability, including lay-out, spacing of dwellings, and availability of utilities and of community facilities.
“5. In working out the plans for construction, arrangements shall be made with the Commissioner on employment and labor toward insuring satisfactory terms of employment and the availability of an adequate supply of labor.
“6. He will, as part of his duties, review the legislation relating to or . affecting defense housing activities with a view to determining the direction of the program within the limits of existing legislation and will recommend to the Commission such additional legislation as may be required to insure, an adequate program.”
At this point Mr. Hillman left the meeting.
Mr. Adams stated that Mr. Stettinius had asked him to report that in accordance with the statement made by Mr. Stettinius at the meeting on August 14,
he had met with Mr. Jesse Jones, Federal Loan Administrator, in connection with the financing of the accumulation and storage of 100 octane aviation gasoline, a reserve wool stock, and for synthetic rubber plant direction. He said that Mr. Stettinius had met with Mr. Jones, and as far as the $50,000,-000 loan for 100 octane gasoline, the $7,000,000 loan for the transportation of Australian wool to the United States and the $30,000,000 to $40,000,000 loan for synthetic rubber, was concerned, he had had a most satisfactory interview with Mr. Jones and was certain there would be no difficulty in obtaining Reconstruction Finance Corporation financing of the above matters.
Mr. Henderson stated that he felt the record should show that, in connection with the proposed amendment regarding the assignment of claims against the United States, which was discussed at the meeting on August 2, 1940, the Bureau of the Budget had reported to him today that it had made the necessary canvass and consulted with the Attorney General and also with Members of Congress who have introduced similar bills and that the Attorney General had reported that the draft obtained by the Commission from the Board of Governors of the Federal Reserve System seemed most satisfactory and made the suggestion that rather than limit the proposed bill to War and Navy contracts it be made applicable to all government contracts. He said that the proposed bill had been presented to the President and as soon as it receives his clearance and is cleared with Mr. Jesse Jones, Federal Loan Administrator, the bill will be available for introduction in Congress.
Mr. Horton stated that he was receiving an increasing number of requests for members of the Commission to speak before various organizations throughout the country and that it was his impression that the members of the Commission do not have adequate time to accept such invitations and inquired how the situation might best be met.
Following a discussion of this matter it was understood that Mr. Horton would advise organizations inviting members of the Commission to speak before them that the members of the Commission are not able to be absent from their duties at this time for the purpose of attending meetings of such organizations.
During the above discussion Mr. Knudsen left the meeting.
Mr. Henderson stated Mr. Thurman Arnold, Assistant Attorney General, had called him on the telephone on the morning of Wednesday, August 14, and advised that Senator Gillette had requested him to come to his office for a discussion of the proposed suits against twenty-two major oil companies in the United States in connection with alleged violations of the antitrust laws and inquired what advice could be given to Senator Gillette. Mr. Henderson said he advised Mr. Arnold that he could advise Senator
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AUGUST 16 AND 21, 1940
Gillette that the Commission now had a qualified man working full time in reviewing the complaint of the Department of Justice in order that the matter might be settled with the quickest dispatch. He said that he had asked Mr. Arnold to call him following his discussion of the matter with Senator Gillette and that yesterday Mr. Arnold had called and said
he had received a letter from the Senator and was preparing an answer which was being submitted to the Public Relations Department of the Department of Justice before it went out.
Thereupon the meeting adojurned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 21, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Wednesday, August 21, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Davis
Mr. Henderson
Mr. Hillman
Mr. Budd
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Deputy Commissioner to Mr.
Knudsen
Mr. Horton, Director of Public Relations Mr. Bane, Director, State and Local Cooperation
Mr. Thompson, Administrative Assistant to Mr. Davis
Mr. Budd stated that he had conferred with certain members of the Interstate Commerce Commission with respect to the status of forwarders throughout the country because of the ruling of the Interstate Commerce Commission that such forwarders are not entitled to the proportional rates they have been receiving because they are not common carriers but shippers. He said that the ruling of the Interstate Commerce Commission had been confirmed by a decision of the United States Supreme Court, that Congress was considering the matter, and he understood a law will be passed which will fix the status of forwarders and enable their services to be available to everyone as has been done in the past. Mr. Budd said that the Interstate Commerce Commission had been embarrassed by the fact that although its decision had been upheld by the Supreme Court there was now a great deal of objection to adhering to such decision and that many requests were being received from common carriers, both rail and truck, and from shippers that the Interstate Commerce Commission not enforce its decision and expressing their desire to have the Interstate Commerce Commission again postpone it. Mr. Budd added that it now appears that the Interstate Commerce Commission is not willing to again postpone
the effective date of its order, and that he had prepared a proposed letter to be sent to the Interstate Commerce Commission if approved by the Advisory Commission reading as follows:
“The Advisory Commission understands that under orders of the Interstate Commerce Commission effective September 1, 1940, existing proportional truck rates which apply in connection with forwarders will be cancelled; that such cancellation would result in disrupting established methods of rapid transport of many essential commodities, particularly parts and supplies used by airplane manufacturers ; that a number of bills pending in Congress would, if enacted, relieve this situation, but they are involved in comprehensive legislation to regulate forwarders and cannot be acted on by Congress before September 1.
“The Advisory Commission also understands that the Interstate Commerce Commission is fully informed as to the widespread use of the transport service in question and also of the much heavier loading of freight cars which is being accomplished in that manner than under ordinary railroad less-carload handling.
“The Advisory Commission is aware that the Interstate Commerce Commission has extended the effective date of its orders in the expectation of action by Congress. With the greatest deference, the Advisory Commission respectfully suggests the Interstate Commerce Commission give favorable consideration to a further extension, for the purpose of avoiding any confusion, delay, or loss of efficiency in transportation.”
Mr. Budd further added that he had prepared the proposed letter with the thought that following its approval by the Advisory Commission he would present it to Mr. Clyde B. Aitchison, Commissioner, Interstate Commerce Commission, and assure him that the Advisory Commission had no desire to interfere with the operations of the Interstate Commerce Commission but felt that such ruling would bring about some dislocation in transportation.
At the conclusion of a further discussion of this matter the proposed letter to the Interstate Commerce Commission quoted above was approved unanimously, with the understanding that it would be signed by Mr. Budd and transmitted by him to the Interstate Commerce Commission.
Mr. Budd stated that he would like to present to the Commission at this time a request [Document No. 31a] received from the Public Roads Administration which he feels should be a routine matter within his jurisdiction but because of the fact it is the first time such matter has arisen, he felt it should be brought to the attention of the Commission. He said that in connection with the approval of locations
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
for defense facilities, he had arranged to have the Commissioner of Public Roads clear with the State Highway Commission on the matter of highway facilities leading to such proposed sites. He referred to the approval by the Commission of the location of a powder plant at Radford, Virginia, and stated that the roads in that locality are in need of certain improvements, that Mr. Thomas H. MacDonald, Chief, Public Roads Administration, had advised him of the expenditures that are needed to make the necessary highway improvements in connection with the plant at Radford, Virginia, which totalled $476,-000. He added that Mr. H. G. Shirley, State Highway Commissioner for the State of Virginia, had signified his willingness to cooperate and to undertake the specific improvements recommended with Federal-aid highway and grade crossing funds and the necessary State matching funds and that the improvements which may later prove to be required on the secondary roads will be financed by the State with possibly some assistance from the Works Progress Administration. He said that Mr. MacDonald had suggested that as a matter of form in all such cases Mr. Budd transmit to him the following letter :
“The highways described above are designated as important to the national defense, and it is agreed that the improvements recommended are necessary. It is requested, as of the date of the preliminary field investigation, that surveys and the preparation of plans and detailed estimates be undertaken, to be followed by construction in accordance with the plans developed.”
Mr. Budd said his sole question was whether this should be considered a routine matter to be handled by him without calling each individual case to the attention of the Commission.
It was agreed unanimously that the signing of such a letter in each individual case should be considered as a routine matter and handled by Mr. Budd without presentation to the Commission. Miss Elliott called the attention of the Commission to the question of apparently false advertising in connection with various items, such as shoes, leather, and hides, and said that Mr. Ben Lewis, Chief Economist in the Consumers’ Division, is making an investigation of such advertising and a report will be submitted at a later date.
Mr. Davis reported that he was planning to be away from the city during the first part of September, that he was appointing Mr. J. B. Hutson, Assistant Administrator of the Agricultural Adjustment Administration, as Deputy Commissioner of the Agricultural Division, and in the absence of objection by the other members of the Commission, Mr. Hutson would represent him at the meetings of the Commission.
No objection was interposed to attendance by Mr. Hutson at the meetings of the Advisory Commission.
Mr. Hillman stated that he would like to report
68
that Mr. C. R. Dooly,29 (formerly with the Socony Vacuum Company of New York City) and Mr. J. W. Dietz, formerly with the Western Electric Company, of New York City, have joined his staff in connection with the training program, and that he was planning to hand to the President either today or tomorrow certain requests with respect to the amount of money to be spent on the entire training program, a copy of which would be sent to each of the other members of the Commission for his information.
Mr. Hillman stated that it had been brought to his attention several days ago that the members of the Commission had been requested as a general practice not to accept speaking engagements as members of the Commission, that without knowledge of such request, he had accepted two engagements, one at the Conference of Mayors to be held in New York City and another at the request of the Herald Tribune, that he had no desire to disrupt the present policy of the Commission in this respect and was perfectly willing to cancel such engagements if felt necessary by the Commission.
Mr. Stettinius stated that he felt in connection with such speaking engagements there should be worked out some coordinated plan, that this should be a responsibility of Mr. Horton, and that all invitations received by the Commissioners to speak should be referred to Mr. Horton in order that he might discuss them with the person or organization requesting the speakers and then with the Commissioners as to the topic to be discussed.
Mr. McReynolds referred to the statement made by the President at the first meeting with the Commission and stated that the bar against speeches was placed on press conferences as well, that press conferences had since been held at the request of the President, and that he did not see how anything but good could come from Mr. Hillman’s attending the Conference of Mayors.
Mr. Henderson suggested that the members of the Commission might follow the policy of declining all invitations to speak which they do not wish to accept by stating that it is the Commission’s general policy not to accept speaking engagements, and that where invitations are accepted, it can be pointed out that they had been made in advance of such general policy or that special permission had been granted.
Mr. Horton then referred to an invitation received from Mr. F. R. White, Chairman of the Program Committee of the American Association of State Highway Officials, to have a representative of the Commission address the annual meeting of the Association to be held in Seattle, Washington, on September 16-19, and requested the permission of the Commission to have Mr. Stacy May attend such meeting. It was the consensus that because of the importance of the work in which Mr. Stacy May is
* Correct spelling: “Dooley.”
AUGUST 21, 1940
at present engaged, it would be unwise for him to be absent from his duties for the necessary length of time to attend such meeting.
Mr. Horton then reported that Mr. W. Averill Harriman, Liaison Officer of Mr. Stettinius’ office, had agreed to address the meeting of the National Petroleum Association and inquired whether there would be any objection to this procedure on the part of the Commission. It was the consensus of the members present that Mr. Harriman should attend the meeting with the understanding, however, that his speech would be prepared by Mr. Horton.
At the conclusion of a further discussion it was understood that the procedure suggested by Mr. Henderson with respect to accepting speaking engagements should be followed by the members of the Commission.
Mr. Henderson stated that he would like to recommend that the following letter [Document No. 16b] addressed to the Advisory Commission under date of August 12 by Acting Attorney General Biddle, in reply to the Commission’s letter relating to material furnished to the Advisory Commission in confidence, be made a part of the official record.
The letter received from the Acting Attorney General read as follows :
"In response to your request for some arrangement whereby material furnished to the Advisory Commission in confidence will not be subject to subpoena, the Department of Justice is prepared to make the following undertakings :
“1. The Department of Justice will not cause grand jury subpoenas to be directed to members of the Advisory Commission or its staff or other Government agencies. acting for the Commission calling upon them to produce, in connection with antitrust or kindred proceedings, documents, memoranda, and compilations which have been prepared by persons at the request of the Advisory Commission and submitted to the Commission in confidence for use in connection with the national defense program.
“2. The Department of Justice will not attempt to subpoena, in connection with antitrust or kindred proceedings, copies of such memoranda, documents, or compilations which remain in the files of the person who prepared them.
"It is understood that the undertaking set forth in paragraph 2 is confined to memoranda, documents, or compilations prepared for the Advisory Commission at its specific request, that is to say, to documents, compilations, or memoranda which would not exist if the person concerned had not complied with the request of the Advisory Commission. It is also understood that nothing in this letter impairs in any way the right of the department to subpoena books of account, records, correspondence, documents, etc., not specifically prepared for the Commission, and that no books of account, records, documents, or correspondence shall be immune from subpoena merely because it was used in preparing information for the Commission.”
Mr. McReynolds stated that he had received the following letter [Document No. 32] under date of August 15 from Mr. Thurman Arnold, Assistant Attorney General, which he thought should be made a part of the official record :
“Some time ago an article appeared in a column conducted by Pearson and Allen which had to do with the delay requested by the National Defense Commission in the
proceedings against the major oil companies. The article attributed that delay to the activities of Blackwell Smith and contained insinuations that Mr. Smith was using the Defense Commission to represent his New York interests.
“It also contained a specific Statement to the effect that I had discovered during the course of my negotiations with Mr. Smith that he was representing clients in an antitrust suit against the Department of Justice while he was on the Commission. .
“When I first read the article, I called up Mr. Smith and informed him that I would make a public denial of these insinuations if he wished it. He informed me that he thought that such a denial would magnify the incident and serve no useful purpose. I therefore let the matter drop.
“It has occurred to me, however, that in fairness to Mr. Smith some contemporary record should be made for his protection in the unlikely event that these charges should be renewed when the evidence has disappeared. I therefore put in writing a full explanation of Mr. Smith’s relations with the Department of Justice so that a copy may be in the files of the Commission and in the files of the Department. I am also sending a copy to Mr. Smith which he may use in any way he sees fit. The facts are as follows; .
“1. In relation to Mr. Smith’s supposed representation of business interests. Mr. Smith and I have frequently disagreed, but at no time have I ever found that any alleged business connections had anything to do with his opinions. Indeed, I found discussions with him most helpful because they served to call to my attention factors in the different situations which we discussed which I might otherwise have overlooked. At no time has he ever made a suggestion which I was not convinced was advanced in good faith and which was not precisely relevant to the subject
“In order to get skilled counsel to advise on the large business interests involved in national defense, it is necessary to consult lawyers who have had experience in these businesses. Therefore experience in business should not be considered disqualification for representation on the Defense Counsel. Instead it should be considered as an essential.
“2. With respect to the case before the Department in which Mr. Smith was interested. When Mr. Smith was called to the Defense Commission at the suggestion of Mr. Stettinius, he was compelled to drop a large number of important matters involved in his New York practice. In one case before the Department he represented members of the flat glass industry. He came to me and disclosed the entire situation. After careful consideration I informed him that it would be both unfortunate for the Antitrust Division and an injustice for his clients for him to withdraw from his representation of the flat glass industry. It was an emergency situation; his services to the .Defense Commission were urgently required. The Antitrust Division after careful investigation could see no possible relation between any problem of defense and the particular suit. It was therefore at my own suggestion that he continued to represent his clients in this particular matter.
“I saw no impropriety in this action at the time and I see no impropriety in it now. However, if there is any mistake, it is one on the part of the Antitrust Division and not on the part of Mr. Smith because he indicated his willingness at the time to drop the case.
“This letter is written so that a contemporary record may be available to Mr. Smith in case any rumors of the type represented by the column arise to annoy him in the future. It is further testimonial of the high regard which the Antitrust Division feels for Mr. Smith and their hope that he will continue to consult with us in the future as he has in the past.”
Mr. McReynolds* suggestion was agreed to unanimously.
Mr. Nelson reported that during the past week very good progress had been made in working with the Quartermaster General to time his purchases of
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
items which conflict with consumers’ interest, and stated that he felt the important thing in buying, in order to get the correct price and prevent disruption, is time, and that the Quartermaster General had been extremely cooperative in changing his orders for four or five different items of apparel which would obtain too large a quantity of such items in too short a period. Mr. Nelson stated that one of such orders was for 3,000,000 pairs of shoes which it was believed would have brought about a disruption of the leather market and affect the price of shoes and that the Quartermaster General had agreed with the suggestion of representatives of the Commission to break the order down into smaller amounts in order not to disturb the markets.
In this connection Miss Elliott suggested that it might be well if some publicity were given to the above fact which might tend to discourage the false advertising regarding the shortage of leather. Mr. Nelson stated that he would like to give some consideration to that point, and Mr. Biggers suggested that Mr. Nelson might work out with the Quartermaster General a statement to be made by the Quartermaster General regarding the buying policy to be followed by him in collaboration with the Coordinator of Purchases, which would meet Miss Elliott’s point. Further discussion of this matter ensued, but no action was taken.
Mr. Stettinius then presented the following memorandum [Document No. 33] with respect to toluol and requested approval thereof by the Commission:
“1. Purchase estimated ‘excess’ (above civilian requirements) production for next 12 to 15 months (about 10,000,000 gallons of one-degree nitrogen grade) at or near present price of 28^^ per gallon.
(a) Cost about $2,850,000; plus $50,000 per year storage, (b) Financing undetermined; probably R.F.C.
(c) Purchasing and storage to be done by Procurement Division of Treasury. ;
“2. Inform each prospective supplier that Government purchasing only excess and not entering into toluol market competitively.
“3. For storage rent insulated facilities near point of production.
“4. But as soon as T.N.T. plants located, Government construct underground storage facilities nearby (Costs, etc., being studied). But approval of principle involved requested now.
Background and reasoning
“1. Practical recovery by industry should provide the estimated excess.
“2. Military requirements for year from 8/1/40 considerably under that amount but in following year are estimated to Be considerably more.
“3. This will, therefore, minimize volume of construction of new facilities.
“4. Minimize conflict with production of 100 octane gasoline which recovery of toluol from petroleum might later entail.
“5. Cost of such recovery estimated to be higher than for by-product toluol from coke.
“6. In event of sudden jump in military requirements, an existing stockpile will help bridge gap required for construction facilities for recovering from petroleum.
“7. Storage near point of production recommended to reduce transportation costs.
“8. Building of storage near points of T.N.T. production recommended as a military safety factor and to reduce evaporation and possible strain on transportation facilities.
“9. Due to diminution of foreign orders, price softening which may cause production to decline. This suggests need of prompt action so present production can be maintained or increased.
“10. This program is precautionary and economic and does not mean new facilities will not be needed later.
“11. Approved by Army and Navy Munitions Board.”
Mr. Henderson inquired whether action on the matter could be deferred until the meeting of the Commission on Friday in order that he might be given an opportunity to consider the recommendation, and Mr. Stettinius replied that it was important that the matter be cleared in order that the work might go forward.
At the conclusion of the discussion the recommendations contained in the memorandum were approved subject to clearance by Mr. Henderson. Mr. Stettinius stated that he would like to have the clearance of the Commission of an authorization [Document No. 23a] to the Tennessee Valley Authority to introduce into the power contract now under negotiation with the Aluminum Company an escape clause reading as follows:
“In consideration of an agreement that the Aluminum Company will build the new plants with its own capital and not look to the Government for reimbursement in the event that the emergency is ended, leaving the plants idle, the T.V.A. will release the Company from the obligation to take the power under the same contingency.”
No objection was interposed by the members of the Commission to the insertion in the power contract of the clause quoted above.
Mr. Stettinius stated that he had reorganized some of the executive personnel in his division. He said that Mr. Carl E. Adams was not in a position to commit himself to full time service with the Commission, that he had agreed to continue to serve as Consultant giving a few days of each week to service with the Commission, that because of this he had appointed Mr. William L. Batt, Sr., to succeed Mr. Adams and would designate him as Deputy Commissioner. He stated further that Mr. Marion Folsom would succeed Mr. Batt as Division Executive in charge of Mining and Mineral Products, and that Mr. Robert Stevens would be made Assistant to Mr. Clarence Francis, Division Executive in charge of agricultural and forest products. He added that it would be necessary for Dr. Yntema to return to the University of Chicago but that he will continue to act as a Consultant and that he will appoint Dr. D. V. Brown, of the Massachusetts Institute of Technology, as liaison representative with Mr. Stacy May’s Division.
Mr. Biggers stated that the committee on taxation and finance of defense facilities had, after considerable study of the problem of a standardized procedure in connection with the financing and disposition of emergency plant facilities required by the Govern
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AUGUST 21 AND 23, 1940
ment, worked out a fairly feasible and fair plan which in the judgment of Commissioners Stettinius and Henderson should be presented to the other members of the Commission for ratification, rather than incur any further delay in waiting for action by Congress on the proposed amortization amendment. He said that he had received, after considerable effort, approval by the heads of the War-Navy Departments and a clearance from the Comptroller General’s office had been obtained. He added that a condensed summary on the matter had been worked out with Mr. Horton in the form of a press statement, copies of which were distributed to the members of the Commission and read by Mr. Horton.
Mr. Biggers added that it had been suggested that he hold a press conference on this matter at the proper time but he felt such a conference should be held by the taxation and finance committee as a group. It was the general consensus that a press conference should be held by the committee at the appropriate time.
Following a brief discussion of the matter, it was understood that the proposed press statement, together with copies of a procedure prepared by the committee, would be studied by the members of the Commission and presented for action at the meeting of the Commission on Friday, August 23, 1940.
Mr. McReynolds stated that he had invited Mr. Bane to attend this meeting to advise the members of the Commission as to the progress being made by his office. Mr. Bane distributed copies of a statement [Document No. 20a] indicating that according
to information available to date in twenty-six States the Governor has either established a State Defense Council or designated some State official as responsible for the coordination of State and local defense activities, that it was estimated that within ten days thirty-five of the States will have organized defense councils and that from then on the development will be much slower with from eight to ten States perhaps not doing anything for a considerable length of time until they have developed a definite program of action.
Mr. Bane said that his office was planning to issue a weekly bulletin which would attempt to give a running account of what the Commission is doing and the progress being made, that such bulletin will deal with any specific important question to be brought to the attention of the State Council, will give each State information as to what all other States are doing and answer the most recurring questions. Mr. Bane stated that the proposed bulletin will not be given out to the press or general distribution made therof. He said his office was also planning to get out a memorandum with respect to spot information regarding the various defense councils, and that arrangements are being made to organize a coordinating committee with a representative from each Commissioner’s office to answer any general questions regarding the general situation in each Division. Mr. Bane then outlined briefly the subjects under consideration by the State councils at the present time, at the conclusion of which the meeting adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 23, 1940
A meeting of the Advisory Commission to the Council of National Defense was held in Washington on Friday, August 23, 1940, at 11:15 a.m.
Present:
Mr. Stettinius
Mr. Davis
Mr. Henderson
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. Hamm, Personal Assistant to Mr. Henderson
Mr. Horton, Director of Public Relations
Mr. Thompson, Administrative Assistant to Mr. Davis
Mr. Biggers stated that owing to the attempt to abbreviate the statement of the proposed contract procedure with respect to new facilities the final draft was not sent out to the members of the Commission until this morning and inquired whether everyone had had an opportunity to read the statement. Mr. Biggers said that Mr. Horton has a redraft [Document No. 25a] of the press release summarizing the provisions of the memorandum on financing and disposition of emergency plant facilities in somewhat briefer form. Mr. Biggers then called upon Mr. Horton to read the following statement:
A plan of cooperation between the Government and pri-Vjte manufacturers for construction of new plants and additions necessary to speed up production of defense materials was announced today by the National Defense Ad-visory. Commission.
“This plan represents striking progress in the evolution
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
of Government procurement methods. It was prepared by the Commission and adopted after consultation with the War and Navy Departments and the Comptroller General. In substance, it offers what might be described as a bankable contract, one which will permit contractors to finance the expanded facilities through use of their own funds or the granting of credit from private sources.
“Specifically, it has two purposes: First, to expedite signing of supplies contracts by assuring the contractor against loss on the construction undertaken for military purposes; second, it safeguards the Government’s interest in such facilities on termination or completions of the contract. The Government’s residual interest upon such termination is to be evaluated by the usual board of three appraisers, one appointed by the Government, one by the contractor and the third by the Senior Judge of the Circuit Court of Appeals of that Circuit wherein the facilities are located.
“Under this plan it is further provided that the Government reimburse the contractor, not in additions to the unit price of the product purchased as heretofore, but in five equal annual installments covering the amount of his capital expansion costs as audited by approved certified accountants. Thus, cost of supplies and amortization by the Government of construction cost would be separated
“Upon passage of the Defense Appropriation Bill, tax and amortization legislation now being considered by Congress, contracts involving the major procurement program can be placed with all the speed consistent with systematic and orderly purchasing.
“Adoption of this plan assures that neither the private manufacturer nor the Government would assume in advance all the risk, nor subsequently reap as a profit the residual value. Should the manufacturer be unable to use the property at the final determined valuation, the Government would then take title, use the property for its own needs, hold it for emergency reserve capacity, sell it, or dismantle and salvage.
“It is expected that the plan will conserve government funds and stimulate investment of private capital in the defense construction program. At the same time, private manufacturers would provide management and operation and assume all the ordinary risks of the business. Government participation would be limited to actual expansion costs. Final adjustment of fair value would reimburse the Government to the extent of the residual value of the property.”
Mr. Biggers stated that the procedure tentatively arranged by Mr. Horton is that authorized at the last meeting of the Commission, i.e., that subject to approval by the Commission the committee on taxation and finance is today holding a press conference which has been tentatively scheduled for 1:00 p.m. He said that such conference has been made more desirable by the fact that the Comptroller General issued to the press his opinion which was carried quite completely in the New York Times and the Wall Street Journal. He said the Comptroller General partly broke the Commission’s story by recounting the questions submitted to him through the Secretary of War and his answer, but that there were still a good many questions regarding the matter and after a conference with Mr. Horton it was decided that such questions could be cleared up to advantage by a conference with the press.
At the conclusion of the discussion the press statement quoted above, the following outline of the proposed contract [Document No. 1c], and the holding of a press conference today, were approved unanimously:
“1. Scope. In certain cases new plant facilities requisite to the defense program will be built by the Government and leased to private industry. In other cases additional capacity will be made available by private industry as a result of normal expansion in the ordinary course of business, without cost and without risk of any kind to the Government. But midway are the cases in which emergency plant facilities, whether built with the aid of public or private capital, will be paid for by the Government through an increase in the unit price of the product. These are the cases dealt with in this memorandum.
“2. General Principle. In such facilities the Government has an interest. As a matter of procedure the cost of construction should be segregated from the cost of supplies, and reimbursement for the cost of construction made over a period of five years in five equal annual installments rather than in additions to the unit price. If the first contract for supplies runs for five years, the contractor will thus be fully reimbursed for the cost of additional plant upon completion of that contract. If the first contract runs for less than five years (as it will in most cases) and no further contracts are placed, the contractor will be promptly reimbursed for the entire cost of construction.
“3. Contractor’s option to purchase Governments interest. Upon completion or termination of the contract three appraisers shall be. appointed to determine the then fair value of the facilities: one appraiser shall be appointed by the contractor; a second by the Government, and a third by the senior circuit judge of the circuit court of appeals of the circuit in which the facilities are located, or by some other equally disinterested and responsible person. The decision of any two appraisers shall be controlling, but if no two agree, the decision of the third appraiser shall be final.
“The contractor may pay to the Government the fair value of the facilities as so determined and thereafter the Government shall have no interest in the facilities. The contractor shall have the further option of purchasing the Government’s interest in any such facilities, without appraisal, at their original cost less normal depreciation, which sum shall also be regarded as their fair value. In either case, if the Government has not completely reimbursed the contractor for construction costs the sum to be paid by the contractor shall be reduced by the balance of the cost of construction.
“If the contractor does not wish to retain the facilities he may transfer them to the Government, in which case the alternatives set forth below shall be available to the contractor and to the Government. If the facilities are transferred to the Government, the Government shall reimburse the contractor for the entire unpaid balance of his costs. In the event of termination, annual payments by the Government will continue until after settlement so that the contractor will not be embarrassed if he has obligations to meet out of such payments.
“4. Meaning of fair value. For contract purposes fair value means the value which the facilities have to the contractor without regard to their original cost and considering only the prospective earning power which they will add to the contractors entire plant, making due allowance for the expense which the contractor must incur if they are to be adapted or converted to the contractor’s normad peacetime activities; provided that if the appraisers find as a fact that any removable facilities have a higher value in an open market sale than under the foregoing standard, such items may be valued at such open market value.
“5. Options available to the Government. If the contractor is for any reason unwilling to purchase the Government’s interest or retain the facilities he may transfer them to the Government. Thereupon, the Government shall exercise one of the following options:
“(1) With respect to such part of the facilities as constitute easily separable or isolated units, as distinct from intermingled facilities, located on the contractor’s land, the Government may
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AUGUST 23, 1940
(a) remove such facilities restoring the contractor’s premises to their pre-contract condition; or
(b) purchase the land on which the facilities are located from the contractor at a price determined by arbitration, as set forth above.
“(2 ) With respect to such part of the facilities as are intermingled with the contractor’s plant, the Government may
(a) remove such facilities, restoring the contractor’s premises to their pre-contract condition;
(b) purchase the contractor’s interest in the entire plant at its appraised fair value, as set forth above, provided the amount paid to the contractor shall in no event be less than his actual investment less ordinary depreciation; or
(Note: This provision will be used only if it is apparent to the Contracting Officer that the emergency plant facilities contracted for will contribute 50% or more to the investment in the entire plant.) (c) leave the whole or any part of such facilities in place, provided that such facilities do not materially impede the contractor’s operations under pre-contract conditions. If there is at any time disagreement as to whether the operations of the contractor are materially impeded this question shall be submitted to arbitration, in like manner as that provided for appraisal above. The contractor shall have the right to use such facilities left in place if and to the extent that such facilities have replaced other facilities of the contractor and are necessary to enable him to conduct operations under precontract conditions. The contractor shall maintain and care for such facilities as stand-by capacity, but all expenses including accounting, maintenance, taxes and insurance, other than such expenses incident to the use of such facilities by the contractor, shall be paid by the Government. Facilities left in place may be removed • by the Government at any time upon restoring the contractor’s premises to their pre-contract conditions.
“6. Requirement of price justification. If new facilities are to be constructed for purposes of a supplies contract and the contractor does not purport to seek reimbursement of cost through price, or protection against loss on such construction in the event of termination, the contractor may nevertheless be required by the contracting officer to demonstrate that the price of the article does not include an extraordinary amount to reimburse the contractor for the cost of new facilities.”
Mr. Stettinius stated that he had received the following letter [Document No. 7b] under date of August 21, 1940, from Mr. Stewart McDonald, Administrator of the Federal Housing Administration, which he thought was a matter to be discussed by Mr. McReynolds with Messrs. McDonald and Palmer, Coordinator of Housing:
"I am enclosing a copy of a letter which I have just sent to Mr. Palmer.
“While it is true that there will be a certain necessity for Government assistance in providing housing in connection with the defense program, I think there is a grave danger of throwing cold water on the large amount of privately financed construction now under way which it has taken the FHA several years to get established.
“I regret the amount of publicity already given the subject as I am afraid the repercussions might tend to cause private capital to restrict their present activities and if you agree with me I would solicit your aid in seeing that any further publicity is curtailed.’’
Mr. McReynolds stated that Mr. Palmer has worked out through the Reconstruction Finance Corporation Mortgage Company an arrangement for financing provided they can have a revolving
fund given for that purpose and he has made an application for an allotment from the President’s fund to the Reconstruction Finance Corporation Mortgage Company which would be restored following the passage by Congress of legislation needed for housing. He said the financing involved a first allotment of $10,000,000 to the Reconstruction Finance Corporation Mortgage Company which would permit them to go ahead and finance the emergency housing developments with the understanding that the $10,000,000 would be taken from the President’s private fund and it would be reimbursed following the passage of legislation by Congress.
In accordance with Mr. Stettinius’ suggestion it was understood that Mr. McReynolds would discuss the matter with Messrs. McDonald and Palmer.
Mr. Stettinius stated that a memorandum in connection with the scrap steel situation had been left with the President, that copies had been sent to the Secretaries of Treasury and State, and that he felt he should advise the Commission of the contents of his memorandum. He said it was a very comprehensive review of the steel scrap situation by localities, that it was definitely the opinion of the steel industry that scrap should be conserved, and that there is a quality of scrap going to Japan which will probably be required in this country. The memorandum also stated, Mr. Stettinius said, the steel industry’s position and the viewpoint of his division in this matter, and that it was now left to the decision of the President and the State Department as to what decision they desire to reach on the matter after taking into consideration international factors.
Mr. Henderson stated that he had hoped a price report would be submitted with Mr. Stettinius’ report or be made a part thereof. He said that as had been found in the past the question of prices of scrap steel and manganese and other like things contribute to the pressure for raising the price of steel. In the event of a price rise in steel it becomes such a barometer for other industry prices and enters so largely into the price in the beginning of manufacturing processes of other things that it is a very strategic item, so that his division had also been keeping a close check on the steel industry and will have a price report to indicate to the President and the Secretaries of State and Treasury the views of his division as to what action should be taken, which will be submitted to them the first of next week.
Mr. Stettinius reported that Mr. Nelson Rockefeller, Coordinator of Commercial and Cultural Relations between the American Republics, had requested the privilege of utilizing the services of members of his staff in connection with the South American Studies which he is making, and that he had agreed to that. He said that Mr. Rockefeller did not wish to build up a large organization and that he assumed it would be agreeable to the other mem
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
bers of the Commission for Mr. Rockefeller to make such use of the specialists in the Raw Materials Division in making his studies.
No objection was interposed to the above practice.
Mr. Stettinius stated that he was wondering if the time has not arrived when the Commission should go on record as30 the urgency of the proposed amendment regarding amortization of emergency facilities for income tax purposes. He said that his impressions are that debate and discussion and other delays might extend for a number of weeks yet before the excess profits tax bill will be voted out, and that he thought if the Commission cannot receive some definite commitment as to when the bill will be passed it should send a notice to Congress that the entire defense program is being delayed on account of the failure to dispose of such legislation.
Mr. Stettinius said that while it is true that some of the representatives of the Commission testified before a Congressional committee, he felt very uncomfortable that the resolution drawn up as a result of action at a previous meeting had not been sent to Congress.
Mr. Henderson stated that last week it was understood that the Commission would raise with the President the question of separate treatment of the proposed amendment, that he was authorized to draft a form of resolution which would be taken to the White House, and that when the meeting was held with the President, the President foreclosed the presentation of such resolution by certain statements made by him.
Mr. Henderson inquired how much of the program is being held up by the Vinson-Trammel and tax amortization parts of the excess profits tax bill and Mr. McReynolds stated that Mr. Henderson’s inquiry was how much of the delay is due to the lack of money to make contracts and how much is due to the lack of authority to speed up the amortization and repeal of the Vinson-Trammel Act.
Mr. Biggers stated that this matter could be looked at in two ways. He said from the standpoint of the fundamentals of the general program there is a great lag due to the failure of passage of the appropriation bill, the amortization amendment and the repeal of the Vinson-Trammel Act. From the standpoint of current production he said the situation is fortunately considerably different because even airplane plants are working up to capacity at the moment and, as regards the new orders, the Commission has cleared a little more than 50% by number but not by amount of the 4,247 planes that can be covered by existing appropriations and there has been worked out with the War and Navy Departments at the instance of the Commission and through its counsel a draft of letter of intent and authorization which they have issued to the various
M So in original. Should read, "as to the . . . .”
companies and which permits them to go ahead and contract for materials and on necessary machine tools and equipment with the provision that if a contract is not forthcoming from the Government by the first day of October, the Government will take over those materials and equipment they have so purchased. Mr. Biggers stated that business is being done but on a stop-gap basis and the public and the critical press do not understand that, and it is probably not advisable to explain it because it is not a logical way to do business and cannot be carried on for a long period of time. As regards new plants, Mr. Biggers stated, some could be provided for out of the existing appropriation bill but a good many will be covered by the new appropriation bill, that even though there is some money in the $200,000,000 fund of the present War Department appropriation bill yet there is no money appropriated to buy material supposed to be made in those plants. He said the release of any one of these things will not help and that they all have to be passed together.
Mr. Fischer inquired of Mr. Stettinius whether there was not a definite delay in the steel plants and Mr. Stettinius replied that the armor plants were delayed. Mr. Biggers stated that in his opinion the armor plate contracts can go ahead under this contract procedure.
Mr. Biggers stated that he thought the Commission should be able to draw a resolution that would emphasize the vital importance of these things without specifically raising the point of separation of one from another to which the President objects and that he thought the Commission could impress the imperative necessity for action without going contrary-wise to the President’s objection.
Mr. Hillman stated he thought that to point out the urgency of the situation might be helpful.
Mr. Henderson suggested that an appropriate resolution relating not to separability but to the high desire for quick action on the appropriation bill, the Vinson-Trammel Act and the rapid tax amortization amendment be prepared, with the understanding that it would be cleared with the President and transmitted to the proper committees of the Congress.
In accordance with Mr. Henderson’s suggestion, Mr. Stettinius moved that Messrs. Henderson, Biggers and Horton be requested to draw up a resolution for submission to the Commission as soon as possible.
Carried unanimously.
In connection with the above matter it was understood that it would be cleared by Mr. McReynolds with the President, and that Mr. Henderson would be present when the matter is discussed with the President.
Mr. Henderson stated that in accordance with the direction of the President with respect to the proposed suit of the Department of Justice against
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AUGUST 23, 1940
twenty-two major oil companies for alleged violations of the antitrust laws, he had met with the Attorney General and Assistant Attorney General Arnold today, at which time the Attorney General stated that it was his understanding that no suit would be filed until he had received a report from the Advisory Commission unless the Commission desired otherwise, and that he (Mr. Henderson) had indicated to the Attorney General that there was no reason why the report should not be submitted within three weeks. He added that he felt the President’s directive had been met in this matter.
Mr. Henderson reported that a statement had been prepared for release to the press, copies of which had been distributed to the other members of the Commission, with respect to the question of labor policy to be followed by the Commission in negotiated contracts, in which it had been stated that the Commission will probably desire to issue other statements regarding negotiated contracts such as on plant location.
Mr. Davis said that the proposed statement is a departure from the original intent of the Commission as to the duties of the committee preparing the statement as he understood it. He said the committee was appointed to prepare a general statement of policy on negotiated contracts, which would include labor among other provisions and that the statement submitted by the committee was almost wholly a statement on labor policy.
Mr. Henderson said he felt all of the points could not be covered in one statement relating to the policy of the Commission on negotiated contracts, that he thought the Commission could clear the proposed statement, and if it is acceptable in principle to the War and Navy Departments, use it as a basis for a press release.
Mr. Davis added that the responsibility for preparing a statement covering negotiated contracts and plant locations was placed in the committee, that he was in favor of a separate statement on labor policy, but believed the committee should feel its responsibility to go ahead and prepare statements on the other matters.
After Mr. Henderson read the proposed statement Mr. Hillman said that he thought it could be said without contradiction that labor is cooperating in the national defense program by not raising the wage levels in the places where it could, and that that is true also of management. He added that all the requests contained in the proposed statement are already matters of law and carried on as a national policy and that it was not asking that any new policies be started.
Following a further discussion the proposed statement was approved unanimously with the understanding that the changes suggested during the above discussion would be made by Mr. Henderson, and with the further understanding that the statement will be cleared with each Commis
sioner, and by the War and Navy Departments through Mr. Nelson, prior to its release.
At this point Mr. Biggers left the meeting.
Mr. Nelson stated that in connection with the clearance by the Commission of sites for plant locations, arrangements had been made with Colonel Rutherford to submit the proposed locations to his office at the same time they are submitted to the site board, and he would like to know whether the Commission considers five days long enough to review each matter and submit a report to him as to whether there were any objections to the proposed site. He said that if five days was considered a long enough period by the Commission, the site board would be glad to wait that length of time.
Mr. Davis referred to the conference held with the site board on August 20, at which time the question was raised as to a procedure which would enable the Commission to obtain information as early as possible in connection with the selection of plant locations and inquired as to what was being done to find out whether the site board was considering more than one community in the location of plant sites.
Mr. Nelson stated that there would be attached to his staff beginning next week a man who would go out and view the proposed sites.
It was understood that a period of five days was time enough for the members of the Commission to consider the location of proposed plants and submit a report to Mr. Nelson as to whether there were any objections to the proposed location.
In connection with the above matter Mr. McReynolds stated that he had received a telegram from Mr. Richard Robbins, Chairman of the Mid-West Conference, which had scheduled a meeting for August 30, 1940, at Kansas City with respect to the location of national defense facilities in the Mid-West and requested that a member of the Commission address such meeting.
Mr. Davis stated that he and Mr. Henderson had been invited to address the meeting and that it had been necessary for them to decline and inquired whether Mr. Budd, who will be in Chicago on that date, might be asked to attend the meeting.
Mr. Fischer stated that he felt that because of the interest expressed by Messrs. Davis and Budd before the Commission with respect to the location of defense facilities in the Mid-West he thought both of these Commissioners would be less valuable than one who has not been as active in the discussions of this matter.
At the conclusion of a further discussion of this matter it was understood that Mr. Fischer would talk to Mr. Budd over the telephone and inquire whether he would be willing to attend the meeting of the Mid-West Conference for the purpose of making an address with respect to the location of defense facilities.
683775—46—6
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Davis stated that he had placed in circulation among the members of the Commission and Mr. Nelson a set of maps and a memorandum prepared by Mr. Galbraith, of his staff, with respect to industrial concentration in the World War which he would like to have the members of the Commission consider as promptly as possible.
Miss Elliott distributed to the members of the Commission a copy of a program [Document No. 34] for the retailers’ conference to be held on August 29, 1940, in Washington, D. C.
Thereupon the meeting was adjourned.
Wm. H. McReynolds
Secretary.
COMMISSION MINUTES—AUGUST 28, 1940
Present:
Mr. Stettinius
Mr. Davis
Mr. Hillman
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Hutson, Deputy Commissioner to Mr. Davis
Mr. Hamm, Deputy Commissioner to Mr. Henderson
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. Cassels, Deputy Commissioner to Miss Elliott
Mr. Horton, Director of Information
Mr. Hamm requested that the record show that an important meeting of the Securities and Exchange Commission prevents Mr. Henderson from being present at this meeting.
Mr. Davis advised the Commission that he would be away for some time and Mr. Hutson would represent him at Commission meetings.
Miss Elliott advised that she would be away for two weeks and Mr. Cassels would represent her at Commission meetings.
1. Miss Elliott submitted for the record a memorandum dated August 28, 1940, “Low Cost Housing (Document No. 101),si containing the following proposed statement relating to the slum clearance program:
“Inasmuch as the raising of levels of living which are dangerously low is an essential part of a program of total defense, and inasmuch as the continuation of housing conditions which are a menace to health is inconsistent with a total defense program, the Commission urges that the slum clearance program of the Government be continued with vigor and that the United States Housing Authority, to which responsibility for this program has been entrusted, should be provided with adequate funds for this purpose.”
“All documents referred to after this date were referred to bv number tn the text of the minutes. The first 34 documents were numbered at a later date and the editors have inserted the numbers « m the tcxt‘ There no documents numbered
lUiuugn xuu»
Miss Elliott did not request Commission action upon this matter at this time but presented for consideration at the appropriate time this recommendation of the Consumer Division.
2. Mr. Hillman referred to the pending bill to expedite the provision of housing in connection with national defense, H.R. 10412, and Mr. McReynolds suggested that the Commission discuss this legislation at a subsequent meeting. The following committee was designated and charged with the responsibility of keeping the Commission currently informed of developments in connection with this legislation and the defense housing program : Mr. Hillman, Chairman, Miss Elliott, and Mr. W. H. Harrison.
3. Mr. Biggers distributed for the information of the Commission the “Weekly Operations Progress Report” of the Production Division, dated August 28, 1940 (Document No. 102).
4. Mr. Biggers reported it had not been possible for the Production Division to clear the labor policy statement which was considered at the last meeting of the Commission and a subcommittee composed of Mr. Adams, Mr. Lubin, and Mr. Blackwell Smith has worked on a revised statement. Mr. Hillman advised that agreement had not been reached on this revised statement so he had requested the subcommittee to meet further on it in an attempt to reach agreement. It was recalled that the Committee appointed for this purpose on June 21, 1940 was charged with the responsibility of developing a draft statement covering Commission policy on plant locations, negotiated contracts and labor standards, and because of delay in developing the overall statement the Committee had prepared the labor standards statement first.
On the motion of Mr. Stettinius the Commission discharged the original Committee composed of Mr. Henderson, Mr. Hillman, and Mr. Stettinius, and designated Mr. Nelson, Chairman, Mr. Lubin, and Mr. Adams as the Committee charged with the responsibility of promptly developing and submitting to the Commission a proposed policy statement covering plant locations, negotiated contracts, and labor standards.
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AUGUST 23 AND 28, 1940
5. Mr. Stettinius announced the Weekly Progress Report of the Industrial Materials Division had been distributed, but he wished to mention at this time the following developments for the information of the Commissioners:
(a) Approximately 85 percent of the manganese stock pile has been accumulated and this is no longer an item of serious concern;
(b) Following a meeting on August 27, 1940, with interested parties it is planned, with the advice of the Agricultural Division, to build up a stock pile of cotton linters;
(c) An Advisory Committee on drugs has been created to insure that civilian needs will be adequately cared for, and a memorandum covering this project in some detail will go to the Consumer Division;
(d) Dr. Patino is now available in Washington in connection with matters involving Bolivian tin and smelting;
(e) The report on the chemical components of powder manufacturing is completed and discloses there will be no shortage of such chemicals in the meeting of production schedules.
6. Mr. Nelson requested early clearance of the draft memorandum to the President concerning priority for orders covering material essential to the national defense (Document No. 103) which had been distributed previously to the Commissioners. Mr. McReynolds suggested, and the Commission agreed, that on the basis of individual clearance with each Commissioner the records show the Commission’s approval of this memorandum for transmittal to the President as follows:
“Pursuant to paragraph (7) of the Order Establishing The Office for Coordination of National Defense Purchases, I am submitting this report concerning priority for orders for material essential to the national defense, to supplement my previous oral report and recommendation.
“In the judgment of the Advisory Commission to the Council of National Defense and in my judgment, economy and effectiveness in the procurement of defense material can, under present circumstances, be best promoted by a system of preferences supported by. the voluntary cooperation of American industry. With the concurrence of the Army and Navy Munitions Board, and in accordance with my previous oral report and recommendation to you, such a system has been devised and put into effect.
"The essential features of the system can be described briefly. Whenever a contracting officer of the Army or Navy, in placing a contract for an item, believes it necessary to expedite procurement of the item by arranging for preferential attention to it on the. part of the contractor, he may assign a preference rating to the contract. The preference rating will conform to the classification embodied in a Directive, approved by the Joint Board, The Secretary of War and The Secretary of the Navy, which establishes an order of importance, by categories, among the vari
ous. elements in the Army and Navy program for equipment and supplies. The contract will also bear the desired date of delivery.
“The delivery date will be controlling. The preference rating will require that the order be given the indicated degre of precedence over other orders only if and to the extent that this may be necessary to assure delivery on the date specified. Under the supervision of the contracting officer or his inspector, a contractor may extend the preference rating on his contract to the necessary sub-contracts, if such extension appears to be needed. In the event of such an extension, the contractor would specify a delivery date, which again would be the dominant factor.
“The details of any adjustment which may be required in the business of the contractor or sub-contractor to enable him to meet the delivery date will be. left primarily to him. If the contractor should find it impossible to meet the delivery date because of other obligation or commitments which he is unable to adjust, he will take the matter up, through the contracting officer or the inspector, with the Priorities Committee, Army and Navy Munitions Board. (In the event that a sub-contractor should encounter a similar difficulty, he would pursue a similar course, moving through the contractor.) When it appears desirable, the Priorities Committee may resolve the conflict by arranging for a change of delivery dates or preference rating. If this is not desirable, and if the Priorities Committee is unable to adjust the matter in some other appropriate way, the case will be promptly referred to the Coordinator of National Defense Purchases. The Coordinator will then take such action as he may deem advisable; he will invoke the advice and assistance of the Advisory Commission whenever he considers it desirable. It is expected that a formal request from the Advisory Commission or the Coordinator to the contractor or sub-contractor, supplemented, when necessary, by conferences with manufacturers interested, will normally be effective. Naturally, the success of the plan depends upon the cooperation and self-discipline of American industry.
“Appropriate instructions to the Supply Arms and Services of the Army and Bureaus and Offices of the Navy have been issued by the Army and Navy Munitions Board. A release describing the arrangement in general terms has been given to the press. Copies of the set of instructions and of the release are attached.” 7. Mr. Nelson reported the Quartermaster does not have the funds to proceed with the handling of bids on hand which means delay in manufacturing certain items such as shoes, blankets, cloth, etc., which might result in a serious impact on the consumer goods market. It was the opinion of the Commission that everything feasible should be done to secure funds for this purpose immediately in order to avoid undesirable peak loads during the busy manufacturing season, and Mr. Nelson was authorized to work with the War Department and the Reconstruction Finance Corporation in an effort to have the necessary funds supplied now pending the making of additional appropriations available by Congress.
8. In connection with the pending bill to amend the Revised Statutes to permit the assignment of Government claims to banks and lending agencies as security, Mr. Hamm reported that at the request of the Chairman of the House
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Judiciary Committee, Mr. Henderson had asked Mr. Ginsburg to represent him at the hearings being held today on the proposal to broaden the scope of the legislation. Mr. Davis pointed out that the Commission is on record in a report as favoring the original bill.
9. Mr. Davis reported that he is adding Dean Curtis of the University of Missouri to his staff to work with the Industrial Materials Division on the supply of chemicals for the manufacture of powder, primarily for the purpose of safeguarding the long term program of soil building.
10. Mr. Hillman reported as follows:
(a) Satisfactory progress in supplying labor requirements through improved employment agencies;
(b) Concentrated training plans for certain industries, such as optical goods, where bottlenecks may develop;
(c) An assistant to Secretary Patterson is in Seattle in an effort to complete negotiations in the Boeing Aircraft trouble, and the Division is also working on difficulties at the Tampa Shipbuilding Company.
11. Mr. Fischer directed the attention of the Commission to the following two problems existing in air transportation: (a) the effect of defense activities on personnel in the industry, and (b) congestion in public airports because of defense activities; and asked whether it is desirable for a consultant of the Transportation Division to confer with Army, Navy, and Civil Aeronautics Authority officials and representatives of the industry on these and other points. Mr. McReynolds replied there was no objection to the consultant on air transportation carrying on complete and constant contact with these people.
Mr. McReynolds reported in this connection that Mr. Hinckley had conferred with the President yesterday about expansion of aviation facilities, and it was agreed the Civil Aeronautics Authority is to have the primary responsibility for the airport building program. This program is outlined in the following memorandum (Document No. 104) prepared by Mr. Hinckley: “Situation
“Unprecedented expansion of aviation, both military and civil, has rendered our airport facilities, always in arrears of planes and pilots, critically inadequate for present plans. With too few landing areas today, here are the aggravating factors:
“(1) Over 600 airports now are being used intensively by the Civil Aeronautics Authority Civilian Pilot Training Program, which is conducting more than 80,000 flight courses this year. It is hoped this training can be extended to 1,000 fields. Private flying must be fostered as the backlog of trained manpower for any major crisis.
“(2) The airlines, enjoying more than double their expected increase in patronage, now use 185 airports. Fifty-three additional cities have been desig
nated as ‘necessary and convenient’ stops, but cannot be served because of inadequate airports.
“(3) The Army and Navy propose to place tactical or training units on approximately 50 civil airports, and National Guard squadrons will occupy 27 more.
“(4) As of July 1, 1940 there were 1,857 civil airports in the United States. This number does not include 282 C.A.A. intermediate fields or 78 Army and Navy Airdromes. These 1,857 airports included:
1,576—Class 1—1500 to 2500 ft. effective landing strips, no paving, lights, etc.
245—Class 2—2500 to 3500 ft. effective landing strips, lights, servicing facilities, some paving.
37—Class 3—3500 to 4500 ft. effective runway lengths, all facilities usually available, including weather information, radio, etc.
5—Class 4—4500 ft. or longer effective runway lengths, all facilities necessary for all types of traffic in all kinds of weather.
Only Class 3 and 4 airports, or 42, are considered adequate to accommodate the largest transport and military planes in all types of weather.
“(5) Congestion already is hazardous at many points and the wide range of present aircraft speeds from 75 to 450 miles per hour requires separate airports for the different types of planes.
“(6) To permit the safe and efficient expansion of civil aviation and provide adequate airports for National Defense a system of approximately 4,000 airports and seaplane bases should be developed in the United States, Alaska, and the Pacific Islands, 2100 of which would be new.
“(7) Federal Airways facilities for navigation also must be extended.
“Proposed Program
“To set up a six-year program that should be completed in three years if possible. The over-all program would require approximately $575,000,000 without allowing for any building construction.
“It is proposed that $235,000,000 be immediately appropriated for airport development and left available until expended. $35,000,000 would possibly be expended during the fiscal year 1941.
“In addition, an appropriation of $7,181,000 should be made available immediately for expanded navigation facilities.
. “It is proposed that the responsibility for the execution of the program rest with the Administrator of Civil Aeronautics, who has legislative authorization for airport construction.
“A board consisting of representatives of the Secretaries of .War, Navy, and Commerce, to determine priorities in this program should be designated.
"It is further suggested that Engineer Officers and their civilian staffs, who may have been relieved from Rivers and Harbors work, be used as far as possible.” 12. Mr. McReynolds reported that, pursuant to the Commission action, of August 23, 1940, Mr. Henderson had drafted the following resolution (Document No. 105) which he, Mr. McReynolds, had taken to the President Saturday morning, August 24, 1940. The President felt the resolution was incomplete without reference to the excess profits tax bill and, at the present stage of developments, its release might be troublesome rather than helpful, and for that reason the Commission’s statement was not released.
“The members of the Advisory Commission to the Council of National Defense have agreed unanimously
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that continuing success of the defense effort demands immediate enactment of pending legislation to provide: , “1. Additional appropriations and contract authorizations. Without them it is impossible to expand productive capacity to the extent necessary to carry out the major portion of the program to re-arm the nation.
“2. Repeal or suspension of the Vinson-Trammel Act. The restrictions of this statute in their manifold application to thousands of sub-contractors having no direct relationship to the Government prevent execution of vital defense contracts.
“3. Accelerated income tax amortization rates on emergency facilities. Manufacturers are of the opinion that contracts requiring substantial expansion of plant cannot be prudently undertaken with the Government until legislative authority is granted allowing special tax amortization deductions in lieu of normal depred
ation on such facilities created for the defense program.
“Accordingly, it is our recommendation respectfully transmitted herewith that appropriate legislation to effectuate these purposes be enacted without delay.”
In connection with the above matter, there was discussion concerning the need to clarify the record in the Minutes concerning the position of the Committee on tax amortization, and it was understood Mr. Henderson would prepare and submit to the Commission the necessary material to make appropriate insertions in the record.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—SEPTEMBER 4, 1940
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Hillman
Mr. Henderson
Mr. Budd
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Hutson, Deputy Commissioner to Mr. Davis
Mr. Cassels, Deputy Commissioner to Miss Elliott
Mr. May, Director of Research and Statistics Mr. Horton, Director of Information
1. The Commission adopted the following report (Document No. 106) submitted by the Committee appointed August 16, 1940 to consider the duties and lines of responsibility of the Division of Research and Statistics:
. “Your Committee, appointed August 16, 1940, to consider duties and lines of responsibility for the Bureau of Research and Statistics, recommends:
“That, for the time being, the Director of the Bureau of Research and Statistics be placed immediately under the sponsorship of the Commissioner for Price Stability ;
“That the sponsor be available to the Director of the. Bureau for consultation, and authorized to make decisions on Commission matters where the Commission has indicated a clear line of policy ;
“That, on new, important matters the sponsor present to the Commission the question for decision;
“That no change be made in the Commission’s previous decision to have the services of the Research and Statistics Bureau directly available to each Commis-sioner.
“Your Committee recommends that the Director attend Commission meetings as an observer.
“Further report on the outline of duties of the Bureau of Research and Statistics will be made at a later date.”
2. Mr. Henderson distributed a memorandum to the President dated August 30, 1940, “Steel Scrap” (Document No. 107), summarizing the price situation with respect to iron and steel, and recommending a complete embargo on exports of all grades of steel scrap. Reference was made to the previous report on the supply of steel scrap made to the President by the Industrial Materials Division. It was agreed the Secretary would write the President as follows relative to these two reports on steel scrap :
“The Commission has received copies of reports transmitted to you by the Raw Materials Division on the supply of steel scrap, and the Price Stabilization Division on the price of steel scrap.
“The Commission recommends, if other considerations are suitable, that a complete embargo on exports of all grades of steel scrap be instituted.”
3. Mr. Stettinius reported as follows to the Commission :
(a) Studies are under way with the Navy people regarding the raw materials necessary for constructing the new air bases from Newfoundland down the coast;
(b) Discussions with representatives from Bolivia are progressing satisfactorily, and within two weeks definite recommendations will be ready on the whole tin smelting program ;
(c) The stock pile of wool from Australia is being delayed pending decisions by the British Government;
(d) Arrangements for financing the synthetic rubber program will be completed next week.
4. Mr. Stettinius referred to the need for closer coordination of information on materials needed in connection with the program for defense highway systems, military roads, etc., and Mr. Budd stated he would get to the Industrial Materials Division over-all estimates which are
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
available for requirements of concrete, crushed stone, etc.
In this connection Mr. Budd referred to the financing problem being discussed with public officials of Corpus Christi, Texas, for the new highway to the plant being located there, because the local people state they are not able to meet the usual Federal highway aid terms.
5. Mr. Nelson advised the Commission of a request from the Defense Supplies Corporation of the Reconstruction Finance Corporation that the Commission originate, presumably through the Army and Navy, requests for appropriations to reimburse the Reconstruction Finance Corporation for such loans as the $50,000,000 for aviation gasoline and the $3,250,000 for Toluol. Discussion of this request developed that the real problem in connection with situations like that of Toluol is which agency will stand any loss which might develop in liquidating any stock remaining when the emergency is over. The Commission requested Mr. Nelson to explore this matter further, including Mr. Hutson’s suggestion for an annual inventory and report to the Treasury as the basis for a request to Congress for an appropriation to take care of such loss, and recommend a course of action to the Commission.
6. Mr. Nelson stated he had received information that a plan is under way to further amend the Overton Amendment to the Selective Service Bill, H.R. 10132, for the purpose of giving the Army and Navy authority to establish their own priorities. The Commission requested Mr. Nelson to investigate and, if he establishes that such a move is under way, directed that the matter be called to the attention of the President with the recommendation of the Commission that the power to establish priorities remain with the President.
7. In connection with newspaper publicity, apparently based on certain information material (Document No. 112)32 released by the Director of Information for the Commission, Mr. Knudsen requested that any material bearing on production be cleared by him before it is released. It was the consensus of opinion that this is a desirable procedure for all informational material under which each division will carry responsibility for all release material relating to its work.
8. Mr. Nelson reported that all Commissioners had cleared the location of the two plants at Wilmington, Illinois.
9. Mr. Hillman reported as follows:
(a) Mr. Palmer has submitted to the House Committee the amendments which the Com-
M This document consists of layouts for two series of articles— one of 16 and the other of 7 articles—on the defense program. They were circulated to editors of newspapers.
mission thinks desirable to H.R. 10412, the defense housing bill;
(b) Developments at the Boeing Airplane .Factory look favorable for the closing of negotiations;
(c) Complaints on the distribution of contracts continue to come in. Mr. Knudsen asked Mr. Nelson to obtain a report showing what orders have been placed for uniforms and where they have been placed.
10. Mr. Budd reported receipt of a communication from the Interstate Commerce Commission advising the effective date of the orders cancelling existing proportional truck rates which apply in connection with forwarders will be extended 60 days beyond September 1, 1940, pursuant to the request of the Defense Commission discussed at the meeting on August 21, 1940.
11. Mr. Budd reported that, in accordance with the request of the Commission, he had attended the Midwest Conference in Kansas City on August 30, 1940, and was submitting at this time with his endorsement the following resolution (Document No. 113) adopted at that conference and directed to this Commission:
"Whereas, fifteen hundred representative business men from the nine middle western states of North and South Dakota, Minnesota, Nebraska, Iowa, Kansas, Missouri, Arkansas, Oklahoma, meeting in Kansas City on August 30, 1940, listened with close attention and patriotic interest to an explanation of the part these states may play in the re-armament program of the United States, including the splendid talk by Mr. Ralph Budd.
"Be It Now Resolved: That the Midwest Defense Conference representing these nine states respectfully request The Advisory Commission to the Council of National Defense, and the Army and Navy of the United States, for an outlined list, including specifications, of all re-armement plants yet to be located and the requirements yet to be filled, to be sent the Midwest Defense Conference at its headquarters in the Hotel Muehlebach Building, Kansas City, Missouri, and
“Be It Further Resolved: That the Midwest Defense Conference and the several state groups that make it up, will promptly thereafter study this list, weed out those plants and items which it would be impractical to locate in this area, or fulfill here, and thereafter make presentations for the remainder in behalf of this region.”
Mr. Budd reiterated his belief that locations which State or local officials select as suitable for plants should be inspected by someone representing the Federal Government before decisions are made in connection with them.
12. Mr. Cassels reported a successful conference on August 29, 1940 with 120 representatives of national retailers organizations who assured the Commission of their cooperation in efforts to avoid increased prices, and designated a continuing committee to work closely with the Consumer Division.
13. Mr. Cassels submitted a memorandum from Miss Elliott dated August 30, 1940, “Recrea-
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SEPTEMBER 4 AND 6, 1940
tion” (Document No. 180) requesting clarification of the responsibility for handling recreation problems relating to the defense program raised by the concentration of large numbers of young men working for expanded industries and living in encampments away from their place of normal residence and also by provisions for recreation on or in the vicinity of army posts. In this connection Mr. Knudsen referred to the position of the Commission with respect to expanding housing and other facilities in the vicinity instead of creating a new community at the plant site, and it was pointed out there had been general discussion along that line but no official decision recorded. Mr. Henderson advised these phases will be covered in the memorandum on plant locations which is being developed for the next meeting of the Commission.
14. Mr. Biggers reported Mr. Knudsen had been requested to make a statement today at the Hearings on the Second Revenue Act of 1940, H.R. 10413, and it was planned to have Mr. Henderson, Mr. Nelson and Mr. Biggers present to answer specific questions of the committee. Mr. Biggers referred to the previous statement on this legislation which had been transmitted to the House Ways and Means Committee, which had not gotten into the record, and requested the Commission to approve a similar statement to the Senate Finance Committee. The Commission approved the following communication (Document No. 109) for transmittal to Senator Harrison, Chairman of the Senate Finance Committee.
“After most careful consideration, the Advisory Commission to the Council of National Defense unanimously and urgently recommends to your Committee that subsections (i), (j) and (k) of the Second Revenue Act of 1940 be deleted and that there not be included in the bill any provision limiting or restricting the use which a. taxpayer may make of facilities against which amortization or accelerated depreciation has been charged.
“The Commission is in full accord with the objective of most adequately protecting the interests of the United States Government with respect to its direct or
indirect contribution toward the creation of new facilities to meet the emergency defense needs. The Commission believes, however, that this can be best and most practically accomplished through the medium of standard clauses in the form of contract.
“A committee of the Commission has been working on these provisions for several weeks past, and its recommendations have been approved by the Commission. These recommendations have been accepted in principal by the Secretaries of War and the Navy and the Comptroller General. If you desire we should be glad to have a member of the Commission present and explain to your Committee these protective contract provisions.
“The Commission feels that protection of the Government’s interest through contract provisions is logical and proper, but that to introduce such provisions by amendment to the tax law is illogical and cannot result in equitable application to all the different situations which will develop.
“The Commission is convinced that inclusion of such provisions in the proposed tax measure will tend to defeat the very purpose of the bill and thereby impede the defense program.”
15. Mr. McReynolds referred to previous discussions concerning studies on manganese to be made by the National Academy of Sciences and submitted a copy of a letter from Mr. Batt, dated August 29, 1940, (Document No. Ill) recommending that an agreement be entered into between the Commission and the National Academy of Sciences under which the Academy will appoint two research and technical committees to study such scientific problems relating to manganese and tin as might be referred to it, the Commission to reimburse the Academy for the actual expenses in an amount not to exceed $10,000. The Commission authorized such an agreement with the' National Academy of Sciences.
16. Mr. McReynolds distributed to the Commissioners for consideration at the next meeting a memorandum “Proposed Commission Procedure” (Document No. 110) covering procedure for Commission Meetings, including time of meeting, individuals to attend, submittal of material for agenda for such meetings, and the handling of Commission Meeting Minutes.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—SEPTEMBER 6, 1940
Present:
Mr. Knudsen
Mr. Hillman
Mr. Henderson
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Batt, Deputy Commissioner to Mr. Stet-tinius
Mr. Biggers, Deputy Commissioner to Mr. Knudsen
Mr. Hutson, Deputy Commissioner to Mr. Davis
Mr. Cassels, Deputy Commissioner to Miss Elliott
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. May, Director, Research and Statistics
Mr. Horton, Director of Information
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
1. Mr. McReynolds presented to the Commission a proposed project for the training of aviation ground service men jointly recommended by the Training Section of the Commission, the Civil Aeronautics Authority, the Office of Education, and the Work Projects Administration, to be financed from Works Projects Administration funds, and for which the sponsorship of the Commission is requested. The Commission agreed to sponsor this project.
2. Mr. Biggers, as Chairman of the Committee on Taxation and Finance, reported that Mr. Knudsen and the members of this Committee had met this morning with the Secretary of the Treasury, at his request, to resolve differences of opinion as to methods between the Treasury and the Defense Commission in connection with the amortization provisions of the Second Revenue Act of 1940, H.R. 10413. The Secretary of the Treasury is willing to go along with the Commission and to recommend to Congress the elimination of subsections (i), (j), and (k) of the Bill providing the Commission will request the Army and the Navy to make public the details of all contracts, except for the specifications, as a public safeguard against improper terms or procedures. The Taxation and Finance Committee, Mr. Biggers, stated, unanimously recommends the acceptance of the proposal of the Secretary of the Treasury. The Commission concurred in the recommendation of the Committee, and directed the Coordinator of National Defense Purchases to transmit the request for the publicity of contract'terms to the Secretaries of War and the Navy.
Mr. Henderson suggested that, in connection with the request to Congress for the elimination of these subsections in the Bill, the Commission and the Treasury propose incorporation in the Bill of a provision that all contracts and certificates under which it is expected to take advantage of rapid amortization shall contain proper clauses to protect the Government’s interest. The Commission accepted this suggestion and charged the Committee on Taxation and Finance with its execution. Mr. Biggers promptly delegated to Mr. Henderson the responsibility for drafting this proposal along the lines suggested, in collaboration with Mr. Sullivan of the Treasury Department, and the responsibility for handling its transmittal to Congress.
3. At the request of Mr. Hillman the memorandum “General Principles Governing Letting of Defense Contracts” (Document No. 114) developed by Mr. Nelson’s Committee appointed August 28, 1940, was discussed. After including two words in paragraph 12 for purposes of clarification, and on the understanding that procedures being developed to implement these general principles will set a ceiling (probably
in terms of percentage) below which negotiations will be held in terms of cost, the Commission adopted for immediate transmittal to the President, the following statement of principles, upon the motion of Mr. Batt:
“The essence of the Preparedness Program is the getting of an adequate supply of materials of. the proper quality in the shortest space of time possible. Considerations of price alone are highly important, but in the Emergency are not governing.
“1 . Speed of delivery of all items on the Defense Program is essential. This means :
a) That orders should be placed in such a manner as to insure the most efficient use of each particular facility from the point of view of the program as a whole:
b) That proper consideration should be given to contributory industries, such as the machine tool industry, to avoid creating underlying bottlenecks ;
c) That once delivery dates are fixed, assurance be given that they will be met by the supplier.
“2 . Proper quality is also of prime importance. It is therefore necessary to determine first of all whether or not the supplier can meet the quality requirements, as specified. There should be a willingness on the part of both the Army and Navy, on the one hand, and of the supplier on the other, to adjust specifications on a cooperative basis in order that such specifications may come as near as possible to meeting commercial standards while at the same time fulfilling the military requirements.
"3 . Price, while not the sole consideration, is of outstanding significance, and every effort must be made to secure a fair price. This must take recognition, among other things, of determination of proper cost factors.
“4 . The impact of the defense program upon the consumers must be recognized. This relates to such factors as:
a) Due regard to the necessity of protecting civilian needs and morals;
b) Proper health and housing conditions among employees ;
c) Consideraion to possible off-season production in order to dovetail the military program into production for civilian requirements. Off-season production should also lead to lower overhead and consequently to lower prices for both the consumers and the Government.
“5 . Adequate consideration must be given to labor. This means compliance with the principles on this subject stated by the Commission in its release of August 31st, copy of which is attached hereto.
“6 . Undue geographic concentration of orders should be avoided, both as to procurement districts and as to industrial sections within any such procurement district. Reasons for such decentralization relate to factors of military strategy, as well as avoiding congestion that will slow down production.
“7 . Financial responsibility of the supplier should examined. Ability to post a bond does not necessarily dispose of this problem. The probability should exist that the supplier will be able to continue in business, at least long enough to complete his contract satisfactorily. Further, an ability to finance himself through private sources should take preference over necessity for securing government aid.
“8 . The avoidance of congestion of transportation facilities should be sought. The same applies to warehousing facilities.
“9 . Due consideration should be given to the adequacy of power facilities, particularly where furnished by public utilities.
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10. A general preference should be given to firms having experience with so-called educational orders.
“11. The moral responsibility of the supplier is important, and in some respects, fundamental. There should be evidence of honest and sincere desire to cooperate with the Army and Navy in producing what is called for, and on time, without profiteering; to assume some risks himself rather than attempting to shift all such risks to the Government; and to furnish a correct statement as to his capacity and his experience. The supplier’s general standing and reputation among reputable business men (as distinct from his financial rating) is one index of such qualifications.
“12. The Commission recognizes that competitive bidding is the better procedure in certain types of industry and circumstances. However, it is often impossible to make sure that the principles outlined above are followed when contracts are placed on the basis of price alone and are let to the lowest bidder. Therefore, in cases where competitive bidding will not fulfill the above stated needs of national defense, the Commission recommends that the use of the negotiated contract be authorized where necessary in order that these objectives be obtained in making defense purchases.”
Labor Policy
"Primary among the objectives of the Advisory Commission to the Council of National Defense is the increase in production of materials required by our armed forces and the assurance of adequate future < supply of such materials with the least possible disturbance to production of supplies for the civilian population. The scope of our present program entails bringing into production many of our unused resources of agriculture, manufacturing and man power.
“This program can be used in the public interest as a vehicle to reduce unemployment and otherwise strengthen the human fiber of our nation. In the selection of plant locations for new production, in the interest of national defense, great weight must be given to this factor.
“In order that surplus and unemployed labor may be absorbed in the defense program, all reasonable efforts should be made to avoid hours in excess of 40 per week. However, in emergencies or where the needs of the national defense cannot otherwise be met, exceptions to this standard should be permitted. When the requirements of the defense program make it necessary to. work in excess of these hours, or where work is required on Saturday, Sundays or holidays, overtime should be paid in accordance with the local recognized practices.
“All work carried on as part of the defense program should comply with Federal statutory provisions affecting labor wherever such provisions are applicable. This applies to the Walsh-Healy Act,33 Fair Labor Stand-
•s Walsh-Healey Act, Public Law 846, 74th Cong., 2d Sess., June
30, 1936.
ards Act,34 the National Labor Relations Act,38 etc. There should also be compliance with state and local statutes affecting labor relations, hours . of. work, wages, workmen’s compensation, safety, sanitation, etc.
“Adequate provision should be made for the health and safety of employees ;
“As far as possible, the local employment or other agencies designated by the United States Employment Service should be utilized;
“Workers should not be discriminated against because of age, sex, race or color;
“Adequate housing facilities should be made available for employees.
“The Commission reaffirms the principles enunciated by the Chief of Ordnance of the United States Army, during the World War, in his order of November 15, 1917, relative to the relation of labor standards to efficient production:
“ Tn view of the urgent necessity for a prompt increase in the volume of production ♦ * ♦ ♦, vigilance is demanded of all those in any way associated with industry lest the safeguards with which the people of this country have sought to protect labor should be unwisely and unnecessarily broken down. It is a fair assumption that for the most part these safeguards are the mechanisms of efficiency. Industrial history proves that reasonable hours, fair working conditions, and a proper wage scale are essential to high production. ♦ ♦ ♦ ♦ ♦ every attempt should be made to conserve in every way possible all of our achievements in the way of social betterment. But the pressing argument for maintaining industrial safeguards in the present emergency is that they actually contribute to efficiency.’ ”
4. In connection with requests presented by Mr. Horton from various organizations for speakers, the Commission discussed its responsibilities in the field of public information and public relations and agreed to the following:
(a) Weekly radio broadcasts, probably of 15 minutes duration, will be arranged through which the individual Commissioners, Mr. Nelson, and the Secretaries of War and the Navy will report plans and progress in the Defense program to the country;
(b) It is the sense of the Commission that the Commissioners should not occupy commercial time on the radio.
Mr. Batt was requested to represent the Commission at the September 12, 1940 meeting of the Washington Trade Association Executives.
Wm. H. McReynolds
Secretary
84 Public Law 718, 75th Cong., 3d Sess., June 25, 1938.
8S Public Law, 198, 74th Cong., 1st Sess., July 5, 1935.
COMMISSION MINUTES—SEPTEMBER 11, 1940
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Hillman
Mr. Henderson
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of National Defense Purchases
Mr. Porter, Agricultural Division
Mr. Batt, Deputy Commissioner to Mr. Stettinius
Mr. Fischer, Deputy Commissioner to Mr. Budd
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Bane, Director, State and Local Cooperation
Mr. May, Director, Research and Statistics Mr. Horton, Director of Information
Mr. Fischer reported Mr. Budd is in New York in connection with negotiations to avoid abandonment of a certain railroad which the War Department considers strategic for the defense program.
1. The Commission considered the proposed procedure distributed at the meeting on September 4, 1940, (Document No. 110), and adopted it as follows to be effective beginning with the Wednesday Meeting, September 18, 1940.
"Commission Meeting Procedure
“1. Meetings of the Advisory Commission to the Council of National Defense shall be held at the principal office of the Commission in Washington, D. C., unless otherwise specified. A regular meeting of the Commission, without notice, shall be held at 11:00 A.M. on Wednesday and Friday of each week unless that day be a holiday, in which event such meeting shall be held at 11:00 A.M. on the next succeeding business day.
“2. The Assistant Secretary, the Coordinator of National Defense Purchases, the Coordinator of Defense Housing, the Director of the Division of State and Local Cooperation, the Director of the Division of Research and Statistics, and the Director of Information may regularly attend meetings of the Commission.
“3. All matters to be considered at meetings of the Commission shall be referred to the Secretary, who shall prepare an Agenda for each meeting embodying unfinished business, matters submitted by members of the Commission, and other matters requiring action by the Commission. Such Agenda shall be submitted to the Commissioners the day prior to the scheduled meeting.
“a. Material originating in any division or office intended for consideration at meetings of the Commission will:
(1) Be prepared and submitted in memorandum form, original (on tissue) and 10 clear copies, over the signature of the head of the division or office, addressed to the Secretary. (It is desirable, when feasible, that each different subject be submitted in a separate memorandum and that this summary memorandum not exceed one typewritten page.)
(2) Specifically request Commission consideration for formal action, or state that the material is submitted only for the information of the Commission.
(3) Describe clearly and make recommendations with respect to, the policy questions involved on which the Commission’s consideration is desired.
(4) Be cleared with other interested divisions; the originating division being responsible for securing necessary clearances prior to submittal of the material.
"b. Material for consideration at a meeting of the Commission must be received in the Office of the Secretary prior to 11:00 A.M. the day preceding the meeting in. order that the Agenda may be prepared and, with the attachments, be circulated to the. Commissioners in adequate time for them to review the material before the meeting convenes.
“Matters requiring prompt consideration which develop too late for the Agenda may be presented in Commission Meeting.
“4. Preliminary copies of the Commission Minutes will be circulated to the Commissioners within two days following the meeting for consideration and comment prior to formal approval by the Secretary. Copies of the Minutes will be distributed to the Assistant Secretary, the Coordinator of National Defense Purchases, the Coordinator of Defense Housing, the Director of the Division of State and Local Cooperation, the Director of the Bureau of Research and Statistics, and the Director of Information, in addition to the Commissioners."
2. Mr. Stettinius reported that decisions have not yet been received from the British concerning the wool stock pile, and that developments in the aluminum negotiations are progressing. Mr. Knudsen mentioned complaints about the lack of aluminum forgings which he received on his recent inspection trip around the country, which indicate the need for providing additional hammers. It was understood Mr. Knudsen and Mr. Stettinius would move on this matter during the week.
3. In connection with the contracts for cantonments recently awarded by the War Department and the problems created in the lumber and building industries thereby, the importance of improvement in the timing of defense contracts was again discussed. Mr. Nelson suggested better cooperation and coordination could be achieved through the appointment to the staffs of the Secretaries of War and the Navy of a civilian to act as liaison officer with this Commission. Following further discussion of these problems Mr. Henderson and Mr. Nelson were requested to draft, for the consideration of the Commission at its next meeting, a proposed statement to the Secretaries of War and the Navy recommending: (a) appointment of a coordinator in the office of each to work with the Coordinator of Defense Purchases; and (b) avoidance of awarding contracts on spot delivery schedules unless there is assurance that adequate materials will be available.
4. Mr. Batt discussed with the Commission a proposal for a comprehensive study of manganese which has been developed with the Secretary of Interior and referred by the President to the Industrial Materials Division for comment. Mr. Stettinius requested the endorsement by the Commission of a request for a supplemental appropriation of approximately $1,375,000 for this project including the construction of a beneficiation plant in Nevada. Mr. Henderson desired to discuss this proposal with a member of his staff who has been working on the manganese problem before he acted on it. The Commission agreed to indorse this request for the supplemental appropriation for the Bureau of
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SEPTEMBER 11, 1940
Mines in the Department of Interior subject to its clearance by Mr. Henderson.
5. Mr. Nelson reported the Site Board is not going to approve Bradbury, Indiana, which location was questioned by several members of this Commission, and the Union Center proposal is receiving further consideration. Mr. Nelson reported further that within the week Colonel Rutherford will make available to the Commissioners a map showing projected locations of all camps, cantonments, etc., which are at present in the War Department plans.
6. In the absence of Mr. Biggers, Mr. Henderson reported for the Committee on Taxation and Finance the development since the last meeting in connection with the tax bill H.R. 10413. Following conferences over the week end, the Senate Finance Committee in Executive Session on Monday: Accepted the compromise developed by the Commission and the Treasury in lieu of Subsections (i), (j) and (k) ; abandoned the special 10 per cent tax on all Government contracts and subcontracts which had come into the picture; and dropped the proposal of having the Treasury participate in the terms of contracts. The Commission expressed appreciation of the work of the Committee, and Mr. Henderson pointed out consideration of the bill on the floor of the Senate probably will reopen several of these matters.
7. Mr. Henderson advised he would have a report relating to the antitrust suits in the oil industry, previously discussed August 23, 1940, ready for distribution to the Commissioners today and would like action on it at Friday’s meeting at the latest.
Mr. Henderson reported he is working on a statement to the Commission relating to the Sperry Gyroscope Company which has a large amount of Government orders, and which is being called before the Grand Jury in New York. This matter was referred by the War Department to the Industrial-Production Division.
8. Mr. Henderson distributed to the Commissioners a memorandum dated September 11, 1940, “Bottlenecks and Productive Capacity” (Document No. 115) referring to a forthcoming acute problem in connection with prospective shortages in capacity of recommending either expansion of capacity or price control, as follows :
“Since this Commission began its work, the level of zVa« as represented by the new FRB index
(1935-39 equals 100), has increased from 114 in May to 122 during the first week in September. Business analysts expect an FRB index of at least 126 by the end of this year. In my own view the index is likely to go above this level.
“When considering the present and near-future levels of the FRB index, the highest levels of previous years should be taken into account The high in 1937 was 120, in 1939 it was 126 (Dec.).
“We are entering a period of expanded defense procurement coincident with an increasing demand for civilian products and services, in which consideration must also be given to the desires of the British and Canadians.
“My staff surveys indicate the possibilities of some very real shortages in capacity. My problem — and not a distant one — involves a decision as to choice of recommendations — expansion of capacity or price controls.
“The expansion of industrial capacity, having in mind maladjustments after the laát war and the underutilization of resources during the 1930’s raises real problems in industrial policy.
“This memo is merely to state the simplest outlines of a forthcoming acute problem and to say that I am working on (a) analyses of potential industrial capacity shortages, (b) reviews of the post-war experience, (c) recent French and English failures to expand sufficiently, and (d) types of possible protections for industry against the threat of post-emergency excess capacity.
“I would welcome an early exchange of views on these issues with the several Commissioners.”
9. Mr. Hillman distributed a memorandum dated September 10, 1940 (Document No. 116) reporting on a study made by Mr. Dooley of the effectiveness of the training program which indicates: (a) that there is no serious concern over shortage of labor; (b) that training through upgrading, plus the regular apprenticeship training for certain carefully picked young employees, will meet the needs; (c) that the need for managers and supervisors is urgent; (d) that actual orders are not yet forthcoming and the companies do not know just how they stand with regard to labor needs, but they are making plans and setting up relationships with schools and establishing their own training programs in anticipation of what is to come; and (e) that the vocational schools are doing a good job for industry.
10. Mr. Hillman reported difficulty might become acute in Tacoma, Washington, and necessitate his getting into the picture in connection with a jurisdictional dispute between the American Federation of Labor and the Congress of Industrial Organizations.
Mr. Hillman also called the attention of the Commission to a lack of cooperation on the part of the Army and the Navy in awarding contracts to concerns which do not maintain the labor standards established by law and adopted by this Commission. Upon the suggestion of Mr. Knudsen, Mr. Hillman will bring this matter before the Commission at a subsequent meeting with specific information concerning such violations of the labor standards.
11. Miss Elliott reported continued favorable reaction to the recent conference with representa
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MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
tives of retailers associations, and advised that the continuing committee appointed at that conference is meeting in Washington, September 16, and 17, 1940. Miss Elliott also stated she plans to take up with the Division of State and Local Cooperation inquiries and complaints received from various localities concerning apparently unwarranted increases in prices.
12. Miss Elliott reported to the Commission that she is not obtaining the services of an individual she had requested from the Department of Justice because she preferred not to accept the basis on which Mr. Thurman Arnold wished to make him available.
13. Mr. Knudsen distributed for the information of the Commission the “Weekly Operations Progress Report” of the Industrial Production Division, dated September 11, 1940 (Document No. 102a).
14. Mr. Knudsen referred to the delay in connection with the contract provisions and procedure for Government financing of new plant facilities. Mr. Henderson explained this matter was not presented to the Commission today because Mr. Biggers is out of the city and that the principle question to be resolved is one of permitting the Government in the case of complete and separate plant facilities to refuse the arbitrated price
if it is not considered satisfactory. It was understood this matter will be placed before the Commission for final action on Friday, September 13, 1940.
15. Mr. Horton reported Mr. Stettinius will handle the first of the series of weekly radio broadcasts by the Commissioners on Thursday, September 19, 1940, between 9:15 and 9:30 p.m. Eastern Standard Time, over the Columbia Broadcasting System.
The action indicated was taken in connection with the following invitations:
American Trade Association Executive, Chicago, Illinois, September 26, 1940, Mr. Biggers—accepted.
Southern Governors Conference, Mobile, Alabama, September 15-17, rejected on the understanding Mr. Bane or a representative from his Division is attending the Conference. National Consumers-Retailers Conference, Miss Elliott—accepted.
Business and Professional Women’s Club of Washington—Miss Elliott will attend.
Washington Advertising Club, Mr. Horton —accepted.
Wm, H. McReynolds
Secretary.
COMMISSION MINUTES—SEPTEMBER 13. 1940
Present:
Mr. Stettinius
Mr. Knudsen
Mr. Henderson
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson Coordinator of Defense Purchases
Mr. Porter, representing Mr. Davis
Mr. Fischer, Deputy Commissioner to Mr.
Budd
Mr. May, Director, Research and Statistics Mr. Horton, Director of Information Mr. Ginsburg, Price Stabilization Division Mr. Shaughnessy, Price Stabilization Division
Mr. Thurman Arnold, Assistant Attorney General
1. Mr. Henderson requested consideration, for clearance at this meeting if possible, of the preliminary draft dated September 10, 1940, “United States vs. American Petroleum Institute, et al.—Report of the Advisory Commission to the Council of National Defense.” (Document No. 117). Mr. Stettinius stated he and his staff had gone over this report carefully
and had a number of refinements which he suggested Mr. Smith and Mr. Monrad of his Division take up with Mr. Ginsburg and Mr. Shaughnessy. He referred particularly to a modification of the statement on page 3, “The Commission does not believe that its relationships with the oil industry will be substantially impaired even if the Government’s prayer for relief were left unchanged.” Miss Elliott re quested that the third paragraph on page 2 be clarified to remove the implication that the Commission might not be opposed to price fixing conspiracies, and also that the covering letter of transmittal outline the procedure followed in the Commission in the preparation of this report.
Mr. McReynolds pointed out the question is not whether this arrangement is acceptable as a matter of policy but whether the arrangement of the industry conforms to statutory requirements.
It was agreed Mr. Henderson’s staff would confer immediately with representatives of the Divisions to consider any suggestions for clarification and that the revised report would be cleared with each Commissioner and transmitted to the Attorney General today, if possible, with
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SEPTEMBER 11, 13, AND 18, 1940
the covering letter (Document No. 117) as revised, as the report of the Commission for such use as the Attorney General wishes to make of it.
2. Mr. Henderson distributed a momorandum dated September 13, 1940, “Responsibilities of the Commission under the Second Revenue Act of 1940” (Document No. 109a), pointing out that immediately upon enactment of this Bill, H.R. 10413, the Commission must be prepared to act upon applications for certification for tax amortization, and recommending a procedure for centralizing the handling of these certificates. The Commission after revising them slightly, adopted Mr. Henderson’s recommendations as follows:
(a) That this responsibility be centralized in the office of the Coordinator of Defense Purchases;
(b) That the Coordinator of Defense Purchases be directed forthwith to establish suitable procedure and organization to handle such responsibility;
(c) That the Secretary of the Commission be authorized to issue such certificates on behalf of the Commission.
It was understood a public announcement would be made immediately that applications for both types of certificates are to be directed to the Coordinator of Defense Purchases.
3. Pursuant to the discussion at the Meeting on September 11, 1940, page 86, paragraph 14, relating to the contract provisions and procedure for Government financing of new plant facilities, Mr. Henderson reviewed the discussions of the Committee on Taxation and Finance on modifying Plan II to further protect the Government in disposing after the emergency of added facilities in plants which are privately owned but in which the Government has an interest. Following considerable discussion, Mr.
Knudsen suggested a single formula based on a negotiated price instead of an arbitrated price, substantially as follows:
The contractor shall have the dominant right to buy any facilities at original cost less equitable depreciation as agreed upon by the contracting officer and the contractor at the time the contract is entered into, or at a negotiated price which is subject to the approval of the highest contracting officers of the Army and the Navy. If, in the case of “scrambled” facilities, the Government does not accept the negotiated price for the additional facilities, it will remove them and return the plant to its original state.
It was understood the above proposal would be put in proper shape by Mr. Henderson’s staff today and cleared separately with the Commissioners in order to complete this contract form and procedure for immediate use.
4. At the request of Mr. Nelson the following sites were approved for General Motors plant expansion: Flint, Michigan; Saginaw, Michigan; and Dayton, Ohio.
5. Mr. Thurman Arnold met with the Commission to explain informally the procedure of the Department of Justice in connection with Grand Jury subpoenas because of the request which has come to the Commission from the Sperry Gyroscope Company for delay in answering a New York Grand Jury Subpoena.
Mr. Arnold pointed out that in this case, and other such cases, the company should make its request to the Department’s trial attorneys, and it was specifically understood that if the Department finds it is unable to grant the Sperry Gyroscope Company the extension it requests, Mr. Arnold will so advise this Commission through Mr. Henderson.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—SEPTEMBER 18,1940
Present:
Mr. Knudsen
Mr. Hillman
Mr. Henderson
Mr. Davis
Miss Elliott
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of Defense Purchases
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. Batt, Deputy Commissioner to Mr.
Stettinius
Mr. Bane, Director, State and Local Cooperation
Mr. May, Director, Research and Statistics Mr. Palmer, Coordinator of Defense Housing
Mr. Horton, Director of Information
1. Mr. Henderson reported, pursuant to the Commission action of September 13, 1940, page 86, paragraph 1, that the report “United States vs. American Petroleum Institute, et al.—Report of the Advisory Commission to the Council of National Defense” (Document No. 117) had been revised and transmitted on Saturday, September 14, 1940, to the Attorney General.
87
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
Mr. Henderson reported further that Mr. Arnold is proposing an alternative to the request of the Sperry Gyroscope Company for a two months* delay in answering the subpoena in New York, and a conference is being held by Mr. Arnold, Mr. Morgan of Sperry Gyroscope, and Mr. Henderson, on this matter this afternoon.
2. Mr. Henderson advised that some confusion exists concerning certain language in Public No. 78136, “Second Supplemental National Defense Appropriation Act, 1941”, and the Commission authorized Mr. Henderson to work with the appropriate congressional committees to clarify the provisions in question, probably through a rider on the pending bill to permit assignment of claims upon the United States, or some other bill.
3. Mr. Henderson reported he was looking into the price situation on zinc and ferro-manganese and proposed to send an inquiry to the steel companies requesting the explanation of some developments in connection with ferro-manganese which are puzzling. He explained it was his intention, after consultation with the Industrial Materials Division people, to explore situations and take appropriate action where there is apparently a low volume of use of capacity and prices start to rise, in order to discharge the responsibilities placed upon his Division of Price Stabilization.
4. Mr. Nelson requested clearance, today if possible, on the plant sites which he had circulated to the Commissioners. The following sites were approved for smokeless powder plants: Charlestown, Indiana; Radford, Virginia.
5. Mr. Henderson reported that a committee composed of Mr. Knudsen, Mr. Nelson, and himself, had developed the language for Plan II relating to the disposition after the emergency of added facilities in plants which are privately owned but in which the Government has an interest, pursuant to the Commission action of September 13, 1940, page 87, paragraph 3, and the standard contract itself had been changed to meet those conditions. He reported further that the War Department had then requested the Commission to work out with the different industries the “equitable depreciation” to be incorporated in the contracts.
Accordingly, Mr. Nelson reported that he had met the evening of September 17, 1940, with representatives of the Army and airplane industries where a tentative agreement on the following depreciation rates had been reached: Buildings, 5 per cent; heavy machinery, 12 per cent; portable tools, 50 per cent, but in no case would the Government receive less than 15
M 76th Cong., 3d Sess., September 9, 1940.
per cent. On the understanding that if further experience demonstrated the necessity these percentages could be changed, the Commission approved them as presented by Mr. Nelson for new airplane plant contracts.
6. Mr. Nelson suggested that additions to existing plants, in so far as location is concerned, could be cleared more expeditiously if the Industrial Production Division were charged with that responsibility instead of the Commission itself. He pointed out that of course action on amortization has to be taken by the Commission itself. There was no objection to the proposal and it was understood hereafter clearance of additions to existing plants would be made by the Industrial Production Division. Mr. Fischer asked that the Transportation Division be advised of such clearances.
7. Referring to the Commission action of September 4, 1940, page 80, paragraph 5, Mr. Nelson reported that developments have reached an impasse in the purchase of aviation gasoline because the Navy does not believe it has the authority to proceed on the terms set by the Reconstruction Finance Corporation. Following some discussion it was agreed the Industrial Materials Division would take up with officials at the Reconstruction Finance Corporation the proposition that entirely new arrangements be made under which the aviation gasoline would be purchased by the Reconstruction Finance Corporation as an emergency defense purchase and the Army and Navy could thereafter purchase it from the Reconstruction Finance Corporation. Mr. Henderson stated that there had been some questions on the part of his Division concerning certain assumptions in the first arrangement, and he would like to review for quick clearance the terms of any new arrangement
8. Mr. Hillman reported satisfactory adjustments in the Bethlehem Steel difficulties and in Tacoma, Washington, and other Pacific port labor troubles.
Mr. Knudsen referred to the fact that shipyards are beginning to “steal” workers from each other, and Mr. Hillman stated it might be advisable to call shipyard management in for the purpose of attempting to reach agreement on regional rates of pay to minimize this problem. There was some discussion of stimulating immediate use of free facilities and workers for toolmaking, and the importance of “incentive” in the entire defense program.
9. Miss Elliott advised the Retailers Committee is setting up a liaison arrangement through which one individual will work continuously with her Division and Mr. Horton’s Division to keep the industry advised of developments. She
88
SEPTEMBER 18 AND 20, 1940
stated representatives of wholesale organizations have requested a conference and similar arrangements to those which have been developed with the retailers.
Miss Elliott also referred to a communication she will discuss with Mr. Henderson concerning the effect of the application of wage and hour legislation in Puerto Rico.
10. Miss Elliott referred to her submittal of September 4, 1940, page 80, paragraph 13, concerning the handling of recreational activities in connection with the defense program, and reported she had discussed this question with the President who wishes recreation matters taken care of by the military establishments. Miss Elliott is to discuss this arrangement with
Assistant Secretary Patterson at the request of the President.
11. Mr. Knudsen distributed for the information of the Commission the “Weekly Operations Progress Report” of the Production Division, dated September 18, 1940 (Document No. 102b).
12. Mr. Batt stated the Commission has a responsibility to more adequately handle requests from organizations for speakers to inform them of the work of the Commission. At the suggestion of Mr. McReynolds the Commission unanimously designated Frank Bane as the official representative of the Commission to handle speaking engagements in so far as his time will permit.
Wm. H. McReynolds
Secretary
COMMISSION MINUTES—SEPTEMBER 20. 1940
Present:
Mr. Hillman
Mr. Henderson
Mr. Davis
Mr. McReynolds, Secretary
Mr. Sherwood, Assistant Secretary
Mr. Nelson, Coordinator of Defense Purchases
Mr. Fischer, Deputy Commissioner to Mr. Budd
Mr. Batt, Deputy Commissioner to Mr. Stet-tinius
Mr. Cassels, Deputy Commissioner to Miss Elliott
Mr. Bane, Director, State and Local Cooperation
Mr. Palmer, Coordinator of Defense Housing
Mr. May, Director, Research and Statistics Mr. Horton, Director of Information
1. Mr. Batt reported a request from Ernest Draper that Mr. Stettinius serve as Chairman of the Community Chest drive for the Defense Commission, and suggested that this probably should be done by someone in the administrative office. However, on the recommendation of Mr. Henderson that Mr. Stettinius is the person to head up this campaign, the Commission unanimously requested him to assume the Chairmanship of the Community Chest drive for the Commission.
2. Mr. Nelson referred to the memorandum from the Assistant Secretary of War “Project for establishing working funds for use in connection with the commandeering of machine tools” (Document No. 118), proposing, in anticipation of the enactment of H.R. 10339, establishment of a working fund in the amount of $4,000,000 from the appropriation for Expediting Production, expenditures under this project to require the customary clearance by the Advisory Commission and final approval by the President;
and requesting the formal approval of the Commission for this project. The Commission approved this project on the understanding that it would be developed as a joint arrangement for both the Army and the Navy, and requested the Secretary to so advise the appropriate officials.
3. Mr. Nelson brought up for the Commission consideration the unsatisfactory basis on which plant sites are being cleared, recommending that the Commission go on record as requiring a week’s time to properly consider and reach a decision regarding clearance. Mr. Hillman again stated that, like Mr. Davis, he thinks the Commission should have a choice of alternative locations in making its decision, and suggested that might be taken care of through the assignment of someone from the staff of either the Farm Products Division or the Labor Division to sit with the Site Board. It was agreed the Coordinator of Defense Purchases would advise the Site Board that it is necessary for this Commission to have five days time for the consideration of these proposals, and hereafter that procedure will be followed, and that in order to facilitate clearances the Commission is anxious to designate a staff member to work continuously with the Site Board in studying sites.
4. Pursuant to the Commission request of September 13, 1940, page 87, paragraph 3, concerning the development of substitute language covering the future disposition of emergency plant facilities under Plan II, Mr. Henderson submitted for the record the following language contained in a memorandum dated September 13, 1940, “Mr. Knudsen’s Statement of the Commission’s Agreement Regarding Disposition of Emergency Plant Facilities” (Document No. 109b):
“The contractor shall have the right to purchase any facilities paid for by the Government at original
89
MINUTES OF ADVISORY COMMISSION TO COUNCIL OF NATIONAL DEFENSE
cost less depredation, or loss of value due to its use for defense purposes. This latter amount to be agreed upon at the time of signing the contract. The general guide for this amount to be regular depreciation for this dass of fadlities.
“In the case of a complete plant, if the contractor is unwilling to purchase the facilities on terms as stated above, he may negotiate with representatives of the contracting Government Department and arrive at the fair value of the fadlities. This agreement however, to be subject to approval of the Secretary of War or Navy, as the case may be.
“In the case of intermingled facilities, the same procedure applies, except that the contractor failing to arrive at an agreement may require the Government to remove the facilities and restore his property to its original state.*
5. Mr. Henderson reported that, contrary to his understanding of Mr. Arnold’s statement to the Commission on September 13, 1940, page 87, paragraph 5, that there would be no difficulty in extending the time for the Sperry Gyroscope Company to reply to the Grand Jury subpoena in New York, difficulty had developed because of the position taken by Mr. Arnold to which Mr. Henderson had referred at the meeting of September 18, 1940, page 87, paragraph 1. Mr. Nelson stated that Mr. Arnold had talked with him Friday evening strongly recommending that instead of the Company’s requesting a delay from the Grand Jury, it would be much wiser for the Company to accept his alternative proposal of putting Department of Justice people into their files to proceed in an orderly fashion to develop the information needed.
It was understood Mr. Henderson would discuss this matter with the Attorney General because of the unsatisfactory condition into which it has developed.
6. The Commission next considered the draft of a proposed letter to the Board of Governors of The Federal Reserve System, previously distributed by Mr. Davis (Document No. 114a) describing the plan of cooperation with private manufacturers for the construction and equipment of new plants and additions necessary for production of defense supplies, which was designed to make available a bankable contract permitting the utilization of private funds in the defense construction program; and requesting the cooperation of the Board of Governors of the Federal Reserve System in laying this plan before a representative portion of the commercial banks in all sections of the country in order to obtain an indication of the availability of bank credit for the financing of emer
gency plant facilities under the plan described. The Commission approved this letter for immediate transmittal by the Secretary to the Federal Reserve Board, together with a copy of the “Emergency Plant Facilities Contract” (Document No. 114a). It was understood the Federal Reserve Board would immediately file on its wires a letter of its own asking for a report of bank funds available for financing such plants and facilities.
7. Mr. Fischer reported with real concern that the Pennsylvania Railroad has complained of a congestion of 1200 cars containing construction material at Camp Dix where there are not facilities for, nor an attempt being made to • unload. He recalled that Mr. Budd had recommended the inclusion in all contracts, including fixed-fee contracts, of a provision that the contractor would assume the cost of any demurrage, but the contractor involved has stated he does not know what his responsibilities are since he is working under a letter of intent Mr. Fischer emphasized it is essential for the Commission to exercise the greatest control to insure the prompt release of all kinds of transportation facilities if difficulties are not to develop which it will be impossible to explain to the public.
Mr. Nelson advised that such a provision should have been a part of the Camp Dix arrangement so he is checking into the matter, and that a new fixed-fee contract form is in his office and he will make certain that such a provision is incorporated in it.
8. For the information of the Commission, Mr. McReynolds advised that the President has signed an Executive Order»? setting up a Health and Medical Committee as a part of the National Defense Council, responsible for advising the Council concerning health and medical care in connection with national defense, and that the scope of the functions of this Committee will be established by the terms of the allotment of funds to the Committee by the President. In response to Mr. Cassels’ inquiry, Mr. McReynolds replied that this should relieve Miss Elliott entirely of problems in the health field although there undoubtedly will be close cooperation between the Committee and the Consumer Protection Division.
Wm. H. McReynolds Secretary
*ot an but an or95
Training plans, avoidance of bottlenecks in in-dustries ....................................... 78
Training program ........................28, 55, 63, 85, 103
Troubles in Northwest ............................... 119
Troubles, publicity ............................... 58
Untapped sources of supply ........................... 106
Utilization ..........................'...............117
Violations, contracts ................................. U7
Wage levels, maintenance .............................. 75
Wage rates, regional ................................. 98
Wage stabilization in aircraft and shipbuilding industries ....................................... 91
Labor Department, Conciliation Bureau, funds for additional employees ................................ 57
Labor Division, representation on War Department Site Board suggested ................................. 89
Labor Statistics, Bureau of:
Additional personnel to work on cost-of-living index ..........................t............; • • 20
Allocation of funds for the regional adaptation and pricing of WPA maintenance budget and the Heller Committee Wage-Earner Budget... 128,
134,136
Funds for expansion of facilities to handle basic price information ............................... 145
Program modification approved ....................... 144
Program to extend the cost-of-living survey ... 104
LaGuardia, Fiorello, Mayor, request for liaison person to work with the Joint Permanent Board of Defense ............................................. U6
Land:
Acquisition policies ........................ 105,107,110
Amendment to law governing acquisition................ 141
Certification for tax amortization................. 140,142
Land, Emory S., Admiral, invitation to meeting to discuss expansion of shipbuilding .................. 5,10
Lau Tool and Gauge Company, plant site recommendation ...................................t ........ 143
Lawyers’ Committee, report on clearance of antitrust matters ............................................... ?, 30
Lead, price situation ............................112,113
Leather, shoes and hides, investigation of advertising 68,70 Lee, Josh, Senator, request that construction of Tulsa, West Tulsa and Sand Spring Levee on the Arkansas River be declared necessary to national defense ............................................163,164
Legislation:
Daily analysis by Library of Congress ........ 37
Resolution for immediate action on tax amortiza-
tion and Vinson-Trammel Act............................. 78
Lenroot, Katherine, appointment as coordinator on Health and Welfare Committee ...................... 29,92
Liaison Committee, scope and functions ...........118,120
Loading plant, Milan, Tennessee...................113,124
Long Beach, California, plant site of the Douglas
Aircraft Company ......................v................ 110
Lubin, Isador, appointment to committee to draft policy statement on contracts ........................ 76
Lumber:
Effect of cantonments contracts ................. 84
Effect of labor troubles in the Northwest............ 119
Prices ................................................ 94
Prices paid by Government............................... 141
Relaxation in prices .................................... 128
M
M-Day, appointment of committee to study program for ................................................ 35
Subject Page
vfcCabe, Thomas B.:
Appointment to Industrial Classification Committee .............: •.......................... 54
Return to private business............................ UI
Study on classification of industries ................. 4
McDonnell Aircraft Corporation, plant site recommendation ........................................ *46
Machine gun plant, Utica, New York................... 57
Machine tools: Price Bulletin, issuance proposed .................. 140
Second-hand, price agreement ....................... 138
Working fund for purchase of ........................89,112
Mackinac Transportation Company, use of ferry as icebreaker in Sault Ste. Marie Straits ............• 146
McNutt, Paul V., appointment as Coordinator of
Health, Welfare and Related Defense Activities . .123,124
McReynolds, William H.:
Authorization to clear resubmitted plant site projects .......................... • • • • • • ’; 1*7
Designation as liaison officer between Office of Production Management and Advisory Commission .................................... 145
Magnesium: Expansion program .............................
New York grand jury investigation ................... 62
Supply, possible effect of antitrust investigations on .............................................. 58
Manganese: Price of ferromanganese ............................. °8
Stockpile ...........................................77,103
Study by Interior Department ......................... 84
Study by National Academy of Sciences................. 81
Maritime Commission: Coordination of ocean shipping ..................... 136
Shipbuilding program ........ . .. ................. 5,11
Shipbuilding wage stabilization ...................... 92
Maritime law, amendment to permit vessels of Canadian registry to transport iron ore between American ports ...................................... 15.-
Marshall, Michigan, plant site recommendation..... 145
May, Stacy: .
Appointment as head of the Research and Statistics Bureau .................................... • • 5
Report of activities of the Bureau of Research and Statistics .............................. ” $4
Report on the proposed transfer of Advisory Commission funds to the Bureau of Labor Statistics for inter-city comparisons of the cost of living...................... • • • • • 134
Mayors, conference of, attendance of Sidney Hillman 68
Mellett, Lowell, housing report ..........•_.......28,30
Memphis, Tennessee, plant site recommendations .. .141,150
Merchant Marine Act of 1936, amendment ......... 91
Merchants Association of New York, activities in production field .................................... 14
Mercury, purchase for stockpile..................... 103
Metals, non-ferrous, price situation .............93,94,138
Methylamine, placement on export licensing list ■ • • • 127
Mica, purchase for stockpile .....................53,103
Michigan Highway Commission, jurisdiction in obtaining ferry for icebreaking in Sault Ste. Marie
Straits ...J..,....................................146,148
Middle River, Maryland, site for proposed bomber plant ............................ • • .......
Midland, Michigan, plant site clearance ........... 102
Midwest Defense Conference, Kansas City:
Request for member of Commission to address meeting .......................................... 75
Resolutions ................................. ......... 80
Milan, Tennessee, site approved for loading plant ..113,124
Mines, Bureau of: Appropriations ..................................... 84
Proposed survey for crude oils that contain aviation gasoline .................................. UI
174
■Subject Page
Mines, Bureau of (Cont.) :
Tests of coal to determine suitability for production of synthetic ammonia.................. 122,130
Moffett, Guy, report on state and local cooperation.34,36,48
Morgantown, West Virginia:
Power transmission lines, clearance .............■. 123
Recommended site for synthetic ammonia plant 100,
102,119
Motion pictures, publicity releases ......................139,148
Muscle Shoals, Alabama:
Aluminum manufacture ........................... 108
Nitrate plant no. 2, essentiality for national defense....................................... 140
Site for synthetic ammonia plant.................100,102
N
National Academy of Sciences : Report on tin smelting............................ 113
Studies on manganese and tin ............................ 81
National Consumers-Retailers Conference, invitation to Miss Elliott accepted .............................. 86
National Economic Committee, investigation of foreign patents ..................................... 58
National Inventors Council, establishment and functions ................................................. 27
National Labor Relations Act, violations ..............96,115
National Labor Relations Board, decisions .......95,96,128
National Oil Products Company, Cedartown, Georgia, plant site recommendation............................. 150
National Petroleum Association, W. A. Harriman to address meeting ....................................... 69
National Resources Planning Board, allotment of funds for activities in relation to the defense program .............................................. 107
National Wholesale Associations, Council of, meeting with Advisory Commission .............................. 21
Natural gas, replacement of coke-oven gas ............ 125
Navy Department:
Appointment of a coordinator to work with the
Coordinator of Defense Purchasing.................... 84
Authority to establish priorities ....................... 80
Aviation gasoline requirements ........................ Ill
Aviation gasoline, stockpiling of ....................... 11
Contract placements...................................... 15
Establishment of liaison with Reconstruction
Finance Corporation ................................. 100
Lack of cooperation in awarding contracts to firms violating labor standards................85,128
Liaison officer appointed .............................. 95
Over-all capacity study of requirements ................. 65
Personnel .............................................. 95
Plant sites .......................................... 57
Procedure in handling tax certification............... 154
Raw materials requirements for air bases.............. 79
Request for establishment of a working fund for buying machine tools ........................... Ill
Requirements program .................................... 12
Shipbuilding wage stabilization ......................... 92
Tax certification ................................112,113,117
Unit to handle tax certification........................ 114
Navy Site Board, plant site clearance procedure ... 99
Navy, Under Secretary of :
Legality of the Emergency Plant Facilities contract form ...................................... 109
Problem in connection with certification of accelerated depreciation .......................... 108
Necessity Certificates : Applications, procedure for processing ...........19, 20, 87,
104, 133, 136, 137, 139, 140, 145
Extension of issuance date, proposal .........125,131
Filing date not evidence of timeliness of application .......................................... 161
Issuance ...................................... 101
Publicity through issues of Defense or Division of Information ...............................162,163
Subject Page
Nehemkis, Peter R., Jr., appointment to Committee to aid small business .............................. 95
Nelson, Donald M.:
Appointment aS Chairman of committee to draft policy statement on contracts. ................... 76
Appointment as Chairman of committee to study M-Day program ................................... 35
Appointment as Coordinator of National Defense Purchases ................................. 3, 5,14
Appointment as Director of Priorities ........ 99
Appointment to committee to assist small business 95
Conference with State Department on loans and credits to Central and South American countries ........................................... 42
Designation as Administrator of Priorities......... 102
Inquiry on handling plant site recommendations. 135,137
Invitation to participate on “America’s Town
Meeting of the Air” ............................... 104
Invitation to speak at Association of National Advertisers’ Convention .......................... 97
Presentation of plant site recommendations to
Plant Site Committee, OPM ........................... 148
Recommendations to Secretaries of War and Navy: (a) appointment of a Coordinator in office of each to work with the Coordinator of Defense Purchasing; (b) avoidance of awarding contracts on spot delivery schedules......... 84
Neoprene, shortage ............................. 127
Nevada, construction of manganese beneficiation plant 84 New York:
Grand Jury investigation of Sperry Gyroscope Company..............................85, 87, 88, 90, 94
Grand Jury investigation of ten industries.....58,62 Suggested establishment of office in New York
City ...................................;.......... 116
New York Shipbuilding Company, labor troubles ... 104
Niagara Falls, New York, plant site clearance...... 102
Nickel, placement on the export licensing list..... 129
Nitrates, Chilean, storage problem .............. 124
Nitrogen, proposals for increased capacity......... 102
Non-Reimbursement Certificates:
Issuance in de minimis cases .................. 161
Legal interpretation..................144,145,149,155
Procedure for handling by Certification Committee .................................. ....v 97
Statement of Policy.............................. 153
Norman, Mark W., Judge, memorandum regarding tax certificates.............................. 147
North American Aviation, Inc., machinery for airplane construction ................................ 126
O
Office Space:
Federal Reserve Building and Munitions Building .............................................. 21
Munitions Building ................................
Social Security Building ................... .2, 127,139
Oil Industry:
Anti-trust cases ....6, 41, 44, 50, 66, 75, 85, 86, 87, 94
Requests from Army and Navy............................ 4
Pearson and Allen Article regarding Blackwell
Smith’s connection with oil companies................ 69
Testimony of E. R. Stettinius, Jr., before Petroleum Subcommittee, House Interstate and Foreign Commerce Committee ...................... 124
Omaha, Nebraska, plant site for aircraft plant..... 124
Optical instruments:
Facilities shortage ................................. 42
Labor training plans ................................. 78
Orders (see Purchase Orders)
Otis Elevator Company, Buffalo, New York, plant site recommendation ...............• -.....*....... 135
175
Subject Page
P
Packard Motor Company, contracts for aviation motors ..........................................; • 29
Palmedo, Roland, appointment to Committee to aid small business ....................................... 95
Palmer, C. F., appointment as Coordinator of Housing ........................................... 33,36
Paper and Pulp:
Press statement on situation .................... 44
Reported shortage ..................................... 39
Parran, Thomas, appointment as coordinator on
Health and Welfare Committee ........................29,92
Patents: Clearance .......................................... 27
Foreign ownership ..................... ........... 58,94
Patino, Simon I., available in connection with matters involving Bolivian tin and smelting .................. 77
Pearson, Drew and Allen, Robert S., newspaper article about antitrust proceedings against oil companies ............................................... 69
Pell City, Alabama, plant site for smokeless powder and bagloading plants ............................. 124
Pennsylvania Railroad Company, request for information on Necessity Certificates....................... 162
Personnel: Appointments procedure ............................. 34
Civil Service status .......................... 49
Exemption from military service ...............91,100
Need for Tax Certification Section ........... 142
Per diem pay ................................ 37
Reorganization of executive personnel in Industrial Materials Division ....................... 70
Transfer from other agencies ........... .^...... 5
Petroleum {see Oil)
Philadelphia Quartermaster Depot:
Adverse Commission action ......................... 95,96
Approval of project .................................. 98
Plant site recommendation, approval .................. 151
Rehabilitation ........................................ 21
Philippines: / H
Establishment of food reserves ....................155,157
Refractory chrome, proposed purchase from ... 99
Pipelines:
Ownership by oil producers ........................41,45
Policy toward expansion ............................... 46
Plant Site Board {see Navy Site Board; War Department Site Board)
Plant Site Committee, OPM, recommendations that alternative locations be considered................147,152
Plant Sites:
Actions taken .............88, 97, 102, 105, 113, 117, 121,
124, 126, 130, 131, 135, 139, 141, 143, 145,
146, 147, 148, 149, 150, 151, 154, 155, 156
Clearance procedures..................89, 92, 95, 120, 126
Committee in War Department for determination of plant location .............................. 22
Consideration by all Commissioners ............38,49
Draft letters concerning procedure and plan .... 134
Factors cited in principles for letting contracts . 82
Factors for consideration to be discussed at meeting with War and Navy Department representatives .............................. 57
Location in relation to transportation, power and other factors .................................. 38
Location in the West .............................. 34,56
Midwest Defense Conference ........................ 75, 80
Policy for selecting ............................... 35,49
Resubmission where amount of money involved
increased over that originally approved ............ 142
Statement of policy ............................... 55,76
“Statement of Policy on the Location of New
Defense Facilities” .............................131,147
Time for consideration................................. 75
Subject Page
Porter, P. A., appointment to the Industrial Classification Committee ................................. 54
Potash, placement on export licensing list........119,121
Poughkeepsie, New York, plant site approval......... 126
Powder: _
Chemical components ................................ 77,78
Plant construction by War Department ............... 38, 39
Power (see also Tennessee Valley Authority) :
Allocation to Reynolds Metals Company........... 96
Contract of Tennessee Valley Authority for expansion of Electro-Metallurgical Company, Sheffield, Alabama .......................... • • 155
Contracts, escape clause ......................... 70
Facilities at Wilson and Chickamauga Dams ... 152
Report of Gano Dunn and Leland Olds ............... 3
Power for Defense, motion picture, distribution .... 139,148 Power transmission lines:
Construction in Washington and Oregon, approval ................................... 152
For Reynolds Metals Company contract ............ 108
From Cherokee project on the Holston River to
Aluminum Company of America, Alcoa, Tennessee, approval ........................ 149
From Norris Dam to Kentucky.......................... 155
Hiwassee Dam to Alcoa plant.......................... 121
Morgantown, West Virginia ......................... 123
President: . . '
Establishment of Health and Medical Committee 90
Executive Order establishing Priorities Board .. 102
Instructions on carrying out defense program .. 1
Meetings with Commissioners .................... 15,29
Memorandum regarding compliance with Federal laws before contracts awards ................... 117
Proposed conference with Priorities Committee. 100 Proposed letter to Secretaries of War and Navy
about Selective Service and Training Act .... 93
Proposed letter to Secretaries of War and Navy regarding liquidated damage clause of contracts 96
Referral of letter regarding labor shortages .... 23
Requisitioning authority ......................... 91
Tax bill, presentation ......................... 74, 78
Tax Certification, referral for decisions ........ 20
Weekly report to Congress, House Resolution .. 56
Preview Theatre, new contract approval .............. 136
Price Administration and Civilian Supply Office: Establishment of food reserves in Hawaii ......... 155
Opinion on adequacy of Government protection . 158,162
Price Stabilization Division: Lumber situation ............................... 128
Price bulletin proposed.............................. 140
Price situation of secondary metals.................. 138
Prices:
Consumer ............................................. 96
Cooperation with retailers ............................ 63
Effect on suspension of antitrust laws................. 7
Funds to enable Bureau of Labor Statistics to supply basic information ................ 145
Increase ...........................................55,86
Increases and adjustments............................ 132
Justification in contracts............................ 73
Methods of control ................................... 93
Policy on price rises ............................. 123
Price-fixing, letter to TNEC ........................ 144
Second-hand machine tool industry and scrap metal industry ............................ 138
Stabilization, definition ........................ 64
Priorities:
Draft of press releases .......................... 57
Establishment for civilian production ............ 99
Power to establish ............................... 80
Press release, substitution of informal preference agreement for priorities .............. 50
Press statement ...................................... 104
Priority for orders ............................... 77
Steel, establishment of committee.................. 122
Studies proposed .................................... 4
176
Subject Pa«e
Priorities Board: Proposed Executive Order ......................... 102
Rules and regulations ................................ 112
Priorities, Committee on, establishment............... 99
Priorities Division, OPM ............................ 134
Procurement Committee ................................. 3
“Procurement Plans,” report ........................ 103
Procurement, policies (see also Contracts; Coordinator of National Defense Purchases; Purchase orders) ............................................ 70,93
Production:
Commercial, responsibility for curtailment ...... 99
Expediting ........................................ 105
Program for increasing capacity........................ 32
Relation to housing .................................... 29
Production Division;
Clearance of additions to existing plants........... 88
Clearance of labor policy statement.................... 76
Designation of a representative for liaison with the Public Roads Administration .................. 63
Merger with Industrial Materials Division...... 134
Progress reports .....................76, 86, 89, 92, 94
Production Division, OPM, merger with Industrial Materials Division ................................... 134
Production Management, Office of:
Division of Purchases, assumption of functions of the Office of Coordinator of National Defense Purchases ................................ 137
Establishment and organization ....................... 134
Liaison between Advisory Commission and War
Department ....................................... 134
New York Times article, “OPM Will Permit _ Price Agreements” ............................. 138
Opinion of General Counsel on interpretation of statute involving Government Protection and Non-Reimbursement Certificates ............144,145,148,
149, 150, 154, 155, 156, 158, 162
Request that State and Local Cooperation Division handle defense plants and housing............ 138
Tax certification functions .................... 140
Profits, limitation ................................... 4
Public Relations (see also Information; Radio) : Clearance ......................................... 80
Motion Pictures ....................................139,148
National defense program .............................. 32
Newspaper stories on confidential matters.....133,138
Policy in regard to speeches and press conferences .......................................32,34,68
Press release on negotiated contracts............... 17,20
Radio broadcasts................................50, 55, 83, 86
Speakers at Herald Tribune Forum....................... 96
Statements to press by the Department of Justice and the Commission on antitrust suits........... 45
Public Roads Administration:
Highway facilities .................................... 67
Program, relationship to national defense.................. 63
Puerto Rico, wage and hour legislation ............... 89
Pulaski, Virginia, bagloading plant...............124,126
Pullman Standard Car Manufacturing Company, plant site recommendation ............................ 150
Pulp shortage ........................................ 39
Purchase orders:
Placement, timing ....................................... 3
Priority .............................................. 77
Review ................................................ 93
Purchasing, Coordinator of, proposed position (see also Coordinator of National Defense Purchases) 3
Q
Quartz crystals, purchase for stockpile.............. 103
R
Radford, Virginia:
Highway facilities to proposed plant................... 68
Locations of smokeless powder plant ................... 43
Subject Page
Site approval for a bagloading plant................... 93
Site approval for smokeless powder plant............ 88
Radio:
Cooperation of radio stations ...................... 148
Invitation to Mr. Nelson to appear on “America’s
Town Meeting of the Air” ............................. 104
Question and answer program ........................... 50
Weekly broadcasts by Commissioners .............55,83, 86
Railroads (see also Transportation, railroad) :
Cooperation in program for stockpiling coal .... 36
Effect of mobilization on ............................. 12
Ravenna, Ohio, Shell loading detonator and primer plant, plant site recommendation .................... 137
Rayon pulp, export to Japan .......................... 40
Reconstruction Finance Corporation:
Appropriation for war supplies ........................ 77
Contracts for facilities ............. •_......... 105
Cooperation with Advisory Commission to aid
small business ...................................100,105
Diamond dies purchase ................................ 132
Expenditures for stockpiles .......................... 103
Jurisdiction over synthetic rubber ................... 113
Loan for aviation gasoline stockpiling and financ-
ing of wool and synthetic rubber............53,62,66,88 Purchase of refractory chrome from the Phil-
ippines ............................................. 99
Receipt of report on tin smelting .................... 113
Reimbursement for loans................................ 80
Rubber, synthetic, financing ........................ 101
Tax amortization, application to RFC financing . 25
Reconstruction Finance Corporation Mortgage Company, arrangement for housing financing .............. 73
Recreation, responsibility for handling problems related to the Defense Program...................80,89
Rent:
Increase ........................................... 26,55
Proposed law ......................................... 141
Survey for cost of living study.................. 104
Survey of changes .................................. 144
Republic Aviation Corporation, plant site clearance . 102,141
Requirements:
Analysis, need for .................................... 65
Determination of Army and Navy................. 12
Requisitioning Act ................................... 91
Research and Statistics, Bureau of:
Centralized arrangement for handling all statistical information .............................. 113
Establishment and functions ........................ 5,58
History, organization, and scope of operations .. 64
Over-all capacity studies of Army and Navy re-
quirements .......................................... 65
Proposed survey of potential expansion of shipping ..................................... .... 11
Report of committee appointed to consider duties and responsibilities ......................... 79
Request of State and Local Cooperation Division for information ................................93,96
Request to assemble data on plant location...... 39
Resources: Idle, use of ..................................... 16
Policy for conservation........................112,114,116
Retailers:
Avoidance of building up of inventories.............. 104
Conference, program .............................. 63, 76
Liaison arrangement with Consumer Division.... 88
National retailers organizations assurance of co-
operation ............................................. 80
Reynolds Metals 'Company, contract for power, approval ............................................96,108
Roads, public, program................................ 63
Robertson, Missouri, plant site recommendation...... 146
Rock Island Arsenal, housing facilities, lack of.... 21
Rubber: Purchases.....................................
Stocks on hand........................................ H3
177
Subject Page
Rubber, synthetic: Agreement for handling program..................... 105
Arrangements for financing program ............... . 79
Decision on manufacture to rest with Reconstruc-
tion Finance Corporation............................. 113
Effect of antitrust suits against oil companies..... 46
Financing by industry or Reconstruction Finance
Corporation.......................................... 62
Plans for financing by R. F. C.................66,101,103
Speed of arrangements for production................. 118
S
Sabin, Samuel H., status as voting member of Emergency Facilities Committee ...................... 155
Saginaw, Michigan, plant site recommendation... 87, 145,149 Sandusky, Ohio, proposed location for TNT plant 117, 120,121
Scrap, prices (see also Aluminum scrap; steel scrap) .94,138 Seattle Grade Separation job, supplementary funds
from W.P.A. ..................".7................7... 144
Seattle, Washington, plant site recommendation....... . 150
Second Revenue Act of 1940:
Applicability to American manufacturers producing materials principally for the British.......119,121 Differences of opinion as to methods between
Treasury Department and the Advisory Commission ............................... 82
Duties of the Advisory Commission.......... i.. 97
Interpretation by General Counsel, OPM.. .148, 149,150 Knudsen statement ........................... 81
Necessity Certificates, amendment permitting ex-
tra time for issuance.............................. 131
Procedure for certification...................... 104,110
Responsibility of the Advisory Commission............ 87
Securities and Exchange Commission, utilization of facilities in connection with tax certification ...118,129, 131,133,136
Selective Service:
Approval of objectives............................. 47
Deferment of Great Lakes seamen..................... 136
Policy of Commission................................ 62,91
Selective Service and Training Act of 1940, procurement authority of the President under Overton amendment ............................. .;..... 80, 93
Senate Finance Committee, statement by Knudsen on
Second Revenue Act of 1940................. ;........ 81
Shaughnessy, M. Quinn, study of effect of antitrust suits on the defense program.......................... 58
Shell loading, detonator and primer plant, Ravenna, Ohio, plant site recommendation, approval............ 137
Shepperson, Gay:
Appointment as Chief of Health and Welfare Division ................................. 92
Transfer to Coordinator of Health and Welfare’s
Office........................................... 124
Shipbuilding :
Expansion program...................................10
Facilities expansion.....................,....... 5
Regional rates of pay............................88, 98,120
Wage stabilization, need for........................... 91
Shipbuilding Stabilization Committee:
Appeal to management and labor that there be no work interruptions ....................... 123
Establishment ...................................... 91
Shipping (see also Great Lakes) :
Need for coordination................................. 136
Postponement of taxation on small shipping companies proposed ........................... 91
Survey of potential demands considered................. 10
Shipping, Coordinator of, appointment considered ... 139
Shoes :
Contracts, compliance with labor standards.......... 95
Prices, Consumer Division conference with producers .................................... 148
War Department contracts......................115,117
War Department purchases, disruption of market ............................... 70
Subject Page
Small Business Activities, Director of, creation... 106
Small Business Committee, plans for creation.....100,105
Small cities, 20 representative, collection of information on ............................................. 104
Smith, Blackwell, charges by Pearson and Allen regarding his representation of oil companies while in Advisory Commission............................. 69
Smokeless powder plants:
Construction expenditures............................ 38
Location....................................... .43, 88,124
Size ................................................. 95
Smoot Sand and Gravel Company, alleged monopolistic practices ..................................... 58
Social Science Research Council, information on
Canadian war administration............................. 14
South America:
Loans or credits for purchase of materials and equipment in U. S.............................. 42
Studies of Coordinator of Inter-American Affairs 73
South Bend or Fort Wayne, Indiana, plant site for expansion of aircraft facilities of Studebaker Corporation approved ................................... 126
South Point, Ohio:
Plant site for ammonia, recommendation ..... 120,122
Plant site recommendation for anhydrous ammonia plant....................................126,130
Southwide Committee, state and local cooperation in defense program .................................... 28
Speeches, policy ............................ 66, 68,69,89
Sperry Gyroscope Company:
Grand Jury action in New York......................... 85
Inspection of records................................ 94
Plant site recommendation......................... 135
Subpoena by Grand Jury.....................^... .87, 88, 90
Standard Gauge Company, plant site approval........ 126
State and local cooperation............28, 34, 36, 40, 48, 52
State and Local Cooperation Division:
Appointment of an Advisory Committee to assemble data on fire protection..................... 114
Defense, publication transferred to the Office of
Information .................................. 132
Establishment approved by the public.................. 51
Handling of defense plants and housing problems
for Production Management Office.............;...... 137 '
Weekly bulletin, plans for issuance................... 71
State Defense Councils:
Consideration of price increases.......56
Establishment ........................................ 71
Relation to training-in-industry program......... 93
State Department, conference regarding loans and credits to Central and South American countries... 11
States:
Help in development of defense program.. .......... 11, 52
Participation in health and welfare program___________ 59
“Statistical Summary of Defense Progress,” Part I, distribution to Commissioners .......... 107
Steel:
Allocations to small plants................;......... 122
Expansion program ......-----------/................. 129
Increase in ingot capacity....................... 119
Prices, barometer for other industry prices..... 73
Steel scrap (see also Scrap) : . ■ wn
Embargo on exports, recommendation. '............. 62,79
Review of situation by localities..................... 73
Stettinius, Edward R., Jr,:
Appointed Chairman of Community Chest Drive. 89
Appointment as head of new Priorities Division, OPM............................................. 134
Appointment to committee to study M-Day program ...............\.......................... 35
Appointment to Priorities Committee.............. 99
Diamond dies, memorandum........................ 121
Press conference.................................. 32,34
Report, “Synthetic Ammonia and Commission duties under Defense Appropriation Acts”......... 119
178
Subject Page
Stettinius, Edward R., Jr. (Cont.) :
Testimony before Petroleum Subcommittee, House Interstate and Foreign Commerce Committee ................................... 124
Stevens, Robert, named as Assistant in Agricultural and Forest Products Section......................... 70
Stockpiles :
Disagreement between Industrial Materials Division and the Army and Navy Munitions Board concerning size.............................. . 98
Programs for purchase............................ 103,127
Status ............................................ 118
Strategic Materials, danger points .................. 57
Studebaker Corporation, plant site for aircraft facilities expansion, approval............................... 126
Synthetic Rubber Committee, report {see also Rubber, synthetic) ...............................k............ 101
T
TNEC, hearings bn interstate trade barriers and amendment to anti-trust acts..................... 144
TNT:
Construction of plant by War Department....... 38
Plant location at Wilmington, Illinois, recommendation .............................. 93
Proposed plant at Sandusky, Ohio.............117, 120,121
Tacoma, Washington, jurisdictional dispute between
A. F. of L. and C. I. O..................;...... 85, 88
Tampa Shipbuilding Company, labor difficulties..... 78
Tanks, proposed plant location at Detroit, Michigan.. 57
Tax amortization {see also Government Protection
Certificates, Necessity Certificates, Non-Reimburse-ment Certificates; Second Revenue Act of 1940) :
Amendment to Internal Revenue Code............14,18,19
Desirability of including housing in amortization 160
Effect on delay, in defense program................ 74
Ginsburg’s report ................................ 18
Land certification................................140,142
Legislation proposed .............................. 79
Procedures ................................ 81, 87,88
Tax amortization bill:
Consideration as a matter separate from excess profits bill ......................... .39, 43, 61
Coordination between interested agencies.......... 25
Demolition provision .......................... . 59
Differences between Treasury Department and
Commission as to provisions.82,85
Importance to work of the Commission ............. 67
Progress by Congress.............................. 51
Urgency ........................................ 74
Tax certification {see also Emergency Facilities Committee) :
Agreement between the War Department, Navy Department and Advisory Commission on administrative handling .................. 164
Alternative basis for certification...........112, 113,117
Appointment of panel on certification.............152,153
Certificates of accelerated depreciation............. 108
Coordination between the Service Departments
and the Advisory Commission........................ 159
Procedure ..........110, 137, 139, 140, 144, 147, 151,154 Tax Certification Section:
Consolidation of War and Navy Departments and
Advisory Commission Sections approved. .150, 151,154
Need for additional personnel........... ? ...... 142
Taxation and Finance Committee:
Conference with Congressmen regarding extension of time for issuance of Necessity Certificates ...................i.. J. 131
Developments in connection with tax bill
H.R. 10413 .......................................... 85
Draft of contract provisions protecting Government interests . 59
Press conference .............................. 70, 72
Recommendations concerning certification of land
140, 142
Subject * Page
Responsibility for execution of proposals on tax amortization ................................ 82
Tax bill developments............................. 85
Tax certification responsibilities.................. 126
Tennessee Valley Authority :
Clearance of agreement with Aluminum Company of America for sale of power.................. 106
Contract for power to be allocated to Reynolds
Metals Company ................................. 96
Contracts negotiation ...........'................. 116
Construction of additional facilities............... 47
Escape clause in power contract with the Aluminum Company of America........................ 70
Expansion legislation............................27,31
Facilities at Wilson and Chickamauga Dams.... 152
Kentucky power project ....................... 155
Location and extent of transmission lines to supply power for the Reynolds Metals contract, approved ................................... 108
Power contract for ferrosilicon plant.......... 155
Request for legal information regarding Nitrate Plant No. 2 at Muscle Shoals.................. 140
Transmission line between Hiwassee Dam and
Alcoa plant...................................... 121
Transmission line from Cherokee project to Alcoa plant .................................... 149
Watts Bar and Fort Loudoun hydro projects, determination as defense projects, approved.. .137,145
Textiles, purchase by Army and Navy Munitions Board, clearance ............................... 34
Tin:
Purchase for stockpile.103
Report of technical committee of the National
Academy of Sciences................................81,113
Smelting program, negotiations with Bolivia_________ 77,79
Toluol: r .
Loans .............................................. 80
Maintenance of stockpile........................... 70
Trade Association Executives, request for speakers... 98
Training-in-industry program :
Appointment of C. R. Dooley as head................. 63
Appropriations ................................. 68
Establishment of regional groups of experts...... 93
Study of effectiveness............................ 85
Transportation:
Bus shortage ...............................> 153
Emergency legislation, approval................ 143
Great Lakes, proposal for improvement ...'... 141,142
Inventory of trucks and busses ................ 114
Rates between truck lines and forwarders . .80,107,145, ............................................146,157
Roads and highways, importance to national defense .....................................68,138
Status of forwarders,.......................... 67
Strikes, threatened ........................ 26
Trackage to new facilities; amortization ....... 25
Transportation, air:
Problems ......................................... 78
Request for reservation office within the Commission ...................................... 120
Transportation Division:
Request for representative from Maritime Commission to handle matters on ocean shipping 136,
■ 140
Warehousing activities, handling of............98,153
Warehousing Department, establishment............. 103
Transportation, railroad: Carloadings .................................. 112
Coal stockpiling to relieve burden on transporta-tation......................................... 36
Congestion of cars at Camp Dix.................. 90, 91
Future requirements................................ 104
More efficient use of freight car capacity....... 153
Requirements for mobilization of troops........... 12,56
Service to defense plants...........'.............. 97
179
Subject
Page
Subject Pa«e
Treasury Department: Proposed for auditing of contracts................
Request for views of Commission on the tax bill. 60
Treasury, Secretary of the: .
Proposal on tax amortization legislation.......... 82
Proposed meeting with committee on tax amor-tization ................................... 2°’a7
Steel scrap exports........................... 02
Withholding of actions under Vinson-Trammel Act ....................,...................... 25
Trucks (see also Transportation) : Inventory .................................... 114
Manufacture, weight restrictions................... 153
Use in mobilization of troops ...................... 12
Tulsa, West Tulsa and Sand Springs Levee, construction of, referral to the Plant Site Committee..163,164
Tungsten, purchase for stockpile................. 103
Turkey, grant of request for British sale of chromite to U.S............................................ 98
U
Uniforms, report of orders placed.................. 80
United States Housing Authority:
Legislation needed to relieve housing shortage for industrial workers ............................. 5
Projects for defense housing program........... 14
United States Office of Education: Funds for labor training....................11,103
Training of aviation ground service men........... 82
Unloading of equipment, delays................... 91
Utica, New York, proposed location of machine gun plant ............................................. 57
V
Vacation policy................................ 155
Vergennes, Illinois, plant site recommendations. 143, 145,146
Vinson-Trammel Act: Aircraft industry, limitation of profits....... 25
Repeal or suspension............................51, 74, 79
W
Walsh-Healey Act, exemption of food canners. .136, 138,139
War Department:
Air Corps educational order program, approval... 150
Appropriation bill ............................. '4
Authority to establish priorities............... 80
Aviation gasoline, requirements................ Ill
Aviation gasoline, stockpiling of.............. 11
Commercial airplanes, curtailment recommended.. 98
Compliance with Federal laws in awarding Contracts .................................... 128
Construction of new Engineer Map Reproduction Plant, approval ............................ 149
Contract replacements ............................ 14
Contracts for cantonments......................... 84
Contracts, invitations to bid on shoes........... 115
Contracts policies............................ 59,63
Contracts, procedure for determining equitable depreciation.............................. 108
Contracts to shoe companies.................... 117
Coordinator to work with the Coordinator of
Defense Purchasing..................................... 84
Establishment of liaison with Reconstruction
Finance Corporation................................. 100
Facilities .......................................... $5
Funds for handling bids, lack of..................... 77
Industrial expansion program......................
Industrial mobilization plan......................... 35
Labor at arsenals.................................... 54
Land acquisition policy....................105, 107,110
Liaison officer appointed......................... 95
Map of projected locations of all camps, cantonments, etc................................. 85
Meeting with members of Commission on selection of plant locations...................... 56
Munitions, increased productive capacity............21, 32
Munitions plants, locations study......................22, 35
Need in Army of technical organization for
handling economic problems in Civilian Areas.. 122
Ordnance supplies contract........................... 125
Over-all capacity study of requirements............. 65
Personnel ...............................................95
Plant expansion by use of Emergency Plant
Facilities Contract or Defense Plant Corporation plan ..................................... HO
Plant sites ..........;......................43, 57, 93, 137
Proposal for appointment of panel to discuss
Proposed construction of a powder plant............. 38
Quartermaster General, appropriations request for
survey of office organization............... ..•... 117
Quartermaster General, purchases, timing of orders ........................................... 70
Recommendation for synthetic ammonia plant at Muscle Shoals ..........................100,103
Reluctance of procurement officers to utilize the new contract form and procedure................ 97
Request for establishment of a working fund
Requirements program ............................ 12
Statement of policy on Non-Reimbursement Certificates .................................... 153
Supervision of construction work..................... 38
Unit to handle tax certification....................... 114
War Department Site Board: Preliminary report .....................• • •...... 22
Representatives from Advisory Commission urged 89
Submission of alternative locations to Advisory
Commission......................• •................ 95
Submission of sites to Commission, time limit for consideration........................*....... 75
War, Secretary of:
Cooperation between the Commission and War Department ....................................... 98
Proposed letter regarding liquidated damage clause of contracts ............................... 96
Referral of German company request for blueprints of power plant at Boulder Dam............. 115
Ware, Caroline, cost-of-living memorandum ............. 55
Warehousing: Control.......................................... 98
Facilities, inventory.............................. 140
Grain storage .................................141, 143,153
Survey of storage space...............;............ 153
Warehousing Department, establishment in the Transportation Division............................... 103
Warren, Ohio, plant site recommendations.......... 150
Waste, commercial, elimination..................... 27
Westinghouse Electric and Manufacturing Company: Inquiry regarding exchange of technical information with nationals of invaded countries........... 132
Referral of German company request for blue-
prints of power plant at Boulder Dam............. 115
Wheeler, Burton K., Senator, resolution to investigate
conditions of interstate and foreign commerce which may delay national defense.......................94,108
Wholesale industry:
Meeting of Council of National Wholesale Associations in Washington......................... 21
Meeting with Miss Elliott.......................... 112
Wichita, Kansas, plant site recommendation......... 150
Wilgus, W. J., request to appear before Advisory
Commission............................................ 28
Wilmington, Illinois:
Clearance of location of two plants................. 80
Land acquisition, public reaction to procedure
used............................................. .104,107
Site approval for TNT plant........................93,142
Wilson Dam Steam Plant and Sub-Station, Tennessee
Valley Authority project, approval................... 152
180
Subject Page
Wilson, M. L., appointment as coordinator on Health and Welfare Committee........................ 29,92
Woodworth, N. A., Company, Ferndale, Michigan, plant site recommendation............................ 156
Wool:
Loan for moving stockpile from Australia............ 62
Price situation ...................................... 108
Stockpile ..............................• • • •.....66,84
Stockpile from Australia, delay................... 79
Storage of Australian wool in U. S..................94,124
Woolen cloth and blankets, contracts................... 2
Woolen goods, prices................................. 132
Works Projects Administration:
Application for funds for Seattle Grade Separation job...................................... 144
Financing of training of aviation ground service men .............................................. 82
Funds for labor training........................... 11
Maintenance budget ............................ 136
Transfer of labor to private enterprise............ 23
World War I:
Commercial conservation, study by committee ... 27
Subject Page
Industrial concentration, maps.......................... 76
Wright Aeronautical Corporation, plant site recommendation ............................................ • 142
Wyman-Gordon Company, Harvey, Illinois, plant site recommendation ......................................135,156
Yntema, Theodore O. :
Appointment to Industrial Classification Committee ............................................ 54
Service as Consultant........................... 70
Young, Owen D., appointment as Consultant to Sidney Hillman .......................................... 21
Ypsilanti, Michigan, plant site recommendation.... 141
Z
Zinc: Price situation ...............................;.... 88
Recommendation for placement on export licens-
ing list ............................................ 121
Scrap prices .......................................... 138
Wu. S. GOVERNMENT PRINTING OFFICE: 1946-S83778
181