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PAYING
FOR A WORLD WAR

The United States Financing of World War II

Jarvis M. Morse

^OOM 5030
TREASURy DEPARTMENT

PAYING FOR A WORLD V/AR,

THE UNITED STATES FINANCING OF WORLD WAR II

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A(JLriAi975
TREASURY DEPAHTMENT

Jarvis M. Morse

Dr. Jarvis Morse brings impressive credentials to the writing
of PAYING FOR A WORLD WAR--scholar, teacher, historian,
researcher and author. But most important, he was a recording
eyewitness to, and a participant in, the planning and execution
of the U. S. Savings Bonds Program from its very inception to
its conversion to a peace-time activity.

The text of this book was drafted immediately after the
conclusion of World War II, while the events were fresh in the
minds of the many who were interviewed. Dr. Morse also had
access to many Treasury documents which might not have escaped
government paper housecleaning in later years.

The Savings Bonds Division is indebted to Dr. Morse and thanks
him for making available his manuscript of PAYING FOR A
WORLD WAR.

Elmer L. Rustad

National Director

U. S. Savings Bonds Division

December 10, 1971

CONTENTS

ter

III

VII

VIII

XII

XIII

Before Pearl Harbor

Bonds For Defense

Initial Organization

The Defense Savings Staff Begins

Early Field Organization

War

Special Problems

The VJar Finance Division

Sales Promotion

The Operating Organization

War Loan Drives

Inter-Agency Relations

The Peacetime Program

CHAPTER I
BEFORE PEARL HARBOR

On May 1, I9UI, the first U. S. Savings Bond of Series E
was sold by the Secretary of the Treasury, Henry Morgenthau, Jr.,
to the President of the United States, Franklin Delano Roosevelt.
On January 3, I9U6, the last dollar of Savings Bonds sold during
the Victory Loan was deposited to the account of the Treasurer
of the United States.

Between those two dates the War Finance Committees of the
Treasury, and their predecessor organizations, were responsible
for selling a total of $185.7 billions of securities to finance
the war. The story of these sales - the greatest mass selling
achievement '.in history - will be here told as far as it can be
set down in words. The real story of VJar Finance defies
relation. An approximation of its full breadth and depth would
run to thousands of pages, for it is the story of hundreds of
thousands of people throughout the continental United States,
Alaska, Hawaii and Puerto Rico. It is the story of a small band
of leaders in headquarters who advised and guided a few paid
workers throughout the nation, the two groups together heading
up in the incalculable labors of patriotic volunteers in every
community of the land. It is a story embracing every color, creed
and condition of men, women and children throughout the American
scene.

The Treasury's war finance operations were the product of
experience reaching back to the American Revolution, during
which the earliest attempts were made to sell government
securities to the public. Not until the Liberty Loan and War
Savings campaigns of World War I, however, was any program
developed likely to achieve the goal which the Secretary of the
Treasury had in mind at the outset of World War II.

The Defense Savings Staff, first of the VJar Finance organi-
zations, was created in March, I9UI, to meet both the Treasury's
need for funds and to help unite many diverse and conflicting
groups in the country into a strong program of national defense.

Disunity of the Am.erican People

The outbreak of war in Europe in September, 1939? found the
American people wholly unprepared for the role they were destined

to play. They suffered not only from lack of military and naval
povrer, but also from sharply divisive opinions as to whether
they had or should take any part in the growing world struggle,
and as to how foreign and domestic affairs should be conducted
to the best advantage of the national welfare.

The core of this psychological unpreparedness was our
history-long conflict between professed faith in political
isolation and our actual practice of participating in world
affairs. Always professing opposition to intervention in the
concerns of other nations, we had nevertheless been drawn by
inner compulsion as well as the logic of events to take part in
the game of power politics. One reason for this seeming incon-
sistency is that the millions of Europeans who found permanent
homes in America kept alive an interest in the affairs of the
"Old Country." Our government has not hesitated to take notice
of and to express itself on internal affairs in other countries
in response to pressure from groups of these nationalities with-
in our own. borders.

Another important cause of confused sentiment in 1939 ^'^^^
the disillusionment of the American people over events following
World War I. The bright promise of a new world of peace and
freedom, summed up in President Wilson's slogan - "Make the
World Safe for Democracy" - and embodied in the ill-fated League
of Nations, the World Court, had seemed to come to nothing but
tears and sorrow. Large sections of our people became convinced
that wars were brought about solely by the machinations of
munitions makers, or Big Business, or "Wall Street." Distrust
of other nations and peoples was the order of the day with many
Americans .

The distrust, however, was accompanied by a real feeling of
humanitarianism for the people who had been suffering under Nazi
and Fascist aggression in the 1930' s, and anger and alarm lest
such injustices and violence should grow unchecked and threaten
to engulf our oi'm country. Trade Union leaders, having seen
their comrades crushed in Italy and Germany, became more than
ever alert to the menace of totalitarian dictatorship. American
Jews saw their German friends and relations subjected to every
indignity, and death. In the Far East a development parallel to
that in Europe took shape with the Japanese "New Order" for Asia.
American missionaries were seized and roughly handled. American
property rights were violated. The new world order of which we
had heard so much in 1917-19 was going to pieces before our eyes.
But we had "troubles of our own" - economic depression, imemploy-
ment, a bitter partisan warfare at home - which seemed to counsel
that we turn to our knitting and let the rest of the world go by.

This could not stop the march of events abroad, nor render

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us iimnune to its effects. There was no gainsaying the harsh and
tragic facts. It was one thing, however, to feel compassionate,
angry, or afraid, and quite another to unite on a national plan
of action to deal with the causes of these compelling emotions.
Every effort of the adinini strati on from 1935 to 19^1 to put this
nation in a better state of defense was violently opposed "by
strong elements of public opinion. There was a secret admiration
for Hitler and his hordes felt by many well-placed people. They
believed that Hitler was their best insurance against Communism.
Fear of social revolution at home transcended their fear of Nazi
conquest from abroad. American opinion toward the Japanese
followed a similar course - resentment of Japanese aggression in
China, loathing of brutalities committed in the name of military
necessity, condemnation of violations of the "Open Door" policy
and neutral rights, but to the last we kept faith in "measures
short of war" to preserve peace.

For some time after the outbreak of war in Europe, public
opinion polls showed that a great majority believed the war would
last a year or less, and would end in a victory for England and
France. A small majority favored selling supplies to the
"democracies" for "cash on the barrel head." Only a minority
expressed itself, in the seemingly unlikely event of an English-
French defeat, in favor of American war on Germany.

1/Jhen President Roosevelt proposed to repeal the arms
embargo to facilitate sending supplies to the democracies.
Congress was flooded with letters of protest. The American
Federation of Labor declared opposition to American involvement
in war, or steps being advocated which would force us into war.
A National Committee to Keep America Out of Foreign VJars was
founded. The National Association of Manufacturers declared
that American businessmen had set the weight of their influence
against another war. In radio addresses, Charles Lindbergh
became a champion of isolationism, saying that the war in Europe
was not a threat to the institutions or security of this country.
In his train gathered a collection of sincere American isolation-
ists, along with German -American Bundists, anti-Semites,
English-hating Irish, various American Fascist groups, Republican
bitter-enders, and other enemies of the Roosevelt administration.

During the early days of the war the isolationists dominated
the scene. Proponents of a more vigorous foreign policy and of
closer collaboration with the beleaguered democracies were in
the minority. Forthright demands for American intervention were
few and far between. Some came from prominent educators. Among
the stalwart supporters of President Roosevelt's policy was
Senator George Norris of Nebraska. His support of the interven-
tionist position was the more notable since he had been one of

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the small group of "^^illful men" v/ho opposed American participa-
tion in World War I. Norris declared that it T'^as self-evident
that England and France were fighting the battle of hui-fianity and
civilization, and that decency and self-interest demanded, that
\Te place ourselves on their side.

However much distinguished leaders might debate the issues
of war in Europe, to most Americans the conflict seemed remote
and the discussions swirling around it monotonous, until the so-
called "phony war" came to an end in April, 19^0. German armies
then moved into Denmark and Norway, and the next month into
Holland, Belguim, and Luxenburg. In June came the heroic evacua-
tion of the British from Dunkerque. Some understanding of what
the possible fall of Britain, or capture of the British fleet,
might mean to the United States began to dawn. Congress voted
large military and naval appropriations, although isolationists
protested loudly. There was a growing determination to strengthen
our own defenses and to "keep our powder dry" against eventuali-
ties. There Tras little doubt where our sympathies lay, but no
readiness to throw the might of our arms and resources behind the
victims of Nazi, Fascist and Japanese aggression. Until the
Japanese atta.ck on Pearl Harbor, the American nation still suffered
from its traditional psychological conflict between the yearning
desire for isolation and the logical demand for participation in
a world conflict upon the outcome of which our security and
independence depended.

Isolationists attacked the Selective Service Act of September,
19^0, as undemocratic and unnecessary. After the Nazi attack on
Russia in the summer of 19^15 the issue was further confused by
the widespread ant i -Communist phodia which the Nazis had sedu-
lously cultivated and which helped to complicate further the real
issues involved in the war. Very widespread support gathered
behind the America First Committee, which developed the thesis
that the United States must stay out of the war at all costs,
that no nation or group of nations could successfully attack a
Prepared America, that dread of invasion was ridiculous, and that
if we ever went to war, dictatorship would come in this country
and the American way of life be lost forever. This committee
operated under distinguished and able leadership, including
Chester Bowles, Charles Francis Adams, John T. Flynn, Henry Ford,
Alice Roosevelt Longworth, Captain Eddie Rickenbacker and
Burton K. VJheeler.

It is not the purpose of this study to follow in detail the
arguments developed in the great debate over American foreign
policy between June 19^0 and December 19^-1. The Roosevelt
administration was resolved to throw the might of the United
States on the side of Great Britain as fast as it could be sure

of public support. The record shows that almost every step in
that direction was supported by a majority of the people, but the
dissident element was large and vociferous.-*- There was hardly
a step taken or proposed that was not challenged and denounced by
those who kept the sacred fires of isolation burning, John T.
Flynn of the Ainerica First Committee accused the President of
using the war emergency and the national defense program as a
smxOke screen to conceal the failure of the New Deal to cure
unemployriient and restore prosperity. VJhen Roosevelt sought to
promote unity by creating a coalition cabinet, and appointed the
Republican leaders Henry L. Stimson and Franl^ Knox as Secretaries
respectively of War and Navy, he was accused of playing politics.
The September I9U0 lease, by executive agreement, of British bases
in Newfoundland, Bermuda and elsewhere to the United States in
return for fifty overage destroyers was attacked as illegal,
immoral, unconstitutional and void. Nazi agents and coadjutors
in this country fanned the flames of racial, religious, class
and national conflict. Protestants were to be set against
Catholics, Gentiles against Jews, labor against employers, whites
against Negroes, until the last depths of hatred and mistrust
were plumbed. An excellent index to the division of American
opinion, geographically, can be read in the Gallup polls on the
Lend-Lease bill for aid to Britain, debated in Congress, January-
March 19^!-lo A poll early in February showed that 77 percent of
the people in the South approved the bill, 55 percent of those in
the Far West, 5U percent in New England and the Middle Atlantic
states, and 53 percent in the West Central states. In the East
Central section - Ohio, Mchigan, Illinois and Indiana - only
39 percent voted in favor of the measure. Chicago was considered
the "hub" of opposition sentiment.

The enactment of the Lend-Lease law on March 11, 19^-13 with
an appropriation of $7 billions, did not conclude the great
debate on American foreign policy. Fear of what faced the nation
if we actually moved into war without a greater degree of unity
was widely expressed. Appeals to the people to close ranlis,
forget their individual and group feuds, only served to make the
absence of national unity more evident. The German attack on
Russia in June, I9U1, rendered the confusion yet more confounded.
Some hoped the two great powers, Germany and Russia, would kill
each other off. Many expected Russia to be a "push over" for
the Germans, not realizing that if this happened the position of
Great Britain and the United States would be even more desperate
than before. Conservatives were baffled over the idea of having
to consider Russia another "democracy" in the ranl-.s with Britain,

1 Hadley Cantril, "Public Opinion in Flux," Annals of the American Academy of Political
and Social Science, March 19^+2.

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China and Greece. The Wall Street Journal TTarnecl that with our
aid Russia might help spread communism throughout Europe.
American communists deserted the America First Committee and
became unwelcome allies of those who fought for more aid to
Britain and France.

Treasury Program for Unity

It was at the height of this confusion ths.t studies were
being made and plans laid in the Treasury Department for a
program to unite the country so that if war came, as seemed very
likely, the nation would not explode into a million pieces because
of internal strife. The Treasury's plan sought to give domestic
substance to the President's message to Congress of January 6,
I9UI, outlining the goal of American foreign policy in terms of
a world founded upon four essential human freedoms - freedom of
speech, freedom of xrorship, freedom from want, and freedom from
fear. To all intents and purposes the United States was in the
war by January I9UI, although the disaster at Pearl Harbor was
still eleven months away. I'Jhat remained was to recognize the
war status as a fact, and to place the nation and its economy on
a v/artime basis. Even after we were in a "shooting war" on
December 7, and the American people temporarily laid aside
private feuds and political, religious and economic conflicts,
there was no guarantee that the disruptions would not appear
again.

How was unity to be maintained? The Treasury's Savings
Bond program was launched to provide a channel for united action
and participation in the national defense and war effort. It
was a program that instead of seeking to eradicate differences -
of religion, race, class, section, or party - would make them a
source of strength and unity by finding a common cause in which
all could work for the financial security of themselves and
also of their country. This was the basic psychological purpose
of the Defense Savings Program begun on May 1, 19^!-1, and continued
by the War Savings Staff and the War Finance Division of the
Treasury, It was because he had this instrument at hand, because
he knew of the work it had already done and because he had faith
in it, that Secretary Morgenthau could report on December 7th
to the Commander-in-Chief -- "Sir, we at the Treasury are ready."

CHAPTER II
BOKDS FOR DEFENSE

The psychological purpose of the Defense Savings Program
vas national unity; the fiscal purpose was to raise money for
defense to supplement the national revenue from taxation and
other sources. Money itself cannot win a war. Seventy million
dollars appropriated for a battleship does not become effective
until the ship is built and in operation, but to a degree money
can be considered a measure of mobilization.

After the capitulation of Holland to the Nazis in May„ 19^0,
President Roosevelt gave to Congress a special defense message
which threw into sharp relief the costs of war under modern
conditions o He reminded Congress that motorized armies can sweep
through enemy territories at the rate of 200'miles a day. . .that
oceans were reasonably adequate defense barriers when fleets and
convoys could cross them at only moderate speeds of 15 to 20
miles an hour ...but that air warfare had stepped up the speed of
attack to 300 miles per hour, so that effective defense required
the equipment to attack an aggressor on his route before he
could establish himself within the territory of American vital
interests. This meant a motorized, mechanized army and navy,
supported by air power and a mighty battery of anti-aircraft
wea.pons .

''Defense cannot be static," he added. "Defense must grow
from day to day." This was, of course, going to require huge
expenditures of money. The President originally asked for
appropriations and contract authorizations amounting to
$1,1825000,000, thus beginning a succession of billion dollar
budgets for defense. During the retreat of the British army
to Dunkerque, the President asked Congress for additional
appropriations of $1,277^7^1 ,000. By midsummer of I9U0 defense
appropriations were in excess of $10 billions. But this was
merely the beginning. By the end of November 19^1? defense
appropriations and authorizations were in excess of $78 billions,
and even these sums were soon dwarfed when, on December 1 ,
America became not only an arsenal of democracy but an ally in
waging a global war.

A program of national mobilization, however, is not measured
by Congressional appropriations. Vast sums can be made quickly
available to produce manpower, plants and material to meet
military needs, but they cannot be as quickly spent. A better

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measure is the rate of actual expenditures for defense and war.
Expenditures do not keep pace with appropriations. It takes
time to recruit an Army, Navy and Marine Corps of 10 million men
and more; to build and equip training camps, wsr plants , and e
bridge of boats across two oceans; to grow and produce food not
only for the home people but also for their allies. Actual
expenditures, measuring the extent to ■(■^hich goals were being
accomplished, increased at a steadily accelerated rate from the
beginning of the national defense program until the peak of
military needs was reached in 19^5. From July 1, 1939 to
June 30, 19^0 (i.e. Fiscal Year 19^0) defense expenditures were
$1,657 millions. In Fiscal Year 19^+1 they were $6.3 billions.
Thereafter war expenditures continued to mount:

Fiscal Year I9U2 $26,011 Billions

Fiscal Year I9U3 72.019 Billions

Fiscal Year 19^U 87-039 Billions

Fiscal Year I9U5 9O.O29 Billions

Thus within a fe\T years annual defense and war expenditures
multiplied fifty times over.^

VJar vs. Non-War Expenditures

It will undoubtedly be a lasting source of partisan
controversy as to whether or not these expenditures were
excessive. Waste and mismanagement were charged and certain
instances revealed. Some such shortcomings seem to be the
inevitable concomitants of war, \jhen victory is the prime
objective no matter what the cost. Critics have held that the
Federal government's non-war expenditures should have been
more drastically reduced.

It is well to remember that, as a result of our high
standard of living, defense costs in the United States ran
somewhat larger than in other countries. It is not easy to make
a sharp distinction between war and non-war expenditures.
Anything that contributes to the success of total national war
effort may with propriety be classified as war activity. In
total war, highways and power dams, shipyards, farms, forests
and factories, even schools and colleges, are as vital to
victory as ships and guns, tanks and planes.

In his first war budget message, January 5, I9U2, President
Roosevelt said:

"In a true sense, there are no longer non-defense
expenditures. . .It is part of our war effort to

1 Figures from Treasury Bulletin. September I9U6.

maintain civilian services which are essential to
the basic needs of human life. In the same way
it is necessary in war time to conserve oiir natural
resources and keep in repair our national plant... In
the preparation of the present Budget, expenditures
not directly related to war have been reduced to a
minimum or reoriented to the war program."
Many borderline activities had been in process of reduction
before the \jar ^ so that the so-called non-war expenditures
declined from $7.6 billions in fiscal I9U0 to $k.6 billions in
19^3. A later increase in such expenditures was largely
accounted for by increase in interest on the public debt, and
by veterans pensions and benefits which were a direct result of
the war. The extent to which the energies of the Federal
government were absorbed by war is indicated by the fact that
war expenditures increased from I8 per cent of the total
expenditures in 19^0 to 92 per cent in 19^^.

Mounting Military Costs

The money expenditures of earlier conflicts in our history
paled into insignificance as the costs of World VJar II mounted
to unprecedented heights. The cost of the /onerican Revolution
has been estimated at $100 millions in specie value, or less
than half as much as we spent in a single day in 19^3- The
total of $7 billions spent for war purposes by both North and
South in the Civil Uar was less than a month's expenditure in
l^kk. Our participation in World War I is estimated to have
cost the nation about $31 billions, or about the same as four
months' war expenditure in 19^^.

These comparisons are somewhat deceptive; they are merely
cited to emphasize the vastly greater scale on which total war
is waged. The men and women in the armed services in 19^2-^5
were not only much more numerous than in I918, they were better
paid, better fed, better clothed, better housed, better trained
and infinitely better equipped. Mechanization tremendously
increased the cost of both equipment and training for fighting
forces .

This is not the place to enter upon a study of combat costs
of a Garand rifle. Brooming machine gun, tank, battleship, etc.,
and the amount of metal and explosives used in an hour of
battle, not to mention replacements of equipment damaged or
lost - such items pertain to military history - but to fore-
shadoiT an element in the later bond promotion plants of War
Finance, be it said that the astronomical figures of war costs
were broken down into figures comprehensible to the layman by

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setting pieces of loan drive quota in terms of specific items
of equipment. It made little sense to the man in the street
to tell him that the national quota for the Fifth liar Loan was
$16,000,000,000. IJho ever saw l6 billion dollars, or even one
billion? But expressed in terms of equipment, the Treasury's
need for funds to meet the costs of war became intelligible.
A 10-cent War Savings Stamp would "purchase" a weather ballon,
or two bullets; a 25 -cent Stamp an aerial photo film; an $l8.75
Bond equalled the cost of an aviator's winter flying jacket, and
so on, up to the commimity enterprises to purchase enough bonds
to "sponsor" the cost of a $10 million destroyer or a $71
million aircraft carrier. In this manner the costs of war
became tangible to the individual, and, more significantly, gave
every Bond and Stamp purchaser a sense of personal participation
in the conflict.

Economic Aspects of Total VJar

In his message to Congress on January 6, 19^2, President
Roosevelt set forth certain production goals: 60,000 planes,
^5,000 tanks, 20,000 anti-aircraft guns and 8,000,000 tons of
shipping in 19^2; and for substantially larger quantities in
19^3. Some of these figures had to be revised, not so much
because they were impossible of attainment as because of changes
in basic plsjis and policies reflecting changes in the character
and tempo of the war."^

"Guns and Butter"

To produce guns, aimnunition, planes and ships on such a
scale required not only the most intensive utilization of
existing facilities, it required new construction. Houses for
industrial workers at crowded production centers were needed.
Factories and foundries of every description had to be retooled,
rebuilt and expanded, and new facilities erected. Immense
quantities of steel and light metals - especially alLiminum and
magnesium - were required. The shutting off of rubber supplies
by the Japanese and the lack of adequate stockpiles necessitated
the overnight building of synthetic plants. The insistent
demand for more and more production was felt all along the line
of our industrial and national economy.

Since most of the nevj or expanded productive capacity was
for war purposes and could not reasonably be expected to continue
in full use after the war, private investment could not be relied

2 William H. Wynne, Development of the Wartime Industrial Economy, Staff Report of Indus-
trial Section, National Resources Plajining Board, June I943.

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upon Lo T.rovide more than a small part of it. Through income
and excess profit tax deductions, the investment of private
capital in defense plant facilities was encouraged, but the
government had to assume the major burden of financing war
production facilities, which made a further substantial
addition to the cost of military equipment.

The expenditure of billions of dollars on new and expanded
industrial facilities would not have been necessary had our
normal civilian economy been sufficiently flexible to absorb
the increased demands of defense and war in one or both of
two waA^s: (l) By having unused capacity that could be utilized,
or (2) By being able to convert civilian industry immediately
to war production at the expense of civilian supply. Both of
these things were done to some extent, but they were not
enough .

We entered upon the defense program in 19^0 with millions
of unemployed workers and an industrial plant not operating at
full capacitAr. Instead of being worried about shortages of
manpower, industrial facilities or materials, we were at first
bewildered by a surplus of all three. So the defense program
was in the beginning regarded not as a solemn necessity that
would require saving and sacrifice but as a welcome opportunity
to put the economy back to work again. Many felt that the cost
of defense could be met through the use of idle human and
material resources financed by the creation of additional
purchasing power, without hurt to the country's normal economic
system.

As early defense expenditures increased, these dreams
seemed to be coming true. We could have guns and butter too,
and deep-freeze lockers and nylons. Workers streamed
back to shops and factories. Smokestacks belched again. Our
whole economy began to feel the zest of new life. By October
19^1, workers' yearly buying power was running about $11
billions ahead of the preceding year, an increase of I8 per cent

While there wrs still some hope that we could stay out of
a ''shooting war," national defense seemed to combine in almost
perfect measure the twin blessings of patriotism and economic
prosperity. So long as there were idle men and idle machines'
and an abundance of raw materials the bonanza continued. TheVe
was some talk about having to choose between guns and butter,
but most people believed we could have both. As a matter of
fact we were able for a time to "live off our industrial fat,"
without being realistically avzare of the ultimate effect that
total mobilization would have upon our economy and our lives.

For varying reasons both management and labor hesitated
to go all-out for war production. Many of our industrial
leaders were afraid of what might happen when the "emergency"

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was over. Besides, they insisted, \je could take care of both
civilian and defense needs without great plant enlargements.
Wouldn't it be a "crime" not to meet the new civilian demand
for goods created by the workers' increased income? To others,
conversion to war production threatened loss of their customers
to competitors. Labor sympathized with some of these views, and
on its own account worried about the "conversion unemployment"
that might arise from the time-lag between full production of
civilian goods and full production of war materials,-^

Guns

It was not shortages of plant and manpower, however, that
ultimately compelled conversion from civilian to war production.
Long before such shortages appeared we began to "scrape the
bottom of the barrel" for raw materials. We could not reach
our production goals in planes, tanks and ships if the automobile
and other industries continued to use thousands of tons of
alumium, steel, lead and so on. Shortages in alumium, magnesium,
copper, tin and rubber irere among the first to appear, necessitating
a system of priorities to insure a proper floxr of these and other
strategic materials to defense industry.

Among those who before Pearl Harbor championed a realistic
and all-out program of defense v/as Secretary Morgenthau. Under
his leadership the Procurement Division of the Treasury acquired
for the United States invaluable stockpiles of strategic materials;
France and England were encouraged to place large orders for
military supplies in the United States, and to invest large sums
in new war production plants here. During and after the "Battle
of Britain" he assumed leadership in the fight for more aid to
England; the Lend-Lease bill was originally conceived in the
Treasury Department, and Secretary Morgenthau with Secretaries
Hull, Stimson and I^ox led the fight for its enactment. In
urging immediate conversion of industry to war production even
at the expense of civilian supply. Secretary Morgenthau told the
American Bankers Association - "It will require all-out effort
on our part to tip the scales in this war... We are trying to make
ourselves the arsenal of democracy by devoting only 20 per cent
of our factory and mining output to defense, only 30 per cent of
our output of durable goods, only 10 per cent of our output of
non-durable goods and only l6 per cent of our national income.
That, surely, is very far from total defense or all-out v^ar
effort." The Secretary and other Treasury officials frequently
used on later occasions, in Bond promotion, the phrase - "This is

3 Labor's Monthly Survey, October I9U1. George R. Clark, "The Strange Story of the
Reuther Plan," Harpers Magazine. May I9U2.

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not a token msx .

Gradually 5 but with apprehension and misgivings, those
responsible for defense production policy came to sha,re the
Secretary's opinion. But it required the stunning shock of
Pearl Harbor, Manila, Malaya and Singapore to accelerate the
process. Only after these events did we face frankly the
necessity of choosing betveen guns and butter. We chose guns.
Through regulations of the War Production Board and other
agencies, production for civilian use was sharply curtailed,
and in some cases eliminated, on a long list of articles,
including automobiles, household electrical appliances, vacuum
cleaners, washing machines, laim mowers, sewing machines, oil
burners, fishing tackle, metal furniture, typev^r iters, telephones,
and tin pans. The pressure of war production reached into every
home and factory. Rationing became a necessity to assure fair
distribution of many scarce goods. Hours of employmxent \rere
increased wherever possible and overtime work was encouraged.
Jobs were classified as "critical,' "essential," and "non-essential,
and pressure of many kinds was applied to those in "non-essential"
callings to shift to one of the others.

Inflation in the Making

There vas revealed a productive capacity in the /.merican
nation that was greater than even the most optimistic estimates
of the most "starry- eyed'' economists. The dollar value of all
goods and services produced -- knovm to economists as gross
national product -- increased from $8? billions in the calendar
year I9U0 to approximately $198 billions in l^kk. Unfortunately
for our living standard, the largest portion of this increase
was in goods and services for war rather than civilian use. In
the calendar year 19^0, the value of war materials purchased by
the Federal government vjas only ^h billions out of the total
gross national product of $97 billions, or approximately 3 per
cent. By l^kk war purchases absorbed $89 billions out of $198
billions, or about ^5 per cent, leaving $109 billions of goods
and services for civilian use. Hence the rapid groirth of war
production added another very important objective to the Treasury's
Defense Savings Program -- the need to curb inflation.

''i the increase in civilian purchasing power -- brought about
by more jobs in new war industry, rising wages, the flocking of
women and young boys and girls into war or other work -- had been
accompanied by an equivalent increase in the supply of goods and
services for civilian use, there would have been no serious

U On April l6, 19^3} a "Job Freeze" order prohibited those in "critical" or "essential"
employment from leaving their jobs, even for higher wages elsewhere.

- 13 -

threat of runaifay prices. Unfortunately this was not the case
after 19^1. Effective demand outran supply beginning in 19^2.
Out of a total national production in that year of goods and
services of $151 billions ^ war purchases took $^9 billions,
leaving $102 billions for civilian supply; but total income
payments to individuals were more than $115 billions or $13
billions in excess of the estimated value of all goods and
services available for civilian use. By 19^i-3 this ''inflationary
gap" between total income payments to individuals and the supply
of civilian goods and services rose to $39 billions- in 19^^!- to
$^^- billions.

Obviously these large excesses of individual income over
available goods and services were a serious threat to the price
structure. If prices were permitted to rise in a free market,
the result would be not only an increased cost of living to
civilians but a much higher cost of waging the war . The
Roosevelt administration took several measures to prevent too
rapid or too great a rise in the general price structure. Direct
price control -- through several agencies, notably the Office of
Price Administration -- lies outside the boundaries of this study.
but indirect control through ta^cation and by diverting excess
consumer purchasing power into government securities is a most
important part of the story of the Treasury Department in the war,

Treasury Plans Fiscal Controls

The establishment of price ceilings, the regulation of
rents, the rationing of available supplies, important as they
are in a war economy, are in the final analysis measures to
control the effects rather than the cause of inflation. The
underlying ca.use of inflation, as already indicated, is an
increase in purchasing power without a corresponding increase
in available goods and services. The paradox of v/artime
prosperity is that at the very time when war e:-q)enditures are
increasing people ' s income by leaps and boimds they are
decreasing the commodities and services for which the ''new"
money can be spent. Since the exigencies of war preclude an
expansion of civilian supply to correspond with the increased
income, inflation has to be attacked from the other end, by
reducing the ajnount of money available for the purchase of
civilian goods and services. Of the various ways in which this
can be done, the Treasury Department developed a program for;
(l) increasing taxes, and (2) encouraging private savings,
particularly through the investment in Savings Bonds and other
government securities.

Since the Secretary of the Treasury is required to advise
Congress and the President on fiscal policy, it was the

- llf -

responsibility of the Treasury Department to devise measures not
only for raising the vast sums reo,uired to finance the war but
clso to help in closing the "inflationary gap." Long before the
danger of inflation was anything but a topic for academic
discussion. Treasury officials were at work on fiscal measures
to supplement other controls if and when the threat of runaway
prices became real. Through a series of weekly meetings,
beginning the last week of September 19^0, in the office of Under
Secretary Daniel W. Bell, the chief research and planning officers
of the Treasury canvassed every phase of inflation, and laid plans
for action along several lines. The Treasury examined in detail,
week by week, the various factors affecting the inflationary
thrust -- price trends, interest rates, industrial production,
retail sales, construction awards and expenditures, employment
and unemployment, securities transactions, bond yields and sales,
transfers of real estate, bank deposits, currency in circulation,
corporation profits and reserves, national income, gross national
product, individual savings, wage rates, imports and exports,
gold movements and foreign exchange rates.

It became evident that the Treasury's contribution to the
fight against inflation could be most effectively made through
fiscal policies that would: (l) help divert current excess
purchasing power from the consumer market; (2) immobilize the
stored-up purchasing power, principally in the form of bank
deposits, so that it could not be used to bid up prices; and
(3) prevent through borrov/ing operations a further unnecessary
increase in bank deposits. The borrowing or war loan aspects
of this policy comprise the remainder of this study.

Economic and Social Aspects of VJar Finance

Money itself cannot win a war, but the manner in which it
is raised may have a profound effect upon the conduct of the
v/ar and upon the stability of the peace to follow. So it was
that in devising ways to provide funds for the United States
participation in the costliest war in history, the Treasury
Department dared not lose sight of the economic and social
effects of its policies.

In considering war finance, it is important to remember
that the Secretary of the Treasury does not have a free hand in
determining fiscal policy. He is both a financial adviser to
Congress and the President, and the executive head of a far-flung
organization charged with responsibility for collecting taxes
and managing the public debt. His recommendations to Congress
are in no sense definitive and usually emerge from the legislative
mill in a form quite different from that first presented.
Especially in the case of tax legislation is this true. The

- 15 -

Treasury proposes but the Congress disposes.

Since no sane person would defend a policy of financing a
war by the simple device of printing paper money, the Treasury's.
only alternatives were to raise the money through taxes or loans.
"All other things being equal," the ideal way to pay for a war
would be with tax revenue. If taxes could equal government
expenditures there would be no "inflationary gap" between civilian
income and supply. Inflation xTOuld be stopped at the source.
To the extent that a war is financed through taxation the national
debt is kept dovm. A smaller debt means also that less revenue
will be required to service it. Thus high taxes during a war
not- only help to prevent inflation but also help to prevent high
taxes after the war.

Unfortunately "all other things'' are never equal. In the
first place, the machinery of tax legislation grinds too slowly
to keep pace with wartime expenditLires. Then too, it is not
easy to devise tax measures of sufficient magnitude to match
wartime expenditures without violating one or more of the basic
taxation canons of equality, convenience, certainty and economy.
An inequitable, irritating tax system, even though of certain
yield and economic administration, might seriously undermine
civilian morale and impede essential war production.

Economists are agreed that every war must be financed in
one way or another on a pay-as-you-go basis. Taxes are the
obvious example of pay-as-you-go. But money that is borrowed
represents a sacrifice at the time since the lender gives up his
funds for public use in exchange for Government bonds and
therefore, as in the case of a taxpayer, has less available for
his o\"jn current private use. The difference, of course, is that
the bonds give the lender a right to get his money back with
interest at some future date. To the extent that Government bonds
are purchased out of surplus and idle funds by a small portion
of the population, the loans thus made not only represent a
negligible sacrifice for the lender at the time but require at
some future time that the entire community be taxed to pay
interest and principal to a small class. Taxation provides a
final distribution of the burden at the time taxes are collected,
while borrowing postpones the final distribution of the burden
to some future time. To the extent that loans are made out of
current income and are widely distributed among the people, the
inequities arising from the final distribution of the burden are
minimized, and in terms of equality of sacrifice, borrowing comes
more closely to resemble taxation. Moreover, widespread
o^mership of the public debt becomes a stabilizing factor of
incalculable importance .

Treasury' s Plan for Higher Taxes

Again and again in the period 19^0 to 19^l-^-5 Secretary
Morgenthau made appeals for increased tax revenue. His initial
formula for financing the war -" two-thirds from taxes and
one-third from loans -- was never actually applied, but he never
abandoned it as a goal. The Treasury asked for higher taxes
than Congress was disposed to vote. In four revenue ects passed
19^0-^2, Congress levied taxes to yield 67 per cent of the
additional I'evenue recommended by the Treasury. VJhen the
revenue act of 19^1-3 is included, the percentage drops to half of
the additional revenue recommended by the Treasury.

VJhen all personal taxes -- federal, state and local -- are
taken into account, the aggregate wa.rtime reduction in national
income available for personal spending was, if not adequate ^
impressive. In the calendar year 19^1-05 total personal taxes
took slightly more than $3 billions; roughly h per cent of the
$77 billions of income payments to individuals; in the calendar
year 19^^-3 these taxes took approximately $21 billions, or
nearly 1^ per cent, of $153 billions. National income about
doubled during this period, but revenues from personal taxes
of all kinds increased more than six times.

Treasury' s Borrowing Policy

Even after tax increases, however, there remained an
alarming gap between disposable income in the hands of individuals
and the volume of consumer goods and services available to them.
This gap represented funds to be saved, or else wasted in a
reckless and inflationary attempt to buy a diminishing supply of
goods and services. It was from this excess of current individual
income over available consumer supply, plus idle reserves of all
kinds, that the government sought to borrow as much as possible
of the funds needed to make up the difference, or deficit,
between its overall expenditures and its receipts from taxes.'

As taxes failed to keep pace with increasing war expendi-
tures the deficit grew. In 19^0, it was only $^ billions, but
it was $12 billions in 19^+1; $Ul billions in 19^2; $56 billions
in I9U3, and $57 billions in I9UU. The gross national debt
grew from $^3 billions in the fiscal year 19^0 to a peak of
$279=8 billions in February, I9U6 .

In raising the vast sums made necessary by the war, the
Treasury was guided by certain basic principles, three of which
were of particular importance:

(1) The necessary funds should be raised in such a
manner as to minimize the risk of inflation.

17 -

(2) Small investors in Government securities should
be protected against loss.

(3) Lending by individuals of every income level, of
every state and section and of every race, class
and creed on a voluntary basis was preferable to
compulsory lending or lending only by the ' rich ,
and the ijell born.''^

Borrowing to Minimize Inflation

By all odds the most important of these principles was the
first, namely, to finance the deficit in such a manner as to
minimize the risk of inflation. The Treasury's borrowing
operations were conducted in accordance with this objective.

In general, there are three types of borrowing in which the
Treasury may engage: (l) Inflationary borrowing from the Federal
Reserve System and commercial banks; (2) Non- inflationary
borrowing from accumulated savings and reserves of individuals,
corporations, associations, public and private institutions of
various kinds, state and local governments, insurance companies,
mutual savings banks and so forth; and (3) Anti- inflationary
borrowing from the current income and liquid savings of individuals

Inflationary Bank Borrowing

Although not all Government borrowing from commercial banks
is inflationary, the bulk of it is. It requires no lengthy
analysis to show why this is so. l^ien a commercial bank buys
Government bonds, it does not transfer money from existing
deposits to the Government's account. It does not reduce anyone's
purchasing power by reducing his current income, accumulated
savings or reserve, by the amount of the Government loan. On the
contrary, the bank creates new deposits, equal to the amount of
the loan, upon which the Government may draw to meet its
obligations. The new money which the Government has to spend,
unless offset by equivalent savings on the part of individuals
and business enterprises, is added to the total volume of
available purchasing power.

Thus, if the Government borrov/s $1 billion from the
commercial banks, it increases demand deposits by that amount
and makes available to itself $1 billion of new purchasing
power over and above the total demand deposits already available
for public and private spending. Because they are mainly book-
keeping transactions, these new credits generated by Government
borrowing from commercial banks have been called "invisible

5 See Annual Report of the Secretary of the Treas\iry, 19^3.

- 18 -

greenbE.cks. ' If carried on in any great amount, they constitute
an inflationary threat of the first magnitude.^ Long term loans
by banks to individuals or corporations for the purchase of
Government securities would have substantially the same effect.

Because of the inflationary character of borrowing from
commercial banks, the Treasury from the beginning of the defense
program sought to place as large a proportion of its loan as
possible elsei-here. It would be inaccurate to conclude that all
Governjnent war financing through commercial banks was bad. The
creation of new demand deposits by bank purchase of Government
securities was a convenient and necessary device for supplying
the additional credit and currency so vitally needed by a rapidly
expanding war economy. Apart from other considerations, the
magnitude of Treasury borrowing operations and the difficulty
of tapping quickly other sources of funds made a large amount
of bank loans inevitable in World War II. So the need for ne\'
credit and currency was never a serious problem. The real
problem wa.s that of preventing an excessive e::pansion of bank
deposits and a dangerous increase in prices by restricting within
the narrowest possible limits the sale of Government securities
to commercial banks. During the fiscal years 19^1 through 19^!-35
commercial and Federal Reserve banks absorbed $U0 billions, or
about ^3 per cent, of the total Government borrowing of $92
billions.

Non -Inflationary Borrowing

To accomplish as great a degree as possible of non-
inflationary borrowing, the Treasury had to tap sources
representing real savings. These were in current accumulations -
savings and reserve f'onds of insurance companies, corporations,
savings banks, unincorporated businesses, institutions and
associations of all kinds, state and local governments, and
government and non- government trust accounts. As war production
absorbed a greater and greater portion of the total national
economy and as the Government assumed increasing responsibility
for the construction and maintenance of new war plants and
equipment, the opportunity for private investment of these
funds became more and more restricted. New private construction
of all kinds came to a standstill. Improvements, expansion, and
even normal maintenance were drastically curtailed. Funds that
would normally have been used for capital expenditures and for
replenishing shelves and warehouse supplies could not be spent
for these purposes. In many cases, existing plant and equipment

6 See Harry Scherman, "Invisible Greenbacks," Saturday Evening Post, Jiily h, I9I4-2, and
Annual Report of the Secretary of the Treasury, 19^3.

- 19 -

were allo-'.-red to fall into a bad state of disrepair from lack of
men and materials to keep them upc

At the same time, earnings of private business (even after
taxes), the income of insurance companies, deposits of sailings
banks c, and the revenues of state and local governments continued
to expand under conditions of vartime "prosperity," Business
and industrial enterprises, state and local governments, used
their larger incomes to pay off indebtedness. But in spite of
these developments there remained vast sums with 'no place to
go" except into Government securities. The Treasury made every
effort to draw on these funds in order to reduce borrowing from
commercial banks. Used to purchase Government securities, these
funds were non- inflationary because they represented real savings
and not new money generated by expanding the deposits of commercial
banks. They were funds withheld from the hands of individuals and
hence not available to them for spending. Invested in Government
securities they vjere placed at the disposal of the Government for
use in meeting the colossal costs of modern war. To the extent
that such funds enabled the Government to reduce the volume of
bank borrowing they helped to minimize the danger of inflation.

Ant i -Inflationary Borrowing

The Treasury had to do more than fight a defensive war against
inflation by avoiding inflationary methods of finance. It had to
wage a major offensive against inflation by borrowing, which
reduced the gap between income in the hands of individuals and
the available supply of consumer goods and services. Even after
payment of all personal taxes, this excess spendable income
represented billions of dollars of "wild" money, 'all dressed up
with no place to go." Some was absorbed in debt payments, life
insurance premiums and savings deposits, but more was 'wild."

Even when such funds were not irmnediately spent, the fact
that they were constantly "on tap" made them an ever-present
inflationary threat. Called "pressure funds," they have been
compared to the flood waters of the Mississippi beating against
the levees of price structure, being at the same time weakened
by declining inventories and war demands digging deeper into
civilian supply. Regulation by the Office of Price /dmini strati on
could not "hold the line" unless a large volmne of the flood
waters could be diverted into genuine savings before their
pressure on the price structure became unbearable.

Government bonds offered the ideal form for such savings to
take in wartime. Personal funds so invested served several
purposes :

(l) They reduced the amount of spendable money a,t
the disposal of the individual, thus helping

- 20 -

to bring national income and civilian supply
into better balance,

(2) They placed non- inflationary funds at the
disposal of the Government for paying the costs of
I'jar, reducing by that much the necessity for
inflationary financing through commercial and
Federal Reserve bank borrowing.

(3) They gave the individual investor an added sense
of personal participation in the war effort,
and when v/idely distributed and of sufficient
magnitude, helped to equalized the financial
burden of the war .

(k) They gave the individual a back-log of savings
for emergencies and for the post-war period
when civilian supplies would become adequate
to meet demand.

(5) If enough bonds were sold to enough people,
they could prove of considerable importance

in sustaining the post-war market, thus preventing
widespread unemployment and too rapid a price
decline.

(6) Because they gave each ovmer a personal stake
in our country. Government bonds in the hands
of millions of Americans served as a bulwark
to our democratic institutions.

It was with these objectives in mind that Secretary Morgenthau
late in 19^0 determined upon a nationwide campaign to encourage
thrift and savings through the purchase of Government bonds.
The resulting campaign, started in May 19^1 as the Defense
Savings Program, ultimately brought 85 million Americans into
some degree of financial partnership mth their Government in
paying for the war . It was a record unexainpled and unequalled
anyvjhere in the world.

The People ' s Bond: Savings Crusade for Everyone

Some of Secretary Morgenthau' s thrift and savings objectives
could be attained if the new campaign were to be confined to the
few - to the "rich and the well born." Even if every individual
in the country earning $5000 a year or more had been required to
invest part of his income in Government bonds, an insufficient
sum would have been realized to curb inflation. The major pressure
on prices was coming from the spending by individuals with incomes
of $5000 or less, who constituted 98 per cent of the population
and controlled seven-eights of the national income after payment
of personal taxes.

21 -

Protection for the Small Investor

Nothing short of a savings crusade to reach every manj woman
and child in the country would do. For such a campaign to succeed,
the securities to be offered to the small investor would have to
be attractive and safe from market fluctuation. Thousands of
people with modest incomes still remembered that they had purchased
Liberty Bonds during VJorld VJar I, only to find, when forced by
circumstances to sell their bonds before maturity, that the
market price had sharply declined. Bonds purchased for $100 often
sold for as little as $82. Thousands of frugal and patriotic
people felt that they had somehow been ''swindled," and were likely
to be "gun shy" when again asked to buy Government bonds.

To overcome this mental hazard, the security for the small
investor had to provide absolute protection against market
fluctuations in its face value. The buyer must be assured that
if he needed to redeem his bonds before maturity, he would get
back as much money as he had put into them, plus interest earned
up to that time. In planning such a security, the Treasury
considered itself the "trustee for the inexperienced investor"
who purchased Government bonds primarily to help his country in
its time of stress, and placed his faith in his Government that
the securities were sound investments.

To be attractive to the small investor, the securities had
not only to be safe but to pay a reasonable rate of interest.
In setting this policy of financing the defense program and the
war as cheaply as possible, securities designed for small investors
might reasonably be expected to pay a higher rate than those
intended for wealthier individual investors or for banks,
corporations and insurance companies, this being not only a matter
of equity but also a special inducement for saving, competing
on reasonable terms with other markets for small savings. The
safety factor proved to be more important than the interest rate.
The "competition" with savings banks, insurance companies, etc.,
was never an unfriendly one. The Treasury had the full
cooperation of such institutions. In fact, savings in these
markets increased during the war along with the War Bond program
itself.

Since one of the main reasons for the sale of Government
bonds to small investors was to reduce the amount of spendable
income and "pressure funds" at the disposal of individuals, it
was important that the securities should "stay sold" and not be
prematurely redeemed for the purchase of consumer goods and
services. On the other hand, it was necessary to protect the
investor's right to recover his money readily in cases of real
need, since to millions of small investors these bonds represented
their only accessible savings for an emergency. Many of these

- 22 -

potential investors would not willingly put their money into
securities which would be difficult to redeem. How to make the
bonds meet the urgent need for immobilizing excess spendable
income and at the same time preserve in them some degree of
liq_uidity was a Imotty problem.

Fully negotiable securities were out of the Question, not
only because they would be subject to market fluctuations but
because they could be easily converted into cash at any bank or
credit institution^ usually at a discount, or even used as
currency, also at a discount, for the purchase of consumer goods
and services. If used as collateral for loans, negotiable
securities in large volume xTOuld ultimately drift into the banks
to serve as a basis for additional credit and currency inflation.
Worst of all, small investors in negotiable securities might be
induced to part with them in exchange for unreliable stocks or
bonds in shaky business deals. Secretary of the Treasury Carter
Glass had concluded that among the factors causing the mass
liq_uidation of Liberty Bonds after World War I were ''the idcked
devices of bond sharps and swindlers who took advantage of the
ine^cperience of many small investors. . .whom the Treasury was,
failing the necessary legislation, powerless to protect." '

Series E

Fortunately the Treasury had in its Savings Bonds, Series
A-D, the so-called Baby Bonds, first offered for sale in
March 1935, a security almost ideally suited to the purpose of
a new savings campaign. These Savings Bonds were first issued
under the authority of an amendment to the 2nd Liberty Loan Act
of 1917, adopted February U, 1935. The law provided that the
bonds would be issued at a discount up to maturity and yield
not more than 3 per cent per year, compounded semi-annually. The
minimum denomination was $25, and an upper limit on purchase was
set at $10,000 for any individual in any single calendar year.
The Secretary of the Treasury was left free, within certain
limits, to determine other features of the securities.^ Reissued
in May, I9U1, as the Series E Defense Savings Bond (renamed War
Savings Bond in June, I9U2) the original "Baby Bond" became the
major instrument for appealing to the small individual investor.

The major features of the E Bond, which is still (1965) on
sale, corresponded to those outlined above as essential for a
security designed for popular subscription. It is a non -negotiable

7 See Annual Report of the Secretary of the Treasiiry, 1919.

8 The Series A-D Savings Bonds supplanted the Postal Savings Bond, a 2^ per cent 20-year
bond redeemable one year from issue, sold through the Postal Savings System from June, 1910, to
July 1, 1935-

- 23 "

bond, registered in the name of the oi'mer, who may at the time of
purchase indicate on its face another person as either co-oimer
or beneficiary. The bond may be purchased only by natural persons
(individuals, not groups or corporations) resident in the United
States or its possessions. It is not available to banks 5 cor-
porations, associations or any other than individual investors.
As a non-negotiable securitj^, the E Bond may not be sold in the
market nor used as collateral for loans. It is also protected
against loss through fire, theft or other accident. If the owner
or co-o\jner needs his money before maturity he may redeem his
E Bond through almost any bank, or directly through the Treasurer
of the United States, at any time after 60 days from the date of
issue, and recover the full purchase price plus any accumulated
interest. The E Bond was for practical purposes a demand
obligation. It was to the ovmer's interest, however, to hold the
bond to maturity since only by doing so would his investment earn
the full interest rate.

Series E Bonds, like the ''Baby Bonds," were issued in
denominations with maturity values of $253 $50, $100, $500 and
$1000. The smaller denominations, even though involving
considerable expense in their sale, registration and redemption,
vrere regarded as indispensable. They made it possible for the
very small investor to buy Government bonds without having to
wait many weeks or months to "save up" enough money. The longer
it took to save for a bond, the greater the danger that the
potential investor would spend his money instead of placing it
at Uncle Sam's disposal. Moreover, the low-priced bond quickly
provided the small investor tangible evidence of his investment,
without which his zeal for saving might very likely have diminished,
Small denominations were also expected hj some to retard the
volume of redemptions because they would enable the investor to
retain part of his savings without having to redeem bonds of a
much larger amount than his immediate needs required.

Because of the high interest paid on these securities, and
in line with Treasury policy of keeping down the cost of defense
and war financing, a limit of $5000 maturity value, or $3750
purchase price, was placed on the amount which an individual might
acquire within any one calendar year. Investors having m.ore than
$3750 to place in Government bonds in a year had to turn to other
securities paying a lower rate of interest. This "favoritism"
to the small investor was designed as an added inducement to
saving. It was justified on the theory that the sacrifice
involved in saving was greater for those with sm.all incomes than

Bonds for Larger Investors: Series F and G

To meet the needs of wealthy individual investors and of
small corporations and associations seeking maximum safety for
their investments, the Treasury decided to issue two completely
new savings bonds in May 19^1? the Series F and G. Both of these
were registered and non-negotiable, hence not subject to market
fluctuations. Unlike E Bonds, however, they could be purchased
not only by natural persons but also by corporations, institutions,
and governmental agencies. They could also be purchased by
savings banks but not by commercial banks which accepted demand
deposits .

Although the interest rate -- 2.53 per cent for Series F and
2.5 per cent for Series G -- was lower than for Series E, it was
too high to allow unrestricted purchase. The Treasury hence
imposed a limit of $50,000 (issue price) as the maximum of Series
F or G, or a combination of both, which any investor might acquire
in a calendar- year. This limit was subsequently (July 1, 19^2)
raised to $100,000. Income from all Savings Bonds, Series E, F
and G, like that from other Government securities issued after
March 1, 19^1-1, was subject to Federal income tax.es.

Series F Bonds were issued on a discount basis ^ the issue
price being 7^- per cent of the maturity value. Both Series F
and G were issued in denominations of $100, $500, $1000, $5000,
and $10,000, a $25 Series F denomination being subsequently added
to meet the needs of small organizations, such as churches and
clubs. The Series F matured in 12 years instead of 10 as for
the E Bond. Also as in the case of the Series E, no interest
was paid currently on the Series F, but the bond increased in
redemption value after the first year until at maturity it could
be redeemed at face value. The Series F Bonds could be redeemed
at any time after six months from date of issue.

Unlike Series E and F, the Series G Bonds were designed for
those who sought current income. Issued at par (i.e., face value),
they matured in twelve years, interest being paid twice a year
by check on the Treasurer of the United States. Series G Bonds
could be redeemed at any time after six months from date of issue,
provided iTritten notice of the owner's intention to redeem was
received by a Federal Reserve Bank or the Treasurer of the United
States at least a month in advance. Although issued at par end
paying interest semi-annually, the oimer who redeemed a Series G
Bond before maturity suffered a penalty through having part of
the interest he had received deducted from the par value that
vfould have been payable at maturity. For example, if the o\meT
of a $100 Series G Bond redeemed it after only one year he received
$98.80. The redemption value progressively declined to a low
point of $9^.70 at the end of five years; thereafter it increased

- 25 -

slouly until at maturity it returned to its full face value of
$100. As in the case of Series E and F, these variable redemption
values were designed to encourage investors to hold their bonds
to maturity. One attractive feature of the G Bond was that it
could be redeemed at par, notwithstanding the interest paid, upon
the death of the o^mer or co-ovmer, provided a request for the
redemption at par was made not more than six months after the date,
of death.

Bonds on the Installment Plan

The multiple purposes of the Treasury's savings campaign
could not be achieved with bonds alone. Some instrument was
required to justify an appeal to school children and to provide
a convenient means for anyone to buy bonds on the "installment .
plan." This was found in the Defense Savings (and after June 1,
19^1-2 the War Savings) Stamps, issued on a non-interest bearing
basis in denominations of 10 cents, 25 cents, 50 cents, $1 and $5.

Originally (May, 19^1) these stamps were simply a special
kind of Postal Savings Stamp issued by the Post Office Department
at the request of the Secretary of the Treasury. Proceeds from
their sale were credited to the general fund of the Treasury. On
September 30, 19^-2, the Postal Savings System discontinued the
issuance of these special stamps, and the Treasury then issued
United States Savings Stamps as public debt obligations. The
stamps could be converted into Savings Bonds, or cash, at the
option of the oivner. They were important mainly as an educational
and promotional device, but they also served an important
function in making it easier for the very small investor to buy
Government bonds. VJhile the stamp buyer was accumulating enough
stamps to convert into a bond, the Government had the use of his
funds without interest.

An additional and most important aspect of bond investment
on the installment plan was the payroll deduction plan, under
which workers on regular wages could arrange to have their
employer withhold specified amounts from their periodic wage
payments, a bond to be issued as soon as the withholdings
equalled its purchase price. 9

Market Risk Securities

Savings Bonds and Stamps, however, could not be counted
on to raise the major portion of the vast funds needed to
finance the war. The Treasury had to offer other securities
to attract funds in the hands of wealthy individuals,

9 See below. Chapter IX.

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corporations, insurance companies, savings banks, state and local
governments, so it issued a variety of marketa.ble securities,
ranging from 90-day bills and 1-year certificates to bonds \j±th
maturities up to 25 years. Since their main purpose was to
absorb the accumulated funds of presumably "market -wise" investors,
these securities were issued cnlj in large denominations, from
$500 upward. Interest rates varied from 7/8ths of 1 per cent on
the one-year certificates to 2.5 per cent on the 25-yesr bonds.

Although these securities were fully negotiable, the
Treasury imposed certain restrictions on their purchase by
commercial banks, to maintain the objective of borrowing every
possible dollar from non- inflationary or anti-inflationary
sources. It may be said that the Treasury conducted its war
finance operations on a double standard -- seeking on the one
hand to sell the greatest possible volume of anti-inflationary
Savings Bonds, while on the other selling marketable securities
to meet war needs. This necessary duality of operation occasionally
caused some conflict of opinion as to which kind of bond should
be promoted the most energetically, and what type of organization
was best suited to the task of promoting either type separately,
or both simultaneously.

Why Not a Small Negotiable Bond?

Savings B^.nds were not universally accepted as the ideal
securities with which to accomplish the Treasury's objectives.
From the beginning of the Defense Savings Program in May 19^1,
there was a fairly strong and consistent demand, mainly by
bankers and security dealers, for a negotiable security in low
denominations, with an interest rate and maturity comparable to
those of Savings Bonds. This request was made at all pre-V/ar
Loan Drive sessions held by the Treasury to determine the "basket"
of securities to be offered. It would serve no good purpose to
examine in detail all the arguments in favor of negotiable
securities of low denomination for popular subscription. Some
indicated a lack of understanding of the major objectives of
the war finance program. Others barely concealed a premise
rooted in self-interest and the desire to profit by "trading"
in the securities as was done in VJorld War I. Some bankers and
security dealers, a minority to be sure, particularly objected
to the E Bond because, as they said, "there's nothing in it for
us." Some bankers were unimpressed by the Treasury's policy
of considering itself "the trustee for the inexperienced investor"
in protecting him against market fluctuations. At a meeting to
consider the "basket"' of securities for the Second War Loan,
which opened April 12, 19^-3 5 considerable support rallied behind

- 27 -

a small negotieble plan, which ran somewhat as follows:
"VJe are \mimpressed by the argument that it is
necessary to protect the small investor against
the normal risks of the market. After all, when
the Government sends soldiers into North Africa
or Guadalcanal, it does not guarantee them
against the risks of battle. At such times as
this, when we are demanding that some of our fellow
citizens risk life itself in defense of our
common country, is it too much to ask others
to risk their money''''
This argument proved too much. By the same line of reasoning
one could justify repeal of all "blue sky" legislation, the
Securities Exchange Commission, even the Pure Food and Drug laws,
or at least declare them inoperative in time of war since they
are designed to protect people from normal risks. The question,
however, was not primarily an ethical or moral but a practical
one -- would a market -risk security for the small investor
contribute to the attainment of Treasury objectives in financing
the deficit?

No argument was ever seriously advanced that more individuals
of modest income xTOuld invest more money in market-risk securities
than in Savings Bonds. Indeed with the memory still strong of
what happened to the Liberty Bonds, and with no assurance of
protection against market fluctuations, the small investor was
probably less, rather than more, inclined to place his money
at Uncle Sam's disposal. The most cogent argument against
Savings Bonds was the economic risk to the Treasury involved in
having outstanding billions of dollars of demand obligations
that might be presented for redemption at any time, virtually
without notice.

Criticism of Savings Bonds, especially of the Series E, on
this score was continuous and often vociferous. Secretary
Morgenthau, and those upon whom he relied most heavily for
advice, never seriously wavered in their determination to protect .
the small and inexperienced investor from the fluctuations of
the market through a continued sale of "The People's Bonds" --
Series E. Nor was the Secretary impressed by the "danger" that
supposedly lurked in a large volume of outstanding demand
obligations. The redemption rate on Savings Bonds after the
close of the war, and particularly during the first seven or
eight months of 19^6, was much lower than even optimistic
supporters of the Savings Bond program had entertained, thus giving
belated support to the strong stand of the Secretary in l^k2.
and I9U3.

10 See notes on this problem, at some length, in the Secretary's Annual Report to Congress
for the fiscal year 19^3. A similar analysis was presented by Under Secretary Bell in his address
to the Economic Club of Worcester (Mass.), on December l6, 19't3.

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CHAPTER III

INITIAL ORGANIZATION

The Defense Savings Staff j established in the Spring of
19^1, was the initial organization to carry out the Treasury's
objectives for a campaign of savings and thrift which would raise
money for defense, guard against inflation, and help achieve
national unity.

Liberty Loan Pattern Not Repeated

For various reasons it seemed advisable to have the new
organization operate along quite different lines from those
common to the Liberty Loan campaigns of World War I. All the
Liberty Loan drives except the fifth and last (the VictorA^ Loan)
were conducted during war, in an atmosphere quite different
from that prevailing in the Spring of 19^1. There were, moreover,
important reasons apart from the temper of the public opinion
why Secretary Morgenthau was not disposed to favor a Liberty
Loan organization or program. For one, the Liberty Loan
committees had been organized in the twelve Federal Reserve
Districts under the direction and control of the Federal
Reserve Banks, and with few exceptions were dominated by
bankers, brokers and security dealers. Even without the tension
existing between the New Deal administration and the financial
community the program contemplated by Secretary Morgenthau was
not one that could best be administered under professional
banking and investment leadership. The rank and file of American
people to whom the Treasury's main appeal was to be made \iere
not likely to respond wholeheartedly to such leadership.
Bankers and stock brokers, epitomized in the term "VJall Street,"
had gone through ten years of stress during which their prestige
and influence with the general public had suffered a marked
decline. They were associated in the public mind with the
"merchants of death" who allegedly fomented war and revolution,
and with those who, by manipulating the stock market were said
to have caused the depression of the 1930' s. President
Roosevelt gave echo to this widespread feeling in his first
inaugural address when he promised to "drive the money changers
from the temple . "

Another reason for rejecting the Liberty Loan type of
program was the ill repute in which Liberty Bonds themselves
were held by many small investors who had parted with their
bonds before maturity at a substantial discount. It was no
consolation to them to be told that had they hung onto their
bonds to maturity they could have recovered every cent invested
and earned an excellent rate of interest in addition. To most
people this only meant that somebody else, "probably a banker
or stock broker," had profited from their distress.

The Treasury resolved to overcome the mental hazard on the
part of the small investor by offering him a registered
seciority paying a reasonable rate of interest and guaranteed
against market fluctuations. The Series E, F and G Savings
Bonds were designed primarily with this end in view. Bankers
and investment leaders and securities salesmen were not psycho-
logically well equipped to promote these bonds, which "had no
market" in the usual sense. Particularly were Series E Bonds
an "uninteresting" type of security to the professional bond
salesman. He never really liked the E Bond and could not put
his heart into the job of selling it. Moreover he was not too
well acquainted with the small investor for whom these Savings
Bonds were designed. Even the Series F and G Bonds which
could be purchased by savings banks, corporations and associa-
tions, as xirell as by individuals, lacked negotiability and
were subject to limits on the amount an investor could buy in
a calendar year. Hence they were not the kind of bonds the
securities industry was especially qualified to promote.

The Liberty Bond organizations had dealt in securities
with a wide-open market. They were sold to banks, insurance
companies, corporations and individuals indiscriminately.
They were freely negotiable and could be used as collateral
for loans. The result was a tremendous volume of indirect
bank buying through the practice of individuals borrowing to
purchase bonds, and using the bonds themselves as collateral
for the loan. Indeed the slogan "borrow and buy" expressed a
common policy of most Liberty Loan committees. The World
War I program was, hence, one calculated to rely extensively
on the banking and investment industries. A much different
type of promotion was held to be necessary in 19^0-^+1.

There was a further basic contract between the policies
which gave rise to the Liberty Loan drives and those which led
to the establishment of the Defense Savings Staff in May, I9U1.
In World War I the Government's main interest was in raising
large sums of money quickly to meet the cost of the V7ar without
too much concern as to the sources from which the funds came.
There was a good deal of talk about the high cost of living

but the use of fiscal measures to check price inflation was
not urged with any great vigor or enthusiasm. This apparent
indifference to the economic effects of fiscal policy was
reflected in the Government's policy of raising only from
one-fourth to one-third of the necessary funds from taxation
and the balance from borrowing. Moreover, the inflationary
effects of commercial bank borrowing were either not fully
appreciated or were looked upon with more indulgence in 1917
than in I9U1.

To a large degree the banks were the underwriters of the
Liberty Loans. The general plan of Government financing was
cyclical. Every few weeks the Treasury would issue to the banks
enough short-term securities (certificates) to meet its current
needs. l^Jhen a large amount of these were outstanding , the Treasury
would conduct a Liberty Loan drive to sell long-term securities
to raise funds with which to redeem the certificates.

In this type of cyclical financing it was logical to look
to bankers and brokers for leadership. Considerable effort
was made to sell bonds to as many individuals as possible; the
number of subscribers rose from about U, 000 ,000 in the First
Loan to more than 22,000,000 in the Fourth. Also the Liberty
Loan drives, supported by extensive publicity, made a great
contribution to public awareness of the war. But the wide
distribution of sales and the effect of the drives on public
morale were incidental, almost accidental, results of a sales
campaign designed to raise a given amount of money in a limited
period of time.

Precedent in Vanderlip War Savings Campaign

A more helpful guide for the proposed 19^1 bond organiza-
tion lay in the V7ar Savings movemxent of World War I as institut-
ed in October 1917? under the direction of a New York banker,
Frank Vanderlip. The purposes of this National War Savings
Committee were much similar to those under consideration in
I9UO-U1, namely, to reduce unnecessary spending by individuals,
to encourage them to save (thus checking the high cost of
living), and to impress upon everyone the feeling that his
funds lent to the Government had a direct bearing on national
defense.

The World War I Savings organization under Vanderlip was
designed to reach every individual in the nation with a broad-
-gauge program of thrift education. It was a continuing
program with a minimum of "ballyhoo." The plan was to enlist
the cooperation of existing organizations representing every

important phase of American life. In Washington there was a
National War Savings Director and a National Savings Committee
with supervision over a Division of State Organizations, a
National Organizations Division and Divisions of Labor,
Education, Publicity, Advertising, Retail Merchants, Production
and Distribution, and License, the latter having responsibility
for licensing agents of various kinds to sell War Savings
securities. During the time Vanderlip served as Director, he
had charge of a speakers bureau and of general publicity. In
every State and major subdivision thereof was a similar Savings
Committee. But the heart of the program was in War Savings
Societies or Committees modelled on the British system of the
time, established in schools and colleges, women's clubs, trade
unions, farm organizations, fraternal and religious bodies,
business and professional associations, service clubs, the
Boy Scouts and other youth organizations. By the end of I918
more than 100,000 such committees, with about 6 million members,
had been established.

In carrying on its program of thrift education, the War
Savings organization sought to become an integral part of the
economic and social life of the nation. Not only was it
organized within the structure of going organizations but it
made use of existing channels of communication. The labor
division, for example, in close cooperation with labor leaders
worked through the labor press and trade union meetings to
reach the rank and file. Similarly the education division had
as its directing head the president of the National Education
Association. In reaching farmers, War Savings officials
collaborated with the Department of Agriculture, County Agents
and other leaders of farm organizations. Foreign-language
groups were appealed to through their oim publications and
through pamphlets written in their oxm language.

The distinguishing characteristics of the entire program
were respect for existing group loyalties, democracy in
organizations, and emphasis on education rather than on
sensational publicity. The major purpose was the inculcation
of the habit of thrift rather than the securing of large sales.
In explaining the patriotic necessity of personal saving, the
War Savings Committees explained also the purpose for which
the war was being fought and carried on a nationwide program
of education in American democracy. By enlisting millions of
members in thousands of savings societies, the program gave
them opportunity for active participation in civic affairs.
Its nationwide thrift pledge campaign in June, I918, helped

-32

millions of others to identify themselves with the nation's
war effort.l

Late in the summer of I918 the War Savings program was
merged with the Liberty Loan committees by the simple
expedient of adding a Savings Director for each Federal Reserve
District. Thereafter the major emphasis was placed on dollar
volume of sales and the War Savings Committees adopted many
of the high pressure selling methods of the Liberty Loan
organization.

The continuing program of education in thrift and
savings soon lost its vitality and seemed less important
when absorbed into the pattern of periodic drives to raise
vast sums of money. Paradoxically the sacrifice of the more
democratic and educational features of the War Savings
organization in favor of more salesmanship did not result in
any substantial increase in the sale of War Savings certifi-
cates. Of the $2 billions authorized in September 1917,
$83^3000,000 were sold in I918; of the $U billions authorized
a year later only $97,000,000 were sold in 1919. Although
the program was continued with new series of certificates in
1920 and 1921, sales were negligible. Life went out of the
War Savings Committee when it ceased to be a savings movement
and became a sales organization. 2 The idea of a government-
sponsored savings program, however, did not die; it remained
in record and memory as a guide for 19^1.

The Division of Savings Bonds

Although the high pressure type of organization and
drive promotion of the Liberty Loans seemed to be incompatible
with the nation's needs previous to our entry into World War
II, there was at hand an operating Treasury unit which could
conceivably have been turned to the new task. A simple and
logical procedure seemed to point to an expansion of the
program already in operation by the Division of Savings Bonds.

1 The mechanics of saving under this program were managed through Thrift Stamps and War
Savings Certificates. Thrift Stamps worth 25 cents each were sold, the purchaser supplied with
a thrift card to which he could affix sixteen stamps of $U worth. The stamps bore no interest,
but when the thrift card was filled the owner could use it to purchase a War Savings Certificate.
These were sold in January I918 for $U.12 and the price increased by one cent a month until Decem-
ber 1918 after which this issue was no longer available and a new series was authorized. At
maturity, January I923, the War Savings Certificate was worth $5, thus yielding an interest rate
of about h^ per cent if held for the full five year period.

2 Labert St. Clair, The Story of the Liberty Loans. Rather thin text, but profuse
illustrations, especially of bond posters.

This Division, formally established in March 1936, was
the outgroTTth of Secretary Morgenthau's determination to
encourage savings among small income receivers through the
purchase of Government bonds. On a trip to Europe in 193^ he
had been impressed with savings programs of this kind in the
Scandinavian countries and in France and England. The time
seemed auspicious for a similar undertaking in the United
States. Millions of small investors had been defrauded, or
at least had lost their savings, through the purchase of
unsound stocks and bonds. Others had lost their savings
through the widespread failure of banks in the depression of
the 1930's. It hence seemed logical for the Government to
provide some place for small investors to put savings where
they could earn a fair return and be safe from the vicissitudes
of the market.

With this in mind the Secretary asked Congress in
January, 1935, for authority to issue a series of U. S.
Savings Bonds. Congress passed the necessary legislation, and
on March 1, 1935? the first U. S. Savings Bonds, Series A,
the forerunners of the wartime Series E, were offered
for sale.

"Offered for sale" is an accurate description of what
was done since for nearly a year no great effort was made to
encourage investors to buy. There was no sales organization
either in Washington or in the field, unless the l4,000 post
offices where the- bonds were on sale could be so regarded.
Secretary Morgenthau's high hopes for a broad-gauge savings
program seemed destined to become another depression
casualty, and the savings bonds carefully designed to protect
the investor from nearly every contingency, were for a time
treated as orphans of the storm. A newspaper columnist,
Ray Tucker, was brought in to preach thrift and sell savings
bonds, but he gave up the seemingly unrewarding task after a
couple of months. His successor, James William Bryan, kept
doggedly on the job until the Division's major promotion
efforts were absorbed by the new defense savings program.

For several years the Treasury employed two advertising
agencies to prepare and place display advertising of savings
bonds in leading magazines. The "Girl with the Flag" became
the "Baby Bond" trademark and was seen on posters, car cards
and point-of-sale material in nearly every post office in the
country .

In the meantime, in August 1935? Secretary Morgenthau
appointed Eugene W. Sloan as an Assistant to the Under
Secretary to "do something about the savings bonds." It was
under Sloan's direction, in collaboration with Jim Bryan,

- 3^

that the basic pattern of savings bond promotion was
developed. 3 in addition to the campaign of magazine adver-
tising, posters and leaflets were prepared and distributed.
Bryan became a "One-Man Chautauqua," travelling up and
down the land preaching the gospel of thrift and the magic
of compound interest to any group that would listen.
Sloan also took to the road to enlist the active support
of bankers, trust officers and others who were in a
position to offer counsel on investments. Since the major
outlets for the bonds were post offices, Sloan devoted a
good deal of his time in an effort to get postmasters
to "push" savings bonds. He travelled throughout the
Middle West where people were reputedly "sour on banks
and were reported to be hoarding cash in large amounts."

After September 1935? sales picked up and in March,
1936, Secretary Morgenthau established a Division of
Savings Bonds in the Office of the Secretary, with Sloan
as Chief of the Division and Bryan as his assistant in
charge of publicity and sales promotion. All the
promotional efforts up to this point had been more or less
indirect. In July, 193^, the new Division embarked upon
what was to be its major sales activity for the next five
years — a gigantic program of direct mail promotion.
Mailing lists of actual and prospective bond buyers were
compiled and equipment was installed with a capacity of
handling direct mail solicitation "assemblies" at the
rate of 100,000 a day. These assemblies consisted of a
combination order form and return envelope together with
literature on the wisdom of saving and the especially
attractive features of United States Savings Bonds. A
"regular purchase" plan was developed through which
investors could agree to buy bonds at certain fixed
intervals. The Division mailed to them reminder notices
in the form of return-envelop-order-forms. All the
purchaser had to do was to enclose his remittance and
mail it to the Treasurer of the United States. This
grew into a large operation in which the Division was
mailing about 125,000 notices monthly.

As part of this direct mail promotion, the Treasurer
of the United States established a savings bond section
to receive mail orders and deliver bonds to the purchasers

3 E. W. Sloan, Princeton I915, was a native of St. Louis, with experience in commerce and
banking. He entered the Treasury in August 1935. The banker who suggested that he become the
Treasury's No. 1 bond salesman is reputed to have told Mr. Sloan: "You don't make any money but
you will have a valuable and interesting experience and meet a lot of people." This prediction
was amply fulfillfd during the next eight years.

As a centralized operation this proved to be unwieldy so
within a few months a considerable part of it i-ras parcelled
out by Federal Reserve Districts.

The Division of Savings Bonds developed into the
largest mail order sales program in the world. Its original
mailing list included 719j828 names of bond owners. Expanded
in 1937 to include names on the Bureau of Internal Revenue's
list of individual taxpayers, the mailing list grew until
it reached a total of about 7 million active and prospective
customers to whom savings bond literature was sent at
intervals. Approximately 30 million pieces of mail were
distributed through the list during the fiscal year 19^1.^

First Installment Buying

One other feature of bond sales during this period is
notable for its later significance. Some time in 193^,
officials of the American Telephone and Telegraph Company
advised Mr. Sloan that they were considering the feasibility
of issuing small denomination company bonds for purchase by
the employees on an installment basis. He recommended that
they purchase U. S. Savings Bonds instead. This proved
agreeable to the company; within a short time about 30 5 000
employees had arranged to purchase bonds on the installment
plan by having deductions for the purpose made from their
pay. As the necessary amounts accumulated the company sent
a single covering check and a list of registrants to a
Federal Reserve Bank, where the bonds were inscribed and
mailed direct to the purchasers.

This is believed to be the first payroll savings plan
for the installment purchase of savings bonds ; at least it
was the first successful one on a large scale. Payroll
Savings became the balance wheel of direct selling promotion
in the defense and wartime bond program.

Record of the Division of Savings Bonds

The achievements of the Division of Savings Bonds during
the five years of its existence were impressive. After a
slump in the Fall of 1935? sales increased steadily not only
in dollar volume but in terms of the number of bonds sold
and the number of subscribers. Sales in fiscal year I936
(the first full year during which they were sold) amounted
to $277,000,000, reached a peak in fiscal year 19^+0 (the
last full year of the Division of Savings Bonds) of over

h Annual Report of the Secretary of the Treasury for the fiscal year ending Jime 30, I9UI.

- 36 -

$1,100 5 000 5 000. The number of bonds sold increased from
1,28^,000 in fiscal year 1936 to U, 700,000 in fiscal I9U0.
By the end of fiscal year I9U1 over 19,000,000 savings bonds
had been issued. Between March 1935 and June 30, 19^41 more
than $U billions had been invested in savings bonds by more
than 1,800,000 customers. 5

On close analysis, however, the achievement of the
Division of Savings Bonds, excellent as it was, fell
considerably short of the goal which Secretary Morgenthau
had in mind for the defense savings program. While in theory
the "Baby Bonds," Series A-D, were the "poor man's bond," for
the savings of laborers, clerks, domestics and other small
investors, close scrutiny of the record indicated that the
program did not reach a large number of such buyers. Out of
a total of more than 15 million bonds issued up to October 30,
I9UO3 less than half, or about 6.5 million bonds, were in
the smaller denominations. In terms of the amount invested
the results showed an even more striking preponderance of
comparatively large investments. From March 1, 1935? to
June 30, I9U0, nearly 95 per cent of the total amount invest-
ed was represented by bonds in the larger denominations — $100,
$500 and $1000. Only 5.2 per cent of the total was accounted
for by $25 and $50 bonds. With a total of only 1,800,000
customers of whom 25 per cent were fiduciaries, corporations,
banks and trust companies, the savings bond program,
impressive as it was, had not cut a very deep or wide swath
in the economic life of pre-war America.

Reliance on the Postal Service

The Division of Savings Bonds was handicapped in its
efforts to get a wide distribution of sales by the lack of
a field force and adequate outlets for the issuance of bonds.
The only places X'/here the securities could be purchased "over
the counter" were in some lU,000 post offices. The
indifference of many postal employees made the sales program
hard sledding. By and large the postmasters and their
associates were friendly and cooperative, but they were not
professional bond salesmen and they had much other work to
do. Nevertheless the bulk of "Baby Bond" sales were made
over their counters. Beginning in 1937? Federal Reserve
Banks accepted savings bond subscriptions, but except for
the sophisticated investor this did not represent any great

5 Prior to April 1, 19^0, corporations, associations, fiduciaries, banks and trust
companies, as well as individuals were eligible to buy these securities, but thereafter they
were restricted to individuals.

gain in marketing facilities.

The most notable sales activities of the Division of
Savings Bonds were its direct mail operation and its
advertising program. From September 1935? when the mailing
division was established, to February 19^1, two months before
the beginning of the Defense Savings Staff, over 125 million
"assemblies" were produced and mailed to actual and prospective
customers at an economical cost of l/20th of a cent per
assembly. The direct mail sales amounted to some $609
million out of a total of o)3.5 billions of bond sales by this
Division. The over-all cost of the direct mail promotion, as
measured in terms of sales, was calculated at 26/100 of one
per cent.o

By commercial standards this was an excellent record, but
on other grounds the operation appeared less successful. With
the addition of names furnished by the Bureau of Internal
Revenue the mailing list grew to nearly 73 000,000 names, and
the number of buyers increased from 719 5 000 in 1937 to
1,837,000 on March 1, 19^1, but at least 900,000 of the new
customers x^ere not on the mailing list. They had been
persuaded to buy through some other channel than direct mail.
Since the mailing of 125 million assemblies to more than
27 million names during a period of five years resulted in
inducing only some 207,000 people to buy bonds, it was not
sufficiently encouraging to warrant great reliance on this
type of operation in the new defense savings campaign.

Advertising

Advertising and other publicity supplemented the sales
efforts of the postal service and the direct mail operations.
For about two and a half years, 1936-39? "the Treasury
purchased full-page ads once a month in major weekly magazines
and the National Geographic in the monthly field. In 1939
this was brought to an end, largely through the efforts of
Representative John Taber of New York, who raised his voice
against what he called extravagant and high pressure sales-
manship behind the Baby Bonds. 7 Weakened by the loss of its

6 Annua2 Report of the Secretary of the Treasury for I938, p. 23I.

7 See Congressional Record. February 2k, 1939. Shortly after the Congressional ban on
advertising. Secretary Morgenthau intimated to a sub-committee of the House Appropriations Committee
that he wanted to start a real popular drive to get the people to invest their savings in Govern-
ment securities, a program which would necessitate extensive advertising.

advertising appropriation, the Division of Savings Bonds was
also handicapped by the lack of a field organization. In the
absence of a field force it was virtually impossible to
organize any systematic face-to-face sales campaign or to
engage in any very extensive educational activities.

Decision to Have a Mew Organization

As the war in Europe and Asia crept closer and threatened
vital American interests, and as the social and economic
implications of the bond program became more evident, the
Secretary resolved that steps should be taken without delay to
provide an organization better calculated to deal with the
problems that were confronting the Treasury, and which were
certain to grow in number and magnitude. What was needed was
a plan which would:

(a) Provide a channel for direct communication with
every man, woman and child in the nation.

(b) Create a field organization that could carry on
a nationwide program of education and publicity
and at the same time serve as a sales force for
Government securities.

(d) Improve and strengthen the public relations
of the Treasury Department.

All of these activities were to help accomplish the basic
objectives of the defense savings campaign as already outlined.
In late December 19^0, Secretary Morgenthau, in consulta-
tion with his own staff and a number of outside advisers,
undertook the formulation of plans to translate these aims
into practice. Careful studies were made of the Liberty Loan
and War Savings organizations of World War I, of the British
and Canadian programs and of the Treasury's o-tm Division of
Savings Bonds, to determine in what way these could help in
finding a solution for the current problem. As a result, the
Secretary decided to create a wholly new organization unlike
any one of those surveyed, but containing some features from
all to them. The underlying plan and purpose of the new
campaign were outlined in a memorandum sent to Secretary
Moreenthau early in 19^'rl.

" 39

Memorandum of January lU, 19^1

In order to "promote national defense through... a wide
distribution of Savings Bonds among small investors," this
memorandum proposed a broad platform:

"To give to the American people a sense of the
magnitude and importance of the national defense
effort.

"To do so by inspiring confidence rather than fear.

"To do so by transforming people from being mere
observers into becoming active participants in
this effort.

"To do so through existing organizations rather
than the creation of new machinery.

"To do so through the cooperation of local and
familiar functional organizations rather than by
remote control.

"To emphasize at all times participation rather
than propaganda -- voluntary cooperation rather than
coercion. "

The emphasis of this memorandum was on the psychological
aspects of the problem. This not only reflected what was
then uppermost in Secretary Morgenthau' s thinking but also
the fundamental assumption that the sale of bonds (and
indeed the willingness of citizens to pay taxes) would
depend on how people "felt" about the defense program.
"The Treasury program," the memorandum noted, "has to do
with the development of a sense of participation in national
defense and the encouragement of habits of thrift, through
the sale of savings stamps, certificates and bonds, to the
largest possible number of subscribers. Such a policy not
only contributes to the financing of national defense, but
also strengthens national morale and promotes national
unity. "

The economics of an expanded savings campaign were also
emphasized. "The conservation of current savings made
possible by the increase in employment, in payrolls and
general business activity should be closely related to the

„ kO -

bond purchase plan »o. the effect of the plan in checking infla-
tionary tendencies and runaway prices should he explained in
terms anyone can understand. If this is donej the subscriber
can be brought to see that his purchase of savings bonds
contributes not only to national defense, but to the main-
tenance of present living standards and the security of
h i s own f u tur e » " ^

Plan of Organization

The January memorandum outlined a plan of organization
in general terms. It provided for a Director of Savings
Promotion to "plan, supervise and direct the entire program,
and to serve as liaison between the Treasury and other
governmental agencies whose cooperation may be necessary.''
There was to be an Assistant Director in charge of publicity
and promotion whose job it would be "to establish relations
with the press, radio, motion pictures and advertising agencies
to prepare releases, posters and other advertising and
publicity materials, to arrange for exhibits at public
places... to arrange for speakers and to supply them with
information and suggestions, to prepare a speakers handbook,
to arrange speaking data and to facilitate the organization of
public meetings. . .to enlist the cooperation of civic organi-
zations, trade unions, farm organizations, schools, colleges,
patriotic societies, state and local governments." Another
Assistant Director was to make arrangements for the promotion
and sale of bonds and stamps not only with other Federal
agencies such as the Post Office Department but with "State
and local governments, banks, savings and loan associations,
trade unions, farm groups, schools, civic organizations" and
so forth. A Research Assistant was to have charge of gather-
ing statistical andoother data needed to carry on the work of
organization.

This general outline made no pretense of setting forth
the details of a working organization but merely indicated
the scope of the problems involved. It was based on the
assumption that the new campaign could "be carried on without
new and elaborate administrative machinery but with maximum
utilization of existing agencies both within and outside the
Treasury." The memorandum included consideration of many
specific promotional devices, such as honor flags, badges and

8 Memorandum to the Secretary from Peter H. Odegard, January lU, I9UI. Dr. Odegard was
called to Washington the first week in January, as special adviser to the Secretary on the new
savings caflipaign.

buttons, payroll savings plans, quotas, and the use of
public opinion polls. The memorandum, in short, indicated
directions without completely "boxing the compass." Many
important details were left for later development, and the
initial organization took a somewhat different form from that
first planned. But the memorandum provided definite targets
"to shoot at."

Secretary's Request to Congress

On January 29, 19^1, Secretary Morgenthau appeared before
the House Ways and Means Committee to request an increase in
the national debt limit to $65 billion, and he asked for
broader authority over the issuance of savings bonds. The
proposed changes, he said, would permit the Treasury to
carry on a program of encouraging more popular participation
in its financing, and to offer securities of a character
which would promote thrift and savings. In concluding his
statement the Secretary explained:

"We hope that a substantial part of the defense
program for which we have to borrow funds can be
financed out of the real savings of the people...

"We ought to make it possible for workers and
farmers no less than bankers and business men to
contribute to the financial needs of the Government,
not only through their tax payments but through their
savings as well...

"The small investor who puts his savings in
Government securities will in this way contribute
not only to national defense but also to his own
individual security.

"There exists in the country today an overwhelming
desire on the part of nearly every man, woman and
child to make some direct and tangible contribution
to the national defense. We ought to give them a
sense of personal participation beyond that which
comes from doing their daily Job faithfully and
well... Our plan to offer securities attractive to
all classes of investors is an attempt to answer
this question. I can think of no other single way
in which so many people can become partners of their
Government in facing this emergency."

- k2 -

Selection of Harold N. Graves

In the meantime Jim Bryan in the Division of Savings
Bonds was impatient to get under way an expanded and
intensified sales campaign of "Baby Bonds" using a patriotic
appeal based on the needs of national defense. 9 He outlined
elaborate plans , which needed only a nod from the Secretary
to be put into immediate operation. The plans embraced
newspaper and radio publicity, a motion picture division,
speakers bureau, field force, and volunteer committees
throughout the country.

Bryan's program had much to commend it, including the
immense advantage of a going concern, the Division of Savings
Bonds, to put it into operation, but the Secretary was
unimpressed. On one hand the program appeared to retain too
great reliance on direct mail operations and on another it
savoured too much of the high pressure sales techniques of
the Liberty Loan drives. The Bryan proposals along with other
matters relating to savings bond promotion x^7ere referred to
Harold W. Graves, Assistant to the Secretary, who was
requested to study the whole program and formulate a feasible
plan of organization and procedure.

The selection of Graves for this job was most fortunate.
It was a task that required not only intelligence, industry,
integrity and loyalty but also a fertile imagination,
administrative ability and experience of the highest order,
detailed knowledge of Government organization and procedure,
insight into and appreciation for the human values involved
— a tender heart in a tough hide which could command both
affection and respect from men and women of every rank and
station. Harold Graves had also the advantage of long
Treasury experience so that he was familiar with the
Department's organization and personnel. He was, in fact.
Secretary Morgenthau's Number One "Trouble Shooter" and
efficiency expert, in whom the Secretary had implicit faith,
knowing that he had made good on many difficult assignments
and feeling sure that he would do likewise for the Savings
Bonds Program. 10

9 He designed and mailed to his list a "booklet. The Land of the Free, heavy with patriotic
art, which for its decorativeness was still in demand by school teachers long after it was out of
print .

10 Harold Nathan Graves: Born in Mt. Sterling, 111., June 22, I887. Graduated from Knox
College, 1903. Ten years in the Philippines. In I925 became Administrative Assistant to Secretary
of Commerce Herbert Hoover, and in I93O Executive Assistant to the Postmaster General. Became
Assistant to the Secretary of the Treasury in 1935. Several honorary college degrees. In 194^
elected president of the famous Cosmos Club in Washington, D. C.

^3 -

Graves' personality was almost as important in his new
assignment as his training and experience. To outward
appearances he seemed an upper-case bureaucrat. He was not
the kind of man strangers slap on the back. He ran his
office with clock-like precision, kept his appointments
"on the dot" and expected others to do likewise. In his
relations with Congressmen and other high officials he was
always polite and respectful but never timid or obsequious.
He had a rare capacity for concentration and an almost
passionate regard for details. His memory was phenomenal
and his knowledge encyclopedia. Beyond all this, however,
he was modest, infinitely patient (even with cranks and
fanatics), and possessed of a boundless sense of humor. He
was a bureaucrat who loved to deride bureaucrats. Although
politically conservative and a Republican, he was an ardent
democrat in the best sense of the word. He V70uld not
intimidate others, and he could not be intimidated. The
only people who feared him were fakers or "phonies," many of
whom crossed his path.

Initial Decisions

There were innumerable administrative details to be
settled before Graves could turn to the main job of building
an organization and outlining a program. One of the first
of these important decisions was to keep the new Savings
Bonds in essentially the same form as the Series A-D "Baby
Bonds." 11

Savings Stamps

It was decided not to use the authority granted under
the Public Debt Act of I9U1 to issue "Savings Certificates"
of World War I type as a device to enable installment buying
of bonds. Postal Savings Stamps, if they could be adapted
to the new program, vrere regarded as satisfactory in meeting
this need.

Accordingly the Post Office Department was requested to
discontinue its current series of savings stamps and sub-
stitute a new and special "Defense" series of appropriate
design. It would be necessary to re-design both the stamps
and card containers to knit them closely into the Treasury

11 The over-all official regulations on U. S. Savings Bonds are contained in Department
Circular No. 530 (various revisions since the Spring of I9U1), and for greater detail on Series E in
Department Circular No. 653, and on Series F and G in No. 65U.

- kk -

program for promoting the sale of Savings Bonds, particularly
to low income groups. To insure maximum distribution, the
Treasury, with the consent of the Post Office Department,
proposed to place the Defense Stamps on sale in retail stores
and other private agencies as well as in post offices.

The Post Office Department readily agreed to these
proposals, but it was some weeks before an appropriate design
for the stamps could be founi. Nearly everybody tried his
hand at it. An Office of War Information suggestion for
designs depicting the "Four Freedoms" proved too complex for
satisfactory reproduction in stamp size, A distinquished
authority on publicity proposed a design consisting simply of
four arrows, to stand for the Four Freedoms. This had the
virtue of simplicity, but would have required considerable
promotional effort to get people to understand what the
arroX'T-s stood for, IJhat the Treasury needed was a simple
and, if possible, familiar counterfeit proof design, the
significance of which would be apparent without too much
explanation and which might be used as a sort of symbol or
trade mark of the entire defense savings program.

After considerable experimenting, a drawing of the
Daniel Chester French statue of the Minute Man at Concord,
Mass., was approved by the Secretary, There remained one
more hurdle. The President's approval was desired, not only
because Mr. Roosevelt was president but also the nation's
Number 1 philatelist. The President approved, and the
Minute Man started on its way to becoming the most widely
known commodity sjn:nbol in the nation. The Minute Man adorned
Stamp Albums, posters, newspaper advertisements and multi-
farious other promotional items throughout the war, and
slightly redraT\m, to give prominence to his plow rather
than his musket, continued on in 19^6 as the symbol of the
peacetime Savings Bond program.

oOo

" ^5

CHAPTER IV
THE DEFENSE SAVINGS STAFF BEGINS
Working Against a Deadline

VJhile artistic explorations on a Savings Stamp design were
in progress a multitude of other matters were pressing for
attention. What to do with the direct mail operation of the
Division of Savings Bonds? What kind of organization should be
established in Washington and in the field? What should it be
called? How was it to be related to existing Treasury organi-
zation? TVhere could suitable people be found for the top
positions? How soon could the nev/ Defense Bonds and Stamps be
produced so the new program could be formally launched? How
much was the operation going to cost? Who was to prepare copy
for publicity? What should it say?

These were but a few questions that had to be answered
before any new or intensified program could get under way.
Secretary Morgentha,u was anxious to "get going." He inquired
if the organization would be ready by March 1'' Reluctantly he
was persuaded to postpone the date to May 1. So May Day 19^1
became the deadline, which approached inexorably while things
pretty much seemed to remain at sixes and sevens. Decisions
on the many problems noted were made ad hoc to meet practical
situations. Appointments were planned on a temporary basis, to
avoid making irrevocable mistakes and because of the limited
time available for a careful canvass of personnel.

Help From Other Agencies

In line with the policy of making as much use as possible
of existing Government agencies and personnel, it \^jas recommended
that steps be taken to secure from the various offices of
information the assistance of their best copy writers, artists,
and photographers in the preparation of Defense Savings material.
Some help of this kind was obtained, notably from photographic
files in the Department of Agriculture, but as a general policy
this plan did not work. The Information Offices of several
Government departments, however, proved to be helpful in many
ways. This was especially true of the War and Navy Departments,
the War Production Board, the Departments of Agriculture and
Interior, the Post Office Department and the Office of War

- 1+7 -

Information. In one area the policy of using existing Government
personnel i-ms most fruitful o Collectors of Internal Revenue and
of Customs T'^ere, with good results, resorted to for initial field
leadership.

Advice from National Organizations

Before any Savings Bond officers were appointed, a list
was prepa.red of more then two hundred organizations whose
cooperation was deemed essentials The tally included the major
business, professional and farm organizations, labor unions,
women's clubs, educational associations, and groups of public
officials and employees. As a first step in preparing the
ground for a field organization, it was suggested that the
leaders of these units in Washington be consulted and their
friendly advice solicited. This proved to be a fruitful line
of procedure.

Decision on the Division of Savings Bonds

No immediate decision was made on the status of the Division
of Savings Bonds. It was assumed that this unit would be
incorporated into the new organization, but the extent to which
the direct-mail operation would be continued was not easily
answered. Anticipating the war, Eugene Sloan had ordered new
and improved equipment capable of handling a vastly expanded
mail promotion. The end of January 19^1, the Division had
nearly nine million names on addressograph plates, and on hand
or in process of delivery five and one -half million booklets and
another five and a half million on order. It had approximately
eleven million order forms delivered or on order, and five and
a half million letterheads. A revision of the basic mailing
matter was in process. Mailings at the rate of a half million
assemblies a day were possible, consisting of personalized
letters over the signature of the Secretary along with order
forms and descriptive literature. To support this program
to the end of June required an additional $600,000; the
estimated cost for a full year was $1,250,000.

On the basis of a careful survey, Graves rejected a
Division of Savings Bond proposal to increase its direct mail-
ing list and expand the scope of its operations, although
current mailings "in the works'' were allowed to go ahead. By
the end of 19^1 it was decided that the cost of the direct mail
program was not justified in terms of sales, and since its
contribution to the Treasury's psychological objectives seemed
to be small, that there was little basis for its continuation.

i|8 -

Direct-mail promotion^ except on ci very limited basis , was
abandoned 0 In 19^-2, the files, personnel and eouipment used
in the program were transferred to Chicago to handle the
distribution of hundreds of millions of items used in the ne^.i
Defense Savings program. Direct-mail sales of Savings Bonds
did not cease, however; it was kept up by the Savings Bonds
unit of the office of the Treasurer of the United States.

With the virtual scrapping of the direct-madl operation
of the Division of Savings Bonds, Bryan's plans for an
intensified campaign became irrevelant, so he resigned. Eugene
Sloan, Chief of the Division, had been most cooperative during
what must have been for him a trying experience as he watched
the demolition of the organization which he had built during
five years of hard work. His advice and guidance on nearly
every step taken in shaping the new program were invaluable.
On April 1, 19^1-1, he became Executive Director of the Defense
Savings Staff, serving as the chief administrative officer of
the organization until July 19^3? when transferred to the
Bureau of the Public Debt as Deputy Commissioner in charge of
Chicago .

Small Paid Staff: Large Volunteer Force

Having decided against a program based on direct-mail
methods, it was imperative that a new organization be established
at the earliest possible date. By the end of February 19^-1? "the
general features of this organization were clear. They corresponded
closely to the basic structure of the War Savings committees of
World War I. The plan was to establish committees of volunteer
workers throughout the nation, based on principles of neighbor-
hood and economic or social interest. There were to be State
Committees, whose members would represent the major economic
and social aspects of the state -- banking, finance, business,
professions, education, workers and farmers, women and so on.
Wherever possible the committee members x\rere to be recruited
from existing associations representing these various groups.
County and city or other local committees would follow a similar
pattern. It was contemplated that each committee member would in
effect by chariman of a sub-committee representing the particular
group with V7hich he or she was identified. Beyond this it was
hoped that Defense Savings representatives and committees would
be a,ppointed in trade unions, vromen's clubs, farm organizations,
schools and so forth. This plan would draw into active
participation in the program a large number of volunteers. By
enlisting this army of volunteers the Treasury sought not only
to build a vast sales organization but to make an im-portant

k9 -

contribution to national unity, since people become aroused over
their problems when given an opportunity to work towards the
solution thereof.

To service the prospective thousands of committees with their
hundreds of thousands of volunteer members a small staff of paid
personnel in each state was planned. From this plan of organi-
zation grew on the one hand the Defense Savings Committees
composed of volunteers in every state, county and tovm in the
nation, and on the other the Defense Savings Staff of paid
personnel to insure administrative control and continuity. This
distinction was not always clear cut, since many who served the
Treasury at a dollar-a-year were in effect volunteers.

Original Washington Leaders

Much remained to be done in February 19^1 before the organi-
zation plan could become a reality. Not even an official name
had been agreed upon. Nevertheless, Graves went ahead to recruit
a staff to assist him pending the official setting up of a new
agency.

On February 21, Harford Pcwel of New York, a distinguished
author, editor, advertising and public relations executive, was
appointed as a consulting expert to act as Information Director.
His approach to his profession had a strong flavor of humor and
skepticism. He knew the uses to which advertising and publicity
could be put, and he also knew their limitations. Under his
direction were prepared the first Defense Savings leaflets, pam-
phlets, posters and car cards. He carried on until the end of
September 19^2, when he resigned to re-enter the Army Air Forces.

To enlist the cooperation of national organizations and
associations, James Lawrence Houghteling was appointed as an
Assistant to the Secretary in July, 19^1. It would have been hard
to find anyone better qualified for this difficult and important
job. "Larry" Houghteling was a blue-blood Democrat. His
political opinions placed him a trifle left of center although by
background he should have been a rock-ribbed conservative. His
experience in the army, the diplomatic service, banliing, journalism,
and as Commissioner of Immigration and Naturalization in the
Department of Labor, 1937-UO, had brought him into friendly
relations with groups representing every major type of
American economic and social interest. His understanding

1 See Peter H. Odegard and Alan Barth, "Millions for Defense," Public Opinion Quarterly,
Fall, 191+1.

2 Harford Powel: Harvard 1909; experience on staff of Vogue and International Magazine;
editor 1917 of Harpers Bazaar; captain in Air Forces I918; editor of Collier ' s 1919-22 and Youth's
Companion I925-28; vice-president of advertising firm of Kimball, Hubbard and Powel 1932-38; vice-
president Institute of Public Relations in New York I938-I+I; author of several books.

- 50 -

of hair-line distinctions betT^een various groups, especially
those of foreign origin, made it possible for Houghteling to
find his way among them and to bring them together through
support of the Defense Savings Program. VJhat was most important,
he commanded their confidence, respect, and often affection.-^
Perhaps the most crucial of the appointments made prior
to the formal inauguration of the program on May 1, 19^!-l3 was
that of Field Director. From a dozen or more names submitted.
Gale F. Johnston of St. Louis was selected on February 25 « A
native of Missouri, educated at Princeton, Johnston was one of
the outstanding insurance salesmen and executives in the country.
As a youngster he had displayed extraordinary journalistic and
promotional talents by foujiding, ox/ning, editing and publishing
four Missouri neirspapers. In 1919 he received some publicity
as the j^oungest publisher in the country. Shortljr after gradua-
tion from college he turned from publishing to the insurance
field, by 1939 becoming Regional Manager for the Metropolitan
Insurance Company. As President of the St. Louis Council of
Boy Scouts, and Director of the Community Fund, he had also
earned a reputation as a civic leader. It was essentially a
missionary job that Gale Johnston did for the Defense Savings
Program in his short term of service. He loved to speak, and
his addresses had the evangelical flavor of a Dwight Moody or
a William Jennings Eryan. "The Challenge of a Great Task'' was
a characteristic title for one of his speeches. Organization and
administration appealed to him less, but in the initial stages of
recruiting and inspiring volunteers he was invaluable. Johnston
resigned January 1, 19^2, to become vice-president of the
Metropolitan Life Insurance Companj^ at the home offices in New
York, but he continued to support the Treasury program loyally
from that point of vantage.

3 After graduation from Yale, Houghteling entered the banking and investment business in
1909, leaving it temporarily in I917 to serve as special attache to the American embassy in
Petrograd. He served in the expeditionary force of World War I as captain of Battery A, 103rd
Field Artillery. After the war he retiurned for a time to the investment business, then went into
journalism. Associated with Houghteling during the early months of explaining Treasury plans and
policies to literally hundreds of national organizations and associations were:

(a) Orville S. Poland, a Boston attorney, who inherited his preacher father's
zeal for good works. A scholar and educator, he belonged to a half-dozen learned
societies. After his initial work with the National Organizations section of the
bond program, he became chief of the Education, Women's and Special Literature
Division, then (I9I+3) Associate Field Director in charge of the New England states,
and in January 19^6, State Director for the peacetime bond program for Massachu-
setts.

(b) Horace Peters, a Yale graduate, appointed April 1, 19'+1. He resigned late in
May, 19^4-3, to enter the Office of Strategic Services.

(c) William C. Fitzgibbon, appointed April 2k, 19^+1. He had been an accountant
with the U. S. Tariff Commission, and the Federal Home Loan Bank Board; he was a
practicing attorney 1926-32, and a professional lecturer I938-I4I.

(d) Dr. William Pickens, a Negro author and educator, appointed May I5, 19^1. A
graduate of Yale (190U), Dr. Pickens had enjoyed a distinguished career as
lecturer, writer and college teacher. For twenty-two years he was field secretary
of the Association for the Advancement of Colored People.

Officjgl Establishment of the Defense Savings Staff

Most of the above appointments were made before formal
announcement was msde that a new organization had been established.
On March 19, 19^1, however. Secretary Morgenthau issued Treasury
Department Order No. 39? which read:

There is hereby established in the Office of
the Secretary a Defense Savings Staff, which
will have charge of promoting the sale of
United States Savings Bonds, and other
similar Government securities offered to the
public. The Defense Savings Staff will
report to the Secretary through Mr. Harold
N. Graves, Assistant to the Secretary.
Mr. Eugene W. Sloan is designated Executive
Director of the Defense Savings Staff, and
will be generally responsible for its
administration. Mr. Gale F. Johnston is
designated Field Director, and Mr. Harford
Powel, Information Director.

Recruiting Personnel for the 'Skeleton Crew"

Immediately following the publication of this Order, the
small trickle of application for jobs, suggestions and schemes
for promotion, questions and comments, which had begun with the
first intimation of a new program in January, swelled to a
sizeable stream. Since all appointments were subject to the
approval of the Civil Service Commission, it was necessary to
place responsibility for the recruitment of personnel in the
hands of someone familiar with the rules and procedures of
that agency. Hence a week following the formal order setting
up the Defense Savings Staff, Graves centralized control over
all personnel matters in the hands of Executive Director Sloan.

Every appointment v/as subject not only to the approval of
the Civil Service Commission but also to careful scrutiny by
the Treasury's o\jn investigators in the Intelligence Unit.
The investigations were deliberate, helpful and in many cases
indispensable. Since they often took some little time it was
customary to make ad interim appointments pending the results
of the investigation. In only one case was such an appointment
terminated by reason of the "Communist" affiliations of the
individual, and then only after the investigator's report had
been double -checked by Graves personally. The conclusions of
the investigators were often decisive in determining appointments,
but not always. Graves never regarded their findings as binding.

and doubts were in practically every case resolved in favor of
the individual under consideration o The character investigation
was regarded as supplying only part of the information upon the
basis of which appointments were made.

Cooperation of the Civil Service Commission

In passing upon appointments to the Defesne Savings Staff ^
the Civil Service Commission was unusually cooperative. The
special talents required were such that fev7 qualified persons
could be found on the regular Civil Service lists. The standard
classifications did not meet the requirements of this new type
of Government activity. It was hence necessary to submit to the
Commission special classifications based on ad hoc descriptions
of the job to be done and to try to fit them into the regular
system. Thus there appeared such positions as "Senior Defense
Securities Promotion Specialist/^ "Advertising Specialist," and
"State Administrator." In only few instances did the Civil
Service Commission interpose any obstacle to appointments to
the Defense Savings Staff.

The amount of work to be done in the three months before
the Ma^r 1 deadline reouired more time and effort than Graves,
Sloan, Johnston and Povrel could furnish. They reached out in
all directions for help. February 27, Powel outlined needs
for eight sub-divisions of his bailiwick: there were to be
separate heads for mail order, publicity, radio, display
(including posters and insignia), paid advertising, outdoor
advertising, movies and research. Vincent F. Callahan, with
the aid of Charles Gilchrest and Marjorie Spriggs (who
subsequently became Mrs. Gilchrest) came in to take charge of
radio. At the end of March, Sidney D. Mahan took charge of
advertising in all its forms. A loveable Irishman, Raphael
H. O'Malley, joined the staff on April 1st to get plans in
motion for a bond selling campaign among Government employees.
About the same time, Carlton Duffus was appointed to supervise
motion pictures and "Special Events." On the administrative and
personnel front, Laurence M. Olney (who became Field Director
for the peacetime program in January 19^6), Charles W. Adams,
James Blyth, Robert Paige and Harold B. Master were appointed
between March and April 15. They worked both with Sloan and
Johnston on special assignments of a great variety, usually
initiated by Graves. Toward the end of April, under considerable
prodding from Secretary Morgenthau to appoint more women to the
staff, Esther T. Henderson and Helen Dallas joined the
organization as special -v/riters under Graves' direction. On
May 1, the historian George Fort Milton was appointed in similar
capacity on a part-time basis.

- 53 -

This \JaS the skeleton ere''.-;' that announced themselves open
for business on May 1, 19^13 and started "the greatest bond
selling and savings crusade in history." There were only forty
of them, including stenogra.phers and clerks. They came from
every.jhere and many diverse backgrounds. They came from
business and the professions, from teaching and preaching and
acting. They came from Foreign Funds Control, the Alcohol Tax
Unit and the Secret Service, from the Departments of Commerce
and Justice, from nearly every state and section of the Union.
There were Irish Catholics among them, and Campbellites and
/jiglicans and Jews. No one Imew for sure or cared what their
political affiliations were. They included a rainbow of
political colors, probably the largest group being Republicans,
but all were agreed on one thing -- the urgent need for national
defense. Beyond that there were talents of every sort. Some
were college graduates with more than one advanced degree.
Others had stopped their formal educe.tion with the elementary
school. There were lawyers, doctors, engineers, \-,Tfiters,
"e^cploitation and promotion" men with talents that defied
description, reformers and performers, advertising executives
and newspaper reporters. An unusual number of them had achieved
distinction and some wealth, and almost without exception they
had jnterrupted established and promising careers to join the
Defense Savings Staff. Some were working for a dollar a year,
and many were working for salaries far below what they had
earned in private life. A very important addition to the staff
was B. M, Edwards who became Assistant to the Secretary on
March l8, 19^1. As president of the South Carolina National
Bank of Columbia, director of five other banks in South Carolina
and three in North Carolina, member of the Advisory Committee
of the Reconstruction Finance Corporation and of the South
Carolina Council for National Defense, he brought experience
and contacts without which the Defense Savings Program among
bankers might have bogged do^m badly.

No Rigid Organization

There were no clock-watchers or time-servers in the
skeleton crew. Indeed one of the serious problems Graves had
was how to control, without stifling, the exceptional abilities,
intelligence and initiative of his staff. It was like a cabinet
of all the talents. They had ideas of their oim and were not
content merely to await instructions or follow directions. They
kne\7 comparatively nothing about Government procedure and cared
little for departmental prestige or bureaucratic rules,
regulations and red tape. Administrative free-wheeling was so
common as to become one of the organization's characteristics.

- 5^ -

Compered to the disciplined operations of established Treasury
units such a,s Procurement or the Burea.u of Internal Revenue,
the Defense Savings Sta,ff appeared to be an anarchy.

Many organization charts were attempted, beginning in
March, 19^l-l3 but all proved to be useful only in general terms,
and any particular one was soon out-dated by changes in assign-
ment or responsibility. Theoretically, lines of authority were
clear. There was a Defense Savings Staff with an Executive
Director, Sloan, reporting to the Secretary of the Treasury
through an Assistant to the Secretary, Graves. Under Sloan
there were two main units: the Field Division under Johnston
and the Information Division under Powel. Matters of personnel
budget, procurement, travel, and other housekeeping activities
were handled in the Executive Director's office with assistance
from Charlie Adams, Larry Olney, Paige, Master and Blyth. The
last four also worked in and out of, and eventually gravitated
into what became a separate Field Division. Radio, press,
motion pictures, advertising and direct mail promotion were
subordinate sections under Powel.

Unfortunately this simple administrative structure failed
to make provision for the National Organizations and the Banking
and Finance operations presided over by Assistants to the
Secretary -- Houghteling and Edwards -- who were, in the bureau-
cratic hierarchy, on a par with Graves himself. Moreover the
special i-iriters -- Henderson, Dallas and Milton -- like homeless
spirits, acknowledge responsibility to no one except Gra.ves and
perhaps Ferdinand Kuhn, and to one or another of several
Consulting Experts who reported, more or less at will, to Graves,
Kuhn, Assistant Secretary Gaston or to Secretary Morgenthau.

If anyone had tried to construct a ''flow chart'' of the
organization showing points at which plans and policies originatec
and their channels of clearance, the result should have looked
like a cat's cradle. Ideas came from everywhere and everyone
up and down the line and from the outside. They were approved,
side-tracked or killed by any one of a dozen people.

Discovery of a good idea xras the passport to authority,
whether the ha.ppy finder, or originator, was an Assistant
Secretary or an assistant office boy. An egalitarian atmosphere
prevailed with reference to ideas. All were accepted on equal
terms, the good and the bad, the feasible and the fantastic,
given a hearing and sent on their way. There was always a good
chance that an idea rejected by one of the "higher ups" would be
approved by another. Graves himself was the final arbiter on
most things but he unfortunately had only twenty-four hours a
day to give to the job. The result was that a good many "screvr^"
ideas got by, but few if any were smothered.

- 55 -

But however difficult to accoinmodate to the accepted canons
of ''sound'' administration 3 the Washington office of the Defense
Savings Staff \ms a happy and effective organization. There was
a refreshing air of informality and, to some, an alarming absence
of red tape. Access to the head man was free and easy. Doors
usually remained open for chance callers and first names were the
rule. Nea^rly every section believed every other section was out
to cut its throat, but this was mainly due to friendly rivalry
and a healthy spirit of competition. There was a tendency to
take everything to the top man or men in the main Treasury building
and circumvent Executive Director Sloan. One reason for this was
a difference of opinion as to the "philosophy" of the program.
One school tended to view the program as primarily a sales
operation and the other as a great educational crusade to teach
thrift, and the meaning and significance of the defense program.
These two views were not mutually exclusive but they did involve
differences of emphasis and method which often resulted in some
tension within the organization. In this, as in so many other
tight situations, the judicious temperament of Harold Graves
prevented any serious conflict.

It was this enthusiasm for the job to be done that explains
the success of the Defense Savings Staff during its early and
trying months. Without this enthusiasm nothing significant could
have been accomplished; with it, almost everything seemed possible
There was almost nothing else to hold the organization together,
for it resembled nothing so much as a combination recuriting
office, theatrical booking agency, convention of prima donnas and
a national society for the propagation or reform of something or
other. A stream of "personalities" flowed through the corridors
and offices of the Treasury -- movie stars, musicians, politicians
great and small, authentic or phony or broken-down celebrities
of all kinds. It soon ceased to be a matter of any particular
interest, even to stenographers and clerks, to see the turbaned
figure of Sabu "The Elephant Boy," Walt Disney and his crew,
Loretta Young, Irving Berlin or Jack Dempsey within the purlieus
of the Defense Savings Staff. Radio executives, newspaper
publishers, head-line industrialists and businessmen. Governors,
Congressmen and Senators were leading characters in the pageant
of humanity that came to offer help, criticism and counsel.

To keep the organization on the right track and moving in
the right direction required the talents of a top- sergeant,

h "In spite of internecine conflict, however," wrote Mrs. Judy Graves, daughter-in-law of
Harold Graves, "it was a satisfying place to work. There was so much to be done in every field that
almost anything was worth at least one try... The Defense Savings workers, paid and volunteer, were
so enthusiastic about their work that they talked of little else to each other and to anyone else
who would listen." Mrs. Graves held several in^jortant positions in the program, including an
assignment in the early Education or Schools -at -War Program, and later editorship of the News Letter
or Minute Man, the "house organ" for the whole operation.

- 56 -

movie impressario and churchly saint combined with the patience
of Job. To an amazing degree Graves possessed them all. He
used to speak humorously of his "company of geniuses'' and
threaten to establish a 'screwball'' department in what seemed
like a small edition of Bedlam anyway, but he realized that he
could not expect creative people to beha^ve like bureaucrats,
and that if you wanted a man to use his mind you had to give him
his head.

Trea.sury Insists on its Own Bond Organization

VJhile guiding the stellar performers on the right path and
also bending efforts to improvise a field organization, one basic
question had to be answered. This question, which kept bobbing
up all during 19^1 was; Is it really necessary for the Treasury
to set up Defense Savings Committees in the field? VJhy not use
the machinery of the State and local councils on National Defense?
In a good many places the councils had already taken steps in
this direction. The Defense Savings Program was a ready-made
opportunity for constructive civilian participation. To facilitate
sharing in every form of defense work, the Office of Civilian
Defense had prepared rosters of people in every comraunity ready
and willing to serve. In theory every type of volunteer civilian
defense activity would recruit its volunteer workers from these
master lists. This was to avoid conflict over jurisdiction, and
competition for personnel among the numerous agencies engaged in
special vrar work.

There were many reasons why the Treasury insisted upon
having its o-vm organization. In the first place, the promotion
of bond and stamp sales and the preaching and teaching of thrift
were conceived to be continuing activities requiring round-the-
clock, round-the-calendar service. The Defense Savings Staff
could not rely on intermittent cooperation from volunteers. 5
Another reason for insisting upon its oim organization was the
belief that no successful sales campaign could be carried on by
volunteers whose interests or free time were divided among a
half-dozen activities. The business of selling defense and war
bonds, moreover, was one requiring a good understanding of the
securities and their place in the fiscal and economic picture
as a whole. The time, training and experience required to
achieve such an understanding was one that the Treasury could
not safely entrust to interim or incidental volunteer assistance.
Most important was the fact that in the promotion and sale of
Savings Bonds, volunteers would be representing the Treasury

5 As the bond program ejcpanded in 19^3 and periodic drives were added to the year-round
promotional job, greater use was made of temporary volunteer workers, many from O.C.D. rosters.

- 57 -

Department. The e:rpenses involved were charged against Treasiiry
appropriations. The volimteers would be dealing constantly \j±th
Treasury agents and personnel. They "i-rauld he expected to make
regular and fairly detailed reports on their activities. It was
hence imperative that the volunteer Defense Savings Committees be
under the direct control of the Treasury. Any other arrangement
would have led to conflict and confusion.

No Integration with the Office of Civilian Defense

The intention of the Treasury to have its oim volunteer
committees, supervised by its ovm paid personnel in the states,
was succinctly explained to Congress by Harold Graves in June
during the hearings on the Second Deficiency Appropriation Bill
for 19^1-1. The story of the relations between the Office ^of
Civilian Defense, its local councils and the Defense Savings
Staff x^/ill be touched upon later. ^ There was considerable
variation from state to state as to the degree of cooperation
and mutual aid. There were instances of rivalry and even of
hostility between the two organizations, but by-and-large the
relations between them were amicable. VJhen in 19^3 the Treasury
came to place more emphasis on special and periodic loan drives,
the air-raid wardens and other O.C.D. volunteers in many places
gave valuable assistance as reserve task forces.

6 See below. Chapter XII.

oOo

- 58

CHAPTER V

EARLY FIELD OPERATIONS

Collectors of Internal Revenue and Customs Become State
Administrators

On January 23 5 19^1, Harold Graves received instructions
from Secretary Morgenthau to undertake the job of setting up
a nation-wide organization for the sale of Savings Bonds. In
the three months to May 1, the deadline set for inaugurating
the new program, it would be impossible to create an effective
organization in every state and territory.

To establish an organization reaching into every county,
city and town to function as a sales force was no simple under-
taking. To insure that the sales committees were truly
representative of the major economic and social interests of
the community from which they were chosen added to the
difficulty. No one sitting in Washington could know who the
real leaders were in fifty states and territories, not
understand the subtle, often unexpressed tension, existing in
various communities. In one state, for example, the president
of the Chamber of Commerce v^as not on speaking terms with the
executive secretary of the retail merchants association, and
in another the president of the State Farm Bureau Federation
was persona non grata to the State Grange.

Should both the A. F. of L. and the C.I.O. be represented
on the committee? What about veterans organizations, service
clubs, women's groups, and patriotic societies? Could some be
invited to serve without inviting all? Who in the community
best speaks for the schools? V/ho for government employees?
VJho best represents the bankers? These were the kinds of
questions for which answers had to be found not in Washington
but in the field. The job was to select representative leaders
who, whatever their differences on other issues, would work
together to promote the sale of savings bonds.

To find leaders having these qualifications, and to steer
a fair course among the rocks and shoals of local rivalries,
required time and care. The active promotion of the defense
savings program, however, could not wait on a careful canvass of
every community for leadership. Fortunately the Treasury had

59 -

available in the Bureau of Internal Revenue and the Customs
Service a field organization of its own reaching into every
state and territory. Harold Graves therefore decided to
experiment, on a temporary basis, with Collectors of Customs
and of Internal Revenue, asking them to assume responsibility
as Defense Savings Staff Administrators for getting things
under way in their respective states.

Advantages and Disadvantages

The policy of using Collectors of Internal Revenue or of
Customs for local leadership in the Defense Savings Program
was sharply criticized. These officials, it was said, were
political appointees, with no special qualifications for the
new duties they were to assume.

Notwithstanding these objections there were compelling
reasons in 19^1 for using the collectors as administrators of
the state defense savings staffs :

(1) They were already on the government payroll,
hence much precious time could be saved by
using them pending the selection of more
permanent leaders.

(2) The collectors were fajniliar with government
procedure and with Treasury administrative
rules and regulations.

(3) The collectors had office space and equipment,
secretarial and clerical assistance with which
they could start to work at once.

(h) They had a wide acquaintance among the people

of their respective states — a priceless asset
in recruiting members for local savings
committees.

(5) Since the collectors would in effect be serving
as volunteers in the bond program they would be
in a good position to recruit other volunteers.

(6) Finally, the collectors were kno^vm to be
sympathetic to the administration's foreign
policy and national defense program, and as
regular employees of the Treasury Department,
they would be amenable to suggestion and
direction from Washington.

First Appointments

Convinced that the advantages outweighed the disadvantages,
Secretary Morgenthau combed the roster of Collectors of Internal

- 60 -

Revenue and of Customs for the most suitable appointees,
placing special emphasis on qualities which would indicate a
talent for organization and procedure, since the administrator's
most urgent task at the outset would be to build an organiza-
tion of volunteer committees. A half-dozen collectors in as
many states were called to Washington and invited to serve as
administrators of the Defense Savings Staff. 1 Graves and the
members of the Washington staff explained the basic purpose
and policies of the new organization. Every effort was made
to impress the new administrators with the importance of the
job they were being asked to do and with their opportunity and
responsibility to render a patriotic service to the country.
Since their immediate job was to recruit volunteers, two basic
policies of the new organization were emphasized: (l) All
appointments whether of paid or volunteer personnel were to be
made XNrithout regard to partisan affiliation; (2) The
administrators were to recruit their staff and committee
members from among those, of whatever party, \\^ho believed in
a vigorous prosecution of the defense program. Support of the
Government's foreign policy was suggested as a desirable but
not indispensable qualification. Following this course of
instruction and indoctrination the collectors returned to their
states and began the difficult task of building a Defense
Savings organization. In the course of the next eight months
administrators were appointed in the other forty-two states,
and for the District of Columbia, Alaska and Hawaii. 2

The Treasury was fortunate in the type of men it was
able to call upon in setting up the state organizations. In
nearly eveiy case they were citizens of outstanding character
and ability. The fears expressed by some that the collectors
would use their new position for partisan purposes proved to
be without foundation. Almost without exception they "leaned
over backward" to avoid any semblance of partisan politics
in making appointments both of paid personnel and volunteers.
Their adherence to this policy was supported by the fact that
in every state the governor, whether Republican or Democrat,
V7as invited by Secretary Morgenthau to serve as honorary
chairman of the Defense Savings Committee.

1 On April ik, I9U1, the following Collectors of Internal Revenue were appointed as State
Administrators of the Defense Savings Staff: William P. Bowers of South Carolina, Dan M. Nee of
Misso\iri, Giles Kavanagh of Michigan, Thomas S. Smith of Connecticut, C. H. Robertson of North
Carolina and Frank S. Schofield of Texas.

2 An organization was set up in Puerto Rico in the summer of 19^'+ » with Raphael H.
O'Malley of the national Payroll Savings section as its head.

- 61

Selection of State Chairmen

In selecting State Chairmen the Treasury acted on the
advice and counsel of the newly appointed administrators.
Since in the plan of organization the State Chairman outranked
the administrator, the calihre of the men selected was of
paramount importance. Above all was it necessary to avoid
partisan considerations in the choice of these top state
leaders. The Treasury insisted on securing the best qualified
men regardless of party. The record on this point speaks
for itself 5 as a few examples will show.

In New Jersey 3 Albert H. Hawkes, President of the
Congoleum Nairn Corporation, and later a Republican United
States Senator, vras appointed. In Utah the chairman selected
was Charles L. Smith, President of the First National Bank of
Salt Lake City. He served throughout the whole period of
war financing. The first chairman for Illinois was the
Chicago industrialist, Harold Swift. New York had as its
first chairman Colonel Richard C. Patterson, former Assistant
Secretary of Commerce. In Ohio where Roy D. Moore, a
Republican newspaper publisher, was the first chairman,
John McSweeney, former Democratic Congressman, became
Administrator. In Oregon, E. Palmer Hoyt, Republican publisher
of the Portland Oregonian: in Kansas, the liberal Republican
editor, VJilliam Allen White; in Michigan, an outstanding
Democratic business executive, Frank Isbey; and in Iowa,
Dr. John S. Nollen, President of Grinnell College, gave the
Defense Savings Program bi-partisan and effective leadership.

In the entire history of our government it would be
difficult to find a civilian organization of similar magnitude
and scope from which partisan politics was so conspicuously
absent or in which the quality of leadership was so high.
From beginning to end this policy of recruiting the best
talent available without regard for party was scrupulously
observed.

Political Pressure

The new organization, however, was not completely free
from external political pressure, although it was very
infrequent. In nearly every case where this occurred the
pressure came from Senators or Representatives intent upon
insuring the appointment of chairmen or administrators
friendly to them, or irritated because they had not been
consulted. Under our system of government this was a natural

reaction and not necessarily an undesirable one. As elected
representatives of the people, members of Congress can hardly
be censured if they take more than a casua] interest in what
the Federal government does in their home state. Nor is it
unreasonable for them to ask that the leaders of an important
activity, such as promoting the sale of Government bonds, be
at least not hostile to them. This is a long way from saying
that Congressmen should in effect make the appointments or that
only those of their political persuasion should be considered,
nor was this claim ever made. Once the basic purpose and
policies of the Defense Savings Program were explained and the
need for making the organization truly representative of all
the people was understood, no serious political obstacles
were encountered. Harold Graves was scrupulously careful to
avoid giving offense to Congressmen, and in nearly every case
where a major appointment was involved he made sure in advance
that no objection would be raised to the prospective appointee's
character and ability. No inquiry was made concerning the
political affiliations of those appointed, and in no instance
was an appointment made for political reasons. In selecting
personnel for the state organizations every candidate's record
was carefully investigated as in the case of appointments to
the national staff already noted. 3

Special Hazards in Isolationist Communities

Political pressure and civil service regulations, however,
were the least of the difficulties encountered in recruiting
suitable personnel for the Defense Savings Program. Hostility
to the domestic policies of the Roosevelt administration was
not always compensated for by support of the President's
foreign policy. On the other hand, many ardent supporters of
the New Deal at home were strongly isolationist in their
attitude toward foreign relations. The Defense Savings
committees were being organized at the very time (Spring and
Summer of 19^1) when the "great debate" over neutrality, lend
lease and national defense was at its height. If the new
organization was to promote national unity, it could not
afford to offend those who for one reason or another were
unfriendly to President Roosevelt and his policies. On the
other hand, the Defense Savings program could not compromise
on the urgent need for all-out support of the administration's

3 See supra. Chapter IV,

63 -

policy of making America the "arsenal of democracy."
Fortimately the extreme isolationists and those who carried
their dislike of the President %o the point of refusing to
support national defense were more noisy than numerous.
Nevertheless the hazards were real. Time and again outstand-
ing citizens declined to serve on Defense Savings Committees
because of opposition to some phase of administration policy.

In selecting chairmen and administrators every effort
was made to give recognition to the critics as well as the
friends of the administration, or at least to select leaders
who could command the confidence of isolationists and ■
anti-New Dealers. Particular care had to be exercised in
Massachusetts where isolationist and anti-British sentiment
among the Irish population was strong in I9U1. Similar
isolationist obstacles had to be surmounted in Minnesota,
North and South Dakota and elsewhere in the Middle VJest.

To make doubly sure that no charge of partisanship
preference could be brought against the new organization,
men and women I^xlox'Jtl to be hostile to the administration on
nearly everything except its foreign policy were often
appointed. There were some complaints from liberal New
Dealers that the Defense Savings Staff was being "loaded"
with conservatives. This was not true. The policy of
appointing both conservatives and liberals. Republicans and
Democrats, who differed sharply on most things but agreed on
foreign policy, made a great contribution to national unity.

Use of Existing Groups as VJorking Units

The selection of State Chairmen and Administrators was
but the first step in building a Defense Savings organization,
Since one basic purpose of the program was to bring together
in a working partnership every important group in the nation,
it was necessary to find capable leaders of varied and often
conflicting interests to serve as members of local committees,
Thousands of men and women had to be interviewed. In some
cases invitations to serve on the State Committee were sent
to a small list of the best qualified people. In other cases
the president, secretary or other leading officer of every
sizeable organization was invited. The result was a wide
range in size, from about a dozen members to more than a
hundred, including, however, regardless of number, some
representation of every important social and economic group
in the state.

- Sk

state Executive Committees

Obviously large state committees of from forty to a
hundred members or more could not function efficiently in an
executive or administrative capacity, nor was it contemplated
that they would. After the first organization meeting in a
state, usually attended by one or more representatives from
the Washington headquarters staff, the full State Committee
rarely met. It functioned through an Executive Committee of
from five to a dozen members.'^

The "Grass Roots"

State Committees were invaluable as intermediary contact
points between "VJashington" and the people, but the Defense
Savings Program, to be effective, had to reach clear dovTn to
the ground, to people in their homes and businesses. Success
or failure of the entire enterprise was contingent upon the
quality of this "grass roots" organization. For upon the men
and women of local committees devolved the task of "face to
face" education, promotion and sales. Here again the principle
of making the committee a mirror of the various interests in
the community was observed.

There were no iron-clad rules governing the selection of
county and other local defense savings chairmen. It x-zas a
slow process. Some degree of prestige in the community,
personal integrity, at least a moderate degree of administra-
tive ability and devotion to the cause of national defense
against fascist aggression, were a few general and desirable
qualifications .

In some counties there was an abundance of such leader-
ship, in others it was scarce. The customary procedure was to
organize the most populous counties and communities first and
then move on to the smaller places. Usually a list of possible
chairmen was compiled in advance from information furnished by
those in a position to know.^

h It was not always easy to create a single committee representative of a whole state.
Only in California, however, were two independent committees set up within a single state. The
size of the state and the striking economic and social differences between Nothern and Southern
California made this necessary. In New York, there came to be what were in effect three committees
- one for the state as a whole, one for down-state and one for up-state.

5 A good many mistakes were made in selecting county chairmen and many of the first
appointed had to be replaced. Thus Vernon L. Clark (Administrator for Iowa and later National
Director of the peacetime bond program) and his deputy "took to the road" in November I9U1, in an
effort to secure a good organization in every county. It was a "hit or miss" proposition,
resvilting in many changes, as the selected leaders proved themselves worthy or failed. Up to the
summer of I9UU, however, over 50 per cent of the original county chairmen appointed in Iowa in I9U1
and I9U2 were still serving.

All of the rocks and shoals encountered in building the
state committees were reproduced locally and multiplied many-
times over. To establish representative volunteer Defense
Savings Committees in more than 3? 000 counties, in over
16,000 incorporated towns and cities and in nearly 20,000
unincorporated communities was an ambitious undertaking. To
extend the organization to include special committees in every
major business establishment, in schools and colleges, in
trade unions, women's clubs, farm organizations, professional
associations, service clubs, patriotic societies, and countless
other groups, seemed chimerical. Although this goal v/as never
fully reached, the proliferation of committees into every nook
and cranny of the nation was one of the most striking civilian
achievements in our history.

When one embraks upon an undertaking of this kind he
becomes acutely aware of the size of the United States and the
variety of its people, Rhode Island with five counties and
only seven incorporated places in an area of about 1,000 square
miles presented a different problem of organization from Texas
with 25^ counties and more than 65O incorporated places
distributed over an area of 263,000 square miles. Personal
contacts within a short period of time vrere out of the
question in Texas, hence use of the telephone, telegraph and
correspondence was heavy. The problems of size and distance
were also acute in states like Montana, Arizona, New Mexico,
Nevada, Utah, Wyoming, and North and South Dakota where a
sparse population was spread over a large area. Notwithstand-
ing extensive reliance on common means of communication.
State Chairmen and Administrators travelled hundreds of
thousands of miles in building and inspiring local committees.
They travelled on foot and by almost every conveyance kno\-/n
to man,"

Areas of Organization

In every state the organization was based not upon some
arbitrary and uniform plan but upon a recognition of local
conditions and respect for the opinion of the community in
which the committee V7as to function. Thus, although the

6 Wartime gasoline rationing, 19U2-UU, made the Job even harder, altho\jgh some extra gas
rations were in June, I9U2, permitted by the O.P.A, to county chairmen who needed to use their own
cars in their work on the War Savings program.

- 66

counby was the basis for organization in a vast majority of
states, the town or township was the basis in New England, the
parish in Louisiana. In Massachusetts, for exaraple, this meant
that the state office had to establish and maintain direct
contact with committees in 39 cities and 312 toims since the
13 counties of the state were of little or no importance as
administrative areas.

^Fj a practical matter, except in metropolitan areas or
where the boundaries of a city and county were substantially
coterminous, the county committees devoted their major attention
to the rural and farm population. Town and city committees
within counties functioned on a more or less autonomous level,
even in those states where the county v/as an important govern-
mental area. The relations between county committees and
other local committees within the county were those of
cooperative equals rather than of superior and subordinates.
The local Defense and War Savings organization thus represented
a loose federation among thousands of quasi -autonomous units.
They were united less by any organizational plan or authority
than by a common purpose and a spirit of friendly rivalry.
To encourage continuous coordination and cooperation among
the county and local committees, and to simplify administration,
most states established regional or district committees. In
New York six such district committees functioned effectively,
and in Texas, Congressional district committees served the
same purpose. Whether established on a formal basis or not,
many other states -- for example, Pennsylvania, Virginia,
Michigan, Illinois, Ohio -- found regionalization, with branch
offices in charge of Deputy Administrators, a very helpful
means of channelling state headquarters activity into the
varied, and often distant, local committee areas.

Functional Representation

Problems of adjninistrative geography were comparatively
simple by comparison with those arising from the search for
representative leaders of functional interests. As in the case
of the state organization, county and local committees were
designed to give representation to every important group in the
population. To determine what these groups were and to enlist
their best leaders for membership on the local committees was
a task requiring even more information, intuition, tact and
diplomacy than was required in setting up state committees.
For as anyone knows who has lived in a small community, the
fires of jealousy and mutual suspicion among rival groups
burn fiercly there.

The almost infinite variety of interests which characterizes
the American people made the job of insuring truly representative
committees a difficult one. America represents in cross section
eveiy class, creed, race and nationality and every political,
economic and social interest in the irorld. Moreover American
freedom of expression and association make it possible for
every one of these interests to organize and be heard. The
resulting confusion of tongues and apparent chaos of conflicting
interests are among the sujrest signs that our democracy is
alive and vibrant. They are the raw materials out of v^hich
we forge our national unity, for national unity in America is
based on a recognition of diversity rather than on an enforced
uniformity.

In the Defense and later the V^ar Savings Committees,
Catholic, Protestant, Jew and Gentile, capitalist and labor
leader, white and Negro, banker and farmer, men and women
worked together, if not in complete harmony at least in a
reasonable approximation thereto. It was too much to expect
that the conflicts in the community would not be reflected in
the committees, but the habit of working together grew strong,
and minor irritations or even feuds of long standing were
tabled or forgotten while the committees got on with their
job. A few general principles were insisted upon as a matter
of policy. The Treasury urged that eveiy Defense or VJar
Savings Committee include representatives of labor and
management, banking and finance, schools, farmers, women,
retail merchants and the major nationality or racial minorities.
The committees were to be truly representative and the
prejudices of individual chairmen or administrators were to
be disregarded in determining what groups should be included.
Secretary Morgenthau often reminded Defense and 'Jar Savings
leaders that the Treasury was "not seeking to establish a
fraternal order or a ne\T church," nor would it tolerate
anything in the nature of race, class or religious discrimina-
tion in setting up these committees.

Within these general principles there was ample room for
discretion. Often the committees reflected the "frame of
reference" of the chairman; if he were a Catholic or an ardent
Presbyterian his committee and staff would tend to include a
disproportionate number of members of those faiths. This was
but natural since men and women of like sympathies and beliefs
make a better team than those of conflicting thought and
temper. Nevertheless, chairmen were put on guard against this
tendency and in only one or two cases did it result in
clique control. There were, however, other grounds for

- 68 -

exercising great discretion in determining the composition of
the committees.

Committees in Massachusetts, Connecticut and Rhode
Island, for example, where the population had the highest
percentage of foreign-born and was the most heterogeneous in
the nation, naturally were more concerned with representation
of ethnic and nationality groups than committees in the South
where the population, outside of the Negroes, was more
homogeneous. The white-negro problem, on the other hand,
presented a problem of representation that could not be
solved in the same manner in Alabama or Georgia, as in Maine
or Kex^^ Hampshire. In the South separate committees were
established for whites and Negroes, whereas generally in
other states they served together. Nevertheless there were
occasions in the South where the two races worked together
and other occasions in the North where it seemed advisable
to have special committees for racial purposes.

In Iowa, Nebraska, Kansas, North and South Dakota, and
Minnesota -- the bread basket of /America -- agricultural
interests and farm organizations were given high priority in
representation. In other states like New York, New Jersey,
Illinois and Pennsylvania where, in spite of important
agricultural sections, urban interests predominated, it was
not always easy in the beginning to persuade State Chairmen
and Administrators of the necessity for building a strong
organization to carry the savings message to rural communities
Harold Graves encountered some opposition when he urged the
appointment of special farm deputies in some of these urban
states. There was never the same degree of blindness to the
importance of the urban market among the leaders in so-called
farm states as there was to the rural market among leaders
draTTO from strictly metropolitan areas. By November 19^2,
Agricultural Deputy Administrators had been appointed in
seventeen states.

In places where labor organizations were strong, their
representatives naturally played a larger role than in less
labor-conscious communities. The extent of labor cooperation,
as was true of many other groups, depended largely upon the
degree of responsibility, and recognition, conferred upon
them; that is, the more they were asked to do the better
they responded.

Although the importance of reaching women — about half
the population -- was universally conceded, the nature and
extent of their representation on state and local committees
varied widely. In some communities they were included in the

membership, not only of the main committee hut of every
important sub-committee. In others they were side-tracked into
separate committees of their own with only the most tenuous
liaison with the others. Where women felt slighted in being
assigned responsible tasks, or denied their due honor for
chores well done, they gave only indifferent service.

In varying degrees the direct relationship between
responsibility end good performance was true of all
functional units -- committees or sub - committee s ; indeed it
was in their relations with women's organiaations , trade
unions, professional educators, nationality and racial groups
that the prejudices of chairmen and administrators were most
frequently revealed. In a few cases they refused to deal with
some of the special groups at all. In others there was a
covert rather than overt discrimination against certain of
them, but fortunately such cases were few. The general
practice among Defense and War Savings chairmen was to lean
over backwards in giving recognition to those very groups
against which they personally may have harbored some prejudice.
Indeed, it came as a revelation to many conservative business-
men on those committees that labor leaders with whom they
served were not subversive but as intelligent, conscientious
and patriotic citizens as themselves. The myth of the "class
struggle" became even less realistic to labor leaders who
worked as bond partners with business executives, bankers and
other representative capitalists. Working together was not
a cure-all for the conflicts that plagued modern democratic
society but cooperation helped to rub off some of the rough
edges that exaggerated those conflicts.

It very early became evident that in most areas where
the bond program seemed to lag among women, farmers, organized
labor or some other special group, the cause could be traced
to the neglect, indifference or hostility of the chairman and
his staff. The latent energy available was usually abundant
but it often required exceptional leadership to mobilize it.
To assist in this the Treasury, after Pearl Harbor, encouraged
State, and in some cases county and local. Chairmen to appoint
full-time Deputy ^Administrators to deal with particular sections
of the total market. Thus, in addition to farm or agricultural
deputies, others were appointed wherever necessary for labor,
payroll savings, xramen, Negroes, schools, and nationality or
foreign-origin groups.

- 70

Organizational Progress Before Pearl Harbor

From March 19^1, until war came at Pearl Harbor in
December 5 the work of organization went on as rapidly as was
possible under the circumstances, but not fast enough to suit
those at the top in the Washington office 3 particularly
Secretary Morgenthau. At weekly staff meetings he pointed
accusingly to the blank or lightly-tinted areas on "progress
maps" indica„ting the states where a Defense Savings organi-
zation was either non-existant or in only a rudimentary stage
of development.

By the end of the first week in June, twenty-two states
were in process of organization under the leadership of
Collectors of Internal Revenue or of Customs. On August 21
it was announced that 32 State Administrators and 33 State
Chairmen had been appointed, and 31 Governors had agreed to
serve as honorary chairmen. In only 13 states, however, were
state committees completed and in 13 others they were
partially organized. By early September, state organization
had been completed in only 2U states although in 37 both
Administrators and Chairmen had been appointed. By the
middle of October, at least a start toward organization had
been made in all but four states -- Delaware, Louisiana,
New Hampshire and Kentucky. The last progress report before
Pearl Harbor, dated December 5? 19^1? showed that in 50 states
and territories the initial organization was at least under
way. Thirty states reported local committees in nearly every
county, city and toi-m. The organizational gap was being
closed.

Organization Ever -Changing; Never Finished

Actually the Defense Savings organization was never
"finished." The process of reorganization, with changes and
improvements built on experience, continued throughout the
entire history of the Defense, VJar Savings and War Finance
Committees. The basic pattern — wide representation of all
important social and economic groups — was always present,
but the local variations were infinite. The variety and
mutation represented strength rather than weakness, for no
healthy promotional organization can remain static -- it
alters and grows with changing conditions, else it withers
away.

oOo

71 -

CHAPTER VI
VJAR
"Pearl Harbor Conference," Chicago, Dec. l6-17g 19^1

The Japanese attack on Pearl Harbor and our full involvement
in the war found Defense Savings Committies functioning to some
degree in nearly every state and territory. After December 7?
the Treasury lost no time in putting the organization on a war
footing. A national conference of State Chairmen, Administrators,
Deputies and key members of their staffs was called to meet in
Chicago on December l6 and 17- Over three hundred Defense Savings
leaders attended.

Meeting within ten days of Pearl Harbor, there was none of
the usua,l "convention" atmosphere about the sessions. There was
no time for frivolity, nor any disposition to indulge in self-
congratulation over what had been accomplished since May 1. The
two-day meeting was devoted to the serious business of extending
and improving the organization on every front.

Harold Graves pointed out that during the seven months the
Defense Savings Staff had been in operation a total of slightly
more the $2 billions of E, F and G Savings Bonds had been sold.
But of this amount $1,705 ? 000, 000 represented sales of bonds in
denominations of $500 and $1000. Since few persons could buy
bonds of this size out of their current earnings, the inference
vjas plain that all except some $300,000,000 of the total had
come from large investors or from accumulated savings. "This
would mean," said Graves, "that wage earners were investing in
defense bonds about $^4-0,000,000 a month, and that's only one-
tenth of the job." The Defense Savings Program had as yet
scarcely made a dent in the savings habits of the vast majority
of wage and salaried workers whom, it was designed to reach. The
organization had to be improved, fast, to achieve a wider dis-
tribution of Savings Bonds, Presses had already been stopped on
all items of "Defense" copy; the new "war pitch" had to be
supplied xfithout a moment's delay.

To assist in this process, four "seminar" sessions were
organized, each including representatives from a dozen states and
presided over by members of the Washington staff. The states were
grouped alphabetically -- rather than by region or size — on the
theory that cross-fertilization of ideas and experience would be
fruitful. The agenda of each of the seminars included every major

-73-

aspect of the program. To state the problems involved, outline
proposed solutions and guide discussion, members of the Washing-
ton staff having responsibility for these various activities
attended each section meeting. In this way, all the state
representatives and the Washington staff were able to share their
wisdom and experience.

To realize new wartime objectives it was imperative that
the organization work which had been going on since spring be
accelerated, but it was not enough to resolve simply "Now we
are a.t war, let's go," nor "we must increase our sales ten times
over." What was needed was a specific project that would compel
the Chairmen and Administrators to "organize the unorganized and
put the organized to work."

Pledge Campaign

The Treasury was not prepared at the time to establish sales
quotas which might have provided the required stimulus.-*- As a
substitute, a nationwide pledge campaign, to be conducted on a
state, county and city basis, was announced. A pledge form for
"Regular investment in Defense Savings Bonds" was presented to
the conference and approved. The plan was, by personal
solicitation, to induce every man, woman or child in receipt of
regular income to sign a pledge promising to invest a given
am.ount in Savings Bonds each pay period. Those in charge of
the program did not conceive the pledge campaign primarily as a
direct sales device for selling bonds. The pledge itself was
not in the nature of a contract or order form and no provision
was made, either in Washington or many of the states, to preserve
the duplicates in order to check on pledge performance. The
campaign was intended to be: (l) A stimulus to the savings
workers themselves, (2) A community promotion and publicity
device, and indirectly, (3) A sales device. The campaign helped
accomplish all three of these objectives. Particularly did a
nationwide pledge campaign require a "down to the grass roots"
savings organization in communities where it was not already in
existence or in process of creation. The delegates to the
Chicago Conference returned home deeply impressed with the
urgency for better and more complete organization. The high
point of the conference and an important fa.ctor in the renewed

1 In ^is speech to the conference. Secretary Morgenthau referred to the demand for quotas.
"I have always avoided answering with a money figure," he said, "because I have been much more
interested, firstly, in reaching vast numbers of individuals and, secondly, in absorbing current
income rather than accumulated savings in the bajiks. But I will tell you now •»rtiat...our goal shall
be and must be. It is to reach quickly, within the next few months, every single recipient of
regular current income in the United States and to have every one of these 35 million people set
aside some part of their pay regularly within the shortest possible time..."

-7^

enthusiasm of the attending officials was Secretary Morgenthau's

speech at the final luncheon session.

"We in this room have been working hard for many months
to mobilize our financial resources in the form of the
people's savings. But we have done more than that.
"Since the very inception of the Defense Savings Program
it has been one of our major objectives to give the
American people a sense of their own direct and
inescapable involvement in this great battle for our
way of life... We have tried to give the American
people a greater pride in their own country and a
greater awareness of the dangers that face them. . .We
have tried to give every man, woman and child in this
country a sense of direct participation in its defense...
"I believe in all sincerity that the devoted work of
the Defense Savings Staff and all our thousands of
volunteer workers throughout the country has helped
greatly to crystallize American opinion. I believe
that the response to the bombs at Pearl Harbor was
deep and wide and iimnediate partly because of our
ground work in the Defense Savings program.
"Now that we have cleared the decks for action, it is
up to us to follow through. . .Let us bear ourselves that
if these United States should last for a thousand years,
men will still say, 'This was their finest hour.'"

Conversion to "War Bonds" and T-Jar Savings Staff

After the Chicago Conference "Defense Bonds" were popularly
called "War Bonds," ?^lthough the name was not officially changed
until June 1, 19^2. The Defense Savings Staff began calling
itself the War Savings Staff at the Chicago meeting, and on April
15, 19^2, this name was officially sanctioned by Treasury
Department Order No. U5, These changes were consistent with the
temper and spirit of the organization now militant in its
resolve that "Defense cannot win the war." Attack on the
financial front, as later on the military front, became the
order of the day.

Stepped-up Payroll Savings

As a slogan for the new, intensified wartime program,
Secretary Morgenthau suggested "Let's Make Every Pay Day Bond
Day." As a step in giving substance to this slogan, Harold
Graves on December 27, just a few days after the Chicago
Conference had adjourned, sent the following telegram to State
Administrators :

-75-

"The Secretary desires that in every state a drive be
made immediately to secure adoption of the pajToll
allotment plan by all employers of 5OO or more. This
to be completed if practicable by January 10.
IJhen firms employing 5OO or more have been reached the
drive should be continued as rapidly as possible to
cover employers of more than 100.

This matter is urgent and should take priority over all
other activity excepting only the completion of local
committee organization in more populous comimunities. "
This telegram was supplemented by a communication from the
Field Director asking Administrators to submit to the Secretary
on January 10 a list of all companies in their states ivhich had
agreed to install Payroll Savings plans, and to submit supple-
mentary lists Tjeekly until the project Tjas completed. To clear
the way for the accelerated Payroll Savings plan the pledge
campaign was postponed from a proposed starting date in January
until about the middle of February.

The Payroll Savings plan for the installment purchase of
bonds had been undertaken at the very beginning of the Defense
Savings program. The promotion was based on what were called
"salary savings plans" that had been operating in a number of
insurance companies and industrial concerns, especially public
utility companies, for the previous fifteen years or so. The
plans provided that workers could request their company to with-
hold periodically a stated amount from their pay, and when
enough money had accumula^ted buy for them- a life insurance
premium or purchase a share of company stock. The plan had
proved to be a successful method of cultivating good labor-
management relations wherever it had been installed. Here
appeared to be a most promising plan for the sale of Government
bonds, so the Treasury undertook to promote the method of "easy
payment savings" for Defense Savings Bonds by employees in
companies throughout the country. Although a number of firms
had put the plan in motion of their own accord, the idea was a
new one to most em.ployers. The National Association of Life
Underwriters with its 350 local associations formed special
committees to cooperate with the Defense Savings State Adjninis-
trators in helping install Payroll Savings plans.

Not very great headway had been made on the plan before
Pearl Harbor. At the end of December, I9UI, there were about
700,000 people investing some $5 millions a month through the
plan. As Graves had suggested at the Chicago Conference, this
was but a fraction of the job that had to be done.

The telegrajia of December 27 set a stiff assignment. It was
characteristic of Secretary Morgenthau to ask the impossible of

his staff and to expect its accomplishment. He was rarely dis-
appointed. In this case the seemingly impossible goal was
reached within a fairly short time. Later at Kansas City in
October 3 19^1-2, at the first national gathering of bond workers
since the Chicago meeting, it was announced that the number
investing in Savings Bonds through the payroll plan had increased
to approximately 20,000,000.

Local Organization Achieved

An immediate and collateral effect of the stepped-up Payroll
Savings plan, and the announced pledge campaign, was to compel
chairmen and administrators to complete their local organizations.
By the end of February, 19^2 , every state and territory had
completed its state bond organization. Although the task of
setting up and maintaining a volunteer organization of nationwide
scope required constant and continuous effort, by June 19^1-2 the
goal of establishing War Savings Committees in every state,
county and local community had been reached.

A dminis tractive Management - Gro^rbh of Paid Staff

VJhen the Washington office of the Defense Savings Staff
opened for business on May 1, 19^1? i"t had only ^!-0 paid employees
and one vpl-a-year man. There were only 6 paid men in the field.
Tiro months later there were 95 paid employees and 2 dollar-a-year
men in Washington and 2k men in the field, including one at a
dollar a year. As late as December 1, 19^1? the paid employees
in VJashington outnumbered those in the states, the comparative
figures being 202 and 157. Dollar-a-year men however were more
numerous in the states. The subsequent growth of the organiza-
tion is reflected in the following figures:

Date Washington Staff Field Staff Total

Salaried

$l-a-year

Salaried

May 1, 19^1

July 1, I9UI

118

Dec. 1, 19^1

202

157

359

Dec. 1, 19^-2

370

851

299

1221

319

Dec. 1, 19^1-3

^93

1719

868

2212

903

July 1, 19^^

^55

1588

896

20^3

938

As noted, the personnel increased rapidly in the closing months
of I9HI and continued to expand steadily through 19^t-33 then began
to decline somewhat in the summer of 19^^!- j after the war in
Europe passed its crisis. The roster lessened slowly through the
following year, and then was sharply reduced to some 25 per cent

-77-

of its wartime level as the Savings Bonds program vrent onto a
peacetime basis in 19^6.

Original Divisions, 19^1

In the beginning and before completion of the field organ-
ization, virtually the entire burden of the Defense and War
Savings program devolved upon the Washington staff. This burden
did not diminish as state and local committees began to function
since the variety and scope of activities increased. Neverthe-
less, although there were additions to the staff and almost
continuous reorganizations, the essential structure existing in
May I9UI remained unchanged throughout the life of the War
Savings Staff. In addition to Harold Graves' own office there
were in Washington the following major units:

1. Division or Office of the Executive Director

Responsible for administrative management and
supervision, and the preparation and mainte-
nance of records, files and accounts,

2. Division or Office for Liaison with National
Organizations

Charged with enlisting and sustaining the
cooperation of national organizations including
patriotic and fraternal bodies, civic groups,
business and trade associations, labor organi-
zations, service clubs, women's organizations,
racial and nationality groups.

3. Division or Office of Information

Responsible for advertising and publicity of
all kinds through press, radio, motion pictures,
posters, pamphlets, etc.
Uo Division or Office of the Field Director

Responsible for the management and supervision
of all field activities within the several
states and territories, the preparation of
instructions for state and local committees
and the maintenance of continuous liaison
between the whole Washington staff and the
field organization.

The War Savings Staff never functioned strictly according to
this neat formula, and as the program increased in size and tempo,
the formal chart became even less accurate a representation of
administrative practice. There was m.uch "free wheeling" and
"cutting of corners," a going over Division heads to one of the
special consultants or assistants to the Secretary. Sections
within major divisions often developed their own programs and

-78-

maintained only the most tenuous relation with the Division head.
Only the administrative genius and patience of Harold Graves
held the organization together, for Tjithout his firm guidance it
would have resembled a headless horseman riding off in all
directions at once.

Secretary Morgenthau kept an eagle eye on the whole opera-
tion and did not hesitate to criticize, commend, condemn or
condone what was done. The Secretary was the program's number
one gadfly and idea man. This solicitous attention was, however,
not without its disadvantages, for the Secretary himself was not
always careful to observe accepted administrative procedures.
It was not unusual for him to deal directly with section heads
or their subordinates without informing the Division head or
Mr. Graves that he was doing so. This Secretarial interest and
frequent intervention helped to keep the entire staff alert even
though it did cause some confusion and uncertainty.

New Personnel

The administrative history of the Defense and War Sa.vings
Staff was one of constant change. There were changes of name,
of personnel, policy, structure and procedure. It would serve
no useful purpose to record all of these since few involved any
important departure from the basic pattern as established in
May I9U1. Several early changes in top personnel, however, were
of more than incidental significance.

A few weeks before Pearl Harbor a most enterprising young
man from the West, with the intriguing name of Theodore Roosevelt
Gamble, joined the VJashington staff as a consulting expert on
temporary leave of absence from his post as Defense Savings
Administrator for the State of Oregon. Under an agreement with
Graves to stay for not more than three months, he was almost
literally conscripted to remain after Pearl Harbor. His coming
was providential.

Two Field Directors followed Gale Johnston: Robert W.
Sparks for the first half of 19^-2, and Robert W. Coyne from
July 1 of that year to the end of the war financing program.
"Bob" Sparks was loaned to the Treasury Department by the Bowery
Savings Bank of New York of which he was vice president. A
graduate of Columbia, he had seen service overseas during World
War I. After the war he attended the Harvard Business School
and subsequently worked for the Metropolitan Life Insurance
Company for eight years before entering the banking field.
Although Henry Bruere, the Bowery president, was reluctant to
release Sparks, Bob volunteered his services in May, 19^1?
because he was convinced that the United States could not avoid

involvement in the war. As vice president of the largest savings
bank in the T'^orld, he knew the importance of savings to the
control of prices as well as to the job of financing the war.

From May through December 19^1, Sparks was Associate Field
Director, assisting Gale Johnston with headquarters organization.
Although a New York banl^er, member of the Harvard Club and some-
thing of a bonvivant. Bob Sparks at forty-seven had a homespun
quality that made him at ease with men and women of every kind,
rani: or station. With none of Gale Johnston's eloquence or
missionary zeal, he nevertheless played a decisive role in
building the office staff and assisting the organization of state
and local committees throughout the country. Particularly did
he restrain several more emotionally minded publicity men in
Washington from plunging too early into "enemy atrocity" or
"threat of doom" advertising, for which the public was ill
prepared and undoubtedJLy would have reacted to in an unfavorable
manner. As an administrator Sparks knew how to delegate
authority; he had the good sense to leave details of management
to Eugene Sloan the Executive Director, to Larry Olney the
personnel officer, and to Charlie Adams, budget and accounting
officer.

In November, 19^1, Robert W. Coyne came to Washington from
Boston, having been "borrowed" from the Alchol Tax Unit. Serving
initially as an Associate Field Director, he became Field Direc-
tor in July, 19^2, when Sparks returned to his bank.

Bob Coyne's indefatigable, almost superhuman activities
during the next three and a half years could be set down
precisely and at length, but his personality is not easy to
analyze or describe. A Maine Irishman, he had a sort of dual or
even triple personality. In one incarnation he was a trigger-
minded, crisp-voiced administrator, managing his staff like a
train dispatcher, never relaxing or allowing others to relax. On
other occasions he unbent, all tension vanished, and the office
or committee meeting took on the appearance and atmosphere of a
"bull Session" in a college dormitory or a country club. This
same informality carried over into his relations with Staff
workers from chairmen to charwomen and janitors. In this mood
Coyne was a much sought after dinner guest. The third mood or
incarnation was that of philosopher and prophet. As a la\\ryer
and member of the Massachusetts bar, he had a lavjyer's love for
hair-line distinctions, but on a strictly theoretical level. As
an administrator, Coyne was impatient with such niceties and
preferred to make decisions on the basis of what "reasonable" men
"by and large" would do under "approximately similar"
circumstances. The "inner meaning" of his decisions, however,
was never completely concealed. Few people were more sensitive
to the theoretical implications of even simple ideas. In this

-80-

respect Bob Coyne reflected the influence of the Jesuit Fathers
under whom he received his early training. Having also a talent
for poetry, his speeches possessed a lyric quality that made them
exceptionally effective as inspirational messages. But unlike
the usual variety of inspirational discourses, Coyne's speeches
had both form and substance. They made an immeasurable contri-
bution to the morale of the entire organization by translating
into vivid and simple prose the underlying and enduring values
in the VJar Savings program of which the sale of War Bonds was
but the sign and symbol.

Organizational Changes

There were many other major a,dditions to the Washington
staff between May, 19^1, and the summer of 19^3} the more im-
portant of which will be referred in subsequent treatment of the
promotional work of their division or section. 2 Changes of
administrative organization and procedure were likewise numerous,
although only a few will be treated here. In a memorandum of
March 19^1-2, Harold Graves undertook to redefine the functions of
the various divisions and sections to provide for better co-
ordination through Executive Director Sloan. At this time there
were seven major working units, the four divisions listed above
plus their sub-division or offshoots — Women's activities,
schools and special literature, press and radio, and advertising

2 These are the major early additions to personnel:

Roy D. Welch and Augustus Zanzig, summer of 19^+2, consulting experts on music.

Julian Street, Jr., in charge of work with literary celebrities, artists and libraries.

Ralph D. Engelsman, April 19^2, to supervise the Payroll Savings plan.

Harriet Elliott and Mabelle Blake, summer 19^2, to head Women's committee activities.

Homer W. Anderson, head of Education Section, September 19^2, for about a year.

Milburn McCarty, Spring 19^41, head of Press Section until he entered the armed service at
end of I9U2.

Ross Barrett, August 19'+l5 for trade and business publications.

Thomas Lane, June 19^2, head of Advertising Section, and later the whole Press, Radio and
Advertising Division.

Emerson Waldman, October 19^1, assistant in radio section, later chief for a brief period.

John M. Delehanty, assumed in January I9U2 responsibility for production of all promotional
materials.

Edward Hitchcock, February -August, I9I+2, chief of Foreigh-Origins section.

Walter H. Wuerdeman, March I9U2, assistant to Horace Peters, later succeeding him as chief
liaison with business and trade associations.

J. Edward Shugrue, October 19^2, succeeded Carlton Dixffus as head of motion pictures and
special events section.

Burton Davis, February 19^2, first in special events, later assisted both press section and
Field Division with special press releases and the preparation of speeches for staff members.

-81-

and promotion.

The March 19^2 allocation of authority a,nd responsibility
did not, however, exactly correspond to actual operations. For
example, Julian Street, Jr., who maintained liaison with hook
and magazine publishers and various groups of artists and writers,
was not included in any of these divisions but reported directly
to Ferdina,nd Kuhn, Assistant to the Secretary, or to Graves.
The same was true of the music men, whose major administrative
connection with the staff was through Messrs. Kuhn or Graves or
I^'irs. Morgenthau, wife of the Secretary, who took an active and
continuous interest not only in Women's work but in decisions
affecting the kind of literature, posters and music used by the
whole staff. The Field Division had divided responsibility to
the Field Director and to Ted Gamble, whose supervision became
increasingly close. To enlist cooperation from banlts and
financial institutions, B. M. Edwards continued for some time as
an Assistant to Secretary Morgenthau, reporting informally to
Graves.

Within and between the various divisions there were many
"twilight zones" of authority and responsibility arising from an
often unavoidable ambiguity in the definition of functions. For
example, the Payroll Savings Section in the Field Division
operated in the same general area as the Labor Section of the
National Organizations Division, and relations between them were
often tense and even unfriendly. There was som.e confusion also
concerning the jurisdiction of the special literature unit. Was
this to prepare literature only for the Women's Section and the
school program, or was it to serve the entire staff? Since both
women's activities and the school program were carried on in the
field, why should they not be placed under the immediate super-
vision of the Field Director? For the same reason should not
the varied "special events," often involving movies and the
theatre, also be transferred to the Field Division? If labor
was properly lodged in the National Organizations Division, why
should the farm or agriculture activities be in the Field
Division? VJho was to have jurisdiction over the bond program.
among the employees of other departments and agencies of the
Federal Government?

None of these questions admitted of any simple answer, so
there were numerous transfers, consolidations and liquidations
before the organization assumed settled form. In April I9U2,
an Interdepartmental War Savings Bond Coiranittee to promote the
bond program among Federal employees throughout the country was
established by Executive Order of the President. Under the
initial direction of a retired Rear Admiral, Charles Conard,
this committee carried on its work, parallel to that of the
War Savings payroll allotment plan, through volunteer committees

-82-

in the various Federal departments and agencies in Washington and
the field, including, very importantly, the members of the armed
services, ^

In June, 19^2, another reorganization abolished special
literature as a Section, leaving Julian Street, however, to
carry on its work as a sort of lone wolf reporting to whomever
seemed most advisable from one da.y to the next. The Women's,
and the Education sections were transferred to the Field Division,
Shortly thereafter, the original Information Division was
renamed Advertising and Publicity (subsequently Press, Radio and
Advertising), and its motion picture and special events opera-
tions tranf erred to the Field Division. In the latter was also
created a section to handle bond promotion through retail
establishments. Hence the Field Division grew to include not
only its original functions of dealing with state committees on
general phases of the whole program, but also supervision over
a great variety of headquarters activities which were not only
related to the field organization but were also self-contained
national operations. A simplified chart is given at the end
of this chapter.

The Problem of Management

The burden of managing an organization having the variety
and magnitude of the War Savings Staff, composed for the most
part of men and women unaccustomed to administrative discipline
and both unfamiliar and impatient with bureaucratic procedure,
was a heavy one. To assist him in the job of over-all planning
and management. Graves proposed in August 19^2 a division of
labor among three Assistants to the Secretary -- himself, Ted
Gamble and Peter Odegard. Gamble was to assume responsibility
for general supervision of field operations, including special
events, motion pictures, retailers, sales outlets, newspaper
carrier activities and payroll savings. Odegard was to function
as over-all Director of Information with general responsibility
for advertising, press and radio, posters, publications, women's
activities, the school program, all national organizations and
national speakers. Graves was to continue as director of the
entire organization but X'/ith special concentration on management,
personnel, budget and finance, sales quotas, statistics, and
relations with Congress.

This arrangement, x\rhich had been informally observed for
some time, was officially announced in a memorandum to the staff
on September k, 19^1-2, and continued in force until the

3 Admiral Conrad retired from headship of the committee after a few months, for reason of
ill health. He was succeeded by Edward F. Barcelt, who entrusted managerial supei-vision to
Charles A. Mead,

-83-

establishment of the War Finance Committee for the Second War
Loan in 19^3. It did not involve any radical change in procedure
but did help to relieve the burden on Graves and to speed up the
process of planning, production and "clearance" of the innuirierable
projects developed by the staff for promoting the sale of War
Savings Bonds and Stamps.

Actually the triumvirate of Graves, Gamble and Odegard
continued to function in pretty much the same way it always had.
Under the new plan there was to be closer supervision but at the
same time less delay in operations and consequently less
temptation to "cut across lots" or engage in unauthorized
activities.

Staff Meetings

In the early days of Defense Savings formal staff meetings were
hardly necessary; informal meetings of the small group could be
and were called on short notice at any time of day or night. It
was not unusual, in 19^1 and frequently afterward for a half
dozen of the top leaders to be at the office until well along
toward midnight.

Later, more formal staff meetings served a useful function.
They enabled the "ring masters" to keep tab on what was going on
in the twenty or more rings of the circus over which they
exercised control. They also kept the various division and
section chiefs informed on what others were doing or planning to
do. They gave recognition to those doing good v^ork, thus main-
taining high morale by giving satisfaction to the hunger for
prestige. They made it possible for the War Savings Staff to
think and work as a united organizations thus maintaining
esprit de corps.

Staff meetings were particularly/- important during 19^2 and
most of 19^3 since the operating personnel was physically removed
from the top supervisory group. The staff was housed in the
Sloane and Delloll buildings on 12th Street, three blocks from.
the main Treasury Building where Secretary Morgenthau and his
chief assistants had their offices. This physical separation
had a tendency to encourage "free wheeling" simply because of
the nuisance of having to trudge or taxi to 15th Street to
secure final approval. The staff meetings facilitated commu-
nication between those on the "policy level" and those on the
"operations" level.

Beginning in July, I9H2, there x\rere usually three staff
meetings each week. Two of these, on Mondays and Fridays, were
held in the Executive Director's office in the Sloane Building
on 12th Street. Attendance was small due to limited available

-8U-

space o Division heads and section chiefs were invited but the
main thing was to assure the presence of at least one representa-
tive from each division. A much larger staff meeting was held
on Fridays beginning July 17^ in a conference room in the main
Treasury Building. Upwards of sixty members of the staff, plus
one or more representatives of the Treasury's Division of Research
and Statistics, were invited to attend. Graves presided with his
usual aplomb, follov^ing a well balanced agenda which, if it did
not always include every division, succeeded in focussing
attention on matters of genuine interest and significance.

Secretary Morgenthau was a frequent visitor at these meetings;
indeed he often presided over the meetings, which were held in
his outer office. In this way he got to know personally the m.en
and women responsible for the program and to keep abreast of what
they and their associates were doing. It was this detailed
knowledge of operations that enabled Secretary Morgenthau to be
the "spark plug and Number one idea man" of the War Savings
program. The meetings xvere always "working" sessions; there were
no "yes yessing" or "me too" proceedings because the Secretary
was present. He was liberal with praise of work well done, and
quick to distinguish good ideas from bad. He vxas equally franlv,
often brutally so, with people, plans or projects of which he
disapproved. He did not hesitate to use forceful words -- dumb,
stupid, junl^, fantastic — to describe what he did not like.

Newcomers to the staff were often shocked and hurt and some-
times frightened by such criticism from the Secretary of the
Treasury, It took them some time to realize that Mr. Morgenthau' s
scorn of an idea was almost completely impersonal and that he
often had the highest respect for those whom he criticized most
fiercely. Equally important for the neophyte to learn was that
as the Secretary could "dish it out" he would also "take it,"
and he always gave ample opportunity for reply or rebuttal. He
had a deep sense of the honor and dignity of his office, but he
never used his position to bolster or camouflage a weak argument.
Having had his say he would give anyone and everyone opportunity
to prove that he was v/rong. It was this observance of democratic
procedure that made the staff meetings so useful.

High Morale

Few organizations, public or private, matched the morale of
the VJar Savings Staff. From the chairman of a most obscure
committee to the national officers in Washington there was a
devotion to duty, a pride of achievement, a firm conviction that
it was the best civilian agency in the entire country, and an
equally firm determination "every day in every way to make it
better and better,"

-85-

It was fortunate that this was so since for nearly two and
a half years the Treasury's mass bond selling organization had
a somewhat turbulent and crisis-filled career. Held together by
the faith of its tens of thousands of volunteer workers, it was
sensitive to any attack that threatened this faith. One of its
articles of faith was belief in voluntary as against compulsory
savings. As will be detailed later, not everyone having to do
with Federal fiscal matters shared this belief. In the Office of
Price Administration, the Bureau of the Budget, the Federal
Reserve Board, the President's Cabinet and in Congress there were
many influential people who regarded voluntary savings o.s archaic,
inequitable and inefficient, and who plugged persistently for a
system of forced savings or loans. Pressure for compulsory savings
in Congress, the cabinet and in the press was reflected immediately
in the morale of the war bond staff and volunteer workers. As
pressure for forced loans increased, war savings went down, and
vice versa. Indeed the volume of space given to compulsory
savings was like a barometer of war bond spirit. But it survived
these attacks and indeed grew in strength because of them.

Another article of faith was the belief in the registered,
non-negotiable savings bond as the ideal vehicle for a popular
selling campaign. So firm iras this belief that any proposal to
offer a negotiable security in low denomination for small inves-
tors was regarded as an attack on the entire war savings program.
The frequent proposals of this kind that were made both within
and outside the Treasury gave rise to recurrent crises almost as
severe as those induced by demands for forced loans. But in spite
of highly placed sponsorship and at times vigorous promotion, a
low-denomination negotiable security was not issued and the war
savings philosophy survived.

A third and in many ways more serious criticism stemmed from
a rather prevalent belief in professional financial circles that
the Treasury's war bond organization was ineffective if not
incompetent; that it was staffed by amateurs with little or no
experience in the securities business; that its organization
along state lines was naive since such areas did not, except in
a few cases, correspond to real market areas; and that it was not
organized, nor was its personnel competent, to reach the large
investors, both individual and corporate, to whom the Treasury
perforce must go with market issues for the funds it would need
to meet the rising costs of war.

The War Savings Staff and its committees took pride in their
"amateur" standing and boasted that their members were modern
Minute Men, representative of every segment of the population
rather than expert bond salesmen. Consequently they hotly re-
sented this criticism and occasionally attributed it to ignoble

motives such as the "desire of the bankers and securities sales-
men to dominate the Treasury by getting control of the war
finance organization," or the desire of such people "to get a
commission from Uncle Sam for selling government securities," or
their determination to substitute negotiable securities in low
denominations for the "E" bond so they can "trade on the small
investor and clean up as they did in World VJar I."

One consequence of this controversy was a series of crises
which were not finally resolved until the establishment, in June
19^-3 > of the War Finance Division, which continued the work
of the Defense and War Savings Staffs and assumed responsibility
for marketable issues also, carrying on the over- all loan
operations of the Treasury to the end of 19^-5. These crises and
their solution form the subject of the two following chapters.

Secretary of the Treasury

I
Under Secretary

Assistant to the Secretary
(Graves)

Other Assistants

Executive Director
(Sloan)

Advertising and
Publicity Division

Press
Radio
Advertising

National

Organizations

Division

Labor
Foreign-Origins
Interracial
Fraternal, Civic
Trade Associations

Field
Division

Administrative
Division

Women

Personnel

Schools

Payroll Savings
Agriculture
Special Events

Budget -
Finance

Procurement

Transportation

Retailers

Speakers

52 state and Territorial
Committees

oOo
-87-

CMFTER VII
SPECIAL PROBLEMS
Voluntary vs. Compulsory Lending

As Federal expenditures increased and taxes failed to keep
pace, it became evident that the Treasury would be compelled to
borrow large sums to finance the war. It was urgently necessary
to economic stability that the largest possible sums be borrowed
from the current- income and savings of individuals. The Defense
Savings Program had been organized for that purpose, with parti-
cular emphasis on the small investor, but Savings Bonds were not
intended to absorb the vast accumulations of funds in the hands
of large corporations, insurance companies, savings banks and
wealthy individuals. The limits on annual purchase, non-negotia-
bility, and interest penalties for redemption before maturity?"
militated against the use of Series E, F and G Bonds for the
large-scale loan operations that became necessary before the close
of I9U2.

How best to reach both the "big money" market and the small
investor was the difficult problem that confronted Secretary
Morgenthau after Pearl Harbor. The Secretary was tireless in his
efforts to improve the VJar Savings Staff and to inspire or goad
it into greater effort. He combed the country for people who
could be of assistance either with their service or counsel.
The War Savings Staff was put under repeated surveillance and
investigation by several committees the Secretary asked to
"look the organization over and tell me what's good about it
and what's bad. Don't pull your punches!" The procession of
outside helpers the Secretary called in was often bewildering
and sometimes depressing to those in charge of the program.
Not all of them vjere manifestly beneficial to the operation,
but the majority were more than moderately helpful.

Improving VJar Savings Record

The record of the War Savings Staff improved steadily
during 19^2. This was due to no single cause but rather to
momentum gained in early forms of promotion and also to
expansion in many lines of publicity and educational endeavor.
A system of monthly sales quotas was adopted on a national.

state end local basis. An intensive drive to increase bond buying
through Payroll Savings was starting to "snowball" and Labor-
management committees were beginning to function smoothly. A
careful study of the farm market had been made and steps taken
to strength the agricultural part of the program. Newspaper
carrier boys had been mobilized into a nationwide Savings Stamp
sales force. A pledge campaign had been completed in over half
the states. Countless thousands of volunteers had acquired
experience in the art of personal solicitation. Several special
national campaigns had been successfully conducted, including a
"Retailers for Victory," the "American Heroes Day," a tour of
British and American war heroes, and a similar tour of motion
picture stars. The War Savings Staff aided in the establishment
of "Victory Centers" in hundreds of communities, and thousands
of other stamp and bond booths, manned by War Savings Committees
or other volunteers, were in operation.

The "'Schools at War" program launched in the nation's
schools by the Education Section of the staff was not only proving
to be a powerful sales stimulus but an important contribution to
American education. War Savings posters appeared everywhere,
outnumbering those of all other Government agencies combined;
VJar Bond radio programs and announcements were on every network
and on every local radio station every day; bond advertisements
and news stories could be seen regularly in every daily news-
paper, in thousands of weeklies, in trade publications and house
organs, and were beginning to appear in magazines of general
circulation. War Savings shorts, trailers and newsreels were
being shown with frequency on nearly every movie screen in the
country. Special campaigns were arranged by fraternal organiza-
tions, service clubs, patriotic societies, trade unions, and by
Polish, Italian, Jewish, Norwegian, Czech, Negro and even some
German groups. Every section of the War Savings Staff in
Washington and in the states was feverish with activity. The
organization had become vital, pulsating, proud of its accom-
plishments, conscious of its weaknesses, but vdth full
confidence in its capacity to do the job for which it was created
and any related task Secretary Morgenthau might ask it to
undertake .

Kansas City Conference, October 26-28, 19^2

It was in this spirit that nearly three hundred War Bond
workers assembled in Kansas City, Missouri, October 26, 19^2,
for a three day conference, the first national gathering since
the Chicago meeting in December of the preceding year. The
conference was greeted by a message from President Roosevelt

conveying his congratulations on vork so well begun and
expressing the hope that the delegates would return to their
communities "with renewed faith and increased determination
to carry on without ceasing j until the war on the fighting
front and the home front is won.'

Mrs. Morgenthau addressed the conference both on behalf
of the Secretary, who was in England, and on her o^m account
as a member of the Women's Section. She gave the results of a
nationwide survey just completed, showing that approximately
22,000,000 people (over 22 per cent of the adult population)
were participating in the Payroll Savings plan. The survey also
indicated that 26 per cent of the adult population had bought
bonds during the past two months outside o_f the Payroll Savings
plan. This added up to the heartening total of more than
^3 J 000 5 000 individuals who had bought bonds in the preceding
two months, not taking account of others who had purchased bonds
previously and presumably would do so again. Altogether the
survey estimated the number of Savings Bond purchasers since
the beginning of the program at more than 50,000,000.1

This was sensational news. The increase in the number of
bond buyers from an estimated 3 ? 000, 000 at the end of November
19^1 to an estimated 50,000,000 by October 19^2 was no mean
achievement for an organization made up of "amateur'' salesmen.

In his report to the conference Harold Graves, always
hard-boiled and conservative in his appraisals, proceeded to
analyze the extent to which the objectives set forth at Chicago
had been achieved. He pointed to an increase in E Bond sales
from an average of $115,000,000 a month in the seven months
before the Chicago meeting to an average of $UU7,000,000 a month
in the ten months from December 19^1 through September 19^2.
This was nearly a four-fold increase as against the three-fold
increase which had been set as a goal at Chicago. In the case of
Series F and G Bonds, which had received less emphasis, sales
had increased from an average of $172,000,000 a month in the
period May through November 19^1 to an average of $265,000,000
a month during the period December 19^1 through September 19^!-2.
This represented an increase of 5^!- per cent in the average
monthly sales. The shift from the large to the small investor
was reflected in the fact that from May through November 19^!-1?
F and G Bond sales accounted for 60 per cent of the total sales
volume, while in the ten months from December 19^1 through
September 19^'2 the percentages were just reversed -- E Bond
sales accounted for 6h per cent of the total voliome . Graves

1 This survey was made for the Treasury by the Division of Program Surveys, Department of
Agriculture, \inder the direction of Dr. Rensis Likert. Subsequent analysis confirmed the substan-
tial accuracy of the estimates. Several more very helpful "Likert Surveys" were carried out for the
war financing program, I9U3-U5.

- 91 "

added that not only had substantial increases occm-red in the
aggregate volume of sales, "but that the bulk of these increases
have taken place where we most wanted them --in sales to the
lower income groups, for the most part representing savings from
current earnings . ''

These results afforded ground for considerable satisfaction,
but lest they might lead to complacency Graves made it clear that
the War Bond program had by no means reached maximum efficiency.
He reminded the workers of the $12 billion annual quota the
organization had assumed, or 10 per cent of the national income
for the fiscal year ending June 30, I9U2.

To make sure of reaching this objective, the Kansas City
Conference undertook a painstaking canvass of every phase of the
program. Major emphasis was given to plans for: (l) Increasing
the sale of bonds through payroll savings allotments; (2) A more
comprehensive and intensive canvass of the farm market; (3)
Development of better direct-sales techniques to reach every
person having income; and (k) A more effective promotion of
Series F and G Bonds through direct personal solicitation. This
last point touched upon a critical problem for which radically
different solutions were proposed both within and outside the
Treasury. The choices were: (l) To have the vJar Savings Staff
undertake an intensified Series F and G promotion; (2) To have
some other organization assume the task of loan operations with
large individual and corporate investors; or (3) To abandon the
voluntary bond program altogether and adopt some system of
induced or forced loans.

Background of the Forced Loan Proposals

More important than the type of securities to be offered in
the Treasury's campaign for war financing by the whole people,
or than the type of organization to undertake the job, was the
basic question: Can people be persuaded by any means to support
the necessary loan operations on a strictly voluntary basis?

A negative answer to this question was given by many
skeptics in high places, who insisted that the Treasury should
adopt some plan of compulsory savings. A vigorous affirmative
was given by Secretary Morgenthau, who spearheaded the opposition
to forced loans. The controversy over compulsory vs. voluntary
lending was long and at times heated. Until it was resolved it
cast a dark shadow over the entire fiscal program of the
Government .

''Keynes Plan'' for Forced Loans

The idea of forced loans as a method of helping to finance

- 92 -

I'Jorld War II was a
Maynard Keyiies. His plan which first appeared in tiro articles
in the London Times was subsequently^ expanded into a book. How
t^ Pay for the War, published early in 19^0,

Like most economists , Keynes urged that as much as possible
of the wa.r costs be met out of tax revenue. Most of the cost
not provided for in this way should be financed by compulsory
lending. Those in the upper income groups would be compelled to
make their contribution, mainljr in the form of taxes. The middle
and lower income groups would also pay heavy taxes, but a part
of their pa^rments, increasing in inverse proportion to their
incomes, would be regarded as loans, bearing interest at 2.5 per
cent, to be repaid at the Government's option after the war.
Only in case of emergency could the individual recover any of
his forced loan before that time. Since these "compulsory savings'
were to be withheld at the source from the workers' pay, Keynes
preferred to call them "deferred payments."

The Keynes Plan started from the premise, for which there
was ample statistical justification, that war cannot be financed
by the rich alone, that some working-class sacrifice was necessary
This sacrifice must take the form of a reduction in the peacetime
level of consumption, or, at the very least, of foregoing any
increased consumption from the proceeds of overtime wages and
other extra compensation for the increased labor required in
wartime. Accepting this sacrifice as inevitable, the plan was
concerned chiefly that its benefit finally inure to the good of
the workingman rather than be represented chiefly by bonds in
the hands of upper-income classes. The Keynes Plan received
wide endorsement not only in England but also in the United States,
The Nevf York Times hailed the plan on April 6, 19^0, as the best
''yet presented to raise money and curb inflation." \^^len Keynes
visited this country in May, 19^1? professional business and
trade journals, as well as the daily press, endorsed compulsory
savings as an ingenious, efficient and equitable method of war
finance. Very little of the publicity, however, was concerned
with the political or administrative problems involved.

Secretary' s Declarations for Voluntary Plan

Prior to Pearl Harbor, agitation for the English tjrpe of
borrowing was largely confined to a small circle of academic
economists . Then the United States became a belligerent, the
demand for some system of compulsory savings widened, particu-
larly among official circles in Washington. Secretary Morgenthau
was not convinced. Confident of the patriotism and good sense
of the people, he spoke frequently and forcibly in favor of the

voluntary method:

"The amount to be borrowed is so vast that some
people feel we should raise a part of it by
compulsory savings,'' he said in February, I9U2.
"As you know, I have always preferred the
voluntary method. I still prefer it because
it is the democratic method and because I am
certain that it will work."
Over a year later, May 6, I9U3, in reporting the successful
completion of the Second War Loan, Secretary Morgenthau
reaffirmed his faith in voluntary savings:

"VJe have exceeded by more than five billion the
goal we set for ourselves. . .This is a measure
of our enthusiasm and our patriotism. . .It is
evidence that the American people are not
going to sit back and wait for any forced
savings plan in order to finance this most
expensive war in all history... I believe in
the American people; I believe that they will
go to the very limit of their capacity if only
they understand the urgency of the situation...
The war must be won and the war must be
financed by the voluntary united effort of
the whole American people. There is no
other way . "
Four months later, in announcing that a Third War Loan drive
would begin on September 9, Morgenthau again expressed con-
fidence in the voluntary method:

"The Third War Loan drive. . .will aim at
raising the largest amount of money from
individuals that any drive has raised in
the history of the world...! don't believe
this is an impossible job for the American
people...! can only tell you how much money
is needed... The rest is up to you... The
very fact that you are free to lend according
to the dictates of your conscience, that no
storm trooper comes swaggering into your
kitchens to demand your money -- the very
fact that you are free adds the more weight to
your responsibility. . .And I fervently hope that
we can continue to work out our financing plans
together and keep them on a voluntary basis.
But in final analysis that is up to you — the
American people."

Demands for Compulsory Savings

Although Secretary Morgenthau kept the Government ' s
"borrowing program voluntary to the end, he did so only in the
face of great pressure and sharp criticism from an increasing
number of economists both in and outside the Government, from
financial writers, editors and Congressmen. Even within the
Treasurj^ Department a majority of the technicians in the
Division of Tax Research and the Division of Research and
Statistics were inclined to favor compulsory savings. William
Green, president of the American Federation of Labor, declared
in July, 19^i-l5 that Congress should establish a mandatory
sa^vings plan for defense workers to cushion the effects of
post-war unemployment and to prevent inflation during the war.
In October 19^2, however, the Federation in session at Toronto
went on record against compulsory savings.

Newspaper support of compulsory savings included such
powerful papers as the New York Times, Wall Street Journal,
Washington Post and Washington Star. In professional and trade
magazines such as Business Week, Nation ' s Business, Harvard
Business Review, i^jnerican Economic Review, Banking , and Bankers '
Magazine, the advocates of forced lending had things pretty much
their own way. Defenders of voluntary sa.vings were conspicuous
by their absence.

During the years 19^i-l-^.'-33 sentiment in favor of compulsory
savings among official circles in Washington were so overwhelming
that it was taken for granted during most conferences on inflation
The new Defense Savings program had been in operation scarcely
three weeks when Representative Crawford of Michigan pronounced
it a "flop" and demanded that some system of compulsory savings
be adopted. In an address to the National Industrial Conference
Board on November 25, 19^!-l5 Marriner Eccles, Chairman of the
Board of Governors of the Federal Reserve System, proposed a
withholding tax, in combination with an enforced diversion of
certain income payments, into government savings bonds, redeem-
able after the emergency was over .

In May 19^2, Representative Gore of Tennessee introduced
a bill to freeze wages, set farm price ceilings at parity and
require compulsory savings by withholding from workers ' pay.
"Dependence on voluntary savings," he said, "is as archaic and
inadequate for total war as voluntary enlistment." Represen-
tative Duncan of Missouri, in a speech the same month to the
Council of State Governments, declared that unless the American
people put $50 billions into War Bonds during the next year,
compulsory savings was inevitable. In August, Senator
Vandenberg of Michigan, and in September, Senator Danaher of

- 95 "

Connecticut, declared that the voluntary plan was inadequate
and should be supplemented by a compulsory plan. Senator Taft
of Ohio shortly thereafter moved the a.ppointment of a Joint
Committee of Congress to study the problem.

Leon Henderson of the Office of Price Administration,
James Byrnes, War Mobilization Director, Judge Vinson of the
Office of Economic Stabilization, Harold Smith and his staff
in the Bureau of the Budget, and Harry Hopkins, Special
Assistant to the President, were among those who declared
themselves in favor of compulsory savings. At cabinet meetings
the Secretary of the Treasury stood almost alone in defending
the voluntary program. Only the President seemed to be on his
side. Morgenthau ' s insistence on the voluntary method, while
most of his colleagues were predicting failure for his program,
made him appear a stubborn and lonely figure. There were times
when even he was assailed by doubts, so that his fervent
protestations of confidence seemed almost to be a "whistling
in the dark.''

General Motor s Plan

To convey some of his o-vrn faith in the voluntary savings
program to members of Congress, the Secretary asked permission
to present to the House Ways and Means Committee the plan of
War Bond promotion prepared by the General Motors Corporation.
The presentation was made on April 15, 19^2. For nearly an
hour, the Committee members listened while representatives of
management and labor outlined in great detail \T±th. graphs,
pictures, posters and pamphlets the methods by which the cor-
poration planned to sell bonds to nearly 300,000 employees.
The members of the committee were impressed.

Time Limit Test Suggested

At the General Motors presentation. Secretary Morgenthau
suggested that about three more months ' experience with the
volunta.ry plan would enable him to reach final conclusion as to
whether or not the system would continue to fimction successfully.

The goal, which had been set as early as January and
repeated in March as a test of whether the voluntary savings
program would work, was the attainment of average monthly sales
of $1 billion by July. In April the prospect was none too
bright. VJhile more than $1 billion in Series E, F and G Bonds
had been sold in January, sales in round numbers had declined
to $700 million in February and $550 million in March. To
reach the $1 billion goal even by the end of July meant an

96 -

increase of nearly 100 per cent over March sales. Could such
a "miracle" be accomplished?

President Roosevelt continued to share Secretary
Morgenthau's faith in voluntary savings, but he would not
endorse the plan unequivocally. In his seven-point anti-
inflation program, presented to Congress April 27, he said:
"I have been urged by many persons and

groups to recommend the adoption of a

compulsory plan of savings o.. I prefer,

however, to keep the voluntary plan in

effect as long as possible, and I hope

for a magnificent response."
The President's statement was a disappointment to advocates of
compulsorj/- savings but they took some comfort in the reservation
implied irhen he said that he preferred "to keep the voluntary
plan. . .as long ?._s possible." How long was that?

In the meantime. Savings Bond sales showed a marked
improvement, exceeding $600 millions in May and running at
about that rate for June. Any hope of reaching $1 billion a
month by July, however, seemed pretty slim. Pressure for
compulsory savings continued in newspapers and periodicals,
and in public speeches its advocates continued to point to the
"inadequacies" of the voluntary program, j^t a press conference
July 30, Secretary Morgenthau announced that sales of E, F and
G Bonds for the month would be at least $900 millions. This was
slightly short of the $1 billion monthly average set up as a
goal, but the Secretary denied that it would cause him to consider
substituting compulsory for voluntary savings. He pointed to the
great progress that had been made since Pearl Harbor, and said
in conclusion that "As long as the American people will lend... to
me, I shall shy away from forced savings." Part of the increase
from $6o8 millions in June, incidentally, was due to the change
in regulation, effective July 1, raising from $50,000 to S100,000
the amount of bonds of Series F and/or G which anyone might
purchase within a calendar year.

"Induced Savings" Feature of Victory Tax

No one expressed complete satisfaction with the volume
of War Bond sales, which declined from $900 million in July
to less than $700 million in August. There was renewed
sentiment in favor of various schemes for "induced savings."
In September, with the enactment of the so-called Victory Tax,
to begin January 1, 19^1-33 a definite step was taken in this
direction. Taxpayers were granted a post-war credit of varying
percentages of the Victory Tax, but any taxpayer wishing to do

so could take this credit against his current Victory Tax by
shomng that he had reduced his personal indebtedness, paid life
insurance premiums, or bought War Bonds during the year in an
amount at least equal to the allowable credit. The Victory Tax
thus combined in its post-war credit a form of compulsory savings
and in its provision to allow this credit to be taken currently
in a form of ''induced savings.'' Since the tax was to be withheld
from income at the source, after certain exemptions, it provided
the machinery, at least in embryo, by which a more ambitious plan
of compulsory or "induced" savings could be administered.

Disappointment at not reaching the $1 billion mark in July,
plus the sharp decline in August sales, plus the mounting deficit
and the corresponding increase in the so-called inflationary gap,
combined to discourage the friends of voluntary savings and to
strengthen the position of those who urged the adoption of some
plan of forced lending. In the month of the passage of the
Victory Tax, a Joint Congressional Committee was set up to
confer with the Treasury on compulsory savings.

Proposed " Spending s Tax"

On September 3? 19^2, Secretary Morgenthau proposed to
Congress a special tax on spendings with credit for current
savings of various kinds including the purchase of \lex Bonds.
Aside from the increased income taxes, this proposal was one
of the most logical of the various measures put forward to
attack the basic causes of inflation. It ingeniously combined
elements of both compulsory and induced savings with the
principle of progressive taxation.

The spending tax proposal aroused little enthusiasm in
Congress, in the press or with the public. It caused great
concern among those who believed in a voluntary savings program
since it looked like the beginning of a relaxation in the
Treasury's opposition to forced lending. In presenting the tax
proposal to the Senate Finance Committee the Secretary had said:
"In the face of present conditions we can no longer rely entirely
upon voluntary lending. The nex\r proposals are intended,
therefore, to supplement the voluntary bond purchase program."

Crisis in the VJar Bond Program

A week after he had proposed a spendings tax. Secretary
Morgenthau remarked at his press conference that the Victory
Tax contained elements of compulsory savings but not enough.
Failure of voluntary savings to come up to expectations reauired
that more stringent action be taken. "That means forced Savings,'

he said, "Let's call it "by the ugliest name; we might as well."

This statement 3 quoted in newspapers from coast to coast,
was a disheartening blow to tens of thousands of eager a,nd loyal
VJar Bond volunteers. It made their difficult job doubly difficult
Reports from many states attributed a reluctance of many small
investors to buy bonds for the fear that their savings would be
confiscated by some plan of compulsory lending. In spite of this
handicap, and in quiet defiance both of those who cried failure
and those who hoped for miracles, the War Savings organization
l^7•ent on industriously cultivating its market and building itself
into the fabric of American economic and social life.

Nevertheless, Secretary Morgenthau's new position was
disheartening. So long as he stood firm in defense of the
voluntary savings program, the morale of the \Jst Savings Staff
was never seriously impaired. For him to abandon his earlier
position and endorse compulsory savings seemed almost like
betrayal; it was more than a blow, it was almost a coup de grace.
State Chairmen and Administrators telephoned, wired or tTrote to
offer their resignations "if the Secretary's statement stands.''
There was grave danger that the organization charged with
carrying on the voluntary program would disintegrate. Something
had to be done to repair the damage if one of the major weapons
in the war against inflation was not to be destroyed. Even the
proponents of compulsory savings were concerned, since they
knew that under the most favorable circumstances, it would take
weeks, perhaps months, of hearings and debate before a new plan
could be put through Congress. If in the meantime voluntary
savings should fall off materially, it would be a serious blow
to the whole price control program.

After hurried conferences with leaders of the Uar Savings
program in the Treasury, Secretary Morgenthau issued September
11 an explanation of his position:

"The impression seems to have spread that I
regard the War Bond program as a 'failure,'
This is not only a distortion of anything
I have said on the subject but it is also
an injustice to the hundreds of thousands
of devoted volunteers in all parts of the
country who are working night and day to
enlist the nation's savings for war,
"'In view of ovoc swiftly rising war eiqpenditure
I have said that the voluntary War Bond
program cannot alone close the gap between
the amount of money available for consumer
spending and the supply of goods available
for civilian use, I have said that it must

- 99

therefore be supplemented by a more drastic
and comprehensive tax program. . .We shall
however, continue to rely upon voluntary
lending for a large part of our financing.
"The mounting requirements of the war demand
that our sale of War Bonds be continued
and intensified.
"To our hundreds of thousands of War Bond
volunteers, I should like to ssy that the
nation is counting on them more than ever
to carry on the magnificent work in which
they are so unselfishly engaged."
This explanation, broadcast over some 800 radio stations and
printed in newspapers from Maine to California, did much to
overcome the devastating effects of the Secretary's earlier
statement on compulsory savings. Advocates of forced lending,
however, hailed the Secretary as a new and powerful ally.
Public opinion surveys were cited to show that fairly substantial
proportions of the population were favorable to compulsory
savings. 2

Treasury Proposals for Compulsory Savings

Within the Treasury Department, research went forward to
formulate an adequate and workable plan to substitute for the
proposed spendings tax. The Division of Tax Research submitted
to the Secretary a draft statement on "The Need for Compulsory
Lending.'' The plan was expected to yield approximately $^
billions a year, although not all of this would be net gain since
its adoption would admittedly result in a substantial reduction
in the volume of voluntary savings .

This proposal for forced lending, when first discussed at
a meeting of the Treasury tax staff along with officials respon-
sible for the War Savings Program, resulted in general disagree-
ment. Harold Graves then prepared a memorandum for the Secretary
setting forth his opinion of the plan. In substance, he said
that the statement in favor of forced lending would destroy the
confidence of the War Savings organization in the Treasury --
to say nothing of the companies cooperating in the payroll
allotment plan and their employees; it would result in the
early collapse of the voluntary War Savings effort. The forced
lending plan vras dropped, at least for the time being, but
both the Division of Tax Research and the Division of Research
and Statistics renewed their ouest for more effective fiscal

2 See "Inflation and American Public Opinion," Bureau of Intelligence, Office of War Infor-
mation Report, Feb, 20, I9U3.

- 100 -

weapons against inflation.

It was not too difficult to prepare plans for increased
taxes and forced lending which 5 on paper at least , would have
solved the threat of inflation 5 but to those familiar with the
political situation it was obvious that any such plans would
get short shrift in Congress. Unless allowances were made for
other forms of saving and various private obligations, the
combined rates of taxation and suggested forced lending not
only would have reduced many families to virtual poverty but
undoubtedly would have destroyed the War Savings program and
threatened insurance companies, savings banks, building and
loan companies and other savings and credit institutions with
ruin .

Forced lending plans eventually died, not because of any
inherent defects in the plans themselves but mainly because the
American people and their representatives in Congress were not
convinced of their necessity. To a considerable extent this
decline in agitation for compulsory savings was due to the
results of the first three War Loan drives.

First War Loan Strengthens Voluntary System

The first special War Loan drive was conducted November
30 " December 23, 19^2, not by the VJar Savings Staff but by the
Victory Fund Committee, set up as a separate Treasury organization
to deal with large corporate and individual investors.

The goal of the drive was $9 billions of which $5 billions
were to come from commercial banks and the balance of $U billions
to be raised outside the banks from n on -inflationary sources.
Total subscriptions of nearly $13 billions were announced in
January, of which almost $8 billions were from non-bank investors,
including over $1.5 billions from individuals. Secretary
Morgenthau's faith in the voluntary method of war finance was
renewed and strengthened by this initial drive. In February,
19^3 5 he announced a Second War Loan drive to be held in April,
and pointed with pride to the fact that voluntary investments
in Government bonds during the first year of World War II
exceeded those in any previous government financing both in
terms of the amount invested and the number of people partic-
ipating.

Second War Loan

Two months later, near the end of the Second War Loan
drive. Secretary Morgenthau, a,lthough expressing some disap-
pointment in the record of sales to individuals, told his press

101

conference that there was no need now for forced lending. Total
subscriptions during the drive, April 12 to May 1, were more than
$18 "billions, or $5 billions in excess of the $13 billion goal. Of
more importance was the increase in individual subscriptions from
$1.5 billions in the December drive to over $3 billions in April.
In the light of these reports. President Roosevelt expressed great
satisfaction with the voluntary savings program and said that the
April drive had reduced the need for forced lending. -^

Final Phases of the Controversy

With the blessing of President Roosevelt and with gromng
support in Congress, the continued use of voluntary methods to
finance the deficit seemed assured. There was, however, a
further campaign in 19^3 to keep the forced lending issue alive.
In the vanguard were a number of technicians and economists in
the Offices of War Mobilization and Economic Stabilization.
They received some support from certain officials in the Treasury
and the Bureau of the Budget. Secretary Morgenthau successfully
resisted further pressure for forced lending. In August, the
Office of War Information issued a "box score" on the battle
against inflation, giving great credit to the War Savings program
as a factor in keeping prices dovm. Even the New York Times,
long a protagonist of forced savings, at last expressed doubt
as to its wisdom or necessity.^

Third VJar Loan Settles the Issue

The Third War Loan drive, September 9 - October 2, I9U3,
finally settled the compulsory savings issue. Although VJar
Savings officials in Washington and the field had taken little
part in the public discussion of the question, W. Randolph
Burgess, New York State Chairman, in the closing days of the
drive joined the small company of those who had openly defended
the voluntary method. Not only was compulsory savings
"un-American," he said, it was "ineffectual." Pointing to the
results of the drive still in progress he continued, "we're
raising vastly larger sums more than any program of compulsory
savings would bring, and doing it the democratic way."

When the returns were in on the Third War Loan, Secretary
Morgenthau 's faith and Randolph Burgess' boast seemed confirmed.

3 Following the April drive, the Treasiiry Department issued over Secretary Morgenthau 's
signature a report entitled The Story of America' s Greatest War Loan.

U New York Times, Sept. 7, 19'^3.

- 102 -

The goal of $15 billions was surpassed by nearly $U billions,
making a total of almost $19 billions of Government securities
sold to non-bank investors. Individual subscriptions were more
than $5.3 billions, including over $2.^ billions of E Bonds.
Although the advocates of compulsory savings did not retire
from the field, the voluntary program had pretty well spiked
their gunSo Press endorsement of forced loans declined.
Congressional support fell away and even confirmed skeptics
admitted that "for good or evil" the nation was committed to
voluntary savings. This conclusion was reinforced by the
results of a Fourth V/ar Loan in January 19^^l-« Against a quota
of $lU billions, total subscriptions reached nearly $17 billions,
all of which came from non-bank sources. Individuals again
subscribed in excess of $5 billions, more than $3 billions of
this representing purchases of the "People's Bond," Series E.

Thereafter little was heard of any agitation for compulsory
savings. The bright plan which Lord Keynes had outlined so
hopefully in 19^0, and which had been embraced by so many wise
and patriotic Americans, was dead. It was even rejected by
Lord Keynes' own government except in token form.

Conclusions

The theoretical case for forced savings was logical and
persuasive . Compulsory savings would greatly complement a tax
program. They wonld be more effective than voluntary savings
in "freezing" spendable income during war, since the individual
could recover his loan only at the option of the government.
Forced lending would be a flexible instrument of fiscal control
because the rates of withholding could be raised or lov/ered as
necessary to keep income payments and civilian supply in balance o
Forced lending would perhaps be more equitable since the sacrifice
would be required of every one and would be distributed in pro-
portion to income, thus avoiding the voluntary system's penalty
on patriotism which permitted the patriotic citizen to sacrifice
and save while his neighbor went on spending as usual.

The issue of voluntary versus forced lending, however,
could not be finally resolved by arguments about what might or
should be done. There were practical aspects which threw out of
gear the theoretical calculations. For example, there was the
crucial problem of securing Congressional approval. If forced
lending could have been imposed by Executive Order with e::ecutive
discretion in determing the rates, it might have been decisive
in the war against inflation.. It was highly improbable, however,
that Congress would approve any system of complusory lending that
would have raised as much money from individuals as was being

103

raised by the voluntary method. This was especially true in view
of the fact that the adoption of forced lending would have reduced,
even if it did not eliminate, the existing volume of voluntary
savings. Unless a compulsory plan was of sufficient magnitude to
increase substantially the total over what was being saved on a
voluntary basis, it would have aggravated rather than mitigated
the dangers of inflation.

During the calendar year 19^3? some $lU billions were invested
in Government securities by individuals (as distinct from corpo-
rations and government agencies, state or local). This amount
was nearly equal to the total Federal income taxes paid by
individuals that year, hence a compulsory lending program that
merely served as an offset to voluntary lending would have required
an increase of about 100 per cent in existing income tax rates.
Even this vrould not have been enough, for no plan of forced lending
could have been considered adequate that did not provide for a
substantial increase in the volume of individual savings over and
above the yield by the voluntary method. Not even the most
optimistic advocate of forced lending believed that Congress would
approve such a staggering increase in tax rates, no matter how
much "sweetened" by their transformation into forced loans.

Although in theory forced lending appeared to be equitable
since everyone would be required to lend to the Government in
proportion to his income, in practice this was not likely to be
true. Voluntary savings could be adaptea to the circumstances of
the individual with greater flexibility than any compulsory plan.
The voluntary method differentiated between the war worker whose
income had increased rapidly and workers on fixed salary whose
income increased little if at all during war; it differentiated
between individuals whose ability to invest in War Bonds was
affected by prior obligations , such as life insurance and the
repayment of mortgage debt, and individuals whose ability was not
affected by such contractual obligations; between individuals who
were members of families in which some or all were working and
earning incomes, and individuals who were the sole breadwinners
of their families.

In theory, many of these elements of difference could have
been taken care of by the use of elaborate schedules for determining
compulsory lending quotas, but the formulation and carrying out of
such complex schedules would have involved tremendous adminis-
trative problems, and machinery, entailing higher cost than for
ordinary tax collections.

Since the individual under a compulsory plan could recover
his forced savings only at the Government's option, some adminis-

- IQk -

trative machinery xrauld have been necessary to take care of
applications for recovery in case of real emergency or need.
Some kind of ''means test'' would have "been necessary, with
resulting irritation and friction between the Government and the
people o

It is important to note also that although forced savings
would have operated as a tax, it would not have provided addi-
tional revenue. It would have added, as did the voluntary
system, to the national debt which had to be paid or refunded
some time. The sound policy of the Treasury was to insist that
the tax mechanism be used to the fullest possible extent to
obtain additional revenue rather than as a device for borrowing.
Forced lending would not have had taxation's deterrent effect
on spending. Those forced to lend to the Government would have
counted those loans as future assets and would thus be less
inclined to put aside other savings for a rainy day. The result
might actually have been to reduce the net total of savings
through 8 decline in insurance and savings deposits in banks .

Whatever the merits or defects of forced lending, no plan
likely of adoption would have eliminated or materially reduced
the necessity for a steady and periodically intensive appeal by
the Treasury to individuals for loans, if the Treasury was to
raise the needed funds from non- inflationary sources. The
difficulties of carrying on these campaigns might have been
increased by a forced savings levy which would have created in
the mind of the wage earner a strong impression that he had
done his full duty with respect to the purchase of Government
securities through the enforced deductions from his pay.

The economists and technicians who sponsored forced savings
failed to take into sufficient account the "intangible'' values
of voluntary savings and the inherent good sense of the people.
They underestimated the consiomer's capacity for patriotic self-
restraint during wartime. To be sure the average person spent
more than he should have and he drove up prices. Rationing and
price control helped some, and higher taxes helped even more.
Beyond all this, however, the average American saved more money
and saved a greater percentage of his income during the war
years than at any time in our history. He paid his debts, took
out more insurance, increased his savings bank deposits and he
bought War Bonds. He did it voluntarily, unless the compulsion
of wartime scarcity and rationing can be described as coercion.

The argument as to whether voluntary or compulsory
methods would result in greater savings was part of a larger
consideration of more intangible values, those which were a
part of the over-all character and complexion of wartime
America, a part of public opinion and national unity.

105

The quality of public opinion •-- the e^ctent to which
people identified their o^vn interests uith those of the nation ^
the zeal and determination i^ith vhich they threir themselves
into the \ibt effort ^ their i^illingness to accept wartime controls
and sacrifice ~- these were the factors upon which all else
depended. It was with reference to these factors that volunary
savings could make a contribution that no one claimed for forced
lending. The voluntary War Bond subscription, with the bonds
physically in the owner's possession as a sign and symbol of
his "Share in America," and to be disposed of at his option, the
sense of personal identification with his country and of his
OT'/n significant contribution to the war -- these were values
which would be largely lost under compulsory savings where a
silent and unseen hand made a deduction from one's pay. The
voluntary lending plan thus became one of the major channels
of participation in the war on the home front. It offered a
channel through which hundreds of thousands of people, acting
as a volunteer sales force, developed a high sense of community
responsibility. It provided a vehicle and an opportunity
through every possible avenue of communication for making
people conscious of the fact that America was at war and that
every man, woman and child had to do his part.

This was the great though intangible force behind
voluntary savings which forced lending would have almost i^holly
lacked. It was because of this psychological value that
Secretary Morgenthau clung so stubbornly to the volunary savings
program. He recognized that the Government not only had a huge
deficit to finance, it had a war to win. Only if the nation
becajae conscious of the magnitude of its task and united in
purpose could it win the war with speed and certainty. The
Treasury Department had an obligation to contribute as much as
it could to that great end, and the voluntary savings program
provided a most important channel through which such a
contribution could be made.

VJith the firm establishment of the voluntary system there
came a clear recognition of the intimate relation between VJar
Bond sales and the healthy state of public opinion. The two
worked together for victory. 'VJhen the people really become
aflame f/dth the war spirit," observed Secretary Morgenthau in
a radio broadcast on May 6, 19^3, "all the other problems seem
to solve themselves. Labor and management get together;
production rises to an all time high; and bond sales go up
automatically. . .The sale of war bonds... is actually a barometer
of the spirit and enthusiasm of the Home Front."

106

War Savings Staff vs. Victory Fund Committees

With implicit faith in the voluntary system, and faced
with the necessity of increasing sales all along the line --
through Payroll Savings, the farm and other community markets --
the delegates at the Kansas City Conference in October 19^2
undertook to complete plans for an intensive Series F and G
Bond promotion. The preliminaries for this program had been
in the making for some time. In an attempt to carry it through,
the F and G promotion became entangled with a jurisdictional
dispute between the V7ar Savings Staff and a new Treasury
organization •-- the Victory Fund Comriiittees -- set up to cultivate
the large investor market.

One of the early criticisms of the War Savings Staff was
its failure to canvass adequately the market for F and G Bonds.
There was some ground for this criticism since the major efforts
of the organization up to October 19^2 had been directed toward
the sale of E Bonds. It was generally conceded that F and G
Bonds were purchased mainly from accumulated savings rather than
out of current income. This being so, the sale of these
securities had never been regarded as making a substantial
contribution to the siphoning off of excess purchasing power or
to the closing of the inflationary gap. It was for this reason
that the War Savings Staff concentrated its efforts on E Bonds,
which for the most part were purchased out of current income.

This concentration on E Bonds iras in accord vdth basic
Treasury policy of borrowing as much as possible from anti-
inflationary sources. As war expenditures increased, however,
the Treasury was compelled to give more attention to other
areas. Among the non- inflationary sources were accumulated
savings of individuals, small businesses and associations, for
which the Series F and G Bonds were designed.

Several months before the Kansas City Conference,
therefore, the Secretary had asked Harold Graves to study a
plan for intensive selling of the larger-investor bonds.

Washington Conference of Securities Dealers

In connection with this study of the F and G market, a
meeting of presidents of the Federal Reserve Banks and heads
of large firms of security dealers was held in the Treasury
at Washington, May 7-9, 19^2. This meeting was called
primarily to consider the problem of having a better
organization than the War Savings Staff for selling market-
risk securities. At this conference the securities industry
representatives assumed that the nev7 organization to be

107

established TTOuld have jurisdiction over the sale of F and G
Bonds, hut this assumption was not included in public announce-
ment of the results of the meeting, which left the matter open
to future interpretation and misunderstanding.

Organization of the Victor^r Fund Committees

The outcome of the May conference of securities dealers was
a plan for the establishment of Victory Fund Committees to be
set up in each Federal Reserve District and to be made up of
bankers and members of the securities industry to aid the
Treasury's financing program. The president of the Federal
Reserve Bank in each district was to serve as chairman of the
Victory Fund Committee. The twelve Federal Reserve Bank
presidents were to serve on a national committee of which the
Secretary of the Treasury was chairman. Continuous liaison
between the Treasury and the Federal Reserve System was to be
maintained through Marriner Eccles, Chairman of the Federal
Reserve Board. Active supervision of the Victory Fund
Committees by the Treasury x^^as the responsibility of George
Buffington, an Assistant to the Secretary, working under the
immediate direction of the Under Secretary, Daniel VJ. Bell.

In explaining the purpose of this new organization.
Secretary Morgenthau said in a press release of May lU, 19^1-2,
that it "will work chiefly with the larger investors and will
in no way duplicate the work of the War Savings Staff. Because
the nation's war needs have increased tremendously the
money-raising responsibilities of the Treasury, the Secretary
of the Treasury has accepted the offer of the banking and
securities industry to coordinate their efforts in helping
to distribute government securities."

The plan of organization for the Victory Fund Committees
was simple. In each Federal Reserve District, a committee of
from five to eighteen members, recruited among volunteers from
the banking and seciorities industries, served under the chair-
manship of the President of the Federal Reserve Bank. Each
committee operated through a smaller executive committee of
which the active direction was in the hands of an executive
manager and his staff. Only these latter officials were
paid; all the committee members served as volunteers. In
addition to the district committee, regional, county and city
committees of volunteers v/ere to be established wherever
feasible and necessary.

There were several striking differences between the VJar
Savings Staff and the Victory Fund Committees. The latter
were composed exclusively of men and women from the fields of

108 -

banking and investment. Unlike the War Savings Committees of
"amateur" securities sa.lesmenj the Victory Fund Committees were
made up of professionals in the business. Their market ^ too,
was a more restricted one composed of large individual, corporate
and institutional investors. Another important difference was
that the War Savings Staff was strictly a Treasury organization
whereas the Victory Fund Committees, although responsible to
the Secretary of the Treasury, were under the immediate control
of the Federal Reserve System. The War Savings Staff was under
Treasury management; the Victory Fund Committees were managed
and controlled by representatives of the banking and securities
business .

The task of organizing Victory Fund Comjnittees in the
Federal Reserve Districts was carried forward during May and
June. By the end of the latter month the basic structure was
completed, and in July plans were laid for substantial
expansion e The paid staff amounted to some 69 employees
including nine executive managers, five assistant executive
managers, and a clerical force of fifty-five. Plans for
e:jq)ansion submitted July 28, 19^2, called for seven additional
assistant executive managers and 93 regional managers plus
clerical assistance, thus increasing the total paid staffers
from 69 to 23^ members. It would be difficult to state the
numbers of volunteers working on or with the Victory Fund
Committees. Various estimates placed the number at anywhere
between 10,000 and 50,000. VJhatever the number. Secretary
Morgenthau was happy to have their aid. "They are a very
enthusiastic bunch," he said, "and full of pep and energy...
That gives us two sales organizations and we need both of them
badly. "5

Division of Sales Responsibility Leads to Conflict

With two sales organizations, the Secretary felt confident
that no section of the total bond market would be neglected.
The War Savings Staff could reach the "masses" while the
Victory Fund Committees would cultivate the "classes." The
first organization would concentrate on anti -inflationary
borrowing from wage and salaried workers, farmers, small
business and professional men and small business and insti-
tutional investors; the second could canvass a special list
of higher -bracket individuals, institutions, insurance companies,
savings banks and corporations. To reach the "mass" market
the War Savings Staff had in its sales kit United States
Savings Bonds, Series E, F and G, especially designed for small

5 Secretary's Press Conference, May 1^4-, 19U2,

- 109 -

investors. For the ''class" trade the Victory Fimd Committees
had all the market-risk securities including notes, bills,
certificates, tax notes, and bonds. It looked like a very
sensible arrangement.

With two organizations, however, both relying on volunteer
sales forces, the Treasury soon found itself faced with various
''jurisdictional" problems. Before many of the Victory Fund
Committees were established, thousands of bankers, insurance
underv/r iters, securities dealers and investment bankers were
giving invaluable aid to the War Savings Staff as members of
local committees and other volunteer workers. Were they now
to give their time exclusively or primarily to the new
organization? To what extent would the Victory Fund Committees
duplicate and compete with War Savings Committees in their
zeal to build on the broadest possible basis and to reach every
possible prospect for market-risk securities? Would they need
an education section, women's committees, a labor division and
so on? What about competition for sponsored and contributed
advertising and publicity? Should the Victory Fund Committees
seek to reach the mass consumer market through newspapers,
magazines and the radio, or should they confine their appeals
to personal solicitation of "special name" lists and the usual
type of bond advertising on the financial pages of the daily
press and in financial journals? Most of these questions,
exacerbated by personal feuds and rivalry, were never satis-
factorily resolved until the two organizations were merged
into the War Finance Division in June 19^3-

Dispute Over F and G Bond Responsibility

The first jurisdictional dispute arose over the question
as to V7hich organization was to have responsibility for the
sale of Series F and G Bonds. The Secretary had advised
George Buffington, while the Victory Fund Committees vrere
being established, that he might want to use them on F and
G Bonds, but the Secretary did not give the Victory Fund
organization formal jurisdiction over those securities.
Harold Graves hence worked on plans for an intensified F and
G drive by the War Savings Staff. A field memorandum to
State Administrators the latter part of May stated emphatically
that:

"The War Savings Staff in each state is
charged with the full responsibility for
the promotion of sales of War Savings
Bonds of Series F and G, as well as
Series E, and the state and county quotas

110

fixed by the Department include sales of
bonds of all three series.
"The establishment of the Victory Fund
Committees is not intended to affect the
responsibility of the Uar Savings Staff
in this connection.''
In line ^d-th this policy. Under Secretary Bell urged all
chairmen of Victory Fund Committees to "give any assistance
possible to the War Savings Staff Administrators" in the sale
of Series F and G Bonds, This arrangement i^as formually
endorsed by a. Treasury Release of June 28:

"These Victory Fund Committees in no way
duplicate the work of the War Savings
Staff 5 which is charged with full
responsibility for the promotion or sale
of War Savings Bonds but they will assist ,
chiefly with larger investors when called
upon, in the sale of Series F and G Bonds."
Harold Graves had on June h submitted to Under Secretary Bell
his plan for increased promotion of F and G Bonds. In this
plan. Graves urged all War Savings Committees to set up special
F and G committees, including in their membership represen-
tatives of the investment and securities business, whether or
not they were members of Victorj^ Fund Committees. Because of
this overlappying membership, however, and some remaining
ambiguity as to which organization should have the responsi-
bility and receive credit for F and G sales, the plan was
slow in getting under way. To remove the ambiguity, Secretary
Morgenthau en August 27 notified the Federal Reserve Bank
Presidents as follows:

"In order to clarify the activities of
both the Victory Fund Committees and
the War Savings Staff, after September
first, the Victory Fund Committees as such
will no longer concern themselves with
sale of War Savings Bonds (i.e. F and G
bonds). No objection will be made,
hOT^ever, to individual members of such
committees serving with War Savings
Committees, at their request, in the
sale of such securities."
To many Victory Fund workers this instruction came as
something of a shock, which Buffington attempted to soften
by a September k communication to all chairmen of Victory
Fund Committees, in which he reminded them that there was
plenty of work to be done outside of VJar Savings Bond sales,

111

and suggested they devote all their energies to that part of
the Treasury's war financing program (i.e. marketable issues)
for which they were primarily organized.

Victory Fund reaction to Buffington's communication uas
mixed. Some chairmen and executive managers were relieved;
others disappointed. Some mshed to promote F and G sales in
the lull between offerings of market issues; others were glad
to help the Treasury in any way possible and cared little
whether they worked on F and G committees of the War Savings
Staff or of the Victory Fund organization.

Reversal of Decision on F and G Bond Promotion

Secretary Morgenthau's clarifying message of August 27
and Buffington's supplementary communication of September k,
seemed to have resolved the first major dispute between the
two sales organizations. The solution proved, however, not
to be a peace settlement but only a temporary truce.

At a Kansas City Conference in October, final plans for
a War Savings Staff F and G Bond solicitation were completed.
These plans involved a person-to-person canvass of an extensive
list of F and G prospects compiled from Internal Revenue and
Treasury bond records, as well as those of banks and investment
companies .

The elaborate plans of the War Savings Staff never had a
chance to be tested in practice. Tension between Victory Fund
leaders and the War Savings Staff continued, and began to
assume the proportions of a feud. There was much back-
biting, mutual criticism and recrimination as es^ch organization
accused the other of attempting to "undermine its position with
the Secretary" or to "take over" its functions. The conflict
was mainly felt in Washington but its effects throughout the
country were serious enough to interfere with the most efficient
management of the program. Plans were being made in the
Treasury for a major appeal to the public, a "drive," to sell
market -risk securities to supplement the War Bond appeals of
the War Savings Staff. In planning for this drive, the
Secretary decided to rescind his message of August 2? and to
transfer full and exclusive responsibility for the sale of F
and G Bonds to the Victory Fund Committees. Graves and
Buffington were accordingly instructed to inform their respective
organizations of this volte face.

It was not an easy thing to explain this sudden reversal

6 Some concern was expressed as to the propriety of using such lists, since in many ways they
constituted the best and most extensive "sucker" list in the world, which private commercial com-
panies would have paid large sums to procure. These scruples were overcome by making any such
lists available only for the confidential use of War Savings State Administrators and Victory Fund
Executive Managers.

- 112 -

of policy to the War Savings Committees. To soften the "blow
somewhat it \:as decided that F and G Bonds would no longer be
designated as War Bonds. This change in terminology as between
Series E Bonds on the one hand and Series F and G on the other
made no impression on the public » All Savings Bonds were
popularly called War Bonds throughout the war, as were also
the market-risk securities on many occasions. Secretary
Morgenthau was anxious to avoid giving publicity to the reversal
in policy. On November 15 he v/lred all Chairmen of the Victory
Fund Committees:

''Commencing December 1, 19^1-2 the War Savings
Staff will confine its activities entirely
to the promotion and sale of Series E VJar
Savings Bonds. Series F and G Bonds, being
a demand liability, the Treasury will no
longer actively promote sale of these two
series and effective December 1, they will
no longer be identified as War Bonds, but
will be offered by the Treasury through
the Victory Fund Committee. I feel that
public announcement concerning this shift
of responsibility would be confusing and
therefore urgently request there be no
publicity. "

Effects of the F and G Shift

Both the War Savings Staff and the Victory Fund Committees
took the shift of responsibility for F and G Bonds with good
grace but without enthusiasm. The investment bankers and
security dealers who composed the Victory Fund Committees did
not particularly like these securities any more than they
liked E Bonds. They were non-negotiable and could not be used
as collateral for loans, hence were not too attractive to
''market -wise'' investors.

A good many War Savings workers, however, with considerable
justification, felt that the removal of F and G responsibility
from their hands presaged a progressive liquidation of the War
Savings program as it then stood.

Actually, Secretary Morgenthau had at no time thought of
liquidating the VJar Savings Staff or of reducing its sphere of
active work. He had consistently defended the organization,
and the voluntary savings program of which it was the protagonist,
against those who advocated compulsory savings. He had just as
persistently insisted that "war borrowing must be done to the
greatest possible extent out of the current income savings of

113

the people." He had repeatedly praised the War Savings Staff
for its magnificent work in accomplishing this objective. But
he was faced with the urgent necessity of borrowing vastly more
money than could be obtained from small investors. To avoid
borrowing from commercial banks on a colossal scale he had to
turn to large individual, institutional and corporate sources.
Admittedly the War Savings Staff had not been organized to
reach this "big money" market, hence he had established the
Victory Fund Committees for this purpose.

If the new organization seemed to be moving toward the
center of the stage, if it seemed to be bent upon absorbing
the whole field of Treasury borrowing activity, such tendencies
were due to the personal enthusiasm of Victory Fund leaders
rather than to any lack of confidence in the War Savings
program on the part of the Secretary.

Growing Tension

It became increasingly difficult to maintain cordial and
cooperative relations between the two organizations. Every
move to strengthen one \7as likely to be interpreted as
calculated to ^'^eaken the other. This was certainly true in the
case of the dispute over F and G Bonds. Once this atmosphere
of rivalry and distrust had developed it was difficult for
those in either group to see events objectively- each looked
for hostile or sinister significance in nearly everything the
other did. As first in the field, the War Savings Staff
resented the newcomer and looked suspiciously upon every
attempt of the Victory Fund Committees to expand their sphere
of authority. There was considerable evidence that the Victory
Fund leaders saw their function as embracing a good deal m.ore
than interim financing or the quiet solicitation of large
investors on a special names list. Many were honestly convinced
that the Treasury should have a single sales organization and
that their training and experience justified their claim to
such leadership. This view was largely endorsed by the Presidents
of the Federal Reserve Banks.

At the outset, however, the sphere of operation for
Victory Fund Committees was comparatively small. They
participated in the distribution of Treasury market issues and
tax notes to banks, insurance companies, corporations, savings
banks and wealthy individuals. They assisted the War Savings
Committees in the sale of F and G Bonds. But their activities
were carried on quietly, almost informally, without much fanfare
or publicity. This initial reticence receded as Victory Fund
Committees took an increasingly prominent part in Treasury

- llU -

financing in the closing months of 19^1-2.

The borrowing in which the Victory Fund Committees parti-
cipatedj however, wa.s of a type that could be done quietly and
without extensive organization outside a few financial centers.
The total market did not exceed a few hundred thousand:
individuals 5 corporations j insurance companies and banks, most
of whom would buy government securities influenced little if at
all bA^ salesmen, whether amateurs or professionals. It was
therefore not easy to understand why the Victory Fund Committees
seemed intent upon building a mass- selling organization, reaching
into every state, county and city. Miy should they need
advertising end publicity directors, radio prograjiis, press
agents and motion picture consultants, or special sections for
labor and vjomen's organizations and other functional interests,
unless the new sales force was really to take over the whole
Treasury financing program?

Victory Fund Committee ''First War Loan" Drive

Early in November 19^-2, Secretary Morgenthau announced
that Treasury borrowing on an "unprecedented scale" would
begin November 30. The drive would be under the full authority
of the Victorjr Fund Committees, which had "already done
excellent v/ork in behalf of Treasury financing" and would have
for its purpose the "enlistment of idle funds in the war effort."
In a special message to the Presidents of Federal Reserve Banlvs
November 11 the Secretary said:

"A large part of the burden of selling the
required amount of securities must necessarily
fall on the Victory Fund organizations and
accordingly these must be greatly e3q)anded.
You are authorized to proceed immediately
to enlarge your Victory Fund personnel on
either volunteer or paid basis to whatever
extent you feel necessary at stra.tegic
points in your district."
With this carte blanche, the Victory Fund Committee
chairmen and executive managers moved to expand. In this they
vrere encouraged by another telegram from the Secretary on
November 12, in which he urged them to appoint publicity men
"the best qualified that you can find." This seemed to imply
that the Victory Fund Committees were to make a full-panoplied
drive to reach the entire potential government bond market.
This inference also lay in a message addressed to "The Salesmen
of the Victory Fund Committees" on November 2^, on the eve of
what had already been dubbed the Victory Fund Drive (later

- 115

renamed the First War Loan):

"I should like to send you a message of cheer
and encouragement as you move into the
December Victory Fund Drive. As you all
Imow by now we are going to ask the American
public to invest $9,000,000,000 in victory
and freedom. . .Your prospects will include
all private investors, corporations,
associations, societies, institutions,
trusts, estates and others who have
funds available for investment in the best
securities the world affords -- United
States Government obligations."
It was not surprising that under this urging the Victory
Fund Committees began to take on the appearance of a mass sales
organization. Every move in this direction caused trepidation
and no little resentment among War Savings Staff members and
volunteer committeemen. Protests began to pour into Washington
from the field against ^zhat seemed to be a move to set up a
dual and rival sales organization to reach the mass market.

It becajne evident to many VJar Savings leaders in
Washington, as well as in the field, that imless the structure
and functions of the two organizations were redefined, confusion
and conflict were inevitable. Instead of a team working
together, the Victory Fund Committees and the War Savings
Staff bade fair to become rival functions competing for
personnel, appropriations, power and prestige. Accordingly
under instructions from the Secretary, Victory Fund Committees
were asked on November 2? 'not to organize committees
representative of women's organizations, labor unions, foreign
origin groups, farmers, schools and other associations of
this character." They i^ere reminded that their chief
function was to induce "individuals, business concerns,
organizations and associations to invest accumulated balances
or idle funds in government securities" rather than to induce
such investment out of current income. These instructions
served for the time being to arrest the development of
Victory Fund Committees in the same pattern as VJar Savings
Committees.

The functions of the two organizations were further
defined by the allocation of all market-issue securities --
the principal one being a so-called "Victory*' 2\ per cent
bond -- plus F and G Bonds to the Victory Fund Committees and
the Series E Bond to the War Savings Committees. But this
arrangement did not solve everything; in spite of all
precautions, areas of confusion and conflict remained. In

116

the first place 3 there was no breakdown of the $9 "billion
national quota except that $5 billions were allocated to
commercial banks and $U billions to non-bank investors. But
in the latter field, no separate quotas were set for individuals
as distinct from corporations and institutions. There were no
separate c[uotas for E Bonds, or for F and G Bonds. Even the
usual VJar Savings monthly quotas were not made public.
Consequently there was confusion and conflict over the assign-
ment of credit to the two organizations for their sales. This
was especially true in the case of sales to individuals which
vjere properly regarded as the most important phase of the drive.
The drive was called a "Victory Loan,'' and the Victory Fund
committees occupied the center of attention, although E Bond
sables were coimted tov/ard the total goal. The result was a
fairly widespread feeling among War Savings workers that their
rivals claimed, or at least received, credit for the work done
by them.

Another complication was the fact that the Victory Fund
Committees were organized by Federal Reserve Districts whereas
the War Savings Staff was set up on a state basis. This not
only made difficult the allocation of sales on a uniform plan
but complicated administrative management of the two organizations
Sixteen states were split, in Victory Fund management by
Federal Reserve District lines. Since both organizations
carried on extensive advertising and publicity, there was
competition for sponsors, space, radio time and so forth.
In some places the Victory Fund Committees, through the
Federal Reserve Banks, paid for advertising space. Since the
entire War Savings promotion was based on the principle of
sponsored or contributed space and time there was some fear
that the practice of the Victory Fund Committees in buying
space would set a precedent that might prove to be disastrous
to the contributed principle. The Treasury did not buy
advertising space directly although several Victory Fund
Committees did so through the Reserve Banks,

Confusion also arose from uncertainty as to whether
Victory Fund volunteers should try to sell E Bonds at all,
and whether War Savings workers should, \fh.en opportunity arose,
sell F and G Bonds which had been officially transferred to
the Victory Fund Committees.

Results of the First VJar Loan

The drive opened with considerable fanfare on November 30,
with President Roosevelt buying the first $1000 "Victory" 2^
per cent bond from Secretary Morgenthau. By the end of the

117

campaign on December 23, $12, 9^7 millions of securities had
been sold against a quota of $9 billions. This appeared to
be a triumph for the Victory Fund Committees, but analysis
of the results indicated that the achievement was not too
impressive as a sales operation. A liberal estimate gave the
total number of subscribers of all kinds, except those uho
purchased E Bonds, as S^OjOOO, of which some ^0,000 were
purchasers of F and G Bonds. Individual subscriptions
to market-risk securities of all denominations were 66,^08.
Compared to the growing millions of individual War Bond
purchasers, even this optimistic figure of 3^0,000 Victory
Drive subscriptions seemed relatively/- small.

Nearly UO per cent of the total sales represented
subscriptions by commercial banks. Of the remaining $73860
millions sold outside the banks, only $1,593 millions were
purchased by individuals, and of this amoimt nearly $1 billion
represented sales of Series E, F and G Savings Bonds. There
was little evidence that the Victory Fund Committees had
made any substantial progress in the sale of F and G Bonds,
even under the impact of a nationx'/ide drive for which they
had been given exclusive responsibility. More than $726
millions of the $1,593 millions sold to individuals represented
sales of Series E Bonds for which the War Savings Committees
were responsible. Of the approximately $200 millions in
market-risk securities sold to individuals in the December
drive, a sizeable proportion would have been absorbed upon a
simple offering by the Treasury without any sales effort.
The same situation applied to the bulk of subscriptions by
insurance companies, savings banks, corporations, dealers
and brokers, Federal, State and local government agencies and
trust funds. By December I9U2, purchase of United States
Government securities had become almost the sole outlet for
corporation reserves and other surplus funds, especially
trust funds, seeking investment. Lest this observation be
considered too critical of the Victory Fund operation, it may
be borne in mind that the same opportunities for large-
investor sales without great sales effort worked to the
advantage of the War Finance Division drives from September
19^3 through the remainder of the wartime loan operations.

Need for Coordinating Head

The none too friendly rivalry between the Treasury's two
sales organizations continued after the results of the December
drive were tabulated. It becajne increasingly clear that
closer cooperation and better integration of effort by the

118

Victory Fund Committees and the War Savings Staff was urgently
needed, particularly in viev7 of the fact that Secretary
Morgenthau had, in his press conference of December 7°= (l)
Plainly announced an intention to continue both organizations,
and (2) Announced his intention of financing further war needs
through future periodic drives similar to the recent Victory
Fund campaign o Since both organizations were to be continued,
it was imperative that they be made to work as a teem and not
as hostile competitors. Something had to be accomplished in
this direction rapidly, for it was already apparent, in January
19)43^ that the Treasury would have to make another major drive
for funds not later than April.

Few people identified with either organization were
satisfied with the pattern of management that prevailed during
the December drive. War Savings workers in the field reported
discouragement and loss of morale, and confusion among county
chairmen due to duplication of effort and organization by the
Victory Fund Committees. Fund Chairmen and Executive Managers
were likewise critical of the situation. Special surveys made
of the December operation in several states bore out the need
for a coordinated sales managership, and one of these, in Ohio,
showed that a large group of bond prospects were not being
reached at all — the individuals not on payroll savings plans
and, though numerous, not wealthy enough to be on Victory Fund
select prospect lists,

A careful study of the December drive in the Second
Federal Reserve District (New York) furnished the basis for a
series of recommendations concerning future policy. "The
successful December drive,'' noted this report, "clearly
justifies the policy of raising substantial amounts of money
periodically by the use of the drive method." These drives,
it vjas suggested, should be fairly widely spaced, three or
four months apart, to allow time for the accumulation of
funds for investment and for planning and perfecting the
machinery for conducting the drive. If these campaigns were
to succeed in raising the largest possible amount of money
from the largest possible number of subscribers, "The Victory
Fund Committee and the War Savings Staff should be integrated."

To accomplish this coordination, it was recommended that
"there should be appointed a single director of war bond sales
to plan, coordinate and direct all sales of Government securities
...under the direct supervision of the Secretary and the Under
Secretary. . .There should be a corresponding expansion of the
selling force -- at least 500,000 salesmen for the country." It
was emphasized that neither the payroll savings plan by itself nor
periodic drives alone, "nor the two conducted independently.

- 119

can be made to yield the desired amounts and properly broaden
the borrowing base. The bond-selling drives must be coordinated
mth, and superimposed on the payroll allotment method."

Leaders of the War Savings Staff, also acutely aware of
the need for clarifying relations between the two sales forces,
looked in general toward a more clear-cut division of labor
both as to securities and markets for which each would be
responsible. The suggestions most frequently made were: (l)
That the VJar Savings Staff have exclusive responsibility for
the sale of E, F and G Bonds, leaving all other issues to the
Victory Fund Committees; and/ or (2) That the War Savings Staff
assume full responsibility for the sale of securities to
individuals, leaving to the Victory Fund Committees sales to
institutions and corporations; and (3) That all publicity and
promotion, excluding the preparation of "special prospect"
lists, be planned and carried out jointly. In any event there
needed to be some plan of joint responsibility that would
conserve the independence and identity of both groups but
make use of the best personnel of both to reach every potential
purchaser of a Government bond, 7

^-^ile organizational changes were under consideration, the
VJar Savings Sta.ff , in spite of the uncertainty which prevailed,
continued to press its campaign for the widespread sale of
E Bonds, and under the sponsorship of Ted Gamble laid plans
for an intensified program built around the slogan "You've
Done Your Bit -- Now Do Your Best." The new campaign was
designed to reach every man, woman, and child in the country
having income or savings available for investment. It was not
conceived as a drive for a limited period or a specific dollar
goal but as a general intensification of the War Savings
promotional effort in all available media. Cautioned by
Under Secretary Bell that the full plan might conflict with
pending arrangements for the coming April drive (Second War
Loan), a modified and attenuated version of the ambitious
expansion was launched in February.

Plans for the Second War Loan

Suggestions and plans for reorganization of the Treasury
sales forces kept pouring in, and Secretary Morgenthau gave
careful consideration to all of them in the hope of finding a
solution satisfactory to everyone. But time was running
against him and the Treasury cash balance was daily diminishing.
Some plan of organization had to be adopted however much of an

7 Recommendations made in January I9U3 to Harold Graves by a "Committee of Five" members of
the War Savings Staff.

- 120 -

improvisation it might prove to be. Action was more important
than a continued search for perfection. On February 225 there-
fore ^ he sent a long i-ire, here digested, to State Administrators
and Chairmen of the War Savings Staff and to Victory Fund Chair-
men and E^recutive Managers:

"On March one I propose to make substantially
the following announcement .. .Contemplating
for early April a large Treasury borrowing
program it is essential for the successful
■prosecution of this job that the Treasury
secure the combined services of all persons
and organizations now working for it in the
promotion of the sale of government securities.
Therefore, I have this day requested the
Presidents of each of the twelve Federal
Reserve Banks, Treasury fiscal agents, to serve
as Chairmen of a United States Treasury VJar
Finance Committee in their respective
districts to direct the April drive. Both
the Victory Fund organization and the War
Savings organization are to be represented
on this committee and the forces of each will
be integrated in every desirable and
productive activitj^ for the period of
preparation and during the actual drive. The
entire basket of Treasury securities including
E Bonds will be available to all forces taking
part in the drive... The VJar Savings organization
will continue as usual during this period its
Payroll Savings activity and any stamp promotions.
A United States Treasury War Finance Committee
will be set up here in Washington including
War Savings Staff and Victory Fund
representatives. All national promotion,
including press, radio, outdoor advertising,
posters, motion pictures and miscellaneous
activities will be pointed to this joint
endeavor. Due to the continuous work of
the War Savings Staff we fortunately have
many local projects moving forward constantly
through all media. In every possible instance
these should with the approval of the Treasury
War Finance Committee be tied into the forth-
coming campaign. Especially we will I'^ant to
retain the full support of organized labor
and women ' s group ..."

•= 121 ~

The Secretary had embodied in his plan features taken
from several of the formal recommendations submitted to him.
The procedure outlined admittedly fell short of perfection
but under the circumstances it was a masterful compromise. By
limiting the operation of the plan to the April drive, the
Secretary had side-stepped objections that might have been
raised to it as a permanent arrangement. Response from both
groups were favorable; on the whole the compromise plan
received a warmer reception from War Sa.vings Chairmen and
Administrators than from Victory Fund officials.

War Finance Committees for Second War Loan Drive

Since it was impossible to postpone the next loan drive
beyond April, and in view of the generally favorable response
to his telegram. Secretary Morgenthau decided to go ahead on
the basis outlined February 23. On March 2, the follomng
comprehensive directive, here abbreviated, was sent to all
VJar Savings Administrators or Chairmen, Federal Reserve Bank
Presidents and Executive Managers of the Victory Fund
Committees :

"The second big drive of the Treasury war
financing campaign will take place in Aprils
It is essential to the success of this drive
that the Treasury use the combined services
of the War Savings Staff and the Victory
Fund Committee in the sale of all Governm-ent
securities.
''To promote the integrated efforts of the two
organizations during the drive, there has
been created in the Treasury Department a
United States Treasury War Finance Committee,
imder the direction of Mr. W. M. Robbins,
Assistant to the Secretary, who will serve
as Chairman of the Committee and will function
with the operating title of National Director
of Sales. . .
"The Federal Reserve Bank Presidents have been
asked to serve as chairmen of similar committees
in their respective districts. Members of
each district committee will include
representatives of the War Savings Staff in
each State and of the Victory Fund Committee.
"The Committee in Washington will act in an
advisory capacity to the National Director
in the formulation and execution of plans for

122

the sale of Government securities and the
committees set up in the Federal Reserve
Districts will likewise act in an advisory
capacity to the Presidents of the Federal
Reserve Banks, who will act as chairmen of
such coinmittees. o .
"To ensure the success of the forthcoming
drive, it is necessary that all national
publicity 3 including press stories, radio
announc ement s , newspaper s , periodicals ,
outdoor and motion picture advertising,,
"be enlisted in the joint endeavor, and
include vjherever possible the continuous
promotion activities of the War Savings
Staff... All issues of Treasury securities
to be offered, including E Bonds, will
be available to all forces taking part
in the dr-ive.''
The story was released to the newspapers the neir'c daj^, and
the War Finance Committee of the Treasury began to function.
Reporting to the Secretary through the Under Secretary, this
Committee was composed of Harold Graves in charge of the VJar
Savings Staff; George Buffington in charge of the Victory Fund
Committees; and William Robbins, the new National Director of
Sales, as chairman of the committee. In every Federal Reserve
District a counterpart of this Treasury comraittee was called
into being; it was composed of the War Savings Ac'iministrators
of Chairmen of the states within the district, and the Executive
Manager of the Victory Fund Committee, serving under the
President of the Federal Reserve Bank who, as chairman, had full
authority and responsibility to direct the drive.

Task of the National Director of Sales

William Robbins, as National Director of Sales, was given
carte blanche "to utilize all facilities of the War Savings
Staff and the Victory Fund Committees, coordinating their
respective activities as he may direct." Admittedly this was
a difficult assignment. The War Finance Committee over which
he presided was at best an unhappy union of incompatible
principles and personalities. There was also a time deadline
to meet. Appointed the first of March, the new Director had
scarcely six weeks in which to prepare for a nationwide bond
drive to raise $13 billions of which ^'8 billions were to come
from non-bank sources. During this brief period, radio
programs, newspaper and ma.gazine advertisements, motion picture
newsreels and trailers, posters for store windoT.-s, lobby display

- 123 -

and outdoor billboards, leaflets, placards and pamphlets,
special events programs and other promotional materials had
to be planned, produced and distributed. Contributed or
sponsored time and space for advertising had to be found since
there was no money to pay for them. Finally, a huge army of
salesmen and solicitors had to be recruited, and trained to sell
bonds to every prospect in the country who could be reached.

There was a thin silver lining to this seemingly dark.
cloud. The new Director had the virtuallj^ unanimous good wishes
of everyone, and the constant and friendly counsel of Under
Secretary Bell whose knowledge and experience in the field of
public administration and Treasury procedure were unexcelled.
Through the War Savings Staff and the Victory Fund Committees
the Director had at his command about a half -million committee-
men, who in turn could mobilize another million volunteers to
serve as ''Minute Men" for the period of the drive, i^jnong these
volunteers were tens of thousands of experienced salesmen
including insurance underwriters, securities dealers, invest-
ment bankers and others trained in selling everything from
automobiles to corn flakes and coffee. He had at his beck
and call the best talent and facilities of every channel and
mediinn of communication. VJhat was eoually important, these
latter Tjere accustomed to working with the Treasury for which
they were currently providing the greatest volume of advertising
and publicity ever given to any product or agency. In addition
to all this, the new Director had the largest customer list
in the world with over 50 million people already owning VJar
Bonds and with more than 50 million buying them regularly
through Payroll Savings plans . The market to which he was
to appeal, moreover, was enjoying the highest income in its
history irith a diminishing supply of goods on which to spend it.

In spite of these advantages, Robbins ' tour of duty with
the Treasury Department was not successful .^ Their impression
was that he was bound to the Federal Reserve Bank Presidents
and the Victory Fund Committees. A goodly number of these had
gone on record as favoring the liquidation of the VJar Savings
Staff. This was unfortunate, particularly since he had to
rely upon the War Savings Staff for the overwhelming bulk
of his advertising, publicity and general promotion as well
as for the vast majority of his volunteer workers. Towards
the end of the drive, the hostility to Robbins that pervaded
the War Savings Staff was dissipated somev/hat, as the National

8 William M. Robbins: Native of Greenburg, Pa.; graduate of Sheffield Scientific School,
Yale University, 192U; Joined staff of Postum Conipany which through various mergers became the
General Foods Corporation. For I8 months preceding his Tre&svocy appointment he had served in
various capacities with the War Production Board. He had become familiar with the Treasury's sales
program thro\;igh membership in the Grant Committee which in the Fall of 19^+2 had made an investiga-
tion of the Weir Savings and Victory Fund operations.

" I2U -

Director undertook to establish more friendly relations, but
it never irholly vanished.

Director Robbins ' administration of the V/ar Finance
Committee during the Second War Loan might have been even more
troubled had it not been for Stuart Peabody whom he brought in
as chief Advertising Specialist to assist in the planning and
execution of all publicity and promotional activities during
the April drive. As advertising manager for Borden's, Peabody
was the creator of the world-famous "Elsie the Cow." To his
experience he had added an imaginative grasp of his job, a
fine sense of humor, a friendly and cooperative spirit and
extraordinary intelligence. The result was that he quickly
earned the trust and confidence of everyone both in the War
Savings Staff and the Victory Fund Committees with whom he
worked; this relieved some of the tension between the two
organizations .

Managerial Difficulties in the Second War Loan

Apart from the personal qualifications of its leaders, the
Second War Loan represented a none too successful experiment in
administrative management. Theoretically the Vfer Finance
Committee in the Treasury, of Graves and Buffington, was simply
an advisory body to its' chairman, the National Director of Sales,
in the formulation and execution of plans for the sale of
Government securities. The National Director was in full charge
of all operations. In similar fashion the War Finance Committees
in the Federal Reserve Districts were to be advisory to their
chairmen, the Federal Reserve Bank Presidents, who had full
authority in their districts to direct the drive.

It was the responsibility of these Presidents to see that
the War Savings and Victory Fund committees, district, state
and local, worked together. Since the War Savings Staff had
no official on the Federal Reserve District level, it had been
suggested that the bank Presidents attach to their offices an
individual thoroughly conversant with the activities of the
War Savings Staff in the various states or parts of states
making up each district. This device was considered impracticable,
so the Federal Reserve Presidents communicated directly with
the State Chairmen or Administrators of the War Savings Staff
within their districts.

Lines of communication and direction during the drive were
not strikingly different than before the drive began. It was
agreed, for example, that Messrs. Graves and Buffington would
continue to operate in direct contact with members of their oxm
staffs on all matters of current operation which were not a

125

special part of the April campaign. It was further agreed that
they would clear all matters of policy with Robbins and would
keep him informed of important developments. Robbins agreed in
turn to keep Graves and Buffington informed of decisions made
or instructions issued from his office direct to the Federal
Reserve Bank Presidents. All others in Washington headquarters
who had direct relations with the field forces were asked to
exercise particular care to make no decisions which should be
referred to a Federal Reserve President for handling. The
Federal Reserve Presidents were instructed by the National
Director of Sales to communicate directly with Graves or
Buffington on all matters relating particularly to the V/ar
Savings Staff or the Victory Fund Committees. It was emphasized^
however, that management of the drive would be on a decentralized
basis, and that most decisions would have to be made in the
field.

All advertising and publicity was to be given a Second
War Loan ''angle" wherever possible even though it was part
of the War Savings Staff program of continuous promotion. To
facilitate this, publicity directors in the Reserve Districts
were authorized to deal directly with Peabody's office in
VJashington. All press releases and interviews in headquarters
cities, however, were to be made in the name of the Reserve
Presidents as Chairmen of the VJar Finance Committees. These
multiple channels of authority, advice and clearance, varying
under different circumstances which often depended on personal
judgment of the steps to be taken, opened a great number of
loopholes for conflicting decisions, and many opportunities
for one group in the over-all organization, national or state,
to forge ahead for days or even weeks on its own favorite
line of progress without knowing what another group was doing.

One innovation during the Second War Loan that proved
to be of continuing help was the establishment of the Allied
Newspaper Council under the direction of Frank Tripp, General
Manager of the Gannett Newspapers and Chairman of the Bureau
of Advertising of the American Newspaper Publishers Association.
This Council grew out of a meeting on March 20 at the Treasury
Department, on the invitation of the Secretary, of outstanding
representatives of various newspaper publishers associations,
the American Society of Newspaper Editors, and the major
newspaper chains. The Council was of great help in mobilizing
the newspaper and advertising industries in support of the
Treasury's War Loan drives.

In a long memorandum of March 23 to V/ar Finance Chairmen,
Director Robbins urged that some division of labor and respon-
sibility be made between the VJar Savings Staff and the Victory

- 126

Fund Committees in terms of either the type of securities to
be sold or the market to be reached, or both. Realizing that
no Washington headquarters decision on these matters could well
meet varying local conditions, this division of labor and respon-
sibility, concluded Bobbins, "must be worked out in every
community in every Federal Reserve District under the direction
of the Presidents of the Federal Reserve Banks as chairmen of
the U. S. Treasury War Finance Committee o"

The War Finance Committee organization during the Second
War Loan was not an ideal arrangement, but imder the circum-
stances it carried the Treasury through a most difficult
transition period. The goal of the drive was not formally set,
at $13 billions, until March 12, when the basket of offerings
was also announced » The duration of the campaign -- Savings
Bond sales were credited to the goal through May 8 -- was not
settled until a short time before the drive opened. The
Secretary, like his colleagues, was feeling his way along,
and the organization established to manage the drive reflected
this spirit of improvisation.

Analysis of the Second War Loan

The goal of $13 billions -- $^ billions more than for the
December drive -- was an ambitious one although an analysis of
funds in the hands of prospective investors indicated that it
would not be impossible of attainment. Of this total, S8
billions were expected to come from non-banking sources and
$5 billions from banks. These quotas were allocated to the
Federal Reserve Districts, and in turn to states and other
subdivisions. A breakdown of the non-banking quota by types
of investors and of securities was supplied to the Presidents
of the Federal Reserve Banks, but x^;as not made public.

The $8 billion non-banking quota was divided into two
main classifications -- $2.5 billions to individuals, partner-
ships and trust accounts and $5-5 billions for corporations
and other types of institutional investors. Of the $2.5
billions allocated to individuals, $1.1 billions were assigned
to E Bond sales and $600 millions to F and G Bonds, leaving
$800 millions to be raised from the sale of other securities.

To reduce somewhat the possible adverse effect of bank
buying on non-bank subscriptions, commercial banks were allowed
to subscribe to 7/8 per cent Certificates only during the first
three days of the drive and to 2 per cent Treasury Bonds only
during three days toward the end of the drive. All sales of
Savings Bonds from April 1 to May 8 were to be credited to the
drive goal.

- 127 -

Judged by almost any standard less than perfection, the
Second War Loan was an outstanding success. Against a goal of
$13 billions, $17.6 billions of Government securities were
sold. If to this total be added the purchase of $935 millions
by dealers and brokers and U. S. Government agencies and trust
funds, which v/ere included in the First War Loan quota but not
this one, the Second War Loan total came to over $l8.5 billions.
This huge amount, more than $5 billions in excess of the sales
in the December drive, was equal to 90 per cent of the combined
sales in five bond drives of World War I. Sales to individuals,
partnerships and trust accounts of $3j29P millions were nearly
$800 millions in excess of the gopl for this category. As
against a goal of $2 billions for insurance companies and mutual
savings banks, sales were over $3 '6 billions, and other
corporations and associations which had been cited for ,$3 '5
billions purchased more than $5 '6 billions. Thus to non-
banking investors, $12.5 billions of securities were sold
against a quota of $8 billions. Sales to commercial banks
remained about the same as in the First War Loan, at $5 billions,

In terms of basic Treasury policy the Second War Loan
showed marked progress over the First. Sales to individuals
increased from 12.3 per cent of the total to 17.7 per cent and
the percentage of all non-bank investors rose from 6O.7 per
cent in December to 67-6 per cent in April. The most impressive
and encouraging feature was the increase in the sale of Series
E Savings Bonds from $726 millions in the First War Loan to
$1,^75 millions in the Second. Series F and G Bond sales also
increased from $288 millions in the First Loan to $667 millions
in the Second. Bank subscriptions which in the first drive
accounted for 39 • 3 per cent of total sales represented only
27.^ per cent in the Second V7ar Loan.

Secretary Morgenthau was more than pleased with these
results. He returned from a 75OOO mile trip around the country
in a mellow mood. He had words of praise for neeocly everyone
who had cooperated in the drive, for the hundreds of thousands
of volunteer workers, the Allied Newspaper Council, the War
Savings Staff, the Victory Fund Committees and the Federal
Reserve Banks. VJhen the returns were all in and the huge
figures tallied, the Secretary Broadcast his satisfaction and
appreciation to the nation. The Second War Loan, he said, was
'a great victory for the American people." President Roosevelt
added his thanks and praise to those of the Secretary.

The Secretary's enthusiasm was not universally shared.
National Director of Sales Robbins warned against "\mdue
satisfaction" with the April drive. W. W. Aldrich, Chairman
of the Board of the Chase National Bank, and others were more

- 128 -

"bearish" on the results =, pointing out the necessity for
"broadening further, as an ant i- inflation measure, the distribution
of securities among individuals. This was not a novel point of
view; it was one the Secretary had repeatedly emphasized, A
good deal of newspaper criticism of the drive was motivated by
the desire to keep alive the case for compulsory savings.

Continuing Differences of Opinion

But sour notes on the Second War Loan drive were sounded
by others than editorial writers plugging compulsory savings.
During and immediately after the drive the tension between the
War Savings Staff and the Victory Fund Committees continued
with mounting acrimony and bitterness. The imposition of the
War Finance Committees on top of the two underlying sales
organizations proved to be no solution of the basic conflict.
It was a conflict born of motives as diverse as petty personal
jealousies and prestige hunger on the one hand and fundamental
differences over the theory and practice of war finance on
the other «

Nearly all War Savings leaders believed that the major if
not the exclusive emphasis of Treasury borrowing policy should
be to reduce the threat of inflation by absorbing as much as
possible of current income and liquid savings in the hands of
individuals. To accomplish this purpose, they argued, was the
chief if not the sole justification for a nationwide sales
organization. Collateral objectives such as helping to promote
national unity and morale, or contributing to post-war stability
through large savings in the hands of consumers, came in
secondary position. Were it not for the ever present danger of
uncontrolled inflation, the task of raising the vast sums needed
to finance the x^j-ar could have been accomplished by borrowing
from the commercial banks. Little or no sales organization was
needed to sell Government securities to banks, insurance companies,
corporations and assocations. According to the theory of the
War Savings Staff, the only justification for a national war
loan drive was to sell bonds to individuals and possibly small
businessmen and assocations that might not otherwise invest
money in Government securities. This was the job the War
Savings Staff was organized to do and it was proud of its record.
The record was, however, less impressive in terms of dollar
volimie than that claimed by the Victory Fund Committees from
the sale of market-risk securities to wealthy individual,
corporate and institutional investors. But Secretary Morgenthau
had repeatedly said that the volume of dollars was less
important in appraising the results of sales activities than

129 -

the source from which the money came. Besides, it was said,
the sales record of the Victory Fund Committees was illusory
since most of the bonds they "sold" would have been purchased
without any effort on their part. To compare the sales efficiency
of the two organizations, it was argued, one must look at sales
to individuals and not only in terms of dollar volume but in
terms of the number of subscribers and the source of the funds
invested. War Savings leaders estimated that their organization
was responsible for some 80 per cent of all new money being
borrowed from individuals during the fiscal year 19^3 •

More fundamental than this argument over sales records was
the belief shared by many of the War Savings Staff that the
Victory Fund leaders, representing the Federal Reserve Banks,
the securities dealers and investment bankers, were intent upon
eliminating any rival organization so that, through their control
of all sales activities and outlets, they could determine Treasury
policy on war finance. Many influential Victory Fund Chairmen
and Executive Managers did not like Series E, F and G Bonds.
Repeatedly they had urged that Series F and G be eliminated.
i^lthough few advocated the outright elimination of Series E
Bonds, a large majority were in favor of issuing a negotiable
security in small denominations to compete with the E Bond for
the savings of small investors. They were also in favor of
relaxing the restrictions on all Savings Bonds to the extent
of allowing them to be used as collateral for bank loans. With
the professional banking and investment interests, who made up
the Victory Fund Committees, in complete control of the
Treasury's sales organization, the pressure for making these
changes might have been irresistible.

The periodic ''drive technique" patterned on World War I
Liberty Loan operations was one to which the professional
investment banker and security salesman hoped the Treasury would
sooner or later return. The major obstacle in the way of a
complete revival of Liberty Loan procedures was the VJar Savings
Program with its nationwide state-by- state organization of
"amateur" securities salesmen engaged in the continuous promotion
of non-negotiable, registered and guaranteed Savings Bonds. By
the end of December 19^2, this organization had sold over $9
billions of Series E, F and G Bonds, of which $6 billions repre-
sented sales of Series E, the so-called "People's Bond."
Approximately 25 million workers had been signed up on payroll
savings plans to buy War Bonds aggregating more than $350
millions every month, or 8.5 per cent of their gross pay. There
could be no revival of World War I methods of finance through
the sale of negotiable securities to small investors during
periodic drives only, so long as the War Savings Program continued,

- 130 -

The latter appeared to be 5 however, in the Spring of 19^3, in
process of absorption by the recently created War Finance
Committees v^hich in turn represented a very extensive transfer
of de facto management and control to the Presidents of the
Federal Reserve Banks , and the organized securities end invest-
ment industry.

In any case it was becoming increasingly evident that it
would be um-jise if not impossible to continue with two nation-
wide sales organizations. The attempt during April to coordinate
them through a. joint committee had not proved to be a happy or
successful experiment. There was plenty for both organizations
to do, but unfortunately there was lacking in too many places
the sine qua non of any successful plan of administrative manage-
ment, namely, mutual respect and confidence among those respon-
sibile for directing the operation at all levels and among the
rank and file workers. The mutual distrust, breaking out now
and again into open hostility, such as characterized relations
at the top between Graves and Buffington, had a baleful
influence in nearly every Federal Reserve District and in all
but a few states. The fact that Director Robbins, when he
did not openly identify himself with the Victory Fund group,
preferred to deal with this explosive problem at arm's length,
did not help to smooth the troubled waters. Had harmonious
personal relations existed between the two organizations all
along the line, the Second War Loan might have become the
basis for a permanent working arrangement.

Reports from the field indicated that cooperation between
the two sales organizations improved as one moved do\'m from
the top management committees to the working force at the grass
roots. Problems of coordination were also less acute in small
towns or rural districts than in larger metropolitan areas,
nowhere were there insuperable obstacles to a smooth campaign.
Friction and conflict could be traced to poor leadership
rather than to weakjiesses in the administrative organization.
Best results came in those districts and areas where a
definite allocation of responsibility was made between the War
Savings Staff and the Victory Fund Committees in terms either
of the securities to be sold or the market to be reached.
This division of labor was particularly necessary in the larger
industrial or metropolitan centers.

The basic problems had not been solved by the plan of
organization used during the Second War Loan. The excellent
results of that drive could be attributed only in part to
the coordination provided through the VJar Finance Committees.
Troubles were due to personal anger and resentment and a
desire on the part of leaders in both camps ''to show the

131

other organization up.'"' In spite of the good results of the
April drive, there xras little or no disposition to continue
the administrative set-up under v^hich that drive had been
conducted. l^Jhat i^as to take its place';'

In seeking the best ansijer to this Question the Treasury
went through a period of storm r.nd stress. For nearly five
months, from Jajiuary through May 19^3, a conspiratory atmosphere
of unrest, suspicion and personal animosity pervaded the War
Savings and Victory Fund organizations. Both official and
personal relations were poisoned by distrust and a resulting
emotional tension that at times reached the breaking point. It
was an atmosphere that would have tried the managerial talents
of the most gifted administrator. It was a tribute to Secretary
Morgenthau that he piloted the Treasury Department \j±th its
warring and almost mutinous sales crews through this difficult
period with so little damage to his goal or to Treasury prestige,
and in fact came out with a stronger sales organization for
all securities than he had at the beginning.

Possible Alternatives

There were several courses the Secretary might have taken:

(1) In spite of almost unanimous opinion
against it, continue the existing system
of dual control with coordination
through the Federal Reserve Banks.

(2) Revert to the plan of organization
before and during the December 19^2
drive, under which Victory Fund and
War Savings Committees functioned
independently except for ad hoc
adjustments made through the Office
of the Secretary.

(3) Dissolve the Victory Fund Committees
and expand the War Savings Staff to
assume responsibility for the sale
of all securities to all investors,
except banks, dealers and brokers,
and Government trust accounts.

(^0 Liquidate the War Savings Staff and

place responsibility for all securities
with the Victory Fund Committees,
perhaps under a different name, with
War Savings volunteers being transferred
to the new organization.

- 132 -

(5) Unite the War Savings and Victory
Fund groups into a single sales
organization incorporating the
best personnel from both. (This
was the couTse finally chosen.)
Each one of these five proposals had a good many supporters
in both the VJar Savings and the Victory Fund organizations.
Several leaders provided the Secretary with lengthy recommen-
dations. Marriner Eccles presented a plan of organization which
could be regarded as the official recommendation of the Federal
Reserve System.

Endorsing the generally accepted thesis that there had to
be wider distribution of Government securities outside the
banking system, Eccles proposed, in March 19^85 that both the
War Savings Staff and the Victory Fund Committees be dropped,
leaving only the War Finance Committees (as in the Second War
Loan) to occupy the field. These committees should be built
up by using those parts of existing organizations which could
best be assimilated. The plan provided for a National Director
of Sales, for the Federal Reserve Presidents to continue as
Chairmen of the V/ar Finance Committees in their respective
districts, and for a section in the national office to continue
an educational campaign to promote national thrift and to
extend the Payroll Savings program.

In the midst of the /\pril drive. National Director of
Sales Robbins presented his plan of reorganization, which
included the following recommendations:

(1) Permanent merger of the two sales
organizations under single leadership
both in Washington and the field,

(2) Leadership of the field organization
to be established through the Federal
Reserve System.

(3) Personnel for the new organization to
be made up as far a.s possible from
the best qualified persons already
working in either the War Savings
Staff or the Victory Fund Committees.

Early in May, Buffington presented a plan which was a
version of the Eccles plan revised in the light of Second War
Loan experience. His proposals included the merging of the
War Savings Staff and the Victory Fund Committees, with the
War Finance Committees continuing to operate under the chair-
manship of the Federal Reserve Presidents. For the headquarters
organization, he also recommended a National Director of Sales,
and a three-division set-up to cover: (l) Payroll Savings;

~ 133 -

(2) Special name lists of large corporate and individual investors;
and (3) A general sales unit to continue the War Savings
promotion through women's committees, schools, farm organizations,
labor, retail stores, fraternal and civic clubs, etc.

As the problem of reorganization was discussed at innumerable
sessions in the Treasury, it became evident that neither
Bobbins nor Buffington had given sufficient thought to the
operational aspects of their plans. Their proposed charts
left a gap between policy planning and actual management of
operations, particularly in the field. There was no such
hiatus between policy and administration in the thinking of
Graves and his associates about reorganization of the Treasury's
sales forces. From his thirty years of ejcperience in public
administration, Harold Graves had acquired a healthy respect for
the vital importance of operational details. He knev/ that
however logical any organization might appear on a chart, the
test of its validity was not logic but success in operation.
Consequently he invariably asked of any proposal -- "How will
it work in the field?" Moreover, after tv70 years of experience
in managing the War Savings Staff he had a pretty good idea of
what would and what would not work. To fortify his o-i-m
knowledge he had the assistance of Ted R. Gamble, who had come
to Washington with detailed experience in bond sales promotion
as War Savings Administrator for Oregon.

In making their recommendations to the Secretary, Graves
and Gamble had the advantage of being already in charge of a
natiom/ide organization representative of every major interest
and segment of the population and reaching into every state,
county and commimity. It was also an organization that in two
years had established a remarkable sales record, a reputation
for non-partisan, patriotic service and a talent for ingenious
publicity. The one segment of the bond market which the War
Savings Staff was not well equipped to reach was that which
embraced large individual and corporate investors. It was from
this market that the bulk of non-bank funds would have to come,
and it was in many ways an easy market to reach. Numerically,
however, it was but a drop in the bucket compared to the mass
market of industrial workers, farmers, white collar employees
and middle class business and professional people, which the
VJar Savings Staff was better organized to reach than the
Victory Fund Committees.

Graves and Gamble therefore proposed to strengthen the
War Savings Staff to enable it to reach the "big money" market
in addition to the mass market, and to entrust it with respon-
sibility for the sale of Government securities to all non-
banking investors. Their recommendations were based on the

- 13^

assiimptions that: (l) The Treasury's main selling job was the
individual market; (2) It was better to build the new organization
on the solid structure of the War Savings Staff which wes already
organized to reach that market; and (3) It would be easier to
adapt the War Savings organization to the job of reaching the
"big money" market than to train the Victory Fund Committees in
the job of reaching the numerically large mass market. Indeed
many of the complications in the Buffington and Robbins plans
arose from the attempt to adapt a "big money'' sales organization
to the task of selling bonds to the mass market. From an
administrative point of view it was a case of trying to get the
tail to wag the dog. Most of these complications were absent
in the Graves-Gamble plan. Because it did not have to improvise
a new mass- sales organization 5 and because it operated on the
assumption that control should remain in the Treasury rather
than be transferred to the Federal Reserve System, the Graves-
Gamble plan presented a comparatively simple solution of the
Treasury's sales problem.

One of the important structual differences between the
Eccles-Robb ins -Buffington proposals and the Graves-Gamble plan
was the basic administrative area to be used. The former
would have based the entire war financing structure on the
Federal Reserve Districts, the latter on states.

States vs. Federal Reserve Districts

There were plausible arguments in favor of proposals to
use the Federal Reserve Districts as operating areas. They
were superior to states in their closer correspondence to
economic, financial and marketing regions. It was through
the Federal Reserve Banks as fiscal agents of the Treasury
that Government securities were distributed to issuing and
sales agents, proceeds of sales collected, and sales reports
collated and summarized. Another great advantage of the
Federal Reserve System was its freedom and flexibility in
meeting current problems of management. Most significant,
from a sales promotion point of view, was the relative
freedom which the Federal Reserve Banks enjoyed in recruiting
personnel and contracting for goods and services. These banks
were much less restricted than the Treasury Department by the
often narrow regulations imposed by the General Accounting
Office, the Government Printing Office and the Civil Service
Commission. Thej^ could hire and fire, rent, lease or buy as
needed and upon their own responsibility. Although they were
reimbursed by the Treasury for expenditures made as its fiscal
agents, and although the purposes for which expenditures were

135 -

made had to comply with Government regulations, there was an
initial freedom from bureaucratic control devoutly wished for
by any vigorous administrator. There were some expenditures
that the Federal Reserve Banks made out of their oivn earnings
and over which the Government had no control. The most common
of these were payments for luncheons, dinners and other refresh-
ments, and in some cases for hotel rooms and facilities.

This freedom was a source of envy and some embarrassment
to War Savings officials. As they observed offices being
rented, equipment supplied, paper and printed matter procured
rapidly for local use, and free cocktail parties and dinners
given as attractions for volunteer workers, they wondered why
these advantages should be enjoyed by one group of workers for
war finance but not by them.

Great emphasis was laid on their freedom from bureaucratic
control by those who favored a unified and streamlined war
finance organization under the leadership of the Federal Reserve
Banks. Freedom from annoyance and delay attendant upon standard
Government accounting and personnel procedures was an advantage
enjoyed by the Victory Fund Committees under Federal Reserve
management, but there was little to indicate that it was an
important factor affecting the efficiency of that organization
as compared with the War Savings Staff under Treasury management.
Indeed there was a potential danger in a disregard of customary
restraints on spending in a voluntary savings program carried
on by volunteers and relying mainly on patriotic appeals for
its primary motivation. The buying of luncheons and dinners
and the entertainment of large investors or volunteer workers
on an extensive scale caused some justifiable resentment among
small investors to whom the major appeals were directed.
There were solutions to the restriction on War Savings need
for "extra" funds: (l) The State organizations built up their
own "kitty" through donations from patriotic sponsors of the
bond program, and (2) After June 19^3, Treasury funds were
allocated to the Federal Reserve Banks to be dispersed on
appropriate requests from War Finance leaders.

There were compelling arguments for retaining states as
the basis of the administrative organization:

(1) The existing organization (VJar Savings)
for reaching the mass market was already
set up on a state basis.

(2) In no less than sixteen cases Federal
Reserve Districts cut across state lines.

(3) The Treasury's program for selling
securities to the mass market was
dependent on the cooperation of many

136

social and economic groups (trade
unions, fraternal "bodies, women's
organizations, etc.) which were
organized on the "basis of political
geography -- States, counties and
cities. Even the banks, outside
the Federal Reserve Banks, were
organized on a state "basis.
{h) There were legal reasons which

supported a state set-up. Payroll
Savings plans affecting public
employees had to conform to State
as well as local laws and regulations.
Many large investors, such as banks
and insurance companies, brokers
and others, were subject to State
lav7s which often materially affected
their investments.
(5) The State Governors were serving as
honorary Chairmen of War Savings
Committees, giving to the bond program
the prestige of their office. State
departments of agriculture, education,
commerce, banking and other functions
had proved to be very helpful, supplying
information, mailing lists and volunteers.
If state lines were disregarded, much
of this aid would have been lost.
Most important among the arguments in support of a State
organization was that of taking advantage of State pride.
People would take pride in knowing that Michigan, or Ohio,
or Virginia, or California had "made its quota" or "gone over
the top." They would not feel any corresponding pride in
learning that a Federal Reserve District had reached its goal.
Finally it was emphasized that any reorganization which would
eliminate the existing State Committees would cause confusion,
impair morale, and involve the establishment of new relationships,
which would take more time to perfect than the Treasury could
afford in the critical situation existing in the Spring of 19^3 •

Other Questions

The extended debate over the relative merits of the States
or Federal Reserve Districts as administrative areas was, how-
ever, only one phase of the long and often heated argument over
reorganization of the Treasury's sales forces. Every aspect of

- 137 "

the sales problem vas passed in review. There were elaborate
arguments in favor of periodic intensive drives versus a
continuous sales effort. There were demands for the elimination
of Collectors of Internal Revenue and of Customs from their
positions as State Administrators. There were euqally emphatic
demands for greater utilization at all levels of experienced
salesmen, especially investment bankers and securities dealers.

Lessons Each Organization Had Learned From the Other

Both the Victory Fund Committees and the War Savings Staff
had learned much from the experience of the First and Second
War Loans. The Victory Fund people had acquired a greater
respect for sjnateur salesmen, especially in promoting the sale
of E Bonds. They had also learned that without a sales organi-
zation reaching doxm to the grass roots it was impossible to
carry on a mass -selling campaign. With only a few exceptions
they had come to appreciate the importance of the Payroll Savings
plan and the necessity for good labor relations in promoting
and sustaining it. They had learned the importance of
maintaining an intelligent program of promotion among women,
farmers, labor unions, foreign-origin groups, school children,
retail merchants and professional and trade associations. VJith
a few exceptions, they had been convinced of the value and
necessity for a program based on sponsored or contributed as
against paid advertising space and time. Many had come to
appreciate that the success of a sales campaign was to be
measured not solely in terms of dollar volume but rather in
terms of sales to individuals from current income.

The War Savings Staff had learned that sales to corpo-
rations and wealthy individuals did require special treatment
which experienced investment bankers and securities salesmen
could best supply. It learned the value of intensive nation-
wide drives of limited duration in recruiting volunteers and
in mopping up "wild money." The earlier attitudes were
modified but not abandoned. The speed with which the Victory
Fund Committees could hire personnel, set up headquarters,
contract for printing and so forth, taught the War Savings
Staff the need for a less leisurely procedure in dealing with
such "housekeeping" details.

Cooperation with the Victory Fund Committees enabled the
V/ar Savings Staff to accelerate the retirement of the Collectors
of Internal Revenue and of Customs as State Administrators. It
opened up an opportunity to eliminate some dead wood. Above
all the first two War Loan drives had caused a great release
of new energies, called into the program many new volunteers

•• 138

who would work for a limited time but not on a continuous
basis, provided closer relations with the business community
and increased the efficiency with which the whole organization
functioned.

The Fundamental Cleavage

In spite of all these considerations the fundamental
cleavage was over the main issue as to whether the whole
bond selling program was to be controlled by the Treasury
or the Federal Reserve System. The issue became sharply
dra\m. On one side stood the Under Secretary, Messrs.
Buffington and Robbins, Marriner Eccles, the most influential
of the Federal Reserve Bank Presidents, and the organized
investment bankers and securities dealers.

On the other side stood the recommendations of the
Graves-Gamble memorandum, supported also by Assistant to
the Secretary Peter Odegard, and resting on the obvious
need of the Secretary to retain the power as well as the
responsibility of his position. Had the Secretary bowed
to proposals to transfer control over war financing to the
Federal Reserve System he might have had no choice but to
resign.

Difficult Position of the Secretary

The Secretary was, for patriotic and public spirited
reasons quite unconnected with his official position, the
outstanding champion of the War Savings program as the most
democratic and socially beneficial x-j-ay of helping to finance
the war. He knew that the thousands of War Savings Committees
and volunteer xrorkers had made an incalculable contribution
to war finance, economic stabilization and general morale.
He knew what the labor -management committees organized to
promote Payroll Savings had done to foster better industrial
ralations and indirectly to improve production . He V7as proud
of the School Program and the contribution it had made to
thrift education and to a better understanding of America's
war aims and methods. He knew of the work done by the inter-
racial and foreign-origin sections of the War Savings Staff
in providing a channel of significant participation in the
war effort by racial and nationality groups. The contributions
made by these committees was not something to be lightly cast
aside. In reaching out to workers and farmers, to women and
children, to business and professional people, to every group
and segment of the American people, the War Savings program

139

was something great and new in American history.

Equally significant was the fact that in all of the War
Savings promotional and sales activities there had been no
hysteria or undue coercion. Wo man's house had been painted
yellow because he failed to buy War Bonds; there were no stock-
ades for saving slackers. In this the record stood in striking
contrast \rith the high pressure promotions of the World War I
Liberty Loan drives.

Secretary Morgenthau realized that the i-inerican people
had, in effect, taken possession of the War Savings program.
In reorganizing the Treasury's sales forces it was vitally
important that this public confidence in the savings movement
be preserved. For the Secretary of the Treasury to have turned
his back on the people would have been an inexcusable blunder.

On the other hand, the Secretary was indebted to the
Victory Fund Committees and the Federal Reserve System for
indispensable aid in raising the staggering sums required to
finance the war. They had assisted not only in enlisting the
cooperation of the banking system but had helped to increase
the percentage of Government borrowing outside the banks.
The increase in dollar volume and number of individual
subscribers to market-risk securities was largely due to their
efforts. To them was also due much of the credit for increasing
the number of corporate subscribers to Government securities,
from 28,000 during the First War Loan to over 75,000 in the
Second. The Treasury stood in continuing need of this friendly
cooperation.

It had become clear, however, that the Treasury could not
continue to operate with two rival and in many ways incompatible
sales organizations. The Secretary, therefore, had to solve
the difficult and ticklish question of how to weld them into
a single organization on some basis which, if not entirely
satisfactory, would involve a minimum of friction.

After weeks of discussion and debate, consultations,
surveys and reports, the Secretary made his decision. In
the meantime William Robbins and Stuart Peabody had resigned
from the Treasury to return to private business.

Announcement of Consolidation

On May 27j 19^3? the Secretary announced that the Treasury's
sales forces would be "streamlined and amplified" through
consolidation of the Victory Fund Committees and the VJar
Savings Staff into a single organization. The consolidated
organization was to function under the direction of State
Chairmen who would report directly to the Secretary of the

- lUO -

Treas-gry and be responsible for tne continuing sale of War
Savings Bonds through the voluntary payroll allotment and other
regular purchase plans. It was explained further that State
organizations would be in charge of War Loan d-rives and
concentrate on increasing the sale of bonds to individuals
and corporations, and that the Federal Reserve Banks as fiscal
agents of the Treasury would handle sales to conmiercial banks,
mutual savings banks, insurance companies and Government bond
dealers «

In most important respects the new plan bore a close
resemblance to the Graves-Gamble memorandum of May 3- The
States continued to be the basic administrative areas; special
emphasis was placed on the sale of securities to individuals
and particularly on the Payroll Savings plan, and the sale of
securities to financial institutions, including insurance
companies, was to be separated from cainpaigns to sell bonds
to individual and corporate investors. Especially significant
was the provision that the State Chairmen were to report directly
to the Secretary of the Treasury and not to the Presidents of
the Federal Reserve Banks. Except for their usual functions as
fiscal agents for the Treasury, and in facilitating the sale of
Government securities to financial institutions, these officials
were relieved of any formal participation in the management of
the sales forces.

Opposition in Financial Circles

The new plan had been adopted after consultation v/ith the
Board of Governors of the Federal Reserve System and the
Presidents of the twelve Federal Reserve Banks, but it was
no secret that the majority of these were opposed to the
arrangement, and that many of them, together with a good many
of the Victory Fund leaders, were indignant. Newspaper articles
blamed the unfortunate situation on supposed personal antagonism
between the Secretary and Marriner Eccles of the Federal Reserve
Board, or upon a desire to "play politics.''

Subsequent appointments to top positions in the new
organization, the War Finance Division, amply refuted such
criticisms and allayed the opposition of Federal Reserve leaders.
To quiet further wrangling, the details of the new structure
were not publicized pending appointments to top executive
positions, the most important of which was the post of National
Director .

oOo

lUl

CHAPTER VIII
THE WAR FINANCE DIVISION
Secretary's Telegram to the Field

Coincident with the press release of May 27, 19^3? the
Secretary telegraphed all War Savings Chairmen and Administrators
notifying them of his plans for consolidation and allaying their
fears of any catastrophic upheaval. "No radical changes in
existing personnel or policy are contemplated," he declared;
"Such changes as may be made will be solely to strengthen and
extend facilities to meet larger responsibilities under the new
plan. "

This message clearly implied that the War Savings Staff
rather than the Victory Fund Committees would be the base on
which the new War Finance Committees V70uld be built. It was also
clear that some changes in the existing War Savings set-up would
be necessary to take care of the specialized functions which the
Victory Fund committees had handled during the first two War Loan
drives. A logical method of accomplishing this was to add to the
committees of the War Savings organization new sections recruited
from banking and securities personnel. A precedent for this
action had been established with the organization of special sub-
committees for the sale of Series F and G Bonds in 19^2, before
responsibility for those securities had been transferred to the
Victory Fund Committees. No revolutionary change was necessary,
and since the new organization was to be called War Finance, thus
dropping both the V7ar Savings and Victory Fund terminology, there
would be no occasion for saying that one of the earlier groups
had absorbed or triumphed over the other.

Leadership the Key to Successful Consolidation

The psychological hazards in the reorganization were greater
than administrative ones. Something more than a simple transfer
of personnel and change of name was required if the Treasury was
to reap maximimi benefit from the consolidation. Most important
was top leadership. William Robbins was gone, but Harold Graves
and George Buffington, directors respectively of the War Savings
Staff and the Victory Fund Committees, remained. Neither of these
men could be placed in charge of the unified organization, however,

- li+3 -

without giving mortal offense to former organization.

Under the circumsta^nces the Secretary might logically have
turned to someone outside the Treasury, as he had before the
Second War Loan, for a new National Director not identified with
either War Savings or Victory Fund management. The recent
experience with an outsider had not proved too happy, and more-
over in May 19^3 the schedule for Treasury financing did not
allow time for an inexperienced director to acquaint himself with
the program. To find some capable executive already familiar
with the program and acceptable to both the War Savings and
Victory Fund factions, was the problem.

The new job of National Director was one calling for more
than executive ability of a high order. It also required a
dynamic personality capable of winning and holding the respect,
confidence and enthusiastic cooperation of thousands of men and
women in every v/alk of life, in every State and territory. Since
the vast majority of War Finance workers were unpaid volunteers,
the new Director would have to manage his organization m.ore by
persuasion than by command. The workers could be led but not
driven. Hence the need for someone without false pride or
arrogance, who would treat his division chiefs and State Chairmen
more as co-workers than as employees and among whomi the Director
would be simply primus inter pares. He would need vast energy
and drive, quick perception, good judgment, and ability to make
decisions deliberately but with dispa.tch. In addition to these
qualities an ideal director would have knowledge of war finance
problems and procedures, public opinion problems, management and
sales promotion. Above all he would have to believe in the prin-
ciple of voluntary savings and in preserving the democratic values
inherent in the War Savings program.

War Finance Division Established

Under normal circumstances the search for a new director
would have consumed weeks or even months, but time did not admit
of delay. Secretary Morgenthau had privately made his selection
even before announcing the resignation of William Robbins, but
it was not until July 2 that he announced the appointment of
Theodore Roosevelt Gamble as National Director of the War Finance
Division.-'- The Division itself was officially established by
Treasury Department Order No. 50, dated June 25, 19^3.

1 As evidence of the non-partisan spirit in which Secretary Morgenthau administered the War
Finance program, it is interesting to note that all three of his top administrators — Graves,
Robins and Gamble -- were Republicans.

Ikk -

Ted R^ Gamble

From almost any point of view Ted Gamble's appointment was
both natural and inevitable. Except for the fact that his
experience in the field of public finance was limited, his
qualifications for the job were ideal. He was young, only thirty-
seven. As one of a family of fifteen, and with three children
of his own, he had learned how to get along with people. Before
he finished elementary school he had become self-supporting and
had worked hard and unremittingly ever since. He entered the
University of Washington in 1922, attending classes by day and
managing a local motion picture theatre by night. In this
capacity he had to a Jack-of-all trades -- booking agent, ad-
vertising manager, usher, ticket taker, vaudeville impresario,
and even janitor.

The fascination of "show business" and the pressure of
earning a living soon got in the way of his university career so
he left college in I92U to become manager of a chain of five
theatres. For the next sixteen years he served in a similar
capacity with a number of large chain theater enterprises, mainly
in Oregon. By 1929 he was general manager of twenty-nine theatres
and a figure of increasing importance in the motion picture world.
In 19^0 he formed his own organization — Gamble Theaters.

Both within and outside his profession, Ted Gamble displayed
an extraordinarily high sense of civic responsibility. In the
1930 's he served as a member of the Motion Picture Industry
Regional Code Authority under the National Recovery Administration,
and as Chairman of the Motion Picture Industry's Infantile
Paralysis and Community Chest campaigns. In 1930 he was president
of the Portland Rose Festival and was selected as First Citizen
of his home town, Portland. In addition he had been vice presi-
dent, trustee and member of the National Board of Directors of
the Camp Fire Girls and was named by the United States Junior
Chamber of Commerce as one of the ten outstanding young men in
the United States.

VJhen the Defense Savings program was launched in 19^1? Ted
Gamble was drafted to become State Administrator for Oregon at
a dollar -a- year. Turning the major burden of managing his own
business over to his brothers, he devoted his full time from
June to December to the job of organizing Defense Savings
Committees and planning a statewide sales campaign. Together
with E. Palmer Hoyt, publisher of the Portland Oregonian and
Chairman of the State Committee, Gamble personally visited every
county and sizeable conmiunity in the state. With a scrupulous

2 Although it was customary for State Administrators to be paid officials of the Treasxary,
Gamble refused to accept a salary, and was appointed on a dollar-a-year basis, both as Administrator
in Oregon and later as National Director of the War Finance program.

- IU5 -

regard for the basic policies of the Treasury and a genuine belief
in the value of the program for the nation. Gamble and Hoyt built
an organization that soon became a model for other states. So
well was the job done that in September 19^1, at the request of
Harold Graves, Gamble went to California to assist in setting up
the Defense Savings organization in that state. In this role of
missionary he proved to be so successful that in December he was
called to Washington on a temporary assignment as a Consultant
to the Secretary of the Treasury. With no intention of staying
more than a few weeks. Gamble wanted to return to Oregon as soon
as possible. By strange coincidence he had railroad tickets and
Pullman reservations for return to Portland on December 8. The
Japanese attack on Pearl Harbor, December 7j and the entreaties
of the Defense Savings officials in Washington cancelled these
arrangements, so Ted agreed to stay on for another "temporary"
assignment. In May 19^2, after a brief visit to Portland he
returned to Washington as an Assistant to the Secretary.
Thenceforth, until his appointment as National Director, he was
one of the triumvirate of Assistants to Secretary Morgentha.u who
guided the bond program along its spectacular but often turbulent
course. His appointment as National Director of the newly-
established War Finance Division was regarded as providential by
those who had most zealously defended the multiple objectives of
the War Savings program. To the task of realizing these objec-
tives was now added the further job of promoting the sale of all
Government securities to all types of investors. The responsi-
bility that had formerly been divided between Harold Graves and
George Buffington was now united. The nex^^ set-up called for a
complete merger of the Treasury's two sales organizations. The
National Director's job was no longer one of coordination only;
it was, as its title implied, the task of giving direction to a
single integrated operation whose function was to raise tens of
billions of dollars from the largest possible number of investors
without sacrificing the democratic goals and procedures that had
symbolized the War Savings Staff.

Tackling the Problem of Consolidation

As a consequence of Treasury Order No. 50, the War Savings
and Victory Fund Committees in every state and territory were
consolidated into War Finance Committees under the direction of
a State Chairman reporting directly to the National Director.
The headquarters staff in Washington was called the War Finance
Division; state and local units v^ere War Finance Committees.
Below the state level War Savings Committees in more than 3? 000
counties, in more than l6,000 incorporated towns and cities,
in trade unions, women's clubs, farm organizations, schools and

- Ik6 -

hundreds of similar functional groups were theoretically involved
in this reorganization. For a large majority of these, however,
the new set-up involved little more than a change in name. Since
the Victory Fund Committees were less numerous, the problem of
consolidating the two organizations was confronted mainly on the
state level and in large cities.

To this task Ga.mhle directed his efforts during June and
July 19^3. It was a difficult and delicate undertaking upon the
success of which depended the Treasury's entire program of war
finance. There X\ras a heritage of rancor, jealousy and open
conflict hanging like a cloud over the two organizations that
were being fused together. Fortunately the new National Director
was thoroughly familiar with the circumstances which had given
rise to this mutual misunderstanding and distrust" he was hence
able to deal with them with understanding and forbearance.

Interweaving of War Savings and Victory Fund Personnel

The Presidents of the Federal Reserve Banks had served ex-
officio as chairmen of the Second War Loan War Finance Committees,
but under a state plan of administrative organization they could
not logically be continued in similar capacity. The Presidents
had also served as chairmen of the Reserve District Victory Fund
Committees. The chief administrative officer for the Victory
Fund Committee in each Federal Reserve District was a salaried
Executive Manager who corresponded in duties to the War Savings
State Administrator. Then there were Victory Fund Chairmen of
State, county and city committees, although the pattern of
organization was not uniform throughout the country.

How were these officials, both paid and unpaid, to be fitted
into the new War Finance Committees? The problem of welding the
tvTo sets of leaders into one happy family bristled with diffi-
culties. In particular, the top man in each state -- the War
Finance State Chairman -- had to be a real leader, whether taken
from War Savings or Victory Fund experience, or from elsex^here,
sympathetic to the aims and methods of both organizations.

To find this type of leadership and to create one sales
organization where two had flourished could not be done by writing
letters or pushing buttons in Washington, As his first assignment,
therefore, Ted Gamble spent nea^rly two months visiting every
state in the Union, to confer personally with War Savings and
Victory Fund officials, labor leaders and bankers, and hundreds
of other community leaders. On this strenuous mission he had
the wise counsel and friendly collaboration of Herbert Gaston,
Assistant Secretary of the Treasury, with whom he traveled.
Gaston's long experience as a businessman, newspaper editor, and
public servant, his detailed knowledge of people and of economic

- 1I47 -

and social conditions in every section of the nation made him an
ideal guide and advisor. In a few cases Gamble had the benefit
of Secretary Morgenthau's advice "on the spot," and in all cases
he had the advantage of the Secretary's unique and almost intu-
itive insight in appraising the character of those whom he
appointed to Treasury posts.

There was some criticism that the new Chairmen and Executive
Managers were chosen too hurriedly, that Gamble had too often
indulged in snap judgments upon the basis of inaccurate or in-
sufficient information. Circumstances did not allow for a more
leisurely procedure. I^jhile he was engaged in the difficult job
of reorganization. Gamble also had to make plans for a Third War
Loan to begin in September. Either job alone was sufficient to
try the talents of a most gifted executive. It is a tribute to
Ted Gamble's genius that he was able to accomplish both tasks in
an exemplary fashion and with a minimum of friction. Undoubtedly
some mistakes x-zere made, but it is doubtful if anyone else, even
under ideal conditions and with ample time, could have done a
better job or made fewer mistakes.

Retirement of the Collectors

It had been decided to replace the thirty or more Collectors
of Internal Revenue or of Customs who were serving as War Savings
Administrators, as soon as this could be done without harm to the
organization. The sweeping consolidation plans facilitated this
move. By the end of July 19^3? only three Collectors — for
Vermont, New Jersey and Hawaii — remained as Chairman or Executive
Manager of the new War Finance Committees.

In the new organization the position of State Administrator
was replaced by that of Executive Manager, a title taken over
from the Victory Fund Committees. This was not merely a change
of name. In the case of the War Savings Staff it had been cus-
tomary for the Treasury to look to the State Administrators as the
active and responsible heads of the organization. The State
Chairmen of the War Savings Committees, with a few exceptions,
fulfilled honorary and consultative rather than administrative
functions. This was also largely true of the Federal Reserve
Presidents who served as chairmen of the Victory Fund Committees.
Active and continuous direction of the latter was in the hands of
the Executive Manager. In consolidating the two sales organiza-
tions into single War Finance Committees it was determined that
the State Chairman would be the top man in fact as well as in
name. It was Director Gamble's intention to pick working Chairmen
and to rely on them not only for prestige, consultation and advice,
but also for active direction of the War Finance program in the
field. The Executive Manager was to be appointed only with the

- 1U8 -

approval of the State Chairman and was to serve under his
direction.

In only a few cases was it necessary to go outside both the
Victory Fund and War Savings organizations to find suitable
chairmen. To insure continuity of experience as well as amity
among all factions, representatives of both organizations were
included among the leaders of the new War Finance Committees.
lAfhere the State Chairman was a Victory Fund man, the War Savings
Chairman was asked to serve as Vice-Chairman, Executive Manager,
or Co-Chairman. In similar fashion, VJar Savings Administrators
and Victory Fund Executive Managers became Executive Managers
and Assistant or Deputy Managers in the new organization. The
greatest carry-over among top personnel was from the War Savings
Staff: twenty-one of the fifty-three original Chairmen of the new
War Finance Committees had held a similar position in the VJar
Savings program.

The high standards of leadership v/hich had characterized
the Treasury's sales organization from the beginning were con-
tinued. A few illustrations will indicate the high calibre of
men recruited to direct the new VJar Finance Committees.
Christie Benet of South Carolina, for example, was a distinguished
lav/yer, formerly solicitor for the Fifth Judicial Circuit,
attorney for the City of Columbia, vice-president of the State
Council of Defense, and former United States Senator. Clarence
Leinbach of North Carolina was vice-president of the Wachovia
Banl^ and Trust Company and former president of the North Carolina
Banlvers Association; Rex Brown of IVIississippi was president of
the Mississippi Power and Light Company and member of the National
Council, Boy Scouts of America; Reno Odlin of the State of
Washington was president of the Puget Sound National Bank of
Tacoma and former vice-president of the American Bankers Associ-
ation; Randolph Burgess, of the National City Bank of New York,
was a former president of the American Bankers Association and
chairman of the Association's Committee on Economic Policy; and
Walter Head of Missouri was president of the General American
Life Insurance Company, and of the National Council of Boy Scouts
of America, in addition to being a director of half a dozen large
corporations and an even larger number of civic and philanthropic
organizations. 3

3 There was some talk at the time of the reorganization that "The bankers are taking over,
or that "The War Finance Committees are being turned over to the Republican Party." Actually the
Secretary followed a scrupulously non-partisan policy in making appointments, and there is no
evidence to show that any Administrator, Chairman or Executive Manager ever deliberately used his
position for partisan purposes.

II49 _

Continuity of Leadership

In terms of leadership the War Finance Committees did not
represent a neir organization. They formed, as Secretary
Morgenthau intended they should, a merger or interiTeaving of War
Savings and Victory Fund personnel. To have accomplished this
merger with a minimum of injured feelings, TTith no feuds or
sensational publicity, and above all with little lost motion, vzas
a tribute to Secretary Morgenthau and his National Director, Ted
Gamble.

That there was no lost motion in carrying on the savings
program and in making plans for the Third VJar Loan was due in
large measure to continuity of leadership at the top. Equally
important was the fact that there was also continuity of leader-
ship at the local level. The overwhelming majority of VJar Savings
chairmen and committeemen in the counties, cities and other
geographical and functional subdivisions carried on without much
change in personnel or program. Where there were changes they
represented mainly the voluntary relief of veteran workers and
the appointment of new volunteers v/ho had displayed outstanding
ability in the First and Second War Loan drives. In those
counties where both a Victory Fund and a War Savings Committee
had been active, the chairman of one or the other was, by mutual
agreement, designated as the new War Finance Chairman. In some
places the question was resolved by the flipping of a coin!
Invariably both the Victory Fund and War Savings chairmen con-
tinued to work as a team regardless of which acceded to the new
title.

Some communities followed a plan of rotating the chairmanship
so that a new chairman took charge for each succeeding War Loan.
There were advantages to be derived from this policy -- new ideas,
a fresh approach to the problems involved and less danger of
bureaucratic complacency. Most important, in an organization
directed by volunteers, was the opening up of new avenues of
leadership which might otherwise have been closed. Many busy
executives who could not assume responsibility for continuous
service as War Finance chairmen were able and willing to do so
for a limited period. Moreover, service as War Finance chairmen
invariably involved not only the expenditure of time and physical
energy but also money for which no official provision was made
and hence had to come out of the chairman's oxm pocket. By
rotating the chairm.anship this financial burden was more widely
distributed. Nevertheless, the all but universal testimony of
experienced War Finance workers was in favor of continuity of
leadership oil along the line from State Chairmen to the smallest
committees in a town. There was no substitute for experience in
a sales operation of the magnitude and variety of the War Finance

- 150 -

program. Nearly all the advantages of a rotating chairmanship
could be realized under a permanent chairman with the aid of a
T'.'-ell chosen advisory committee.

Typical State l-Jar Finance Committee

The success of War Finance Committees depended not only on
able 3.nd fairly permanent leadership but upon continuity of the
underlying organization. The transition from War Savings and
Victory Fund Committees to a unified War Finance Committee
disturbed this very little. The basic organization of the War
Savings program was continued. The main change was the addition
or strengthening of the banliing and investment function. Publici-
ty and special promotion facilities were also improved.

A typical State War Finance Committee included the Chairman,
one or m_ore Vice Chairmen, occasionally an Executive Vice Chairm.an,
an Executive Manager, and one or more Deputy Managers in charge
of agriculture, labor, payroll savings, women's, school and other
sections. No rigid pattern of organization was insisted upon and
no two War Finance Committees presented the same structure. In
some places were found a Negro, Nationality, House-to-House
Canvass, or even a Sports section. Each Committee was free,
within very broad limits, to adapt its organization to community
needs .

In June 19^1-35 at "the time of the transition from VJar Savings
to War Finance, Director Gamble proposed the follox^/ing plan of
organization:

CEAlRl'iM
Co-Chairman and/or

Vice Chairman
Executive Manager

Deputy Manager
for Administration
Personnel, travel,
budget , space

Deputy Manager

for Publicity

Press, radio, movies,

advertising, special events

Banking! Investment
Corporations
Bankers list
Special names
Government agencies
Savings and Loans
Savings banks
Related associations

Industrial Division
Payroll savings
Labor unions
Labor-management

committees
Other commercial

and industrial

employees

Community Division

Agriculture

Schools

VJomen

Retail stores

Self-employed

Professions

Fraternal groups

Service Clubs

Foreign-origin groups

Inter-racial groups

151

This blueprint represented only c. slight departure from the
existing organization of War Savings Committees. Although in no
state was it applied in exo.ctly the form sent out from Washington,
it did offer a pattern to guide the thought and planning of the
new War Finance Chairmen and Executive Managers. Every state
organi^.ation was identical in one respect, namely in striving to
give recognition in the administrative structure, no matter what
its variety, to every significant group or interest.

Regional and Local Counterparts

The principle of decentralization that governed relations
"between Washington and the State Committees also ruled the
relations between State and local committees. To expedite
operations on the local level, most States established a regional
organization between the State and the local comm.ittees. For
example, the 23 counties of Maryland were grouped into 6 regions,
each under a regional chairman and manager, "uhile Pennsylvania
had 3 regions or districts, with a, Deputy Manager in charge of
each.

The regional committee chairmen and Deputy Managers gave
further substance to the principle of local autonomy by recog-
nizing the valuable economic and social conditions to be found
in the various sections of the State. They helped also to avoid
"bottle-necks" at State headquarters and served as a clearing
house for plans and projects that had proved successful in
various loca^lities within their regions. This cross fertiliza-
tion of ideas was an indispensable ingredient of any live
organization, and especially of a promotional enterprise carried
on by volunteer frarkers.

Below the State and regional committees were the county and
other local committees at the "grass roots." Nearly every state
had county committees led by a county chairman, and local
committees in metropolitan areas and the larger to"^^ms. These
committees were the field force of the War Finance army. Their
members were tireless workers who carried bond promotions to
their neighbors, who interviewed the butcher, the baker and the
candlestick maker, and who brought in reserves of man and woman
power to carry out house-to-house canvasses in the War Loan
drives. Their numbers x^ere legion. At the height of the VJar
Finance promotion, near the end of the war, the great army of
volunteers was estimated to be six million strong.

Changes in Washington Headquarters

The merger of Victory Fund and War Savings organizations
within the Treasury Department in Washington involved even less

- 152 -

change in structure and personnel than in the field. The Second
War Loan War Finance Committee was replaced "by a new War Finance
Division, established by Treasury Department Order No. 50.
'Except for the title of National Director, new headquarters
Division bore no resemblance to the Second War Loan organization.
Instead of serving as chairman of a coordinating committee of
rival organizations, as Robbins had done, Ted Gamble was in fact
as well as in name the National Director of a unified sales
force. Although in theory he was to report to the Secretary
through Under Secretary Bell, in practice he attended the
Secretary's regular staff meetings and had direct access to
Mr. Morgenthau at all times on all matters affecting war finance.
The relations betxsreen the two were very close; between personal
conferences the Secretary consulted with his National Director
by telephone. Conferences were easily arranged since the former
War Savings Staff moved from its quarters on 12th Street to the
Washington Building on 15th Street, diagonally across the street
from the northeast corner of the Treasury Building.

Although the reorganization of June 19^3 "^'^as called a merger
of the War Savings and Victory Fund groups, this was true only
at State and local levels. In V/ashington there was very little
of a Victory Fund organization to merge. There was no head-
quarters staff with personnel or facilities capable of planning
a.nd directing a national sales campaign. The VJar Savings Staff,
on the other hand, was designed to perform this function, hence
the reorganization involved little more than a, change in name of
this Staff.

Addition of Banking and Investment Division

The major change was a functional one arising from the
additional task of having responsibility for promoting the sale
not only of Savings Bonds but of all securities offered to the
public by the Treasury Department. This was accomplished by the
addition of a Banking and Investment Division to the other
functional sections of the War Savings Staff. The importance of
the new Division was indicated by the fact that Edward B. Hall,
a Chicago investment banker who was appointed to head it up,
was given the rani', of an Assista.nt National Director. Hall was
president of the Chicago investment firm of Harris, Hall and
Company. He had cooperated with the War Savings and Victory
Fund Committees in Chicago and thus was familiar with the program.
He remained about half-imy through the rest of the War Finance
operation. Upon his return to his private business, his place
was taken by Stanley 0. Prenosil,

153

Functional Organization

There iras some regrouping of Divisions and Sections to
attain simplification, but in essence the administrative
orga.nization remained the same as before. In early Junej Ted
Gamble prepared an organization chart for the War Finance Division
in Washington similar to the one suggested for State Committees,
but hardly ever did the actual organization correspond to the
chart. There was so much functional overlapping that it vras
impossible to keep the niimerous activities within the bounds of
an organization chart. Women's activities, for example, in one
way or another cut across or affected every phase of the program.
Retail establishments were not only important sales outlets for
Stamps and Bonds, but were the source of most newspaper advertising.
The Newspaper Carrier Boys Stamp Sales program might as well have
been placed under Advertising and Press, or Retailers, as in a
Community or Field Division.

No m.atter how logical any organization chart may have been,
the promotionally minded individuals who were in direct charge
of the various functional operations seldom subordinated them-
selves to the Division Director through whom their most cherished
plans and projects were supposed to clear. Direct access to the
National Director or to one of his close associates had so
characterized the organization from the earliest days of the
Defense Savings Staff as to be regarded as a prescriptive right.
Section heads who had customarily sat in on top staff meetings
and who had regularly consulted with one or more of the four
assistants to Secretary Morgenthau, or with one another, were not
content to look to the Division heads for final clearance and
guidance. The administrative "free-wheeling" that had character-
ized the War Savings Staff continued under the War Finance Division.

Fortunately the personnel of the War Savings Staff and the
informal, democratic spirit which characterized it, were carried
on intact. Knowing and respecting one another, and inspired by
an attitude of getting the job done with the least formalities,
the personnel of the War Finance Division could have made almost
any organization chart work, whether it was logical to adminis-
trative cartographers or not. Although there were several minor
changes made between June 19)^3 and December 19^!-5, the following
chart shows the general organization of the War Finance Division.

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In addition to the familiar operations indicated, there were
several peripheral activities that functioned semi -independently,
sometimes relating their planning and management fairly close to
one of the regular divisions, at others to several divisions or
sections, and looking more or less directly to the National or
Assistant National Director for guidance. Among these may be
mentioned: The Music Project (19U2-UU); Speakers Bureau- Books
and Authors Program; Library War Bond Campaign- the Promotional
Pvesearch Section, and the War Finance house organ - The Minute
Man. These various activities xx^ill be touched upon in following
chapters .

Various Personnel Changes

The only major changes in personnel as the War Savings Staff
became the War Finance Division were the appointments of Ted Gamble
as National Director to replace Harold Graves, and of Edward B.
Hall as Assistant to the Secretary in charge of the Banking and
Investment Division.^ Gamble's appointment could scarcely be
called a change in personnel. For over a year and a half he had
been one of a triumvirate that managed the War Savings program.

A very large proportion of the "old worthies" of the original
Defense or early War Savings Staff, appointed in 19^1-^2, stayed
on, at least for a considerable time. Vincent Callahan continued
as Director of Press, Radio and Advertising until succeeded by
his assistant, Thomas H, Lane. Radio and Press Section leader-
ship underwent several changes in personnel, but usually with a
former assistant rising to the top, so that there was no break in
continuity. Carlton Duffus, and then Ned Shugrue, carried on in
motion pictures and "Special Events." Ralph Engelsman remained
in charge of Payroll Savings, with the assistance of L. "Bunny"
VJolfe and, until he left VJashington for a tour of duty as Executive
Manager of War Finance in Puerto Rico, Ray O'Malley. Miss
Harriet Elliott guided the Women's Section, assisted by Dr.
Mabelle Blake and, until marriage interruped her War Finance
career, Helen Dallas. Homer Anderson left the Education or
Schools Section, giving way to his assistant, Daniel Melcher.
James H. Houghteling remained at the head of the National Organ-
izations Division, with most of his original crew -- Gilbert Hyatt,
William Fitzgibbon and William Pickens. Walter Wuerdeman replaced
Horace Peters in promotions affecting business and trade
associations. For about half the remaining War Finance period,
Sidney Mahan had charge of work with Retailers, being followed

h Graves continued on a short time as an Assistant to the Secretary, and then was appointed
an Assistant Commissioner of Internal Revenue by President Roosevelt. His loyalty to the program
which he had launched never diminished. Even after leaving the Government to become Vice President
of the Queen City Broadcasting Company in Seattle, he remained one of the most valued counsellors
and devoted supporters of the War Finance program.

- 156 -

by his assistant, F. Edward Pulte. The Agricult-aral or Farm
Section leaders were first Lloyd Partain and then Merrill L.
Predmore. Charles W. Adams continued in charge of the Adminis-
trative or "housekeeping" Division. As Assistant Field Director,
Laurence M. Olney carried out a great variety of duties, some
continuous others ad hoc, having to do with instruction and
advice to the State offices, relations with other Federal agencies,
personnel matters within the Field Division itself, direction of
the travelling Associate Field Directors or regional men, and a
great miscellany, including the planning of office quarters for
new personnel and the physical arrangements for pre-War Loan
national or regional conferences. Working largely behind the
scenes, Larry Olney was one of the great unsung heroes of the
V/ar Finance Division. His innate politeness, almost shy nature
on occasions, kept him from taking the spotlight often sought by
more extrovert members of the organization. In his multifarious
duties, routine or otherwise, he was ably assisted by two veterans
in the bond organization -- Harold Master and Jarvis Morse,
appointed respectively in April and August 19^1.5

Three of the early traveling or regional men entered the
armed services, but the others -- Orville Poland, Albert D.
0' Conner, Boyd Fisher, Earl Ross, Edwin R. Mowbray and Robert
W. Fowler stayed on their work, being supplemented by a new man
for the southeastern area, Alsa C. Glenn, and, for the Far West,
Howard D. Mills, formerly the War Savings Administrator for
Southern California. There were also four women regional
directors one of whom, Mrs. Nancy Robinson for the southern area
of the United States, became head of the Women's Section under
the peacetime program in 19^6.

Most important of all to the continuity of the War Bond
program, in purpose and spirit as well as in activities. Bob
Coyne, Field Director of the War Savings Staff, retained that
position under War Finance, with the expanded title and duties
of Assistant National Director in charge of all operations in the
field. For a great majority of the War Finance activities
carried on from June 19^3 to the end of December 19^5 j i't would
be impossible to point out precisely where the work or influence
of the National Director ended and that of the Assistant
National Director began. Gamble and Coyne were a team. Their
names were bracketed together on almost every important occasion.

5 Jarvis M. Morse, Yale University B.A., M.A. , and Ph.D, and for some sixteen years teacher
of history at Yale and then Brown University, became head of the Education or Schools Section in the
peacetime program in May I9U6. His previous governmental experience was two years, 193'+-35j as
Rhode Island State Director of the Federal Writers Project. Harold B. Master, Brown University
Ph.B. 1927, Harvard Graduate School of Business Administration MBA I929, with government experience
in the Works Projects Administration, Public Works Administration, Reconstruction Finance Corpora-
tion and the Federal Reserve Board, usually operated under the title of Administrative Assistant to
the Field Director. He became Assistant Field Director in the peacetime program.

- 157 -

Both being men of extraordinary executive capacity, each brought
personal characteristics or qualities to supplement the strength
of the other. They occupied adjoining offices in the VJashington
Building, and the connecting door was almost always open.

It is not possible in a study of limited compass to do
justice to all the unique personalities making up the War Finance
family. A few may be mentioned here. The original Executive
Director, Eugene Sloan, left Washington in July 19^1-3 to become
Deputy Commissioner in Charge, Bureau of the Public Debt, in
Chicago. His place was filled briefly by John B. iicNamiara, and
then Charlie Adams, head of the Administrative Division, assumed
in fact if not by title the duties of executive director. Helen
Dallas' place in the Women's Section was taken, and filled with
both efficiency and charm, by Naomi Engelsman, wife of the head
of the Payroll Savings Section. John L. Schram, a veteran in
Government service, who transferred to Defense from the Division
of Savings Bonds in October 19^1, remained as a general staff
assistant until near the end of the program, when he became Cashier
of the United States in the Treasurer's office. He was away from
the bond program temporarily in 19^2 on a special assignment for
the Treasury in Hawaii, to see to the destruction (in fear of a
Japanese inva,sion) of U. S. currency, and the substitution for it
of a special wartime currency for the islands. Harold Mager, a
former teacher of economics and i/riter of articles on banl^ing and
finance, joined the staff in September 19^1-3 on tra.nsfer from the
main Treasury Building where he had been a "ghost writer" of
speeches . For something over a year he acted as the National
Director's chief advisor and critic on promotional copy for all
phases of the War Finance program, and he also continued his
previous assignment of preparing drafts of speeches for various
high Treasury officials, including War Finance.

Along with Larry Olney as an unsung hero of VJar Finance
should be placed William Hirzel. Of varied business background,
including service in Japan for an American exporting company.
Bill was early associated with the bond program as office manager
and general assistant for the Pledge Campaign in Greater New York
City. Transferred later to Washington, he had charge for most of
the time through the war of what was called the Distribution Unit
of the Field Division, which controlled the distribution of all
promotional materials -- leaflets, pamphlets, posters and what
not -- to the State and other field offices of the War Finance
operation. His duties, or rather his activities, did not stop
there. A man of seemingly limitless energy (he worked himself
more than once to the edge of a nervous breakdown), he reached
beyond the bounds of distribution, as often on his own initiative
as on request, to do almost any hard and tedious job tha.t som.eone
else might or should have done but did not.

- 158 -

From June 19^1-3 to December 19^r5 there were many other changes
in personnel and operating duties, but the remarkable thing about
the War Finance Division in Washington or the War Finance
Committees in the field was the solid continuity of program, and
leadership. This continuity explains much of the success of the
War Finance program..'

Policy Planning: Staff Meetings

Under Ted Gamble as National Director the policy planning
phase of War Finance was managed somewhat differently than under
the Graves-Sloan regime in Defense and War Savings. Gamble called
very few, and not regularly scheduled staff meetings of the whole
Division, but relations between the head of the War Bond organi-
zation and the Treasury Department continued much as before. As
already noted, Gamble attended the Secretary's staff meetings,
and was in very close touch, often by telephone, with the
Secretary. The National Director also kept in close contact with
Under Secretary Bell and with other top officials in the Treasury
whose spheres of activity bordered on subjects relating to War
Finance, for example, the Commissioner of the Public Debt and
the Director of the Division of Research and Statistics.

There was one major change in these relations with the
Treasury Department in the summer of 19^-5 • ^'^^^ Finance workers
received with a sense of shock the announcement on July 13 that
Mr. Morgenthau was resigning, effective upon the appointment of
a new Secretary. He had so long been the guiding spirit and most
ardent supporter of war savings that there was considerable
anxiety as to what a change in administration might presage. Any
fears on the subject were soon put to rest. Sworn in July 2^ as
Morgenthau' s successor. Judge Fred M. Vinson gave wholehearted
endorsement to the War Finance program. Its accomplishments
since 19^2 had revised his earlier leanings toward compulsory
savings .

Unlike Morgenthau, however, Secretary Vinson concerned
himself directly with War Finance problems and operations hardly
at all. The new Secretary kept personally busy with other matters,
such as the International Banl^, the British Loan and political
doings at the VJhite House, so that he left the War Finance Divi-
sion pretty much to run itself. He addressed a Washington meeting
of State Chairmen prior to the Victory Loan drive which opened
the end of October 19^5 j t>ut otherwise Secretary Vinson made it
plain that the War Finance Division was well established, had
been very successful, knew what it was doing, and hence needed

6 One factor In increasing personnel turnover was the demands of the armed services.
Through voluntary enlistment or calls under the Selective Service Act, I9UI-UI+, at least I78 members
of the organization entered the Armed Service, 132 from the field and U6 from Washington.

- 159 -

little of his personal attention.

Within the VJar Finance Division itself, Ted Gamble inclined
toward small and ad hoc staff meetings rather than large assemblies
formally scheduled at a set time each week. Meetings were called
as some special problem or undertaking arose. Division and Section
heads were called together informally, often on short notice and
usually by telephone. Those present at consecutive meetings would
vary according to the subject matter at hand. Except when some
large-scale staff meeting seemed advisable, Gamble preferred to
operate directly with individual Division and Section heads,
calling them in to see him for a few minutes on one matter at a
time.

To revive a history book expression describing the cabinet
of President Andrew Jackson, Ted Gamble accomplished a good deal
of his top policy planning and direction through a "Kitchen
Cabinet" of a half-dozen or so close associates on whom he relied
most heavily for assistance. This group, if it can be called a
group in any organizational sense, included Bob Coyne, Charlie
Adams, Ralph Engelsman, Tom Lane of advertising and Ned Shugrue
of "Special Events." They met as chance would have it, over a
mid-forenoon cup of coffee, at a noon lunch of sandwiches, and
over more coffee after 5 '30 in the evening when the majority of
the staff had gone home for the night.

These informal proceedings made for uninhibited discussion,
frank judgements and speed in arriving at decisions. They
reflected the efficient, direct approach typical of Ted Gamble
personally and of his theatre business background. They had one
disadvantage, in that the decisions arrived at in a small group
were not always disseminated quickly enough to the rest of the
promotional and operating staff. The responsibility for this did
not lie wholly with the National Director. It was theoretically
possible to have broadcast every important "cabinet" proceeding
by office memorandum for all to read. But who wanted to waste
precious time, and scarce paper, in a high-geared wartime operation
writing and distributing office memoranda? There were very few
such formal internal memoranda. "Hot news" had to get around by
word of mouth on a catch-as-catch-can basis.

The results of this somewhat unorthodox practice were seldom
serious, but there were many occasions on which lesser promotional
heads, or even whole sections, did not know until after consider-
able delay what some other section or division was planning, or
even perhaps where a major part of the whole organization was
headed. All in all this was not too serious a matter as frequent
result was a duplication of effort by two or more sections rather
than the leaving of a loophole by all. Duplication of effort was
a much less serious weakness in a wartime organization than the

■160

total neglect of some important field of operation.

The unique story of VJar Finance, hoxNrever, lies to only small
degree in administration or policy planning. The real story of
War Finance is the promotional one, the appeals and methods used
to make the bond program meet the needs of the nation and its
people. Sales promotional methods will next be outlined.

oOo

l6l

CHAPTER IX
SALES PROMOTION

The War Finance Division organized and successfully
carried through six special loan drives, and in addition
conducted an intensified, continuous day -by-day promotion of
Savings Bonds as begun under the Defense and War Savings
Staff. The details of no two drives were precisely alike,
but the general outlines of all were similar.

As overwhelming evidence of War Finance workers and the
Likert and other surveys showed, the prime way to get people
to buy bonds was to ask them to buy. To ask them twice and
three times if necessary; repetition did no harm. Person-to-
person canvassing was aided by other types of promotion and
publicity, particularly by radio, press and magazine advertis-
ing, which will be described in due course.

With forty-eight States, the District of Columbia, Alaska,
Hawaii and Puerto Rico carrying on their o'vm particular variat-
ions of promotions suggested by national headquarters, plus
original plans of their own, the total result was infinite
variety, a detailed account of which would run to thousands
of pages. A. social historian could with profit write the war
finance narratives of many geographical areas, but for
purpose of concise review it will be convenient to list the
major promotions by types, indicating their chief advantages
and limitations, without straying too far afield into local
variations. For purpose of analysis, the twenty or more
major types of promotion may be grouped under two main
classifications: (l) Those which involved "direct selling,"
such as the payroll savings plan and house-to-house canvasses,
and (2) all other forms, particularly advertising, which may
be termed "indirect Selling."

Direct Selling: Payroll Savings

The Payroll Savings plan was the backbone of the
continuous monthly sale of Savings Bonds, almost wholly of
Series E, during the Defense-War Savings and War Finance
program, and it was stepped up to increased tempo during
War Loan drives, both to secure additional worker allotments

163

that, might continue in effect after a drive, and for extra
cash sales during the drives themselves. There was no
insuperable obstacle to the sale of Series F or G Bonds through
payroll savings. Series E were better suited to most workers,
but a few plants made it possible for employees, especially
those in the upper brackets, to subscribe to Series G through
the plan.

The payroll allotment or savings plan was undertaken at
the very beginning of the Defense Savings Program but no great
headway had been made before Pearl Harbor. At the end of
December 19^1, about 700,000 people were putting about $5
millions a month into War Bonds through the plan. This record
had been vastly improved by the time of the Kansas City
Conference in October 19^2, when approximately 20,000,000
workers were participating in the plan. From that time on >
under the unremitting efforts of regular War Finance Committees
and also of special plant, labor and labor-management comrndttees.
the record advanced by early 19^5 to more than 27,000,000
workers, including those in the armed forces, who were putting
over $500 millions monthly into War Bonds.

Fundamental Mechanism

The payroll savings plan was very simple to operate. A
wage or salary worker signed an authorization card requesting
his employer to withhold from each pay a certain number of
dollars, which the employer kept in trust, and had a bond
issued as the withholdings reached the issue price of the bond.
Many large concerns became issuing agents for Series E Bonds -
Others sent perj.odically their lists of ' employee buyers, with
one covering check, to a bank, the bonds being either mailed to
to the purchasers or returned to the company for personal
delivery to the employees. The extra bookkeeping involved in
handling these withholdings, typing up the purchase lists,
arranging for personal bond deliveries, etc., ran into fairly
sizeable expenditures, which the companies assumed out of their
own funds as a contribution to the V\rar Finance program, and,
from their own point of view, as a demonstrable contribution
to higher worker morale and good labor-management relation-
ships. Company payment of the costs of administering payroll
savings plans, along with sponsored advertising, were factors
which enabled the War Finance Division to keep dovm the over-all
costs of the whole bond program to the Treasury.

I6h

Installation

Payroll Savings plans were initially installed in
industrial plants in one of several ways. The most common
was for a iJar Finance worker to "sell" the plan to top
management, to the officials of the chief labor unions in
the plant, or to a combination of both. Then there would be
a worker assembly at which a War Finance representative,
assisted by plant speakers from both management and labor,
would explain the advantages of the plan — to the war program
and to the workers themselves through savings for future
security. After that, authorization cards were passed out for
the workers to sign requesting the pay allotments. If the
plant was a small one^, the cards were distributed to the
workers en masse at the close of the presentation talks.
Otherwise, the employee signing was done in succeeding days, in
in small groups, every ten or a dozen workers being solicited
by one of their fellow workers chosen for the assignment.
Supporting publicity for the plan was supplied by nationally
prepared posters and literature. Similar items were often
provided by State or local War Finance Committees, and in a
great many cases by the companies themselves.

Service

After a plan v/as once in effect, it was the continuing
task of the local War Finance Committees, and one or more
employees of the company especially designated as Bond
Officers, to keep it in a flourishing condition, to get more
employees to sign up, to get new employees on the plan, and
to increase as much as possible the total percentage of wage
payments being diverted into bonds. Every important industrial
State had a Deputy Manager for payroll savings, charged with
general oversight of all the plans in his area. These
Deputies spent a large part of their time on the road,
helping local committees to install new plans, and dropping
in on managers of active plans to ask if further information
or material was needed.

Chronological Growth

General Motors Company was one of the first big concerns
to put on a thoroughly organized campaign to urge their
employees to buy bonds through the payroll savings plan. Its
success clearly demonstrated that the Treasury's plan was

- 165

both desirable and attainable. Another very successful early
demonstration of the voluntary payroll savings plan was
provided by the General Electric Company.

By April 19^2, with advice from representatives of labor
and management, life underwriters and the War Advertising
Council, the Washington headquarters Payroll Savings Section
developed twin objectives: (l) A goal of 90 percent employee
participation in each plant having the plan, and (2) A goal
of at least 10 per cent of the over-all payroll going into
War Bonds. The plan was presented to state meetings of VJar
Bond workers throughout the country in Hay and June, and it
very soon produced encouraging results.

Special certificates of award were developed for firms
reaching 90 per cent employee participation, and 10 per cent
or more of payroll being invested in bonds. Special posters
for plant display highlighted the 10 per cent goal. An
experiment was made with a 10 per cent button for every
worker to wear who was putting at least that much of his pay
into bonds, but this device did not work well. The tin
buttons were cheap looking, they were easily lost and they
wore out rapidly. A much more successful promotional device
was the Treasury Flag, a dark blue banner with a white
Minute Man, which could be flovm by a firm or institution
reaching the 90 per cent employee participation goal. When
the 10 per cent of gross payroll goal was reached also, a
white "T" was added to the banner. ^

In July 19^2, the Payroll Savings Section formed a
National Labor-Management Committee including: Thomas C.
Cashen, Chairman, Railway Labor Executives Association;
William Green, President, A. F. of L; Eric A. Johnston,
President, U. S. Chamber of Commerce-, Philip Murray, President,
C.1,0.; John J. Pelley, President, Association of American
Railroads; and W. P. Witherow, President, National Associ-
ation of Manufacturers o With the names of the leaders as
sponsors, a series of twelve labor -management meetings were
held, one for each Federal Reserve District, Top manage-
ment was invited and leading labor officials. The sessions
were attended by representatives of some 5,000 firms, labor
unions and other employee organizations. The meetings cul-
tivated good labor -management relations, and helped swing
the 10 per cent plan into action.

1 In the Seventh War Loan a further addition to the Treasury Flag was provided, a white
star, for firms reaching or s\irpassing their "plant quota." There was some agitation for a distinc-
tive certificate or flag to denote 100 per cent employee participation, but this was not encoiir-
aged, on the ground that efforts to attain 100 per cent might cause too much pressure to he put on a
few employees who for perfectly good reasons could not participate in the Payroll Savings plan.

166 -

In October 19^2, in connection with the Kansas City
Conference, Washington headquarters developed a special
drive to "Top That lOfo by New Years," and subsequently
special industry-wide drives were carried out in a few fields,
notably the rubber and steel industries. Later analysis
indicated, however, that it was more productive to concen-
trate efforts along geographical lines of the State and local
committee areas than on a vertical industry-wide basis.

At about the time of the Second War Loan, in considering
plans for further strengthening of the payroll savings plan^
it was concluded that the 10 per cent goal should be gradually
supplanted by something better. At the time of its adoption,
the 10 per cent of gross payroll for War Bonds was a reason-
ably high goal. By the late Spring of 19^3 that goal had been
reached by a great many concerns, and it tended to become a
ceiling, that is, when individual x^rorkers or groups reached
the 10 per cent they felt that they were at peak performance,
whereas a great many could go much higher. It was decided
that a precise figure, in some greater percentage, would not
be practical. A much better method was an approach not in
figures but in general appeal to each worker's maximum
performance under his individual financial and family
circumstances. The upshot of this thinking was the family
income approach, illustrated in a leaflet prepared for
distribution to individual workers, called "Figure It Out
Yourself." Through simple references to family budgeting,
each worker already on the payroll savings plan, or each
prospective participant, was sho^m graphically how much of his
income he ought to put into savings through 'f'Jar Bonds.

In the Third War Loan an experiment v^as made with plant
"drive quotas." State offices were encouraged to urge the
firms in their area to accept quotas of their current payroll
savings "take" plus a sum representing two weeks' pay. The
plan was promoted in several areas, notably in and around
Detroit, Michigan, but it was not generally well received.
The plant "drive quota" idea was revived later, and used
successfully in the Seventh War Loan and the final Victor^'-
Drive.

Preceding the Fourth War Loan, which began January 1, 19^U
payroll savings leaders from the imporatant industrial states
met with headquarters officials in Washington to consider
both drive and interim payroll savings promotion, A substitute

167 -

plant "drive quota" plan was adopted, on the simple formula
of a goal of a $100 Bond per employee during the drive, the
goal to be reached tlirough regular payroll deductions plus
extra cash sales to make up the $100 average. This plan
T'jorked well; a great improvement was noted in Fourth I^Jar
Loan sales in plants and factories. Nationally prepared
material for this drive, used widely and effectively,
included a manual "How It Has Been Done," a folder called
"Getting the Order from Workers," and a simple thermometer
chart to be used in plants, showing day -by-day approach to
the drive goal.

One of the problems in managing the payroll savings
program, at least from Washington, was to keep it moving
along the single track of maximum employee participation
and maximum dollar investment in bonds, without becoming
involved in diversionary promotions, such as bond premieres
at theatres, "Buy a Bond to get a free ticket" to a play,
concert or football game, or "Buy a Bond for an autograph"
by Lana Turner or Frank Sinatra, etc. These and other
special Bond promotions helped payroll savings when properly
managed, but from beginning to end the organization problem
was mainly this :

1. To see that State and local vJar Finance
committees thoroughly understood the job
to be done.

2. To assure that Treasury Representatives
thoroughly understood their job.

3. To get top management and labor behind
the plan in each plant.

h. To see that an organization was set up

within the firm to secure drive and interim
solicitation of every worker by a Minute
Man captain^ or whatever the title, with
not more than 10 fellow workers being
assigned to each solicitor.
In simple language this organization and continuous
service job x^/as described in the opening paragraphs of
"How It lias Been Done":

"The ultimate objective of organization for
sales to individuals on plant payrolls is to
have every single worker solicited personally.
Somebody has to say:

'Bill (or Mary), your War Loan Card has
been assigned to me -- here's the way
it works - - '

168 -

If this person-to-person canvass is to be
successfully achieved, we must start at the very
top of organization and work doT'm in careful
steps from the State Payroll Chairman, who is
responsible for the success of the entire
operation, to the team captain in the plant who
is responsible for 'Getting the order', from
ten of his associates."
Ample experience proved that the above pattern was a sound
one. Success lay in convincing all the State organizations
to take all of the steps indicated.

To this general management story should be added the late
loan drive refinement of plant quotas. In the Seventh War
Loan and the Victory Drive, plant quotas were set in terms
of dollar goals, a total for the plant, scaled by companies
according to the average monthly wage in the plant, the
over-all goal to be achieved by a combination of regular
payroll savings during the period of the drive, plus extra
cash sales. This was the chief addition, and a very successful
one, made to earlier payroll savings techniques.

Women ' s Cooperation

Women's activities in War Finance cut across the whole
functional organization. The Women's Section of the Field
Division in Washington dealt with women's committees in the
States and with national women's organizations outside the
bond program, but in reaJ.ity there was no such thing as a
self-contained water-tight women's program. Women volunteers
did not deal exclusively with women; they helped wherever
their services could best be used.

VJomen played an important four- fold role in the payroll
savings program. In many communities they helped install the
plan, usually in smaller i*irms of one hundred employees or
less. In many larger firms women acted as Treasury Representa-
tive or chief Bond Officer, In a great many firms, especially
under wartime conditions, there were as many women as men
employees, often more, so that women carried a proportionately
large load of the person-to-person solicitation, both in
loan drives and interim periods. At least ^0 per cent of the
bond purchasers on payroll savings were women workers.

169 -

Conclusions

The record of payroll savings in the Uar Finance program
TTas impressive; at its peak in the SLiminer of 19^^ and the
spring of 19^5, there were more than 2? million people
participating at the rate of over ^f^500 millions monthly. In
terms of the ratio of payroll deductions for bonds as against
total wage payments in the participating firms, this repre-
sented an increase from about h per cent in December to 8
little over 11 per cent in December 19^^. Extent of employee
participation in payroll savings firms reached a national
average of about 76 per cent.

Of all the numerous types of War Bond Promotion, the
payroll savings plan was the easiest to operate and, over the
long run, the one most productive of sales for the amount of
promotional energy required to keep it operating efficiently.
If all income receivers in the country could have been placed
on a payroll savings plan, the Whole War Finance program would
have been very simple indeed. The chief limitation of the
plan was that it could not readily be applied to large groups
of prospective bond buyers, such as farmers, professional men,
housewives, and the self-employed, in. other words to people
with income not derived through regular salaries or xxages.
Other promotions of the War Finance program were designed to
reach these groups.

To the participation and dollar record of payroll savings
should be added the equally important intangibles: (l) Greater
financial security for the workers themselves; (2) Improved
worker morale and demonstrably increased war production in
plants having successful plans, and (3) Improved labor-manage-
ment relations. The cooperation of representatives of
management and labor on bond committees, both working on a
project to help the individual as well as the nation at war,
taught each side increased toleration and respect for the
other. The worth of the payroll savings plan to individuals,
to industry and to the community was clearly demonstrated in
the overwhelming requests for its continuance after the war.

Schools At War

Although primarily educational in purpose, the Schools
At War program can be considered a direct-selling promotion
since it centered around the purchase of Savings Bonds and
Stamps by school children in their schools. The antecedents
for the school program of World War II were the Thrift Stamp

- 170 -

program of World War I and the school bank plans which had
been conducted for a generation or so by many savings banks
throughout the country. In the V/ashington headquarters staff
of the original Defense Savings program, the value of a war
program in schools and colleges was first promoted by
Orville S, Poland as a part of his many c.ctivities in
connection with national organizations. In the States a
beginning school program vras under way in Michigan before
plans for a nationwide operant ion were well developed.

An Education, Literature and Women's Division of the
Defense Savings Staff came into existence in ivlovember 19^-1,
with the historian George Fort Milton in charge of the
preparation of pamphlets and other literature for the use of
the staff, Milton and the Treasury Department agreed to
part company soon thereafter, and the embryo school program
grew very slowly, with help from Judy Graves (Mrs. Harold N.
Graves, Jr.) and whatever time Orville Poland could spare from
his many other duties. The program began to come to life
in 19^2, on closer association with the Field Division,
especially with the encouragement of Robert Coyne, then
Associate Field Director.

T\-To significant school items were distributed in 19^1?
a Circular Letter, July 30, from John W. Studebaker, U. S,
Commissioner of Education, laying the groundwork for
cooperation between the Office of Education and the Treasury
Department, and an 8-page leaflet entitled Sharing America.
The latter, a declaration of policy, was so carefully phrased
that its basic philosophy needed to be changed hardly at all
throughout the war, alterations being chiefly expansions of
detail. Sharing America was partially reprinted, with
explanatory notes, early in 19^6 as a statement of the
fundamentals of the school savings plan in the peacetime
bond program. In theory the U. S. Office of Education had
charge of the relations of all Federal Agencies with the
nation's public school system. That office, however,
graciously allowed the Treasury to deal directly with schools
regarding Savings Bonds and Stamps, and often helped with
material assistance, such as the use of certain of its
mailing lists, and with advice. The Teasury's Education
Section developed and preserved very close relations with
many non-governmental organizations such as the National
Education Association, the American Council on Education, and
the National Catholic VJelfare Conference.

- 171 -

Purpose

The broad, general purpose of the Schools At War
program, as it came to be called, was to enlist the schools
— teachers and pupils -- in support of the war, not through
military service, nor wholly through participation in the
purchase of U. S. Savings Stamps and Bonds, but through
education for the preservation of democracy and good citizen-
ship. The school program was primarily educational, with
financial support of the war in second place. Through the
Schools At War program the Treasury undertook to help teachers
give their students an understanding of America, how to live
in it, and how to plan and build for its future. The Treasury
offered schools materials on war aims, thrift and conservation,
and a plan for practicing thrift through the regular purchase,
by students in classrooms, of Savings Bonds and Stamps,

The Schools At War program was directed to school
administrators, teachers and pupils, and through the latter
to their parents and the community. Although the Treasury
hoped to sell substantial amounts of Government securities
through school activities, the major objectives were
correlative. School students were growing up to have
eventually their owa homes, business and professions. They
were prospective candidates for payroll savings plans. While
still in school they could carry the war finance message home
to their parents. Thrift education for students would help
the boys and girls themselves to be more substantial and
financially secure citizens in future years when the war
crisis was past. In this sense the school savings program
was educationally sound, was one which professional educators
appreciated and could sponsor in their own field as well as
to propagate for the long-range value to the nation as a
whole .

Early Stages

In the spring of 19^2, under the general oversight of
Orville Poland, Judy Graves actively managed the growing
Education Section, Between January and May, a half-dozen
publications helped bring the slowly developing program into
focus. T\'7o of these. Pennies and Junk, provided schools with
readily useable material highlighting the need for thrift and
conservation under wartime conditions. Also completed were
the first of several Handbooks for the guidance of educational

172

workers on State Coiranittees, and a Program, for Colleges. The
college program proved to "be rather unsuccessful. Large
universities found little place in their crowded curricula
for consideration of the Treasury's problems. For some
reason, college teachers proved less responsive to the
defense or war savings program than almost any other professional
group. However, the Schools At War program received sub-
stantial support from a great many small colleges, and from
individual student groups elsewhere. Their needs v^ere
especially catered to through a periodic mimeographed release.
The Campus Clipsheet. The lack of enthusiastic response from
colleges X'/as in some cases due to the fact that many college
students had no funds to invest. Meager college response to
the Treasury's program v/as also due to academic preoccupation
with the intellectual rather than the practical aspects of
citizenship.

Most substantial of the early 19^2 educational
publications were: Stamps ; How They Help Uncle Sam, and
What You Should Know About U. S. Savings Stamps and Bonds .
The latter of these pamphlets contained a very full and
felicitous statement of the basic philosophy of the whole
savings program. In April, 19^2, was also distributed a
Pledge Card for school children to sign, promising to keep
up their Stamp purchases during the summer vacation. This
item was so well received that it was reissued, in slightly
revised form, in 19^3.

Chronological Development

A full-fledged Schools At War program got under way in
the fall of 19^2. Homer W. Anderson, Superintendent of
Public Instruction in St. Louis, Missouri, was appointed
Director of the Education Section. His chief assistant was
Daniel Melcher, who succeeded him in October 19^3? and
remained at the head of school activities throughout the
remainder of the war program. 2

2 Beginning his work with great promise. Dr. Anderson proved disappointing. He seemed
unable to work up necessary enthusiasm for the promotional Job. Melcher, who Joined the staff in
May, I9I+2, was a Harvard graduate, with experience in publicity and selling, having previous to his
Treasury appointment been for about two years with the Viking Press. He possessed boundless energy,
and had a tendency to keep more irons in the fire than could be well heated at one time. His
argumentative and slightly intolerant disposition caused people who did not know him well to form an
unfavorable impression, and to decide \uiconsciously that they belonged on the other side of an issue
from that taken by Mr. Melcher. His substantial promotional merits could be recognized only on close
acquaintance over an extended period of time.

173 -

A parade and formal ceremony on the south steps of the
Treasuiy Building in Washington, September 2S, 19^2, placed
the Schools At War program prominently in public awareness.
Participating in the special ceremonies were Secretary
Morgenthau, Mrs. Eleanor Roosevelt, Commissioner of Education
Studebalcer, and two representatives from Philadelphia who
opened the "Liberty Brick" campaign, the first of many
nationwide endeavors in which school children took part very
enthusiastically. The "Liberty Bricks" were actual bricks
from Independence Hall in Philadelphia, being discarded in
the course of repairs to the building. For the school
program, the rescued bricks were placed in individual glass
cases, with a small replica of Independence Hall, and then
offered, one to a State, as "prises" or awards in recognition
of the participation of the schools of the state in the
Treasury's savings program, 3

Follox\'-ing the launching of the Liberty Brick campaign,
which was supplemented by the making of Scrapbooks by
participating schools, illustrating their war activities, the
permanent features of the Education Section program rapidly
took shape. To keep the educational world informed on the
Treasury's program, there were released periodically mimeo-
graphed or printed items such as the Campus Clip Sheet, the
High School Clip Sheet containing publicity suggestions for
the educational press, and, most important of all, a quarterly
journal, S cho ol s - At -War , printed in quantity of more than a
million for each issue, and distributed to nearly every
teacher in the land. These journals contained practical
suggestions on how to conduct Stamp Sale Days, and explanations
of the Treasury's objectives, war e}rpenditures , and Government
financing.

A complete list of titles distributed I9U2-U5 by the
Education Section would run to almost as many pages as this
chapter section on the school savings program. The unit
distributed more material than any other agency of the V/ar
Finance operation, save only the Division of Press, Radio
and Advertising. State Chairmen and Executive Managers
occasionally complained that school material was much too
bulky, both as to number of separate items and the quantity
of each broadcast. Classified by intended use, the chief

3 The bricks, in their impressive cases, were awarded at the close of the school year. Most
of them came eventually to rest in State Capitol buildings, or offices housing State departments of
education. Most of the expenses of the Liberty Brick promotion were paid by the Ladies Home Journal
as a contribution to the Treasury's program.

17^

educational materials fell into four main groups: (l) Teach-
ing aids, (2) Mechanical aids, (3) Student use items, and
(h) General or miscellaneous publicity.

Of these, the Teaching aids were educationally the most
substantial. They included such useful publications as:

The Teacher of Mathematics and the 'Jar Savings
Program

The Teacher of English and the V/ar Savings Program

War Savings Programs for Schools at'~War~(Targely
plays )

Art in the Service of Schools at War
Material for student use was more variegated: Victory
Vforkbooks (three different ones, for grade levels 2-5);
Songs for Schools at War , plans, directions for play or
essay writing contests, and designs for War Stamp Christmas
greeting cards, etc. Mechanical aids included Stamp and
Bond order and report forms for use in handling purchases and
keeping record of achievement.

There were several special promotions carried out after
the Liberty Brick-Scrapbook campaign, notably a "Jeep"
promotion in 19^3. School children vrere urged to buy enough
Stamps and Bonds through their school to sponsor (equal the
price of) a Jeep, that useful Army vehicle which appealed
particularly to youngsters. Some ^40,000 Jeeps were sponsored
in this manner in the closing months of the school year.
From the following September through December it was estimated
that another 50,000 Jeeps had been so "purchased" by the
nation's school children. The sponsorship campaigns were
then extended to include six or more types of planes, from
Fairchild Trainers to Flying Fortresses, and, nea.r the end
of the war, to hospital and rehabilitation equipment.

As in the case of Payroll Savings, student bond-buyer
enthusiasm for a good record was" encouraged by awards and
citations which could be displayed by individual schools, the
principal one being the Schools-At-War flag, which was of the
the same design as the Treasury flag for Payroll Savings but
with the colors reversed. Student interest in the equipment
they "bought" through sponsorship campaigns was heightened
by a system of decalcomania marking, in which a label with
the name of the school was placed on a piece of military
equipment of the type "purchased." Many schools received
grateful letters from servicemen who eventually used the
equipment so sponsored.

The Education Section did not confine its xvartime
activities to school and colleges; it fostered the Treasury's

175

TDrogram with the Boy Scouts, Girl Scouts, Camp Fire Girls,
ii-H Clubs, Future Farmers of America, and several other
youth organizations. Not until the very end of the wartime
program did the Section have a formal National Advisory
Comm.ittee similar to those called into "being for several
other units of the Division. This Committee, which met in
V^ashington December 7? 19^5 3 was continued as a valuable
counseling body for the peacetime school savings program.
Advice of professional educators was, of course, sought
throughout the program^ by memoranda, correspondence, and
informal personal conferences. A great many nationally
prominent educators had offices in Washington within easy
walking distrance of War Finance headquarters.

Sales Record

The Education Section estimated after the close of the
Victory Drive that some $2 billions of Government securities
had been sold as a result of its efforts. This figure could
not be proved by irrefutable statistics, but it afforded a
reliable approximation of the size of the Schools -At -War
achievement.

As a method of war financing: the school program had
iseveral advantages; (1) A great majority of school admini-
strators and teachers were readily convinced of the merits of
the voluntary system of war savings; (2) Opinions of the
teaching profession were highly respected in most communities,
hence when schools demonstrated their belief in War Finance
and actively participated therein, others in the community
were ready to follow this example; (3) School children told
their parents about the War Bond message, thus helping to
reach large segments of the population; {k) School children
and youth organizations, particularly the Boy Scouts, often
helped distribute general War Bond promotional material to
whole communities; and (5) The school program was essentially
a payroll savings plan in embryo. When a youngster decided
to put 10 cents of his weekly allowance or earnings into
a War Savings Stamp, he was practicing payroll savings on a
small scale, and acquiring the habit for his older years.

As a productive means of selling Governm.ent securities,
the school program had many limitations, chief of which were;
(l) Opposition of some State and local school administrators
to anything that savored, however faintly of Federal

176 -

interference or program planning; (2) The necessity for
clearing almost every piece of promotional copy with a large
number of State and local officials; (3) The unwillingness of
many teachers, already overburdened with work, to give adequate
attention to vrhat they considered an "outside" activity;
{h) A complicated distribution problem, due to the great
variety of local school systems. To avoid building up a
tremendous mailing list including individual teachers by
name, the Education Section had to rely heavily on local
school superintendents to redistribute bulk shipments of
material to the teachers under their jurisdiction. Superin-
tendent cooperation in most cases was good, but in others,
shipments of the teachers' bulletins were greatly delayed in
reaching the intended recipients, or else did not get to them
at all. Good cooperation from school administrators was
generally more easily secured in the Roman Catholic parochial
than in the public school system, this being due to the
former's more centralized organization. Cooperation with the
Treasury once being agreed upon by a few high officials, it
carried on do\m through the whole parochial system.

In the Schools -At-War program, cash sales of bonds as
against the expenses of promotion were smaller than in many
other types of promotion, particularly payroll savings. The
final judgment on a school program as a savings program must
rest on its value as an educational process for training
students who as adults would have, because of the program, a
better understanding of their country's government and
financial problems.

Newspaper Carrier Boys Stamp Promotion

The groundwork for a Newspaper Carrier Boy Stamp
promotion was laid in the fall of 19^^-1 as part of the over- all
retail plans being developed by Sydney Mahan. The program was
initiated outside the Treasury, by Howard \'K Stodghill of the
Philadelphia Evening Bulletin. Begun in the middle of
September, the carrier sale by that newspaper resulted in the
distribution of more than 1,000,000 stamps during the first
seven weeks of operation. Stodghill remained the guiding
force behind the expanded program, as chairman of the Treasury's
Newspaper Advisory Committee, which represented circulation
manager organizations throughout the country. Within the
Treasury the promotion was managed by John M. Black and then
by his successor, Harry V7. Cullis.

The Newspaper Carrier promotion gained headway in
January, 19^2, and was in good working shape by the summer of

" 177

that year. The promotion provided a plan through which
carrier boys would participate actively in the vrar savings
program by purchasing Stamps and Bonds themselves, and by
selling Stamps to their customers on paper routes. The
promotion was a direct-selling device possessing collateral
advantages . It appealed to newspaper managers as a means of
improving the morale of their carriers, and hence influenced
them to look with favor upon the whole Treasury program, and
to be more willing than they might otherwise have been to
aid the sponsored newspaper advertising program for \1rt Bonds.

The carrier boys participating in the Stamp program were
supplied with pledge cards and identifying insignia and awards,
one of the latter being a shield to the bottom of which could
be attached honor bars and pendants.

Tito special promotions were carried out within the
framework of the carrier boy plan --a Water Weasel campaign
and sponsorship of a fleet of LCVP's. The Water Weasel
promotion was scheduled February 10 - May 12, 19^5 ? to sell
Savings Stamps to meet the cost of a large number of M-29's,
the "swamp goin' Jeep" useful in jungle fighting in the
Pacific islands. One Water Weasel could be sponsored, and
marked with a decalcomania inscribed with the name of the
newspaper, for every U8,150 ten cent stamps sold. The LCVP
campaign to sponsor landing craft for V-J Day was launched
August 6, 19^5? to run through October 27. Japan surrendered
before the campaign was over.

As a sales promotion the Newspaper Carrier Boy campaigns
achieved an enviable record. Originating in Philadelphia
vrithin sight of Independence Hall and the Liberty Bell, it
spread to more than 900 cooperating newspapers, and 150,000
carrier boys who sold more than 1 billion 700 million ten cent
stamps or equivalent. That was no small achievement in terms
of ~^small change," and, more importantly, as Howard Stodghill
said in launching the LCVP campaign, the carrier boys not only
sold stamps but greatly strengthened the patriotism, responsi-
bility and enterprise of American youth.

Personal Solicitation

The best way to get people to buy bonds is to ask them
to buy. This is an axiom of salesmanship so evident as to
need little proof. One quotation, from a report on the
will suffice to illustrate this point:

-■ 178

"As in all previous drives people who were
solicited were much more likely to buy
bonds than those not personally asked to
buy. In the Sixth Drive 57 per cent of
the non-farm people solicited bought extra
bonds while only 26 per cent of those not
solicited bought. Solicitation still remains
the most effective way of selling bonds,'

Obviously any program of direct person-to-person
solicitation to reach every receiver of income, or bond
prospect with accumulated savings ^ required a tremendous
army of solicitors. The paid staff of the War Finance
Division, reaching at its height less than two thousand field
xrorkers, represented a mere drop in the bucket of canvassing
personnel necessary. The only practical solution was an army
of volunteers. The Defense and the War Savings Staffs laid
the groundwork for this in building up membership of volunteer
cooperation with the Treasury's program. By the time of the
Kansas City Conference, in the fall of 19^2, there were
regularly organized committees in practically every county in
the nation, and in the larger cities and in a great many civic,
fraternal and other social organizations.

Upon assuming management of the War Savings operation in
19^2, Ted Gamble laid plans for intensified personal
solicitation which became common throughout succeeding drives.
Tllie plan was, simply, to have the War Finance committees
recruit additional volunteers to serve for the month or
slightly longer period of each loan. In this way the permanent
committees periodically expanded their effective force to many
times normal strength, so that the bond volunteers increased
nationally from a total of approximately 500,000 between
drives to five or six million during drives.

Sources of Volunteers

The volunteers were both men and women, and they came
from everywhere — from life underwriter associations,
securities dealer organizations, hotel staffs, the Civilian
Defense rosters, from national organizations such as Rotary,
Lions, Masons and the American Legion, from labor unions.

U Appraisal of the Slyth War Loan, U. S. Department of Agriciilture, Bureau of Agricultvural
Economics Study No. II8-I, Feb, 1, 19^+5 •

- 179 "

They included Boy Scouts and Girl Scouts, school children,
rural mail carriers, housewives, literally every group in
the complex social structure of the nation.

Training of Volunteers

Before each v/ar Loan drive, the extra volunteers were
trained for the short, intensive job by members of the
regular War Bond committees. Most importantly, a major
share of the task of person-to-person canvassing fell to the
lot of, or was gladly assumed by, the women's committees of
the War Finance Division, and their cooperating volunteer
organizations .

The VJomen ' s Section

At the beginning of the Defense Savings Program, the
Women's Section functioned almost entirely through established
women's clubs and organizations. The General Federation of
Women's Clubs was one of the first to adopt the promotion
of Bonds and Stamps as a national war service project.
Others vrere the National Federation of Business and
Professional Women's Clubs, the Daughters of the American
Revolution, and the Women's Supreme Council of B'nai B'rith.

A mailing list of these organizations was assembled and
the groups were circularized by such pamphlets as We Gals
Must Stick Together, and Mrs. Brot-jn Buys a Bond. Special
programs suggesting bond and stamp sales at club meetings
and the presentation of War Bond playlets were prepared for
War Savings committees and related organizations. From these
early materials grew a set of Program Aids for distribution
to all Women's Clubs, an informational set of questions and
answers on Savings Bonds and Stamps, and suggested speeches
for club presidents and War Savings women chairmen.

In June of 19^2, Miss Harriet Elliott took leave of
absence from her duties as Dean of the Women's College of
Eorth Carolina at Greensboro and became Director of the
Women ' s Section. 5

5 Harriet Elliott: Howard College (ind.) A.B. I9IO; Columbia University M.A. 1913; Howard
College LLD 19^1; taught political science at North Carolina University for 2^+ years, and became
Dean of Women 1935. She returned to her college duties in March I9UU. Her influence on the whole
War Finance operation was great. Her chief assistant was Miss Mahelle B. Blake, formerly of Smith
College, who came to the Treasury program in July 19^+2 . She took charge of promotion with National
Women's organizations and she succeeded Miss Elliott as head of the Women's Section. For some time,
19ltl_U3j Mrs. Morgenthau, wife of the Secretary, worked with the Women's Section as a volunteer,
and took particvilar interest in other phases of the bond program, particularly posters, music,
special literature and some aspects of the school program.

- 180 -

She had previously served as the only woman member of
President Roosevelt's Defense Council, and as head of the
Consumer's Council , Office of Price Administration.

Women's Divisions were then set up in the states to
assist the over-all State War Savings organizations and to
plan activities for women along state and local lines. A
Women's Chairman was appointed in almost evevY state, and
chairmen of various women's committees -- on booths, materials,
special events, speakers, Stamp corsages, etc. -- were chosen
to serve with her. County and local Women's Chairmen were
also appointed, and they developed committees cooperating
with the general County and local committees.

Materials

A Women's Handbook was prepared and distributed in
19^2, for use particularly by State Women Chairmen. It
contained organizational outlines, work sheets on the duties
of Women's Chairmen and the heads of special committees,
Basic information was also included on the need for saving
and the securities offered by the Government.

In cooperation with the Ladies Home Journal a newsletter
for women committee members and key Volunteers was developed
-- the Home Front Journal — edited by the Women's Section and
printed by the Curtis Publishing Company. Especially designed
for women, this publication supplemented the Division's
general house organ, The Minute Man . The Women's Section
had its oxm Distribution Unit for sending women's publications
to the field, and general bond promotional items to women's
clubs and cooperating organizations.

The very extensive use made of an important early
publication of the Women's Section, called Mrs. Brown Goes
to War (originally Mrs. Brown Buys a Bond), will illustrate
the distribution methods vrhich reached into many and
variegated quarters for useful bond publicity. This l6-page
booklet was revised after Pearl Harbor by Nancy Hale, author
of The Prodigal Women , and illustrated by a popular commercial
artist, Floyd M. Davis. Nine and a half million copies of
the revised booklets were ordered and the entire distribution
was made at practically no cost to the Government through
the cooperation of large grocery chains — A -": P, Safeway,
Fisher Brothers, American Stores, Kruger, Piggly Wiggly and
the Independent Grocers' Alliance. These booklets were
picked up by the groceries' warehouses just as though they
were cases of baked beans, and transferred to the grocery

181

shelves from coast to coast. Bulletins to store managers
urged distribution and prominent display.

The grocery chains also contributed prominent ads in
their newspaper publicity and announcements on their radio
programs the week preceding the distribution of the booklets.
Their magazines, Every.-roman ^ s ^ Family Circle, Turnstile, and
VJoman ' s Day, also devoted prominent space to the booklet and
the problem of inflation as affecting housewives' pocketbooks.
Spot announcements on radio programs, as v^ell as a special
15-minute dramatization of the booklet, were also scheduled
to encourage grocery shoppers to get their copies of Mrs. Brc/jn
Goes to War , Newspaper and syndicate food and women ' s page
editors also generously publicized the booklet, as did women's
radio commentators.

Local Promotions

Locally the Women's Section developed a great variety of
promotions, among which the following were notable:
Booths :

Thousands of women volunteers staffed Bond
Booths as supplements to bank and post office and
other bond issuing agencies. These were located
in key spots such as railroad stations, theatre
lobbies and department stores.
Minute Maids :

Thousands of communities made extensive use
of itinerant saleswomen, variously called Minute
Maids, Victory Aides, Molly Pitchers, etc., dressed
in attractive attention-getting costumes, to sell
Bonds and Stamps in public places.
Victory Exchanges :

Useable household articles, "white elephants,"
or other articles for which the original possessors
had no further use, were sold to new purchasers for
an exchange price in War Bonds and Stamps.
Auctions :

Community-donated articles were bid for in
War Bonds. One variation of this plan was to
auction off the services of prominent citizens
as domestic help and handy-men to the highest
bond bidders.
Special Promotions

On a nationwide basis, women carried out a dozen or so
special promotions. They cooperated with the state Pledge

182 -

Campaigns in the spring of 19^2, in many cases providing
the bulk of the extra personnel needed for the local
campaigns .

The first exclusively Women's promotion was "Women At
War Week/' carried out after the Kansas City Conference in
the fall of 19^-2. This did much to consolidate women workers
within states and communities and to strengthen their
organization.

During the Second War Loan, women workers staged an
"Outfit the Outfit" campaign. Cost estimates on complete
outfits for a soldier, sailor and marine were gathered; also
the estimates on complete outfits for platoons, companies
and regiments of military personnel. Committees, sponsoring
groups, clubs and communities were urged to set their Bond
buying quotas in terms of Outfitting the Outfit. News reels
and press publicity pictures were taken of opening day sales
to Mrs, Morgenthau, Colonel Hobby of the WAC ' s and Commanders
McAfee and Stratton of the naval and coast guard women's
reserves. Communities and clubs staged rallies in which
Bond buying was dramatized in terms of military equipment,
and stage personalities were photographed with members of the
armed forces whom they had symbolically outfitted through
their Bond purchases.

A Molly Pitcher Day was a one -day promotion held in the
summer of 19^3? highlighted by national radio and press
publicity. Molly Pitchers, named for the Revolutionary
War heroine, frequently in costume, carried pitchers and sold
Bonds and Stamps on street corners. Customers were given a
tag showing Molly and her pitcher and carrying the slogan:
"Fill the Pitcher with Bonds and Stamps on Molly Pitcher
Day," In some cities youngsters aged six and up acted as
Molly Pitchers, In many places the American Legion Auxiliary
spearheaded sales because of their successful experience with
Poppy Days.

"Bonds for Babies" was a 19^3 advertising campaign built
around an appealing poster showing a baby and a War Bond, and
carrying the message: "For Baby's Future, Buy War Bonds."
The poster was distributed to maternity hospitals and to
prenatal clinics. Women's committees also displayed it at
booths, and in the infant departments in stores, Baby
magazines, such as Congratulations and Baby Talk, adapted
the poster as their cover design for the month. Firms in
the infant wear field made up special Stamp Album covers
using the picture from the poster, and gave the albims with
the first Saving Stamp in them to their baby customers.

183 -

In the Third VJar Loan the Women's Section issued an
instruction guide for "door-knocker" campaigns; this item
was part, of the program for the greater stress upon person
solicitation being carried on by the whole War Finance
organization.

One very effective and appealing promotion, developed
originally as a Retailer's item, but in practice carried out
almost exclusively as a women's promotion, was the War Stamp
Corsage, Nationally-known designers evolved seasonal corsages,
with the "flowers" made of cellophane -covered VJar Savings
Stamps, and women's committees created variations of their
own. In many cities corsage centers did a thriving business
in table decorations, party favors, and novelties, as well as
in more conventional boutonnieres and corsages. National
publicity did much to make such Stamp decorations chic and
popular .

For the Fourth War Loan the VJomen's Section launched a
Hospital Equipment campaign, to replace earlier sponsorship
of bombers, tanks and other items of military equipment. This
campaign had very general appeal, particularly to organizations
which preferred not to picture their dollars as paying for
the death-dealing instruments of war. A cost list of items
of army medical equipment was assembled, as was done for the
"Outfit the Outfit" campaign. Pictures of medical equipment
were made available to women's committees and cooperating
organizations, and also a sound film showing the evacuation of
wounded by airplane. For selling stated amounts of E Bonds
for hospital equipment, clubs and organizations could secure
a special citation signed by the Surgeon General of the Army,
Norman Kirk.

There were many other special women's promotions of great
assistance to the over-all bond campaigns. To some degree the
hospital equipment promotion was continued after the Fourth
War Loan, and a part of it carried over into the school
program. A new twist was given to the "Bonds for Babies"
promotion through a certificate designed by VJalt Disney, with
a scroll of his most popular movie and cartoon characters.
Originally prepared for the Women's War Finance Committee for
Southern California, the certificate was made available to all
states. Committees which used the certificate often wrote
a letter to parents of new born babies, suggesting the
purchase of a Bond for the nev7 citizen. Parents would then
inform the committee of the serial number of the bond purchased,
the name and date of the birth of the child, and receive a
duly filled- in Disney scroll. Use of the Walt Disney

iQk -

certificates was not confined to Women's Committees. Many
bond issuing agents were stocked vrith the certificates, and
they were also used to some extent in the school program.

A Grandmother's War Bond League was launched in April
ISihk by a nationwide radio broadcast featuring Mrs, Eleanor
Roosevelt. The promotion was instigated by Mrs. George C.
Marshall 5 wife of the Army Chief of Staff , who bought bonds
directly from Secretary Morgenthau for her three grandchildren.
The promotion was extended nationally, along the theme of
"Grandmother's Bond with the Future." It was supported by a
promotion guide book, and a clipsheet for newspapers.
Membership in the League entailed merely the buying of Savings
Bonds for grandchildren.

In the fall of 19^U the Women's Section developed
materials for a "Pin Money" campaign, directed particularly
to housewives, who were urged to save up their spare pennies
and other small change to accumulate toward the purchase
price of a bond.

Conclusions on Personal Solicitation

The full story of direct solicitation defies narration.
Women assumed a large share of it, probably somevrhat more than
half the total. Women engaged in direct canvassing in nearly
every state in the Union. South Carolina, home of "States
Rights" since before the Civil War, was the only state which
refused to have an independently operating women's organization,
The five to six million War Loan Drive volunteers, as well as
the 500,000 non-drive, permanent committeemen and women, came
from all ages and sections of the population. They included
farmers, school children, butchers, waitresses in hotels and
restaurants, retail clerks, professional models, movie actors
and actresses, a complete roster of occupations and way of
living.

Admittedly the army of volunteers, great as it was, did
not and could not reach every prospect. After each War Loan
there were many voices crying, "Nobody asked me to buy a
bond. " The number of volunteers really set the limit on the
voliome of Series E Bonds and other securities that could be
sold to individuals in a drive. War Loan goals to all
investors were achieved by percentages ranging from 120 to
192, E Bond goals were missed in two drives, the Third and
Seventh, and only surpassed once, in the Sixth, by as large an
oversubscription as 15 per cent. Had the war continued longer,
market-risk securities probably could have been sold in much

- 185

greater volume, but any appreciable increase in individual,
particularly in E Bond, sales would have required a larger
volunteer force than the six million peak attained.

To secure six million volunteers was a giant undertaking
in itself. To inspire them to keep plugging away with dogged
persistence, and to make the nation realize their importance,
was an even greater undertaking. One distinctive device for
giving recognition to VJar Bond workers was an identification
badge, used most widespread in the Fifth War Loan. Volunteers
were on other occasions cheered for their task by a great
variety of means, depending upon the ingenuity of the local
War Finance chairmen. There were impressive "swearing in"
ceremonies for new "Boundadiers , " systems of promotion,
military fashion, for good sales records, and lunches ^ dinners,
and free movie shows. Last minute additions to solicitation
forces were gathered in through nev/spaper ads or by appeals
from a sound truck.

The heart of the bond selling program, when the stage
had been set by every conceivable type of advertising,
depended upon asking people to buy, asking them two or tliree
times, asking them at work as well as at home. Mobilization
of volunteers was the key to success. It was never accomplish-
ed to the point of perfection, but each War Loan ran a little
more smoothly than the one before. At the close of war
financing, the Treasury owed its bond volunteers a debt of
gratitude that could be paid in no way save a heartfelt
"Well done, thou good and faithful servant."

Indirect Selling

By comparison with direct methods of Savings Bond and
Stamp sales through payroll savings, school and newspaper
carrier boy plans, and person-to-person solicitation, the
other promotional efforts of war finance may be termed
indirect selling. The most all-embracing type of indirect
selling was that included in the many-sided operations of the
Press, Radio and Advertising Division, which will be reviewed
in the latter part of this chapter. The other types of
indirect selling will be treated here, with no attempt to
rank them in order of relative importance.

- 186 -

Banking and Investment

The work of the Banking and Investment Section was of
great importance to the whole War Finance operation. The
cooperation of the "banking 'and investment industry was a
sine qua non of the Treasury's program, and efforts to
cultivate this fertile field were undertaken at the very
beginning of the Defense Savings Program. B. M. Edwards
joined the Staff in the spring of 19^1, as an Assistant to
the Secretary, to aid the bond program with banks. Until
after the Second War Loan, however, the banks worked primarily
through the Victory Fund Committees, especially in the larger
cities, and concentrated their activities on the sale of
issues other than E Bonds, particularly to corporate investors.

Beginning with the Third War Loan, closer relations
between the Treasury's bond organization and banks was
brought about by the creating of the Banking and Investment
Division (later renamed a Section), headed by Edward B, Hall,
a Chicago investment banker. He was assisted by Stanley W,
Prenosil, former New York financial writer and investment
banker, who prepared booklets and other material suitable for
distribution by banks to potential bond buyers.

After the Fourth War Loan, the American Bankers
Association, at the request of the Treasury, created a
Committee on War Bond Drives, to help formulate a national
program and to coordinate the activities of all the nation's
banks in selling Government securities. The Committee
studied sales operations of the preceding drives, and grouped
the most successful of them into a comprehensive program
entitled "The American Bankers Association Plan of Action
for Banks." An A. B.A. War Loan Chairman was appointed for
each state.

This "Plan of Action" was built upon actual war finance
experience, and laid emphasis on personal solicitation of
bank depositors. Although some banks were reluctant to
canvass their depositors for fear of losing deposits, it was
found after the Third War Loan that total bank deposits in
the country increased steadily between war loan drives.
Survey of several banks which had done an effective job of
personal solicitation failed to disclose loss of a single
account because a depositor had been asked to buy War Bonds.
Some institutions reported that solicitation of their customers
to buy War Bonds resulted in new business for their trust,
loan, safekeeping and other operations. Wherever the complete
A. B.A. program was adopted, it proved very successful; the

187

plan as a whole, or in large part, was operating in every
state by the time of the Seventh VJar Loan.

During the Seventh War Loan Drive, the A.B.A. organiza-
tion was further strengthened by the addition of Regional
Chairmen to coordinate the work of the A.B.A. State War Loan
Chairmen. Both the A.B.A. State and Regional Chairmen were
outstanding "bankers, who worked very closely and effectively
with the State War Finance Committees. Bank cooperation with
the Treasury reached its peak in the Victory Loan. Heavy
over-subscription of the national goal for sales to individual
investors reflected in considerable measure the increased
cooperation of banks.

The National Association of Mutual Savings Banks accepted
a quota of $85 millions for the sale of Victory Loan securities
to individual investors, and their total sales reached
approximately $120 millions. The Investment Bankers
Association kept no record of War Bond sales by member firms,
but they reached large volume, particularly in such financial
centers as New York, Chicago, Los Angeles, Detroit, Boston,
Philadelphia and San Francisco, where investment banker teams
worked very closely with the local War Finance organizations.

Banks furnished much of the leadership for war loan
drives and also interim promotional operations. In the
Victory Loan, twenty-seven of the State War Finance Chairmen,
and approximately half of the three thousand county chairmen,
were bankers. In the Fifth, Sixth and Seventh /Jar Loan
drives, the A.B.A. Committees published a comprehensive
booklet of sales and promotional ideas, which was distributed
to the nation's 15,000 banks. Similar booklets were published
by the National Association of Savings Banks. In the final
Victory Loan, the American Bankers Association distributed
three issues of a special newspaper bulletin knoi'm as the
Victory Loan Campaigner, which contained speech material,
statistics on Government expenditures, statements by the
Secretary of the Treasury and prominent War Finance and
banking officials, and helpful hints on the sale of securities.

The Banking and Investment Section of the War Finance
Division had a great deal to do vrith originating and helping
to provide the ammunition for promotional material distributed
on behalf of the War Bond operation by cooperating financial
organizations.

• 188

Farm Program

The agricultural phase of the Defense Savings Program
originally operated as a part of the National Organizations
Division, with a member of the Department of Agriculture
acting in a consulting and supervisory capacity, A separate
Agricultural Section was set up in the spring of 19^+2. This
Section, headed in late 19^3 hy Merrill L. Predmore from the
Ohio War Savings Staff, prepared and distributed bond folders
for farmers, including Freedom for the Future and Twelve Facts
for American Farmers About Defense Savings Bonds and Stamps.
Early distributions were handled through Department of
Agriculture mailing lists, particularly for the Rural
Electrification Administration and the Agricultural Adjustment
Administration. By December 19^1? agencies of the Department
of Agriculture, the National Grange, the National Farmers
Union and others had assisted in the preparation and
distribution of some fourteen million Defense Savings leaflets
and folders .

In the spring and summer of 19^!-2 5 the head of the
Agricultural Section made an extensive field trip through
agricultural states, and with the aid of a Cornell University
professor wrote the Wartime Program for American Farmers,
which became the basic workbook for the farm program.
Published late in 19^2, this pamphlet emphasized: (l) Maximum
production of food for war, (2) Reduction of farm debts, and
(3) Investment in Government securities.

By the time of the Kansas City Conference in October
19^2, expanded plans for bond appeals to farmers were vrell
in hand. They ranged all the way from special promotions
like the Victory Pig Clubs to an adaptation of payroll
savings under which arrangements could be made through
cooperatives and other dealers and associations handling
payments to farmers to have definite allotments of the
payments diverted into War Bonds. The Victory Pig Clubs
were sponsored by the Production Credit Associations. The
plan was to select a first-class pig, then sell it at a
Victory Pig auction where all the proceeds would be paid
in War Bonds.

These basic promotions were not all initiated in
Washington. Throughout the bond program, many promotions
that x^^ere eventually recommended as nationwide plans were
begun in states , not only in the farm program but in every
other field of promotion, particularly in the unique category
which, for lack of a better title, was referred to as
"Special Events."

189 -

In the early farm program Colorado experimented in the
spring 19^2 pledge campaign with the setting of quotas for
family sales to farmers. Kansas set a goal of $1 million
sales to farmers in January, and by March had sold $3 millions.
Many state offices became acutely aware of the need for
having a Deputy Administrator for supervision of bond promotion
in rural areas 5 a procedure later encouraged by the national
office.

The expanding operations of bond promotion in rural
areas were outlined to the field in several comprehensive
instructional memoranda of late 19^2. These guides emphasized
the necessity of cooperating closely with every local branch
of national farm organizations; the need for adapting each
state farm program to the special conditions of the community;
and above all the need for exploiting all feasible sales
outlets for bonds in rural areas where the bond issuing
agencies common to metropolitan areas were lacking.

Bond publicity for farmers in 19^2-^3 included, in
addition to the Wartime Program, a pamphlet Our Good Earth
...Keep It Ours, a leaflet Lay 'em on the Fighting Line
(6|- millions sent as a stuff er with Agricultural Adjustment
Administration checks), and a folder The Minute Man Was A
Farmer Too. For use particularly by ^-H Clubs, the
Agricultural Section distributed quantities of a folder
originally prepared by the Education Section, Dimes Can Help
Vfin the War.

An elaborate survey and analysis of promotion among farm
groups was made by the Agricultural Section in October 19^3.
At that time good programs were operating in Maine, Llew
Hampshire, New York, Ohio, Kansas, Indiana, Nebraska,
Alabama, Oklahoma and Northern California. Of the large
agricultural states, Minnesota and Michigan were found to need
much further bond development; the others were fairly well
organized for campaigns in rural districts.

By the end of 19^3? VJashington headquarters had not only
encouraged states with large rural areas to have a special
Deputy Administrator for heading up the farm program, but had
taken on three or four field men to travel out of Washington
to help states with farm problems. A publication. Farm Bond
Aids, first in mimeographed form and then printed monthly,
served as a house organ for the agricultural phase of the
war finance program.

In 19^1-^ and 19^5 the farm program developed along lines
already in practice, and reached periodic promotional peaks,

190

as did other bond selling plans, in the War Loan drives. For
the Sixth War Loan, for instance, beginning November 20, 19^^?
the Agricultural Section made special plans to go after the
farm market since this drive coincided with the time of year
when farm income was high in many agricultural areas. State
offices were provided, in October, with elaborate mimeographed
material, "The Farm War Bond Market," pointing up the excellent
possibilities for rural sales. For the first time in V^ar
Loan drives, solicitors in rural areas were given a special
handbook. Your Job As a Victory Volunteer; 6th War Loan Farm
Manual. Each state was encouraged to develop a special
training program for farm solicitors. There was a folder
entitled Over There and Over Here, showing the connection
between the farm front and the fighting front, and a very
effective poster "A Crop That Never Fails." The Agricultural
Commission of the American Bankers Association cooperated by
preparing and distributing to rural banks a folder Hox^r You
Can Keep Agriculture Financially Sound. Many other appeals to
people in rural communities were channeled through radio
broadcasts and special newspaper and magazine advertisements.

Similar appeals directed to farmers were developed for
the Seventh and the Victory Loan drives. In the interim
between the Sixth and Seventh War Loans, the Agricultural
Section attempted to develop a program to secure investment
in bonds from income from the potato crop in Aroostook County,
Maine, but this proved less successful than the results from
a similar promotion undertaken earlier with tobacco in Virginia
and North Carolina. The latter developed a 19^U campaign
booklet entitled Minute Women in Tobaccoland.

For the Seventh War Loan, the Department of Agriculture
made available to the War Finance Division state estimates of
the dollar amount of farmers' demand deposits not needed for
current expenses and family living. These indices of "excess '
funds encouraged the states to which they applied to make
extra effort to reach their rural markets. In the Seventh
War Loan also, the Department of Agriculture encouraged State
Extension Services to cooperate with War Finance Committees
in securing showings of 16mM. bond films or "trailers" to
rural gatherings.

For the last special drive, the Victory Loan, all the
counties in the United States were classified on the basis of
agricultural income. In 19^^ some 626 counties had more than
$10 millions in agricultural income. State offices were
asked to report on the status of their bond promotion in
these counties, and many of them (about 85) were personally

191

visited "by a representative of the War Finance Division. The
results of these surveys were used as the basis of a conference
in Washington to perfect plans for the agricultural phase of
the Victory Drive.

The Victory Loan featured improved radio and newspaper
ad publicity, more, 'extensive use of l6 I#I. film, a printed
Farm Sales Manual, a Farm Program, and a play, "Tomorrow's
Harvest," prepared for the bond people by The American
Theatre Wing, War Service, Inc. Also, through cooperation
with the Retail Section, the Agricultural Section received
supplementary support from a 2-page combination War Bond
advertisement and bond application form in the Sears Roebuck
& Company catalogue, and a full page bond ad in the
Montgomery Ward catalogue, both of these being favorite
reading in rural areas.

The total of Savings Bond sales made through the farm
program cannot be closely estimated. Bond sales statistics
were not classified by the purchasers' occupations any more
than they were by race, color or creed. There was, however,
particularly in the Victory Loan, a close correlation between
the leading states in Series E Bond sales and those in which
agricultural income also ranked high, for example in North
and South Dakota, Montana, VJyoming, Minnesota and Nebraska,
This is not to imply that the War Finance organizations in
those states could have made a good record anyway, or that
War Finance Committees in other states did not cultivate farm
bond prospects as intensively as they should have, but it does
point up the fact that farmers would and did buy Government
bonds in substantial quantities when systematically and
properly approached. The farm program was a very important
part of war finance.

Farmers, it may be noted in conclusion, did not like to
be approached as if they were a peculiar genus of man, different
from the rest of the population. What was a farmer anyivjay?
There were all sorts of people making a living from the soil,
from the so-called gentleman farmer viho never touched a hoe
to the humblest share cropper. To some degree all were
business men, as much as the proprietors or managers of
grocery stores, gas stations, department stores or shoe
factories. Farmers appreciated and understood appeals directed
to them as business men, but not those made to them as a social
class. In bond promotions, they resented any "By Cracky" or
"hick" diction in the manner of a city man's caricature of
country people, or any implication that they as a group did
not bear their share of the country's problems of production,
distribution, and public financing. Bond promotion among rural

192

people had to be on a completely business-like basis as among
any other social or economic groups in the nation.

Retail Stores Program

The Retail Stores Program began on a test basis in
Michigan 3 under the aegis of Sydney Mahan. The experiment
proved successful j especially in setting a patriotic example
for retailers to emulate in helping meet the country's needs
for defense. Within a short time, retailers all over the
country were clamoring for ideas and direction. In Washington,
as Assistant Director of Information for the Defense Savings
Staff 3 Mahan brought into the organization, in June 19^1,
F. Edward Pulte, Jr. to have direct management of promotion
with the nation's retail industry.

As the first step in organizing all the diverse elements
of the retail industry into a cohesive Treasury program, a
meeting was held in Washington of representatives of leading
retail trade associations, from which emerged a Retail Advisory
Committee. The first major activity of the program was
"Retailers for Defense Week," September 15-20, I9U1. The
week was launched by a meeting of some five hundred_ retailers,
held at the Mayflower Hotel in Washington, September lU, at
which promotional plans were shaped for a long-range program
of retail cooperation in the selling of Defense Stamps and
Bonds .

For the calendar year 19^2, retailers pledged at a meeting
held in the Hotel Astor in New York City, February 5? to sell
a minimum of a billion dollars in bonds and stamps, represent-
ing 2 per cent of the volume of the nation's retail trade.
The slogan "Take part of your change in Defense Stamps" was
adopted as the official by -word of retailers. The National
Cash Register Company prepared for the Treasury a million
streamers bearing this slogan, and the same company published
several issues of Retailers for Victory, a tabloid distributed
to retail committees of the Treasury's Defense Savings
organization.

July of 19^2 was featured as "Retailers for Victory" month.
All retailers in the country were asked to set aside a 15-
minute period, ' preferably beginning at noon, July 1, in which no
merchandise would be sold but Defense Savings Bonds and
Stamps. This period was called the "White Out for Victory."
To facilitate retail sales of Savings Bonds to the public,
steps were taken in this month to qualify eligible retail
stores, and radio stations also, as issuing agents for

- 193

Series E Bonds.

In the summer of 19^2 a Victor^/- Display Committee T^as
established to work with all Government agencies in the
distribution and display by retailers of war publicity and
posters. The committee was composed of display men from
department and chain stores. It organized local committees
and planned window displays to aid the bond program. The
committee financed its o-tni activities 5 and published a
monthly bulletin giving information on home-front war
activities.

Early in 19^3 this committee was absorbed into a
Retailers War Campaign Committee, representing all national
retail trade associations 5 to cooperate with the Treasury
Department and other Government agencies throughout the
remainder of the war program. The Retail Section of the
Treasurj'-'s bond organization worked very closely with this
committee, relying on it for advice, and for help in reaching
the nation's retailers, but the War Finance Division also
maintained its own contacts directly v^ith retail promotional
people throughout the country, and built up its owii mailing
lists for the distribution of posters and other bond material
to a large proportion of the nation's stores.

The participation of retailers in the bond prograra raised
two or three particular problems. For one, the Treasury
wished to extend the payroll savings plan to employees of
large retail stores. It became evident that the regular
payroll savings plan might not function well, or be
introduced at all, in some retail establishments because of
the rapid turnover of personnel, and somewhat lower wage scale
thaxL that in many industrial plants, particularly those
engaged in war production. To meet this situation a compromise
plan was worked out, whereby retail stores could conduct a
payroll savings plan on a Savings Stamp basis rather than
through cash deductions from payroll. Large retailers,
however, found that they could conduct the regular plan.

Another problem arose from the apparent inconsistency
between the Treasury's program and the essential business of
retailers. The latter wanted to sell goods to their
customers in as large volume as possible. The patriotic
wartime duty for them to sell Bonds and Stamps involved the
idea of saving money, which was the exact opposite of the
spending philosophy ordinarily urged on the public by
retailers, and which was their reason for existence, their
means of making a livelihood.

194 -

Retailers dealt with this conflict in several different
ways. One was through good-will or institutional advertising:
"Our shelves are bare; save your money; buy War Bonds and
have funds to patronize us later when the war is over." Or,
"Buy our goods, but invest in War Bonds first."

For many retailers, who were understandably more intent
on their continuing profits than upon the Treasury's program
for spreading the public debt, the bond program offered an
opportimity to use patriotism as a means of stimulating their
oxm business. "Patronize our store tomorrow and get a free
War Bond." "Ten cent Savings Stamp given away with every
dollar's worth of goods purchased Saturday," and so on. The
Treasury was obliged very early in the bond program to come
to grips with this riding of patriotism for private profit.

The measure taken was a declaration of policy, made not
only to its own field organization but given considerable
publicity in the press. This statement declared that the
Treasury Department disapproved of the use of Savings Bonds
or Stamps as prizes, premiums, or trade discounts in connection
with the sale of merchandise, in any way calculated to give
one merchant an advantage over his competitor. The statement
added that this position was taken by the Treasury on the
grounds of good public policy, regardless of the legality or
illegality of any prize or premium plan under consideration.

Note the opening phrase of this declaration -- "The
Treasury Department disapproves..." There were no national
laws, or official Treasury Department regulations, against
the use of Savings Bonds or Stamps to stimulate the purchase
of merchandise. Such a use of Government securities was to
be frowned upon on grounds of good public policy. Evasions of
this policy were many. They could not be dealt with by law.
In many cases a personal conference, by some member of a
local War Finance Committee with the offending merchant, was
sufficient to stop the practice. In others, the local Better
Business Bureau intervened to keep the War Savings program
on an ethical and patriotic basis.o

6 Another problem, althoiigh not confined to retailers, arose over the question of deductabil-
ity from corporation income tax returns of sums spent in advertising Government securities. How
much of an advertisement had to refer to bonds to qualify for deductability? Would "Buy War Bonds"
do if the rest of the column or full page referred to private products? This question did not come
within the jurisdiction of the War Finance Division; it was dealt with by the Bureau of Internal
Revenue .

- 195 -

Another problem, though not of frequent incidence, arose
as a variation of the preceding, when stores, to advertise
their patriotism and at the same time cultivate trade, offered
a plan whereby their regular customers could purchase Savings
Bonds through their charge accounts, receiving the bond in the
month charged, and paying for it in tvro or more subsequent
installments. On teclinical grounds, the Treasury objected to
the practice since the purchaser- had his bond before it was
fully paid for. To be sure the store had paid into the
Treasury the full price of the bond, so that in case of any
default by the purchaser the store would be the loser. But
even though taking no risk itself, the Treasury Department
considered it unwise for a retailer conceivably to be put in
position of having to duji customers for the unpaid purchase
price of a Government bond. On promotional grounds, the
War Finance organization feared that the charge-a-bond plan
might irritate people on payroll savings plans, who did not
receive their bonds, and begin to ea.rn interest on them, until
the bonds were fully paid for. The charge-a-bond question,
however, did not become a major problem anywhere in the country.

Another and considerably more troublesome variation of the
patriotism vs. private profit conflict was the practice of
merchandisers of scarce wartime goods, nylons for instance,
of offering their much sought after articles for sale to
those who would purchase a ^'^ar Bond of certain denomination
in order to qualify for the coveted merchandise. This
problem was dealt with largely under Office of Price Admini-
stration regulation. In addition, the War Finance Division
in March, 19^3? publicly frowned on tie-in sales in which the
purchase of commodities, especially of scarce goods, was made
conditional upon the purchase of War Bonds.

Many special promotions were initiated by the Retail
Section of War Finance, some of which became recurring types,
others being purely "one shot" affairs. Among the recurring
promotions were special days or seasons of the year in
connection with which it was found that retailers ' Bond and
Stamp activity could be especially effective. One of these
periods was the Thanksgiving to Christmas season, when
retailers advertised Bonds and Stamps in connection with
thanksgiving for our heritage which we were fighting to
preserve, and promoted the sale of Bonds and Stamps as
Christmas presents. For the holiday season in 19^2, the
War Savings Staff developed an attractive envelope in which
could be placed Bonds purchased as Christmas presents. Other

- 196

days or seasons which featured intensified retail Bond and
Stamp activity were December 7, the anniversary of Pearl
Harbor, the birthdays of Washington and Lincoln in February,
and the Fourth of July. In the Fifth and Sixth War Loans, the
Retail Section developed interesting Window Display Contests,
in which bond prizes, paid for by sponsoring private companies,
were aviarded on both a local and regional basis for the best
displays featuring War Bonds and Stamps in connection with the
whole war program. On a continuing basis the retailers
program also assisted with the sale of War Stamp corsages,
which was otherwise a flourishing promotion of VJomen's
committees.

One of the most successful special promotions supported
by the Retail Section was the "Four Freedoms War Bond Show,"
carried on in 19^3 in conjunction with the Special Events
Section, and sponsored by the Saturday Evening Post. Public
exhibits of Ktorman Rockwell's famous paintings illustrating
the Four Freedoms V7ere arranged, with Rockwell's personal
appearance and other supporting attractions, in display rooms
of leading retail stores in a large number of cities. Bond
or Stamp purchases were not required for admission, but the
securities were actively promoted during the period of the
exhibit.

In the summer of 19^3 the Retail Section developed an
appealing "Shangri-La" promotion, which was taken up and
carried through by outsiders without Treasury sponsorship.
The plan was to have retailers set a goal_ representing the
purchase of an average of one dollar's worth of War Stamps for
every man, woman and child in the country, which would realize
a sum sufficient to equal the cost of an aircraft carrier,
"Shangri-La," to help bomb Tokyo.

In the winter of 19^3-^^? the Retail and Special Events
Sections cooperated in a promotion somewhat like the Four
Freedom's show, a "Tribute to the Unconquerables, " featuring
American support to the nations of Europe which had been
overrun by the Nazi war machine. This promotion had less
general appeal than the Four Freedoms exhibit, but it produced
good results in areas with large foreign-origin groups in
their population.

A strikingly successful retail promotion was the "Third
Army Plan," the keynote of retailers' participation in the
Sixth War Loan, and expanded for the Seventh drive. This plan
originated in Los Angeles. It was built on the average person's
love for recognition and insignia. It centered around a system
of small badges showing insignia somewhat similar to Army

197

designations of rank, and giving military titles from private
up through general. Retail sales people participating in the
plan started as privates and then achieved promotion to the
higher ranks 3 being a-v^arded the appropriate insignia as their
sales increased. To this plan in the Seventh War Loan was
added a Navy Task Force with corresponding naval insignia.
California also pioneered in another sales channel which was
promoted nationally in the Seventh War Loan with good results
— a plan of enlisting dairy routemen as bond salesmen.

Posters and other publicity items prepared nationally by
the War Finance Division, its local committees, and by a great
many retail organizations cooperating with the Treasury's
program, were very extensive. In addition to display pieces,
the Retail Section brought out a number of promotional guides,
usually in the shape of a tabloid newspaper. The first
iiffportant one of these was a bulletin called Big Guns, first
issued in January 19^3. In the later Vlar Loans the Section
published a Retailers Program for each drive.

Outstanding participation by retailers in the VJar Finance
program was recognized by a number of special citations in
addition to the standard awards used in recognition of
volunteer support. At one time a number of very elegant
leather stars were provided, for award to the stores (or
their display managers ) creating outstanding War Bond
advertisements and displays. During the last two War Loans,
cooperating retail establishments accepted drive "quotas,"
which set a minimum goal of $200 or $300 in War Bond sales
to the public, which each employee was asked to meet.

Reduced to simple terms, the retail program involved
three major items: (l) Purchase of Savings Bonds and Stamps
by retailers and their employees for themselves; (2) Promotion
of Bonds and Stamps to the public through over-the-counter
sales; and (3) Advertisement of War Bonds and other Government
securities. Of these, the third represented the outstanding
service which retailers could offer the Treasury. Retailers
were the country's greatest advertisers, and since the VJar
Finance program depended on sponsored advertising not paid
for by Government funds, the retail industry offered the
greatest possibilities open to the Treasury for contributed
space in newspapers and magazines.

- 198 -

National Organizations "

Throughout the war finance operation the administrative
structure represented a working compromise between geographical
and fimctional units. The geographic structure was basic,
being founded on states and their political subdivisions.
Within each state all war finance activities headed up in the
State Administrator, and later the War Finance State Chairman.
Since by no means all of American economic and social life
is organized along geographical lines, however, it was
necessary from the very beginning to have functional units
which could assist the geographically organized areas in
promoting bond sales to particular groups of the population.
The National Organizations Division in the headquarters office
was the most extensive of these functional units. James L.
Houghteling, Assistant to the Secretary, headed the activities
of the National Organizations Division in Washington from the
spring of 19^1 to the end of 19^-5. Collaborating with him
were assistants having charge of specialized approaches to
labor, fraternal and civic organizations, trade and business
associations, foreign origin groups and the Negroes.

Early Organization

The National Organizations Division came into being in
March 19^1, as a result of the Secretary's desire to ask all
private organizations of citizens of nationwide scope to
present the Defense Savings program to their members. This
avenue of approach was based on the fact that practically
every American is a member of at least one group, often of
several, tied together by civic, patriotic, educational or
social incentives, hence a vast majority of such national
organizations could be counted on to help in the bond program.

For the first few months of operations, Houghteling
directed bond promotional work with labor unions, foreign
origin groups, and Negro organizations. Orville Poland took
responsibility for professional, civic, patriotic and
educational groups, and Horace Peters was assigned business
and trade associations. For six weeks prior to the public
sale of the first Defense Savings Bond on May 1, members of
the National Organizations Division were kept busy interviewing
and corresponding with the presidents or secretaries of the
principal national organizations, explaining to them the
Treasury's objectives and soliciting their help. It was
planned to t\irn over as much of this promotional work as

199

possible to the state organizations of the Field Division when
they became well established. In its long range activities, the
National Organizations Division was to work with groups that could
better be approached nationally than on a state or local level.

VJorking with professional and civic groups, Orville Poland
was given many opportunities to present the Defense Savings pro-
gram at national conventions held in the spring and summer of
19^1, He addressed the American Bar Association and meetings of
doctors, surgeons and dentists. He contributed Defense Savings
articles to their magazines, and enlisted the support of the
American Legion, Veterans of Foreign Wars, the Daughters of the
American Revolution and other patriotic societies. Mrs.
Ferdinand Kuhn joined the staff temporarily to handle work among
women's organizations, these activities being subsequently
transferred from National Organizations to the Women's Section of
the Field Division.

In the area of national business and trade associations,
Horace Peters did a competent and effective job until his retire-
ment in May, 19^3. He travelled over the country making contacts
with the officers of trade associations, a procedure which helped
considerably in supplementing the efforts of the Payroll Savings
Section to have the payroll savings plan widely adopted. Peters
prepared and circulated a small folder, 6 Ways for American
Business Men to Cooperate in the Sale of Defense Savings Bonds
and Stamps, which included a return postal card on which a busi-
ness concern could notify the Defense Savings Staff of its
interest, cooperation, and need for bond promotional material.
The results of this operation were turned over to the State
Administrators for their guidance in following up the initial
contacts.

Organized Labor

The field of Organized Labor was recognized from the very
beginning as one of the Treasury's major outlets for the sale of
Savings Bonds in small denominations. James Houghteling made
contacts with President William Green of the American Federation
of Labor, President Philip Murray of the Congress of Industrial
Organizations, Chairman James Phillips of the Railway Labor
Executives' Association and John L. Lewis, president of the United
Mine Workers. These labor leaders, interviewed independently, all
welcomed the Defense Savings program with spontaneous understand-
ing and approval. Secretary Morgenthau subsequently discussed the
Savings Bond program in personal consultation with the presidents
or other high officials of these labor organizations. Gilbert
E. ^yatt, an active worker for the American Federation of Labor,
was called in to head up the active management of the National
Organization Division's work with labor groups.

- 200 -

As a result of the Secretary's conferences with labor lead-
ers, the National Organizations Division prepared a pamphlet.
Defense Bonds for American Workers , and a slightly different
version thereof entitled Defense Bonds for American Railroad
Workers, which, with the cooperation of officers of some I50
national unions and 50,000 local unions, were distributed to
about 15,000,000 persons. At the request of Secretary Morgenthau,
Presidents Green and Murray and Chairman Phillips addressed per-
sonal letters to the presidents of all national and international
unions, and state federations and councils, outlining the objec-
tives of the Defense Savings program. The follovjing excerpts
from President Green's letter of April 25, 19^1, will illustrate
the tenor of these communications:
"Dear Sirs and Brothers:

As part of the National Defense program, the
United States Treasury is offering to the American
people on May 1, 19^1, its new Defense Savings
Bonds. The American Federation of Labor is whole-
heartedly in favor of this program. In a recent
conference with Secretary Morgenthau I assured
him of our complete cooperation and support...

I ask the officers and members of the
American Federation of Labor, and all our friends,
to stand ready to cooperate in making the plans
referred to successful in every way. I urge all
organizations affiliated with the American Feder-
tion of Labor to create special committees for
the purpose of supplying your membership with
full information, and for the purpose of pro-
moting the sa.le of Government securities to
individual members.

Please advise me of your purpose and will-
ingness to cooperate fully and completely in the
promotion of the Government's financial plans as
set forth in this communication."
The appeal to American wage earners by these nationwide labor
bodies emphasized the idea of systematic and repeated purchases of
Savings Bonds out of current earnings, as contrasted with the
Liberty Bond techniques of World War I, Parallel with these _
developments in the National Organizations Division, the over-all
Defense Savings Staff perfected methods of introducing the payroll
savings plan on a nationwide basis. In conjunction with this
general expansion of the bond program, the National Organizations
Division prepared a pamphlet. Three Plans for Systematic Savings
for Members of Organized Labor. Plan 3 was the straight payroll
savings plan as it was most commonly adopted in practice. Plans
1 and 2 suggested ways in which workers could purchase bonds

- 201 -

through arrangements handled entirely by labor unions rather than
by management or a combination of labor and management. Both
I'illiam Green and Philip Murray felt that Plan 3, the one actual-
ly carried out in most cases, was the most practical one.

Pearl Harbor intensified the efforts of the National Organi-
zations Division as it did the whole bond program. Ho group of
American citizens arose to the challenge of war more wholehearted-
ly and patriotically than the labor unions and their members.
National organizations of labor set bond qutoas for themselves;
the traditional rivalry between the A. F. of L. and the C.I.O.
proved to be a rivalry of patriotic enthusiasm.

The willingness of organized labor to cooperate with the
War Bond program was almost boundless, but progress, particularly
within the framework of the War Savings organization, was often
beset by difficulties. Many of the promotional experts in the
Washington office, and in the field, came from elements of the
business community that were hostile to, or at least barely
tolerant of, the increased importance of organized labor in
national affairs. The Labor Section of the War Savings Staff
was often regarded as a necessary evil, to be kept in as incon-
spicuous a corner as could be found.

Early in 19^2 the Treasury and the national A. F. of L.
headquarters worked out arrangements for bolstering the bond
program with labor by means of regional assistants. As the
result of a generous offer from President Green, the Secretary
of the Treasury appointed as dollar -a.-y ear consultants on the
bond staff Frank P. Fenton, the A. F. of L, Director of Organi-
zation, and its four regional supervisors. This arrangement
proved very helpful. The regional representatives became respon-
sible for twelve states each, and worked closely with officers of
state federations of labor and many hundreds of city central
bodies and other local unions.

President Murray of the C.I.O. offered similar help to the
'Jar Bond program, but approached the problem from an industrial
rather than a geographical angle. A large scale approach to
payroll savings along the lines of individual industries vrould
have conflicted seriously with the geographical organization basic
to the field work of war finance, but the C.I.O's proposal was
met on an experimental basis by trying it out in a few industries
-- rubber, steel, and petroleurn. These were a success.

Railroads

The problem of promoting the purchase of War Bonds by rail-
road employees proved much more difficult than that encountered
in commercial businesses. The great railroad systems of the
country presented a more complicated War Bond problem, since they
could not be serviced by any single State Bond Committee.

- 202 ••

Confronted by this problem, the Secretary sent telegrams to the
presidents of the 102 Class I railroads, asking them to send
representatives to a conference in the Treasury Building on
November 19, I9U2.

More than 80 railroads sent high officials to this meeting,
at which it was agreed to organize War Bond committees consisting
of one or more members of top management and the general chairmen
of the most active labor brotherhoods and unions in each of the
systems. As a result of this meeting, every Class I railroads
and most of the short lines established system-wide War Bond
Committees, and organized payroll savings plans for their employ-
ees. Within six months, railroads employing 75 per cent of the
same 1,500,000 railroad workers of the nation had qualified as
issuing agents for War Bonds, and undertaken to get as many of
their employees as possible signed up on the payroll savings
plan.

There were frequent misunderstandings between the field
offices and the National Organizations Division concerning payroll
savings plans on railroads. Field offices in some states wanted
a breakdown of bond sales to railroad workers they considered as
belonging to their area. Field offices were never quite certain
how far they should go in supplying bond promotional materials to
railroad units located within their borders. Field offices com-
plained that the Railroad Unit of the National Organizations
Division did not always keep them well advised of current develop-
ments. Troublesome cases were dealt with individually. Generally
the labor regional men, and assistants who travelled in the
field, worked well with State War Finance Committees, each help-
ing the other. At the end of the War Finance program, railroad
payroll savings plans were turned over to the states to handle,
the responsibility for each interstate railroad being given to
that state in which the home office of the company was located.

Labor

From the beginning of the organization of State War Bond Com-
mittees, the Labor Section pressed vigorously for the inclusion
of a labor man as Deputy Administrator in each of the great indus-
trial states. First action along this line was taken in Ohio in
November, 19^1, followed shortly thereafter by New York. Labor
Deputies were subsequently appointed in Massachusetts, Pennsyl-
vania, Michigan, Indiana, Illinois, Missouri, Wisconsin, Minne-
sota and Oregon. As the payroll savings plan became more and
more undeniably the backbone of the War Bond program, the State
War Finance Committees, with few exceptions, generously acknow-
ledged the debt which their program owed to organized labor.

The Labor Section worked hard to promote good labor-manage-
ment cooperation, because it believed that in such cooperation

- 203 -

lay the best hope of selling a maximiom number of War Bonds. The
payroll savings plan generally enjoyed its greatest success in
business establishments where workers were well organized, and
couJLd be brought to cooperate wholeheartedly with management on
the war program. Weekly newspapers and magazines published by
labor unions welcomed the War Bond program, printing timely news
stories and backing up the record with approving editorials. The
system of conventions common to labor bodies offered the War
Finance Division open forums for the discussion of War Savings.

The best War Bond records were made in "war industries"
such as shipbuilding 3 automotive, agricultural implements, steel
and iron, aviation and electrical equipment. The workers in
these industries were close to the war and constantly aware of
its demands. The workers in these industries were also better
organized and better paid than those in a great many others.
Railroad workers, although as well organized and almost as well
paid, were among the least responsive to the payroll savings
program. This was a field in which the National Organizations
Division was directly responsible for reaching more than 1,U00,000
individual workers without the direct aid of State ^-^ar Finance
organizations. In spite of the unflagging enthusiasm of an
impressive group of railroad executives, and the cooperation of
the chief officers of many of the railroad labor organizations,
the V'Jar Bond record of the railroad industry for a long time
stood near the bottom of the Treasury's list of 32 major indust-
ries. In the Seventh War Loan, however, all but two of the
principal trunk line railroads of the country accepted a War
Bond quota comparable to the plant quotas in other industries.
These quotas established a War Bond goal for well over 1,300,000
workers at an average cash purchase of $100 per person during the
period of the drive. While many railroads had not reached their
quotas at the end of the drive, the effort was successful in that
railroad employees bought more than twice as many War Bonds in
that drive as in any of its predecessors.
Victory Loan

The Victory Loan was in many ways the most severe test of
the loyalty of organized labor to the Treasury's program. The
war incentive no longer existed. The shipyards were mostly out
of business. The special skills developed by workers in war
industries, which had qualified them for high wage categories,
were at a discount and men and women were being returned to their
peacetime jobs. The TTell-paid overtime work of war plants was no
longer needed. As a result, organized labor was entering a
period of struggle to defend its take -home pay by demanding
upward adjustments in basic wage rates. Strikes and rumors of
strikes dominated newspaper headlines. The economic atmosphere
was unpropitious for the sale of $2 billions in E Bonds.

- 20U -

Under these circumstances it is pleasant to note that the
leaders of organized labor unanimously supported the Victory
Loan drive. The Treasury never found the chief officers of
labor unions too busy to help in this last great loan. They put
special emphasis on the desirability of preserving accumulated
savings of the war years, and urged their memberships not to
redeem War Bonds except in cases of real necessity. The success
of this most difficult of all the drives was due in no small
measure to the loyalty and good will of labor. The greatest
labor endorsement of the Treasury's program, near its wartime
end, lay in the overwhelming requests that the payroll savings
plan be continued in peacetime.

Business and Trade Associations

Promotion with national business and trade associations
extended to approximately one thousand such groups of national or
regional scope. Most of these sponsored their own special War
Bond drives. Their trade magazines carried many columns of War
Bond publicity. The associations publicized tables and charts
showing the relative standing of member industries, thus stimu-
lating a competitive spirit. The Business and Trade Association
Section continued to ^-^ork with professional groups such as the
American Bar Association, the American Medical Association, and
the American Dental Association. The over-all work of the Busi-
ness and Trade Association Section was a helpful supplement to
payroll savings promotion in industry, and in its relations with
professional groups it reached a large number of people with good
incomes but not adapted to regular payroll savings plans.
Fraternal and Civic Groups

Within the National Organizations Division, bond promotion
with patriotic, fraternal and civic groups was organized under
a Fraternal and Civic Section headed by William C. Fitzgibbon,
whose supervisory duties came to include also bond promotion
among foreign groups.

As in the case of its work with labor organizations, the
promotional efforts of the National Organizations Division with
patriotic, fraternal and civic groups were carried on by personal
contacts, and correspondence with top officials, to supplement
the work of the state and local War Finance committees. The
field organization was kept currently informed of promotional
plans suggested to national organizations, so that the field men
could work with state and local officials of these groups to
perfect plans for community promotions.

The first appeal to national fraternal and service clubs was
made by a circular letter of May 10, 19^1. The response was most
gratifying. Large fraternal and service clubs -- such as I^ights

_ 905 -

of Columbus, Civitan Tnternational, Fraternal Order of Eagles,
Odd Fellows, Knights of Pythias, Elks, Loyal Order of Mocse,
and Kivjanis -- responsed splendidly in adopting resolutions
-endorsing Defense Savings, and pledging active support to the
Treasury's program. At some time in the history of war finance,
the National Organizations Division worked closely with about
fifty of the nation's principal fraternal organizations, includ-
ing in addition to those already mentioned, B'nai B'rith, Lions
International, the Zionist Organization of America, and the
various Masonic orders.

It should be borne in mind that members of these organi-
zations were important men in their communities, who could help
the bond program in at least four ways: (l) By purchasing '\lar
Bonds themselves; (2) By investing funds of their societies in
Series F or G Bonds or in market-risk securities offered in the
^Jar Loan drives; (3) By spearheading person-to-person canvasses
in their communities, and last, but very importantly; (k) By
installing and encouraging the effective operation of payroll
savings plans in the plants where a great many of the memberships
worked in either managerial capacity or with high position in
labor unions .

Fraternal and civic organizstions started a large number of
special ^'ar Bond campaigns with self-imjDosed, generous sales
quotas. One of the first of these was a campaign, November 15 -
December 31 > 19^'-2, conducted by the Masons, covering ^9 Grand
Jurisdictions and 15,000 subordinate lodges, to sell $100,000,000
in War Bonds. During February 19^3? the Zionist Organization of
America featured a one-month program to sell $10 millions. The
drive was an outstanding success; more than $23 millions in VJar
Bonds being sold. Further special drives by the Zionists were
carried on in June I9UU and May 19^5? the goal on the latter
occasion being $100 millions.

In celebration of "Founders Month," the lOiights of Columbus,
a great Catholic fraternal organization with approximately ^50,000
members, promoted a $25 million liar Bond program, March 29 -
April 29, I9U3, which resulted in sales of more than $90 millions.
From January I9U1 through January 19^5? more than $U60 millions
in Defense and War Bonds were sold through the efforts of the
national Jewish organization B'nai B'rith. Throughout the country
the members of this group promoted special bond selling projects
wherever its lodges met.

The leaders of service and luncheon clubs accepted the
War Bond program as just the sort of project for which their
memberships were banded together. They undertook no special
nationwide campaigns, but they performed valuable service by
enlisting their organizations on the state and local level to
support the Treasury's committees, particularly through the
recruiting of great nuirfoers of volunteers.

- 206 -

American Legion cooperation with the War Bond program was
excellent. Its members, and the Women's Auxiliaries, were
particularly energetic in support of War Loan drives, making
large purchases on their own account and furnishing volunteer
solicitors to local bond committees.

The work of the Fraternal and Service Section was never
spectacular, nor could its over-all results be compiled with
accuracy. Its efforts, however, represented a sound and demo-
cratic method for impelling and educating some fifty million
members of such organizations to direct their inherent patriotic
enthusiasm in a practical way toward victory and a better post-
war world. The Fraternal and Civic group program provided
innumerable contacts betxreen Treasury spokesmen and those who
carried on bond solicitation at the immediate points of sale,
in banks, payroll savings plants, bond booths and through
door-to-door canvasses.
Foreign Origin Groups

It was essential that the program of war finance, to carry
out its basic intention of contributing to national unity,
should have directed special efforts to the large foreign-
origin groups within our borders, not only to those of
nationalities which in Europe and Asia were oppressed by con-
quering enemy hordes but more especially to those whose fore-
bears came from the enemy countries of Germany, Italy and Japan.

Promotional work with foreign-origin groups was similar
to that carried on with fraternal and civic clubs, except that
it was much more diffuse, there being fewer nationally orga-
nized groups to deal with, and the appeals had to be varied
considerably from one group to another, depending on the
cultural habits and Old I^Jorld background of each. There was
also in some cases a language difficulty. Not all of the
foreign-origin prospects were proficient in the use of
English, To overcome this handicap, a few VTar Bond posters
and folders were printed with texts in foreign languages.

For the guidance of State War Finance Committees, the
Foreign Origins Section furnished several mimeographed sets
of promotional suggestions, including sample speeches. In
May of I9U2, I9U3 and 19UU, special bond talks were woven
into the ceremonies of "I Am An American Day,'' the occasion
which marked the giving of the oath of citizenship to newly
naturalized Americans.

The outstanding example of foreign origin cooperation
with the V/ar Bond program \tsls provided by the American Hel-
lenic Educational Progressive Association, generally called
Ahepa, The national convention of this group adopted in

- 207 -

August 19U1 a resolution to inaugurate a Defense Bond
campaign with a $50 million quota. At the conclusion of that
drive, a new selling project with a goal of $100 millions was
undertaken and successfully completed. In July 19^^^ a third
program for the sale of an additional $100 millions was launched.

As an exception to usual Treasury regulations which did not
include foreign-origin organizations among institutions eligible
to become issuing agents, the Order of Ahepa was authorized to
be an issuing agent for Series E Bonds.

All of America's nationality groups patriotically supported
the war finance program. In addition to working for the success
of regular drives, special campaigns were carried on by the
Poles, Italians, Slovaks, Czechs, French Canadians, Russians,
and several others in addition to the Greeks in Ahepa already
mentioned. Uhile nationwide nationality campaigns were encourag-
ed, it was more common practice for the National Organizations
Division to channel information on foreign-origin groups, and
suggestions for promotion with them, to State Uar Finance offices
for local application. Special Foreign Origin Chairmen vjere
appointed in several states, notably New York, Pennsylvania, Ohio
and Illinois .

While members of the Treasury were primarily charged with
the responsibility for selling War Bonds, the Foreign Origin
Section did much more than that --it sold the idea that the
United States derived its strength from the "consent of the
governed," and that its strength was greatest when the largest
possible numbers of its people were able to do their share on
a free-will basis in the planning and financing of great
national projects.

Inter-Racial

The founders of the Defense Savings organizations gave
considerable thought to ways and means of reaching the ten
per cent of the population of the United States made up of per-
sons of the Negro race.

The Negro population of the country was essentially a cross
section of the entire population, but with certain marked
differences of approach to the problems of community life. One
of the principal differences was the fact that among Negroes,
religious institutions played a far larger part in the economic
life of the comiriunity than among white people. The Baptist and
Methodist churches and their subdivisions bulked very large in
the lives of the Negroes. Also important in this field were non-
religious orgajiizations such as the National Association for the
Advancement of Colored People, the National Urban League, the
National Negro Business League, the National Association of
Teachers in Negro Schools, and the Jeannes Teachers, Still other

- 208 -

and functional organizations such as the National Negro Insurance
Association and the Negro Nev^spaper Publishers Association.

Upon the" recommendation of a number of prominent Negroes,
the Treasury appointed Dr. William Pickens to be head of a Negro
unit 5 officially designated as the Inter-Racial Section of the
Defense Savings Staff. Dr. Pickens was a Yale graduate, a
teacher for some fifteen years, a Director in the National
Association for the Advancement of Colored People, and a most
effective public speaker. He joined the Defense Savings Staff on
May 15? 19^1. The first approach to Negro bond prospects was
through their churches and religious organizations, which was
soon supplemented by promotional work with important Negro busi-
ness associations and with the Negro press.

The historical development of the Negro race in the United
States had not been favorable to habits of thrift and financial
responsibility. Until after the Civil War, a vast majority of
Negroes had little experience with the handling of money. In the
Defense Savings program, Negroes accepted with enthusiasm the
idea of becoming "money partners of Uncle Sam." One of the
problems of the Inter-Racial Section was to prevent over-buying
of War Bonds beyond the sound economic needs of individual pur-
chasers. All too often, Negro bond buyers made larger purchases
than they could really afford, with the result that the redemp-
tion of Savings Bonds by Negro owners tended to be at a rate
higher than that for the rest of the population.

The Inter-Racial Section sought to arrange for the organi-
zation of Negro sub-committees of the Defense Savings Committees
in all states which had a considerable colored population. This
was not difficult to arrange in most Northern states but it met
with considerable resistance in the South. In accordance with
the general Washington policy of allowing state offices a very
large measure of local autonomy, the problem of the organization
of Negro sub-committees was settled by local option. In many
cases the question of Negro representation was solved by persuad-
ing the presidents of land-grant colleges to form Negro commit-
tees and to take the chairmanship of them. In both North and
South, Negro VJar Bond committees did much to integrate the
national war finance program among colored people with the over-
all Treasury program.

In one way or another, all the successful methods of War
Bond promotion adopted by other units of war finance were suc-
cessfully used by the Inter-Racial Section. There was a farm
program among Negroes, assisted by the representatives of land-
grant colleges and the Department of Agriculture. There were
Negro sponsorship campaigns to "purchase" airplanes and a Liberty
Ship. Many industrial units manned largely by Negroes carried on

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successful payroll savings plans. Negro institutions made large
purchases of Government bonds for their own portfolios, and
instructed their solicitors to give one or two days a week to the
sale of War Bonds. The Negro "beauticians," who occupied a posi-
tion of influence and respect ?mong colored women folk, made a
rule that every member and employee give at least one day a week to
V/ar Bond selling. The small Washington unit of Negro bond work-
ers travelled very extensively through every part of the country
where there were large centers of Negro population. In 19^^? for
instance, the four men and one woman then active in field work
visited 258 cities and addressed more than 711 Negro conferences
or other meetings connected with the war effort. Top flight
Negro artists and entertainers gave special performances and
made personal appearances for the bond program. Among these
were Paul Robeson, Kenneth Spencer, Duke Ellington, Hazel Scott,
Count Basie, and the Jubilaires.

The War Bond program for Negroes was in no important respect
different from that carried on among the rest of the nation's
population, save that somewhat more extensive use was made of
religious organizations. There was not, indeed, a separate
Negro bond program that operated everywhere as an independent
program parallel to the over-all promotion. Each state or metro-
politan bond organization made its own adaptation to best suit
local conditions. In some Southern states the Negro bond pro-
motion was completely integrated with the over- all program; in
some Northern states, notably New York and Illinois, there was
a semi- independent Negro promotional unit, headed by a Negro
Deputy Administrator or Manager, The members of the headquarters
Inter-Racial Section cooperated with the State Committees, often
on invitation, in bringing the bond message home to Negroes.'^
Special Events

The activities of the Special Events Section are less amen-
able to neat administrative survey than the proceedings of any
other VJar Finance unit. Special Events cut across the whole field
of other activities, both geographical and functional. They rang-
ed all the way from continuous relations with the moving picture
and theatre business to a display of silverware salvaged from
vessels sunk at Pearl Harbor, an exhibit of historical dolls and
a tour for the captured baton of Reichsmarshall Goering. In
short, they were special.

On a more or less continuous basis, the Special Events Sec-
tion supervised promotional work related to bond movies, the

7 There are no official figures on bond sales to Negroes. At one time a few banks in
Southern states issued Savings Bonds to Negro purchasers with the word "Colored" stamped after the
purchaser's name, but this practice was soon stopped by Treasury order. The only conclusion on
Negro bond buying is an estimate of performance not in terms of dollars but in patriotic response to
the war. Those closest to the work of the Inter-Racial Section concluded that Negroes bought Savings
Bonds at a rate much beyond that which would have been expected in view of their relatively low
income level. Several posters illustrated Negroes (an Arqy flyer, a Negro baby) but generally the
same bond promotional materials were used among Negroes as with the rest of the population.

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moving picture industry in general, the theatre. Army and Navy
cooperation with war finance, and campaigns to sponsor military
and naval equipment through bond purchases. In a broad sense,
the Motion Picture and Special Events Section was organized to
create an "atmosphere of enthusiasm" for War Bonds. Its function
was to promote special events of both nationwide and local scope
to serve as pegs on which to hang other forms of bond publicity,
and in connection vrith which extra bonds could be sold to the
public.

Movies

The Special Events Section supervised or assisted with the
creation of special War Bond movies, shorts or trailers, usually
although not always in l6 MIvI. Some 35 MM. items were arranged
for showings in coiimiercial theatres. The first movie used in
the Defense Savings program was a l6 Mil. "America Preferred,"
featured in the sLmmer of 19^-1. Six hundred prints were made
for State bond office use. From the beginning of the Defense
Savings program, the Special Events Section had the assistance
of the War Activities Committee of the Motion Picture Industry.
ITith this aid, the Section, in the first year of its operation,
arranged for five nevrsreels, with fifty different "clips" to
carry the Defense-War Bond message to the public in commercial
movie theatres. An important one of these was Walt Disney's
"Donald Duck."

A major contribution of the motion picture branch of Special
Events was launched in November 19^1, with the "Minute Mc.n for
Defense" series of newsreel trailers, later entitled "Fighting
Dollars." The five national newsreel companies agreed to clip
a 1-minute Savings Bond appeal to their releases, changing it
each week. Under the direction of the Special Events Section,
experienced newsreel crews toured the country, securing shots of
local men and vromen engaged in important war work. In showman's
parlance, these bond trailers "rode free" at the end of the
commercial newsreel, thus saving the Treasury the cost of distri-
bution. A notable early film was "The Price of Freedom,'' with
script written by Burton Davis, the story being built around the
payroll savings plan in the International Harvester Company.
Other early bond films, before the specialized developments
integrated with the military services were exploited, were "Bonds
at War," "Report to the Nation," and "Seven Fighting Words."

Beginning in the Sixth War Loan, the Special Events Section
worked out plans, expanded in subsequent drives, for the use of
selected films produced by the Army, Navy and the Coast Guard,
which were particularly well adapted to the promotion of War
Bonds. A plan of consolidation was also worked out with the
nation's organized l6 MM, film industry, under which the latter

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cooperated with State Uar Finance offices in mobilizing projectors
in schools, war plants and industrial firms to give the largest
possible number of showings of bond promotional film to the
public. Some 300 distributors handled the prints, under the
direction of State l6 IM, Chairmen, working hand-in-hand with
the State TJar Finance Chairmen. It has been estimated that
approximately thirty million people saw these l6 MI'-i. liar Bond
promotional films, which were a most valuable adjunct to the
over-all program.

Cooperation of the Motion Picture and Theatre Industries

The Special Events Section not only helped produce War Bond
films, or adapt other films for promotional purposes, but also
supervised the cooperation of the Motion Picture and the Theatre
industries with the bond program, especially in plans involving
the personal appearance of state and screen stars at bond rallies,
A major part of this promotion wa? arranged through the VJar Acti-
vities Committee of the Motion Picture industry.

From the beginning, motion picture and theatrical stars
were used to arouse interest and enthusiasm at community bond
rallies and in meetings to install payroll savings plans. This
activity came to include the cooperation of other celebrities
such as sports figures, opera singers, and prominent writers.
The first large nationwide tour of this sort was called "Stars
Over America," sponsored by the motion picture industry in
cooperation with local War Savings committees. In September
I9H2, the promotion brought top-flight Holly\70od personalities to
more than 36O communities. The full list of stage and screen
stars who at some time gave their services to the Treasury's
bond program would fill many pages. The high calibre of this
cooperation may be judged from the following selection of parti-
cipants: Dorothy Lamour, Lucy Monroe, Marlene Dietrich, Adolphe
Menjou, Ronald Coleman, Bette Davis, Basil Rathbone, Ginger
Rogers, James Cagney, Fred Astaire, Veronica Lake, Greer Gar son,
Hedy Lamarr, Irene Dunn, Charles Laughton, Humphrey Bogart,
Lionel Barrymore, Bob Burns, Claudette Colbert, Gary Cooper,
Clark Gable, Judy Garland, Cary Grant, Rita Hayv/orth, Raymond
Massey, VJilliam Powell, Cornelia Otis Skinner, Ann Southern,
Robert Taylor, Spencer Tracy, and Vera Zorina,

Judgment on the effectiveness of stage and screen stars in
stimulating bond sales is various, depending on the star in
question and the audience addressed. Pretty young actresses were
very popular with i-rar industry workers and miscellaneous street
gatherings. Serious-minded members of the profession made good
impression on more critical audiences, but a good many robust
patriots in the country felt that any stage "hoopla" in connec-
tion with the serious business of financing the war was in
bad taste.

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Sponsorship Campaigns

The Special Events Section supervised methods and procedures
whereby States, counties, cities or organizations of citizens
could sponsor, through special bond campaigns, the "purchase" of
airplanes, naval vessels, and a great variety of other military
equipment. The marking of airplanes for bond sponsors was begun
by arrangement with the Bell Aircraft Company in Buffalo, New
York, in October 19^1. The first formal, comprehensive instruc-
tions for "Buy a Bomber" campaigns were circularized to the field
in October 19^2.

As a means of stimulating extra bond sales, and "bringing
the war" closer in spirit to the home front, this type of acti-
vity proved to be so popular and effective that it was extended
to naval vessels in "Sponsor a Fighting Ship" campaigns. Event-
ually bond sponsorship was, with the cooperation of the Army and
Navy, extended to a long list of aircraft, cruisers, destroyers,
submarines, landing craft, army trucks, ambulance planes, and a
great number of items of either combat or hospital use. Some of
these items were marked at first with a metal plaque carrying the
name of the sponsoring community or group. Plaques being heavy,
often hard to install, and rather expensive, were in most cases
supplanted by decalcomania. Sponsorship campaigns for combat
items were continued until the end of hostilities with Japan.
The total number ran to tens of thousands. They were designed
as a means for securing extra bond sales, that would not have
been gained from other types of promotion. Such campaigns were
usually conducted under rules which specified the kinds of bond
purchases to be counted in reaching the goal -- either only Sav-
ings Bonds being counted, or at least sales to individuals, but
not market-risk securities bought by corporations or
institutions.o

8 In addition to Field Memoranda, elaborate promotional suggestions for sponsorship
campaigns were circulated through special Campaign Handbooks, widely distributed to State and local
committees for each War Loan drive, beginning with the Second.

The goals for sponsorship campaigns in terms of dollar prices of the items to be "purchased"
proved to be something of a headache. Actual costs varied by manufacturing plants in different
parts of the country. By agreement with the Army and Navy, the War Finance Division had to settle
on average or symbolic costs.

The marking of equipment was another tough problem. It was not difficult with respect to
naval vessels, since the vessels to be marked for sponsorship were relatively few. The chief
problem arose over aircraft. Bombers and other plane sponsorship campaigns outnumbered other types
of sponsorship. At first, cooperating aircraft manfacturers agreed to paint the special name of the
sponsored bomber on the nose of the plane, and to give the sponsor, through the Treas\iry, a picture
of the plane. Picture deliveries were very slow, giving rise to many embarrassing complaints from
sponsoring organizations. The substitution of decalcomania, in the summer of I9UU, for most
identifications relieved this problem, since no pictures had to be provided. The sponsoring organi-
zation was given a duplicate deealcomajiia to mount on cardboard or to frame. But another problem
arose. So many planes and other items were sponsored that there were not enough turned out to
receive all the decalcomania. A great many decals were never placed on actual pieces of equipment.

- 213 -

Army and Navy Cooperation

The Special Events Section assumed responsibility for all
arrangements involving cooperation of the Army, the Navy and the
Coast Guard with the war finance program. These arrangements
included the use of service films suitable for bond promotion,
negotiations regarding prices for sponsorship campaigns, and most
particularly the appearance of military personnel or the use of
military equipment at local bond rallies and special performances
and exhibits.

A nationv7ide plan of cooperation between War Finance Com-
mittees and Army Service Commands and Naval Districts was per-
fected for the Fifth War Loan, and continued thereafter. Special
drive arrangements were publicized to the military services by
directives from the Secretaries of War and Navy, requesting all
officers and units to give State War Finance Committees whatever
assistance and personnel and equipment that could be extended to
them without interfering with regular service requirements.
Throughout the bond program. Army, Navy and Coast Guard coopera-
tion was excellent, and invaluable.

Miscellaneous Activities

A full account of the miscellaneous activities carried on
by the Special Events Section would fill a book. Some of these
were related to the continuous types of promotion already referr-
ed to, others were promulgated by the Special Events Section
since there seemed to be no other place for them. Special Events
became a catch-all for everything that did not obviously belong
somewhere else. Many of the miscellaneous activities or short -
run promotions were very important in stimulating extra bond
sales; they cannot all be described here, but a selective list
will suggest their range-

1. Treasury or Victory Houses, or large
bond booths , featuring speakers and entertainment
in many large cities throughout long periods of
the whole bond program. The costs of some of
these were underwritten by private sponsors.

2. Tour of Sabu, "the elephant boy," to
some 26 cities in 19^2.

3. Series of Community Songfests, featuring
Lucy Monroe in some 13 cities.

k. Kay Kayser's "Bond VJagon" tour of 6
cities.

5. Trek of Abbott and Costello to ^1 cities.

6. Countrywide tour, 19^2-^+3, of the 2-Man
Japanese submarine captured at Pearl Harbor,
Admission by purchase of VJar Bond or Stamps.

- 21U

7. Sports Events -- Baseball Defense Bond
Day in the fall of 19^1; Uashington Senators vs.
Norfolk All-star Navy team, June 19^3; bond
promotion at Army-Navy football game, fall

of 19^U, etc.

8. "Back the Attack" military equipment
show. District of Columbia, September 19^3.

9. Saturday Evening Post - Fou.r Freedoms
War Bond Shovr, 19^3 ? tour of l6 cities.

10. Cross-country Hospital Train exhibit.

11. Liberty Ship exhibits at leading
seaports,

12. "Airmada" performances in U? cities.

13. Exhibitions of captured equipment at
State fairs in Midwest and elsewhere,

lU. Art exhibits, especially of war paint-
ings by men in service.

15. Bond scripts for radio programs such
as "Truth or Consequences," and "Dr. I. Q."

16. Ice capades for War Bonds.

17. Special performances by Army and
Navy bands,

18. Symphony orchestra programs for
benefit of war finance,

19. "Here's Your Infantry" demonstration
shows in some 23 states.

20. "Victory Trains" touring through
principal cities in the country in the Victory
Loan.

The list could be much expanded. Management of this diverse
activity was not handled solely by the personnel of the Special
Events Section in Washington. In addition to the headquarters
staff, the Section employed "advance agents" to go ahead of
special tours, making local arrangements with War Finance com-
mittees and cooperating organizations. State and local War
Finance committees also designated one or more persons to
specialize in "Special Events." Cooperating with both the field
organization and outside sponsors, the Special Events Section
arranged for the production and distribution of essential
materials to expedite its many promotions -- such as posters and
streamers and pictures for bomber campaigns and fighting ship
campaigns, display and informxational material for theatre lobbies,
special citations for moving picture and other bond volunteers,
photographs of sponsorable equipment, tickets for War Bond pre-
mieres of movies or plays, publicity releases on war heroes and
war films, and so on ad infinitum.

215 -

A number of related activities may be treated as Special
Events irliether they were integrated with the Section having that
title or operated as semi- independent projects. One of these
was music.

Music

The importance of music as a means of stimulating enthusiasm,
especially patriotic enthusiasm, is universally recognized. As
an adjunct to more conventional types of promotion, the Defense
Savings Staff and its successors encouraged the writing of songs
with a War Bond or savings theme, made elaborate use of music on
radio programs and elsewhere, and, for a time, employed two
special music consultants.

The first piece of exclusively promotional music used on a
national scale was the song "Any Bonds Today?" composed by
Irving Berlin and donated to the Treasury. This was not a parti-
cularly good song, musically speaking, but it lasted well, and
was in demand throughout the bond program. Other bond songs, of
which there were a great maiiy, the majority used locally rather
than on a nationwide scale, included "Everybody Every Payday,"
"This is Your l^ar,"-"Dig Doim Deep," "Songs for the Home Front"
(a collection), and "Jolly Molly Pitcher."

Beginning in the summer of 19^2 and continuing for about tx/o
years, the Treasury enjoyed the services of two music consultants,
Roy D. IJelch and Augustus D. Zanzig. Roy Welch was professor of
music at Princeton University, to which position he returned after
his tour of duty with the Treasury. Zanzig had been for many
years Director of Music for the National Recreation Association
in New York City, to which he also returned after his Treasury
experience. These men helped contact song writers who might be
in position to compose pieces for the Treasury; screened a great
mass of voluntary song offerings sent in to the bond office,
looking for a possible "find"; encouraged college music depart-
ments and other music associations to cooperate with the
Treasury's program to sell War Bonds; circularized suggestions to
the field staffs on how to use music effectively at bond rallies;
and helped select appropriate music for Treasury radio programs.
They also travelled extensively to conduct in person the music
phase of large bond rallies.

Aside from what may be termed their physical contributions
to bond promotion, Messrs. Welch and Zanzig had a very important
influence on the program through their efforts to keep bond
music on as high an aesthetic plane as was consistent with its
practical purpose. For the latter year and more of the War
Finance program, music was handled in Washington by the Radio
Section, and in the field by any State or local committee members
who had some flair for the subject. Sheets of patriotic and War

- 216 -

Bond music, especially Songs for the Home Front, remained in
great demand by Women's Clubs, patriotic organizations, and
schools.

Libraries, Books aiid Authors

J-ijlian Street, Jr., known to his office associates as "Pete,"
had at the beginning of the Defense Savings program a roving
appointment with the Secretary's office; he joined the War Sav-
ings Staff in December 19^2, Pete Street probably had his
fingers in more promotional pies than any other virtuoso in the
War Finance organization. Administratively he belonged to every
Section and to none. An account of his activities can well be
summed up in the phrase Libraries, Books and Authors, but his
operations included much more than is indicated by that tri-
partite title.

To begin vjith. Street was charged with securing the support
of writers, , artists 5 literary agents, publishers and editors. In
19^1, for instance, he secured the services of, or promises of
cooperation from, Carl Van Doren, Booth Tarkington, Marquis
James, Clifton Fadiman, Alexander Woollcott, Henry Steele Com-
mager, Henry F. Pr ingle, Thomas Mann, Nunally Johnson, Munro
Leaf, Robert Nathan, Louis Untermeyer, Alfred Knopf and John
Farrar.

During the next ten months he continued his basic tasks,
which could be summarized as: (l) Those of an agent to procure
written material from established authors to fill various Trea-
sury Department needs; and (2) To assist in securing suitable art
work for War Savings posters and pamphlets. These broad assign-
ments branched out into a great variety of individual undertak-
ings. One was the production by prominent writers of short
essays on War Bonds, for use on the Jackets of their forthcoming
books. He helped to produce three books on a war morale theme:
Walt Disney's Victory March, Munro Leaf's % Book to Help America,
and a collection of twenty-eight essays written by prominent'
current Americans on the lives of twenty-eight historical Ameri-
cans, entitled There Were Giants in the Land.

Street worked hand-in-glove with the Writers War Board, a
wartime agency for authors similar to the VJar Activities Com-
mittee of the Motion Picture Industry. The Writers Board contri-
buted War Bond slogans, fillers for release to newspapers and
magazines, and it organized a poster committee to cooperate with
Associated American Artists in arranging slogans and texts for
War Bond posters. In cooperation with Abbott Laboratories, Pete
Street helped secure many of the best known posters in the war
finance operation, notably Our Good Earth -- Keep It Ours, Till We
Meet Again, and The Present IJith a Future. These activities,
and many related ones, v/ere continued throughout the remainder of

- 217 -

war finance. Street's two feature operations were the Books and
Authors VJar Bond iihoi-rs , and the Library War Bond campaigns.
Books and Authors

Books and Authors got under way experimentally at Allentown,
Pennsylvaniaj on February 2^, 19^3? in cooperation with the
Special Events Section. The campaign was headed by Pearl Buck,
and other writers participating were Robert Lawson and Mildred
Jordan. This experimental rally resulted in the sale of more
than $80^^,000 in War Bonds.

A3ooks and Authors rally was a community social event at
which prominent authors, journalists, illustrators, and radio
commentators were featured speakers, and to which admission was
the purchase of a War Bond. Rallies were staged by special com-
mittees appointed for the purpose, operating under the direction
of the local War Finance committee. A.t the rally, to increase
bond sales, over and above those realized through tickets of ad-
mission, autographed copies of the works of the participating
celebrities were auctioned off to War Bond bidders, and often one
or more original manuscripts of a book, story or article.

After the successful Allentown experiment. Books and Authors
rallies were next held in New Britain, Connecticut, New Bedford
and Springfield, Massachusetts, and thereafter were extended to
any interested city or War Finance^ committee. By March 19HU, Books
and Authors rallies had been held in three hundred communities.

The importance of the Books and Authors promotion lay less in
the number of rallies held than in the influence this type of acti-
vity had upon a great many people not otherwise touched by bond
publicity. Not only among academicians but also among a great
percentage of the American public there was a very strong interest
in people who wrote books. The power of authors to create excite-
ment and enthusiasm in subjects quite apart from their books was
very great. Through the Books and Authors rallies, these innate
potentialities of authors and artists stimulated the patriotic

support of book lovers to the nation's wartime needs. 9

To capitalize further on the potentialities of the users of

books, a Library War Bond promotion was undertaken in 19^^. Tried
out on an experimental basis in Connecticut, this type of promo-
tion was found to be particularly successful in small toT-ms and
cities which had previously had no special community War Loan or
bond promotions. The good results were based on the fact that
libraries are important centers of community life, that librarians
enjoy prestige in moderate -sized communities, and that their
institutions offered convenient points of sale in the absence of
the many issuing agents common to large metropolitan centers.

9 See editorial, "Books for Bonds," by Frederic G. Melcher, Publishers Weekly, May I5, 19'+3,
i Ferber, "Step Inside," reprinted I9U3 from United Newspapers Magazine Corporation.

- 218 -

The Library War Bond program offered libraries opportunity
to aid war finance by taking applications for bonds and by call-
ing the attention of their patrons to especially prepared arti-
cles on the war and war finance. Through a national Library War
Bond Coimiittee, as a part of the Books and Authors Committee,
libraries were supplied with special kits of posters, placards,
and articles. One of the placards read simply, "War Bonds are
like the Best Books; They grow in interest as the years go by."
To stimulate friendly rivalry among libraries, participating
institutions were ranked roughly according to size or type, and
then each class within a state was offered unique manuscripts or
illustrations as awards. Libraries in twenty states took part in
the Library ^'Jar Bond campaign during the Sixth VJar Loan, and
institutions in eleven of these signified their intention of
continuing the promotion during subsequent War Loans or interim
periods.

As was true of the Books and Authors program, the
Library ^Jar Bond campaign was significant not only for its
sales but for the influence it had in increasing public
understanding of war finance, especially in circles not
greatly touched by the payroll savings plan, stage and screen
star appeals, or the usual run of War Bond advertisements.

Community Theatre 1-Jar Bond Premieres

Working in cooperation with the War Activities Committee
for the moving picture industry, the Special Events Section
began very early in the War Savings program a bond promotion
built around premiere showings of important motion pictures.
Admission to these premieres was by War Bond purchase.

In 19^4 this type of promotion was extended to Community
Theatres, assisted by a grant from the Rockefeller Foundation.
There were more than fifty thousand community theatre groups
in the country, ranging from high school to college and
civic organizations. George Kaufman became chairman of a
national advisory committee for this project, and Alfred E.
Rowe the active director on the War Finance Division staff.

Eleven experimental performances netted more than $5
millions in bond sales. A number of leading playwrights and
play publishers agreed to give civic theatre groups a
copyright-free War Bond performance of Broadway successes.
State IJar Finance Committees were given comprehensive
instructions on how to secure the cooperation of community
theatre groups in their areas, and War Finance obtained use
of a number of plays especially written for War Bond promotion
in the non-professional theatre. Titles of important War Bond

- 219 "

plays vrere "The Favor," "To Ease Their Hurt," "The Sergeant,"
and "The Music Goes Roimd and Round."

Speakers Bureau

VJithout stretching the truth too far it can be said that
there was never an especially organized Speakers Bureau in
the headquarters office of the "bond operation. From time to
time particular individuals — Orville Poland, Julian Street,
and Mrs. Sue C. Oulahan -- were relied upon to secure
prominent speakers, either War Finance officials or Treasury
Department heads having close connection with the program, or
outside experts such as economists, bankers. War and Navy
officers, returned war heroes, etc. These and other
audience-drawing speakers were in demand by VJar Finance
committees, and conventions or other gatherings interested in
the war program. Generally, however, the booking of
■nationally prominent speakers was on a hit-or-miss basis,
with a War Finance Division member hearing of the need then
starting out to find the best candidate available. Many
states had more efficiently organized speakers bureaus.

Speech Material

The Washington office considerably aided local bond
committees with material which their members or cooperating
speakers could use. The headquarters office also published
a number of pamphlets especially designed for speakers, the
earliest appearing in the summer of 19^1. A Handbook for
Speakers was distributed in the summer of 19^2, and suggestions
for local speakers bureaus in October, The Campaign Handbooks
from the Third War Loan contained a great deal of material
adaptable to bond talks. In the Sixth and Seventh War Loans
were distributed very helpful pamphlets. For Speakers Only,
containing items of varying lengths written by War Finance
officials and the Writers War Board, and excerpts from the
writings or speeches of other people prominent in current
affairs.

The virtue of a Speakers Handbook lay in its selectivity,
both as to content and distribution. Broadcast use of the
material would have spoiled its effectiveness, since too many
resultant addresses would have been too much alike. Such
handbooks were printed in relatively small quantities, ten to
twelve thousand, for distribution almost wholly to IJar
Finance committees, in the hope that their key workers could
make use of the suggestions, but otherwise would exercise

- 220 -

their own ingenuity so that the speeches delivered would have
the virtues of apparent spontaneity and application to the
conraiunities where given. Also as a speakers manual may be
cited These Are Their Words , a I9UU pamphlet setting in
juxtaposition the declarations of Nazi and other enemy leaders
against honored rights of free men and the declarations of
famous Americans in support of religion, free speech, and
related privileges.

V-Mail Gift Certificates

Although neither initiated nor sponsored by the Special
Events Section, one very effective promotion may be considered
a special event -- the V-Mail Gift Certificate. Suggested by
a California postmaster, the V-Mail idea was experimented with
for the Christmas season in 19^U, and was expanded into a
broad-gauge promotion the following spring.

This campaign operated through the use of an attractive,
specially designed V-Mail letter form, on which was printed a
representation of a War Bond. Supporting publicity urged
relatives and friends of servicemen to buy a War Bond for their
soldier or sailor overseas, and to send him the Gift Certificate
via airmail. The recipient's name, and the denomination and
registration number of the actual bond were filled in on the
bond representation in the certificate. This promotion proved
to be very popular; large stocks of the certificate were
supplied to War Finance committees, payroll savings plants and
many other bond issuing agents.

Conclusion

The precise contributions of "Special Events" to the War
Finance program defy assessment. Figures could be quoted to
show just how many dollars worth of bonds were sold at events
for which accurate records were available -- movie or theatre
performances, for instance, to which admission was the purchase
of War Bonds. Promotional credit for bond sales, however, is
an illusory thing, often verging on the intangible. One can
seldom ascertain just which one of several compelling motives
was the decisive one which led to the purchase of a bond.
Leaving all such qualifications aside, however, it is certain
that Special Events were invaluable to the VJar Bond program.
They secured vast numbers of extra sales that would not
otherwise have been made. Most significantly of all. Special
Events provided variety in promotional appeal. They gave

- 221

IJar Finance workers, paid and volunteer alike, something new
and different, promotions of infinite variety, with which to
keep alive public, and their oxm, enthusiasm when the steady
grind of day-to-day effort tended to become monotonous and
deadening.

Press, Radio And Advertising

Objective

The self-evident, over-all objective of the Press, Radio
and Advertising Division was to secure the maximum publicity
and space in all advertising media for Savings Bonds and
other Government securities. In this respect the Division
objective was not unlike that of the advertising branch of
any private manufacturing company or retail distributor —
publicity to increase the sale of its product.

Comparison with Private Enterprise

There were, however, certain differences between the
bond advertising campaigns and those which might be undertaken
by private concerns to promote the public's use of, let us
say, a particular brand of coffee, tobacco or soap. For one
thing, the United States was engaged in war during most of the
bond program, so that the compelling motive of patriotism
helped induce people to buy War Bonds, and to incline the
managing officers of newspapers, radio stations and other
publicity media to cooperate with the Treasury's program.

In the second place, the advertisers of United States
Government securities could be certain that the product they
were promoting was absolutely sound -- it would not only help
the Government finance the v/ar but would also provide the
individual bond purchasers with the safest and best investment
they could make.

Decision to Rely on Donated Space and Time

The foregoing factors did not, however, make the work of
the Division of Radio, Press, and Advertising smooth and easy.
One basic question, which had to be answered at the beginning
of the Defense Savings program, was whether the Treasury was
going to pay for bond advertising or seek contributed space in
newspapers and magazines and contributed time on radio
programs .

222 -

Opinion on this question was divided in high official
circles. The Secretary and several of his Assistants thought
that the Treasury should pay for its advertising. Harford
Powel, first Information Director, was open to conviction
either way. P. H. Odegard came out flatly for donated space
and time. An estimate was made of the probable costs of
advertising Savings Bonds by radio, daily and weekly news-
papers, magazines, on outdoor 2U-sheet poster boards, on
car cards in trolleys and busses, through the movies, etc.
The tentative figure, approximated under I9U1 conditions
before the United States was involved in the war, came to
more than $U, 000, 000 for a year of advertising of national
scope, using all media. The Secretary decided, in going
before Congress on the first budget for the Defense Savings
program, not to ask Congress for such a large sum of money.

In this slightly off-hand fashion the great decision was
made; the Treasury's bond program would rely on contributed
advertising. This was undoubtedly a wise decision. The
Treasury received much more advertising space and time, and
much greater cooperation from advertisers on a sponsorship
basis, than it would have on a paid basis, unless appropriations
for advertising had been raised to great heights, many times
over the 19^1 estimate. The decision to ask for contributed
advertising created a healthy atmosphere for the War Bond
program. Contributors of advertising space and time felt that
they were doing more to help the war when asked to give,
volimtarily, than if they had been paid for their support.
Futhermore, if there had been Treasury appropriations for
paid advertising, it would have taken a genius to divide
the total sum available among different media, so that
nevrspaper managers would not have complained that radio
got more than its share, magazine editors that outdoor
billboards were receiving too large a slice of the available
funds, and so on, not to mention rivalries within each medium.

Paid Advertising Bills in Congress

The question of paid advertising was kept alive in Congress,
coming to a head in the closing months of 19^3 with three bills,
one sponsored by Senator John. H. Bankhead of Alabama and two
introduced by Pvepresentative Clarence Cannon, chairman of the
CoiMiittee on Appropriations, but none of these bills became
law. The Treasury's case for the continuance of the voluntary
program was well summed up by National Director Gamble. Citing
figures to prove his stand, he said: "This nationwide effort.

.23

conducted along voluntary lines, attains volume peaks, during
drive periods, which have never before been equalled on
either a paid or a voluntarjr basis... The War Finance Division
cannot, in good conscience, call upon the majority of the
American people to contribute what a very small minority
demands by v/ay of tribute. It could only result in a decided
lessening of the volume of advertising we now enjoy... The
great merit of voluntary sponsored advertising is that it has
induced the advertisers to substitute War Bond copy for their
own copy."

Initial Operations

What became eventually a cohesive Division of Press,
Radio and Advertising began in the spring of 19^1 as separate
activities under the general supervision of Harford Powel,
Director of' Information, and his Assistant Director, Sydney
Mahan. The initial atmosphere of puzzlement over what to do
first, or who should do what, in the opening weeks of such a
gigantic undertaking as a campaign to sell Savings Bonds to
every man, woman and child in America, can best be indicated
by phrases in the recollections of Mahan:

"For the first few weeks I was more confused
than I have ever been in my life, which is
saying something. Powel talked hazily of
organization and jobs to be done but there
seemed to be no pattern of any kind. I
did things as they came along until May
when the Defense Bond activity started and
things began to straighten out somewhat."
Mahan cited as time-consuming issues the constant procession
of applicants for jobs, and of publicity agency men soliciting
paid advertising for Savings Bonds.

The early operations of the Director of Information and
his immediate assistants were not confined to channels which
could be neatly labeled press, radio or advertising. They
included promotional work with the movie industry, with
bankers who arranged bond displays in their institutions,
with the continuance of the mail order business inherited
from the Division of Savings Bonds, and with Post Office
Department cooperation with the new bond program.

Viewed from the vantage point of later perspective, the
sights of the early advertising program were not set high.
As Director Powel said in July 19^1, it was the practice of
his office not to ask any publisher, radio station, advertiser

22U -

or anyone else for any kind of contribution or service that ran
counter to his own interest or involved any great expense to
him. Newspapers were asked to give the bond program only a
little space. Press releases were short. "Spot" announce-
ments for radio could be used at the time and convenience of
the stations. This initial policy of moderation was undoubtedly
a wise one. Finding that the Treasury was not asking for
costly favors, leaders in every channel of communication and
advertising came forward with voluntary offers of cooperation.

Personnel

In the early months of the Defense Savings program.
Director of Information Powel secured as major assistants, in
addition to Mahan, several people who had long and useful
connection with the bond operation. Recommended by major
networks and several large radio stations, Vincent F. Callahan
was brought in to head radio bond activities. He was a
form.er r'^ational Broadcasting Company executive, station
manager, and Washington newspaper man. Remaining on the
staff to March I9UU, "Vince" Callahan supervised the whole
press, radio and advertising operation. The first chief of
the Press Section was Milburn McCarty, Jr., v^ho left the
Treasury in September, 19^2, for military service. He was
followed by Walter A. Shead and then by S. George Little. As
assistants in radio, Callahan had Charles J. Gilchrest,
Marjorie L. Spriggs (later Mrs. Gilchrest), and Emerson
Ualdman. Charles Gilchrest was the first Chief of Radio, then
Marjorie L. Spriggs Gilchrest the second Chief.

For obvious reasons the promotional work with press, radio
and other publicity media never operated in water-tight compart-
ments. It was necessary to have constant integration of effort
and overlapping of operations, but for convenience sake the
account of this very important Division vrill be broken doxm
into its more or less distinct parts.

Press

Purpose

All the units of the Press, Radio and Advertising Division
had as their major tasks the creation of War Bond copy and the
securing of its widest possible use. To a considerable extent
the latter part of this job depended upon the former -- the
better the copy the more likely it was to be used by publicity

225

agencies which were not being paid for whe.t they used but were
voluntarily cooperating with a Government prograjn.

The Press Section dealt primarily with newspapers, but its
work, as was true of other sections in the bond organization,
touched upon so many other phases of the over-all promotion
that no attempt was made to draw sharp lines of administrative
jurisdiction. Press publicity naturally tied in with radio,
with advertising in general, and with the activities of other
functional operations such as payroll savings, the farm program,
and^he education_program.

Materials

VJithin its primary field of operation the Press Section
was responsible for creating and servicing the following types
of material:

Mats for newspaper ads, in various sizes,

usually 3-column width to full page.
Special features —

Comic strips with bond angle
"Question and Answer" boxes
"Uncle Sam Says"

"Behind Your Bonds" (short paragraphs
on the economic strength of
various parts of the country)
"American Heroes" series (Heroes of

the armed services)
Mats of War Loan Insignia
Editorial "ears"

"Drop ins" -- especially cuts of the Minute
Man, "trade mark" of the bond operation
Press Books for special campaigns, such as the
19^2-^3 Pledge Campaign, the I9U2 Ten
Percent Radio Club, the Schools at War
program. Women at War Week, Stamp Album
Clearance in January 19^2, etc.
Press Books and Clipsheets for special phases of
the bond program (Agriculture, Labor, etc.)
The Press Section produced, as occasion demanded, a great
variety of publicity for special purposes. In addition to
the types noted above, the Section carried on a news picture
service, supplying the press with pictures of bond activities
or with war pictures which could be given a good bond slant;
suggested publicity on the maturing of the first "Baby Bonds,"
Series A, which "came of age" in March 1935; and publicized
special promotions such as the V-Mail Gift Certificate.

■^2.6

I^elations xfith the Treasury Public Relations Office

The Press Section worked very closely with the main
Public Pvelations Office of the Treasury Department. Sometimes
the dividing line between the two, as regards i^ar Bonds
releases, was indistinguishable. Particularly significant
announcements on the course of war finance operations 5
especially those sent out in the name of the Secretary, were
usually released by the news bureau in the Treasury Department,
even if prepared by the press service of the bond organization.
Other important releases were prepared by the VJar Finance
Division and checked with the main publicity office before
release, while routine matters were sent out by the Press
Section of the bond organization on its oxm responsibility.

Special Drive Publicity

IJhen the pattern of continuous Savings Bond promotion
plus periodic drives became established in 19^3? the Press
Section prepared special publicity material for each VJar Loan
drive. Advertising highlights for loan drives were broadcast
through Portfolios of newspaper ads (one for daily papers and
another for weeklies), showing reproductions of mats, loan
insignia, and drop-ins, and giving directions, with return
postcard order form, on how and where the mats could be
procured. The Section also distributed Press Books or copy
sheets for newspapers a short time before the opening of each
drive, giving data on the basket of securities, excerpts from
statements by Treasury and other public officials, and suggested
slants for local stories.

Cooperation with other Divisions of l/ar Finance

VJith its battery of news experts, the personnel changing
from time to time, the Press Section was looked to for
assistance in publicity matters by all other sections of War
Finance. The Women's Section, Education Section, the farm
and the payroll savings people, in fact anyone wanting to
build up a news story for a particular purpose, went to the
Press Section for advice and help. Usually the Section most
concerned would rough out proposed copy and ask for expert
criticism. At other times some member of the Press Section
would be handed the outline of a special job with a note-
"Please do this for us by noon."

- 227 -

Relations between the Press Section and the Field Division
were very close. The former relied heavily on news coming in
from State offices for timely bond stories, especially anecdotes
with a good "hmian angle." In the reverse direction, it was
very essential to keep the Field staff currently informed
as to what the Press or any other unit of the Advertising
Division was doing. One way of dealing with this problem was
to have the State Administrators, Chairmen or Executive
Managers placed on mailing lists to receive at least sample
copies of all portfolios of ads, mats or proof sheets, and
press books. To focus the attention of State Uar Finance
committee members on press and other advertising copy, many
separate items or collections of material were transmitted to
the field offices by Field Memoranda. In every case, special
drive materials were called to the attention of the field
staff by memoranda addressed to the State Chairmen. Similar
memoranda, with attached proof sheets, also advised the field
of between-drive ads. To let the State War Finance Committees
l^now what newspapers "were receiving mats or other materials
direct. Field Memoranda explained the system of direct
distribution, and offered state offices opportunity to revise
the mailing lists for their areas.

Drive Bulletins

In the Third Uar Loan the Press Section sponsored a
special "Attack" Bulletin, a fast-moving, mimeographed service
of two or three pages daily, distributed principally to State
Chairmen and their local publicity agents, giving up-to-the-
minute news on preparations for the drive, and developments as
the drive progressed, along with suggestions for stunts to
push the loan over the top. This helpful service was continued
under the general supervision of the Press Section for the next
three drives, and then carried on through the Seventh War Loan
and the Victory drives by special bulletins from the Field
Division.

Wsr Loan News Desk

Beginning with the Third War Loan, and continuing in each
drive thereafter, there was a special News Desk, set up two or
three weeks before the drive opened and maintained to its
close. The personnel for this service, averaging eight or
nine individuals, was drawn from the War Finance Press Section,
the Treasury Public Relations Office, and a few invited persons

- 228

from newspapers in various parts of the coiintry. The War
Loan News Desk supplied daily stories to the wire services
and the Washington papers, and additional copies of their
releases were distributed, by airmail to distant points, to
all State ^'Jar Finance offices.

Magazines

Within the Press Section was a Magazine Unit which
carried on promotional work with magazines similar to that
given nev7spapers. Magazine ads were provided in electrotype
rather than mat form, and were "pitched" for several distinct
varieties of publications, such as magazines of general
circulation, business executive publications, and farm or
retail magazines.

"P.S."

One very important service which the press and magazine
people gave to another section of War Finance was the editing
and distribution of "P.S.", a monthly publication sent
primarily to editors of house organs or plant publications
in firms conducting payroll savings plans. This neat
appearing and sprightly written little magazine contained
"testimonials" of successful payroll savings plans, cartoon
features, editorials on Treasury objectives, and suggested
payroll savings ads for local adaptation.

The Advertising Division did not originate all its mats,
copy and other bond publicity features within the closed
circle of Treasury officialdom. In the publicity field,
perhaps more than anywhere else, close cooperation with
outside agencies was highly essential.

Radio

Radio offered the Treasury a tremendous opportunity for
bond publicity. In 19^0, for instance, there were estimated
to be more than 29 million homes with radio sets, 8 million
automobile radio sets in use, and more than 12 million other
radio sets elsewhere, making a grand total of more than 50
million sets. In the spring of 19^1, many Government agencies
were making extensive use of radio -- Army recruiting
stations, the Department of Agriculture, the Office of
Government Reports, the National Defense Commission, the
Department of Justice and others. The task of the bond
organization was to do an outstanding job in radio, to

- 229

create programs that would be different from the usual run of
educational programs so they would attract attention.

Starting off with short 1-minute transcribed messages on
Savings Bonds, and with brief dialogues on the personal
advantages of investing in Government securities, the radio
people built up to countrywide network programs of sometimes
an hour in length opening War Loan drives, and a series of
entertaining music programs, in transcription, which came
into popular use on a weekly basis by a great majority of
radio stations in the country.

As in the case of press publicity, radio advertising
embraced a great variety of programs and services, among
which may be included the following:

Short transcriptions, one to five minutes,
on major aspects of the bond program, some
given by Government officials, others by
leaders in the war, in industry, by stage or
screen stars and musicians, by heads of
women's clubs, prominent sports writers, etc.
Music programs, 15 minutes in length, with
entertainment to attract attention, the bond
"plug" being subordinated. Most important
was the "Treasury Salute" series, begun in
October 19^2 as the "Treasury Song Parade,"
and supplied to upwards of 87O stations.

Special broadcasts featuring the beginning
or closing days of a War Loan drive, and
sometimes including short talks by the
Secretary of the Treasury, or the President.
In addition to Treasury-prepared programs, the Radio
Section urged the inclusion of bond "plugs" in popular,
privately sponsored network shows, in commercial announcements,
and in all sorts of locally organized programs. To assist
this the Radio Section sent out packets of "live announcements,"
that is, short statements which could be adapted to local
conditions and given at liberty by station announcers. Last
but not least the Radio Section conducted an Information Service
beginning in I9UU, to supply radio commentators weekly with
releases providing data on which to make helpful references
to bond drives, or give well-informed summaries or current
developments in the over-all Treasury program. 10

10 Let it not be assumed from the above outlines of press and radio activity that all such
items originated in Washington. Every state office had one or more members of its personnel special-
izing in publicity, and these local officials originated their ovm plans and projects to supplement
the material sent out of Washington.

- 230 -

Our America

A unique experiment in "bond advertising, which might
well have been continued in later phases of the program, was
the rotogravure mailer Our America. Tvjo issues of this
publication were distributed, the first late in 19^1 and the
second in the spring of 19^2.

Our America was a small tabloid of eight pages, two in
full color. The front covers of both issues carried
illustrations of children, and the back covers a comic strip
with a war bond angle, and a bond application blank. The
contents included messages from President Roosevelt and
General MacArthur, figures on war production costs, and
(second issue) a 2-page spread on the pledge campaign in
Oregon,

The twenty million copies of the first issue were
delivered by the postal service to practically every home in
America- the second issue, in slightly larger printing, was
also distributed as a "drop mailing" proposition. Appearing
early in the program, before the Treasury's campaign had
acquired momentum in other fields of advertising. Our i^jnerica
was a distinctive and effective agent for carrying the bond
message to the mass of the people.

Outdoor Advertising

A more continuous advertising program was carried on
through outdoor posters, otherwise knoi-m as 2U-sheets for
billboards. There were "painted boards" in addition to those
on which paper was mounted.

The initial arrangements for cooperation between the
Treasury and the outdoor advertising industry were worked out
in the fall of 19^1-1. Outdoor showings were secured in one
of four ways: (l) By Treasury production of 2U-sheet posters,
which could be distributed free to advertisers to mount;
(2) By Treasury-approved designs which members of the outdoor
advertising industry would themselves display, at their own
expense, as their contribution to the bond program; (3) By
Treasury-approved designs which the Outdoor Advertising
Association of America would sell to advertisers through its
agencies; and (h) By the creation and display of original bond
copy by individual outdoor advertisers. In the last two loan
drives, a good deal of the bond appeal was secured by
streamers or corner cards, the latter providing a convenient
method whereby a bond slogan could be added to the advertiser's

231

copy on his own product.

By the summer of 19^2 there were about 2,000 outdoor
boards in the country showing bond posters. This number grew
slowly but steadily to an estimated 10,000 panels in the later
period of the bond campaign, reaching peaks of 60,000 or more
in loan drives.

Car Cards

Similar to the outdoor advertising operation was the car
card promotion. The Treasury produced a fe\i car cards --
some State offices made their own for limited local use --
but worked more generally with the two largest national car
card industry companies to arrange showings of Treasury
approved bond designs in trolleys and busses.

Miscellaneous

An account of the miscellaneous activities of the
Advertising Division would fill a small volume. Broadly
stated, the Division sought to secure bond advertising in any
blank space available on anything, anyrfhere — on paper match
covers, hotel and restaurant menus, milk bottle collars,
greeting cards, the covers of popular magazines, theatre
programs, and as inserts with bank statements and utility
bills. 1^

Posters

Perhaps the most colorful task of the Advertising Division
was its close connection with the production of War Bond
posters for general distribution. By no means were all the
original designs for posters initiated in the Division.
Suggested designs came from many sources -- from independent
artists, Abbott Laboratories, and the War Advertising Council.
Occasionally the Division was authorized to hire an outstanding
artist to design a poster. Sometimes the graphics people on

- 232 -

the staff sketched out a rough design which was polished up
by outside experts. All tentative designs were considered
"by a poster committee 3 which included the National Director.
In the early months of the bond program, Mrs. Morgenthau
took an especial interest in posters. There were general
posters and special posters. The general items were suitable
for display almost anywhere — in banks, stores, schools or
factories. Special posters, streamers and placards were
produced in smaller quantities for display at "points of
sale," in payroll savings plants, rural stores and so on.

As each poster came out, whether general or special, it
was announced to State offices by a Field Memorandum, and the
distribution described. In most cases there were direct
distributions to selected mailing lists — of retail stores,
banks, post offices or schools -- and then bulk supplies were
shipped to State offices for supplemental use.

At the close of War Finance a list was prepared, for
historical purposes, of what could be considered representative
posters of the whole bond operation. About sixty titles were
selected, including for the most part general posters plus a
few of the outstanding items produced for special purposes —
for payroll savings, schools, women's activities, foreign-
origin groups and Negro organizations. This selection, the
cream of the crop, included less than half of the total
number of posters produced nationally, not to mention the
innumerable items of state or local origin. Particularly
in the payroll savings field had a large number of companies
produced War Bond posters, at their own expense, to aid the
Treasury's program.

Advisory Councils

Throughout all of its activities, the Advertising Division
worked with a number of councils and associations, of which
the following were relied on most heavily for advice and
assistance:

1. The ^Jar Advertising Council (see below).

2. The Allied Newspaper Council.

This group grew out of a meeting of editors
and other press officials called together by
the Secretary in March 19^85 to aid in the
Second War Loan. Frank Tripp of the Gannett
newspapers was appointed chairman, to head
up all press activity on behalf of the
Treasury. On a continuing basis, this

- 23:

Coioncil evolved into the Editors Advisory

Committee 5 of eight members, of I'.^hich

Tripp was chairman.
3. Periodical Publishers Association.
k. Public Relations Committee of the Association

of National Advertisers.

5. War Aid Committee, Newspaper Advertising
Executives Association.

6. American Association of Advertising Agencies.

7. National Association of Broadcasters.

8. The Outdoor Advertising Association of
America, Inc.

The \-Jar Advertising Council

The War Advertising Council was formed shortly after
Pearl Harbor in 19^1, on a non-profit, voluntary basis, to
cooperate with all agencies of the Government in helping to
aid the war on the home front. It represented all elements
of the advertising industry, in all media. The Council was
in position to provide over-all publicity information and
placement service for advertising.

The first formal conference between the Secretary and
other Treasury officials and members of the War Advertising
Council was held in Washington on April 25, 19^2, as a result
of which the Council immediately went to work on plans to
help the Treasury's payroll savings plan. Some seventeen
experts in various advertising fields were chosen by the
Council to report to Washington later in April, for further
conference with Messrs. Graves and Gamble, and the heads of
the advertising staff of War Savings. On return to New York,
the "agencies skill" group, in the interest of speed and
effectiveness, apportioned the work to be done among several
men, each to be responsible for a separate phase of activity,
such as radio, magazine, or newspaper advertising.

The VJar Advertising Council drew up a list of thirteen
important national advertising associations, to which the
Treasury supplied protfolios on its own advertising materials
and progress. This basic list of associations continued to
receive VJar Finance and War Advertising booklets, information
and data.

The helpful and extensive activities of the War Advertising
Council centralized three services for the Treasury: (l) A
channel of communication through which information on the bond
prograin could expeditiously reach the heads of large, national

23^-

advertising agencies; (2) An expert advisory board on promotional
plans being developed within the Treasury; and (3) The Council,
through its member agencies, created a great variety and volume
of bond advertising for Treasury use.

An account of advisory councils in relation to the work
of the Advertising Division should include the Office of Facts
and Figures (October 19^1 - June 19^2) and its successor
organization, the Office of War Information, the latter of
which was created to coordinate the war informational activities
of all Federal agencies for the purpose of assuring an accurate
and consistent flow of such data to the public.

The Record

To sell millions of Savings Bonds -- and U50 million E
Bonds alone were sold during war finance — to some 85 million
Americans on a voluntary basis, with the lowest price of the
product being $18,75? required a large advertising campaign to
back up the efforts of the volunteer solicitors in the field.

A widespread and effective advertising campaign was
achieved. From the ear]y steps in the spring of 19^1 through
the Fourth War Loan, or in its first three years, the advertis-
ing support to the War Bond program was estimated to have been
worth a quarter of a billion dollars at prevailing commercial
rates. However, any estimates of the presumed value of War
Bond advertising in terms of paid space and time were but
general indications of the size of the program. Attention will
be paid here to the prevalence of certain types of advertising
rather than to their commercial value. Newspaper advertising
reached a high table in 19^^? from which level it did not vary
greatly until the end of the war, except for occasional peaks
during the later war loans. War Bond "features," that is,
special picture services with bond text, appeared in 19^^ as
follows :

Feature

number

Totals

daily papers

weekly papers

Feature picture

page

U29

157^

2003

V\Far Bonds in

Action

U56

3507

3963

American Heroes

378

3161

3539

235 -

Bonds Over

America ^28 21+93 2921

Fashion Feature 132 17^+1 l873

Stars in Service 2^8 1738 I986

Wounded Americans ^2 269^ 2736

The following table shows the growth in the number of

Treasury ads being run from the Second through the Fourth
War Loan:

War Loan Number of Bond ads Number of Bond ads
in daily papers in weekly papers

Second U0,77^ 22,109

Third 88,9^7 63,8U6

Fourth 89,0U8 70,830

Estimates of measurable advertising show that War Bonds
were receiving support in I9I+I valued at about $U2 millions,
at $69 millions in 19^+2, and $100 millions in 19^3. In the
Fifth War Loan alone, it was estimated that War Bond
advertising of all types, donated and sponsored, by radio,
newspapers, magazines and outdoor boards, reached a total
of more than $2^ millions at current commercial rates.
Sixth VJar Loan advertising was estimated at a measurable
value of $25,26^,000.

Conclusions

The War Bond advertising campaign became a large-scale
operation by the summer of 19^+2. It extended to all types of
publicity media. The Press, Radio and Advertising Division
took the initiative in preparing all sorts of materials that
would encourage people to invest in bonds. Beyond such
consciously created advertising there was a great deal of
general publicity which came without the asking. The
activities of the War Finance Division and the State and
local committees made news. Sales figures were news.
Speeches of Treasury and War Finance officials were news.
The appointments of new State Chairmen and other bond
personnel were news.

This very extensive publicity, surpassing that achieved
by private commercial advertisers, and topping that of
other Government agencies, was accomplished at relatively
small cost. Any comparison of War Finance advertising
with that of other Government agencies needs to keep in

"236 -

mind the fact that War Finance had a good product to sell --
a sound individual investment bearing a good rate of interest
— while most other wartime agencies were trying to make
palatable a variety of restrictions — Don't throw away waste
paper, or bacon grease; turn off unnecessary electric lights;
learn to make cake without sugar, etc.

As already noted, the Treasury did not buy advertising
time and space. The VJar Bond staff, did, of course, bear
considerable expense in connection with this — the salaries
of the Advertising Division personnel, travel of its members,
and, most importantly, the production and distribution costs
for electrotypes, mats, proof sheets, clipsheets, etc., some
of which were handled through the Government Printing Office,
but a large proportion of which were managed by the Western
Newspaper Union. Special press books for promotions such
as Schools at War, and Women at War Week, were produced in
quantities of from ten to fifty thousand; War Loan Campaign
Books ran from thirty-five to fifty thousand or more. It
would not be easy to carve out of total War Finance expendi-
tures the items solely related to press, radio or other
publicity. Estimates of the over-all cost of the War Finance
program in relation to sales will be treated later.

It should not be assumed that all War Bond publicity
originated in or was controlled by the Press, Radio and
Advertising Division, In a very true sense every member of
the Defense -War -Savings -War Finance operation, both in
Washington and the field, from the National Director to the
humblest clerk-typist, was engaged in publicizing and
promoting War Bonds. Ideas sprang up from everywhere, and if
good were given a fair try. War Finance promoters asked the
War Advertising Council for criticism on new approaches.
The Council brought in its own copy for consideration by the
Advertising Section, with final judgment in nearly every case
lying with the National Director.

The Press Section originally intended to build its chief
activities around national publicity in newspapers. Operations
with magazines were taken up a little tardily, and somewhat
stinnblingly. The mass production operation adapted to radio
and newspapers was not equally suited to magazines. A
magazine editor likes to think that his product sell and is
read because it is different from every other publication in
the business. Magazines had to be fed a variety of ideas,
selected advertisements, and a collection of stories from which
a few could be adapted to the special reader audience. Bond

- 237 -

items for magazines also had to run against the hazards of
timing. A good deal of newspaper and radio advertising^ for
example, was tied to current events in the war. Since material
for many magazines, especially the monthlies, was "put to
bed" a month or so in advance, the chances were great that
any "news" copy would be out of key when the item finally got
into print. By 19^3 these hazards were met by a triple
approach: (l) Treasury advertisements were geared to special
themes , depending on whether the publication was a general
magazine, farm publication, or professional journal for
business executives; (2) "Copy policy" sheets were circulated
widespread, from which magazine advertising executives could
create their own bond stories or ads; and (3) Copy vjritten by
the Treasury or the War Advertising Council or both was made
available to magazines using agency accounts.

Comparatively speaking, the large War Bond advertising
program developed in the magazine field was a more outstand-
ing achievement than the huge bond lineage reached in
newspapers. Of all the publicity media, it could be said that
the radio industry generally responded most wholeheartedly to
Treasury appeals, and that this industry kept up a much
higher level of cooperation than the other media after the
war crisis had passed, and the bond program went on a
peacetime basis.

Publicity alone did not sell; it paved the way for sales.
The press, radio and advertising personnel of War Finance
had, during war loans, the support of from five to six
million volunteer salesmen to help make the publicity program
pay off in dollars invested in War Bonds. Conversely, the
volunteer solicitors and War Finance committeemen and women
were provided by the Advertising Division with the "atmosphere"
which induced people to buy bonds when asked. One cannot
readily assign credit for sales on a proportional basis — so
much to advertising, so much to Women's committees, to banks,
to solicitors in rural areas, etc. The whole War Finance
operation was bound together. Although designed to reach
certain well-defined objectives, the results of the work
of different Divisions and Sections overlapped in many fields.
Publicity was an essential; it helped secure bond sales; bond
sales made publicity; there was a war beign fought; nearly
everyone liked to boast about what he was doing to help in
the war; people bought bonds for any one or a combination of
several compelling motives. Some $185. 7 billions of
Government securities were sold to help finance the war.
In this outstanding achievement, composed of innumerable
interrelated parts, there was room for ample credit for all.

- 238 -

Citations and Awards

Since the War Finance Program operated with a very small
paid staff 5 and had to rely on volunteers for the great bulk
of its sales force, and on tjponsored or contributed advertising
for much of its publicity, seme means of recognition for all
this public spirited support was very essential.

Not everyone in the country wanted to be thanked for
what they did to aid the cause of war financing. A few
people every week wrote to Washington, returning their
citations or other certificate of appreciation, and saying
they needed no thanks for doing their duty, and would VJar
Finance please save the money spent on citations to use for
the purchase of guns and ammunition. On the other hand, a
considerably larger number of people, particularly residents
of New York City, 'vrote to inquire why they had not received
a citation for their work in the recent VJar Loan drive.

One of the best ways to thank volunteers and cooperators
for their help to war finance was to express appreciation in
a gracefully worded letter. Probably not a day went by that
every promotional member of the War Finance organization
wrote a half-dozen or more letters of thanks. After the
Fifth and Sixth drives, the Field Division of Washington
headquarters agreed to write letters of appreciation, to be
signed by Gamble or Coyne, or in some cases by the Secretary,
to the outstanding volunteers each State Chairman wished to
have thanked in this personal way. The number of letters
written on these occasions ran to four thousand or more.
Most of these were "v/ritten on electric typewriters. Obviously
a great many letters had to be alike, but they were varied as
much as possible.

But there were from five to six million volunteers in
the late War Loan drives, not to mention the tens of
thousands of other persons and institutions helping the
program in some way. They could not all be thanl<:ed by
letter. There were not enough hours in a day for that, nor
secretaries, or typewriters. Other forms of recognition had
to be resorted to in a majority of cases.

239

In the late suiter of 19^1 the Defense Savings Staff
developed plans for a distinctive and attractive lapel button
-- and corresponding pin for women -- which could be worn by
headquarters staff members, the personnel of State offices,
and by county chairmen, as an identifying badge denoting their
"enlistment" in the Savings Bond campaign. About five
thousand of these buttons, carrying the Minute Man insigne,
were cast in bronze by the Mint, and the bulk of them shipped
to State Administrators for distribution. The entry of the
United States into the war, with consequent shortage of
metals for civilian use, prevented further production of
these distinctive buttons or pins.

The bulk of War Bond awards for volunteer service or
other support consisted of citations or certificates printed
on good quality paper. There was quite a variety of these,
but the most distinctive one remained in standard use,
practically unchanged, throughout the whole program, and the
other most generally employed types were altered but once,
shortly after the reorganization in the siommer of 19^3.

The highest Treasury award for cooperation with the War
Bond program was the Distinguished Services Citation, so
called from its text, which read in part: "For distinguished
services rendered in behalf of the Defense Savings Program
this citation is awarded to..." This citation originally
bore a small Minute Man design, encircled with stars, and the
facsimile signature of the Secretary of the Treasury. Most
of the citations bore a stamped or printed reproduction of the
Treasury Seal, although a few, awarded for especially out-
standing service, were decorated with the full, embossed Seal
officially placed thereon, individually, by the custodian of
the Seal in the Secretary's Office. In 19^2 the Distinguished
Services Citation was amended to read "in behalf of the War
Savings Program," and in 19^3 changed once more to refer to
the War Finance Program, and on the latter occasion, the
citations were printed with two backgrounds — the Minute
Man being kept for citations designed for individuals , and a
background of the Treasury Building for citations to groups
or institutions. VJith few exceptions, the Distinguished
Services Citation was awarded only by Washington headquarters,
not by the states, and a record of all awards was kept to
avoid duplication.

Previous to the reorganization of 19^3? and in addition
to the Distinguished Services Citation, there were several
general citations or awards, all having a Minute Man design,
but with variant texts to suit several types of use. The

- 2^0 -

most important of these were:

(1) Minute Man citation for payroll savings
firms and other groups in which at least
90 per cent of the employees or membership
were enrolled in payroll savings,

(2) Minute Man citation for payroll savings
firms or other institutions in which at
least 10 per cent of the gross payroll
was being invested in War Bonds.

(3) A general Minute Man citation which,
without reference to payroll savings,
could be awarded to women's clubs, civic
organizations, etc., for cooperation with the
the bond program which was not of as
outstanding character as to merit the
Distinguished Services Citation.

The great bulk of all Minute Man
citations were for issuance by State
offices to local volunteers.
The citation system was simplified after the reorganiza-
tion of 19^85 "by reducing the number of general citations but
having them so vrorded that they could be used to cover almost
every type of cooperation. One read: "For patriotic
cooperation rendered in behalf of the War Finance Program."
Another read: "in appreciation of services rendered in behalf
of the War Finance Program. "

The foregoing citations could be used to fit nearly every
need for recognition, but there were many variations and
supplements. On occasions a few Distinguished Services
Citations for outstanding cooperation were hand-lettered on
parchment. Occasionally a very special citation was made up
individually, with an original text different from that of the
printed variety. Functional sections of the War Finance
Division had their ovm awards. There were at one time or
another several special citations issued for the Schools at
War program, others for moving picture stars, banks, and
savings and loan institutions. The Advertising Division had
"In 'Appreciation" cards for radio stations and contributors
of sponsored newspaper advertisements. Beginning in 19^^i-
it became fairly common practice to have small stickers,
which couJ-d be attached to the general citations, with
colored designs showing that the award had been made for
achievement specifically in payroll savings, or the farm
program, etc., of for an outstanding record in a particular
War Loan drive.

2i^-l

This treatment of citations has reference only to awards
provided by the headquarters office for nationwide use. State
offices employed whatever of these awards were most suitable
for their needs, and they also produced a great many others
for their own local use. Citations and awards relieved War
Finance officials of much of the burden of personal letter
T-rriting to express appreciation for cooperation with the
bond program. By and large the citations were attractive
items, which the recipients treasured as a token of their
contribution to the war, and which could be framed or
publicly displayed if desired. The suitable inscribing of
the recipients' names on the citations was occasionally a
problem. For the Distinguished Services Citation, which was
not issued in large numbers, the names were printed on a
lettering machine, or inscribed by the Government Printing
Office. State offices occasionally had more trouble,
especially in issuing a large number of citations after a War
Loan drive. Sometiraes an office was fortunate enough to
find a good penman on its staff, for the hand lettering of
awards. In other cases there was no resort but the mundane
typewriter.

With few ezcceptions, citations were awarded only to bona
fide volunteers, and not to any paid officials of the bond
staff, including dollar -a-y ear men, on the sound principle
that since these were Treasury awards it was not fitting to
give them to Treasury employees, and thus permit the system of
awards to degenerate into a practice of self-glorification. 12

At the end of the War Finance program need was felt for
some final token of recognition, different from citations,
that could be extended to at least a fair proportion of the
army of volunteers who had given so much of their time and
energy to aid the Treasury and their country.

T\'TO special tokens were developed, a Silver Medal and
an aluminum card. About fifty thousand Silver Medals were
struck. They were handsome pieces, the size of a half-dollar,
bearing on one side the legend "19^1 - For Patriotic Service -
19^5 - War Finance," surrounded by a bas-relief of the famous
flag-raising scene on Two Jima. The reverse bore simply the
legend "U. S. Treasury Award," decorated by the Minute Man

12 The chief exception came at the end of the War Finance program, when Distinguished Services
Citations, and Silver Medals, were awarded to all the personnel of the headquarters office, and to
top officials in State offices.

- 2^2 -

symbol and the Treasury Seal. A few of the medals were awarded
by "i/ashington headquarters to persons whose outstanding
cooperation with War Finance had been on a nationwide scale.
The bulk of the medals were allotted to Mtate Chairmen for
award to their outstanding volunteers.

The aluminum cards, or "Committee Awards" as they were
called, 1 3/U by 3 lA inches in size, were produced in much
larger quantity than the medals, and were practically all
delivered to State offices for local use. The aluminum
plates were relatively cheap to produce, but they had little
display value, the text being unreadable from a distance of
more than three feet or so.

Uar Bond officials considered several times the adoption
of a system of what might be termed "service awards" similar
to that employed by the Civilian Defense Committees, i.e., a
pin for new volunteers to which could be added either honor
bars or different colored ribbons as the volunteer completed
designated numbers of hours or days service in the cause, A
system of this sort was not adopted nationally, but a number
of states tried some form thereof for the recognition of
volunteer solicitors, particularly women volunteers.

Citations and awards were not only tokens of recognition
for past service; they had a very important promotional value
in keeping alive the interest of volunteers to continue their
cooperation. All good letters of thanks carried a "hook,"
gracefully expressed, along the line of "We greatly
appreciate your wholehearted support to the War Bond program,
and we are confident we can count on your continuing
cooperation." The mere receipt of a citation, even if it
came prosaically in the mail, put the recipient in better
mood for continuing with his help to an organization which
thus showed appreciation for what he was doing. Particularly
was this double-edged effect — thanks for the past and hope
for the future -- achieved when citations or other awards
could be presented at a dignified ceremony, in which the
State Chairman or some other War Finance official delivered
the, award in person. Such personal presentations were made
whenever possible, especially to representative of civic
organizations, or of management or labor for outstanding
performance in payroll savings. Promotionally considered,
by no means the least value of personal presentations of
awards lay in the attendant newspaper or magazine publicity,
often illustrated by a picture of the ceremony.

- 2U3

Although not an a^jard for services in the ordinary sense,
the headquarters office of the War Bond operation kept in
stock for State use an Appointment Certificate, which could
be issued to County or other key committee chairmen, as
evidence of their title and position. A few of these
certificates were issued hy national headquarters to
individual State Administrators or State Chairmen.

Citations and awards were a very important part of the
War Finance operation, as they were of many other fields
of popular endeavor.

oOo

- 2^1+

CHAPTER X

THE OPERATING ORGANIZATION

The term "operating organization" may be something of a
misnomer. It does not imply that only a certain section of the
War Finance office "operated" while others devised or planned.
Broadly speaking, all the functional units of War Finance operated
in many areas of direct contact with the public. For convenience,
however, we may consider that several units of the over-all
organization were primarily for the purpose of transmitting,
expediting, coordinating or otherwise helping to put into effect
the plans of policy or promotional planners.

Field Division

Chief among these operating units in the Washington office
of War Finance were the Field and the Administrative Divisions.
The "operating" part of the Field Division was a small unit which
came into being in April, 19^1-1. Its initial tasks were to (l)
Organize the Field Division in the Washington office; (2) Help
the Field Director and others set up State offices; and (3)
Select and train Field Representatives.

As the over-all organization expanded, the duties of the
operating section of the Field Division became very numerous,
among which were the following:

1. Handling of correspondence x^jith the public on
general aspects of Savings Bond or War Finance policy
not intimately related to some specialized activity
such as payroll savings, agriculture, or banlis.

2. Preparation of a large portion of the correspon-
dence going to State offices over the signature of the
National Director or the Field Director.

3. Transmittal to State offices of information,
suggestions and instructions, through circular letters.
Field Memoranda or other types of memoranda.

h. Distribution to the field of posters, pamphlets
and other promotional supplies.

5. Guidance and control of the Field Representatives
— the traveling agents who visited State offices to
assist with special problems.

2i+5

6. General supervision over the Minute Man, the
house organ of the whole War Finance operation.

7. Lia.ison between functional units of the head-
quarters office and the State offices,

8. Supervision of mailing lists for transmittal to
State offices of Field Memoranda, informational material,
sales statistics, etc.

9. Editorial work or "clearance" on a good deal of
promotional copy.

10. Award of certificates or citations for volunteer
cooperation (on a national or interstate level) with the
War Finance program.

Theoretically the Field Division was supposed to be the
channel of communication between all branches of the Washington
office and the State offices. It was neither practical nor
advisable, however, to insist that everything any other section
wished to communicate to the field should pass through the Field
Division's operating unit. In practice, heads of functional units
were given discretion to correspond with State offices on the
subjects lying within their particular sphere of activity. Ma,tters
affecting two or more functional units, or touching on general
war finance policy, were cleared through the Field Director a.nd
handled by his operating assistants.

Field Memoranda

The major medium of communication between the Field Director's
office and State bond offices was the Field Memorandum.. These
were mimeographed releases, of which some 895 were issued to the
end of the War Finance program. The memoranda, treated a great
variety of subjects and were of varying lengths and complexity,
from a simple one -paragraph announcement that the song "Any Bonds
Today?" was temporarily out of stock too long and technical
treatments of payroll savings procedure in plants having a Cost-
Plus-a-Fixed-Fee contract vrith the Government, and the "Taxable
Status of Savings Bonds."

The issuing procedure on Field Memoranda in 19^13 before 8.11
State offices were organized, iras quite simple. Many memoranda
were simply typed v/ith carbon copies, and mailed individually to
the State Adjninistrators. Early in 19^2 a more complex procedure
became necessary. Field Memoranda were distributed both from
Washington and from the Division of Savings Bonds in Chicago.
First the stencils were cut in Washington, and enough copies run
off to mail at least one copy to each State office and major
branch office. The the stencils were forwarded to Chicago, where
more copies were run, to service several different mailing lists,

- 2k6 -

and to supply many of the larger State offices with extra copies ,

Memoranda mailing from Washington were m.ade through the
convenient service known as Consolidated Mail. A large m?nila
envelope was set up each day for each State headquarters office
and major branch, the total averaging about 85 in number. At the
end of each day there was placed in the appropriate envelope all
the letters addressed to persons in each office, irritten by anyone
in the Washington office, and whatever Field or other memoranda,
or samples of promotional material were being currently distributed.
The Consolidated Mail envelopes were addressed to the person who
was the active boss of the State office, whether the State Chairman
or the Executive Manager.

On the supplementary distribution from Chicago, usually two
copies of each Field Memorandum were mailed to each person on two
mailing lists, one of which included some I30 or more Executive
and Deputy Managers, the other covering a miscellany of a.bout
100 persons who needed to know about such matters -- VJomen's •■
Regional Advisors, Regional Labor Advisors, liaison officers in !!
Federal Reserve Banl^s, and some fifty field officers of the
Interdepartmental War Savings Bond Committee. ;;

The mailing lists grew something like Topsy. To some extent •]
they were made up in the Washington headquarters; otherwise they ;i
grew by individual requests from State offices or from persons
cooperating irith the bond program who felt they would benefit ;;
from receiving the memoranda. ^'.

With few exceptions the Field Memoranda were not sent to ;;
bond personnel below the state level, that is, they were not sent "
to county or other local War Finance volunteers. VJhen State []
offices felt that it was advisable to circularize their key '•'•
volunteers with the text of certain important memoranda, they '\
either secured extra copies from VJashington for the purpose, or •'
remimeographed the memorandum locally, perhaps xvith their own Jj
paraphrasing and comments. -'

The creation of Field Memoranda followed no single pattern.
Occasionally the memorandum originated with the National or the
Field Director. More often the item sprang from the division or
section which had developed the promotion being described. Except
in the relatively rare instances where the memorandum burst full-
blown from the top of the organization, the rough copy, or notes
for the story, were delivered to someone in the operating section
of the Field Division to put into shape for issuance. All Field
Memoranda were cleared with the Field Director, and many of them
also with the National Director. Memoranda which touched on
technical aspects of finance were also cleared with the appropriate
officials in other divisions of the Treasury, such as the Bureau
of the Public Debt or the Division of Research and Statistics.

- 2U7

A few \reTe issued in cooperation vith other agencies, such as the
Office of Civilian Defense or the Office of Price Administration.

Special Memoranda

After the mailing list for Field Memoranda became quite
large, and included many outside the circle of the War Bond
family, it became advisable to have a different type of communi-
cation which would go only to State Chairmen or Executive Managers.
To meet this need there developed a type of circular letter called
"Special Memorandum to State Chairmen." Most of these were
special injunctions or semi-confidential communications. Others
Trere on matters that did not need to go beyond State Offices to
the larger list of people on the Field Memorandum, mailings. A
large proportion of Special Memoranda originated at the top of
the organization, that is with Messrs. Gamble or Coyne. Copies
were mailed from Washington directly to the State Chairm.en,
although some were sent also to branches of State offices. Since
many Special Memoranda were of an urgent nature, they were often
airmailed to distant points — those west of the Mississippi.

Loan Drive Bulletins

For the last two drives -- the Seventh War Loan and the
Victory Loan -- the Field Division took over the preparation and
distribution of special bulletins replacing the earlier Attack
releases. The bulletins iiere designed to be a fast-moving
informational service on drive plans and developments. For the
periods of issue they largely took the place of both Field and
Special memoranda. Mimeographed in Washington, they were sent
only to State offices, three or four to a dozen copies each,
depending on the size of the office.

Interoffice Memos

Except for matters relating primarily to such administrative
subjects as budget and personnel, the Field Division usually took
charge of circularizing Interoffice Memoranda giving necessary
information or instruction to members of the Washington office.
Most of these memoranda had to do with office procedure. Two
examples will indicate the character:

"From Mr. Sloan to The Staff January 11, 19^1-3

All members of the War Savings Staff are requested to
be extremely careful in giving what might be construed
as official Treasury approval to any ideas, plans or
devices submitted to them by individuals or companies

- 2^8 -

— and in writing letters of commendation to any-
individual, manufacturer or publisher thanking them for
material produced as a tieup with the Savings Bond
Program.

The reason for this is that there are many regulations
that must he adhered to 3 and few members of the Staff
are thoroughly familiar with all of them. . . "

"From Mr, Sloan to the Staff (Undated but issued

prior to July 19^3)
Please tell everyone in your Division that the practice
of tossing papers, matches, cigarettes, etc. out of
windows of the Sloane and DeMoll Buildings must stop
immediately. Vie have been warned by Police and firemen
that this is an absolute violation of City Ordinances. 11
Already two fires have been started on awnings and some '
persons on sidewalks and in the alleys have registered ['
violent complaints. ij

Unless you assist me in putting a stop to this someone "
is going to get into bad trouble."
As a convenient means of keeping the headquarters personnel 'j

advised on information and instructions sent to the State offices, :;

the Field operating division distributed copies of Field Memo- ■;

randa, and of pertinent Special Memoranda, to key personnel with- ;

in the War Finance Division and to interested officials in other ]',

bureaus or divisions of the Treasury. :;

Distribution "'
!•

One of the most important activities of the operating unit '",
of the Field Division was the distribution of promotional materials. I*
There was much more to the problem of distribution than the Ij
mechanics of assuring that stocks of posters and pamphlets ■»

promptly reached state and local bond offices and other outlets.
Distribution embraced the whole range of promotion. It began,
for instance, with the original idea for a poster. The nature of
the poster would determine to some extent the total quantity that
could be effectively displayed. The nature of the poster would
also determine what types of outlets -- whether department stores,
banks, industrial plants, post offices, or schools -- could best
display the poster. The distribution unit had to work closely
with the production unit from the very beginning of the creation
of any piece of promotional material, and follov/ through to the
end, checking up on unused stocks and arranging to have subse-
quent distribution of similar items made more efficiently.

Before December, 19^2, there was practically no systematic
distribution. Arrangements were made in haste, and ad hoc,

„ 2k9 ~

and they xTOrked very poorly. One complication back of the distri-
bution problem was the lack of governm.ent training of most of the
personnel originating promotional material. The "idea boys" had
difficulty learning that promotions had to be planned far in
advance, and that it required two or three months between the time
material was originated and its eventual distribution to the field.
Another early problem was the inadequate facilities of the
Washington warehouse of the Division of Savings Bonds for handling
the flood of materials. Both of these difficulties smoothed out
in tim.e, but until they were rectified j after 19^2, the distribu-
tion of bond items made a spotty story, the shortcomings of which
could not in fairness be attributed to any few individuals charged
with handling the problem.

Systematic distribution got under way in 19^^3j after rumblings
of discontent from the field. The chief symptoms of disorder were:

A. Bitter complaints from State War Savings Committees
regarding:

1. Material arriving too late for the promotion for
which it was intended.

2. Arrival of material without advance notice,
instructions or information concerning its
purpose .

3« Grossly excess quantities of material.

h. Or inadequate quantities of certain items.

5. Unfulfilled promises in respect to arrival dates.

6. Changes in announced plans and schedules without
notice.

B. Large stocks of obsolete material in the central
warehouse.

Of the complaints from the states, the loudest and most
frequent and demoralizing were those concerning late arrival of
promised materials. Delayed deliveries created the impression in
the field that the Washington staff was incompetent. They gave
key men in State offices an excuse for almost any sort of short-
coming on their own part. The arrival of hundreds of dollars
worth of material too late for scheduled use had a very damaging
effect on the morale of volunteers; it stultified the inspirational
messages and "pep talks" that Washington executives sent out
frequently to keep the volunteer army on its toes. A classic
example was the distribution of the "Make Your Oi'/n Declaration of
War" poster, Tjhich was supposed to be mounted in retail stores on
December 7, 19^2, a year following the Japanese attack on Pearl
Harbor. The shipment to Honolulu, Hawaii, arrived March 6, 19^^85
three months late.

The causes of this disorder were numerous, some being charge-
able to the headquarters office, others to the field offices. In
Washington the chief difficulties were;

- 250 -

1. Lack of coordination. Too many people were working
"on their ov/n," and there were too many bosses
having jurisdiction over different parts of the
production line. Section chiefs often ordered
material vrithout consulting their Division head.

2. Arbitrary distributions. Too many were made to
State offices on the basis of population, without
regard for the size or efficiency of the volunteer
organization, the system of local redistribution,
or local production of similar pieces.

3. Late planning. High executives sometimes delayed
approval, so that production men lacked time to
complete the job on schedule, but the plans had
already been announced to the states.

h. Attempts to produce and distribute material within
a time limit that wa.s impossible from the outset,

5. Inadequate and tardy advice to field offices of
distribution plans and schedules. Often a bill of
lading would be the first notice a State office
had of on important piece of promotional material.
Sometimes a Field Memorandum or other notice would
be sent out in time, but lie neglected because the
State Chairman or ExecLitive Manager was away on a
field trip and no one else took the responsibility
for a follow-through on local redistribution.

6, Over- ordering. This was often due to the natural
fondness of the originator of a promotional piece
for his OT-m handiwork. The prize example was the
"Foreign Language Dodger," produced in 20 different
languages, some 5,8^1-0,000 copies all together. After
two years, 2,300,000 copies were scrapped at the
Division of Savings Bonds in Chicago (there is no
record of how many copies were scrapped in field
offices).

Distribution shortcomings in the field fell into four major
classifications :

1. Lack of good management,

2. Failure to redistribute promptly.

3. Poor planning,

U. Failure to decentralize distribution operations.
In many State offices in 19^2 and early 19^1-33 there was no
adequate management of promotional supplies. Many offices kept
no up-to-date inventories. Stock rooms were cluttered and dis-
ordered. The local redistributions handled by volunteers were
often poorljr planned and badly executed. In some States having
branch offices (for example. New York and Michigan), the central

- 251 -

office for a long time insisted on having all bulk shipments made
there, but this slowed up redistribution a week or m^ore.

One of the first improvements was the avoidance in so far as
possible of arbitrary allocations of posters and other promotional
items. State offices were invited in advance to indicate their
requirements. VJhen this was not feasible. State Chairmen were at
least notified in adequate time of the quantities allotted to
them, so that they had opportunity to suggest changes before the
shipments were actually made.

For use in calculating arbitrary allocations ■'..'hen necessary,
various formulae were devised so that the allocations could be
made on variable bases, such as:

1 . Population

2. Series E Bond sales

3 . Income

h. Number of counties

5. Number of cities over 5,000 population

6. Any desirable combinations of the above

To cope with the failure of some States to redistribute
promotional materials properly, the headquarters office established
an extensive mailing list of some 39 classifications of retail
establishments, and distributed posters and certain other items
to them by direct mail. The States were given copies of these
lists, and invited to revise them and to add new outlets. State
offices were kept advised of any distributions by direct mail,
and for the sake of economy, such distributions were usually
arranged so that several different pieces could be mailed in the
same envelope.

To overcome the notion held in some States that all shipments
should be made only to the central office, the Distribution Unit
encouraged deputy managers of branch offices to prod their State
Chairmen into consenting to direct shipments to local offices.
To curb wasteful ordering by State offices, the unit worked out
a plan with the Washington administrative division whereby State
Chairmen were instructed not to scrap any surplus of obsolete
material without first reporting it to VJashington and receiving
consent for the disposal. These requests for surplus disposal
gave a check on local use of material.

For each war loan drive, the Distribution Unit kept records
of the quantity of each piece of material ordered by each State.
VJhen requests for the disposal of surplus came in, they vrould be
entered against the quantities requisitioned. In inviting State
Chairmen to indicate their requirements for the next loan, they
would be reminded of their previous order, and the surplus scrapped
or transferred elsewhere. This headquarters -induced check helped
greatly to keep State requisitions dotm to an efficient level.
State Chairmen were asked from time to time to report their stocks

- 252 -

on hand, so that presumptive surpluses could be moved irhere needed.
Field offices were frequently/" reminded of slow-moving stock.

The work of the Distribution Unit was hampered by the fact
that the warehousing of promotional materials T-ras at a distance
from VJashington. The mailing unit of the Division of Savings
Bonds moved to Chicago late in 19^-2, which meant the requisitions
received in Washington from the field had to be relayed, by mail
if there was no rush, otherwise by telegram or teletype. After
the experience with the "Declaration of VJar" poster, the VJar
Finance Division endeavored to avoid "occasional" or dated posters,
which would be of use only for a short period of time. The chief
exception to this policy was the production of a Christmas poster
for each holiday season, which could be profitably displayed for
the whole month between Thanksgiving and Christmas. For most of
19^^ and until the conclusion of hostilities, the poster program
included one general poster per month, with extra posters for War
Loan drives, and a few special posters for payroll savings plants,
schools, or banks.

The good effects of more systematized distribution by both
headquarters office and the field became apparent by the spring
of I9UU. An Office of War Information official who made a field
trip through several mid-western states reported that the War
Finance poster ordering and distribution was the most efficiently
handled of any Government agency he investigated. There were very
small stocks of unused materials at a_ny point.

Distribution complaints declined from 95 in "^^e Second War
Loan to 5 in the Seventh. The job was never perfectly done.
Probably no mass distribution job, involving hundreds of thousands
to several million copies of individual items, can be perfectly
managed for a country as large and as diversified as the United
States. But the plans did work in practice. They had been
carefully arranged to meet the problems of the volunteer Boy
Scout, the retail merchant, or banl^er who was going to put a bond
poster in a window, or pick up a package of bond leaflets to hand
out to potential customers.

Field Representatives

For assisting State offices with special, problems, the
national headquarters of war finance maintained a group of Field
Representatives who could be sent on short notice to points where
they were most needed.

At the outset of the bond program it was felt that ten or a
dozen such travelling agents would be necessary. About 3^0 men
applied for the positions in the spring of I9UI. Forty of the
most promising applications were sifted from this number. The

253 -

top twelve candidates were interviewed at length, then six vrere
selected. They were then trained for two weeks in the fundamentals
of the Savings Bond program. Treasury policy, and administrative
procedure. The six were then sent out on trial trips into the
field to (l) Assist new State Administrators in setting up their
offices and in organizing volunteer committees: (2) Explain over-
all policy to new State officials; (3) Report to Washington good
local promotional ideas, and help transmit them to other areas;
(h) Secure from VJashington the answers to questions that could not
be settled in the field.

Six other Field Representatives were taken on before the end
of 19^1, after which it was found that twelve were not needed for
full time work in the field. Several found jobs in the head-
quarters office, three joined the armed services, and one was
permanently assigned to a State office „ After a number of changes
in assignment, there came to be eight more or less permanent field
men, six of whom were assigned to definite geographical areas.
The Field Representatives were generally given the rank of A
Associate Field Director,

Expressed in brief, the travelling agents were trouble
shooters o They were called upon to do almost anything, from
procuring good office space for State headquarters to helping
select new State Administrators or Chairmen when the incumbents
resigned, helping to set up State and important metropolitan
committees, to smooth over arguments with politicians, to secure
larger budgets for States needing them, and so on without end.
The men were in the field about three weeks our of every month, or
for longer periods when operating at a considerable distance from
VJashington. A sample week in the life of a field man can be
gathered from the report of one of them for September 25-30, l^kk:
Started out in auto with State Chairman
Lovelock (of Nevada) ; travelled clear across
state, for purpose of reorganizing county
committees; kept several good county chairmen
from resigning: picked three nevr chairmen to
replace weak ones; in every tovm of any size
made "courtesy calls" at newspaper offices,
banlis, stores; called on important volunteer
workers .

Before leaving Washington for a trip, the Field Representatives
were given a long list of errands to be attended to in their areas.
Similarly, while in the field, each one accumulated an extensive
list of commissions which his State people wanted cared for in
Washington. A good many times the hard working Field Representatives
felt that they were but conveyors of grief -- of messages from
Washington that the States had to do a better bond selling job,

- 25^ -

and conversely, of complaints from States about inadequate
attention to their i/ants at headquarters.

The Field Representatives worked under verjr trying conditions.
They travelled under wartime restrictions when accommodations, either
by rail or plane or in hotels at their places of call, were very
hard to procure. They were ambassadors without portfolio.
Although enjoying the title of Associate Field Director, the
travelling representatives v/ere not given authority to make major
decisions. All important matters had to be settled in Washington.
A good m.any of the State Chairmen were so aware of this fact that
they paid scant attention to the recommendations of the travelling
agents, preferring to make direct telephone calls to Ted Gamble,
or Bob Coyne, regarding even fairly simple problems.

With few exceptions, however, based usually on clash of
personalities, the Field Representatives were welcomed in State I
offices. Their advice and physical assistance were usually most \
helpful. Probably the period of their greatest usefulness was in
the opening months of the program.. The regionalization of assign-
ment was not strictly adhered to in the last years of the V/ar Finance
program. Field Representatives were sent where most needed for
tem.porary assignment. One of them was Acting Executive Manager
of West Virginia for several months. It may be concluded that the
Field Representatives helped the field most in the early days of
the program, and that in the later years of VJar Finance they were
most helpful to the headquarters office, since they were experienced
reporters on conditions in the States. Their advice was always
sought on new- promotions and other important problems being
considered at headquarters.

The Minute Man

Some sort of "house organ" or promotional magazine was very
essential to the bond program, as a means of keeping volunteers
posted on current developments, and of letting bond workers in one
area knox-r what those in another were doing. A magazine was a very
important clearing house for new ideas, a large proportion of which
originated in the States rather than in the imagination of someone
in the national headquarters.

The Minute Man, as it came to be called in March, 19^2, began
in May of the preceding year as a weekly mimeographed "Field
Organization News Letter." The first issue, May 23, comprised
eleven pages on legal- size paper. It introduced the new field
leaders to each other -- listing the first eight Honorary Chairmen
of the Defense Savings Comjnittees, the seven active State Chairmen,
the first eleven State Administrators and seven Deputies. The
issue carried figures on early sales in the new program, citing

255

the first toim in the United States (Meddybemps, Maine, jJopulation
60 ! ) where every man, woman and child had bought a bond or stamp.
The News Letter carried paragraphs on national plans for press and
radio advertising, and early bond appearances by movie stars.
There were also references to endorsements of the Defense Savings
program by important organizations such as the American Bankers
Association, the American Legion and the American Federation of
Labor, and a list of some thirty large industrial plants which
had adopted payroll savings.

Five numbers of the News Letter vfere issued in the original
style, and then the format was dressed up a bit. Subsequent News
Letters carried a color masthead, and were in letter- sheet size,
and so duplicated that there could be occasional illustrations
-- of bond rallies, prominent volunteers, or forthcoming posters.

Beginning March 28, 19^1-2 3 the house organ was transformed
into a UO page printed magazine, entitled The Minute Man, in size
about 6x9 inches, issued semi-monthly. Printing, and the use
of sized or "slick" paper, offered opportunity for much more
extensive use of illustrations than before.

After a brief experiment with a much larger page size, the
Minute Man assumed in September, 19^3? its final form, a magazine
of about 2^1- pages, 8 x 10-|-, something like Time in its general
appearance. Semi-monthly issues were continued throughout the
rest of the War Finance period, and then four terminal issues
were published in 19^6, the last appearing for the month of June,
summarizing the whole record of V/ar Finance and setting forth the
early developments in the peacetime bond program.

It is not easy to summarize the contents of the News Letters
and The Minute Man . They touched at some time or other on every
aspect of VJar Finance organiza.tion — including short biographies
of State Chairmen, technical articles on Treasury financing,
results of surveys of public reaction to war loan drives, announce-
ments of promotional materials, summaries of drive results, and,
perhaps most importantly, news items and pictures of important
local promotions originating in the field, which were thus
publicized for other field organizations to copy or adapt.

To give a sampling, these were the highlights in two typical
issues of The Minute Man:

November I5, I9UU

Lead article - "Nation Awaits 6th 's Opening"

Technical article - "Sources of Funds for Federal
Borrowing August-December 19^^," with graphs
and charts

Promotional article - "Record Press Support to
Mark 6th"

"Christmas ^kh Style," describing the new V-Mail

- 256 -

Gift Certificate promotion
May 1, 19^5

Front cover appeal to the public to support the 7th
Uar Loan, i/ritten by President Roosevelt just
before his death
Nexis from the field — "Reports on Payroll Drive

Indicate Early Quota Toppers"
"TJew War Bond Frontiers" - paragraphs on methods

of personal solicitation
"Banks Mobilize for the 7th"
"Here's Your Infantry Show" - Special Events

performances made available by the Army
"Wartime Accumxilation of Liquid Assets"
"7th War Loan Quotas" (state)
Article on expanded use of the V-Mail Gift
Certificate
Starting from a modest circulation, chiefly to State Adminis-
trators , Deputies and other key personnel in state offices, the
News Letter and its successor grew to issues of from seventy to
one hundred and twenty-five thousand, distributed through a number
of different mailing lists. The magazine was sent to the persons
who received Field Memoranda, to the payroll savings workers knoirn
as Treasury Representatives, to the more than three thousand county
and key metropolitan War Finance Chairmen, and to a miscellaneous
list of nearly 15,000 names comprising persons not in other
established War Finance mailing lists but who had indicated a
desire, or whose names had been supplied by State offices, to
receive the publication. In addition to the direct mailing of
individual copies, nearly 73 000 copies of 19^!-^--^5 issues of The
Mnute Man were pro-rated in bulk shipments to State offices for
supplem_ental local distribution. Most copy for The Minute Man
was cleared with the Field Director before publication.

The expense of such an elaborate publication as the printed
Minute Man could not be underwritten in the reduced peacetime
bond progra^m, so that after June 19^6 the magazine was replaced
by a )-l--page mimeographed Mnute Man Letter, mailed to a small list
of the Savings Bond family — State officials e.nd. outstanding
War Finance "alumni" who acted in advisory capacity or otherwise
continued a close interest in the continuing program.

The Administrative Division

The most "operating" part of the operating organization of
War Finance was the Administrative Division, which handled such
necessary functions as budget, personnel, travel, transportation,
and procurement of supplies and office space. Administration was

- 257 -

the housekeeper for War Finance.

Broadly speaking, the opera.tions were not different from
those that any administrative unit would carry on for a regular
Federal agency in peacetime, so that it is not necessary to
examine the routine operations in detail. Here will be noted only
those features meeting the special needs of a wartime, promotional
organization.

For one thing, during the war years, the Administrative
Division worried much less about budgetary limits and fiscal
controls than would have been the case in peacetime. Within
reasonable limits operating funds were always available, partic-
ularly during the War Loan drives. This is not to impljr that War
Finance spent money needlessly, but merely that Congress imposed
few arbitrary limits on funds that could justifiably be expended
to make wartime financing a success. Very seldom was question
raised by the public, or Congressmen, that the Treasury might have
been extravagant in details of particular promotions. Consider-
able leeway was permitted War Finance in securing office space and
printed materials, matters that in peacetime would have been much
more rigidly held within the bounds of procedural red-tape.

As in fiscal controls, so also in personnel did liar Finance
have a large sphere of independent action. There were no standard
Civil Service registers for most of the promotional positions to
be filled at the top levels of War Finance. Promotion men of all
sorts — advertising, press, radio, for special programs with
banlvers, industry, labor, schools, farmers. Women's clubs, fraternal
and civic organizations -- had to be borrowed or recruited from
private business wherever they could be found. The "papers" on
these appointments were processed through the Civil Service
Commission, but if the prospective candidate could show any
reasonable background for his duties, no objections were raised by
the Commission,

There were many interesting wartime quirks to personnel
problems in the lower ranl^s — for clerks, typists and secretaries.
For one thing, an adequate supply of such help was almost im-
possible to obtain. So many agencies, not only Washington but
throughout the nation, were expanding their activities that labor
of any kind was at a premium. The Treasury had to comb the fields
and crossroads for secretarial help. There could not be much
selection. At times the Personnel Unit of Administration had to
welcome with open arms any girl who could walk, talk, and tell a
typewriter from a i/ashing machine.

The care of these youngsters raised many problems aside from
their training to become useful on the job. They had to be looked
after until they became accustomed to looking after themselves in
a crowded, hectic wartime capital. Many had to be counseled very
thoroughly. Some had never seen a movie. Some had never used a

- 258 ~

hand- set desk phone, and didn's know which end to talk into. A
good many had to be taught how to dial automatic phones.

War Finance felt some responsibility for young girls suddenly
plumped down in a big city, far from home and parents. They were
advised on places to live. Many were practically ordered to the
"Government Girl" housing project at Arlington Farms, where they
would be chaperoned, before they were let live in boarding houses
or apartments by themselves. After a shocking case of a Government
girl (not Treasury) being raped then murdered in a local park,
one of the Personnel Unit gave the newer or younger "kids" a
heart-to-heart lecture on the "facts of life".

The Administrative Division carried on many less dramatic
but nevertheless useful services for wartime girl employees. Many
of the girls were homesick. A companionable member of Personnel
T70uld make it a point to invite them out for a "coke" or get a
group to go out to dinner and a movie. Occasionally the parents
were contacted, especially if it seemed that the secretary's
slowness of adaptation to the job and the new society was abnormal.
Occasionally a "country girl" in the city was in danger of being
fleeced by unscrupulous merchants, in which case Personnel put
the prospective victim in touch with the local Better Business
Bureau.

Problems like these occur in personnel offices of big
business concerns in many areas at various times, but they were
particularly acute in wartime Washington. The special services
provided to cope with the emergency were an interesting, temporary
phase of the otherwise routine work of Administration.

Travel Bureau

In the early days of Defense Savings, promotional experts.
Field Representatives and others who traveled outside of Washington
had to make their own arrangements, in person or through their
ot-m secretaries, for railroad and plane reservations. As wartime
travel conditions became "tight", this time-consuming job seriously
sapped energies which should have been devoted to more important
matters .

To alleviate the wastage of promotional brains on the
frustrating routine of securing travel accoimnodations, a member
of the Special Events Section was drafted to spend a part of his
time as expediter of reservations for the whole staff. The position
was no sinecure. Its demands became more severe as the War Loan
technique developed, and troops of movie actors, theatrical stars,
and other "big name" cooperators with the bond program were
shuttled about the country on split-second schedules to appear at
special War Finance rallies.

?59

There were a f ev bright spots in the travel expediter ' s
career. Director Gamble would never let a single plane priority-
be cleared for his wife. Eddie Cantor did not ask for Pullman
compartments: he said he did not care a whoop what kind of
accommodations he was given, as he was out to do a job to help
the Treasury, and not going on a pleasure jaunt. Once irhen 3ing
Crosby had been assigned a room on a train from Memphis to
Washington, to appear at a War Bond rally, he turned the space
over to a group of wounded servicemen, and spent the trip in the
lounge car p.nd the men's wash room.. This "Good Samaritan" attitude,
however, was rare in the history of the bond office's trr^vel
bureau.

Beginning in January 19^1-5, the War Finance Division had a
formal Travel Section, headed up by an experienced travel man,
John Cook. With the help of two lady assistants, Cook worked
miracles for Treasury travelers, of headquarters office or field.
There was hardly a railroad or airpla.ne official of importance in
the country that he did not know personally. War Finance people
enjoyed the luxury of being able to secure, on short notice,
accommodations that much bigger brass hats in Government service
would have spent days in obtaining. This efficient and high-
powered travel service was a great boon to such a fast-moving
program as War Finance, in which it was often necessary to trans-
port a speaker, or a whole squad of travelling dignitaries, to
eight or ten cities across the continent within the same number
of days or less.

Promotional Research

Beginning early in 19^1, the Bond Office employed a number of
people whose work was eventually consolidated under the title of
Promotional Research.

In the initial phases of the program, a number of media
studies were made to determine which avenues would provide the
Treasury with the most effective advertising and publicity. As a
result. Defense Savings went in very heavily for cooperation from
radio stations. Promotional Research in 19^1-1 and 19^-2 carried out
a number of evaluations of advertising support, procured a great
variety of statistical data for the use of the staff, and acted
as semi-official custodian of historical material. Beginning in
the Spring of 19^!-33 Promotional Research made many extensive
studies of the support being given to War Bond advertising in
daily and Sunday newspapers across the country.

One of the major problem.s in this survey was the weekly press.
There was no recognized advertising checking service for this
m.edium. Hence Promotional Research took on the job, personally.

260-

of checking the advertising support in weekly papers. Special
personnel for this work was not available. With the usual enthusi-
asm that permeated War Savings, employees from several other
sections worked hundreds of overtime hours for Promotional Research,
measuring and talDulating the thousands of tear sheets received from
the Western Newspaper Union, culled from 5,000 weekly newspapers.
The early study revealed a„ total of ^2 million agate lines of
advertising that had appeared in the weekly press, estimated at a
value of .'pi, 200, 000, in support of the Second War Loan.

In cooperation with Promotional Research, the National
Association of Broadcasters undertook a continuous study of radio's
support to War Finance. Machinery was set up for measuring m.agazine
support. All this work was so completely done that the Media
Committee of the War Advertising Council discontinued its parallel
survey and relied on War Finance statistics. Estimates for Out-
door Board advertising support were made in collaboration with the
national office for that industry.

With the approach of the Third War Loan, Promotional Research
attention centered on methods and procedures to evaluate the
editorial support given to War Bonds in the na.tion's press. Again
the big problem was adequate personnel. The Section recruited
volunteers from amongst the wives of Treasury employees. The
response was overwhelming; many of the housewives reported h hours
a day, six days a week.

In addition to undertaking quantitative studies, Promotional
Research was able to check the day-by-day use of items distributed
by many units of the War Finance Division, and hence to give good
advice on all sorts of folders, pamphlets and posters, as well as
advertising or publicity releases. The Section's procedures and
formulae for measuring and evaluating advertising and publicity
were recognized as top-notch by many private organizations working
in similar fields, so that a number of them often visited this
War Finance unit for guidance in their own work. Incidentally,
the encouraging results of the newspaper checks made by Promotional
Research enabled Director Gamble to have full data with which to
kill a bill before the House Ways and Means Committee which would
have required paid War Bond advertising in newspapers.

After the high-pressure days of War Finance, Promotional
Research provided the Washington headquarters staff and the field
with monthly statistics on Savings Bond sales and redem.ptions ,
and undertook studies of "market" — that is, of the States,
counties or cities where Bond salesmanship should be stepped-up
because of favorable investment conditions due to industry, crop
income, accumulated funds in banks, and so on.

- 261

Likert Surveys

The Treasury's bond organization instigated or used more than
forty special surveys, 19^-2-^53 to assist in planning in a great
many T-rays — to help determine effective promotional copy, to test
the effectiveness of bond promotion in reaching different areas
and groups of the population, to uncover the reasons for unfavorable
reactions to the bond program, and so on. Most of the special
surveys were carried out for the Treasury by the Program Surveys
Division of the Bureau of Agricultural Economics, U. S. Department
of Agricultu-re.

The first survey, reported in May 19^2, and entitled "Effective
Appeals in the Buying of War Bonds," was initiated in response to
Secretary Morgenthau's question: "I'lhy do people buy Bonds"?
Conducted under the supervision of the Bureau of Intelligence,
Office of Facts and Figures, the report set forth these major
conclusions

A. People buy bonds to (l) Help the Government: (2)
Make a good investment for themselves.

B. Bond sales were going much better in defense plants
than in those engaged in non-defense work.

C. Few people were interested in the problem of
infl action.

D. There was evident a strong desire to have the bond
program kept on a voluntary basis, but most persons
interviewed were not violently opposed to a compulsory
plan if it became necessary.

The initial conclusion in this early report, which was based
on interviews of x/orkers in the city of Baltimore, Maryland, was
particularly significant -- most people felt they vzere buying
bonds to help the Government win the war. Later surveys, and
field experience, demonstrated clearly that the patriotic motive
was paramount in stimulating large bond sales. Of course many
other motivations were active also, and bond appeals covered as
many reasons as possible for buying bonds, but patriotism held
first place to the end of the war.

An equally significant item in the first survey was the
conclusion that few people were interested in the problem of
inflation. Undoubtedly people should have been much more concerned
that they were. The bond organization might profitably have
decided to pay greater attention to inflation in its copy, as a
means of increasing the public awareness of the danger of too
rapidly rising prices. However, the feeling became fixed in the
minds of copy writers early in the bond program that people xirere
not interested in inflation, and hence that the topic should be
given only minor place in war finance publicity.

- 262 -

In the early summer of 19^2 the War Savings Staff endeavored
to test the effectiveness of Our America, the rotograAAire mailer
of which t\-io issues (January and April) were distributed widely
through "drop mailings." The results of this survey, also made
in Baltimore, indicated that few people remembered having received
the rotogravure, and that only about one-third of those who saw
the publica.tion had read it. On the basis of this report it was
decided that a bond rotogravure for "Every Home in the Nation"
was not worth the cost involved.

With the Congressional enactment of the withholding tax,
the Treasury was anxious to find out if the new system of income
tax collection would have damaging effects on payroll savings
plans for the purchase of War Bonds. A survey made in the fall
of 19^1-2 indicated that most people were very favorable to the
withholding method of tax collection, and that it would have a
negligible effect in reducing paytoll deductions for bonds.

There became available to the War Savings Staff in December,
19^2 5 the first comprehensive study, "Participation in the War
Savings Program," based on national samplings rather than on
investigations in only a few cities. From this study were
derived the first estimates of the number of people holding bonds.
The report showed that; (l) More than 6I per cent of economic
family groups had bought at least one War Bond since the beginning
of the program; (2) More city people than country people were
buying bonds; (3) About 5O per cent of bond purchasers were
investing 10 per cent or more of their current income in bonds;
and (^0 Bonds were being bought mainly from current income rather
than from accumulated savings. -^

The supervisors of this survey made several significant
recommendations on the basis of their findings:

1. It vjas essential to increase the rate of purchase
on the part of those already buying War Bonds.

2. The Payroll Savings Plan should be greatly extended.
3o It was advisable to give more emphasis to the lOfo

quota idea that everyone should put at least 10
per cent of his current income into War Bonds.
^I-. More attention could profitably be given to
promoting the sale of War Sa.vings Stamps.

5. People should be persuaded that their standard
of living must be reduced during wartime.

6. It was essential to increase publicity which would
give the public greater sense of direct involvement
in the war.

1 U. S. Department of Agriculture, Bureau of Agricultural Economics, Study 55, December 9,
I9U2. Later reports of this organization, under Dr. Rensis Likert, will be referred to as the
Likert Sin-veys.

- 263 -

These were very sound recoinmendations ; most of them were
acted upon with satisfying results. A supplementary report on this
study made further recommendations:

1. Personal solicitation was the best way to sell
bonds .

2. There should be more outlets for both Savings
Bonds and Stamps.

3. Special appeals should be developed for bond
promotion with farmers and rural populations.

h. It would be well to place more emphasis on the

future enjoyment of funds being currently invested
in bonds.

To the positive recommendations was appended a list of things
to avoid:

1. The sale of bonds in theatres or movie houses
during intermission, a procedure that was likely

to embarrass or annoy a good many people, especially
those already purchasing elsewhere all the bonds
they could afford.

2. Stressing the ICffo theme too much so that it
became a ceiling on individual purchases.

3. Using movie stars for personal appearances before
groups that would resent that type of publicity,
feeling that it "cheapened" what was otherwise a
serious, patriotic undertaking.

Special studies made in the spring of 19^^3 assisted the
Treasury in handling quotas for bond sales, in making different
approaches to urban and rural markets, coping with public fears
that VJar Bonds might not be redeemed, and in assessing the reasons
why some people did not buy bonds. Among the latter were: (l)
Low income; (2) Bonds not a safe investment; (3) War Bonds not
a liquid form of saving.

Beginning with the Second War Loan, surveys were made after
each drive to determine the thoroughness of the promotion and to
discover possible weaknesses which should be remedied in future
operations. Each of these surveys sought information under four
major headings of identification, motivation, implementation and
participation.

Under the topic of identification, the surveys estimated the
proportion of the population that was aware of the drive, the
extent to which the purpose of the drive vras understood, and how
many people knew what the quotas were. Awareness of the Treasury's
campaign was considerably greater in the Third Loan drive, and it
reached a high peak in the Fourth Loan, when only about 5 per cent
of non-farm people and about 9 P^^ cent of farm people did not
know of the drive. This was approximately the saturation point,

- 26h -

which did not vary noticea.bly in succeeding drives.

The surveys probed people's understanding of the purpose of
the loan drives, since to secure full cooperation in a voluntary
\TQX finance program it was necessary for prospective bond buyers
to have some realistic conception of why the Treasury needed
special money raising campaigns in addition to the regular bond
purchase plans such as payroll savings, which operated continually.
The surveys showed that a great many people did not grasp the
reason for special drives. A comrnonly held vie^j was that the
drives were intended mainly to remind people of their general
obligation to buy bonds regularly rather than to get them to
purchase extra, bonds during a drive. It was discovered that many
persons enrolled in a PajToll Savings plan felt that they were
already doing their share and were hence not obligated to m.ake
extra purcha.ses during drives. These findings led to the adoption
of special drive quotas for payroll savings plants.

With respect to individual or personal quotas , the report on
the Second War Loan showed that it was necessary to furnish people
with a fairly definite idea of the amount they ought to buy. In
the Third War Loan, consequently, a hundred dollar bond was set
as a sort of average individual quota. This device was fairly
effective. More emphasis was placed on individual quotas in the
fourth, sixth and subsequent drives. Surveys following those
drives indicated that about a third of all the people who had
hea.rd of the "Extra hundred dollar bond" quota did put at least
that much into bonds. National and state bond quotas did not
mean very much to the average person. Local or community quotas
were more effective, very largely because they gave solicitors a.
helpful argument in pleading for greater purchases so that their
own city or town could meet its quota, or exceed it by a comfort-
able margin. Local pride was thus brought into play with
effective results.

Judging from the results of the Likert Surveys, the War
Finance Division did not make much headway in educating people
on the basic features of deficit financing. The Division, in
fact, made no serious attempt to cover technical features of
fiscal policy in promotional items intended for popular consumption,
On the contrary, much of the bond publicity, geared to the
necessity of raising huge sums of money quickly, helped to instill
in popular consciousness an over-simplification and even false
conception of War Finance. There was often a too clear implication
that if I^'Ir. Brown did not buy a bond his son on the fighting front
would be deprived of a gun or ammunition. Few people understood
the real reasons for loans as a necessary supplement to taxation,
or thought much about the potentialities of the bond program in
curbing inflation. It was clear, however, that vrhether most

265 -

individuals understood the fundamentals of War Finance dimly, if
at all, they, did regard their own purchases as long-time invest-
ments. There was little indication that people bought War Bonds
with which to purchase "gadgets" after the war was over.

All the Likert Surveys pointed out that most people bought
bonds because they were personally asked to buy. It was found
that solicitation at the prospect's place of employment was
rather more effective than solicitation at home; and that men
seemed to be more successful solicitors than women. This latter
conclusion was in part due to the fact that many War Finance
Committees assigned to their women volunteers only the smaller
or poorer prospect lists. Multiple solicitation resulted in
larger sales than single solicitation, and little resentment
was ever found because the same individuals were asked more than
once to buy. School children were found to be about as good
solicitors as adults; there was little evidence that they were
put off with token purchases because they were children.

The surveys helped War Finance officials to plan more in-
tensive appeals to groups or areas where past performance
appeared weal^. In the Second War Loan about 20 per cent of
income earners or their dependents purchased extra bonds. In
the Fifth War Loan about ^7 per cent bought extra bonds. It was
also discovered that markets which maintained the highest partic-
ipation in bond purchases between drives bought more heavily
during special drives; that is, more extra bond purchases were
made by people on payroll savings than by others. War Finance
did not fully tap the community and farm markets. The best results
in those fields came near the end of the war bond operation. By
income groups, a larger proportion of people in the higher income
brackets bought bonds, but they did not purchase so large a
dollar volume of bonds as they could have in comparison to those
in more modest circumstances.

A number of special surveys vrere carried out 19^i-3-^i-5. In
the spring of 19^U the Treasury asked for investigation of the
rumor that "if everybody would stop buying VJar Bonds the war
would end and the boys could come home." Instances of this
claim were encountered during the Third War Loan. By the time
of the Fourth War Loan, about I.5 per cent of the people inter-
viewed repeated it, the ratio rising to h per cent among farmers
or their wives. Prevalence was high in some parts of North
Carolina, Pennsylvania and Illinois. Most of the people who
mentioned the rumor were bond buyers, who stated that the charge
did not interfere with their own bond buying. The source of the
rumor was never satisfactorily located. It did not appear to
have come into the country via German or Japanese radio broad-
casts. Many claimed to have seen the injunction in letters from
American servicemen either here or abroad, but no one could

- 266 -

produce a bona fide letter- the rumor was spread on the basis of
what "my next-door neighbor said his friend at the office had said
his Aunt Sophie had seen." This rumor, along with several others,
persisted throughout the War Finance program, but not in alarming
volume, nor of evident retardant effect on sales except in scattered
localities for brief periods of time. Such rumors were generally
counteracted by local rather than national publicity. The War
Finance Division felt that to give false rumors too much attention
would lead to the impression that the rumors might be true. To
have taken the false charges too seriously would have exaggerated
their effects.

After V-J Day, three surveys helped the Treasury orient its
policies for a continuing peacetime bond program. A report on
redemptions showed that about a third of the bonds being cashed
before maturity were redeemed to meet emergencies or living
expenses. About two-fifths of the redemptions soon after V-J Day
were for reinvestment in houses, farms, business or other securities.
As during the war, few people regarded Savings Bonds as short-term
investments .

Another study confirmed Treasury belief that an overwhelming
majority of the people were in favor of having bond sales continued.
Only a feu (l in 10) were in favor of having Treasury security
sales restricted to large investors. People intervievred cited
the spiritual value of participation in a common national effort,
and the continuing advantages to be gained from the increasing
security gained by individuals through regular purchase of
Government bonds. They pointed out that through a continuing i
bond program, people would save more, especially through pa^^roll
savings, than would otherwise have been the case. »

The Likert and other surveys were of great assistance to the s
Treasury in planning its bond selling operations. Often the '
surveys revealed promotional weak points which could be strengthened. ;.'
At other times the surveys confirmed official reliance on the '.
efficacy of current practices. In either case, the surveys
provided reliable sailing charts so that the bond program did
not have to be steered by blind reckoning.

oOo

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CPI/^.PTER XI
THE WAR LOAK DRIVES

The proof of the pudding is in the eating. After all that
has been written here or elseTThere about how the War Finance
Division came into being, who were its leaders, hoT.^ the program
was organized, what promotions i.'Orked well and which ones did
not, the real test is in the seles record, now to be revie-'.red.

From May 1, 19^-!-l, through December 19^55 the War Finance
Committees of the Treasury, and their predecessors, were
responsible for the sale of $185. 7 billions of Government
securities. This is a staggering sum, which passes the
comprehension of most of most of us, accustomed to dealing
in figures of a few hundred dollars, or e few thousands at
best.

Originally organized on a continuous promotion basis,
the Defense Savings program exx^anded into a dual operation ---
of periodic Wer Loan drives imposed upon the continuous sale
of Defense or War Bonds. The results of the first two War
Loans can be summarized briefly as follows:

First VJar Loan

Goal $ 9,000,000,000

Sales To Individuals 1,593,000,000

Sales To Corporations 6,028,000,000

Sales To Commercial Banks 5 5 087, 000, 000

Sales To Treasury Trust Accounts 2395 000^00

Total Sales "$12,9^47,000,000

Second War Loan

Goal $135000^000,000

Sales To Individuals 3,290,000,000

Sales To Corporations 9,836,000,000

Sales To Commercial Banks 5,079,000,000

Sales To Treasury Trust Accounts 350,000,000

Total Sales 5l8,555,000,0'00
The five succeeding War Loans, and the Victory derive, were

conducted by the War Finance Division as reorganized in the SLimmer

of 19^3.

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Third Vfer LoEin

The Third VJar Loan \ie.s scheduled to extend fro:-n September
10 through October 2^ 19'l-3p with a goal of $15 billion j the
second largest goal of all the drives. By the time the War
Finance Division had been placed on a sure administrative
footing, after the long period of storm and stress accompanying
the conflict between War Savings and the Victory Fund Committee,
there were very few weeks in which to get everything in readiness
for a great public campaign. The newly organized Division i/ent
into the drive with hope and a prayer. Were the old an'':agonisms
between War Savings a.nd Victory Fund smoothed over? Would the
new State VJar Finance Chairmen have their revamped organizations
well enough in hand to cope iiith a drive beginning only a little
over t\io months away?

War Finance workers matured fast in those hectic d.Qjs,
They grew in stature and experience as rapidly as did the
i^merican troops going into battle on foreign shores. By coin-
cidence the invasion of Italj^ began just eight days before the
opening of the Third War Loan drive. War Bond task forces
were quick to take advantage of this timely turn of events.
''Back the Attack'' was the very realistic slogan for the drive .

The Third War Loan quota meant that War Bond volunteers
would have to sell more than twice the largest amount of E
Bonds ever sold in a single month before-?— it m.eant that, on
the average ;, a $100 Bond would have to be- sold to each of kO
million Americans, This difficult assignment called for
intensive planning, careful organization, and back-breaking
personal sacrifice from the vast army of volunteer solicitors.

In addition to comprehensive radio, press and advertising
coverage, the Third War Loan fea.tured a large number of
''Special Events," including notabljr a nation-wide Cavalcade
of movie stars, and Airmada shows in which war veterans in Prmy
planes and Na^/y transports visited cities in some 35 states.
In Washington, D. C, a great war show, "Back the Attack,*'
opened September 9? playing for eighteen days on the V/ashington
Monument grounds, two shov/s daily, with more than 1,600 i^rmy
men in attendance, to demonstrate the tremendous array of
ordnance which was being financed in part by War Bonds .
Canvassing plans were laid to reach as large a proportion as
possible of the country's 130 million citizens — through
personal contacts with men and women on payroll savings plans,
door-to-door community campaigns in parts of every state,
special appeals to farm families in rural areas, canvass of
religious and professional organizations, and solicitation of
''Special Name" lists as previously carried on by Victory Fund
Committees .

- 270 -

On September 30, two dsys before the end of the drive.
Secretary Morgenthau announced that the goal had been met.
When the returns were all in, it was found that Americans,
used to doing things in a big way, had gone over the top by a
margin of nearly $U billions.

There had been 53 million separate E Bonds sold, for a
dollar total of $2,^72,000,000. VJhile it took the whole
coimtry 22 days to reach its quota, many states had made theirs
sooner. First was Maryland, which topped its $196 million mark
on September 20. Next came Rhode Island on September 21,
followed by West Virginia and Ohio on September 2k. Thirty-one
states reached their quota on sales to individuals. The over-
all quota was accomplished in every state except Vermont, which
reached 98 per cent of its goal. Mississippi was the only
state east of the Mississippi River to make its E Bond quota,
the goals in this category being attained in the middle western
states of Montana, Wyoming, Colorado, the Dakotas, Nebraska,
Minnesota, Iowa and Oklahoma.

The Third War Loan definitely committed the War Finance
Division to direct personal solicitation as the most effective
iray to sell War Bonds. The Likert Survey after the dr-ive showed
that 52 out of every 100 individuals who were personally solicited
bought extra bonds. Out of every 100 persons not solicited, only
20 bought bonds. Personal solicitation in the Third War Loan,
among non-farm people, v/as about doubled in extent as compared
to the preceding drive, reaching hj per cent of non-farm people
as against a previous figure of 2k per cent in the Second War
Loan. Aside from the prime significance of personal solici-
tation, the Third War Loan indicated that successful future
promotion would be based on: (l) Showing people that through
bond purchase they would be taking a personal part in the war 3
(2) Employing a dignified, sincere and direct approach; (3)
Convincing people they could afford to buy more bonds" and
{k) Combining patriotism with the personal advantages in bond
investment.

Personal solicitation was even more effective in selling
to farmers than to urban groups. Not being on payroll savings,
the farmers' largest purchases were usually made during special
drives, so that in farm solicitation it was found advisable to
soft pedal the $100 bond as an average individual quota, and to
plaj^ up instead a personal quota adjusted upward to the purchasing
power of the prospect.

Fourth War Loan

Requirements of Treasury financing made it necessary to
have another loan drive early in l^kk. Dates of the formal

- 271 "

d_rive T-zere set for January l8 through February 153 ^^^^ci in
addition all Savings Bonds and Savings Notes for which subscrip-
tions ■'.-jere received at the Treasury or Federal Reserve Banks
through February 29 vere to be credited toward the quota. The
over-all goal was set at SlU billions, or $1 billion less than
for the Third War Loan, with a subordinate goal of S5-;- billions
for individuals (including partnerships and trust accounts )j of
which $3 billions were expected to be in E Bonds.

Field officials and volunteer solicitors were reminded of
the lessons learned from the Third War Loan, particularly to ask
in person more people to buy, and to give everyone a clear idea
of the specific amount of purchase e^cpected of him. Special
promotions included a Hospital Equipment Campaign, conducted
largely by Women's committees, drive quotas for paj^roll savings
plants, and a "Treasure Hunt" by school children for partially
filled Stamp /Ibums, which were to be completed and exchanged
for bonds.

The Fourth War Loan drive produced a total of $l6,730
millions^ all in non-bank subscriptions, which exceeded the
quota by 20 per cent. The oversubscription was widely dis-
tributed over the country. All states attained their over --all
quotas. Sales of securities to individuals totaled $5^309
millions, of which $3,l87 millions came from the sale of E
Bonds, a most gratif^/ing result.

The Fourth \Tar Loan x^as carried on by a seasoned army of
some six million volunteer salesmen, most of whom had served
in earlier drives. As a result of increased personal solici-
tation, a larger proportion of sales in this drive were to
individuals than in previous drives. A stupendous number of
pieces of E Bonds were sold -- c total of 69,856,000 separate
bonds £S compared to 52,577^000 in the Third War Loan and
32,515,000 in the Second Loan drive. One of the greatest
selling jobs was done in the northern agricultural states;
North Dakota outstripped the field with 18I per cent of its
E Bond quota.

These figures, impressive as they are, convey but a part
of the story of the progress of war finance. The greatest
accomplishment was the program's contribution to home-front
morale. Through bond appeals, war finance aroused patriotism
and a spirit of sacrifice. Through the bonds which were sold,
war finance provided a tangible way in which that patriotism
and spirit of sacrifice could be expressed. The bond program
stirred the conscience of the individual. It did not let him
rest with the purchase of a bond. It stimulated him to put
in longer hours on his job, or to sign up for volunteer Tiar
services in addition to bond selling. War finance provided

272

an activity in uhich all Americans could share. With these
many assets of var finance so plain by the beginning of 19^^,
the bond selling organization proceeded with courage and
confidence to the challenges that lay ahead.

Fifth War Loan

Plans for a Fifth War Loan irere well under way in Argvll,
19^1-^. The dates set were from June 12 through July 8, with
the accounting period for Savings Bonds and Savings Notes
e::tending from June 1 through July 31- The quota was the highest
one set for all of the War Loan drives -- $l6 billions -- broken
doT-m into $6 billions for sales to individuals ($3 billions of
this to be in E Bonds) and $10 billions for sales to corporations
Arrangements were made for a complete presentation of drive
promotions and materials to be given to state War Finance
Committee officials by national officials at a series of regional
meetings held in Boston, Atlanta, Cleveland, Tulsa, Minneapolis
and Portland, Oregon, between April 22 and May 1.

The Fifth War Loan came at a critical time in the period
of war financing. The tempo of the war had sharply increased.
Production was hitting new peaks and consequently costs ran
high. The huge sums of money going out of the Treasury every
month made it necessary to have the Fifth drive quota the
highest to date. Of course the upward trend of war production
had put more money than ever before into the hands of the
people. It could not all be spent on consumer goods because
they were not available in quantity. Some of the increased
earnings were going into life insurance, savings bank accounts
and debt retirement, and being in part absorbed by taxes, but
a substantial proportion of the increased earnings still
remained available for investment in War Bonds.

To aid in equipping the six million army of volunteer
salesmen for their task, the War Finance Division made available
to state officials a 15-minute, sound- strip training film,
"Minute Men — Call to Action." Military events stirred
bondadiers to a whirlwind of activity. D-Day, the invasion
of Europe, came on June 6, six days before the announced
opening day of the drive « Many communities went into action
at once, to "Back the Attack with the Fifth War Loan."

The drive produced sales of $20,639 millions, which
topped the goal by $U,6 billions or 29 per cent. It was the
largest sum raised in all the loan drives except for the
Seventh, in the following summer. Oversubscriptions were again
widely distributed over the country. All states but Nevada
made their quota. For the country as a whole. West Virginia,

- 273 -

Georgia, Maryland and Florida led the list \j±th oversubscriptions
in excess of 80 per cent of quotas. Among the stetes with big
quotas, Ohio led the list with an oversubscription of 39 per
cent of its $797 million goal. The state with the largest
quota. New York, oversubscribed this amount by 2^ per cent.

Sales of securities to individuals totalled $6.35 billion
against the $6 billion quota. Included in this figure were
$35036 millions in E Bonds, an amount just over the $3 billion
quota for this security. Thirty- four states made their ouotas
for sales to individuals; forty made their E Bond quotas. Sales
of securities to corporations amounted to $1^.28 billions,
which exceeded the quota by $^.28 billion. 7^11 states made
their corporation quotas. The coincidental invasion of Europe
had heavily underscored the drive slogan -- "Back the Attack -
Buy More Than Before."

The organization of workers for the drive followed state,
county and toT-m lines, and relied more heavily than in any
previous Drive on person-to-person contacts. Women's organi-
zations did a large share of the house-to-house canvassing;
civic associations, foreign language groups. Boy Scouts, Girl
Scouts, members of U-H Clubs, and others were active.

Most agricultural states had a special farm, program which
included a farm-to-farm canvass. Retail stores assumed a
quota under which they agreed to sell $300 in Bonds per sales
person. Theatres made a particularly intensive effort to sell
Bonds, and many individual theatres turned in an outstanding
record of sales.

As a Fifth War Loan effort, industrial a,nd commercial
firms had been asked to set plant quotas averaging $100 per
employee. In order to meet these quotas, labor organizations
and labor and management committees undertook a large share of
the work of canvassing in individual plants. For the first
time in a War Loan drive, the American Bankers Association
asked its members to canvass their depositors to purchase
Government securities. Special sales drives were put on by
the Army and Navy, and these services also helped in many
campaigns by furni*shing entertainment, speakers, and equipment
for local programs .

As in the Fourth War Loan, a group of tlie mountain and
plains states in the midwest and northwest, together with a
block of states in the southeastern part of the country, made
the best showing in Series E Bonds, among them being North
and South Dakota, Wyoming, Iowa, New Mexico, Montana and
Alabama. In the Fifth War Loan, each of the major investor
groups purchased naore securities than they bought in any of
the preceding loans. As Secretary Morgenthau said in a formal

27H -

letter of appreciatioD to Director Gamble , the Fifth War Loan
was ''a smashing success. The timing and the result made a
fitting salute to our boys as they broke through the German lines
and began to s^Teep across Normandy and Brittany, and to the
advance of our forces in the Pacific. We have raised the
greatest sum ever/raised in any financial operation. . .Besides
showing the \j111 of the American people to back the attack,
to support their men in action, this result reflects the work
of a grand organization, of willing workers who are giving their
m.ost enthusiastic and loyal efforts to this great war-time task
under your direction,''

The Likert Survey statistically underscored the Secretary's
enthusiastic commendation. More bonds were sold in the Fifth
than in any previous drive. Fifty- two per cent of persons
receiving income bought extra bonds or increased their payroll
deductions. Personal solicitation was more extensive than in
any preceding drive. War Loan drives had clearly become accepted
by the American people as a ''regular" part of wartime affairs.

Sixth VJar Loan

The Likert Survey people began ca.utioning War Finance
leaders after the Fifth War Loan to take care that the
patriotic motive for purchasing Government securities should
not be overemphasized to the exclusion of other motives. "As
the end of the war draws nearer," they reported in the Minute
Man of September 1, 19^^^, "certain disadvantages arise in the
use of patriotic appeals which rest upon the logic of paying
for the war and buj^ing equipment. Fifty per cent of the
population believes that the boys would not get enough
equipment if people stopped buying Bonds. This literal-
minded attitude may lead to the thought that it is unnecessary
to buy Bonds once hostilities cease."

These recommendations were shaped into an advisory
article for canvassers in the next drive, and broadcast in
the pages of the Minute Man:

"VJhen the 6th War Loan opens this Fall,
the war will definitely not be over...
Billions of dollars are still needed
to win the war; these same billions, lent
to the government by Bond-buyers, will
also be needed to help win the peace on
the home front. But, as the war in
Europe draws closer to its end, those
who bought Bonds to send equipment to
the boys overseas may no longer feel

^75 -

the same urgency to buy Bonds . . .
Those on the home front who are
now employed in plants and industries
which may experience cut -backs in
employment until reconversion is
fully made want to hold on to whatever
cash they may have for a possible
period of unemployment .. .Thus,, the
canvasser in the 6th VJar Loan faces
tough uphill going in many instances/'
Follo^^/ing this vjarning of the increasing difficulty of
solicitation, the Minute Man of September 15, 19^U, set forth
several pages of advice on how to line up effective canvassers,
and how to provide them with answers to the most likely questions
about the need for further bond purchases that would be raised
by prospects.

Plans for the next drive depended to a considerable degree
on the course of military events in Europe. Aside from the
certainty of the need of one or more special loan drives, the
War Finance Division wished to be ready to capitalize, at a
moment's notice, on the patriotic surge of emotion that would
come on news of the surrender or collapse of Germany. In the
middle of September, the field force was circularized with an
elaborate Field Memorandum advising of national plans for
special bond promotion immediately following Victory-in-Europe
Day, and suggesting local variations and supplements.

National Sixth War Loan plans and drive strategy were
outlined to State Chairmen and key volunteers at four regional
meetings of two days each in Atlanta, Chicago, New Orleans and
Los Angeles. A preliminary conference in preparation for these
meetings was held in Washington, September 13-1^, to consider
'Special Events,'' as it was felt that special promotions
would be of greater importance in the forthcoming drive than
on previous occasions. One state leader returning home from
this preliminary conference reported enthusiastically that
he was carrying with him "forty- six definite ideas varying in
scope from a new kind of lapel pin for Bond buyers to the
giant Navy show planned for Chicago's 6th War Loan." i^nother
effective promotion, tested in the 5th War Loan and expanded
for the 6th, vras the Library War Bond Campaign, headed up by
the National Book and Author Bond Committee.

The Sixth VJar Loan was scheduled for November 20 -
December l6, 19^U, with an accounting period on Savings Bonds
from November 1 through December 31- The over-all goal was
$1^ billions, of which $5 billions was to be in sales to
individuals and $2|- billions of the latter to be in Series E
Bonds .

- 276 -

In addition to the general Campaign Book, similar to that
used in the three preceding drives, the War Finance Division
prepared for the Sixth two sales manuals -- Your Job as a
Victory Volunteer, one for general use and the other designed
to meet the specific needs of solicitors in rural areas. Five
screen plays, in 16MM sound film, ten to twenty minues in
length, were prepared for the War Finance Division by the Navy,
one of these being "It Can't Last," vjritten by Archibald
MacLeish, the Librarian of Congress.

Two full hours of coast-to-coast network broadcasts,
climaxed with an address by President Roosevelt, launched the
Sixth War Loan the evening of November I9. States and cities
arranged their supplementary opening events. There was a
giant cavalcade of horses and riders in Los Angeles, a military
parade in San Francisco, Philadelphia, Harrisburg and other
cities. Montana's Prairie County was the first in the nation
to achieve its E Bond quota, $56,700, topping it on November 1,
twenty days before the official opening of the drive. Another
quota-raising record in that state was made by Daniels County,
where residents observed Armistice Day by lining up at banks
and post offices from early morn to late that night, making
bond purchases which averaged more than a $100 bond per man,
woman and child.

The drive continued at a lively tempo. As the closing
days drew near, the home-front army of volunteers, inspired
by the pledge "my thinking, my money, my time will stay in
this war to the finish," maintained a canvass of farms and
factories, suburbs and prospects off the beaten path. In
Ohio, bond buyers had a special invitation from the Army to
"step right up with your mess kit and enjoy a good meal of
C-rations." Missouri's drive was dramatized by bond pleas
from wounded war veterans. On Pearl Harbor day, a leading
New York City department store turned over its entire first
floor to the sale of E Bonds. The nation's workers from
coast to coast responded to a variety of Bond promotions
ranging from gigantic rallies featuring combat heroes and
high-ranking naval and military officers, to the wearing
of lapel badges to those who bought an extra Bond.

Sales in the Sixth War Loan totaled $21.65 billions,
which topped the quota by $7.6 billions, or ^h per cent.
Sales to individuals totaled $5.88 billions against the quota
of $5 billions. Proceeds from the sale of E Bonds were $2.86
billions, representing an excess of $368 millions above the
quota for this Bond. Corporations bought $15-73 billions,
exceeding their quota by 75 per cent. Every state made its
over-all quota -- New Hampshire, West Virginia and North
Carolina leading mth sales exceeding 200 per cent of quota.

- 277 -

Of the territories and possessions, tlaimii xjas the first to
make its goal, on December 6. Bjr the close of the drive,
Puerto Rico led this group with a percentage of quota attained

of U37.

All states oversubscribed their corporation quotas, and
all but six states made their goal of sales to individuals.
Every state but Maryland made its E Bond goal. Wyoming had
the highest score in this category, with 213^o of quota, a
repetition of its 5th War Loan rank. As in the preceding
drive. North Dakota was second, with I8I per cent of goal.
Runner-up was Montana with I60 per cent. Success of the E
Bond drive in Wyoming and North Dakota was in part due to the
excellent publicity accorded the work of selling organizations

Seventh War Loan

Quite elaborate plans were made for the interim months
between the close of the Sixth War Loan and the opening of
the seventh drive. A film entitled "These Are Your Bonds"
was prominent among these promotions. Designed for use in
payroll savings plants, it offered a swiftly moving presen-
tation of what Bonds were doing to help win the war and what
they would do for the security of every bondliolder in the
future. Highlights of the film were an address by President
Roosevelt and a statement by Secretary Morgenthau. A second
major piece for the interim period was a booklet entitled
HoT-^ to Get There . Addressed especially to workers, it asked
the question:

"Do you Imow, that if you invest ."075-00
each month in War Bonds and keep it up
for ten years, you will then have a
$100 Government check coming to you
every month for the following ten years?''
A series of conferences was held in February, five to
cover new payroll savings plans, one for representatives of
the iGVM film industry, another for the Women's program,
and others for "Specia.l Events," in connection with repre-
sentatives of the Army and Navy.

From the payroll savings conferences developed plans
to have that phase of the Seventh War Loan begin in April,
six weeks ahead of the opening of the rest of the drive.
Since it was expected that the Seventh War Loan goal for
sales to individuals would be greater than ever before,
emphasis had to be placed on more purchases from current
income, i^hich meant greater E Bond buying on the part of
millions of men and women employed in the nation's plants.

278 -

offices, and shipyards. To meet this challenge, Payroll Savings
designed a sliding- scale quota system, which did not suggest
a flat average of bond investment for all TTorkers in the country
but which established plant quotas based on the average i;ages
paid in the different concerns.

State IJar Finance officials from the fields of publicity
and special events met in Washington for a 2-day conference
early in March, at which national promotion for the 7th War
Loan was outlined. State delegates presented their ov/n
locally developed plans.

The formal dates of the drive were from May ik through
June 30, with an accounting period April 9 (the day of the
opening of the advance payroll savings drive) through July 7.
The national over -all quota was Silk billion, with $7 billion
to be in sales to individuals, of which sum $U billion was
sought in Series E Bonds. These were the largest individual
and Series E nuotas of all the War Loan drives. Some help in
meeting these high goals was provided by the extra long
accounting period and the extended payroll savings activity.
National Director Gamble declared that the country was in a
favorable position to support the drive:

''IMot only is there more money available
than ever before in each state, but
individual income ■'dll be higher in
the period of the 7th War Loan than
in any previous War Loan period.''

The Office of War Information pledged to the 7th War
Loan fifty per cent of all radio time available to that agency.
"Special Events'' for the drive outstripped the nationally
planned 1,000 events of the 6th War Lop.n. The Newspaper
Executives Advertising Committee adopted a quota system
designed to increase the volume of sponsored dally advertising.
The popular 6th War Loan "Here ' s Your Infantry" show was
repeated, with three times as many participating units as before.
The armed services made a.vallable about ten hard-hitting War
Bond films, running approximately 15 minutes each.

"Now is the time of times to strike hard and fast/' declared
Carl Van Dor en, biographer and historian, quoted in the Minute
Man of March 15. "To let up in this new drive is to let the
earlier drives dovm. Think of our fighting men. I'-Jhen they are
done V7ith Germany, thejr must go on with Japan. And so must we
go on buying and buying Bonds."

"VJhen they are done \i±th Germany..." The prophetic words
became accomplished fact before the drive opened. On the 7th
of May, Germany surrendered. The djrive went on; there was still
Japan. A closed circuit broadcast of April 7 marked the last

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time President Roosevelt's voice Tjas heard on the air « 'I don't
need to tell J'^ou/' he saidj ''that ire are still locked in a
deadly struggle i-rith our enemies — the enemies of our ira.y
of life "- and the ^ra.r is still the chief job of each one of
us..<To sp.ve -•- to bu^r and to hold all ire can of Max Bonds ■■-
this is a small service to ask of us \fao do not fight yet it
is one of the biggest things we cen do for our fighting men."

In an address delivered in New York the opening day of
the drive, Secretery Morgenthpu said:

■ I'Je have had our period of eicultation over
the gre^t victory in Europe. Now it is
time for us to get back to serious
businesS"-to the business of taming and
civilizing the Japanese in the East and
to the business of helping to rebuild
civilization in the West...Ue who stayed
at home in this war have been in the
position of trustees. We must turn over
to the men \rho come back from the fight
for freedom a. healthy economy in which
they can find homes and jobs and a fair
chance to prosper. VJe must keep America
sound, as they have kept it safe. Let
us make the Seventh War Loan Drive which
begins today a fresh demonstration
to them of our unity and our uni^avering
support. ''
A good manjr people felt that the surrender of Germany
would quickly relieve the drain on the Treasury, so that
full subscription to the 7th War Loan would not be necessary.
The chairman of the War Production Board pointed out, however,
that industrial cutbacks would come slowly, and that war pro-
duction for the period of the 7th War Loan would be approximately
at the same level as during the first quarter of 19^5. "America's
pool of war savings is important in a way that mere property
alone can never be," declared Supreme Court Justice Douglas in
an address to War Finance workers in Indianapolis. "It is a
challenge -- a challenge to use onr* savings no matter how much
or how little -- as seed, to put our accumulated wealth to work.
For the war savings pool can become an instrument to guarantee
for tomorrow both security and opportunity."

Montana was again the first state to achieve its E Bond
ciuota, thus maintaining its record as "first" in the four
preceding War Loans. Although the 7th VJar Loan was the fifth
drive in txro years, the national response was greater than
in any previous campaign.

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The final score shoired a total of $26.31 billions, or
188 per cent of quota. Sales to individuals reached $8»68
billions, or 12h per cent of the goal in that category. The
high quota of $J^- billions in Series E Bonds was missed by the
narrow margin of one per cent, or sales of $3.97 billions
against the ^k billion goal.

.All states made their quotas. The highest percentages of
oversubscription were in New Hampshire, North Carolina and
Tennessee. Every state made its quota of sales to individuals.
All but 19 states met their E Bond quotas. Dollar value of E
Bonds sold exceeded previous records in all but one state.

In any such great achievement it was impossible to give
appropriate credit to any few contributing factors, but it was
apparent that the successful result was due to early planning,
and to solid support from such large cooperating groups as the
armed services, bankers, labor and retailers. Most important
of all, the planning and cooperation of these organizations
made easier the difficult work of the some six million volunteer
solicitors.

The 7th Wa.r Loan marked the climax of Morgenthau's career
as Secretar^^ of the Treasury. In his final broadcast to the
American people from the Treasury, on July 10, he said:
"It has seemed to me from the beginning
that the essence of this program lay in
its voluntary character .. .It is the
purpose of the Treasury to raise money
for national defense by methods which
strengthen the national morale -- VJhat-
ever the problems of the future, we shall
meet them through the methods of freedom,
through the voluntary unity of free men!"
The 7th Viar Loan sales record was a timely accolade to the
retiring Secretary. The accomplishments of War Finance had
overwhelmingly justified Morgenthau's faith in a plan of
voluntary savings. At the same time, the War Finance Division
welcomed the new Secretary, Judge Fred M. Vinson, as a man
who well Imew the solid record of war finance through his
recent labors as Director of the Office of Economic Stabili-
zation, and Director of War Mobilization and Reconversion.

Victory Loan

By August of 19^5 the War Finance Division could announce
that the next campaign, the Victory Loan, would be the last of
the organized drives. War Bonds were to be called Victory
Bonds. The drive was scheduled from October 29 through December

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8, \r±th a goal of ^H billion, th billion in sales to individuals,
and $2 billions of the latter figure to be in E Bonds.

In announcing the Victory Drive, Secretary Vinson said:
'"Eeevj expenditures attributable to the
\TaT \illl continue for many months. We
should make the Victory Loan the last of
our organized drives, but for the benefit
of the country and for the benefit of its
citizens, we should continue the sale of
United States Savings Bonds, especially
under the payroll savings plan. . .Millions
of our citizens have learned the value of
of thrift .. .They should be encouraged to
hold the bonds they now have and to buy
more. National stabilitjr vrill be
advanced by having our national
obligations held by the greatest possible
number of our citizens."
A special bond in memory of the late President Franklin
D. Roosevelt \ms made availe.ble at the beginning of the Victory
Loan Drive. This bond, in denomination of $200 (issue pric^.
$150) made an addition to the existing list of Series E Bonds,
and had the same terms and attributes as the others.

In preparing for the Victory Loan, the Agricultural Section
ma.de special plans to sell a quarter billion dollars worth of
securities to wheat grox^^ers, harvesting the largest crop they
ever produced. The Education Section concentrated plans for
schools on sponsorship of hospitalization facilities, illustrated
by a 35M14 slide film ''Speed His Recovery." A "take home" piece,
entitled "Exam for GroT'.Ti Ups," a^ve the facts about bonds that
parents and every citizen should Imow,

Regional meetings were scheduled September 25 - October 5
in Albany, Cleveland, Dallas, Miami Beach, Milwaukee and
Portland, Oregon, to perfect state plans for the drive. On
behalf of payroll savings. Secretary Vinson sent an urgent
appeal to more than 38,000 industrial and labor organizations,
which brought forth a flood of enthusiastic telegrams and letters,
practicually unanimous in their endorsement of full cooperation
in the loan.

Secretary Vinson, Director Gamble and many other War
Finance officials spent a good deal of energy explaining "Whj^
a Victory Loan?" Citing the 12,200,000 men and women in the
armed services on V-J Day, the majority of whom would not be
demobilized for many months, they called attention to the
related e:cpenses of mustering out pay, hospitalization and
rehabilitation, and the administration of the "G. I. Bill of

282 -

Rights." There were also occupation forces to be kept up for
some time, contract terminations to be settled, and some
refunding to be arranged on currently maturing securities.
Last but by no means least there was the continuing threat of
inflation. On this point the Secretary declared in a speech
broadcast from New York on November 1, 19^5°

"The individual goal, and particularly the
E Bond portion of it, is the most important
part of the drive. Here, every dollar
counts twice. It counts once by helping
the Government finance demobilization
and reconversion. It counts again by
holding a dollar of purchasing power
off the market until reconversion is
further along and there are more worth-
while things to buy with it... Foot-
loose spending will invite inflation --
that enemy we have so far held at bay."
The Secretary repeated this point in an address on
Armistice Day, and National Director Gamble drove home similar
arguments on the importance of Bond holdings in his talks to
War Finance workers before the opening of the Victory Drive.

State Uar Finance Chairmen accepted with optimism the
q_uotas assigned. Preliminary surveys indicated that adequate
funds were available for investment, especially since the
requirements for deficit financing were declining somewhat in
the second half of 19^1-5.

The drive got off to an amazing start. State Uar Finance
Committeemen pinched themselves to make sure they were not
dreaming as they viewed the opening sales figures. There was
the usual "prestige'' contest between states to register the
first completion of local quota by a county or city. So many
localities reported quota completion within a few hours of the
kick-off that congratulatory telegrams had to be sent out
wholesale.

The Victory Loan was an unqualified success. Totsl sales
were $21. lU billions, which topped the quota by $10. lU billions,
for en achievement of 192^0 of the goal. This was the highest
per cent of oversubscription in all of the War Loan drives.
The dollar total was the third highest, being surpassed only
by the $26.3 billions of the 7th War Loan and the $21.6 billions
in the Sizcth Drive.

Sales to individuals totalled $6.8 billions against a
quota of $h billions. This accomplishment was exceeded only by
the $8.6 billions of sales to individuals in the 7th War Loan.
E Bond sales were $2.2 billions. Every state oversubscribed

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all of its quotas -- total, to individuals , and in E Bonds «
The highest percentage subscriptions of E Bonds against c^uotas
were in North Dakota (l89fo), Montana (l6l%) and Alaska (l5Mo).

In considering the Victory Loan a great success, it must
be borne in mind that although the goal was lower than in all
drives but the First, and the total sales exceeded in two drives,
the Victory Loan was the first drive undertaken without the
stimulus of war. The inevitable let-do"V7n generated resistance
difficult to overcome. War production had been terminated, and
many war T^orkers had given up their jobs and gone home. Some
took extended vacations. Others awaited new jobs in factories
still undergoing conversion to peacetime products. Some
employees voluntarily or involuntarily worked fewer hours per
week. Thousands drew no pay at all during periods of industrial
strife. Servicemen were returning home in increasing numbers,
while family budgets were stretched for their welcome.

All these difficulties made it a far greater task to sell
a smaller volume of Bonds in the Victory Loan than a larger
volume in a VJar Loan; hence even more than in preceding drives,
the success of the Victory Loan may be ascribed to the unflagging
zeal of the volumteers. In the midst of the Thanksgiving and
Christmas seasons, they relegated their personal affairs to
second place. In the stormiest of winter weather, their
enthusiasm carried the Victory Loan to a victorious conclusion.

Sumraary

The total accomplishment of VJar Finance cannot be
summarized effectively in a short paragraph. Expressed in
round figures the totals mean very little. From May 1, 19^1-1
through the end of the Victory Loan, the bond organizations of
the Treasury were responsible for selling $185. 7 billions of
securities to help finance the war. Who can comprehend
$185,700,000,000? The figures only take on meaning when they
are broken down into categories, by securities, groups of
investors, and by localities.

The war finance program embraced the promotion of Series E,
F and G Savings Bonds continuously from May 19^1 to January 3j
19^65 and of seven War Loan drives and a Victory Loan in which
Savings Bonds and marketable securities were also offered.

Of the total of $185.7 billion raised in eight drives,
$^3.3 billion, or 28 per cent, was sold to individuals, partner-
ships, and personal trust accoimts.

Sales in the First War Loan^ which was the smallest, totaled
$12.9 billion. Sales in the Seventh War Loan amounted to (026.3
billion. This was the biggest drive. The Second, Third and

- 28I1-

Fourth drives averaged over $l8 1:111101-1 In sales ^ and the last
foiir more than $22 billion.

In the eight Loans, sales of restricted Issues, that Is,
marketable securities not eligible for bank o"imership3 together
with sales of non-marketable securities, amounted to $88.7 billion
or 57 per cent of the totel. In the Seventh War Loan and the
Victory Losn, the sales of restricted Issues and non-marketable
securities amounted to 75 per cent and 82 per cent of total sales
respectively.

Aggregate goals in the eight Loans amounted to $106 billion.
The total goal was oversubscribed in each Loan, and aggregate
sales were equivalent to 1^8 per cent of aggregate goals. The
goal of the First Loan, $9 billion, was the lowest, and the next
smallest was $11 billion in the Victory Loan. .The highest goal
was $l6 billion for the Fifth Loan.

E Bond goals were set for the last six Loans, and the sales
amounted to 101 per cent of goals. Other securities sold to
individuals in the last six Loans amounted to I38 per cent of .
goals for this category. Aggregate sales to corporations and
associations in the last seven Loans amounted to IO9 per cent of
their goals.

Of the $^1-3.3 billion of securities sold to individuals in
the eight Loans, more than $19.9 billions were in Series E
Savings Bonds. This was the security that was principally
relied on for sale to small Investors. It was promoted through
the payroll savings plan and by many other sales devices, so
tha.t by the end of the war, E Bonds had been placed in the
hands of some 85 million persons.

Of the $19.9 billion of E Bonds sold in the eight Loans,
it was estimated that payroll savings accounted for $10,U
billion, or 52 per cent;, the farm and community market for
$8.1 billion, or Ul per cent; and sales to the armed forces,
through their finance officers, for tl.h billion, or 7 per cent.
Federal civilian employees purchased over $1.5 billion of
Savings Bonds in the eight Loans.

Sales in the eight Drives entailed the Issuance of more
than U50 million separate E Bonds. Of the tote.1 sold in the
eight Loans, the $25 Bond represented 28 per cent of total
dollar volume, the largest for any denomination. Sales of the
$1,000 denomination rose from I6 per cent of E Bond sales in the
First War Loan to nearly 27 per cent in the Victory Loan.

In the eight Loan drives, 6I per cent of the total E Bond
sales came from twelve states, in each of which the sales were
over a half billion dollars. Five of these states --• New York,
Pennsylvania, Illinois, Ohio and Michigan -- topped the billion
dollar mark.

285

Particular success in attaining E Bond q_uotas after the
Third War Loan marked the efforts of a group of states in the
Middle West and the West. North Dakota, Wyoming, and Montsna
generallj^ filled high-ranking positions and shared the distinction
of leading the entire country in the achievement of quotas.
Three other states with consistently outstanding records were
Iowa, Alabama and South Dakota.

For the country as a whole, taking E Bond sales betTreen
May I9UI and Junary 19^.^6, and using population statistics as
of November 19^3? it was estimated that per capita sales
averaged $31^i-» They ranged from a low of $lUO to a high of
$56i-^ in the District of Columbia,. The six states having the
largest sales per person had extensive shipbuilding and aircraft
production for war.

A fitting climax to the four and a half years of War
Finance Committee activity came just at the close of the Victory
Loan, when the one billionth Savings Bond was sold. Couriting
Savings Bonds sold between drives, a total of $5^1- • 7 billion
was sold from May 19^!-1 to Januarj^ 3? 19^1-6. These sales
represented 997 million separate E Bonds, four million F Bonds
and nearly 10 million G Bonds.

The relation of War Finance borrowing to the total costs
of the -jar to the Treasury, the extent to which Savings Bonds
"stayed sold," that is, \jeve not redeemed, and the conversion
of War Finance to a peacetime Savings Bond program will be
taken up in the following chapters.

oOo

286

CHAPTER XII

INTER-AGENCY RELATIONS

Much has been noted in preceding chapters about the relations
of the bond organization with cooperating clubs, institutions and
the general public. The War Finance Division of course operated
in close contact with several other branches of the Treasury, and
with a number of other Federal agencies.

Bureau of the Public Debt

Within the Treasury itself, the bond program was bound up
very closely with the Bureau of the Public Debt, vrhich was charged
with the conduct or direction of transactions in the public debt
of the United States.

From this Bureau emanated the Department Circulars, partic-
ularly No. 530 and its revisions which set forth the regulations
concerning all series of Savings Bonds. The Bureau also supplied
the official circulars describing the War Loan marketables and
other issues. Copies of the descriptive circulars were supplied
by the Bureau directly to Federal Reserve Banks for distribution
to all bond issuing agents, and to the War Finance Division for
distribution to its state offices and key volunteers.

Division of Savings Bonds

Within the Bureau of the Public Debt was the Division of
Savings Bonds, the predecessor organization of the Defense Savings
Staff. Previous to May I9UI, the Division of Savings Bonds handled
the Series A-D Savings Bonds. Its promotional activities were
taken over by the Defense Savings Staff in the spring of I9U1.
After that date the Division was of chief service to the war
finance organizations in managing the physical distribution of
promotional literature.

Originally located in VJashington, the Division of Savings
Bonds moved to Chicago in June 19^^2, a circumstance which somewhat
complicated the distribution of bond literature, since all requests
received in Washington had to be relayed to the Illinois city.
Close contact was facilitated by teletype service between the
two organizations.

On its own initiative, the Division of Savings Bonds carried

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on considerable correspondence with the investing public in
connection with the registration of Savings Bonds, and with the
"mail order" purchase plan.

The separation of duties between the Division of Savings
Bonds and the war finance organization was not so precise as to
readily described in fevr words, but the general situation may be
summarized as follows: The Division of Savings Bonds set up and
serviced for War Finance the mailing lists for promotional
materials, and handled many transactions regarding the bonds
after their issue. War Finance promoted the original sale of
Savings Bonds and other securities.

Division of Loans and Currency

Also within the Bureau of the Public Debt was the Division of
Loans and Currency, which was the issuing branch for Treasury
securities. This Division handled the receipt and custody of new
securities, and their transmittal to Federal Reserve Banks. It
also handled transactions in the outstanding debt, including
exchanges, transfers, maintainance of registry accounts, the
issuance of interest checks, and the settlement of claims on
account of securities lost, stolen or destroyed.

Whereas the major service of the Division of Savings Bonds
to VJar Finance was the distribution of promotional material, the
Division of Loans and Currency relieved the sales organization
of having much concern with the technical aspects of bonds — it
handled the distribution of bonds to issuing agencies, and
"serviced" the bonds after their sale to the public. Inevitably
the War Finance Division received from the investing public a
considerable volume of correspondence concerning changes in
registration, replacement of lost bonds, etc. It was natural for
people to v/rite the War Finance Division on such subjects since
volunteer salesmen of the organization had promoted the original
sale. Correspondents in the War Finance office handled requests
for general information, but letters requiring technical treatment
were promptly referred to Loans and Currency, the main office of
which was also located in Chicago after the summer of 19^2.

Procurement Division ( Bureau of Federal Supply)

The VJar Finance Division had constant dealings with the
Division of Procurement, the Treasury agency which, with few
exceptions, handled the procuring and distribution of equipment
and supplies for all Federal agencies. These dealings related
largely to such "housekeeping" functions as the securing of desks,
typewriters, file cabinets, paper, and certain printing orders on

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the Government Printing Office. Procurement (renamed in 19^+6 the
Bureau of Federal Supply) gave War Finance, both headquarters and
the field offices, very good and prompt service, which was all the
more laudable in view of the difficult wartime conditions under
which the supply office had to work.

Division of Research and Statistics

Of the other Treasury agencies with which War Finance had
constant dealings, perhaps the most intimate relations were with
the Division of Research and Statistics. This close connection
was due not only to the essential services which the Division
provided the promotion agency, but also to the personal interest
which many in the research office took in the over-all bond
program. Research and Statistics provided War Finance with
estimates of the best bond markets, based on anticipated income;
calculated the sales quotas for War Loan drives and interim
periods; supplied statistics on sales by states, counties and
metropolitan areas ; and generally stood ready and willing to
provide data on a great number of special topics calculated to
increase the effectiveness of bond promotion.

Other Treasury Agencies

At one time or another War Finance operations i-iere aided by
many other branches of the Treasury. Obviously essential to V/ar
Finance was the Bureau of Engraving and Printing since it designed,
engraved and printed the bonds being promoted. The Bureau of
Internal Revenue was called upon occasionally to clarify questions
relating to the taxation of bonds and their income, and to the
tax-deduction privileges of individuals or corporations making
voluntary contributions to the expenses of the bond promotion
program. The Bureau of the Mint arranged for the Silver Medals
which were awarded to outstanding volunteers at the end of the
War Finance program. The legal division of the General Counsel's
office v/as frequently called upon to answer technical questions
concerning the rights of bondholders. The Office of the Chief
Clerk placed the Treasury Seal upon special citations issued to
outstanding War Finance volunteers. In the course of its regular
duties, the Secret Service helped the bond program immeasurably
by tracking down persons attempting to steal, counterfeit, forge
signatures to, or otherwise improperly handle Government securities
A very useful publication of the Secret Service -- KnoiJ Your Money
-- was extensively used, especially by the Education Section of
War Finance, in showing school students and others what the Secret
Service did to guard against counterfeit money, forged Government
checks, ■^nd the theft or fraudulant cashing of Savings Bonds.

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VJar Finance relations vxith all Treasury agencies were close and
cordial.

Although not strictly speaking a Treasury agency, the
Interdepartmental War Savings Bond Conmiittee worked within the
framexrork of the Treasury, and carried on a program i7hich was an
essential part of TLar Finance.

I-Jhen the payroll savings plan for private industry had been
begun by the Defense Savings Staff in 19^1, two members engaged
an officer of the Government Accounting Office in a series of
discussions with the object of making the plan available to
employees of the Federal Government. The reason for approach to
this promotion via the Government Accounting Office was that it
was necessary to have the approval of that office for deductions
for bond purchase from Government salary checks.

Pending a decision from the Comptroller General authorizing
such deductions, the Treasury Department made available at the
beginning of the bond program a "Group Agent" plan. Under this
substitute for payroll savings, groups of employees made regular
payments, after receiving their pay checks, to their "agent" for
Bonds and Savings Stamps. By October 19^1? the Federal Reserve
Board and the Federal Deposit Insurance Corporation had installed
a regular Payroll Savings plan for their employees. A decision
of the Comptroller General, that deductions from Government
salary checks for Bonds were legitimate when requested by the
employees, was made in January 19^2. The Treasury Department
then established, by Department Circular No. 6773 the Payroll
Savings plan for its employees, both in VJashington and the field.

Presumably the Defense Savings Staff could have supervised
Payroll Savings promotion in Federal agencies, but it x/as con-
sidered better to have this work undertaken by a special committee
representative of all the important Federal agencies. Consequently
Executive Order 9135? April l6, 19^2, established the Interde-
partmental War Savings Bond Committee, of which Rear Admiral
Charles Conard was the first chairman, and Edward F. Bartelt,
Commissioner of Accounts in the Treasury, the vice chairman. An
organization meeting of this Committee was held in the Labor
Department Auditorium the middle of May, at which time it was
decided to abandon the "Group Agent" plan as soon as possible and
to place all Federal agencies on the regular Payroll Savings plan.
The Interdepartmental Committee maintained a headquarters office
in Washington, and operated in the field through volunteer
Regional Coordinators and Executive Committees.

Obviously it was necessary for the War Finance Division and
the Interdepartmental Committee to work very closely together.
They were doing practically the same thing, except that the latter
confined its promotion to Federal employees and specialized in

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Payroll Sa.vings. Each organization gave full information to its
field force as to what the other was doing. Field offices of War
Finance were frequently called upon to supply Interdepartmental
Committee units with bond promotional materials The Interdepart-
mental Committee put on special War Loan drives in Federal agencies,
coinciding with the drives sponsored by the larger organization,
and it continued the promotion of Savings Bonds between drives as
did War Finance. In other words, the Interdepartmental Conmittee
was a somewhat smaller War Finance Division, working independently
but in synchronism with the latter. In the continuing peacetime
program after December 19^-5, the Interdepartmental ComMttee became
in effect the Federal Payroll Savings Section of the U. S. Savings
Bonds Division.

Federal Reserve System

The Federal Reserve Banks were active in War Finance,
especially in the early phases of the program. Federal Reserve
presidents acted as chairmen of the War Finance Committees in
their respective districts for the Second War Loan Drive. After
the organization of the War Finance Division in the summer of 19^:-3j
the Federal Reserve Banl^s ceased to have direct responsibility
for the promotional phases of the bond campaigns, but they
continued to be a most essential part of the over- all bond operation
because of their unique position as fiscal agents of the United
States in regard to the issuance and redemption of Government
securities.

To summarize briefly, the Federal Reserve Banl<:s provided the
following services for War Finance:

In all but a few cases authorized the issuing

agents for Series E Bonds.

Outside the Treasury itself were issuing agents

for Series F and G Bonds.

Received Savings Bonds and other Treasury

securities from the Treasurer's office for for

warding to issuing agents and/or for direct sale

to the public.

Received monies from the sale of Treasury

securities for forwarding to the Treasurer's office.
Received reports of sales from issuing agents for

forwarding to the Treasury (eventually to the Division

of Research and Statistics), and on request supplied

information on such sales direct to State War Finance

Chairmen.

Received from banks acting as redemption agents

Series E Bonds redeemed before maturity.

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On o\m initiative printed order forms for bonds for

use in War Loan drives.

Out of own funds, made available to War Finance

field staff some money for operations in War Loan drives.
For the Treasury, administered the special

regulations (contained in Department Circulars, and/or

special instructions from the Under Secretary or the

Fisca.l Assistant Secretary) regarding War Loan issues,

particularly the marketable securities.

This is a formidable list of services, which could be
expanded. All were essential to the success of the bond program.
The Fed Baiilvs occasionally provided data on income and bond
holding, to supplement that procured through the Likert Surveys
and the activities of the Treasury Division of Research and
Statistics. Federal Reserve officials used their personal
influence with other bankers, and with leading industrialists, to
further the cause both of the continued sale of Savings Bonds and
the VJar Loa.n sale of marketable securities. In explanation of the
"some money" item noted above, it may be said that the Fed Banl^s
often under-^«rrote lunches or dinners for VJar Finance Comraittees
and key volunteer salesmen. Last but not least the Federal Reserve
top officials were often called into consultation with the
Secretary and War Finance leaders in Washington to confer upon the
terms of War Loan offerings. Save for the temporary "storm and
stress" surrounding the 19^1-2-^3 contest between War Savings and
Victory Fund, in which the Federal Reserve heads championed the
latter organization, the relations between the Federal Reserve
system and VJar Finance were excellent.

Post Office Department

Post Office dealings with Savings Bonds antedated the
organization of the Defense Savings Staff. Series A Savings Bonds
were placed on sale in post offices on March 1, 1935. This issue
was followed by Series B, C and D, which were practically the
same security as the Series E which was put on the market in 19^1 »
During the pre-Defense years, the Postal Service also sold Postal
Savings Stamps, but since little promotional effort was put behind
them the sales were relatively small.

On May 1, 19^1, the Post Office Department cooperated with
the Treasury in inaugurating an intensified Bond and Stamp program
as part of the national defense program. More promotion was given
to Defense Stamps, as the new design of Postal Savings Stamps
came to be called. On September 30, 19^2, the liability for
outstanding Postal Savings Stamps of all series (including the
so-called Defense and VJar Savings Stamps, of the Minute Man design).

- 292 -

and the accountability for all unsold Savings Stamps then in the
hands of the Postal Service, were transferred to the Treasury a.s
part of the non-interest-bearing public debt.

Postmaster General Walker took part, with President Rooseveli
a.nd Secretary Morgenthau, in the April 30, 19^'l radio broadcast
announcing the Defense Sa,vings Program to the nation. The
Postmaster General pledged the complete support of his Department
to the Treasury's program, and stated that Defense Savings Bonds
and Stamps vrould be placed on sale the next morning in every
first, second a.nd third class post office, and in some UOO of the
fourth class offices. He also directed a letter to the post-
masters, urging their cooperation. To further close cooperation
with the Treasury, the Postmaster General appointed three postal
officials to serve on a joint committee of the two Departments.

Representatives of the two Departments held a series of
meetings to work out a tentative program of operation. The out-
line of this agreement was set forth in a letter from Secretary
Morgenthau to Walker about the middle of June 19^13 to which the
latter agreed in principle. Some details were subject to later
modif ica„tion. The original joint agreement covered eleven
topics, of which the following were of major importance:

Postmasters will cooperate with the Treasury in their
communities by serving, on invitation, as members (but
not chairmen) of local Defense Savings Committees.
The Treasury will prepare promotional materials for
distribution to the public through post offices.
VJhere necessary, in each post office designated to sell
Bonds and Stamps, a special window will be provided for
the purpose.

The Treasury will prepare window lay-outs and posters
and displays for use in post offices, and on mail trucks.
^There facilities are available, one or more postal
employees in each office designated to sell Bonds or
Stamps will be thoroughly familiar with all aspects
of Savings Bonds and Stamps.

The preparation, printing, and distribution costs of
all material in connection with the Bond program is
to be borne by the Treasury Department.
All proposed communications of any character, or
material to be used by any postmaster, prepared by
the Treasury, will be submitted in draft form for
the approval of the Postmaster General.

It was further agreed that the cooperation of the Postal
Service with the Bond program should be so arranged as not to
interfere with the prompt and efficient handling of the m.ail
and regular postal duties.

= 293 -

The results of the work of the joint conmiittee, assisted for
a time by a representative group of postmasters, were digested for
circularization through a lU-page printed brochure entitled
Program for Guidance of Postmasters for Defense Savings Bonds and
Defense Savings Stamps . This included a letter from the Postmaster
General to postal employees, concerning the general nature of the
Defense Bond program. It explained the Treasury program briefly,
illustrated a Bond and Stamp window for post offices, the first
bond poster for display on mail trucks, a small Bond and Stamp
advertising card for display on street mail boxes, and indicated
the character of two forthcoming folders -- Questions and Answers
about Defense Savings Bonds and Stamps for use by Postal Employees,
and for distribution to the general public, Questions and Answers
about Defense Savings Bonds and Stamps . Copies of this brochure
were widely distributed to the postal service, and to the field
offices of the Defense Savings Staff.

In the early meetings of the joint committee, and on later
occasions, it became evident that the Post Office Department was
somewhat critical of the Treasury's promotion plans. Members of
the former Department felt that certain materials were not in
keeping with the dignity that postmasters felt should be stressed
in Government publications. In brief, the Post Office had a
conservative approach to promotion, while the Treasury felt that
the times made necessary an intensified campaign, requiring high-
powered merchandising with every device of commercial advertising,
publicity and customer appeal. This divergence in point of view
continued for some time, and was occasionally the cause of the
Treasury's inability to have bond posters placed on postal trucks
or bulletin boards, or to gain permission for bond advertising
signs on post office grounds. After the summer of 19^3 however,
the Post Office Department came very close to complete agreement
with the VJar Finance position on advertising. There was further
cooperation. At the beginning of the Defense Savings Program,
rural mail carriers were authorized to carry Savings Stamps for
sale along their routes. In June 19^!-2 they were also authorized
to accept applications for Bonds.

At the outset of the Defense Savings program, postmasters
were not authorized to make reports on their bond sales to anyone
outside the postal service. The purpose of this was to protect
postm.asters from multiple and overlapping requests for reports
at a time when their ordinary duties had increased through the
mounting volume of wartime mail. With the establishment of the
quota system by the War Savings Staff in the spring of 19^^2, the
regulation resulted in some discontent since some postmasters
agreed to give local bond chairmen reports while others refused.
As the result of a Treasury appeal, the Postmaster General agreed.

29U

the middle of May, to have postmasters furnish sales reports to
State Bond offices four times a month. The Treasury supplied a
printed postal card for the reports. Originally these reports
were returned to the Treasury in Washington, where they were
tabulated and the totals transmitted to the states concerned.
This system was improved a few months later by having post offices
send their sales reports directly to the Federal Reserve Banl^s of
their Districts. In November 19^2, postmasters were authorized
to send, if requested, a duplicate report direct to the State
Bond Administrator.

In such a large-scale operation as War Finance, involving
cooperation between two such extensive personnel groups as those
of the Treasury and the Post Office Department, there were bound
to be cases of misunderstanding. There were sporadic instances
in which Treasury workers, paid or volunteer, made greater demands
upon postmasters than the latter could meet. Occasionally post-
masters complained that War Finance workers did not give them
sufficient notice of impending promotions, for which large stocks
of Savings Stamps, Albums or Bonds would be required, so that
their offices could lay in adequate stocks. Hs-ppily such cases of
faulty cooperation were relatively rare.

In the beginning, as previously noted. Savings Bonds and
Stamps were placed on sale at all first, second and third class
post offices, and at about four hundred fourth class offices. The
Stamp selling facility was extended to all post offices and the
Bond issuing agency, by 19^5, to more than five thousand of the
fourth class offices. In many cases the qualification of a fourth
class office as a Bond issuing agency was sought directly by VJar
Finance officials, or else the local Bond Chairman asked the
postmaster to request his Department that he be made an issuing
agent for Bonds, since the local demand justified that action.
Such requests were almost invariably granted.

Shortly after the United States entry into the war, the
Post Office Department offered to transfer its postal savings
department to the Treasury. Although postal savings certificates
were being converted by thousands into War Savings Bonds, the
Treasury refused the transfer, feeling that its retention by the
Post Office would bring additional income with which to prosecute
the war. This opinion proved to be well founded, as postal savings
increased along with War Bond purchases.

One of the early problems the Treasury had to straighten out
with the postal service was the reluctance of many postmasters to
certify requests for redemption of Savings Bonds unless they had
absolute proof of the owner's identity. To relieve this situation,
which threatened to lead to a feeling on the part of the public
that the Government was making bond redemption unnecessarily
difficult, the Treasury interpreted its regulations concerning

- 295 -

the responsibilities of certifying officers to require only
"reasonable evidence" of identity'- rather than incontestable
documentary proof.

The Post Office Department cooperated irith War Finance in
many special sales campaigns. One of these early promotions
involved a good deal of negotiation before it T/as finally cleared
for operation. The pledge campaign in Minnesota called for
validation of the completion of the pledge signer's promise to
buy a bond. A stub detached from the pledge form was to be
delivered to the issuing agent at the time the bond was purchased j
the issuing agent then to stamp the stub as paid, and to deliver
it to the appropriate local War Savings Committee. Local postal
officials in I'linnesota agreed to service the stubs, but just
before the opening of the campaign the Post Office Department in
Washington wired the inspector a,t St. Paul to rescind the order,
on the ground that the plan would interfere with the normal opera-
tions of the postal service, and that in addition it violated
Treasury policy in that it made svailable to the public informa-
tion as to the amount of an individual's purchase.

Minnesota War Bond committees directed numerous telegrams
to the Post Office Department requesting revocation of the stop-
order. F±na3.1j on December 23, 19^^3^ "the First Assistant Post-
master General circularized bond issuing postmasters in Minnesota
advising them that the pledge card stubs could be stamped with
post office dating-stamps and retained for collection by a local
bond committeeman, or forwarded on request to the headquarters of
the local committee. The purchase- validating plan, successfully
used in Minnesota, in the Fourth VJar Loan, was later adopted in
several other states.

Early in the bond program, many State Administrators found
their efforts to promote Payroll Savings in private firms somewhat
hampered by the fact that the postal service was not on the plan.
Officials of certain business firms, when asked to install the
plan, would object that such a large Government agency as the
Post Office should be setting a good example of support to the
war through Payroll Savings. With the formation of the Inter-
departmental War Savings Bond Committee, the Post Office Department
endorsed in principle the Payroll Savings plan for its employees,
but difficulties of bookkeeping and personnel, which were greater
in that Department than in smaller Government agencies, kept the
plan from being put into effect until near the end of the period
of war finance. Payroll Savings was first introduced on a test
basis in the Washington, D. C, postoffice in the fall of 19^-35
and then in Baltimore. When the tests indicated that the regular
Payroll Savings plan was more satisfactory, and less expensive to
operate than the group-agent plan, it was decided to extend the

- 296 -

former plan to all first and second class post offices. Due to
the size of the operation, and the large number of post offices
involved, the plan did not become fully effective until March 19^5 .

Two subjects were a matter of considerable argument between
the Post Office and the Treasury during the course of Wa.r Finance,
The first related to the franliing privilege. Under postal laws
and regulations, the use of the franking or penalty-postage
privilege was restricted to paid officers of the United States
and to matter mailed by them relating exclusively to the business
of the government.

As War Finance never had a large paid field force, but
relied upon a vast number of volunteers, the Treasury went ahead
early in its program on the assumption that bond promotional
materials could be mailed from all field offices, and by local
bond chairmen even if they were volunteers, under the further
assumption that such officials were in effect agents of the
Treasury, To keep within the spirit of the regulations, it was
uniform practice to have letters by volunteers countersigned by
a paid Treasury official.

In December 19^-2, the Post Office Department cited an instance
of this practice as an infraction of regulations on the franliing
privilege. The circular letter in question had been prepared and
signed by a New York clergyman, countersigned and mailed with the
knowledge and consent of the State War Savings Administrator,
The Postmaster General stated that the mere countersignature by
an officer of the United States Government did not fulfill the
requirements of the law. The matter was allowed to rest several
weeks, whereupon the Under Secretary of the Treasury requested
that the War Bond headquarters in Washington and its subsidiary
committees in the states be fully accorded the penalty privilege.
Postal officials replied that t;^hile it was not clear that the
committees set up by the Treasury for its bond operations
constituted "officers of the United States Government" within
the contemplation of the law, nevertheless the Post Office Depart-
ment would accept for mailing, under the penalty privilege, such
official matter as the duly appointed officers of the committees
might have to send, provided, of course, it related exclusively
to the business of the government.

Subsequently the Post Office Department requested information
as to the number of War Savings committees that would use the
penalty privilege, and that the Department be supplied the names
and addresses of their heads or chairmen. In June the Treasury
explained at length the organizational set-up in the ^1-8 states,
the District of Columbia, Alaska, Hawaii and Puerto Rico, and
requested that the War Finance Chairmen who were dollar-a-year
appointees be accorded the franl^ing privilege. The Post Office

- 297

Department agreed to this proposition, accepting dollar-a-year

War Finance chairmen as regular salaried employees of the Treasury.

This agreement settled the matter officially. In excess of
zeal, or through misunderstanding of the postal regulations, a
few volunteer War Bond workers in scattered parts of the country
did continue to place bond promotional material in the mails
under the penalty privilege. I'Jhenever postmasters refused to
accept such mailings, their rulings were not contested by the
Treasury. Fortunately there were not many instances of this sort.
Postmasters often refused for mailing under the penalty privilege
VJar Bond appeals which bore the imprint of a private concern or
individual.

The other technicality of postal regulations which caused
War Finance some inconvenience was the matter of the weight of
packages which could be mailed on the franli or penalty indicia
label. VJhen the Defense Savings Staff was first organized, the
Division of Savings Bonds, which handled bulk mailings and
distributions, was located in Washington. The Post Office Depart-
ment had previously granted to various Government agencies in the
city the privilege of mailing bulk packages up to 70 pounds on
the franlv. i'Jhen the Division of Savings Bonds moved to Chicago
in the summer of 19^2, the 70 pound limit was retained on bulk
mailings for War Finance from the latter location.

From the beginning, however, field offices of the bond program
were restricted to the customary limit of four pounds on a frank.
The limitation caused state offices considerable trouble at times,
since they often had shipments to make of much greater weight,
for instance, several hundred copies of bond folders, authoriza-
tion cards or posters to a big payroll savings plant. The usual
solution was to break down the shipment into several four-pound
pacakges, to be mailed on different days, but this practice was
rather expensive, often requiring extra help, and of course more
wrapping paper and time. Another solution was the arrangement,
made with postmasters in all large cities where a state bond
office was located, under which a monthly bill was submitted to
Washington for postage on packages mailed by the field offices
exceeding the four pound limitation. This arrangement, made in
I9U2, was quite satisfactory to the field offices. The Post Office
Department consolidated all the bills from the various cities
and submitted them to War Finance for payment monthly in lump
sums .

Public Law No. 36U, effective August 1, 19^^, made it
necessary to change this procedure. Under the new franking
regulations, the four-pound limit was applied to both V/ashington
headquarters and the Chicago mailing division. A charge account
was established for both with their local postmaster, for mailings

over four pounds. Field officer were supplied with mailing
stickers not carrying the penalty clause, for use on packages over
four pounds, on which they would pay regular parcel post rates
from their own budgets. Public Law No, 36U also provid.ed that
all franl^ed material be paid for at the rate of $15 per thousand
penalty indicia labels, which was a very reasonable figure. The
difference came in the method of accounting for the number of
labels used. Previously each office sending out franked mail
kept record of the number of pieces mailed, for the use of the
Post Office Department in billing the agency concerned. After
the summer of 19^^, each agency declared the number of franked
labels it had on hand, and added to this all new labels secured
during the course of a year, and was charged on the number of
labels available. This made it necessary for the secretarial
force to use care in not spoiling franked envelopes, and to refrain
from sending out a manila envelope bearing a frank plus a sticker
also bearing a frank, since either practice amounted to the
wastage of a stamp. After the four-pound limit became effective
at the Washington and Chicago mailing division offices, most
hccLvy iiictLerial was shipped under Government Bill of Lading. Since
there was very liLhl<=> r^ifrevcucc in the rate between express and
parcel post, the former service was found on numerous occasions
to be as convenient and as fast as the latter.

Office of Civilian Defense

The preceding data has covered the units x-zith which War
Finance worked most closely and continuously. Attention will now
be directed to Government agencies with which War Finance contacts
were sporadic, or at least less integrated.

The Defense Savings Staff and its successor organizations
were unique in that they were essentially war agencies yet they
were at the same time an established branch of a regular and
permanent agency, the Treasury. This situation had distinct
advantages in that the war service unit could lean heavily on
the parent organization for advice, support, and a good many
contributing services that it did not have to create de novo
for itself. At the same time these advantages aroused feelings
of rivalry and envy in certain purely war agencies, whose officials
tended to feel that they should control the distinctively war time
activities of the government. Justifiable or not, this spirit of
rivalry caused leaders of the bond program to feel that one or
two war agencies were activated by an ambition to tie-in with or
take over the Defense Savings prograjn. Fortunately for the peace
of mind of the bond officials, the Treasury followed a strong
policy of keeping the War Finance program separate and distinct
from other agencies. The practical problem was, hence, one of

- 299 -

working as closely as possible with agencies that could help war
finance, without being maneuvered into a position in which they
vrould exercise any policy control over TreasuPu-^y activities.

In the early days of Defense Savings a conflict arose 5 which
for a time threatened to become serious, with the Office of
Civilian Defense. The latter organizatioxi was established in
May 19^1, with broad powers to assure effective coordination of
Federal relations with State and local governments engaged in the
furtherance of war programs. The broad purpose of the Office of
Civilian Defense led its executives, quite naturally and with
considerable force of logic, to feel that their organization should
be the controlling over-all agency for all important war programs,
including volunteer activities in support of Vfer Finance.

In the early and considerably ruffled relations between
Defense Savings and the Office of Civilian Defense, the latter
had two initial advantages: (l) Several state governments
appropriated large sums of money for the use of their Committees,
thus giving them a financial advantage over unpaid Treasury
volunteer comjnittees; and (2) In quite a few states a x\rell-
organized Civilian Defense group was established and functioning
before Defense Savings appeared in the field. In a few states
the governors almost insisted that Defense Savings be a part of
the general Civilian Defense organization, and in others the
latter objected strongly to an additional volunteer organiza.tion,
urging that it should manage bond solicitation as part of its
integrated activities.

Tactfully but firmly the Treasury insisted upon control of
its own orga.nization. There was no intention of fighting the
Office of Civilian Defense on general principles. Not only did
the latter have valuable activities of its own to organize and
manage, air raid warden service, for example, but the broad scope
of its program for volunteers presented the Treasury with a
potential source of valuable help.

Strictly speaking, the Office of Civilian Defense was only a
headquarters office in Washington, which advised and guided local
activities. The country was organized into nine regions, with
boundaries corresponding to Army Corps areas. Within each state,
the O.C.D. acted in an advisory rather than a supervisory capacity.
Each state had a State Defense Council which was supreme within
the state. The O.C.D. in Washington, through its regional
directors, made recommendations to and received reports from State
Defense Councils, and helped them coordinate their activities.
Local Defense Councils were established in more than lU,000
cities and large towns.

The early conflict between Civilian Defense and Defense
Savings in a few states was ironed out slowly over the course of

300 -

a year or so, each case being dealt with locally, with due regard
to the personalities involved «

The remaining problem was to secure good working relations
between the two organizations nationally, so that, especially
during War Loan drives, the volunteer force at the command of
the O.C.D. could join in support of the Treasury's volunteer sales
army .

The first move in this direction was the inclusion of Treasury
bond promotional items in material being distributed to the public
at O.C.D. "Information Centers" scattered over the country. There
were several hundred of these, one in each city where there was
a concentration of war industries. The Information Centers were
distributing points for all Government agency pamphlets having
direct relation to the prosecution of the war, and particularly
to ways in which the civilian population helped the whole war
program. In the summer of 19^3, the O.C.D. accepted from the
Treasury large supplies of about a dozen of the leading items of
bond promotion, including three "morale builder" song sheets and
a folder Questions and Answers about Series E Bonds and Savings
Stamps.

Following shortly on the heels of this first nation-wide
cooperation between the two agencies, plans were perfected for
the O.C.D, to assist the Treasury in the Third War Loan. Through
a directive to its regional officers, the O.C.D, urged all local
Civilian Defense Councils to make available to War Finance all
volunteer services which the latter could use. Working agreements
were made at the state level, that is, the State War Finance
Chairman worked out x\rith the State Civilian Defense office the
places where and ways in which the volunteer services of the
latter could best be used. There were many Civilian Defense
services which were very helpful in War Loan drives. First in
importance came the supplying of additional volunteers as bond
solicitors, then the distribution of Treasury material. Civilian
Defense could also furnish "Victory Speakers" and the help of
Junior Service Corps and Recreation Committees.

It would be difficult to assess the overall extent of O.C.D.
aid to the War Finance Program, The assistance was very effective
in some places, less so in others, and almost non-existent in
others. Generally speaking the Air Raid Warden Service, where
called upon, most effectively provided aid in solicitation, since
the wardens were so organized that they were familiar with the
individual families on their own street or block. For similar
reason, the O.C.D. "Block and Neighborhood Leaders" proved very
helpful aid in large cities. These leaders had been trained to
organize community activity along many lines of war endeavor, and
they could and did turn their activities during war loans to

301

helping VJar Finance, in some cities taking over almost completely
the job of organizing house-to-house canvasses. O.C.D. cooperation
\ms particularly helpful from the Fourth War Loan through the
Seventh, but by the time of the Victory Loan the O.C.D organiza-
tion itself had begun to disband.

Office of VJar Inform.ation

The relations of War Finance with the Office of War Informa-
tion were considerably more intimate, and at times much more
controversial, than with the Office of Civilian Defense. The
O.W.I, developed from the Office of Facts and Figures, which v/as
established in October, 19^1-1, to facilitate dissemination of
information on the progress of defense policies, plans and
activities.

Relations between the Defense Savings Staff and the O.F.F.
were relatively slight. The latter agency got under way some six
months later than the bond organization, and did not have much of
a program in hand until the spring of 19^2. Plans were put into
operation for clearance, by the O.F.F. , of public addresses by
high Government officials, and an allocation plan for all Govern-
ment announcem.ents over the radio was undertaken in April 19^!-2.
President Roosevelt had already requested members of the Cabinet
and heads of Independent Agencies to have their public addresses,
and those of high officials under their supervision, submitted to
the Director of the O.F.F., Archibald MacLeish, for clearance in
advance of delivery.

The Office of War Information, which absorbed the O.F.F. in
June 19^-2, was given broad powers to formulate and carry through
press, radio, motion picture and other facilities, information
programs designed to aid the development of an informed and
intelligent understanding, at home and abroad, of the status and
progress of the war, and of war policies, activities and aims of
the Government. This involved the coordination of war information
activities of all Federal departments and agencies.

The 0.V7.I, was organized regionally, with twelve major offices
directing the operation of 5O branch offices. Major offices were
located in cities where field operations of other war agencies
v/ere clustered. O.W.I, regions rarely cut across state lines.
By the summer of I9U3 every state but four had an O.W.I, branch
office, and several states had more than one. States without a
branch office were taken care of by the branch office most
convenient to their lines of communication. A Bureau of Field
Operations in Washington supervised both regional and branch
offices, but a large part of the work done in the field originated

302

there. Various divisions within the national 0,, \h I. headquarters
made contact with the field on a nation-wide basis, such as in
making arrangements with the entire radio or press industry to
carry out some national policy. Even when this was done, however,
the administration of the policy was managed locally by the field
offices.

Within a very short time after its establishment, the O.W.I,
issued a series of regulations, No, 1 dated July 10, 19^2, which
tended to place most news and other publicity releases of all
Federal agencies under its jurisdiction. Except for small matters
of routine or intra-agency business, this supervision extended to
releases to the press, to Government publications, radio programs,
motion pictures, advertising, posters and other graphics.

Regulation No. 2, effective Oct. 1, 19^2, specified very
exactly the conduct of Federal agencies in the radio field. Plans
for new radio programs had to be submitted to the O.W.I, Radio
Bureau, which would submit them to networks for their consider-
ation, give programs of war information priority ratings, and so
on.

The Treasury was somewhat concerned lest strict application
of the O.W.I, radio regulation hamper the very extensive volunteer
cooperation of radio stations and other agencies and individuals
aiding the bond program. In response to a formal request for
clarification of policy, the Chief of the O.W.I. Radio Bureau, in
mid-October 19^2, assured the Treasury that it was not the wish of
his agency "to hamper the fluid relations" the Treasury had
built up with networks and local broadcasters. The O.W.I, dis-
claimed intention to interfere with privately-produced bond
programs; it only requested that the basic material supplied to
such programs, and to radio stations, be cleared by the O.V/.I, for
uniformity on statements of war policy.

Despite this conciliatory reply, a number of Savings Bond
officials felt that the O.W.I,, not content with control of war
information, was undertaking to supervise all internal, domestic,
and civilian propaganda. Unofficially various members of the
O.W.I„ made it quite plain that the Treasury, by the energy and
general excellence of its promotional campaigns, had achieved a
position of enjoying too large a percentage of free radio, news-
paper and other advertising for the War Bond program, VJar Finance
officials viewed the activities of the O.W.I, as an attempt to
transfer their laboriously acquired advertising time and space to
other agencies. To push the argument further, it appeared to
War Bond officials that certain other Government agencies, including
the O.W.I. , which had not so well succeeded in establishing good
relations with private advertisers and advertising agencies, were
not only envious of the result but proposed by official order,
and centralized authority, to take away from the Treasury part of

- 303 -

the effective channels of publicity which were the basis of its
success. The controversy essentially became one of basic ideology
-- whether better results were achieved by voluntary cooperation
or by official decree.

The incipient conflict never came to a last-ditch fight
between the Treasury sponsors of voluntary cooperation and O.W.I.
administration of publicity rationing by decree. There was too
much to be said for both systems to warrant the exclusive victory
of either. The Treasury had a vitally important program, which
had secured widespread public support. It justifiably held out
for preservation of its freedom of action as far as would be
consistent with the well-being of other Government programs. The
O.W.I, at the same time came to recognize the value of the Treasury
program to the whole war endeavor, and to approve its freedom of
action as far as was consistent with its own essential aim of
furthering intelligent understanding of the broad aspects of the
whole war program.

Not all the O.VJ.I. personnel was of adequate calibre for the
great responsibility so hurriedly undertaken, but this criticism
could be made of many another organization, governmental or private,
in wartime or peace. There were temporary arguments and conflicts,
but in the long run they resolved into very hearty support of V/ar
Finance activities by the O.W.I. A few of the controversies will
now be taken up.

Radio

The Office of Facts and Figures began in April 19^2 an
allocation plan for Government announcements over the radio. The
immediate effect was to cut down the number of War Bond plugs on
the air. This was not necessarily harmful to the bond program.
In its first year, the Defense Savings Staff went in for a great
number of "strong punchy" announcements on commercial programs.
The week of January 18, 19^2, the Treasury had lU8 such network
spots. Under the O.F.F. allocation plan the whole Government
was to receive only 123 spots a week. But before that time the
Defense Savings Staff had begun to broaden its radio programs, so
that its OT-m move to pay more attention to quality rather than
quantity placed the program in position to meet the O.F.F.
reduction order readily, hence bond publicity was not affected
too adversely.

An O.VM. "Station Announcement Plan" went into effect
nationally the middle of January I9U3. Under this arrangem.ent
either the Washington headquarters of O.W.I, or its regional offices
took charge of placing all "spot announcements" for Government
agencies on local radio stations. The local allotment plan applied
only to requests for spot announcements over and above national

- 30U -

announcements prepared and cleared in Washington. At that time
virtually every radio station in the country had agreed to carry
twelve to sixteen 1-minute wa,r messages daily. Seventy-five per-
cent of these vrere to be serviced from Washington to cover national
announcement needs. The remaining twenty-five percent were to be
sent to local stations from regional O.W.I, offices to cover
local needs. This plan did not seriously hamper, as some were
afraid it might, local freedom of action in obtaining supplementary
radio announcements. It chiefly meant that such announcements or
program be cleared in advance through regional O.W.I, offices.
After local War Finance Committees became accustomed to the
procedure it worked satisfactorily. The main precaution was to
prepare plans sufficiently in advance so that O.W.I, clearance
could be procured in time.

In March 19^3 5 Secretary Morgenthau took initiative in
seeking O.W.I, assistance in support of the Second War Loan. The
latter agency appointed a special deputy for the Treasury, who
spent a good deal of time finding out just how the Treasury bond
publicity program worked, and in making recommendations on how
the O.W.I, could help. There was some friction, due to what might
be termed "high pressure" demands on O.W.I, for facilities. The
trouble lay less in the size of the demands than in the somewhat
arbitrary manner in which they were presented. Early Defense
Savings publicity directors had the understandable attitude that
nothing but Savings Bonds counted. Relations gradually settled
doim on an amicable basis, especially after the Second War Loan,
when T. R. Gamble becam-e National Director of the War Finance
program.

By O.W.I, testimony, the Second War Loan drive received the
most extensive support given up to that time to any Government
information program. Radio marshalled the largest concentration
of network shows yet scheduled under the allocation plan to carry
the War Bond message. Ninety-one network programs carried War
Bond publicity during the first week of the drive. In addition
to the network programs, War Bond publicity was worked into
forty-three of the country's most popular radio shows under
O.W.I. 's "Special Assignment Plan." Also thirty-three national
and regional non-network prograias carried Second War Loan messages
sponsored by advertisers, and other short announcements were
carried on practically all of the country's more than 9OO radio
stations. All of this amounted to about 19,^25 "air advertising
insertions" per week.

Third War Loan relations got off to a good start and on a
logical basis. The new National Director of War Finance made an
agreement whereby the Deputy Director of the Domestic Branch,
O.W.I. , should be sole contact in O.W.I, on all policy matters
and requests for facilities for the bond program, and that he

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TTOuld have access to Director Gamble at all times. Follox-zing this
laying of a direct communication cable at high levels details were
worked out with the people in War Finance directly charged with
radio and other publicity. To avoid oral bickerings, the usual
procedure Tjas to submit Viar Finance proposals for War Loan coverage
in -^-/riting, the O.W.I, Radio Bureau then studying them and
reporting its recommendations.

The results were good. Third War Loan messages were carried
on 229 national network programs under the allocation plan, on
3U3 networks under a, special assignment plan. There were 86,237
station broadcasts under the station announcement plan, I3619
national non-network programs broadcast under National Spot
Allocation Plan, and 3 "Special Events" programs, all adding up
to an estim.ated 1,111,720,000 "listener impressions" during the
drive period. A rough evaluation of the dollar value of time and
talent for this, if paid for, was over $2,300,000, representing
an increase of about 58*^ over the Second War Loan performance.

By the time of the Fourth War Loan, O.W.I. -War Finance radio
cooperation was working very well. Occasionally someone kicked
over the traces on following established channels, but to no
great harm. "Listener impressions" for the Fourth War Loan were
estim.ated at 1,3905 5^33 000 at rough evaluation of $2,57^' ? 000 on a
sale basis. Radio cooperation between the two agencies ran
smoothly to the end.

Posters

On the matter of poster distribution, relations between the
Treasury and the O.W.I, were at first confused, and at times
acrimonious. They eventually settled down to a position very
much nearer the Treasury design than O.W.I, proposals; in fact,
the O.W.I, admitted that the bond organization was doing a much
better job than it could.

According to O.VJ.I. opinion, the Treasury's VJar Savings
Staff, by the fall of 19^2, was distributing an excessive number
of posters, both as regards the number of different designs and
the quantity of each design distributed. For a time the Bureau
of the Budget looked on the bond poster program with a jaundiced
eye because of the growing wartime shortage of paper.

In an informal letter of November 19^1-2, an O.W.I, graphics
official outlined what he modestly termed "probably the finest as
well as the largest distribution operation that has every been
available for use of display advertising." The contemplated
procedure assumed that O.W.I, would prepare requisitions for all
Government posters, and make monthly mailings to points of display,
agreeing to include Treasury materials in every mailing. Treasury

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was to be allowed to make supplementary or special distributions,
and to suggest "hitch hikes" on other agency posters whenever
practicable. The chief objection to this contemplated program
from the Treasury's point of view was that retailers and others
receiving the monthly mailings of posters would not feel under any
urgency to display the bond poster. They would be receiving a
package of a half-dozen or so different war posters, and might feel
they had done their duty if they used only one, perhaps not dis-
playing a bond poster for months at a time.

In December 19^2 and January 19^1-3 the poster distribution
question was carefully considered, and decision arrived at in the
Treasury to have the War Savings Staff continue its own distribu-
tion system.^ Before this decision, however, relations with the
O.W.I. became somewhat strained due to a supposed Treasury agreement
to the latter 's plan. Responsibility for this assumed agreement
with O.W.I, procedure was clouded and could not be established
without attacking the veracity of one or more of several officis.ls
involved on both sides. Leaving out personalities, the incident
may be summarized as follows: an O.W.I, official claimed he
secured oral agreement that the Treasury would follow the O.VJ.I.
plan. He was not certain as to which of two War Savings officials
gave him the go-ahead sign. Subsequently both of the latter denied
making any such promise.

In reviex^Jing their position in late January, War Savings
officials decided that too great reliance on the O.W.I, distri-
bution system would handicap bond publicity, and that the latter
agency should be called upon only for supplementary aid and
cooperation. This was the reverse of the O.W.I, proposal outlined
the preceding November, in which O.W.I, would be the mainstay of
poster distribution, the Treasury to engage only in supplemental
proceedings on its own account.

The War Savings Staff hence proceeded to improve and expand
its own mailing lists for posters, relying on the O.W.I, and other
agencies for supplemental distributions. What became the basic
poster distribution list was a collection of some h^ separate
lists of various types of retail establishments, from chain stores
to specialty groups such as florists, jex^7elers and beauty shops.
There were more than 800,000 plates on these lists combined.
Posters were distributed to individual groups in different numbers
and sizes to best suit their display potential. Supplementary
quantities of general posters were also supplied, the number
depending on the character of the poster, to other agencies such
as the Interdepartmental War Savings Bond Committees, the Office
of Civilian Defense, the War and Navy Departments. Posters were
occasionally distributed to mailing lists of selected sections
within the War Finance organization itself, such as educational

307 -

groups, women's organizations. Payroll Savings plants, grain and
farm implement dealers, post offices and banks and youth organiza-
tions. No two poster distributions were just alike in detail
though similar in general outline. Specific distribution on each
issue was determined by a Poster Committee meeting with the men
who handled the mechanics of distribution with the printers and
the Chicago mailing division. The poster design committee usually
met with representatives of the O.W.I, to get their ideas and
general approval of proposed designs, and also approval of the
quantities in relation to paper stock available.

Stocks of general posters supplied other Federal agencies
such as the Interdepartmental Committee, the Army and the WaA/^r,
were redistributed by the latter through their own channels. The
O.W.I, at the outset relied extensively on Boy Scouts as distribu-
ting agents for all Government posters. The method was not too
effective, and after the Fourth War Loan Drive was not much
resorted to except in scattered localities.

The O.W.I, was more useful to the Treasury in placing special
rather than general posters. Two areas in which this was done
successfully comprised car cards for trolleys and busses, and
outdoor 2U-sheet billboards. In the Third War Loan, for exam.ple,
the O.W.I, arranged for the showing of 122,000 car cards, repre-
senting about 15 percent of the industry's total facilities. In
the same drive the O.W.I, allocated 10^000 O.W. I . -controlled out-
door locations to bond posters.

News Desk

The O.W.I, cooperated with the special News Desk for the Third
and later War Loan drives. The desk was established too late to
be fully effective during the Third War Loan. Further-more, in a
burst of enthusiasm, Secretary Morgenthau had President Roosevelt
assign Jonathan Daniels to the Treasury for the duration of the
drive, to pass on all news and other publicity matters. This move
side-tracked the Secretary's regular publicity assistant, the
Treasury information bureau, and the War Finance press desk. In
the next VJar Loan, the War Finance working press desk turned out
a great volume of material, some of which duplicated the O.W.I.
efforts. An O.W.I, representative was included on the VJar Finance
loan press desks. Coopera,tion between the two agencies was much
better in the Fifth War Loan and after.

General

There were many avenues for mutually helpful cooperation
betvreen the Treasury and the O.W.I., but most of the time the

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bond organization tended to view the latter as a police force to
be avoided or evaded. In so far as this feeling had solid
foundation, it was based, on certain sections of O.W.I, regulations
Nos. 3 p-nd 5, which in general:

1. Gave the 0,V7.I. power to discontinue, curtail or
modify informational materials issued by all
Federal Agencies.

2. Discontinued general mailing lists "for all releases
and/or publications" formerly maintained by many
agencies .

3. Forbade agencies to send information to newspapers,
radio stations or other news media except on request
of the media, or with permission of the O.W.I.

h. Limited distribution of the full text of addresses

by heads of departments and their chief subordinates.

On at least one occasion, the O.W.I, threw a big scare into
the bond organization by threatening to investigate the distribu-
tion of advertising mats. The Scripps -Howard papers had discovered
by April, 19^''-35 that the Treasury was paying the Western News-
paper Union considerably more for its mat service than did the
O.W.I, About the same time the 0.1-/.I. began receiving complaints
from, a number of newspapers about the receipt of unusably large
quantities of advertising mats. The results of this flare-up were
beneficial. The bond organization tightened its mat preparation
and distribution arrangements.

On certain subjects less amenoble to objective test or proof,
the Treasury's bond officials often felt that the O.W.I, was
attempting to impose its own particular tastes or predilections.
Questions of this sort came up occasionally in regard to poster
designs. Treasury officials, with the backing of the War Ad-
vertising Council, felt that they knew what effective advertising
designs were, and O.W.I, qualifications were regarded as attempts
to impose artistic canons Quite unrelated to the practical end to
be gained.

Fundamentall3A the cause of major frictions betx\reen VJar Finance
and the O.W.I, was a difference in their essential roles. From an
informational point of view, the Treasury's problem was to explain
its fiscal policy to the American people and to prom.ote the widest
possible sale of bonds through publicity and advertising. The
O.W.I, operated over a great many areas, both military and
civilian, covering in the latter field a great variety of endeavors,
such as the collection of scrap metal, the conservation of gasoline
and greases, food and paper, the restriction of unnecessary travel,
and the encouragement of victory gardens. In other words, the
O.VJ.I. strove to cultivate a great many home-front endeavors, of
which War Bond promotion was but one. This accounted for the

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divergence in point of view, a difference which both sides came
to recognize and accept after the Second Uar Loan. Otherv'ise
difficulties arose because of the shortcomings or biases of
individuals in position of authority. In the early m.onths of the
war, propaganda or information agencies were manned largely by
well-meaning amateurs who were long on theory but short in practice.
The Treasury preceded the O.U.I, in the information and propaganda
field, and understandably felt that it had a vested interest in
what it had built up. In the course of time, Treasury information
specialists became less insular in their viexrpoint regarding the
war as a whole, and the O.W.I, came to appreciate the Treasury
program as a very fundamental one, to be guided into the most
profitable channels rather than curbed by parcelling out all
publicity media, among Federal agencies on an arbitrary basis of
proration. The Treasury maintained most of its position, and
improved details of its operation through O.W.I, assistance in
certain lines. There was a condition to be met rather than a
theory. The American people have submitted to, or voluntarily
created, a larger degree of regimentation in time of war, to deal
with an emergency, than they desire or will tolerate in time of
peace.

Armed Services

The major sales promotion cooperation between the Treasury
and the Armed Services centered around the activities of the
Special Events Section, which have already been noted. Both the
Army and the Navy were extremely cooperative in providing for
Treasury use selected films on a great variety of military
topics, ranging from home-front training scenes to footage from
official combat films. The Armed Services cooperated in arrange-
ments whereby special bond campaigns could be built around the
"sponsorship" through bond purchase of airplanes, naval vessels.
Liberty Ships and a great number of items of either combat or
hospital use. The services also staged special exhibits or
performances, especially during War Loan drives, and provided
speakers for bond rallies. The Armed Services usually took bulk
supplies of each issue of general bond posters to distribute to
their camps and installations. On many occasions, the services,
especially the Army, produced bond posters of their own. In the
later VJar Loan drives the Armed Services made comprehensive plans
for special campaigns, to correspond with the over-all civilian
effort, within their own organizations.

In the field of direct bond selling as distinct from pro-
motion, the Armed Services took over a great load from the
Treasury by agreeing to become issuing agents for bonds purchased
by military personnel or civilian employees within their

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organizations. In the case of the War Department, this activity
was so badly handled at first that it threatened to have unfortu-
nate repercussions on the bond program in general.

War Department Circular No. 77? setting forth the Pay
Reservation Plan for bond purchases by military personnel and
civilian employees, was issued in the spring of 19^-2, the plan
going into effect at various dates thereafter in individual corps
areas. The Plan bogged down because at the outset the War Depart-
ment attempted to have all bond authorizations cleared through its
Central Finance Office in VJashington. Deliveries got so far in
arrears that both military and civilian personnel complained
loudly to the Treasury Department, requesting special search be
made for bonds due them five or six months and, still not forth-
coming. Bond issue by a decentralized system within the War
Department was the remedy indicated to meet this problem. Begin-
ning in December 19^-2 and January 19^83 local disbursing officers
of the War Department, at army camps, stations, posts and arsenals,
were designated by the Chief of Finance to act as bond issuing
officers. They secured bond stock from the Federal Reserve Banl^s.
Accounts of civilian employees were also maintained locally
thereafter.

The bond delivery situation improved slowly. It could not
be cleared up fast because of the tremendous back-log of unprocessed
purchase orders when decentralization went into effect. To allay
public criticism, the War Savings Staff in January, 19^-3, circulated
to its field offices a suggested press release explaining the
improved system, and asking bond purchasers through the War
Department pay reservation plan to be patient, knowing that their
money or their bonds vrcre safe, and that the latter would be
forthcoming soon.

Due to the slowness with which the situation improved, a
second memorandum on the subject was distributed to field offices
of the bond organization about six months later. This memorandum
admitted that the War Bond Division of the War Department was
still behind in issuing bonds, but that the problem would be under
control in the near future. The War Department accounts under the
Pay Reservation Plan had mounted by the end of I9U2 to U, 500, 000.
The Department began to issue bonds on its own account in December
of that year, bonds being issued thereafter at the rate of 8,000
per day. By the summer of 19^3 there were about UOO War Department
bond issuing officers. The Department soon became current on
recent or new bond a.uthorizations, but still had to struggle for
many months with the original log-jam. A considerable number of
bonds under the pay reservation plan were still unissued or un-
delivered at the end of the war.

Fortunately the Navy had no such difficulty with its bond

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issuing problem. It had a smaller number of people to deal with
than the Army, it employed a simpler accounting system, and kept
all bond stock in this country, placing in safe-keeping all bonds
purchased by personnel outside the country, to be delivered to
them on discharge or return to the mainland, or on their order to
coowners or beneficiaries.

The difficulties in the Army's pay reservation plan led the
Treasury to experiment with a smaller denomination bond than the
$25 Series E. In June I9UU a $10 (issue price $7-50) so-called
"G.I." Bond was announced, which was in other respects the same as
the regular Series E, except that it was to be issued solely to
persons in the military forces of the United States. The purpose
of the $10 bond was to facilitate sale in a single payment without
the need for several pay deductions toward a bond of larger
denomination. The Navy did not adopt the $10 bond program, and
the Army's experience with it was not very satisfactory. Too many
purchasers fell into the habit of thinking they had done their duty
with a $7-50 investment per month when they could have subscribed
much more.

The V7ar and the Navy Departments helped the Treasury's bond
program in a number of other ways besides those just cited. They
supplied the War Finance organization, as did a number of other
Federal agencies, with data on the award of construction projects,
so that local bond committees could promote with the contractors
the installation of Payroll Savings plans. All in all. War Finance
received very good cooperation from the Armed Services. The
difficulties which the War Department had with bond issuance vrere
due to poor organization within its own finance office but not to
any faulty relations with the Treasury.

Department of Agriculture

As already noted in a preceding chapter, the Department of
Agriculture very obligingly furnished certain personnel and
facilities for the early bond sales program among farmers. In
19^1-^2, bond folders for farmers were distributed largely through
Department of Agriculture mailing lists, and the agency also
actively assisted in securing the cooperation of related units such
as the Rural Electrification Administration, the National Farmers
Union, and State Farm Bureaus, The Department encouraged its
State Extension services to give all possible aid to the bond
program. It furnished statistics on farm income which War Finance
used in establishing sales quotas for rural areas. Throughout the
program, Department of Agriculture officials were most helpful in
reviewing proposed bond sales copy, and making suggestions on both
content and the best channels of distribution. The Treasury-
Agriculture relationship was one of the closest and most mutually

- 312 -

helpful of all the inter-agency cooperations in the war.
Office of Price Administration

As also noted in a preceding chapter, the Office of Price
Administration assisted War Finance in a very important respect,
by helping to keep the bond program on a high patriotic plane, as
far removed as possible from undesirable motives of private profit.
A number of retailers scattered about the country attempted at one
time or another to capitalize on the patriotic urge for investment
in bonds by offering articles, especially scarce wartime products,
at a limited sale to favored customers who would qualify for the
desired merchandise by buying stated amounts of War Bonds. The
retailers could thus maintain they were aiding in the sale of bonds,
with no thought of the mere sale of merchandise. In certain cases
the Office of Price Administration dealt with these sales as in-
fractions of their price regulations, and the Treasury and the
O.P.A. combined in declaring the practice of such tie-in sales,
merchandise plus bonds, as against public policy. A somewhat
similar practice was for a retailer to seek to draw trade away
from his competitors by offering special sales in which the
purchase of certain amounts of his merchandise would be rewarded
by the gift of a War Bond or Stamps. This practice was frowned
upon by the Treasury. Many individual cases v/ere directly dealt
with by local Better Business Bureaus.

Another O.P.A. aid to the War Finance program was the
permitting of key bond workers to have extra gasoline rations
wherever necessary to enable them to use their automobiles in
essential bond promotion. The first action, in June 19^2, enabled
paid Treasury bond workers, on travel status, to receive extra gas
rations without making out formal application. Later, in April
19^3, the O.P.A. and the Treasury agreed on a system whereby
State Administrators could certify key volunteers, usually county
chairmen, to receive extra rations.

An incidental but occasionally bothersome problem relating
to O.P.A. contacts with War Finance came up when some enthusiastic
bond worker, or private sponsor of a local bond campaign, would
offer as a prize to large bond buyers a cow or a pig, either whole
or broken down into steaks, chops or bacon. The O.P.A. usually
insisted that the lucky winner of these "prizes" had to produce
the required number of meat ration stamps just as if the meat had
been bought in a store.

Office of Education

As foreshadowed above in the treatment of the Education

- 313 -

Section of the bond program, relations between the Treasury and
the U. S. Office of Education were amicable but slightly peculiar.
At the outset, the Office of Education cooperated wholeheartedly
xvTith the Treasury's "Schools -at -War" program. Commissioner John
W. Studebaker issued a Circular Letter in July 19^1, endorsing the
defense savings program in schools, and Office of Education people
helped with the preparation and distribution of the first school
bond folder. Sharing America.

After that beginning, the relations between the two organi-
zations were intermittent. The Office of Education occasionally
gave the Treasury use of its mailing lists, and individuals in
each organization cooperated vrell with each other. Commissioner
Studebaker designated one of his ste^ff to be liaison with the
Treasury's school program. This officer proved to be cooperative,
but lacking in initiative and imagination.

Underlying the conservative attitude on the part of the Office
of Education was the feeling that the Treasury should not deal
directly with schools, but approach them only through the office
supposed to supervise all Federal relations v/ith the country's
public school system.

An informal proposal by the Office of Education to take over
the school Stamp and Bond program was not acted upon by the Treasury,
In the peacetime program, in May, 19^6, Senator Wayne Morse of
Oregon introduced a bill in Congress to coordinate all the
educational functions of the Federal Government into a single
agency. One section of this bill provided for the transfer of the
Treasury's Education Section to the Office of Education. The
Treasury arguments in opposition to this measure showed clearly
the divergence in point of view between the two organizations, both
as regards the x^artime program and its successor-

1. The Treasury's school program deals with
Government securities. VJhereas the mechanics
of the program are educational, the purpose

is an understanding of Treasury fiscal policies
and student participation in Bond and Stamp
purchases.

2. In the Office of Education, the School Savings
Program would lose the benefit of a well-
established field organization,

3 . The removal from the Treasury of the educational
functions of the Education Section would leave a
serious gap in the well-coordinated over-all
Savings Bond Program. Loss of the school program
would mean not only loss of contact with school
children themselves, but loss of contact through
them with their parents o.nd others in the community.

- 31^^ -

h. School people generally throughout the country
are pleased with the Treasury's program and the
way it was handled, and do not hesitate to endorse
it, or to participate in it, because it is not a
part of the Office of Education.

To summarize, the School Savings Program under Treasury
guidance was well conceived and well managed, and enjoyed greater
success than would have been likely under the aegis of the Office
of Education, which was not by the nature of its major duties or
personnel a promotional organization. The Office of Education
people were at least subconsciously aware of this. For most of
the time after 19^2, their attitude toward the Treasury's bond
program may be characterized as one which appreciated and admitted
the good work the Treasury was doing, and devoutly wished at the
same time they were doing it themselves. Hence the Office of
Education people never threw any serious obstacles in the way of
the Treasury's program, but they seldom on their own initiative
suggested any way of helping it. They were usually cooperative
when asked for specific aid.

Congress

The major relationship between Congress and the War Finance
Program centered around authorization of the program in the first
instance, and the subsequent annual appropriations for carrying
on its work. The other relations of Congress to War Finance were
largely of a personal nature, that is, individual Congressmen
corresponded with the Secretary of the Treasury, or directly with
the bond organization, concerning topics in which they were
particularly interested.

In the early days of the Defense Savings Program, a number of
Congressmen were naturally concerned with the initial appointments
to be made to the field offices in their own states , Proceeding
on the sound theory that the bond program had to be non-partisan,
Treasury officials refused to be high-pressured into making
appointments on a political basis, but at the same time they
scrupulously avoided giving offense to Congressmen. VJherever a
major appointment was to be made, the bond organization made sure
in advance that no objection would be raised by Congressmen to the
candidate's character and ability. Congressmen wrote many letters
of endorsement on behalf of their constituents who aspired to
either new positions in the program or to replacements of outgoing
officials, either in Washington or the field. There was no high
press-ore behind these recommendations. They were polite letters
of endorsem_ent any man in high position writes on behalf of his
friends and acquaintances. All such endorsements were promptly

- 315 -

acknowledged, with the assurance that the candidates would be
given every consideration on their merits.

In the course of their voluminous mail. Congressmen received
a great many letters from their constituents asking all sorts of
questions relative to War Finance -- how to get a long-undelivered
bond, wasn't the bond organization being wasteful in its distribu-
tion of advertising copy and other literature, could something be
done about getting Mr. Blank a Treasury citation for his cooperation
v^ith the bond program, and so on. These Congressional inquiries
were all answered promptly, with full information wherever required,
and promise to investigate any complicated or unusual case.
Congressmen also wrote the Treasury, as did members of the general
public, for bond folders and samples of other promotional material.

Along with their routine m.ail touching matters of War Finance
interest. Congressmen occasionally received more or less critical
complaints about certain aspects of the program, many of them due
to misinformation on the part of the writer. If the matter
appeared to be of sufficient importance, a member of the head-
quarters bond staff telephoned the Congressman at once, and
explained to him personally, or to his confidential secretary, the
circumstances of the case. Often the reaction on the Hill was that
the Congressmen understood the Treasury's position thoroughly, but
wanted to have the letter of referral answered in due course for
the sake of the record. Often the reply that eventually reached
the complainant, from his Congressman, carried more weight than
if it had been handled directly by anyone in the Treasury, "My
Congressman approves of what the Treasury is doing, so it must be
right!" On very few occasions did Congressmen become involved with
internal problems of the bond organization, the most troublesome
cases being in Colorado, Illinois, and the headquarters staff in
Washington.

Over-all relations between Congress and the bond program were
excellent. VJith rare exceptions, Congressmen appreciated that the
bond program was doing a necessary job for the country, and doing
it economically and very well. Outstanding proof of this endorsement
was the Congressional approval, with accolade, of the Savings Bonds
Division budget for the fiscal year 19^8,

The foregoing treatment has not touched upon all the Federal
agencies with which the Savings Bond organization had dealings at
some time or other. War Finance touched almost every Federal agency,
as it did the lives and activities of private individuals and
groups. The major administrative relationships, however, were with
the particular agencies mentioned.

It is clear that the relations of the War Finance Division
with other agencies of the Treasury were very close and very
friendly. With the Federal Reserve Banks, the Treasury had some

316

argument over the structure and administrative control of the bond
program, "but this was resolved by the summer of 19^'33 and otherwise
the Fed Banks gave the War Finance operation constant and yeoman
service.

Relations with the Post Office Department did not proceed on
an even keel, but there were no major difficulties. Relations
with the Office of Civilian Defense and the Office of VJar Informa-
tion were at times strained, though in the long run both of these,
especially the latter, contributed a good deal to the success of
the bond progra.m.

The Armed Services and the Department of Agriculture cooperated
wholeheartedly with War Finance; the Office of Education in a.
restrained manner. With the exception of a few individuals.
Congress was solidly in support of the program.

In broad analysis, the Treasury was doing more than selling
bonds; it was selling the war. In addition to carrying on its own
work as a fiscal agency, the Treasury supplemented the morale-
building, war -informational activities of many other agencies,
especially the Office of War Information, the Office of Civilian
Defense, the War Production Board, and the Office of Defense
Transportation, The Treasury had to be, and was, super-conscious
of its responsibilities to the war program as a whole „

oOo

" 317

CHAPTER XIII
FINISHING THE JOB: THE PEACETIME PRCGRAI4

War Finance was a wonderful undertaking , although by no
means perfect. There could have been more restrictions put
around the sale of securities to keep them out of banks and
to stop some speculation, but the final results would not
have been much different. The manner in which World War II
was financed was the result of the Treasury's experience in,
and study of the after effects of. World War I. The Treasury
learned to adapt the borrowing instruments to the requirements
of different investor classes, so that the purchasers had
opportunity to buy securities that closely fitted their needs.
This obtained a large volume of sales from well satisfied customers

One measure of the success of War Finance was the extent
to which Savings Bonds, the redeemable bonds, st_ayed soldo
Let us investigate the story on redemptions.

Redemptions

A lot of nonsense has been voiced or -v/ritten about Savings
Bond redemptions. Let it be kept clearly in mind at the outset
that redemption before maturity was one of the legal terms of
the bond. Being non-negotiable. Savings Bonds could not be
traded on the open securities market. It would not have been
feasible for the Treasury to trj^ to distribute a non-negotiable
bend which could not be redeemed, in case of need, before a
maturity of ten or twelve years. Hence the redeemability of
the Savings Bond was one of its selling points. People of
modest or low income could be asked to loan their Government
funds, with the assurance that if they needed the money back
before the maturity of the bond they could get the principal
plus accumulated interest. Redemption v/as in no wise to be
regarded a sin. Unnecessary redemptions cost the Treasury
money in turnover and extra bookkeeping, but reasonable
redemptions were to be rega.rded as a matter of course.

Starting from zero in May 19^1, the amount of E, F and
G Bonds redeemed during the remainder of the year 19^1 was
O.'^kio of the amount issued. At the end of 19^i-2 the cumulative
total of redemptions was 2.21^0 of the amount outstanding. At
the end of 19^3, cumulative redemptions were 6.91'^ of the

- 319

dollar amount of Bonds outstanding o Redemptions of Series E
Bonds J slightly higher than for F and G, tended to average
about 1% per month of the amount outstanding.

This was a very reasonable rate. What lent color to the
impression that redemptions were excessive were local stories
or incidents. For example, take this report from a Likert
Report of April l6, 19^3:

"Some of us do"tvn at the yard were talking
about bonds at lunch just the other day.
Not one guy ever expected to get any of
that money. It's like one of 'em said,
'The bonds is just the Government's way
of reducing wages. ' I guess they figure
the working stiff is eating too much.
Another guy said that the Government is
going to owe about 300 billion dollars by
the time the war is over. He said only
about 30 billion of that will be owed for
War Bonds, and it's a, damned cinch the
Government will pay off those rich... that
got the 270 billion coming before they
pay off all the little potatoes that have
a few War Bonds. Most of the guys figure
that the Government will just not pay it.
I don't think those bonds will be worth
the paper they're printed on."
Rumors such as this, that the Government would not pay
off the War Bonds on maturity, caused temporary fear flurries
of redemption in scattered areas.

A more frequent circumstances giving rise to the
impression of excessive redemptions arose from the fact that
there were fewer redemption than issuing agencies, so that
while bonds were being issued in a great many places they
could be redeemed only in a few, thus concentrating bond
redeemers where they were noticed. Originally Savings Bonds
were redeemable only at the Treasury and the Federal Reserve
Banks. Beginning in October 19^U, Series E Bonds were made
redeemable at most banks. Whereas Series E Bonds were being
issued through many outlets -- post offices, banks, some
theatres, radio stations and department stores, and many large
corporations on Payroll Savings plans -- the bonds being
redeemed by the small percentage of holders had to be taken
to a bank. Hence there were occasionally sizeable lines of
bond redeemers at a particular bank. The lines occasionally
looked impressive, but nevertheless they represented only a
small proportion of Bond purchasers.

320

In October 19^^, when the simplified redemption method
went into effect, the percentage of redemptions to the total
volume of Series E Bonds outstanding rose temporarily, from a
previous average of slightly more than 1% per month to 1.59fo.
In November it dropped to 1.^3%, in December to 1.3lfo, .and in
January 19^5 to 1.15^0.

The dollar redemption of Savings Bonds (all series,
including maturing Series h) increased slightly in 19^5, but due
to continuing sales the amount of such bonds outstanding at the
end of the year was over $2 billion greater than at the
beginning. In 19^6 sales again exceeded redemptions and
maturities by a comfortable margin, so that the total out-
standing was up more than $l| billion. This trend held
throughout the two years following the Victory Loan,

Ttto years after the close of War Finance, total redemptions
of Series E, F and G Bonds issued since May 1, I9UI, were
$21,UlU,000,000, or SOoOufo of the $71^1905 000,000 issued;
G^.^Z|'o of the total remained invested. On Series E Bonds,
$19,231,000,000 of total sales of $50,^56,000,000, or 3o-ll'/o,
had been redeemed, leaving 6l.89fo in the hands of the original
purchasers of that series.

That was a very good record indeed. It wholly contradicts
the oft-^expressed but uninformed opinion that most War Bond
buA^ers could hardly wait out the required 60 days before turning
their bonds back to Uncle Sam, Of course many people did redeem
bonds. By May 19^'-53 about one in every four bond holders had
redeemed at least one bond. In the first seven months of
19^6, about one-fifth of bondholders redeemed some bonds, and
about one-third of these redeemers turned in all the E Bonds
thej owned.

Most people who redeemed bonds did so either to meet
emergencies or to pay for large living expenses. On the
average, the amounts redeemed for these purposes were small.
Relatively few people cashed bonds :n order to pay for houses
or to invest in business and other securities, but the total
cost involved in such transactions was considerable. The
redemption in the months immediately following the war, however,
indicated that most people continued to think of Savings Bonds
as the family's capital fund, to be kept until maturity and
not to be used for ordinary expenses.

Generally speaking the great bulk of redemptions in the
latter period of war financing came from bond buyers who had
bought their bonds on the Payroll Savings plan. This was due
mainly to the fact that War Bonds represented a larger propor-
tion of the savings of wage earners than of other groups. Wage

1 Data from Promotional Research Section, U. S. Savings Bonds Division, September 19^7.

- 321 -

earners often ran into the kind of situation which demanded a
quick dip into savings. The ratio of War Bond redemption to
total bonds outstanding, however, was less than the normal ratio
of savings bank withdrawals to total deposits. It was a little
higher than insurance loans, probably because it was easier to
cash a War Bond than to borrow on a policy.

Of those who redeemed bonds. Treasury surveys indicated,
as might have been expected, that the largest group -- some
k9 per cent -- cited "emergency expenses" as the reason why
they took back some of the savings they had lent to the nation.
A large majority of those who mentioned emergency specified
medical attention as the cause of their difficulty. Another
group -- about 17 per cent of bond redeemers -- used the money
to improve their general financial position. A third set --
23 per cent -- used War Bonds partially as a short-term
reserve. They bought bonds regularly and cashed some of them
when large obligations had to be met. Only h per cent of bond
buyers cited nonessential expenditures, including Christmas
shopping, as their reason for redeeming War Bonds. ^

In any event, through the war and the succeeding two years,
the redemption picture was healthy. Savings Bonds stayed sold.
Undoubtedly a strong factor in keeping the redemption situation
normal was the continuing promotion of new sales. As long as
people were aware that Savings Bonds were a continuing
proposition, that the bonds offered them a reasonably permanent
pla.n for prime investment and a safe method of saving, they
were inclined to keep their stack of bonds growing higher
instead of diminishing.

Continuing Program

The Savings Bond Program did not end with the war. It
did not begin with the war. Savings Bonds began in March 1935?
long before the United States became involved in the hostilities
of World War II . Savings Bonds were continued after the war
not only as an important phase of Treasury management of the
national debt but in response to public demand.

Secretary Morgenthau asked the Labor Section of the VJar
Finance Division in July, 19^^, to ascertain the position of
leaders of organized labor toward the continuation of the
Payroll Savings Plan after the end of the war emergency. The
Secretary recognized that in peacetime the Treasury could not
properly play as large a part in the development and maintenance
of good labor -management relations as it did under the necessities
of war, but that hope for much good from future payroll savings

2 Ted R. Gamble, "Report on 85,000,000 bondholders," in Saturday Evening Post, May 12, 19^5.

- 322 -

lay in the mutual good will of the workers themselves and their
employing companies.

Under the Secretary's direction, the Labor Section made a
thorough cs.nvass of the attitude of organized labor toward a
perpetuation of payroll savings in time of peace. The proposal
met ^-^ith a surprising and gratifying unanimity on the part of
labor officials, who stated ijithout hesitancy that payroll
savings was an effective form of Social Security which should
be continued.

At about the same time, the Payroll Savings Division of
War Finance headquarters and of State War Finance Committees
canvassed officials of corporations and the managers of plants,
and were pleased to find that most of the major industrial
concerns of the country were willing and ready to continue the
Payroll Savings Plan if the employees wanted it. A similar
response came from educational leaders when approached on the
question of continuing the school savings phase of the Bond
program. 3

From the Treasury's point of view^ a continuing Bond
program was important as a means of combatting postwar inflation,
and of assuring widespread holding of the national debt. The
program was built on the basic objectives of thrift and
individual holding of Government securities postulated in 1935 5
plus modifications as circumstances dictated. A most lucid
and comprehensive statement of the objectives of the peacetime
program was given in the Savings Bonds Division request to
the Bureau of the Budget for a Congressional appropriation
for fiscal I9U9, as follows:

"It is the policy of the Treasury Department to
continue the sale of U. S. Savings Bonds and
Stamps for the following important reasons among
others :

1. To keep the national debt widely spread...

2. To combat inflation by reducing the amount
of money in competition for goods...

3„ To sell U. S. Savings Bonds to the public
in am.ounts sufficient to offset redemptions
and to lessen the need for refunding or
other Treasury issues. . .

k. To provide a regular, safe and practical
savings plan for millions of individuals
through Payroll Savings at their place
of employment.

3 "The Public's Attitudes Toward Continuation of Bond Sales," U. S. Department of
Agriculture, Bureau of Agricultural Economics, Division of Program Surveys, Study I30, December
I9U5. The summary concluded that "About eight out of ten persons who have owned bonds want to go
on bTxying."

- 323 -

5. To provide a regular, safe and practical
savings plan for those who cannot take
advantage of Payroll Savings -- farmers
and XJirofessional people, small businessmen
and the self-emplcired -- through the ne\j
Bond-A-Month plan.

6. To strengthen further the habit of thrift
in the minds of the American people,
especially through a widespread program
of thrift education in the nation ' s
schools, and to develop both in young
people and adults a better understanding
of Government financial problems and
Government securities."

This \-TSiS a very clear and specific statement of the
philosophy and objectives of the peacetime program. It did
not claim that there was a bond program chiefly for the
convenience of the Treasury or the Government at large. The
statement emphasized that the Savings Bond program was being
continued after the war because it was good for the American
people ,

The operating design for the peacetime program was drawn
up in December 19^5? and circulated to the field organization
as a special printed Memorandum to State Chairmen, Vice Chair-
men and Executive Managers. ''' In general, read the opening
paragraphs of this Memorandum, the peacetime program will be
one ''of information and sales. There are no drives contemplated
nor formal sales quotas for States, although standards of
performance will probably develop. The program will be mainly
one of consolidating the wartime gains made in the habits of
thrift by insuring availability^ of bonds and stamps at as many
outlets as possible and encouraging their purchase by the
continuance of the established methods of purchase. The program
will be in no sense high pressure and its voluntary character
will be carefully preserved."

The body of the Memorandum outlined the operating plans
of the functional units of the Bond Division -- payroll savings,
labor, banks, farm, school savings, women's groups, radio, press
and advertising. These plans were very much like those of the
wartime procedures save that they were tailored to a much reduced
budget, which meant a smaller staff and fewer promotional items,
both in number and quantity of each distribution.

The chief differences between the war and the peacetime
programs, functionally considered, were that the latter had no

1* R. W. Coyne, Field Director, Post Victory Drive Bond Program, December 20, IS^J-?,
(Government Printing Office).

- 32U -

formal retail section , fraternal and civic club unit (until I9H8)
nor very much of a "Special Events" shov7. In order not to leave
these promotional fields wholly uncultivated^ the Advertising^
Press and Radio Division continued a small part of the wartime
program with retailers 5 and the residual Special Events Section
kept alive some contacts with fraternal and civic clubs. The
peacetime Special Events Section promoted very few 'stunts'' of
the wartime variety -- infantry and airplane performances --
but endeavored to secure as much aid as possible through the
coiMiercial movie industry and l6mm film. The outstanding
prom.otional piece of this sort in the earlA^ postwar program
vfas America 3 The Beautiful, a gorgeous color film donated to
the Treasury by Warner Brothers. Five hundred prints were
allocated to the state Bond offices, where they were used with
great effectiveness before club meetings, church gatherings,
farm and school groups, and occasionally bank and payroll savings
bond rallies.

U. S. Savings Bonds Division

The staff and internal organization of the peacetime
program were a simplified, streamlined version of the wartime
Division. The United States Savings Bonds Division, as the
continuing unit was called, was established January 1, 19^6,
by Treasury Order No, 62, The peacetime Division v/as charged
with the general responsibility of promoting the sale of
Savings Bonds and Stamps to the public. As in the VJar Finance
Division, the head official v/as the National Director, who was
also an Assistant to the Secretary, reporting to the Under
Secretary of the Treasury.

Reduction in budget and personnel was made voluntarily by
the Bond organization, and not imposed by an economically-
minded postwar Congress. In presenting to Congress its budget
estimate for the fiscal year 19^-75 the Treasury voluntarily
offered to reduce its Bond budget from the wartime high, an
$8-2" million appropriation for fiscal 19^6, to less than $3
million. During the first year of peacetime operation, the
paid staff was gradually reduced to a quarter of its wartime
size. By the summer of 19^i-7 there were only 38O paid employees,
including both headquarters and field, in the U. S, Savings Bonds
Division.

Organization

With some regrouping, largely due to reduced personnel,
the headquarters organization chart of the Savings Bonds

325 "

Division bore great similarity to that of the War Finance Division,

The National Director was assisted by an Associate National
Director \jho was at the same time Field Director. Connected
directly with the Office of the National Director vrere four
functional units — Labor, Banking and Investment , the Field
Liaison men, and Federal Payroll Savings which was formerly
the independent Interdepartmental War Savings Bond Committee.
There were only two Liaison men, the "trouble shooters'' in the
peacetime program, and one of these carried out more special
assignments in the headquarters office than in the field.

Under the Office of the National Director were four
divisions -- Payroll Savings, Special Field Activities, Adminis-
tration, and Advertising, Press and Radio. The Special Field
Activities Division coordinated what might be called "Community
Programs" — Agriculture, Education, Women's organizations and
the promotion of Savings Bonds with Negro groups. The operations
of these functional units were essentially the same as those
of their wartime counterparts.

Reduction to the peacetime base bought about rather more
drastic changes in the field than at headquarters. The distant
"territorial" offices in Alaska, Hawaii and Puerto Rico were
abandoned. Savings Bonds and Stamps were still sold in those
areas through the regular channels of post offices and banks,
but there was no organized promotion, at least not in Alaska
and Puerto Rico, In Hawaii, the most productive of these markets,
the wartime Chairman remained in advisory capacity, and the
Executive Manager gave part-time volunteer assistance to a
modified promotion.

In general the State War Finance Chairmen were retained in
advisory capacity as State Chairmen of the peacetime State
Committees. About thirty- six of the wartime chairmen remained
in this advisory capacity; new men i/'ere appointed in the other
states, VJith one or two exceptions, notably New York, the
advisory chairmen were just that -- they gave advice when .
called upon. Few took active part in the program.

The Executive Managers, the active operating officers, of
the War Finance Committees became State Directors of the
continuing program. About thirty of the wartime managers
remained in the continuing capacity; new Directors were secured
in the other states.

The most radical change in the field was the amount rather
than the kind of work the continuing force had to undertake. In
sixteen states there was but one man, the State Director himself,
who had to assume the burden of all promotion and bond services,
assisted only by a secretary. The one-man states were the New
England states (except Massachusetts and Connecticut), Delaware,

- 326

and eleven states west of the Mississippi River. In the other
states the paid force ranged from two to twenty-five , depending
upon the sr.les potential of the area. The burden this reduced
force undertook was all the greater because with the end of the
Victory Loan the volunteer army dwindled away almost to nothing.
This was partly the result of the end of the war itself, and
partly the fault of the bond organization in not making more
effective arrangements to keep a volunteer force alive and
provided with definite assignments . Very few states retained
a.11 or much of their wartime volunteer force »

By the summer of 19^7 it had become evident that the best
sales records were, almost without e^vception, being made by
states which could count on active volunteers. In year-end
letters to State Chairmen and Directors, the National Director
urged all states to reactivate their volunteer forces. A good
many states had *'paper committees'" ---- lists of names of prominent
people "" which amounted to very little in terms of actual aid.
This was a serious defect, which kept the peacetime program in
me.nj states from being as successful as it could have been. The
peacetime staff of 20 per cent war size was endeavoring to do
80 per cent or more of the former work. Volunteers were
essential.

In the change from war to peace there was some change in
the relations between headquarters and the state offices. The
wartime State Chairmen were without exception ''big men'" in
their states -- leading bankers, businessmen and educators. They
iiere granted almost complete autonomy in running their 01/n
state bond programs. In the peacetime organization the State
Chairmen 'jere advisory officers, and the State Directors the
responsible operating heads. Some of the latter had been
wartime Executive Managers; several had held less responsible
positions in the preceding program. A number of the State
Directors, hence, were not quite big enough for their position.
One remedy for this weal-mess was a closer relationship between
headquarters and the field ■■-- a t:Arpe of organization in which
headq_uarters would run the program through precise instructions
and orders. Headquarters was reluctant to make a complete
reversal in former relations with the field. The result was a
compromise in which headq_uarters assLimed considerably more
control of field procedure than during the war, but did not go
the Tdiole way into a centrally-directed organization. Actually
the relationship, or degree of control, varied by state,
depending upon the calibre of the Director concerned. About a
half dozen Directors, in the big states, were looked upon as
key people, and their advice was frequently solicited on
measures for the national operation.

327

The direction of the field hy headquarters flowed through
the same channels as before. The wartime Field Memoranda were
continued under the new title of Savings Bonds Bulletins, and
other circular instructions or suggestions went out as Special
or /administrative Memoranda. Complicated or special matters
were handled individually by letter 5 telegrajn or telephone calls,

Nationally considered, the greatest change in the shift
from war to peacetime management was in top personnel in
Washington. The famous team of Coyne and Gamble retired, Ted
Gamble returned to movie business, and Bob Cojme went with him.
This left a big hole at the top. Coyne and Gamble had made a
superb team, hard to match. Gamble's position as Natione.l
Director was filled by Vernon L. Clark, former War Finance
Executive Manager in Iowa, who had been in the program since
November 19^!-1.

Relations between the Savings Bonds Division and top
Treasury officials continued on an even keel in the peacetime
program. Contacts between the parent organization and the
Bond staff merely did not have to be so continuous as during
the hectic days of war financinfj. Judge Vinson, who succeeded
Henry Morgenthau as Secretary in the summer of 19^5 3 paid
relatively little attention to the mechanics of the Bond
program. He felt that the operation was in competent hands,
and needed little of his personal supervision.

Early in the peacetime program. Secretary Vinson was
elevated to the Chief Justiceship of the Supreme Court, and
John W. Snyder became Secretary. He had a. deep personal
interest in the Savings Bond Program, and proved to be the
easiest of the three Secretaries with whom to work. The Bond
program lost an old-time friend when, also early in the
peacetime program^ Under Secretary Daniel W. Bell retired from
Government service. Following brief- tenure by 0. Max Gardner,
the Under Secretaryship devolved upon A. L. M. Wiggins, who
was an expert and kindly counselor to the Savings Bond Program.
This was most helpful since the Under Secretary was the official
to whom, in line of authority, the Bond Division reported for
day-to-day guidance on policy matters.

Promotion

The National Directors of the peacetime program had to
tackle several policy problems which had not arisen in war
financing. During the war loan drives, the chief goal was
to raise as much money as rapidly as possible to help the
Treasury finance the war. This particular urgency was wholly
absent from the peacetime operations. Continuing sales of

- 328 -

Savings Bonds were intended to keep the national debt widely
spread, to help combat inflationary influences, and to cultivate
individual thrift.

This being the case, a major question of procedure was --
How much promotional pressure or steam to put into the bond
program? Should the U. S. Savings Bonds Division be merely a
sort of service organization to help the Bureau of the Public
Debt offer bonds to people already inclined to invest in them,
or should it actively promote sales in new quarters to new
prospects'^

This posed a difficult decision -- Where was the dividing
line between a, little promotion, a good deal of promotion, and
all-out campaigning? To a, considerable extent the answer was
provided by budgetary limitations. The first peacetime appro-
priation, of $2 06 million for fiscal I9U7, less than a third
of the appropriation for the preceding fiscal year, made it
impossible to carry on a large-scale, war-type promotion had
that been otherwise desirable o There was simply not enough
money to pay for any but a modest number and quantity of
promotional aids =

Largely influenced by this factor, the decision was to
have one or two periods during a year in which there xrauld be
special efforts in advertising; not wartime drives with state
and local quotas and door-to-door canvassing, but short periods
of intensified advertising in magazines and newspapers and over
the radio o

The first of these peacetime promotional peaks was set for
the period from June 6, 19^6, the first anniversary of D-Day
in France, through Independence Day, July k. The promotional
campaign was carried through by a number of the adaptable
wartime features -- two special posters, a 2^- sheet outdoor
posting, payroll savings stuffers, "Treasury Salute'' trans-
criptions for radio, car cards, a speakers handbook, a
campaign book of newspaper ads and a press book or newspaper
clipsheeto The major "talking points" in the drive were appeals
to self-interest on the part of the investor, the theme being:
"You Backed the Attack, No-vr Back Your Future ,''

In opening the peacetime drive with an address over the
National Broadcasting Company network the evening of June 5?
19^6, Secretary Vinson summed up the aim and purpose as follows:
"One of the best ways to combat inflation is
to take as few of our dollars as possible
to market until production shall match
demand o As an individual, as an American
citizen, if you desire to assist your
country and yourself to win the economic

329

phase of World War 11, you will not only
hold every United States War Bond that
you have, but you will continue to buy as
many U. So Savings Bonds as you cano In
this way you can help not only yourself
but you, as an individual^ will help to
control inflation.

Tomorrow, the second anniversary of D-Dsy,
marks the opening of the first peacetime
publicity campaign for Savings Bonds.
During the next month you will see and
hear much about the peacetime United States
Savings Bond. I urge you to consider
the various messages presented in order
that you may Imow the whole story of these
bonds. And I urge you again to hold
the War Bonds you have, to buy as many
more Savings Bonds as you can .. .Remember,
you back America's and your o-v/n future
with United States Savings Bonds/'
State Offices expanded and intensified their personal
contacts with payroll savings firms and other organizations
preceding and during the drive. How much could be done along
this line depended largely on the size of the state staff.
Considerable extra effort was put forth in the states v.dth
sizeable personnel -- in New York, Pennsylvania, and Illinois
for example -- but not much extra could be done on a personal
basis in the states having only a Director or Director and
one Deputy.

This "drive by advertising" did increase Bond sales for
a time. National sales of Savings Bonds of all series for
April, May and June I9H6 were respectively $667 million,
$59^^ million and $571 million. For July and August, the
effects lagging behind the drive, sales vrere $752 million
and $590 million respectively. In other words, the advertising
or promotion peak caused a rise evident in the July report of
about $lUO million in sales over the preceding three months
average.

The second "promotion peak" campaign in the peacetime
program was set between Armistice Day, November 11, and Pearl
Harbor Day, December 7? 19^6. Again there was a noticeable
bulge in sales. Series E, F and G totals for November were
$^52, 7^7^000, for December $576,291,000, and for January I9U7,
over $900,000,000. The latter high figure was not wholly due
to the extra promotion, however, but to "limit buying'' which
usually bolstered sales in the month of January.

330 -

In 19^1-7 a new promotion plan was added, nationallyj to the
time-tested programs of payroll savings, farm, schools and others
This was the Bond-a-Month plan, designed to make automatic Bond
huying easy for professional people and the self-employed to
whom payroll savings was not available.

Under Bond-a-Month, a prospective purchaser authorized his
bank to purchase for him every month a bond or bonds, to be
charged against his checking account. This plan had operated
in a few scattered localities since early in the war, but it
was first promoted nationally in the SLimmer of 19^7. Unlike
payroll savings, Bond-a -Month was not a partial payment plan.
Each deduction was for the full price of a bond. Five hundred
thousand professional people, farmers and the self-employed had
joined the plan by the end of 19^7.

Peacetime Sales

The peacetime sales records, l^kG and 19^7, xrere much
better than most people expected they would be. Departing
well-wishers in I9U5 -- wartime officers going to other folds --
prophecied that the peacetime Division would be doing well if
it sold $6 billions, or even $5 billions in 19^1-6. The peacetime
organization sold $7^^^ billions in I9U65 and nearly $7 billions
in 19^7 o

With declining redemptions, the total amount of Savings
Bonds outstanding increased, thus giving the Treasury the
opportunity to use the excess of sales over redemptions to
retire short-term and bank-held secirrities. This was an
economically sound procedure which promoted widespread holding
of the national debt, and also lessened the outstanding amount
of securities of an inflationary character.

Conclusion

This historical sketch of War Finance has been written
to aid future generations who may have to cope with similar
problems. Properly cultivated, history is not a dead subject.
It is very much alive. It can help answer that eternal
question -- WHY? I'Jhy was a Savings Bond program undertaken
in the first place? Why did some promotional methods work well
and others not so well';' Should succeeding Treasury officials
follow the same procedure or attempt something entirely different?

EssentiallAr the success of War Finance, and of the
succeeding peacetime program, rested upon the adaptability of
the program to the needs and desires of the American people.
Organization and promotion were essential, but they were merely

- 331 -

the tools with which the Treasury could reach people who wanted
to buy Bonds.

Starting slowly, a popular Bond program received over-
whelming endorsement from the country during the war « It was
continued after the war because people wanted it. The staff
members of War Finance and of the U, S. Savings Bonds Division
were public relations men for the Treasury Department, and to
some extent for the whole United States Government . It was
their duty to service the investment needs of the public from
the president of a million dollar corporation dovjn to
waitresses and bootblacks.

The Savings Bond Program had tremendous things to sell.
Not just Bonds. Those valuable pieces of paper represented
great horizons -- personal security, national security, a
guarantee of the American way of life. The discharge of this
tremendous responsibility required thought, imagination,
initiative and hard work. War Finance and its successor
organization might have done a job more perfect in details,
but the main goals were achieved.

oOo

332 -

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10859132 31 I

BQ/38/B8

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