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OGRAPHER'S MINUTES
Official Reporters
STENOGRAPHER'S MINUTES
ORGANIZATION COMMITTEE.
"FEDERAL RESERVE DISTRICT DIVISIONS AND LOCATION
OF FEDERAL RESERVE BANKS AND HEAD OFFICES.11
T8.
Sem York City, K. Y.
January 1, 1914,
Law Reporting Company, Official Stenographers
1 16 BROADWAY.
NEW YORK
TELEPHONE. 282O RECTOR
G-a
325
yev York, Jfcnmry 7th, 1914.
I'et pursuant to adjournment a t 10:30 A. K4
Present:
Barties as before.
S A E E T 07 SBQRGl I . BAKER, JP.
T TMN
The Secretary of the Treasury:
your banking connections a d
Mr, 5 a k e r :
"":-. Baker, please s t a t e
experiaice.
Vice -p-esident of the F i r s t V a t i o i a l Bank.
T have been in the banking business 15 y e a r s .
The Secretary of the Treasury:
Are you familia r with the
P e d e ^ l Reserve Act?
: r . Baker:
Yes, s i r , T have read i t over *j7ith some
c a r e , *lr. S e c r e t a r y .
The Secretary of the Treasu'*y :
You r e a l i z e t h a t the
problem Immediately confronting the committee i s the
d i v i s i o n of the country into
:ot less than eight nor more
than twelve d i s t r i c t s as required by the Act?
Mr. Baker:
Yes.
The Secretary of zhe Treasury :
"re would like to have
your views as to v;hat ought to he embraced in the \ ev: York
d i s t r i c t , assuming t h a t a Federal r e s e r v e Bank should be
e s t a b l i s h e d in 3 «w Yo:*k City,
1
zz:
•ge r. Baker, Jr.
I have f?lt that the eaate-Ti d i s t r i c t
around 1 e York should I ? as 1 a^^e as i t could be mc.de,
7 w
D
to comply with the requirements of making only
tricts;
c
i£ht d i s -
"brt I do not know whether that suggestion will
meet withfavo* in the gaieral ••-uft.
If i t dees not,
I think the su^jestion that Kr« "line made,
bodied in a
l e t t e * to you,
which he er.-
meets m views,
y
ception that if m own judgment we*e asked,
y
with the exI would make
i t as l a - r e as possible for* the eastern d i s t r i c t around
N w York.
e
The 3ecreta~y of Agriculture:
. Baker:
I think he sent i t to you l a s t night.
have a copy of
? Sec-
v/hat is h i s suggestion?
I
it.
-;- cf Agriculture!
Oh, yes.
W have not seen
e
that yet.
•• Bake?]
I lookedit ov-r
ith him carefully yesterday.
The Secretary of Ac "icultu-e;
this letter
I see that Mr. Hine in
suggests 6onnectic-A , :< w Y "k and northern
:?
o
sey to OOBprlae t h i s H w Yo~k d i s t r i c t .
e
The 3«c reta^y of the 7read" ry:
Does he give any f igtirea
as to the capitalization?
7 - jecrettiry of As ricult^ *e:
"
Ye3, 425 "banks,
and a
B
George F. Baker, Jr.
327
capital of !<23,400,000 on the six per cent basi3.
The secretary of the Treasury:
That appeals to you
a3 "being a reasonable arrangement for New York, doea it?
Mr. Baker:
I think i t would " e "better a l l around to
b
have New York include New England and include Philadelphia
and include Pittsburgh.
In other words,
t
I wotrld have it
as large as possible.
The Secretary of the Treasury:
You mean net only as to
area of territory covered, but also as to resources and
cap ital?
Mr. B*ker:
Yes.
The Secretary of the Treasury:
What i s your theory about
that?
». Baker:
M theory abovt that i s that t h i s i s the comy
mercial center and whenever the~e have been la^ge things to
do, whether to j?rve one pfi^t of the count.-y or another,
they have generally come to > e Yo^k to accomplish that.
yw
The Secretary of the Treasury:
Are yo« taking into con<-
sideration the fact that these several units are co-ordinated th~ou^h a central board,
fore for having
and that the necessity there-
one bank of preponderating atren&th, will
not exist to the same degree under t h i s system as now
ge P. Baker, J~.
328
exists under the present methods.
"r. Baker:
I app-eciate that it does not exist to the
same decree;
but if i t were one large "bank,
cculd act ir.o •• luickly,
"e
cussion,
which I presume
I think i t
and i t would not take 30 much diswould " e required where all had
b
to act in a unit.
The Secretary of the Treadi:.^-!
be better to
D you not think it would i
o
have pi£ht strong institutions than one strcn
one and seven weak ones?
" ~ . Baker:
I would not 3ay that the other 3even were
weak, " ~ . 3efretary.
The Secretary of the Treasur;*:
No,
one was made of p.'epcnderating strength*
but I mean that if
mi^ht i t not 'veakc:
the others T«ry materiall: r , 30 that they mi{jht net be able tc
take care cf the legitimate demands of the different
Kr. Baker:
sayinj
section.
Vh*n I started I tried to cove.- that by
I would only make the eastern d i s t r i c t as 1 ar^e t~s
p ossible,
and s t i l l compl;*
law to make eiG^t d i 3 t " i c t 3 ,
properly e^ipped.
cf the others.
i t h the requirements of the
and have all those d i s t r i c t s
I would not do i t to the detriment cf
B
George P. Baker, Jr.
The Secretary of the Treasury:
Bxaotly,
329
and It la upon
that theory that |fr« "line's suggestion 13 now inade that
~ecognizingthe necessity for dividing the country into eight
d i s t r i c t s as ~eiuired by the law,
I mean as a miniitum,
that jjew York then ni^it be —
The Secretary of Agriculture:
Relatively strong.
The Secretary of the Treasury:
pelatlvely strong,
upon the plan that Jje suggests here.
The plan "<?ferred to "by "^
"rine is a3 follows:
PI^ST NATIONAL BAiH^.
Francis L. Kine, Presiden*.
H w Yo^k, J"an. J, 1914.
e
Reserv? Bank organization Committee,
Office of C e n t e r cf Coronerc ,
New
Yo -k City.
Sirs:
Supplementing the few word3 I addressed to you on
the
5th i n s t a n t , I
beg to submit the enclosed m m :sindum
e o
containing iny suggestions a3 to the location and extent of
eight Regional reserve Banks.
Very respectfully,
•.
L.Kncl.
L.::INE,
President.
330
r, J~.
Federal
Reserve
Bank of
Including
States
ilat.Banks
capital ft
surplus in
millions
6,S cf H*'
Btink3 ca;
ital 8
1
s- rplus
In thousands.
New Yo~k
Philadelphia o r
Pittsburgh
Chicago
Atlanta or
New Orleans
All ITew England
except Conn.
135.
8,100.
Conn. , V.Y.
Northern H.J.
405.
24,300.
Southern BJ. ,Pa.
Del, Va. , W Va. ,
.
::d., D. c.
358-
21^480
!'ich. , Wisconsin,
111., Ind., Ohio,
Kentucky
330.
10,800.
215.
Boston
12,900.
145.
8,700.
94.
5,640.
102.
6,120.
1,734
107,040.
U. C. , S. *\ , Ga. ,Fla.
Ala. , >'iss. , Tenn. ,La.
St. Lou Is,Kansas
City or Denver
Missouri, Iowa
Kansas, Ne"b» Colo.
San Francisco
Califs Kevada,
Utah, Arizona,
Portland, S e a t t l e , Wash, Ore* Idaho,
Minneapolis or
"cntana, ^ycrdnc9 l^.D. ,
St. Paul
S. D. , Minn.
Total
B
George P. Baker,
p Baker:
«
N w York
e
I do not think
Jr.
331
Kr. "line proposes to make
relatively asst^ong as I a trying to express i t
m
now.
The Sec retary of the Treasury:
I was ap eakin^ of the
theory upon which ?:r. Hine's suggestion ia made,
in which
you concur to the extent that if i t is necessary to have
the eight d i s t r i c t s ,
and with as equal distribution of fin-
ancial strength as possible "between them,
t h i s would be about the r i j h t
~. Baker:
then you think
idea?
Yes.
The Secretary of the Treasury:
I understand that to "be
your view?
Mr. Baker:
Yea, because I think the general t"end of
opinion is that
that la what i s wanted, to have a number
cf d i s t r i c t s in the East here,,
and if that is what Is want-
ed, I think that io a jood division.
The Secretary cf the Treasury:
I see.
M« Secretary,
r
do you think of anything else that w wi3h to ask
e
Mr.
Baker?
The Secretary of Agricultu *e :
The Secretary of the Trsasv ry:
"r\
" aker.
Ho, I think #ct.
That is a l l .
Thank you
B
560rge F. ^aker, Jr.
The Secretary of Agriculture:
this
D you wish to
o
332
file
l e t t e r and memorandum of &r. 'Tine aa a pa.~t of your
t estinio ny?
Mr. Bnkcr:
Yea.
The Secretary of the Treasury:
It will bem#de an exhibit
tc ::r. f i n e ' s testimony takai on I!onday.
8 I A T B S R GT CHARLES
E
The Secretary of the Treasury:
rr
. 3A3IN.
Please state your
banking connection, Mr. Cabin?
. Sab in:
I a vice president of the Guaranty Trust
m
Company.
Tte 3eCretan of the Treasury:
Sab in:
ied i t
I have ^ead i t .
You have examined the law.
I v;culd not say I have stud-
carefully.
The Secretary of the Treasury:
You know the problem with
which we are dealing?
.Sab in:
Yes.
The Secretary of the Treas1 ry:
r i l l you kindly L'ive us
your views?
. Sabin:
I have not Given t h i s matter very careful con-
sideration, except that I have read about i t every day and
1
3
Chdries E. Satin.
333
have read the law.
It sesms to m that the territory comprising the ! e York
e
Tw
district
ou^it to have sufficient
capital
tc handle the
volume of business ^'hich naturally flew 3 in this direction,
and m judgment would " e that it oi'tjht to comp rise New
y
b
England.
The Secretary of A{j *iculture:
?.*r. Sabin:
And what other territory?
Poisibly Be* Jersey.
The Secretary of Agriculture:
' r. Sabin:
Uew York State?
V Yo~k St. ^ e .
The Secretary of Ag ri culture i
V h t i3 your reason for
Ta
^Cestin^ that it inclvde a l l cf i;«w "^ncl and?
. Sabin:
It seems to
m that the capital
e
v;ill not be
srff icient *.o handle the volume cf business coming in t h i s
direction unless you do inclvde IIewEngland«
The Secretary of Ag "iculture
Do you regard the capital a3
the chief factor in the central insti ution?
. Sabin:
Tliat has a bearing upon the dep o a i t s , which
are the assets.
The assets are the factor.
C. H. Sabin
354
•-a
The Secretary of Agriculture:
Just
what service do you
think that such a strong institution here could serve that
one with a smaller banking power
Mr, Sabin:
The service
might not serve?
particularly, it seems to me, is
the handling of comTnodities through this territory, particularly of foreign exchange; that is a very large volume
every year.
The Secretary of Agriculture:
One thing that this Act
undertakes to do is to provide a reserve of banking
ower,
to secure better banking in normal times a^d provide a
reserve of banking power against any strain.
yen so far
as foreign exchange is concerned, do you think that any one
of the eight banks w i l l be the chief factor there, or that
the whole system, acting through the Federal Reserve Eoard,
will be the machinery that w i l l control discount rates.
Tr. Sabin:
T think naturally the whole system is going
to be the control of the discount rates; but the physical
work w i l l , a great deal of i t , go through this particular
t err i t 02*; .
The Secretary of Agriculture:
Tf you were to establish
one of the banks at Boston, what area would you include in
that district?
G-b
335
C. -:. Safcin.
' r . Satin:
T should thi:k it would be logical to have
one of the banks in 2ew York; "but if you had one in 2osto^,
T do r.ot knoTr but what a b-^anch in * e York would do as
w
v/ell.
You are going to have br^a^cnes of the irnin bank, T
understand.
The Secretary of Agriculture!
That is co* tern la ted by the
law, yes.
:*r. Sab in:
Tt seems to me rather immaterial, except
that ^ew York i s the logical place, whether i t is a branch
or a bar! .
The Secretary of Agriculture*
sideration to -;-.e division
~:r. Sabin:
Have you given any
f the cc
' ot particularly.
as a r:hole?
Tt seems to me that the
Comptroller's reco-d showing the currents of exchange
should control that to a very lar-e extexit.
I read l r .
,^insf testimony on that and T/as ver-y much impressed by
it* because, knowing the currents of exchange are so much
larcrr in some sections than in others , the only way you can
t e l l is by the Comptroller's records, and T am not
familiar to spoak
intelligently about
The Secretary of Agriculture:
reserve holdings?
sufficiently
it.
T^at is as to the p-esent
S-c
C, H. Sabi...
M« Sabin:
r
„/
The present flora of exchange from one t e r r i -
tory to another.
The Secretary of Agriculture:
Should you think that the
Comptroller^ records would show
IT.
Sab in :
orcal conditions?
T should think so.
The Secretary of Agriculture :
To what ex-ent does the
practice v/hich exists in a .lumber cf commnities, of paying
rather high interest nites or. deposits, be regarded as
nornal or abnorna 1?
7<r. Sabin:
There are some communities -There they are
abnorna 1; there is . o dou^t a rout that.
The Secretary of Agriculture :
7ould not that have to " e
b
taken into account in interpreting the s t a t i s t i c s that are
a-ailable.
"r,
Sabin:
T do aot thick to such a iery great extent,
because those d i s t r i c t s are not may in number.
~re can think
of one or tv:o d i s t r i c t s in the east, and possibly there are
some further \7est or south, where a high rate of interest
is not B imrortant and does r.ot cause a very great flow
O
of exchange in that direction.
or t*.7o.
1r> the east there a re one
G-d
C. H. Sabi. .
The Secetary of the Treasury:
3
Exchange is affected
very
m a t e r i a l l y , though, Vjr. Sabin, is i t n o t , "by the place v:here
the reserve "balances of the "banks are kept,
" r . Sabin:
Yes, i t
is.
The Secretary of the Treasury:
they
Let us take a c i t y where
Ay from t h r e e t o three and a ha If per cent i n t e r e s t on
country bank accounts or reserve accounts; do you not think
that that would unduly a t t r a c t a very large ar^ouxit of money
to the banks offering
those high r a t e s , and that i t would
not represent the nornal intercourse between the c i t y
offer-
ing such inducements and the r e s t of the country.
' r . Sabi -i:
" r e l l , T do not knov;; T do not think there is
but one such c i t y ,
is there?
The Secretary of the Treasury:
^ e l l , suppose there
is
o.:l." one; l e t us take that as an example?
" r . Sabin:
e -ast,
Yes, T r e a l i z e that t h a t has a t t r a c t e d
in
Since 190? T am not so su^e that thty have been
a t t r a c t e d by high r a t e s .
The Secretary of the Treasury:
But undoubtedly that v:ould
a t t r a c t money to such a l o c a l i t y or c i t y
would not no**na lly go t h e r e •
•. Sabin:
Yes.
• v;hich otherwise
G-e
C. H. Sabin.
The Secretary of the Treasury:
And to a very
large
degree.
wr Sab in:
j«
T am :^ot so sure as to the large degree.
As
T said, i t did at one time, "but T am :ot so sure, s i ce 19°7
that they 'iave been a t t r a c t e d , "because at fiat
time there
were some d i f f i c u l t i e s .
The Secretary of the Treasury:
further by the fact
That i s also influenced
that some of these c i t i e s collect checks
without charge and offer advantages of that character.
3 r . Sabin:
That a t t r a c t s a great d e a l .
The Secretary of the Treasury:
You thiuk that a t t r a c t s
to a larger degree thai: the i n t e r e s t -^ate?
"'r. Sabirj:
T do .
The Secretary of the Treasury'
Tlat
<^actice is quite
c m o in some c i t i e s , is i t not?
o mn
r . Sabin:
A f e " , not so irany.
The Btcretary of the Treasury:
" r . Btbln:
Only a few?
Only a fer.v.
The Secretary of the Treasury:
practice e x i s t s , the C o n t r o l l e r » s
To the extent that that
epo^ts '.rould not rive
us an accu'ut e idea of the norm l i t ? of things | vould i t ?
•. S a t i n :
You knov that practice has existed since the
G-f
339
0. H. Sabin.
York Clearing House rules went into effect more than
ever before,
-pefore that they were pretty normal.
T imagine
then checks came to 7-en York because they collected free,
but since then there are a fer/ other c i t i e s which have been
doing that business.
The Secretary of Agriculture:
W e was that change made,
hn
do you recollect?
Mr. Sabin:
T am not sure, but T think it rzas in
The Secretary of the Treasury:
!
97 or
O course, i t is a very
f
indefinite and indeterminable thing, but have you given any
thought to the effect that is going to be produced by the
cessation of the privilege that certain c i t i e s nov/ enjoy,
of being reserve ager.cies for the rest of the country, and
as to vrhat re-distribution of deposits and -eserres would
normally occur under those conditions.
• Sabin:
T have not given much thought to i t , no;
T Bve somewhat.
The Secretary of the Treasury:
The present sys trm
undoubtedly stimulates the depositing of moneys in certain
reserve centres to more than the normal demands of com.nerce
would j u s t i f y ,
does i t not?
G-g
C. II. Sabin..
r. Sabin:
Yes, no doubt.
The Secretary of the Treasury :
Of course, the b i l l seeks
to correct that practice and distribute those reserves
according to normal requirements; therefore, in dividing the
county into d i s t r i c t s , the problem confronts the committee
i s to what extent the present practice and present course
of exchanges should be a determiniog influence upon their
decision, and that i s one of the points upon which we are
seeking l i g h t .
: r. Sabin:
of study.
T should thiak that would need a great deal
T would not pretend to advise you, because there
are certain d i s t r i c t s t/hich, commercials, are very a c t i v e ,
and a l l have their various lines of "business and seasonal
business.
The Secretary of Agricultu-e:
You have aot undertaken to
f i x in your o*.rn mind the seven or more other centres?
"r. Sabin:
* o, T >ave not.
The Secretary of the T-easury:
Thank you.
T"/at is a l l , "T, Sabin.
A-a
Charles D. Dickey.
341
B A E E T OF CHARLES D. DICKEY.
TTMO
The Secretary of the Treasury:
You a r e a men.ter of the
firm of Brown Erothers & Company, a r e you, Mr. Dickey?
fcr. Dickey:
Yes, s i r .
The Secretary of the Treasury:
Till you kindly give the
Comt.ittee 3ot.e idea, for the sake of the record, of your
banking experience and the length of your banking connections*
Mr. Dickey:
I have been 31 years with the firm and
about 25 of that ao a partner in Hew York, Philadelphia,
Linden and Boston.
The Secretary of the Treasury:
Your firm doeo not
only a large domestic banking business, but a very largo
business in foreign exchange?
Mr. Dickey*
Yen, I suppose so.
i Secretary of tho Treasury:
6
You have branch houses
in Eooton and Fario?
Hr. Dickey: NoThe Secretary of the Treasury:
fcr. Dickey:
Hew York.
I mean London and Taris?
No; London, Ecston, Philadelphia and
Correspondants in a great many other places.
The Secretary of the Treasury:
Mr. Dickey, have you
A-b
Charles D. Dickey.
343
thought to the problem confronting the Comrittee
here, about the division of the country into districts,
and"farticularly as to the extent of territory that should
bo served by a regional or federal reserve bank established in New York City?
Mr. Dickey:
it;
Yes, I have given considerable thought to
but I am afraid not half as much as the subject re-
quires or experience will prove to be wise.
I personally
do not sea how it is possible to avoid New York being the
principal center.
It is my experience that in all
civilized countries there has always been one financial
center.
I do not knew any particular reason why there
should be, but people gravitate towards that ao the center of business•
I think that is true in England,
France and Germany.
certain extent here, —
I think it always he s been, to a
to a very large extent, in fact.
I believe under the present theories of finance it is
almost the self-evident result that there should be one
greater than the others.
That does not reflect at all
upon a great many others.
The Secretary of the Treasury:
Would ycu give us your
idea ao to what territory should be served by the New
A-c
Charles D. Dickey.
343
York bank/
L'r. Dickey:
I think that depends a little en the lo-
cation of others.
The Secretary of the Treasury;
Having relation of course
to the division of the country into the ininiznum and maximum
nunber o<£ districts . Tcu can assume either you like, for
the purpose of answering the question.
Mr. Dickey:
If there were to be tv?o on the Atlantic
Coast, I think I should, without giving the subject such
consideration as perhaps I should have, before answer-
ing the question, or trying to, —
I have in a general
way thought the country north of the Potomac, east of the
Allegh&nies and south of Canada would be the territory
for one Federal Reserve Bank.
The Secretary of the Treasury:
Have you figured hotf
iruch of the banking capital and resources of the country
aould be absorbed by that one bank?
Kr. Dickey:
No, I have not.
16 33cretary of the Treasury:
v c u - r^ia. not leave
.
very cuch for the other seven reserve banks *hich must,
ae a iLiniEuxn, be established, under the Act, if • e
•
otart out . ith that.
A-&
Mr. Dickey:
Charles D. Dickey,
344
Tell, there r:ould be aome very large
centers, I think.
The Secretary of Agriculture:
That
culd include over
45 per cent.
Ur. Dickey:
Of the capital?
The Secretary of the Treasury:
It -ould include ovsr
sixty per cent, the territory you have described rouXd
probably take mere than sixty per cent, leaving forty
per cent of the remaining capital and resources to be
divided between the seven.
Mr. Dickey:
I asouir.e in that district there nould be
several branch banks.
The Secretary of the Treasury:
Yeo, but you must estab-
lish eight reserve banks as a minimum.
Sup-rose that there
*ere three reserve banks alcng the Atlantic seaboard in
the territory north of Korth Carolina, nhera *culd you say
>
that those should be put, starting .vith No* England, for
instance?
Mr. Dickey:
I am afraid I have not given that hypothesis
sufficient consideration,
Three north of that I have
not considered.
The Sec retary of the Treasury:
Boston I presume -culd
A-a
Charles D. Dickey.
345
be naturally considered a3 the proper place for Ner. England, .ould
it net?
kr. Dickey;
It is decidedly the financial centar, yes.
The Secretary of the Treasury:
York —
Then if you had New
suggestions have been n^ade by a number of ..itnas-
seo that Nev< York night comrrise the State of Sea York,
the northern part of Fe« Jersey and the res tern half of
Connecticut.
Upon that assumption VJU -culd have a district
south of Ne.. vork, covering Pennsylvania or Maryland,
Delaware, and s r . of the other states.
ore
The question then
arises ao to whethsx a reserve bank should be placed at
Baltimore, Philadelphia or Washington,
In
that vie* ,
which of those three points would ycu say -culd be iLO3t advantageous for ouch a bank?
tor. Dickey:
Wh"# I suppose Philadelphia probably, cr
Pittsburgh, possibly —
ycu did net mention Pittsburgh.
The Secretary of the Treaoury:
No, but that is in
Pennsylvania, of course. To .hat extent do you consider
that foreign exchanges play an important
part or ougjat to
have a very serious consideration in detemin^ng the loca-
tion of these federal reserve banks la the eaat?
• Dickey;
I an. frank to say I have not <?iven that qucs-
A-f
Charles D. Dickey
346
tion the slightest consideration yet.
The Secretary of the Treasury:
Baltimore originates a
great deal of foreign exchange, dos3 it not'i
Mr. Dickey:
Not a very large amount, compared v.ith
other places.
The Secretary of the Treasury:
delphia and Baltimore;
I mean as betv.een Phila-
Baltimore originates a very much
larger amount of foreign exchange, does it not?
Mr. Dickey:
I should be rather surprised if it did, -.ith—
out knowing the figures.
The Secretary of the Treasury.
I have asked the question
upon the assumption it io true, because other -itneoses have
that *
testified
io a fact.
fcr. Dickey:
I have not locked at the figures.
The Secretary of the Trsasury?
Ycu have not thoughtthen
of the division of the remainder of the country?
Mr. Dickey:
To a certain extent.
Of course it depends
a little bit u^on whether it is to be eight or twelve.
I juot jotted do/»n last evening some idecs.
Do you *
those?
The Secretary of the Treasury:
glad to have your suggestions,
Yes, ve shall ce very
A-g
Charlie D. Dickey
V.T. Dickey:
347
New York, Chicago, St. Louis, Denver, San
Francisco, Ne* Orleans, Atlanta, and I think
Dallas,
Texas, from .vhat I know of it, although 1 am not very
familiar.
The Secretary cf the Treasury:
Have you arranged, in
your mind, any districts to be served by these cities?
Mr. Dickey:
No, I am not quite familiar enough *ith
shat districts are tributary to those cities or ho* far
the business tends towards one or the other.
The Secretary:
Do you think, Mr. Dickey, that the for-
eign bankers would consider that the resources of the frew
York bank ?.ere all that *ere available to it, under this
Act?
I mean in considering its strength or its credit.
Or do ycu think that they -culd vlevr the eight units as
co-ordinated under the Federal Reserve Eoard and that in
caoe of emergency or otherwise,
the shole force and
po er of the eight units might be exsrted, through that
Eoard, at any given point.
Ur. Dickey:
I have not thought of that point at all,
but I should venture to think that they ^ould consider
that they .'ere all co-ordinated, so far as it \as able to
make banks at different distances co-operate.
A
Charles C. Dickey
The Secretary of the Treasury:
the ohief argument here in favor
348
That being true, and
of a predominating tank
in Van York being the foreiern vie-- that \culd be taken of
its strength, do you think that it ~culd be necessary to
have the bank in Ne* York, considering the -*hole situation,
as predominant as has been suggested?
Mr. Dickey:
I think that they are so accustorred to hav-
ing one predominant meney center abroad, that they ~culd ?t
.
first, at any rate, be strongly inclined to take that
v e . of it.
i-*
I am speaking fron. the foreigner's vie^xoint.
The Secretary of the Treasury:
This bank is not going * o
:
destroy the character of the n.oney centers of the country.
It is only going to be an additional facility.
The argu-
ment has beer, presented hare that the Ke.. York bank ought
to be tremendously strong in capital and resources, because foreigners, in dealing
ith it, —
and the assumpt-
ion has been that they 'ould deal mostly with the New York
tank —
• culd vie* its strength solely
.
ible capital and resources ".Men it has.
by the arcunt of vis/n element of
very great strength to all of the bar.ks in this system is
the co-ordinated po-er of the banks through the Federal
A-
Charles D. Dickey.
349
Reserve Board and the ability of the banks to ayply to the
Federal Reserve Eoard for additional assiatatoo vhen it is
required, and that assistance tfill always be forthcoming,
so there is an additional financial asset .hich La not ordinarily ccnoi^ered in a bark as an asset'. In vie* of
these facts, is it necessary to make the New York bank so
predominant in capital that it "?culd have to bo judged by
that alcne?
kr. Dickey:
I quite appreciate what you say about the
additional strength of any bank here in Be* York, dra-.n from
the other Federal Reserve banks, but I still think that the
ryes of theforeicmer 'ould be more apt to focus on one
point.
The Secretary of the Treasury:
But those gentlemen
are very shrewd bankers, and they are very able men, and
in considering the pov.er and resources of any one of these
banks all the factors "ill undoubtedly be considered by
them*
Mr. Dickey:
They 77ill gradually come to undarstand the
system, I think.
The Secretary of the Treasury:
Thank you, l.r. Dickey.
i l l ! a m <7ocdward,
350
B-a
3TAT2HJ I o r
-TLLTA:: ''O
The Secretary o f Agriculture?
!Tr. " r codwa~d, wlllyou
jive
the stenographer your banking connections?
"r. "codwa-d:
I am president of the "Tancver National
rit
, The 3-rC - <t avy of Agriculture:
?
I-robler. that
"~.
*MV e you considered t h i s
ve a"? discujsin^;, ".r. V/ccdwar*d?
l7
oodwar^i:
I :iave thought about i t , yes.
The S?c>*etary of A ^ i c u l t u r e :
"~ would he v-ry £;lad if
2 - u would £iv-? us any vieT.vs you hav* about the diviaion of
>o
the count r/ as a vrholo, and e3peci ally about t h i s eastern,
section, the establishment of the centers fc r the reserve
banks.
•• Wood^vard:
Well, I do not know that I am ve-y clear
In ny mind ctbout i t , but it seemed tc me that i t mu-3t be a
ographical division.
to-oing
If i t depends on c a p i t a l , you ar»e
to center in the East a number of the banks, vhi ch I
should think is hardly dsaleable,
and I think the capital
consideration shouH be somewhat ijno red 71 thin the l i m i t s
which a *e necessary and have i t depend more on the
graphical s t a t u s of the country.
of cou "3e,
O co-
I realize
that some of those i n s t i t u t i o n s would be 3ir.all i n s t i ^ r t ion3#
B-b
William Woodward.
351
tut I do not think that can " e avoided,
b
because I dc not
think that the count-y bends i t s e l f for t h i s purpose into
eight d i s t r i c t s ,
I have always f e l t that four or five
v;culd " e better,
b
I think possibly that ij the
that presents the
difficult;-.
Tha secretary of Ac "icultvre:
wea>ness
Whe^o would you
locate
the reserve banks if yo u were creating ei^ht?
v
*'r.
'codvard:
Weld , I can hardly answer thdt, because I
do not l i k e the assumption of creating
tackle the probl^r. t h i s way, I think.
ei^ht.
I should
I think I would
create four or five.
?h<? S ? c - J a ~ y of Ae'-icultvi^e;
useless.
locate
That i.; academic,
But w Cdnnot.
e
It in
-re are requi^ecl by law to
eijht.
Hr. Woodward:
fa r.isunderstand each ether.
Locate them
in your mind at f i r s t , then f i t the other three in as best
you can.
- Secretary of Agriculture:
Approaching i t from that
poi.it o# view how have you thought of the centers?
:*r. V.'codvard:
av:
x
*;'?11> I think the l a ^ e csnters should
::?ir present large centers:
H w York, Chicago,
e
3t. Louij, and one on the western coast;
would b« "an 7"anci3cc. Ai.
I presume i t
' one in thfl northwest some-
B-0
illiam Y7ocdwa~d,
353
re, I don't kno-v jutft where; then I think f o ,
.'culd 3tand i t , three in the South.
or if
it
I do not think i t v l U ,
They would be smaller baiks.
The Secretary of A^ricultu *e:
V m v/ould be your eastern
H t
t e r r i t o ry?
:'r. Woodward:
ness.
I hav ? not thought of that in any definite-
It is ea3y enough to outline some, s t a t e s ,
has not been cone into deep enough.
but that
It should be borne in
mind that in a division like undoubted! y the southern
bankj *nd the banks in the f a-min^ section of the
Vest,
they ^vould probably be bo ^owers at certain seasons of the
year.
The Secretary of Agriculture:
binationj,
you could establish
Under any nuniber of conrei^ht banks with capital
£inj from s i x or 3even millions to
tw en t y-f ou r mil-
l i o n s , and your reserves ranging — I have not tried to
f icu"*e out the reserves,
but of course with much larger
reje^ves. Now, with such a distribution i s it not l i k e l y
that in the va-ious sections of the country they could know
zi d take care of the normal demands, and that in a time of
3t-*ain, th*i.* resou "cea could be u t i l i zed and directed to
B-d
'"illiam '"ood'Ycird,
353
m? ?t weakness ?s o y
: T . Woodward:
I do not f u l l y ^et you? questicn.
mean that if a "bank, •'?
i l l da:' in. Dallas,
Do ;rou
had a c a p i t a l
cf seven millions?
The s?c~eta~y of Agriculture:
surplus, and would not the fact
those demands and
Yes, with tawch larger
f
hat they kno'v and meet
steady conditions, normally relieve any
s t r a i n that mi^ht come in la~£?r sections?
'. 7ocdwa:^d:
'^ell, "bocause t h i s entire section i s a
borr»owinG section today, in your* seven million doll d bank
T
-•cu are not adding any capital to the cap i t a l that
today.
is there
Thrfefo *?# I do not see how the bank 13 to avoid
bo .~-cvin^ at t h e time whe:: m 'e Qapltal i s nc c-dedin that
e
country.
The 3?creta*t r of Ao~iculture:
V7ell,
-hen th^t
is
t Tie, the law provides that the Federal reserve Board may
1
Tsit or roiv.ire .-edisccunt?
". v/oodv/a^d:
Yes.
The Secretary of Ac^iculture:
How,
with that i-"cvi3ion
in cind^ would i t mak r so v^"y mveh diff?."ence whether you
have great dominant c e n t e s 0? not?
B-i
WIIliac '"ccd-.;a^d
codv/cird:
354
I think i t should be as I said before.
I
think i t should " e geographical s a net dependent upon the
b
ud
cap i t a l .
I think that the CapiTal should take care of
it-
self — that i t should "be geog'^aphioal.
The Secretary of AC'Icultare:
Yes,,
"but you see 7/hen you
ccme to a p r a c t i c a l arrangement, if you take too large an
area here you leave - e l u t i v r l y l i t t l e for the cth^r centers,
"r. "'ood\.-ard:
The a l t e r n a t i v e seems to be to p ut three
"banks here (indicating on map).
The 3ecretary of Agriculture:
In that case,
where would
you lo cat e then?
*!-*. Woodward:
I should locate then gecgrap hi cally there,
I do net think i t makes oo much difference wfcere the
banic i3 o * v?here i t 3 b ^anch i s .
*
as I get the idea.
I think
r;?
oo(tvard:
I t is to se^v- ft region,
H w Tor* should have one.
e
The 3ecreta>f of A riowlttJre:
•:r.
initial
'"ouJd you put in Host on?
Boston i.s considerable of a c e n t r ,
ye3.
Poobably in Boston — serve t h i s terMto^y (indicating on
map).
The s«creta*y of Ag "icultu ^e:
>5oston ttt present serves
r.ore uew England banks than :pw Yo^k, cbea i t not 2
wcird:
Yes, if you eliminate Connecticut?
B-f
William Woodward
355
The See "eta~*y of Agriculture:
Which of the eenterd to
the South would you think, '-aahin^ton, Philadelphia, B^dtim o •.*«,
P i t t ahv rgh?
::r. Woodward:
*ve would not think of v /ashing t o n , u n l e s s i t
were t h e 3eat of goven^ment, and whether that would "be a
sufficient
argument t o p l a c e a Federal bank there — i t mi^ht
be w e l l to have i t .
there.
The o f f i c e r s of t h e Federal Board are
Otherwise, I should think P h i l a d e l p h i a or Pittsburgh
^ould be a b e t t e r center.
The S e c r e t a r y of A g r i c u l t u r e :
That i s a l l .
Thank you.
STATEMENT OT UD3EPH 13. KAHTIBDAIiS.
The Secretary of t h e Treasury:
Mr. ^ a r t i n d a l e , w i l l you
k i n d l y £ i v e you." f u l l name?
"r. ::a-*tindale:
Joseph B. !?a-.-tin-dale.
The secretarj*- of t h e TreasTrv*y:
You are p resident of t h e
Chemical National Bank?
"r. % r a~tindale:
Yes.
The Secretary of t h e treasury:
T
Iow lone; have you be en
connected with t h e bank as president?
"r.
"artindale:
Up vardj o f
30 years.
The Secretary of t h e Treasury:
In what c a p a c i t i e s ?
B-g
Jcssp h i. ':a~tindale.
356
:*r. "artindale:
Cle^k and
assistant cashie^, vice
p resident, president.
The secretary of the
rn
rea3iivty:
H w lon^ have you "been
o
president?
Mr, ?:artindale:
Th-ee year's, vice president, about ten
years.
The Secretary of the Treasury!
is mo~e of
The Chemical National
-hat we call a commercial "bank, i s i t not?
"r. "a**tindale;
Entirely so.
The Secretary of the Treasury:
And I t e l ieve it is 80 years
old, is it not?
1
"r. *'artindale#
90 years.
The Secretary of the Treasury:
'!r. "artindale:
90 years?
Yes.
The s?c~?tary of the Treasury:
It is not sensitive about
i t s ace?
Vr. ^a^tindale:
Not a "bit, si^, proud of i t .
The Secretary of the Treasury:
Your "business covers how
much of the country?
?rr. Martindale:
Practically a l l .
The Secretary of the Treasury:
HP, "artindale:
Yes.
Practically all?
3-h
Joseph 3. yd-tindale.
The secretary of the Treasury:
*h<?r«fo ^e,
You are autte familiar,
are you, ?'r. "artiradale, with the course of
commercial exc'an^es and
Mr. ':artindale:
domestic exchanged?
Fairly .30r yes.
The Secretary of the Treasury:
Chemical
357
To what extent i s the
national a reserve agent?
Kr« "a~tindale:
Qv .- national bank "balances amount
to
about four millions of dollars — four or five.
The Secretary of the Treasury:
What are your t o t a l de-
posits?
|&\ "-.\rtindale:
Abov.t thirty millions — t h i r t y to
thirty-t\c.
The Secretary of the Treasury:
'"r. ^ctrtindale, you are
faniliar v.ith the problem before the committee, I p resume?
!!r» 'ra^tindale:
Yej,
tc an extent.
The Secreta»*y of the treasury:
The immediate problem,. I
mean, to divide the country into not l e s s than ei£ht nor
m re thdn t / e l v e
e
?r. ^'artindale:
dijt"ict3?
Yes.
The Secretary of the Treasury:
And tc establish the head-
1 a inters for a regional bank in each one of these districts*
"
B-i
^
Joseph >;. "a *tindale-
358
•'•V'- you given any thought to t h i s problem?
Mr. "a~tindale:
I have,
! * Secretary, yes.
&•
The Secretary of the Treasury;
W will "be v«ry ^lad if
e
you will give the committee the benefit of your views
as
to how the county ought to "be divided, o r if you have not
considered the whole of i t , 3uch part as you have thou^it
about,
M« '-artindale:
r
Well, in the f i r s t place, the great
money centers of t h i s country are N w York, Chicago and
e
3tf
Louis, and they will remain 30, in m opinion.
y
It
'.roTzH seem necesaary, therefore* to plac e strong banks in
those three cities and draw from a la^ge t e r r i t o r y .
M
y
own. personal opinion i3 that ei^ht are entirely too many,,
but since the law reads not i a s than eight nor no-e than
twelve,
I vould suggest the following c i t i e s :
Atlanta,
in addition to the three central reserve c i t i e s .
The Secretary of the Treasury:
is ^artindale:
Yes.
inneapoli3 or St. Paul*
™
That makes four.
Atlanta, ]jew Orleans, San Francisco,
Then, I assume that by reason of
the fact that a l l of these banks will be under the supervision of the Federal reserve Board that you v/ill require a
bank in Washington. I a3sume that.
I think that the aeVen
B-j
Joseph £.
c i t i e s I have mentioned will
The sec~eta~y
'^.
of
"a~tindale:
' ..'tindale
Cover the t e r r i t o r y
the Treasury:
yev Cr&eans,
sufficiently.
13 that 3 even c r
That i s seven.
c i t i e s , Atlanta,
359
Three central
San Francisco , Minneapolis
or St. Paul.
The Secretary of the Treasury:
"r. * a ^tin/dale:
D you exclude Boston?
o
I should make Boston and Philadelphia a
branch of the I e York
Tw
d?ral Reserve Bank, the t e r r i t o r y
to "be cont-olledby the I e Yo~k tsnk,
Tw
to be N w Y ~k, IJnwe
o
jersey, Pennsylaania and a l l of H w England.
e
The 3?Ci*eta^ of the Tr eaavry:
. *-u~tindale,
Whdt is your theory there,
that you want a bank of p "epo nderant
capital?
"r. ,.artindale:
*rave a bank of large capital yeB.
It
is
necesaar^' on account of the tremendous amount invested in
commercial bvsiness in t h i j City, and the borrowings up on
p d.-^ of the large ccmma~cial houses a l l over the country,
in H w York.
e
The Secretary of the Treasury:
It i s not so much
tion of the capital is i t , as the reao
:'r. ••a~tindale •
urces of t h i s bank?
I t is neces3a.-y for a bank to have a
proper percentage of capital tc i t s resources.
mi£ht be topheavy
a ques-
The bank
or i t might not have sufficient
The secretary of the T^easvry:
capital.
VJell, I a speaking of
m
H-k
Joseph B. *'a~tindale«
360
resources in the combined 3en.se, of course.
:.:r. T'artindale:
Yes#
The Secretary of the Treasury:
capital i s one of the
resourcesof a bank?
.'. yartindale:
Yea, "but a " a k might "be overcapitalized
bn
or under capitalized,
either one is "bad.
The secretary of the "reasury:
But a combination of
capital and resources i s what gives a bank strength?
-'. trartindaler
Undoubtedl y.
The secretary of the
n
reasury:
So I say i t is not merely
a question of capital?
"r. ...a^tindale;
Not entirely, no.
The secretary of the Treasury:
bank may be not only the
And the reso
urces of a
-actual tangible assets upon i t s
books, but also the po'ver that i t may have to draw from
ether sources,
r. Martindale:
when i t is necessary.
There comes to an end to that power.
The Secretary of the Treasury:
But i t i 3 an element cf
strength*, i s i t not?
Mr. yartindale:
Yes, but i t can be overdone.
The Secretary of the Treasury:
oh, there i s no question
B-l
*Toseph B. Kartindale.
about that.
YTiat I mean i3 t h i s :
361
In estimating the p ov=r of
a bank you must take into consideration not only the actual
resources which appear on i t s bocks, "but the po^.er to
jtr:n^then I t s e l f or to get assistance, which would come
through the federal neserve Beard,
Vr. " a r t i n d a l e :
under t h i s Act?
Th<=re is no doubt of t h a t , Mr. Secretary,
but i t has £ct to be very properly and carefully aid conservatively handled.
?he secretary of the Treasury:
abovt t h a t , but what I a s e t t i n e
m
Ti^re
is no question
at is the divisioncf
the count -y into d i j t - i c t a a3 you outlined them
there.
You
are p^oceedinj evidently on the theory that i t is necessary
" O 'lave d. bunk in Stm
T
many of t v e
Lentlem?n
. of p 'e^cnu^ont jt :-enoth.
liave
No-,
.<=stified to the same effect.
The t e n t i t c ? ;-&u hare outlined -vould ^ive to the Tederul
y
?eserve Bank in N w Yo~k between 40 and 50 per cent of the
e
capital and resources of the count-y
o^ntl
low,
evidently the
: -:i -ho take that view are proceeding upon the theory
ftt those are the only resources that this bi.nk will have.
That i j , i t must rely upon i t s o m independent j*:"en^;th at
v
times,
to
ake ca.^e of the
iitpjiation.
The
act pro-
B-m
Joseph B« " - - i ^ i n d a l e .
vides that thase various independent unit* shall be
362
co-
ord i native through a 7?deral Board, and that under certain
circumstances the entire power
may "be exerted,
and st "engjth of these "banks
if necessary, and also provides for the
conversion of the liquid assets of these "banks into c.rrency, under prop-?" x nditicns, ^hen needed.
How, these
I say are elements of strength v/hich must "be taken into ccnside~ation ini the division of the country into these districts.
G
Joseph E. ""-irtindale.
r. :artindale:
3o3
Yes-
The Secretary of tha Treasury:
V w in that view of the
o
situation do you think i t is so necessary to combine 40 to $0
pe** cent of the "banking capital of the country into any one
bank, whether in Bew York or anywhere else?
? r . .'artindale:
Grafting a l l t h a t , ~?r. Secretary, T s t i l l
am of the opinion that the capital of the bank in *ew York
should be greater tharj the capital of the bank in Atlanta
or l:ew Orleans or any one of these other interior c i t i e s ,
because there is a greater volume of busir.ess here, a^id larger
amounts of credit are granted he-*e, and there is greater
wealth here. Therefore a stronger, larger bank is required
here •
The Secretary of the Treasury:
m question, however.
y
That does not quite touch
T vas asking "hether or not in view
of these additional resources t/hleh thla bank in ". evr York
w i l l have - • T mean the • esources '.;hich T have described - i t is so i:ece8sar3r to make i t absolutely preponderant or
so predominant in the Ofttter of c a p i t a l a.d resources that
the other d i s t r i c t s would be provided with a r e l a t i v e ^
snail amount of cai i t a l and ""esources.
e:
You l:..ov/, " r . Sec:-etao r , to refer to
G
Joseph E.
%
artin dale.
our conversations in tho past, that T have always "believed
in the "benefit to " e derived f~om centralized power.
b
The Secretary of " h Treasury:
&e
Then you "believe in the
federal Reserve Board?
"r. 'fertindale:
Therefore lew York having demonstrated - -
i t is not a natter cf theory 'out i t had "been demonstrated —
that it is the financial centre of this country, and in m
y
humble opinion w i l l always regain so, it is necessary to
have a large " a k in this c i t y .
bn
The Secretary of the Treasury:
That is inevitable in any
case, if one i s established here, "because the provisions of the
lar; are that the contribution to capital cf the Federal
Reserve Bank shall have an exact mathenntica 1 relation to
the "banking capital and
:ir. :artindale:
esourcss of the d i s t r i c t .
Yes*
The Secretary of the Treasury1
So of necessity that ^'
follow automatically?
-*r. "fertindale^
Yes.
The Secretary of the Treasury:
:'ow the question con-
fronting the comiuittee, "being compelled to establish not
less than eight nor more than twelve, is how the country
shall be equitably divided so that these banks may have as
Josephs* SStrtlKtlftle,
36?
much relative B trength as possible t o the d i s t r i c t which
each is to serve. T other vords, we must get as much of a
n
financial equipoise as possible under this plan,
Sow in that
view of the question we are trying to ascertain what would be
the best division of the country, and at this moment we are
addressing ourselves mo~e particularly to the eastern part
of i t .
pr« >fertindale:
I thi_;k that the commercial business of
the east vrould be better served by having a large bank in H w
e
York, with branches in ?h;ladelphia and Boston, and the
t e r r i t o r i a l limits of the region to be as I have stated
before.
The Secretary of the Treasury:
Would not the d i s t r i c t be
just as well served if you had a Reserve Bank in Boston, one
in l*ew York, and one in Philadelphia or Pittsburgh, as the
case may be, because those banks w i l l a l l be strong, and the
exchanges between them can be made in very short order.
Mr. Ifartindale*
^ot in m opinion, because T believe
y
that when you get centralized power you get the best
effect
always, in every line of business.
The Secretary of the-Treasury: You are getting very much
more centralized power even under that division than you have
G
Joseph Ba ' a r t i n d a l e -
366
got :io\7.
a*~tindale:
T differ with you there - - you say nore
than you have D W
Q i
The Secretary of the Treasury:
'•r. "a-tindale^
Yes.
Yes.
The Secretary of Agriculture'
One c r i t i c i s m uB.de of
existing or past co.-.-dit ions has "been that an abnoriinl part
of -:he "banking po.'er of the different
sections has "been
employed avmy from home, that there has "been an Uiidue
congestion and an ab.^onnal congestion of f i a-.cial pov;er in
Vev York : i t y ,
**r.
artiudale:
That nay have "been so to a certai.. extent,
"but T think it has "been greatly overrated a.«d overstated.
The Secretary of Agriculture:
But to the exte.it to r./hich
i t is true i t would toe a 'lesirable change to have the ^ornnl
co.ditions restored, "vould i t ..ot?
:.r# ^"arti.idale:
•»'r. Secretar: r , if mo^ey or credit
requi-ed ir. " o h i l e , it w i l l go t h e r e .
is
Tf i t is Aot required
the^e i t r ; i l l co^ie to ' er/ York 0" iOao other mor.ey centre.
That is natural lav; a :d you car. ot change i t .
The Secretary of the Treasury:
But suppose that certain
centres, like &W Yo>-k, for instance, offer abiiornal
0
Joseph B. Iflro:1 nfjxle*
G
^67
inducements•
. :«trtindale:
D they?
o
The Secretary of Agriculture*
T am asking you, and trying
to get the Information.
IT* Jfertindale:
"'ct in up opinion - - aot to a,~y great
extent.
The Secretary of Agriculture*.
Tt is frequently asserted
" y students of the problem that money is unduly congested
b
here, employed in particular di**ectio.-s , a^.d that vfata a
strain cones, money caa>:ot " e secured by the banks in ether
b
parts of the country that sent i t here, and that creates an
fortunate condition,
~r.
artindale'
Ts that true In your judgment?
I t has never been so in m experience.
y
T can.:ot s t a t e as to the other banks.
*~Te have always been
able to respond to the requirements of our banks, not only
in norna 1 times, "out also in abnormal times.
fortunate in that respect.
Perhaps we are
I have heard this criticism, of
course, had there roay be ar, element of truth in i t , but T
think i t has bee.i grsatl;
exaggerated.
The Secretary of Agriculture :
T co.i..ection with your
n
suggestion that there might be a Reserve Bank ir. 7ashi::""to ,
you kno-..r, of course, that there are ~eDatively fe\? banking
G
Joseph B a r t i . j d a l e .
«
368
connections In 7ashixjgton.
r.
artlndale:
Yes, T appreciate t h a t .
The Secretary of Agriculture:
^ould that "be a "barrier
in your judcment?
r« ?%rtln6ale:
Tt 'Tould be an objection, but T thouf
possibly for the reason that the Federal Reserve Board T'O'ald
be located in that c i t y , naturally you would want a bank
there or require a bank there ^ i t h a s n a i l c a p i t a l .
That
was -x* reason for mentioning Tashingtor..
The Secretary of Agriculture:
You mean nore for adinin-
i s t a t ion?
-ti:.dale:
Yes, T do.
The Secretary of Agriculture :
T case a lede^-al Reserre
n
Bank 'Jere established in 3osto.:, hov: -ovld you divide the
t e r r i t o'«-y?
"j". ."a-tindale:
T had .ot given that very much thought•
T assume then that naturally rostovi v/ould v^r.t to ooatroi
the e t i - e ! e\7 England States ".rith the possible exception of
Connecticut.
The Secretary of the Treasury:
dale.
Thar.k you, l r . Tartiii-
A .
Fred I. Kent.
~CQ
STATEMENT OF MR. FRED I. KENT.
The Secretary of Agriculture:
Kr« Kent, :ill ycu state
your banking connection.
Mr. Kent:
I an: Vice President of the Bankers * Trust
Company.
The Secretary of Agriculture: You kno^ that this Committee is required to establish not less than eight nor r ore
than t?.Alve cf these Federal Res2rve Banks?
Mr. Kent: Yes.
The Seo^tary of Agriculture:
Mr. Kent:
And to divide the country?
Yes*
The Secretary of Agriculture: Have you given any oonsides
ation to that problem?
Kr. Kent:
Yes, I have to a certain extent.
It seama to
me that the concensus cf opinion of men vho have not
studied the matter carefully and cpecially as to -here
these districts should be divided, is not the prefer
base from ;?hich tofl^ure them.
Inetsad, of that I think
r,e ought to consider the facts that exist in this country
that cannot be ohanged.
For instance, we cannot gro- cotton in ^all Street,
neither can 76 finance railroads in the cotton fields.
A-b
Fred I Kent.
370
And there are many things in this country that are based
on facts that man cannot change.
If ~e establish any
regional system vrhich goes contrary to the conditions .rhich
exist because of those facts, it is going to be an uneconomical system that is going to cost the country core than
it should.
For instance, Ns^ York City
is the largest pert in the
^orld, not because any can or any set of ten wish to make
it the largest port in the ~orld, but because of its peculiar situation geographically, and the further fact that
this country wao settled by the people from Europe, ""nich
means that our habits and customs are very similar to theiro.
Consequently *e import moro and export more between the
United States and Europe than na do between the western
country, for instance, and the Orient.
The clcthing of
pic in the Orient and of the people in this country
is very different*
There is not the exchange there.
And there are many things like that *hich mean that Ne*
York hao grorn to its present position because of these
things, and not becauce of any desire of man to make them so.
The same thing; .s true of Chicago.
It is situated at
thr» foct of Lako Michigan, and it is in a natural placr to
A~c
Fred I. Zvi"l
take business to sand from the east and the '.vest, and it ie
also in a good position to *?ork in the southwestern territory.
Those things have gro~n up;
Chicago and New York are
large cities, and other cities are large cities because
of natural conditions largely;
and the east being settled
first, of course its mam:facturing interests are larger.
And then again'"e have in the south a climate that
makes possible the growth of cotton, and in the middle
-.vest the growth of ?>aeat, and oo forth.
Now New York City being in the position it is, is the
city of import;
and being the city of inport, it needs
the foreign exchange in order to meet the demands
the importers.
of
That foreign exchange is made largely
through cotton which comes from the south.
There ie no
market for the foreign exchange made by that cotton in the
south, that is comparatively speaking, consequently that
oottonhas to be handled by New York,
not because New York
wishes to handle it particularly, ncr because the southern
interest© that gro# the cotton wish to have New York people
handle it, but because New York needs the foreign exoh&nge
made by that cotton in order to pay for its imports.
A-d
Fred I. Keuv.
And all of the lineo that naturally trade through thio
country seem to center into leu York.
They go through
Chicago and into I-iinneapolis, and yet Minneapolis, even
though it is nearer Chicago, has an intense trade with New
York directly over Chicago.
The same is true of San
Francisco, ' * i h deals ~ith Chicago and to a certain extent
.hc
•*ith St. Louis, but more largely »ith Van York because of
these conditions that actually exist.
No* in trying to divide this country into districts,
it seems to me *e shculd take into consideration those
things, and not opinions.
It is quite a proposition,
because we are going to try to make a system of regional
banks as nearly efficient as a central bank \ould be, as
possible/
And in order to do that, if
e do not bear
these thingn in mind, *e are going to c-ake a very expensive
proposition of it.
I do not believe that Ne^ York should have a bank that
has a capital that is too large in proportion to the rest
of the country.
On the other hand, I do not think it ~ould
be 7<ise, at the moment anyway,
to ^stfcblish any regional
bank on the eastern ccast other thanin Ne^ York.
In the first place,
the regional banks are authorized
373
Frod I. Kent
to establish brancheo abroad, and if t e bad a regional bank
i
in Boston, New York and Philadelphia and they each established a branch in Europe, it might not be received ftltb
much fa-ror by foreign institutions, whereas they might be
very glad to work in conjunction . ith one branch of a
.
bank that ^culd repreoent the *hola country, that Ttould
be a branch, say, of a large bank in New York,
The Secretary of the Treasury:
Tell, on that point, Mr.
Kent, these banks' only resource for foreign business is
not to establish agencies cf their own;
they may have
correspondents, exactly like ycur trurat company*
Mr. Kant:
They could establish branches under the law,
could they not?
The Secretary of the Treasury:
Go could the national
bank3 now under the law establish foreign branches, if
theywanted to.
resource.
But I mean to say that is not their only
They may, and probably would, find it -TLOre--advan-
tageous to establish correspondents;
and to that extent
it would not be any less advantageous to have tho reserve
banko, say three reserve banks having correspondents in
Europe than to ha-^e the number of banks and trust boo mpaniee
in New York having correspondents under the present system.
A
Freu I. M a
In other words, theoe tanks are not wxclusive of the
existing facilities;
thsy are in addition to existing
facilities.
Mr. Kent:
Yes, except that one thing ycu wish to
accomplish in this regional system, as I understand it,
is the control of the shipment of gold.
Sow we cannot
control gold beyond our proper comr. 3rcial position, but
we often can delay shipments until the trade turns and
ao prevent that entirely.
And that can only be done
with an institution that is large enough to do it.
If you
have a large nur.bar of institutions dealing in gold or
in foreign exchange with Europe, you are going to have
the same condition that exists today, that is, that they
xnust base it on profit, and that is the only way gold is
chipped back and forth now, so far as this country is concerned, on a basis of profit.
Few a public utility bank
is supposed to be in a position to ignore profit temporarily, when the needs of the country require it, and on
that account it would seem to me we should have a bank in
New York that is strong enough so that it could afford to
stand that expense, and that would have a sufficient power
to get enough bills together and enough credit together
A-
Fred I. Kent
375
abroad so it cculd handle tho crold proposition aa the
necessity develops.
The Secretary of the Treasury:
You realize, of course,
that if you had three of these barka,they are co-ordinated
through the Reserve Board, and one of the protections
la the uniform interest rato that may be established.
Now as it stands to-day, your protection against gold
exports
is very much less than it will be und3r tris ays-
tec, aven with three reserve banks en the Seaboard, ia
not?
Lr. Kant:
Tell, that eight be true and it tight not.
You see the regional banksare bound together in weakness
and not in strength*
In other words, it is impossible to
make the reserves of each regional bank serve as reserves
for all.
Instead, when a regional bank gets into trouble
or whan it becomes extended, or when, Is the natural course
of business it must borrow from some other regional bank,
then when it is in that state of reakneso, it takes strength
from some other regional bank.
The Secretaryof the Treasury:
! T t of necessity,
\o
Mr. Kent: Fell, it would probably have to, in a way.
That is, you do not get mobility.
In other words, we have
A
Yxed l.Kent.
3?6
three central reserve cities now and that is considered two
too many*
Now if ~e increase it fco eight, we will have
seven too many.
The Secretary of the Treasury:
But there io no power of
co-ordinating the present reserve cities; no power exists
anywhere to coordinate them.
Mr. Kent:
No, that is true.
The Secretary of the Treasury:
They are independent of
each other and do absolutely as they please; but the
present system contemplates a very effective co-ordinations
of these unite through the Federal Reserve Board, and that
is a very decided element of strength in this system.
kr, Kent:
It io necessary, I grant, in this system, in
order to give it any degree of efficiency whatever. But it
seems to me that it should be worked out and can be worked
out very nicely.If we have a proper Federal Reserve Board,
there~is no reason why fr.is country should not grow as a
change in our banking system of this kind would m^ke possible
But in figuring out the regional districts, it seems to me
if you are tc have eight to start with, which I understand
ycu must have, if you have one in New York and the other
seven are
divided in here, as business goes on and develops
Fred I. Kent
377
youican easily establish another in Boston or Philadelphia,
if it seems necessary;
whereas, if you divide your
strength at the moment, and lc.ter you find you do not
need one in Boston or in Philadelphia, you have gone to
unnecessary expense.
It is more difficult to bring a
condition back whan you have spread it, than it is to lat
it grow naturally.
The Secretary of Agriculture:
way?
Has it not grown that
Is not Boston a reserve for Hew
Mr, Kent:
_xl: England?
Tfcy, yeo, but en the other hand it is a very
anaii part of the country.
For Instance, I believe the
New England banks, that is the national banks, would
have a capital of ^"9,900,000 if regional banks ^ere formed
in New England, whereas in New York, if you took the
natural eastern ctatss, as they are called, it wcul3 be
about 40,000,000, and the southern stp.tes would represent
abcut 15,000,000, and the middle western states about
25,000,000;
you see that would include Chicago and St.
Louis, and then the western states would be about 6,000,000,
and the Pacific states about seven and one half million.
That is about the way that divides up.
Put we must consider again, it seems to u.a, the question
A
Fred i.Ke,i<;
oYfc
of the currents of trade, the way trade works back and
forth.
For instance, TQ have, say, about two billion
in manufactures around New York City, I believe,
Now
those manufactures are spread out over the west., and the
west has to pay New v ork for them, and that is one thing
that makes New York exchange necessary in the west, just
the same ae the question of influence.
Now we mist
differentiate in considering the trade of this country
between what you wculd call local trade and through trade,
and New York ahowo a very large proportion of through
trade.
The Secretary of the Treasury:
Are you proceeding on the
assumption that these reserve banks are to be banko of
deposit and discount in a general sense?
Kr. Kent:
Only of their member banks.
The Secretary of the Treasury:
Mr. Kent:
Exactly*
Yes.
The Seoretary of the Treasury;
Now the currents of
trade do not affect them to the same extent, because they
are
t\+J reoervoiro of credit, and so long as they are
accessible to the different districts and the reserve
which they held io readily available for the assistance
A
Frod I. Kent
379
of the merber banks, that is the important question*
The ordinary courses cf trade and conx-erce are not
interrupted or interfered with by the establishment of
this system.
You are consolidating certain of the
reserve powers of the banks of this country and are
throwing into that seme additional resources;
for in-
stance, several hundred millions of Government deposits
which are now k e pt in the Treasury at ra3hington and in
the sub-treasuries.
i wa are simply making available
r
these resources for the benefit of business generally and
to enable an excessive store of credit in the country.
New for that reason it is not so important, is it, that
one bar.k should ^rerenderate or it should have the great
majority of the available resources of the country, because even with the larger nunber, those resources
are
simply placed in 3if~erent spots and are accessible to
the member banks of those districts,
Mr. Kent:
That might be true, if your regional bar.r.s
could *ork together in the same m a n e r that a central
bank wculd.
But, for instance, suppose you take a omali
bank in New York with a capital, say, of five million
dollars;
of course that is smaller than the New York City
38
Fred I. Kent
°
banks alone would make, but I cean just to consider it;
now how ia a bank of that size going to take any appreciable
part in handling the gold which .goes back and forth between
thio country and Europe?
,The Sec etary of the Treasury:
It depends entirely upon
ito resources, apart fron. capital.
Mr. Kent:
But European banks in dealing with this
country, are not patriotic
^hen they come to deal with
this country they look to* the profit, and to the risk which
is to be run.
Capital is one of the things they give a
good deal of attention to.
The Secretary of the Treasury:
But capital and resources
combined is the thing which determines*
. Mr, Kent:
But the resources must necessarily be bound
by the resources of that individual bank, becauoe the only
value that these other regional banks have to that bank is
for it to borrow from them.
That is all they can give.
G-a
Fred T Kent.
The Secretary of the Treasury:
351
But you r e a l i z e , " r . Kent,
t h a t the reserves of & Tederal Reserve Bank a r e of a very
different
character from those of an ordi'.iary ba,:k of
discount and d e p o s i t .
These banks hold the reserves of
the member banks, a id they a r e of a l i q u i d c h a r a c t e r , a d
they are u t i l i z e d , under the provision's of t h i s M i l ,
in
such a manner t h a t they a r e kept l i q u i d a l l the time, ar>d
they a r e t h e r e a v a i l a b l e for use by -he member banks, and
there cannot be a run or, a l e d e r a l Reserve Bank*
jpr« Kent:
But i f there T^S a ru:.i in any d i s t r i c t
there
would be a run on the member bax^ks.
The Secretary of the Treasury*
The Federal Reserve Bank,
under those circumstances, i s expected to be a b l e to a s s i s t
the member banks.
The provisions of the 3aw seem to be
quite adequate for that purpose, so that in considering the
power of any one of these bajks,
i t must be c o s i d e r e d as a
r e l a t e d i n s t i t u t i o n to the system and as ore of
seve^l
strong coordinated u n i t s and ..ay, in case of n e c e s s i t y , have
resource t o the co .lhined power of the other ba^ks through
the Tederal Board.
In that aspect of the c a s e , the
considerations you a r e presenting here,
while important,
a r e not of the supreme Importance that they would be if
each
G-b
Pred T Kent.
332
of these banks was a:: ordinary bank of discount and d e p o s i t ,
as if they were expected to stand alone.
S N Kent:
O
Conversationally that might seem to be t r u e ,
but p r a c t i c a l l y things do not always work out t h a t way,
not
The Secretary of the Treasury: T am/suggesting the
p r a c t i c e , I am t r y i n g to f a m i l i a r i z e you with the s t r u c t u r e
of t h i s system.
7
r . Kent:
I understand the struc t u r e Tery w e l l , but
what has been in my mind is the question ar to how European
barJcs, with t h e i ~ great big c a p i t a l s which run from
*50,0°0|000 up, in rany c a s e s , a r e going to look a t a small
institution
in Vev York that ..^y be dealing back and f o r t h
in the shipment of gold, tad that nay be p a r t i c u l a r l y
true
i f we r e a l i z e that the lew York City bank is apt to "be
called, upon to rake loans out in d i f f e r e n t
country.
There a r e two sides t o t h a t question of being bound
to the other banks.
O one side i t gives s t r e n g t h ,
n
needs t o borrow; on the other i s that
of l e s s s t r e n g t h if
it
i t may make that bank
Assuming that these eight
banks have a combined c a p i t a l i z a t i o n
hundred m i l l i o n
if
i t i s forced to loan.
The Secretary of the Treasury:
jjarts of the
dollars?
of more tha*i one
G-c
F:~ed T Kent.
:-. " e ; t :
: ;
; I06,000,r:00, T b e l i e v e .
The Secretary of the Treasury:
And that they aay hold
u l t i m a t e l y something l i k e six hundred to seven hundred or
eight hundred millions of d o l l a r s of Government
deposits a^d the reserves of the member banks, arid a 11 of
those u n i t s thoroughly coordinated th~ough the Federal
Reserve Board, a t a*.y t i n e , e i t h e r domestic or abroa d, can
you c i t e any i n s t i t u t i o n in the world that v/ould have the
same s t : ength, the same i hsrent elements of s t r e n g t h that
t h i s combined system would have.
" r . Tent:
T can jot see how i t i s
possible f o r you to
figure the reserves of one regional bank as being a part
of the reserves of the other, when eTe^y regiona 1 bank i s
-iiiized by i t s e l f ,
on i t s own b a s i s , a.^d the only ^ y
it
i s coordinated with the ethers i s through the loaning pu#vl •
That i s , i t -my "be c a l l e d upon to loan or i t may ask for
loans.
T think i t i-.&kes a very different
proposition of
T car. see how t h i s imy be developed into avery
system but y e t ,
it,
satisfactory
L order tc do s o , i t s tens to me the d i s u
t r i c t s should be divided with the g r e a t e s t care and t h a t
was one phase of i t t h a t appeared to me.
o-r, T am a western
man; T vras bona in I l l i n o i s and brought up t h e r e , and T have
G-d
Pred T Ke.it.
384
aitarayB f e l t as though t h i s v/as one 3^-eat country, the United
States of America, and T notice that the westei-n people aid
the southern people and others seem to think possibly " e
Nw
York is too powerful at hone here, "but we arc Tery proud
of i t in Europe and rre ought to "be proud of i t in t h i s
country t o o .
W a r e Just as much a part of the south»s
e
wo derful cotto.. crop — and the men in the west should "be,
a l l of u s .
Tt seems to me i t is not a question of for
instance trying t o divide up the cottor. f i e l d s and have part
of the cotton grown in the no~th or of trying to divide up
the great flaaaolal power of ^ew York a /d t r y i n g to put that
out in the desert or in the country, 'out a question of
trying to work t h i s «hii:g out for the benefit
The Secretary of Agriculture:
of a l l .
*o o^e is interested in
any other question,
ET. ^"e t :
T realize that,
T did -:ot want you to mia*
understand me, t t e t I r;as urging 2 e York as against the
^w
other
a r t of the country.
The Secretary of Agriculture:
Ve can T^aive a l l t h a t .
7
a r e a l l interested in r/orking out a
¥e
system *hat vrill be
best for the nation.
The Secretary of the Treasury:
This is purely an economic
G-9
Fred I Kent,
problem and i t has to be d e a l t vrith in the broadest possible
spirit
of p a t r i o t i s m ar.d i n t e l l i g e n c e , and the purpose of
t h i s committee in having these hearings is to get the benefit
of the best judgment of the business men and backers of
this
country to enable us to put t h i s system into operation not
for the benefit
of any l o c a l i t y but the cour;tT a s a whole;
so v/e might dismiss any other co.:siderat io/i*
Mr. Kent:
I appreciate t h a t .
The reason T :.:e. tioned
what T did was because T -anted you to r e a l i z e T had that
in mind a l s o , aiid in speaki.ig for l*ew York in the imzwier I
have
dore, i t i s r;ot because T think Ve?r York should be
favored, because T do:: f t think so; i t \*as only for the
purpose of expediency.
The Secretary of the Treasury:
You trere suggesting the
d i s t r i c t s tr&t you had in your mind.
What 7/ould you say
should be t h e reserve c i t i e s , if you have not less than eight
•. Kent:
That is a p r e t t y d i f f i c u l t
problem, without
s i t t i n g down and going into fig:u~es for a good nany hours.
The Secretary of the Treasury:
"r.
Kent:
You h a v e ^ t dor.e t h a t ?
1 c , T admit T have :iot.
T did do t h i s , T took
the n a t u r a l divisiovis of the country as shown by the Compt r o l l e r and firmred out the percentage of c a p i t a l , to see
C--f
"2re& T Kent.
3
how i t v/ould work, a::d t" :ose a r e the figures T gave you a
few minutes ago, and that is as far as T have go:;e*
The
channels of t r a d e , i t seeias to ne, should "be considered.
Tt may be that you could '.York over those chanr.els of trade ,
but i t would seem a s though i t would "be uneconomic.
The Secretary of A g r i c u l t u r e :
t7e a r e required to do t h a t
"by la*/, a s w e l l a s by the n a t u r a l economic view of it*
J£r • Kent :
Yes •
The Secretary of A g r i c u l t u r e -
T/ould you have time and
i n c l i n a t i o n to study over the n a t t e " f u r t h e r , a:*! give us
your ~iews la a l i t t l e b ' i e f
en t h e s u b j e c t , a-.d nark a map
for u s , giving your aotior.s as :o the division of the t e r r i tory.
vrm Kent '
T : i l l "be rery "leased to do so if you ^/oulcL
l i k e to have me.
The Secretary of the Treasury:
Tf you w i l l take that a.?d
l e t us have t h a t .Ap *.vith your suggesvior.s for
the d i v i s i o n
of the country a t a s early a moment a s you can, w% s h a l l be
very i/iuch obliged to : ou.
Mr. Kent:
H w long would T have to prepare i t ?
o
l i k e t o give i t c a r e f u l
T would
thought.
The Secretary of the Treasury:
7ould a v/eek be
sufficient*?
0-g
Fred I
.
T
33 7
Cert.
"ent : Yes.
.e S e c r e t a r y of the Treasury:
" ' i l l you k i n d l y send i t
to Washington?
ur« Kent : v e s .
The S e c r e t a r y of the Treasury:
And we w i l l a t t a c h i t
t o your testiinor.; .
BTATBW 7 0 1 BTXPIDQl BAKER.
The Secretary' of Agriculture:
"Vill you state your "banking
co...i3ctio.., ' ' r . 5aker, fo:- the sake of the record.
""r. Baker:
T am "^-esident of the Bank of rknhattan
,iaiiy.
The Secretary of Agriculture:
are wrestling v:ith?
You know the problem we
"re Tor.Id " e very g]ad tc have any
b
suggestions or exrressic.is from you to help us.
- . Baker:
" r . Secretary, T feel that T v/ould be ir favor,
have been in favor under this b i l l of reducing the
re~io.:al reserve ba iks dorm to as small a proportion as
possible, but rocog.:ize that the b i l l has become a la\? a^d
that the b i l l provides for eirht regional reserve banks as
a minimum and twelve as a o&ximuia.
So i t seems to :^e that
co.'.sidcrati or. should be given to locating those regional
G-h
Bteph«a 3 a k e r .
568
^
reserve "banks so as to ^a":ce them, as nearly as possible, of
an equal strength, i.i so far as the business that nay bee one
contiguous to that certain section v/i 11 a l l o r .
T do .:ot
want to take up your tine and T have/.ft much to say. Possibly
T can convey m ideas o" thoughts by simply saying that
y
so far as eight <-egional reserve banks are concerned, T rrould
v/ant to put them so that possibly one strong bank could be
able to take care of a large amount of what might be c ailed
weak t e r r i t o r y , a.d
>ot divide the territory of the United
States up into a number of s.r&ll d i s t r i c t s which vould net
be able to take care of their requirements, a.?d while T
believe that f^om the natural course of business, as i t is
ce tred and rravitated naturally toward the larger centres
a.:d the trade in them, that especially ' • * Xork ought to
have a fairly large t e r r i t o r y , yet T thin.k in consideration
of there being eight regional reserve barks, there ought to
be one i.: Los tor:, o . e in * 9 7 York, oae in Philadelphia , one
>
*
in the south, one in Chicago, one in St. Louis, one in the
no-thwest, sa; at St. Va.v-1 o^ Mn^eapolis , to control the
grain trade, ar.d one ou the Pacific Coast.
The Secretary of Agriculture-
You srould think that
Philadelphia *7ould be the natural c entre perhaps for the
G-i
Stephen Baker.
38 3
south.
; r . Baker:
Tt is a question as tc whether Philadelphia
would go far enough south to reach the requirements of ~hat
southern country.
You have got to
have a location also that
will bring you sufficiently within nail communication of
your central point, and T think if you had no regional reserve
bank farther to the south, that Philadelphia ^rould " e entireb
ly too far from your mail communication.
That criticism
might also be true so far as the southwest is concerned;
and en the other hand it seems to m as though it would be
e
very necessary,in covering a large extent of this more
sparsely settled section of the country, t t e t you should
have one strong i n s t i t u t i o n , . ir, capital ard surplus, like
St. Louis, to take care of that section.
The Secretary of Agriculture:
Had you thought of the
problem presented by that grovp of c i t i e s to the south of
us, Baltimore, Philadelphia, Washington and Pittsburgh?
Ilr. Baker •
T would eliminate Washington entirely, because
T canrot see that there is lay concentration of trade in
77ashi:?gtor;.
There is £0 large oanufacturing going or: in
to
Washington, and T should judge
the cities to the south—
that Philadelphia would be certainly able to take care of
Cx-j
Stephen Baker.
390
Baltimore "business.
The Secretary of Agricultue:
At present Baltimore seens
to have larger banking connections with the south than
Ihiladelpnia , judging from the number of banks.
x
'r. Baker.
T think it would be a mistake to place two
reserve institutions so close together.
The Secretary of Agriculture*
I meant as between those
two.
>0r. Baker:
T should think that Philadelphia, controlling
the large manufacturing business and tonnage that there is
throughout the State of Pennsylvania especially, would more
than offset what might be the greater business of Baltimore,
and therefore control a larger amount of business.
T should
be in favor of having the stronger and larger institution
as the centre of the reserve system.
The Ba Itimore business
could be very easily handled by a branch.
The Secretary of Agriculture*
T was going to ask you
more definitely about the south, from your business experience and connection.
What centre in the south would you
suggest?
Vtr. Baker:
M business, of course, T2r. Secretary, with
y
the south amounts to but very l i t t l e , because I am a state
G-k
Stephen Baker.
i n s t i t u t i o n and T have
through the oouth.
•--v.eral business
Tf T answered that question i t v/ould
simply be more of a matter of taking the geographical centres
rather than speaking f^om experience.
The Secretary of the Treasury:
To vrl-Rt extent do you
think that the foreign business of Baltimore is an important
factor in the location of a federal reserve Bank for that
d i s t r i c t , assuming that Baltimore and Philadelphia are both
In that d i s t r i c t .
'r. Baker:
YJT, S e c r e t a T , T know ve-~y l i t t l e about the
foreign business of Baltimo. e.
T could rot r e a l l y speak
upon i t .
The Secretary of the Treasury:
Eut if
i t were large,
if
there was a large foreign business a t Baltimore, and a s n a i l
foreign business at Philadelphia, v/ould you consider that
that f a c t ought to have a serious influence upon the s e l e c t ion of one or the other of those c i t i e s .
W« Baker:
T should think the foreign "business could be
«=jasily handled through the channels through which i t
is
handled at the present timeThe Secretary of the Treasury:
T asked the question
because some arguments have been rade in favnr of those
392
S-«phen l a k e r .
c i t i e s which have a large export t r a d e , and Baltimore, of
course, i s a very important export point for grain now and
a l s o a point of growing importance for other commodities.
Thank : r ou, "*r. Baker.
Is Vr. Gallav/ay, of the Merchants National, here?
STATED T 0? r03ERT :'. GAIIA^AY.
The Secretary of the Treasury:
VT. G&Ua'tfay, have you
stated .your c onnections?
:'r,
Gallawayi
T have stated m .ame.
y
T ^as only asked
my iiame*
The Secretary of the Treasury:
^ i l l you be good enough
to give us your bankV
. Gallav/ay:
T am President of the "'lerchants National
Bank.
The Secretary of the Treasury:
You are familiar, are you,
with the problem ve are trying to solve, the division of the
country into not less than eight nor more than twelve
Federal Reserve d i s t r i c t s ?
"r. Gallav/ay:
T am somewhat familiar, yes.
The Secretary of the Treasury:
Have you given it any
thought and could you give us the benefit of your views on
G-m
Robert : . Gallaway.
395
such a division?
Kr. Gallaway:
lvo.
T haven't given i t ar-y thought so as
to give the committee the benefit of any views, "because
there are so mny other thinking people around T did aot
see where T would come i n .
The Secretary of the Treasury:
GallavTay.
You are over-modest, Vr.
Tould you "be rood Baough to take one of these naps
and give the subject some thought, and give us the "benefit
of
any suggestion you -nay have «o offer.
" r . Gallaway:
T have no suggestion.
The Secretary of the Treasury:
T say, w i l l you "be good
enough to co aider i t and submit l a t e r any sur-estioi: you
may have to offer 0
TY. GallixT7ay:
As T understand i t ,
there can be aot less
than eight nor more than twelve?
8 Secretary of the Treasury:
M« Gallaway:
f
Quite r i g h t .
And you vzant C locate those eight or
o
tv/elve?
The Secretary of the Treasury:
VT, G lla way:
&
Yes.
"/ell, my idea is tlmt you should have about
as large a one in }ew York as you can get.
oueht to include say
?
I thiuk that
ew England, lev; Jersey ard Pennsylvania,
G-n
Robert *•'. Galla7/ay
so as t o have a
large
c a p i t a l in the "ba^k here, much
larger than a::y of the other "banks.
unless you had i t juat about
as
394
^That good would i t " e
b
as lar^e or three times
large?
The Secretary of the Treasury:
^Taere would you put the
other banks, M * Gallavraty?
k«
ftr.
Gal3a^my*
T v;ould have o.je in Chicago, one la S t .
Louis, one in Atlanta or on the Seaboard down in the south,
one in lew Orleans, a id in t h i no^th.;est, somewhere in the
iiorthr/est and on the
fticific
Coast.
B-a
395
Robtrt VU Gall«nr*y.
The S e c r e t ^ ^ of the Treaaury!
The Secretary of Ag^ioultu 'e:
That makes seven.
You would not put one
in the section represented " y Philadelphia or Baltimore?
b
:>.
Giillaway:
I do not see the necessity for
The Secretary of the Treasury:
it.
You would make t h i s one
jerve from Virginia to Canada?
. Gall away:
at Savannah.
Yes.
I would have one either at Atlanta or
I think the South ou^ht to " e very well
b
token care of, because they want mon ey down there a l l the
time to move the crops,
and the same i s true in the Eest.
The Secretary of the Treasury:
Bid you think of Denver aa
one?
H « Gall away:
T
Ho, I never thought of Denver.
-The Secretary of the Treasury:
I think you gave us
jevea where do you think the eighth ou£;ht to z,o?
: "r. c- a l l away:
3onewhere on the other side of the Rocky
The Secretary of the Treasury:
You would have one in
I\-and sco?
r« ^allav/ay:
Yes.
The Secretary of the treasury:
And do you mean one up in
the No"thv;est, at Seattle or Pci-tland?
2J-b
Robert ::. Gallaway.
>!r. Gall away:
Up the^e in the Northwest.
The s e c r e t a ^ of the Treasury:
Thank you, Kr. C-allaway.
MDrr OF WILLIAK ":.
The Secretary of A&*uc i l t u r e :
Mr. Williams,
p lease
s t a t e your banking connection.
. Williams:
Vice p r e s i d e n t o f the T i t l e Guarantee
Thrust Company of Queens County.
The S e c r e t a r y of A g r i c u l t u r e :
You have heard the
state-
meat o f our problem?
r. Williams:
Tes.
The S e c r e t a r y of A o * i c u l t u r e :
?:ave you studied t h i s
new law?
"r.Williams:
No, I have n e t .
The S e c r e t a r y of A g r i c u l t u r e :
W i l l you p l e a s e be cood
enough t o g i v e us any views you have en t h i s question of
l o c a t i o n of r e s e r v e banks, and theifc
. Williams:
territcT?
I have a d i s t i n c t b e l i e f
d i v i s i o n o f t e ^ r i t c ^ r around New York,
being New Yo**k,.
supremacy,
a3 to the
not because of
but because cf I t s present
it3
commercial
t h a t i t should r e c e i v e a bank which i s
to take care of that commerce, and t h a t t h e r e g i o n a l
the
able
reserve
B-c
William 7*. *"illieuns
bank for t h i s di strict should be
Z'jl
built heavy enough
to
take ca^e of a l l our requirements and a ^ood many of the
~e^ui~ements of the *Tnited States;
but I do feel that
dividing the three for the Atlantic Coast,
in
about ihlch I
have heard so much — that is if the^e is si ch a division
into three —
different
I shovld consider the Coast in a l i t t l e
way f 'cm
hat i t has "been considered by some of the
others who have a;.eared before you.
I should considc" the Coast m n
o e
fc yrirn countries,
Jtnd I • ould
=tnd one in " J iltimo "<?,
in i t s relation
put one bank in jew York,
tind then I would consider some
c i t y along the Gulf, fc~ instance HW Orleans,
«
I should
consider those as :he tli."»ee regional ^essrve centers,
cau ie fhlla
I d en^a^ed in bulking I a alac
m
m
terestedin exporting and lnportlng business,
-? a lot of
*eason to be
fc -eii^i countries,
H w Yo**k.
e
tc
in
and do net
be-
heavily ln-^
and those c i t i e s
di *ect communication -. ith
need so much to come to
pf course <c- do move a lot cf the cotton c ~op
f ' m :i?w ^ro"k,
bvt I thovght
in censid^in.^ the three
-?£ional banks
in the Hast It
vould be a v-~y good idea
to consider the problem as a Coa3t problem instead of ent i ^el y A3 a central problem.
B-d
William F-Williams
308
I do not see &ny reason fo^ a Federal reserve bank at
Washington at a l l ,
main "board.
of
"because cf course Washington has the
Eh«t is m o n personal view.
y w
course our banking
in the institution which I repre-
sent is more local than foreign.
In the Western States cf course there are natural points
that these "banks would have to
uo
to,
"but I think the la-ger
you make the reserve bank at N w York, the better for the
e
whole system that you are trying to take c<*re of.
The Secretary of Agriculture:
And f-om the p oint of
view of your experience in the exporting trade you would
rather look to ards the export centers, H w Orleans and
e
Baltimore?
"r. Williams:
I think they ou^ht to be taken into con-
sideration in establishing the three bank3.
tablish three banks on the eastern coast,
to take the
three banks,
If you esI think you ou^ht
whole Atlantic Coast for the establishment of
and then take you r western coast for two
banks — I do not know whether that is the proper number
there —
and not consider the Atlantic Coast as one division
and the Gulf cts another division.
The secretary of A3 Mculture:
That would leave the basis
332
William :*. Williams
to? a minimum number of three for* the central section.
?:r. V7illiama:
Yes,
but that v/ould cover the
imp orting
and exporting business in the way I have mentioned,
and a
great deal of mon-ry is required for that.
The Secretary of Agriculture:
interior.
7hc<t would leave three for th
Where would you locate those?
Mr. Williams:
I am not familiar enough
with the interior
except I think Chicago i3 a very fundamental point,
and St.
Loui3 i s another.
. zh the JO rt of a seacoast which we have,
those are m
y
suggestions.
0u~ president will be he^e l a t e r on.
The secretary of A^'icvlture:
STATE: :IOT OP
'etary of the
T
.
reaaury:
Thank you,, !Ir. V.'illiams.
:. VAIT WRTJE
please j t a t e your banking
connection?
Mr. VanD?usen:
I ^ cashie^ of the rational
m
::ewa:"k Bank-
ing Coitpany, of K^wa-k, i:«w Jersey* and I a chairman of the
m
Banking and Currency Committee of the 1 ".' Jersey Bankers
*
Association.
B-f
\7. ::. 7
m
I have ajked the privilege of appealing befcro you to
ccmr.uni cate to 2'ou the desires of the banks of :T?w Jersey
ad to the
d i s t r i c t that each 3hould be located in, in case
you divide New J«?rjny.
The sx retary of the "roasu~y:
VThat number of banks is
represented by you for t h i j p -..rticular purpose?
::r. VanDeuson:
Abcvt 275,
and there are about 320
banks in * e Jersey.
Tw
The j ^ c r e t a v of Au^lculture:
Hot that many national
banks?
V". VonDev3en:
He,
comr.-^ciul banks.
The Secretary cf Agriculture:
banks ii.
Thc-re arc- 203 national
J?/*aoy.
?Ir. VanDeusen:
Ye3.
The Secretary of the ~rea3ur^:
You arc here with author*-*
it: r to speak for them?
• VaiDeusen:
Y?$9 -e have made a canva3£.
The Sec*etar2r of the Trsasury:
*
:'r. VanDeusen;
Expressed in v;hat form?
"Te sei t out a circular to a l l of our member
banks in the S t a t e ,
asking them
if a ?e3e?ve bank 3hculd
be established in Philadelphia — ' e are not *dvoeating t h a t ,
3-g
Wm H. Vas. Deusen.
401
but i f one was establijhed in New York and one in
Philadelphia
— which territory they would prefer to " e locatedin.
b
The secretary of A£~riculture:
}£Tm VanBeujen:
What i s your view?
The replies received from, them would
indicate a division cf the State by counties.
pose you would cut up a county.
delphia would take in
I do not sup-
Ty counties,
Phila-
the counties of Burlington, Camden,
Atlantic, Gloucester, S-ilem, Cumberland, Cape May and Mercer •
The Secretary of Agriculture:
T
'e^cer County includes
~ ^enton doea i t not?
Mr. VanDeusen:
Yes, i t includes Trenton, Princeton and a
f?w smaller towns.
The secreta:-y of A^riculture:
Would those
include about two thirds of the State,
!!r, VanDeusen:
almost equal,
counties
north and south?
i t is a division t e r r i t c r i a l l y which i s
the line running practically through
" "enton right straight across the state.
The u«w York d i s t r i c t would include the counties of Sussex,
Paasaic, P e ^ e n , *7a^en, J5orrie, E33ex, 7:ud3on, Hunterdon,
Somerset, Union, *'iddle>ex, ''onmoi'th and ocean.
A-a
W, K« Van Deusen
The Secretary of the Treasury:
403
You spoke of ^aseaic,
did you not?
Hr. Van Deusen:
Yes, Passaic in the Tew York district.
The trade and financial interests of New Jersey divide
aluost along the short line.
The trade south of that
goes aliLost exclusively to Philadelphia, and north of that
almost exclusively to New Ycrk, and the bankers of those
towns, north and south of there, go very frequently to those
cities.
I presume almost all of them gc at least
once a rceak to one city or another, and their interests are
that way. The commercial interests follow very closely
that way. For instance, in the south, the farmers in agricultural districts, they sell almost exclusively to
Philadalphia, and in the north almost exclusively to New
York, and commercial purchases are made that way.
The Secretary of Agriculture:
Does that reference carry
with it any expression of opinion as to whether they desire
a reserve bank in Philadelphia?
Mr. Van Deusen:
No, *e did not take that point up at all.
The Secretary of Agriculture:
Mr. Van Deusen:
You got no intimation?
^ell, we have in a few cases an intima-
tion, but we did not ask for that.
That was volunteered.
A-b
W. 1C« Van Deusen
403
The only case there, where there was any division is in
Mercer County.
Philadelphia.
Trenton io naturally affiliated with
It io nearer there by rail, and their busi-
ness ia primarily with Philadelphia.
Princeton and Penning-
ton, they seen* to be more closely affiliated with New York,
but they did not express themselves strongly enough to
warrant a division of the county.
The Secretary of Agriculture:
Do you desire to express
any opinion as to the general problem?
kr. Van Deusen:
Personally —
now speaking personally
entirely, — personally, I shculd prefer to see as
strong a bank as possible in Hew' York,
I trink it would
serve the district better and serve the country better.
STATEMENT OF FREDERICK E. FARNSFORTH.
The Secretary of the Treasury:
Mr. Farnsworth, will you
state your name and business for the benefit of the record*
Mr. Farnsworth:
Frederick E. farns^oft^,General
Secretary, American Bankers Association, Secretary of the
Currency Commission.
The Secretary of the Treasury:
Mr. Farnwrotth, you know
the problem we are immediately addressing ourselves to?
A-c
Mr. Farasworth:
Frederick E. Farnsworth.
Yes, sir.
The Secretary of the Treasury:
Have you seme suggestions
to offer about thedivioion of the country into these districts?
Mr. Faroo^orth:
Well, in the first place I want to state
so there wont be any misunderstanding in regard to anything, I may oay this in a "personal capacity more than in
an official capacity.
The American Bankers Association
has fourteen thousand banke, which represent about 100,000
bank officers anl bank directors.
Of course, I a r not
i.
authorized to lLake any ourrestions for the Association,
Perhaps Mr. Hepburn who appeared before ycu Kcn^ay, has
the authority in speaking for the Currency Commission*
The Secretary of the Treasury:
You are submitting merely
your individual vie^o?
Mr. Farneworth:
My individual vie^s, based on my know-
ledge of the country, and of course
the Association,
the membership of
I have not given vary much thought to
the division of the country, buttbhat opinion I have is
based very largely, I think, on the testimony that has
bean given here, and that is that the cities to be selected ohould be the cities to w M c h trade is tributary and are
A-d
Frederick A. Famoworth.
known as financial centers.
405
Another question in n y mind
.
regarding New v ork City, New York City has "been the finane 1A*
cent3r of the country always, and it is to-day.
There is
np question in c y mind regarding it.
.
The Secretary of the Treasury:
T
ell, now, kr. Farns-
worth, if you are basing your vie^a, as you say, uyon the
testiiLony that you have heard here, thftn I tnink that it
would be better if you wcuid siiqrly tcvke one of these m a p s —
kr. Farnsworth:
I am not basing it en the testimony.
I siuxly stated that my crinicn —
not have said that.
if I said base, I ohculd
Uj orinicn is similar to the testimony
which has been "based, I say largely, on the cities of the
country where the banking "business is tributary to.
The Secretary of the Treasury:
Tow, what citieo would
you suggest as the headquarters for the different banks?
kr. Farnsworth:
I want to say in that, connection, that
I have heard some testimony this morning, and I believe
that after the organization of the federal reserve banks
or the regional banks, that there will still be a very
large amount of business that will be tributary to these
various cities, regardless of the fact that the reserves
bo withdrawn.
I think it is somewhat rroblecatical
A-e
406
Frederick A. Farnsworth.
yet as to just how far the otate institutions or the
atate banks T?ill go into the system.
If the state banks
dc not go into the system generally, those banks will
still do business with Few Ycrk and Chicago and St. Lcuis,
regardless of reserve cities and central reserve citiee
and a large business—
The Secretary of the Treasury:
That discussion is aside
fron. our problem, Mr. Farns^orth.
We are crlad to hear
these academic discussions, but must confine ourselves to
the immediate problem.
If you have any definite idea as
to where these ei.tht or tore banks should be established,
uld be very glad to have it.
r. Farnoirorth:
I should oay New York City, Chicago,
St. Louia, New Orleans, Can Franciscro, Boston and for the
eastern seaboard Baltimore- £iladelphia, Ealtimore-Fashington.
ky inc. nation torard Washington would be more
free the standpoint of the Federal Reserve Eoard being
organized and its headquarters there, and it might be
of son.e advantage, being the seat of the Government, to
have a regional bank in rashington;
and Atlanta, Georgia.
That, I think, would conrrise the tight banks vhich the
Act calls for and probably more than that.
It would be
A-f '
Fredrick A. Ferns^orth.
4^7
betrsen Baltimore and Washington, but in favor of Washington
on the suggestion I made in regard to being the seat of
Government.
The Secretary of the Treasury:
Thank you, Mr. Farns-
worth,
VLT. Faras^orth:
I just want to give, if you gentlemen
Fill allov me, — t o just r^ake one statement here which ycu
may not be familiar with, it may not be along the lines of
this, but will simply give ycu son.e information that you
cay not have at ths
present time, and that is the work of
the Aasooiation al^ng certain lines, which gives this
system perhaps great advantages which it otherwise Pould
not have had, and that io in regard to the uniform laws.
During 1913, 36 laws on ten subjects cf legislation reoommended by the Association, ware placed on the statute
books of twenty states.
These included the Uniform
Negotiable Instruments Act, Uniform Warehouse Receipts
Act, Uniform. Eillo of Lading Act, False Statersnts for
Credit,
Giving of Cheoks or Drafts without Funds, and
Liability of Barko for Payment of Forged or Raised Checks.
In the last six years of organized effort by the Association
b its Law Committee and the office of the General
A-g
Frederick A. Farnaworth
40b
Counsel, more than 300 measures have been enacted relating to instruments arising from comrercial transactions.
The Unifornr. Negotiable Instrument Act has been passed
now by almost every state in the Union.
The Secretary of the Treasury:
Thank you, kr. Farns-
worth.
ST/TEI'SFT CF CHARLES E. FCYT.
The Secretary of the Treasury:
lir. Koyt, ^ill you
give your full name and business for the benefit of the
record,
fcr. Hoyt:
Charles E. Hoyt, Secretary of the Connecti-
cut Bankers Association.
I simply want to represent the
request of the Connecticut Eankare Association, or the
member banks, to be rlaced if a reserve bank is established
v
in Eos ton, in theffdffi ork District. ^3 heard it racored
that -e *ere likely to be placed with Ee? England in
there, and many of the bankers of the state requested the
Executive ComLittee to get tosrethsr, which they did at a
Lasting, and while they fait they kne? pretty thoroughly
the feelings of the banks of the state, yet thay directed
me to send out a notice, which I did in that form (indicattgg postal card), and thsre are 115 banks and trust
companies which are eligible to join the Reserve As=jocia-
A-b
Charles £• Koyt.
tion ?.nd I have here
4Q9
—
The Secretary of Agriculture;
There are 78 national
tan^s.
iir. Hcyt:
78 national hanks.
The Secretary of the Treasury:
I have here 8S rerlies.
HOTC
many fron national
tanks?
Mr. Hoyt:
of them
al banks*
I have not separated then., but a large part
the rerlies favorable to Nev York are from nationOnly seven rerlies favorable to Eoston, of *rhich
only three of those are national banks and only one large
one, Norwich.
Tfca oth3rs are fron. snell nan trust cc-Lrar.iaa
B Secretary of the Treasury:
lr. Kcyt:
fill you file tha^e?
I will be very glad to file then..
The Secretary of ths Treasury:
Just let then, be filed
with kr. Hoyt f s testimony.
I Secretary of Agriculture:
That embraces ban/.s east
as well as vee-t.
Mr. Hcyt:
That tak33 up the nhole state.
STATE!'E!TT Of BtHRT U. ^ELLS.
The Secretary of the Treasury:
Mr. ^slls, ^ill you state
your n?.rre and business.
Mr, Fells:
Henry i.. w alls, ^resident national City Eank
*-i
Ksnry I . !?alla.
"
...
of Erocklyn.
The Secretary of the Treasury:
HOT?
long have you beer-
President cf your bank?
fcr. Wells:
Two yearo.
The Secretary of the Treasury:
^hat was your previous
bankir.e- experience?
l.r. "ells:
13 ye^rs;
I ^as cashier of that bank for the previous
in connection *ith the bank for 38.
The Secretary of the Treasury:
l.r. ""ells, .Till you be
good enough to gire ycur s*ug esticns, if you have definite
and concrete idaas.
l£r. p elio:
I could hardly call then, suggestions.
Of
course in Erccklyn ^e are still, I presume, a reserve city,
or are we new a central reserve city as part of Greater
Nevr v c r k ?
I have not h8&x£ that question ansvtered yet,
although that would net affect my viers at all.
The Secretary of the Treasury:
kr. ^ells:
Reserve
city.
^e still continue as a reserve city.
How,
I think that in a very, vary fe^ words, I cculd express,
perhapo, the sentin-ent of the Erocklyn "cankers an^ rsrhapg
the Lcnc Island bankers,
I Tould not say that;
but thc,t
^e are in accord frith the sentiments that have already been
A-j
Henry 1-. ^ells
411
exprsssed by particularly, perhaps, Mr. Frew, or kx.
i.cGarrah —
a combination of the two, that New York ohculd
be supplied with a bank large enough to -rc-'erly take
care of and if necessary Control the situation. Of course,
re have to meet ccnditiono as they are and the condition
here is that New York is the financial center, and 9ven
though it n.ight be at the expense of son.e other districts,
is it not necessary for the coznnittee to m3et those conditions ao they exist, not perhaps as they would like to
have then?
Personally, I believe that Eoston, as it is
now a clearing hcuse really for New England, other things
being equal, should have a reserve bank there.
The Secretary of the Treasury:
v
cu have not considered
the rest of the ecu ::try then.
Mr. ^ello:
I trink that the central reserve cities should
be provided in each case with large enough reserve banks
to properly take care of the field an3 the wants of the
cotxunitieo which they cover, Khich are included in that
district, even though it might perhaps cripple and make
smaller some other institutions.
Of course, our opinion
in Brooklyn is »— I would not say moulded, but you
cannot read testimony, if you have not a plan mapped out
A
Henry K. Wella
413
in your o * Kind, without being largely influenced by
*n
that.
The Secretary of the Treasury:
Yeur vie*s are more
largely influenced by the testimony you have read than
by any study you have given,
kr. "'ells:
No, I would not say thst, but the views as
expressed will, of course, have a certain tearing urcn a
tan who has not already fornoilated a rlan for himself
for his own satisfaction.
The Secretary of the Treasury:
Thank you.
STATEMENT CF FREDERICK G. LEE.
The Secretary of the Treasury:
Ycu c r President of the
.e
Eroadray Trust Cozrrany?
kr. Lee: Yeo, sir.
The Secretary of Agriculture:
Mr. Lee, have vou given
much thcurht to this question that we are considering?
Kr. Lee:
I hfcve given sone thcu^ht to i t , yes.
The Secretary of Agriculture:
"ould ycu give ^ 9 a ^y
views that you have, bearing on the whole rrotlor. or any
f a r t cf i t .
ILT. Lee:
I have figured out in m r.ind that i t will be
y
necessary, not having one central bank, to have nine cf thsir.
Frederick 0. Lee
413
The citieo that cught to be in
Boston, because that
is the metropolis of New England.
The business of Uew
England, the whole spirit of it runs into Eoston.
Ken York,
naturall/, and I think that New York cught to be as large
a bank in capital, deposits and territory covered as it
can.
Pittsburgh,
serving the Ohio Valley, Ttest Vir-
ginia and part of Kentucky.
Baltimore, rather than either
Richnxnd or Washington, because that is a sea coast city
and the south —
the northern part of the south is tribu-
tary to Baltimore, just the same as it is to eithsr Richmond
or Washington.
every way.
Chicago, en account of its pre-eminence in
St. Louis, New Orleans and a city on the western
coast, whether it ought to be Gan Francisco or Lcs
Angeles, I have not any opinion.
Some city there.
The Secretary of the Treasury:
Mr. Lee:
That would make nine.
That would make nine.
I do not see how the
natural divisions of the country and the business tributary
in those divisions, can be covered with less than that.
The Secretary of Agriculture:
If you Tsere to place one
at Pittsburgh, where would you draw the line?
lir. Lee:
I would have it, generally speaking, covering
the Ohio Valley, practically all of Ohio, the southsrn part
A
Frederick G. Lee
414
of Indiana, Kentucky and "eot Virginia and the western
part of Virginia itself.
The Secretary of Agriculture:
iir. Lee:
Altocna.
In Pennsylvania.
Pennsylvania, it rill go somewhere around
The difference in time from Pittsburgh to New
Yori: is socewhat considered, in ieternininc just vrhere that
line should go«
I only have this other thcugh$,that put-
ting banks in perhaps what you eight call the rocrer sections of the country, due thought must be had to the fact
that they should net ail be borrowers.
That is, you
cannot have a territory There all the ba~ko are borrowers,
it seems to me.
I know that scn.e banks have trouble on
that account nowadays, because they have more borrowers
than d3positors, c r 5 that Bight likely be the case in soire
..
of this territory There the banks themselves might be borrowers a large part of the year,
STATEKEl'T CF EDWARD S. STROEHAR.
The Secretary of the Treasury:
J.r. Strobhar, will you
kindly give ycur name and state your connection and
business experience.
iir. Strobhar:
Ed~ard S. Strcbhar.
My experience *--~eli
I am with the President's office of the Bradstreet Ccn.-
A
Edward S. Strcbhar
41b
pany.
The Secretary of the Treasury:
What position do you
occupy thsre?
Kr. Strcbhar:
^ell, I assist in the management of the
business.
The Secretary of the Treasury:
assistant to the ^resident?
Mr. Strcbhar:
^ould ycu call yourself
Is that your title?
That is the nature of the business.
I
vrculd not like to a sauce to ^ay that I ^?as that, but that
is the nature cf the business, assisting the ^resident.
The Secretary of the Treasury:
Who is the President
of your company?
l.r. Strobhar:
Kenry E. Dunn.
The Secretary of the Treasury:
Mr. Strobhar:
Yes, sir.
Is he in to^n?
Ycur telegram requesting
us to attend this nesting, re only got this morning;
got
it frcn. Boston.
The Secretary of the Treasury:
r. Strobhar:
Yru got it froL Eos ton?
Ye3, sir.
The Secretary of the Treasury: *h f didn't you g-at it
from ffen Ycrk?
Mr. Strobhar: I don't krxw.
A
Edward S. Strobhar
The Secretary of the Treasury:
416
I do not quite understand
how you got it free Boston.
Mr. Strobhari
Well, it was signed by Kr. Elliott.
The Secretary of the Treasury: Well, you have been
cozurur.icated with previously on the telephone?
Mr. Strobhar:
No, sir.
The Secretary of the Treasury:
lir. Strobhar, the CoiLL.it-
tee is desirous of learning something about the courses of
trade and ccmi-erce in the country, and *e have thought that
perhaps the Brad3treet Cocrany, with its large knowledge
of the business
conditions throughout the country, could
give uo seme light on that subject. Are we correct in
that assumption?
UT. Strobhar: tfell, on^y in a general way, Just as you
see —
for instance, " e have no statistics bearing on that.
r
That is not our funotion#
Our business is to rercrt the
individual merchants.
The Secretary of the Treasury:
You publish some tabula-
tion, do you not, of the number of manufacturers and business concerns in the different cities cf the country?
kr. Strobhar:
Yes, oir.
The Secretary of the Treasury:
In the different states?
A
Frederick S.Strobhar
Mr. Strobhar:
417
Yes, s i r .
The Secretary of the Treasury:
Is that supposed to com-
prehend all of them, or only those who are subscribers to
the agency?
Mr. Strobhar:
Oh, no, all of them.
The Secretary of the Treasury:
Ycu think it is an ac-
curate statement, do you?
Mr. Strobhar:
^ell, reasonably so.
The Secretary of the Treasury: '"hat is the latest one
of such statements you have made?
Kr. Strobhar:
"ell, January, 1914.
The Secretary of the Treasury:
And that is brought up
to date, is it?
Kr. Strobhar:
Yes, sir.
The Secretary of the Treasury:
Cculd you furnish us with
one of those statements?
Mr. Strobhar:
Yes, sir*
The Secretary cf the Treasury? Have you one with you?
Mr. Strobhar:
I havenft one with me.
The Secretary of the Treasury: If you will send it to
the Co-.-mittee, it ^ill be made an exhibit to your testimony
k'r. Strobhar:
Let me see if I understand what it is.
A
Frederick S, Strobher
418
We issued on the first of the year a list of failures during the year. Is that what you have in mind?
B-a
Edward 3. St~cbhar.
The Secretary cf theTreasi-~y:
it,
419
No, you have, as I recall
a statement by c i t i e s or by different
states showing the
numb e~ of manufacturer's and business men, either dealt with
by your local officers or comprehended in a Given d i s t r i c t .
!!r« Stofeha?:
Yes.
That would only be in the volume, in
the general Bradfctreet volume.
The secretary of the Treaarry:
No, I have 3?en su ch a
printed statement separately f^om the volume.
Mr. Strobhar:
I do not recall i t ,
I do not think 30*
You see* the figures —
The Secretary of the Treasury:
It is net material but
i t might shed 3ome li^ht on one "branch of the inquiry in which
we a^e interested.
!*r. Strobhar:
T e ar?
7
at your service to furnish you with
any facts which are in ou *• possession.
The secretary
of
Agriculture:
^ave you any views on this
problem based on your experience and knowledge of the
country?
The Secretary of the Treasury:
('"anding paper)
a copy of the statement I was thinking cf.
Kere is
Is that one of
yours?
?
:r. Strobhar:
Yeo, that 13 ours.
W have that a3 cf
e
B-b
Edward 3. Strobhar.
420
January.
The S?c~eta-y of the Treasury:
Well, would you j i v e us one
of those, that is what I wa3 driving at.
Mr. Strcbhar:
The Secretary
Yes.
of
Agriculture:
rrave you given any thought
to t h i s problem we are co nsiderin^, and would your experience
with the firm give you data that would enable you to form an
opinion?
Mr. Strobhar:
point out.
7 e l l , I have not thought that particular
I think that the closer the regional banks are
to the proposition they have to handle the m ^e i n t e l l i g e n t l y
o
and satisfactorily they caa get to i t ;
should be located,
but as to where they
v,e have not views to £ive you on that.
™ think that is another matter.
e
The Secretary of Agriculture:
give here?
::r.
VHiat does this summary
It says names; is i t names of firms or —
strobhar:
rramea of merchants, ty states.
in Alabama we have offices
Fo ? example,
in those j/lacea, and each place
has charge of that many names.
The Sec retary of the Treasury:
But i t does not undertake
to give the total numb ?r of business fi.rms and their business
B-c
Edward 3. 3t 'cbhar.
in each particular state?
v
!r. St *obhar: Yes.
The ~ecreta-y of the Treasury:
Mr. Strobhar:
The t o t z l number?
Yes, w can easily (jive you that.
e
The Secretary of the Treasury:
In other vorcLs, you con<-
sider that an accurate cen3U3.
?'r. Strobhar:
Yes.
The Secretary of the Tu*eaaury;
as,
I had understood that
it
and I thought a3it was a l a t e one we should " e glad to
b
have i t .
'V.
3t~obhar:
W would "be plc-as d to &ive you that or
e
any other information at our command.
The Secretary of the Fr a jury:
And if you would accompany
that with an explanation as to i t s meaning,
I mean as to
whether i t i s supposed to be accurate and up
to date and
whether i t comprises all, the "business men or only those reporting to your office, v;e should be clad to have t h a t .
I % 3trobhar:
U
Yes.
The Secretary of Agriculture:
underlying t h i s which would be
mittee?
And any other information
of information to the com-
b-d
Mr.
William J. -amiltcn.
Strobhar:
Yej.
or VILLIAM J . HAMILTON.
7h? 3ereta-y of the Treasury:
Mr. -r=smilton, you may
s t a t e your full name and occupation?
Mr. -^amilton:
William ~:
"ar.ilton, president of the
? i s t National "^ank of Cc.^ona,
a suburban "bank of ! ? York
Tw
in Queens Cottnty.
The S« retary of Aj'icultur-e:
Mr. '"dnilton, have "ou
thought much about t h i s problem with which we are confronted'
Mr. ?Tiinilton:
I have thought i t ovc-71; I have read the
b i l l and thought i t ever to some extent.
The Secretary of Agriculture:
you would care to ^ i v ^ ua a3 to
be located,
*:av? you any viev/3 which
where these banks should
especially any views with reference to t h i s
eastern section?
v. -**milton:
Well, I only considered the e a s t e ^ section
of the country because I a not so familiar with the western:
m
part of the country.
I think that I would designate l>v; Yor:
Boston and >?altimon? in the eastern section.
I think that
I e Yc*k cuslit to have a moderately larger bank thtoi some
Tw
of the others; not to the extent that 3ome ^7culd have i t , to
V/illiam J. :-r^iilton.
B-e
423
inclnde almcjt fifty per cent of the c e ^ i t a l , out I think
there
ou£ht to "be seme larger
caj^ital ^iven to the H w
a
York "bank thctn to dome of the other "banks,
The Secretary of Agriculture:
You have not civ en thought
to the general problem?
?.'r. "Tar.ilton:
Uot to the -Thole layout of the country,
of
course I have considered i t in "ecard to the three "banks here
on the east coast, and cf course,
took into consideration
P--"tially the designation of the other c i t i e s .
three to the !Ea3t,
Hut £>*ivin£
you would necessarily give one to
Chicago, one to 2 ° ; Orleans,
TV
and one to St. Louis.
one to the Pacific Coast,,
That would make seven; three in the
East, one on the Pacific Coast and two in the interior;
and
one at Denver.
The secretary of Ac* iculture:
13 there anything else you
care to say?
"r. T'anilton:
I do not know that there is.
The Secretary of Agriculture:
?he Secret ary of the Treasury:
Thank you, Mr. ""ar.ilton.
!:r. Austin.
b-f
Robert ?. Austin*
424
TE0SIT or !S?. ROBF.RT 13. ATTSTI1T.
The ^ c r e t a r y of t h e Treasury;
:;r. Austin-, v;ill you Give
your f u l l name?
*:r. Avstin:
Fob -?**t H. Austin, President of t h e Oueeno
County Trust Company.
The s e c r e t a r y of the Treasury:
:-rcive you given thought to
t h i s d i v i s i o n of t h e country into net l e s s than e i ^ h t nor
rao.^e than twelve Federal reserve d i s t r i c t s ?
::r. A a t i n :
I have t o a c e r t a i n e x t e n t , Mr. *:cAdoo
.
I
am not in acco M v;ith seme who have preceded me here r e c e n t ly.
I do not "believe t h a t 1 « York City should "be made too
7w
l a r g e a c e n t r a l :*e3erve.
I think i t would defeat t h e very
p u ^ o s e a of t h e measure, which i s t o p l a c e t h e reserves cf
the member banks in th» l o c a l i t i e s where they belong.
Po" th.it reason I think Beaton should be made a reserve
c i t y , because i t has f o r years been t h e f inanei al' c enter of
ITev; England.
And f o r the- other r e s e r v e c i t i e s on t h e e a s t e n
c o a s t , I t h i n k any la~ge c i t y t h a t
is a financial
center and
has become a f i n a n c i a l c giter th^ouch i t s s i z e and
manufactures, should be a ^eaerve c i t y , even i f you exceed
the eight reserve cities.
I think the object cf this b i l l
B-g
Robert B. Austin-
and the object
"best to be
425
attained by i t ,
13 to make it
possible to create in the country other financial
centers
than those existing today, \>y the placing of the reserves
cf the banks in the locality where they can be used for the
ddvanc^ienb cf that locality.
The Sec ret a ry
of
the rreasv.ry:
Where, outside of Boston
iind U w Yo^k, ^ould you say that the other banks should "be
«
located?
Have you Given that thought?
.Austin:
city and
-
I think Philadelphia should be a reserve
either ?altimo~e or Pittsburgh;
-mine between the tvroj
Chicago, Denver,
£ * Orleans,
«w
I could not deST. Louis,
and San Francisco*
The Secretary of Agriculture:
You speak of keeping the
reserves of the 3ection '.vhe^e they belong and of the needs
of the section.
Mr. Austin:
Just '/hat have you in mind?
As I understand the effect of this b i l l ,
i t is that the members of the regional bank
will leave their
reserves in that bankj and if N w York i3 made too large a
e
regional reserve center i t will get the reserves from, a l l
the member banks
in the region, and while i t may temporarily
be a hardship to N w Yo^k City orsome of the banks in H w
e
e
B-h
Robert &. Austin
t_^r
York City, because of t h e loss of reserves which they new
have,
in m opinion i t has for years been a fact
y
that those
^~ve3 have been accumulated here and U3ed for purposes
other than the advancement of manufactures, and when the
rest of the country called for that money, i t was distributed
to them and the pinch was f e l t here.
The secretary of Agriculture:
of course, to the extent
that these reserves are called for b?' t h i s new law they
would
disappear from e x i s t i n g banks and be transferred
to
these Federal peserve Banks, any way?
?:r. Austin:
That i s true, but they would s t i l l be here
for the U3e of t h i s l o c a l i t y through rediscounts by the
And
members*
then the suggestion made by one of the previous
gentlemen that foreign exchange entered 30 greatly into
if I ^ York was made too la~ge,
Tw
with competition
it;
i t would perhaps do away
between large centers which are e n t i t l e d to
corcp e t i t i o n in. foreign exchange.
The secretary cf the Treasury:
!.:r. Austin.
^e are much obliged to you,
B-i
7. Sidney Rothschild.
427
STATEK2BT OP KR. V. SID1IEY ROTHSCHILD,
The S e c r e t a r y of t h e Treasury:
Mr.Rothschild what i s i t
you had in you*-* mind which you cared t o p r e s e n t t o t h e
committee?
w
r.
Rothschild:
Mr. s e c r e t a r y , a s on? who has had a small
i-art in t h e f raining of t h i s measure, I h a d c e r t a i n views
as t o how i t would vork
out.
They may "be 3cmewhat
t h e o r e t i c a l as I am n o t a l t o g e t h e r
abanker;
of a banke~, a "banker and "broker.
I have
of i t i
I am somewhat
j u s t t h i s view
-:y i n t e r e s t was f o r Hew York C i t y , and I f e l t
jjew York C i t y should b e somewhat of a d i f f e r e n t
of r e s e r v e c i t y than t h e o t h e r s ,
that
character
a 3 i t occupies a p e c u l i a r
p o s i t i o n of i t s own, and t h a t p o s i t i o n i s a n a t u r a l one, t h e
same a s t h e p o s i t i o n of B e r l i n o r Amsterdam o r London o r
Paris.
I do n o t b e l i e v e t h a t by any l e g i s l a t i o n you can
take t h a t p o s i t i o n away, no r do I t h i n k
of t h e go v eminent to t r y to t a k e i t away.
The SvC-"etary of t h e Treasury:
nong a s s u n p t i o n , t h a t anybody
i t to t h e i n t e r e s t
In o t h e r words —
Are you not proceeding on a
i s t r y i n g t o take anything
a*.vay t h a t n a t u r a l l y belongs t o new York?
"r.
-othschild:
Ho, excepting t h a t i t seems t o be t h e
i n t e n t i o n not t o l e t new York b e too l a r g e a s ^ e l a t i n g t o
the
other reserve cities.
B-j
V. 3. Rothschild.
The sec retary of the Treasury :
interr.ncr
unjustifiable
428
V,Tell, that is a wholly
because the co nr.ittee has expressed
no opinion and these hearings are for the express p uvpo3e
of gettinc a l l the infenaction w can, to enable us to fonn
e
an opinion,
Mr. Rothschild:
I quite understand, but m idea is
y
to
work in the other direction, to make i t as large as possible.
In other words,
perhaps,
N w Yo*k is to represent the foreign trade,
e
and a l l the other reserve c i t i e s —
The secretary of the Treasury:
think
Concretely now, what do you
N w York should embrace in the way of territory?
e
Mr. Rothschild:
I think new York should embrace the whole
East, excepting perhaps Boston, and m view would then be
y
perhaps to have
u n t i l we
a bank
more as a model bank in Washington,
o rk out the workings
of this reserve bank system.
The Federal Board can chonje these reserve banks if they do
not work out properly, and I thought as an experimental bank
to have one in Washincton, u»w York p erhaps
to be the only
other one in the East, making i t v ->ry strong in reserves, so
that i t could handle foreign trade business.
The Secretary of Agriculture:
You mean to have two reserve
*r. S. Rcthschild.
B-k
4 2 9
banks.
fc!r« Reth3child:
"So, H w Yc"k to " e one "bank —
e
b
eithe", or in fact, nine-
oh,
no,
If yon make H w York particularly
e
.strong,, I favor perhaps having nine.
M idea was H w York,
y
e
Washington, ITewPrleans, Galveston, 3an. Prancisco, something
in the Northwest, perhaps Spokane,
or Portland, tc handle
Alaska, and the ITorthwest, and San Francisco to handle the
Philippine
trade and the extreme West* and Galveston per-
haps to handle the 6e.it .-al American and extreme southwest
unti N w Orleans to handle the middle South, and St. LoT;is
e
and Chicago, one to handle the middle East and the other the
middle *iVest, giving us j, <?rha;.s nine, "but making H w York the
e
i-rincipeJ. one.
The Secretary of Agriculture:
. Rcthschild:
Yes.
king I ? York relatively
Tw
~!«re you have a natural reservoir
which has cheated itself "by it3 natural location, a3 !'r.
.t says,
for inpo"t£jnt reasons, Li d there is nc law
-n
thfct can take that away.
Everything g-avitates there.
In
-pt in the old days, '.hen they did not have the Assouan
D.x., thej had floods,
and famine and
drouth, and sines they
have had i t , they have t h i s natural reservoir and l e t out
" r . Z. -.ctluchild.
430
cvr *ent of water as they need i t .
In the sane way
B-l
here, I think as the United States Government is
Ooin£
to
cent "ol a l l these "banks, I dc not see how any p ~ecnde"ance
is i>oinc to be harmful because they can resii.s count, and :'cu
can draw away from n«w Yc^k if i t ^'ets toe l a ^ e a surplus.
You c-in rediscount r i ^ i t in ::^.v Y "k al'/ays.
o
The secretary of the Treasv.^yt
"r.
^:. th.3child:
*-ave you anything else to
If I r.i^ht ask a point of information —
I uc not kno-' w):ether that i j in order.
The Secretary of the
r
Veasvy:
Veil, the committee i s
seeking information.
\
Rothschild:
A point of
infc-motion.
The 3 ?c rotary of the "'reasury:
I do net knevr whether v;e are
in a position to {jive you that info Tnation.
::r. Rothachild:
handled,
As to
hov the cold situation w i l l be
so that our people v i l l kno'-v.
The Seoretary of the Treasury:
That i j a matter for the
Federal Reserve B a:*d to deal trith*
o
mittee i3 not concerned
s. Rethdchild:
The organization Com-
; i t h that.
There are so many of our friends here in
B-m
V. S. R o t h s c h i l d
431
Hew 'So ~k '.vho a r e i n t e r e s t e d t o knew how that w i l l v.crk
The S e c r e t ary of the Treasury:
P e d e r a l Reserve Beard t o
Mr. Hot h 3 c h i l d :
That i s a n a t t e r f o r t h e
d 3al w i t h .
I mi^ht say f u r t h e r ,
me a '^or*d mo " e , ire idea in naming
*athe" to
—
i f you v l U allow
t h e s e c i t i e s would "be
^e ^ ^inander the d i s t r i c t sc that v;ould meet .<ith
the r e s e r v e required by the Act to rr.ake them s t r o n g enough.
The S e c r e t a r y of t h e (Treasury:
Thank you.
The committee
•vill t a k e an ad jou "nment t i l l t h r e e c 1 clock.
v;h?**eupon, at 1 P, T :. , a r e c e s s vas taken u n t i l 3 P.EL
APTER REJLSS.
STATE*"E-T OP G O G C. V U TUYI, JR.
E R E
A
The Soc"etary of the Treasury:
Mr, Van Tuyl, 2/ou a r e the
S t a t e Banking Conmissio^er of l-'ew York?
Mr. Van Tuyl:
Yes, T am the Superintendent of Banks of
t h e S t a t e of ^ew York.
The Secretary of the Treasury:
Are you familiar with the
problem immediately confronting t h i s
?!r. Van Tuyl:
I might say y e s , in a general
The Secretary of the Treasury 1
viith
organization?
ay.
^e & * charged immediately
*e
t h e duty of dividing the country into not less thar.
eight nor more than twelve d i s t r i c t s , and tlie establishment
of a F e d e r a l Reserve Bank a t so.ne convenient point in each
one of those d i s t r i c t s .
The committee rrould "be glad to
have any suggestions or viev/s t h a t you iray care to suonit
with reference to the most a p p r o p r i a t e division of the
country, or t h e most advantageous d i v i s i o n of the country,
and p a r t i c u l a r l y t h a t p a r t of t h e country with ^hich you
a r e more e s p e c i a l l y concerned.
Mr* Van Tuyl:
I think i t e s s e n t i a l t h a t Vevi York City
should have one great b i g one.
Tn t h a t zone should "be the
G
George 3 . Van Tuyl, Jr.
<*>;
States of S e York, Connecticut, Rhode Tsland and Hew Jersey.
*w
The Secretary of the Treasury:
Then is i t your idea that
Boston should be the reserve c i t y fo" the reminder of the
flew Bngland States?
?v. Van Tuyl:
Yes.
The Secretary of the Treasury:
THiere else r/ould you
place these banks?
. Van ~ .
I thiiik Chicago i s very
The Secretary of the Treasury:
r
'r. Van Tuyl:
essential.
That ^vould be three?
T am r.ct familiar with S t . Louis , but it
i s a central reserve c i t y at the .'resent time.
Tn the far Treat, the State of
badly.
feahlngton
.ads one very
Whether S e a t t l e is too much on the Coast or .ot
T do •: ot kiiov:, or -vhether i t should coiae back further,
to
a c i t y l i k e Spokane,
San Francisco i s e s s e n t i a l .
Kov; ufcuy have T get novr?
The Secretary of the Treasury:
r. Van Tu^ri:
You ha~re ianed s i x .
One at " exi Orleans and One over in the
!
Cotton B a i t | in C-eorgia, right in there somev/here.
The Secretary of the Treasury:
- . Van Tuyl:
7ould you suggest Atlanta?
Yes, Atlanta -ould be a good location.
The Secretary of the Treasury:
How vhat are you going to
G
George C. Van Tuyl, J r .
434
do with Pennsylvania , :ary:i£ind, Virginia and Test Virginia?
Mr. Van Tuyi:
That "being the case, T w i l l put Pennsyl-
vania in the Te York d i s t r i c t ,
Jw
j t i s a hard thing to
divide the country up into just eight d i s t r i c t s .
Give m
e
about two more arid T think T could fix the whole "business.
The Secretary of the Treasury:
You my do t h a t .
You
k. o ire have the power t o ra&ke i t tv/slve, if necessary,
w
r . Van Tuyl:
r
T am familiar with the Pacific Coast
o~th*7est, and i t is absolutely essential to have one Federal
Fese-ve Bank in the State of 7ashington.
The Secretary of Agriculture :
Have you had expedience
out th*. e '
r . Van Tuyl:
* ot in ;he banking business, but T kijow
the way the banking business is conducted cut there, and the
way the poor bankers have to keep their reserves I i their
x
v a u l t s , a great deal more than is required by lav;.
They
have to do i t to answer the needs of the business out "here*
The Secretary of the Treasury:
^ould a ?ede-*al Reserve
Bank a t San prancisco, r ;ith branches at Seattle and Portland,
or through that d i s t r i c t ,
v
r . Van Tuyl:
se^ve them sufficient3c; well?
Yes, possibly i t would.
You see the^e is
not much banking business right around here in the Rocky
G
George C. Van Tuyl, J r .
fountain section.
435
l^Jorth a^d South Dakota aud Nebraska
and that region w i l l naturally "be tributary to Chicago.
The Secretary of the Treasury:
* o getting "back to
w
Pennsylvania , if Pen sylvania and Maryland, a. d
ossibty
Virginia, ""est vi~gii3ia and DelaT/a-e v/e*-e la the sane
d i s t r i c t , vrhere would you consider that the Reserve Bank
had "best be loc ated?
Ur. Van Tuyl:
A branch should
"be establis-ied at
Philadelphia, of the > evr York "bank.
":ot u:less it isas i.: the
The Secretary of the Treasury:
sa.je d i s t r i c t with ". ew York.
I r . Van Tuyl:
' ot Uiiless i t raas in the sa.ie d i s t r i c t .
The Secretary of the Treasury:
" o , they can only estab-
l i s h "branches In the same d i s t r i c t ,
r . Vim Tuyl:
oh, yes.
The Secretary of Agriculture:
j t is a l i t t l e
difficult
to n&ka t'::e proper diYisioris offhand*
r . Van Tuyl:
Yes, indeed i t i s .
That being the case,
if t7e cor Id have branches, T r^ould put Pe jsylvania ic- the
" e'.* York d i s t r i c t , a.-d everything dosm to
n
eet
Virginia and
Virginia, because the tendency of everything is that ™
The Secretary of the Treasury:
You would get such a
G
George C. V i Tuyl, J r .
a
456
preponderance of capital and resources in the H w York bank
«
that you would not have nuch left for the rest of the country,
"T. Van Tuyl:
V&if York is a pretty "big t < m , and requires
an awful lot of banking c a p i t a l . •
There is another thing that must be ~emembered.
lew York
City serves pretty nearly half the United States as a
depository of individuals.
That has hardly been realized.
All through these s t a t e s , you nay go as lar 7/est as Philadelphia, in snail communities
"here there is no "business or
nanufacturing, they a l l depend on * eu York City, not only
as a depository, but for borroving purposes as well.
The Secretary of the Treasury:
As you understand, of
course, the Reserve Eaiiks are merely holders of the reserves
of member banks.
r . Van Tuyl:
Surely.
The Secretary of the Treasury*.
Thee; arc
ot Txn-ks of
deposit, generally speaking,
- . Van Tuyl:
o:.f T understand t h a t .
The Secretary of the Trcusury:
A d they are not intended
to interfere with or to a l t e r the normal cou-ses of busii-'ess
or to
'evolut ionize those things at a l l .
They a^e intended
to hold the reserves, and to re-discount "he paper of the
G
George 0, Van Tuyl, J r .
457
banks, as well as to perform certain other functions.
So
t h a t , being a depository of that character, the extent of
the capital and resources of those "banks is *:ot so important
as if they were engaged in the general banking business,
and were standing alone as separate u n i t s .
Mr, Van Tuyl:
Oh, no.
The Secretary of zr.e Treasury:
In that view of the case,
and also talcing into co,:s ideratio*; the fact that these
various units that may be established w i l l be thoroughly
coordinated through the Federal Reserve Board, and that fo~
certain purposes their resources can be more or less availed
of for the protection of the system, do you think it so
important that the Hw York bank should be so preponderant
t
as you suggested.
Mr. Van Tuyl:
way:
" o doubt the
change
O course, T am o. 1; looking at it in this
f
clearings of lew York are enormous.
of money is so enormous that "when
The
the emergency
currency is required and required quickly, as i t will be,
there will be a bigge*- dena & for i t in the large centres
than there w i l l be over here in the parts of the country
where population and business are got so cone entrated.
The Secretary of the Treasury:
There would be nothing in
G
George C . Van Tuyl, J r .
J
vJS
the size of the - e York "bank and nothing in the natter of
w
policy that would ja'ie i t impossible for the member banks
to draw t h e i r required cu--ency so long as they could put
up the e l i g i b l e paper, the liquid paper required by the Act,
and also maintain their necessary gold reserves.
Mr. Van Tuyl:
There is probably more liquid paper in
this section here tha.: there is in the rest of the country,
and when timt comes iij it will require a great big bank to
take care of
it.
The Secretary of the Treasury:
Exactly, but if you
exhaust the resources of the federal Reserve Bank for that
purpose, you can have recourse to the Federal Reserve Board*
¥x. Van Tuyl:
Ye3, that is t r u e .
The Secretary of the Treasury:
That is
standing over
i s BUG
and above the whole system, with the po*.7er to
currency
in times of necessity against this liquid paper, and these
liquid a s s e t s , and that is one of the elements of strength
in the r.evr system.
" r . Van Tuyl:
But that does i.ot change the fact
that
a larger bank w i l l be required here than in San Prancisco
or up here in Dakota.
The Secretary of the Treasury:
That is very t r u e , and
G
George C. Van Tuyl, -Jr.
455
that vrill automatically follor;, i?o nutter -/hat your divisio,
of te- "itor;r i s , "because the backing capital a i
resources
of each .\eserve 5aiik will liave the relation of six per cer.t
of the oombltied c a p i t a l a .d surploa of the member "ba::ks, so
i t i s bound to be in proportion*
" r . Va. Tuyl:
Will that be large enough?
A-a
Gehnjro C. Vg n TuyX, Jr.
The Secretary of the Traasury:
The Sacratary of Agricultural
440
Fall, that is a question.
Fith tha T303rv3s and
Government deposits which haretofora, you know, excapt
in a cursory way, have bean withdrawn tamporarily from circulation.
The Secretary of th3 Treasury:
And in addition to that,
the pow:r which tha Fedsral Reserve Beard n a exercisa,
-y
I itaan which n a be exercisad through tha Fodaral Resarva
.y
Eoard, of ottEining circulation against thair liquid aa~
83tS.
Mr. Van Tuyl: Yes.
The Secratary of Agriculture:
that
Your original idaa was
New York ought to include Connecticut, Rhoda Island,
Naw York and New Jarsey, and your difficulty arose frort
taking car3 of ths rest of the country.
kr. Van Tuyl:
I balieve that the eiza of a bank should
be the banking cor.runity that it covers. Right in Naw York
Stats alone our state institutions hava one sixth of th3
entire banking power of the United Stateo.
Tho Saorctary of Agriculture: Vhtro would your citieo
naturally COILG, to New York?
Lr. Van Tuyl: Yes.
A-b
G3org3 C. Van Tuyl, Jr.
Tho Sscrstary of
th3 Treasury:
You mean the entire
state?
Mr. Van Tuyl: 736.
Th3 Secretary of the Trsaeury:
Buffalo, Syracuse, Ro-
chester and all those citiso wculd normally corns to Vt*
York?
Mr. Van Tuyl.
Yeo, air.
The Secretary of the Treasury:
And ought to be enbrac9d
within the district?
kr. Van Tuyl:
Ey all means. It hao been fch3 setablishad
custcL., cf course, and I think that business has sort of
arranged itsalf in that way.
I think it would be almost
a hardship to &ake it othDrsisa.
Th3 Secrstary of tha Treasury:
P« thank you very
much, Mr. Van Tuyl.
STATEMENT CF MR. JAIES H. PERKINS.
Tha Secratary of ths Treasury:
You may state your
full name, Kr, Psrkino.
Mr. Parkins:
J&E.30 F. P3rkinQ, Fraqi^.snt of the
Naticral Coiut3rcial Bank of Albany.
!.r. Coggowsll and
mysalf are here rsprssenting the Albany Clearing Houo3.
&1HTly
COILS down to go on rscord as rsquosting that ws
A-o
Jaaea H. Farkins.
^43
be included in the Naw York District. We think that
the ccBiL.erce and the business of our part of the country
is in the habit of dealing with Now Tork, and that it
would bo very cuch more convenient, both for the banks
and for the comrerce of the state to coma here than it
would bo to bs included in any of the other districts,
Th3 Secretary of th3 Treasury:
Are ycur exchanges
almost wholly with Naw York, Mr. Parkins?
Mr. Porkins: Fell, we do a very large collection businese in Albany•
Albany is a rsserva city, you know.
The Secretary of tha Treasury:
Yes, I know it is.
UT. Perkins: And tho Albany banks have made it a
practice of collecting itecs all ovor the country, so
that last year the three national banks of Albany put
through it3ms amounting roughly to between Z\ and 3
billions of dollars.
Tha Secretary of the Treasury:
Do you collact those
items without charge?
Mr. Parkins:
balancss;
r
3 do without charga;
wa are T&1& through
of course we are paid for collecting.
The Sacretary of the Treasury:
direct charge for collection.
But I mean thare is no
A-d
Jams© H. P3rkir:3
443
Mr. Perkino:
No diract charge, no.
T3 are pr3tty
faniiiar, of course, with all of lew England and N377 Ycrk,
The S3cretary of the Traaoury:
rhere would you say
that VarLor.t, for inctance, and Eastern iiassachusatts,
should go?
fcr. Psrkins:
I nhculd think that Festsrn !:aesachus3tts
frOE: Pittsfield would go better in the Naw York Dictrict
than in tha Booton Diotrict.
New York;
I think th3 business ccmao to
but east of Pittsfisld, I should think it
should go to Boston.
Th3 83crotary cf the Treasury:
Mr, t ark ins:
>
How about Varcont?
Pall, ^srccnt is nsarar few York. That
io, for inotar.ce, if you r^t a branch in Albany, < e will
*
say, it rculd be much closer froc. VcraoDt then it ^ould
be to go across hora to Eoston.
Tha railrcad ccnnsction
io nore north and ocuth than it io across the state.
Fe have felt that thisrcholadistrict, including Western kassachusetts and parhaps Varment, New York State,
low Jersey and Connecticut -Tha Secretary of the Treasury:
You &3&n Northarn Ksw
Jeresy, I prssume?
Mr. Psrkino:
Yes, probably so,
I do not know. I have
net talked with n.any of tha ??3w Jersey banksrs, but thoae
A-e
Ja&ea F. Psrkir.a
444
I have talked withwculd rather be in the Kaw York District than in some other district.
The Secretary of Agriculture:
The western part of
Vermont, you apeak of?
Mr. Parkins:
Yes;
I should think Burlingtonand Rutland
and those towns are all hitched on with Albany and New
York, and corue through that way, whereas Bellows Falls
and Fhite River Junction, e t c on the Eos ton and Maine
Railroad, would run into Boston.
We also want to call the attention of the Comn.itt<33
to the fact —
I do not know whether you want to discuss
branches or not —
we think W3 are pretty well located
for a branch there.
It is no particular advantage to us,
but we are a central point and it is a good distributing
place, and we thought we ^culd sirrply call that to your
attention while you are here.
The Secretary of the Treasury:
Yes.
Committee is not charged with that duty.
The Crganization
However, we
quite willing to have suggestions about that.
It is
vary good to have them in ths record.
The Secretary of Agriculture:
sire to be haard?
Does Kr. Cog{:3P3ll de-
A-f
Henry Clows.
Mr. Copgswall:
Mr. "Parkins has said e l l I would
to s a y .
STATEl-.^TT OF VR. KEFRY CLE^G.
The Sacretary of tha Treasury:
Kr. Clews, ^3 undar-
stand you want to be haerd, and *f3 would bs very glad to
hear from you now*
Mr. Clews:
I sketched out a little plan with r3f3ranc3
to the designation of all th3 sight banns which it is
proposed to hava, and I would like to treat than: as a
wkcle, if you will p3rL.it ta to.
The Secretary of the Treasury:
kr. Clews:
Certainly.
It will take but a fsw moments.
The naw
law has ituch to com end it, VT. Sacrstary, and it is as
•^^rfsct a piece of legislation as could possibly be obtainad undar existing circucstancse and conditions.
Fith an.endc.3nt0 latar on, I consi*.3r it a great step
forward in sound constructive financial lsgislation.
It will do iL-uch towards ^isanr.ing public hostility to tha
00 called Kcnay Trust, for such a thing in tha future wil
be impossibls,, and the gain fro& classification of public
orinicn ^ill ba icr. ansa.
In dividing the country into districts,! would surast
A-g
Kanry Clawo
W
tha fewest nui-tsr possible, which is 3ight.
Th3S3 Light
bo Nsw Yorr., Eo^ton, Baltimore, Now Orleans, Chicago, St.
Louis, Oi^aha and San Francisco.
Thio nuc.ber io fully as
large as should ba permitted, to start vcith, in r y orlnlon*
u
Th3 Saoratary cf Agricultural
Till you give thoea citiss
again, Kr« Claws.
Mr, CJ-awo:
!^3W Yori. City, Boston, Baltimore, Naw Or-
l^ano, Chicago, St. Louis, On.aha and Gan Frfnci^co. And I
will givs you the raaoons Tvhy I have desiarnatsd thase
differant cities.
This nur tar io fully a* lr.rrra, also, as should ba parmittad to start with, I think,
Tha graatar tba nur^bar
cf regional bar/r.s, the ^3ai:er ZCL.3 must ba, and tha greater
tha or^ortunity for friction and local jaalouaias.
Cor.C3ntration ^ill 3trangthan th3 national banks for n.aating 3L.3rganci3s, and facilitate prosft action.
Naw York naturally possaooao a big frapcndaranee of
ta:
rowar, th3 rasult cf its great COCJ arcial and
geographical advanta^eo.
way.
New Yor*. is tha Nation's gate-
!"aw York is tha Nation's cla&ring hcuee, einca more
than ona half of tha bank clearing cf tha entire country
are iLada in thio City.
Nav3rth3le«3g, th3T3 io no raason
A-h
Henry Clewa
447
for aprrehenoion or prejudice regarding th3 undue influence of low York in th3 Reserve Board, because only atcut
one seventh of th3 national bank resources are held in
this city,
The proportion cf otate ban/.s and trust com-
panies is probably mien about the same.
essential
It io
that as little hindrance as possible ohould be
placsd upon the free movement of banking faciliti-as,
a
further argument for creating as f_w regional baru;s
as possible •
The point next in importance totfftHYork should be
Chicago, which ooneo second in banking power and
clearing house activities,
Chicago should certainly pos-
sess large banking faoilities, for thj reason that the
handling of the crops, to a vary largj extent, falls upon
that point.
Boston probably ranks n^\-t to Chicago as a banking
cjnt:r, and would very likely be Iarg3ly dependint upon
for taking care of the NJW England District.
Philadelphia and Pittsburgh ara hardly sntitl^d to
a-lsction, and T?ould b^ttjr con... und.r thj District of
N.w York.
Washington has b^n
namjd as a point of sileotion,
:' .nry Cisws.
-
448
but is objectionable becauos too much cxros^d to political
lnfluancjs, and it is a non-comr^rcial city.
Balticora would bo a much bsttjr a^lsction, inasmuch
as it could cov ;r everything b:stw3 n th3 N *w York District and Nsw Orleans.
N3V Orleans, of n^csQ^ity, ^ould bi a moot important
point, not only on account of its rapid comnsrcial growth,
but also bscausa a largo proportion of the cotton crop
must be finane;d at that point.
St, Louis and Omaha are worth naming as r-jgional c^ntsrs, for similar, thcu;.h laso pronouncjd, r3asons, as
Cr.icago.
3an Francisco is, of course, pre-emin3ntly tha bani.ing
of th3 Pacific Coast.
Doubtless thj rival citias
of Loo Angelas and Portland would like r^prjs^ntation,
but t'ris is objactionabls for th3 reason that a multiplication of banks would procotj friction and lssgan
that saoy flow of banking faoiliti33 which is absolutjly
nscsssary to 2ffici3nt working ofth3 now law.
I neod hardly add that for a successful outcoL.o much
d^p;nds upon thi charact:r and ability of th ; man who
ara to sjrva upon thia Board.
Ths cocponsation is not
A
H^nry Cl2*o
'-iL
largo, and mjr. will hav^ to bi found rcho * i l l bs glad to
S3rv9 for honor sakj.
Tharj has b^jn no lack of such
n.-3n found for the Supr3E,j Court and oth^r appointiV3
pcoitions, and though such mon ars difficult
thsy cen undoubtsdly bs had for ths
to ajcurs,
searching.
That is
a l l I havj to nayr
Th. C^crjtary of th^v Tr.a^ury:
**: thank you v.ry iruch,
Kr. Cl3wo.
Tho S^crjtary of Agricultur3:
Kr«
CIJWQ,
do you think
thj ejcticn froa N w York to Baltimoro, can b3 takon cara
s
of by bani<o at thosu t^o 3nda?
kfr.
CIJ^O:
I do, ind3 3d.
The Secretary of Agriculturs:
Have yc^ cocrparsd thi
ban/.ing pcT.:r of ths nswsr conjcunltijs,
li.;o Dallas c n
*d
Fort Torth, *ith I3H Orls:na?
I r , Cl.tre:
djtails.
No, I have not.
I havo graat confidence in our Secretary, and
hie a&sociatja,
fori,
I h£V3 not gonj into th~
to ljt.-riLinj thooj quootiona, and th^r^-
I havo not r r j r a r s d cyB If to talh on thoej points.
I hav3 nothing n.or3 to add to what I have aaid.
I think
the t cov-jro ths ground, if you will p s r r i t ir.3 to cloae
with t h s t .
I aiu cuch obliged for ths priviiag3 of a^-
H.nry C l ^ s .
450
fearing b^sforo you, Mr. S
Thi focretary of th^ Trsasury:
Net at a l l .
Fa ara
nruch otliT-id to you.
Arj th^r^ any othjx g3atl38i9D who d : s i r j to be hsard
now?
If not, th3 Comnlttas w i l l close thj h3s.ring3
in N w York, and the naxt hsarings v i l l be in Boston,
o
at 3:33 F. K», tha hearing was adjcurn2d
to mojt in Boston Friday, January 9th, 1914.)
@FedFRASER