Full text of Hearings before the Reserve Bank Organization Committee - Washington, D.C. : January 16, 1914

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STENOGRAPHER'S MINUTES

THE RESERVE BANK ORGANIZATION COMMITTEE.

•FEDERAL RESERVE DISTRICT DIVISIONS AND LOCATION
OF FEDERAL RESERVE BANKS AND HEAD OFFICES.1

TS.

At
Date

Washington, P.O.
January 1 6 , 1914.

Law Reporting Company, Official Stenographers
115 BROADWAY,— NEW YORK
TELEPHONE, 262O RECTOR

971

Washington, D , C , January 16, 1914.
The Organisation Cosaittee »et pursuant to adjournment
at 9:00 A.U.
Pro8ent:
The Secretary of the Treasury*
The SQoretary of Agriculture,
Appearance*;

APPEABIHG fOR CHARLOTTE, IT.C.
Char lee A* Bland, Mayor,
Charlotte, H.C.
H. M, Victor,
Charlotte, H. C.
Cameron Uorrleon,
Charlotte, N.C.
W« C. Wilkinson,
Charlotte, N.C.
T* T. AlUeon #
Charlotte, K.C.
APPEAEIHD FOR PHIUDH.PHIA, FA.
Leri L, Huegi Chairman,
Clearing House Ceomittee
Caleb K. Sherward, VIoe President,
Wilmington Trust Co*

B7B

Vinfleld R. Mlnch, Ylo* President,
Bridgeton national Bank,
Montgomery Evans, President,
Horristown Trust Co«t also
President Pennsylvania
Bankers Association.
H. 8* Whitman, Jr., V.P.,
Cloarficld K&tlonal Bemk
John C. Carterf Preaid«nt,
Fulton National 8&nkt
Sanuel lioCracten, Caehier
Peopled Bank,
TTilkee-Barra, Pa,
« H« Painter,
Weet Branoh Hatlonal Bank
Williamaport, Pa,
mOU WIirST0BH3AX,ESr# K.C.
H, E. F r i a « , Vice Praoldent #
Board of Trade^

tf% F r i e s ,
Peoples n a t i o n a l Bank

Maslln, President
H&tlon&l Bank
f

Freoidont,

Board of
PITTSBBRG
Clmrlea Molnlgbt,
Clearing Hou«o A s s o c i a t i o n

Logan MoKee, Secretary,
Chamber of Commerce
William H. Stevenson,
President Chamber of Cozmneroe
Stephen G. Porter,
Pitteburg, P&.
It. C« Bihler,
Pittsburg, Pa.
Joseph. F. Guff07,
Pittsburgh, Pa*
John B. Barbour,
Pittaburg, Pa.
Pittsburg, Pa.
Pittsbuirg, Pa.
Hon. James Franoia Burke#
Kembor of Oongreso
Hon. U« Clyfi© Kolly,
Member of Congreee
from Pennsylvania

Eon, John M. Uorint
Member of Oongrese
from Pennsylvania
Hon. Andrew H. Walters
Member of Congress
from Pennsylvania
Hon. Woods B. Carr
Member of Congress
frost Pennsylvania.

974

Joseph A* MoHameo, President
Chamber of Compare©,
Atlantic City, H,J.
CarXtoB Godfrey, President,
Guarantee frutt Company,
AtlanUo Cltyt B* J»
Hon. William Riddle, liayor
Atlantic City, N.J,

975

The Secretary et the Treasury: Gentlemen, will you
please come to order*

Xe this Charlotte that we are to

hear thle morning?
Hr* r E. T. Webb: It is, gentlemen, and if ycu will psrsit
me, I represent the Charlotte district*

I just want to eay

three words. The citizens of Charlotta are here to represent that splendid city, in an effort to secure a regional
bank for ^Charlotte. Xfe are not here in such large numbers
as Richmond, beoauee we understood that you were a little
crowded for room up hero* and we did not want to bring so
many auditors, but the Mayer of the city, Dr. Charles A.
Bland, is here, and I desire to present him to ycu gentlei&en
and he will be the Master of Cereaonies.
The Secretary of ths Treasury: Fa will be very pleased
to hear from Mayer Bland,
STATEMENT OF CHARLES A. BLATO.
The Secretary of the Treasury: &r, Mayor, I do not
«
know whether you heard the remarks we Bade to the* Richmond
delegation,
Kr. Bland:

Ho, s i r , I did ncjt.
>

The Secretary of the Treasurer: I sight say very fcriefly

C. A. Bland.

976

the tho Comnittee desires to confine itself strictly to the
questions before it cf dividing the country Intc not less
than eight nor core than twelve districts, and to determine
the location cf the Federal Reserve Bunk in each one of
these districts.

It Is an economic problem and almost

wholly economic, and what we desire are certain faots
relating to the claims of certain cities, which we c«i
generally best ellolt by & certain line of questions. Now,
we know about Charlotte* s poaition on the oapf

We know it

is on the map * very largely, and we know also its railroad
facilities and fill that sort cf data ^a have. I only mention
these things to save tlise, so that the question of its bank
clearings and the courses of trade and commerce within a
given district are the Batters upon which we most desire
information. How, anything that you can give us along that
line will be useful.
Kr. Bland:

How, Kr, Socretary| I understand that you are

familiar with the g&ographic •ituation1
The Secretary of the Treasury: Tea; ,1 aa eure Secretary
Houston is at any rate.
Mr. Bland:

I wish to aay, gentlemen

—

The Secretary of Agriculture: May I ask, before you

Q. A. Bland.

977

start, whether you have »&de out any map or laid out a
district?
Mr. Bland: Yes, sir.
The Secretary of Agriculture: To be tributary t© Charlotte,
Kr. Bland: We have one with us. It will be presented a
little later.
The Secretary of the Treasury: We would like to start with
that, to see what your assumed district is,
Mr. Bland: From a geographical standpoint, we think we
are about the centre of the situation*

If there le any

question you wish to ask me along that line —The Secretary of Agriculture: I am impressed with the
remark that old Governor Roberts of Texas made at Tyler, a
little town there. They asked hl» what he could say about
it, and he said he could say it was In the centre of the
surrounding country.
Hr. Bland: We are like Borne. The hubs extend In all
directions.
The Secretary of the Treasury* How, Mr. Mayor, you have
included in this district everything scut* of Pennsylvania
and the Ohio River, and as far west as —*
The Secretary of Agriculture: Mississippi.

C A* Bland.

973

The Secretary of th© Treasury: Bo, he does not quits go
to Ulaeisiippi. Oh, to the Mississippi state line in
Tennessee, How, that would put Louieville, fcr instance,
in this district, and many other large cities in the country*
and also the West Virginia dietriot. You would have Washington sending all ite exchanges down to Charlotte; Richmond
the eame way, Lynchburg and other large oitiee. flow, the
trend of exchange and commerce le northeastward altogether,
i« it not, in thie •eotion?
Mr. Bland: Very largely in the east*
• The Secretary of the Treasury: You would, therefore, be
revere ing tb<$ ordinary course or things if ;*e cttempted to
put a Reserve Bank in Charlotte?
Mr, Bland: So, air, I do not think that* I presume £ou
would have one in one of the largest cities in the north,
but of oourse it is very wuoh based on hew you laid out your
lines youreelf. You gentlemen who have the division of
thooe regions, but I think, after going into the eituation
very carefully it would be SLR ideal place for itThe Secretary of Agriculture; Do you include this area
you have marked out here as the district that Charlotte
would serve*

C. A. Bland.

979

Mr. Blend: You mean all of the so outlying states?
The Secretary of Agriculture: Yes.
Mr. Bland: That Is the district it could serve. That will
be explained to you later* Of course, we do not expect to
take in soae of those territories here (indicating on isap).
The Secretary of the Treasury: I assumed this map represented the district you had in your »indt to be served by
Charlotte?
Mr* Bland: Hot entirely.
The Secretary of Agriculture: ffhat would you include in
the Charlotte district?
Mr. Bland: Well, we could take Virginia, North Carolina,
South Carolina and Georgia, Florida, and probably up to
Alabsuaa.
The Secretary of Agriculture: What about Tennessee?
Kr. Bland: And Tennessee and Kentucky we could, too, but
that was not our contemplation. We were going to have
the eastern coast line —
The Secretary of Agriculture: Could you be specific?
Mr. Bland: Virginia, North Carolina, South Carolina,
Georgia, Florida, and part of Alabama,.
Tha Secretary cf the Treasury: IFhat part?

C. A. Blend.

980

Mr. Bland: Well, the part adjoining Georgia. I as
assuming that there might be a bank in Hew Orleans.
The Secretary of the Treasury 5 How, have you Bade any
figures on the capitalisation that euoh a bank would have,
and deposits?
Mr* Blend: I have so mo. Hr. Victor here is prepared with
all of thoee figures*
The Secretary of the Treasury: Then, Mr* Mayor, if you
have anything further to add, we will bo glad to have it*
Mr* Bland i I might add too that that we have wonderful
&all facilities there. Have about 52 trains a day, and we
have, including interurbany 70 trains a day* Then, it
being a geographical centre and I do not say that Atlanta
or Richmond — I think you know that all countries when they
get into aOBM controversy, usually meet on common grounds
to settle their differences, like the Japanese and Russians f.
I think it would be asore convenient for Richmond to come te
Charlotte than to go to Atlanta and more convenient for
Atlanta to cose to Charlotte than go to Richmond, Ko, I
; think we have a strategio point from a geographical situation*;
Then, I assuz&e that we could take part of T&rne&aee in
there easily. . I presume you will have a bank in the west

•o

0. A. Bland.

981

somewhere, probably handle these state s, but you know we have
trains from Asbeville, Kncxville and all those points.
The Sooretary of the TreFeury: Ifould you take Chattanooga
too?
Mr. Bland: Tee, sir, we oculd do it, but the points that
I am specific about are Virginia, Horth Carolina, South
Carolina, Georgia, Florida, end part of Alabama.
The Sooretary of the Treasury: That would not give you a
•ary strong bankt
Mr, Bland: Ifell, we could take Kentucky and Tennessee.
Of coureo, I do not know rhcw many divisions you gentlemen
will make. That Is the thing that puzslss me.
%.
The Secretary of tho Treasury: But we want to be informed
about it. In the study of this problem $ou cannot just
apportion a part of the territory you would like to have*
That division has to be made with reference to the other
districts of the oountry.
Mr. Blandi I understand that.
The Sooretary of the Treasury: Because there is an
intimate relationship between these districts anu you cannot
disregard the whole problem.
Mr. Bland: Hot at all.

0. A, Bland*

983

This Secretary of the Treasury: So that all we assume when
the district 13 augijastod to us hers ia that the people who
have Laid it out hava dona it upon the assumption that wa are
going to hava eifgbt, nlna or ten, or eleven or twelve
districts In th& country.
Ur. Bland: That ie what X aseuoe.
The Secretary of the Treasury: How, what ie the assumption
in that regard.
]£r# Bland; In that regard we could really take hold of
a great deal of this*
The Secretary of the Treasury: Ko» I issaa what nutaber of
dietrlots h&ve you assumed for the country?
Mr* Bland: About twelve* I really have no ground for
that assumption* except my own idea*
The Secretary of

Agriculture: Tou think ther* should 1>©

twelve.
Mr, Bland: Tee, eir.
The Secretary of the Treasury: that £0 that hated ©n?
Mr. Bland: 1 Just based it on the idea that the country
would prcbablysrequire that usury* Ba»ed m. taking care of
the business of the whole United States.
The Seorstary of the Treasury* Iow # if yen were settling

C. A. Bland.

983

that problem, Mr. Mayor, would you settle It upon a mere
assumption of that kind?
Mr, Blond: Ko, air, I certainly would not.
The Secretary of the Treasury: Ife have got to get some
faots here; that Is the point.
Mr. Blend: I presume if you want to go into the banking
department of it more oarefully* you would like tc consult
Hr> Victor.
The Secretary of Agriculture: What is the population of
Charlotte?
Hr. Bland: About 45,000. If there ie any question
you want to ask me, I Trill be very glad to anewer it.
The Secretary of the Treftsury: I think if Mr. Victor hae
the etatletloe, it will probably be beat to call him.
STATEMENT OF H. If. VICTOR.
The Secretary of the Treasury: Tfhat ie your business?
Mr. Victor; President Union national Bank of Charlotte,
and Secretary of the Clearing House of Charlotte.
-The Secretary of the Treasury: How, Hr. Victor, will you
kindly state * to the Committee what district it is that you
have in your mind that Charlotte should serve, and what

•o

H. M. Victor.

number of districts for the country as an entirety you have
assumed in staking that division?
Mr, Victor: That map does not represent the division. We
just had that for an exhibit along the line of some figures
we are going to give.
The Secretary of the Treasury: Row, what ia the district
you have in mind for Charlotte?
lir* Victor* Virginia, Forth Carolina, South Carolina,
Georgia and Florida, and the eastern pcrtiog of Tennessee,
eastern portion of Alabama, and I have made figures for that
purpose. The capital and surplus of that territory is
$119,014,000, The amount cf money borrowed last fall was
{35,915,000.
The Seoretary of the Treasury: You ciean your re-diacounte?
Mr. Victory

Re-disoounts and bills payable together. The

deposits cf those banks were $407,000,000, which would give
a capitalisation — well, I will go further.. The total
figures of the above states will be slightly reduced, that
is, if Tennessee and Alabama —
The Seoretary of the Treasury:

Is this based upon national

bank capital alone?
Itr. Victor: Tes, eir, but we are only supposing that

H« U9 Victor,

985

the western half of Alab&xsa and Tenneeseee trill be out off,
which will reduce these figures eli^itly, but will be more
than made up by the number of state banks which will undoubtedly come Into the organization.
The Seoretary of Agriculture:

Can the state banks of

Horth Carolina subscribe under existing laws?
Mr.. Victor: I think so*
The Seoretary of the Treasury: Is there any question about
that.
Mr. Victor: Ko, X hav3 not heard any question raised
at all. In our Clearing House they are debating it. If
there were any question about it, some of then have indicated
their determination to do so, and I suppose they found that
they oould.
The Seoretary of the Treasury: Of course, wherever they
are confronted with the lack of authorityto subscribe for
stock, they can beoome national banks*
Mr, Victor: Certainly. We wilj. do that, or Join, one
or ther other, but we figure that with 830,000,000 of reserve
deposits and over $6,000,000 cf capital, that this division
**ould give, that the territory we have indicated there
would afford plenty of capital for reserve banks.

H. If. Victor*

The Secretary of the Treasury: Sid you take Washington
into that characterisation?
Mr, Victor: Ho, sir, we do not.
The Secretary of the Treasury:

Cone to the district line,

Mr, Viotor: Coma to the district line*
The Secretary of the Treasury: Take the whole of Virginia,
Mr, Victor; flhole of Virginia, yes, sir, Kow, I have
got some other facts here, if it would be interesting to you.
The Secretary of the Treasury: Go ahead,
Mr, Victor: Charlotte is in the immediate centre of the
largest cotton nanufaoturins district in the south, 90 per
cent of the production of cotton yarns and cloth of the
south is manufactured within a radius of 150 si lee of
Charlotte, It is also a large market for the handling of
raw cotton, and the oentre of a large production of ootton
seed oil and other by-products of ootton. Already Charlotte
conducts an immense amount of business with all points in
the district outlined, and with a Reserve Bank would be
conveniently situated to serve with despatch and convenience
the wants and needs of the entire district. The established
custom and trend of business has for so Ion? been in favor
of Hew York, Philadelphia and Baltimore, that it would be

H. H. Victor.

98?

presunptouB for any city now in this nils triet to
to control or have any overwhelming share of the general
banking transactions of the southeast. The very nature and
object of the formation of the Reserve Banks is to ore&te
euoh a centre of financial operations for *rhich Charlotte is
most admirably adapted, by reason of location, sisce, business
surroundings end the iairenee amount of commerce carried on
to the immediate northeast and south. Richmond on the north ,
and Atlanta on tho south otter a wonderful array of figures»
shewing why a&oh point should be selected, but Charlotte,
being an equal distance immediately"between the two, offers
the sum total of both their figures and advantages, and in
addition the wonderful and rapidly developing: territory
intervening, of which Charlotts is the centre, Charlotte
is the oentre geographically, the centre of pppulation and
the centre commercially of this district.
The Population of thin distriot ie of the sa»e racial
decent and it could bo said also, for the most part, engaged
in the saise lines of pursuit, so that their business shows
euch a similarity in character that it would make it most
convenient and most practicable to have it handled through
one Reserve Bank.

H. H. Victor.

938

The Government already owns valuable and admirably
located property in Charlotte, known ae the United States
Mint, recently uaed as an Aeeay Office, and this property
hae long been aeeooiated with the financial operations of
the Government and wouldcafford a splendid hone for a
Reserve Bank for this district. In the district that we
hare referred to, Charlotte le within 12 hours ride, or one
night's ride by nail of every city of importance except .
Tampa, 18 hours; Birmingham, 14 hours; Montgomery, 14 hours;
Chattanooga, 15 houro. The following cities are within
12 hour8 of Charlotte and each would be within a night's
ride, by mail: Lynchburg, Richmond, Wilslngtfm, Winston,
Asheville, Columbia, Spartanbufg, Atlanta, Savannah, Danville,
Horfolk, R&leigh, Greensboro, Knoxville, Greenville,
Charleston, Augueta and Jacksonville^

Charlotte is almost

in the centre of ths district outlined, being very aliafrtly
to the north of tho centre. The banks of the eouth, without
be
exception, desire that Reserve Bank/to the north of them,
rather than to the south.
The Secretary of the Treasury: How about the banks to the
north of this point,,
Kr, Victor; I say that the banks desire —

R.tf.Victor.

The Secretary of the Treasury: The banks to the couth, of
this point, you eay desire, but the banks to the north of
this.
Mr. Victors

They do not? ire found, I think, that ie

pretty generally the case, but it strikes ae that the very
intent of this le to decentraliao the proposition as it has
been, end to make, regardless of where this Reserve Bank Is
located, to make that probably the centre of that district
anddt will soon become so, if the plans and provisions of
this Act are carried out as intended, ra&ardlese of what
has been the former custom ~ former trend of business even*
The Secretary of Agriculture*
lfc% Viator*

Just go ahead*

I am very near througju The nail facilities

from Charlotte are excellent, Kails going north, south,
eaet and we at on evening trains reaching 12 hour cities
the next corning*

Vo present you here with a map showing

Charlotte's geographical location in relation to the district
and showing distances and sail receipts and deliveries*
The Secretary of the Treasury*

How, you have marked out

a territory here that nominally is sn outlying territory?
Mr. Viotor: Yes, sir.
The Secretary of the Treasury:

Do you think that i s ft

H. *. Victor.

990

wise arrangement?
Mr. VIotor: Ho, air, but as far as 1" can figure it out,
and I have gone over it very carefully, expecting possibly
those questions would arise in your mind, and it cannot be
avoided.
The Secretary of the Treasury:

Could it be avoided by

attaching more territory north of it?
Mr, Viotor: Unless you would destroy the convenience of
accessibility.
The Secretary of the Treasury: But would it? Is not
the custoE&ry course of business and ths convenience of
business best served by an arrangement — you do not dislocate the ordinary course of those transactions nat &llf by
having a Reserve Bank located further to tha northeast?
Mr. Victor: No, wo do not dislocate them, but as I said
just now, your object as I presume Is to sake it not necessary
to go tc those points. ITe have had to go north.

If we

follow out the plan of this bill , it will be centralised
and whatever points you naxe will be the financial centre
of that district,The Secretary of the Treasury: Headquarters of the bank?
Mr. Viotor; Headquarters of the bank.

H. M. Victor.

The Secretary of Agriculture:

£91

It would not change the

fundamental economic, conditions of that community, would it,
simply putting this reserve banking power there.
Mr. Victor:

I think so.

The Secretary of Agriculture:

To what extent is Charlotte

now a financial centre?
Mr. Victor: Well it has a large aaount of deposits fro»
the Immediately surrounding banks J We have net any large
amount of business outside of our inrcedlate territory.
The Secretary of Afericulture: Do you pay Interest on
deposits?
Mr. Victor:

Ho, sir.

The Secretary of Agrioulture:
Mr. Victor:

Hone of the banks?

I think some of the banks pay Interest to

other banks.
The Secretary of Agrioulture: Do you know what the rate
is?
Mr. Victor:
of deapoit.

Four per cent we pay on tiiae certificates

I think not over three per cent on deposits*

The Secretary of the Treasury: What ia the entire banking
oapit&l of Charlotte?
Mr, Victor: $4,000,000.

E. H. Victor,

993

The Secretary or the Treasury: IThat are the dopoalta?
Mr* Victor: About $8,000,000.
The Secretary of Agriculture: You do pay from three to
lour per cent interest at present?
lir» Victor: Yes, air.
The Secrett^ry of the Treasury& On bank balances?
Mr* Victor: Yes, air*
The Secretary,of the Treasury; Thank you*

993

STATEMENT OF MR. CAHEROH M0HHI80H,
Mr, Korrison: I have not heard vm.it h*s been said by all
the gentlemenjwho proceeded me, and I say repeal something,
but I Trill try to be brief, however.
The Secretary of Agriculture: SThat is your naiae and
bueineoo?
Mr # Morrison: Cameron Morrison: I am on attorney at lav*
The Secretary or Agriculture: You know the banking and
commercial situation, and the facts relating thereto?
Vr v Morrison: I could not say that I know it. I have
eome general knowledge, I hope of conditions down there.
The Secretary of the Troaeury: Have you studied the immediate problem confronting the ooronlttoe, ishich la one relating solely to the division of the country ir&o these districts and the location of the headquarters bank so as to
conserve as far as practicable tho convenience of business
in the district and preoerve the custoio&ry course of traded
Ifr. Ilorrisom

I have thought a great deal about itzsis

related to our section^

I have not undertaken to work out

in asy head any scheme of division of the entire country.
The Secretary of the Treasury: Th^t ia exaotly \?h*t we
want»
Th« Secretary of Agriculture: Can you give us any test!

Cameron Morrison

994

aony on the course of oo&zseroial transactions and convenience In banking transactionsT
Mr. Sorriaon,: Of course I thinkrl can, or I would not be
here*
Tho Secretary of the Treasury: You aro a lawyer and so
am I„ so you tenon it io Tory necessary to toat the qualifications of & witness*
fir, Morrison: Yea, and about the boat way to do that
would be to hear what he has to say, if ho does not take
too long about it.
The Secretary of tho Treasury: But there are some preliminary questions, and if the witness shove in advance
that he doott not know what we are inquiring about, I do not
think he Ahowo that ha la Qualified.
Hr. Horriaon: Yes, that la true.
The Secretary of tho Treasury: So that on the question
immediately confronting us, of the banking and buaineoa
situation hero, and the statistical data w&iah would be
useful to the Conanlttee, we always like to know whether we
can get that information,
ttr, Morrison: Well, sir, ao I say, I hare thought about
it, and ^thought about it vary seriously, aa related to our

section thora, and I have soae Tiowa which I would like

Cameron Morrison*

995

to state to you*
The Secretary of tho Treasury: It you will st&te Just
briefly, we trill be glad to hear from you*
Mr. Morrison: In the first place, I think our people
generally have thie opinion, that that whole cotton country
down there ought not to be put together, and our regional
bank ought not to eatbr&ce too much of tho cotton belt, because that ootton crop, as you well k»ow, requires a l&rge
amount of sonsy, and at thana&me time, How the territory
suggested by HiohKond, and the territory suggested by
Mr. Victor, embraces Georgia and Florida and South Carolina
and Horth Carolina, In ©urbst&te only about one-third of it
is devoted to the cultivation of cotton* We have varied
industries* Virginia has no ootton and the Tannessos territory touched has no ootton there* We think the business
of rthat district is varied enough not to maXo too large a
demand in that district to move the cotton crop* I@ do not
want to go with Atlanta, becauas we eajiaot tliinfe of any
sehoise under which the country can be divided up and
mice a district around Atlanta that will not throw too
rcuch of the cotton belt together»
The oQoond section of this Act seems to require

Cameron Horrison.

that these districts a hall be laid out with dud regard to
the con/axiionca and customary course of business* that
*
language has no zref erenoe to the location of the Bite of
tna district bank, as I coicprehend it* It maters to the *
diet riot* Hot? we are vary anxious to have —•
The Secretary of the Treasury: Do you not think that
the convenience and customary course of business in the
district has relation to the location of the headquarters
bank, especially in a large area of this character?
Mr* Horriacn; I do, sir* but X do not agree with the
thought expressed by the representatives of Richmond hare,
that it has so mxch to do with it as they seemed to think,
that the customary course of business should control it.
I do not see how the location of the regional bank would
have anything to do with the regular channel of business*
Convenience* it seems to m&* should be the controlling
principle upon which it should be located, I cannot for
the life of me see — it is not going to be a local institution —

I cannot se© why putting a bank in a large

city will help the bank to discharge its functions to the
whole district any better thim in a small city# if it has
superior accessibility*

I cannot see why It should.

Cameron Morrlaon.

Secretary of the Treasury: You consider accessibility,
than, the only consideration?
Mr. Morrisons Wall, I would not say the only conaidera*
tlon* but tha prime consideration* How in our district
there ia no euprama financial city* The proposition at
Richmond, Baltimore or Atlanta ftaa ouch financial aupresacy
in our dietrict, as to give it tha right to have thia bank
located thara in order not to Interfere with tha regular
channel of buaineaa, cannot ba suatainad.
In our a tat a of South Carolina, wa do a large
busineaa »lth othor cities, it ia true* But while %hm
Virginia cltiaa have more banking capital than we have,
our atata has more population, and tre hare ssora property
valueo, and tha value of our fans products exceeds theirs —
The Secretary of the fre&aurys You roaliae that tha Act
providaa for the eatablish&ent of branch banka in the district.
Mr* Morrison: Tea*
fhe Secretary of t£a Treasury? Would not Charlotte get
every poasible convenience from the establishment of a branch
bank there that she would with the establishment of a headquartars bank?

...-J:

Cameron Morrison.

Mf. Morriaonx

998

I have tried to thirik of any particular

advantage in the qatablishaentnof this bank, to be frank
about it, other than by Just havins that many worthy gentlemen located there, and that business enterprise located there
and to save my ,lifa, I cannot think of any.
The Secretary of the Treasury: So far aa the question
of theae different cities goes, it is a- question of local
pride and prestige?
Mr. Morrison: Looal prida and prestige.
The Secretary of the Treasury: That la exactly trhat the
Committee cannot consider, and ore stated that befora wa
started.
Mr* Morrison: Tea* How I think this, we do not Ilka the
^oaumption of Richmond or Atlanta, that they have a right
I believe one gentleman stated hare yesterday that God had
given thorn

. a right —

The Secretary of tho Treasury: Eo assumptions gon&th
this Committee, so you naed not worry about that*
Mr. Morrison: And after thinking about it, we concluded
that Charlotte had as much right to expect this bank to be
located there for this district, if it ia created anything
lika ia being discussed, and it id ths doaira, I think, of
all the people of that section. I cannot see why Charlotta

Cameron Vorrlaon.

999

would not be just aa good a place for tho Crovern&ent to put
it, and why we would not liavo just as tauch right to it»
But this mich Is true, that if it ia situated in Charlotte
for that territory, tho accessibility ia certainly very
superior to what it ia on dither side of it.
The Secretary of the Treasury; Wo are familiar with
that, of course; we know all about Charlotte's accessibility,
Mr. Morrison: Yes, and to be frank about it, it is upon
that point almost entirely that we urge our case*
The Scoretary of the Treasury; We do not need any argument
upon that. I do not trant to eeom to out you off, but X
want to make it d e a r that of course the tine of the Commit too io oo limited, and there are eo oany gentleman to be
heard, that TPO want to avoid argument on anything that Is
obvioue.
ttr* Morrison: TT©11, sir, I believe if the Cozstnittee pleaaet, that ie the only thought that I cur© to ez&phaoize
about it. As to the ouaaeta of the banXa and all tuat eort
of thing, we havo a map here shoeing how easy it is to get
in and out of Charlotte* Of courao rro know our claim to it
dependo entirely on the district, ao to bow the district

Cameron

ttorrison.

1000

la first laid out, and wo think that a careful investigation will disclose that there la no regular channel of
buoinesa to an/ of these cities from that territory that
givee them any supreme right to this bank, absolutely
none.
The Secretary of tho Treasury: "Ho thank you very

BJUCIU

Hr« Webb; I want to present Hr, Wilkinson, the Cashier
of the Kerchanta and Farmers Bank,
STATEIEST OF MR* W. C. WILKXHSOff.
The Secretary of the Treasury: We oan hoar Kr. Wilkinson
for a moment. What is your occupation?
Mr* Wilkinson: Caohier of the Kerchanta and Farmers
National Bank at Charlotte, The assumption of Charlotte in
applying for this regional bank, was that the territory
mentioned would be laid out as suggested, otherwise we
would have no olaia to it. In all this territory the business naturally goes north, except Virginia* Virginia's
business goes south* The majority of the banking business
of Virginia la with fforth and South Carolina and Georgia,
and rcect of the cheeks that they handle go south, not
north, as does the balance of the territory

W. C. Wilkinson,

1001

fh« Secretary of the Treasury; How about the reverse
movement?
Mr. Wilkinson: Well* their business, their transactions,
are almost entirely, in ooaaaeroe and banking, with the territory south of them* In other words, they are sellers*
Th* Secretary of the Treasury; How about Richmond's buoinesa to the north? She oust have rery large transactions
northward,
Mr* Wilkinson: Tea, but those transactions to the north
originate through her ability to sell her coxsmeroe to the
I south,
the Secretary of Agriculture: Do you think a district I
laid out as this is and embracing practically only state!
which are large borrowing states, should be thrown together
and have a regional bank which would undertake to provide for
it in normal times?
Mr* Wilkinson: I think that this territory could take care
of itself, practically* and with the further assistance of
the government deposit* that I presume will be made with each
bank, &n& the note lssrae that can be made, and the rediscount
ing features from one bank to another, this territory will be
aisply able to take ©are cf the business which woul 1 naturally
go to this regional bank.

|I df

W. C. Wilkinson:

1003

The Secretary of Agriculture: Does it take care of itself '
i

now?

»
i

Mr* Wilkinson: Ho, they borrow north,

I
i

The Secretary of Agriculture: Would not they have to* in j
any onset
Mr, Wilkinson: They would have to borrow from the regional
Beaerve Bank.
The Secretary of Agriculture: The regional Reserve Bank
would just have its proportion of its resources there.
Mr* Wilkinson: But these banks do net borrow an a&ount
e^ual to the deposits with the northern Reserve Banks*
The Secretary of the Treasury: As I unieretcni from the
figures submitted a aoaent ago, you borrowed something like
$24,000,000 last year,
Mr. Wilkinson: Yes*

The Secretary of the Treasury: The resources of the disItrict as you have laid i t out* woull not nxske i t a district

!
I
I

able to take care of itself when the extraordinary den&ndt comes
and the Secretary of Agriculture's question is adirssaed to »
.I

Ithat phase, whether or not it would be wiser to organise a
district more varied in character and of larfcer reacurces.
ii

W. C. Wilkinaon.

1003

The Secretary of Agriculture: TZhother it would not be
better for that district.
The Secretary of the Treasury: Yea, whether it would not
be better for that district, or to have a smaller district
with less varied industries, better able to meet the neoese-

The Secretary of Agriculture: And your experienoe would
throw light on that question*.
Mr. Wilkinsons

I believe in tines of stress, if we should

have any trouble, that the provisions of this bill would
zsake it so that t U a territory cculd be taken care of by
any other territory. If there was a deiaand in that section
for funds, the Government in the first place could shift
its deposits from the section where it waa not needed, to
where it was needed*
The Secretary of Agriculture: But you wouli not want
that to be the nonaal situation?
Mr. Wilkinsoni

No.

The Secretary of Agriculture: And are not your moveesnts
of trsde down there in a certain sense abnormal; do you
not have a very nruch larger movement© in one season than in
another?

W. C, WilKlnson,

Mr. Wilkinson:

1004

In part of Horth Carolina and South

Carolina, and Georgia, it ie a cotton section; but in Virginia they raise no cotton, and in Florida their n.ovea:ent is
in the spring with the track proiuct, and in eastern Horth
Carolina it is the same way, strawberries ani fruits; so
that the lower anl eastern part of Horth Carolina and Georgia
and South Carolina* are the cotton sections &n& Virginia
and Florida and eastern Tennessee and eastern Alabama —
The Secretary of Agriculture: Would you say as a banker
that excepting in tiroes of stringency that district would
take care of itself?
Mr, Wilkinson:

I think it would, with the Government

deposits. Of course we are expecting that the Government
would place some of its funds in this bank, and with that
ani the capital and deposits of the member banka, I should
say it would be able to take care of itself, except in
extraordinary times*
The Secretary of the Treasury:

As a banker, alaft,

assuming that this district woro laid out, ani
local pride entirely in answering the question, ani having
r*g&r$. only to what is beat for that entire district, and
having regard also to the cuaternary course of business and
convenience of business in'the district, would you say

W. C. Wilkinson,

1005

that Charlotte was the be*t place to put that bank?
l£r* Wilkinson:

Absolutely*
m

The Secretary of the Treasury:

You would?

Ur. Wilkinson: Without any reference to local ;,ride at
all,

When this creation was first broached by the bankers

in Charlotte, I had net given it consideration, and I told
theiL I did not think it was a proper place for it; but
after studying the railroad connections and the location
geographically and the trend «f" trade* X became thoroughly
convinced that Charlotte was a proper plaoe Tor thia location.
The Secretary of Agriculture: T/hat is the principal factor
on which you base that opinion.
ISr* Wilkinson:

The distance by train from the points

that would be assigned to this territory.
The Secretary of jfericulturo: Is Charlotte to2ay in any
ofenao a banking centre?
Me. Wilkinson;

It has the largest banking capital of

any place in Korth Carolina or South Carolina, or any
place between Hichaoni or Atlanta*.
• The Secretary of Agriculture:

These Reserve Banks must

of necessity have large clearances bet?;eon each other*

W. C. Wilkinson.

1006

Ur* Wilkinson: Yo».
The Secretary of Agriculture: And we will take Rich&ond,
for instance, *Mch would be the largest city in this entire district,

Richmond already haa large bank clearances

with other banks to the northward.

Now if a Federal Eeaenre

Bank should be located rt Charlotte, all that business
would have to be sent back to Charlotte, and then clearei
from there through Richmond again with the banks to the
north?
Mr, TTilkinson: Yes.
The Secretary Gf the Treasury: Woul-i you say that that
was conserving the convenience and customary course of
business?
Mr* Wilkinson:

I would say that when this bank was estab-

lished, Ricfcisond woull have coajparjfctively amall business with
the banks north*

Most of the business would be done with

the Regional Reserve Bank.
The Secretary of the Treasury:

But t M o is not going to

prevent transactions with Kew Ycrk and Boston,
The 8eoret^ry of Agriculture:

And the member banks also

have that power,
Mr, Wilkinson:

I v?ou!3 say Richmond would aen± the

W. C. Wilkinson.

1007

business of Richmond — more of it would go south today
than goes north. I think possibly 75 per cent of the
checks handled by the banks in the City of Richmond go
south every day instead of north, and to that extent 75
per cent of them would be best served by having the bank in
Charlotte, and 25 per oent by having the bank north.
The Secretary of Agriculture: Mr, Webb, you can submit
anything else that occurs to you in a brief.
Mr* Webbs

Would you like to hear from any of the other

gentlemen?
The Secretary cf Agriculture: I think we have all the
facts we can get*
Mr, Wilkinsons

We woull like to subcJLt a brief a little

later. We did not have time to prepare it. Ani when you
gentlemen are oft your return trip from Atlanta, we would be
glad to have you stop off and visit us*.
The Secretary of Agricultures

We are going north from

Atlanta, you understand.
Mr. Webb: We will prepare a brief an! subnlt it to you.
We are very icutrh abligei to you.

1008

idf

3TATES3TTS SUBMITTED OH BEHALF OP
PHILADELPHIA*
8TATE»iEHT 0? !*&• LEV! L. RUE,
The Secretary of Agriculture: Will you state your
tlon, Mr. Rue?
Mr. Rue: President of the Philadelphia National
and Chairman of the Clearing House CoiEedttee of Philadelphia.
The Secretary of Agriculture: Hr. Rue, you are fand liar
frith thia bill?
Hr* Hue: I a©, sir,rcoreor less.
The Secretary of Agriculture: Ani you know the problem
we are trying to solve?
Mr, Hue: Vje do, sir.
The Secretary of Agriculture: The division of the country
into net less than ei£ht, norrcerethan twelva district a,
and the location of a Feicral Reaerve Bank in each district.
Ifow we welcome any information which you can give uo be*£w
ing on that problem,
Mr. Rue: May I first, with your permission, simply
present for the record resolutions which were passed by our
Clearing House and certain trade bodies, which can go on

Lev! L. Rue.

1009

the record?
!fhe Secretary of Agriculture: If you will, just read the
Clearing House resolution*
Mr. Ruet

(Reading) At a Special Hooting of the Phila-

delphia Clearing House Association, held Monday, December
39th, 1913.
On motion, the following Preamble and Resolution was
aborted;
VHEREAS The Federal Resenre Act as passed by Congress
m d signed by tho Proaident tton December 23rd last, provides
or the establishment of not loss than eight nor more than
;welve Federal Reserve Banks In "districts to be apportlond with due regard to the convenience and customary course
f business*; and
WHEREAS Philadelphia stands first in manufacturing,
econd in banking resources and third In population of the
roat citios of tho United States; and
8 the Commonwealth of Pennsylvania-, of which
Philadelphia Is the metropolis and thy natural financial
enter, haa a greater number of Hatlonai Banks than any
ther State in the Union, and
WHEPJBAS the banks of Philadelphia, by a biard and

Lovi L. Hue.

1OXO

liberal policy, have made the City a financial center not
only of Pennsylvania and states contlgueoua thereto, but also
a channel through which the "cuetosary course of business11
of a vast section of the United States naturally flows.
Therefore, be it
RESOLVED, That if the broad purposes and spirit of the
Aot are to be fulfilled, a Federal Reserve Bank should be
located in Philadelphia^
RESOLVED, that this subject be referred to the ClearIng House Committee with full power to appoint a CoazLittee
of Five and take such other steps as say seem to them advisable to best present the clalas of Philadelphia to the
organization Committee as Washington..
On motion* it was resolved that in the opinion of the
residents or other executive officers of the national
a represented at thiB meeting it is desirable for the
anks to enter the now system,.
Francis B. Reeves,
Presidents
ttest:
Jno. C. Boyd,

Secretary*

10X1

Lev! L. Hue,

The Secretary of Agriculture: How the other a are of similar imrort*
Hr* Rue* The others are froa the Chamber of Conferee,
Merchants and ttanufactuerea Aeooclatlon, Asaoeiation of
Credit Hon t and ?he Grocers1 and Ierorters1 Exchange
and ao on* I do not think we will take up your time 1$
reading them, but will slniply aubait than for the record,
because it would be simply a repetition,
The Secretary of Agriculture: Tee*
(The statements r re a anted by Mr. Hue, are as folloar*):
PHILADELPHIA CHA!£BER OP COJaEERCE?
Bourse Building, Phlla,, Pa,
January 10th, 1914.
Mr, John 0, Eoyd,
Secretary, The Phila. Clearing House Association,
Philadelphia, Pa«
ar Sir:
At the meeting of the Board of Directors of the
[(Philadelphia Chamber of Conferee held Thursday evening
Tanuary 8th, the following resolution was unanimously adopfrtd:

•It is the opinion of the Board of Director* of the

Lori IM BUS,

1013

Philadelphia Chamber of Commerce that Philadelphia ie entitled to havo a regional Reserve Bank. This city is the
first in manufacturing, is the second in banking resources,
is the thirdin regulation, and is one of the cost Important in the issue of cocusercial raper and in, the holding
of reserves for country banks. Philadelphia is the central
and nattmal banking head of one of the most populous and
richest sections in the United States. For these and other
reasons a federal reserve bank should be located here
if the rla-in mandate of the law i» to be carried into
effect*

That rasa-age of the law reading:

•That the districts shall be aprortionsd -frith due
regard to the convenience and customary course of business
and shall not necessarily be coterminous with any State or
States** '
should leave no question as to the legal necessity of
establishing a Federal Reserve Bank in our city*
The question of a Federal Reserve Bank Is not, In
our opinion, merely a banking quoetion, but is a question
of financial interest that affects every class in the

COBUBU-

nity. We have been informed, however, that the Secretary
of the Treasury has stated that he prefers he should be
visited only be delegations of bankers as he desires to

to a decision for the apportionment of the federal

OOBO

Lev! L. Hue.

1013

Banks on the basis of banking facilities and necessities,
and inv view of this statement, the Philadelphia Chamber of
Commerce will not t*Jce any action further than this expression of ita opinion, because of the confidence It has
that the representative bankers of this City will see to it
that the necessitifcar-and the needs of our city are taken
care of and that our juat demands shall be accepted.
It is voted that a copy of this expression of opinion
shall be sent to the Clearing House Association of Philadelphia
and to the prase*

CHARLES J* COHEN, President,
B

H.. H, Kelly, Secretary.»

PHILADELPHIA AS80CIATI0H OF CREDIT UES
Incorporated.
1911 Chestnut Street,
Philadelphia,
January 13th, 1914.
At a 3pecial Eieetins of tho Board of Direetore of the
Philadelphia Association of Credit lien, held January 12th, tfc
following resolutions wore unanimously adopted:
WHEREAS: The Federal Reserve Aot requires the'establishment
of no less than eight Federal Reserve Banks throughout the
country, and "That the districts shall be apportioned with
due regard to tho convenlenoe and cuato&ary course of bueineifa
and shall not neoeeoarily bo co-t-Qr n.inoU9 with any state oi
States", be It therefore
RESOLVED: That Philadelphia with its large banking resource^,
ranking eecondonly to Hew York City, ita manufacturing pro*
eminence lto wonderful commercial, fining, transportation an<
agricultural interests, we believe is entitled to be selects*
as a superior location for one of the Federal Reserve Banks;
and be it further
RESOLVED: That inasmuch as the Secretary of the Treasury ha
stated that he prefers he should be visited only by delcgatl
of bankers, that this Association will not 3t*ek any direct

1015

aosaBunioation with the Organization Committee at Washington
because it has full conficence that tho ropresentatirt
barkers of this City will demonstrate to that Committee the
justice of Philadelphia*0 claims and see that the needs of
our city are properly oared for| and be it further
RESOLVED: That a copy of these resolutions be sent to the
Clearing House Association of Philadelphia and to the Press:*
THE GROCERS* AHD IMPORTERS* EXCHANGE
of Philadelphia.
Philadelphia Bourse
Philadelphia, January 13,
1914.
Mr, John C« Boyd, Secretary,
The Philadelphia Clearing House Association,
Philadelphia, Pa*
Dear Sir*
At a meeting of the Board of Directors of the Grocers
and Importers' Exohange of Philadelphia, held January 7th,
1914, th? following resolutions were unanimously adopted;TOEREASJ The Fodoral Reeenre Act requireo the eatabliahaaant
of no lose than eight Federal Reserve Banks throughout the
country and "That the districts shall be apportioned *?ith
due regard to the convenience and custoi&ary course of bus

1016

inesaand shall not necessarily be coterminous with anyState or States,11 be it further
BE SOLVED: That Philadelphia owing to its numerous superior
qualifications as a business and .banking oenter, ranking
first in manufacturing interests, second in banking resources and third in population, la in our opinion entitled to ba
selected as a location for one of the Federal Beaerge Banks*
Philadelphia ia well known as the natural banking head of
one of the most populous and affluent sections of the country,)
which fact should emphasise the justice of the establishment
of a Federal Reserve Bank in this City, and be it further
BE80LVED: That as the Secretary of the Treasury has expressed;
a desire that he should be visited only by Delegations of
Bankers, this Exchange, having full confidence in the ability
of the representative Bankers of Philadelphia to ably demon*
strate the superior claims of Philadelphia and urgea that the
needs and requirements of our City be given just consideration, will not take any further action at this time.
RESOLVED: That a copy of these Besolutiona be sent to the
Clearing House Association of Philadelphia and to the Preao.

John E. Poore
Secretary,

Chaa. D. Joyce
Prealdent.

1017

MERCHANTS AHD KAITUFACTURERS ASSOCIATION

Philadelphia,
December 30,

The following Resolution was adopted by the Board of
Directors of the Harchants & ttanufacturers Association of
Philadelphia:•WHEREAS, Federal Regional Reserve Banks are contemplated by officials of the United States Government, and
•fTHEREASJ the distribution of these regional banks
apparently omits J-hiladelpbia as a reserve City, and
•TOEREAS, the icrortance of Philadelphia aa a manufacturing and industrial centre, ao well ao ita geographical
location and large banking doroaito, would point to this
City as a logical rlaoe for a Regional Bank; therefore be
it
RESOLVED: That the Merchants and Manufacturer* Asooc
iation is unalterably opposed to having this City disregarded
in this respect* and
That we call uj.on the President* Senators, Bofresentativea, %a& officials of the government, as well as business
men generally, to lend aid and influence toward having Philadelphia recognized ao a Regional Reaenre City, and to pro-

1013

vent the elimination of Philadelphia in this regard."
On behalf of the Board of Diroctoro,
D« ?• Fleiaher,
President.
Attest:

C. !?• Sunanerfield,
Secretary,

PHILADELPHIA DRUG EXCHANGE
Bourse Building,
Philadelphia.
Mr. Levi L. Rue, Presidentr
Philadelphia national Bank,
Dear Sir:
At a stated nesting of the Board of Directors of the
Philadelphia Drug Exchange* held on January 14th, 1914,
the following preaisble and resolution s-ere unanimously
adopted:**
TOEREAS The Philadelphia Drug Exchange, composed of
merchant© and Kamufacturora in the drus and allied line a,
vievo with deep interest the plans proposed for placing in
operation the Federal Reserve Act rooontly passed by Congress,
and
UHEREA8 They thoroughly believe that Philadelphia,
Its large banking resources, its preeminence in Bsanuf actures,

1019

and its extended oosmiercial interests, is entitled to be
selected as an eminently proper location for one of the
Federal Heeerve Banks to be created under thia act, therefore be it
RESOLVED That the Secretary of the Treasury and his
associates are respectfully butisarnestly urged to give due
consideration to the arguments which will be advanced by
the repreaentative bankers of this city, Tilth the hopo that
this nay result nin the establishment of such a bank here,
as suggested.

Very truly yours,
J. W. Ougland,
Secretary*

1030

Mr, Rue: With your permission, rre have prepared here some
iata which xra think will bo of great assistance, and I
rould like to give eaoh one of you a copy so that you can
follow me, and if you will permit me to read it, if there
ire any questions you want to ask, I will either try to
mswer them at the time, or later on, if you will mark
;hen, whichever is your pleasure.
The Secretary of the Treasury: before you begin, have you
jrepared a map of your proposed district.
Mr. Hue: Too, we have a map which we thought we would prelent to you later*

Would you like to have it now?

The Secretary of the Treasury: Wo would like to seo it
tew*

X& simplifies the natter very ouch if we can under-

stand the outline of the district as proposed*
Mr, Hue: We have a map showing the districts, and
attached to eaoh section we have designated the cantor by a
-sd circle and a number, and the data of that section is
attached •
The Secretary of the Treasury: you have figured on ten districts,
Hr, Rue: We have figured on ten districts, sir. That
las seeaed to us, as we have gone into this problem, would
>rob&bly best serve the needs of the country atthis tima,

Lag! L. Rue

anyhow.

102L

I will not attempt to speak of courae, of the past

glories of Philadelphia, but will get right down to the facts.
The Secretary of the Treasury:

Ws know the glories of

Philadelphia, and are proud of them, and now we will take
the facts.
Mr. Hue: Vs are glad that you appreciate them, too.
¥• are speaking of present achievements and not,past.
Knowing that it is the d&sire of your Comaittee t to
roceivo suggestions and information which will aid you in
determining the proper location for the Federal Reserve
Banks, and that you will render Impartial judgment and will
approach the subject with open minds,

we venture to submit

for considerations the following facts:
in order to endeavor to be helpful to the Committee
in solving thia soat difficult problem, «a have prepared
a map which Illustrates our views aa to the moat practical
i

division of the country into districts so that each disi

xrict will be ao nearly as possible, symmetrical, and will
lhave its Federal Reserve Bank Iocat3d in the most active
business city, and will at the same time possess sufficient
banking resouraoa within its territory to make a strong
Reserve Bank.

I»evi I*. Rue

3.033

The number of districts should be determined not so
much in anawar to the claims of the various cities actuated
by local pride, which of course is natural, but in order
to render prompt and efficient banking service to the member
banks without radically

changing the cueteaary course of

business.
The attached map indites approximately cur views as
o districts, vis:
Ho. 1, including Maine, Hew Hampshire, Varment, lfassa~
Ghusetts and Rhode Islandwith headquarters at Boston.
Ho. 3, including Hew York State, Connecticut and that
porticn of Hew Jersey lying north of a line draim east of

from Trentonj with headquarters at Hew York City, un& a
brancn at Albany.
Ho. 3 including Pennsylvania, southern Hew Jersey,
Delaware, Maryland, Bistrict of Columbia, northeastern
half of West Virginia, Virginia and Horth Carolina

with

headquarters at Philadelphia zn& branches at Pittsburgh,
Baltimore and Bichisond.
You will notice in Ho. 3, we have included fraryl&nd
and Virginia and Berth Carolina, not that we wnatee th: se
particular states, but we wanted to be helpful and w#

Levi L. Rue

1023

with the vast banking capital of Philadelphia it would aid
in financing thooe districts, where banking capital is
scarce.
H. 4, including South Carolina, Georgia, Alabama,
Florida and eaptern Tennessee; with headquarters at Atlanta*
H« 5, including Ohio, Kentucky, Indiana, Illinois,
Michigan, the acuthern half of Wisconsin, southwecternfc,
half of West Virginia; with headquarters at Chicago and a branch at Cincinnati.
Ho. 6, including, Mlescurl, the southwestern portion of
Tennessea, the northern part of Arkansas, Oklahoma, Kansas,
Nebraska, T owa and the northern portion of Texas; with
headquarters at S U Louie and beancbes at Dallas and
Kansas City.
*°« ?, including lon^r His sisslppl. Loulsiar.na, lower
Arkansas and wouthern Texas; with headquarters at Hew
Orleans•
Ho. 8, Including Minnesota, uppar Wotioondia, Horth
and South Dfckota and Montana; with headiuarters at Minneapolis, and a branoh at ^ l e n a .
Ho. 9, including Colorado, Wyoming, Idaao, Uta'u,
Arizona and Hew Mexico; with headquarters at Denver,
Ho. 10, including California, Washington, Oregon,*evada

Lev! L. Rue

1034

with headquarters at San Francisco and branches at Seattle,
Portland and Los Angeles.
If advisable, Ohio, half of West Virginia, Kentucky
and Southern Indiana can be grouped about Cincinnati,
forcing an uleventb district, and possible a twelfth district
about Dallas, including practically all of Oklahoma and
Texas.
District No. 3 can with convenience be United to
Pennsylvania, southern Hew jersey, Delaware and eastern
Maryland, but this will bo to the disadvantage of ether
parts of the district, where the banks are hsavy borrowers.
The attached sheet indicates for the several districts
their population, capital, surplus and lnolvldual deposits
of national banks

en October 31, 1913; and subscriptions

of capital and federal Reserve Banks and their minimum deposits, baood on individual deposits only of national
banks

and assuming that all national banks trill become

members.

(Exhibit A.)

This arrangement should accomplish the following
objects:
More than the •iniraum capital is provided for all districts save that around Denver.
As nany districts as possible contain self-supporting

L. Hue

1035

banks by reason of varied industries, diversified business
and accumulated banking resources, with ample funds in
creditor areas to care for normal needs of borrowing areas.
Each head office is loc ted in the principal city of
it3 district, and therefore upon established routes of
trade currents, effecting auperior mall accessibility for
entire district to head office or branches*
The districts about Hew York, Chicago, Philadelphia
and St. Louis will each contain population ranging fron
13,000,000 to 20,000,000. The other districts will each
have considerable smaller population.
The Federal Reserve banks in Boston, Net? York, Chicago
and Philadelphia will be larger than the others, and can
extend assistance to Federal Reserve banks in Atlanta,
New Orleans, Minneapolis and possibly St. Louie, which will
probably borrowtoavilydurinfc the seasons of crop
ation

prepar-

and crop moving.

The district thus defined about Philadelphia, will
embrace a region in which are the following activities:
exceptionally diversified manufacturing, highly varied
farming, extensive mining, timber and trucking oparaticng.
The ourrents of trade move to the e*st and to the
northeast, becauae there are the areas of

densest

Lsvi L. Rue

population and heaviest consumption,

. 1036

and the points of

national exchange settlement.
The total banking resources of the State of Pennsylvania
comprise 67< of the total banking resources of the district
of thfthich Philadelphia would be the natural centre.
The states in this cistrict of which the banks are very
light borrower^, are Pennsylvania, ^elawi.re, Ifest Virginia
and Hew Jersey; as the following figures, representing
ratio of maximum borrowing in 1913 to capital, will illustrate:
Pennsylvania

5.6$

Delaware
Wsat Virginia

.38$

Maryland
Washington City
Virginia
Hortb Carolina
The transportation facilities of the district, exclusive
of the State of Pennsylitsnia, are mainly along parallel
lines, running toward the northeast.
Philadelphia has better railroad facilities than any

city

Lev! L. Rue

1027

other city in the district, being accessible f rosi nearly
every banking point within 18 hours;
the greatest number of hours away.

Aaheville, H. C , being:

However, Aaheville tanks

have for amny years transacted buslneos satisfactorily
with Philadelphia.
The following tab's will show the number of hours
required to transport mail from various points within
the districts to Philadelphia*

Asheville, N. C.

31 hours

Wilmington, H. C.

Raleigh, H. C.

16 *

Charlotte, R. C.

16 *

Parkersburg, W. Va.

Morgantown, W. Va.

14 •»

Wheeling, W. Va.

Charleston, W. Va.

11 »

Warren, Pa.

Washington, Pa.

11 «

Horfolk, Va.

•

Lynchburg, Va.

9 «

Richmond, Va*

Pittsburgh, P*.

9 «

•

1026

Say ra, Pa*

8 hours

Gettysburg, Pa.

•

Cumberland, Md.

•

Frederick, Md,

•

Altoona, Pa.

Williaasport, Pa

•

Scranten, Pa.

filkes-Barre, Pa.

York, Pa.

•

Salisbury, Ud.

Dover, Del.

•

tashpngton, D. C.

•

Bricgeton, If. J.

•

Harrisborg, Pa.

•

Baltimore, Md.

Lancaeter, Pa.

Wilaiington, Del.

•

Practically any p&rt of Hew Jersey, south cf Trenton, within
ona to tare? hours.
The nuttbar of mail trains arriving at and leaving
Philadelphia par day is 664, and the poets.1 receipts for
the year ending June 30, 1913, amounting to $3,028,000.

flue

1029

Philadelphia ia the natural metropolis of the distriot,
and therefore the natural headquarters of the Federal
Reserve Bank serving all the district.
The largest sub-trasury in the district is loc ted a&
Philadelphia •
The Philadelphia Mint is the first Mint established
in the United States, and today transacts the second largest
volume of business.

It location in a head city willfc

best serve all the banks in. the district; total exports and 1
Imports for the year ending June 30, 1913, a&nuited to $169,
584,000 and total customs receipts fpr the same period 1}
amounted to $20,797,000.
The Philadelphia national banks reported to the
Comptroller of the Currency on October 31, 1913,
$22,000,000 capital
40,000,000 surplus
184,000,000 individual deposits• '
We have left out the bank deposits, because they
will be changed under this system.
The State of Pennsylvania leads every other state*
In the number of the national banks, having 838, with
capital of $116,000,000. Surplus $136,000,000.
ual deposits $803,000,000 as of June 4, 1913.

Individ-

Lev! L. Hue

1020

There are in the State of Pennsylvania 493 banking
institutions operating uBder state charter, having a
capital of $118,270,080. Surplus and profits of
|302t780,453, and individual deposits of $885,765,643, as
of June 4, 1913.
The national banks will in all probability all become
member*;

how many of the state institutions join the system

depends largely upon whether the organisation committee
the
locates/Federal Heasrve Bank at Philadelphia, the logical
a.

place for the headquarters in accordance with the spirit
of tha Federal Hasarve Act, or places the bank elsewhere
and subject Pennsylvania banks to the inconveniences of loeee
attendant upon following artificial channels of trade.
The Secretary of Agriculture:

Is there any restriction

in the law against state bank subscribing?
Mr. Hue:

Hot that I know of.

The Secretary of the Treasury :
Hr» Hue:

In Pennsylvania?

Ho, they cannot subscribe, but I think to make

the system advantageoustand effective to the© the la*? would
have to be amended so as^to permit out state banks to invest In commercial

paper and discount commercial paper

Lev! L. Rue

The Secretary of the Treasury:

1031

Upon the point you make

therap .that their coroing into the system would dependiargely upon whether the headquarters bank were in Philadelphia,
you know that many bankers and other gentlemen in Heir
York contended for a vsry large denominating bank there,
with Pennsylvania included.
yr. Rue: Tea, sir.
The Secretary of the Treasury:

Suppose that were tola

done and the headquarters bank were in Now York, would
the state banks still hesitate to go in?
vr. Rue: No, I do not think so.

I think if your gentlemen

in your wisdom should deside it was desirable to place the
great resources of Pennsylvania, Philadelphia alone amounting to over a billion of dollars, into the Hew York system,
if we did not got a bank in Philadelphia, I think Hew
York would be acceptable, but I think it would be contrary
to the spitit of the Act, to make a great

dominating

bank in Hew York.
The Secretary of the Treasury:
hand —

and I only ask this torasehow strong a point

| this is, you understand.
Mr. Rue:

Suppose, on the other

I understand.

Lev! L. Hue

The Secretary of the Treasury:

1032

Suppose en the others

hand, the district as you have outlined It here, which embraces Washington, had Waahlx&on
Mr. Rue:

aa a headquarters.

I do not think the banks would come in.

The Secretary of the Treasury:

Why not?

Mr. Rue. Because It not the natural trend of trade.
We hare no business in Washington, and Washington Is not
a commercial city*
The Secretary of the Treasury:

But this location of

Washington, would not Interfere with the normal course of
exchange as betwsan the member banks.

Mr. Rue: „ Why nott
The Secretary of the Treasury:
to that.

There is no Interruption

These headquarters banks ^re, of course, the cue*

toflians of a large amount of reserve and hold 'some government deposits, and are reservoirs to be tapped when neoes*
aary for certain specific purposes under the Aot. You
wuuid be able to tap the till just as well if it were located in Washington, as you can tap the till we have here
now, without injury tc the ordinary commercial course of
transactions.
Mr. Rue: I hardly think you could.

You are probably aware

Levi

L. Rue

1033

Mr. Rue: I think that la a different proposition, because if we had one great central bank, the resources would
be concentrated.
The Secretary of the Treasury:

The point I want to

bring out is whether, ao a matter of fact, there la anything
in the proposition, rather than as a matter of sentiaent.
Mr. Rue: I think there is.
The Secretary of the Treasury:

I know that sentiaent ft

is 90 strong aaoun/cities, and that is the thing we have

disregard in the Interest of the proper solution of the
aole and very: important economic problem confronting the
committee, but it is so strong is some cities that some of
the Committee to prenent their case on sozee other city
which they consider a rival.

How the Committee is Just as

able to digest a fact about any city, no natter where it Is
presented.
Mr. Rue: I would not ba considered presuaptlcus If I
should ask you what lead to you favor the establishment
of a great bank in Washington rather than in the greater
city of the district?
The Secretary of the Treasury: We are not suggesting it,
but we waat to get your views on the question*

T,evi

1034

L. **•

that in a great centre like Philadelphia, where there are
large commercial transactions, the banks have to have frequently

near the close of banking hours, the ability to

meat large demands —
The Secretary of the Treasury:

On that very point, the

bill provides for branches, you understand.
Mr. Hue:

I know that.

The Secretary of the

treasury:

Suppose you had a branch

under such circumstances in Philadelphia and

—

Mr. Rue: And the haad bank in Waahingtont
i

ingbenSecrotary of the Treasury:

The head bank in Wash-

ington.
Mr. Hue:

It woujd be the tail wagging the dag, because

the vast business of that bank would naturally

be where

the great business ic, and the great business will be in
Philadelphia, becauce it is the metropolis
The Secretary of the Treasury:

of the district*

Suppose some gentlemen

bad succeeded in impros *ing their views on Congress that
bnly one central bank sho Id be located here in Washington
>ith a branch in Philadelphia, would you refuse to take in
i

,he state banks becasua of the head bank being located
n Washington?

LeYl L. Rue

1035

Mr. Rue: But I am giving you what I think is the logical
reason —
The Secretary of the Treasury: But I am asking what
reason would prevent itself. After all. It gets back to the
fact whether or not it is advantageous to the state banks
to cone into this system, and whether the head bank isA in
Baltimore, Washington, Philadelphia or anywhere else, if
it is to furnish proper facilities, I suppose they would
accept the facilities, and otherwise not.
Mr. Hue:

I claim the facilities would not be equal, be-

cause if the bcanch bank —

while the nominal head might be

in Washington, Baltimore or some other city, in the district
the real business

and resources of that bank would have to

bewhore the greatest demand upon it was, if It w&e to
be effective.
The Secretary of the Treasury:

I think I ought to aay

here, as I have said to all the other cities which have
appeared, that you must not infer froa the line of questioning that we have an opinion. We only ask these questions to bring out the argument. What we are after is
light, and we want facts.
Mr. Rue: yes.

Lev! L. Rue

1036

The Secretary of Agriculture: nn that same subject, what
would the banks do, do you think, if Pittsburgh were made
the head?
an
Mr. Hue: I think Pittsburgh would be/unnatural

location

or this reason. The course of trade is to the east and
ortheast. The best evidence a-* to wfefct is the real course
s the demand for exchange. That shows the course of trade,
her© a Merchant has to make his 48ttlenents. How Pittsurgh exchange is never sought,' That fact is it is
hunned by —
The Secretary of the Treamry:

does not pass at par?

Mr « Rue: You sake that comment, sir. 1 simply said shunned
d why is it shunned? BecauBd it is not needed, and no
ettlements are made in Pittsburgh.
The Secretary of the Treasury: But under this situation
he exchanges will be at par, and so the parring of exchange
verywhore will correct that situation.
Mr. Rue: But what would be the result, if a Federal
iesorve Bank was put in at Pittsburgh, and the demand fort
he exchange, if the Philadelphia banks had to throw into
lttsburgh, we will say, and all this section towards the
est, the business which they get which produces their
xchange. low as I say, the trsnd of trade is east

Lev! L. Hue

1037

northeast.
The Secretary cf the Treaury:

It would get down to a

question of clearances, that Is all,
Mr. Rue: Exactly. The result would be a practical
standpoint that the banks In this territory which I have
outlined there* in Sedtlcn 3, would send their business of
that description out to Pittsburgh with the loss of a nught
or a day 1 * sail, to that bank to create reserve in their
federal Reserve Bank. Vow what would the Federal Reserve
Bank dowith it? It would have to sell It for collection
eastward again, cither to a Federal pas *rve ^ank in Hew
York, or Atlanta ofc Boston, or wherever you gentlemen
may, in your wisdom locate them. And the march ant a of
Philadelphia, our reserves being in Pittsburgh say,
would have an exchange, which, you say would pass at par
through these other Federal Reserve B*nks, would be unnatural
and it wculd create such a preponderance of exchange against
the federal Reserve Bank in Pittsburgh, that it would be a
continual debtor to the Federal Reserve ^anks of the east,
and wculd require a constane shifting of balances of
currency. I do not"care how you locate these banks, you
cannot overcome the l a w of trade.

1038

Lev! L. Hue

The Secretary of the Treasury: That is exactly what we
do not want to do.
Mr. Rue: X know that, I am sure you do not , but you
cannot overcome the laws of trade•
The Secretary of the Treasury: That is the reason this
is the kind of information we want*
Mr.Rue: I understand, and I am trying to explain that
you cannot overcome the laws of trade. If you should place
a Federal leserve Bank In Pittsburgh to represent this
eaetorn district, the balance of exchange 1 s v&lways eastward, because there ie always the great density of population, and the great coneuxin? powers, and there are the
importing ports, and settlements have to be marie in the
east.

NOT?

tha Federal Reserve Bank in Pittsburgh would be

a continual debtor to the Federal Reserve Eajiks on the
Atlantic Coast, and would require continual shifting of
money tc off-set. that debit balance.
The Secretary of Agriculture: S uppose you took exactly
the same area and put it in Pittsburgh, instead of in
Philadelphia.
Mr. Rue: Thereame situation exists.
The Secretary of Agriculture: You would have exactly the
same amount of banking power?

1039
Levi L. Rue

Ur. H u e : * o u ^ould have exactly the same amount of banking
power, but you *ould be goinf; contrary to the law and trend
of trade.

The trend of trade ie eastward and northeastward

towards the density of population, and the Pittsburgh bank,
even if you sake the district as it is, would be a continual debtor to the east, as it is now, and you «ould put
a great expense on that bank in making a credit balance
against the tremendous debit that would be cosing from
the other Federal Reserve Banks in the east, which gets
the vast volume of exchange.
The Secretary of the Treasury: Would the difficulty be
lessened if Baltimore were made the headquarters, I mean as
against Pittsburgh.
Mr. Rue. Surely.
The Secretary of the Treasury: And so far as Washington
ic concerned, you think it would not be lessened anything
like the sane degree as if Ealtiaore were chosen?
Mr. Rue: I think Baltimore and Washington are on a
par as far as echange goes*
The Secretary of the Treasury: Baltimore has a very large
foreign exchange?
Mr. Rue: Comparatively, sir.
on*

I will touch upon that later

1040
Levi L. Hue

The Secretary of the Treasury:

We do not want to interrupt

your argument, but sometimes it elucidates the matter to
bring out pointe as you touch upon them;
Mr. Rue: I understand.

Banking is tho servant of the

commerce, hence banking facilities mutt folio* commercial
transactions,

Philadelphia has more important trade rela-

tions *ith this District than any other city.

At all hours

trains are moving towards Philadelphia bearing raw material
which Philadelphia industries bought from all parts
of the District and the entire south and west, and are manu! factur^d into the finished product and then distributed
throughout the world, total value exceeding $800,000,000
per annum.

The total Philadelphia tonnage as taken from threb

of our great trunk lines is 30,357,561.

This tonnage

consists principally of
Coal (Pennsylvania products 47jt of all the coal
mined in the United States)
ore (Philadelphia imported 1,696,333 ton»s cCf ore
during the year ending June 30, 1913)
'Iron and Steel
Haval 8tores (The naval stores of the south are
used by Pennsylvania paint manufacturers, soap makers and
paper manufacturers.)

1041
Lev! L. Rue
Timber (Philadelphia ie building 12,000 houses per

annum.

MoBt of the lumber consumed here in shipped from

the South)
Leather (Philadelphia la a veil known leather zarket)
drawing part of Ite supplied from 0er,r8ylvania, l?est Virginia and Borth Carolina
Cotton goods (Three-fifths of all the yard produced
and market by Southern cotton milla le bought and distributed by Philadelphia wholesale firms, amours ting to
$*5,000,000 per annum)
Raw eugar (Philadelphia ranks second in sugar refining in the United States)
Tobacco (Philadelphia drains leaf tobacco from South
Carolina, North Carolina .land Virginia, as well ao from
Lancaster County, Pennsylvania).
Wool {Philadelphia la 1913 handled 90,000,000
pounds of wool, and her industries manufactured $54,000,000
offtoolproducts)*
The Secretary of the Treasury:

Ho* does that compare,

for instance, with the wool industry in Ne* Efcgland?

I do

not recall the figures?
Mr. Rue: I do not kno*

sir.

Kut of couree, a great

deal of the wool which comes to Philadelphia ie sold again
to Hew England*

But you see the figures, 90,000,000

pounds of wool and $50,000,000 In products of wool*

1043

LevI L. Rue

Of course in the product of wool they do not make everything of pure wool.
The Secretary of the Treasury: I understand they may be
more inclined to do that now.
Kr. Rue: Perhaps so. I vould like to call particular
attention to this, that Philadelphia is the largesttextile centre in the United States, and of couree prac-

tically all the cotton conBumeJ by her cloth mills, hosiery
mills and knitting mills coses from the south.
Philadelphia has become a great market for the purchase of bills of exchange against cotton, so auch so
that these purchases now extend into every cotton town and
village in the cotton states. The development of this market
in Philadelphia for foreign bills has created a competition
for these which heretofore did not exist, as they were
practically all financed through New York, ThiB is a great
benefit to the cotton shippers and dealers.
The Secretary of the Treasury: Have you any statistics
on that?
Ur. Rue: I have a little later on.
Tho Secretary of the Treasury:
that subject in Now York.

He h:id aoffie figures on

Levi L. Rue

Mr.Rue: Yes, sir.

Philadelphia will probably lose this

business and it will again go to Hew York unless a Federal
Reserve Bank is located here,

A vast amount of exchange

is created by those purchases of cotton in the fora of
drafts against cotton dealers in this city and this is the
method of financing even though the cotton may be shipped
for export from Galveston, Ken Orleans, Savannah, Charleston, Horfolk or Baltimore, consequently a very large amount
of Philadelphia exchange le created in the south and
thie has made desirable the opening of a large number
of bank accounts in Philadelphia by barks in almost all
tha principal cities and tor<ns of tfee Cotton States.

These

banks should have the facility of a ready transfer of the
balances which this exchange creates, through L. Federal
Reserve Bank located here.
No small part of the foreign exchange created by
such deposits is sold in Philadelphia.

As art evidence of

this, the foreign exchange turn ovor by the banks of
Philadelphia last year amounted to over $3E0,C00,0G0,
covering all - lasses of business.

As one of the important

functions of the Federal Reserve Eanks will be to deal
in foreign exchange Philadelphia tilth the isuflens-s business already developed will bs a logical and advantageous

1044
Levl L. Pus

location for a Federal Reserve Bank*
Foreign Exchange can be handled nitb equal facility
In Philadelphia as it can be in He* York because the
closing of th 1 nails for fa»t

steamers sailing from the port

of Kew York is practically the eame in Philadelphia as Hew
York.
All these lines of commerce create banking relations
Therefore, the files of Philadelphia Eank Credit Departaenttf are filled with data regarding the banks throughout
this dlstrlttt-and their customers. As the Philadelphia
banks are also among the largest buyers of commercial paper
from note brokers, Philadelphia is aloo a centre of accurate
information fir credits of this sort.

Philadelphia banks,

including that thay buy for their correspondents in Pennsylvania, Rew Jersey and Delaware, purchase annually a
voluae of commercial paper of business firms and corporations located all over the country from the Pacific to
the Atlantic end from the Lakes to the Gulf, a&grcgatin£ about $200,000,000.
Philadelphia io not only the largest, richest and
busiest city in the district, but it has been for £enerationa the city of large wealth and accumulated capital,

1045
Lev! L. Rue

its lines of activity are firmly established and
broadly diversified.
Banks of Philadelphia hsve the accounts of business
flrae and cor:orations outside of the city represented by
mills in the south, manufacturing concerns of the Middle
Vest, wholesale and jobbing firms and corporation* in dry
goods, hardware, groceries, harvesting machinery and other.
staple products, numbering approximately 1,000.

The total

accommodations granted to these concerns by the banks of
Philadelphia **ill aggregate $50*000,000.
There are likewise 4,000 banks from every state in the
Union keeping accounts in Philadelphia.
The Secretary of the Treasury:

On that point, Phila-

delphia payo a very liberal rates of interest on bank balances, does she not/
Mr. Rue: Ho, sir, not unusual. Tfe pay but i> per cent.
The Secretary of the Treasury: Eut ycu collect checks
frad, I believe.
Mr, Rue: Only nominally free,tfr.Secretary, for this
reason.

Philadelphia has an arrangement *hich I think is

unique. We do not like other cities, allo* interest on
a check as soon as it reaches our banks, whether it be on
Swi Franciscoffi Galvestcn or Jacksonville, Fla.

But the

1046
1*

Lev! L. Rue

Philadelphia banls have arranged as a schedule of time allowance baaed on actual experiences, and if a bank froa out of
tov«n eenda us a check say on Jacksonville, F1&., or San
Francisco, a tine allowance ia mede on that check until the
bank receiving it can get the actual

returns back

and

interest is not allowed until that time is consumed.
Then besides that we require, while nominally it say be aaidThe Secretary of the Treasury:

That id quit*; alluring

isfctnot?
Mr. Rue: Alluring to whom?
The Secretary of the Treasury:

To the banks which keep

their balances there*
Mr. Hue: It may be alluring to them, but they are not
allowed interest until we get the money back, as compared
v,ith other cities.
The Secretary of Agriculture:

In Foston the other day

a ereat number of the Hew England bankers said they kept
thuir accounts in Philadelphia because they di.l clear free,
but that normally they would not do

it.

Kr. Rue: Of course we do net want to give secrets
away as to our methods of dcing business, but you know
people in thie country hate to pay a direct charge; they
will atand an indirect charge where they will object

104?

Lev! L* Rue
strenuously to a direct charge•
The Secretary of the Treasury: They feave been educated
to that*
Mr. Rue: Yes, *ni a banker will do everything to avoid a
direct charge of exchanee, but is perfectly willing to
pay an indireot charge of exchange. Ey euch pl&ns as I
stated, a time allowance is n&de and in many cases they
require a free balance froa country banks* We do not allow
interest on all of those balances, but not only take that
time allowance, but require a balance to be retained
«ith u«, without interest*

And if that does not work out

profitably, all the larger banks keep on analysis department, and at the end of each aonth we know how an account
stands, and even after all these devices I have deecribed
to you, if our banks come oul loners, *e charge to the
bank the expense of operating and the actual loss, so
they do not get free exchange.
The Secretary of the Treasury: You do not m^an to serious*
ly eugrgest that a banker Is as easily Tooled as that, do
you?
Mr. Rue: Ho, I do not think— that ic not our side of
it, but I think it is human nature to object to a direct

Levi L. Rue

charge on exchange.

And then I wouli like to say this,

that business begets business. A b&nk for instance in a
certain town ie very desirous of getting tha exchange on
its own town, as you oan readily understand, bscauso it
makes it a creditor bank.

Now, the settlements in the tc^sns

say in the south, arercadeeither In cash or northern
exchange, as the case may be.

If a bank in a certain town

gets a less amount of exchange, on the other banks, than
the other banks receive on it, It is a debtor,bank, and
must make a settlement to the debtor bank in that city,
either xn northern exchange or currency.

It is of great

advantage to each of the banks in that city to get as much
local exchange as they can, to throw them a creditor bank.
Therefore, by attracting to ourselves the vast voluse of
exchange, It brings its remuneration in that it brings to
us the accounts of tba interior banks throughout tho United
States, who want this local exchange on their own town
to throw them a creditor bank.
that
The Secretary of Agriculture: How/will be changed,
Mr. Rue: Yes, I understand, but I am simply answering
the question why we do that business at present.
The Secretary of the Treasury: This argument is advanced

W49
Levl L. Bue

in favor of a number of citlee aa to these clearings, arid
we desire to have as such light on that as we can get, to
see what would \>t normal, and to vchat extent this i« artificial
beoauae we are enabled by that means to judge asore clearly
as to the importance of this point.
Mr. Rue: I have nndeavored to state our position, le
have given in our figures only individual deposits, because the other figures would be misleading.

Wo could have

made our figures look much larger, but wo realised us
every practical banker must, that this law when it goes
into effect will change the whole system.
The Secretary of Agriculture: Tea, that practice will
disappear.
Mr. Rue: Yes, and therefore not desiring to BWSII our
figures, we have given you simply individual deposits.
Eecause no nan can foretell what the bank deposits in this
country are going to ba in the future aftar thin systea
gets into operation . It io going to change the v.hole syetea,
we realize that fully.
The total number of checks and Arafta received by
tanks of Philadelphia each day froa those corrcapondents is
pproximately 80,000 separate Items, and the number

1050

Lev! L. Rue

of similar Items sent out by the banks of Philadelphia each
day to the various b&nke throughout the United States
aggregate approximately 100,000.
Thle Kill give some indication of the extent and
volume of intercourse daily taking place between Philadelphia as a great financial centre uith the other states.
Two life insurance companies of Philadelphia along
have over $75,000*000 loaned on farm lands &&& property in
to»na and cities throughout the middle lest and South,
which makes a bond between all these sections and Philadelphia.
Philadelphia hae been developed harmoniously along
financial lines, and the co-operative banking machinery
works at all times smoothly and without friction.
The Philadelphia dietrict covered by the minimum rate
for parcel poet has a larger population than the ainimum
district about any other city in the country.
The following comparative statistics indicate Philadelphia's rank compared vith olhjr cities:

1051

EXHIBIT A

Ho. 3

Reserve District

No. 1

Head Office

Boston

Hew York

Phila.

Population

5,435-

1 1 . 918

15,217

690

1,311

Ho. Hfrt'l Banks

373

NO. 2

*/B Capital

53,847-

207, 554-

180,163-

" Surplus

51,604-

198, 403-

180,919-

Individ.Deposits
Cent* Bee. Cities
Reserve Cities

189,658

73^64641,598-

377,5*1-

Country Eanke

362,063

576,074

771,347

Cap.Fed.Re6.Bank
Subscribed

8,064

24,354-

ai,66O

Depoeita from
Cen. Res TJb

50J092

Reserve 6jC

11,376

^,490

22,650

Country 5j£

13flOO

28,800

38,673

24,476

81,33c

61,523

Total Eanking
Resources
Ho. E&nks
Reporting

2,523,461

7,469,86b

873

1,347

1053
EXHIEIT A (Continued)
As of October 31, 1913
Reserve District

Ho. 7

Ho* 8

Ho. 9

Head Office

H.Orleans

Population

5,675

4,591

3,174

411

643

337

H/B Capital

44,375

45,836

33,095

32,562

35,101

13,631

Ho. Hat'l Banks

Surplus

Minn.

Denver

Individ. DeDoeite
Cent. Res. Cities
Reserve Cities

64,163

80,369

55,816

Country banks

113,600

363,718

107,333-

4,003

4,348

3,19D

Reserve 6J6

3,848

4,818

3,348

Country 5£

6*876

13.135

5,380

17,953

8,708

Cap.Fed. Roe. Bank
Subscribed
Deposits from
Cen. Res 7jf

As of June 4. 1913
Total Banking
Resources
Ho Banks
Reporting

614,516
1,450

1,037,851-

414,395
847

1054

EXHIBIT A (continued)
Aa of October 21..&913
Reserve District

Ho. 10

Head Office

San Fran.

Populaticn

4,271426

Ho.Nat'1

81,014

HjjB Capital
*

37,357

8urplus

Bndivld, Deposited
Cent.Bes.Cities
Reserve Cities

214,506 -

Country Banks

193,455-

Cap. Fed. Res. Bank
Subscribed

7,098-

Deposits from
Ce.- Res. 7%
Reserve 6J&

12,870"

Country 5jt

9,67022,540AB of June 4, 1913.

Total Banking Resources
Ho. Banks Reporting

1,647,432
1,447

1055

Comparative Table.
Philadelphia

Baltimore

Cincinnati,

Richmond

Population

1,549,000

558,000

364,000

128,000

Hat'l Bank

(As reported to Comptroller Oct. SI, 1S13)

Hu/nber

23,055,000

11,790,000

13,900,000

5,150,000

8ur.&Proflts
46,802,000

10,452,000

9,739,000

5,373,000

Cap Sur & Profits.
68,857,000

23,342,000

23,639,000

10,523,000

Net Deposits
281,340,000

60,846,000

55,875,000

36,053,000

Capital

(Ket a ReSpecie Eoldinga
5,061,000
serve
3,968,000
32,054,000
City)
Max Borrowings
Hone
4,340,000
1,324,000
Percent to Cap,
6*
Total Kat»l
Bank Resources
114,973,000
102,621,000
438,020,000
State & Hat'l
Institutions (As reported to the Comptroller June 4, 1913)
Number

100

30,181,000
Capital
64,657,000
23,490,000
Sur. & Profits •
15,634,000
130,888,000
31,562,000
Cap.Sur. & Prof.
195,545,000
55,053,000
35,805,000
Ket Deposits
624,481,000 196,439,000
106,258,000
Cash on ahdn
10,345,000
50,568,000
7,924,000
4
156,000
Borrowings 3,573,00Cfc
#370,000
Total Bank
Resources
966,518,000
296,859,000
185,296,000
Clearings
1913
6,523,508,000 1,967,560,000 1,317,212,000

26
10,472,00C
8,339,000
18,831,000
38,148,000
2,19^,000
543,00d
|
j
71,713,497
419,121,000

1056

COMPARATIVE TAELE (Continued)
Philadelphia
Exports
76,315,000
Ioporta
93,209,000
Total Ex. & Ircpt.
169,524,000
Custom Receipts
30,797,000
P. 0. Receipts
8,038,000
Life Ins, Co.
^Assets 352,491,000
Fire Inat. Co.
86,883,000

Baltimore

Cincinnati

Richmond

116,474,000)
33,895,000)
149,369,000)
Tear ending June 30,
4,634,000) 1913
2,577,000)
6,873,000
3,737,000

(^Includes borrowings of three institutions, marked
as trust companies, but who do not engaged in the banking
business and whose business is largely that of financing
and guaranteeing mortgages,)

1057

Pittsburgh
Population

533,000

National Eanke#
Humber
Capital

£5,900,000

Surplus & Profits

^6,687^000

Capital, Sur, & Profits

42,787,000

Ket deposits
Specie Holdings
Maximum Borrowings

1 78,560,000
20,063,000
1,993,000

Percent, to capital
Total H/B Resources

273,974,000

State & Nat'l Institutions ()
Humber

Capital

53,759,000

Surplus L Profits

95,588,000

Capital, gur, & Profits

149,317,000

Bet deposits

417,957,000

Bank Clearings 1913
Post Office Receipts

2,932,40^,000
3,186,000

# As reported to Comptroller October 21, 1913
() Figures as to State Institutions taken from bank
directories*

1058

national
Tho/pank
Resources of Pennsylvania amount to
11,435,154,000, which is ?0j£ of the total National Bank Resources of large District Ho. 3, amounting to $2,0*6,971,000.
The Hational Bank Resources of the small District No. 3,
comprising Pennsylvania, Southern Kew Jersey, Delaware, and
the Eastern Shore of Maryland, aaount to $1,578,851,000.,which
is 77j£ of the* Rational Eank Resources of the large district
No. 3, amounting to $2,018,971,000*
The total Banking Resources of the State of Pennsylvania
amount to $3,669,643,000., which Is 67jC of the total Banking
Resources of the large district Ho, 3, amounting to
$3,954,984,000.
The National Bank Resources of Philadelphia amount to
$436,000,000. which is 21J& of the National Bank Resources
of large District No, 3, amounting to $£,025,971,000., and
la 27^ of the National Bank Resources of the small District
Ho. 3, amounting to $1,575,851,000.
The total Bank resources of Philadelphia amount to
$966,000,000, which is 24# of the total Bank Resources of
the large District No. 3, amounting to $3,954,964,000.

1059

FACTS AEOUT PHILADELPHIA.
Aggregate to Capital Surplus and Undivided profits
of Rational Banks

$68,857,000.

Aggregate Capital, Surplus and Undivided Profits
of State and National Institutions

195,545,000,

Aggregate Resources of National Banks

436,0*0,000.

Aggregate Banking Resources

966,512,000

•

including Trust Funds
1,833,068,000

Building & Loan Association Assets
Net Deposits of National Banks
Aggregate Clearings for 1913

110,000,000
591,340,000.
3,533,508,000.

There is located in Philadelphia the following:
First National Eank chartered by Congreee,
First Savings Fund in the United States.
Oldest Trust Company in the United States- established
nearly 100 years ago.
First Title Insurance Company in the torid.
Largest number of Building & Loan Associations of any
city in the United States, and at the last National Convention
they nere pointed at aa model Institutions of their class.
Philadelphia is the greatest manufacturing

centre in the

United States, when meaoured by the average number

1060

of wage earners. There are more establishments In
Philadelphia with 500 employees than any other city in
the world.

Philadelphia has an annual output of manu-

factured goods of a value exceeding $600,000,000.
Philadelphia is the greatest textile centre in the United
States, her mills employing 105,000 people.
The weekly payroll for skilled labor in Philadelphia aver-

ages over #3,000,000.

1061

Levi L. Hue

The Secretary of the Treasury:

You refer here to a

large district and & small district.

I only see one

Indicated on the map.
Mr. Rue: There is only one indicated, but the small
district im Pennsylvania, Southern Few Jersey, Delaware
and the eastern part of Maryland— the Eastern Shore of
Maryland.

We have not indicated that on the map, but we

have given you the figures.

1063

Levi L. Rue

The Secretary of the Treamury: Tou incorporate that
statement in the record as the testimony of Mr. Rue. Have
you anything to add?
Mr. Rue: Nothing more, sir, unless you want to ask some
Questions*
The Secretary of the Treasury: I see that you have
tentatively divided the country here into ten districts.
Uz> Rue: Yes, sir.
The Secretary of the Treasury: That is upon the theory
that you would have the large district of Philadelphia?
Mr. Rue: Yes, sir.
The Secretary of the Treasury: How, if the district
should be made smaller, the Philadelphia District, what is
your idea as to how that would alter this map?
Mr. Rue: If tha district was made smaller, sir, I presumeof course, it would depend, Mr* Secretary—it depends
whether— that of course, would Include the southern part
of Hew Jersey, the State of Delaware, and the State of
Pennsylvania, and the State of Maryland.
The Secretary of the Treasury: Eastern Shore of Maryland
Mr. Rue: Eastern Shore of Maryland. That would naturally
follow, I think, sir, that the next regional bank would

1063

Lev! L. Hue

have to be either In Baltimore'or Atlanta.

That, of course,

would be according to the judgment of tbia Organization
Committee, because you do not want to make any district too
weak.

You do not want to have a lame duck all the time on

your hands. Each district, as far as it can be, except
in extraordinary matters-- there are certain sections of
this country that have extraordinary demands upon it all
at certain times.

It is a crop demand, a seasonal demand at

times, when they have a plenthora of money. Other times
when there is a great scarcity.
The Secretary of the Treasury:

If you are going to leave

one district ofthat sort to itself—
Mr. Rue: If you are going to leave one district of that
sort to itself, it 1B like a man trying to pull himself up
by hie boot straps.
The Secretary of the Treasury:
districts

You are bound to have some

now of that character?

Mr. Hue: Sure you are.
The Secretary of the Treasury:

We assume we are going to

get a thoroughly coordinatlve district*
Sir. Hue: We appreciate that.
The Secretary of the Treasury:

Of course, it is desirable

1064
L. Hue

to make these districts, as far a© possible self-contained,
Mr. Rue: Yes, sir.
The Secretary of the Treasury: But it does not admit
of that solution in its entirety.
Mr. Rue: We realize that.
the Secretary of the Treasury: With that in view, have
you come to this conclusion that there should be ten
districts, after deliberate study of the whole problem?
Mr. Rue: Yes, sir*
The Secretary of the Treasury: Yes, rather than eight or
twelve.
Mr. Hue: Maybe twelve. Certainly ought to be not less
than ten, barring a central Reserve Eank, which, of course,
is out of the question. The law is settled now. Bo use
discussing that phase of it at all.
The Secretary of the Treasury: What is the theory upon
which you have created these other districts?

Is it upon

actual study of the conditions in thane different sections
or merely assumptions.
Mr. Rue: Mr. Secretary* we do not know actual conditions•
Of course, you gentlemen will glean that as you pass around
the country*

1066
Levl L. Rue.

The Secretary of the Treasury:
Mr. Rue: Exactly.
know.

There is a lot of data.

It is utterly Impossible for us to

We have figured this out* air, more by banking

resources and banking capital, which is the only actual
information we have had at our command.

We have endeavored

to nap out these districts, so each district will have
sufficient backing capital to create a bank isxge enough to
come in under the law, and apparently be a good strong bank.
The Secretary of the Treasury:

How, in Colorado, you have

given $3,ISO,000 banking capital.
Mr. Rue: You will note inraybrigo^" sir, I stated Denverthat is a problem, because it has states around it that are
lean with banking resources.
The Secretary of the Treasury:

Coming back to District

Ho. 5, where you divide West Virginia, North and South,
that will be an unfortunate division of West Virginia, on
account of the course of travel and commercial transactions.
Mr. Rue: We did not think that that was so.
The Secretary of Agriculture:

They were in here yesterday,

and they represented that West Virginia ought to be divided
about the centre of the line running east and west.
Mr. Rue: This of course, is not arbitrary.

We felt this

1066

Levi L. Rue

ae to where there are particular divisions— or we did not
know, but we realise this: That a certain amount of West
Virginia bueineee flows west, and a certain amount comes
east. Whether that division is as we have it or whether it
Is where they indicated it} I do not think it materially
changes the banking resources of the district which we have
created.
The Secretary of the Treasury: Again, take Texas here.
A part of Arkansas and Texas particularly. The trend of
City
all that business is to Kansas/and St. Louis*
Mr. Rue: Well, the reason— yea, we realize that.

The

reason we here made that division is it Is on the assumption
that the Southern pacific Railroad, running from Hew Orleans
westward, would be a natural artery of traffic and travel.
The Secretary of Agriculture: Only have the least well
settled part of the state.

The rest of it goes north.

Mr. Rue: Yes, sir, goes to St. Louis and Kansas City.
The Secretary of the Treasury:

What is your view of the

argument made in Hew York, that there ought to be a predominant bank in Hew York?
Mr. Rue: I think, sir, it all depends on the purpose of
Congress

of the United States.

If the Congress of the

1067
Levi L. Hue

United 8tatjs thoughtthere ought to be a dominant
bank in this country, they -would have created a central bank.
The Secretary of the Treasury: Aside from that, looking
at it as an economical problem, what do you think of the
argument advanced in favor of it,
Mr. Rue: What particular phase of the argument was put
forth?

As I underotand the testimony, it *a« to have a

bank of that description you have mentioned, that would
command greater respect abroad.
The Secretary of the Treasury:

As well as at home.

Mr. Rue: I do not so understand the wording of thie lac
I understand, sir, that it will be the purpose of the Federal
Reserve Board in carrying out the spirit of t'ls Act , to
make this a coordinated system.
The Secretary of thenTreasury: It must be coordinated
under the Act.

It is coordinated under the Act.

Ur. lue: Exactly. Row, therefore, whether you have a groat
dominating bank in Hew York, or whether you have ten
banks that more nearly create an equipoise, the result ie
going to be therame, because under the direction of the
Federal Reserve Board, the power of one bank can be thrown
to tha power of the other.

I believe, sir,— I believe

1068

Lev! L. Rue
that finally the operations will work through tho New York
bank, largely in foreign exchange, whether it is from Chicago,
or whether froa San Francisco or any other centre, because
Kew York is the port of export and port of entry.
will be the great centre.

It always

The Federal Reserve Ear.k in

Philadelphia, the Federal Reserve Bank in Eoeton, the Federal
Reserve Bank in Minneapolis, will probably instead of dealing directly with great banks of Europe, Kill find it
advantageous to deal with the Federal Reserve Bank in
Hew York.
The Secretary of the Treasury:

Do you think that so far

as the European banker la concerned, in considering the
strength of any of the units he is dealing with here, once
this system la established, that he will look more to the
strength of the system as a whole, thtrough its coordinations
than to the strength of any individual unit.
Mr, Rue: I do.
The Secretary of the Treasury: But on the other hand,
in dividing the country into these distriots, is it your
view that we ought to create as few strong units as possible,
or the largest possible number of weaker units.
Mr. Rue: I think it would ba a mistake, sir, to establish

1069

Levi L. Rue

a large part of the weaker units. I think you ought to eetab-lieh— try, ae I said before, to eetablioh that which will
create an equipoise. You do not want any one bank to be so
large that the rest of the banks will be cere satalites.
The Secretary of the Treasury: Now, upon that theory
do you feel it would be better to have eight banks than ten;
assuming, of course, that Philadelphia would not be affected.j
Mr. Rue: I am leaving out Philadelphia.

I am forgetting

Philadelphia for the time being, trying to lay out this
system as a whole. You have got this problem before you,
; gentlemen. You have got a country of vast area. The
exchange of European bankers is not goin? to help you very
much.

Taking England, the Eank of England. Of course, our

problem is entirely different. Take France and Germany,
only a night»s ride from the great central bank, but here
you have got a vast continent. Row you m u s t — if you were
to have kad a central bank, you would have to have had
important branches in every one of the centres wo have now
spoken of, but that is out of the question. You have get
a condition, not a theory now confronting you.
The Secretary of the Treasury: is an academic question
merely, it becomes very interesting in the light of the

1070

testimony we have had, when we have asked the question
! whether or not a branch of the regional bank would not serve
the purpose equally «ell, we were told at once that nobody
wants a branch.

How, If we had had a central branch, *ith

branches throughout the country, we would have been in worse
condition than regional branches, because th&t would have
put you in less close contact.
Mr. Ruew My opinion is most all of them will want branches.
By the tine this system gets in full operation the banks will
have to establish a number of branches.
The Secretary of the Treasury: Unquestionably.

It is

mandatory.
Mr. Rue: It is a good thing it is, because it will have
to be to acoomodate traie, but the question you have got to
solve, where is the logical and best pl^ce to establish the
head office.

The head office ought to be where trade is

concentrated and where the v«e-t amount of trade passes,
because there a bank can more properly fulfill its functions.
The Secretary of Agriculture: Now, we have had several
suggestions recently, involving all or a great flart of this
territory that you have marked out, one goin&further to
the south, with a no them lino about the Potomac.

1071

Mr. Rue:

Going d e a r into Florida.

The Secretary of Agriculture:

Yes. Their argument I s

that that region possesses an economic u n i t , h i s t o r i c a l and
so forth, and that they would understand one another, and
the bankers who have to deal with the problem there would
understand credit conditions, whereas, i f the territory wejra
extended northward and the parent bank was in Philadelphia,
that there the bank would be out of touch, out of sympathy —
would not understand the conditions*

what would you say to

that?
Mrr Hue;

My answer to that i3 t h i 3 , s i r ; As I understand

that the power and function of the branch bank i s going: to
bo almost equal to that ml the parent bank, and that the
credit question w i l l be passed upon by tho branch bank - but what you have got to consider too, i t aeons to me, Mr.
Secretary, i s t h i s ; In order to make this sy3ton work, you
have got to supply to each d i s t r i c t sufficient banking power.
The question of credit w i l l determine i t s e l f through the
branches*. The most important thing ia tho banking power.The Secretary of Agriculture:

Well now, l e t us see just

a raoraent. Gone back to that.. The branch w i l l have seven
directors.

1072

Mr. Hue: Yes, s i r .
The Secretary of the Treasury: Four named by the Federal
Reserve Bank

regional Reserve Bank and three by the

Federal Reserve Board*

Whereas the Federal Reserve Bank

has s i x of i t s directors named by the member banks. How,
they say that they do not want a branch bank, because after
a l l the discretion w i l l be lodged with tho regional bank*
Mr. Hue; I s that so*
The Secretary of the Treasury: Well, I an Just asking you.
Mr* Rue: Of course, I do not know. That i s up to the i n terpretation of the law.
The Secretary of the Treasury:

They w i l l determine that

,in tto law that i s passed*
Mr* Rue:

But wonH i t be natural, s i r , following your

uggestions, that i f a head bank was located in Philadelphia,
he Board of Directors of that bank are just as anxiou3 as
feasibly can be that that bank should be a succaso. That i t
hould not nake any bad debts and that i t shuld not extend
y credits that are not justified* Now, i f i t has through
t s branch, we w i l l say, in Charlotte or Augusta

on f t care what town you make - - i f i t has to extend credit
hrough i t s branch to the industries and the farming

1075

i n t e r e s t s , or whatever the activities nay be in that location
The Secretary ot t.h* 7r*»a3ury:

I t oxtenda i t only to the

merobsr bank*
Mr, Rue;

I know, but i t i3 tho 3*m* thine;* They extend

i t to the jaonber bank and Jiavo cot to ts&o tha nsnbor bankfs
paper*
The Secretary of the Treasury: Exactly, but I rasan i t
does not do i t directs
ilr. Hue: That i s true, s i r , but aftor a l l , th« soeiirity
which i t i s tfoin£ to gat i s coi^C to bo the paper of the
raorchants an-i nanufa^turera and farmors of that district*
Also, the Mombor bank ifdll want to have ths very beat l i g h t ,
thQ vary boat Jud^raant, tho very best infornation to determine whether the credit *rhich a branch bonk in Charlotte haa
a3ked for by i t s constituent banks, to grant thon;

will

know as practical bankers that the head office in Philadelphia will be enabled to intelligently pass upon those
credits, and in selecting the four directors which they
have the authority to nanie, to manage that branch bank, they
will naturally select'the nen of that district that are best
qualified to pass intelligent Judgment on the credits of
that section*
The Secretary of Agriculture:

I t does not follow that

1074

tho s i x directors of tha recional bank would come from a
sin^lo locality*
JCr* Huo;

By no aeans, sir* I t would not, becauao each

constituent bank has a rote and i t would be a rery bad
arrangement* I have no doubt each section would hare i t s
own representative* The^t i s the point I make* Then in the
anagoxnent ojt the branch bank, the parent w i l l want to make
that branch bank a part of i t * Zt i s one body* The parent
bank w i l l want the branch bank to be just as strong in i t s
organization as p o s s i b l e , and i n order to be strong, i t
must havo i n t e l l i g e n t rianagenent* In order to hare intelligent raanajoraent, i t 3 directors w i l l have to cone from tha
erchants, nanufacturers and business men of that local-*
I t y , tc pas3 i n t e l l i g e n t Judgment on the credits which are
pffored to i t *
Ths Secretary of tha Treasury:

You 3aid, very properly a

omont ago, that the chief point herd i s the power of these
anks, tha several units*
Ur* Huo:

Ko doubt about t h a t , sir*

Th9 Secretary of tha Treasury: In view of that f a c t ,
s tha location of the headquarters of such r i t a l importance
n tho d i s t r i c t , so long as the headquarters I s accessible

1075

and properly managed.
Mr* Rue: I thin): that i t i s important, in t h i s particular
Ur. Secretary.

The managenent of tho h9ad bank hare cot

such tremendous problems to deal with i n extending credit
to any section which belongs to them* They must be men that
are in touch with the era at flows of trade and commerce.
They zaust be men that have broad knowledge; wen who are, as
I aay t in touch with things and where tlw great commerce of
that d i s t r i c t concentrates* They must be* Jtow, that natura l l y i s true of the metropolis of the d i s t r i c t *
The Secretary of tha Troaiury: Well, that i s an additional
argument in favor of
Ur* Rue:

SOMQ

particular point.

Hot any particular point, but the metropolis

of thn d i s t r i c t .
The Secretary of tho Treasury:

Well, I say that whorever

that condition a p p l i e s , i t i s an argument in favor of that
particular point*
Ur* Rue; Yes*
Tha Secrotary of tho Treasury: But what I want to draw
out from you, i s to what extent you regard that as essential*
Sow, here i s the treasury of the United s t a t e s located at
Washington and wo hare sub-treasuries throughout tho country.

1076

JTG

The transfer balance i s made by wire. You want something
in Now York or Philadelphia, you can gat i t in a few minu t e s , r e l a t i v e l y apeaking*
Mr* Rue: Very r e l a t i v e , Mr* Secretary, Our experience
i s i t takes a whole day and some time a the next day*
The Secretary of the Treasury: I t depends on the method
of going at i t , as to whether you use the wire or mail*
!fr* Hue:

Ho, i t depends on the machinery here in Wash-

ington*
The Secretary of the Treasury: I am very clad to learn
[about i t *
| ttr* *ue:

I t i s not our experience, sir* We havo had a

|great deal of d i f f i c u l t y .
The Secretary of the Treasury:

I may begin at home with

erne reformation*
Mr* Rue:

I ara glad to hare had the opportunity of t e l l -

ng you that*
The Secretary of the Treasury* That i s wery valuable
nformation. I l i k e to hear those things, because that i s
administrative function that ought to be improved as much
possible* Hut, assuming that those banks are going to
e better handled than the United States Treasury*

1077

MrP Rue; That i s hard to imagine*
The Secretary of ths Treasury; And that you can, by
aeans of telegrams and the telephone have these transfers
and exchanges mad** promptly, or effected promptly, and assuming again that the headquartersf wherever i t may be in
the d i s t r i c t , i s thoroughly accessible to have the banking
power reside at that point, as against some other, i t i s
not so thoroughly essential, i3 i t ,
Mr, Hue; I think i t is*
The Secretary of Agriculture: We had an argument this
morning, and tlv* entire foundation for the claim was
accessibility, disregarding everything else,
lir. Rue: I think that i s secondary, for this reason: I
am trying to forget Philadelphia* Fran my experience as
a practical banker, the vast transactions -» - the great
majority of the transactions of this Federal Bank will be
where the greatest business i s - -- bound to be f

How, the

greatest business i s in the metropolis of the district - bound to be, s i r .
The Secretary of the Treasury; ffentleinen, the Secretary
and I are obliged to attend a Cabinet Meeting at eleven
i

o'clock, I would suggest that you return at twelve*

1078

think that we can be back at that time.

We w i l l ask to be

excused as quickly as p o s s i b l e , in order to return; so i f
you w i l l fiire us a l i t t l e leeway, we w i l l bo here as quickly
as possible after twelve.
ing: u n t i l luncheon time*

Then, we w i l l continue ths hearThank you very much*

Whereupon* at 10*55 o'clock A»U- a recess was taken
u n t i l 12*00 o'clock H*

1079

AFTER RECESS

13.15 P.H.

STATEMENT OF LSVI L. HITS (Continued).
The Secretary of the Treasury: Tou had concluded, had
you not?
Ur» Hue: Practically, Mr. Secretary* Just one
other natter which we have gathered together alnce our hearing before, I nade reference to the smaller territory ftO.S*
Ve have soae figures which we would like to incorporate
in our report t that illustrates what would be the banking
powers rOf that Bank H0*3* Shall I repeat what that district was?
The Secretary of the Trea3ury:

Yea.

Hr* Ruei That smaller district, Mr. Secretary, was the
State of Pennsylvania* the lower half of th» state of
Haw Jersey, all the State of Delaware and the State of
Maryland - - eastern 3hore

» I bog your pardon

eastern

shore of Maryland% lfowt there are some other figures which
I think night prove interesting to you. The following
figures will Include the amount of balanceshow held by
the national banks of Philadelphia from, and tlie accommodations extended to the institutions outside of Philadelphia

flO !

1080

in the large D i s t r i c t K0»3, as collected from nine of the
larger banks of Philadelphia. That w i l l give some idea of
the business we have* Balances t #80,948,000* Accommodation,
$34,918,000,

number of accounts, 2730*

The Secretary of the Treasury:

Referring to national

banks only?
Kr» Hue,: Beferring to national banks only* Reference
was made in the testimony that i f , in tte Judgment of the
Organisation Gonuittee, i t was deemed desirable to group
about Philadelphia smaller d i s t r i c t HO.S, which would
include Pennsylvania, southern Hew Jersey, Delaware and
the eastern shore of Maryland, this would create a b e t t e r
reserve d i s t r i c t as follows:

Population
Uumbor of national banks

9,081,000
97G

l a t i o n a l Bank c a p i t a l .

$127,800,000

national bank surplus

$148,104,000

Individual deposits

$798*700,000

Capital Federal Reserve
Bank
Minimum deposits
Total banking resources

$ 16,544,000
$ 42,000,000
$5,053,240,000

1081

Total number of banks

1589

The reports issued by the Comptroller 3how that while
bank deposits of the National Banks of Philadelphia i n creased 92 per cent in the period since September 5th*1900 9
to October 31st* 1915, the individual deposits also i n ereased 80 per cent*
Mr. Secretary: I hare no more testimony to civ© for
Philadelphia and that which I have given 1 B the report of
the Clearing House Committee of Ftve. The other members of
the Committee are here* They a l l concur i n the report which
I have fciven, and of course, are w i l l i n g to answer any
questions i f you desire to aak thorn, in reference to the
report which we have rendered* If i t i s not your desire to
c a l l them and ask further questions, a delegation i s here
from Hew Jersey 9 and fron Delaware and Pennsylvania, outside , that would l i k e to be heard In reference to a Federal
Reserve Bank in Philadelphia*
The Secretary of the Treasury; I believe the Committee
has at present in very compact and satisfactory fora a l o t
of the information that we require for this purpose, and X
do not think we need any further information on the subject,
although i f any gentlemen era here from Philadelphia, who

1083

I
desire to apeak briefly - Mr. Rue: That la the view of our C admit tee. They did not
think it iras necessary, unless you desired it.
The Secretary of the Treasury: It does not occur to us
that there is any additional information necessary. Mr.
Secretary, do you think of anything additional?
The Secretary of Agriculture: I cannot think of anything
further, than to ask this one question: To what extent is
the present course of trade from Virginia and North Carolina, with Philadelphia, rather than with Baltimore or some
of these other citio3.
Mr. Hue: I will 3ee if I aan give you that, by states. The Secretary of Agriculture: I have noted the number of
banks.
Ur. Rue: I think I have that information, not the coramarce.
There was no way, Mr. Secretary, we could get the flow of
commerce, except as indicated by the banking transactions* *
The Secretary of Agriculture: I moan the banking relations
especially* .
The Secretary of the Treasury: Ton have given that. *
Mr. Rue:

I think that is covered in our brief. -

The Secretary of the Treasury: I may say this, that if

1085

anything occurs to you gentlemen that you care to say you
|j can do i t at any lira© through a supplemental brief* Just
address i t to the Organisation Coraraittee, and i t w i l l be
giren due consideration, of course*
Mr* Rue:

We are very much obliged to you for your courte-

sy*
The Secretary of the Treasury?
from the State of Delaware*

There i s a delegation

Hare you s e l e c t e d a spokesman,

or do you want to c a l l on any one in particularSTATSMEHT OP CHARLES H. HILLSR«.
Ur. Miller:

I can s t a t e in about twelve words what

Delaware has to say on the subject, s i r *
Delaware

The State of

I era Chairman of the Sxecutire Committee of

the State Bankers* Association, composed of 50 banking i n s t i t u t i o n s , and we desire to endorse In the e n t i r e t y what
Hr. Hue has said to you, and that represents the combined
banking I n t e r e s t s of our s t a t e , s i r *
The Secretary of the Treasury: forernor, would there be
any serious d i s l o c a t i o n of normal course of business in
Delaware - - I wean the kind of business which would be done
by a Federal Res erre Bank, i f the headquarters were located

1084

at Baltimore or Washington, for instance, and a branch was
established at Wilmington*
Mr. Millar; We practically have no business with Baltimore or Washington*

All our business is transacted through

Philadelphia,
The Secretary of the Treasury: I am speaking now of the
business that would be done with a Federal Heserre Bank* It
seems to be an Inclination to view the thing from the other
standpoint all the time, whereas this isa new function
that is going to be esarclsed*
Mr* Millers We have discussed that question*
The Secretary of the Treasury! I mean the normal courses
of exchange between banks themselves, not interfered with
by this system*, X say would it make any difference, in
your Judgment, what her tho headquarters were at Philadelphia
or Baltimore, or even Washington?
Mr* Miller: We feel it would*
fhe Secretary of the treasury^, Provided, of course, you
had the facilities through the branch established in
Wilmington, for instance.*
Mr* Miller: We did not view that* We did not think that
was a possibility^ fhat question has never presented

1085

i t s e l f to us*
The Secretary of the Treasury: The matter of re-di3counting t
as wsll as every part of inter-relationship between the
banks In Delaware and the Federal Reserve Bank, wherever
located, and i t might be handled through a branch, as I
said, before * How, in these circumstances, would i t make such
a great amount of difference whether the headquarters bank
was In either one of those three places for that d i s t r i c t t
Mr, Killer;

We feel that i t would,

The Secretary of the Treasury:

You feel that i t would,

but I aean have you any facts or anything that would i n dicate,
Mr, Miller;

I have never considered that phase of i t ,

Mr, Secretary| but the entire volume of business from our
s t a t e | goes in that direction, and X would have to confer
with the other banking institutions! to aacertain t You
want accurate information, sir?
The Secretary of the Treasury:

Yes*

tfrv Miller; I would not care to express a personal opinion, which might not convey to you the true conditions,
s i r . We go to Philadelphia for a l l our re-discounts and
a l l our commercial paper i s purchased

we do not know

lose

coBcoarcial paper through Baltinora.
Th» Secretary of the Treasury:

Suppose t h i s systea were

e s t h l i s h e d , as I said a moment ago, and you had a branch
rebarik in Wilmington, with which you would do your/di a counting , which would be the representative of the Federal
Reserve Bank, wherever those headquarters happened to be,
and that was a branch bank, conducted by a committee composed, of course of people who were familiar with local
conditions, you would get Just as good f a c i l i t i e s , and nay
bo hotter ones than you do under the present ays tea,
Hr* Miller;

That i s quite p o s s i b l e , s i r -

The Secretary of the Treasury: And in those circumstances
you would have to go l e s s far for your re-discounts than
you go now*,
Ur« U i l l e r :

Yes, s i r .

The Secretary of the Treasury! And whether the headquarters bank were in Philadelphia, or in Washington j in
thl3 Instance you would get the saae facilitiesf would you
not?
Mr. Miller: I should think, Hr~« Secretary, that that is
a question that would have to be developed in the light of
future circumstances.

1087

TJ» Secretary o f the Treasury:

Thank you very ranch,

Governor.
Mr. K i l l e r :

We have no re—discounts.

The Secretary of the Treasury:
i s e n t submitted.

I n o t i c e from the s t a t e -

That I s the reason that I thought I t was

of such Importance.
Mr- Millar:

Thank you, gantloaen.

The Secretary of the Treasury:

Does any one e l s e d e s i r e

to be heard from Delaware?
STAT3MEHT OF OALSB M. SHEWAHD.
Th3 Secretary of tho Treasury:

Mr. Steward, you are

|, v i c e - p r e s i d e n t of tiifl ffilmlii£;ton Trust Company?
ii
ii

Mr* Sheward: Yes, s i r .
The Socrotary of the Treasury: Wo will bo clad to have
your views on this problem.
Mr. Sheward:

I am hare rsproaantine an organisation, ttr#

Secretary, really of tto Delaware Bankers* Association, and
after our meeting we fait i t

*TOS

our duty to say what we

could In behalf of what wa thought was tho proper location
; for a regional b&nk. Tfa9 banks of tha State of Delaware, in
entirety, look to Philadelphia in a financial way* The

1038

fia|

trend of business is toward Philadelphia. We buy a great
deal - - some of tho banks do of commercial paper, single
names and double named paper, and there is very little of
that paper bought, except through the advice of our Philadelphia correspondents* I cannot recall scarcely where we
go to Baltimore for advice on commercial paper* We would
be in a foreign land* The State of-^Delaware today, as It
Is located between the Chesapeake and Delaware Bays, with
a great Increase in production of berries and fruit, is
bringing a great deal of money into that state, and some
few years ago where there was three banks in each of the
two lower counties, today there are probably a dosen or
aoro; and I know fron our connection in the larger cities
that they are very closely allied to the Philadelphia banks,
< and I think if there was a regional bank in Baltimore or
Washington, it would be an unnatural trend for us to pursue*
;

The Secretary of tho Treasury; Well, it would not be un-

| natural for you to borrow money fron such a bank, if it
! had it and was willing to lend it, would it?
1

Mr. Sheward; Mr* Secretary, I think outside of probably

I one bank in Wilmington, that we seldaro borrow any money.
I t i s an exception, and when that bank borrows, X think they

f!9

1089

£0 to the Savings pund* We have a very strong savings fund
there, with about eight millions of deposits and i t i s vary
soldom that they go out3ido to borrow money.
The Secretary of the Treasury:

That being true, then ths

location of this headquarters bank, as far as the rediscount ing feature, i3 not inportant to Delaware*
Mr. Sheward:

I t i s not important, for this reason; while

we are a large manufacturing c i t y , we have, I guess, two of
the largest ear building concerns in the east there, both
concerns also building boats. The l a r g e s t , I gues3, morocco
industrial centre in the country, and considering the a g r i cultural pursuits that are going on around us and the menufacturinc f & c l l l t l e s , TTC have to go outside and buy commercial paper to keep our money employed^
The Secretary of the Treasury:

Exactly; now you buy

commercial paper and you do not ro-discount i t as a rule*
Jir. Shawardz
i

Ho, s i r .

The Secretary of tha Treasury:

The result i s , that as

J far as the r^-discounting f a c i l i t y afforded by one of these

f bonks

i s concerned, you wouldn't resort to i t , even*

Mr. Sheward:

Ho, s i r .

Ths Secretary of the Treasury: But i f you did rejjort to

f20

1090

i t , you id.ll probably got Juat as goodraonoyat Baltimore,
or Washington, as at Philadelphia.
Mr. Sheward: If we needed i t for re-discounting, we could.
fbe Secretary of *ha Treaaury:

How, i t i s not, of course,

only the ro-diaoount f a c i l i t i e s afforded by these banks
that deaerres consideration. They perfona other functions - —
these regional reaerre banks, and I think It probably might
be wise to say this: The function of these banks la not to
interfere with the normal course of exchange a between banks
themselves. That will continue Ju3t aa now. These are resarTOirs for Uia reaorves and for other re source a which are
going to b<* put into these banks, to be utilised by the
member banks when they require them for specific purposes•Of course f and for this purpoae i t i s inportant

for a n

purposes Important, that they ahould be located at the right
place, but there seems to be a disposition to lay too much
stress upon re-discountinc f a c i l i t y and upon the location
of the bank, In order that that f a c i l i t y may be had, and
there seems In turn to be a thought that the regional bank
i s going to be officered very largely in the community in
i which i t la situated^ That i s , the directors are going to

ion

be very largely In that particular contntmity. How, the b i l l
provides that the banko In each district shall bo divided
into throe classes* The banks of certain capitalisation
form ona class, another capitalisation another c l a s s ,
another capitalisation s t i l l anotlier c l a s s , and these
different classes ©f banks elect two directors of this
federal Roaorva Board, and i t i s assumed — - wall, i t i s
required by the Act that they shall be representative of the
general interests of the d i s t r i c t , so that wherever the
headquarters i s located, a l l parts of the district are
likely to bo represented in that Board; so that there will
be people there at allttlmas, able to judge the credits of
the different parts of the district*

x mean not only on

the Board of the regional bank, but also on the Board of
Directors of t!» branch banks that may ba established* How.
in that view of the case > as far as the rediscount feat|tre
i s concerned, we would like to have argument advanced as to
what i s th» best location for thn Federal Resarve Sank*
ia any given district*
lfa% Sheward: f a l l , now, in answer to that, I would say ini
relation to ourselves we carry perhaps a half a million
dollars of purchased coiarseraial paper* If w» want advice

1092

as to the stability of these names, we go to the sources
naturally in the locality where that paper i s dealt In.
The Secretary of the Treasury: You would continue to do
that, no matter where the Rssorve Bank i s located*
Mr, She word: If we wanted that paper re-discounted, we
naturally would go to your bank that had the taanagenent, or
the directors that were familiar with that paper* We would
go there asking them to take i t for re-discount«

Howt i t

seems that the directors that would be appointed in Philadelphia, would be more oonrarsant with that class of paper
that all of the banks in Delaware trould have, than the directors in Baltimore or Washington.
fhe Secretary of the Treasury*. Undoubtedly, Philadelphia
would have a representative on this Board, no matter where
the headquarters bank would be located, but assuming there
was a bank at Wilmington, you would apply to Wilmington
bank i where you had local directors *
I

Mr* Sheward: I t would be compulsory, would i t f to apply
to tht local bank there?
fhe Secretary of the Treasury:

I t would be naturals You

would very naturally apply right In Wilmington.
ifev Shaward: Ir« McAdoo, fro® Philadelphia to Wilmington,

we are so near a suburb of Philadelphia that I think i n tan
years we w i l l be a part of thecu

While we would l i k e to

have a branch bank there, we are so near Philadelphia that
not at t h i s date do I see that i t i s necessary to hare one*
She Secretary of the freasury:

Ho, I did not 320 an to

hare you assume that there would bo one.

X was s t a t i n s a

hypothetical question* That I f one i s there, would not
that &ira you the f a c i l i t i e s *

That i s a l l , thank you*

STATEMENT 0? WIXPTSLD H* SX90B*
Tho 3ecrotary of the freasury:

f i l l you kindly s t a t e

your na:i« and business?
Mr. Minch:

Binfiold H« Mlnch.

I am ?ice-Pre3ident of

the Bridge ton National Bank i n the southern part of the
s k a t e t and do not represent the northern t i e r s , whose close
proximity to Uew Tort: would probably drive thea to Sew Toiic
I was selected to come hare, because Just at t h i s year I
happened to be president of ths Hew Jersey Bankers Assoc i a t i o n , and as I figure i t , and you probably know from
s t a t i s t i c s , that south Jersey banks represent about 102 or
105 of the $S0 banks i n the s t a t e of lew Jersey, and tbair
combined c a p i t a l , of course, i s small as compared with the

tZA

1094

bankers Mr. Rue represented this morning* While our capitalisation i s small In a gveat many banks, their interworen
relation with Philadelphia i s so strong that we feel that
Philadelphia would toe a better centre for us to work in than
either Hew York, Baltimore or Washington. I have taken some
l i t t l e pains, in jttst the day X hare had time to look i t
«p, and I find that some of our banks clear ten times as
much through Philadelphia today, as they do through Hew York
and a l l othar sources r the lowest bank I heard from cleared
thro3 times as much through Philadelphia as Hew fork* I
did not take this up personally with Trenton banksf because
X did not have time* X tried to get two or three banks on
the phone yesterday morning$ but could not do i t f X am sure
their normal trade would be greater through Philadelphia
than Hew YorKf we have in that southern t i e r about
|98,000,000 deposits*
The Secretary of th$ Treasury.: Will you kindly state
what 1$ the southern tier now, by countie3?
Mrp Mlnoh; I drew the l i n e , including Mercer County on
the south, and X did not take in the south seashore resorts
The Secretary of the Treasury: Bid you take in Atlantic
SityT

Mr. Uinoh: Yes, s i r , I did not take in Anbury Park and
Long Branch, but I was told by Congressman Soully last night
that tha banking institutions of his Congressional district
wore very anxious to have Philadelphia hare a regional bank*
In the spring of tha year - - now, speaking more particularly,
Mr. Secretary, to the extreme southern end of the county,
which we call the rural d i s t r i c t , while we are developing
wary fast into intense farming, our banks In that location
are handicapped somewhat, We hare there an oyster industry
whoaa product i s about #6,000,000 a year* They draw on us
in the spring of th* year to plant oysters* Our fanners do
the same tiling, draw out money and give us notes* Our
glass manufacturers, which are only second in tho United
States, X think, in these lower tiers of counties, draw on
us for their sunnier supply, so we are re-discounting in the
spring of the year, and when i t comes to August, September
d October we get more money than we know what to do with*,
a have to &o to Philadelphia and buy commercial paper* We
ry to buy that to make i t come due so we can use i t the
xt spring; so wi are In close touch with Philadelphia,
jdlmost every day, If our patronage i s short tonight, we
|ump on a train and hare i t to our credit at eleven o'clock

T2S

1098

tomorrow morning, so it is very handy and in close proximity
to us* I want to endorse tho very able argument and brief
that Mr, Hue has presented to the secretaries» and I think
that so far as South Jersey is concerned, that we would be
very anxious to have an exchange at Philadelphia es a
regional bank*
The Secretary of the Treasury: Wherever such a bank night
be located*, do you feel the South Jersey territory would be
included in some district with Philadelphia, in any case?
Mr. Minch: I think not, Mr. Secretary* I think the entire banking fraternity of !few Jersey» if Philadelphia is not
a centre would ratbor go to new York than thoy would to come
to Washington or Baltimore, because we hove no exchange or
! no acquaintance with those territories at all*
i

The Secretary of the Treasury: As I said before, there
j will be, no matter where this bank is located
there will
be no interference with your ordinary transactions or corresponding banks*
Mr* Minch: I quite ncrae to that, except we would rather
deal with the mother institution than we would with the
branch*
The Secretary of tho Treasury: Thank you* Any one else

1097

from Haw Jersoy to be heard*
STAT3HEHT OF MOHTOOMBRf 1VAHS.
The Secretary of tho Treasury: Will you stats your name
and residence?
Mr* Evans: Montgomery Xvans, President Horrlstown Trust
Company; and while I happen to be the president of the Pennsylvania. Mw&LQrB Association, X do not appear for themf because we have had no meeting to dismiss this question,
but I do appear as a representative of Group 3, composing
half a dozen counties of the southeast district of Philadelphia* including the Schuylkill Valley and Schuylkill
Valley coal fields* I do not Intend to take up your time
by doing much more than to affirm in behalf of that district,
most earnestly» all that has been nre«d by the representatives of Philadelphia* I would not» I could not if t
would* and I would not If I couldt repeat or attempt to
amplify the reasons that were given by them* From a
number of letters froa the various banks and banking institutions in this Group t the reason ml?:ht be aasummed up In a
few sentences; First * that that territory naturally and
necessarily appeals to and turns toward Philadelphiaf and

1098

if any other regional bank were named than Philadelphia,
Philadelphia then would simply be but a conduit to carry on
to the other place this influx and reflux of money*

other words, we would be sending through Philadelphia to
the other regional bank, rather than to Philadelphia as we
would hope It should be 9 and as to our reason, other than
what has been said I am a imply putting that in a different
fora* It seens to us that an Inspection of the map of your
country, and in inspection of the records of the Treasury
Department, with a history of the country attending it t
necessarily names Philadelphia as a regional bank city,
because the psople hare named that place, by building up
their principal city as our metropolis, both in population
and in financial business* That is our financial centre*
That Is the natural financial centre of that locality, and
there does not seem, fron the district that I represent,
anything aors to be ald« fhe people hare made that in
the history of the country the great metropolis, and there
is no section where the financial interests are more thoroughly centered than In this city for which these people
hare appeared,
the Secretary of Agriculture; How far are you from

1099

Philadelphia?
!&•• Xrans: I am only 17 miles from Philadelphia,
the Secretary of the treasury: Mr* Brans, how is the law
of Pennsylranla with respect to state banks and trust
companies, taking stock in this system. Hare they power
to do Itt
Mr. Brans: Mr* Secretary, that is a question that I
would not like to gire en opinion on at presentf because it
Is a question that would hare to be considered with a great
deal of care* The law of Pennsylranlaf by special charter,
authorizes trust companies to do certain particular things,
tho things that are al30 authorised under the new Currency
Act. Bow f whether there must be additional legislation
before the state banks go under the control of the national
system, that might conflict with the laws of Pennsylraniai
and I would not undertake to glre an opinion at this time*
the Secretary of the treasury! I an ape ah inn »ore about
jtha right to subscribe to stocks*
: Mr. Erans: I think there Is no question*
the Secretary of the treasury: X assun9 the trust comjpanies would hare the right, because they generally do*
Mr* trans: Yes, air*

;
\

tso

1100

fhe Secretary of the Treasury:

Thai* you*

stxmmm 07 H« S* WHUMAH, J B .
She Secretary of the Treasury:

tiro your f u l l name and

residence, and occupation?
Mr* tfhiteman: Vice-Preaident and Cashier of the Clearfield Kational Bank of Olearfield. Pa*; Chairman of Group
6 t Pennsylvania Bankers1 Association*

Mr. Secretary, I

come from a section of the state that has contributed
largely from Its natural resources to build up the great
shipyards of Hew Jersey, Delaware and contributed largely
to the building of Philadelphia, through the vast virgin
timber forests, which as you a l l know have been devastated.
We are now developing fire clay and bituminous coal.
Millions of tons of I t are a l l drifting to the east* We
are furnishing itt in Washington, Hew York, Philadelphia,
and our fire clay for manufacturing bricks la leading a l l
parts of the world* In Clearfleld County we have the finest
fire a lay that i i found anywhere in the United States,
particularly fine brick* All of our natural resources,
the greater part of them, come to the east* laterally
there i s where our funds l i e * In Olearfield County we have

an abundance of money at a l l time a of the year. In the 22
year3 that the Olearfield National Bank has been organised,
i t has mver rejdiacounted a single dollar* I can say the
same of other banks in that section.

We look upon Phila-

delphia — The Secretary of the Treasury: la that because you mrw
need i t , or because you hwr* a feeling that Many of the
banks hare, or most of them hare on the present system,
that ro-dlacount la discreditable.
Ur* Whiteman;

Ho, I t i s because m ham an abundance of

money there* The last census gave Glearfleld 8,851 population*

We hare today 14,120,000 on deposit*

The Secretary of the Treasury:

So the need never arose

for re-diacountingt
Mr* Whiteiaan: Hover comes; always ht&Q a surplus to loan*
The Secretary of the Treasury;

Proceed.

Mr* Whitoman: That naturally comes to Philadelphia and
part of lew York *and part of the adjoining counties there
lean toward Pittsburg. East of the Alleghanies I think i t
trades towards Philadelphia* We a l l have accounts in

Philadelphia* We look upon Philadelphia aa lew York looks

upon » w York Uilya^ • Wa favor a regional bank $a Phildelphl a

•o

H, S. *biteaan,

1103

delphla.
The Secretary of the Treasury; Suggestions hare been made
at some of the other places we rlslted of an arrangement
of this territory, so that Pennsylvania would be divided,
half of it coins, for instance, to the Heir York district
and naif of it connected with some part of Ohio and form a
separate district in that way. Would you consider the
division of the State advisable in those olrcumotances?
Ur, WhitoBjan: Ho, I would not, Hr« Secretary, I think
the natural tendency la towards Hew York,
The Secretary of the Treasury: You mean throughout the
entire state?
Hr, TThiteraan: Yea, I feel sufe in mating that assertion.
If Philadelphia does not get the Beaerve Bank, we will
; naturally keep our requirements to whatever district wo
might be assigned to, but just as euro as the waters of the
Suaiuohanna eventually reach Atlantic Oooan* so the surplus
of funds of that section of the state will reach Sew York,
if Philadelphia is not designated as a Besorve oity«
The Secretary of the Treasury: ftell, there io a certain
amount cf it that cannot roach any place, except the bank
that is established, and that io all we expect to got, aa

H. S, Vhiteman.

a matter of fact*

That cannot be altorad you know, Tfcat

ic a l l , tiia^Jc ycu*

1103

1104

8TATZUEKT OF KR, JOEH C. CARTER.
The Scoretary of the Treasury: Mr, Carter, you aay state
your name and occupation,
Mr, Carter: John G, Carter; president of the Fulton
Rational Bank of Lancaster, Pa,, and I arc Chairman of Group
5 of the Pennsylvania Bankers Association,
The Secretary of the Treasury: You are familiar with our
problem, and we would be glad to have your views. You
have heard Philadelphia9» ease presented,
Mr. Carter: I have heard Philadelphia's dase presented, and I do not wioh to add or subtract very much from
it, I have b~eon invited to help them, by reason of
being Chairman of Group 5, which consists of 11 counties
in Pennsylvania, one-sixth of the entire state, represent**
ing in resources probably $300,000,000 in banking capital
and deposits; one county, isy own county of Lancaster, rep-*
resenting nearly $50,000,000 in 49 banks; and York County
and Dauphin County, are large counties, approaching if
not probably exceeding Lancaster in so&s reopecto.
The Secretary of the Treasury: So you feel that the
Reserve Bank in this district should be located at Philadelphia?

John 0* Carter

2JL05

Ur» Carter: I do, yes. The natural trond is to Philadelphia?
The Secretary of tho Troasury: Tour relations would bo
almost wholly ^rith Philadelphia, in Lancaster I should say,
of course.
Mr. Carter: Tea,
The Secretary of tho Treasury: We thank you.
STATEHEST OF VR. SAMUEL KoOHACSEK.
The Secretary of the Treasury: Tou Bay state your na$e
and occupation, for the roccrd.
Kr. EoCraoken: Samuel MoCracken, T7ilkes~Barre, Pa.,
cashier of the People's Banlj X am clao chairman of Group 3,
of Pennsylvania Bankers Aaoociation.
He fully agree in our section of Pennsylvania th-tt
Philadelphia1 a olaiis for & regional bank should he sustained, believeing that it would best oerve our interests, &LS
practically the majority of our buoinooa centres around
Hew Yorfc and Philadelphia, They olear practically everything for ue, under the present arrangement, which pf
course is advantageous to us now, and it seems to me
under the clearing systeis alone, if we have to send our

Samuel HeCracken

1106

items, w h i c h a r e principally drawn on H e w York and Phila| defiphla, down to W a s h i n g t o n or Baltimore o r some other
section, it would simply "be back tracking on the proposition a n d losing time w h i c h , from o u r standpoint is not advantageous, b e c a u s e w e believe w e ought to collect our items
"by direct route i f p o s s i b l e .
As to t h e re-disoounting feature, Washington I "bfill ere does not rediscount except in extra p a n i c k y times,
i

and I think a "bank located in Philadelphia, which has been
servinp our section so well, eren though the directors
were not all from that one city, they would hare the advantage of "being in very close touch with information
available tin the banks of Philadelphia throughout all
our section, I think you could find posBibly in at least
half a doaen banks in Philadelphia the information about
almost every bank in our section, and the demand of industries represented in our section*
benefit to the Board

1 think it would be a

of the regional bank to be located

where that information is clone at hand, because It seer.*
to me our only tine of using rediscounts would be in
panicky times when we could not wait until the Reserve Board
located possibly in Washington or Baltimore, would t*dce

Samuel Me Crack en

1107

the necessary steps to find out about our paper.
The Secretary of the Treaeury: ¥• hope you will not
haye any more panicky times under this system,
Mr, Kc Crack en: We h6pe this will obviate that, but
this is the only time when we would find it necessary
to use such a feature. Ye used it in the panic of 1907,
not to re-discount, but to borrow on bonds, and we hare not
had to use it since, I think that is pretty general
throughout our section.
The Secretary of Agriculture: You prefer Philadelphia to
Kew York?
Mr, lfc Crack en:

As far as we are concerned, in Vilkes-Barr«

and from Wilkes-Barre down through to Allentown,
I think all would prefer Philadelphia to New York.

course the northern end around Scranton and Lackawanna
County, I think up there they would prefer to be attached^
to the Hew York Bank.

In fact, the Soronton Clearing

Hosoe passed a resolution, a copy of which I har« with me,
indicating that if they could not be attached to the
zone of the Hew York bank, by all means they ought to
be attached to Philadelphia, and regardless of where they
wtre to be attached, they were yery strongly of

1108
Samuel Me Crack en

the opinion that Philadelphia ought to have a regional bank.
The Secretary of the Treasury: Bo you want to leave
that with us?
Mr. IfcCracken:

I have a number of letters from members

of our group, and that Is among them*
The Secretary of the Treasury: You might file them as
part of your testimony*

We thank you*

STATS&CSHT 03? i!R. W. H. PAIKTBR.

The Secretary of the Treasury: You may state your name
occupation.
}lr* Painter: V. H* Pointer,cashier of the West Branch
National Bank, Wllliamsport, Pa*
Ur. Secretary, I think I have very little to add to
the knowledge you have gained this day. I an Secretary
of Group 4 of the ten counties in the northern tier of
Pennsylvania*

Sending out a communication to the 74

different banks, I received 74 answers with only one
positively against Philadelphia*

Upon that we rest our

claim.

Tttt Secretary of the Treasury: Will you file those hers?

V. H* Painter

Kr. Painter:

1109

I sent them down to you and I think they

should lie here.

We hare lieen closely connected with Phila-

delphia for a number of years, and we are here more on
account of the Berries rendered "by Philadelphia than anything else.

Itaring the check collection charge* on Kew York,,

Philadelphia came to our rescue and took us in — I mean
in a feifelical sense.
The Secretary of the Treasury:

I am trying to grasp

that.
Kr. Painter:

During the currency panic Philadelphia

was a tower of strength to us*

I would like just to add,

in looking orer the l i s t of statements at Boston, I no*
ticed a Massachusetts Bunker sent out 190 communications
to hanks, to which he receired 110 replies, 26 "being in
faTor of Hew York.

That i s quite a contract as compared

with Group 4 in Pennsylvania alone*
I do not care afcout disparaging the other points
mentioned, fcut to take a great "big city — state like ¥enn~
sy Irani a and attach i t to a town like Baltimore, i s like
putting a "bif t a i l on & small dor, and as far as i t s pract i c a l working would 1&ef i t would "be like Captain Cuttle*s
watoh, that had to "be turned forward about sixteen times

a £*y and then would not kttp ti»e.

V. H. Painter

Hid

The Secretary of the Treasury: Do you want to repeat
that statement at the hearing this afternoon?
Mr. Painter: I am afraid icy friend Ramsey Is here now,
Mr. Rue: The Chamber of Commerce of Wilmington has passed
a resolution, I understand, but they neglected to Taring it
with them, and would like to hare the privilege of filing
it later.
The Secretary of the Treasury:

It may "be filed, and as a

matter of fact, anything which has been omitted can be
filed later.
The Secretary of Agriculture:

I should like to ask Mr.

Low a question. A good deal has been said about people feeling at home in Philadelphia.
Virginia and Korth Carolina*

I notice you hare included
Would connecting them with

Philadelphia, as this might indicate, do any violence to
their banking relations, and what would you think they
would say of this natter of feeling at home?
Ifr. Law: X think the Philadelphia banks today hare a
great many useful relationships of that sort. Those
relationships exist with national b^nks, state banks,
industrial operations and wholesale houses, and they
! aresteadily frrowinf.

Philadelphia Is ©ore of an industrial

V. H. Paint tr

13JU

city than A wholesale jobbing city, and it is a great consume)
of the raw material that those southern states produce, ouch as cotton, yarn, timber, coal, truck products
and fruits.
The Secretary of the Treasury:

I notice from the chart hen

that Philadelphia has the accounts of 44 banks in North
Carolina*
The Secretary of Agriculture: Baltimore has 53.
The Secretary of the Treasury: And she has 57 with
Virginia, 37 with Georgia, and 21 with South Carolina.
That is not rery large.
Mr, Law: You must recollect that these are national
banks.

I suppose those are the reserve appointments that

you get from the Comptroller's records.

Uow there are a

great many state banks that also deal with Philadelphia.
The Secretary of the Treasury: Yesf I am only speaking
of national banks. These are the charts from the Comptroller's office showing the number of banks keeping records
in the different states, in the different

reserve centers.

Mr. Law: I would imagine that Richmond and Baltimore
would probably hserw a larger number of accounts in that
territory than Philadelphia has at the present time.

W. H. Painter

1112

Mr. Rue: Might I inject a remark there, Mr.Secretary?
The Secretary of the Treasury: Certainly.
Mr* Hue: I do not think the number of accounts necessarily
Indicates thefevslness*

There Is a rast number of small

banks In that territory whose business is strictly local.
The Secretary of the Treasury: This only relates to the
keeping of reserres*
Mr. Rue: I understand*

And they would naturally have

accounts probably in a city like Baltimore or Richmond,
whereas the banks In the larger cities of that territory
would carry big balances in Philadelphia.
The Secretary of the Treasury: This is only of ralue
as giving sort df a line on the situation.
Mr. Hue: Yes. X just wanted to make that explanation.
Mr # Law: I want to fire you one view of this* Here is a
watershedt *n& Philadelphia is near the mouth of that
river, and that is the channel through which business customarily flows, and conveniently flows, and I beliere when you
look ©Ytr the districting of the entire country, you will
see that in nej&rly tTery instance the city where you will
locate the head office will be on one side of the territory Tou will find it that way la the cas# of SewYork.
fliers is a ourrent which tends towards the east* Throughout

¥• H. Painter

1113

the Atlantic States and the South Atlantic States this
current of trade flows towards the northeast, and I hare no
doubt in these tarious examinations and hearings that you
are carrying on that you will find that nobody wants to go
contrary to that current*

You will find that the Richmond

bankers will protest against dealing with Atlanta, and you
will find that the Baltimore bankers will protest against
dealing with Richmond as a head office 5 but you will find
that they all, as a second choice, will select some city
towards the northeast of them, because that is the natural
current of trade, necessarily following the natural current
of business*
May I Illustrate this further* If you locate the
head office of this district which we have described here
in Baltimore, you will do as great yiolence to that natural
course of business, as you will to locate the Kew .York
district in Albany, or the Chicago district in Indianapolis*
Because the great city where the accumulation of banking power
lsf ia the city where you want to locate your Head
office, prorldedit has accessibility, which I think we
hats proTtn* Banking power Is the first consideration
accessibility the second, and the third is a direrslfied

V. E. Painter

1114

class of business throuefromt the district,so the "bank will
"be self supporting*
The Secretary of Agriculture:

I was going to ask you there,

as you heard me say a few moments ago, we hare had
sereral suggestions defining a territory reaching from the
Potomac to the south and southwest.. Bo you think that
would be a better grouping, or to hare it divided and have
part of it the leading section, as you propose?

You are

familiar with the south?
Mr. Law:

Gentlemen, I think you want to hare as many

strong districts as possible, as many self supporting districts

as possible, and then make the districts which

are sure to be always borrowing districts , as small as possible*
to come within the requirements of the Act;

but make eTery

unit that you possibly can a self supporting unit, where
the dirersityof business will enable the credit area to
take care of the debtor area*
The Secretary of the Treasuryt

The larger the number

of units you make, the less likely you are though, to accomplish that purpose*

I mean I judge from what has been

said, because you reduce the area, and therefore you are
w>r* likely to get a district in a number of places where

W. H. Painter

1115

thereis not the requisite diversification.
JlTm Law: The nueber of your units i s going to "be determined very largely by accessibility in my judjsment, in
order to irive them efficient banking service.
The Secretary of the Treasury: You can get accessibility
pretty nearly everywhere.

The question i s the power to take

oareof the requirements of the d i s t r i c t .
Mr* Law:
tricts.

X am referring especially to these small dis-

The reasons you have to create these weaker dis-

t r i c t s , if I may use that terra, i s in order to provide accessibility to a federal Heserve c i t y .
Th 9 secretary of the Treasury:

Thank you, Mr. Law.

How i s any one else here who desires to be heard?

If not,

we will decide this hearing closed, and we will hear
Pittsburgh at two o f clock.

A cordial invitation i s extended

to any frentleman from any other city to be he&rdl

1116

STATKMEHTS PRESENTED BY KEPKESEHTATIVBS OS
WINSTOH-SALBI.
STATEMENT OF MR. H. £• FRIES.

The Secretary of the Treasury: Mr. Pries, you may state
your name and occupation for the record*
Mr. 3?ries: Kr. E. "B* tFries, Vice President of the Board of
Trade of Win at on-Sal em and President of the Winston-Sal em
Southbound Railway Company. We are here not to detain you,
gentlemen, because I know itis after the hour of adjournment, and you have had several resolutions presented by our
Board of Trade.

Our position in a nut shell is that we

expect to be joinedto a regional bank north of us rather
than south of us. I wrote to Secretary Houston a few days
ago giving him a very brief outlineof our situation from the
standpoint of the agricultural interests and of our
affiliations in "banking, which are northward rather than
south*
The Secretary of the Treasury: What would you say about th s
district proposed by Philadelphia, or rather by Pennsylvania
here, and facing Horth Carolina, Virginia, Maryland,
Delawart and Pennsylvania, and having a regional bank at

H*X.Jrie«

1117

Philadelphia, that is the headquarters*
Xr« Fries: It would not he objectionable to our people*
The only question which would arise is just a little difference in the time of transportation of our commercial paper. But we would decidedly prefer a northern hank to a
southern connection.
The Secretary of the Treasury5

Of course Richmond would

undoubtedly haye a "branch, and :ou would get the same facilitl
through that "bank really that you would get through the head
office?
Mr. Pries: Yes.
The Secretary of Agriculture: It would be like making
water run the wrong way to send you south?
J!r* Tries: Yes; all our connections and associations
and affiliations art northward*
The Secretary of the Treasury: Yor instance, you would not
want to be sent to a bank at Atlanta, you mean?
Mr* fries: Bo*
Tht Secretary of Agriculture: I should like to ask you
one question on this point. Two of the delegations which
har* appealed here, have drawn a district froa the

River southward* Kow that is normally a borrowing
* it not?

E. £• Pries

Ilia

Mr. Fries: Yes*
The Secretary of Agriculture: Would it lie your judgment
that we should isroid that if we can, and that we ought to
have normally part of a borrowing territory in a district
which is hardly a lending territory?
Mr. Tries: That would he our rl*w»
The Secretary of Agriculture: Because it would be apt
more nearly to "be self supporting in times of stress*
Kr. Pries: Yes. We want to be in a district which can "be
taken care of independently of the othar sections*

If it is

necessary to £0 to them we can go, of course, but we have
a good deal of foreign paper coming to us through the
tobacco Interests in our town, and that must necessarily
come through the port of entry, and for that reason we are
extremely anxious for this northern connection*
The Secretary of the Treasury: You do a great deal of
disoounting at Winston-Salem, X mean your banks do?
Mr* 7ries: Yes. Hy brother is president of one bank,
and Vr« Ifaslln is president of another, and I am a director
in a third institution of which ay other brother is presi*
dent, but he is sick and could not be here* But these gentlemen are »er« able to speak about the rediscounts than I am*

E, S. #ries

1U9

The Secretary of Agriculture; What is your opinion as to
the trend of business, isit more largely to Richmond, Baltimore, Philadelphia or some other city?
Kr. yries: Our trend —

and these bankers can speak

about that more than I can —

I should say it is more to the

north, to either Baltimore or Philadelphia*
The Secretary of the Treasury?

And Bichmond?

Mr, Pries: Yes, Richmond is convenient, and we hare a
great deal of business with them, but the greater volume is
with the northern centres.
The Secretary of Agriculture: Have you gentlemen anything
to add to what Kr. Pries has said, or do you simply enfiorse it?

STATEMENT 0? 0. ¥,
m Maslin: I wish to add that we &r« not a cotton
territory and therefore are unique in that respect
in our territory, because the trend of the lnrge manufiicturin
territory is almost entirely east. Our paper is such
that we would not hesitate to send it to Washington,Baitiicore or Philadelphia. Bichmond would be infinitely more
valuable to us than Atlanta, because our wholt government
is tils way,and to put us back the other way is simply
reversing the laws of commerce.

G.V.llaslin

1120

The Secretary of the Treasury* Assuming one of these four
c i t i e s was t o b t m regional bank c i t y and you were in the
d i s t r i c t , which «n« would best merr€ the i n t e r e s t s of the
d i s t r i c t , do you think?
Mr. Maelin: Washington would be very acceptable to u s .
We have j u s t supposed that Washington would be more natural
than Richmond, but Baltimore would be our second choice*
i
| Either one of them, we could put our paper into Washington
or Baltimore by early delivery and save one day18 time
on a preat many transactions as compared with Hew York}
but either of those cities would be acceptable to us,
because they are in the natural trend of our territory1*
trade* wt are manufacturing people, and therefore are not
a large deposit city, Mr. Tries is a director in the
largest bank of the city, which is a state bank, with a
deposit of slat millions and over, and we have ample
I demand at ho»e, all the year round, for our funds, because
! of the increase of the manufacturing capacity that is always
going on. Therefore, we are not seeking to borrow meney
surrounding jcitle*, but if we have to go there our
is not at ail such that we would hesitate to send
it, and w# would likt to have a, lending capacity as well

0. W, MasXin

1121

as thft others*
The Secretary of fee Treasury:

Suppose you Imd headquarters

bank In Philadelphia, and & branch in Hi chnond; your trans**
actions vould "be with Hi chnond?
Mr. igaslin: Yes, our only fear is that *t may be put in
the south* Our dividing lino should be to the south of
usj because our business a l l comes this my*
STATSrgBT OF WL. JOHB V. PRIBS:
Ur. Pri^e:

I would l i k e to se^v onn wrd.

I am presidsnt

of tbft Pnoples national Bank of Vinston-Salonu

that my

colleagues have s a i d about any point north of us being
satisfactory, X concur i n , entirely*

But personally I would

like to emphasise <At X hare as3t%»d to be the likely
solution of the qxestion, that there would be a bank in
Washington.

X assune that I f this a c t works as contemplat-

ed, i t i s tfoinc to be a great national institution, largel y unctor the • n t r o l of the Govirnnftnt, and that the
business done «ith the United States Trm&mwry v i l l "be rnry
large.

X as BUM* tbat thn natural thing would be to consider
as such as vhat th^se other gentlemen say about

JT. ¥• Tries

1122

local "business and local interests*

The biggest business

that this new institution w i l l <*> will be with the United
States Government, and the desirability of Washington as
our Keserre Bank city applies particularly to an institution l i k e ours, and I e n therefore sp*ak strongly about i t ,
in that we lave to ran i t to the United States Treasury
from, our torn $5^000,000 and more per annual for internal
revenue, and the nearer we get to the United

States Treas-

ury v.ith that, whether tin re be a local depository them in
the future cr not, the better i t i s for the business of our
community.

And my prefemnce would be decidedly for Wash-

ingtcn City, although we « n do business without violence
i to th<t custonary course of business* i t h either of thaee
! cities*
The 3ec>etar/ of Agriculture:

Bo you say that, in spite

of th4 fact that Washington i s not in the saxus sense as
' these oth**r c i t i e s are, a. commercial csntre?
Mr. princ:

I feave not understood that tlwe necr banks are

to be ccnnerclal bankc, end in spite of that fact I do
not see that a branch at Richmond would do us any good*
l e could deal with ¥u,shlngton as well as with Richmond,
and we would certainly prefer to deal direct with a big

J . W. Fries

X123

bank i n Washington.
That i s another t hing t h a t s t r l k s

me.

There i s

t h e opportunity, if you. gentleman in your wisdom eo arrnge
the d i s t r i c t , to stake a bank in Washing on which w i l l compare
favorably with Hew Toil: aidChlcago, perhaps not in volume
of money, but i n influence and power.

And I would v^ry

etrongLy l i k e to be ©nnect*id w i t h a bank i n Washington
City, although we can do our business m\ th the o t t o r c i t i n B .
The Secmt&ry of Agriculture:

Vould you aaia us a map

showing u s what t e r r i t o r y you wofrld i n d u * in a d i s t r i c t
with Washington us the centre?
Mr. P r i m :

Veil, —

The Secretary of Agriculture:

That i s what we have

got t o do*
The 3eoi*ary of the Treasury:

Ye hare some sheets h:r%

and if >ou % i l l tke one and out l i n t the d i s t r i c t on i t ^nd
send i t in l a t e r , we would be obliged to you*
Mr. Trine:

X overheard the argument of Philadelphia as

t o t h e i r big d i s t r i c t , taking in the whole South Atlantic
Coast, or p r e t V naaily so; they want t o go Irom the
Northern boundary of Pennsylvania to Key Vest —
The Secretary of thft Treasury:

Ho, they only included

J. V. Fries

1124

tforth Carolina*
Mr» Prints: Well, they siggested It*
the Secretary of Agriculture:

Washington lias submitted

such a map, and IT you will get a copy of that, I t night
help you* But «e should l i k e to get your views on it*
Hr* Tries?

X know so litfcl* dbout the hanking requirements

of the country at l a ^ e ^ that I would hesitate to draw a
soap*
Th<s Secretary of thi Treasury* f£ are only speaking of the
district you would have served frcra Washing on.
Mr. Priro: Just f rca Washington?
The Secretary of tie Treasury: Yes*
Mr* Tries:

And leaving out Pennsylvania?

The Secretary of the Treasury:

What you think should go

In*
Mr. Fries:

If Pennsylvania i s Included, It would he en-

tirely satisfactory to us, because we do a ymry c&tiBfactory business vifti Philadnlphla*
She Societal of Agricultuie:

We want you to Include ths

territoiy you *mld inclu* If 5»u put a hank in Washington*

lor* Trios:

I f you would \*mn i t to m%9 I would say

J. V. Tries

1125

everything from Pennsylvania t o Key Vest, and made It
enough to over influence the big 'banks in Hew York and
Chicago*
The Secretary of Sgricultuxs:

If you have any

resolutions

to f i l e , you say present them*

Mr. Ludlow:

I am president of the Sine ton-Saifsn Board 01

d»3f a i d I hav* a msolution

hftre| a copy of trv«leh has

been addrassod t o t h o Acting H^cretary of this Committee,
and 1 prusus: 'jou hav<?it on f i l e .
!Cae Secreteiy o f t i e Treasury:

You may fi3a

a co|$r i f you

desire*
(She Resolution was filed, and i s as fblions:)
BO-AH) OP IRASB
Vinston-Salem, K.CJanuary 1 5 t h t 1914
f o the Ho no r a b i e s
%a« C. McAdoo and
David 5V Houaton,
Bank Organization Comaittne,
, B. C.

aentlemem
I hsre th^ honor to advise you that at a

meeting of the Board of Directors of the Board of trade

J. V* yrie»

1X26

of Winston-Sal en, Horth Carolina, held on this date, the
following resolutions were adopted:
WH!£KSAS# since the beginning of the public
hearings "by the Organisation Committee i n the matter of the
location of the proposed Central Reserve Banks under the new
"banking and currency l a v i t has become Beamingly apparent
that It nay not be good public policy t o treat© one particul a r l y large {Federal Reserve D i s t r i c t with Hew York as the
Reserve City; and
a very large percentage of a l l the financ i a l connections and a f f i l i a t i o n s of the banking and indust r i a l i n t e r e s t s of t h i s city and state have been b u i l t
up and developed tferough a long term of years with the c i t i e s
to the north and east of us,- and the maintenance and continuation of those financial a f f i l i a t i o n s with the l a s t disturbance that nay be practicable adder the operation of
the xm banking and currency law i s considered to be of
the toostImportance t o tha i n t e r e s t s of t h i s c i t y and
WH38K&S, the location of t h i s c i t y and state i n a
Reseve D i s t r i c t of which any c i t y to the south o f u s
i s to bethe Reserve Centra, and the consequent distrubance

J. L. Ludlow

1127

and reversal of the noxmal f a c i l i t i e B of ready communication
and of the channels of commerce i n financial transactions
under which our industry and commerce have been built up
and maintained during a long period of years, would be so
disastrous and inimical to the commercial and agricultura l derelepraent e f t h i s state as to e x c i t e our moot serious
apprehension, and
v'HRRAS, in connection with the normal financial
and trade relations with the larger c i t i e s to the north
i

: of is, we a l s o have intimate and iiaportant mutual i n t e r »' e s t s inbtrade and financial relations with the State of
i
' Virginia and the c i t i e s thereof t
:'

KSSOLVZD, that the l e t t e r authorized by t h i s Board

! of Directors, addressed to the Hon. Ym, O» MeAdoo, Secre, tary of the Treasury, under date of December 51, 1913, in
j which the request was made that Korth Carolina be placed in
• the Reserve District of which Hew York shall be the Reserve

City, shall bo so modified as to make our request be that
Wine toji-8alem and so much of Sorth Carolina as may be found
feasible shall be placed in a Raserye District of which

I some

city to the Vorth of us is to be designated as the

'Btssrrw City; snd

J, L, Lddlow

1X28

RESOLVED, that the Reserve Bank organization Committee
i a further requested to place the States of tforth Carolina
and Virginia i n the same federal Reserve I& s t r i c t , and
RESOLVED, that the Reserve Bank Organization Committee
i s hereby respectfully requested to grant a hearing at i t s
convenience during the s i t t i n g of the Committee i n washing tor
next week, to representatives of the Winston-8alem Board of
Trade, that the subj act matter of the above resolution may b<
presented in person.
Very respectfully submitted
J, L. Ludlow
President, Winston-Salem Board of Trade,
i

(thereupon, at 1,25 P« If,, a recess was taken until
2 o'clock P. V.)

1X29

&WT8R HEOTSS, 2 If* If*
STAT2WHHTS SUBMITTED IN BEHALF 07 PITTSBUKO, PA.
The Secretary of the T»asu ry:

Gentlemen, I do not know

whether any o f you were here t h i s morning when we opened
the proceedligB.

I f you were, X need not r e - s t a t e the prob-

lem that we deaire to secure information about.
i t i s this.

Briefly,

We aiw required t o divide the country into not

l e s s than eight nor more than twelve regional d i s t r i c t s ,
and to l o c a t e the headquarters of a bank i n each one of
these d i s t r i c t s ,

what we want are pertinent f a c t s r e l a t i n g

to the courses of trade and commerce and the banking exchangeb
within the d i s t r i c t s that are t o t e organised.

Haturally,

where an argument i s made i n behalf of any c i t y , i t must be
based upon the assumption of some d i s t r i c t which that c i t y i s

to serve.,
Pittsburg, 2 presume, i s prepared to present i t s
views as to what the district which Pitteburg should serve
should be, and also how that i s to be related to the other
d i s t r i c t s In the country,ttKsausei t i s an inter*related
problem. i t usually find that we can get the information
we want best by asking questions, and where briefs have

been prepared, i t would b« better to submit then, especially

V. H. Stevenson

1130

where they a r e s t a t i s t i c a l , and hare them mad© e x h i b i t s to
your to stlmony.

v e should be p l e a s e d &ocr to hear from anybody

who wants to speak f o r Pittsburgh
BTATESrailT OP 1R. W. H. ETEVEHFON:
Jfr. 8tevaifson:

I am p r e s i d e n t o f the Chamber of Commerce.

The Secretary o f tba Treasury:

How any r e s o l u t i o n s of

Clearing Houses or Chambers o f Commerce, or Boards of Trade,
you need not read, but they may be submitted and attached
: a s e x h i b i t s to the testimony.

They are g e n e r a l l y j u s t r e s o -

|; lutions favoring the c i t y .

How what we want are some

I facts.
ii

I Mr. Stevenson:

Gentlemen, I represent the commercial

| organizations of the City of Pittsburg, and we appreciate
i
t h i s opportunity of*presenting the claims of Pittsburg to t h i s
Committee,

we have confined our presentation of t h i s oase

to three gntlemen, who w i l l speak here today.

The few

remarks I Have t o sake, 2 have put In writing so that X
could be wief, covering the general proposition from an
industrial and commercial standpoint.

Ve could have brought

a crowd of character witnesses, i f we had thought i t would

bw necessary, but from the proceedings t h i s morning

W« H.Sterenaon

1131

The Sooretary of the Treasury; You do not mean that you
ooulA bring a crow* from Pittsburg?
Mr. Stevenson:

We would bring a crowd, just as they did

from Philadelphia, but *e did not Viink it *as necessary*
The Secretary of Agriculture:

Before you begint haro you

a map showing the district you have in mind?
Ifr. Stevenson: The other gentlemen will preaent that.
The Secretary of Agriculture: If you will let ua hare it
while you are talking, so we can look it orer,
ICr. Llndennan:

We hare a asp prepared*

We understood yoi

wantod ua to surest other district8.
The Secretary of Agriculture: 7es«
Xr* Ziindermen: Ve did that, not Intending in any w&y to
show what you should do, but to ehow the relationship*
This is the particular one thcit we spoke of for Pittsburg
(Presenting Mop.)
The Secretary of the Treasury: You may prooeed, Mr*
Sterenson*

. H. Stevenson*

1132

Pittsburgh i s ho re today to express i t s Depreciation
of the consideration of your Honorable Committee in granting
t h i s special hearing for th£ claims of our c i t y in the
consideration of the important problem which you hare before
you for the people of t h i s country, of determining the
places at which shall be located and established, the
Regional Banks contemplated under the now Currency Law,
Since the passage of the new Banking and Currency
la* much of the opposition to its prorisions has now d i s appeared and has been transferred into approval*

Where

d i s s a t i s f a c t i o n and even denunciation were h-mrd three
months ago, the b i l l as revised by Congress and signed by
the President, has brought forth expressions of confidence
and words of ooTaraendation*

The business men cf Pittsburgh

hare f a i t h in their country and b e l l ere that with rapid
adjustment to the n-jw conditions resulting from the enactment
of the new Currency 3111 we shall hare an era of commercial
and industrial a c t i v i t y and prosperity*
Xn a s p i r i t of cooperation, as well as p a t r i o t i c
interest in tho great problem that confronts ycur Honorable
Committee, *e deaire to submit to you the reasons why *re
belisva Pittsburgh's advantages and resources not only

Stevenson

1133

entitle It to consideration, but that it is a logical place
for a Regional Bark, in consideration of the interest of
our whole country* toni Committee, we understand, has
outlined three essentials for the qualification of Regional
Bank Centers9 viz:
•Pirat. Geographical convenience, which Involves
transportation facilities and rapid and easj communications
with oil parts of the district*
•Second.

Industrial and commercial development and

needs of each section, which involves consideration of the
general movement of commodities and of business transaction a
within the districts and the transfer of funds and
exchanges of credits arising therefrom*
"Third, The established custom and trend of business,
as developed by the present ay at era of bank reserves and
checking accounts.

In laying out the districts and

establishing the headquarters for reserve banks, every effort
will be made to promote business convenience and normal
movements of trade and commerce,11
Other representatives of the City of Pittsburgh here
today, will satisfy you as to its iu*lifixations fros a
financial standpoint.

I a&va th« honor to appear before

¥• H* Stevenson

1134

you as President of the Chamber of Commerce of Pittsburgh,
which with the other trade and commercial oiganizationo way
said to represent the sentiment of the business men of the
great Pittsburgh Region, and who wish to lay before yea *
few facts in support of what they believe are pre-eminent
qualifications of Pittsburgh as a business and transportation center for a Regional Bonk.
The United States Census compiles s t a t i s t i c s for
metropolitan districts (a ten-mile radius), and in manufactures, population and area Pittsburgh i s outranked by
only Hew York,

Chicago and Philadelphia*

Had we the time

and opportunity to show you, we believe i t could be easily
demonstrated that the Pittsburgh industrial and business
district, exclusive of other territory included in the
financial district to be considered in the location of a
regional bank, would giie i t an industrial and business
supremacy second to none i n this country*
As is well known to you, Pittsburgh i s the iron and
s t e e l center of the world* I t i s also the center of the
world's largest supply of the best bituminous coal.

The

tonnage of the industrial district (forty-mile radius)
as reported to the Chamber of Commerce and compiled by i t

¥. H« pteveneon

1135

last year was railroad 164,594,915; river 12,476,323, a
total of 177,071,238 tons*

To carry this tonnage requires

sufficient railroad ears of modern capacity to make a train
reaching around the world at the equator*

To move such

enormcB business Pittsburgh has i t s three rivers and the
serrioe of more than a dozen railroads, thus furnishing rapid
and regular movement and unexcelled transportation
facilities.
Pittsburgh io the natural gateway between the East and
West and i t s strategical position for this reason was
early recognized by the nations of white men who first
occupied this country; i t hoi-3s the same advantage today.
Pittsbuxgh i s within 12 hours of the sea and 12 hours of
the Vississippi Valley,

yearly half the population of the

United States dwells ?dthin a night* e ride from Pittsburgh,
which cannot be said of any othercity.

Approximately

700 passenger trains enter and depart from Pittsburgh er^ry
day serving a large proportion of the population, which
must be considered in the establishment of a Regional Bank.
The number of mails received by railroads in Pittsburgh
i s 157; the number of mails dispatched 170*
The Pittsburgh District produces amually 25j£ of a l l

V. H, Stevenson.

1136

the pig-ironmanufactured in the United States, 20j£ of the
steel r a i l s ; 33j£ of tha glass and a large percentage of the
tin plate, tubing, steel cars, air-brakes, electrical
Manufacturers, pickles, cork, and other useful articles to
trade and commerce.

In 1910 i t produced 90,000,000 tons

of bituminous coal, nearly one-thirdT of the production of the
entire country.

The value of the manufactured products

alone for the Pittsburgh metropolitan District, as shown
by the Federal Census for 1909, in nearly $600,000,000; with
wage earners of nearly 150,000,
The pay roll of the Pittsburgh district —• and I wish
to emphasise this point, which I think i s a very important
factor in tne establishment of a regional bank.
The pay roll of the Pittsburgh District i c approximately $1,500,000 for each day — $45,000,000 per month, .
One of our banks alone pro Tided over £7,000,000 last

i
j
j
i

month,
Prom these stupendous figures i t must not be concluded,

;

as i s too ften the impression among the uninitiated, that
Pittsburgh*s industries are confined tonthe manufacture of
iron and steel and the production of fuel.

I t has been

said we do not make anything but iron and steel in Pittsburgh,

« H. Stevenson

which i s a wrong impression*

1137

The region I s f a l l of direr*

sified industries, as can easily be seen by examining the
census of manufactures of JL9O9 covering many lines of
industrial activity*
The mount of foodstuffs and product handled in
Pittsburgh gives an idea of the local market and i t s
position as a distributing center^

Pittsburgh stands third

in t he country for distribution of produce and vegetables.
35,000 care were rocoived and sold in Greater Pittsburgh
i District in 1912; 20,000 oars of vr* ich were sold in the
Greater City, and the balance in the surrounding territory.
These products show an increase of over \A% over 1911 and
over 1910.
;
r

Pittsburgh i s also a great wholesale and jobbing
oenter, the voluraeof the dry goo4s business in 1912 alone
being estimated at $25,000, &00.

;

The shoe trade of Pittsburgh in the last year amounted
to $10,000,000.
Pittsburgh1* retail merchants reach 5,000,000 consumers beyond the city, in its statements of the thirteen

metropolitan districts the Federal Census shows the average

wages paid in the Pittsburgh district to be the greatest

W. H, Stevenson

1X38

of any district east of the Missouri River, establishing
the high purchasing power of the people of this region.
Pittsburgh's oank clearings in 1912 were
$2,798,990,215,, an Increase of nearly 10j£ over the previous
year.

According to the chief of the Corporation fax

Division of the Internal Revenue, the 23rd Internal Revenue
District! of Pennsylvania, 2050 corporations In the P i t t s burgh District paid taxes en net earnings of $213,520,000,
according to the Government records of the l a s t fiscal year.
This i s nearly \4% of the net earnings of the corporations
of the entire United States, x
The Chamber of Commerce of Pittsburgh hao, within the
l a s t ft* days, aade direct Inquiry as to the business of
the banks in the territory.. This inquiry was sent to 917
banks in Western Pennsylvania, la&tern Ohio and Vest
Virginia, representing a capital and surplus of $170,000,000,
and replies have already been received from 260, representing a capital and surplus of over #100,000,000.

These

replies show that of the $86,000,000 worth of business done
with other banks, $48,000,000 was with Pittsburgh and
$32,000,000 with a l l others, or about 10^ more with P i t t s burgh alone than with all others combined.,

w*. E, Stevenson

1139

With a l l these and other considerations which will
be set forth atthis hearing today, i t can be safely stated
without fear of contradiction that a regional bank located
in Pittsburgh would be an economy and convenience to a very
large proportion of the country's people and business
interests ensuring the retention of their reserves under
Federal supervision in a strong financial center at their
fery doors*
The Chamber of Commerce of Pittsbuigh, at a largely
attended meeting January 8, 1914, unanimously adopted the
following resolution:
R3S0LVKD, in view of the pre-eminence of Pittsburgh
as a Banking9 Commercial, Manufacturing and Transportation
center, t) at the Chamber of Commerve of Fittsbuxghpresent
to the federal Reserve Board the peouliar claims of this
city and urge upon them the desirability of establishing
here a Regional Bank*
This expression has been confirmed by similar action
on the part of the commercial and civic organisations
throughout the city and district, and, we have reason to
believe, has the hearty concurrence of the large population
of the region for whose benefit and advantage we submit

¥. H. Stevenson

1140

PittBburg as the logical place for the location of a
Regional Bank.
, In conclusion, gentlemen, I JVE t wish to ray that we
hope that you will inolu ie Fittsburg in your itinerary,
i f possible, and see for yourself chat a district we have*
The Secretary of Agriculture:

we are both familiar with

it.
The Secretary

of the Treasury:

we have been there fre-

quently.
Mr. Stevenson:

And the financial statement will now be

made by the president of the Clearing House Association,
Vr. VoXnight*
The Secretary of the Treasury:

Have you made a l i s t of

the gentlemen you want ue to hear?
STATBfEN? 07 CHARLES KcKHSaHT:
The Secretary of the Treasury:

Your occupation, Mr,

VcXhight.
Ifr. XoKnight:

I aa a banker.

The Secretary of the Treasury:
The Secretary of Agriculture:
Ifr* VcXhight:

What bonk?
What position?

I am president of the Western national

Charles McKnight

1141

Bank and President cf the P i t t s b u ^ Clearing House
Aeeociation.
The Secretary of the Treasury:
familiar with our problem.
tentative d i s t r i c t f o r

Mr. tfcKnight, you are

I tee you have laid out a

Pittsburg and I w i l l he glad to

have you submit your argument i n having such an arrangement*
Vr« VoKhight:

We hare l a i d out that d i s t r i c t , gentlemen,

because i t seems almost contributory to PittBburg's
business, and Pittsburg in i t s way i s contributory to the
I business of that d i s t r i c t .

I t i e on the other side of the

Allegheny ifountaino, and through i t s position, through
iron —
The Secretary of the Treasury:

Pardb n me j u s t a moment.

In order to get t h i s in the record, take t h i s down, Mr.
rteftographer.

The Western part of Sow York, <* l i n e drawn

j u s t east of Hoohoster; western part of Pennsylvania, a
l i n e drawn east of Altoona; extreme veetern end cf Maryland,
the whole of Test Yizginia — I moan the western and of
Haryland, the who la of Test Virginia and the entire state
of Ohio, with Pittsburg suggestod as ths loc&tioa of the
federal Reserve Bank.

Charles HcKnight

Mr. iteKnight:

1142

I have no idea, gentlemen, of making any

set speech on t h i s at a l l , and I an only going to try to
t e l l you, in a few words, what wo would like to hare.

The

district, as I say, i s contributory to Pittsburgh and
Pittsburgh i s contributory to i t , on account of the quality
and kind of i t s business.

The coal business of Pittsburgh

i s , of oouree, entirely th* father of the iron and steel
business, because fuel i s naturally part of that.

The coal

business reaches from Pittsburgh as far as Duluth, and
practically a l l over the country and from those districts
we receive the cozsnereial paper which you gentlemen have to
t e l l us later on what i t in, Tait we received paper from a l l
that part of
over/the country, which we haye to discount and hare to
take care of*.
The o i l and gas business i s — practically Pittsburgh
i s the home of i t . .

That i s almost all of the o i l and gas

business of the United States, no natter where i t i s
located, in Texas, or Oklahoma, or California, i s financed
and operated from pittsbuigh, by Pittsburghers,

The glass

business and the other business tfhich Vr*. Stevenson has
mentioned, and which I will not go into the details of the
s t a t i s t i c s at a l l , are naturally contributory to Pittsburgh,

Charles IfoKhight

1143

because a l l ths paper ooses back to that part of the countrym
to be discounted.

I t s connection with Cleveland and Cin-

cinnati are those of iron and coal, and the connection i s
rery close, because we receive ore from the lakes which
land at Cleveland, Astabula, Erie and other ports alsng
the coast, and i s sent to Pittsburgh, and ia made into iron
and steel, and th»ee parts of the country that maks i t into
pig iron, frequently send i t ~ - a great deal of i t i s sold
in Pittsburgh, for the purpoao of making i t into iron,
steel, tin plate, sheet iron and things of that kind; e o
we claim this whole district i s practically a basin which
has the Eaae kind of business.

It i s a l l of the came kind.

We have no export business, or at least the export business
we hare in iron and et el goes through Hew York, but i t i s a
business that i s composed of practically one people, who
are interested in e ache the r and know each other, and know
the paper that will hare to be discounted in these regional
banks.

Pittsburgh i s located in tha central rag ion.

i s nearer to any city that you oee mentioned i n that aap
than any other large city.

That i s , for instance, we are

nearer to Cleveland than Cincinnati, and we ore nearer to
Cincinnati than Cleveland.

Wo are nearer to tfohnetown than

Altoona and Buffalo, so that practically we havft a

Charles McKnight

1144

ride — the longest ride we hare in a train i s one night
to get to "Pittsburgh from any other place*

And we are also,

should i t be necessary — ire are also within one night's
ride, as you know, of r-aahington.

The other points mentioned

in our district for a regional bank will take considerably
longer to get to Washington than we would*
The postal f a c i l i t i e s of Pittsbuigh are peculiarly
good in that direction, because Pittsburgh i s what we call
a fast postal district*

I do not know that that i s the

technical name, but that describes i t .
send this mail as far as Pittsbuigh.

That i s , they
Then i t i s distributed

to different parts of the country and from there on i t i s
slow mail*

That i s , our place i s situated in such a way

that we get the first quick delivery of mail, which, of
course, under those circumstances, from a business point of
view, i s very necessary*
The Secretary of the Treasury:

How, this district as you

have laid i t out, i s that a borrowing district,or i s i t a
self-contained district?
Hr* HoKhight:

The biggest borrowing —

The Secretary of the Treasury:

When they could hare a

surplus of funds to lend at the season of greatest demand*

Charles McKhight

Ifr. VoKnight:

1145

I t i s a large borrowing d l s t r i o t , for the

reason that they s e l l a l l over the world.

The coal g o e s f

I say, everywhere*
The Secretary of the Treasury:

What are your rs-discount a

—» what rrere they l a s t year at the maximum point f o r t h i s
di strict?
Mr. McKnight:

we could not t e l l you.

The Secretary of the Treasury:
in Hew York?

What was the ro-discount

How much was the borrowing of this d i s t r i c t

from other bankc, I mean by the banks?
Mr. MoKhight:

I t would be impossible to t e l l .

That i s

one thing that we nerer boast very such of, how much we have
to borrow from other people.
The Secretary of the Treasury:

I t i s a fact we want to

know.
|fr« McKnight:

I t i s a fact we cannot give you.

The Secretary of the Treasury:

We can get i t , of course,

from the Comptrollers records.
Mr* McKnight:

That would not entirely cover it*

There

i s a great deal of paper sold, which i s practically —
i
The Secretary of the Treasury: Our Comptroller1 s reports
w i l l show the re-discount* of the national banks for that

Charles McKnight

district.

1X46

Of course, that i s a l l we know or can rely on,

Mr. McKnight:

What I am trying to get at i s t h i s .

w i l l show you what h i s record shows, bat won't show you
what paper was actually sold.
The Secretary of the Treasury:
said.

That i s exactly what I

I t w i l l show what was reported to the Comptroller

as haying been borrowed by the national banks of the
d i s t r i c t , and that w i l l be Borne indication, at l e a s t , so far
as national banks are concerned^ as to what their borrowing
i s at the period of extrane demand. Do you think i t i s
wise to create d i s t r i c t s which are wholly borrowing d i s t r i c t s , rather than to grade d i s t r i c t s of a greater diversity.
Vr. XcKhlght:

No, X do not think so,

X think you have

got to have a well balanced d i s t r i c t as nearly as possible.
In t h i s d i s t r i c t the country banks, as we c a l l them — the
banks out through the country, where there i s on manufacturing, are usually accumulators of money and they deposit
i t at Pittsburgh, at i n t e r e s t .

Pittsburgh and these other

c i t i e s mentioned i n there are a l l loaning c i t i e s *

That

i s , they are the centres where the people go to borrow money,
*
but there i s a constant demand from the country, for notes.

Charles HoKnight

The Secretary of the Treasury:

1147

la not Pittsburgh i t s e l f

a very great borrowing city?
]fr. McKnight:

I do not think i t i c , tfr* Me Ado o.

mean borrowing from other banks*
the shape of deposits^
money*

You

I think i t i s , except in

I t has always an active demand for

That i s one of the reasons why a regional bank —

that should be the location of a regional bank, and in
- Pittsburgh money soonest touches the bottom.
tremendous payrolls.

That i s our

AR has been shown in 1907, the panic

practically started in the City of KevrYork, but the c r i s i s
of It came i n tte City of Pittsbugh, because of people
taking money out and hiding i t , putting it in their clothes;
took i t out of tanks* Our deposits vent down there so fast
that inside of. three days i f we had not had come emergency
currency, inside of three days after the panic started, most
of the banks in Pittsburgh and practically almoct every bank
in the country would hare closed.
The Secretary of the Treasury:

What interest do you allow

on reserve balances kept in Pittsburgh?
yr. VoKnight:

Three per cent.

The Secetary of the Treasury:
about collecting checks?

What i s your practice

Do you collect them free?

Charles YcKhight

tfr. VoEnight:

1148

The practice i s , we usually collect the

checks for l i t t l e or nothing.
The Secretary of the Treasury:

practically free.

what

do you estimate that the value of that i s — i t s equiTalent
i s the interest rdbe per annum, free collection of checks?
Ifr. IfcKnight:

I should say I t was equivalent — i t i s

rery hard to estimate that.

Three and one-half per cent,

perhaps•
The Secretary of tho Treasury:

You do not mean that the

free collection —
tfr. KcKnight:

1 mean one-half per cent*

The Secretary of tha Treasury:

We have

had testimony

here that i t was equivalent to about one per cent.

Do you

think that i s too high?
Ifr. VcKnight:
too high.

Veil, I should think one per cent would be

In the .first place, we try in Pittsburgh to

estimate the cost of the collection of the checks, end make
people keep a

balance corresponding to that.

That i s , we

try to.
The Secretary of the Treasury:

Ve are only trying to

asoertain about the value of the inducement.
Mr* ifoXnlght:

X see what you mean.

Charles McKnight

Secretary of the Treasury:

1149

Of your reserve accounts,

and i t s importance to ascertain also to what extent these
extra inducements artificially stimulate the use of certain
c i t i e s as raBerre agents.
Mr. McKnight:

I should pay hardly more than one-half per

cent on that, but you must remember in paying inter381 on
deposits, I hare understood Pittsburgh has "been criticised
because of i t —• because i t paid high interest on deposits
but you must remember also Pittsburgh i s a great money
market.

That i s , i t needs money and has to uee i t in the

manufacturing business and all these other businesses.
She Secretary of the treasury:

It i s not a criticism, so

far as this Committee i s concerned*
Mr, HoKnight:

I did not mean that, but I have understood

by the papers that we have been criticised) because we pay
high interest, tv«ry city c a l l s to i t s e l f the money i t
needs, and i f i t needs more money, i t calls aom money to
i t , sir, and the nay to do that Is by the interest i t pays,
London, for instance, i f i t wante to get off speculation,
raises the rate of interest, because i t cannot afford to
borrow money.

We, i f we want money for our business and

i t , we raise the rate of interest.

I do not mean to

1150

Charles McKhight

say that i t always i s a good plan to do i t .

We would sooner

have the same amount of money and no interest at a l l .
The Secretary of the Treasury:

we were asked to give

coneideration to the Dank clearances of a city*

How, i t

tocomes important too, to know i f thoee bank clearances
reflect normal business or abnormal business, to the extent
that reserves are attracted to a city by a free collection
of checks, which; of course, increases your clearances to
that extent;
face

These etatisties must not be taken at their

value.

Mr. lfcKnight:

1 can only answer that ay self; because 1

am not familiar with other banks in Pittsburgh, except by
conversation, but X do not believe there i s money attracted
to the city of Pittsbugh, outside of the legitimate district by the free payment of interest or collection of
checks, because I am pretty well familiar with what banks
do business there, and they are usually attracted ty the
nearness,of the reserve city to thorn, and the quickness with
which they can get currency if they need i t ; and of course,
the parsonal element has more or l e s s to do with i t and the
aggregate of business done*
strong*

That i s something that i s very

You cannot make i t too strong, because a bank in

Charles HcKnight

1151

West Virginia, for instance, knows that Pittsburgh i s
familiar with i t s business men, and i f they have to rediscount t h e i r paper, they can go to Pittsburgh and get i t .
The Secretary of the Treasury:

I s that true of the whole

of Western Pennsylvania, or does i t not apply largely to
the northern part?
Mr. McKnight:

Almost/ X should say, three-fourths of

West Virginia, the lower part of which I s on railroads that
come from t e east and west, that don't come north and south
I from Pittsburgh.

1 should say that the extreme southern

part probably would not count i n there.
The Secretary of the Treasury:

would i t not be doing

violence to convenience and the customary course of business,
to include Cleveland, Toledo and Cincinnati and those c i t i e s ,
i n the d i s t r i c t of which Pittsburgh was the headquarters
for the regional bank?
1

Mr, UcKBight:

Hot as much so as making Cleveland or

Cincinnati, or Akron, Ohio, for Pittsburgh,

You hare got

to do i t scmstfere.
The Secretary of the Treasury:

I a* not making com-

parisons,
]fr, HcKnight:

I am making that comparison j u s t for that

Charles HcKnight

' reason.

1X52

You said Cleveland and C i n c i n n a t i .

The Secretary of the Treasury:

I am only asking a s a

matter of f a c t , i f i t would do v i o l e n c e to the conveniences
i and customary course of b u s i n e s s , because that i s the
language o f the Act here, to embrace the whole of Ohio and
t h i s d i s t r i c t and make P i t t s b u i g h the reserve center?
Mr. iffcKnight:

X do not b e l i e v e i t would, because there

i s not a day p a s s e s that the i r o n and s t e e l men are not i n
c l o s e connection with both o f those c i t i e s ; c o a l men a l s o .
Their g r e a t business coming from P i t t s b u r g h g o e s through
i those two p o i n t s , and they are very
i!

familiar with each other*

Cleveland i s only about four and a h a l f hours from P i t t s b u r g h
and Cincinnati very l i t t l e l o n g e r , and while Cincinnati

not quite a s i n t i m a t e l y connected with P i t t s b u r g h a s
Cleveland i s , because i t i s further west, and i n the old
days when coal was sent down the r i v e r by barges, Cincinnati
was very c l o s e l y connected with P i t t s b u r g h •

I t i r that to a

large extent —
The Secretary of the Treasury:
between Cleveland and

Bo the banking exchangee

Cincinnati and Columbus and Toledo

and a l l of those important Ohio c i t i e s — are the bank
c l e a r a n c e s and exchanges g r e a t e r w i t h P i t t s b u r g h than with

Charles VcKhight

1153

Philadelphia, or Hew York, or Chicago, for instance?
Ifr. XcXnlght: ffot e i t h e r ffewYork or Chicago.

I should

say that they are greater than with Philadelphia, unless
they are sent there simply tor the purpoeeof collecting
checks,

Philadelphia c o l l e c t B a great Many check* i n a

general way, for the whole of tha country, "because they do
i t without charge.
The Secretary of the Treasury:

You do the same, X under-

stand.
Hr. ifoKnight: - We do very much tha same.
The Secretary of the Treasury:

I think that Philadelphia

only allows two per cent?
Mr. IfoKnight:

Two per cent.

The Secretary of the Treasury:

How, you have Been the

d i s t r i c t which Philadelphia suggested here today, the
whole of Pennsylvania?
Ifr. tfeKhlght: X have not seen i t , no s i r .
The Secretary of the Treatay:

The whole of Pennsylvania

and the southern part of Sew Jersey, Maryland, the eor.^ern
half of West Virginia, the whole of Virginia and Sorth
Carolina, with Philadelphia as the headquarters^ for © regiona l bank,

what would you think* of that d i s t r i c t ?

Charles Mclhight

» ifcKnight:

In t h i s (indicating) the one?

The Secretary of the Treasury:
Mr. McIDUght:

Yee, in white.

Clear down to North Carolina?

The Secretary of the Treasury:
Hr# UoKhlght:

1154

Ye».

Well, we hare no objection to that —

looks a l i t t l e big.
The Secretary of Agriculture:

That includes Pittsburgh

and Philadelphia.
tfr. VcKnight:

The trouble i s the business between

Pittsburgh and Philadelphia — Pittsburgh and Philadelphia,
their business i n t e r e s t s are BO entirely different.
are not the some kind of business*

They

we are more i n sympathy -

1 do At mean to say we are not i n sympathy with Philadelphia,' beoauBe we leva them rery much, but Pittsburgh
has done business more closely with Hew York than Fhllad elphia.
The Secretary o f the Treasury:

The location of a Reserve

Bank i n Philadelphia wou*& not disturb there, because the
ordinary course of business between banks and their correspondent banks i s not affected by t h i s arrangement.

Your

reserve bank i s located mt one place or another and i t holds
the reserves of the member banks of the d i s t r i c t , and

Charles McKnight

1155

also re-discounts for member banks when they require i t ,
ITr. McKnight:

There i s the point you are getting at.

They re-discount for member banks when they require i t .
The Secretary of the Treasury:

Now, could not a h?ad-

quarte re bank in Philadelphia, for instance, the directors
being select ad throughout the district which Philadelphia
serves, as required ty t h i s b i l l — could not i t effectively
deal with the situation — as effectively, Z mean, as i f the
bank was at Pittsburgh?
Mr. tfcKnight: I do not mean to say i t could not, except
to say that they are

not familiar with the paper <f the

manufacturers through this section of the country.
The Secretary of the Treasury:

Suppose PittBtwrgh had a

director.
Vr. VcKnlght:

If they had the right kind of a director,

i t might work a l l right.
The Secretary of Agriculture:

Would not that objection

Apply JJUBt as well to Cincinnati, i f you took Cincinnati to
Pittsburgh?
Vr. ITcKnight:

Hot entirely so, no sir.

I think we

are more intimately connected with Cincinnati, even than
v are with Philadelphia.

Charles McKnight

The Secretary o f the Teaary:

1X56

I notice you suggest that

Philadelphia he taken to Baltimore, or Washington.

Would

there not be more vfiLenoe from that point of Yiew, than
taking Pittsburgh to Philadelphia?
Mr, McKnight:

Washington, as X ttderstand i t , i s a rery

central point, and they w i l l probabXy be able to handle
through the additional adTioe they will get from the
Committee here, almost any section of the country.
The Secretary of Agriculture:

What 1 mean to ask i s ,

would not your argument be applied to every city?
Hr. WcKnight:

Yes s i r ; i t would spply to every c i t y you

are going to put i n t h i s group.
up your mind to that*

You might juct as well make

There will be a great many violences

of everything*
The Secretary of Agriculture;
rery real?

Would the violence be

Your ordinary banking operations would go on

ust as before.
Hr. HcKhight:

Yes, I think you w i l l find them real,

hat a l e c s you have some connection by birth and breeding
d business, that they w i l l eliminate the Federal Bank very
argely, exvept f o r carrying what they carry bylaw*
The Secretary of Agriculture:

Birth and breeding haven't

Charles VcKhight

1157

played such, a tremendous part in the reserve operations up
to date. You hare gone to Hew York. You hare gone to
Chicago and you hare gone to Pt. Louis*
Mr. MoKnight:

Yes, because you have made us do it* We

have only three places we can keep our reserves, Hew York,
Chicago and St, Louis.
The Secretary of the Treasury:

But I hare a diagram here,

showing that Pittsburgh has the reserves of banks in all
parts of the country and that does not BCem to be doing any
very great violence to the birth and breed of the se people
in these other communities.
Mr. HcKhight: Veil, X do not mean to eay —

what I mean

to oay by birth, I mean the same people in the same business*
1 don't m-aan to say thore is any particular breed or birth
in Pittsburgh, because I do not think we have any, except a
few that may have left up an account of the iron business*
The Secretary of the Treasury:

I notice here that Pitts*

burgh has reserve accounts in banks, some of them as far
west as California.
Mr. HcKnight:
city it is, sir.

That shows just wnat a remarkable good

Charles VcKhight

The Secretary of the Treasury:

1158

Co you think that tha

interest rate and free c o l l e c t i o n of checks has a l o t to do
Kith that?
Ux. lloXnight:

I t might have, hut why would they stop at

Pittsburgh, when they can get them from Albany, Chicago or
Philadelphia?

I as an why should they come there, when they

can get the same thing i n Philadelphia*

They do not come

for some u l t e r i o r reason*
The Secretary of the TreaBury:

Why did they leave

Albany or San Francisco?
Mr- JfoKnight:

perhaps they a re offering them a b i t more,

I don't know.
The Secretary of Agriculture:

I u Boston, the bankers froM

Hew England t o l d «s they went to Albany and Philadelphia,
rather than to Boston, where

they would normally go, simply

because they offered those inducements.
The Secretary of the Treasury:

Albany'D statement

shows something l i k e two b i l l i o n s of bank clearances a year.
On i t s face that would & ve i t a great deal more Importance
than the f a c t s as developed disclosed, because a large part
of those clearances are the result of the unusual inducements
that are held out by the banks there to carry the reserves

Charles McKnight

1159

of other banks.
Mr. McKnight:
these things o*t.

You hare so much more facilities to find
Bo you find many of those things in

San Francisco, for instance, and outside points?

We have

an account in Blade Hills, for instance, Horth Dakota. It
is not «n account of any reason except that of friendship.
We do not know what you have there, because I cannot tell
you, but do you find many of them?
but do you find many of them?

You might find a few,

Because I do not believe there

are very many in Pittsburgh that are interested in that way.
The Secretary of the Treasury:
trying to get information.

I do not know*

I am

I am simply asking for the facts,

in order that the Committee may give the proper weight to all.
of these considerations.
Mr. McKnight:

I think you will find very few.

If you

have your department here diagnose this case, you will find
very few outside of the district I mentioned.
The Secretary of the Treasury:

I do not consider it

the slightest reflection on Pittsburgh that she has spine
California accounts, but on the other hand I want to know
how much weight to give to the significance of those
accounts, that is all.

Charles VdKhight

Hr. VcKnight:

1160

Yes, I understand you.

The Secretary of Agriculture: Have you some other point?
Hr. VcKhight:

I have nothing more, sir, no, except by

the way, here are some charts that we have made and on
these charts I have not produced any statistics, because I
knew you were so sick of statistics that you could not sleep
at night for them. We have these charts which we have
prepared and will be glad to fite them tdth your Committee
and have them coxae up for consideration, if you can use them*
The Secretary of Agriculture: What do they show?
Mr* HcKnight:

They show the business with Pittsburgh.

The Secretary of Agriculture:

That is an elaboration

of thiB (indicating) on a larger scale?
Hr. HcKnight:

Hot if you will excuse me a moment, I will

show it to you and then we will cloee right up again.
The Secretary of the Treasury:

These are commercial

statistics.
Vr. HcKnight:

Commercial statistics. This is simply to

show the coal and iron —
from —

the pig iron.

where they draw the coal and iron

These (indicating) are statistics

about steel, I think.
She Secretary of the Treasury:

We see the point*

1161

Charles KcKnigkt

Mr. ifcKaight:

You can see the idea.

These were pretty

carefuly drawn up and t h i s (indicating) shows a radius of
100 miles around Pittsburgh, shovdng the population of the
towns tributary to i t , which would come into t h i s d i s t r i c t .
These on the margin here (Indicating) show the Industrial
s t a t i s t i c s we hare secured, and down here (indicating) you
w i l l find a l l of the a u t h o r i t i e s .
guess work*

They are o f f i c i a l , not

They are a l l taken o f f i c i a l l y from ones that

you would be able to find out whether they wsre correct or
not.
The Secretary of Agriculture:
question.

I should l i k e to ask one

In case i t were deemed undesirable to put one of

these banks i n Pittsburgh, what would Pittsburgh's second
choice be?
Vr. VcKnight:

Our a f f i l i a t i o n s , I cay, have always been

with New York, and 1 think I am saying that the rest of the
bankers i n Pittsburgh would eay, that we would prefer being
associated with Hew York.
The Secretary of the Treasury:

How, assume that you could

not be thrown Into Hew York, then what would your choice be?
Mr. YcXhight:
say.

V e i l , I do not know.

1 would sooner not

I do not think we hare any second choice, Hr,

Charles MoKnight

1162

VcAdoo, Ur« Houston* As we sued to say In Chicago, we
are for Pitts burg first, last and all the time* Tat is
what we are here for.
The Secretary of the Treasury: Sometimes compromises are
necessary, you know. You cannot alrrays have Just what ypu
want* ^1 do not mean to say we hare many opinion OR this.
Mr. Mcknight:

That is a pretty hard question to say what

would be your second choice* You know you are changing
the whoe financial system of this country at one stroke of
a pen* Our affiliations, as I say* hare been with Xew York,
Ve have kept our reserves to Hew York and Chicago , because
the law requires us to do it* To ask whether we would
choose Cincinnati, Columbus,Cleveland, Chicago, Hew York;
or Philadelphia, would be hard. The movement of Pittsburg
in a financial way has always been east so far*
The Secretary of the Treasury: Tould not Philadelphia
serve better than some western city, if Hew York were
excluded? The object of the Committee is to get as much
light as possible and fin£ out what would be the next thing
In your mind to best serve your convenience in the custoary
course of business* That Is the reason we a sk these
questions*

1X65

Charles KoKnight

Mr. KoKnight: I an disposed to think it would, yes,, sir.
The Secretary of Agriculture: What ara your present
relations with Buffalo?
Xr« KcKnight: Our relations with Buffalo are particularly
now through coal and iron business— iron and steel.
The Secretary of Agriculture: Are Buffalo's relations
anything like as intiaate with Pittsburgh as with other
city?
Mr/ KcKnlght:
financial way.

I should hardly say they were, not in a

Buffalo has done most of its business, I

think, though Bew York, accept as trade relations —• that
is, as to coal. They buy a great deal of coal from us* and
•hip us more of less pig iron and ore and things of th<*t
kind.
Ths Secretary of Agriculture:

Have you included the

entire state of West Virginia?
Hr« HcKnight: The northern and almost three quarters of
of the state of Pennsylvania.
The Secretary of Agriculture: West Virginia.
Jfr. HcKnight; All of West Virginia, practically.
The Storetary of Agriculture: Are not lines of

nieation there aast and west?

Charles VcKhight

Mr. MoKnight:

1164

Ho, air, they are alaost north and south.

The Baltimore & Ohio Road, the Panhandle Road and several
other roads that connect with Pittsburg —

the Panhandle

of the Pennsylvania Line gridiron the State of Vest Virginia
north and south*
the Secretary of Agriculture: We hare testimony here
yesterday that southern West Virginia would very much - prefer
to go either to Cincinnati or Baltimore:.
Mr. McKnight:

They might say that. I do not know,, but

you will flr$ the railroads run right down here (indioalng)
all over this table. You will find this coal region here
(indicating) in largely right straight through here (indicating) to the lakes. They also ship east, but they have
a tremendous Lake business upon through those roads here
(indicating) and passing through Pitts burgt and sold to
Pitts burg people, a, great deal of it. The Oil and gas
region here

(indicating) is another thing.

gas deals directly with Pittsburgh

The oil and

You will find that all

through here. There areraor*or less manufacturing plants
supplied through this point of the state, but the oil and
gas runs all over and their home is in Pittsburgh
deal directly in Pittsburg. They sell their oil in

They

Charles McKnight

1165

Pittsburgh
The Secretary of Agriculture:

The northern part of the

state indicated a preference for Pittsburgh and Baltimorre
second*

The southern half of the state indicates a prefer*

•noe tor Cincinnati first, Baltimore second, or Richmond.
The Secretary of the Treasury:

Thank you*

STATBKBHT OF JAMES PRAHCXTS BURK33*
Mr. Burke; How, gentlemen, I realise that your duties arejust beginning where ours have left off*

The allied coameiv-t

cial organizations and trades bodies in western Pennsylvania
had a convention in reference to this matter, and were good
enouffh, whether discreet or not, to ask EN* to appear in
their behalf and say a word or two with reference to Pittsburg* s particular claim in this matter*

How, what I

have to say, I say with reference to a general situation
affecting the entire country and realising the r^ry
intricate and important problem that you gentlemen have to
solve, and I realise too, that you have the disadvantage of
having no precedent in history*

I realise also that while

seas of the features of the bill are not those that X would
have ratified, that it is a great landmark in the legis*

J. 7. Burke

12.66

latlon of this country and that it Is In the hands of this
Cowlttee, primarily, in the hands of the Federal Reserves
Board ultimately to establish an instituation that will outriral anything In the history of finance. It is not a
natter of pure local pride with Pittsburgh

Plttsburg is

probably the one practical coaounlty in this country that
does not ever even deal In sentiment*

Pittsburg and

Pitts burgers hare fron the first desired results and we
hare gotten results where best we could obtain them
honestly, whether these alliances were with Chicago, St.
Louis, Hew York or some of the southern cities. How, it
seems to me that this bill having imposed upon you the
limitation of naming eight banks as a minimum and twelve as
a maximum, you hare Y9ry little leeway.

I think it would

probably hare been r^ry much easier to have located four
banks than eight banks*

X think It is going to be rery

much easier to locate nine banks than eight banks, because*
of the distribution that you will be compelled to make with
reference to the financial operations and trade conditions
In this country.

Three of these banks, I should say

should be on the Atlantic Seaboard; essentially one in
Boston, one in Sew York and one either In Philadelphia or

1167

timore, In their order. Later on, the question of whether
or not one of these banks should be located in Atlanta or
few Orleans, is a natter that must of course be governed
omewhat by the location of the other banks, the trend of
rade being, I be H e r e , in all instances entirely from tfce
est to the east, and from the south to the north*

There is

ery good natural reason to ay mind for that* for the reason
t condition ha<i always existed, by reason of the
arly settlement on the Atlantic Coast first, and all trade
lations that these people had were with Europe
rimarily*

The money went east* When the second generation

am* along and settled west of the Mountains, and Pittsburg
d Ohio Valley, they traded in turn with the east, and so
n as you went west, eren to San Tranoisco* I do not find
d do not feeliere there is any general trend of trade,
Ten in the far west in that direction, because of theffaot
hat we hare not yet dereloped our Oriental trade* How to
mind Pittsburg — and with reference to this natter of
third bank on the Coast here, the question as to whether
r not it should be located in Washington, I do not attach
importance to that,. I do not think it Is either essenal v and I doubt if it is wise te establish one of these
gional banks in the capital of the nation* X think that

1168

. P. Burke

the federal Be serve Board that fundamentally must deal with
this entire proposition, would be able to do better service
to the entire country If it were divorced, rather than
attach It to any particular unit, even by proximity.
There are only two waysr to my mind, to select these districts*

One Is to select districts in which the natural

combination of trades and industries will give you a normal
banking activity the year round, and other to couple
up two or mor* regions whose banking requirements are az odds
at times, one

offsetting the other*

Both of these rules

believe, will have to be Invoked by you gentlemen, and.I
think as you go west younwill probably find that difficulty
nhanced* Pittsburg is one of the regions that X believe —
e regions that we suggest, and by the way we are not hid*
ound to this proposition*

I will say that with frankness,

d having consultedtfr*KcKnight and those other gentlemen,
will say that is a tentative proposition*
last 16 one*

It is rery

There is no particular reason why we should

ot take in Buffalo, if it becomes accessary In the dftsribution of the assets of any of the other districts to
o eliminate it from then*

(to the other hand, there is no

J. ?. Burke

1169

thought> and it was remarked to me by Senator Oliver in
Philadelphia last night, the western strip of Ohio might
be rery properly excluded from this district and loss injury
and less distrubance done to the final course of trade by
attaching it even to Chicago, or possibly even to St. Louis.
That would hare to do, of course, with bringing down the
capital of this particular bank in the Pitta burg region to
the normal account, which I would figure would be about
$180,000*000 on a basis of ten.
The Secretary of the Treasury: Taking western Pennsylvania?*.?
The Secretary of Agriculture: May I ask — you mentioned
that and may I ask do you favor the sane number of districts
that have been suggested?
The Secretary of the Treasury: He suggests nine.
Mr Burke : I have suggested nine. I think so far the re lias
net,been mny more conviction on this subject as to whether or
not there should be tr^n eight or eleven, so far as that
is concerned, and we thought possibly it night be well just
to suggest both plan* so that your Honors would have the
opportunity of comparing*

Your question will arise as

J. y. Burke

1170

to whether or not this bank should be in this region
eoTerlng Western Pennsylvania, Test Virginia and Ohio. I
take it that the question will arise whether it should be
in Cincinnati* Cleveland or Pittsburgh

How, if you will

notice the nap, from the map that was prepared by your
Board or your Committee , the centre, the black'spots
indicating population is store nearly »Pi ttsburg than any
/
other given point in that territory, How, if the commercial
trend and the banking trend also corresponds with itt with
what is indicated as to population, then naturally and
irresistably, logic points to the selection of that city.
We believe that it would be, while we do considerable
banking business with Cleveland and soon with Cincinnati*and
a great deal of the volume in West Virginia, we believe that
to locate for this region either In Cincinnati or Cleveland,
would be equivalent to placing this hub of a wheel on the
outer rim. You would get smooth running, and that is
one of the essential factors, X take it, your board 1B
attempting to aad oust develop*

How we figure that with

reference both to the capital that would be Involved, the
reserves —

the resources of this bank' that as many of

these banks as possible should be made self-sustaining the

J . 1* Burke

1171

y*ar around, and i f there are two or four possibly that
right on oould not b* made self-sustaining, that in the
oourao of time the ^federal Re^erva Board ^ould develop ard
pr&otioe a ralationahlp between thm& two caid four alono, to
help «aoh otheer out in their seasonal requirements and thus
ignore the entire other s i x or eight banks of the system,
and in th$t way you would hare & greater equanimity throughout the ya&r*

from the dhar&oter of her industries —

i s not only self*

sUBtainins f but almost unllfee any other c i t y or any other
rogion in the country.

Howt I can be Tsry brief*

I hare

about four pages hare i f you will permit me to juat take It
in i t s order,
the 3?renah dooidcd at Versailles^ the English
deoldod in Downing Stroet and Washington decided on the spot
one hundred and fifty yo&ra a$o that the point there the
Allegheny and tha Uonongehela form the Ohio and enter tho
Mieoipaippi basin is one of the great stragetlo centres of
the Horth Amorloan oontinant.
History has oonfirmod this viaw.

Vhat was then a

wilderneaa is today & throbbing centre of industries aore
•axled in choraoter and more extensive in volume than any

J» y. Burke,

1173

other in the busiest of all the busy nations of the world.
In the solution of one of the mos£ intricate and important problems that erer arose out of a federal statute,
this region of which the City of Pittsburgh is the very
centre presents aspects and arguments which would oeem to
compel the establishment of a regional bank at this point*
Local pride should hare no place in this undertaking
The ill-advised designation of a single regional institution
today cannot fail to lead to disturbance of the entire
system and local di3 as tor later on*
As a consequence of more than one hundred years of
effort during whioh time man113 genius and industry hove
rendered richer fruit than ever marked a similar period in
historyt the people of the United States have established
certain unchangeable channels of commerce and certain
indestructible centres of trade .
Through these channels and to and from thsse central
it is as assentlas that credit and currency should travel as
it is that blood should flow

through the veiBB and to and

from the human heart.
When credits cease to move from man to man,
from town to town, and city to city, and *hen ourroncy

. Burke#

1173

a hiding place or is driven from its natural field of activity or become stagnant in the srterles of tradet, disaster
follows and commerce dies*
Therefore our government1^ efforts both in leglslat|«
Ion and administration should be to encourage and fortify
wherever possible every legitimate development of commerce
which our people hare brought about in the past in order that
the period before us may bear richer fruits than ever.
Ho law in the history of this country ever inv
ed in human agencies greater po*e£ for evil or possibly great
er power for good in the end than the national Reserve Act,
Its administrators have the power to do the greatest violence to established commercial customs, and on the
othsr hand, to render a great national service in correcting
some of the manifold evils of our present banking and
currency system*
They wuat accomplish these objects:
Mobilize our reserves; create

an elastic currency

create a ready market for our commercial paper and establish
&n effective discount policy to control the movement of gold,
In doing these things the manner of establishing and
managing cur regional banks becomes a vital part of the

J. L. Burke

1174

process.
Th* f i r s t duty devolving upon this Board I s to outline
the regions, the second to locate the bank in those regions.
In the performance of this task the following objects
should he kept in mind:
Pi ret:

To do the leafit violence to established

commercial currents and relations.
Second. To make accessible the largest population and
greatest number of banks and banking centres.
Third.

To embrace territory whose industrial and

commercial a c t i v i t i e s (having relation to banking) will
produce as nearly as possible a normal demand upon banks
at a l l seasons of the jear.
Ifany elements may influence our conclusions: The
topographical, climatical, industrial and social conditions
and relations as well as the political subdivisions of our
nation present themselves for consideration*
I t i s true that while this i s a federal law i t has
not changed * single state line nor modified a single state
custom nor amended a single state statute in relation to
bankizg or credits.

Hor ims i t converted strangers into acquaintances

J. *• Burke

1175

nor automatically given the lender i n one section confidence
i n the borrower in another.
Commercial conditions remain unchanged and commercial
customs remain unaltered.
Bankers w i l l discriminate ae they hare since banking
firBt began and mutual acquaintance, mutual interest aid
mutual confidence w i l l dominate the world of banking i n epite
of any l e g i s l a t i o n to the contrary.
Statutes may make i t harder for men to do that which
i e natural and honest and profitable, but they cannot
wholly prevent them except by destroying commerce entirely*.
The Heserve Act w i l l hare a tendency to ease the way
by releasing a large volume of reserves heretofore i d l e .
On the other hand, i t may possibly cause some con*
traction by reason of unusual precaution upon the part c f
bankers i n making loans during a period of transition and
experiment*
This i n turn may be overcome by $he prompt action of
Regional Reserve Banks i n making r e d i s c o u n t s and issuing
new reserve notes.
Again, a ready market for oonraeroial paper both at
home and abroad w i l l , i f expectations of the b i l l ' s

. Burke

1176

proponents are fulfilled, render mechants and cankers l e s s
lia"bi to temporary embarrassments than heretofore.
Our ability, through a flexible discount rate and the
mobilization of our reserves, to control the movement of
*
gold and preventing foreign nations from depleting our gold
reserve, will also have a tendency to steady the money
market and reflect a placid influence on business generally*
Assuming, thasfore, that our new banking system will
do all these things i f i t s unite are wisely located and i t s
a c t i v i t i e s and

responsibilities

prudently distributed, we

come f i r s t to the number of banks that should be established.
As a general proposition 1 would ray the minim* number
of regional banks would best subserve the ration's interests.
While the two conflicting schools of thought point
on the one hand to the e v i l s of concentrated power %n a
single central t>ank9 and on the other to the danger and
weakness of a multiplicity of so-called r&B&rre banks, we
find each school ersry now &n& then claiming characteristics
of the other.

Thus when a central bank champion i s con-

fronted with, the charge that h i s institution would work m

. P. Burke

1177

dangerous concentration of money at one point, he replies
that euch an amount cannot be the cane, as the branches of the
central bank would after all be individual instruments of
strength in themselves with virtually the same powers and
resources as a regional reserve bank*
Likewise, when a reserve bank champion is told that
our reserves and resources will be so scattered throughout
the country that no bank will be strong enough to command
the respect of Europe and for this reason the latter will
not deal freely in our commercial paper, not knowing where
it can dispose of it in an esrgency, and furthermore, that
no one bank will have sufficient resources to control the
movement of gold, he floors his adversary by saying that
after all these entire eight, ten or twelve regional banks
are but branches of a single institution, the federal
Reserve Board, which in itB unlimited powers over discounts
and its control of the volume as well as the location of our
money, make it substantially a central bank*
In view of the fact that it may be impossible to
divide the country into an even as small number of regions
as eight without creating some that may be drained to the
danger point at one season and burdened with a plethora of

J. F. Burke

1178

oasft at another, the natural remedy for such a condition
would be to establish, through the KeBerve Board, a particularly intimate relation between certain regional reserve
banks who Be seasonal and industrial requirements would be
such as to enable them logically and easily to relieve each
other.
Thus the first object of the Organisation Committee
should

be to establish asany regions as frill be wholly

eefl-reliant throughout a l l seasons, and thus preserve
and promote the flow of commerce through those arteries of
trade which time and thrift Inevitably create.
If the administrators of this law should attempt to
revolutionize American business methods to the extent of
doing violence to customs founded upon the Inexorable rules
of commercial intercourse, the law will inevitably prove a
failure.
If, hovever, they Invoke and interpret i t as an
Instrumentality for imparting vigor and regularity to the
m&ods of conducting our commerce and relieving i t of
ailments for which under the old system therr was no cure,
i t may prove to be one of the greatest legislative landmarks
In our national history.

PITTSBUBOH'B POTORF0L POBITIOK.

J. P. Burke

1179

Viewing this great proposition from the standpoint of
every element involved, 1 am convinced that the City of
Pittsburgh offers more unanswerable arguments for the
establishment there of a regional reserve bank than any other
city in the United States, New York and Chicago alone
except ed.
There are certain American products used throughout
the world —

some of them are seasonal, others are produced

at all seasons.

Some keep bankers bust in the spring, others

in the fall, others in the winter —

while the ceaseless

activities of othere ksep bankers busy every month of the
year.
Cotton, corn and wheat, while adding billions each
year to our national wealth, are seasonal in their banking
requirements,

A bank situate in the centre of one of these

regions would be subject to violent fluctuations caused "fay
an abnormal demand for cash at one season and an almost
total lack of It in another*
The articles of which Pittsburgh is the very producing
centre are those which rarely fluctuate but present a
continuous line of deposits to and a never ending demand
for loans upon the banker, which offsetting the other from

J. F. Burke

1180

January to December.
The United States Government, after exhaustive study,
stamped Pittsburgh as the centre of the great bituminous
ooal mining and kindred industries by establishing there
the American Bureau of Industrial Research.
Coal i s rained and shipped and sold North, South,
Hast and West the year around*

The vast vilurae of bank

exchanges involved from the minx** pay roll to the bondholder s* interest and the stockholders' dividend i s
constantly taxing the banters energies and resources on
the one hand and reinforcing them on the other, thus
preserving a normal condition throughout a l l seasons.
Oil, an industry born in Western Pennsylvania, i s
being produced in every great oil field in America and in
Mexico with Western Pennsylvania money, and i s being refined
and shipped to various parts of the world every week in
the year, and practically every dollar of currency and erery
piece of commercial paper involved in these particular
and extensive enterprises find their way back at a l l seasons of the year in and out of Pittsburgh banks *
The natural gas Industry t e l l s a companion etory in
I t s oemerftatlon by the promoter, the d r i l l e r , the shipper and

J. P. Burke

1181

the consumer from i t s hiding place in the earth to the form
of cash in the bank — cashalways active from one end of
the jear to the other.
'Electrical devices that are lighting up the streets
and structures of the civilized world are flowing out of
Pittsburgh in a never ending stream, while the currency aid
the commercial paper involved are as familiar to, and as
logical a part of, the Pittsburgh banker's daily scrutiny
and care at the most ordinary local transaction,

in this

vast business, seasonal changes are unknown.
Safety appliances, block signals, automatic couplers,
air brakes and cteel oars are in demand wherever modern
methods of travel are in vogue on either continent, and
their demand i s l i k e the running of trains, constant
throughout the snows of winter and the suns of each
succeeding summer day.

Pittsburgh supplies the world «ith

these and nearly every dollar involved finds i t s way through
Pittsburgh's banks.
The glass industry, of which we are the heart, i s
feeding the warehouses throughout the nation and shipping
even beyond our borders at a l l season* a volume of products
that takes in and out of Pittsburgh's banks vast sums of money

, P, Burke

1182

throughout the four seasons with rarely, i f ever, a violent
fluctuation.
The greatest cork factory in the world, the greatest
aluminum company on earth, the Carborundum Company and the
Hew York Shipbuilding Company, the greatest pickling and
preserving houses in the world, are sending their products
every day of the jear to the four quarters of the globe, end
Pittsburgh money and Pittsburgh bankB are the great financial
engines through which their operations are carried on.
The iron and steel industry now supplies a we rket so
varied in i t s demands and so universal in territorial
scope that renders description useless*

Suffice i t to e&y

that i t i s not a seasonal product but one that rewards
the laborer and the manufacturer alike, and imposee upon
the banker practically the sana degree of responsibility
in the month of January as in the month of June, and not
only requires, but keeps in hi scoffers the same volume of
currency during the platting season of spring aB in the
harvest season at the summer's end,
Thms i t will be seen doth this marvelous region
preserve the even tenor of her way from year to year and
day to day*

J. 3\ Burke

1183

And thue does she pro re the necessity for locating in
the very heart of these unp a railed and diversified
activities a regional reserve bank to supply with ease and
: sgularlty i t s financial demands both in the reception and
distribution of money, and In the discount and disposition
of her mighty volume of commercial paper.
Other things than these preponderating elements prove
that Pittsburgh i s a centre of American activities involving
large volumes of money and credit*
The internal revenue returns from Western Pennsylvania
reflects the existence of a contiguous territory unequalled
In the nation.
The one institution that ignores state lines and
t e l l s strikingly the story of men's dealings tdth each other
the United States Court*
association.

Litigation grows out of

It i s an index of the business activities of

great regions established by the United States Government
regardless of state Unas.

Pittsburgh ranks third in the

pfnited Statec inthis regard.
Running a line from Tjaet to Vest through the very
leart of the nation, we find i t pierces the only seven
si t i e s that have a national

banking capital and surplus of

. F. Burke

1X84

over $25,000,000. These cities are Boston, Hew York,
Philadelphia, Pittsburgh, Chicago, St. Louie and San
ffrancieco, and Pittsburgh ranks fourth in this distinguished
line.
Can these great towering landmarks in our banking and
commercial world be ignored without doing violence to
natural trade conditions and the normal trend of American
banking?
Journeying from Boston to San Francisco one passes
in almost a direct line through the eight cities of the
nation whose bank clearances last year exceeded two billion
dollars each.

These are Boston, Hen York, Philadelphia,

Pittsburgh, Chicago, St. Louis, Kansas City and Ban 7rancipoo.
?iv* &f these are not central reserve cities and
thus are not the recipients of artificial aid, but represent
the regions they drain and serve*
How can these be gnored and preference be given to
places whose business and banking rank are both far beneath
these nighty leaders in American

development?

By what logic can Pittsburgh, the fourth in this
mighty line of industrial and financial giants, be stricken

. Burke

1185

down and cone miner oity enthroned in her place?

How long

would any lair survive that would thus seek to reverse the
order of the rules of American f a i r play and the natural
laws of trade?
Shall a oity whose $605,482,836 of banking resources
i s Berring business, represented in nearly three billion
dollars of clearances last year, plead in Tain for a
regional bank?
Shall a city whose clearances increased in 1913 over
$132,000,000 while those of the country decreased over
$4,000,000,000 pack her grip and gc knocking at the door
of Borne strange and smaller city avery tiae she wants to rediscount or aid a great enterprise?
Shall a city whose reoord in this respect exceeds
that of Cincinnati and Cleveland combined be compelled to
give up that supremacy bom of a hundred years of industrial
struggles and corcnerd al triumphs and be sent to either of
these younger and weakerolster c i t i e s to do her larger
banking?
Shall a oity within a night's ride of which dwell
half the people of the nation be told that what nture has
done the Federal Be serve Act will undo, and that the great

J. ?• Burte.

1X86

Metropolitan centre of to day will be made a provincial town
tomorrow?
Shall a olty whose total tonnage last year was nearly
three times as great as that of Hew York, London and Hamburg
combined, be numbered among the missing when the honor roll
is read by those designated to name the twelve great centres
of America trade?
Shall a oity whose postal receipts of nearly three
and a half million dollars last year reflects the vast
value of her commerce be passed by and minor cities
preferred?
Shall a city within

seventy-five miles of which are

national banks with a capital and surplus of nearly
$98,000,000 and whose national bank capital, surplus and
deposits approximate $5000,000,000, be omitted from a list
which er^ry American business man expects to Include our
loading banking centres?
Can you possibly ignore the olalms of a city whose
pay rolls alone average a million and a half a day the
year round? One night as well consistently attempt to changes
the course of the sun as to attempt to divert the flow of
trade and banking activities to such a went re.

J. ?• Burke.

X287

As the logical place for a hotel lobby in which the
calls to and frost erery room are answered is in the centra*
of the building, the logical place for a regional bank is in
the heart of the region supplied with banking requirements*
You might as well place the hub of a wheel on the
edge of the rim as Ignore Pittsburg and locate this
regional bank on the outskirts in Cincinnati, and you
might as logically order us for all time to come pump
water up hill as to reverse the natural trend of banking
and compellus to go to Cleveland next to the Canadian border
and Aurora Boreal!B to conduct the great volume of our rediscounts and larger banking transactions*
Western Pennsylvania, Ohio and Vest Tirglnia from a
tural banking region of which* Pitts burg is the centre*
er regional bank would have a capital of over$23,000,000
usple to take care of the great cojsraeroial activities of a
eotlon of the nation that for kinship of Interests and
quality of Activity through every passing season Is unurpassed.
Vlth these indisputable facts in hand, and with
upreae confidence in the wisdom of your Honorable Board,
lie leave our case with you*

. ?• Burke.

2188

I have a telegram here from Mr. HeAllen, Just received
a moment ago, Indicating the even tenor of their business
The Gulf Refining Company alone, one company, the total
cash receipts and disbursements by checks through Pitts burg
banks at this office during the year 1913, was
$57,419,000. That is true of the average amount per month
for the first eleven months, which was $4,476,000, December
being $8,000,000, because at that time they paid off some
bonds, but there are nearly $60,000,000 disbursements
through Pittaburg banks, affecting an industry located in
Hexioo, Texas, and plants throughout the entire world. I
have a letter hero from Mr. JSaus, President of the Pittsburg Plate Glass Company, received a moment ago. That
company* s clearances alone through Pitts burg banks last
year was $23,000,000. M O B , Xr.Secretary, here is another
natter that indicates the co-relation existing between the
people of this region which I speak of, and that is the
United States Court. As you all know, of course that
indicates the activities —the United States Court indicates that people of various states have been doing business,
because litigation ordinarily arises out of business^ and
the business done in the United States Court in the dtyof

. y. Burke.

1189

Pittsburg was the third in the United States—Hew York,
Chicago, Pittsburgh

Philadelphia comes fourth, and other

cities along the line. How, running a line through the
very heart of this country— here is a condition that I do
not Believt can Tery well be ignored in this* We find It
pierces only seren cities, which hare national banking
capital and surplus of over $25,000,000, and that line rims
from Boston, Hew York, Philadelphia, Pittsburgh Chicago,
St* Louis and San Francisco, as direct almost &s if it were
a projectile from a gun* The very heart of the banking inter•sts and activities of the country taking in all of
these places, and five of these cities by the way arc not
central reserve cities* How again, from Boston to San
yr&ncisco one passeo In almost a direct line through the
eight cities of the nation, whose bank clearances last
year exceeded two billions of dollars* Those are Boston,
Hew York, Philadelphia* Plttsbnrg, Chicago, 8t« Louis,
Kansas City and San ?rancisoo, being a rery good stateaant/
For the reason that you state, Mr* Secretary*
The Secretary of Agriculture: Hot so happy for us*

. Burke

Mr. Burke:

1190

Might not "be later on, and five of these c i t i e s

are not central reserve c i t i e s , and those are not the recipients of artificial aid, "but represent the natural
volume of clearances incident to the regions they drain
and serve.

Pittsburg has $603,482,836 of banking re-

sources, serving business representing nearly three
billions of dollars of clearances l a s t year.

In 191?,

her clearances increased $132,000,000 while the clearances
of the United States deceased your billions,

speaking

rather well for a city whose banking methods have been
quectioned In a casual way here and there by gentlemen, who,
in a faoetilus nay have insinuated with reference to the
high rate of interest paid, and with reference to the manner In which Pittsburg banks have been conducted, Pitteburg
has bad her share, as every city In the nation has had in
the l a s t twenty years — her share of advertising; yet,
in spite of a l l this, she stands on a solid bed of rock as
any city in the country today, and the fact that she does
pay 3 per cent interest on money i s only an indication
*f the natural and active requirements of that great dist r i c t , and I t i s a place where X believe, for that reason

J. P. Burke

1191

aloney a central "bank with reserve funds and the government
funda and other deposits should be logically located.
How, this city has, with a capital and surplus of
$98,000,000, "banking capital and surplus of approximately
$500,000,000 in a 75-mile territory, and I do not see
very well how a territory of that kind can "be ignored and
passed up, and a less substantial centre selected*

believe it is just as necessary to locate this bank in
the heart of that region, as it is to locate a hotel
lobby in the center of a hotel. The operations are practically the same*

You want accessibility, and that cannot

be said with reference either to Cleveland or to Cincinnati,
unless they are made the center of another region, *nd
with the kindliest feelinps toward Cleveland, and indic&tigg
our affection for her, because we want her in as a part of
the Pittsburgh family, as we feel that when you compare Pittsburgh and Cleveland, that from a geographical standpoint
Pittsburgh is the very heart and center around which all
these great centres of population revolTe, but with Cleveland, she has not a thing to trade from, but the Great
Lakes, and so far as Cincinnati is concerned, it would do
T«ry great violence, in my mind, to Arair on the great

JT. P. Burke

1192

banking resources of Western PennsylTania over the state
line, and into the southern and southwestern border of
Ohio.
Those, Mr .Secretary

, are some of the reasons that

occur. It has been suggested that we had some difficulty
in — people had difficulty in petting money out of Pittsburg, in 1907, but as has been stated, our cash pay roll
runs a million and a half a day.

I do not know anything

like it in this country, and yet that pay roll was conducted and those industries were running, as far as there
were demands for their products, without any difficulty.
Banks got together and took care of each other.

Merchants

placed their credit and responsibility on the bankds
and that was that relationship existing there, that extended
over into Ohio. Youngatown and Steubenville were
accepting our clearing house certificates, and other
f
places. They do the bulk of their banking business in
Pittsburgh.

West Virginia, the part you hare been speak-

ing of, has been developedby Pittsburgh money, as well as
the coal interests and the other interests there.
The Secretary of Agriculture: I have not had an opportunity to examine this map, but I inferred in glancing

J. P. Burke

1193

rapidly through it that you suggest Uew York as one
center*
Hr. Burke: Yea, i*r. Secretary, Boston taking from the
east.

I hare drawn this out.

The Secretary of Agriculture: This (indicating) is the
same.
Mr. Burke: Yes, sir, that stands out in "bold relief
there.
The Secretary of Agriculture: That would leave rather
lanre regions to "be covered "by —
Mr. Burke: By the other eight, or the other six, yes.
flew, there is a question there about flew Orleans. I think
myself from what personal reading I hare aade, and from
what comments I have heard, that the trend of banking
clearances from Texas, and possibly Hew Orleans, is in
St. Louis, and it would probably b« a more logical business
proposition to locate a bank in St. Louia, instead of locating one at We* Orleans.
The Secretary of Agriculture:

St. Louis and Kansas City.

Mr. Burke: Yes, to both of these cities, with a. predestinating influence, I believe, in St. Louis. ^r%
ting) you h*r» the largest territory in arts,

(indica-

but that i*

J. F. Burke

something that cannot he gotten away from.
at your map shows clearly why that is so*

1194

A single glance
In all that

territory, I counted last night, and I think there were
only about six or eight black spots on it, and every black
spot I counted a mark of merit, and that is all there is in
all of that Tast territory, out almost to the Pacific
Coast states, to indicate that there is really any banking
demand.
The Secretary of the Treasury: T*ow, you have thrown
Philadelphia to Baltimore*
Hr. Burke : I would throw Philadelphia and Hew Jersey in*
The Secretary of Agriculture:

Southern Xew Jersey?

Mr. Burke: Yes, Southern Hew Jersey, and it would be a
question as to the location of one at Atlanta or Ifew Orleans, as to how far south you wou^d go* That would be
governed entirely by that*
The Secretary of Agriculture: Would you care to express
any opinion as to what should be done in case a bank were
not established at Pittsburgh?
Mr. Burke: ¥ot Hr* Secretary, because I have no banking conntdtions,

and I would not want ny opinion to handicap

the situation there* I say frankly, of course that that is

J. P. Burke

1195

our preference, and, in that event, I belieTe our preference
would be that which is impossible• Our preference, of course
would "be Hew York, but I regard it from haTigg attended
some of your meetings in Uew York, and listened to the comments of the ablest witnesses and the examination that
you hare mtide, that that is almost out of the question.
If that were not done, of course, that is because of the
previous condition. Whether you might call it the previous
condition of servitude or not, but the present condition
that has existed with reference to Pittsburgh. We do our
banking

business in bulk there. Our lines are established;

our acquaintances are made;

our credit is good, and I will

say, Mr* Secretary, that a thousand men go to Hew York on
the train, where 100 po to Philadelphia.
Th£ Seoretary of Agriculture: They go through Philadelphia?
Mr. Burke: We go through Philadelphia, and reoently
they cut out the Broad Street Station, and they send us
through on a direct line, so there is not much choice*
Xt has been suggested that we be tied up to Washington.
X do not bell ere that would be practical. X think that would*

. ?• Burke

"be almost as impractical as going west*
The Secretary of Agriculture: Just what harm, what disturbance would there "be if the headquarters "bank were at
Philadelphia! or some other city, and you had one of the
branches in Pittsburgh?
Mr, Burke: Veil, I do not know. That is a hypothetical
question, and that is hard to answer, unless we know just
exactly what the policy of the federal Reserve Board is going
to "be, and what its powers are going to be, and what the
powers of this branch bank is poing to be.
The Secretary of Agriculture: That is to be defined?
Mr* Burke: That is to be defined*

It is possible under

the language of this Act, I take it, to make a branch
bank just as powerful and just as strong, for the purpose
of conducting banking activities and relieving the demands of
a region, as a regional bank. There is very little limitation, but whether or not they are going to rest that power
in the Board

of three which is selected by the Reserve

Bank, and four by the Reserve Board, or vice versa, 1 do not
recall which

—

The Secretary of Agriculture: #our by the Reserve Bank
and three by the Central Reserve Board*
Mr. Burke: Having selected them in that manner and

.y. Burke

1197

having them under control, whether or not there would "be an
absolute co-ordination between the two bodies, is a question that I could not answer.
The Secretary of Agriculture: There would certainly be,
they would be in very intimate touch*
Mr, Burke: 1 agree with you*
The Secretary of Agriculture; Pittsburgh, for instance,
would have those gentlemen there all the time to pass on
the discounts and credits*
Mr. Burke: Yes; but now if your federal Reserre Board
in the selection —

this bank in the selection of the

goyernors or the board of directors of the branch banks,
should adopt a policy that would result in selecting those
men from the immediate community, it might be a tery potent
factor and it would probably be a rery logical solution of
many of the questions you are going to encounter*
Tht Secretary of Agricultur e: Would not they naturally do that?
Mr* Burkei

I think they would* I think they should.

Tht Secretary of Agriculture: Of course you know the
entire district elects those stsslx directors in the Begional
Bank*

The headquarters city does not do that*

Itr, Burke: X understand; but the trouble about that it

J. P. Burke

119*

that while the entire district selects them, the city itself
is the canter of their operations. If the greater part of
the population weee in the western end of the district,
and the bank were located in the eastern end of the district —

I take it that the majority of that Board would

come from the eastern end of the district, and not near
the center of the commercial transactions, and in that way
there would be some consistence*
The Secretary of Agriculture: The "banks would have to
determine that?
Mr* Burke: The banks would have to determine that, of
course.

It would depend of their vote*

The secretary of Agriculture: Then we must not forget,
as has been Btate^ before, that the great mass of banking
transactions go on just as before*
Mr* Burke: ¥ell, they will* Of course, your clearances—
whether these Reserve Banks are going to be clearing houses '
and to what extent they are going to abolish present practices, is something that cannot be answered*
The Secretary of Agrioulture: -They art in a sense Reserve
Banks and Clearing Houses*
Ifr* Burke: Yes, that is true, but as I understand the
Boston case—the Boston Clearing House has the best

J. P. Burke

1198

system of clearances ii the world, or at least in this
country, "but I think they cost about 7 cents a thousand
dollars to clear, and yet less than 10 per cent of the
exchanges for that territory avail themselves of the Boston
Clearing House opportunities*

That is "because they have a

better system of their own*
The Secretary of Agriculture: We will make the whole
system as pood as the Boston system*
Mr. Burke:

I hope so, Ur. Secretary.

The Secretary of Agriculture:

I hope so*

Anything else,

Vr. Burke?
Kr. Burke: Ho, sir.
The Secretary of Agriculture: Any other gentleman desire
to speak from Pittsburgh?
557ATHin?RT OP GEORGB T. OLIVER.
Mr. Olirer: I will only say, Hr. Secretary, that I have
scarcely anything to add to that has been so well said before, but it seems to me*- I hare not conferred with these
gentlemen that have been in Pittsburgh, as I have been here,
but I do not know the details of the plan they have submitted.
but I do know this; that it seems to me that the theory
which should be followed by your committee in reoommend

J.P.Burke

1200

ing the location of these regional tanks, should be to
put the regional tank where the business i s , and I think
that the Pittsburgh district itself, eliminating a l l other
[metropolitan communities, or partially metropolitan comnnnitiea, like Cleveland or Buffalo — take the Pittsburgh district i t s e l f , that i t will furnish enouph of the banking capital, i t s resources, i t s business a l l through i s fully oneeighth orone-tenth or one-twelfth, as thexcase say be, owing
to the number of the locations of the banks for the entire
country. How, i t seems to me that the logical place to
locate these banks i s where the business iB.You draw a
Line, taking Altoona on the east, say—The Allegheny Mountains on the east, the northern part of West Virginia,
the eastern counties of Ohio, half of western PennsylTania,
you have a district that will furnish enough
msineas i t s e l f , every bank in which has i t s natural
jenter in the City 6f Pittsburgh; and you will find that
Its proportion of tht business of the entire country i s
tqual to the one-tenth, one-twelfth, or one-eighth as the
sa»e may be, of the entire business of the country.
You people on the outside do not appreciate the im>ortance of this community. The Pittsburgh district has a
.onnag-e, inland out, three times as much as any other

J. F. Burke

1301

Iletropolitan diotriot in therworld. Three time a as xnuch aa
London, Liverpool and How York combined, or any other three
cities in the world, and the tonnage, in and out, Eultiplied
by threo, would be Iaa3 than the aggregate tonnage of
Pittsburgh, It would be a »ha»e to take thio into Cleveland.
It would be making one rarim upstream all the tine, and
you consider it with no as a natter of sentiment, but it is
a natter of buaisaas a* well. I think the banks should be
located where the buaineaa iet and In tha natural oentre
of tha business, and we will be satisfied if you give us
one of these banks, if you do not put a single village in
whose banking business ia not to-day centered in the City
of Pittsburgh. That is all I have to say.
The Secretary of Agriculture: Gentleaen, if anything
occuro to you at tfce hearing th^t you, desire to submit,
you will have an opportunity to do so. You can send it
in in writing to the GoBssittee,
The Secretary of Agriculture: Io Atlantic City here?
Gentlemen, trill you kindly oone to order?

1203

STATEMENT OF JOSEPH A.
The Secretary of the Treasury: Your occupationt
Mr. HoHanee: X am president of the Chamber of Cocraerce
of Atlantic City*
The Secretary of the Treasury: Tour business?
Mr, HcHamee: Treasurer of the ISarine Trust Company•
The Secretary of the Treasury! You have something you
want to say about Atlantic* City?
Mr. McHaaee: We do not cone for a regional banlc for
Atlantic City, because wo know we could not get it, but
we come in the interest of Philadelphia* Wo cot&e saying
that we have a great deal of sympathy with the desire of
the administration, and the Committee to distribute the
interest at par, instead of confining it in any one place*
We also come, ©ore or less, with some sacrifice, We believe
in what the President says in his letter to the Committee
to Congress, that the work to be done is so pressing and
so fraught with big consequences, that we are not at liberty
to weigh against it every point of personal sacrifice,
and we believe the Bill means what it says, when it states
that the districts shall be apportioned with due regard
to convenience and austcf&ary course of business.

Joseph A* McHameo*

1303

tfe come from a district of South Jersey, which haa over 100
banks, with §23,000,000 of oapltal and surplus, and with a
valuation of $400,000,000, all within an average radlue
of 50 miles of Philadelphia. Our own City of Atlantic has
an assessment greater than the whole state of Delaware*
We have ten banks, with a capital of Four Millions of dollars and surplus, and more than one half of the banks have
earned a surplus greater than their capital. ITo have one
bank fourth on the Roll of Honor of the United States and
two Trust Companies on the Roll of Honor. Our clearances
in Atlantic City laot year were about $350,000,000. How,
vre have beon doing business in Philadelphia, for years*
They know U Q .

They know our methods* They know our

ways. They knosr our people. They know what we need by
way of favors, and we have no trouble getting them. They
helped us to build up this great city, this great system,
and we fear that If sre are compelled to go to another city
for our regional bank service, we would not be knovm so
well. They would have to commence to learn no all over
again, and ae a natter of fact, we feel that if we cannot
get Philadelphia for a regional bank, that we might be
obliged to give our business to Sew Tork, which knows us

Joseph A, HoNamee

1304

second best to Philadelphia. And, therefore, we are particularly anxious that a regional bank should be established in Philadelphia^ TTe eay for instance, off hand, there is
no sentiment in business* 'Son, I feel and I think you gentlemen realize there is a great deal of aontimsnt in business. It is all of more or less sentimental in character*
We have a great deal of patriotic sentiment all through
that section. Our South Jersey and our Philadelphia were
prominent through the Revolution. Ife have our Monmouth,
our Trenton; Philadelphia also has its associations. We
would feel almost, if you took us away from Philadelphia,
that you would be taking away our father, and that you
would be forcing us to go out and get a foster mother*
We would be like a loot child somewhere, forced to live
under a stepmother, and we hope that you will take into
consideration the needs of South Jersey in regard to
Philadelphia and give her a regional bank there.
The Secretary of Agriculture: Suppose you had a branch in
Philadelphia?
Mr* McHamee: There sight probably be some relief in
that respect, but is on the sane principle that you
always want to go to the head, to deal. How, for instance

Joseph A, HcHameo

1305

it takes uo three hours to go to Baltimore; takes us almost
four hours to coca to Washington. How, dealing with heads,
wo would probably have to leave that branch and come to
another point* and we do not want to discourage any other
point. They are all our friends, 7e like them, ?e get
business from all of them, Washington and Baltimore and all
through the south.
The Secretary of the Treaouryi

You realize of course, tha

your ordinary operations with your correspondent banks
are not disturbed by this Bill, do you not, that thfa ordinary
bu&lneaa that you now do trill continue as heretofore?
Theoe Reserve Banks will hold part of tha reserves and re*
discount from member banks. They have some open sarket
operations, but so far as general business is concerned,
between banks and their correspondents, that is not affected. How, do you re-dlocount very ouch at any time of the
year?
Mr. McHameei Yes, that is a very important part of our
business * We have a season of famine, and a season of
plenty* Three months a rery large business and nine
months In the year we borrow money. Baring the summer
season we ship probably §12,000,000 of currency to Philadelphia, and tor the other eight months of the year, at

Joseph A. YcHaaee

1206

least, our banka are In debt.
The Secretary of A&rlculture: TThat is the population of
Atlantic City?
Mr. itoHaaee: Horssal population 50,000 and in sussmer time,
at the height of the season, about 350,000. T7e have 1,000
hotels and boarding houses*
The Secretary of the Treasury: Yours is a Trust Company?
Hr, HoHaaeei

A Trust Company.

The Secretary of the Treasury: Are you cooing in, or
have you applied yet?
Mr. KoKaaeo: Wo have not appliod, because we cannot under*
stand our position yet, our status*
The Secretary of Agriculture: Could you come in under
the lav?
Hr. VoHaaae: I wrote to the State Department, asking
that question, and they said the matter was being con*
sldered*
The Secretary of tho Treasury: Ordinarily, a Trust Company
would have a right to take stock in another institution*
tfr* McHaaee: The question I submitted to the Comptroller
of Currency, by correspondence, was should our bank
come into the aye tec*, would they still retain their powers

Joseph A* IfeHamee

1307

under the state charter, which, for instance, would give
them the right to loan money on real estate mortgages of any
kind, and to that Z have not received a reply.
Tha Secretary of the Treasury: Hay be you stutaped him,
Mr, McHaaee: I would not like to.
The Secretary of tho Treasury: The fact is, that a great
many questione of that character are being aaked, and the
4

correspondence at the moment is soprodigous that it has
not boon possible to answer then all properly. Of course,
it will bo done in due time*
Mr. HcHasee; I did not wish to put it in as you say,
but it has ooourred to ne that you stake three heads for
loaning, agricultural, oosoeroial and industrial. In
any
the ordinary sense of the term, we have not/one of
those. I asked the Comptroller how he would class theatres*
amusements and hotels — under which of the three heads he
would put them, for instance, we ssade a rory large loan to
a splendid customer not long ago, dealing with 9a for years,
an amusement enterprise, total amount of $30,000* We thought
it eligible or acceptable for re-discount for a regional bank.

1308

The Secretary of tho Treasury: Tho Federal Reserve Board
hao tho power to dof inc th© charactar of p<\por which is
eligible for re-discount, under this bill, and that'jqueotion
the Board will undoubtedly deal Tilth immediately upon its
organisation.
The Secretary of Agriculture: Have you any othor facts
to presentt
STATEHEHT OP MR. CARLTOH GOBFRET,
Mr. Godfrey: There was one point raised here which J
would like to consent upon, and it has nothing in relation
to anything th^t haa boen spoken of by Kr # MoKaaee,
Tho Secretary of Agriculture: What is your position?
Mr, Godfrey: I ast president of a Trust Company in Atlantic
City.
Th2 Secretary of Agriculture: IThat is the n&»e cf th«
Trust ConpanyT
Hr. Qodfrey: The Guarantee Trust Company, I happen at the
prosent tiae to ba a Bseaber of the legislature of lew Jersey; and anticipating the doubt legally that you have
raised with respect to the rights of & at ate bank of Trust
Company in Hew Jersey to join this system, and being desirous

Carlton Godfrey*

1309

that every atate bank and Trust Company should join the
syotea, I introduced a bill last Tuesday in the legislature,
af tar consultation with the Stato Banking and Insurance
Coirjnieaioner, to give the state's permission to aocpiapliQh
that result, so that I anticipate after the next/ftro or
three weeks there will be no doubt upon the question.
The Secretary of Agriculture: The sajsse course is being
followed in a nunfcer of states*
Mr. Godfrey: As to whether all the trust companies
77111 join the system, and all the state banks, I presume
that question will be affected a great deal by the rules
?7hiah govern the actual operation ofribhenational system* For instance, in the paper which is re~di8oouxited,
if there was permission given to the banks to take that batik
again, immediately upon funds coming in, regardless of
whether the payment was dur or not, and a return of that
portion of the unearned interest, I assume that that would
materially affect the willingness of ©any of the Trust
Companies and State banks in Hew Jersey to come into the
system, as veil as more or less of the national banks •
Because funds do coxse in. We need to borrow for a short
time, and if the paper runs for four months and we are

CarIton Godfrey.

1310

allowed to take it back in two months, I assume if that
practice is carried out, it would affect a very largo per
cent ago of tha banks in Southern Hew Jersey and along the
seashore•
In relation to our desire for Philadelphia, I think
that has been well oovered by Mr, HoKamoo. Atlantic City Is
very desirous to have Philadelphia selected as a location
for one of the FederalriHeserve Banks.
The Secretary of the Treasury: That is your normal con-*
noction,
Mr, Godfrey: Too, absolutely, and in the normal oouroe
of business.
STATEUEBT OF MATCH YILLIAH RIDDLE.
The Secretary of the Treasury: Kr. Mayor, have you anything
that you wish to add to the views already expressed?
Mayor Kiddle: Mr. UoAdoo, with the desire that the system
shall succeed, I think it would be a serious detriment to
you if the regional bank were not in Philadelphia, Many of
the Trust Companies will aocept the proposition of the
Corn Exchange Bank of New York, and not go into the system,
if it is not in Philadelphia. And we people in Atlantic

Mayor Riddle.

13U

City feol that a very great detriment trill be done to our
busineca proopecto If Philadelphia does not have a Reserve
Bank, Because, aa president of our Chamber of Commerce,
I nay aay that -we have three rontha when we wake a great
deal of acnoy, and take it away from you people who vlelt
us, and for nine months ve have te borrow and nra.it for you
for the next season.
The Secretary of the Treiaury: I arc qjiite faailiar with
the process.
Uayor Riddle: tfo felt like ftoe^ultoes after we hoard about
Pittaburs, but we are not mosquitoes In the sunsoar tltse.
We oortiiinly are a groat city, with about 350,000 population, and it would be greatly to the advantage of everybody, if Philadelphia, rrhioh lied so near to us, would be
at our command, for our business oporations.
The Secretary of the Treasury; Ur. Mayor, vra shall
cortiiinly give it very caricma consideration.
llr, Elwood s. Bartloaa: I aa cuohiar of the Atlantic
City Hational Bank. If we cannot have Philadelphia, vo
asuch prefer to have Eetr York, to Ba,lti»oro«

(At 4 P.1S* the hearing trae adjourxxad, to iseet in Chloago,
Ilia., on Monday, January 19th, 1914.)

Full text of Hearings before the Reserve Bank Organization Committee - Washington, D.C. : January 16, 1914

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