Full text of Charles S. Hamlin Papers : Writings -- "Memoranda Concerning the Federal Reserve Board...," Diary Vol. 2, 15 Mar. 1913-15 Jan. 1915 (pp. 38-83) (2 of 19), Box 356, Folder 16

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The Papers of Charles Hamlin (mss24661)
356 16 001-




Hamlin, Charles S., Miscellany, Writings,"Memoranda Concerning The
Federal Research Board...," Diary Vol. 2, 15 Mar. 1913 — 15 Jan. 1915 (PP.
38-83(2 of 19)

CHARLES HAMLIN
PAPERS
Folder /‘
Box jJz,




Miscellany

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to take any responsibility in the

matter. He asked me my conclusion amid I

said I had reached none yet but I was gradually tending towards the opinion
that in view of Arnold's report and subsequent doct, I could hardly take the
responsibility of advising an abandonment of the proceedings but that it rather seemed to me that the W's should be permitted to go before the jury
and
that the jury should be permitted to consider the case without any influ
ence
by the District Attorney other than a fair p honest presentati
on of the evidence,

p

with of course a cross examination of the Ws;that I felt that a
crime had
been shown--the long continued absence of the particular
s in the Custom's
invoice prescribed by law,--which I understood to be
the gist of the case--Mr
Arnold having repeatedly said that any conspiracy count would
s
be merely to get
in evidence otherwise perhaps inadmissable; that this
crime in fact had resul..
ted in loss of duties by the Govt; that the W's
had directly benefitted by the
scheme;that the gift of the camera and the payme
nt of insurance commissions to
the appraiser,and also the apparent knowl
edge by John Wannamaker of the continued absence of specifications in the Consu
lar invoice --all certainly called
for answer if they were not evidence direc
tly of personal guilt. Secy. McAdoo
asked me to prepare a letter to the Atty.
Gen. along these lines for his care.
ful consideration.
December 19th. Friday. Secy. McAdo
o walked home with me last night and said he
had incorporated in the Currency Bill
my amendments as to issuing Bonds to raise
redeem
gold to redeem' the ileserve notes and he
hoped he could keep it in the Bill.
December 23rd1 Invited by Presi
dent to go to White House at 6 P.M. to see him
sign Financial Bill. An impre
ssive sight--the Cabinet--House & Senate Committees
et ale were present. The Presi
dent,after signing,delivered a short address.
Some wweks ago I ordered that expen
se of trucking sugar from ship to scales must
be born by the refineries at Bosto
n and New York et als. For years this expense
at these Ports had been paid
by Govt. although at New Orleans it was paid by
refineries. New Orleans refib
ers protested and after studying the matter held
that expense at all Ports must
be paid by refiners. Thouszikds of dollars annual'
were thus saved to Govt.




December 25--Thur
sday.
Secy. McAdoo sent for
me at 4 P.M. • Told me Mr John Skelto
n Williams was to
be made Comptroller of the
Currency and that he felt that it was
vital that his
successor as Asst. Secy0
in charge of Fiscal Bureaus,should be a
man of the most
absolute integrity and
one well versed in financial matters,also
said he wanted
a man he knew and could
work with; he added that he wished ver
y much that I
could take this positi
on although he hated to ask me to give up
the Tariff work
I was so eminently fit
ted for and so successfully undertaking;
that he VMS tired
out and knew he could
rely on me to help him as he appreciated
the work I had
done in getting the Financ
ial Bill in shape; that he would hav
e to go west early
in the New Year and be
away perhaps six weeks; that I would
be the ranking Asst.
Secy. and acting Secy,
and would have to manage the Treasury
in his absence
even as to appointments
etc. but that I could keep in touch wit
h him by wire;
that he hated to put
this extra burden on me but that he
knew of no one in the
country so well fitted
for the work. Asst. Secy. Williams was
also present and
he begged me to undertake
it. I told the Secy. that I was enlist
ed for the war
and his wishes would
be carried out by me with pleasure,tha
t while I was attachd
to the Customs work,' had
had much familiarity with the financ
ial work 20 years
ago and would be glad
to undertake the other if he wished
it.
He seemed very much ple
ased and asked me to suggest some man
for the Custom
work; I at once suggested
Halstead,the chief of the Custom's
division and the
idea seemed to please him
; he asked me to look up his
record,endorsers etc. on
files of appointment
division. Mr Williams sugges
ted Mr Pelk of N.Y. wham the
Secy originally
wanted for Collector at
N.Y. but the Secy. said he tho
ught he
would not do as the
appointee should be an exp
ert.
December 28. Thursday.
Secy. McAdoo has been lai
d up with a bad cold and
general fatigue for sev
eral days. Goes tonigh
t to Georgetown S. f3drolina
for a few
days rest. Confer
ence with Arnold as to
W. case. Told him to say
to Atty. Gen.
that Secy. McAdoo
wished to go over the cas
e with lp before making any
definite
recommendation but tha
t on the present record
I could not ask that the
proceedings be dismissed
as the facts seemed imp
eratively to call for an
explanation



from all concerned; that W. should be
allowed to go before the Grand Jury and,that possibly his testimony might throw
light on the question.
Denied application of C.P.R. to seal
cars at Abercorn Junction as a means of
sending them through to Newport Vt. witho
ut entry at Richford.
41
:anuary 2-1914. Friday.

Postmaster Gen. Burleson called,

Said he had written

Dr. Coughlin that Chaseand Coste
llo could not be appointed and to seriously con.
sider McClintock. I took no part
in this contest other than to give Jim. Carroll
a letter jro Burleson. \ x\)
Saturday. Jany. 3.4
7.fttsonochief clerk Dept. of Labor,called and said Secy.
wanted to know the political situation in Mass, as regar
ds Comma.. of Immigration.
I said Skeffington was ideally equip
ped for the place and was my friend—that I
did not claim t know the political situation.-advi
sed him to write to Dr. Cough.
lin & Judge Riley.
James Folan of Nomwood wrote thanking me for the good words
I spoke as to
George Fred. Williams.-said he heard this
from Washington.
TuesdaytJan, 6, 4,30 P.M. Howard Elliott calle
d and wanted to go over New . taven
R.R. matters. I reminded him that when here
a month or so ago,I advised him to
consult Brandeis; he said he had but Brand
eis wanted to force New Haven to sell
B.& M. stock at once which would be a terri
ble sacrifice. He shoved me a list of
proposed trustees for B.M. stock but I advised him to
show it to Brandeis as I
felt sure he would be fair and helpful; he also spoke
of lawyers suggested by him
to carry out Atty. Gene's wishes.-said Atty.
Gen1 mould not consent to Robbins
or Choate: that while be admired Olneythe thought he had
been too much mixed up
in the matter to act etc, I again advised his seein
g Brandeis especially on
question as to whether Moorfield Storey would be a good lawye
r to act. I called
up Brandeis at his suggestion but he was out and
Elliott said he would surely see
him later.
Wednesdayt Jan. 7.

Sherman Whipple wrote asking me to make appointment with Atty.

Gen, as representing situation of N.H.R.R..said Directors were trying to secure
immunity bn their settlement and that stockholders had a
right to be heard on
this, I sent his note to the Atty, Gen, askin
g him to write him directly and
wrote him (Mx Whipple) to this effect,



AA

Monday. Jan. 12,

Secy. McAdoo went over Treasury matters with me; said he

wanted me very much to take the Fiscal Bureau and that for my own sake he
thought it very desirable as no one could kprpee_plat might happen perhaps ill
the near future..

From whist he said or the way in which he said it,I begin to

think there may be something in rumours that he does not expect to serve his
term out.

He asked me to think of some one to do the Customs work, he seemed

favourably inclined tp Peters whom he had been speaking to on the train and
who evidently had told him mtet he told me--that he would like as Asst. Secretaryship. I said he vas a fine fellow and merely suggested that he tell him or
anyone else applying for the place what a difficult task it was -necessarily
continuous workplittle vacation etc.
Secy. Redfield sent for me to see his experts just going abroad to investigate pottery costs.

At my suggestion he wrote a letter to McAdoo stating

that his investigation would be private and details as to sources of individuals will not be made known to any other department except merely the result in
general: I said foreigners would not open their books except on such assurance
and advised him to have Secy. McAdoo and the President endorse approval in the
letter. He said he would take it up with the President.
Tuesday, Jan. 13. Wise,Counsel of Wannamaker,called and I told him that Mr
McAdoo amd I had reached the conclusion that we could not advise the Atty. Gen.
to

dismiss the Grad Jury proceedings in view of the record.

He said Arnold ,

talked to him od a settlement of the personal goods by part of 400,000. I
said I had no authority even to discuss this until asked by Atty. Gen, and the
matter had not been mentioned by him to me.
Secy. McAdoo said he had talked with the President about making Peters
Asst. Secy. but that he thought it would not be wise politically to have two
from Hass, also he had some doubts as to Peters industry and capacity for hard
work.
4?an. 16—Friday,

3 ayard
Secy. McAdoo told me in absolute confidence thEt Wm. 4,

Hale had reported to the President that Huertats downfall was simply a question
of time: tilt the Constitutionists had plenty of money and if they could only




buy ammunition etc. they could quickly dispose of Huerta; that the Collector
at BogalestArizona, was very strict in forbidding exports of what he called
munitions of War and was unduly severe

on Constualistsi that a vessel would

shortly leave San Francisco bound for China and that he hoped its clearance
would not be forbidden.

He then said squarely that the President hoped we could

be reasonably lenient as the prohibition of exportation of what were called
munitions of War --a very indefinite phrase--as it was now a direct boonon
success of Constualists.

I told Secy. McAdoo that the clearance of vessels

was under control of Secy. of Commerce--the Collector acting under him.

He as-

ked Me to bring matter to the att‘tention of Secy. gedfield. Also asked me to
call Collector at Nogales to Washington to be sure he was not unduly severe
in interpretation of munitions of War,
Jan, 17. Saturday,

Secy. McAdoo again spoke of above.

Also asked me to review

dispute between Treasury & War Dept as to which under new civil Govt. the Treats.
or War Dept. should collect tolls through Panama Canal and as to system of
counting and to submit my conclusions direct to President,

ac-

Alsopat Request of

Oswald Villardtasked me to review dismissal of two negroes from Oustodian force
of Atlanta Custom House--involving a charge of segregation.
Jan. 19.-Monday,

Atty. Gen, called me up and said Arnold was fearful that de.

lay in taking up addit, civil settlement vs. Wannamakers might prejudice Govt.
case. I told him of Wise interview and said I would not even discuss a civil
settlement unless directed by him,

From his manner I rather felt that he wan,.

ted to discuss the criminal proceedings.

I told him MrMcAdoo and I had gone

over the matter and we could not advise this in view of the record.

He asked me

to call him up when I returned from Boston,
Jan. 22, Thursday.

Called up Atty. Gen, as requested; told him of my memo.

reviewing Wannamaker case and said if he wished it I would send him a copy. He
said he would like to see it and would later discuss matter with me.

I accordir.

.gly wrote him a letter in my own hand sending the MtM4, but had a copy printed
for my copy book,



Jan. 23. Friday.

Collector Hardy of Nogales,Ariz. came to Washington on or.

ders. Said the Constualists had plenty of money and were getting arms and mu.
nitions--asked how this could be done.

He said the only way he could think of

would be by concealing them ib coal shipped to Mexico from Denver.
itcAaoo wired from west to announce that I was to succeed Asst.

Jan. 27.- Secy

Secy. Williams in charge of Fiscal Bureaus and to be acting Secy. of the Treasury.
Jan. 29.

At Secy. McAdoo's request,prepared memoranda for Pres• in favour

of having all accounts of Panama Canal zone audited by Auditor of the War Dept.
See letter book.

PresideW acknowledged this by letter.

Ordered Maine Central to repair injury to Custom House tianceboro caused by
undermining illegally.
Refused request of J.W. Byer to permit entry of free goods along Canadian border destined for export from Atlantic seaboard without production of Consular
invoice.
Feb. 6.-Priday1

Have been acting Secy. beginning last Tuesday Feb. 2nd.: also

have Customs work and all of Asst. Secy. William's work.
Last week idsued letter to Manager of C.P.R. at Lowelltown,Maine that entry
must be made of all merchandise before examination and appraisal and if R.R.
promptly entered them would not be the delay now objected to.
Feb, 7. Saturday.

Some days ago Mayor Curley of Boston wrote me stating that

negro delegations had waited on him and he hoped segregation in 71/ease Dept.
would cease.

I sent for Thompson and he said there was segregation today in

Teas. Dept. especially in Internal Revenue Bureau and in Auditor of P.O. and
also in Bureau of Engraving & Printing,--in lunch room; that separate toilets
were provided in Treas. building etc.

He also said that Asst. Secy. Williams

sent for Chief Clerk Wilmarth and ordered him to segregate all negroes; that he
also sent for all chief of divisions etc. under him and confidentially told
them to segregate; that he recently said that segregation did not go nearly far
enough.

He gave me file relating to Belle laPollette who quoted letter from

Chief of Bureau of Engraving & Printing admitting segregation in lunch roam;



the particular case complained of by Mrs LaFollette was the removal of Rosebud
A, Murray for insubordination Aug. 20 1913 by Asst. Secy, Williams.

Examination

of this record failed to disclose her removal because of color.
Feb. 9, Msnday.

NT Gilthan tat MB that MT Gantt,Chief Clerk of the Commissio-

ner of Internal Revenues had just told him that MT Williams,as one of his last
acts as acting Sec3r, directed him to remove All colored messengers now having
desks in the rooms of the Internal Revenue Service into the corridors and keep
them there.

Gannt said there had been no complaints whatsoever about them,

Gilman said he told Gantt to forget the order and I told Gilman that was right
and that no such order should be issued or carried out while I was acting S@cy.
March 9, Saturday. Comptroller Williams came in and asked me to tell Mt Spear
of the Income tax division--not to send to the Secy. 2522112, of the returns
of the names he gave him but to send the originals and I at once told Thompson
to convey this message to Spear.

Later Williams said the names referred to

were J.P. Morgan ,Rockefeller et als.

Later Spear said he wrote to

for 66tiea of the returns and later wired for the ulexala,

Collectors

Later Williams

told me just what Rockefellers return wasohowing that it had been shown him.
March

al.

Wednesday.

Met Atty. Gen. at Metropolitan Club at lunch; I was with

Robert Munroe and was with a N.Y. lawyer Mr Coudert.

Atty. Gen, said he did not

know what to do with Wannamaker Grand Jury matter; I advised him to do as I suggested in my memoranda which I sent hims--to insist on their giving the Jury an
explanation of the frauds and not to dismiss the proceedings.
March 21, Saturday,

Atty. Gen

telephoned over that he had $100000 from Wanna.

maker Co, in settlement of their liabilities to Govt. --asked me as to accepting
it. I asked if this meant dismissal of criminal proceedings.

He did not answer

directly but from what he said I inferred he intended to dismiss them.
he had sent for Arnold to discuss it.

e said

I told him I would prefer to have them

explain to the Grand Jury as to this fraud but that,of coursefit was for him
to
determine.
March 23. Monday.

Arnold called: said Atty. Gen, asked him to see me: I told

him Secy. McAdoo and I had sent a MAMO, to the Atty. Gen, setting forth our view



and that we must rest there; that while my opinion had not changed,' realized
that the responsibility for action was on the Atty. Gen, and that he must consider every phase including the chances of winning or losing if criminal proceed.
ings were pushed.

Arnold said our chances were 4 to 1 against our winning; that

practically the only hope was to get a disagreement; that even if we convicted
thempthe evidence would be so purely circumstantial that the Govt. could hardly
ask for and the Curt would certainly not impose a term of imprisonment; that
if we should press the civil case it would be almost impossible to prove the
value of the personal goods; that we could not get at the French books of those
who sold the goods to the Wannamakers unless the French Govt. ordered them produced; that in present condition as between France & the U.S.—great irritation
because of new Tariff Sch. .-the French Govt. would certainly not help us; that
even if it did,it would cost a very material part of a dollar to recover a dolla
--that the civil settlement of $1000 000 was a very good one. He evidently was
inclined to accept the offer,
March 24. Tuesday, Secy. McAdoo told

MB

the Wannamaker case consaered by Cabi.

net this A.M. and it had been decided not to proeeed with criminal proceedings.
March 27. Friday, Atty. Gen, by telephone asked if T"easury was ready to report
whether acceptance of $100 000 from Wannamaker was a good settlement of civil
liability,

I told him I tiought it was but would let him know definitely as

soon as Halstead had reported on it.
April 23. Thursday, question arose along Mexican border on report of Calles that
arms & ammunition were coming in en route to Nexic000me for Federalists and
some for Constualists. Halburn & I went to
& Houston.

l
s y. who had with him Lane,Garrison

I advised sending telegraph to 44111 Collett to hold all such exports

pending final instructions and told him one such telegram sent day before. He
rather sharply said he could not do that at least until he Could talk with Pres.
who was then out driving.

That evening just as we were going to Russian Embassy

to dine,Secy. McAdoo telephoned me to send such a telegram to all Collectors.
I called up Gilman & told him to get Ealburn & send out such telegraphs which
they did,
April 24, F idaY•

•


More telegrams came and Collector Cobb especially asked for

specific orders as to arms etc. already there.
April 25. Saturday.

Secy. McAdoo mnsidered matte;„

Secy. McAdoo not at office today. Told me to settle all

matters with Malburn.

I advised Malburn to have conference with War. Dept, and

at 12.30 we went there and had conference with Asst. Secy, Breckenridge aril Gen.
Wotherspoon,Chief of Staff.

We agreed to wire Calles to hold all munitions of Vial

and to give them constructively into possession of army officers.

There was no

authority of law for this but we agreed that such munitions might later be used
against our people and that the emergency demanded quick action.

Gen. Wotherspoo

said he would assume all responsibility.
April 26. Sunday.

Secy. McAdoo by telephone asked me to see that all Collectors

were wired that above order did not cover food or food supplies.
April 27,

Menday. Told Secy. M.cAdoopin my opinion,it was most advisable to issue

100 millions of Panama Bonds out of the 200 millions available; that the Treasury
was not in good condition as there was not over 10 millions surplus, of assets
over liabilities unless you include in assets the subsidiary silver coin and
bullion which was not really a debt paying amt; that of the net balance in gene.
ral fund of about 83 millions,51 millions were in the depositary Banks leaving 0211:
32 millions in TReasury & Sub. Treasury; that the subod, silver coin and bullion
amounted to about 25 millions leaving only about 7 millions over liabilities.
Secy. McAdoo did not seem to be at all disturbed--he took the view--as he has
several times before;that the liabilities did not become due all at once and that
therefore we could treat the assets like a Bank reserve and as long as they were
25% of the liabilities,everything was smooth.

He has often daid that we could

loan another crop money fund from present assets perfectly safely.

He seems to

have queer ideas of Govt. finance; more like Mrs Howe's bank.
He said he would not think of issuing bonds now as everyone would think it meant
war; I told him that if he issued them at any other time,he would be criticized
as admitting the Treasury position was weak; as it really was; that this was thd
time to put out Panamas & that Williams agreed with me absolutely.
be brought to see any necessity for ay action.

He could not

The papars say he told Underwood

that the T easury could easily spare 50 millions now for war purposes.' hope for
r
his reputation he did not say this.



Later he asked me as to his power to issue

certificates of indebtedness under old War Revenue Act of 1898 as amended
by Tariff B;11 of 1909.

I gave him a memo, on this.

These certificates run only

for one year and it would be very poor policy to issue them.
April 27. Monday.

Some time ago a committee of the Clearing House association

of Washington National Banks called and later wrote asking that 5- millions be
deposited with the Banks to help in paying the District taxesfas had been done
for past few years; last year four millions were deposited and apportioned in
prilperztion to individual and Trust Co. deposits.

I spoke to the Secy1 and be

said he would not give the Riggs National Bank a dollar because of their unjust
attacks on himself and Williams.

I told him this would cause a bitter row and

that he would be severely attacked. He said he did not give a damn--he would
fight them back.
Abbut this time a statement as to receipts from taxes was sent us by Auditor of
State et als Dept, saying it had been prepared by a clerk Hodgson at request of
Ailes.Vice.Pres. Riggs Bank and Auditor referred it to us.
ion should not be given.

I said this informat.

Later Williams called me up and asked me to look up

this clerk.intimating he ought to be discharged.

I did this but found that alth.

ough the clerk had given this information to Ailes in past yearsfhe had not given
it out this year but had referred it to Auditor who referred it to me.

Williams

also said he had heard that Ailes was delkghted that I had been made Fiscal Secy.
--meaning thereby to prejudice rile against him.
This morning I told the Secy, we must decide as to the tax deposit. He said he hd
decided on this Saturday (without consulting with me) and that he would make a
deposit but would not give the Riggs Bank anything.

I protested saying that I

accepted all he said as to its attacks on him and Williams & as to his statement
that Ailes was a "damned scoundrel" but that this was a business questiontthat
the Riggs Bank would be entitled --because of its individual & Trust Co. deposits
to li millions (if four were deposited in all) and if it were not given this
amount it would incommode the Bank; that in any event if he gave the four minims
to other Banks they would not need as much and could not use it but in all probe...

Ili

bility they would give the Riggs Bank its share.
what the Bank did with the money.




He said he did not give a damn

I earnestly beggedhim not to do this as it

would justify a charge of vindictiveness in making public deposits and that it
would cause a scandal and probably a Congressional investigation.

He said he ma

not afraid of the Riggs Bank and he directed me to prepare a letter to the Clear
ing House Committee saying he would deposit four millions in certain Banks but
the old apportionment would not be followed but he would appottion it according
to his own judgment.

I accordingly prepared such a letter and sent it in to him

His action is extraordinarytno matter how unju
stly the Riggs Bank attacked
Williams and himself and I am
seriously considering whether I ought not
to resig
Williams seems to be his evil geniu
s...he is evidently secretly influencing Mc
Aacto and they are allowing
personal vindictiveness to dominate their
management
of the Treasury finances,
If this keeps up I shall resign,
April 29. Wednesday. Saw Will
iams that A.M. & he spoke of District tax
matter
saying Riggs Bank should not
be given a dollar. I told him such acti
on would
surely result in charges of
vindictive discrimination; he said we would be criti
cized if we did not refuse to give them
any money. He has evidently persuaded
the Secy. to adopt his view.
Later Williams told Thompson that the apportion.
mtnt perhaps could be made on basis of Rese
rves and suggested that I ask each
Bank what their reserves were.
April 30--Thursday.

I checked a letter for Secy. to sign to Clea
ring House

Corn, of District saying not
exceeding four millions would be deposited with
certain National Banks but the old
rule of apportionment would not be followed
but
the Secy would apportion in
his discretion, I also signed a letter to
Auditor
saying he had properly refused
to allow his clerk to give out information
as to
tax receipts from District,
Later I sent a letter to each National Bank
in Die.
trict asking for surplus--the
re was none written to the Riggs Bank and I
asked
Thompson to ask Williams wheth
er he thought we should write it also and he re.
plied"Yes:
May 1, Tuesday.
ion called,

One of committee of ''ashington Nat. Bank Olearing House
commiss-

I told him the Secy, had just sent them a note
fixing four millions

as maximum to be deposited and
that the Secy. would apportion and fix security
to be taken in his discretion and he
would advise them s4ortly.
May 2, Saturday. Had another talk with Secy. McAd
oo as to District tax deposit,



4/7
Riggs Bank; asked me to '
He said he positively would not give a dollar to the
prepare apportionment with Williams on this basis; I said I did not agree with
Williams and wished he would make the apportionment.

He said he understood fully

that I believed he could not lawfully discriminate vs Riggs Bank and that I assu.
med no responsibility for his action; that he had positively made up his mind in
this matter and that he hoped I would help him and prepare some form of apportio
ment with Williamst although he said Williams had really nothing to do with it. I
went to Williams and had a talk with him; said I did not approve this discrimina
ion but would of course help in any way to apportion the money as directed by the
Secy.

I told Williams that if we took four millions as the maximum and then appo

tioneft it in proportion to deposits and then struck out Riggs Bank leaving say
2i millions apportioned as if four in alltit would be possible for the Banks to
work back and dlow that the apportionment was bnse on four millions and thus pro
deliberadiscrimination vs Riggs Bank.

He said he did not object to this as

the intention was thus to dicriminate and the S2cy. wouldfay so openly. II told
him I did not believe the Secy

would publicly state that he intended and had

discriminated vs Riggs Banktbut he said he would do so.

Finally he said he would

like to talk it over with Mr Sands of the Commercial Nat. Bank as to maximum
amount needed and would ask him to see me Monday about it.
May 4. Mondays
to see me.

Williams brought Mr Sandst Vice. Pres. of Commercial Nat. Bank(?)

We asked him as to necessity of deposit for Dif.strict Banks • He

said they would get along with three millions but if this at least were not giver
thempthey would severely suffer and would have to call loans.

Williams asked

him as to the Riggs Bank and he said they did not loan as commercial paper as
much as did the other ,-anks but he said it mould suffer as all the other pinks
if deposits not made and would have to borrow money to keep up their reserves.
After he left I asked Williams what he thought ought to be done and he sal
he thought the only thing to be done would be to deposit three millions among the
Banks but nothing to go to the Riggs Bank.

He said to apportion it among the

13anks as last year in proportion to individual and Trust deposits.

He added

that it would be better not to apportion among all Banks at four millions and




then strike out the Riggs Bank as thus they could figure back and see
mathemat.:ically the discrimination vs Riggs Bank.

Last week he said he did not object

to this.
I had thoroughly pointed out to him my objection to this discrim
ination and consequently preferred to have him take charge of it.
write letters apportioning it on this basis.

I then told Huddleston to

One Bank...the Franklin,' think,

had not sent in its statement as to deposits and later Williams sent

MB

the ay.

portionment list adding in his own hand about $300.000 I think,for this
Bank.
I then checked letters to the Banks signifying the apportionment for
the Secy.
to sign.

He signed them but directed kelly not to mail them until after Cabinet

meeting tomorrow.
I hope he will take it up at the Cabinet meeting and that sound sense
will
prevail.

At first I thought I would refuse to check them but as they were qp.

dered to be sent by the Secy. on his own responsibility and over
my protest I
felt it my duty to check them.
Later I talked with the Secy. as to necessity for a bond issue to record
Panama expenses.

I said we were in a critical condition because paying out

more than we took in and were losing our gold; I thought the Banks were strength.
ening their gold reserve at expense of Treasury but would let him know definitely
when he returned after his wedding trip.

He seemed willing to issue bonds up to

fifty millions; I said one hundred would be better to put Treasury in good pooltialattion.

He said he would like to issue certificates of indebtedness but I

pointed out they must be redeemed in one year and would ultimately intensify the
situation.

He asked me confidentially to prepare form of public subscription.-

which we agreed was the best form altho we would lose money by it.
May 5--Tuesday.

Late this P.M. the Secy. ordered letters to be sent out to Die..

trict 43anks apportioning the 3 millions of dollars but giving nothing to the
JD
Riggs -ank. This P.M. Flather of the Riggs lknk called but was told the letters
would go out tonight.
May 6, Wednesday. Mr Flathsr Vice. Pres, of the Riggs Bank called at 10 A.M.
and
asked me what the Riggs Bank could get.. I told him the Secy. personally
had distributed the fund among the District Banks and had not allotted anything to the



Riggs Bank, He seemed very much disturbed--said Riggs Bank had to pay 1/5 of the
District taxes and would be severely injured by this discrimination.
ked the reason for this discrimination •

He then as.

I told him as directed yesterday by the

Secy....that the Secy, personally had made this apportionment and that I must refer
him to the Secy

for his reasons.

He said it was a rank tunjust discrimination

and asked if I thought it would be of any avail to try to see the Secy.; I said
he had better go to Cooksey and say he wished to see the Secy. and he went out
saying he would do this.

Later Cooksey told me he did not come to him.

Later

in the day Mr Glover wrote the Secy. a letter asking for an explanation for this
discrimination.

Cooksey brought it in and I told him to give it to Secy. McAdoo.

That afternoon Secy. McAdoo told me in presence of Williams--that Williams could
prepare a statement to show the Riggs Bank did not need this deposit as it had
little commercial paper and loaned its money to the National City tank in
N.Y.
Their whole attitude has changed; until now they were ready to say frankly
that they declined to make the deposit because of unfair political attacks
of the
Riggs Bank and Nat. City Banks vs McAdoo & Williams;now however,they wish to de.
fend their action on other grounds,

Later Secy. McAdoo told me he had consulted

the Pres, with regard to the matter; I am amazed that the Pres, did not carefully
look into this.

Sec. McAdoo also said the Riggs Bank had established in past an

espionage on the Treasury through loans to employees and that he knew just
what
employees had loaned from there and that he would see that the loans were
paid or
dismiss the employees.
Last week the Secy, asked me--the other members of the Organization Cam,
being
present.whether I thought the designation of the National Shawmut Bank as one of
the Banks to form a reserve Pank, would be looked on as a discrimination
against
its rival the 1st. National (?) Wing's Bank--who represented the tat.
City ?ank
interests;he said he wanted to designate it.

I told them that the National Shaw.

mmt was one of the strongest Banks and that its directo
rs were men of character
and influence in the community and that
it would be only natural to turn to this
Banks I added that Gaston & I had
been bitter political opponents but that I felt
able to rise up above any such conside
ration.




BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

.g 1

Date

irEct_ TIE
Merritt Sherman

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Secy. Mello°

said today,' ought to attend the Cabinet meetings in his
absence

and that he would so advise the Pres.
This P.M. Mr Paul Warburg came
over from N.Y. in response to telegram from
McAdoo to take over Etnama Bond issue
; he said on facts submitted by me such an
issue was necessary and he would advise us
how much could be floated.
May 7. Thursday, Mr Warburg called me
from N.Y. on telephonelvery difficult to
hear him but I gathered that in his opinion
it would be very difficult to place
even 50 millions of Panama bonds. Said he
would write me a confidential letter,
esterday morning,Secy. McAdoo told me he had urged
'Cr
the Pres. to put me on the
that
Federal Reserve Board but idaita the
Pes, while appreciative of what I had done
for the administration felt that as there would
be three members--MoAdoo,Williams
and Miller on the Board taken from administra
tive office holdersthe would be orit
icized for putting on another1 I said that
I had had no intimation that my name
was before the Bd0 except thro the newspapers
; that while of course I should have
amcepted if offered,' felt that when I saw Miller's name,
that settled the matter
even tho Olney declined as Secy. McAdoo said he had
already done. Secy. McAdoo
seemed very disturbed lest I ebeuld feel
that he had not urged my appointmentlhe
said he had had it in mind from the first
.
I didnot say to him what I felt-.
that the Pres, should have offered me the appoi
ntment before appointing Millerpor
should have at least sent for me and
have expressed some appreciation for what
had done for the administration in accepting
a subordinate position and have explained why he could not offer me the posit
ion.
•rok

May 8.

PAday.

Several newspaper representatives have called and said there

was a general consensus of opinion that I
was entitled to Olneyss place and that
I would be appointed.
May 9, Saturday.

Hugh Vkllace called and said in confidence that Col. Huse had
A

urged on the Pres, the necessity of appointing
me. He said the only trouble seen
ed to be that it would mean four
members of the administration officers; also that
It was the chairmanship and that
the Pres. feared I was too young for such a posi.
tion. I said if this were the only objec
tion,he could appoint someone else chairman--he said he felt sure the Pres
0 did not want to make Warburg chairman and




J73

might have to if the man in place of Olney were not made chairman.

He said he

thought House ought to go on and talk with Olney; I said I had never expressed
any desire for this position and could say and wanted to be able to say that no
friend of mine by my knowledge or consett had urged my name. He said--then you
forbid me to see 0 ney or Col. H use to see him." I saidflabsolutely." From his
1
mannerl however,I am convinced he will see him.
He said House saw Olney,Sunday May 3 and thought he would accept.

I told him

that if I were Pres. I would not appoint myself after Miller had been appointed.
He said if not appointed,there would probably be changes in the Cabinet and I
would be in line.

He said Col. Hduse and he both felt it was essential that I

should be appointed.
May 15,

Comptroller Williams sneds letter addressed to Secy, showing the condit-

ion of the Riggs Bank,--that it loans little or nothing on commercial paper,but
largely on investment securities and makes large deposits in N.Y. in Nat. City
ank; says their claim that business men in District will suffer if no deposit
is made against tax payments is false and insincere.

(This Bank never made such

claim; Ur Sands said this Bank loaned little on commercial paper.
Press

Mr Glover,

.in letter to Secy, said its customers paid 1/5 of the taxes and that the

Bank would be injured by not being given a share of these deposits.)
The Secy. called me up from N.Y. this AOL, to ask about proposed easement to
_N.Y.

city to put subway under the P,O.xxxxxxxx I told him I had the gold situat.

ion well in hand and could give him at least a weeks notice in advance of any
critical situation.
May 26, Tuesday.

Gaston called & stayed over a 1 hour.

His ostensible reason

was to see Comptroller Williams & urge appointment of Directors in Reserve '5!anks
by the Reserve Board before the local Directors were elected.

He seemed pleased

that his Bank was selected to form the Reserve Bank of Boston&

I told him the

Organization committee asked me and I rent over the Directors of his Bank and
said there was no reason why his Bank should not be designated.

He said he hoped

I would doo all I could to secure a member of the Reserve Board
from Boston. I
told him the Pres, had not consulted me in the matter and added
thrt I had seen




his name as well as my ovn mentioned in that connection.

He said he ould not

even consider such a proposon & that he probably could not get it anyway.

He

never said a word to me about my chance of being appointed & thus clearly indica.
ted his opposon,

Later Andrew Peters called ani they went together to see

Williams.
6.30 P.M.

Peters called at house: said he saw the Pres. last week and presented

names of J'eremiah Smith and Ptof, Sprague of Harvard but told the Pres. that my
mame vas on all lips & would please tverybody; that the Ptes. praised me most
highly but said the 3.1% wanted a man on the Board & seemed rather inclined to
pass over New England.

Peters said he thought Gaston really wanted the place.

In the evening dined at the McClintocks.

Senator Hollis was there & he said the

Ptes. ought tp appoint me..that all factions would unite on me.
write the Pres. tomorrow and call on him THursday.
anyone speak iz

Said he would

I told him I would not let

.461

him on my behalf.

Hg said he fully appreciated this but whit he

had to say vas in behalf of N. England & not of me personally,
Nay 27,

Wednesday.

on Reserve Board.

Exp. Mayor Fitzgerald called; said I ought to accept positior

I said no offer had been made to me.

He said he had talked it

over with Gaston who seemed friendly but said I would not accept it.

I said if

offered I would accept.

I said I

He asked if he could write or see the Ptes.

had told my friends not to ask for this,that if it came it must come absolut
ely
unsolicited.
Kay 30.

Saturday.

Took Brandeis to ride.

He spokeof Reserve Board & said my

appoinement would be ideal & that to his knomledge my name had been strongl
y ur.
ged upon the Ptes.
June 1.

Monday.

•I'),tl

Brandeis dined with us,

Seemed very much interested in my ap.

Spoke very enthusiastically of Warburg.

June 5. Filiday.

Nt Cooksey,private Secy. of NcAdoo,said a number of newspaper

representatives yesterday asked Nt McAdoo about my chances for Reserve
Board &
McAdoo said that mas for the Pres. to determine; that
my appointment would be a
very great loss to him personally but that
he wanted to say that there vas no ap.
pointment under the Govt. that
vas not eminently qualified to fill & thEt I



ought to have anything I wanted.
June 7. Sunday.

Et McAdoo has not mentioned the Reserve Board to me sin
ce his
return except once last week when he asked
me to consider a legal question he was
talking over with Elliott saying--"this is
a matter you will be interested in"
and then suddenly corrected himsel
f by saying--"we shall have to have many talks
about the Reserve Board from the
Treasury point of view".
Nt Williams nearly
every day intimates that I am
to be appointed & from his intimacy wit Sec
h
y. Et
Adoo,I feel quite sure they
must have talked it over together.
June 9, Tuesday. Nt Dud
ley of the Washington Star told me in
confidence that
Tumulty had just told him
I would not be appointed to Reserve
Board. Have every
reason to believe Secy. EtAgto
asked the Pres, to appoint mt,
Am disappointed
that the Ptes, does not
promote mt..-he does not seem to be ver
y appreciative of
what I have done for him.
Jr
,

June 10. Washington Pos
t announces that I am not to be
on Reserve Board.
June 12. Friday, &icy.
McAdoo,just before going to Cabinet
meeting called me
in & said the Pres. at
his earnest request had decided to
appoint me on the Federal Reserve Board; that his
only hesitation had been because put
ting four members
on from his official family
might be critieized;were it not for
this I wOuld
have been among the first
to be appointed. I thanked him and ass
ured him that I
gladly accepted. He then
asked me if the Pres, was obliged to
designate the Gov,
& Deputy Gov, when the
names were sent in--I said "NO" --h
e could nptcdetignate
them until they were appoin
ted & confirmed,. He added that he sho
uld ask the Pres
to make MB Gov*
In the afternoon he sen
t for MB again & said that the Pres.
would send the names to the
Senate on Monday & that he had determ
ined to designati
me as Gov. and Mt Jones,a
lawyer of Chicago as Deputy Gov. He
said Secretaries
Houston ea Burleson strong
ly backed him up in his request for
my appointment &
designation.
I told him how I app
reciated the honor,that I hoped
the Board would be harmoniou
s
as dissenting opinions
would weaken its influence; tha
t there were many questions
which must come up under the
Act,in the relation between the Board
and the Tfeasur
which could only be adjusted
by most cordial and intimate rel
ations between the
two,that in some of these
e.g. deposits of public moneys
the Treasury was necess.



-sarily paramount and that in all these relation
s there must be perfect harmony
between the Treasury & the Board.
He said he could not tell MB how pleased he
was at the Pressident's decision although he did not know
how he could bet along
without me in the Treasury & that I must help
him in choosing my successor. I
suggested Malburn & he said he would talk
with me about it.
He seemed very much relieved at my appo
intment for he said the large financial interests would move heaven & eart
h to control the members. I told him the only
special quality I claimed was tact
in harmonizing conflicting interests & that in
that way I could be helpful & that I
should do my utmost to weld the Board toget.
her in a united whole. He said if this
could be done t we could demonstrate to the
country and even the extreme radicals
that the Act would really benefit the people.
He told me not to mention my appointm
ent to anyone except that I could in
telephoning Bertie say I thought the
matter was arranged satisfactorily.
June 13. 6aturday.
Received letter from Stuart Gibboney enclosing letter
to
McAdoo warmly endorsing my appointment.
He referred to a talk with me had together
Thursday P.M. late walking home with me.
He then said he hoped I would be appointee
and I told him I had never sought it dire
ctly or indirectly nor had any of my
friends with my knowledge solicite
d it for me; that' I felt I could help McAdoo
if appointed by securing fair play
if any attempt was made by big financial interests to control the Board in any
undue may. This was in response to his statement
11
tha
he feared =- arding would be influenced by
'Wall St. as Mr Bertrand who recommen.
ded him was a millionaire very
close to the interests. He alm distrusted Warburg
-.knew little of Miller e
told him I could 6 much towards tactful harmonizing
and felt I could be useful in brin
ging the Board together in unity for without
this,the Act would fail.
As a matter of fact the only
time Mr McAdoo spoke to me of the Reserve Board
was the day before he was married
and yesterday--Friday.
J ne 15, Monday. 12.30, cele
bration of Flag day at T"easury--I delivered an orati,
on. 2 P.M. President sends to
Senate my nomination as member of Federal Reserve
Board for a two year term,
u
J ne 17, W6dnesday.
xxx Received enormous number of letters of cong
ratulation,



June 22. 4nday,
confirmed.

477
Serator Hollis sent me a letter

saying I would surely be

Senator Weeks called at 5 P.M. asked me
to give Asst. Appraiser
George 30 days leave letting him res
ign Aug,
Said I would ask Secy. to do
this. Senator Weeks the said...."
n
Well--you are subject to congratulati
ons on
your own account". I said "Ye
s" and he then began tal talk about the Res
erve
Board & said the Committee
wanted to be sure that none of the mem
bers were sUb.
ject to any entangling all
iances or influences. I said this was cle
arly their
duty. He said he was on the
subs-committee to which my name had bee ref
n
erred &
that no objection would be
made to me or to Nfller.
He asked if I had ever been
a director of a National Ban
k & I said "Yes--the Nation& Eag
le Bank about fit'.
teen years ago--it was abs
orbed by the Shammut". He then ask
ed as to my blvd...
nese affiliations--I said
I had absolutely none--that I
retired from law when I
became Netropolitan Wat
er Commissioner except for Bos
ton Chamber of Commerce for
a short time--and that
I had no business affiliations
& owned not a share of any
Bank or Trust Co. He
said he alsio gave up business
when he went into the Senate.
I said my wife had a
few shares of Bank & T ust
Co. stock & that I should sell
this also. He seemed to
thirk this not striCtly necess
ary but I said I preferred
to do it. I said also
I was trustee of the Peabod
y estate but should also resign
from that. I added tha
t I felt that membership on
that Board was like member.
ship on the U.S. Suprem
e Bench.
We then talked about Warburg &
Jones. He seem.
ed very favorably
impressed with Warburg but wan
ted to know about Jones. I
show6
ed him a letter fram
Asst. Treasurer Sherman of Chi
cago enclosing an editorial
from an opposition pap
er praising Jones and said
I would send him a copy
also
showed him a letter fro
m Frank Hamlin praisi
ng Jpes.
Senator Hollis also
called this morning--said
there was no oppositio
n to
me--that Senator Bri
stow told him I was
the only man wham he recogn
ized as fit
fS r the poso
n; that he supposed
if George Fred. Williams
were here p he might
revive his old cha
rge of a secret ret
ainer from theR.R.;
that he had spoken of this to mem
bers of the cammittee
& had told them it was a
laughable absur.
dity. I toldhim
Williams had come to me
& we had made it up and
that Williams
had written me a
letter from Greece
congratulating me on my
promotion to the Pis.



cal Bureau.
Navy Club.

Mr Brandeis and Mr Rublee

of Wisconsin dined with me at Army&

Brandeis said--"Your friends will take care of you as to confir-

mation".
Jane 23.

Secy. McAdoo

called me up late at night and asked me to do all I

could with Senator Weeks as to confirmation of Mr Jones.
June 24.

Mr Laughlin,former Asst. Secy. of State and now representative of

Chicago paper,mtt me on cars and said I surely would be confirmed but Jones
and Warburg would be rejected.
41y 2,

Thursday. A.M.

I*

Senator Hitchcock,acting chairman of the Senate

Banking & Currency Committee called

MB

at Treasury about 11.30 A.M.

He said

he had read the sketch of my life and he wanted to say to me that Charles E.
Russell's book had been sent to the committee--he did not say by whom.-in which
I was attacked as having had a secret retainer of 1.0.00 from
the Boston &
0
Maine R.R. while practising law in Boston. I told him fully as
to this.explained how it originated and showed that it was simply a politi
cal attack as there
was no secrecy about it whatever.

He asked me the exact time during which I

was retained and I explained to him fully as in the letter
subsequently sent
Senator Hollis, He then hung up the telephone. A
little later Senator Hollis
called me up to say the committee had voted IR
to 1 he mut, have meant 10 to 1
as Senator Oliver is in Europe) to report favora
bly on my nomination after
carefully considering the Russell article and my reply. He
said Senator Bris.
tow voted against me because of thisarticle and said he
would have voted for
MR otherwise.
Hollis said--on my inquiring whether it would not be well to
ask Mr Brandeis to see him--that this was an excell
ent idea and I at once telephoned Brandeis to the Gordon Hotel--he said
he would see Bristow at once and
later telephoned he had seen him and he felt
sure he would not violently op.
pose me altho he could not say he had comple
tely disarmed his opposition. I
then Wrote Hollis a letter giving all
the facts as to my relationship with the
Boston Chamber of Commerce and the 13,& U.
P.R.
July 2. evening.

Net Senator Weeks in N.Y. at station.--he
told me about same
as Hollis-.said he had
urged Bristow to vote for me and Hollis confirmed
this,



He said he would use every means to bring Bfistow over and at one time he
thought he would insist on my being given the opportunity to go before the corn.'
mitteyout they were all..-except Bristow--of opinion that as I was in private
life I had a right to take any case and were satisfied there was no secrecy
in my retainer,

For letter to Senator Hollis & clippings showing attitude of

committeepsee my Treasury letter book and Scrap book.
July 6, 4nday.

Sent another letter to Senator Hollis and Senator Weeks &

Senator Brandegee as to B.& U. R.R.--going fully into matter.

Senator Brande.

gee was on train with me last night and he said if Bristow attacked me,he would
gladly defend me in Senate.

At Treasury found letter from Hollis that he had

shown my letter of last eursday to Senator Bristow and he felt sure he would
not oppose me.
July 6. 5.45 P.M.

Senator Brandegee has just telephoned that I was just con,.

firmed by the Senate without a dissenting vote,

A minute later Senator Hollis

telephoned to the same effect,and said Senate passed a vote to notify
the Pres,
of the confirmation,

I at once went home and called up Bertie at Mattapoisett
less
and told her and then sent a wire/to Secy. McAdoo on the
"Onondaga" on Long
Island Sound,
July 7, Tuesday.

Dined with Senator 1181115 at Chevy Chase Club,

Present--

Senator & Mrs Hitchcock,Senator Salisbury et also
July 8, We dnesday.

Wrote letter to Judge of Probate CourtOoston and sent for.

mal application resigning as Trustee for Mrs Phillpp
s at als under Will of Anna
P. Peabody to take effect Saturday,July II.
I found the estate had some few
shares in National Shammut Bank (about 75) and a smaller number
in a Salem It..
Bank or Trust Co, While probably my co-trus
teeswould have sold this stock if
I had asked them..I thought the fairest thing
was to resign absolutely to qua]...
ify as member of Reserve Board.
Also wrote Lee„Higginson & Co, to sell Bert/eft
shares in National Bank of Commerce of N.Y. &
Union Trust Co. of N.Y.
I thoughl•
it was better to do this altho the Act did
not seem to require it.
July 16. Thursday, Mr Elliott told
me Secy. McAdoo decided not to designate the
Gov, & Vice, Gov. of Reserve Board
in the commissions but simply tp make out




1911 commissions as members of Reserve Board and later to make the designations.
Aug.1 Saturday.

and later asked me to

Secy. McAdoo telephoned me to go to

come down to Cshington Sunday A.M. for a consultation.
Aug. 2. Sunday.

krrived at Washington 1.30.

9.P.M. Attended tankerts Conference.
Aug. 3.
ury.

Left with Secy. McAdoo for N.Y.

See Scrap book.

Monday Aug. 3 through Thursday Aug. 6 in N.Y. in charge of Sub-Treas.

Asst. Treas. Vbgel being in Europe.

Passed on collateral for Aldrich..

Vreeland notes with Mr Harding of Reserve Board.

On Tuesday Aug. 4,there was a

line of three or four hundred people asking for gold in exchange for National
Bank notes and silver certificates.

Altho not legally entitled to gold,I ins.

tructed the Asst. Tress. to Day gold freely when asked for in reasonably small
amounts.

ater I telephoned Secy. HcAdoo;at first he opposed& this but,I told

him a refusal might cause a panics and he agreed to let me as as I wis,hed.

The

result was that the line disappeared in a day or two.
Saturday.

Secy. McAdoo said the Pres. had designated me as first Gov.

of the Reserve Board and he ordered a designation ta,mm drawn up by the appoin*
..ment divon.
Aug. 10.

Took oath of office in Secy. M.cAdools roam.

Bertie was present and

a large number of people including Secys. Houston & Lane,Senators Owen,Simmons,
& Hoke Smith, Mr Glass etc.
reIly.

S.6cy. McAdoo made a speech and called on me to

First meeting called for Thursday.

Aug. 12.

Vanderlip called me from Ner York in behalf of committee of Chamber

If Commerce.

Said they wished legislation to authorize holding Wtional Bank

rriites as part of lawful rescrves--that our Banks owed Canada and England about
130 millions: that England had appointed an agent in Canada to receive all
amounts due Englqih people;that it would be dangerous to, pay this out of .Bank
reserves.
at once asked Senators Owen & Simmons and Iff.r Glass to come to Dept;held
conference 3 Pa.: they said impossible to change law under 2 weeks,: I pointed
out to Comptroller that he could permit reserves to
legislation &

eIraw

agreed this was proper course to pursue.

on withcut any

Arranged vdth Van-

derlip for conferenee Thursdaymorning at which Sldridge --representing his



61.

Bank would be present.
August 13.

Thursday.

Conference 10 A.:Y.; Present McAdoo & Reserve Board....

SenatorOwen0fr Glass and 71Uridge"

Whole situation gone over.

Shown that

England's moratorium excused her people from paying any debts: it seemed in.
equitable for us to draw don gold reserves of Banks to pay her. Eldridge
thought if necessary could be worked out by Comptroller allorod
:Ig reserves to
drop.
2.15

Conference at White House with President.

3 P,X. Reserve Bonrd organized.

He delivered an address.

Secy. McAdoo said President would be grate-

ful if Dr. Fine of Princeton could be made Secy. of Board;that
Mrs Wilsonla
dying request vas fnr this. Board unanimously electe
d him.
Also passed resolution that Comptroller was justif
ied in permitting reserves
to fall under present extraordinary conditions.
August 14.

Conference of Chamber of Commerce trades bedies tbankers etc.

In

A.

afternoon had talk with Woodward & Eldridge. Brough
t out clearly that Balks
dian "
in TT,Y. had not yet decided to pay CanadaAc
Engltth credits:in gold to Canada;
the Treasury had merely said it would llow reserves
to be encroached and
that if ultimately it vs decided flat gold must

be sent. to Canada,it would

be taken from the reserves altho they might be deplet
ed.

Seth Low,Gov. Fran4iE

& Peters dined with me at LletreiAlitan
Club.
Por work done in Reserve Beard see minutes
of meetings.)
Aug. 27. Thursday,

N± Warburg in vritten memorandum strongly opposes
opening

Reserve Banks until someamendments are made to
the Reserve Act;strongly advooates change so as to require member banks to
deposit their reserves with
eserve banks taking therefor Federel Reserv
e notes which should be made avail.
able as part of larTul reserves; said that
new banks under present law would
not get more than 250 mil7ions of gold and as1z could be paid in with carlo.
paper the net would be only about 150 milli
ons—too small a sum to be of any
ail in present emergency, On other
hand he said that if member banks would
deposit reserves --over the
money --with Reserve Banks ,we -would get 800
millions of fzeld which would sustai
n our whole oemercial system without difficulty,



August 28. Friday.

Tent over Warburg's suggestions in full Board.

62•
Much

cussion as to Reserve notes: I pointed out they were tied down to
and represen,
ted Commercial paper.

Warburg

the Secy. thouL;ht that Reserve notes could be

issued for gold under Section 14
(a)--power to exchange Federal Reserve netes
for 7old etc.

Williams and I agreed thA

alre.ady_ issued for geld.

this meant merely to exchange notes

The Secy. said the intent ef the

Reserve notes could be issued for gold.

was that new

I pointed eut that this 7ould constitute

a new kind ef Federal Reserve note not authorized
by the Act & if authorized
would require the geld te be held as a trust fund-

if this were so lthe Banks

might prefer a present gold cercate to such
notes.
The Secy. then said we ought seriously te consid
er the proiJriety of the U.S ,
suspendinz gold payments. He did not say this had been
considered by the Cabinet but frem his manner this seemed clearly te have
been the case. He pointed
out that this would enable the U.S. to keep the
gold
Ai
gold certificates
were outstanding t altho the certificates would still
be in circulation. Taller
said that they would be at a discou
nt which Secy. McAdoo, denied.
Till new I
rather felt that the Federal Reserve
Act 7aS not passed to keep U.S. on a gold
basis but rather to make commercial paper
liquid S5 it could be used instead of
call loans Pi: further to keep the Govt. money
deposited with Reserve Banks and
the rieMber banks reserves similarly deposited
away from Wall St.--the duty of
maintaining parity being on the Secy. of Treasu
ry who WaS given extra powers
to issue gold bonds for this purpose.
The minute the Secy. mentioned suspension
however--I made up my mind that I would
consent to Enyamendment of the Reserve
Act which would avert such danger. Warbur
g felt confident that with these amendments we cnuld keep U.S. on gold
basis without much if any danger of suspension.
In evening we met and drew up
certain amendments.
Segtember 7--14.

Mr Glass said no hnpe of amendments as any bill would
be loaded

dovin with ViCiGUS amendments.

Senator Owen at once introduced a bill contain-

ing draft provisionally adopted
by us at above evening session. It was understood holvever that no bill would
be put in until we had shown amendments to
Secy.
and Presidents The next mornin
g we changed the amendments by striking
out ac


ceptances of 2 nam.! cmmmercial paper etc.

The Owen

bill

63.
does not represent

viws of Beard and some things in it e.g. lower cap. linit. of Bational Banks
we had not agreed te and had so informed Senator Owen.
Sept. 12. Saturday.

Mr M,11er presented computation to show that Federal Re-

serve Bonk 5f Atlanta would soon have t3 shut its doors if called on for geld.
This was based on Warbures views.
itself by raising discount rate.

They both forget that Bank could protect

They also seem to think that Reserve Banks

must furnish all -gal-r1 needed for export as if they were the only banks in the
U.S.

They are both unduly pessimistic.

Oct. 7. Wednesday.

Today we finished election of Govt. directors by electing

the Cleveland bank directors.

Until now every election was unanimous

but in

this election of Henry Wolfe,Nessrs Delano llriller and Warburg voted TO.

Iff,r

Harding said that while sVis-ried that Wolfe had the character and ability requisite,yet he feared that this matter might be construed as a political issue
& he felt constrained to vote no Wolfe.

Be said horever,that in vier of the
to,
was authorized to tell this,/

fact that Wolfe was elected last .week and the Secy

Mayor Baker ofCleveland,an adverse vote now--the natter having already been
re-considered—would put the Secy. in a very awkward and embarrassing position
& he should vote for Wolfe.
iTo

Delano,EIller & Warburg.

ed elected.

The vote stood: aye l Williams,Hamlin & Harding.
The Secy. thereupon voted aye as Wolfe was declar-

There was quite a bitter contest over this matter.

Hiller even

told the Secy. that he--Xiller--as voting to save the Secy. from himself.:
Some time ago Senator Burton wett over the various names with me andobjected to
Wolfe not apparently on any ground of character or fitness but chiefly as I remember,on the ground that Wolfe had not treated him fairly in his newspaper-that once he had taken a few sentences from one of his speeches and had magnified them unfairly and had attacked him unjustly.
I ,
..ave high opinion of Burton and would not willingly do anything
to offend
him but in looking over Wolfets endorsements,'
the best men for this place & thet

was

satisfied that he was among

not to appoint him would be to do the very

thing we all sought to avoid--to allow political
reasons to influence us.



64
Senator Pomerene was very strongly interested in Wolfe &
testified to his high
character. Last week or the week before
we elected Homer Johnson of Cleveland
to this position but he dealined to take it becau
se of his professional relations to banks etc.
At our request he came on aa was very bitter tovards
Wolfe.

Warburg said he told him that whenever Wolfe got drunk
he would say

that he owned Gov. Cox and that once Wolfe asked
him to appear for him in a law
suit but it ,ms of such a nature that he declined.
Last week one morning,the
Secy1 sent down a note while we were
in session,asking us to give Senator Pomerene a hearing. Thereupon Warburg moved
to adjourn on the ground that we should
never give a hearing to any Spator or Congr
essman except upon our invitation.
Williams 8: I protested & said this would
put us in a
:; ridiculous position.
rifler said on adjournment we could
go up to my room and listen to Pomerene in,
formally. I said it would be ridiculous
to hide our face in this manner but
they persisted and voted to adjourn—Zi
llions and I voting Tbe I felt this vas
most discourteous to the Secy.
Later we met Pomerene in my room-this was Thursday,Oct. 1 at noon.
After some discussion,Warburg said
to Pomerene—speaking as he said for the
Board,that the only reason we had for
not voting for Wolfe was that he could not
give the necessary time to the wokk
as it would involve almost continuous pres.
ence in Cleveland at first and
much time always. This statement was not in fact
true as Warburg and some of the
others were influenced against 7blfe by Johnson':
statements. Shortly after Warburg said
to Williams his statement was not true.
I very nearly objected to
this statement when it was made but did not want to
have any dispute before Pomerene.
Miller then asked Pomerene if he could obtain
assurance from Wolfe as to whether
he would give the necessary time even if it
involved residence in Cleveland.
.A
This was done as M ller later admitted,in hopes
that Wolfe would say Ito.
In afternoon I said to Board that in my opinion,the
above statements committed the Board
to Wolfe if he cave satisfactory assurances
&I. should in such event vote
for him. Warburg said if he gave such assurances
,
we must then vote that the
director must move to Cleveland and give all his
time
__altho in San Franc
isco,Texas and other States 7:e had not required
this.



65.
While we were spePking,Senator Pamerene calle me
d
on telephone & said he had
just been talking to Wolfe who gave all neces
sary assurances. Later Senator
Pomerene wrote me as to this. (See his lette
r)
Later thet afternoon or the next

day after long discussion o we voted to elect

Wolfe and Treadway of Cleveland & Warburg said if Treadway would
serve with
Wolfe he would be perfectly satisfied.

We then asked the Secy. to call up "Mayor

Baker and ask if Treadway would serve on above
conditions.

Friday or Saturday

the Secy. said he had telephoned Baker who said
Treadway would serve & that he
(Mayor Baker) on whole thought Wolfe
's selection would be a wise one.
On Mo nday or Tuesday at another meeti
ng,Delano moved to reconsider election of
Wolfe. Much rather bitter discussion followed.
I said thr„t as the opposition
to Wolfe came from Johnson's remarks to
Warburg,--Wolfe should have a chance to
be informed of them & to answer them.
Williams agreed with me, Warburg was
very mad ec. said if this were donel he would
never again give any confidential
information to the Board. Finally
on vote it was moved to reconsider,Williams,
the Secy, & I voting No and Harding,Mi
ller,Delano & Warburg voting Aye, Finally
as hove stated,Wolfe was elec ted.
The Secy. was very indignant at the
treatment of his request for hearing of
Senator Pomerene--said he had talke
d it over with President Wilson who said he
would consider it his duty to remove
anyone taking the preposterous position
that our Board would hear no Senat
or or Representative except by invitation.
During the discussion above,ri Warbu
rg stated that he would agree if Wolfe's
election were voted down tht he would
vote for him on first vacancy one year
from dateor that he would agree that
we should tell him that we would use in,.
fluence to have elected a member of the Advis
/I
ory Council or of some local commt
ee
to be formed in connection with the
Federal Reserve Bank. M4 answer vas that
if fit for election a year from
no.w,he would be fit now.
Friday October 9.

Festus Wade of St. Louis and a committee of St. Loui
s mer-

chants came to advocate a 150 milli
on fund to help cotton growers,handlers,
mnf14
etc.
Reserve Board named myself,Harding and
Warburg to hear. 'AA discussed
plan for three hours. As
originally presented a syndicate was to be forme
d whidI



66
The syndicate

would raise 150 millions for which they were to receive 75 net.

managers were to loan nis through banker:as their agents to banksin South
were to lend to individuals at rate of not over 6% per lb.& were to rediscount
2
(1/10
month
the notes at rate of
plus further sum of 3110 of 112cer
year) to cover expense of managers and commissions to Managers

& their agency

S anks.

Yo limit was put on vhat the borro'zing banks should charge 55rro7ers.
V10
After long discussion they voluntarily agreed to limit rate to 8
V further said that the exact commission to be paid must be expressly stated
re
and I said that having one eyndicate manager would not be satisfactory but it
should be a committee of at least 3 prominent bankers at least 2 to be in South,
October 10.

Saturday.

Warburg prepared a letter specifically approving detail.

•f plan but saying nothing as to syndicate manager.
had talked with was J.P. Morgan
I thought rate 1MS

a

I felt this ':Iould not be satisfactory alone.

IS high but al present said rate in South was 10

--the anti-usury laws being got nround.
came down to meeting

Yr Wade said only one he

5 upwardc

Finally we went to Secy. & later he

said he was willing to endorse such a plan on principle

but that he would not endorse this particular plan as he thought interest rates
tS o h

Later I prepared

a

letter 2slightly charged by S;cy. agreeing to such
e'S

a plan in principle but declining to discuss or approve rate of interest,com^
missions etc.

(See Scrap book)

As the Secy. was leaving room after Board approved my letter2he said he hoped
we would use every endeavour to open banks as soon

RS

possible.

I said this

would be done and that a call for capital subscription should be issued in
near future.
Suddenly Warburg paced up and down the room violently angry attacking

MR

for my conduct as Go ,. in bull dozing the Bonrd or some such expression;said
it was absurd to open before conference with Gov. of Y.Y. and other banks;
that I often forced the Board to charge its views to please the Secyretary;
thnt he

WaS

disgusted that he had voted for NClallan of Indiana when he saw hin

--that he was disgusted with waiting for Secretary when late etc. and that as
Gov. I 7RS responsibl)., for dignity of Board,that he did not intend to stand it
any longer etcletc.



67•
Then Harding opened by saying the banks could not open until certain preliminaries accomplished,that he should never again vote for anyone against his honest convictions etc.etc.--referring to the Wolfe appointment.
I replied to Warburg that T had never en could never influence Board to vote
against its convictions;that Williams & T had fought & bled with the Secy.--had
great affection for and respect for his opinions.

Warburg then said or implied

we were voting with Secy. because of affection etc.

Williams and I denied this

ad.. I said the most significant deference to any others opinion was our deference

to Warburg in appointment of Strong as GOTo altho we had reason to fear that
choice might be attacked on ground that Strong would not have courage to with
stand IT.Y• capitalists influence. Thi rather ataggered him & I added that the
only criticism I had heard of myself that I vs too lenient in presiding and otgr
strict enough.
Warburg &

rding then both opposed my sudden opening of the banks & spoke of

fact that if amendment as to reserves was not adopted by CongressIthe banks
would be quickly forced to close etc.

replied that even if amendment did no'

pass 2T shouli vote to open the banks as soon as the necessary preliminaries -were
accomplished tho they were sure to close next day as I believed it was our duty
to carry out the will of Congress.

Harding thought I said that I would vote

to open at once before even necessary preliminaries were accomplished and was
very mad but I made my statement clear.

I then said I appreciated that neither

Warburg nor -ia.
. rding were in sympathy with the Act unless amended & thet they
believed until amended the banks should never open.

They denied this rather

feebly when I reminded them of the report for the Finance Committee on the proposed amendments written by Warburg

a

expressly concurred in by Harding saying

banks should never open unless amendments passed.

This somewhat quieted them.

Finally Miller moved that they both be appointed a committee to consider &
report next Wednesday just what preliminary steps should be taken before opening.
Then Warburg began again about dignity of Board & that Secy. was only
one
member etc.--that responsibility was on me as Gov. & I replied that
I should
shirk no responsibility & felt satisfied I
had discharged my duties fairly &
justly.



Then Eiller

68.
elivered an analysis of the Secy.'s character—brilliant and

impulsive but unable to give necessary time to duties of Board; that it was more
or less annoying to diccuss a question perhaps for hours & suddenly have Secy.
conm in and have to go over n11 again & he intimated perhaps have to cheelge
our
views to please Secy:s snap judgments.

Finally the meeting adjourned,

I am about satisfied Warburg is absolutely out of sympat
hy with Reserve Act
unless he can turn it into a vast system of centralizati
on with N.Y. the predomi
nating factor & that he is representing the wishes
of the r.Y. bgnks rather than
the people—in fact I suspect he hes little sympat
hy with the people.
October 15. Thursday. 3 p.m. Boprd meetin
g. Secy. McAdoo read a letter address
ed to him as Chairman of Board from
President Wilson. The President said many
cSmplaints had been made to him
by Snators et ale ttivt the Board vas deliber.
ately holding back in organization of the Reserv
e Banks;that he knew this vas
untrue:that in order to show it to be untrue l he
hoped the Board would use every
effort to expedite the opening. The
Secy. who read a letter prepared by him.
self to the Board,urging haste & saying
the banks should be opened by Nov. 2.
Warburg was very indignant,saying both letters implic
iTtnly criticized
the Board; he added that had it
not been for delays caused by Secy.'s being
late at netingslmuch faster progre
ss would have been made. The Secy. at once
asked Werburg what he meant ani a bitter
controversy seemed imminent. Warburg
backed dorn,hovever,and could give
no instances.
Delano said we had asked the directors to state at
conference next week the
earliest moment they could be ready E.:
thet it Tould be discourteous now to make
any announcement, It seems the
circulnr to the directors vas signed by the
Secy. of the Board & prepared by
the committee ga none of
eIther members had
seen it.
There was a long discussion,Warburg saying
we could notopen before
Dec. 1. at earliest. Strong
vas in town ad re called him down into the meeting.
He said N07. bankers felt
stronglyee.ould be the earlieet day because
•
of
on gold but he admitted to Williams the
Reserve banks would not affect
or be affected by that. His real
reason seemed to be that this vas a bad tinR
for the Banks to open (c! he naid
We should wait until all could be
heard at the



69.
meeting next week.

At first he said the clerical force could not be ready but

later he said that T.Y. would not be the last bank
to •open in any event. He
agreed with Warburg that me could not properly open until
Federal Reserve notes'
were printed & he said in reply to my question why brIlks could
not open&merely
rediscount by book credits or cashlthat this -would make the
banks merely safe
deposit co's.

Finally it r7as s7reed no announcement should be madd before

the meeting Oct.20.

We also voted to issue call for payment of 1st, subscrip-

tion of capital stock pay. YOV. 2.
Oct. 19, Monday, British Ambassador came
to Reserve Board with Sir George Paish
&Mr Blackett who were invited by
Secy. McAdoo to come over to discuss International exchange matters ete.

He introduced them to us a we had a very short

talk.
October 20.

Tuesday.

Convention of directors of ReseVrve Banks . Secy. McAdoo

tr,ken ill.

We gave Sir ‘*eorge a dinner at Army & ravy Club--Secy
. 11.
. cAdoo cs
to have given him one. Later we went to buffe
t supper at same Club for Reserve
Bank directors, & Sir George gave a short addre
ss.
October 27, Friday.
October 241

Meeting to arrange cotton pool.

so.tur day.

1,

,1 t, !I ;1 ,1 ti I, 11 11 11

11 II II II 11 11 II 11

11 II
•

Also with Sir George.
11 II II 11 11 11 11 11 tI 1, VI

/1 II 11 II

0,1
; 11* 3(2

Representing the U.S. sub committee consisting
of myself and Warburg: represent..
Reserve Banks—Gov. Strong of 37.7..; Bnker committee,31ggi
s
n and ra. Brown of
Brown Bros, Y.Y.
On Friday we discussed the value allowed American Eagles
when delivered at Montreal. Gov. Strong conte
nding value not enough.
On Saturday Gov. Strong outlined difficulties in estab
lishing r,',71". Bank an impopsibility of its guaranteeing gold for acceptance
s to discharge British debt. Sir
George said: 1. The British Govt. will remai
n on a special basis for International payments. 2. It will agree to accep
t finance bills for present indebtedness provided the security is first class
. 3. It will not object to being paid
in credits when Bills mature. He agreed that
securities sent here for sale
could not be or should not be paid in gold
as English people did not pay gold
but credits. Finally we adjourned
until next Friday & Gov. Strong agreed to
permit a memorandum covering
whole question.
Friday evening Oct.23,dined with



70.
Warburg; he wants Reserve Bank to grant 100 millions of gol
d to cover finance
bills. Mr Schiff and Gov,. Strong were oppose
d to this.
Oct. 30. Friday. Session of Comm. wit
h Sir r,eorge.
Oct. 31. Session. 10 to 1.30. At the
se sessions Gov. Strong read a number of
memoranda covering —sp. Price
allowed for gold. at Ottawa. Claimed not high eno
ug
Sir George said if England all
owed
--it mulct facilitate gold exports
from U.S. and thus injure us.
We replied this would be so in normal condit
ions
but not now. Sir George adv
ised us not to figure exact cost etc. whi
ch Bank of
England should allow but
merely claim as a matter of justice we
should be allcw6.
ed a greater sum. B.
_acilities faf-free opportunity for sel
ling cotton to
England an assistance fro
m England in financing its movement,
GOT. Strong said adv
ised that there was an understanding bet
ween English mfgs1
not to buy cotton save
from hand to mouth, Sir ‘zeorge denied
this and said
matter as slowly righti
ng itself; that Manchester spinners at
first were short
sighted but were now more
reasonable; that he had cabled London
cotton Excha,nge
should now be opened etc.
C. Opening Stock Exchan
ges.

D. Payment to England of indebtedness
not yet provided for. We took these
up together using C. as an excuse for
bringing up the
principal question...D.
Gov. Strong said Comm. of Y.Y. Stock Exc
hange should
go to London to consult
with London Stock Exchange Comm. bef
ore opening.
After long discussion
Gov. Strong said he,Viggin & Brown wou
ld make a stattment in writing as to a pla
n for taking care of the Stock Exchange
in case our
securities were dumped upo
n us after opening. The plan sugges
ted was a syndi.
cate of banks and banker
s who would lend to Stock Exchange bro
kers taking Stock
Exchange collateral; a
Conm1 representing the syndicate to
draw on certain English banks or on Bank of
England the Stock Exchange collateral
to be given as
security; thus the banks
in the syndicate would be individua
lly liable on the
Bills; furthermore the
Tringlith Banks were to agree to
renew these bills if considered necessary by the
syndicate and this would relieve
our banks from necessity of covering these
bills with gold which Strong
said they would never be
do. Wiggin said to me.
these Banks could get gold from
wil.Ing
1/eserve rank by
discounting commercia
l paper if necess
ary in future,



71.
Gov. Strong said Reserve Brik could .not safely glaranty to deliver gold in
future. If system was successfully established,they could do
it but would not
agree to do it.
Sir _
i eorge at first insisted on Govt. bondr as collate
ral but finally said
he would advise British Govt. to agree on some such plan
as stove.
.lestion then arose as to how this plan should be presented to
Sir George
--whether as a suggestion of the bankers,Gov. Strong,A.ggin
suggestion from our whole sub-conmittee.

ai

Brom or as a

Sir george said he could not cable

a suggestion merely from bankers--it must have approval in principle
of Secy.
and Reserve Board.

77rburg then called up Secy. McAdoo in N.Y. er. he said he

had no objection to the memos being given to Sir George if understood to be
merely a memo, from the bankers but if anything more,he &Reserve- Board
must
have opportunity to consider it. (1 had previously telephoned him and advised
him to say this).
Finally we adjourned until next Tednesday.

We then called a meeting of

Reserve Board and I suggested that if any memo, were to be given to be cabled
to Chancellor of Exchequer with approval of Secy. o of Reserve Board,we
ought
first carefully to consider it as also the Secy. & the President.

We all agr-

eed to this.
As a basis for PI.1 discussions as to mmounts oqed abroad,we took the figures
prepared by bankers Comm.; showing due 379.1 millions .Can, oviing 56.6.
Tet debt 322.4--as follows.
Credit balances

95

Time darftm

63

Acceptances for
our acct.

86

50

Travellers credits
15




not covered by above.
n- nking house

13

corp.

due from

obligations pay.abd

all count-

Securities

5

ries,

Dividends

8

56.6
millions,

Loaned pers.
for Europ.
clients

Debt
balances

Com, credits
still unused.

Millions.
Exchange we must deliver

Due Europe for Sec's
recd.but not yet paid

7

Amt.due Europe for Sec's
12

sold but not recd.from
13.
Europe

As I understand it from this net balance is to be finally deducted the
80 million

7.Y. notes for rhieh gold has been provided.

72.

Also the 100 million

gold pool & the exchange made on exports.
14 all agreed with Gov. Strong thrt in all human probability
the incream.
ing exports with the 100 million gold pool would amply take
care of our indebted.
nesz and that the only cause for anxiety would be whether on opening
of Stock
Exchange we should be flooded rith our Secures sent back
for sale.

The above

suggested arrangements,the bankers thought,would take care of the
possibility
provided it could be carried through.
3--Tuesday.

Went to Boston to vote.

'Nov. 4. Wednesday.

In Boston with Mr liarding of Ileserve Board.

.L.,Comm. of Clearing House.

10 A.r. met

After long discussion they said would meet tomorrow

J and would probably advise taking crr 5 mons tomards Cotton
loan provided Atty.
Gen. of U.S. gave opinion that it did not violate Sherman
anti-Trust law,Claytah
Bill or other laws of U.S4

I said I would ask Secy. to obtain an opinion fram

Atty. Gen.
1 P.M. Lunched at St. Botolph Club rith directors of Federal
Reserve Pank and
later visited offices also t1-1., offices they expected to
have permanently.
for Washington
Nov. 4 Wednesday.,

Left

In Washinzton. Reply wired would appoint Comm. to raise 5

millions if %Anion of Atty. Gen. 7ere obtained.

They also stipulated in Boston

that the Guaranty fund was to give preference to Clr,ss A. contrib
utors.

Nothing

in the agreement r,,s to this but Harding said it was the intenti
on C.7. such povrer
must have been omitted by error.
Secy. McAdc,
,o said Atty. Gen. did not rant
as yet but muld see him.

mI ask opinion by formal letter

Later he came over and had conference with Secy.

At

Secy.ts request I wrote him a letter & stated request
of Boston Clearing House
Comm.
Secy. McAdoo smid he would give the suggestion of the banker'
s comm.as to
a 100 million loar from B-itish GOTte or Bank of England to
Sir eorge with his
general approval. I pointed out thPt Warburg (9
I were appointed a sub-comn. to
represent Reserve B5Prd E'L we sLould
pass on it ,7,7 he finally agreed to this.



P.M.

reeting between Secy.,7arburg,C.S.H. and Sir George and

mr

73.
Bln.ckett.

Secy. YoAdoo said he approved in principle of the suggestion of the bankers Comn
c7; that Sir 'eorge could cable it over 4 1-1form,
Ily altho bPrkers would not sign it
0.011,

until tomS rrow.

I suggested that reference to British Govt. be eliminated as

it las merely a suggestion of a plan from the bankers and finally the suggestion
was amended co that it read that the loan ras to be arranged by or through the
Bank of England or other British Banks.
I redrafted letter of- barkers—ornally addressed to me--so thht it read
addressed to Wrburg

myself as a sub-camm. of Reserve Board,also drafted a let-

ter from Warburg & myself to Secy. transmng the banker's letter to the Secy.
rith an approval of the principlt:of the plan,stating that we 'were authorized
bY Reserve Bo.
,rd thus to transmit it.

The Secy. pronised Sir George

to send

him a letter of approval tomorrow.
4.45 called meeting of Reserve Board rhich authorized us so to forward letter
to Secy.
At Sir George's suggestion,the bankerls letter t.o warburg & myself was slight,
amended by adding clause that the suggestion vas merely a tentative one & mak.
ing it clear-7-as ras thf: f6„ct4-that it came from the bankers fc, was not suggeste
••••

by Sir George'
Warburg called up Stropc. and dictated the letter which the bang
kers Comm. ran to send us.
November 13 Fridny.

Fixed discount rates. Williams wanted all districts fixed

at 65 and I rather agreed rith him as a purely teworary matter.

After long dis.

cussion horever,the conclusion vas reached that rates should be higher in districts rhere money

OT

rather credit 771.S needed.

We fixed rate of 515 for 30 days

or less at. N.Y. & Phila.and 6% for others, at 6% flat for Boston,Cleveland,
Chicago etc. and 6 and 6-1 for San Francisco,St. L uis 2Dallas;ffinn. Richmond,
Atlanta etc.

We decided to give Boston,Cleveland & Chicago 51 for 30 days or

lesn P.: telephoned them but they said they did not 7
- ant it.
rov.14 Saturday.
stroighte

Decided to put Richmond dorn to 6% clasf3 also St. Luuis--

Finally announced rates.

Boston.
for 30 days or le--. 6%



orS

74.

Phila. 5;1, for 30 days or less. 65 for others.
Cleveland

6% straight.

Kansas City

6% &

San Frrn. ”flumunufluu
Minn.

II II II II II II II II 11 tl II II 11

Dallas

11 11 11 II II II 11 11 II II 11 11 II

Richmond

6% straight.

Atlanta.

6% &

Chicago,

6% straight.

St. Louis. unnunnflunn.
Festus Wade mired us asking for very low rates to be increased later—az I renvmber he ranted as low as 3%.

Te all thought this foolish as it vould quickly

drain every cent from the southern banks and no funds would go there.
Originally Kansas City ranted 7% but mhen Warburg telephoned,Gov. Savyer
said he didnot want to be out of line with rest of country and asked for 6%.
Atlanta originally asked for 5% but explained this was on theory Govt. would
deposit large sums mith it tand later said if no such guaranty could be given it
wanted 6%.

San Francisco originally asked for 51% and 65.

7I felt that while

this would be all right for San Fl-ancisco tit would not do for the 7hole vast
district and that 6 .S-

vas more rise at least in first instance.

The report

as put out vas unanimous,
Yovember 17. Tuesday.

Cotton loan fund of 100 million dollars completed today,

We had much trouble mith the Boston banks.

Harding & I went to Boston & met

the Clcaring Wduse comm. (see scrap book); they said they would approve subscription cf 5 million—we had asked ten--if I rculd secure opinion from Atty. Gen.
altho later Beal intimated that even then they might not do it unless their
counsel HUtchirsmm said it ras not in violation of anti T.T.ust law.

I went

back and the President asked opinion of Atty. Gen. who said it did not violate
such laws.

Meantime Hutchins had i;iven an opinion that the question was doubt-

ful and that any director voting to subscribe incurred risk of indictment
by a
future administration.



Hutchins alsS -Jort to Phila. and secured opinion of John G. Johnson,

75.
The

complete opinion 1:es not published--only the latter part advising against such
subscription .
Me

DwInnell--Vioe-Fres. of 1st. tlational lank of Boston—told

that Johnson held that the anti-Trust laws were not violated.
The Secy. invited.a nutber of Boston bank Ftesidents to meet him in Washing-

ton ,Friday rbv. 13--but all regretted for one reason or another except Amory
Eliot of 'Webster J1 Atlas who came on (c% later subscribed to fund.
Gaston told me in confidence that Stockton of Old Colony Trust Co. defeated
the motion to subscribe--it was defeated by onc vote.

Gordon Abbott came down

Etiarday, Nov, 14 and said Stockton (or his father Howard Stockton or both)
also
voted agninst it in the Merchants Tational (Hazard Stockton is a mill Treasurer)
Gs,ston also said that the cotton Mmfts. were fighting the fund as they felt
it would raise price of cotton they had to buy. Col. Higginson wrote to sane
effect to Secy. rcAdoo.

Dwinnell told me that the Stocktone,Yr Duuaine and Yr

Prendergast and also Kidder,Peabody J- Co. fought it bitterly.
Nov. 17--Tues,lay

Grilled up Stockton & Thayer and asked them if they could

not vote to invest in ;500.000 class A. certific.e.,tos without joining the agreement.

They said they would take this up.

Stockton was somewhat angry at statements thnt Boston wanted the gold pool
for its own benefit but was unwilling to help South as to cotton;said Boston
did not want or need the gold poel,--that the banks gave their share --7 millione
--very reluctantly ; he even intimnted thst statement given at the banker's Con.
vention that Boston had 35 millions of gold obligations—was not true.
Nov.

dnesday.

I wrote Stockton a letter quoting Beal,President of Clear-

ing House associnfion,strongly urging necessity of gold pool—saying the whole
Clearing House Conm. concurred. (See letter to him)
Stockton & Thn.yer both wired they could not subscribe.

Stockton said in

telegram that he reuld not even put it to a vote as their policy was
never to
put to a vote any matter av,inst which there was
strong opposition. (I)
Am
disgusted with the Boston banks and am satisfied their refusal
to come in was
due to-Vanger at indictment of Yew Haven directors.



76.
2/
4 Republican politics.
3/ Influence of cotton mnfts. who hoped etill furthe
r to deprees cotton.
V That question of anti-Trust la= was merely a subterfuge.
Nov. 20--F;idays

Sir George Paish called on Secy. mhe aeked me to be present.

Last week the Secy. told the Beeerve Board that the Biitis
h Govt. had told Sir
George thet it vas so busy it could not answer
the suggestions of the Bankerls
Convention for some daye; the Secy. added that financial matter
s had so far in.proved that he felt it would not be harmful if the
whole matter were dropped.
He asked Warburgprhe vas going te
Y.Y. to aek the bankers Conventien,if they
agreed to this,to rmke this suggeetion mhich the Secy.
would give to Sir (ieorge.
Sir corge p at this interview—Friday—said he
had heard nething from the
British Govt. but it was not surprising considering the matter
s on their hands
euch as the War loan,double income tax etc.
Secy. McAgoo eaid he lene in no
hurry as Sir George could confer with me vhilc
he was amay at Jekyll Ieland
and it

177a$

zo arranged.

MT Cooke of State Dept. called and said Dept.
wee besieged with requests to
know status of Rererve Board. I advise
d him to tell Asst. Secy. Thillips to
take rmtter up 71th Secy. UcAdoo.
He said the State Dtipt. felt nositively
that our Board outranked Aest. Secretaries
clearly outranked all Commissions.
He said further they thought the Gov.
should come next after the Solicitor Gen.
—outranking Rear Admirels. Later I talked it over 71th
Secy. licAdoe; I said
he vas clearly wrong in stating some days
or weeke aco tht Compt.
S utranked the Renerve Board as the Federa
l Reterve Ac;t--so far as related to
Federal Reserve notes,suits for violat
ion of Act !-te. put the compt. as much
under Reserve Board as under the Secy.
of the Treasury. He seemed to agree
with this.
T also advised him to euggest to President to "be
lmry liberal
in fixthg stetue of the 71oerd ac many of
them felt humated and tliPt it 77ould
br! easier for us to insirt upon the
legal lie:Itations of the Board in many mat.
ters sure to arise if personally the Presid
ent gave them a high statue. I told
him Cooke said the State De5t. felt
they were clearly above Asst. Secys. He said
Atty. Gen. was about to rule that
the Boerd vas an independent Board L. that it w



77.
would be easier toarule they outranked Asst. Secys. if they were a branch of
the Treasury Dept.

He further said if they outranked Asst. Secys. this could

not apply to Williams the Comptroller.

This seemed to trouble hira very much.

He said the President would probably be annoyed to have the matte
r brouaht be.
fore him but I pointed out that whatever their status was
it should be fixed
once for all and he agreed to this. I told him also
what Cooke caid as to sta.
tus of GOT. He said clearly the Gov. outranked
other members of the Board but
if he were put clenr above them it 7,qDuld seem anomalous
e.g on Yew Years day
to have the Gov. from rest of Board and he
thought the whole Board should have
sane status.
/
!TOT'. 29--Sunday.
Interview 7ith Tunuity in regard to 7dthdrawal of President'
(from ceremonies connected rith the dedication of a tablet on the Octagon house:
He spoke also of Reserve Board ,7-: rumour of a split
& resignations;said this woul6
_
ruin the D mocratic ;arty as the
menbers or at least "Warburg & D'%ano were big
e
46

men and the people right side ,Tith them.

I told him there were and would be

divons but I felt I coula keep the Board
together provided they did not feel
humilimted ec I told him of their desir
e to have their status fixed. He snid
President 7as disgusted ,-Ith four of
them & would like to remove thPm;that he
said "they want their status fixed
? relltI rill stntus them"!
I explained
to Tumulty
it night originally have been their socinl
statuslas President
thought,but that was not
eScndton now; that they felt they were part of thr
army under lead of President &
that he should let them know whether they were
fighting as privates in the ranks or as
officers; that there were many questionn
ahead on which they could give great
trouble--that they felt they had grent
powers--fai grenter than I believed they
had--and that it would be far easier
to induce them to accept reasonmble
limitations of power if the President showed
thnt he had m high apnreciation of
their stmtus,but that if he humiliated them
by e.g. putting them below Asst.
Secys.--it rould certainly make them more tenacious as to their extensive
powers tand that if these powers were what they
claired,they would be as powerful
as the President himself.
He agreed with
me Pc said he would get the
President to tell Asst. Sec. Phillips
to take no



78.
action in the natter of status until he could see him; also said Presi
dent
should invite them to lunch & pay some attention to then.
Yov. 3O-.-Monday.

Dined with Asst. Sec. Roosevelt.

British Ambassador there;

asked me if I thought it absolutely necessary
for British Govt. to reply immediately to our proposals through Sir George Peish.

Knoring Secy. McAdoo's atti-

tude--explained to Reserve Board--thnt he would be
glad to have all negotiations
lapse--1 told him that speaking personally nnd
entirely unofficially,' saw no
reason for urgency in view of the great improvemen
t in our export trade.
Dec. A. Williams,Conpt. & 7n1la
ce came in--I think this was the day--to speak
of Fertin, Secy. McAdoo's son-in-law. They
had a telegram from Peabody,Govt.
director of Senttle,saying directors had voted
not to employ Mnrtin.
7)as very indignant & Tellace had a teleg
ram he proposed to send Peabody telling
him he it fix the matter,--I said this
would not do & that it might embarrass
the Reserve Board,3ecy. McAdoo & the President.
'Williams said even ifit became
Public it could embarrass nobod y as
Yartin was the best man for the pince etc‘?)
I said it would put in the
directors hands a weagon they could use against us
and the matter should. now '‘c dropp
ed. Dent know what they finally did but fear
Williams zill make some break.
Dec. 5--S- turday.

Called on Asst. Secy. Phillips at his request to talk over

status of Reserve Boerd.
serve Board

7,77'S

He said State Dept. had reached conclusion that Re-

inferior in status to Asst. Secy'

he:-$3acq.utd tie n list in

which the order was Asst. Seeys.--Secys.
of I4'Ition--Reserve Board C., asked me
my opinion s —I said I felt th-t Reser
ve Board outranked Asst. Secys. as the
Board had on it the Secy. of the Treasury

had broad independent powers--thet

Asst. 3ecys. had no power except under
orders of the Secy.
differed from Interstate Commerce Con-Assion
Treasury vas on it.

He asked hoz Board

I said by fact that Secy. of

He said the President must settle it.

I then called on

Tumulty on another natter and. told
hin,also told lain the State Dept. had dropped him do= 0 or 10 :umbers-as
Phillips told mc. He was furious & said no
Republican Asst. Secy. should fix his
status--he was also emphatic that we out.
ranked Asst. Secys.




Ttis evening dined with

r-LF

Lee.

Phillips ras there and again spoke P)*me

rind asked about my opinionI sayirg he had sent letter to President.

I rliterated

my oninion andsaid the lenst thnt eould be done rould be to make Asst. Sgeys.
and Reserve Board co-ordinnte in rank p ench to outrerk Secys. of Legation.

He

rt once rgreed to this and said it was a happy solution and he would 7tite thc
Ptesident.

I advined

Konday.

mato

snld I would take it up with Secy. McAdoo.

Secy.
, McAdoo returned from South.

Bonrd & I told hin all the facts.

Asked me alout status of

To my surprise I found him suggesting ail

manner of difficulties rs to giving status to Board ahead of Asst. Secys.
He saw smite difficulties to making them of equal
rank.

He kept saying that

these difficulties were suggested by the President—the,t he Md nothing
to do
with it—that he would be
personally etc.etc. It 7;as perfectly svident thrt

ei_id not '.-prnt
showe

77(r.,. 4 to he,ve

71e a. letter from 7-1serve agent Perrin c=plaining rhy
Director

turned do= Ya.rtin.

Said the only

5.000 job mas cashier (1 that Martin adnitted

he could not properly fulfil such duties;that Martin
was affected rith tubercu.
loeis &; there 7as great prejudice on Pacc coast to such
invalids etc.
Dec.
to Tan. 1. 1015. Too busy to mtitc in diary.
Had several conferences with Asst.
Secy. Phillips--once rith Secy. McAdoo:at
7ihich Secy. IT.8Adoo kept speakirr, of the difficul
ties of making Reserve Board
r7mk ahead of Aset. Secys. and of course Mt
Phillips agreed rith him. I told
them both frankly t7rint I did not cart n
straw IS
the natter but thnt 22:7 associates felt very keenly about it and
severel had said they never would hn.ve
accepteI membership on the Board
if they thought their relative poson
to
be on a par with Asst. Secys.--thrt it -would
interfere mith their duties to put
them in such a relatively lor poson
, especially the rank originally eugges.
ted to the President by Phillips—to put Asst.
Secys. ahead of foreizn
and Legations and to nut th,!! 7Rt!ntrvt. Board
behind them.
I added thrt in my
opinion the Reserve Boa,rd outranked
Asst. Secys. from the very nature of the
great porers Granted to them by
Congress,while Asst. Secys. had no porer mhateoever except to carry out the
orders of the Secy. and from the further feet




that the Board was absolutely independent p ae ruled by the Atty. Gen• in
so f55
.
am its princinnl dutien were concerned.

Secy. rcAdoo then expressed doubts as

to the other Conmissions—the Interstate Comrlerce, Civil Servic etc.
e

I said

the Reserve Board differed from. a Cormission--a/ It has on it a
Cabinet officer__
b/ It is independent-0d/ Thnre is no appeel from its decisions.
Secy

I begged the

to talk with the members but he did not -art to and fincally sugges
ted

that Phillips had better do this.
it infornnlly asked Delano and

Finally I brought natter before the Board and
Iler to see Phillips later.

Subsequently

Phillins told me he had had a talk with both and that Miller
was very bitter.
I told Phillips that it vas a far reaching matter
tthat the members were big
men and had taken office—many at great personal sacrif
ice
that to make then
feel humiliated would impair their work and useftlIness.
He seemed very much
disturbed and said "you know the President has 1ready decide
d the question".
I did not know this nor haw he had decide
d it and did not nsk. He added,"
"Hoirmver he will undoubtedly change bf the State Dcpt.
asks him and we nust
satisfy the Board and I will recommend thrtt the Board be
given a status above
Asst. Secys."

Have nctL• heard from the netter since except that we gave a

dinner Monday,Jany.11 at which Harding & Asst. Secy. Malbur
n were present; I
asked Cooke of the Strte Dept. how to scat them and sent him
a diagram putting
Valburn ahead of Harding.

He wrote

P.

letter saying that he had changed the list

putting Harding ahead of M7lburn.
1915.

ijny. l.

Secretary Lane told me at my house Yev Yeats day that Secy.

McAdoo was disturbed about the Atty. Gen.'s opinion that
our Board was independent of the Treasury.

Secy. Lane also told Mrs Miller that it was absurd not to

put the Reserve BonTd ahead of Asst. Secys. & Mrs /Tiller
told Bertie.

At a din.

ner Jelly. 13 at Secy. Burlesonts—he told Bnrtie we were c7tarl
y ahead of Asst.
S cys.

Atty. Gen. Gregory in the latter rert of December told me over the tele,

phone that he had no clifficulty in cinciding that
we were independent of the
Treasury but that his opinion had been "hold
up" for a long time—adding that
"I would understand"—meaning that Secy.
MAdoo had held it up.
Jany. l5
or the last month we have been prepar
ing regulations on Acceptances




81.
undr r_octio1-1 1Z
latall of

hich

distinct.

14 of l'ederl 7.eserve Act.

rburg has prepared =ny drafts

e 'eas mixed up 13 :1 14 and I have insisted on their being kept

3ec. 13 hrs to do with closed market operations while Sec. 14

entitled open na.rkeli operations.
to member banks to accept 1-::.port

is

To my mind Sec. 13 merely gave the privilege
export 'Dills while -.7b.rburg claims --our

Counsel Elliott agreeing with him--that "Acceptances" in Sec. 13 means the same
as "bankers acceptances" in Sec. 14.

Such an interpretation would enpble the

Federrl Reserve banks to discount when indorlicd by a member bank—acceptances
of State bankso T,.ust Cos. and as well as of private bankers.

I do not believe

Congress intended to give any such privilege to State banks and private bankers
44

under Sec. 13.

The p.n. ..ct as passed by H.R. in express words limited such

discount of acceptances to acceptances of member banks when indorsed by at least
one member bank.

The Senate in various drafts of amendmente retained these

words until the Owen modified amendnents of Dec. 1 which were adopted firrlly by
the S nate.

The Owen draft struck out the words of "member banks" leaving the

power in 7eder-1 7 0!..cerve banks to discount "acceptances " generally.

I thought

this was done merely because it was unnecessary to repent the words member barks,
at it -Tas plain that this

70S

the intent of Congress.

I called up Senator Owen

who said while not clear in his recollectiont yet he thowiht he intended to broaden the word.

Even

if

true,' think the word is plainly limited to member banks

and 'Allis thveoughly agrees to this E: regards the distinction as vital.
To ply mind Sec. 14thl o„)..!n -1,
1rket powert—is much broader than Sec. 13 and
extends to all vcce„)tancen o not being limited to inports

exports.

On the other

hand Elliott thinks the power to purchnse acceptances under Sec. 14 is also
to importssr'z exports.

To my mind these open market powers were given--

net to encourage the finnncing by American banks of the inport trade (this
7;as
ane by Sec. 13 giving member b?nks power to accept such transacti
ons) but merely
to give Pederni Reserve banks a right to establiih a livid
secondary reserve
at tines when there War5 no demand for rediscounts of cornercia
l paper and also
the right to protect its netior in raisin: or lowering
the rate of discount to




1

;,rotect the cold reserve by buying or -elling in open r-,rket in conpetition
with -Ienber and all other brirks so as to irfl-te or cortrnct credits.
Warburg contends thnt Sec. 14 as

Cf.!'c. 1- ;:ns irtene - d to ercoursge the

financing of import transPctions--a very narrow view.
difference doer it make T

The question ,lay be asked

The answer is,on my view Sec. 1/1 reintes only

to extrnordinrry powers to be used only when actunlly necessary for the protection of the Federal Reserve
to V;/nrburgto vier Sec. 13

systn- urder stringent regulations,bile according
gives pow-r to Federnl Reserve b*nks to discount

St-tn b2nk acceptances ard rriv-te b-nkcrs Pcceptnrcee,
To r: nind,nverytbir
part o

under Sec. 13 must be do-1ns

as

n

r1r;Varr 02Crr'41 i0114)

- 1ntt-r of riaht on the

4-1 o-e benefitted,e.g. State banks x individyal bankers as well as

Member bnrke (if 13 covers this) while Sec. 14 is simply an authority to do
certain things when beneficial to the Federrl Reserve systerl.
.
In other words urder7Prburgts theory it is our duLy to invest a certPin
portion of our resources in acceptances of Stnt- tanks and private bPnkse
agree thn

such is our duty as to all property covered by Sec.

I

Yember

bank -ccert-flcce, but Vint n11 otlier nece-Itnncer 1--fle.,t be governed by one concer,tion of the needs of thf: Federal Reserve Syste7n 6

In n.ctu- 77, Ir-cticrburgls

tlieory ni7ht result in a very large prorortion of our assets beihz corstn,ntly
i=cotec: in acceptance

of brks or private bankers outside the system,resultinc

in inability of the banks to help other Pedern1 Reserve banks by rediscounting
oper- tions.

Originally 7-rburg confined all authority to rake such purchases

to acceptances

an indorsed. by Herber 7)-,nlcs which

at

least has

,iving the direct benefit of the op-r?tions to such banks.

lerit of

Gov. 3tronz objec-

ted vicorouiay to thIi

ind. Tarburg ,eccordingly chnnged his views and tried to
)AA \
give oil :drivileges without any limitation to member bank indorsements altho
the 2deral Advisory Council officially told us they should be so linited6
I also insisted a unit sholld he set to the amount which a Iledern1
Reserve
bank should so invest and 7nrburg fought this bitterly as also my proposition
of Its net amounts of any private hankers or hank thus -iccon-lodated.




Pinr.11y - rePrrpnged or rpther W_rrburg drw

drrrt of rrrulntion72 urder Sec.

14 chiefly but including also Sec. 17 2hich avoided the broad construction or
acceptances which he contendnd for under

oeC4

17-1 finPlly after consultr.tion

with 7i1lit--agreed to accept this as a compromise,there being inserted a
statement that the spirit of the Law limited such trnnsactions to acceptances
of menber Inks or indorsements by menber barks.

1

insisted however on the

other limitations mentioned (above.
This A.M. received a -letter from Senator Owen enclosing a telegram fror.
Jacob Schiff protesting against Federal Reserve banks discounting acceptances
of banks and bankers for the assistance of the Russian Govt.
thought we could not interfere;

Secy. McAdoo

I took the contrary view and told him we could

not under the Act buy foreign Govt0 rotes or bonds or diScoutt a rote of a
foreign Govt0 and

vie

ought not to

or inclined to the opposite view.

0.0

:
the same thing indirectly. Delano tool.

Pinally We allagreed- to 7rite Owen thrt 710

regulationjauthorizing acceptances 111,7n yet 'been issued and t1.7,t we would carfully consider the .
.,Ichiff telegrm.




410..

ao.

-

I