Full text of Charles S. Hamlin Papers : Writings -- "Memoranda Concerning the Federal Reserve Board...," Diary Vol. 3, 17 Jan. 1915-30 Aug. 1916 (pp. 180-223)(5 of 19), Box 357, Folder 1

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The Papers of Charles Hamlin (mss24661)
357 01 001-




Hamlin, Charles S., Miscellany, Writings,"Memoranda Concerning The
Federal Research Board...," Diary Vol. 3, 17 Jan. 1915 — 30 Aug. 1916(PP.
190-223)(5 of 19)




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180
Friday. t'eby. 25.

Board voted to transfer southern part of Louisiana
now in

Dallas district

Atlanta district.

Williams & I voted ro and asked to have

votes recorded.

Am satisfied it was merely an attempt of Bra
nch Bank of N.Orlean
to secure more capital & territ
ory in order to help Y. Orleans clearinfr house
banks who had agreed to be respon
sible for expenses of the branch bank. Parding
put it on the ground that the
rice and suaar district belonged to N. Orlean
s.
Board also took up Connectic
ut petition. Warburg moved to grant whole petiti
on
& -larding seconded. Delano
said oriaiballv indisposed to P:rant it but Pet
itioners had convinced him. They all
took around that due regard in the la17, meant
absolute regard—i.e. that
is that country can only be divided into dis
tricts
along lines of present husine
ss--an absurditY. Finally Miller mnved to
postpone
whole matter until check cle
arance question settled. Finally postponed act
ion
until next Tuesday. Compt.
Williams told me that Pres. jilson wanted
Lrs
brother Ex Bolling made F.R
.Agent of Richmond. His nane had been pre
sented by
Ex Wilcox,Pres. of a Bal
timore Bank. ?Luestion was raised whethe
r he had been for
2 years a resident of Virginia
& Elliott is preparing an opinion
on this. Willis
or Williams told me thR
t riller,Delano & Warburg had said the
y would vote against
him & larding had said thi
s would leave decision to him & he did
not want to be
put in this position.
rondaY. FebY. 28.

SecY. McAdoo came into mv office after lun
ch.

Liaid Pres. Wilson woyld be pleased if
Bolling could be made F.R.Agent but
did not wish to am.
barrass the Board. All he
ranted was that if fit for the position,
the mere fact
that he was his brother-i
n-law should not militate against
him. Secy. 11. said he
had asked for an opinion
of Elliott whether Bolling vas a res
ident of Va. within
the Statute. I told him I
should consider the matter solely from
point of fitness
and if fit,I should vot
e for him.
February 29. Tuesday.

Took up Connecticut Petition.

I introduced lona resolution shoming effect of
transfer upon N.Y.—increasing wit
h the r. Jersey addition
the N.Y. capital 17% and
injuring N.Engla,nd. Miller aga
in said postponement shoul.,
be had to awaitAngitrig
developments.
tfarding r.ead long report favorinP




entire demnds of Petitioners.

I answered Harding--said we ought to await rIal.

result of clearing—that Congressman Hill said to me this A.11. that further petitions would be filed by banks east of Conn.. b, also by Providence,R.I. barks.
I also said that,while I would not suggest it,if a motion vere made to put Fairfield Co. in N.Y.—including Norwalk snd Bridgeport,I would not oppose it as it
might fairly be claimed that thie county was almost a part of greater N.Y.
Fihally Delano said he would move this as a fair adjustment,pendinc further development of clearing system.

Ve then voted as follows.

1. Lotion to grant postponement of vhole matter pending clearing developments__
Aye; riller t'Alliams,amlin.

No. Delano,Warburg,Harding.

Lost.

2. Motion to transfer Fairfield Co. & to deny rest of Petition,reeeiving right
to review it later when clearing system developed.
Aye; hiller,Delano,Willians,Hamlin.

Itlarding

No; Warburgardirr.

then said he would give his report to the Press; I said I should then

give out an answer.

Eiller said he wnuld in that event,give out an ansver

should say that centralization of credit should not further be carried
out by in.
creasing power of N.Y. except after clearest demonstration that it was absolutel
necessary.

I said thst I should be obliged to go much farther than my resolutiol

in that event and that the disclosure of a division in the Board
would result in
a charge that certain members were reactionaries—whet
her true or not--and were
trying to centralize everything in N.Y.

4arburg then whispered something to

& he seemed to be less eager to publish his report.

Finally it vas ag-

reed to grant peti:Tion as to Fairfield Co. and suspend as to balance until
clear.
ing system developed.

Vote;
Aye. Delano,Eiller,'Alliams,Hamlin.
Nb;

arburgdlarding.

Later in P.L. Congressman Hill called
me on telephone,said the decision might
injure him politically but he could
stsnd that;asked me to vrite dhipple,N.Haven
that he had not suggested turning over '4'airfield Co. alone.

I said this was tru

but if I did it,Whipple would think
he vas responsible for it. He said this was
true & asked me not to do it. He
seemed pleased with the result.




TuesdPylFebruary 29.

182,
opposed
At meeting today Delano at first appumaft Postponement

of part of Comm. petition to await clearings as it would give me an tnducement
to postpone clearings in order to block petition.
he really meant it.

While he tr,
.ated it as a joke,

I quietlY said I was sorry he had such an opinion of me--

that I had always been one of the most enthusiastic members in faror of clearings
I f I had said such a thing to Delano the would have been crazy with rage.

He has

no regard for the feelings of others.
Thursday,March 2.
to A2.000.

Voted to increase Gov. Seay's salary ,Richmond,from q0.000

Directors recommended .15.000.

Harding got very angry at Willjams'

opposition, said if office of Gov. were properly

compensated,he would look some-

what differently upon kind of man needed for F.R.Agent; tht it 911 depended on
having a good man as Gov. & proDday compensated.
unanimously to increase Seay's salary.

Secy.

came down & we voted

We all realized Seay's defects but the

office clParly deserved :)12.000 considering success of the bank and,as wellother
salaries paid to other Gov.%
Londay,Liprch 6.

Prepared a review of matter or Compt. Jilliams' salary

Board to pay it--see memo. chn file.

advised

After sme discussion all agreed it was a

legal claim except Delano who thought it a legal sophistry.

riller suggested

that we prepare a resolution stating that we d[aould vote to pay it because Compt.
of Treasury and our Counsel Elliott & Cotton said it was a legal claim which shoul(
be paid.

This was agreed to and on motion of

ano who voted against it.

all voted for it except Del-

He said my memo. stated the case fairly and was very

convincing but that he had "got in stb deep" that he felt he must vote against
it.
Harding took up question of increase of Elliottts salary. Delano
moved to increase it to P.000 on April 1,provided the arrangement with Comptroller as
to
Elliott acting as counsel for Compt. & Board on matters in commnn worked out sat(he)sic
isfactorily. Miler became verv indigrnant & said(it)was a bargain & even intimatl:
a corrupt bargain & said he should file a memn. showing up
whole matter,that it w
was a "fudge".

Harding became very indignant & told riller the decalogue was as

potent in the South as on Pacific coast—that this
vas not the first time Liller




183.
had implied bad faith on part of his colleague
s--that he did not intend to
rest silent under such an int
imation. Niller then in effect apologized. Mea
nwhile Williams asked him what
he meant by "fudae"--I suggested valLask our
counsel
to define it & we all laughed.
I then said Elliott's salary should belincre
ased
to A0.000 on the merits who
lly apart from any understanding with the Com
pt. but
I recognized that P.0
00 was as hiah as my associates were
now ready to go.
I therefore moved to make
it )9.000 from April 1 and all voted
for tb5s except
Miller who voted against it.
The Connecticrt Petition was then taken
up by
Harding who moved to advise
Petitioners that no action would be taken unt
il return of McAdoo & Warbur
g but that matter would be settled not later
than June 15.
I agreed to this as I
said if clearinas werP not in force by tha
t time,I should
despair of their ever bei
ng in force. I said we ought to study the
evidence before Reserve 4ank Organizat
ion Comra. & that the question was squarely
on issue
there,almost every witness
being asked as to Western Conn. by Secy. McA
doo. I
agreed howeverythat a final
vote could be taken not later than June 15,alt
ho I
did not commit myself as
to how I should vote. I asked authority
to take up
with Congressman Hilly -the
attitude of eastern Conn. as if it were made
clear that
they were content vrith
Bostonyit would make it easier for me to
let Western Conn.
go if I found that it suf
fered injury under the F.R.Act,which howeve
r I believed
it would not. I also poi
nted out that 10 out of 21 banks in West
ern:brass. voted
to go to 1T.Y. "arding
said he never would vote to assian any
part of Uass. to
U.Y. or to assign Eastern Con
n. -/arbura said he would agree also neve
r to vote
for either and especiall
Y he would never put the N.Y. line farthe
r east than the
Connecticut river. The
matter of the P.R.",gent at Richmond was tak
en up in the
afternoon. Harding as one
of Richmond Comm. stated that he was com
mitted to a Ur
Hardy wham he and Willia
ms had had before them. He referr
ed to a talk over telephone which he and Wil
liams had had rith Hardy in which Hard
ing said that while h
should recommend him &
thought
would get a majority of the Board,that
several
very influential mmbers
were for some one else & under
the circumstances he assumed he would not care
to have his name presentedybut
that Hardy insisted upon




his name being presented.
Delano seconded it.

liarding---formally moved that he be elected and

lA4.

Eiller said he should vote for him & altho Warburg did not

expressly say so,it vas evident that he vas for him as he thought Hardy should
not be criticized for his insistence in the matter.

Williams said it vas clearl

explained toWardy that the Comm. had no authority to offer him the place but
later admitted that perhaps he had a right to assume that the Comm. would report
his name favorably to th- Bdard
per man.

Williams also admitted that iiardy was a

pro-

I said that I could not have been one of the "influential members"

opposed to'
lardy as I had never even heard his name mentioned until Williams
spoke to ine of itt on EondaY

Liarch 6; that I had carefully examined the list

of names & the indorsers ez Hardy vas not among them,to the best of my recollection; that I had reached the conclusion that both Olde & Bolling vere capable,
fit men for the Position,but tha,t Bolling ras the best fitted,especially because
of his experience at Panama managing the branch bank of the Commercial National
of "ashington.

That I had reached this conclusion wholly regardless of fact

thnt he happened to be the brother-in-law of the President; that he vas first
suggested by LI' Wilcox,Pres. of the 1st. National of Baltimore--a prominent Republicanland vas endorsed by the Baltimore Clearirw Association in a very strong
resolution as as the 'dashington Clearing house association and many banks in
fk
Washington,Va. Ed. & W.Va. Finally re agreed to postpone vote tntil tomorrow
when Secy. EcAdoo could be present.

I am satisfied this alleged commitment is a

device of "arding to avoid recommending Bolling.

In evening called up Secy.

EcAdoo--vho knew all that had happened--at first he said he wished to be recordec
vs Hardy,because of his telephone message,if dor nn nther reason.

Finally he

said he realized Hardy would be elected & that he should not attend meetino: but
let the majority do as they pleased.

He said he thought it better not to pro-

test as he wanted nothing in the record which would
even seem to embarrass him
in the future "when certain events might
take place" (meaning I presume,the removal of some member or members.) He
was very bftter--said
was a most deliberate affront
be forgotten.



an entirely unnecessary affront upon the Pres. which could not
We also took up Glass letter lsending us Smith bill
giving power

to

the Reserve

cqnks to buy commerciel notes in open market.

attacked this as did also Harding.
(3.: would jp

vote.

Delano also opposed it.

viarburrr bitterl

I said I was for it

Finally after lonq discussion,it vas referred to Comm. on law.

I shall press for a speedy report.
Tuesday. Larch 7.

APproved minutes as to vote to pay lilliams salary.

As dint

originnlly drew this,the vote said that whereas the Compt. has put in a claim
for salary etc.

I told Willis vote should read,whereas Compt.has raised question

of effective date of salary etc.
rection to the Bonrd.

corrected this and I explained the cor-

It was read tvice and approved unanimously.

Later in P.M.

Allis came in with a statement of the vote in writing,restoring the statement
that whereas the Compt. had put in a claim for salary etc.
not the vote as passed.

I told him this was

said Delano as chairman of Comm. on expenditures had

told him vote must reaa as above before payment could be made tand that he would
have to bring it up before Board at next meeting
.
4

took up this A.1.1.
. the question of appointment of F.R.Agent at Richmond.

Harding at last meeting moved the appointment of
:A0.000 and Delano seconded it.

ardy of Norfolk at salary of

Hiller moved to table whole question until Del-

ano C;c Harding returned from 'Jest; said he was not satisfied
that Hardy was the
best man
'
esPecially in view of the memo. of a telephonic talk between him & Williams & Harding vhidil had been presented to the Board and discuss
ed . Hiller said
he wanted more time to examine his qualifications.

Delano,?arding & warburg

were very indignant--said nothing in telephone memo. to indicat
e any disqualification.

Hi ller would not budge and I put the vote.

NO; Delanorburg & Harding.

Aye; Miller,-Alliams & C.S.H.

I expinined before voting,that I had fully expec-

ted to have matter settled this A,X.
as Delano,Eiller

tarburg & Harding had all

saq) yesterday they should vote for
Hardy; that in that event I should not have
voted at all as I had never heard of Hardy
until day before yesterday and felt that
the telephone memo. raised doubts in my
mind as to his fitness--that I should like
further time trb investigate; thdt inasmuch as Hiller
insisted on his motion I
felt obliged to vote for it. The
vote being 3to 3,I declared the motion lost.
After further discussion in
which Hiller reiterated his views,' put the vote
on



main question; Aye. Delano,Hardingrburg.

186.
Not voting; hiller,Alliams,C.S.H.

Before announcing vote,much discussion as to whether such
a vote constituted an
election. I said I was in doubt and would have to study the parliamentar quesy
tion.

Eiller then said if I was in doubt,he would vote Aye.

I said I certainly

was in doubt alad by request Put the vote again; Aye,Yiller,Delano,
Harding l Warburg. Not voting; /illiams,C.S.H.

I explained agiin mv reasons for not voting-

that I had not sufficient knowledge of Hardy,that I certai
nly could not vote for
him without further investigation and I would not vote agains
t him at that time
without possibly doing him an injustice.

I then declared la..rdy elected.

Eiller's change in vote shows his insincerity

he said he had doubts of lardyt

fitness and wanted more time,yet when the doubt showed
doubt of his election,
which if so ruled by chair would have given him the additi
onal time he wanted,he
proceeded to vote for him for fear I should not declar
e him elected.

I did not

refuse to vote in order to embarrass the election;
on the contrary,4 members had
said the day before--including Miller—that they would
vote for -iardy,and,assum.
ina that he would be elected,I had made up my
mind that I had not sufficient information to vote intelligently either Aye or No.
voting on motion to table.

This I fully explained beforw

The whole proneeding in my opinion was a device oil

Harding's part--concurred in by the other :3--to avoid passin
g on Bolling's name
whom they knew to be competent. (Edller,havina as usual cold
feet,tried cunningly
to avoid voting to save his face but he was forced to
show his hand and had to
vote

Aye altho a moment before he had said he was not satisfied
Hardy was a pro.

per man for the place.

His duplicity disgusts me; 4illiams on motion to table,

asked that matter be held up that Secy. 'McAdoo might vote.

I ruled however,that

as Secy. M. was at Cabinet meeting and had told
me to proceed with all business,
I could not hold up the meeting for
this purpose. At lunch,' telephoned Secy.M.
4
at .dhite House,where he was having lunch,and told
him all that had happened.

He

said I was exactly right in not holding up
meeting to enqble him to vote on motion to table. He was very indignant with
the 4 members and felt that sharp Drac.
tice had been resorted to to elect
HP,rdlr. Secy. EcAdoo & party left for Araentine.



1111111.111.1”
..m."
.
"

187.
Wednesday. Llarch 8.
Compt.'s salary.

Brought before Board l copy of resolution as to payment of

This had been put into a new shape followinir exact wording

of vote as passed by Board.

I stated to Board that no further action by it was
the
required and if no objections were then orfered,I should sign/voucher which I

:To

held in my hand.

one offered any objection and I thereupon signed voucher

and gave it to Willis.

Present;

C.S.H.

Thursday,Earch 9. Ilinutes of meeting appointinF F.R.Agent approved.

There was

added at my suggestion a statement that 'Alliams
& myself were not prepared to
vote either for or against Hardy on the limited time accorded ;7or inves
tigation
and—we refrained from votin
g.
Thursday. March 23.

At lunch given to Mills on his lepving for Philadelphia.

Harding said that he had written the British embar
go on cotton.

Uuaa- gyci:aaicdxzs.
Tuesday. April 4.

Kansas City Reserve Bank asked permission to raise certain

retes from 4(/'' to 45. Gave no reasons.

Delano & Harding favored.

ler & I opposed without reasons given,

Delano admitted had wired for reasons

but had 'hot received reply.

C.S.H. said he feared reason was to shut off dis-

counts in order to protect large investamnts in Govt.
bonds.
await telegram.

Williams,Mil-

hter in day telegram received.

Matter held up to

Said Reserve -bank rate was fron

li to 2/G: below rates at which paper was
placed 10V Reserve City Banks in Kansas
City district; increase would
not shut off rediscounts—would probably incrPase
them.

iarding said examination of Bank satisfied him that F.R.discou
nt rate vas

out of line with Interbamk rediscount rates
of Member banks;that puttinF up rates
would have no effect on Interbamk rates
or customers rates,but would give 15 .nk
a margin for future reduetions if
later it wanted e.g. to make lower rates effec.
tive. Later Delano brought in
proposed telep;ram saying Board was in doubt but
would permit increase tentativel
v,to be lowered in 2 or 3 weeks if circumstances
in opinion of Board justified
this. I said,basing my decision
ftardingts
statement,' would agree if Williams riould.
Williams however would not agree.
Delano walked home with me 'ec said execu
tive Comm. must decide it tomorrow.



oednesday. April 5.

Meeting Executive Comm.--C.S.H. Miller & Harding.

188.
Mier

said he firmly believed rates should be increased in all Reserve t'anks but did
not like reason

given by ll'ansas City Bank. :iarding got very mad--attacked

ler--said he & Warburg had noted his suspicion of and prejudice vs Banks in general and that he would publicly denounce him & would defend the Banks if this
conduct continued.

Said if he believed all rates should advance,he should per.

mit these rates to be advanced whether he liked the particular reasons given by
Kansas City or not.

Finally Miller agreed to vote favorably when Secy. Allen

said he had already told us that on order of Delano's Secy. he had already sent
the telegram.

This order ras given yesterday P.Y.
,

Thursday. April 6.

I stated to meeting that executive Comm. had voted to send

telegram to "ansas City and later found it had been sent already by Dglano's
order.

Delano made some equivocal remarks neither affirming or denying that he

had ordered telegram sent.

I am reluctantly forced to conclusion that Delano

deliberately concealed from me in walkina home last night,that he had ordered the
telegram sent; on the ray hom he had distinctly told me that the executive Comm
today must decide the question.

Allen this P.M. told me--what I had already

observed--that the printed form to 'pe put in papers to be circulated omitted
any reference to the Secy. of Treasury or Comptroller.

The matter had been

considered in Board som tIme ago & it ras deemed wise to put their names last
to avoid delay but no authority was given to omit their names,.

Allen also show-

ed me a draft of a new form for papers to be circulated omitting the Secy.-Compt. & also omitting my name.
Thursday. April 20.

I shall inquire as to this.

Board had informal conference with Comm. of Governors con-

sisting of Govers. Strong,Aiken t& Wold.

Strong Presented a memo. of proposed

agreement with Bank of England to act as the correspondent and Agent of 2.R. Ban:
of r.y. in purchasing foreign bills of exchange on /;) Sec. 14 of Act.

He ex.

plained that if we appointed a joint stock bemk,we could have no assurance
that
sums to credit of F.R.t'ank would be Paid in gold.as this would require
a guarant
from Bank of England which toaay absolutely controls England's gold supply,and
that--it would be better to appoint the Bank of England directly.



He said

189.
that in the fall there would be an enormous exportation of cotton,wheat and
especially oats; that throwing these Bills on the market would depress exchange
to the injury of our exporters: that in such a time lif the Reserve Banks could
buy exchange even in limited amounts vit 7ould stabilize it and the Bills could
be sent to Bank of England and as well to anv other foreign central Bank and
remain there when paid to our credit.

The Bank of England will allow us intere

at a rate a little below the ordinary bank rate v and also will ear mark the gold
agreeing to hold it ns our property.

On the other hand,as we cannot technicall

receive banking deposits from a foreign bank,we would take any gold from Bank
of England as ear marked gold just as we did the Netherlands deposit.

e said

he thought that Sec. 14 bv authorizing F.R.Banks to deal in goLd coin and bullion at home and abroad,clearlv authorized them to receive gold deposits repayable in gold,similar to te the gold ilational Banks at time of Civil lar.
He agreed that it might be better to have law amended to give us such power
directly altho many Nation& -5arks might opposex this.

fle said speculators in

exchange would not object to thus stabilizing exchange as it would be for their
benefit.

He said the Bank of England mem. was strictly limited to Bills of

-Axchange and would not authorize e.g.flosting a British loan in U.S.--payment
to be made to F.R.Banks.

Speaking of the Netherlands ear marked gold,he said

this enured to advnatage of (
'ermany as it was reported that the Netherlsnds
would or perhaps already hadobtained legislative authority to issue Lotes secured by deposits of gold with our F.R.Banks; thus the 'ietherlands could e.g.
buy German securities and pay for them without Dowsibility of interference
from Gt. Britain,

No copy of the mem. was left with the Boardpas Gov. Strong

said he wished to lay it before his Bank but he would send us a copy after the
Bank had condidered it.

The Board expressed no opinion but said when formally

presented to us it would then take it up.

Gov. Strong informally talked this

over with Delano and myself last Nonday at lunch at the Ntropolitan
Club.
He said the officials of Bank of England looked upon the F.R.Act as a monum.entall marvellous piece of legislation and that it
made possible for the first




190.
tim in history of future cooperation between England and all othe
r nations
& the U.S. which would ten
d to remove instability in foreign exchan
ge. Also
said the Bank of England off
icials thought it most important to secure
similar
agreement from Bank of France
,altho Bank of England could not be a par
ty to any
such agreement. Gov. S. said
he had also talked with officials of Bank
of Franc
and he thought they would
undoubtedly be glad to enter into a similar
agreement;
in fact that they had said
they rould,if such an arrangement were entere
d into,
be willing to accept F.R.Ba
nks as depositors of Bank of France.
Londay,Eay 8.
While talking over F.R.matters,Er EcA
doo asked me when my term
expired--I told him Aug. 10
and he said he thought it ras earlier but
if Aug.10
there was ample time to arr
ange for my reappointment. He said he wished
me re.
appointed and while he,of cou
rse,did not make the appointment,he felt cer
tain
it would be all right. He
added tht he knew of no one & had heard of
no candi.
date for the place. He also
said he had made up his mind to earnestly pre
ss upon the Pres. the absolute
necessity of redesignating me as Gov.--when
my new term
began--for at least another
two yearstaltho--as he said--this would bre
ak Warburg's heart. I told him I
enjoyed the work immensely and would be gla
d to be
reappointed--I added,that so
far as the Governorship went,all I could
claim was
that I was probably the most
evenly tempered of the appointed members.
He said
there was much more to it
than that; that I vas in all respects
the best fitted
man for the position,that I
possessed judicial fairness,tact,and abi
lity to
handle disputed questions
with absolute fairness.
Lay 16. Tuesday.

Gov. Strong had conference with Boa
rd on question of appointing
a foreign Agent or correspon
dent oforothe71Mlartk of N.Y.. 'dhile abr
oad he
had reached an informal und
erstanding with the Ba-k of England,binding
upon
neither party,that the Bilk
would act as Agent if desired and woul
d open an account with F.R.BPnk of Y.Y
. for itself & such other Reserve Ban
ks as cared to
join, that the Bank of Eng
land would guaranty payment of all for
eign bills bought
for us and would ear mark
the goldogreeing to ship us gol
d on balances,no mat.
ter whether a moratorium
e.g. micht be declared in future
or not. On other hand
F.R.B-nk similarly would
guaranty Bills bought for Ban
k of England and would ear



191.
mark its gold as a special deposit not bei
ng allowed under P.R.Act to open an
account at hone with a foreig
n Bank altho it could open such an account abr
oad.
Gov. S. pointed out that whe
n cotton begins to move,there will be a flood
of Bills on market which ril
l tend to deprAss exchanae still lower.
If F.R. B
were to buy exchange at such tim
es,it would stabilize it to f;reat gain
of our
exporters. The bought bills
would be sent abroad and placed to our cre
dit in
Bank of England and would off
set future claims on our gold. Gov. S.
said England could pay for our mun
itions exports only -a/ By sreding us
goods. b/ sending us our securitiest c/
using credits here now nearly exhausted
, d/ shipping
gold. Gov. S. said Dank of
171ngland would agree in a,dvance as
to price to be
charged for shipping gol
d so we would be fully protected
. Gov. S. said the Res.
erve Board must under
the Act,approve appointment of suc
h an Agent and--were
directly responsible.
He thought the question of Neutralit
y might be raised in
view of position of Ban
k of England as well as relati
on of Reserve -3anks to our
Govt. If other P.R.Ba
nks dont want to come in,the F.R
.Bank of N.Y. wishes to
make this arrangement
alone. Lord Cunliffe said Bank of
England had long wanted
to make some such arr
angement with U.S. banks but
could not discriminate between
banks but they felt now
they could make arrangemerq rit F.,
h
R,Bankp. Gov.S. said
f
t-et-e) Z-15,--4. -4 '
724 .&4
if P.R.Banks had been in ope
ration in Aug. 1914.he wouldvhave
gone th/ limit in
P
selling(Ithem to pull dow
n increasing rates of exchange v and
he added that this was
Warburgts opinion.
If exchange in the fall should
e.g. go down to 4.25 Gov.S.
said,the purchase of 40
or 50 millions would have gre
at effect in stabilizing.
Warb
urg said this amount
would be too too small in times
of great stringency.
Gov. S. said we could
not lose by this operation as
no matter how high exchanae
might go abroad or how
low here,re could always buy
back cold to our credit with
Bank of England at
prices fixed in advance and unchan
geable. Secy. UcAdoo said
no question of Neutralit
y involved as neither Bank
of England nor Reserve anks
were Govt. bamks--a
legitimate bankina transactinn,
purely and simply. Gov.
S.
said other Reserve
Barks should make formai con
tract with N.Y. tank: sharing bur
__dens as veil as priyil
eaes. Suppose no for
mal contract and that exchange ris
e.-other Reserve i?anks
might say re have
use for our gold and
N.Y.Bank must give up



41111111111r
1111111101111111111
.

its gold for export.

-4,..now
.---

This would be inequitable.

Gov. S. said

192.
eserve Board

could approve such a contract
and could enforce it. If it could not enforce it,
and gold lost by N.Y.Reserve l'an
k,other Reserve 'Ljanks might demand that N.Y.
rediscount with them to fil
l up their gold supplv—plIOnly unjust
. Secy.
Adoo said the whole propos
ition seemed vise to him and suggested tha
t Gov. S.
propose a formal agreement
among the Ileserve :banks for approval
of teserve Board.
He felt that it would be onl
y necessary for Reserve Board formally to
approve
the appointment of an agent
to be designated by Reserve '''anks,without
naming
any particular Bank.
''arburg asked how the rate
would be fixed,supposing Bank of Lngland were
to
offer us 10 millions of pap
er today and say 20 tomorrow. Gov. S. sai
d this would
be fixed by agreement—that
ve rould not be obliged to take any pap
er except at
rates agreed upon at time.
Werbura said he had suggested while in S.A
merica an
international gold fund to
be administered by foreign nations col
lecti vely,
so that in case e.g. of war
between two nations,the other trustee nat
ions could
administer it. It was
clearly stated that this vas merely an
informal talk,requiring no decision by Res
erve Board until matter formally pre
sented to it later,
and that informal expressio
ns of opinion were not to bind Board
in any degree.
Iiiay 18. Spokelankers Clu
b-_Cleveland.
Ilay 25. In Atlanta at Reserve Bank—
Spoke at lunch. May 26. Spo
ke Convention of Georgia Bankers
at Lacon.
Lay 31. - lednesday. Dr.
Liller announced thrit he should lea
ve next Tuesday on a
vacation not to return until
Sept. 1; an absence of 3 months.
He mver asked consent of Board—merely announ
ced his decision. The Vembers did
not enjoy this
very much. Dr. NI. said he
also approved our amendments to Sec
. 16 of Act (F.R. 3
issues); He said; He fav
ored issue of Notes vs gold or
vs part gold & part paper
Thought present indirect
method should be validated. oaid
he objected to prnvision that gold pledged wit
h Agent should excuse bank fro
m keeping vault reserve
pro tante. "arburg asked
him if he would not agree to thi
s as an emergency proposition—when voted e.g
. by 5 members. He said Not Tha
t he had no confidence in
the Reserve Board as at
Present constituted and that he
thouRht it would be unsafe




M.

MINM=MM91111111111111M
111111.1.1111111

to giye_them any such power.

193.
The ''embers merely smiled at this pronouncementl

Judge Uceoy issued permanent inju
nction vs Treasury in favor of Riggs 'ank.
June 1. Thursday. Conference with F.R.
Agents. In talking over subjects on
which the respectivp Banks should act
in cooperation,Dr. Miller gave a lona.
tedious harangue,taking position tbat
lianks should each fight for itself and
not cooperate. Delano got mad and said
any man with brains should be able to
see the difference between thinas
that are different: that Banks so far as ordinimg discounting goes,should
stand by themselvespbut as regards open market
operations,they should cooperate.
Compt. Williams F;aid Banks should not combine
e.g. to depress price of Govt
. bonds-2% s—which they rished to buy and increas
price of 3's (converted) rhich they
wish to sell.
Warburt_r took contrary view
& he and Williams had an alterction.
June
aturday. Secv. rcAdoo in talking over other matt
ers casually remarked
that there was a devil of a comm
otion as to rotation of office of Gov. a: ViceGov. of the Reserve Board. He
said he vas seriously thinkina of asking, Pres.
to redesignate me as Gov. but
to designate (
.3rding as Vice Gov. He asked me
what I thought. I said I thou
ght Delano would probably resipn. This did not
appear to worry him but he said
he did not for a =haute believe he would. He
asked me rhat I thought of the
whole situation and I said that,so far as I was
concerned,I thought only of the
good of the Board and if the Pres. thought it
advisable to designate another
after my present term expires,--I should understand it perfeetlY. ;e said—vho
would be the best man other than you? I said
I thought on the whole,Ha
rding would be and he said he felt so too. He seemed
_if
determined not to keep Delano as
Vice Gov. I saidttarding is madd Gov. and Del.
ano not kept as Vice Gov. 'aarb
urp should be made Vice Gov. I added,that Warburg
would I thought,be bitterly
disappointed if any change and he not be made
Gov.
He said that was true but
Warburg could not be designated Gov.--if
for no other
reason,because of his German
affiliations. On the other hand,he realized
that
much bitterness would
follow if any change were made.
said he thought the
Pres. should show that
it was his prerogative to make the
designation and that
he should redesignate me and make "ard
ing Vice Gov.



r

194.
I told him to pass over Delano before the elections,might caus trou
e
ble but he
did not agree to this.

He said it must be settled by August 10,when my term ex,

pired.

I said if Pres. determined that he ough
t to designate some one else as
Gov. but wished to wait until after elec
tions,I would gladly have him ask MB tO
be redesignated until he could dete
rmine what final action to take. He seemed
fixed in the idea that I should be rede
signated Gov.--said it was imperative
that only a tried man should hold
the position but tht he thought Harding would
be much pleased to be designated
as Vice GOT. and that it would be for best in,
terests of the Board to make the
change.
June 19. IlAnday. Interview
Delano & ?larding.
Uonday morning on mv return
from Nattapoisettpelano & liarding came into
my room and said they felt
it was only honorable to tell me ttrat they
had had
an interview with the Pres
ident last week on the subject of rotation
of the of.
fice of Gov; they begged me to
understand that there was nothing in this at all
personal to me; that quite
to the contrary,they had both stated to the Pres
ident
that in their opinion I shou
ld be reappointed to the Board. They said
the President listened to what they
had to say but said nothing. Delano gave
me a copy
of a letter he had sent to
the President asking an interview. (See scra
p book.)
This letter said this wasone
of the important matters on which the Boar
d wished,
or rather 4 members,to send
to Congress for an amendment,but that owin
g to the
Presidential election,they
had forborn sending any amendments exce
pt those vi.
tally necessary in the admi
nistration of the system etc,etc. (Ily comm
ent on the
letter is that it failed to
say there was nothing personal to me in
the matter
and that it would be a reas
onable presumption from reading it,that
there were
personal reasons growing out
of my administration of the office,which
prompted
it. For example,they well
know tht but for mv management of the matt
er othey
would have forced throughor
at any rate,promulgated a decision to cut
down the
Reserve Banks from 12 to 8 or
9.)
Delano added that they had
explained to the President that the ex,o
fficio
members were able to atte
nd only about 1/3 of the
meetings. Delano_seemed very



..1011111160.

195.
egotistical and bumptious—lie acted as if the whole matter was settled in advance.

He said rotation must come and then added--I am a candidate--meaning

for Gov.lhispat least,' understood him to say--I was not sbsolutely sure but
thought it best not to ask him to repeat it.

I told them,of course,there was

no reason why they should not go to the President and I understood fully there
were no personal reflections upon myself intended; that so far as I was concerne
I should give no -thought to the natter; tliPt whatever the Presidentfs decision,
I should accept it with unswerving lovnitv.

I neither favored nor opposed their

suggestions v in fact I did not reaa tile copy of Delano's letter until he had lef
when I read it and made a copy.
That afternoon,I saw Secv. EcAdoo and daowed him the letter.
not seen it nor did he know t

He said he had

had had an interview with the Presidentlas he

had not seen him for several days.

HP said last week they came to him and dis-

cussed the subject of rotation and rather complained that they had
not had an
opportunity of discussing the matter with the President & he said
why dont You
t

see him ?

He seemed very adverse to even considering designatinp any one of

them and seemed indignant at the tone of the letter.

I told him not to think

of me but to do what was best for the system. He said
he would never stand for
if
Delano as Gov. I told him I thougilt/Pny change were made it
would be better
to designate Delano as I feared,being Vice Gov. if he
vere not promoted,he would
be verY angry and resign.

He said he wished he would and others too.

Finally

I suggested not to talk with me on the matter
again,that he and I had been good
friends—az he had often proved--and that whatever decisio
n was reached,I would
loyally accept as the best thing for the F.R.System.

I then told Williams:—

he uas very indignant r; said it vas prepost
erous to designate any one else & he
should say so to the SecY.;

Left 7 P.11. for nendersonville.

June 20. Reached ftendersonville
5.30 P.M.
June 21.

Spoke at Convention of S. earolina bankers--had
great reception. Left

there at
Bank.

Went by auto. to Kanuga Lake,6 miles.

poz.

Had lonp talk with Thralls—former cashier of Kansas City
F.R.

Am satisfied we did not treat him
fairly.




He said taller dominated—he

tried to promote efficiency but was finally told bv a friend thPt if he did
not do everything Miler wanted,he would be discharged; that Eiller was jealous
of him & that he put in office incompetent men because they were of his religiou
faith—Catholic es I learned afterwards.
came to him--to Eiller's disgust.

e said all people coming to the Bank

He said nller still had incompetent men;

that Mier thought F.R.Agent would be looked upon as head of the Bank but when
he Bund it was not,he wanted the Governorship; that when the matter came up of
re-electing him,Triller told the Board that if re-elected the F.R.Board would
not approve it; that F.R.Agent Sawyer said the Board would re-elect him, if he
would agree at once to resign; tht he refused to agree to this and that shortly
after he was offered his present position L decided to accept it.

fte also said

Taller told the Board that if he,riller, were not elected Gov.,he could say with
authority,the Reserve Board would abolish the tank.

Also said that Board colld

have got Ex Goebel as Gov. originPlly but Liner told Board would never pay over
17.500 salary & Goebel could not accept this & was scared away; that Eiller was
determined no one should receive a larger salary than himself.

He said the Ban-

kers had no confidence in Miller L did not like him; that Liller started the op.
position to Fleming for personal reasons,gioriviang ut

of political differences;

that sooner or later a crash uould come under :Mier.

--ie was also bitter againsl

the policy of investing reserves so largely in Govt. bonds.

Suggested that paid

in capital be returned to Banks,but they to l eave it as a special deposit for
a Uational Bank Guaranty fund for depositors; said the bankers would oppose this,'
Altho I was with him 2 days and talked for hours rith him,he never mentioned
his troubles with the bank until just before leaving him I asked him to give rae
his reasons & insisted on his doing so.

I was very favorably impressed with himi

on the whole.
June 22.

At Board meeting,arburg et als were so Pleasant,I am about satisfied

EcAdoo has surrendered & agreed to have another designated for Gov.
noon,Secy. E:. asked ne if the meeting was peaceful (?: I said very.

This after.

I think this

was what was in his mind,undoubtedly.
Friday, June 30.



Secy. 11. came in and asked me to lunch with him. ';v:1 went to

197.
the Shoretpm. Evidently he had something on his mind.
began to talk about Reserve Board.

After quite a rhile t he

He said the Pres. would send in my nominat-

ion rithin a few days so that I could be speedily confirmed.

Also said he had

not made up his mind as to Governorship; that if any change were made,Harding
would be made Gov. & probably Warburg Vice Gov.--he did not actually my this
but left no doubt in my mind,as he would say—supposing H.& W. were desirmated,
how would the Board feel etc.

I told him I thought the Board would be very macl-

except,of course,Harding2 that Warburg expected to be Gov.—that he was going on
his vacation at once,to return early in August
had comeout for 'Jilson to this end;

that in my opinion Jacob Schiff

He said Uo,it vas for public spirit.(Bosh!)

I also said Delano expected it as he doubtless felt that "arburg could not be
made Gov. & --it i7ould fall to

e said ITO,that they all asked that the Gov.

be given to the one having the daort term.

I said--I know perfectly well from

Delanots manner,thot he thinks by fighting,he rill aet it.

I said if H.& Ur. ivere

designated,"arburg would be furious,Delano would probably resign and both would
say that Harding had double crossed them; thst as a result it would split them
uP forever,

He said Delano under no circumstances could have it—that he was a

narrow,Deevish man & that he only wished he would resign.

.4 said he could not

stand for "orbura being Gov.—that it would injure Wilson to put on a pro-German
at the head of our banking system. Also said they were all narrow menoot wortbN
aot
of the position & if he had not/married as he did,the composition of the Board
would have been very different.

I begged him not to consider me ot

ever he & the Pres. did would have my loyal support.

I added that,if he wanted

to know mY real opinion,I thought tht it might be better to designate Delano as
Gov. to avoid a disruption of the Board prior to the election; thot the Board
had struck and could injure the Administrstion greatly if it did not vield.

On

the other hand,' realized fully their plans which were- 1. To get the Lrovernorship;
future

2.

To move out of Treasury building.

Administration.

4.

tral bank bV slow degrees.



7A4 To fight the Administration & alg

To abolish the Comptroller.
He said he kner, all this

5. To bring obout a cen-.
vas very much embarrassed

198.
as to what to do,--that I knew he wanted for the good of the System,to keep me
as Gov.--& lie intimdterl

this was also the President's wish.

I said again the

thing to do was to amend the Act & change title to the Board of Governors,--that
then each Member would be a Gov. & they could be permitted to choose the active
ex.ecutive officer as it would then be merely a business

& not an honor. He said

Congress would not consent to this.
July 12.

Two or three days ago,''arburg filed a memo. in answer to mine on sub-

ject of Congressman Hill's Savinms '!iank bill and at the end,stated that he was
aware that he had used some expressions in it rather loosely "and do not wish
this memo. to be used as a basis for a 20 page rejoinder".

lost insulting.

This la.m. Allen sent in P.R.Agent Curtissts report on week at Boston Bank,accompanied by a letter to Delano saying that Warburg had written him to send his
••

reports to him--Delano--during his-- arburgts absence.

Delano also had put a

circulating tag on the letter and Report which tag,did not bear my name,

I am

amazed at this impudence both of s4arburg & Delano.' -.2/tote a letter t once to
Delano but Allen came in and advised me not to take up the matter until my reappointment and confirmation.

Consulted with Alliams also about it and finally

decided to wait a while when I shall address myself to both these gentlemen.
Evening.

Williams at tetropolitan Club,said had just taken a ridd uith Secy.

McAdoo who said "flamlin is all right; the Pres. said today he will reappoint
him".

Warburg is nearly crazy in his desire to be Gov.

decision for the present.

The Pres. will make no

Warbura will be desianated only over mY Protest.

July 18. Tuesday. 'Avening Star said Administration officials gave out I was to
be re-nominated & Secy. EcAdoo vas not to take my place as Gov.; that whether I
should be redesignated as Gov. was for Pres. to determine.
Williams at Raleigh Hotel roof garden.
liams & Comptroller Williams.

Secy. &

4Avening.

Dined with

EcAdoo,Miss Bones,Col. Wil-

Secy. V. said; "It is settled--your name will go

in quickly".
July 19. Senator Husting of Wisconsin called as to -Asconsin Redistricting Petition,

said a




ember of our Board told him the whole matter was "up to me"

intimating that

vas holding the matter up.

1991
I told him if any such statement

had been madepit was not true; that a month or two ago the Comm. od Redistricting filed a unanimous Report ageinst granting the Petition at the present time,
as opinions seemed divia6d among the -L'anks and the Comm. hesitated to cut dovn
the capital of the Einneapolis :Bank any lower; that since then I had suggested
amending the clearing regulations to permit Wisconsin banks in the part in question to remit direct to Chicago for the credit of lanneapolis Reserve Bank and
that 1 thought that would meet their difficulties.

I added that I vas satisfied

there were difficulties which had arisen regarding The iilvaukee l'anks which
must be remedied out of justice to them & that the only question,to my mindf was
the proper remedy; that I did not 7ant to transfer the counties in question to
the Chicago district if pny other practicable remedy could be found; that Yr
xding did not believe my suggestion would remedy the situation; I accordingly
asked him to consult the 3 nks and see whether they felt my suggestion vas a remedy; thet if satisfied,it vas not,I should feel compelled to vote to transfer
at least part of the counties in auestion.

At his suggestion,' wrote him a let-

ter suggesting this remedy and asked him to ascertain whether the Banks thought
it would cure the difficultY.

I had also prepared a memo. some days ago,vhich

I sent to Harding; also wrote him todey repeating the suggestion
any other points in U.S. were in a similar position.

askinp if

-nrding had liritten some

days ago my suggestion would not solve the problem and today he came in and repeated this opinion.

'e said there were no other points in his opiniontin the

U.S. where a similar situation could erise except Connecticut
& he said Conn.
vas really different,as in Wisconsin case the hardship vas on Milvrau_kee banks
while in Conn. the 1T.Y.Banks would not be m?terially affected & the UOnn.banks
could be protected by some remedy similar to that which I had suggested
.
."
July 21. Friday. Delano writes favoring an
Amendment that small National Barks
may withdraw from F.R.Systm.t.
He is a tinkerer!

bays large banks can take care of the small bank;

I vrote him we had better try to getthe Amendments we really

consider vital ?: let all others go.




200.
On train.

Told

Delano Ur Marsh,Treas. of National Comm. left with me,the

ter fr)voring ET ----for Govt. Director of Chicago Bank in place of rieredith.
Also asked whether he thought F.R.Board Y.embers could proletly contribute to
campaign fund.

I doubted it.

& not as to Board to which
tioned the matter to me.
mended by Marsh.

He said we ought to consider question indiviffuall

of course agreed.

I told him Es Liarsh had not men.

He -sai.d he had vritten Senator tenyon as to main recom,

I asked him if McAdoo had said anything bout rotation of Gov.

He said--not a word--but Harding has had several talks with him.

I said I was a

disinterested spectator in the matter; that I had told Secy. Y. whatever Pres.
decided to do would have my loyal support.
sure you would take this position".

lie seemed very pleased

said "I fell

I added,I told Secy. M. I hoped he would

not even discuss the matter with me as whatever was done,I should be satisfied.
Eonday. Jlily 24.

Eugene Carver called me up at Mattapoisett.

Asked if I would

accept chairman of Shipping Board--that all interests would agree on me etc.
I said-Ilunder no circumstances.

He said-.2suppose you are drafted':

that under no circumstances could I or would I serve.

I repeated

He was in Ned's office at

the time.
Tuesday.JulY 25.

Uuch discussion as to /isconsin petition.

On careful consider.

ation I stated that undoubtedly the ralvaukee Banks,under operation of the clear.
ing system,would immediately lose reserve accnunts of much value; that the total
deposits in Milumukee banks from other banks were 19 millions whilb. Minneapolis
& St. Paul held over 70 millions.

I--fpvored granting the amended petition.

11,± Harding vas asked to consult with Secv. H. as to this.
The Senate bill as to power of Board to abolish F.R.Banks etc. vas taken up and
'
larding psked to arrange with Secy. for a meeting tomorrow.

Later ttarding told

me the Secy. felt that the Amendment if pressed now,would jeopardize all pending Amendments and--without expressing any opinion on the merits,the Senate Comm,
should be advised that the -thole matter should go over to next session of Congre
ilarding said he told Secy. he would agree to this.

Also said if Harding & I

thought Wisconsin petition should be granted l he rou3Z favor it and talk with
jilliams about



201
In evening at lietropolitan Club,Williams told me he had talked with Secy. Y.
the
in the
probably/Pres.
that
who said the reason my name had not been sent in p ras
pressure of business,hadforgotten all bout it: that if the form nf nomination
were to be prepared by Treasurvphe would have sent it to Pres. long ago.

lie

said he 7ould speak to Pres. about it; also said Secy. M. said Pres. had about
made up his mind,no change should be made in Gov. at any rate for the present.
aednesday. July 26.

warburg returns

is at meeting.

Lotter of Smith Bill per-

mitting F.R.Board to abolish Reserve Banks etc, taken up.
draft of letter which he cut down & changed.

I had given Harding

After som discussion at the meet.

ing,all agreed on sayina to Senate Comm. that without expressing any opinion on
the merits,the Board felt the present was not an opportune time for enacting
this legislation.

Wisconsin l'etition then taken up.

I told Board that Secy.

LicAdoo said he would be recorded as favoring the Petition with the limited area
as upon a Map given Er Harding by the Comm. of Nilwaukee bankers o provided this
was the judgment of his associates,which fiarding had previously told him it was.
Just before taking this up,Secy. IL sent for Williams & myself and said the
same c?c said he hoped 'Jilliams could conscientiously vote for the Petition.
Alliams said he would prefer not to vote at all on this question & would leave
the meeting before any vote taken.

We then went back to the meeting.

Supposing,as Harding had repeatedly told me,that Delano & warburg wanted the
Petition granted,' said what Secy. Y. told me and then asked for expressions of
opinion.

To my amazement Delano bePan to offer objections in which he was joi-

ned by farburg.

Delano said first that he felt there was a great injury to

Wisconsin which should be remedied,but that there were practical difficulties In
the way.

He said that thf the Comm. of Yilreukee bankers--one was not a

member

of the P.R.System; that they did not appear at all at original hearinp: that
Senator Husting had never called upon him: th_2:_th___s_andthi.im

on Redistrict-

inE_Eaull_hut liked to meet the _problem by abolishing the Einneuolis l'ank,but
ti71;:t that gun hpd been spiked!

Also said to grant the Petition,would make

enator Townsend of Nichigan & Senator ;Telson of llinnesota very angry.
Also raised technical point that we had dismissed the original petition without



202.
prejudice to right of Uisconsin banks to file a new petition later. The decision of Board on Wisconsin was then read. Petition vas dismissed Ias above,and
as I remember ,reference was made
to the effect of proposed clearing system on
Banks in 9th. Dtstrict.
Delano then said there vas no Petition iroon which to
act and--a new Petition must be filed
. question was then raised whether we had
not the right to redistrict of our orm motio
n and all agreed that we had.
larburg said it would be undignified and would stult
ify the Board now to reopen the
case & Delano agreed with him. Warburg said new
Petition should be filed and
new briefs & arguments not earlier than Sept.
1.

l'arding said he was perfectly

sure that Uilvaukee banks would lose all their reser
ve accounts to Linneapolis
member banks

said if any delay the injury would be irreparable ; that the petit

ion should be reopened & granted.

C.S.H. said originally some members wanted to

grant the petition because the banks 7anted it; ti-_at
the only doubt in these
members minds was whether this would weaken the Einne
apolis Reserve Jj'ank and
whether clearing system would not solve the difficultV
and whole Board felt time
should be given to ascertain this; that he,C.
S.H.Iranted to permit Wisconsin bani7.1
to pay checks by payment to Chicago to credit of
Minneapolis Reserve Bank but
that Harding said this rould cause delay
& would not solve the difficulty; that
he would accept i4ardingts judament as to this,
altho reluctantly; that there remained two courses. a/ Transfer Eilwaukee
back to Minneapolis District making it
a Branch Bank or clearing agency; or
b/ transfer this territory to Chicago.
ld
Delano, axburg & -iarding all said a/
vas out of the question. C.S.H.said—really
a contest between Yinneanolis & ST. Paul
banks4r 1111,1aukee banks; former now had
over SO millions of -_ank deposits while
latter had only 19 millions. C.S.H. said
Organization Comm. had determined to annex Uilva
ukee to Chicago and that this
fairly seemed to require taking with it terri
tory always doing business vrith Eilwaukee.that this really sustained decis
ion of Organization Comm. C.S.H. said
had anxiously considered whether
lanneapolis -6ank could stand the transfer; that
the District. was largely an agricultur
al wheat district; that the cash or credit
demand vas largely concentrated in :;
months in the fall; that when Secy. made
deposits of crop money
funds,Uinneapolis banks did not want
any either in 1913,



203.

14 or 15: that St. Paul banks had only one deposit of „,500,000 in 1913;
that 1:inneapolis banks had made only very limited use of the Commodity rate:

that last fall the rinneapolis Ileserve Bank refused to accept anv Govt. deposits
I
that he was satisfied they could stand the withdrawal.

Finally C.S.H. moved to

reopen Petition and to grant it as to territory covered by Lap given by Eilwau.
kee Comm. to Delano & Warburg.
No.

On vote,Harding & C.S.H. Aye.

aaxburg &Delano

Lotion lost.

C.S.H, said in view of the opposition,he had no authority to record Secy. lIcAdoo
as he & Harding had told him Delano & Warburg wanted petition granted.

11±

liams had left room before the discussion began and was not present when vote
taken.

Finally we adjourned as C.S.H. said wished to confer with Secy. as to

his vote

Warburg had to leave.

Warburg dinally said he could be recorded as ir

favor of a Hearing on say Aug. 15,no further briefs to be required and Lichigan
allowed to intervene,EinneaPolis Reserve Bank & Chicago also to be notified.
At 3 p.m. Senator Husting called.

HardinR explained whole situation to him,

having as he said,secured Delano's consent to tell him everything,as to votes
taken etc.

We at once asked Delano to come in

he said he would shortly.

At

3.30 he had not come in and Senator Husting & 4arding left,Harding suggesting
that Senator H. had better call & see Secy. McAdoo.

iater Delano came in & I

sugcested he go to Secy. where Harding & Senator H. probably were.
to Secy. & found Harding & Senator H. there.

Delano not there.

I then went

Secy. Y. sent

for him & he came in.

Secy. M. said wished evPrybody to understand this questior
even
was to be decided on its merits—that #700a suspici
on of politics would cause

a reaction in his mind; that he had consented to vote for Petitio
n on statement
of Er fiarding and Warburg (or probably Delano)
that they all felt Petition should
be granted.

Secy. then asked Delano how he felt,adding he fersonally had no

possible objection to a new hearing.

Delano stated case as above.

After some

discussion,Delano suggested that the Board vote to reopen Petition & grant
new
hearing. Secy. M. then suggested that
we call a meeting then & there & so vote
as all were willing to yote.
ro objection was made ahd then Delano moved as
above & it was unanimously voted,harding,Delano.C.S.H. & Secy.
being present.
"We then

adjourned.



204. 1
into my office,said most undignified to have haa

Shortly after,Delano cam

a meeting in presence of Serator HustinR.

I told him it was merely a formal ;at

ter & he himself made the motion to reopen.

He said,in writing the record,he

did not wish to have it appear affirmatively that he had made the motion and suggested that Record read--Thereupon a motion vas made etc.
to this as it was the usual procedure.

I said no objection

;4ater,Barding said Delano very much

disturbed as to date finally fixed—Aug. 8--as he had planned to be away then. I
said he need not be present as a stenographic reeord would be kept.
to satisfy him,

I am amazed at Delano

"arburg.

This seemed

Only yesterday Jarburg said

in meeting,he was and he had been always prepared to vote for the Petition and
Delano never said a word to the contrarY.
Secy.

I think the moment they found that

& I were willing to vote for the transfer,they thought there might be

some politics in it especially as Senator Husting was so interested.
not acted in good faith.

They have

There 7as no suggestion or suspicion of politics. The

Lilwaukee Comm. first visited Delano & iarding & had long conferences with tham
& later they talked with me.
any of us.

This ilas before Senator Husting ever came before

E± Stafford,a Republican Congressman,first came to see me about this

matter—long before Senator Hustings

I reached my conclusion by a careful exam-

ination of the :Record (See my memo.) and could not reach any other conclusion.
I told Allen about Delanols desire not to appear on record as mover of the vote
taken.

iaterl telegraphs as above,were sent to all Parties.

Wednesday,July 26. cont.

Yr Dodqe of International Press service.has just tele-

phoned thpt Pres. has just sent in

name to the Senate for e 10 year term.

Jut prior to this,told EcAdoo of Delanots request as to :/ecord.
at Delano Pc 'jarburg for their queer action.

He was verv mad

He said--three members,meaninr

Delano,WarburR & Harding--are threatening Ore and awful things if no rotation ir
Gov.—they have however made no threats to me—I will never be bull dozed.
realize however,at this time,they could do much to harm the system.
him to yield on GovernorshiP.

I

I advised

4.jater I told 7illiams,thPt if Pres. did not vant

to settle rotation question nowthe could redesignate ne Gov. until Jany. 1,1917




205.
and say that then he would take up question as to a definite policy.
-dams said he had suggested this to Secy. who seemed to favor it
start things.

tater,Wil

said he would

A little later I heard of my nomination as above.

Thursday. July 27.

Early in morninp,Harding came in and congratulated me on
MY
n4ppgintraent. Seemed pleased and
very courteous. leter Williams came in and
said last night he dined 7ith seve
ral men
later Delano joined them; that he
spoke of my appointment and all
were very much plPased except Delano,who lifted
his eyebrows with a sort of half
grunt,a mixture of surprise and displeasure.
Williams said it was astonish
ing,that he was so boyish he could not conceal his
displeasure. Delano never
came to me to congratulate me altho he was in his of.
fice all day. He is petty.
is evidently mad because his plan to trick us in
Redistricting failed. The mome
nt Senator Husting cam and favored transferring
the Wisconsin banksphe evid
ently thought,as did also 'iarburg the could in som
way injure the Administration.
As a fact after the Wisconsin comm. called on
Delano &fiarding,or possibly
before that,a Republican Congressman from iisconsi
ni
Stafford,called on me in behalf of
-Asconsin banks. I told him we would con.
sider the matter most
carefully,that we believed the clearing system woul
d solve
all difficulties and if Ot
did not,we should not hesitate to remedy any difficulties whiCh in our judgment
justice required.enator Husting never discusse
d
politics with me in any way,
except thet after our vote at which my Eotion was
defeated--in the afternoon of
Wednesday,July 26,in presence of Harding,Sena
tor
Husting began to speak of the
political effect of doing justice to the Wisconsi
n
banks. I at once interrup
ted him andsaid I should absolutely decline
to consider
the political effect of any
decision of the Board,that every question would
be
decided on its merits. sardi
nr7 laughed & said he had seen so much of
politics,
it did not scare him or
influence him in any way. This was the
only even indirect mention of politics
made in the matter.
Dined at tttropolitan Club with
Senator Brandeaee.rDelano
& Harding dined together near us
but Delano never came
over to congratulate
me. , He is.evidently very mad with me-I fear it is his
guilty conscienceein the
li;LO:ter,




J.

7

206.
Had talk with 1- ]lliott as to my suggestion that /isconsin bank
s be allowed to
pay checks presented to them by Einneapo
lis by remitting cash or items to Chicago Bank for account of Einneapolis Bank. He said he thou
ght this would not
solve the difficulty; that unless strictly limited
to Wisconsin items it would
permit arbitrary creation of exchange and tend
to injure clearing system.
not favor the suggestion at all.
think.

Did

Ala) had talk with Harding on WednesdaytI

He said he had no doubt but that the transfer would leave
Einneapolis

Reserve Bank amply strong enough to
take care of all demands from its District.
Also said that District was a
wheat district and that he was inclined to think,
considering the rediscount power,it
was not necessary to create diversified districts. We spoke of Boston as a dist
rict where development of Acceptance business eould probably be it's chief work
in future.
July 28. Friday.

Altho Delano was in my office several times and was at Boar
d

meeting,he never alluded to my appoi
ntment in any way,

At meeting this A.11.

Secy. licApoor rather before the
meeting,Secy. Burleson & ricAdoo had conference
with Harding,Delano & myself. In view
of opposition of Kitchin,to collecting
State Bank checks through the P.O.
a full discussion was had. Later I suggested
that Burleson v in view of the doubt
throgn on his authority to issue order v ask
an opinion from Atty. Gen. This
was agreed to and Secy. E. went to Cabinet meeting. Later he returned
said Burleson would not agree to this as he felt he
had the power. Then we decide4r
cAdoo present,to ask Burleson to suspend the
order pending completion of arra
ngements for bonding in taking out insurance on
Postmasters. (The first talk with Burl
eson ras Thursday & Delano was not pres.
ent. Burleson said Harding had
intimated to Kitchin that he did not approve of
order. Harding rather warmly
denied this--explained how he had told Kitchin
how
he could evade the order by
making all checks payable in N.Y.exchange
regular rates) At conference
Priday A.Y. I suggested Delano should be
called in
which was done. At first
Harding said if State Bank checks not at
once collected
mall Rational Banks--at
least 500--would be driven out of syste
m by the competit
ion; later he said we
could suspend such
collection for the present
without injur



ing collection system.

2.ori

Finally I was instructed,at full mee
ting,McAdoo being
present l to telephone Kit
chin & Senator Simmons. 1.
Board had asked Burleson
to susPend order pendin
g completion of arrangements
for bonding Post-mLasters.
2. These arrangements could
not be completed for from. 30 to 60
days.
3. Lieantime Comm. on cle
arings would be glad to hear from Kit
chin or my others
interested.
C.S.H. mnde memo. of all
he said. C.S
telcphoned as directed
& both seemed pleased.
ttardirg suggested plan permittin sma
g
ll State Banks
which could not join sys
tem to make deposits in F.R.Ba
nks for clearing purposes,
and also said they mig
ht be allowed to charge n rea
sonoble exchange on the check
--agreed to consult Glass
ns to whole matter. Left 3,1
5 for Williams' house,
Blue Ridge Summit,bu
t first sent telegrams to all
F.R.Agents that collections
thro P.O. suspended unt
il arranaements completed for
bonding P. masters asked
them to make arrang
ements,appointing a Elomm. if nec
essary and report at once to
Board.
lionday. July 31.

Conference rith Glass,E
- ardinp & Secy. EcAdoo. Glass ver bit
y
ter with Kitchin. Tol
d of my talk with
this A.1
Glass said would agree
to allowing mall State
Banks which could not enter sys
ten,to make deposits with
F.R.anks for clearinp•
Purposes. Nothing said about all
owing them to deduct ex.
chanae. I said Kitchin agr
eed to put his objections in wri
ting not later than
next week & we agreed
to wait for this,in meantime
pushing ahea0 arrangements for
.
bonding, P.-masters.
arding said he was satisfied
we could for the present,abandon such collectio
ns and that without injurv
to collection system. Said also
we could strike out
at Par from Sec. 16 if we kep
t right to collect tbro Post.
masters--seemed to
favor this. At about 12.30
Kitchin called with 11±
Congressman. Said 8.000
State
mks,not eligible for F.R.System.w
ould close down
at once if collectio
ns made thro Post-masters
or thru exchange provisions interfered with. Said wor
d "patrons" in Sec. 16 wherev
er used,meant l'ember banks and
thru--legalized deduction
of reasonable exchange charge
s; that "patrons" trould
not have been intended
to refer to depositors in
banks for bamks had never deduc.
ted exchange charae
s from their depositors
and thnu 4o.;;Lcould not have been
in
minds of Congress.



°aid law would be made clear in next session of Congress.

The present2°8*

interpretation would make N. earolina,Republican; that Sena
tor Taggart said it
would make Indiana 1000 000 Republican. Finally he agreed
to put his objections
in writing not later than next reek. Glass said he
was irrevocably opposed to
making Reserve Notes lawful money. Also
said vas opposed to Permitting gold with
P.R.Agent.to count as reserve vs F.R.Notes,but not quite
as positive against this
Said he would talk with me berore rinally made up his
mind.
tor

Allen told me he had learned confidential
ly that Saturdaylthe Comm. on Banking
L. Currency was polled
7as unanimously in my favor & that I would be confirmed
at first Jaixecutive session,probably
this P.M.
Senate adjourned -Tithout Executive session.
Tuesday. Aug. 1.

Discovered that our Amendment that F.R.Notes be lawf
ul money up
to 55 etc. was never acted on by Sena
te. "arburg had thIs matter in hPnd and on
starting on his vacation wired Harr
ison to come back from his vacation
remain
in Washington while warburg 72S away
. Allen said Plso that arburg 2aid,that Harrison
the only man who knew anything about
the Amendments: "arbura & :Ilarrisor
can settle this between themselves!a
rding gave me a draft of Amendment,strikir
out "at par" in Sec. 16. He is
evidently weakening-_I never believed at heart he
wanted to abolish exchange charges.
Secretary 3,1. today asked me for my copy of
Delano's letter on Rotetion or
Govs. which he sent to Pres.
The "ashingtom evening Times
states that the Comm. on Banking
Currency this
A.M.. reported my nomination
favorably. There ras no Ibtecutive session,however.
today. Glass called. %1Vas pleased
that Senate did not pass Amendment makinF
F.R.
;tes lawful money for vault
reserves tas he woulcl never consent to it.
Wednesday. August 2.
dprburg came back and came into my office but
did not con.
gratulate me or refer to my nomi
nation in ay way. Said he had met witb Glass last
night & he had decided it 7as
better to drop the matter or makinP: F.R.Notes law.
ful money for vault reserves;
that he never expected it vould_pass any -7ayit
___
he seemed perfectly cheerful
& contented about it altho he told us when
ve voted
for it that it vas absolutely
essential and vital.
Another instance of his du,licity. I asked him how
Harrison over-looked the fact that Sena
te Comm. did not



209.
report it—that I
understood he vired Harrison to come back from his vacation
& remain here while he vas avay for the express purpose of vatch
inc the Amendo.
ments. -lie said he asked iarrison to
return for purpose of drawing regulatim
etc.--a deliberate lie--& thnt I was respo
nsible for not knovinc the Amendment
was not reported. He said,however,that np one could have knovn
of it until it
appeared in the Record,published Tuesd
ay A.M. I shall never trust his statements again as to vital amendments
.
Harding said he had given his Amendment striking out "at
par" from Sec. 16
to Glass who seemed to favor it. I shall oppos
e this. dilliams said he had
seen Senator Swanson who said he would press
for an Executive session today.
ater Williams sent in vord,that an Executive
session had been held,that my
name & the parm Board had been formally
laid before the Senate,that the Farm
Board was voted on first and that
it vas 6.3°--the agreed hour of adjournment
before my name vas reached ('c that
the Senate adjourned vithout actim on it.
Aug. 3. Thursday. Called up
Senator Hollis. He said my name vas not reached
yesterday as there vas a row raise
d by Senator Penrose in connection with con,.
firming Farm Loan Board; that he laid
my name formally before Senate
it is
now on calendar; that there was a full
Corm. meetina at which the Republican
members were present; that I recei
ved the unanimous vote of the Comm; that all
praised me in the highest terms
: that there vas not the slightest doubt of my
unanimous confirmation; that he
vould surely have me confirmed before mxt Tiles4
day and possibly earlier.

t

Harding said he had made a mw draft
of Amendment to Sec. 16 keeping in the
words "at par" but providinp that
State Banks under regulations of Reserve Board
could keep deposits in
F.R.Banks for clearing purposes. Said he had shown it
to Secy. & had sent it to Glass
.
SecV. Eci400 said he had called up Senator
Pomerene to hurry up my
confirmation: he said it would surely go through as soon
as an 1]xecutive session could
be had--. 7 P.Y. Secy. ric-4400 has just telephoned
that Senator Pomerene telep
honed him I had just been confirmed by the Senate.
August 4. Friday. At
Secy.'s request,I copied off my old designatio
n as Gov.



UcAdoo said matter not yet settled.

210
He also asked me to call up Asst. Secy.

Phillips & ask him to have my commission made out so as to be ready for Thursday
as it was a State Dept. matter.
August 8. Tuesday.

I did this.

Secy. McAdoo said would talk with me about Gov. tomorrow.

I forgot to note at the time that Delano said—when Smith Bill giving authority
to Board to change F.R.Banks etc. was considered by Board--told -jilliams that
be had wired Miller for his opinion. 'Alliams asked to see his reply & Delano
showed him a telegram from riller saying that he absolutely favored this Bill.
Delano never told the 3oard as to this and the telegram was never sbown us.
August 9. -,ied,nesday.

Secv. M. sent for me and said that the Pres. had reluctan-

tly made up his mind to have the Gov. rotate for irearlv terms; that Delano &
'
4arburg had told friends of the Administration that they should resign if this
were not done; that the Pres. fully appreciated that Delanofs letter to him was
a polite species of blackmail: that at any other time,he would have had no difficulty in treatina it as it 7arranted: that if they should resiRn before the
election,it would undoubtedly embarrass the Administration es this was clParly
their intent; that he had carefully condiderPd what the rotation should be: that
it would be impossible to make Warbura Gov.! to make Delano Gov; would emphasize
the passing over of Warburg;ithat Delano was absnlutely unfitted for the positiol
anyway; that he was narrow,bigoted and a reactionary2

supposed he was honest

but he was thick & stupid; that he had given him every opportunity to be cordial
and friendly but that he had been cold & aloog! that he was more of an undeveloped boy than a man etc; that '4arding was better fitted than theothers tho he
recognized his limitations: that Eiller was absolutely out of the question for
any position.

He then asked my opinion; I aid looking solely to harmony,Delano

should be designated altho I appreciated this would emphasize passing over aarburg; he would not agree to this.

I said I felt sure Delano woild resign if

dropped from Vice-Gov. and not made Gov.; he said he did not care a straw whether he did or not: he had forced this idsue on the Pres. & the Pres. had yielded
if now he resigns because he could not make himself Gov.,his position would be
ridiculous.



211.
I said I feared his resignation might be more injurious than "arburg's; he
said"Nol if Warburg resigned v it would hurt us with the bankers,at this time':
I asked if Warburg would accent the Vice-Govr.; he said "Yes,without
any doubt."
I said if Nrding & Warburg were designated it -7ould embitt
er Delano and probably
warburg as they would feel thet Harding had double crosse
d them & this would
probably break up any future combination between them.

He agreed to this.

He said he had still grave doubts
about Harding's loyalty to this system (°: asked
if I thought he would be loyal; I said I believ
e he -would be as he would consider himself ns an important factor in the
Bosrd which would tend to make him
uork for harmony. tie said he would have a tPlk
with him & impress upon him that
the Pres. relied upon his loyalty to the
system & in vier of his fine work on
Clearingsv had determined to designate him.

He said the designation would be for

one year only which would give the
Pres. a hold upon the situation.

fte said he

fully appreciated how insincere the member
s were and their reactionary feelings;
that in short they had "struck" at
a critical time & that very regretfully he &the Pres. felt it was expedient to
yield,but ss little ss possible. I told him
I thought on the whole tit was
necessary to yield at this time; that while I
should be glad to continue as Gov.
I fully appreciated the situation & would pro1
-ably do the same thing if I were
President; that I was only too glad to render
a service to the President & the
system by eliminating myself.
Ae expres
sed the deep gratitude of the Pres.
himself to me for the broad
way in which I looked upon the
situation; he said over
over,they both wished
to designate me again but that
it seemed better to yield. Jut before he began
to tnak,Congressman 'Aagle was
in the room & he congratulated me on my reappoint
ment as Goy. EcAdoo rAther
sheepishly 50tid--he is Appointed As laember,the Pres
designAtes the Gov. E4gle
sAid--"Then tell the Pres. for God's sAke not to designAte WArburg, he is Jew,
GermAn, b4nker
A-n Alien; while Er 4mlin of
goodold /T.:2% stock is Gov.,the
people 7111 hAve confidence inthe system,but if
14rburg is designAted,there -Till
be trouble." Secy.
smiled sheepishly Z... sAid
nothing. While,on the rhole
I cAnnot blAme the Pres.,And very likely would
hhwe
done the sAme myself for
expediency's sAke,yet the 4ct remx.ins,the reActionArie



_.12...
have il...ared tle Pres.

he has yielded.

They have now got the Gov.--the next mov

will be to move out of the Treasury building--then there will be nn open fight
for Amendments making them all Powerful e.: backed up by Harding with his prestige
as Gov.

The only hope is th,,,t liarding 7ill decide to abendon his freely expres-

sed rer,ctionery views in vie- of his elev-tion to Gov.

Delano is the man to be

pitied,--bumptious,conceited,vain,jealous,he has forced the issue L has only
succeeded in losing his own job as Deputy Gov.

Hoist by his own Petard! It serves

him right.
This P.L. went doun to Vice- Pres. Larshall in response to a telephone message.

He said he had learned—not from NcClallan--that the Directors of the

Chicago Bank had unanimously agreed that Bosworth should resign as F.R.Agent L
to recommend that EcClallan should be appointed in his place; thrt Bosworth wanted to do this as he said he had plenty of money & that EcClallan could do all
he could; that they wanted to recommend thrt Bosworth be put in an aftisory capacity at a small salary of say
year to the Bank.

2500 per year; that this 7ould save

)7500 per

He also said that Delano was so piqued at not having been co

1

sulted in the matter th-t he had told the Directors this a)uld not be done and

had broken up the whole plan; that now he feared th-t Delano's pique would cr,use
him to have EcClallan removed. I told him this was the first I had heard of the
matter; that Delano had never reported this to the Bcv=rd or alluded to it in any
way; that if true,it was astounding;that in any event he need not worry about
EcCliilan's removal except upon charges and a full opportunity for hearing.
If above is true,' begin to doUbt Delano's sanity.

1"arshall said Delano was

evidently r very narrow man.easily piqued & allouinc his personal pique to guide
his official action. He has sized him up well.
Gov. 'old came in; very indignant because we allowed Senators LaPollette &
Husting to come before Board rith the other Wisconsin Congressmen,. Intimated
that he should chrrge in his brief th-t the Board was influenced by politics.
I told him thia was not so; tht last spring a majority of
Board favored grant.
ing the Petition--that the sole question



VMS

the trend of business which we be-

lieved was lbrth & South.

That to me the only question was vhcither

ing would cripple the Minneapolis Bank.
could be added properly

213.
tj
redistric

I said if there is any territory which

he hould sugge-t itIthe Board would give it consider.

ation but not as part of the Petition.

He admitted tht probably he had not sent

his circulrr of July 26 saying would take Eilwaukee checks at par for unissued
credit in stttlement for checks presented to Wisconsin 'i'anks for collection,—
to the Board,but added "the Board was on his m=--iling list".

I am satisfied that

this circular was sent out to hend off the Petition, while dated July 26 I believe as does also ilarding,that it ras really issued a day or two later.
telegram as to new hearing was sent out late on afternoon of July 26.

The

This shou

be looked into.
I asked him about practice we had heard existed in Chicago—when the Chicago
Bank refused to par Eilwpukee checks,even the Milwaukee benks made excess deposits specially for this purpose.
why.

To my surprise he defended this --t asked

4e said these banks all had accounts with Chicrgo banks

by checks on their subj. to time pllowance.

should settle

I said why then should a member

bank ever keep an excess deposit with a Reserve Bank. He said simply to save
trouble of keeping & issuinc its money!

He evidently wants to have all banks

cling to their reserve agents as now,thus tying up forever--as shown by
Gov.
Seay_800 millions of excess reserves in Reserve Agents' This would emascula
te
the whole clearing system.

He was almost impudent in his manner & may have to

be called down.
August 10. Thursday.

Following vote passed by Texas F.R.Bank.

"It was moved by Director S-nsom ti•r-,t the Bo:.rd express
their great satisfaction
and pleasure at the re-appointment of Gov. C.S.Hanlin as Director
of the F.R.
Board 2 and extend to Gov. Hmlin their
hearty congratulations over this deserved
recognitionywhich motion was seconded & carried by unanimous vote
of all tembersg
Extract from records.
At bout noon,Secy. 11.
. cAdoo sent me a letter enclosine the designation of Hardin4
as Gov. & Walturg as Vice Gov. of the Board
for 1 year,--askirg me to give it to
them.



The designation ran;
The jhite Hogse. WPshington.

August 10th, 1916,

Under the provisions of the F.R.Act (Section 10) approved Dec. 23. 1916-IdP.G.Herding id hereby designated Gov. of the P.R.Board for a period of one
year from the date hereof or until otherwise directed.
.00drow
Warburg's was same lexcept Vice Gov.
I at once wrote letter to each enclosing designation with congratulations
called on Herding who was out.

Also wired :iarburg at Loon Lake.

The Secy. also wrote me e ch9rming Dersonpl letter congratulating me on my
successful term as Gov. Pnd upon my reoppointment as member to which I replied*
Extract from letter of Secy. EcAdoo to C.S.H. Aug. 10.
"xxxxxx and I wish at the same time to take advantage of the opportunity of ex,
pressing to you my cordial congratulations upon the able,efficient,tactful and
satisfactory way in which you have l as the first Gov. of the Board,conducted its
affairs during the past two years.

You have measured up in the highest degree

to the responsibilities of the honorable position you have occupied and have left
a record of faithful service as the first Gov. ot the P.R.BoErd which will always
be a stcndard for your successors.

Permit me also my dear Gov. to congratulate

you on the great honor the Presdient jas conferred upon you in- reappointing you
a member of the F.R.Board for a ten year term.
dhatever may be my own future,I shall always look back with pleasure and
satisfaction to my association with you in public life v and particularly my assoc.
iation with you during the past two years in the inspiring work of establishing
the F.R.System.
Believe me,my dear Gov. rrith my very warm regards and best wishes for
the future.
Cordially Yours,

W.G.HCAdoo.

ILIxtract from letter of Pres. Wilson to C.S.H. dated Aug. 10. 191.6*
"I can not send you a note at this particular time t without expressing my gratit.
ude and appreciation for the generous and public spitited attitude you have
taken



Vie

`CFI

215.
reported to me by Ex
in the matter of the Governorship of the F.R.Board as
Cordially & Sincerely Yours.
',Toodrow Wilson.

LcAdoo.
Thursday

:11aust 10. continued.

1,I,arding told me th-A Gov. .iold admitted to him

checks would
that the circular dated July 26 of his bank,stating that lAlwaukee
be accepted at par in settlement from 'disconsin banks was ante-dated. I asked
Wold if 3oard were notified of this f]: he evasively replied that the Board was
on his mailing list.

He deliberately deceived me.

Fcrding also said he fear7

ed trouble over his designation; that his associates wanted rotation but had
got more rotation than they expected or wanted.
,Jarburg for a conference Sunday in 1T.Y.
licIhe feared trouble.

lie said he had wired Delano

He added that Warburg was so vitrio.

I told Harding my room was ready for him a: that I hoped

he would move in tomorrow.

He stggested that I take vrith me the pictures of

Lass. ez N.H. Secretaries L. I said I should be glad to do this.
He added that it was his desire to keep down all differences in the 3oard
until after the election; th7.t out of loyalty to the Pres. he felt it his duty
to accept the Gov. whatever his associates might feeltbut he seemed very much
disturbed.

I firmly believe he entered into a solemn agreement with his assoc-

iates which they will charae him with violatina.

Went to Boston.

At night

wrote Secy. LcAdoo from University Club advising him to stiffen up Harding as
he seemed weak & worried.
Wednesday. August 15.

Attended ftrst meetino. since Harding was designated as

Gov.

Harding in the late P.E. told me Warburg was furious at not being desig.
more
nated but Delano took it/quietly altho bitterly disappointed. He said "arburg

prepared a letter to the Pres. accepting his designation as Vice Gov. but lecturing the Pres. for not making. him Gov.; that he a; Dplano with great difficult
persuaded him not to send it but to send a simple acceptance instead; said he
told Warburg the Pres. would justly resent any such letter and would take dras.
tic action; said 1,ierburg made all sorts of wild suggestions

threats; underg,1-41

stood him to say that "arburg wanted to insist on Pres.'s designating
burg as Gov.



Delano as Vice-Gov. but Delano would not agree to this; Harding

216.
said he had just--6 P.L.--told .darburg that if harmony vies not restored he would
write the Pres. that he accepted the designation in the hope of restoring harmonY
but that evidently he could not succePd---he would ask the Pres. to designate someone else.

He said it was plainly impossible for the Pres. to have designated gar.

burgybeing a German only recently naturalized
having a brother holdinz a high
position in the Imperial Council,I think he said--in GermanY.
grromy
This
about 3.30,Delano came in and said he had not congratulated.me
fighti
been
hypocritical as he had
re-appointment as he felt to do so would be
me on the Governorship but th

he was very glad I was reappointed c; his opposit-

I took it very casually & said of course I assumed it

ion had not been personal.

;as not personal,that I had advised Secy. YcAdoo to recommend a change to the
President,

evidently wanted me to tell him about the designation but natural-

ly I said nothing about it.

He seemed very subdued and almost dazed.

I think he

.
- It
appreciates that he used a boomerang which hurt him more than anyone else
serves him right

I think has taug t him a lesson he will never forget.

In evening dined at Letropolitan Club with -Alliams.

He said Secy.LicAdoo had

tried to persuade him to accept the position of 2arm Loan Commissioner but that
while appreciative of the honourthe felt that the hostile press would say he had
been turned down by the Administration--he had declined.
August 16. Thursday.

Ilarding came in

said larburg was almost wild: that he

had drawn a memo, which he insisted should be printed in the next bulletin;he
shovmd me a copy; it recited the fact of the designatio n of the Gov. & Vice-Gov.
then proceeded to state that at least a majority og the Board favored rotation
beginning with the 2 year term member

7-ere opposed to the exercise of any

choice by the Pres; it ended by stating that the Board would shortly bring the
matter to the attention of Congress w--a direct slap at the Pres.

Harding said

he told 'darburg squarely this must stop; th-,t no such statement would be printed:
that .;arburg said he would publiSh it himself: that he told 4arburg he would onlv
make himself ridiculous.

Also said .1 xburfr had written Col. House that if rotat.

ion in numerical order were not adopted by the Pres. he & 3 others mmbers would
a
resign & come out in/public statement.
arding said that long ago the told Wax.
burg that he would abide by the decision of the Pres. & that he had no riL;ht to



7

quote hira as intending to resign.

217.
He added thrt if !fprburg did say such a

thing,it would merely give comfort to the enemies of the system & would deprive
Administration of its deserved credit for passage of the Act; that Warburg then
said--"thats just what I wantu l

',,rburg went back this, P.M. LI Delano went to

station with him--telling Harding he wanted to get him out of Town&
I told "arding of the Amendirent I had in mind--to change title of Board to
Bo?rd of Governors--he said he

he believed the others would have gladly accep-

ted this,--that Delano was working on a somewhat similar Amendment.
Delano had come to me frpnkly,I would have favored this

I said if

I believed Secy. Lc

Adoo would also lbut I did not feel like offering it as some might say I was selfish in having had the title for 2 years & then trying to keep it.
thinks warburg id out of his head.
LcAdoo who said the Pres•

,efore seeing iarding,I had a talk with Secy

he -ere ready for '
4arburg whatever he might do.

were satisfied he & the others were selfish
iv

Harding

determined to rule or ruin; that

axburg cared to resign,he could LI they could make him ridiculous.

liams told me ilarding had also talked

Thei

tater Wil.

him.

1- eturned from Lattapoisett,Tuesday August
22.
Pound when I returned v a letter from F.R.Agent Rich protesting
vs granting
iisconsin petition and incidentally saying several bankers had told him that
iiembers of Congress

Senators had threatened the J7.R.Board and had held my

confirmation over their heads as a club to enforce immedia
te action on the re.
quest of Asconsin & Milwalikee bankers
to re-open their petition,adding that the
date of confirmation lent color to this
view.

Gov. Harding also sent me a lette:

sEying :/ich had sent a copy to him L.
: giving his reply.
rumor was absolutely 7ithout foundetithn.
of blackmail to terrorize the Doard.

Harding said he knew thil

Evidently this letter is a polite kind

I prepared at once a letter to Rich deman.

dinE the names of the Congressmen & Senator
- & of these bankers & then pointed out
in passing that the Board voted
to reopen the Wisconsin petition on Wednesday,
July 26 at 3.30 P.M. while
my name was not even sent to the Senate by the Pres.
until 5.30 that same afternoon.
Also - xote gprding that no Representative or
Senator had ever discussed my confirm-tion with me in connection with Wisconsin



petition or in any other manner,except merely to congratulate me.

21.8.
I also re-

minded Itarding,apropos of Rich objecting in his letter to Senators & Congressmen
appearing,that he told me the other day Gov. .
1 :old told him he had had an interview gith one of the Linnesota Senators

had urged him to go to the hec7ring

and protest but that his efforts had been unavailing as he declined to do it.
I told Itarding I should demand an investigation of the whole matter by the Board
at its next meeting.
In my opinion Gov. 'dold should be removed for his action in issuing a circular
dated July 26--the day ve voted to reopen the 'Asconsin Detition,but vhich was
ante dated not being really issued until after he received a telegram from Board
July 27 that petition had been reopened.

This circular said chedks on LilwaukeE

banks would be received by Einneapolis F.R.Bank at pax vloth imudikate credit
This vr,s never sent to the Board

in settlement for checks,

Gov. Wold admitted later to 4:larding it vas ante

of it was at hearing August 8.
dated.

I have utterly lost confidence in both Viold

,dednesday, August 2 .
meet them.

first intimation

Rich.

Governors of Reserve banks meet in Boston.

I:et Harding & Delrno there.

proposed letter tfl Rich.

dent up to
my

Told slarding of my letter to him

Said I muld send Rich letter to him when I came back

from ;iashington & if he thought it wise to hold it back until Lliller returned
next Tuesday Willer was to stop off at lanneapolis tomorrow or aaturday)
could feel free to do so.

he

He said he was very indignant at Rich's letter; that

he believed that if anY bankers had spoken to Rich--Gov. .iold was "the bankers"
every opportunity to speak of the matter but

--thEt he had already given
that he had not mentioned it.

Delano also said he did not believe any bankers

had made such remarks to Rich.
of any consequence.

They both evidently thought the matter was not

I told them if I sent the proposed letter to Rich c, he

gave me the names of any bankers,' should probably feel it my duty to inform the
Jisconsin Senators & Representatives of the matter.
simply playing politics,
ious,

They both thought Rich was

"arding said he had talked with Alliams who was fur.

H, said he felt satisfied - dlliams would vote for the Petition when the

matter came up.



ThursdaY. August 24.

2ound my letter to Harding

returned from '‘ashington.

219.
Rich on my desk last nicht

I signed them both Cc sent them to lass ..,aninfr with

instructions to deliver to liarding his letter

to show him the Rich letter C2c to

mail the latter unless Harding felt we should hold it until meeting next Tuesda
y.
Read in 1T.Y. Journal of Commerce this A.17. thqt the Conference Comm. had rejected our proposed Amendment that F.R.Notes may be issued vs Gold etc. but had
accepted most of the others as passed by S4
'nate.
Last week,just before I left on vacation,probablv Thursday
Aug. 17,Secy.

told me

only he

the Pres. could induce Glass to accept above Amendment

he was not clear enough as to its merits to undertake
to do it.

1,4
that

I explained the

wisdom of the Amendment but he did not fePl sure enougrh of
it,to induce Pres. to
insist upon it.

A great mistake,in mv opinion,as I told him.

August 28. at tattapoisPtt on vacation from Aug. 17 to 28.
H.P.H. told me Lrs Franklin Lane told her in strict confid
ence on Ash Wednesday,Feby. 1915,that Secy. Houston was bending Pvery nerve
to get my ploce on th
Reserve :30ard, that many had noticed his efforts to ingrat
iate himself with the
Reserve Doard members by entertaining them etc.
August 29. Tuesday.

Arrived from Uattalooisett.

Harding came in

held up my letter to Rich and
strongly advised me not to send it.

said he had
qaid he had

talked with his associates el esPeciallY vrith
Mier who had just come from Lin*
neapolis where he had a conference with Rich
that Rich would shortly write a
letter asking that his letter to me
to Gov. Harding of Aug. 18 be withdrawn
as the implication drawn by ijiller from it,was
utterly foreign to his intention.
.11
I
told arding the charqe in Rich's
letter was against the Board rather than my,
self
th-t if he
his associates thought Rich should be given pcmer to withp.
draw his letter,' should not object.
to Rich the above facts.

I accordingly noted on margin nf my letter

In the late P.Y. I went into rdller's office.

He said

Rich had also written a letter to
him complaining of the 'disconsin Congressmen
but not mentioning my name in any
way. He told Rich such a letter deserved(:1;
7;ould doubtless receive a severe
rebuke from the Board as it seemed to express




220.
his opinion that the Board would
be influenced by politics. He then asked
Rich
about his letter to me—a copy
of which I think he said 11Frding had sent him.
Rich said the letter to me was
identical with that to Liner. Liller said it was
i
not &. Rich seemed very much
disturbed
called Mosher in. Losher said it was dif.
ferent. Rich read it and Dr,.
Miller said acted as if he had never seen it
befor
Liller added it was evident to
him that rDsher had written both letters. Rich
said he merely intended to inf
orm the Board and myself of the gossip
rumours
floating about L: that of cou
rse he did not believe them-1411er said
he told him
if that 'ere so,his method
of expression was very faulty. Rich also
said Losher
had suppressed statements
which would otherwise have appeared in the
Press.
Miller said evidently the :inneapolis .jank and Dedker were trying
to scare our
Board. Finally Rich sug
gested writing and asking permission
to withdraw his letters.
Dr. Li ner said tif I would
agree,he would write Rich tht he could
make
this request. I said tht the charge was against the Board (7., not
vs me; that if
Rich were to - rite such a
letter I woul not object if he & my ass
ociates wanted
this done--that it was a
matter for them to determine.
I said if the letters were
probably
not withdrawn,' should/de
em it my duty to send a copy to the
Jisconsin Congressmen
L. leave them to take
up the matter 7ith Rich. Dr. Liller
begged me not to do this
as it would result in Rich's
resignation or removal and the -oublicity
would injure
the 2.2System. 2inally I
repeated that the ,
ttack was on the 3oard
whatever my
associates felt was best,'
sholud offer no objection to,
I added that if Rich
had intimated that I hnd
in any way been influenced in ny vote
by the question of
confirmation,' should have
demanded an investig-tion by the Senate
Commll
Dr. L. said he was disgus
ted with Rich --that evidently he depend
ed on Losher
to do even his thinking
for him. He added that he should
vote agrinst transferrinl
this territory to Chicago
es it would cripple the ::innea_poli
s
I explained
to him that Gov. 'old
tried to induce Senator/Nelson
to intervene,thus showing
on his part a desire to
Play politics. He said pro
bably jold would say that they
did this to counteract
the Asconsin delegation. -ar .
ding also told me,Delano
had had a talk with Gov
. -.fold in Boston
he was decidedly against Ric
h for writing this letter,saying he
7ras almost obsessed over the matter.



•

221.
This P.L.. ha(1 meeting overktem. submitted by 1T.Y.Reserve - ank as to arrangement with Br'nk of England.

Warburg insisted we should elsk State Dept. if this

could be considered an un-neutral Act;

if they said :.o,he would vote for the

agreement altho' in many ways he did not believ
e B:nk of Engl -,nd was the proper
agency. I pointed out that the agreem
ent was not to r,pply until after the War
was over except one clause authorizinp
Tr.Y.BP,nk to put it into effect before.
All agreed that Board,if ppproving,shoul res
erve riht to give its approval or
d
disapproval as to its taking effect
before ,ar was over. Lost of us felt that
the Reserve -L'anks should begin to
buy Bills before
was over so as to have
a fund abroad against which exchan
ge could be sold in future if the tide turned
exchange should go against
I psked if Reserve -L'ank could lawfully guarus.
antee payment of Dills bought by
it as Agent of Bank of 2
- ngland. a--- rburg said
clearly Yes,as Eserve '?ank cou
ld under Act indorse these :Ails. I then asked
if gold ear-marked for us in Bank
of England could be counted as part of the Reserve banks reserve. Warburg sai
d our Counsel had in-Porm:lly said T.° and Delano
said he agreed to this
we must Proceed on assumption that it could
not so count.
I then pointed out that Gov
. Strong in his previous talk sRid pur
pose was
to buy domestic bills dra
wn vs exports to stabilize exchan
ge t while in Lem. now
submittedpit was pointed out
that this should not be done,as too
much risk,but
that the Bills bou
ght,should be foreign
Warburg said the individual ban
k
would buy the domestic
long bills
we could buy checks
cable drafts from them
to create balances
abroad which could then be
invested by Bank of ...ngland
in thei
Jills. He said this
would accomplish same pur
pose as if we had bought e.g
. cotton or grain bills
directly.
Warburg said the amall amount
we could put out in
this way--sr'y 25
millions—would have no eff
ect upon exchange; thct it
would be
fully to tie up our
mall supply of
Reserve money in such for
eiEn investments
which could not
count as reserve.
Warburg left no doubt in our
minds but that
he was bitterly
opposed to the AEreem
ent
hoped State Dept. would
advise agains
it t and that he
was willing to say
he would vote for it
if State Dept. consented
,
thinking it Imuld
turn it dom. He
evidently does not dare to
vote directly
against it
it would show
his hand. "larding
then asked my opinion. I sai
d I



222.
had originally felt that the Aeserve -L'anks were certainly very
near being Govt.
banks but tht our Counsel advised us :o
That I had accepted that ruling0
that we had thereupon put through the BOVIO,greement & later
the ,cnk of Holland L. I saw no rez-,son for not agreeing to this if we deeme
d it expedient,but
if any nember wanted to consult State Dept. as
to neutrality I would certrinly
offer no objection.

I strongly advised against deciding what we would do before

asking State Dept. as I felt we ought not to put upon
them the burden of overthrowing any decision made by us. Willi
ams felt we should decide question first
cf: then ask State Dept. Delano
agreed to this. 1illiams said not necessary to
approve this now E: moved postponement for
present. This 7as voted down---Alliam
1-iller alone voting Aye.
Thereupon it was unanimously voted that the Board
accepts the principle of the Proposed agree
ment & that with certain modification
--especially reserving ri,:;ht
in Board to determine whither it should go into effect before dar over,it should be
approved now,provided State Dept. interposed no
objection on ground of Deutrality r other
wise. Secy. licildoo,Gov. Harding
C.S,
11. appointed a Comm. to consult State
Dept.
In evening,/illiams said he had talke
d with Secy. licAdoo on telephone
he
asked that a copy of the vote of Board
whidh is to be submitted to State Dept.
with the Reserve Dnk. Ae1110. be sent
In him befnre our meeting with State Dept,
*Alliams feels such an arrangenen
t would be of great political injury if it became known during the campaign. I
agree as to this but feel tht r;reat weip,ht
must be giver to the Comm. repor
t or Governors and judgment of 1-.Y.directors
that this hould be entered into
now even tho no action taken under it for presenEven "arburg agreed thrt ifnot enter
ed into nowIthe '
Dank of England would be
not pleased ES the terms - ;ere very
favorable to us (T,
.
might not be able to get
as good terms in the future. Delano
was especially insistant as to this.
4 1ourg said also that the 71-iown Bros
. Agreement was guaranteed by Prench Govt.
altho we were told at the time
the 7rench Govt. merelv agreed that gold could
be
exported if necessary under it;
he said latter statement was not true;
.
Delano insisted that before
consulting Str,
te Dept. we should vote on the Agree




-ment.

223.
I thought this uas very foolish but prevailing opinion vrs contra.

.August 30. Wednesday.
A.L.

Alm

appointed Delp,no in Secy. ::.ts place.

ding to cpll up Secy.
Secy.

Hardinrr made oppointment with State Dept. for tomorrow

on

telephone.

In afternoon I cdvised H-r-

He did this in my presence.

theciught we should cancel our appointment with State Dept.

ked -ith him.

He said statement made by Curtis,Connsel

At first
I then tal-

of IT.Y.Bank th.t he

al)proved this Acreement,was not correct: be did not know enouqh about it to approve it; in any event,he thought it should not be approv
ed my; he at first op-

posed going to State Dept. although his letter,of which jilliams gave
me a copy
strongly approved this; finally he said perhaps it 7as better
to do it.

Later

Harding asked me to see Lansing in advance
& advise him to give no immediate ans
wer until he could carefully study the questi
consult with Cabinet. rilked
on
with Williams and he felt I ought not to do this.

ie prepared copies of the

vote that on principle we favored the Acreem
Pnt; vote was as follows._
Extracts from minutes of a special meetin
g of P.R.Board held 2.50 P.M. Tuesday,
August 29,1916.
uThe following resolution VMS offered by Ex Warburg & agreed
to by the Board;"
uThb it is the sense of the Board that an agreem nt substantially along the lines of th-t submit
ted by the P.R.Bank of :T.Y. should be
authorized. Provided,however,that the richt
to be reserved by the 1T.Y.Bank
under Sec. 9 of the Agreement to commen
ce operations before the conclusion of
the War be not exercised uithout
further =uthority from the P.R.Bovrd,and Provided further,th-t a comm. of n
shall first take up the matter with the Dept,
of State and report to the loard
thr,t the Dept. of State sees no impropriety
in its granting such authority".
Rich, 2.:-!.Agent wrote me letter
saying his letter of Aug. 16 was not intended af
a criticism of either C.S.H. or the
Board,but merely to inform us of the current talk etc. Told riller of
thiso rho said he would t once send his letter
to Rich saying he could withdr
aw his letter to me
Harding as he had suggested.
Liller strongly urged me to
agree to this and I finally said. I would
would not
answer Richts letter until he
had replied to Taller's letter. Liner said unless Hichts letter were withdram,poprd
would feel nbliged to censure him for i.



K.'"-e.