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The Papers of Charles Hamlin (mss24661)
357 02 001-
Hamlin, Charles S., Miscellany, Writings,"Memoranda Concerning The
Federal Research Board...," Diary Vol. 4, 19 Nov. 1916 — 22 Mar. 1919(PP.
224-289)(6 of 19)
CHARLES HAMLIN
PAPERS
Box 357
Folder 22-
Miscellany
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224.
VOLUME 4
1916, November
Since August sway on vac-tion and nothing special to note.
Prior to election V.arburg told Harding who told me that he was tempted
to vote for Wilson because of Roosevelt's speeches attacking German Americans.
Harding said Warburg told him that Delano told him that he should vote
for Hughes.
Harding said Delano was very piqued because VA.lson did not consult
him as to P hour law trouble. 'rs. Grant, Delano's daughter, told Mrs. Hamlin
at Mattapoisett that she had no use for Wilson—this was just after her father
had returned from Bar Harbor, and she had evidently been talking with him.
Mrs. Bayard told Bertie 7rs. Delano had told her that Mr. Delano intended
to resign if Wilson were elected.
Since election Delano has said nothing.
Warburg showed no pleasure 'et result of election--has never said how he voted.
Secretary McAdoo told me he was satisfied Warburghad voted for Hughes, no matter
what he might say.
Warburg one day said Seligman telephoned him from Lew York
just after the election to wire Hughes his congratulations but that he replied
that he was not yet satisfied that Hughes was elected.
A few days ago Willis said Tarbug had just told hiia he had written Governor
Steacy that it was inevitable that we should have a central bank--that the directors of the Federal reserve banks were not fit to manage them.
Last week, Nov. 13-20, Delano and Harding reported on purchase of a site
for Atlanta bank.
They said it was done in order to anticipate the election
end to prevent any future redistricting; that the site was not a proper one,
but was chosen because the directors were over influenced by Government director
Colonel Firoun, who owned property next to proposed site and who used his relationship to the President to over awe the directors, etc.
for a full meeting of our Board, which was agreed to.
I suggested postponing action
225.
Nov. 19, Saturday
Arrived at office 10:30.
Harding sent in word that Davidson of J. P.
Morgan & Co. was in his room and be wanted me to come in.
Went in and found
a meeting in full progress--evidently bad been in progress for some time.
Later I learned Davidson had telephoned Warburg two days before but no notice
had been given me.
Williams was not present.
Davidson said he asked no ruling or decision from Reserve Board, merely
wished to let them know facts as to proposed issue by British Government of
100 million exchange notes unsecured.
Said he believed them a safe investment
for our banks and that they would certainly be paid at maturity.
Long discussion—Davidson said British Goverment was spending 10 million
dollars per day in U.S.
Arranged to have only 10 million maturities each month.
Government had 500 millions in gold in Canada.
notes or trade woula stop.
Seemed
Said our Banks must take their
greatly shocked when intimation was
given
that perhaps better to have a recission of trade than to load up our banks with
securities which though liquid in form, might have to be refunded into30 or 40
year bonds.
Said our banks must see Great Britain through the war, as if Great
Britain went darn financially, U.S. would also.
}larding said if he meant that our
banks to secure what they had taken must invest more and more and should say this
publ;cly the courtry would be thrown in a panic.
Davidson said meant only that
in long run every war reacts on all nations, said thought war would not last
much longer.
Said Ketchener told him originally Great Britain wanted only 50
Plillions loan from U. S. and Yorgan firm agreed to take this at 2% and further
loans at 15.
Said he thoughtperhaps 500 millions more needed--admitted limit
might come when no longer prudent
for our banks to invest--if war lasted longer
than he expected, but we were zai. iro.a any such limit now.
226.
We adjuurned for lunch
12.d. Harding finally was instructed to say to him
that the Board had no intention of doing or saying anything as to these notes
for investments purposes by individuals
s very likely they were good, but it
could not favor such investments to any material extent by our member banks and
might have to issue a word of caution in this respect.
Harding later reportec7
he had seen Davison who said no present action was contemplated by him and said
he should like to confer with Board again.
as to any prospectus which might be issued
Warburg wanted Harding to warn him
as
to investors but this was dropped.
Harding early in week had a conference with Secretary Lansing who said he
wished Board would withdraw recuest for opinion as to purchase of exchange
through Bank of England but Board should feel free to take any action it pleased
in the matter:
also said he felt banks should go very slow in investing in
unsecured exchange notes which may prove unliauid.
Yov. 20, Monday
Fede-al Advisory Council meeting.
Harding told re before meeting he had seen Lansing who fully approved all
', had to say to Federal :Avisory Council.
He then opened 'eeting and put whole
-]uestion to counsel as to further investments of banks in foreign securities,-also as to any changes from sold importations, etc., etc.
Evening
Federal Advisory Council and Reserve Board dined with Warburg.
Nov. 21
Tuesday Advisory Council reported on our cuestions.
P.M.
Dr. Willis made draft of proceedings for the President.
It was so
startling as to special activity, :etc., it might have almost precipitated a
panic.
Board went over it and Harding & Williams appointed a correspondent
-ith power to make a new statement and Live it out.
227.
-
Nov. 24, Friday
Meeting Board.
Decided to send each Federal Reserve Agent a letter as to
proceedings at meeting with Feder71 Advisory Council especially as to feeling of
Board as to bank investments in unliauid loans especially proposed British exchange
notes—although latter not specifically mentioned.
Governor Harding referred to article in this A.M.
*New York Tribune announcing probable offer of such exchange notes.
Governor Harding called up Davison—New York.
He
was out but Lamont answered.
Governor Harding said had read Tribune--that Board supposed, when Davison lest
Saturday asked us for a further interview, that no action would be taken before
said interviews.
Lamont said Tribune article went too far.
Governor Harding
said Board might deem it its duty to write public statement as to danger of
banks investing in such securities.
Lamont said if Board were to come out
they might have to change their plan.
He said nothing would be offered before
December 1 and thmonly 10 or 15 million dollars for from 60 to 90 days as
British Government objected to 30 days.
Governor Harding said, inasmuch as
Davison did the Board the courtesy to call upon them and tell them the situation,
he felt it only proper to tell Lamont that the Board might take action.
Lamont asked that no action be taken ,
:ithout letting them know and Harding
said he would report this request to his colleagues.
Governor Harding, tell the President the situation.
It was then voted that
Mr. Glass called during
meeting and said we owed it a duty to the banks to warn them vs such investments
as they really amounted to almost taking part in the war.
P.M.
Board put letter to Federal Reserve Agents into shape.
Governor Harding
said had talk with Tumulty and said very important to have 5 minutes talk with
President over foreign credit situation.
could arrpnge this.
*
Tumulty did not seem sanguine that he
17o word was received from him during the 'lay and late in
It said banks would take 1 billion dollars.
228.
afternoon Board voted to send the letter.
After this Lamont telegraphed that his firm would announce toraorrow morning that the exchange note issue would be a limited one and not unlimited as
stated by N. Y. Tribune.
Yesterday I asked Comptroller for list of foreign securities held by
New England Banks--with a view to taking this up with the Federal Reserve Bank.
Nov. 25, Saturday
Yet early in morning and 'rent over letter or rather a statement for insertion in the Bulletin along lines of Agent's letter.
Warburg furnished a
draft which to my mind was offensive to Allies--it even complained of the
es
prospectus/of prior loans (presumably the Russian loans) as false and misleading and laid dawn rules as to what facts the offering bankers should state in
the prospectus.
It also admitted that conservatism in purchasing the British
exchange notes would cause our exports to fall off, but said that as to certain
exports (munitions, I suppose) it would be a good thing for the country.
insisted on stricking out all about prospectuses as unnecessary and also as
to the notes as investments from point of view of individual investors, and
pointed out that at the interview with Davison
many of the Board, especially
Dr. Miller, said they were a first class investment say up to 500 millions.
Delano pointed out that the reference to falling exports being beneficial
would give the embargo advocates a great weapon.
The President sent word he would se Harding at 2:30 and finally we put
the proposed draft in rough shape for the President to see.
3P..
Governor Harding said had seen President who said he agreed with the
Board that F'eat caution should be exercised by the Banks in investing in
these notes; that he had hoped the Board would make a public statement but he
229.
had not felt like suggesting it; that he would read the proposed announcement
and return it with suggestions Monday.
Warburg is in 7th Heaven of delight; while he talks fairly I cannot but
feel he is so prejudiced against the Allies that he will go to almost any extreme to injure them and this feeling has made me very cautious as to what we
should say and insistent on confining our remarks to the Banks and not to the
investing public.
If we were to issue the statement as originally drawn by
Warburg, I am confident it would have precipitated great confusion and trouble
financially.
Nov. 27, Monday
Board met 11 A.M.
Governor Harding read confidential letter from President
stating that he had read our proposed statement as to the British Exchange Votes
and fully approved it.
The only suggestion he would make was that it was not
strong enough and could be made more positive; that he believed it most dangerous
for banks to invest in this kind of security as it was no liquid and would prove
very embarrassing if there should be any change in our foreign policy.
Board then amended the statement to make it stronger.
Governor Harding suggested an addition as to clear statement of facts and
conditions in prospectus and advice to private investors to obtain all data, etc.
Question raised whether advice to private investors was responsive to President's
criticisms.
Governor Harding said yes it clearly was:
pertained to private investors as well as to Banks:
that President's remarks
that he specifically men-
tioned that Kuhn, Loeb & Co. had brought a loan for French cities and soon would
bring out another for German cities and that prospectus failed to show the people
in these cities were subject to heavy nat'ltaxation; that he--the President--had
obtained figures through our Ambassador in London showhing National strength of
230.,
allied countries or Great Britain today as compared to period following Napoleonic
Wars and that the figures showed a stronger condition today, but that he was not
satisfied with them as they failed to distinguish between liquid and unliquid
resources.
Governor Harding also said 2res1dent said if he personally advised investors
against taking these securities, it would be claimed he was unneutral and that
he was glad and hoped the Board would so advise.
Governor Harding said our
reference to private investors were more moderate than President would like to
see adopted.
To my mind the President is contemplating trying to secure peace and this
would explain his reference to a changed foreign policy in his letter.
I feel
that the reference in our statement to private investors was unwise--however, my
colleagues could not see this, and Governor Harding strongly impressed on us that
the President wanted such a statement made.
We voted that Governor Harding should send T. P. Morgan & Co. a telegram
late in the afternoon merely stating that we had issued a statement for tomorrow
mornings papers.
This was done for reason that Lamont asked Harding to let him
know if such a statement were to be issued.
While we felt we were under no obli-
gation to communicate with him, yet we felt we should be scrupulously careful-in view of the statement to give them no cause to feel we had not treated them
fairly, especially considering that Davison come to us voluntarily and told us
his plans.
Nov. 29, Wed.,_6 p.m.
Sir
Cecil
over to see me.
Spring Rice called me up and asked if he could come right
I, of course, said yes and he came over.
He was very much
excited and said he might as well make a clean breast of it--that there was
tremendous excitement in England and France over the Reserve Board's statement,
that it was reported then that it originated out of a German plot to induce
231
the President to mediate for peace--that Warburg and Kuhn, Loeb & Co. were at
the bottom of it--that it was even said over there that this was a German
alliance with the IL S. and the submarine activity was being carried on with
the collusion of the U. S.--that, of course, he did not believe this but merely
was telling me what was being said over there.
I at once said to him that the Reserve Board had agreed to say nothing on this
subject except through Governor Harding but that I felt I could say to him as a
very old friend that the Reserve Board--as it stated in its published statement-was not referring or even thinking of any foreign government but that it was
purely a banking, internal question--that it was just as if an engineer of a train
saw mist some distance ahead on the tract and consequently slowed down the engine.
I advised him to speak to Secretary Lansing and ask him if he could have a talk
with Governor Harding and that I felt sure if Secretary Lansing asked him he would
gladly talk with him.
Be said Secretary Lansing was to dine with him and he would
tell him of these rumors and ask if he could talk with Governor Harding.
I said
if Secretary Lansing gave this permission I would gladly speak to Governor Harding
and ask him to see him.
I said that the matter of liquidity for our banks was
first pressed to our attention by the statements in connection with the French
credits in which Kent and others invited Banks to purchase, pointing out that
ultimately the money could be procured from the Federal Reserve banks and that
we had to take notice of this--I did not tell him in what manner we took notice.
He said undoubtedly such talk was the result of German influence.
Davison could tell him probably all about this.
I told him
He then spoke disparagingly of
Davison--said he had all the aggressiveness of the older Morgan
without his
genius and that he was always inclined to slap over.
I also said that the New York Tribune stated that probably a billion dollars
of these exchequer notes would be placed in the U.S. and the Board felt it was
232.
incumbent upon it to warn the Banks to remain liquid.
He said that he knew- Warburg and Kuhn, Loeb & Co. were plotting as above
because of letters
his government had intercepted.
He also spoke of a prominent
Frenchman--Caelloux--I do not remember his name, who was working for Germany--that
he had almost succeeded in getting a treaty by which France was to cede colors
in return for Alsace Loraine; that this man was sent to South America but had
returned.
He said he should cable his government that the Reserve Board issued its
warning purely as an internal banking matter.
I at once said to cable nothing
as a result of my talk as I had no right to speak with him and had only said what
our statement said.
He said "I had already reached this conclusion before seeing
you and it is my own opinion which I shall cable."
I said go to Lansing and he will, I am sure, talk with you freely.
He
said Lansing knew nothing--he only spoke as President Wilson ordered--that since
appointment he had never told him anything, that he merely took orders, etc.
I said he must see Lansing; that he would be offended and justly so if he talked
with others and not with him.
I asked if he had any objection to my speaking
to Governor Harding about this and he said he had no objection.
Finally as
above stated he left saying he would see Lansing that very evening when he dined
with him and would let me know as to seeing Governor Harding.
Nov. 30, Thursday
Telephoned Harding and met him at Metropolitan Club--told him whole story.
He spoke of several papers, especially Philadelphia Ledger, which said Warburg was
responsible for our circular.
This irritated him very much.
He said the Presi-
dent told him at his interviews that our relations with Great Britain were more
strained than with Germany.
We agreed that Delano should be told and I called up his house and found
he went to New York last night not to return until Sunday.
We agreed that he is
233
in all probability had gone on to confer with Morgan & Co.
or myself that he was going.
Be never told Harding
Governor Harding said he gave (Delano) much informa-
tion to a New York Times correspondent over this matter last week.
I think, how-
ever, he said he was going to talk with him.
12 Noon
Sir Cecil called me on telephone--said had talked with Lansing--he had
read papers' items and was indignant--said would be very glad for him to talk
with Harding and he would at once call him up.
Dec. 12 Friday
Governor Harding received letter from President saying he was much pleased
with the Reserve Board statement.
Governor Harding told me Sir Richard Crawford
called on him yesterday and they had a very satisfactory talk.
P.M.
Word received that Morgan had given up Exchange loan--telegram to this
effect from Lamont.
Earlier in day also wired that report in New York Sun that
his firm defied the Reserve Board was utterly unfounded. Later Governor Harding
said Polk, Counsellor of State Department, told him Sir Cecil and Crawford had
called and asked that Reserve Board make some further statement to remove the
injury to British credit from our statement and that he had seen representatives
from the New York Sun and other papers with whom he went over the situation in a
guarded way and he thought this would be sufficient without any formal statement.
Evening
Dined with Justice McReynolds
December 2, Saturday
Conference with Glass.
Lunched with Dr. Miller.
Glass said our Amendment
did not require Agent to hold 40% gold vs Reserve Notes and also paper up to
100%.
We assured him we so intended and he said if this were clear he would not
oppose the Amendement as it really merely reduced the security (reserve and
collateral) from 140% to 100%.
234
Secretary of State told Governor Harding that Sir Cecil and Sir Richard
Crawford had called and were still very sore over injury to their credit because
of our statement and wanted Board to issue another statement.
Agreed Crawford
should see Governor Harding and state what he wanted us to do and Board would
consider it Monday.
Dec. 31 Sunday
Conference at Dr. Miller's house.
C.S.H.
Present Glass, Warburg, Dr. Miller and
Long discussion as to Federal Reserve Notes as reserve money.
Finally
Miller said he would support this if law were fixed so as to authorize Board
to require higher reserve than 4CP°.
Glass is still doubtful.
Glass on principle
said he would agree to having all reserves carried in Federal Reserve Banks and
then
money could be in any form Banks wanted, but impossible to secure this
In short session of Congress.
Warburg said he would accept this.
Glass said
he did not fear giving Federal Reserve Board greater powers,--that as far as
Board was concerned the System was a central bank.
Miller was astonished at
this.
Dec. 4, Monday
Meeting Federal Reserve Agents.
P.M.
At lunch--Perrin, Curtiss, Wells.
Governor Harding said British Ambassador and Sir Richard Crawford were
entirely content to have no further statement from Reserve Board.
Said the
proposed loan on consideration did not meet their approval as if few notes
were taken would do not good and if many taken would put British and French
governments at mercy of American banks.
6 P.M. Governor Harding came in and said Comptroller had just told him he was
about to issue another circular on condition of banks which repeated all statements
as to enormous excess reserves, etc. of other statements.Warburg and I agreed that
such an optimistic
i,;tement
st,
/-- at present time would only do harm and asked Governor
Harding to say so to Comptroller.
He came back and said Comptroller insisted
235
on putting it out.
do it.
Governor Harding and I went to him and begged him not to
Comptroller said he had wired McAdoo who said he saw no objection to
issuing it.
Comptroller then called up Secretary of State and read it to him.
Lansing
said he did not object and then Harding told him we were against it, that it
would simply enrage Great Britain--they would say if condition of banks so sound,
only purpose of Board in issuing statement must have been to injure British and
French credit.
Lansing then said it had better not go out.
Comptroller argued
with him and even asked if he (Comptroller) could not show it to British Ambassador!
Finally I told him in my opinion it would only do harm and would put Board in a
ridiculous position--to issue a note of warning one day and almost the next day
to have Comptroller issue such an optimistic circular.
Finally Comptroller agreed
not to put it out at present.
Among other things Comptroller said in circular in view of extravagant
statements as to holdings of foreign securities, it was gratifying
to note that
only 300 millions in foreign bonds and acceptances were held!
We do not agree with statements in circular--the great development is simply
a very extraordinary expansion based on imports of gold.
Furthermore, we had
warning from Wing of let National Boston that many banks had even invested in
foreign bonds, including speculative purchases of Russian roubles.
300
millions total may not appear large but undoubtedly many individualtanks have
over-subscribed, not to mention State Banks and trust companies.
Dec. 5, Tuesday
With Federal Reserve Agents all day.
Harding.
Lunch:
Walked home with Governor
He said Warburg and Delano continually urged him last summer to
go to President to demand rotation, and that finally he agreed to go
236
on express condition that they should tell the President that in their opinion
I should be reappointed to the Board.
He said that when conference finished
he was not quite satisfied with the way they spoke of me to President, so he
said he hoped President would clearly understand they believed it to be for
best interest of the System that I should be reappointed.
Speaking of interest of Delano and himself with me after their talk
with President I asked Governor Harding if my memory was correct that Delano
said he was a candidate for Governor--he said he thought Delano said he was
not a candidate, for he had previously said to them that Warburg, having next
shortest term, should be made Governor.
He said, however, he thought that
Delano felt that Warburg being a German would not get it and that he Delano
would.
Dec. 11, Monday
Governor Harding said Williams sent his proposed announcement to the President saying McAdoo had wired his approval and asking if he had any objections
to his publishing it and that the President wrote Williams not to publish it
as he wanted first to consult McAdoo about it.
Dec. 14, Thursday
The other day, in discussing Delano's proposition of having State banks
associate members of Federal Reserve System, Mr. Warburg, in answer to a question from me, reiterated the statement that he would not object to all the National
banks leaving System and again entering as State banks.
In A.M. Governor reported conclusions as to questions we put to them.
In
Hardings absence Warburg presided and made bad impression by cross examining
and objecting to recommendations he did not like.
When Governor Aiken reported against the associate member matter, Warburg
heckled him and
3 times insisted that "we" (meaning Board) approved of the plan,
utterly ignoring fact that I had vigorously opposed it.
Finally I broke in and
237
stated my views on opposition. I said time had nearly come to tax checks in
Interstate Commerce and thus make them come in.
et als expressed unqualified assent.
Governors Aiken, Wold, Miller
Aiken said the National banks in New England
would support us—they all felt Board would be stronger if he lead the way in
this matter.
Dec. 19, Tuesday
Board voted to authorize Federal Reserve Bank of New York to appoint Bank
of England as its correspondent and Agent and to open account with it and for it.
Warburg fought vigorously to prevent every action under the Agreement until the
war ended but Board voted otherwise.
The final vote was unanimous except that
Warburg did not vote at all.
Dec. 221 Wednesday
Conference with Secretary over Amendments--he refused to agree to redemption
of Greenbacks--said he hoped later to reform our currency in a systematic way.
December 26, Tuesday
Morning papers had account of our permission to New York Reserve Bank to
appoint Bank of England as Agent and foreign correspondent.
this got out.
Did not know how
At noon McAdoo came to my office and said some members were in-
dignant at its publication but did not say how it got to be published.
Secretary
McAdoo told me the President knew nothing of the publication before it was issued
by Harding.
I believe, however, it will help to allay the feeling against him
because of his Peace letter to the Allies.
Walked home
with Harding who said McAdoo called him up Saturday night and
said it ought to be published as secrecy in such a matter would injure the Board;
McAdoo then asked him if he had general authority to publish it.
Harding said
yes under resolution of Board of last year (when C.S.H. was Governor) giving the
Governor general authority over publicity in default of explicit instructions
238
from the Poard.
Harding said he sent for Willis Sunday A.M. and they prepared
and gave out the statement.
office most of the day:
Harding said Miller was very angry and was in his
that Delano at first was not pleased but later took it
very well; that Miller said Harding should have declined and Harding said suppose the Secretary published it on his own account?
have objected and settled it with the Secretary.
Miller said--then we could
Harding said he did not want
to bother the Board on Christmas Day and asked Miller where he was at noon that
day.
Miller said he was entertaining the German Ambassador at lunch. The Sunday
before he entertained at lunch the French Ambassador and Secretary Lane.
Miller told Bertie they stayed until 5 P.M.
Mrs.
Harding said Miller said he was
the only member of the Board who was in a position where he could afford to be
Neutral!
Harding said also Warburg called him up from South Carolina very angry
and asked by what authority the statement was made, and was somewhat abashed
when Harding replied--I gave it out myself!
Harding said Deputy Governor Tremain of New York also called him up and
was very much disturbed—said it was agreed the Agreement with the Bank of England
was to be secret and asked if Harding had consulted Steacy .
Harding said Not
That the Board had not mentioned any agreement but had
merely stated to Public that it had permitted the Bank to appoint Bank of England
as its Agent; that it would have had to state this in its coming report to Congress
and felt it better to state it now.
Harding also said the New York American had an interview with Vanderlip who
said he had known of this contemplated action and approved of it but could say no
more now.
Harding said he believed all the favored New York bankers knew this from
Steacy and that the Board was bound to let the public know it.
(See page
)
239
In the morning while riding to Department passed British Ambassador.
The
sun was in my face and I did not recognize him until he had passed although he
looked at me closely.
Later I telephoned from my office and told him I was really
more polite than I seemed--he said he had passed me.
He then said he wanted very
much to have an evening with me and I suggested a family dinner.
He asked me to
ask Bertie to telephone Lady Spring Rice and any date that they would agree on
would be most pleasing to him.
Later Bartle and Lady Spring Rice agreed on
Saturday of this week.
This P.M. Delano came in to talk about Fleming.
He said he ought not to
be reappointed but that he had no one to offer in his place.
Said his past
political career was unsavory and he should not have been originally appointed.
I told him when appointed I did not even know his politics--he said this was
true and none of us know it:
that Warburg was really responsible as he gave
Board a number of telegrams from bankers strongly endorsing him; that he did not
even know that Senator Reed was his friend until after his appointment.
on behalf of Thralls.
Reed called
I reminded him that I heard of the attack on Fleming only
after his appointment and that Miller and I voted against his designation as
Deputy Federal Reserve Agent.
girst as I had told Mr. Flower(whom Delano got to
come on from Kansas City two or three weeks ago) the question before us now was a
different one from the original appointment; that slower told
e he had no charge to
make against Fleming's performance of his duties as Director; that so far as he knew
they had been faithfully performed; that Kerning was by all odds the ablest man on
the Board; that his objection was as to his past political record; that Flower was
as bitter towards Miller as towards Fleming; said Miller caused trouble every time
he opened his mouth; that the bankers had no confidence in him; that he absolutely
dominated the Bank.
I said I believed we should carefully consider whether there
should not be a change in future in all the chief officers of the banks; that to refuse
to appoint Fleming would be a great victory for Miller and no one could be found
240
who would not be dominated by Miller; that the status quo should be maintained
until a clean sweep should be decided upon.
I said, to my mind, the question
was as follows:
1. Fleming has done faithful work as director;
2. He is the ablest man in the Board;
3. He is the only man not dominated by Miller;
4. While the attacks on him might well have been considered as to
propriety of his originsl appointment, a very different issue
was now presented.
Railroad speech
I added that Delano in his / under these circumstances would see the new
light in which the matter was presented.
Delano said if Billie Barnes in New York had been the Director, he would
not want to reapppoint him even if he had done faithful work and that Fleming
was the Barnes of Kansas City.
I said that to me the issue was as outlined;
that if we were ready to remove Sawyer and ask Directors to remove Miller-then the whole question could fairly be considered.
He said this could not be
done now although he agreed it ought to be seriously considered in the future-that we had no authority to remove Miller.
I said a word to the Directors would
probably settle the matter and we could then ask Fleming to resign also if
we believelit desirable. He was bitter at Dr. Miller who had given up Kansas
Committee
City
/
and exchanged for Minneapolis when he found matters not working
well.
He also sent for the files concerning the circular of Flemings Insurance
Co. advertising fact that Fleming was Deputy Agent and was making a trip over
Oklahoma.
I agreed this was improper and in bad taste but pointed out that
Delano in his letter to Fleming about it merely questioned the good taste of the
circular.
Delano also read Flemings reply which admitted that the circular should
not have been sent--also a private letter from Fleming pointing out that a corporation in which Miller was a director was also advertising Miller as Deputy
Federal Reserve Agent or Governor of Reserve Bank.
241
Delano then said--what about Senator Owen?
I said presumably would do
anything possible for him but in this matter must do what is best for System-that Owen would ask nothing more; that in any event I believed Miller had persuaded Owen to protest to which Delano agreed.
Finally I said I suspected that
banking politics were at the bottom of this.
Dec. 27, Wednesday
Dr. Willis told me Deputy Governor Tremain was very impertinent to Harding-said he knew nothink of Bank of England matter until he read it in the papers;
showing he knew about it.
that Harding wrote him
Willis said he sent an official
copy of the vote of the Board to Jay; that Curtis kept it secret from Tremain and
sent it to Jay who was in South Carolina; that he suggested to Governor Harding
that he (Willis) prepare a letter to Tremain but that Governor Harding replied
he would do it himself but that he forgot to do it.
Allen told me today--as to Vanderlip interview (see supra) that some time
ago Vanderlip gave a talk in Washington to Coin. Club at which Allen was present
and that he spoke to him (Allen) about the Bank of England Agency but that Allen
avoided giving him any direct answer.
Voted today to elect Fleming a Governor director of Kansas Bank.
matter in great detail.
Went over
Secretary McAdoo felt not to appoint him would be a great
victory for Governor Miller and for Kemper who had said his trust company would
enter System only when Fleming left it.
Harding said Governor Miller told him that if Fleming were dropped he would
arrange to have Cross of our Division,temporarily assigned to the Kansas Bank,
made a Deputy Governor.
not an office broker.
Harding was very indignant at this and told Miller he was
Finally McAdoo said he would be glad to have Kansas Com-
mittee report on while situation and if satisfied of the necessity, he would vote
to remove the Governor Federal Reserve Agent and Fleming as well.
Delano and Miller
voted NO; MdAdoo, Wins. Harding and C.S.H. voted Aye; Warburg was away.
242
Dec. 28, Thursday
Governor Harding told me today that last year when we had the redistricting
fight and the committee proposed the merging of Boston in New York in one of
their tentative plans, they had no real intention of wiping out Boston but put
it in the plans merely for the sake of "jolting" me.
Harding said Senate Committee
heard of plan to consolidate Atlanta and make New Orleans the site of the Federal
Reserve Bank and bitterly protested; that Harding told him he should insist in
cutting down to the minimum of 8 and that there would be a
Congressmen who would defeat any cutting down.
combination of interested
Harding said this was his only
reason for including Boston but that the other members were glad to include Boston
in order to get a hit at me.
If Boston were annexed to New York the question would arisewhetherI was not
ipso facto put out of the Reserve Board, as there would be two members from one
district.
I had always suspected this was their motive and this remark of
Governor Hardingts proves it.
Governor Harding received a very bitter, nasty letter from Warburg this A.M.
In it he attacked McAdoo bitterly assuming that he had ordered Harding to issue
the notice as to the Bank of England; said that last year he had "instructed"
C.S.H. to ask opinion of Attorney General as to redistricting; that it was an
insult to the Board; that the matter must now be settled or that he should resign,
or words to that effect; that such announcement would embarass "our English friends",
etc. etc.
Be also enclosed a telegram from Jay,who was in the South, asking
Warburg to procure an explanation from Governor Harding of his action as Harding
had told him the matter would be kept secret.
Governor Harding showed me his
reply to Warburg which was very emphatic as Harding was very angry.
In it he
said if Tay asks him to explain his official act he would get into trouble.
I
suggested that he should say that he assumed that Jay would not undertake to
demand an explanation from him as to his official acts, and he agreed to make this
243
change.
I also spoke to McAdoo--he was very indignant and said he should
tae the matter up at the proper time.
Governor Harding said he never gave
any announcement to Tay as to secrecy.
Governor Harding also said that
before giving out the report he saw Sir Richard Crawford who was delighted
at the suggestion and fully approved it and further said the Ambassador would
at once cable it to Great Britain.
Governor Harding said he was satisfied
that the President wanted this announcement made in order to head off the
British hostility to William's peace suggestion.
Dec. 29
Fridg
Governor Harding told me McAdoo wanted Board to reconsider election of
Jay as Federal Reserve Agent but he had he thought satisfied him that this
was not wise.
I
Saw
Secretary and we took lunch together.
I explained to
him that Warburg was really responsible for conditions in New York Bank and
that Harding suggested a new rule that no member of Board should serve on a
committee for the Reserve Bank of City in which he lived.
enthusiastically.
He favored this
Secretary McAdoo also said he should inform the Board
that he should exercise his right to give out interviews at any time in any
matter concerning Reserve Board of which he was an ex officio
member.
I
finally suggested that it was not necessary for him to tell Board he had read
Warburg's letter as it might embarrass Governor Harding who had just discovered
that this letter was marked "private".
Be told Governor Harding this and he
came in and thanked me for what I had done.
I advised him to tell Warburg
tomorrow--be is to be in town for two hours on way to New York—that he was
considering whether it was not his duty to spread this letter on the files of
the Board and this would put Warburg on the defensive.
He said he would tell
Warburg, of course, that he had stated to the Board that he bitterly objected
to the newspaper announcement.
244
Secretary McAdoo said he had almost made up his mind that the Board
should be reconstituted and disloyal members removed.
He said that Miller's
position remained for him to decide and had for a year.
I told him that
British Ambassador was to dine with me and asked him to join us; he said he
could not but asked me diplomatically to let him know that he--McAdoo-- was
not pro German and to tell him how he had helped in the Brown Bros. securing
credit; also to speak of the unfair position of the British press.
Be said
young Spring Rice (nephew of Ambassador) had been quoted as saying many bitter
things about the Administration.
He told me to assume a very friendly attitude
towards Great Britzin, which he, in fact, felt, although he could not understand the bitter feeling of the British people.
this.
I said I would take care of
I spoke of the change in feeling towards him of Bankers and said I
hoped he would avoid any more clashes with New York especially--that I wanted
him to get on a pedestal--especially in view of the many suggestions of his
name as a presidential candidate.
a thought would distress his wife.
Be said he had no such ambitions--that such
He said confidentially he had made up his
mind not to remain in the cabinet but I told him to go slow on this.
Be said
his position would be misunderstood and everything he did would be charged to
Presidential aspirations.
I told him he was a picturesque character and that
he would certainly be prominent among those to be considered for President.
I told him what Governor Harding said--that last year Boston was suggested for
merging in New York merely to embarrass me--that under the Act if this were
done, either Warburg or I would have to leave the Board.
He quickly replied
that under such circumstances, Warburg would be dropped and I retained.
Be
spoke very feelingly of a charge about that he had made millions out of his
knowledge of President's peace note and said he was trying to find who was
responsible for it and he would put him in jail.
245
E2I:2111
"
1
/3()
Warburg got back but did not appear at the reception held by Secretary
and Mrs. McAdoo in the Department at 11 a.m. and Governor Harding said he had
not seen him.
Eveni_nE
British Ambassador and Lady Spring Rice dined with us.
Irade clear to
him that Secretary McAdoo was not a Pro German--he seemed however to have no
doubt as to this.
He spoke at some length upon our gold exports to Argentine;
he said merchants there insisted upon cash for sales to United States and thought
we should try to stop this; he said he had a report on this which he would show
me.
He expressed hope that United States would get all the trade which formerly
went to Germany.
He seemed very piqued at Davison whom he thought had botched the matter of
the British Exchange loans; said he had no judgment; that neither he nor Sir
Richard Crawford were in any way consulted; if they had been, they would at once
have held up all negotiations until Federal Reserve Board was satisfied.
He
said he knew the whole story of our announcement (evidently from Harding) and
felt we had done the right thing
Spoke with almost contempt
and that we could not have done otherwise.
of Davison's talk at Chicago where he said Davison
said 2 billions would be subscribed by American banks and bankers.
Morgan came down to explain situation to him.
Also said
Said Morgan was more tactful
but that his firm should not have had charge of these negotiations as it was
too identified with Republican politics.
us in slighest degree.
I assured him this had not influenced
Spoke of Bank of England agency with enthusiasm--said
It was considered a most friendly act on our part; reason British papers had
not said more about it was that they were controlled by Jewish bankers who held
control of exchange operations in Europe; that the arrangement would cut out
246
the middleman and would be of great benefit to both countries; said I need
have no fear but that Bank of England would accept agency.
Spoke of the war:
said danger was that Germany might suggest peace terms
for express purpose of splitting France off from Allies and give France what
she wanted to make the people insist on peace
that France was weakened and
had already just shortened his lines and Great Britain had extended hers.
I spoke of bitterness of English feeling and he deprecated this; said
English Government was most friendly and appreciated that we could help her
more than if we entered the war.
Said that Lord Bryce had unconsciously made
British people think that his personal friends in America were perfectly representative of whole American people; he fully appreciated the American people
as a body wanted to keep out of war.
At dinner he said CardinAl O'Connell had
made bitter speeches against Wilson and that these were fully distributed among
the Lutherans in the West and had done much towards election of Wilson.
I spoke of Great Britain's attitude towards us in Civil War; he said Great
Britain was then in danger of a Democratic revolution and that Seward and Sumner
knew this:
that Seward instructed our Minister to withdraw if Great Britain
offered mediation and told Great Britain that if a clash arose between United
States and her, there would be a British revolution which the British ministry
knew to be true.
Said that when Gariboldi visited England in 1862 he aroused great enthusiasm
and that British Ministry arranged for his entertainment at country houses and by
the Queen to keep him away from the large cities especially in the North where it
was feared a revolution might break out.
Russian Japan Peace Treaty.
He gave me the whole history of the
Said that Japan wanted peace and that Russia feared
an Agraiian revolution; that japan asked Roosevelt to intervene; he declined unless
Emporer should write him directly and that such a letter was in existence.
247
Roosevelt then approached Russian Emperor and said as originator of Hague
Conference he could not decline to consider Peace:
that Emperor was sure Russia
would ultimately win (which he said was certain) but said would never agree
to Peace if any territory were to be annexed or indemnity paid,--but on this
understanding would take up Peace negotiations; that he was helped in this
view by cables sent by Tapan to the officers in Europe saying they would never
consent to peace except on condition of (a) annexation of territory; (b) indemnity;
that
apan knew Russia had its code and would thus think no harm in talking peace
as nothing would come of it; that Emperior of Russia accordingly agreed to peace
conference; that suddenly Tapan abandoned indemnity and territorial annexation-as she had intended to all along--and peace was secured.
Said that Emperor of
Germany thought he had secured it but 'tat he had nothing to do with it.
Speaking of France, he said Cailloux had tremendous power over many individuals
in France—knowing their scandals and he feared if Germany made criticisms to
France, Cailloux would have power enough to split off France from the Allies.
Be did not seem at all sure that Germany was exhausted—he thought it was a
deep political move.
Speaking of Belgium, be said no one could justly claim that U. S. should
have intervened—but he thought Wilson made a mistake in not using some "high
falutin" expressions by message or otherwise, indicating United States sympathy;
that if he had done that we should have been saved much trouble.
He asked me whether Dr. Miller was Pro German; I said we never discussed
these matters in the Board; that
at outset he was supposed to be very Pro German
but that lately I had heard he was Pro French.
Be said Bank of England had an arrangement with Egypt very similar to that
proposed by Reserve Board for Bank of England.
248
1917
January 2, Tuesday
Board voted to permit Schwab and Harriman to be interlocking directors of
Guaranty Trust Co., Harriman N ational Bank, Empire Trust Co. and Chase National.
Miller and C.S.H. voted No; Harding, Warburg, Delano voted Aye, on Harriman's
petition.
On Schwab petition--C.S.B, only, voted No.
Tanuary 2, Wed.
Discussed New York Federal Reserve Bank condition.
Governor Harding read
Vice Governor Tremain's questioning of authority of Reserve Board to announce
decision as to Bank of England.
Warburg said wise to make announcement but if
he had been in town would not have been pleased if he had not been consulted.
Delano pointed out that Bank first had notice by reporters coming to office.
(They must have read this in morning papers, however.); that we had made error
in marking our letter to Tay confidential; said he believed, however, Board
must turn Tremain down for disputing our authority.
Secretary McAdoo said never would consent to secrecy in such a matter-would have injured Board.
Warburg said he did not tell Vanderlip of this. (Be, however, went to
Denver to see Steacy with Vanderlip.)
All admitted that low York Bank was not running well and Secretary McAdoo
said he felt Governor Strong should resign as it was evident he could not
return for a long time; that he was a wealthy man and could afford to resign;
that he would be glad to vote to increase salary so as to fit the best man for
the place.
All agreed--cxcept Warburg--that the Bank rather despised authority
of Reserve Board.
Governor Harding said Tremain told him that he had been
apologizing for Board for last 30 days--that he also objected to our notice as
249
It was felt that it would be wise for the Bank to see more of
to Acceptances.
the members of the Board.
Warburg said that although he was on the New York Committee many other members had "butted in" and written letters to New York bank,--that Delano had
written more of such letters than all of the other members.
was on the New York Committee, I felt
Inasmuch as Delano
this was a gratuitous insult.
Returning from lunch picked up Delano, he was angry at Warburg's remarks
and said he believed that Hardings proposed resolution against any member serving
on Committee of Bank in his home town, was a wise one and ought to be adopted.
Riding home with me at night Harding said Secretary had written Miller and
Warburg that henceforth his private elevator could not be used by them; that
Miller took it all right but that Warburg at first blew up in the air.
Governor Harding after talk with McAdoo and myself wired Peabody to come
down tomorrow. Peabody replied that he could not but that Bank had appointed
a committee to come dawn next week.
Tan. 4 Thursday
Delano said Lamont of Morgan& Co. called up Governor Harding and asked
if rumor was true that Board was to issue a new warning as to Exchange Notes
or liquidation and that Harding said No.
Lamont who said rumor that Morgan
said American manufacturers had lost 100 millions of contracts because of
Board's warning was not true; that that amount had been lost but for a variety
of causes viz:
preference to Canadians, work done at home, etc., etc.
W. E. Curtis called--said represented Committee of Munitions Manufacturers-that they were losing valuable contracts--must soon discharge vast body of
laborers--that trouble was that Government was supposed to be inimical to a
general British loan in U.S.
I said that was a matter for State Department--
we had nothing to do with it--that I did not see why manufacturers could not
250
take obligations of British Government at least in part payment—he said they
had never been asked to do this.
I said investors could do as they pleased--
we merely felt Banks should not invest in securities which might later be
funded into long time obligations.
He said he would see Lansing and I called
Lansing up who said he would tell him what Curtis had to say but would make
no reply.
Tan. 5, Friday
Board voted to permit Armour, Shedd and Mitchell of Chicago to serve as
interlocking directors with certain Chicago and New York Banks.
C.S.H. voted No.
Warburg, Harding and Delano voted yes.
Miller and
The directors were
Informed that Board gave decision pending further inquiry as to competition
of these banks in loans, open market purchases of paper, etc, in other parts
of country.
P.M.
W.E.Curtis of New York had conference with Governor Harding, Delano and
C.S.H.
Repeated what he said to us yesterday.
Governor Harding and Delano
showed danger of banks investing in funds, etc., whether domestic or foreign.
Delano said we had bought two billions of our securities held abroad and that
our banks and trust companies, national and State, still held 1.2 billions
of those.
Governor Harding said inadvisable even for investors to load up with
such securities at a time when peace seamed somewhat near which would bring
about a change in our foreign trade--especially in Munitions.
Governor Harding
very inadvisedly told Curtis what Davison said as to our being tied up with
Great Britain.
We finally told him these questions of neutrality were for the
State Department to settle.
He said he had seen Lansing who told him the
original statement of the State Department, issued by Bryan, as modified by
him, still stood and would stand until changed by President when special cause
shown.
251
Evening--Dined with Aset Sec. and Mrs. Roosevelt.
Jan.
6, Saturdu
I am satisfied that President Wilson wants to put obstacles in way of
new British loans in U. S. in order to make Great Britain more inclined to
consider Peace terms, and, I trelieve in the whole, this is not an unwise step.
Foreign nations have lost their heads and Wilson is right in doing everything
he can to induce Allies to consider whether, after all, they cannot achieve
practically all they are fighting for now without years more of exhausting and
devastating war.
Jan.
9, Tuesday
In evening Geo. Peabody called--said the Bank of England cabled at once
to New York Reserve Bank on hearing of Board's announcement, but did not say
what the cable contained.
Also said Tredure 0oudert told him that Davison
said that Reserve Board agreed to let him know before putting out any warning
as to Exchange Notes, and I think he said--agreed to show him in advance anything
before it was put out. I told him to see Secretary McAdoo early in the morning.
Tan. 10, Wednesday
Peabody, Woodward and Towne representing New York Reserve Bank directors met
Board.
done.
Secretary McAdoo asked for a stenographer to take proceedings which was
Town spoke for committee in 2 matters--1. Bank of England; 2. Method of
sending letters to Federal Reserve Agent instead of to Governor.
At first Towne was quite vigorous in his statements and intimated almost
In so many words that some of the directors might resign.
Secretary McAdoo be-
came angry and said he thought we could secure others to take their places; also
that while the Board would listen to any suggestions it would not discuss with
the committees the propriety of its official acts.
252
As record will show, Woodward said the directors cabled the Governor of
Bank of England expressing their regrets at announcement of Board and later
received a very courteous and reassuring reply from them.
Peabody then asked
if the Bank of England did not first cable asking what the announcement meant-which cable crossed the New York directors' cable.
I think Towne said Yes.
None of them mentioned any cables until Harding asked the question as
to whether any had been received.
Towne in response to request of Secretary
said the directors would send us copies of all cables.
(See stenographic
record for complete account.)
Peabody dined with us.
I cannot understand why he did not tell me the
whole truth about the cables.
He said I could use the statement made to him
by Coudert who said Davison told him the Reserve Board had promised to call
him on the telephone before any announcement was made and that he had told
this to Comptroller Williams this A.M.
Jan. ll, Thursday
In discussing minutes of yesterday's meeting, Delano asked to postpone
approving minutes until Secretary McAdoo was present; said stenographic report
should be wiped out--thst most important part of McAdoo's remarks, he, McAdoo,
had asked stenographer not to take down; that this particular statement was
made after McAdoo "cooled off" and was a very fair temporate presentation of
the matter.
Dr. Miller said the report would leave Board in a very unfortunate
position to which Delano and Warburg emphatically agreed.
Finally approval was
suspended until Secretary would be present.
Warburg criticized McAdoo for ordering a stenographic report and Delano
and Warburg said it was not a very courteous way of receiving the committee;
253.
Warburg said if a vote had been taken he would have voted against having a
stenographer.
Board also, after long discussion, authorized Willis to comply with Mr.
Glass, request to help him in drawing amendments which Glass intended to
introduce.
Warburg demurred for a long time--saying it was not fair to Board
as Willis was opposed to Federal Reserve rote amendment which a majority of
Board favored.
Miller and C.S.F. took opposite view very strongly.
It was evident that Warburg felt Glass put more reliance in Willis,
opinions than in Warburgs--which is doubtless true.
In afternoon Frank Hackett,
former Postmaster General called and said Governor Harding asked him to call
on me and I would introduce him to Williams, Comptroller,
Be said he was oppos-
ing some appropriation for Comptroller's office for destroying notes which,
in fact, were destroyed by the Treasurer.
Be said he supposed he ought to
frankly to go to the Comptroller and talk it over with him as the national banks
should not be forced to bear this expense and should have a refund of amounts
already paid.
Be asked if I would introduce him, that he hesitated to go
alone as he had heard so much of Williams, eccentricities and general demeanor.
I told him I was sure the Comptroller would receive him courteously, whatever
his decision in the merits might be and I said I would go in and introduce him.
I stepped into the Comptroller's inner office before him and told the Comptroller
who he was, saying I had known him slightly for many years.
his son had married a daughter of an old friend of his.
The Comptroller said
He asked his clerk as
to tackett's claim and he said the Auditor had turned it down and it was now,
I think, before the Comptroller of Treasury.
I said to Comptroller--just hear
what he has to say--I know nothing about it and brought him in only at Harding's
request.
The Comptroller seemed in fairly good humor and said he would do so
254.
end I brought Hackett in and introduced him and left them. In about 15 minutes
Hackett came back and said that while he was very grateful to me for my trouble,
he felt he ought to say that never before had he had such an interview or met
such a man; that he was offensive, overbearing and almost insulting.
pressed my regret that he felt this way and he left.
I ex-
I remember that when
talking with Williams before Hackett came in, he turned to his clerk and
said--is not he the man who took the paper in the Riggs bank case and never
returned it?
The clerk said Yes.
Evidently the Comptroller thought he saw
In Hackett a friend of Glover and treated him accordingly.
It will be a long
time before I introduce any one to him again!
Jan. 13, Saturday
Board meeting to pass on letter from Governor Tremain, New York, relating
to French credit of 50 millions . Tremain forwarded draft of proposed letter
to other Federal Reserve banks stating the telegram and letter of Board,
October 23, 1916, I think, indicating that Reserve banks should be cautious
in buying such renewal acceptances but nevertheless not ruling against them.
In the draft Trema4 n said to other banks--if we doilt hear from you to the
contrary we will assume you wish to take your share in any we may buy, or words
to that effect.
I was not at the meeting
in October, being away in a week's vacation.
The Board felt it was honor bound to refrain from advice not to buy this
Issue because of its action in October.
row with Kent about in New York.
This was the credit the Board had a
Finally we suggested some changes in Tremain's
letter and said if made l''oard would interpose no objection.
During the discussion
Delano said he had seen I. P. Morgan who did not seem in any incensed with the
Board because of its warning vs British Exchange Nbtes; he said "Well, you
255.
scotched us and we must find some other way."
Delano said Morgan said as
result of our warning Davison had to buy about 20 millions of exchange,
which in Delano's opinion was the reason the call loan market advanced to
15%.
This confuses what Peabody told me.
Miller said the French Ambassador
was at first very bitter about the warning as an attack on French credit; that
he did not even know Davison had consulted the Board; that he finally felt we
had to do what we did but thought Davison had badly bungled the whole matter.
Miller also said he heard that Davison had been speculating heavily in copper,
which Peabody also told me.
Tan. 15, Monday
Harding drove home with me; said Warburg insisted on mentioning in Annual
Report that power of President in designating the Governor of the Board should
be cut dawn.
Harding
said he told Secretary McAdoo who said to say to Warburg
if he wanted a "scrap" on this question to go ahead.
Lawsen in testifying before Congressional Committee named McAdoo,
Warburg
et ale, as among those whom he was told profited by the leak in the peace message.
Tan. 18, Thursda
Miller said Vanderlip called on him and said Board made a great mistake
in ruling that acceptances growing out of revolving letters of credit representing renewals could be rediscounted or purchased by Federal Reserve banks and
that Board should reverse this ruling.
Warburg said he did not agree with Vanderlip; that while he was originally
opposed to such rediscounts or purchases, it was only with a view to restricting
theEmoumt taken within reasonable grounds.
Governor Harding said he hed had a two hours' talk with I. P. Morgan at
the Metropolitan Club late this P.M.; that Morgan never mentioned the new
British 250 million loan; that he seemed very bitter against Warburg evidently
256
thinking he was
dominating the Board; that he said he did not trust Jews;
that they had killed his father (referring, I suppose, to Untermeyer) and
that some time he should get even with them; that our Board should consult more
with national bankers; that some large national banks in New
were consider-
ing leaving the System, etc., etc.
Governor Harding said he thought he satisfied him that Warburg did not
dominate and said the Board members would try to go to New 'fork more frequently
and confer with the National bankers which seemed to please him.
Governor Harding also begged me to dissuade Williams from making any public
statement as to national banks subscribing to new British loans.
I told him
Williams talked with me yesterday about this and I advised him no action was
necessary; even Warburg told me he thought this secured loan was all right.
Jan. 24, Wednesday
Governor Harding said McAdoo was inclined to have Williams issue a warning
to banks as to further investments in foreign securities.
Williams showed
Governor Harding and myself figures that the natLonal banks as a whole had about
201 of capital so invested and a much larger percentage in some cases almost
double of foreign and domestic bonds.
In New England district the national banks held about 5 millions in foreign
bonds and securities and about 30 millions in domestic bonds—their capital being
about 30 millions and their surplus as much more.
We all agreed that another
warning would be unwise and unnecessary.
Governor Harding said McAdoo asked him to see Sir Richard Crawford and gently
intimate that Great Britain ought to do something to appease U. S. in way of
facilitating gold exports to Argentine, etc.
257.
Tan. 24, Wednesday
Williams removed Examiner Starck, New York, and appointed Malburn in his
place.
Starck by attorney demanded hearing.
Williams assigned date--Starck
said could not come because of illness--assigned another date--attorneys could
not come--finally Williams assigned Tuesday, Jan. 23, attorneys could not come and
Williams removed Starck.
Starck wrote Williams a letter--said if Williams would say he removed him
merely to give Malburn a place, he might resign.
Among Williams specifications
or charges he said Starck had a private telephone in his office.
Starck replied
this was there when he came--Williams knew it and frequently used it--Williams
told him to use as he did not want Warburg--who was fighting him in examination
reports to learn what he was saying--also to avoid wire tapping by enemies of
himself--Williams.
Starck also accused Williams of holding back his report of
Merchants National Bank showing a dummy loan of $200,000 to Morton Plant--until
Statute of Limitations had run.
Governor Harding said Sir Richard Crawford asked
to see him in Bank of England Agency matter.
Miss Loring sent me a letter from
Dr. Dixon of Penn. Health Department giving particulars of death of Dr. Warren.
Jan. 25, Thurdday
The record in the Starck case transmitted by the Comptroller was read by
individual members of the Board and referred to the New York Committee--Delano
and Warburg.
Warburg and Delano reported that the letter should be sent Starck
asking by what right he insinuated that members of the Board engaged in such
unseemly contemptuous conduct as conspiring against Comptroller, etc.
Finally
I persuaded them to let it go over.
Tan. 26, Friday
Williams came in--said never knew Starck had a private telephone--that
this had never been customary between him and Warburg as to examiner's reports.
Finally referred whole matter back to Committee.
258.
Governor Harding said had had a talk recently with Sir Richard Crawford
who asked to see him on Bank of England agency; said Sir Richard wastrongly
in favor of it but wished to know--(a) whether Board had power to ensure
participation of the other Federal Reserve banks;
must get authority from their stockholders.
(b) whether the banks
Governor Harding said he satis-
fied him that Board had full power and that stockholders need not be consulted.
Governor Harding also told me that Committee had turned dawn Federal Reserve
Note amendment and others; said it would be easy to make a bargain with supporters
of Kitchen Bill /21rmitting 1/10 of 1% deduction for exchange charges; that if we
agreed to that the Reserve Note Amendment could be put through over Glass' head.
I told him I should stand by Glass.
January 27, Saturday
Governor Harding came in and again repeated above.
I believe he has tried
to arrange some trade of above nature as helns always been rather sympathetic
with the Kitchen crown as to exchange.
I said again I should stand by Glass
and he dropped the matter.
January 29, Monday
Governor Harding said Miller came in and expressed great dissatisfaction
over appointment or suggestion of Denman as Chairman of Shipping Board; said
the short term was made Governor in Federal Reserve Board and long term ought
not to receive it in Shipping Board.
Governor Harding said Miller evidently
thought he would be made Governor to succeed Harding but that the Governor
and Chairman of Shipping Board could not both come from San Francisco.
Harding
said Miller said he thought C.S.H. was at bottom of this.
Williams told me McAdoo was much worried because telephone records showed
Baruch, stock broker called him up December 19, the morning of the stump over
President's peace message; that McAdoo said he merrily suggested a name for the
259.
New York director of Federal Reserve Bank to succeed Starck; that he--McAdoo-had mentioned it to Colonel House who probably had spoken of it to Baruch.
Tan. 30, Tuesday
Governor Harding said he lunched today with British Ambassador who was
very bitter vs administration--said President Wilson by addressing Senate had
lined himself up with Germany; that he was evidently apprehensive of being recalled--said it was a German plot.
Said also he knew how McAdoo got into
politics--his tunnel company needed reorganization--he took up cause of Wilson-went to Kuhn, Loeb & Co. and said Wilson would surely be elected--intimated he
would be Wilson's right hand man and induced Kuhn, Loeb & Co. in this way to
reorganize Tunnel Co.
Complained also of McAdoo's intimacy with Warburg.
Tan. 31, Wednesday
Delano and Warburg reported on Starck case.
Before reading report a
telegram was received from Starck resigning as director of Federal Reserve Bank
of New York.
I raised point that having resigned (and not tendering resignation)
he was out and no report, therefore, was necessary.
presenting and reading report.
The Committee insisted on
It advised removing Starck simply because he had
ceased to be an examiner--the only reason for appointing him.
Also said a majority
of Board wished to remove him in Tune, 1915; that several members or a majority
asked Comptroller to remove him as a national bank examiner but that he refused;
expressed regret Williams had not told Board about Starck before he did--said he
had told some members--{Governor Harding and C.S.H.); expressed opinion that law
should be changed to give Board complete control as to salaries, removal, etc. of
examiners.
Williams took issue at some statements which Committee agreed to modify.
I raised point that Committee report went beyond scope of resolution or vote
appointing it and that it was really a report of censure of the Comtproller, a
260.
brother member, without proper inquiry.
Millar moved to recommit
Committee could make the changes in facts it had agreed to.
mean by this that he objected to the censure.
so that
Miller did not
On vote to recommit, Miller and
I voted Yes and Governor Harding, Warburg and Delano, No and it was lost.
It was then moved that the report be received and filed.
I objected to
having a censure of a brother member spread on files as a committee report.
Delano and Miller were very angry and impertinent--said a committee could report
anything it saw fit and Governor Harding agreed. I said any member could file
ment
any state/he wished to make and I always had and always should so vote, but the
contents of a Committee report, if beyond scope of authority, should be recommitted and not received.
Williams did not vote.
On vote to receive, I voted No and the others Yes.
Williams told me that he had just learned that Delano
had made a contemptible, outrageous statement about him and he would slap his
face were it not for fact that he had pledged his word to the man telling him
not to reveal his name.
I told him he could take no action after giving this
pledge.
Later Secretary McAdoo said a newspaper reporter told Williams Delano
said to him in connection with the leak hearings that the Committee should
examine Williams as his two brothers were in a banking firm and leaks might
be discovered there.
I am sorry to say that Delano has a "yellow" streak in him.
Februari 1, Thursday
At the meeting Governor 'Harding referred to a letter from Secretary of
State to effect that Bank of Russia wished to ear mark gold in its vaults
against which the Reserve Bank of New York could pay out money in United States
261.
or sell exchange.
Some days ago, Governor Harding read a letter of reply--
based upon vote of Executive Committee—stating Board did not wish to enter
into such an agreement at the present time and Board voted the Governor should
send it.
This A.M. Governor Harding said he had redr9fted the letter and read it.
In it, it was stated as the chief reason for declining that there were no
Treaty relations between United States and Russia.
Warburg suggested this.
Governor Harding said
I at once objected saying it referred to the fact
that Taft put an end to Russian Treaty (because Russia would not give greater
privileges to Tows) and that this put our Board in the position that it did
not care to have any dealings with Russia because of there being no Treaty
and that such a statement would infuriate Russia.
I suggested that we merely
say that as we had not yet entered into any arrangement with Bank of England
we preferred
to wait until that Agency was agreed upon before making others.
Warburg objected and after a spirited talk on my part said he meant that
we
had no gold_ Treaty with them--a palpable evasion.
I replied--neither have
we with England and pointed out that he was against all Agencies of this sort
except through an International Gold agreement which he had recommended in connection with his South American trip.
Finally, in spite of my protest, the Bord voted to send this letter to
Secretary McAdoo to be presented to Secretary of State.
After the meeting I told Delano that this letter would cause us trouble
and Russia would say Warburg had "put it over" and Delano seemed much disturbed and said he would speak to Governor Harding.
Later Governor Harding came in and said he had decided--on his own responsibility--to strike out all reference to Treaties.
It is evident to me that
262.
Warburg deliberately tried to deceive the Board and through it to insult
Be seems to be willing to do anything to gain a point.
Russia.
Feb
/ Sat.
President broke off relations with Germany.
Geo. Eustis asked us to dine with him but we had another engagement.
Later learned that German Ambassador and the new Austrian Ambassador Tarvowski
were his guests.
Someone told H.P.R. that German Ambassador said he had warned
his government that the submarine order would result in our breaking off relations, but that his government did not believe he was correct.
Feb. 5, Monday
Matter of reply to conduct of New York Reserve Bank in apologizing
by cable to Governor of Bank of England for action of Reserve Board was referred
to Executive Committee.
reply.
At Governor Hardingts request I prepared draft of a
Later Governor Harding read letter prepared by him based on my letter.
Be said Warburg thought we should drop whole matter and he replied--there are
three Southerners and one New England man on Reserve Board and a letter will
go out if necessary by a majority vote.
Finally Warburg agreed to it and
Harding went in to show it to Secretary McAdoo.
Warburg told Earding United
States could not have done less than to break off relations with Germany and
that while he favored Germany as against England he should be loyal to United
States as if born here.
Mrs. Houston told Bertie Mrs. Warburg telephoned and asked if she
could have talk with her; she said she felt terribly at the position they were
placed in--that, of course, they would be absolutely loyal to the United States,
etc.
263.
Wed., Feb.
7
Governor Harding said letter to Federal Reserve Bank in subject of
cables to Bank of England was sent yesterday.
Secretary McAdoo made some changes.
It followed my draft literally except (a) Reference to Vanderlipts knowledge
of the negotiations and (b) statement that a copy was to be sent to Bank of
England—were stricken out.
Governor Harding said he showed it to all members
who approved it.
Governor Harding this A.M. had talk with Secretary McAdoo and Sir
Richard Crawford and a
representative of the Bank of France. They were dis-
turbed over our reference in Annual Report to policy of Banks not investing
in unliquid and unsecured securities.
Governor Harding told Board he told them
that our report related only to 1916 and in case of war we were free to modify
our opinions as we felt best.
Miller is softening on Federal Reserve Note
Amendment and is pre-
paring an Amendment he will support.
Feb. 13, Tues.
Yesterday Mr. Lindberg of Minneapolis introduced an Impeachment
resolution of Federal Reserve Board.
Referred to Committee on Judiciary.
Feb. 141 Wed.
Met Mr. Danforth of Judiciary Committee at Metropolitan Club.
Be
said Lindberg came before Committee and had positively not a shred of evidence
upon which to support his impeachment proceedings and that finally at his request the Committee gave him one week in which to present his evidence.
I
told him the Board was in the hands of the Committee as it could not call
Lindberg to account.
He said he thought the Committee should take drastic
action against Lindberg.
264.
Governor Harding walked home with me--said had had a conference
with Davison and Secretary McAdoo this P.M.--that Davison wanted to bring up
matter of another loan on unsecured Exchange Notes, as time was coming when
it might be difficult to provide American securities as collateral:
he also
said if we insist on collateral the American people may insiston collateral
for our own bonds if and when we issued them.
He said he told Davison and McAdoo agreed that the warning of
Board applied to conditions at that time and that if conditions changed the
Board might change its views; that clearly war with Germany would be a radical
change and that very possibly, even without war Board might find concAtions so
changed as to warrant a change in minds of Board.
Davison said the warning
had injured British credit and if any issue of such Notes were made it would
not be sufficient for Board merely not to object--it ought to go further and
at least say it did not object; that he and Secretary McAdoo said that if amount
were specifically limited and Morgan were to certify that there would be gold
in Canada sufficient topay all who wanted payment at maturity, the Board would
give careful consideration to the matter and that possibly it could be worked
out.
Feb. 15, Thursday
Governor Harding rode home with me.
Said last night British Ambassador
and Sir Richard Crawford dinedwith him staying until nearly 12 P.M.
He showed
me just before going home a printed memorandum to effect that British Government
should offer 250 millions of Exchange Notes running two years at 6%,
Morgan to
certify that there would be held at Ottawa at least 20% in gold in case any
holder demanded payment before due date on certain interest days specified - 2
In all; that if so demanded, interest should be only 510 and 4% respectively.
Governor Harding said Ambassador wanted an assurance from Reserve Board that if
265.
such a suggestion were made by Great Britain the Board would state it had no
objection to Banks investing; that Secretary McAdoo and he soon would have
another interview with them.
I said to Governor Harding that times were changing so rapidly it
would never do in advance to agree as above even if at present time all of us
agreed; that the fartIcer,esthe could properly go would be to say that such an
offer would be the least the Board could consider, but that if made he would
bring it to the attention of the Board for its consideration.
I also said that as far as I was concerned, I thought—apart from
changing conditions--the matter could be worked out along some such lines as
these but that I should not want to have the British Government given any such
Intimation in advance.
I said that the original warning was forced on us by Davison's action
and that we did not know then the exact amount of foreign bonds, etc., held by
the national and State banks as investments--we merely knew of rumors that the
banks had heavily invested, etc.; that if we had waited until the Comptroller
got the full returns—only a few days later--we might not have deemed it necessary to issue such a warning or at least in such specific terms; that the new
memorandum covered many of our objections (a) It was fixed as to amount; (b)
It provided for a distinct pledge as to gold held at Ottawa; (c) it gave holder
privilege to demand payment before two years by taking his interest.
Feb. 16, Friday
Secretary McAdoo sent for me but only to get some information as to
Fuller, elected to Congress from Massachusetts in place of Roberts.
Be said
MacFarland (Boston) said he would try to find out how Fuller stood politcially.
While leaving he put in call for Tustice Brandeis to ask him about MacFarland.
Said nothing about proposed British Exchange Note loan.
I fear he has committed
266.
Board or a majority.
If he has, he had no authority to do such a thing,
at least not from me.
Feb. 17, Sat.
Secretary Lansing told me at lunch at Metropolitan Club that Germany
was much puzzled at our not breaking all relations with Austria--he said Germany
would soon get suspicious and think Austria was playing double with her.
Be also
said Bernsdorf in his opinion had lately done his best to keep peace.
Feb. 19, Mon.
Meeting Federal Advisory Council.
In afternoon, 4 P.m., Morgan said he wanted to have a lone talk with
me about future British loans-- I asked him if he had talked with Governor Harding-he said perhaps I will talk with him first and later talk with you.
do you think the matter will be adjusted all right?
until we go into the whole matter with the Board.
some way to maintain our export trade.
He then said--
I said, I cannot commit myself
I hope, however,
we can find
After the meeting I told Governor Harding
of this and he said he had a new memorandum covering the matter which Secretary
McAdoo had or would (am not sure which) communicate to the British Ambassador and
Sir Richard Crawford as approved.
He did not say whether or not Secretary McAdoo
had undertaken to commit the Board or only himself and Governor Harding.
Governor Harding said if I would come into his office he would show me
a copy of this.
I then told Governor Harding that if the British Government
wished us to recommend a loan along lines of Memorandum, he showed me the other
day, I did not see how we could do anything which savored of advising Banks to
invest in it as our warning as to other loan was specific on this point, and I
had noticed several statements in papers that Great Britain did not want her banks
to invest in their latest loan as they should keep themselves liquid; also said
267.
I had read that the British banks too about 1/3 of the earlier loans as Investment
ments, I added that if all they wanted was some state/that Board did not look
with disfavor on new loan so far as regards individual investors, that was another
matter which might be worked out in view of the promise in the Memorandum shown
me to keep 20°10 gold always in Ottawa to pay all who wished to redeem before final
due payment.
Governor Harding agreed with me as to, Bank investments and I gathered
from what he said that what Great Britain wanted was not any recommendation as
to Bank investments.
I did not go to Governor Harding's office to get the copy
but went right home, as I did not wish to be committed by any statement the
Secretary may have made or might make, but wished to keep myself absolutely free
to take any course I thought the best interests of the country and the banks demanded.
Morgan was very bitter towards Congress--said he had the most supreme
contempt for the whole body--Republicans as well as Democrats.
Feb. 20t1purs.
Governor Harding said later this P.M. had long talk with Secretary
McAdoo and Morgan; that Morgan now wants to issue 250 millions of short-term
Exchange Nbtes--just like old Exchange Notes against which we gave warning,
amount limited, however, to 250 millions and will agree to keep 20% reserve
either in Ottawa or in Federal Reserve Bank--says must have Bank subscriptions;
that Secretary said he was inclined to favor it but that Morgan should prepare statement
sharing how new loan met requirements of Board in its warning and later
come down and have hearing before full Board.
Feb. 21, Wed.
Governor Harding reported as to talks of Secretary McAdoo and himself
as to International loans--said Morgan now insisted on putting out short-term
Exchange notes precisely like old ones--and objected to a two-year bond with
268.
right to prior payment by accepting lower rate of interest; that he wanted
Board to reverse itself and give out an approval both for banks and individuals;
that Secretary McAdoo had told British Ambassador this could not be done; that
British Government had overruled Morgan and directed that next loan should be
for two years, etc., as in statement previously shown me.
Warburg expressed his
approval of this decision--at least as to a fixed maturity of two years—nothing
said about security.
Feb. 23, FridEly
Vanderlip called.
Had general talk--feared that peace might bring
some trouble although not in immediate future.
I explained our position as to
renewal acceptances--that Comptroller ruled that Banks could give such Acceptances-private holder was not bound to renew--that our counsel ruled that we could not
legally prohibit a Reserv
could lawfully give.
Bank from rediscounting any acceptance a member bank
Although we might limit amount in any reasonable way.
He said this opinion put a new phase into the matter and he saw clearly that
Board was right; he felt, however, that it was not good banking and should be
kept within reasonable
bounds.
Bb also said our warning vs British Exchange Notes was undoubtedly
good for the country but wrong in theory as such loans were necessary to absorb
gold imports; that Banks would always expand up to full limit of their gold
holdings.
Spoke of attacks of New York Financial Chronicle—said he had never
met any of the editors--that their editorials showed profound ignorance, etc.
Feb. 24, Sat.
Robert Greer Monroe called.
Said he had been asked by interests in
New York to go to Washington as a Democrat and work to bring about a declaration of war against Germany; said that the opponents of Germany were largely
269.
Republicans and their partisan hatred of the Administration had spoiled all
their efforts.
March 2, Friday
Board decided for present to make no statement as to future purchase
of foreign securities by banks.
Each member prepared draft.
Secretary McAdoo called meeting at
4 P.M. to consider issuing statement,
for said time under consideration by Board relating to clearing up the misconceptions of Board's warning of November 28, 1916.
Governor Harding told me McAdoo said the President had just received
a cable from Ambassador Page in London saying that our previous warning had
scared investors and injured condition of Great Britain; that Great Britain
could not continue shipping gold to United States; that in any event it could
not be done safely because of submarine activity; that France could not spare
if
any more gold without injuring her domestic position and that/something was
not speedily done Great Britain must suspend specie payments which would probably
mean a world wide panic which would necessarily involve and greatly injure the
United States.
The meeting took up a draft of notice based largely upon draft prepared
by Delano and to less degree by Miller and after some suggested changes by
Warburg and Miller and a few by C.S.H.--which were previously accepted by McAdoo,
the Board voted unanimously to publish it in papers tomorrow.
About
7 P.M. Secretary McAdoo called me at house over telephone and
asked how I liked the announcement;
I said I though it was in good shape.
March 12, Monday
Board voted to recommend to Treasury for charwoman a woman who was
Dr. Miller's washwoman.
The Committee reported this at Dr. Miller's request.
270.
We had no one in mind for the place and it was not under Civil Service
Miller said his washwoman wanted the place and that it would not interfere
with her work as she had to be at the Treasury early only certain mornings
in the week.
If any other member had proposed his washwoman now Miller would
have raved!
March 21, Wednesday
Governor Harding spoke in New York at Quill Club.
Threw out sugges-
tion that in case of war, United States should lend Allies one billion dollars
taking their bonds as collateral and issuing its own bonds.
Told Board today
he was asked to throw out this suggestion--meaning that McAdoo wanted it done.
Never consulted any of Board.
March 27, Tuesday
Secretary McAdoo informed Board that he had decided to issue 50
millions of certificates of indebtedness at 2% and asked us to offer them to
Reserve Banks.
He said he could sell them at that price anyway but wished to
give Reserve banks the first opportunity.
Warburg bitterly opposed this--said
rate should be 2% and at such price the Reserve banks could sell them to other
banks.
He could not deny, however, that the Reserve banks could easily take
this issue as an investment--the certificates running only for three months.
He said the banks would be very angry--I said if so the reason would be that
such an issue would have a material effect upon future bond issues and enable
them to be placed say at three instead of at three and one-half per cent.
Of
course, he denied this.
Be insisted on our holding up the matter until he could talk with
the Secretary—who was at cabinet meeting.
I pointed out that it was for
the Secretary to determine at what rate he would offer the certificates and
It was not our business--that all we could do would be to inform the Banks or
refuse to do so which would be ridiculous.
Everyone except Warburg voted to
271.
Inform the Banks.
March 28, Wednesday
Eight Reserve banks have already taken whole issue with Atlanta,
Minneapolis and Chicago yet to be heard from.
New York said would take any
part of 25 millions.
April 4, Wednesday
Meeting of Governors.
McAdoo presided and severely criticized
New York Reserve Bank because it passed a vote objecting to being asked to
subscribe to new 2% certificates without being consulted as to their issue.
While the Bank was clearly wrong, it was most unpolitic for the
Secretary to attack it as he did.
The Secretary also said he wanted to have
law amended so that Reserve Board could appoint a majority of the directors
of the Reserve banks.
opposed it.
Board considered this and every appointive member
I said I favored it in principle as very likely necessary in
the future but at present time deprecated it--would cause bitter opposition
and might defeat our amendments.
It certainly would change whole Act and
in time of war like the present nothing short of suspicions of treason on
part of banks would warrant such drastic action.
To say that the banks
furnish all the capital and resources of the System were to be in a minority
of Board of Directors would be enough to condemn it except for extraordinary
circumstances.
April 17-19 - In Boston
While gway Secretary McAdoo asked Board to sound Reserve banks as
to how many certificates of indebtedness could be placed at 2%. Board very
indignant.
Warburg go Kuhn, Loeb & Co. to take 10 millions and this forced
272.
Morgan to do same.
Then Warburg and Harding told Secretary it was willing to do this
as it ignored market conditions--that 3% was right rate.
Finally Secretary
changed rate to 3%.
April 22, Sunday
Bulfurn and party arrived.
Department met them.
Lansing, Polk and Phillips of State
The Governor of Bank of England rode with Phillipps--
most extraordinary as the Governor of Reserve Board should have done this.
In P.M. Secretary McAdoo called up H.P.H. and said he had to give an official
"stag" dinner to Lord Cunliffe, Governor of Bank of Englancl Tuesday evening
and, therefore, could not attend the dinner we were to give in his honor
next Tuesday evening.
He then called me up and somewhat sheepishly said that
as the visitors would not care to meet Warburg he had decided only to ask
Harding to his dinner,--also said he would invite Jay and Truman of New York
Bank, Aiken of Boston, Rhoades of Philadelphia and Seay of Richmond.
this will anger the Reserve Board and justly so.
I fear
While Warburg is in the
Board he should be treated with decent civility:— and I believe this is
merely an excuse for not inviting the five appointive members of the Board.
Am curious to see whether Williams will be invited.
April 23, Monday
Lord Cunliffe called on Secretary McAdoo for over an hour.
Board was in session but McAdoo did not ask us to come in.
Our
After our meeting
was over Harding suggested that we send in word to the Secretary that we would
wait in his room for Lord Cunliffe.
Lord Cunliffe cared to see us.
I suggested that we did not know that
Then someone suggested that if he came to
Harding and asked to meet us, Harding could take him to each of us in our
rooms.
273.
Finally we adjourned and Harding said if Cunliffe called he would
send for us.
Later Cunliffe did call and we were sent for and met him very
briefly.
Evening
President Wilson gave a dinner and invited many assistant secretaries,
including Roosevelt and Vrooman, the whole industrial defense commission, Governor
Harding, the Chairman of the Shipping Board and also the Comptroller of the
Currency.
To invite Williams, the Comptroller, merely a Bureau Chief over
the heads of the other members of the Board seems, speaking mildly, somewhat
surprising.
It is small wonder that the members dislike Williams.
Apparently
the Assistant Secretary of War and the Assistant Secretary of the Treasury were
not invited either.
Yesterday Delano insisted on having a lunch for Lord Cunliffe
and he agreed on Wednesday.
I feel, personally, it was a mistake to do this.
Harding and Williams
living been invited to meet him could give him any hospitality they might desire
but the Board should have maintained a dignified silence.
Secretary McAdoo has now clearly shown his jealously of the Board and
his contempt for them and I fear trouble may arise in the future.
Tomorrow, Tuesday,evening, Lansing,
Baker and McAdoo are to give
dinner, and so far as I know, no member of the Board, except Harding, has been
invited.
After the dinner, there is to be a reception at the Pan American Build-
ing to which apparently none of our members are invited.
It seems certainly an
extraordinary proceeding.
April 24, Tuesday.
Received invitation to Pan American reception at about 4 P.M.
Gave
dinner--Mr. Kuhn said he had received no invitation to Pan American reception.
Later at reception saw Lansing and he said all Representatives and Senators were
invited.
274.
The State Department has botched the affair.
April 25
Went down on Treasury south step-3 and with McAdoo, Lord Cunliffe,
et els saw Viviani and General Toffre pass
by.
Great enthusiasm.
Went back and showed Lord Cunliffe our Board room--then gave him
a lunch at Chevy Chase.
After lunch he talked to us for nearly two hours.
He said war will not be over in any three months--may be of long duration-money will be dear for many years, nc matter when peace comes--follow market
rate in loans to Government--France made great mistake in loaning to Government
at 1%--disrupted exchanges--England has issued too many Treasury bills--feel
this because rates are higher than acceptance rates, e.g. of his own firm of
bankers--in issuing bonds having long maturities with right to redeem after
The currency notes are issued not as loans to banks on collateral
Vreeland
(as our Aldrich-/Notes) but as payments of Government indebtedness exactly as
few years.
were our greenbacks.
He also told me he had great sympathy with our warning
to banks as to investing in short-term securities which really were long-term
loans--he felt England would have made a great mistake in issuing the Exchange
Notes against which we warned our banks.
I asked if his banks were forbidden
subscribing to last British loan--he said No, but they were advised that public
should take their redistributionthrough banks, but he said Lloyd George told the
banks they must place the bonds with the public as the banks must take them
If the people did not and this spurred up the banks to place them.
He said last
loan brough in practically no new money--it was really a conversion of old
floating indebtedness and that banks turned in old bonds owned for conversion
in large neasure.
In driving out Say told me that the Reserve Bank of New
York at request of Secretary of Treasury had done an ultra vires act--it had
275.
given a deposit credit in name of British Government itself And not in name
of Berk of England.
Lord Cunliffe said Bank of England would at once agree
to be our Agent and wanted to announce it publicly in few days--that while
not much might be done now under Agency, at least gold could be earmarked.
April 26
Thursday
Lunched at Dr. Miller's with Lord Cunliffe.
He said first British
loan at 3f4% was very poorly subscribed--that he insisted on 4% but Lloyd George
insisted on 3,4%--that the Bank of England was forced by the Government to
underwrite the loan and in fact had to take 1/2 of it.
Be impressed on us necessity of meeting the market rate so that
banks would have to invest in undigestible securities.
He thought it unneces-
sary to provide for loans at special rates to banks to recoup for money withdrawn by subscribers to the certificates of indebtedness although this he said
should be done as to the long-term bonds.
He explained policy of Bank of
England as to discounting finance bills--he laid dawn as a rule of practice
that bank would not discount such bills although he said it was not always
easy to distinguish them from common bills.
I gathered from what he said that
if bills were presented by a first class holder and not clearly finance bills
or bills for permanent improvementtobusiness, etc., they might possibly be taken
in small amounts but the rule of practice was rigid, at least in form.
He
also read us a cable to Bank of England to close nt once with Federal Reserve
Bank of New York as to Joint Agency.
April 27, Friday
Secretary McAdoo said he wanted to get a good man to take charge of bond
distribution who would give all his time to it--asked about Robert Winsor--I
said he was too identified with special interests although very able--I strongly
276.
recommend Starrow and seemed to impress McAdoo.
He also said he wanted at good
railroad man to go with the committee to Russia and run the Russian railroads.
He spoke of Stevens the ereineer--said he had a vague idea he was somewhat discredited.
April 28, Saturday
Lunched with Mr. Hohler, Counsellor of British EMbassy--present Mr. Simon,
Financial member of French Committee; Mr. Anderson, British wheat commissioner;
Secretary Redfield and Trade Commissioner Davis.
April 30, Monday
Gave lunch (Federal Reserve Board) at Metropolitan Club to Mr. Simon, Cozenave
and Baum--of French Commission.
In morning Governor Harding at our meeting said
the French commissioners told him they did not want us to put them any questions
but to leave it to them to ask questions of us.
I expressed some surprise at
such a request but said if they wished to put a muzzle on us, of course, we must
acquiesce.
Such a request seemed to me almost insulting.
After the meeting, Harding said it was because of Warburg--that the commissioners
declined to speak confidentially before him.
It seems to me that we should have at
once withdrawn our lunch but the other members did not seem to be aware of the insult
to our Board.
At the lunch scarcely a word was said on subject of finance--not a question was
put to us as to the Federal Reserve System--our guests evidently avoided any discussion and tried to keep the conversation away from finance.
Their manner was in
strange contrast to that of Lord Ounliffe.
May 2, Wednesday
The other day the papers all said the Federal Reserve Board had recommended to
McAdoo a method for issuing Treasury Certificates weekly.
before Board, I asked Harding about it.
As this had never come
Secretary McAdoo also wrote Board about it.
277.
Harding said Warburg had written Secretary a letter and mentioned it to Miller
who told it to Delano and Delano gave it to a reporter.
/larding said Secretary was very angry as he ought to have been.
Can't see
how Delano could have given out such a false stetement as matter never came
before Board and I never even knew Warburg had written a letter.
Harding said
Secretary McAdoo asked him to say to Board that henceforth it must be clearly
understood that when he consulted with a member it was a personal, confidential
matter not to be advertised.
May 3, Thursday
Governor Harding said Lord Cunliffe had decided to go West to meet bankers
and Federal Reserve Banks, etc. end that Secretary McAdoo asked me to go with
him as an Ex-Governor of Board.
Cleveland and Boston.
The trip was Richmond, St. Louis, Chicago,
I suggested Delano for St. Louis and Chicago and I would
meet him at Cleveland.
Later Harding said Secretary McAdoo wanted me to take whole journey as
Delano could not speak, etc., so I agreed to do so.
P.M.
Lord Cunliffe toolc tea with us at our house.
May 4, Friday
Lord Cunliffe called and said would have to cut out Boston for present as
must be in New York Thursday, May 10.
Be said he would surely go there before
leaving United States.
The itenerary is:
Sat., May 5
Sun., May 6
Mon., May 7
Tues., May 8
Wed., May 9
Thurs., May 10
-
-
To Richmond
To St. Louis
Dinner - St. Louis
Lunch and dinner - Chicago
Lunch - Cleveland
New York
278.
May
5)Sat.
Left Washington 2 P.M. for Richmond with Lord Cunliffe, Comptroller
Williams, Governor Strong and Sherman Allen.
Richmond 7:30.
house.
6,
Drove out to Williams' house - a company of Militia guarded
Had dinner - about 15 guests including Governor Stuart who was placed
on left of
May
Train 14 hours late; arrived
hostess, Lord Cunliffe being given place of honor.
Sunday
Attended church--called on Governor Stuart--went back to lunch--left
for St. Louis 2 P.M.
May
7,
Mondaz
Arrived St. Louis 6:30 P.M.
Had dinneret Hotel Jefferson given by
Governor Wells of Federal Reserve Bank.
Lord Cunliffe spoke.
Mr. Watts, Justus Wade, C.S.H. and
Took midnight train for Chicago.
May 8, Tuesday
Arrived Chicago 8 A.M.
Went to Hotel Blackstone.
In morning visited
Federal Reserve Bank, where our photographs were taken--then visited Forghn &
Reynolds banks, et als.
Lunch at Chicago Club attended by 50 prominent business men.
request Frank Hamlin invited and attended.
Lord Cunliffe drove over park system.
Hotel.
At my
In P.M. went to stockyards--then
In evening, dinner of 60 at Blackstone
Left in 11:45 train for Cleveland.
May 91 Wed.
Arrived Cleveland 8 A.M.--visited Reserve Bank and other banks.
Lunch and speeches at Club.
P.M.
Drove out to White automobile works.
Left for New York on 6:30 train.
May 10, Thurs.
Arrived New York 8 P.M.
I went to University Club.
Lord Cunliffe drove to T. P. Morgan's house--
11 A.M., Allen and I met Lord Cunliffe at Mr. Morgan's
279.
library--tIs.en went to Federal Reserve Bank.
Association committee at Bankers Club.
Lunched with American Bankers
Took midnight train for Washington.
Lord Cunliffe spoke very modestly and quietly--explained fully the three large
British loans.
1. 311, Loan. Said rate too low and over his protest.
Also income tax slightly increased. As a result
the Bank of England had to take a large part of it-10 times as much as it ought. This loan was a
failure.
2.
410 Loan.
The banks invested heavily in this loan.
3. 9% Loan. The banks were advised not to invdst in this
loan but were told if people did not take it they must.
As a result they worked very hard and pinced whole amount
with the people taking none themselves. They, however,
loaned freely to their customers to help them.
The lat loan resulted in small, if any, withdrawals of savings deposits
in the Government banks--deposits in some commercial banks were drawn down but
not seriously.
Every effort made to prevent contracting the currency even tempor-
arily.
Said our country, under new Federal Reserve System, now much better
prepared from banking standpoint than was Great Britain when war broke out.
He told me he did not like notes issued by Government but feared Great Britian
would not for long time get back to old system.
Said also he did not like con-
trolling all gold held by people and giving notes instead as gold held in pockets
was a good secondary reserve.
He said Bank of England had had to do many things not warranted by
its charter.
He strongly favored member banks depositing gold in Federal Reserve
banks.
280.
Monday, May 14
Went to Boston with Lord Cunliffe.
5:45 and
Allen and I called for him at
then we all had early dinner at our house then taking 7 P.M. train.
Thursday, May 15
Arrived 7 A.M.
us.
Went to Copley Plaza Hotel where Governor Aiken met
Took breakfast--I.P. Morgan was in hotel and called.
Drove to Federal
Reserve Bank where some bankers met us. Then went to Harvard where we met
President Lowell at 11:15 at University Ball.
Went out with Lowell and
reviewed the Harvard beitalion on Soldiers field.
Drove in town and called
on Robert Winsor at Lord Cunliffels request who knew him.
Lunched at University
Club given by Governor Aiken--present directors and other bankers--took drive
around Tamaca Pond--took 5 P.M. train for New York.
In New York, Mrs. Robert Bacon met us--Mr. Bacon was to take Lord
Cunliffe in a special car to Miami, Florida, for some tarpon fishing, but he
had to go to Washington that A.M. to see Secretary Root and Mrs. Bacon came
to take Lord Cunliffe to Penna. station.
to his car and she went home.
I told Mrs. Bacon I would see him
With two secret service men we went across and
put Lord Cunliffe in his car.
May 24, Thursday
Heard Balfour speak before National Press Club.
British Commission
left for Ottawa.
May 25, Friday
Lord Cunliffe called on way from Florida.
not going to Atlanta Bank.
I begged him to go to Philadelphia but he said it
was impossible so I dropped the matter.
help his country and I am very sorry.
Had little to say as to
Be has missed a great opportunity to
He could have cut down his fishing trip
281.
a day and have had ample time to visit Atlanta and Philadelphia.
I gave him a lunch at Metropolitan Club also Assistant Secretary
Crosby and Sir Richard Crawford.
We were to give a dinner in evening and I
invited him--he said he could not accept as he left that evening--I asked
him when he left and he said he did not know--he evidently did not want to come
so I dropped
it.
We went dawn into Board room and had a talk about gold exports
which he asked us to do all in our power to prevent.
Said feeling in England was
that England should not send so much gold to United States and if we permitted it
to go out he feared opposition in England would increase.
We discussed Spanish situation--he did not see haw Spain could insist
on
taking our gold only at a discount--intimated that Spain wanted food more than
gold and that we might have to cut down our exports to her.
Also discussed Ludlow Manufacturing Co. which had been ordered by our
Government to make
India.
and cloth but could not get rupees to pay for it in
He finally said that if we would certify that it was for Government
account the Bank of England would provide us with means of payment.
He said no
objection to New York banks shipping silver bullion to India as Indian Government
would be glad to give rupees for it.
of Exchequer asking him to renew the
He showed me a cablegram from Chancellor
6 month's acceptance credit given by American
banks through Vanderlip--to eight London banks--this was the 50 million 410 credit
due about Tune 1; he said in his opinion it ought to be paid and not renewed but
he was bound by instructions of Chancellor.
After lunch went back to Treasury and he met Vanderlip and asked him
to renew--Vanderlip said this could undoubtedly be arranged but could not be
done tomorrow, Saturday, and would have to wait until Monday.
said he would stay in New tork over Monday.
Lord Cunliffe then
I then drove him to station to his
282.
private car to get his passport said it would be reissued by British Embassy-then we drove to house and called on Bertie--then to Embassy where I left him.
Be intimated he would like to have me to with him and make some calls but I did
not do this as I felt I had done enough for him--in view of his selfishness.
told me he caught 4 tarpon in Florida, one weighing 125 lbs.
He
His devotion to
fishing has been at the expense of his Government.
June
3, Sunday - To Boston.
•
4, In Boston
•
5, Spoke at Boston City Club with Secretary McAdoo. - Left for Detroit.
•
6, In Detroit. Left late P.M. for Cleveland.
•
7, In Cleveland. Spoke for liberty loan.
Left
5 P.M. for Buffalo. Arrived Buffalo 8:45 P.M. Guest of Mr. Rand,
President of Marine National Bank.
Drove with him to Niagara on Lake in
Canada and spent night.
•
8, Spoke twice in Buffalo.
•
9, In Boston. Left 1:15 for Portland, Maine. Attended dinner of Maine
Bankers Association and later spoke in City Hall on Liberty Loan.
Tune 13, Wed.
Spoke with Secretary McAdoo in Baltimore at the Academy of Music.
Theatre packed.
Had tremendous receiption.
August 10
Governor Harding redesignated as Governor and Warburg as Vice Governor
for 1 year.
September Pi or 20
Governor Aiken of Boston called and stayed with me 20 minutes--said he
came down to talk with Secretary McAdoo as to new loan.
just before our meeting and Warburg was 1/2 hour late.
Then went to Warburg
The next day Governor
Harding told me that Warburg said Aiken told him that he had been offered
283.
065,000 per year by the National Shawmut bank, that he had a family and relatives
to support etc. and was in doubt what to do.
Governor Harding said it was extra-
ordinary that Aiken did not consult me as Chairman of the Boston Committee.
Later
as Warburg did not mention the matter to me, I wrote him a letter asking what the
facts were.
Two days later he told me he had the letter--that Aiken consulted him
confidentially--that, of course, he supposed he had also told me, that Aiken was
not going to accept, etc., etc.
Governor Harding told me that Warburg had also talked with Delano about
it, and later Williams told me Warburg had said Aiken would probably accept and
that there were only 2 men fitted for his place, one of whom was Ripley--he did
not remember the other.
Governor Harding also said Warburg wanted to increase
Alkents salary to 050,000 but that he--Governor Harding—would not stand for this.
I am amazed at Warburg's duplicity in concealing this from me--if anyone
in New York had consulted me behind Warburgts back, he would have been furious.
October 18
Spoke in Omaha, Nebraska on Liberty Loans.
October 20
Spoke in New Bedford on Liberty Loan.
October 22
Spoke in Savannah, Georgia, at noon at luncheon of Rotary Club at 7 P.M.
Spoke at open air meeting at lighting of Liberty fire:
at 8 P.M. attended a dinner
given by Mr. Lane, President of Citizens and Southern National Bank.
October 23, Wed.
Spoke at Bankers lunch at Jacksonville, Fla.
October 24, ThuAl.
Spoke at Chamber of Commerce 10 A.M.
284.
October 25, Friday
Spoke at noon at Chamber of Conmerce to ladies of Charleston and at
7:30 P.M% to men in same place.
November 17
)Sat.
Japanese Financial Commissioner arrives in Washington.
McAdoo asked me to represent him and look after him.
Secretary
Baron Majata the chair-
man dined with me in Boston April 11, 1902 with Marquis Martiukata.
At 11 A.M.
the commissioner called on Secretary McAdoo and later on the Reserve Board.
Nov. 20. Tues.
Gave a lunch at house to Commissioner. Present:
Ambassadorsfrom
Great Britain, France, Italy, Japan and Argentine Republic; Secretaries
Baker,
Lane, Houston, Redfield and Daniels; the Federal Reserve Board, the Federal
Advisory Council, including J. P. Morgan, F. A. Vanderlip, Mr. Hoover, the food
administrator, Dr. Tounsig, Norris, Chairman of Farm Loan Board, Albert Straus,
banking advisor of Secretary McAdoo, Assistant Secretary Philipps, Assistant
Secretary Long and Baron Cartier, the Belgium Minister and others.
Mr. O. Matsukata, son of Marquis Matsukata, came to visit us this A.M.
and stayed until Friday; he was at the luncheon.
May. 21, Wed.
Went with the Commissioner to Camp Meade; rode with Japanese Ambassador
and Baron Mejata.
Urged Baron Mejata to have Japan join in war--he said he felt
that if Japan did it must send a large army--that a small force for merely sentimental reasons would avail
nothing.
Commissioner left for New York.
Nov. 23
Matsukata left asked if I had any message for his father.
I told him
the people of America hoped Japan would enter the war with a large army--appealed
285.
to his imagination--the civilization of the East to help that of the West restore
order and Democracy.
He said he would tell this to his father.
I wrote Lansing this A.M. asking if I could say this as a personal
expression of hope.
Later he telephoned me through his Secretary, Lane, that
I could do this.
Dec. 3, Monday
Secretary McAdoo said the Tapanese Commissioner wanted to induce American
capital to invest in China along with Tapanese and that Assistant Secretary Long
and Williams of State Department had put together a very foolish diplomatic
document on this subject; that if American capitalists invested so, also foreign
governments would insist on doing same and we should have to loan to Great Britain
and France the wherewithal.
Also said some one must go to China to help readjust
the 9/0 etjeira.44440 ,volun4ery duties on Chinese imports.
Said that he thought I would be a good man to go, with perhaps Dr. Willis.
I said under present conditions every member of Reserve
post;
Board should be at his
that if I should hive no one could tell what Board might do as Administra-
tion would not have a majority.
He seemed to accept this.
That afternoon Dr. Rowe called and said he had intended to sent Segur
and Assistant Appraiser at New York who was not in Havana, but Secretary McAdoo
'aid he had decided to send me.
I explained to him this was impossible and told
him Dr. Taussig could give him some good names.
Segur to Washington and send him.
He then said he should order
I though this a good solution.
Dec. 7, Frida7
Secretary McAdoo asked me to tell Baron Mejata in New York that Treasury
had not yet decided to ask authority to sell any part of the silver behind the silver
certificates; that if they so decided, Congress must have legislation to permit it,
286.
and that if this were done in the future and if the Baron were then to renew
his request for authority to buy part of this bullion, the Treasury would then
give it careful consideration.
Asked me also to suggest to him that japan for the present keep out of
the market for silver or the price would greatly advance and it might be necessary to refuse all licenses for export.
I also talked with Strauss about this--
he said if Japan went into market, it would te very embarassing as silver miners
now looked on $1.00 per oz. as a good price and if japan should buy she would so
drive up thl price that the miners would want far more than $1.00.
I was not
able to see Baron Majata privately and, therefore, did not give him this message.
I so told Secretary McAdoo and he said he would write him or if he did not I
could
speak to him in Boston.
We had large dinner in New York this evening.
Four hundred present:
I spoke praising Japan but not committing myself on any pending question.
the dinner, Mr. Smith, President of Export Association, said
After
Mejata had ordered
an abstract of my speech to be cabled to Japan that evening.
Dec. 11, Tuesday
Secretary McAdoo met me in entry and said he had suggested my name to
Secretary of State to go to China; I told him Mejata did not ask for any Government participation in loans to China and he said we may desire to participate.
Be was quite indignant with Reserve Board for passing a resolution either
Monday or Saturday last, condensing the Calder bill (Federal Reserve notes vs.
certain securities) and suggesting a Government corporation to loan to savings
banks and corporation on investment securities and asking him to send it to
President which he did.
Dec. 12
Be said it went beyond our jurisdiction.
Wed.
President acknowledged our resolution in an apparently friendly letter
287.
saying the suggestion had been made to him before and that he was awaiting a
report from Secretary McAdoo on the matter.
All of us except Delano and Warburg
thought it was a plain intimation not again to interfere in matters not our own.
Dec. 14
Spoke in Boston at dinner tendered by banks to Japanese Financial
Commissioner-400 peresent.
Dec. 15
At lunch of Governor Aiken to Financial Commissioner.
Spoke.
Dec. 16
Dined at
with
Newton at dinner given by Mr. Wing of let National
Bank to Japanese Commissioner.
Baron Mejata asked me to ascertain confidentally Whether New York
Federal Reserve Bank would appoint Bank of Japan its Agent if it made a future
application.
Week ending Dec. 22
Committee of New York Federal Reserve Bank came down to discuss
dividend of Bank.
Board approved setting up a reserve fund to cover depreciation
in Government funds held, etc.
Secretary McAdoo strongly opposed this to Governor Harding but whole
Board felt that with the conversion 31 s selling at 86, sound principles demanded
some depreciation account although
down.
we all agreed the value should not be marked
The Comptroller agreed with Secretary McAdoo.
Secretary McAdoo told Governor Harding that Warburgs plan of a new
Government corporation to loan on investment funds, etc. was not out of the
question.
prices.
I regret this as I believe it would cause present troubles in security
288.
Something must be done.
Friday, A.M.
Governor Harding said Comptroller Williams had shown him a letter he
had sent to Secretary predicting a panic worse than 1907 unless something were
done and suggesting legislation authorizing issue of Aldrich Notes again.
Board opposed this.
Whole
Governor Harding said he was drafting a bill.
Dec. 22, Sat.
Governor Harding said he had talked with Brennan, Ex National Bank
Examiner at Boston, he said large Boston banks would agree to take care of the
savings banks and their country correspondents, if Secretary McAdoo would agree
to maintain a fixed Government deposit with them on which they would pay 4% interest
and they would loan at 9%.
Governor Harding said he would draw something on these
lines.
Becretary McAdoo asked Governor Harding to read a letter of his to
Federal Reserve Board asking if it would act in an advisory capacity on matters
of flotation of new securities all over the country, he, the Secretary, however,
to sign all the letters.
The Board vigorously fought this on ground chiefly that the Board should
be given full jurisdiction and not be asked to act as assistants to the Secretary-also on ground that a large department would have to be created.
would be so whether Secretary or the
Board had jurisdiction.
This latter
Delano said a
public request of President or Secretary to Governors of States would make applications less numerous.
He said McAdoo had replied to several such communications
and in one case his letter was published with the flotation circular.
Finally
I suggested that Secretary McAdoo had put us a simple question—whether we would
act as his advisors and we ought to answer it.
Warburg, Delano and Miller No.
On vote, I voted yes and Harding,
289.
Finally voted that Governor Harding write a letter to Secretary on
subject.
I agreed to this but said it should state that I favored acceptance.
The point was brought out that if we decided a case and sent it to Secretary it
might be days or weeks before he would sign it and we should be very much embarassed.
There is force in this argument.
attend to Department duties.
Secretary McAdoo is so busy he can't
Governor Harding complained he could not reach
Secretary--sometimes had to wait a day or longer.
Delano said he often had to
wait an hour or longer in outer office.
Governor Harding said he thought Secretary McAdoo would soon break
down and if he took over the Railroad operation, it would kill him.
Governor
Peabody, I think, said McAdoo had been advised by his friends to resign as
Secretary if he managed the Railroads.
Governor Harding, I think it was, said
Bertrand told Secretary if he did both he would have to serve as his pallbearer
within 90 days.
Dec. 22 - 29
Baron Mejata asked to ascertain whether in case Bank of Japan asked
for reciprocal agency with Federal Reserve Bank of New York, the request would
be complied with.
I said I would ascertain.
Baron Mejata said all he wanted
now was the appointment and announcement in the Press; that he did not expect
to do any business under the designation for the present and probably not until
after the war and that the details of the arrangement could be left for future
consideration.
I spoke with Secretary McAdoo and he thoroughly approved and suggested
my seeing Lansing which I did. ',aping strongly approved and told me to say so
to Board.
@FedFRASER