Full text of Committee on the History of the Federal Reserve System : Curtis, James Freeman : Reminisces (1951), Entry 168, Box 11, Folder 10

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The Reminiscences of
JAMES FREEMAN CURTIS

These reminiscences are the result of a series of
interviews with Mr. James Freeman Curtis by Mr. Harlan B.
Phillips during the months of February, March, April, May
and June 1951.
The interviews were held under the auspices of the
Oral History Research Office, and were subsidized by the
Bancroft Fund of Columbia University and the Lucius N.
Littauer Foundation.
The interviewer's questions have been omitted from
the account.

The questioning was primarily in the form of

topics suggested to Mr. Curtis concerning which he might have
some intimate knowledge. No editorial insertions have been
made other than the brief synopsis of the donor's activities
and the index.
The language of the narrative is entirely that of the
donor since all interviews were transcribed on a tape-recorder,
The completed manuscript has been corrected by Mr. Curtis,
and the validity of the information it contains has been
attested to by him.




-96-

was so tired with signing last minute bills that he could
hardly keep his eyes open.

Secretary MacVeagh presented

his side of this thing - the President knew of course what
we were going to talk about - and then I presented my side*
The President went to sleep during my talk*

A few minutes

before midnight when he woke up he said, "I donft know whether
this will be legal if it goes after midnight - I guess Ifve
got to sign something now*w
We both had our rival programs for him to sign*
He said, "Now I tell you, you canft expect me at this
hour to take anything except the Secretary1 s point, can you?11
I said, "I can hope canft I?"
So Secretary MacVeagh1s was signed*
into effect on the following first of July*

It was to go
By that time

Mr. William G. McAdoo was Secretary of the Treasury*

Mr#

McAdoo had asked me to stay on in the Treasury as Assistant
Secretary in charge of Customs and I had told him about this
reorganization and I had pointed out that Mr. Wilson would
have not as many Customs officers to appoint as there had been
before the first of July when the proclamation was to take
effect*
McAdoo said, "Well, let me think about this a little
bit,w which he proceeded to do*

He talked with various

Congressmen and Senators and finally said, "All right*




Ifll

-97-

go along with you but this is pretty terrific isn't It?"
I said, "Yes It is, and you111 have a lot of people
on the back of your neck on account of this."
So McAdoo did go along with this and the new scheme
went into effect the first of July, 1913. In order not to
have any question arise as to the meaning of the law, whether
or not we had complied with the law because we weren' t going
to save quite that full million dollars a year, I had said
to Secretary McAdoo, "Now, I'm getting the resignations as
of the thirtieth of June from all persons whose Jobs are
going to be wiped out by this so that we will avoid having
a test in the courts of whether or not this scheme is really
legal."
McAdoo said, "That's all right with me - they*re all
Republicans, aren't they?"
And I said, "Yes, they are."
As the thirtieth of June approached there were four
or five or six fellows who didn't send in their resignations.
I said, "We're not going to have this thing fail Just because
some recalcitrant Collectors are kicking up in the small
places." Of course all the big ones did because most of the
big ones were not going to lose their positions; they were
going to gain prestige through this. So I said, "I've
got a list here and here are some telegrams I've drafted.
They're all the same. They say the person addressed is hereby




-98-

removed from office, and they're signed by Voodrow Wilson.
Is that all right?"
McAdoo said, "Say, you think of almost everything,
don't you? Yes, I think that's all right. We'll have to
send them over to the White House first though." He got in
touch with the President and Mr. Wilson said, "That's okay."
So the telegrams were sent out and no one ever attacked
the reorganization scheme. It went into effect and I think
it did save a million dollars a year for the first few years.
Then of course it began to not save that amount as wages
went up and so on. At that time the Customs was the principal
source of revenue for the government.

We used to average

more than three hundred million dollars a year in revenue
from Customs. Internal Revenue then was less than that,
ordinarily under three hundred million dollars a year. Look
at the situation today (1951). It's astounding what a complete
reversal the income tax and other taxes have made. I used
to always kind of look down on the Internal Revenue group.
The Wanamaker affair was another thing that came
at the end of the Taft Administration.

Old John Wanamaker

had been a seconder of Mr. Taft at the Convention in 1912.
Our Special Agents Division made a very careful check-up of
things at Philadelphia and discovered that the John Wanamaker
Company had been importing a lot of valuable antiques, rugs




-99and other things and paying no duty on them*
investigation there that took months*

We had an

That was one of the

cases that Mr. Penrose talked with me about*
hefd go to the bat very severely on that*

Youfd think

He came and talked to

me about it and after he9d gone he telephoned in from his
office - I remember this v#ry well - and he said, "Mow Curtis
I have to talk for my constituents, of course*
you think is right.

You do what

Just let me know what you do*11

Now

that was Boise Penrose for Mr* Wanamaker who was a very* very
heavy contributor to the Republican party*
We couldn't prove a criminal intent on the part of anybody high up in the organization*
on anybody*
now why.

We could hardly prove it

There was a real failure of proof* I've forgotten

So we said, "Well, on the civil side there are a

lot of duties that haven11 been paid.11
a settlement.

We finally came to

The Wanamaker people paid a hundred thousand

dollars which was assessed as that amount of additional
duty and penalty and called it a day.
The matter had been the subject of a good deal of
investigation and of conferences with the company and its
attorneys.

I had inserted a clause in the proposed settlement

that this settlement was limited to and based upon the facts
that were stated above, and to no others.

This I put in specifically

to protect the government in case any other improper Importations




-100vere subsequently discovered.
had agreed to it.

The attorneys for Manamaker

I talked it all over with Secretary

MacVeagh and he said, "Okay."

That was settled just a few

days before the end of Mr* Taftfs term.
To go back a little, when Mr. McAdoo asked me to
stay on, I did so and some day after, perhaps a month or
so after, I went Into his office with a case that puzzled
me a good deal and started to tell him about it.

I said,

"I want to get your instructions on this.11
McAdoo leaned back and threw down his pencil and said,
"Mow listen Curtis, you've run the Customs for about four
years.

You agree with me that you111 run them the way you

have in the past and Ifll agree with you that Ifll back you
up whatever you do.

Only bring to me the things that you

know contain political dynamite.

I don!t want to go into

the detail of running the Customs.

Ifm too busy, particularly

over the new Federal Reserve business and I just haven!t got
time to find out how the Customs operates.11
So I said, "That

s u i t s me

*

I?11 do that and

ini

keep you advised on anything I|4iow has dynamite in it and
Ifll go ahead just the same as before.91
McAdoo said, "You1re not very much of a Republican,
are you?"
I said, "No, Ifm a Simon-pure Mugwump.

I said the

Republicans on the Hill think Ifm a Democrat and the Democrats think Ifm a Republican so I have no friends except




-150-

I sent the check for the $7000 along to Mrs. Thompson
vith a modest bill of my ovn for services rendered - in the
neighborhood of |1500 or something like that. Whereupon I
got back from Mrs. Thompson a note enclosing my bill and the
check from the United States for $7000 and a little more, to
her order endorsed by her to me, saying that my bill was
ridiculously low, here's what you ought to have charged, here's
the check for the whole amount of money.
I've never had since.

That is an experience

It just shows how grateful she was to

get off all the hooks there were there, and there were some
hooks.

I've always been very grateful to her to set me up

at a time I needed some setting up as I was just starting
in practicing law.
I did have a terribly interesting case that came about
this way: During the hearings in the Senate on the Federal
Reserve Act - the Glass Owen Bill - several New York bankers
appeared before the Senate Finance Committee.

Among them was

Mr. Frank Vanderlip who was then president of the National
City Bank.

They presented certain criticisms of the pending

bill, suggested changes, from their point of view, in the proposed Reserve System.

At the end of Mr. Vanderlip»s testimony,

Senator John W. Veeks of Massachusetts, who was on the Committee, said, "Mr. Vanderlip, you have some very interesting
ideas there. Do you suppose you could put them in the form




-151of a bill to be introduced as a substitute for the GlassOwen Bill?"
Mr. Vanderlip said, "Well, if I have a little time,
I f ll try.

I can get some of my associates in New York who

feel about it as I do, and I ! ll try and do that.11
He got in touch with Mr. Henry P. Davison of J.P.
Morgan and Co. and Mr. Benjamin Strong, president of the
Bankervs Trust Company, and asked them If they would help
him draft a Federal Reserve Act as a substitute bill. They
said they would.

Then they were trying to find somebody to

act as counsel for them, and among other people they talked with
my former associate, Charlie Morton.

They said, "Can you sug-

gest somebody who knows his way around Washington, who f s
been in the Treasury, knows how to draft bills and can

VLB*

the Ehglish language.19
Norton said, "Yes, I think I have just the man for you a fellow named Curtis from Boston."
Charlie Norton called me up one night and said, "I
want you to come down to New York on the midnight train. I f Te
got something very Important for you. Have you got anything
on tomorrow morning?"
I said, "Not in Court.

I havenft any engagement I canft

!

break."
So he said, "Jump on the midnight train and come on here.
This really 1§. something."




-152-

I came on to Nev York and breakfasted with Charlie
Norton.

He introduced me to Vanderlip, Strong, and Davison -

no one of whom had I previously known.

They told me what

they wanted to do and what they wanted me to do - to take
charge of the actual draftsmanship of the whole thing, supply
ideas from time to time. They were given Mr. J. P. Morgan
Senior1s private room at the top of the Banker's Trust Company.

He had just completed his new offices at the corner

of Vail and Broad but Mr. Morgan, Senior, had a private suite
of rooms which was practically the whole of the top floor of
the Banker's Trust Company.
We retired there and we spent more than a week in
constant session drafting a new Federal Reserve Act.

Ben

Strong had a very bad back and it was almost impossible for
him to get around, so sometimes we would meet at his home
and he would lie in his bed while we hammered out the new
bill. After a little more than a week's hard work, when we
were at it morning, noon and night, we finally finished the
Job.

It was Just a labor of love for those three men. I

expected to be paid for my work, but they were doing it Just
to meet the wishes of Senator Weeks and his Republican associates
on the Finance Committee.
What to do with the bill was the next problem.

Those

three gentlemen said to me, "You know Senator Weeks?"




I said, "Intimately, since we're both from Massachusetts

-153-

and I used to see quite a lot of him."
They said, "You know some other Senators, don*t you?"
I said, "I certainly do."
They said, "You take this bill down to Washington and
get somebody to introduce it and we ! ll see what happens."
So I went down to Washington with a number of copies of
the bill and got hold of Senator Weeks and explained to him
that this was the work of these three men in accordance with
his request to Mr. Vanderlip. He said, "I think this bill
would be better introduced by somebody not on the Committee.
Senator Theodore F. Burton of Ohio is very much interested
in the Reserve Act.

Talk to him."

So I took the bill to Senator Burton of Ohio and expounded
where it differed from the existing Glass-Owen Bill. The
principal difference was in giving more centralized authority
to the Federal Reserve Board when they had under the GlassOwen Bill. Under the original Glass-Owen Bill most of the
authority was with the Federal Reserve Banks. After we'd
discussed it for a while, Senator Burton said, "Yes, 1*11
introduce that."
He did and made a speech in its favor.
also made a similar speech.

Senator ELihu Root

One or two minor changes were made

in the Glass-Owen Bill by the Senate Committee in accordance
with the views expounded in the new Burton Bill. In the end
the Glass-Owen Bill was passed just the same, but we did have




-154a little effect.
I got paid for my services and that was that. But I
became quite friendly with Messrs. Vanderlip, 8trong and
Davison.

Then I went back to practicing law in Boston.

As I recall it, the Secretary of the Treasury, the
Comptroller, and one other person, whose office I donft
remember, were made a committee, under the Glass-Owen Bill,
to decide how many, and where, Federal Reserve Banks should
be in the system.

The number was left open.

I remember

Secretary MeAdoo coming to Boston to hold hearings up there.
My wife and I were at a party or ball in the Hotel Somerset,
that was being given in honor of this committee.

I remember

McAdoo came up to me and said, •Curtis, where1s your wife?*
I wanted to talk to him about the Federal Reserve Act but
he said, "Where1s your wife?*
I said, *Ifll find her, but I want to talk to you.*
He said, *0h, I donft want to hear any more about the
Federal Reserve Act. Ve f ve been sitting all day trying to
decide how many banks there should be, where they1re to be
placed and so on.99
I said, "You really want my wife?"
He said, "Why, yes, I want to dance with her."
Finally they finished their labors and decided there
would be twelve Federal Reserve Banks and decided which cities




-155they would be in.

Then they started the appropriate machinery

to create the first Board of Directors and begin the functioning
of the 12 banks.
Mr. Pierre Jay was made chairman of the Board of Directors of the Federal Reserve Bank of lew York, and also Federal
Reserve Agent.

The two positions were required to be the

same man at that time. Mr. Benjamin Strong was elected Governor of the Federal Reserve Bank in lew York.
ganizing the bank.

They set about or-

The first thing I knew I got a letter from

Ben Strong asking me to come on and talk about becoming counsel
for the bank and helping to organize it.

That was entirely

a bolt from the blue to me. Mr. Jay had been Bank Commissioner
of the State of Massachusetts when I was in the Attorney General f s
office, and he was one of the people who received legal advice
from me. Mr. 8trong, I got to know pretty well, drawing up
the Burton Bill.
I came on to lew York and had a chat with them.

They

said, "We want you to come on and be counsel and secretary
of the new bank and help us get it organized.n

After talking

it over with my spouse, I could see that this was going to
mean giving up Boston as a home and adopting New York. Ve
finally decided that that was the right thing to do.

Thatfs

how I came to be in the Federal Reserve Bank of Hew York. It
was a very fortuitous way around.




-156-

I came on to Mew York in the autumn of 19L4 and
assisted in the organization first on a temporary basis and
then on a final basis of the Reserve Bank in New York.
It was intensely interesting work because we were
charting unknown seas. There never had been a system of the
Reserve Banks before and very few precedents to go by. Ve
got in as temporary cashier, Mr. Gregory who was loaned to us
from the National

City Bank and until we had a permanent

cashier he did all the work of setting up the cashier1s
division and so on.
Ve all worked pretty hard. My wife did not come on
that year as we were expecting a baby in March.

I used to

commute over the weekends from New York back to Boston.

My

oldest boy was born in the early part of March, 1915, in
Boston and she and the children - there being then, two didnft come on until sometime later in the spring of 1915.
Shortly after I was associated with the Bank, I was
made a Deputy Governor so that I held for a long time those
three positions of general counsel, Deputy Governor, and
secretary.

One of my Jobs was to prepare the minutes of

all meetings of the Board of Directors and the agenda for
all meetings.
occupied.




These three positions kept me quite reasonably

-157-

Under the Federal Reserve Act, the twelve Federal Reserve
Banks were supposed to initiate the rediscount rates for the
member banks who wished to rediscount commercial paper at
the Federal Reserve Banks. Those rates all had to be approved
by the Federal Reserve Board in Washington*

Fairly early in

the administration of the system arose the question of who
initiated the rates - the Board of Directors of the Federal
Banks, or could the Federal Reserve Board, itself, initiate
a rate. This was a very Important question for the Board
of Directors of the Bank, as can be seen*
The Reserve Board felt that they could not only approve
and disapprove rates, but also direct rates and Initiate them.
Ve felt otherwise and I gave quite an elaborate opinion to
the Board of Directors of the New York Bank to the effect
that the Reserve Board could approve or disapprove of a rate,
but that the Board of Directors of the Bank was entitled to
initiate the rate and change it when they saw fit.
The matter was so important that Governor Strong felt
that he must get added, outside, impartial opinion on that
point. He and I decided to get it not from a Mew York lawyer.
I was Instructed to get the opinion of Mr. John G. Johnson of Philadelphia, who at that time was the leading lawyer




-158-

of Philadelphia and one of the leading lawyers of the country*
I wrote a carefully worded letter to Mr. Johnson and
asked his opinion on it. I got a reply back which to the
horror of Mr, Strong and myself, went the wrong way. Mr,
Johnson had come to the conclusion that the Federal Reserve
Board did have that right.
Strong said, "We can't lie down under this. You must
go down to Philadelphia and hare a talk with Mr. Johnson."
I telephoned down and arranged for a conference. I had a
long interview with Mr. Johnson who was most agreeable and
courteous. I said to him, "I don't think you've laid sufficient
stress on such-and-such a seotion of the Act which has a very
direct bearing on the question propounded." We went over the
situation point by point in great detail.
Finally Mr. Johnson said, "Veil, I think I've made
a mistake. I think you're right and I'd like to change that
opinion if you'll send it down to me."
I said, "Mr. Johnson I hope you won't think I'm forward,
but with the idea that you might change, allow me to present
you with your decision." I then pulled it out of my pocket.
Mr. Johnson smiled and said, "Thank you very much. I
think I'll rewrite this." He did that, sending us a very fine
opinion the right way.




-159-

In my work in the Federal Reserve Bank as general
counsel I naturally came into contact with a few banking
lawyers, but by far the most of my contacts in Mew York were
with bankers. In the first place, naturally, I knew the whole
Board of Directors of the Federal Reserve Bank extremely well
as we used to meet about once a week.

I got to know their

idiosyncrasies and their views on a great many matters.
As far as practising law individually was concerned
my arrangement with the Federal Reserve Bank was that I was
entitled to do so if I had an opportunity to do so. I had
almost none, I may say. I was a stranger to Hew York and
although I did have one or two small cases they were not
much of anything.
I still had some contacts with the Treasury Department.
We were in touch with the Treasury right along. The Secretary
of the Treasury and the Comptroller of the Currency were §&
officii members of the Federal Reserve Board.

There were

also five others the original members being W.P.G. Harding
of Alabama who subsequently became Governor of the Federal
Reserve Bank of Boston; Paul M. Warburg, a Mew York banker
who used to be a partner of Kuhn, Loeb and Co.j Frederic A.
Delano, who was an uncle of a young man, not so well known
at that time, named Franklin Delano Roosevelt? Edmund Plattj




-160-

and Adolph C. Miller who came from California,

That was

the original Federal Reserve Board•
At the Bank we were on very cordial relations with the
Federal Reserve Board although we did not always agree with
them.

But our relations with the individual members were

always on a very agreeable plane*

They had a secretary who

had assisted in drafting the Reserve Act, named Dr. H. Parker
Villis. I always thought that he arrogated a good deal of
power to himself. We in the Bank did not get along quite
so well with him as we did with the members of the Board
themselves.
Vhen the Federal Reserve Act was first put into effect,
which I think was November 15 or 16, 1914, there was a good
deal of disagreement among the bankers of the country as to
whether it was going to be any good or not; whether it was
workable and if so, how it would work) whether it was an
advantage to the country.

I think the strongest backer of

the new proposed system in lew York certainly was the late
Mr. James Stillman who was chairman of the board of the lational City Bank; also Mr. Frank Vanderlip, who was president of
the National City Bank. He was ardently for it and was active
in rendering assistance of all kinds to the new system.
On the other hand I remember a number of bankers who
thought It was going to fail and just be another piece of




-161legislatlon that wouldn't work. Even as distinguished a man
as Charles H. 8a£in vho was president of the Guaranty Trust
Company said to me at one time, "This new thing you people are
trying isn't really any good.
do the country any good.

It won f t work out, it won't

Xou and Ben Strong and Pierre Jay

are three idealists who think you've got hold of something
wonderful, but us practical bankers know better - it won't
work,"
The law was that all national banks with a capital
of $25,000 or over were automatically members of the Federal
Reserve System.

State banks with a minimum of $25,000 capital

could apply for membership if they wanted to and their
application would be scrutinized by the Federal Reserve Bank
of the district in which they were. Then it would be forwarded to Washington where the Federal Reserve Board could
approve or disapprove of their entrance into the System.
For quite a while, no state institution joined the
System. Ve used to have some national bank officers write
in and say, "Veil, here we are, we're in the system, and
we've sent along subscriptions to the capital stock of your
Federal Reserve Bank which we are carrying on our books at
$1.00." That really, truly happened.

Of course the stock

was owned by the member banks in a certain proportion to
their capital surplus and undivided profits. If the Reserve
Bank had any income it went first towards paying 6% on the




-162-

capital stock to the member banks and thereafter to the
Treasury.

So instead of its being a £J* investment it wag

put down as a $1.00 in some banks*
It wasnft till after the war situation had got more
desperate that the state institutions began to Join the
Reserve System.

They they joined in great quantities,

including the Guaranty Trust Company of Mew York.

The

System expanded quite rapidly after the situation of the
Allies became more desperate and fortunately long before we
went into the war so that we were well-equipped by the
time we went into the war.
The problems were new and very interesting.

One of

the most interesting things, as far as I was concerned, was
the fact that it soon became apparent that in order to function
smoothly the twelve Federal Reserve Banks must act very
closely together and the personnel of the different banks
should be on close terms of intimacy and friendship•

From

that rather obvious situation there came the beginnings of
what was called the Governors1 Conference.

The twelve

Governors used to meet amongst themselves and discuss matters
of arrangements between the banks, acting as a clearing
house for instance for the forwarding, the checks, and all
sorts of items of mutual functioning.




I was secretary of that Conference and used to prepare

-163the agenda, keep the minutes, make arrangements for the
meeting places, hotel accomodations and so on.

We met three

or four times a year, always at different banks around the
country.

The Federal Reserve Board members were not present

at those meetings, but they were always advised of exactly
what recommendations were adopted or action taken at everyone of the meetings. Ben Strong was chairman of the Governors1 Conference and one of the most astoundingly good chairmen I have ever seen perform*

He was a brilliant man.

I can remember one meeting which I think had been
held in Washington, which was not our usual place to meet,
but we were in Washington and Bon Strong undertook to report
to the Federal Reserve Board all that had gono on at the
Conference of Governors which had lasted several days, as
they usually did.

I can remember most of the Governors were

there and all of the Federal Reserve Board, not including the
two ex officiis members. Bon Strong, without a single note,
for several hours took up item by item the things that tho
Conference of Governors had done*
performance*

It really was an astounding

He was much the most able and brilliant member

of the Federal Reserve System as a whole that there was. There
was no one on the Federal Reserve Board that was really in
his class, though the nearest approach was Mr. Pawl Warburg,
who was a brilliant banker of course.




Later in my career I was astonished to find that banking

-164-

was not an exact science by listening to a debate between
Mr. Warburg and Mr, Strong on how foreign exchanges work
and finding their views completely different from each other.
Legal questions came up all the time and I had my
hands filled with problems.

The Reserve Act authorized the

Federal Reserve Banks to arrange to collect checks for the
member banks or to act as a clearing house for the member
banks.

One of the early things we did in the bank was to

organize a transit department where checks went through.

Sub-

sequently they took over the functions of a clearing house.
The clearing house balances instead of being cleared by checks
on the various members of the clearing house and by clearing
house certificates were all cleared in a very simple way by
making an entry on the books of the Federal Reserve Bank
crediting one member bank and debiting another.
The Reserve System simplified so many things that
it was almost an unqualified success. I use the word "almost"
because it hadn't stopped completely financial panics some
people thought it would be able to do. My own personal judgment, getting a good many years ahead of my story here, is
that if Ben Strong hadnft died in 1928 the terrific smash of
•29 would not have occurred.

He would have taken some drastic

action before that happened, but he fell ill and died in '28
so that there was nobody of his towering personality and
strength to say, "How this is going to stopl" nhich I think




-165he would have done*
The taking over of one function after another required
a lot of legal work in deciding exactly what the Federal Reserve Act authorized the banks to do and so on. Just before
the United States went into the war in 1915 or fl6 there
was an issue of Anglo-French bonds - Joint bonds of the two
governments handled by J. P. Morgan and Company.

In connec-

tion with that, or some large financial transaction, the House
of Morgan was to receive two hundred million dollars, which
at that time was the largest sum ever appearing on one check
in a transaction in this country.

I remember handing

a check

for two hundred million dollars to Mr. Jack Morgan in person.
I took it over to his office and said, •Here's a little piece
of money for you.11
Jack Morgan took it and smiled,
photostatted.

f! f

I m going to have this

Would you like to have a copy?"

I said, "I certainly would," which I still have today a copy of a two hundred million dollar check.
We went on in the Reserve System from one point to
another gradually enlarging the functions that it was undertaking
and enlarging the personnel employed.

Instead of being a very

small bank we became a very large one.
The following incident merely illustrates how important
affairs sometimes are handle* completely behind the scenes




-166-

and results achieved that could not be achieved directly.
There came a time when we felt in the Bank, where we were
incidentally all violently pro-Ally in the war which was then
going on in Europe and which began before the Bank was open,
that it was very important to take some action with respeot
to our relationship with the Allied countries and their
financial situation.
Secretary McAdoo was rather opposed to the Reserve
System taking the action that we wanted.

Governor Strong

and I and the other officers of the Bank debated for a long
while how to get the matter put through. Ve came to the
conclusion that the thing to do was to try to get Mr. Wilson,
as President of the United States, to take a hand in it.
I knew Mr. Wilson slightly and I'd served under him
for about six months; some of the others also knew him slightly
but none very well.

I think Ben Strong said, "Why not talk

with Colonel Edward House?" and everybody agreed that that
was a good idea.

I said, "Veil, Colonel House is spending

the summer on the northshore of Massachusetts. He has taken
a cottage about a mile and a half away from where my sisters
live in my old family home in Manchester, he being in Magnolia.11
I went on and suggested to Ben Strong, "How would it be if
you and I went up and played some golf at the Essex County
Club at Manchester, Massachusetts, at the Myopia Hunt Club,




-167-

or other golfing centers*

Perhaps we could stay with my

sisters and maybe go over and see Colonel House?11
That struck a responsive chord in Ben Strong's mind
so we went up there and played some golf. We stayed at
my sisters and I took Ben over to where Colonel House was
living.

He expounded the situation to House and after about

an hour or so, the Colonel said, "You're absolutely right*
That must be done.

I will see that the President gets the

right slope on this." In a few days it was done and I have
no doubt that Mr* McAdoo never knew how the rug got pulled
out from under his feet on the particular proposition we
were struggling over*
I can't remember the proposition exactly, but I think
it had to do with accepting paper for vast purchases of
munitions and other Implements of war that were made In this
country by both France and England*
Ben Strong made a good many trips to London and a few
to France to keep in touch with the Bank offrigland and the
Bank of France*

The Federal Reserve Bank of Mew York became

a depository for both of those banks*

They held balances

With VLMm

I remember Ben Strong's telling me of an interview he
had with Sir Rufus Isaacs - he may have been Lord Reading
at this time, as he was a Judge.




There was some case of

-168-

espionage or treason that was on in Etagland and Ben Strong
knew quite a little about one of the actors in it. He was
dining with Lord Reading on one occasion and Reading said
to him, "Tell me all you know about this man." My recollection is that the trial was then on and Strong said, "Is it
quite right for you, a Judge, to receive information other
than in court?"
Reading said, "Now listen, Strong, there1s a war on
and I'll take all the information I can get any place, from
any source. Tell me what you know about him."
Ben Strong was not physically well and he came back
from abroad on one occasion and was met by the news that
his wife was leaving him. He managed to get up to his apartment and his doctor came and told him, "You have TB. You!ve
got to go out Vest at once." His world seemed to be more
or less collapsing at that point.
He went out Vest and was in Estes Park, Colorado, for
a good while, and later on in Arizona. I went out to visit
him in Arizona and we were in Phoenix together at the time
that Ambassador J. H. von Bernstorff was sent home by President
Vilson.

It was quite clear that war was very imminent and

we kept the wires hot between the Federal Reserve Bank of
New York and Phoenix for all the time I was out there. His
TB had caught him in the throat so he could hardly speak and




-169I had to do all the talking*

Ve n d t such preparations as

we could for the effect of war on the Reserve System, which
was quite considerable*
After war was declared, we naturally lost some men
to the Armed Services, but the Board conducting the draft
act took the position that anybody that the Directors of
the Federal Reserve Bank said was vital to the proper running
of the bank with respect to its war functions - and those
soon became quite heavy - would be exempted from the draft*
So we didn't lose any of our key men*
After a while Ben Strong came back. He was active at
the Bank during part of the war and then he had to go off
again and recuperate out West*
Ve had a tremendous responsibility with respect to
raising the various Liberty Loans and getting the bonds
placed.

About two-thirds of the resources of the System

was in the New York, as I remember It.

There was formed a

Liberty Loan Committee of which Ben Strong was chairman and
Pierre Jay vice chairman.

I was secretary of it. The general

manager of it was Arthur M. Anderson who is now one of the
partners in J. P. Morgan and Company and who had been loaned
to us by the Morgan firm.

The other members of the Committee

were all very well-known bankers of the 2nd Federal Reserve
district.

They used to meet frequently and discuss ways and

means of distributing the bonds and getting the subscriptions in.




-170-

It was an organization that went into every hamlet*
We had county chairmen, city chairmen, town chairmen and
so on*

It was a tremendous organization and there was a

Tery effective women's organization that paralleled the men's*
Mrs* John T* Pratt, who was subsequently a Congresswoman from
Hew York, was chairman of the woman's committee*

My then wife

was, I think, treasurer of the woman's committee - I've forgotten her exact position but she was very active*
were very instrumental in raising the money.

They

Some details

of it are amusing - I think it was with respect to the first
issue*
Mr* McAdoo's ideas of raising money, as he was the one
responsible for the country as a whole, were far bolder than
most of the banking group in New York - far bolder.

If they

set their sights on a billion dollar issue, he'd say, "Make
it between two and three," or something like that*

He was

a very fine man to have at the helm in the war years.
I remember sitting around the table at one meeting of
the Liberty Loan Committee of our district, during the first
loan, I think*

It was the day before the campaign was to close.

I had been on the wire with the Treasury in Washington getting
the very latest reports from the twelve Federal Reserve districts
in the country as a whole.

It appeared that the loan wasn't

going so well and it might fail*




I'd gone back into the

-171-

meeting with vord of what the very latest plan was from
the Treasury, having talked to either Mr. McAdoo or the person in charge in the Department. Mr. Russell C. Leffingwell
who is now with Morgan and Company was down there part of
this time and I may have talked

with him.

I told the meeting what the situation was and Mr. George
F. Baker, Sr. who was the most elderly banker on the Loan
Committee said, "This loan cannot fail; I propose that we
underwrite it here and now." He took out a paper and a pencil
and in a rather shaking hand wrote something down on it and
said, "The First National Bank had already subscribed to what
we feel is its correct quota, but we 1 11 subscribe another ten
million dollars.• He then went around the table asking each
one how much additional they'd underwrite Just to make sure.
They underwrote at that time and place three hundred and
fifty million dollars without batting an eyelash. Ben Strong
took no part in this. Mr. Baker did this whole thing himself
as Strong didn't want to be in the position of urging the
private bankers to underwrite any

such loan. But three hun-

dred and fifty million dollars were underwritten there inside
of ten minutes. However the loan was a great success, and
the underwriters were never called on for that additional
amount*




It was a thrilling experience to see those men all come

-172-

up to scratch*
There was a good deal of competition between the men
and the women1s groups, since I f ve brought the matter up*
Those were exciting days*
Another Interesting thing in connection with Liberty
Loans was a Tlsit from the Governor of the Bank of England,
Lord Cunliffe*

He came over during the first Liberty Loan

campaign to discuss certain matters with the Federal Reserve
crowd and the Treasury.

I remember he was sitting around

one day with Pierre Jay and myself and we were chatting about
bond Issuesand raising money*

I said, "Governor Cunliffe,

how did the first bond issue go In Etagland?"
He smiled and said, "Very well*

Very well, Indeed*

We only had to take about half of it at the bank*11
Jay and I expressed astonishment at this and he said*
"Oh yes, that's the way it goes*
it at the Bank of England.

Ve had to take a half of

Afterwards we got going a little

better.11
Ve said, "Veil, we hope we donft have to take a half
of it at the Federal Reserve System here,11 which we dldnft*
Ve got up a dinner in honor of Governor Cunllffe and
I was In charge of making most of the arrangements*

Ve had

a little menu card with the flags of the Bapire and the United
States crossed on It*




I found a quotation from Lord Arthur

-173Balfour of a speech he f d made when he was just plain Arthur
Balfour, vhich was yery apropos and which I put on to the menu.
Ve had many Important functions during the war.

One

of my Jobs was to interview the press. I used to hold, my
recollection is, daily sessions with the representatives of
principal newspapers in New York and tell them what was going
on.

I had established a system of talks which consisted of

things which were printable, some of them Ifd have typed out
in advance all ready for than for a press release.

I also

gave them things that were not printable and "off-the-record."
I remember that at one period of time the flow of gold
had begun from Europe to the United States to pay for all
the different war materiel that they had bought.

Four

hundred million dollars worth of gold was brought along on
a destroyer that had landed in Canada.

I told them off-the-

record that it was being shipped from Montreal by rail on
a certain day down to the Federal Reserve Bank of New York.
Incidentally, we had established a machine-gun guard over
our vaults that was something terrific.

I said, "How this

is all off-the-record until it arrives. After it arrives
then it can be published.11
The next morning out of all the newspapers that were
there the Hew York Times carried the story of the fact that
that gold was then coming down from Montreal to Hew York.
To say that I was up in the air with anger, is putting it




-174-

very lightly*

And so was Ben Strong*

When the newspaper

men came in that afternoon, the Mew York American man put
both his hands up in the air over his head and said, "Not
gulltyl"

I said, "I know who's guilty."

I told him in no

uncertain terms how outrageous it was. There were seven or
eight newspaper men in the room and the New York Times man
said he hadn f t understood it was "off-the-record."

I asked

each of the others in turn what their understanding was and
whether they would confirm me that it was off-the-record.
They had so understood it and not one of their papers had
published it*
I said, "Now I f ve gone over this with Mr. Strong and
we 1 re just not going to have any New York Times man come
in here and get any news any more. That's the end." As
you can imagine, that caused quite a little rumpus.

The

New York Times thought they had lost something and of course
they had.

I think Mr. Carr V# Van Anda was at the head of

the Times at that point.

The first thing you know he was

running around to see Mr. Strong and there was hell fire.
Finally after some days the Bank relented on the understanding that that man would not again be welcome and the
Times would put on some other man and then the New York Times
could still get the news.




That was an interesting episode.

During the war, after the first Liberty Loan campaign,

-175we were in constant work over raising money.

If one cam-

paign was over then wefd be laying the preparations for the
next one. There were five Liberty Loan campaigns during
the course of the war and immediately afterwards. There were
four during the war and one, I think, called a Victory Loan
Just after the war had ended. 80 that wasn't a very long
space of time between campaigns.
I personally had been getting a little restive at
fighting the battle of Wall Street and wanted to get into
the conflict and fight some other battle. In the spring of
1913, I think it was, after one of the Liberty Loan campaigns,
Mr. George F* Baker, Sr., Invited Ben Strong, myself and
my old friend, Charlie Norton, who was, at this time, a vice
president of the First National Bank, to come down and hare
a little vacation between loans at Jekyl Island off the
coast of Georgia. It was a millionaire1* club thatfs now been
taken over by the state of Georgia, but at that time it was
the most exclusive club I ever heard of. Mr. Baker wms a
member there and we three younger men went down with him.
We played golf, swam and had a very fine time.
While I was down there, the method of locomotion on
the island was by bicycle. I think Mr. Baker and Mr. John
D. Rockefeller, Sr., were the only two people allowed to have
motors down there and that was solely on account of their
age. Ben Strong, Charlie Norton and I were off swimming one
day when Mr. Baker came along in his car on the wonderful




beach and said, "There's a very large alligator down there
at the other end of the island*

Put on your clothes and

come on down and take a look at him - he's really worth
seeing." We all had our bicycles along so we dressed as
quickly as we could and the other two got in the car and
put their bicycles on the rack. What with bicycles and people
there wasn!t any room for me.
tow along.

I said, "All right, I'll just

You start off and I 1 11 hang along behind and

take a tow."
We started off and I had my hand on a rear mudguard
or some other piece of metal and the driver of the car either
thought he was being funny or didn't appreciate that bicycles
didn't go at the rate of speed of motor cars, so that the
first thing I knew I woke up in a sort of a hospital ward
and it appeared that my bicycle had collapsed completely
and Ifd been thrown on my head on this very hard sand which
was about as hard as a brickbat.

I had quite a concussion

of the brain and had been carried home on a shutter in the
car. When I came to it was several days later.

Fortunately

there was a brain specialist there who was a young doctor
from Johns Hopkins.

They telegraphed for my wife who was

about to have another baby.

She came down, and in general

it was quite a time.
That wasn't quite the kind of a rest I had bargained
for. I stayed there beyond all the others for quite a while




-177as they couldnft move me.

The first time I came dovn

into the dining room of the club, which was some weeks
after the accident, I hobbled in at lunchtime and the
only person who got up and said, "Veil, IYm glad to see
you alive," and came over and welcomed me back to the land
of the living was Mr. William Rockefeller, concerning whom
I had said some rather bitter things*

I said to myself,

*Thatfs what can come of falling on one f s head."
I finally got back to the Bank and started in work
again.

The doctor down at the island said it would be

all right but that I musnft work too hard and so on. Along
about that time, the United States Army was getting up a
brand new thing in the Army called the Chemical Warfare
Division.

It was the first time that our Army had ever

used, or proposed to use, chemical warfare. My friend and
classmate, Percy Haughton, had received a commission in
the Chemical Warfare Division as Captain and he was given
the job of getting some men of experience who knew something
about physical sports, how to manage themselves and knew
their way around in the world.

I remember he was getting

several baseball players to come in, receive some training
and get a commission if possible. Anyway, he asked me to
be one of them.




That just suited my book.

I didnft want to keep on

-178fighting the battle of Wall Street.

I told them at the

Bank that I thought I'd go. I think the Board of Directors
was unanimously of the opinion that I ought mot to, but
I vent to see the doctor who'd been looking after me more
or less since I'd got back and said, "Mow give me a real
going over. I'll tell you why*

I want to know if I'm in

sufficiently good shape to get into the Chemical Warfare
Division, go to the front, and be in the active service."
My doctor gave me a very complete going-over from head to
toe - mostly the head.
He said, "You would like to have these answers really
correct and accurate?"
I said, "Yes, I would - I didn't come to you to hear
any fairy tale."
He said, "In my honest judgment, if you vent to France
you wouldn't last a day. Hot only is your situation very
bad and one that you simply couldn't

do any real strenuous

work of the character that you're talking about, but I want
you to leave the Bank this afternoon and not go back to it
for several months."
I said, "You really mean that?"
He said, "I certainly do, and will tell thai at the
Bank that you shouldn't be at work.
blow and you're no ways near




You've had a terrific

recovered from it."

-179So he did talk vith the people at the Bank and I left
the Bank the following day after this conversation. Instead
of getting into the Chemical Warfare Service and fighting a
war, I vent home at that time in August, 1918 - my accident
having been in March of that year - and did not return to
the Bank until January, 1919* I spent the last months of
the war in absolute Idleness and disgust.
Vhat the doctor had said came as an absolute shock to
me.

I had no idea that I vas so badly off. I thought as

long as the brain specialist from Baltimore had given me
leave to go back and work, I vas okay. I knew I got terribly tired, but that was certainly some shock. Instead
of becoming a warrior, I became an invalid and was completely
out of everything until January, 1919. I then went back
into the Bank again and took part in the Fifth Victory Liberty
Lean campaign. I stayed on with the Bank until the late
summer of 1919. At that time the war had been over for
quite a while and I felt that most of the most pressing and
interesting problems of the Federal Reserve System had been
solved, so I was anxious to leave the Bank and go back to
practicing lav. I never was much of a banker.
I had talked over returning to the law with Vinfred T.
Denison who had fairly recently come back from the Philippines
where he had been vice governor and had gone back to the firm
of Stetson, Jennings k Russell where he was a partner. He




-180-

was not very happy there and thought he'd like to start
out for himself.

80 did I. Ve tried to get others who had

seen public service to Join with us and we!d thought we'd
have a sort of ex-public servant group to make a firm.

Ve

asked Mr. Russell C. Leffingwell, who'd been down in the
Treasury during the war. He vas about to leave the Treasury
and go back into private work. Ve also asked Frank L. Polk
who had been both Under Secretary and Acting Secretary of
State during the war.

Those two gentlemen we lost because

Mr. Leff ing well was inveigled by J. P. Morgan and Company
to become one of their partners and Mr. Polk was inveigled
by Stetson, Jennings and Russell to become one of their partners.
Denison and I decided to go it ourselves. He said
there were various younger men in Stetson, Jennings and Russell who would come along and make a staff for us - not as
partners, but as employees. Ve acquired at least three a fellow named Briggs; a fellow named Vatts; and Chauncey
Belknap, my present partner.

Those three came with us when

we started the firm.
Denison said he would like to get as counsel for our
firm, Mr. Villiam J. Curtis who was a partner in Sullivan and
Cromwell who had become very deaf and was not very happy
there. He introduced me to Mr. Curtis who was a Maine man,




-181as Denison was, and they had known each other for many
years. He agreed to come along with us as counsel,
I left the Federal Reserve Bank on 1 August 1919
and we started up the firm of Deal son and Curtis, with
most elaborate offices in the Yoolworth Building about the
end of August or the first of September*
Denison. a most brilliant man, was then suffering
from what I think they eall now cycular insanity. le had
periods of great elation and then periods of terrifie depression. He had a trained nurse constantly in attendance.
The seriousness of his illness had not got into my consciousness. I wasn't really aware of it*

It appeared that when

we were projecting our proposed firm, he was in one of his
most elated periods. Ve were going to hare the world by the
tail* Ve took tremendous offices in the Voolworth Building*
I went along with him thinking he knew what he was about*
I personally had no clients whatsoever in the city of lew
York as I had devoted practically all of my time to the Federal
Reserve Bank*
Ve started in. Denison's elation shortly turned to
depression. One day his secretary came in to see me and
said, "Mr* Denison is really very ill and has got to quit
work now. He's afraid to tell you."




I said. "That's all right, I can run this shop."
She said. "Veil, he's right in the next room, but he's

jttst afraid to tell you that news."
I vent in and talked with him telling him that I was
capable of running the business. He was tired and vas going
away for the time being till he got his strength back, which
he did*

I had a long talk with his doctor who was a very

famous combination psychoanalyst and neurologist, Dr. A. A.
Brill. He told me that Denison was in a fit of depression
and said, *It would

b« a godsend if you could find him a place

to live out near you in the country, so that you could keep
an eye on him from time to time. He musn't come to work, but
he should be interested in what*s going on at the office."
My wife and I were then liring at Roslyn, not in my
present home, but in a place called Roslyn Estates about a
mile and a half from where we now lire. We got under
lease for him a rery agreeable little cottage almost next
door to where I now lire on Bryant Avenue in Roslyn. He,
his trained nurse, a cook and a maid established themselves
there and lived there for about three months*
When I had talked with Dr. Brill, I had said, "Must
we be on the lookout for suicide?11
The reply was, "lo, Denison is past that.

There was

a time when that was very much of a problem, but now he»s
past that and the thing to do is just nurse him along and try
to get him interested in his office."




After three months he said that it would be all right

-183-

for Denlson to come In and do half a day's work.
The doctor vas wrong about Denlson's return. He had
told me, Denlson and Denlson's nurse that it would be all
right for him to come to town and work for half a day or
a few hours. Denison was then still living in Roslyn. A
day was set, he was to come in and about the late morning
while I was off at a meeting, Watts called me up and said,
"I have some bad news."
1 said, "You needn't go on.

Denison has committed

suicide?"
He said, "Yes, just so."
Denison just couldn't take it. He had got as far
as the Long Island station of the subway and jumped in front
of a subway train. He never did get downtown.
The funeral was at Mr. William J. Curtis' house on
Fifth Avenue - the whole thing was very, very sad*

After

the funeral was over I found myself in the position of haYlng
very elaborate offices in the Yoolworth Building, practically
no clients except a few that were leftovers from Mr. Denison,
and thirteen people in my employ, no one of whom, except my
own secretary who had come over from the Federal Reserve Bank
with me, had I known for as much as ninety days.
I made up my mind to try it.
mostly by ones but




I called the crowd In,

some in groups, and said to then substan-

-Inithat the situation had been so completely changed
by Denison's death that they were all to feel at entire
liberty to take other positions if they wanted to; that I
vas going to go ahead and see vhether I could make a go of
practising law in Mew York City without clients; and that I
would continue to meet ay payroll for as many months as I
could and would like to hare them all stay if they wanted
to take that chance that we might go under and never survive.
They all said that they'd like to stay, rather to
my surprise*

I didn't know any of them rery well, but

only one of them left after a few months staying at least fer
the first few months, and the rest of them stayed with me
for a good many years, some of them until they also died*
Vatts left just before his death to form a little firm of
his own. Mr* Belknap, my present partner, was one of the
ones that stayed, in fact the chief one*
Ve managed to survive but it was a very close call,
I must say, during the years of 1919 and 1920* I didn't
know whether we would sink or swim*

Clients came in and

the Federal Reserve Bank of Mew Xork was extremely helpful*
They not only asked me to act temporarily as their general
counsel until they could arrange for a new one, which they
did after a few months, but also they sent various people
to me. I remember Mr. Domenico Oidoni of the Bank of Italy
was one of them and I did quite a lot of law work for him.




-185-

I had a very amusing relation with the Bank of Italy In my
travels, vhlch I shall go Into later.
Early in 1920, and this is what really saved the life
of the firm for the first few years, the Federal Reserve Bank
asked me to supervise the protesting of commercial paper for
the Bank.

The Reserve Banks act as collection agents for

the member banks in their various districts. An enormous
volume of checks, drafts, notes and bills of exchange went
through the transit and city collection departments of the
Reserve Bank.

The lav provided that paper that vas not paid

at maturity should or might be protested by a notary public,
which involved a notary public going around with the piece
of paper, either himself or through an agent, to the obligor
on the bond, note or check, presenting it for payment and
mtkiwg a formal demand.

This, of course, was almost always

refused as it had already been refused once, before it was
given to the notary to make the protest. Whereupon the
notary would go back and make up a certificate of protest,
sending notices of protest to all the endorsers on the piece
of paper that was bad, then returning it to the bank the
following day.
The fee for protesting commercial paper, and the additional fee for sending notices of protest to persons obligated on that piece of paper as endorsers or otherwise, were




-186-

all fixed by statute. My arrangement with the Federal Reserre Bank was that I would charge the exact statutory rates*
This business soon assumed immense proportions. The volume
of bad checks and bad commercial paper that vent through the
Federal Reserve Bank of New York was simply enormous. laturally
it provided me, as notary public for them, with a very agreeable
income.

Of course I had to employ people to make the presenta-

tions of the paper and also to make the notices of protests
and certificates

of protests for each item.

This was done

by filling in the individual data on the printed forms which
we had on hand for that purpose.
After I'd done that for a good while for the Federal
Reserve Bank they asked me if I could arrange to supervise
having it done in Hew Jersey.

I told them that that would

necessitate employing a New Jersey notary or two*

The Reserve

Bank had got up a little clearing house called the Northern
New Jersey Clearing House, which involved the banks of the
three northern counties of New Jersey, whose paper was handled
by the Federal Reserve Bank of New York, they being in the
New York district.
After many years the items to be protested began to
decrease very materially, when the New York Clearing House
Association reached the conclusion that it was a waste of time,
effort and money to have small checks all protested - and it




-1*7vas rather an anachronism as a Batter of fact*

So they

began to make rules saying first that checks under fifty
dollars should not be protested, then cheeks under one
hundred dollars should not be protested, th«n checks under
five hundred dollars should not be protested, so that the
number of items fell off so much that I finally had a conference with the people who ran this activity at the Federal
Reserve Bank and told them that the amount had dwindled to
much that it hardly paid me for the trouble and time of employing people to manage the details of the protesting work,
particularly as a notary public was always under a rather
unknown liability with respect to whether he had correctly
done the notarial work. Some such liabilities might suddenly
occur that would put me in a seriously embarrassing position*
One such liability almost did occur at the outbreak
of the second Vorld War when some very large foreign drafts
of hundreds of thousands of dollars were sent over to be
protested. They were Japanese in origin and we had to watch
our steps to make sure that we did it exactly right so as
to have the appropriate people held as endorsers on these
various obligations.
Although the protesting was once in a while carried
into court, the Reserve Bank never lost a case and in fact
in every court case that we had, which considering the volume
was very slight, the court accepted my records of the protesting




-188-

vithout question, the statute providing that the notary*s
records vere yrlffff ffffl* proof of what they said, I bad
taken great eare to have My records correct so that they
would be accepted by every court, and they always were.
When I gave up the protesting, in the early U O s ,
I wrote a note to the Federal Reserve Bank outlining what
had gone on and asking to be relieved.

Of course I didn't

send this letter until after ve had made complete arrangements for the protesting, such as it was, to continue at
the Bank.

I gave a little history of it and pointed out

that in the years of my service in supervising the protesting
more than one million items, all bad, had passed through
my office.
At one time the Federal Reserve Bank used the notarial
work as a method of making supplemental retirement allowances
to persons that were somewhat superannuated and they were
letting go from the staff.

At one time we had fifteen

notaries doing this work, myself and fourteen others, each
of whom would be allocated a sufficient number of items
for their signature so that the compensation would go from
the Bank direct

to them, and they would not be on my payroll*

An amusing part of this was the fact that this arrangement, which as I say was very profitable to me, appeared in
public owing to a controversy I had got into with the Income




-1*9-

Tax people. Among other things, the correct treatment of
the Tarlous sums of money that vent through my of floe on
the notarial work was the subject of a court decision in a
case that vent up to the Circuit Court of Appeals.
For years the income I received from notarial work was
ruled by the Bureau of Internal Revenue to be tax-exempt on
the ground that it was compensation of a state officer and
therefore non-taxable by the Federal government - of course
notary publics are state officers.

That ruling prevailed

until Franklin D. Roosevelt came into office, at which time
there were a good many practices that vere overhauled, this
being one of them.

The Commissioner of Internal Revenue

issued a ruling to the effect that notary fees vould not
thereafter be exempt from federal income tax.
I vas the leading notary to go to bat on that issue as
I think I vas the only one in the country on vhom the ruling
really had quite an effect.

I took the case to the tax court,

then ve vent up to the Circuit Court of Appeals. After the
decision in the tax court, but before the decision in the
Circuit Court of Appeals, Congress passed in 1939, a statute
called the Public Salary Tax Act, I think, which provided
that in the future all salaries of state public officers
vould be taxable, but that the salaries received in the past
they vould be considered as non-taxable.

So Congress came

to my relief Just in time and I didnft have to pay the




-190tax on all the past years between f 34 and ! 39.
The Supreme Court had held in a very early decision,
I think one of Justice John Marshall's dicta, that the power
to tax was the power to destroy. Subsequently that phrase
was very broadly construed.

It only began to be whittled

down when the various states began to go into what had theretofore been private businesses. The Supreme Court finally
established a rule that state salaries were only exempt from
taxation if they were paid in connection with a truly essential
function of government. They drew the line there and I claimed
that a notary public's job was a truly essential function
of government. However, Congress came to my rescue so we
didn't have to decide that.
I got a letter from a gentleman In the neighborhood
of Buffalo who had read of the case In the courts and said,
"I don't see how you can make twenty thousand dollars a year
from being a notary public. I make a couple of quarters in
a year." I didn't write to explain that, it was too hard.
That notary public work was a lifesaver to me. Then
the Federal Reserve Bank was instrumental in getting me into
another situation from which I received appropriate compensation. In either 1919 or 1920 the twelve Federal Reserve
Banks decided they wanted to establish a retirement system for
all officers and employees. They appointed a committee to




-191-

prepare such a system and put it Into effect* The committee
itself then asked me to be counsel for them and prepare a
plan, which I did*

It was based on the proposition that

the Federal Reserve Banks, as a whole, had ample authority
under their general banking powers to establish a retirement
system*

I wrote quite an elaborate opinion along that line*

The Committee accepted the opinion and sent a copy
down to the Federal Reserve Board and asked for authority
to go ahead and establish the retirement system which would
Include all the officers and employees of the twelve Federal
Reserve Banks and all the employees of the Federal Reserve
Board* the officers of the Board being Presidential appointees
were not to be included*
The Federal Reserve Board were somewhat timid about it;
I'm not clear exactly why. I do know that they were afraid
of criticism of a retirement system that had the same ratio
of retirement pay to actual pay for both employees and officers«
They thought the retirement allowance might be so high for
the senior officers of the banks as to be subject to public
criticism, and they wanted the committee to Include a clause
providing that all salaries above twelve thousand dollars
in a Reserve Bank should be considered, for retirement purposes, as twelve thousand dollars*
The committee didn't believe In the correctness of the




-192-

Board»s views, and neither did I, but we put it in.
The Board still hesitated and finally decided to ask
the Attorney General for an opinion. They sent over to the
Attorney General a copy of my opinion and asked him for his
opinion as to whether the Federal Reserve System was authorized to establish its own retirement system.

Before the

Attorney General got around to writing that opinion, they
withdrew the request because the majority of the Board had
taken the position that they didn't want to do it irrespective of its legality.

Ve were told that if the twelve

Banks wanted to establish such a system they were welcome
to go to Congress and get a piece of legislation through
specifically authorizing it.
The committee of the Banks had to bow to that point
of view of the majority of the Board, though the Board was
not quite unanimous on that, and asked me to draft a new plan
for the retirement system in the form of a bill.to be enacted
by Congress; which I did having already drafted a plan for a
voluntary trust organization to be managed by persons from
the twelve Federal Reserve Banks.

I drafted such a bill for

Congress and for fourteen years I would go down to Congress
at every session and try to get it through, with very little
assistance from the Federal Reserve Board. A majority were
opposed to it but didn't express their opposition. A minority




-193of I think two were In favor of it and used to consult
with me about it, but they took no public stand.
Ve got it through the Senate once and then Congress
adjourned. Ve got it through the House ence and then Congress
adjourned. But ve never got it through botti Houses at the
same session.
Then the complexion in the Federal Reserve Board and
the spirit of the times changed. By 1934 the Board took the
view that ve didn't have to get Congressional authority after
all; that Mr. Curtis' original opinion of fourteen years
earlier vas okay. They authorized the committee to go ahead
and get a plan to put into effect.
So I dusted off the original plan; it vas duly adopted
and it is now still in effect with some modifications, of
course. The plan originally took in the officers and employees
of the twelve Federal Reserve Banks and the employees of the
Federal Reserve Board.

At a subsequent time the Congress

passed a more favorable, from the point of view of money to
be received by the retired person, plan for civil service
employees of the government. I say it vas more favorable to
the person receiving the retirement allowance deliberately
and I limit it to that. It wasn't more favorable from the
point of view of being a good retirement plan because it never
was actuarially sound, and isn't today. Some day the United
States may find the government seriously embarrassed because




-194lt v s not actxiarlally sound the way ours was and Is In the
Federal Reserve retirement system*

Ve had the assistance

of two actuarial and pension experts to assist the committee
in preparing it*

Mr. George B. Buck was the chief expert

and he is still employed by the retirement system.
The committee and 1 were both minded to have the
plan include powers sufficiently broad to authorize any
member bank of the System to make use of the retirement
feature. We never could get the Federal Reserve Board to
agree to such an extension of the original plan. Personally,
I f m very sorry because it would have meant having a good
retirement system prevail throughout the banking world in
this country whereas, at present, while some of the big
banks have good retirement systems, some of the small ones
get along without any or without very well established ones.
It would have been a great thing if we could have got it
through, but we didn f t.
There's a separate plan now (1951) for the employees
of the Federal Reserve Board who may choose between the
Federal civil service retirement plan and the Federal Reserve
Bank retirement plan.

I think at the present time they1 re

all under the civil service retirement.

The Federal Reserve

Board, unlike the Federal Reserve Banks, have their employees
as United States government employees, whereas the bankfs
employees are private employees, as a matter of law.




-195-

¥e still have a good many problems in connection
with running the organization of the retirement system*
That work is all carried on in our office, mostly by my
partner, Mr. John V. Duncan.
My former secretary, when I was in the Treasury in
Washington, Mr* Guy Emerson, who was in 1919 an officer in
the Bankers Trust Company, sent over to me a man named William
F. Coale who was in the coal business. He had a very extensive business with contracts for the export of coal to a great
many foreign countries. He was spread very thin and needed
a lawyer.

So I got into the coal business at that time in

an extended way, not only for Mr. Coale but for a good many
other coal companies.

I worked hard in attending to the

legal requirements of a good many organizations in that
commodity.
During the war, Mr. McAdoo as Director General of railroads, and some others, had created an organization of a
rather loose character of all the bituminous coal producing
companies of the country to pool their coal. It was called
the Tidewater Coal Exchange.

It helped win the war in a very

material way because, instead of having vessels waiting to
take coal to our own ports and to our Allies around the world,
lay up at the port of shipment till the coal that had been
ordered for them came down from the mines, the Tidewater Coal
Exchange had for its function the loading of the vessel immediately




.-227-

That just about covers my speculating activities
except for one or two amusing Incidents•

When the so-called

gold statutes were enacted by Congress, I felt quite strongly
on the subject of the cutting down of the gold content of
the dollar, and even more strongly on the repudiation by the
administration of the promise In various Liberty Loan bonds
that the United States of America would redeem the bonds in
gold coin of the existing standard of weight and fineness•
I thought that was an outrageous repudiation of a direct
promise by the government of the United States and a very
bad thing*
The interesting part of that was that my brother, Harry,
at that time had a little more money than I did and we went
into a speculation joint account with respect to some of the
Liberty Loan bonds that had the gold clause in them.

I felt,

and he agreed, that the Supreme Court would not sustain the
governments repudiation on those bonds. So we bought about
a million dollars worth of them*

The required margin in

those days on government bonds was so little that you dldnvt
have to put up very much to buy a million dollars worth of
bonds - we didnft put up much.
Then the great day came around when all the gold cases
were argued before the Supreme Court of the United States.
There were four principal questions; - first, the effect




-228of the statute reducing the gold content of the dollar;
second, the effect of providing that all gold coins and gold
certificates must be turned into the government; third,
whether the Baltimore and Ohio Railroad could legally pay
off its gold bonds in the depreciated currency; and fourth,
the character of payment required on the gold obligations
of the United States itself.
The fourth question was embodied in a case called
P w r y T U.S. 294 U8 330 (1935) - a personal action brought
by Mr. Perry, a well-knovn lavyer, who f s Just died (1951).
That vas the case that we were principally interested in.
I vas in Washington at that time and heard some of
the arguments. Some days later I was lunching with my former
wife, who by that time had organized a little club in Washington called the 1925 F Street Club, which had formerly been
the home of Representative Augustus P. Gardner of Massachusetts,
my friend Charlie Norton in the Treasury, and I think at
this time owned by my wife. We were lunching there one
day, she and I, and her cousin, Mrs. Hare Lippincott, who
was a very intimate friend of Mr. Justice James C. McReynolds,
eni1 thn Jmfri88

This cousin of my wife's began to joke

with the Justice about the gold cases as they were very much
in the public eye at that moment, and turned to me and said,
"Jim, what do you think about these cases?"




-229-

I said, "Considering that they * re now in the hands
of the court, I think I'd better decline to answer that in
this presence."
Mrs* Lippincott said, "Oh, poohl
all.

That's nothing at

Go ahead - give us your views."
I said, "No, I guess I'll remain silent at the moment."
Wiereupon McReynolds popped up and said, "Go ahead,

Jim, I ! d like to hear your views. Never mind the case being
under our jurisdiction now.

Go ahead, give us your views•"

So I said, "Now as far as the gold content of the
dollar is concerned, that clearly is within the competence
of the Congress to change any time they want to. I don't
think there's any question about that.

It's under their

general power to coin money and regulate its value.
"As far as people being allowed to have gold coins
and gold certificates in their possession, I think that's
also clearly within the competence of Congress on the same
ground.

I'm not sure whether it's constitutional to require

people to give them up without receiving full value, as of
the time it was issued, but that's a much closer question.
"As far as the Baltimore and Ohio Railroad Company
case is concerned, although they've promised to pay their
bonds in gold coin at the existing standard of weight and
fineness, a superior power to them, i. e. the Congress of




-230the United States, has told them not to do that and to pay
them in something else. I think that excuses the Baltimore
and Ohio Railroad Company frcm paying in that character of
money.
"But when it comes to the United States government
itself going back on a promise, I think that's unconstitutional. My belief is that they canft do that to the holders
of those bonds of whom I am one.

I don't think that case

was terribly veil presented."
McReynolds said, "Why, Jim, you ought to think that
case was well presented; we had the learned Solicitor-General
arguing it before us,19 with a great deal of sarcasm in his
voice.
I said, "Why, I'd forgotten that, of course."
Then he said, "Well, I'm very glad to get your views.
You cure not one of the people who say that lt v s all black
or all white, or everything is good or bad as the case may
be.

I can see you9ve made a little study of these problems."
I said, "Veil, just like any other lawyer, I guess."
When the decisions came down, all of the views that

I had expressed turned out to be the views of the majority
of the court, with the single exception of the case of the
gold clause in the Liberty Loan bonds. There the court
divided four-four.




The Chief Justice, Charles Evans Hughes,

-231-

vrote an opinion in which he said that while Congress
could not properly do this, there was no injury to Mr, Perry,
because if he received his payment of the bond in coin of
the existing standard of weight and fineness, Congress had
already required him to turn that in and therefore he wouldn't
get anything of any value for himself; a case of damnum

was the decision on that very point.
think it was wrong.

I still

Of course, four Justices agreed with

Chief Justice Hughes on that, and that was the majority
opinion.
80 all the cases went for the government and against
the individual. My brother and I were very much disappointed
as we stood to win an enormous sum of money, if the decision
had been the other way.

I think Hughes was just beating the

devil around the stump; I have always thought so. It was
not a very logical decision.
As it turned out, It appeared that almost all the
holders of Liberty Loan bonds had assumed that that was going
to be the decision, so the price of those bonds didn't go
down after that decision.

In fact, we sold them out shortly

thereafter and made a slight profit, in spite of the decision.
I never did discuss it again with Mr. Justice McReynolds,
Of course he was very bitter about all those decisions and




-232-

thought the country was going to hell in a hack, its good
name was gone forever and so on.

He got to be more and more

of a reactionary thinker as he got older.

He was a very agree-

able man to be with and I have great admiration for many of
the things he did, but he got a little too reactionary for
me towards the end of his life.
My brother and I had another speculation that involved the gold clauses in another aspect.

It had to do

with bonds of American companies that contained an option
in favor of the holder to require them to be paid off in
the currencies of various foreign countries, instead of the
currency of the United States.

There was a special situation

with regard to that of which we tried to take advantage,
but without success.
So far as the law went, I had made up my mind rather
early in my career that most lawyers worked too hard and that
if I could afford it I wasnft going to work that hard.

So

in 1923 I told my partners that they could continue to work
eleven months out of the twelve, but I wasn! t going to work
more than eight months out of the twelve.

The percentage

of compensation out of \Aiat we might make practising law was
readjusted accordingly, and everybody was pleased.
That was in 1923 and my first sense of freedom came
when I started off with William Beebe, the naturalist, on his




-248-

middle of the Mediterranean*

When the boat arrived at

Morocco, a German who was on board was indicted for having
pushed her overboard and killed her*

He confessed that that

was true, and he is now serving a jail sentence of twenty
years for that episode in Morocco•
On the other hand, some people who knew her report
that they have recently seen her In London*
story?

Isnft that a

A man is serving a jail sentence for a murder that

he admits, and she's perhaps .till alive in London.

Prac-

tically everybody who associated with her met a violent end
but still she 1 * one of the most charming people I ever saw*
I got a postal card from Joseph Llndon Smith, the
artist, and his wife, also signed by Marga written from
Persopolis, or some place in Iran, where they were having a
good time together, and my name happened to come into the
conversation.
I've always maintained that if the story of Marga
dfAnduraints life could really be written out intelligently
and fully it would be so astounding that people wouldn't believe it.

But those things Ifve said are true, and I still

have the story of her life in French In typewritten sheets.
Only the story of her last twenty years or so needs to be added to make it complete.




Just after I left the Federal Reserve Bank and started

-249-

practising lav on my own, Mr. Domenico Gidoni, was in this
country and city representing the Banca d!Italia, which in
turn represented the Italian government.

They were floating

some Italian securities in this country and at the Federal
Reserve Bank they kindly suggested my name as an appropriate
person to do their legal work for them, which I did.

I got

to know a good many of the Italian group over here pretty
veil, particularly Gidoni.
On one of my trips in 1924, when I spent several months
In a villa on the outskirts of Florence, I was down in Rome
on a little side trip, and my pocket had been picked of
practically everything I had. My letter of credit and all
my money (approximately eleven thousand lira) which was about
seven or eight hundred dollars, had been lifted off me in the
church of Santa Maria Maggiore.
I had made an engagement to lunch with Mr. Gidoni, who
by that time vas the head of the Banca dfItalia in Rome. I
told him of this episode, which I had promptly reported to
the American Ambassador who was a great friend of mine, Henry
Frather Fletcher.

Gidoni said, "What have you got left?"

I said, "I have left nothing - no money, no means of
getting money and they even took my tickets on the good
ship fiaiii."




Gidoni said, "Your credit at the Banca d1Italia is

-287-

who made the round with the fewest putts. She played
eighteen holes, going down in one putt on twelve greens,
so she still can play.

They wouldn»t give her the prize

however since they had a rule that no person could win two
prizes, which seems silly when you had a special prize on
putting.
I remember when I beat John Reid, Jr., of Yale in the
finals of the intercollegiate championships in 1898. We only
played fifteen holes, by which time I had won by a score of
5 up and 3 to play.

In those fifteen holes I went down in

one putt on seven greens, so that John Reid was really up
against it that time. Ve were playing at Ardsley where
most of the intercollegiates were played in those days. The
last time that I played in that contest we played at Atlantic
City where our team won, but I personally did not.
At one time I played on the Old Elm Course outside of
Chicago. We were in Chicago attending the Governors Conference of the Federal Reserve Banks and were taking an afternoon off to get a little relaxation at golf. Ben Strong,
the Governor of the New York Bank, and two gentlemen named
Forgan, were with me - James B. Forgan was a director of
the Chicago Bank and a very fine banker, and his brother,
David, a very fine golfer with whom I had played in Canada
in 1898. So we four played out there. As we approached the
end of the round, during which I had played very well, the




-288-

two Forgans were terribly excited.

They were keeping the

score and said to me, "Do you know what?"
I said, "No, what?"
They said, "If you make a four on this last hole you
will break the course record now held by Chick Brans."
I said, "Now, that's something, isn't it?" whereupon
I took a five, but I tied Chick Brans' course record.
I played several of the California courses - Pebble
Beach, Cyprus Point, Monterey, San Diego - and I almost
made a great score at Cyprus Point.

I stood seventy shots

on the eighteenth tee, the par was only four on the eighteenth
hole, and I thought I might make a seventy-four, which was
pretty good, but they had woods on both sides of the course
and I bounced between the two, and finally got a seven.
I was being taken to the summer jinks at the Bohemian
Grove, which I've already described, by my classmate at
college, Ben Dibblee, who was a member. What Ben and I
used to do was to spend the weekends with the crowd up at
the Bohemian Grove indulging in a great deal of alcohol.
Then in the middle of the week we would motor down to Cyprus
Point, of which he was a member, and play some golf and get
ourselves ready to go back into the drinking bout again. It
was with Ben that I played the above-mentioned very fine
round.




Many years earlier, about 1901, I had been out at

-316-

from our class but the only decision was made by Mr. Curtis
without appeal. The active man in that group was Mr. Frederick
R. Swift who was also a lawyer and subsequently died. After
he left the organization went by the boards quietly, in the
words of General Douglas MacArthur "faded away".
During the war, to go back a little, I had many pieces
of work thrust upon me at the Federal Reserve Bank. I was
sort of a Jack of all trades.

There was an informal Capital

Issues Committee of which I was a member and secretary from
shortly after the war started. Its purpose was to prevent
capital from being used for purposes that did not advance
the war.

It had very broad powers, far broader than the law

because we had the backing of the Federal Reserve Board and
the government at Washington and if we said n no n to a person
who wanted to use capital to form some new organization, the
answer was no.
I also worked on the Committee to Save the Cotton Crop.
The price of cotton had fallen tremendously shortly after the
break of the war. I worked with that group.
As a banker, so-called, I was invited to Join a little
group of golfing bankers headed by Charles Sabin, who was
head of the Guaranty Trust Company, and Charles MacDonald,
a broker. They held annual golfing parties at the National
Golf Links down in Southampton.




I frequently attended these