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February 24, 195-4 •.••;,''^r-':H^$
Internal Memorandum
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Interviews with Mr. J. Herbert Case
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Interviews with Mr. J. Herbert Case, now retired after a long
career both in commercial banking and in the Federal Reserve System.
.These interviews took place on four days during each of which Mr* Case
.' ' talked for about an hour beginning at 11 a.m.
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In spite of his con-
siderable age (he is over 80) his memory is sharp and precise. He has
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enough of the pedagogic quality which distinquishes his two sons, both of
whom are presidents of colleges, so that it was possible to stop him and
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ask him to go back to explain things not clearly understood at first hearing. Mr. Case was an operating man in his day. He seems to have had the
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reputation.(this comes not only £rom Mr. Leslie Rounds but also from one or
two other people) of being more or less passive until an emergency arose
then he was able to summon the extra force needed to cope with it.
Mr. Case said that he was one of five children in a family with
very little money where the father fell ill and died. He himself went
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into banking in 1887 at the'age of 15* His banking education is obviously
one in which experience has played the largest part. He became skilledjas
a man who knew all about commercial paper. In February 1917 the Federal
Reserve Bank of New York had taken in mil-lions of dollars worth of commercial, paper as collateral for war bonds and no one in the System at that
time knew what to do about it. He was then receiving/£\L$,000 a year from
the ChrbyH* Farmersi Trust Company and was asked to go at a salary of $25,000
to the Federal Reserve. (Obviously in those days that represented much more
money than the same figure does now*)
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Mr, Case met Mr. Warburg at Saranac and long discussions of the
then young Federal Reserve System were carried on. The major problem was
that of hov the war would be financed and,said Mr. Case "We then established
the pattern.for the government financing of the war."
(This does not
necessarily mean that Messrs. Case and Warburg by themselves established
the pattern.)
The System vas that the Federal Reserve of New York sold to
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member banks and other banks short-term Treasury paper (certificates and/or
notes) worth four to five billion dollars/ &n the patriotic plea that the
banks were financing the government in its war venture * Then when the
banks were loaded with short-term paper the Federal Reserve set out to
sell to the public four liberty loans* and one victory loan which would
J1 bail out the banks". This was the process which it was repeated of the
four liberty loans. The fifth, the victory loan, was issued late in 1918
or early in 1919*
It was a much larger loan than any of the others and
carried U 3/A per cent interest.
At that time England used to issue Treasuiy bills which were 90
day paper. The United States had nothing like this. In 1929 Mr. Case was
asked by Mr* Mellon (Ogden Mills was then Mellon1 s assistant) to go to the
Bank of England and study the procedure on these Treasury bills. They had
features which Mellon thought might be adaptable to the United States.
Arrangements had been"-made with the Bank of England for this visit and the
bank officers gave Mr. Case what is now. known as the VIP treatment. They
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were met at the pier by deputy gov^fior Cecil Lubbock in a car with a
chauffeur and that car and chauffeur were turned over to Mr. and Mrs* Case
for the duration of their visit. Tho Bank of .England set aside a room
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Mr. Leffingwell took part in the discussion. There were late night conferences.
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The Manufacturers Trust then began to have runs and then the
Public National Bank. Mr. Harrison was in Europe. Mr. Case worked out a
banks in trouble
proposal that the three of-them should combine^ 1th the Clearing House
to provide $20 million in new capitalism advisory committee &hett!4 be formed
including Mr, Frew, Mr. Davison and Mr. Buckner. They asked Mr. Case to
take the chairmanship of this consolidated bank. Mr* Case was loath to do
it. Mr. Leffingwell persuaded him that the whole thing hung on his willingness to take the chairmanship and that he could not refuse. Coming down
'in a- cab late at night with Mr. Burgess he asked Mr. Burgess to cable to Mr.
Harrison and then he himself returned to the bank where be was then spending
his nights. A bed had been set up for him in the clinic. At U a.m^ having
gone to bed very late after the conference, the telephone rang and Mr. Harrison
was calling from Germany. He agreed that Mr. Case should take the chairmanMr. Case
ship of the new consolidation,and te? thereupon agreed to dp so.
There was however a hitch. The Public National Bank withdrew from
the proposed consolidation. Mr. Boosevelt, then governor of New York State,
sent Mr. Lehman down to plead that the consolidation should go through. One
of the then distinguished bankers shook his head and said "let it fail, draw
a ring around it so that the infection will not spread". Obviously, any such
idea was impossible*
In May of 1931 Mr. Case his health very much injured by overwork^
vent to the hospital for an appendicitis operation and did not return to business until the end of 1931.
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Meanwhile banks vent on folding up all over the country. Mr*
Hoover, as President, suggested that fir* Roosevelt cooperate in making
national the bank holiday vhich then seemed to be spreading from state
to state. Mr. Roosevelt refused.
Mr. Case says that the last few days before Roosevelt's inauguration were "pure hell". „ Not only was the epidemic of bank closings
spreading to an alarming extent^ but big corporations such as Sears-Roebuck,
Woolworth and Company and others which normally kept their money in Detroit,
cash
Cleveland and Buffalo began pulling/i-tr out of the local banks in those
cities and siphoning it to New York. This made a bad situation just that
much worse. People began thinking they would never get their savings.
They wanted gold and they stood in line to get it. (Get the record from
Mr. Roelee on how much gold Federal Reserve Bank of New York lost on Thursnational
day, Friday and Saturday before the/bank holiday was declared.) People took
their gold and put it into the safety deposit vaults,leaving the banks just
that much weaker*
The fourth interview with Mr. Case was on Monday, February 15.
He picked up where he had left off the previous time*
The federal bank holiday lasted for an entire week. During that
time the program in the New York Federal Reserve Bank was |is had been said
eart?s*)to review €tii conca lions in all member banks and certify to the Secretary of the Treasury those that were in a condition to open. It was
arranged in New York to have the Federal Reserve ^Board of nine members go
into session at 10 a.m. every day and work until 6.
A program was liSvoa out
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