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September 15-17, 1955
Internal Memorandum
Interviews with Owen D« Young - Second Series
(As a postscript to these interviews, there was the supper with
Everett Case and his wife, Josephine Young Case, at Hamilton,
N.Y* on Sunday evening, September 18th.)
These interviews were with Mr. Young alone, and the difference between the two sets is explained first by the fact that we covered the ground
fairly well in the first set, and second by the lack of stimulus from Mr* Case
Sr. and Mr* Case Jr. It was not easy for Mr. Young to be asked about details
which he did not remember. On the other hand, he unusually liked to talk about
the past, and it was somewhat difficult to do much digging into papers to
call back events and spare his memory.
Interviewed again by a discussion of the Bank SBT International
Settlements, talking of the reason for its creation, Mr. Young said, "As the
central banks kept coming more and more into the international picture, a need
was found for more understanding between them." In a situation as sensitive as
that period was, the heads of the central banks could not visit each other
without exciting great curiosity on the part of the press and the public. The
r&3oJ+~ , for all practical purposes,oxwfhcct-^ off from each other by this
curiosity, as every trip or projected trip created repercussions in the money
market and the stock market of the countries concerned*
Mr. Young, with that reasonableness which is one of his most important
characteristics, said, "Why don f t we have a central organization where the heads
of central banks can meet regularly without exciting such curiosity?" The next
course was to invent a mechanism which would serve that purpose, and the B.I.S*
was set up with that in mind. Meetings were held at regular periods, and
public notice of those meetings was given* Heads of central banks could go to
those meetings without exciting undue curiosity, and the veiy fact that the
notice was public quieted suspicion. The regularized meetings met the needs for
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conversation* In the long run the financial dealings which took place at these
meetings were less important than the opportunity for, talking over mutual problems which might have repercussions in the various countries*
It was understood %&^t in the Dawes Flan discussions (before the
Bank for International Settlements was set up) that the need to bring the
Reichsbank along with the central banks of the other nations was vital. The
Dawes Plan aimed to develop a new program with the cooperation of the German
government* It was understood that whatever payments were finally scheduled
would ultimately be revised, but no one knew exactly how much* The phrase
on every street corner was "Gennany would have to pay," and this phrase
dominated the thinking of the men who met in the Dawes Plan conference, but
no one of them knew how Germany would pay or how much she would pay. The
demand that she bear the costs of the war wag universal, and the emotional
response to that demand was such that it swept aside practical problems such
as how funds were to be raised and how they were to be transferred across
frontiers*
The Dawes Plan came at the end of a long period of confusion and
frustration on the part of the Reparations Committee* Its public injection is
generally credited to a speech made by Charles Hughes, on December 29, 1922
at New Hsven, where he spoke at a meeting of the American Historical Association. It was agreed that the Plan must be free of p&litical influence (more
details are given in the Tarbell biography of Mr. Young, pages 160 and 161).
Asked how Mr, Young had come to be appointed to the Dawes Committee, he said
that he had come to know Mr* Hughes well after Hughes1 defeat in his campaign
for the Presidency and his return to New York. Mr. Young had hired him as
counsel for the General Electric in the anti-trust suit. Also Mr. Young knew
Coolidge well. Dwight Morrow had talked with Hughes about personnel, and it
is possible that he suggested Young (see the earlier memorandum on this,
also see Ida Tarbell1s idea as to the possible suggestor, a friend.ox Thomas
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Perkins). Daves was picked as a spectacular-«friftra?3£5Srg figure from the
middle vest, popular in Europe because of his military exploits during World
War I, and popular in the United States for his good sense and spectacular
publicity abilities. loung vas to go along as an associate, and possibl^fto
provide the kind of legal and financial intelligence vhich vas not expected
of Daves. The appointment vas cleared vith Mr. Burgess of the Nev lork Bank,
vho vas the young, brilliant monetary expert of the period.
No one of the central banks played a part in the formulation of the
Daves Plan, although obviously they vere concerned that it be a success• In
Mr. Young's opinion, it had to be that vay in order to keep the Plan free of
undue influence. The men vho did the actual vork vere Sir Josiah Stamp of
England, Pirelli of Italy, Franqui of Belgium and Parmentier of France, all
of vhom cooperated* Kindersley of England vas also useful. It vas Mr. Daves
vho "put on the shov," and vho proved very popular in France and highly acceptable to London, (in a vay he resembles General Patton during World War I,
although the latter died untimely.) Daves met the press and kept advertising
vhat the Committee vas doing, so that the public vas content and no atmosphere
of anxiety built up.
The vhole attitude of the entire group vas merely, "What vill ve do
vith a mess like this?" The vork done by the private bankers on the Committee
vas remarkably free of political and financial pressures. No charges of
influence vere laid. The Daves smoke screen effectively varded off critical
suspicion. The chief burden vas to find something vhich vould seem to hurt
Germany so that the public vould be placated, but vould at the same time allov
Gennany a chance to pay the charges levied against her.
The story of the "instructions" vhich Coolidge gave Daves and loung
is told in the earlier memorandum on this subject. A third chapter should be
added. At the end of the third veek of the Daves meetings Mr. Daves got a
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letter with a request that it be shown to Mr. Young. A lady, unnamed, living
on the Rue St. Honore^ expressed herself as extremely pleased if General
Dawes and Mr. loung would come to tea with her. She gave as her reference,
"I am an intimate friend of your President." Neither Dawes nor Young accepted
the invitation. Both of them agreed on rereading it that "your President"
did not mean Mr. Coolidge, but the titular head of the Bake-e {fcmai-ttooj wlrcr
-|fe^3^^
Nevertheless, Mr. Dawes decided he would
hold onto the letter and that he had a use for it when he got back to the
United States. When the two men went to report to Mr. Coolidge, Mr. Dawes
said, "Mr. President, do you remember your last instructions to us?" The
Veimont face of Mr. Coolidge brightened, and he said, "Yes, I told you to
take your wives along if you were going to Paris." Mr. Dawes then pulled the
letter from the lady out of his pocket, and read it to the President, saying,
"It is obvious that the next time you go to Paris, you better take your wife
along." This was the only report made to the Coolidges. Otherwise the entire
luncheon followed the pattern of the first one, and the chief subject of conversation was not reparations or finance, but politics.
This interview also turned up an addition to the information previously given about the meeting of the premiers in August following the
Dawes Plan meeting. This conference was held in London under the chairmanship
of Premier MacDonald and was for the expressed purpose of explaining the Dawes
Plan to the heads of government in Europe. Mr. Dawes was at the time very
bu$y with the Presidential campaign in the United States and could not go.
Mr. Young was therefore asked to go and explain the Plan to the Premiers*
He found to his surprise and dismay that this was a strictly political
meeting and that State Department rules of status applied. Premier MacDonald^
presided. Frank Kellogg (then ei#J§5*-Ambassador ^ g s f e @ ^ S £ ^ ^ ^ g S ^ g = o f
I K~"
0
State) who "knew nothing about the Dawes Plan" was the American representative *
Ch?en D. Young
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Mr. Young discovered that he was not supposed to speak unless Mr. Kellogg called
on him to speak. He was hedged about with State Department rules, and from his
point of view, the situation was not tolerable. Mr. Young objected that he
himself was not there as an American representative, but as a representative
of the Dawes Plan, having come to explain it to heads of government. He refused to sit under the State Department aegis and left the meeting • He made it
known that he had rooms at Claridges and would be glad to be of service to anyone who wished to confer with him. That process worked veiy quietly and without publicity. Heads of governments had come to the conference with briefing
from their own nationals who sat in on the Dawes Plan conference, but with
political axes which they felt they had to grind. The ability to ask further
information from Mr. Young without any public knowledge of such questions was
a great help.
The Plan was finally approved by the assembled premiers on the
ground that Mr. Young would set it up. He went to Berlin for that purpose and
stayed eight weeks. Mr. Hough ton of the Corning Glass Company and a resident
of the same section of Hew York State was American Ambassador and very friendly
and serviceable. Mr. Young knew Schacht. His tiiird set of contacts stemmed
from his setting up of the 1i&&fe^s=±9^, when he went to Paris to confer with
German and French heads of electrical companies, Siemans, and so forth. Thus
he fed the cooperation of the financiers, the politicians (rather, the
political leaders), and the heads of the ©j&poiet industries* With this
background, the setting up of the machineiy for the operation of the Dawes
Plan was not too difficult. He had complete German cooperation.
He argued with Schacht that colonies, which had played so great a
part in Germany's demand for room in the world, were not important, but that
the underdeveloped markets of the world were, and that international cooperation was needed to develop such markets. The Germans were extremely sensitive
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as to vhether those markets would really be free. As proof of good intent, the
General Electric and Westinghouse acquired "big blocks of stock in German, French,
Swiss and Italian companies on the understanding that the American companies would
never exert pressure on the administration of the foreign companies except on
complaint of blackmailing security orders. In that event, the G.E. would reserve
the right to ask questions about the misuse of power to prevent competition.
This was,according to Mr. Young, a conscious attempt to prevent the misuse of
combination and cartel. (Tiie incident needs elucidating*)
Mr. Young, talking about the German situation, said that while the work
of sorting out her power to pay was going on, Morgan and Co, kept saying, "How
do you e&pect Germany to pay unless you give her a chance to make the moneys to
psy with?" The difficulty was that of getting a practical plan accepted in the
high state of emotional tension which then prevailed on both sides of the Atlantic,
and indeed in both the allied and enemy countries*
Mr. Young was so obviously sure that the Dawes and Young Plan would
have worked had it not been for extraneous circumstances that I asked him why it
was that Germnay, which at one time must have seemed well on its way to recovery,
fell into the hands of Hitler and a second war. He said that the breakdown was
largely a matter of political immaturity, rather than of economic pressures that
could not be withstood. To illustrate his point, he told this anecdote. Mrs.
Young (Mrs. Josephine Edmonds Young) had 8 had heart. She went with him to Germany
when he went to set up the mechanism for the Dawes Plan, and an excellent German
heart specialist was provided who made daily calls in the late afternoon at the
Adlon Hotel where the Youngs were staying. This was an intelligent man, speaking
English, and he and Mr. Young became good friends. The doctor came in one afternoon very much distressed and said, "Mr. Young, I!ve had a terrible day* I've been
needed at the hospital; my patients have been calling for mej and in spite of this,
I have had to spend hours over these candidates. I don't know who they are, they
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££>
aren't important, and why should I have to worry about them. In the old days the
castle made the appointments, and in the main they appointed competent people,
These new people that are running for office aren't very good, and there's really
nothing I ought to have to do about them,11
Mr. Young regarded this as an indication th&t the process of imposing
democracy on the people who were not ready for it was a great mistake. The
Gennans were, he said, conscientious people. They undertook their responsibility
seriously, but the responsibilities which go with a democratic government were not
such as they understood• Wien the people for whom they voted did not do their
jobs very well, they felt that the responsibility was theirs and that they had
failed* Hor did they have time to learn this strange new process, Tnere was A
no quiet period when they could become seasoned in the ways of democracy, TOiat
Hitler did was to give them back the confidence that he would run the works and
that they could stop trying to elect people as good as those who had been appointed
by the throne in the old days.
Mr. Young is convinced that the Dawes and Young Plan would have worked
had it not been for the emergence of Hitler, whom he regards as a maniac reasdertion of German strength. Payments had been modified; mechanisms were working
well; the economic pressures were not so great as to cause a breakdown, had the
country been seasoned in political ways.
Mr. Young was last in Germany in , ,
September 16, 1955
This interview was mostly devoted to dei&ripi^lli
Young knew in the early days of his work on the Board•
For Adolph Miller he obviously had a certain amount of respect, if
not admiration. He said that the old man (Mr. Miller seemed old when Mr. Young
first met him) was a persistent and rigid man, sometimes very disagreeable, but
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there was no doubt that he knew his economic theory and that he had a certain
philosophy of central banking and a picture in his mind of what a central bank
should do.
Mr* Charles Hamlin was a very different type. He had had an excellent
reputation in Boston, where he was regarded as an intelligent gentleman, but
no specialist* He had been brought up in politics, and it must be remembered
that he was a Democrat, which In Boston does not veiy often mean that one is
considered as acceptable smong the best families. It was much worse in those
days than it is now,
(it should be remembered that Mr. Young himself is a Democrat, so that
he spoke without rancor.) When Mr. Wilson was picking the men for the Board,
he had regional interests to consider, and it must have seemed logical that he
get a Boston man. The problem was to get a Democrat from Boston who would be
intelligent and acceptable, Mr. Hamlin had been brought up in politics; he
represented the public interest, but on a rather high plane. He was a temperate
man and not controversial, and seldom so interested in anything that he would
make a real fight for it.
I asked why Mr. Hamlin keeps referring in his diaries to Mr. Brandeis,
and the answer again was politics and power. Mr. Filene, the famous Boston merchant, wanted at that time to build a store on Summer Street. This plan inter*
fered with the interests of the famous fifty associates who carried on investment
and realty business in many directions in Boston. Mr. Brandeis represented
Filenej Mr. Young represented the fifty associates.
(Mr. Young was at that time
a partner in the fiim of Tyler and Young.) Mr. Hamlin, as a Democrat, had only
people of the type of Richard Olney to rely on. Hence he fell back on Brandeis.
Paul Warburg's abilities and qualifications seem to Mr. Young very
clear. He was a man who had done central banking in Germany and in England. He
knew much more about it than most Americans. He was tremendously interested in
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central banking as such and was the man from whom Benjamin Strong learned a great
deal in the early days* It was Mr. Warburg who taught Owen Xoung the basic principles of central banking. He was a man without bias or prejudice, always willing
to talk, and capable of abstract consultation.
Mr. Frederic Delano, again like Mr. Hamlin, was a Democrat "who was a
gentleman," an able man with railroad experience and a great deal of business sense,
but unlearned in banking. He too learned from Warburg.
William McAdoo had been an important customer of the General Electric.
He had a big place at Tarry town where he liked to entertain. He was a nice man,
elastic, adaptable and charming.
Asked about Andrew Mellon and the statement made elsewhere that Mr.
Mellon was mostly in Mr. Strong's pocket, Mr. Young said that Mr. Mellon habitually
went along with Mr. Strong, but that this was because he trusted Strong and was
basically not very much interested in the Federal Reserve System* Mellon was
tremendously interested in business and the financing of business. He was also
tremendously interested in private banking as against centralized control. He
had no keen conception of the part which central banking might play. He was not an
economist. On the other hand, he was a man of character and great intelligence,
a quiet man, never interfering unless his convictions went deep, and then he was not
to be balked by anyone*
Mr* Young said that in the early days, while the Federal Reserve System
was solely a domestic matter, no one really cared whether it succeeded or not.
When the country reached the middle 1920fs after Harding1s death, things began to
get more interesting. At that time Andrew Mellon began going to Europe on his own
account. He bought picturesj he had his own picture painted; he talked to bankers,
and he thought about what they said* The death of Warren Harding and the scandals
which followed, plus the lack of any interest on the part of Calvin Coolidge in the
Treasury, threw a great deal more responsibility on Mellon than he had had earlier*
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It vas then for the first time that he became interested in the banking field
and began to grow out of his rather parochial background which had centered around
Pittsburgh. He never again could go back and be merely a Pittsburgh industrialist.
Secretary of the Treasury in a weak administration, he was master of the situation,
and no one opposed him* "When Herbert Hoover came along, he had complete confidence
in Mellon and no specialized banking interests or banking theory which might have
set up an opposition. It was, in Mr. Young's opinion, this combination of an able
man and a weak administration which made Mellon seem a greater man than he actually
was*
Crissinger was to Mr# Young solely a political man. He was a friend of
Warren Harding and enveloped in a cloud of suspicion from the beginning. Ho one
really gave him a chance.
W. P. G. Harding had a background somewhat similar to that of Andrew
Mellon but no such capacity for growth. "His arteries hardened too quickly.11
He was able and anxious to do the right thing. By and large, he was unusually
sound, but "he never let visions of what might be keep him awake nights."
Edmund Platt left no impression on Mr. Youngfs mind. George James left
no great impression. He was a Kentucky geneleman.
Continuing the thread of interest in Mellon, Mr. Young said that the
Tseasuiy did not, to his knowledge, tiy to run the Board in the 1920 f s. Mellon
left that job to Strong, and between those two men, there was no development of
petty irritation such as developed between Strong and Miller. Miller was jealous
of the Board1s prerogatives. As a theorist, he believed that the Board should
play the chief part in the System, but in practice emotion entered into this
theoritical idea and gummed up the whole works. Ur. Young believes that the record
is unfair to Mr. Miller, that he made a real contribution to the Federal Reserve
System, that no one could placate him, but on the other hand, that history can
certainly not dismiss him.
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September 17, 1955
Mr. Young talked at some length about the problems vhich confronted the
board of the Federal Reserve Bank of New York at the time that Mr. Strong died.
This was in response to questions concerning the tone of reports that Mr* McGarrah
was leaving his post in a private bank to come to the board. Mr. Young said that
in those days the private bank job payed much more and had more prestige than did
a post in the Federal Reserve Bank. It was in an effort to correct this that the
Hew York Bank felt salaries of their top men must be raised and that they mast be
surrounded with certain foraalities.
The board agreed with Mr. Strong that Harrison was the only man really
fitted for the job of succeeding Benjamin Strong. The problem however, or at least
one of the problems, was that Harrison was physically in very bad shape. The New
York board had for years worked with a Governor who periodically took time off to
go into hospitals and sanitaria. They dreaded taking on another governor who was
in bad physical condition. Harrison himself went to Johns Hopkins hospital
shortly after his election.
Concerning the telegram which Mr. Young sent privately to Parker Gilbert
asking whether he might have any interest in the job, Mr. Young said that Gilbert
had veiy good relations with central bankers abroad, and that this was an important
factor. Also there was the difficulty of Mr. Harrison's health. It is sardonic
that Mr. Gilbert died some years ago, whereas Mr. Harrison continues living in bad
health.
Mr. Young said that the New York board W E S good and that he enjoyed
working with them. He was himself responsible for getting Edmund Day to become
>Cornell.
MA: IB
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