View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Report on a Pilot Project
Proposal for a Further Grant
to Study and Write
The History of the Federal Reserve System


Allan Sproul, Chairman
W* Randolph Burgess
Dr. Robert D. Calkins
William McG. Martin, Jr.
Walter W. Stewart
Donald B. Woodward, Secretary
Mildred. Adams, Research Director



for a

Grant to Study and Write

The History of the Federal Reserve System

In January 1954* the Rockefeller Foundation made a grant for a
pilot project leading touard a history of the Federal Reserve System* The
immediate end m s to find out ^uhat materials WGT® available for such an
undertaking, materials not only in the sense of papers, but also of the
living memories of men active in the early days of the System*
that task has been carried on since January 15th* It has
yielded extraordinarily good results (a report of its findings to April is
appended), and there is eveiy reason to believe that an even greater harvest of papers and memories lies miti33g to be gathered* The Committee
feels that this has proved to be in the best sense of the irorfi a pilot
project* In addition t© exploring papers and memories, it uncovered that
sense of personal struggle and accomplishment "whiph is the living core of
any institution* It enlisted interest and it ensured cooperation for the
future* It points the nay very surely to the next and much bigger task
^nhich lies ahead, and for "which the Coimittee now asks the consideration of
the Foundation*

The Task
In calling itself the Committee on the History of the Federal

Reserve System, the group presenting this proposal defined its primary purpose* But the discoveries and contacts made and the discussions held
during the pilot project have deepened the content and widened the scope of
that purpose* The Committee now k n o w that i$hat needs to be done is much
more than a single history of the Reserve System — it is an appraisal of

- 2 one of the most extraordinary inventions in this democracy, a review of
experience in its fianctioning, an analysis of its performance illtamined
by the papers and the memories of men ^feo helped develop it and who took
paii* in its operation. The episodes areraad nhich conflicts seamed, and
out of nhich change came, the process by ishich decisions irere made, the
importance of personalities, the interplay between public policy and private
needs -~- these various angles of approach and maiay more i$hich have been
suggested from time to time by Gcaamittee members testily to the vitality
of the subject and to the lessons i&ich can be learned for other democratic
institutions by a detailed study of the experience of the Federal Reserve


Ihy Important?
The importance of the subject is, however, greater than the

material dealt *dth or the people dealing fdth it. It goes much farther
than the task of history witing, vital as that is, and farther than
are coBsaoaly considered the sc#ae*ihat narrow confines of the banking
(a) Among the innovations in government mechanisms ^ i c h
Americans have brm^ght about during the twentieth centiaxy, the Federal
"Reserve System occupies a unique position, and not only because of the
exceedingly important functions lahich it is called upon to perform* It
operates idlth a high degree of autonomy linked 'with a fine sense of public
purpose. To an extraordinary extent it has managed to preserve its freedom
from both temporaiy Congressional and narrow Executive pressures, as i?ell
as pressures from private finance, #iile maintaining its responsiveness to
the general economic purposes of the Government* In periods ^ e n it has

- 3 been forced to yield to such pressures the public protests against such
yielding have been continuous until the pressures have softened and the
balance has been restored•
(b) Writing in 1946 about twentieth century monetas-y controls,
Professor Eobert Warren of the Institute for Advanced Study observed that
in the nineteenth century there developed a new type of society, the money
eoonosgr, t&Lch Bade new demands on those who administer* Government control
over the supply of money. ^High and low, rich and poor, bond and free
there had always been, but never before had there been an economy that expected the majority of its people to be totally dependent upon the
continuity of a stream of money income.n Alosg with other observers
Professor Warren interpreted the primazy task of the Federal Reserve System
as one of seeing that this continuity of the stream is not interrupted by
monetary failures • To do this, it bridges a gap between public and private
efforts to influence the ecoBMy*

fhe goal toward which it has been

directed in these later stages is the stability of the economy for the
public good; in that pursuit it has developed, tried and discarded one
method after another, only to reach for a new one which promised better
results* Analysis of these experiences would form important chapters in
both ©onetaicy and economic history, and in our striving to develop an
economic ^stem in which increased public participation will not stifle
private initiative•
(c) In the practice of the functions laid upon it, the System
has enlisted and trained staffs whoae skill and devotion to the System1s
work stands in notable contrast to that of some goverismental institutions

or agencies* lot only has this institution weathered forty years of political storosj the System as a *«hole, by some carious magic, has "withstood
political attack from both parties* Tensions ^hich in tfceoiy should have
split it apart seem somehow to hare been important factors im holding it
(d) An analysis of the changing esqperience in design and in
operation of this ui&que governmental mechanism would have great value*
It is important for the future perfoasaance of the System and of the American
econ&iy* There is reason to believe that such analysis may hold lessons
iihich canfeeapplied to problems of organisation in both governmental and
private affairs, not directly concerned ^sriLth the process of monetary management*

Issues to Be Treated
The questions ^iich this study mraLd illumine fall into two categor-

ies* There are iit the first place "Hhat might be called the technical issues,
scaie theoretical and same matters of operating policy* -Hhich have absorbed
the Systems attention at one time or another in its life* These appear in
private papers and in anniaal reports, they are high-lighted in Congressional
hearings; but the questions *which an informed and impartial student might
ask are wiaaiHy diverted by the exigencies of the moment* Enoiagh time has
elapsed, for instance, since control of the discount rate t?as first used by
the System as a tool of monetary policy so that its ijasportance under vaiying
conditions can be weighed and studied* The same thiiig is true of changes in
reserve requirements, and of open-market operations- Tet there is little
knowledge of them even among an informed public, and controversy still surrounds them -within the banking mirld. Some of this ignorance could be

- 5 dispelled and same of these controversies might be resolved by competent
Beyond the technical points at issue (of which these are merely
instances that come first to hand) lie broader issues both id thin and
without the banking system. For example, how did it come about that such
a mechanism of monetary control, uniquely adapted to our needs$ was
established? Sy what methods and devices has it endured and thrived?
How are the skills, competence and individual freedom of its staff, unusually high when compared with most governmental or private bodies,
maintained and encouraged? How has the relationship between regional
Eeserve Banks and the Board of Governors, between staff members and policymaking officials at the Banks and the Board been worked out? How can the
System^ role in the world of government and in the economic world be best
defined and understood? ^Jhat are the lessons of this role for other
organizations, in or out of government? How are decisions of the Board of
Governors, of the Federal Open Market Committee, of the Boards of Directors
of leserve Banks, with their high degree of importance in American life,
arrived at? How does the System influence the operations of the whole
monetasy mechanism at moments of crisis? lhat lessons are there in the
relations wbtich prevail between Board, Reserve Banks and Member Banks, and
how are those relationships evolving?

Scope and Method of Inquire
fhe study which we propose would cover the entire Federal He serve

System, including the Board and the twelve regional Banks, from their inception* Much has been written on the events, crises, and personalities vhich

- 6led tip to the founding of the {-System, but even this needs restudyitig
in the light of newly discovered material, and then it needs to be carried forward into decades of operation.
We would therefore set out to make a complete search for the
material and the people concerned in Federal leserve legislation, theoiy
and operation, going back at least to 1907 'when the ildrich Commission
functioned* Frosa 1913 forward, we would undertake to brixsg records to
light and use and to discover the cast of influential characters in the
System's growth, change and operation, including governmental figures in
Congress and the Executive Branch; Members of the Board and influential
men on the Board staff; Governors, Presidents, and officers of Reserve
Banks; Members of the Federal Advisory Council, the Federal Open Market
Coasmittee, and other related bodies; men in academic life (as, for
example, Oliver ¥. M, Sprague and John H. Williams) wbo have been in close
and influential contact with the System during its years of growth.
The Committee considers that an important part of the ^hole
study is this effort to encourage those who took part in the System1 s
development to tell the story as they saw it. Complete objectivity is not
an ea$y ideal for a^y historian, and it becomes even more difficult when
the histo3cy being dealt with is recent. The recording of contemporaxy
memories is an important contribution toward that ideal*
The method to be used is that which has successfully been
developed during the pilot phase of this sttady. It includes visiting
Board and Banks, both to search out men ^ho remember early days, and to
ascertain how records are kept and ^hat local records are available; the

~ 7_
establishing of the names of the dramatis personae, the recording of brief
biographic data concerning them, the request for interviews if they are
still alive, the search for their papers if they are deceased.
Ibqperience in the pilot project, and consultation -with those
engaged in other attempts to chart and record the course of living institutions, have taught us that the comprehensive study of the Federal Reserve
System, which is the core of our endeavor, divides itself into three stepsj
these for convenience may be called the archival process, the interview
process, and the writing process. Logically, these three appear to be
separate, just as in the pilot project the process of discoveiy of papers,
gathering of memories, and building of card files appeared to be separate•
Actually, each process in the pilot project fed and profited from each other*
Ihe success of that project was in no small part due to -what seemed at
times a handicap — namely, that all three processes were necessarily going
on at once.
Were it advisable, in view of that experience, to try to cariy on
the archival, the interview, and the history-writing processes of the maim
project one at a time, in series, we might propose that the grand design move
forward in two phases* A reading of the report on the pilot project shows
how much has been started, and how much remains to be done. For example,
the research director hoped to visit all twelve Reserve Banks during the
pilot phase, but the volume and variety of work under way forced postponement j most of those Banks distant frosi the Atlantic seaboard remain to be
explored, fhe mapping and survey stage uncovered not only papers and
memories. It also set the pattern for the study of those papers and those
memoirs • A great deal more must be done along these lines before the master
files of papers and other materials are ready for the students use.

~ S Hot only must the master files be completed, but the papers
have been uncovered during the pilot project, and the collections still to
be found, must be analysed for pertinent material• The Hamlin diaries,
recently released from a ten-year seal, stand alone in texsas of the preparation and indexing lavished on them, but even the Hamlin diaries are new
ground for the student. Someone must read those 28 volumes and evaluate
them for the purposes of any comprehensive history of the System.
The work to be done on other collections, not yet sorted or
classified, is more extensive• The National Records Management group stands
reaefy" to start a pilot study of a similar group of papers in order to chart
costs and work out efficient methods of handling• !• Parker Wilis, Jr»
would take time from his work at the Federal Reserve Bank in Boston to
survey his father*s papers if this were arranged• The Goldenweiser papers,
the Adolph G# Miller papers are destined for this Committee1 s use. These
and massy more must be classified and set in order•
But even i*hile setting down these small examples of the lai^e
asaount of work which remains to be dome in the first two processes we
recognize how inextricably linked with them is the third process• During
the pilot phase we became aware of writings under way and needing encouragement which would be valuable for our purposes and which would be finished
the sooner if they could profit from the work we were doing* Research
into the past is not well done in a vacuum or without the added spur of a
person who wants to use its results. The historian -^ho can work with
researchers, using their data, stimulating and broadening their search by
his questions, has a richer content to draw from than the one -who starts
after the research process is finished and filed away.

- 9 Proposal
We therefore propose to move forward "with three groups of activities, all of them vital to the comprehensive stuc^ -which is the core
of this endeavor:

!• Archival and Research
(1) To -continue and complete the visits to Board and Reserve
Banks, the search for records, the interviewing, the
hunt for papers and the recording of discovered material
•nhich was started during the pilot phase. These archival
activities lead to, and should be considered an integral
part of, the research activities* Their purpose is to
contribute speed and accuracy in the research process*
(2) to continue and complete the biographic, bibliographic, and
chronological master files which were started during the
pilot phase.
(3) to make available to qualified students tiiat part of the
Committeef s research material which is pertinent to their
(4) to work out problems of handling related collections of
papers and putting them in usable shape for students* This
may include financial aid in certain instances*

(For example,

the Hamlln papers must be read and evaluated; the Carter Glass
papers at the Iniversity of firginia, the ¥illis and Goldenweiser papers all need work as described in the report on the
first phase* Their classification and study is essential, but
funds would have to be provided•)


- 10 2. Interviews
To continue the interview process which has yielded
such good results uoder the pilot project, and to enter on
a series of further interviews ^&th chosen individuals in
the older group who have already shown themselves to have
good memories and an interest in contributing all they
can to this project* Such men as Bey Young and Walter
"S^ratt ©f the Board, George L# Harrison, J* Herbert Case
and Leslie Bounds of the Hew York Bank, John Sinclair and
GaslMr Sienkiewics of the Philadelphia Bank, Bay Gidney
of the Board, the Mew York and Cleveland Banks, and now
Comptroller of the Currency are of this type, and there
are ma^y more* Just as the Harvard Business Studies group
finds a tape recorder valtr&ble for catching the living
word in key interviews, so might we profitably avail ourselves of this technique in selected instances.

the writing and editing fall into three parts:. In a sttidy as extensive and important as
this the monograph plays a key part* In some instances
it stands by itself, as a definitive study of one part
of a related *whole« In others it acts as an introductory
stucjy and may later be incorporated into the whole.
The pilot phase uncovered certain monograph ideas, some
of them already started, others only in the planning


- 11 stage• For example, Carl E* Parry, now retired
from the Board staff, should be eneotiraged to complete
his half-done monograph on "Selective Credit Controls,n
a subject in which he has had active as well as
theoretical interest. Gardner Patterson of the
International Finance Section at Princeton University
woiild like aid to write a study on "Reserve International Financial Operations in the 1920fsffj Lester ?.
Chandler, also of Princeton, would like aid to write
a long monograph or a short book on n Ben Strong,
Central Bankert!$ either of two able men, Dr* Karl R»
Bopp of the Philadelphia Reserve Bank and Professor
Edward S, Shaw of Stanford University would be qualified to write a study which might be called 1!13ie Art
and Politics of Central Banking •" Ho com&tments have
been made in regarcj to such work. These examples are,
however, listed as showing the kind of work and the
caliber of men which this Gasnaittee would like to
encourage with access to materials and use of funds*
(2) Major Works*
Of these the definitive history is the core of
the project and the one toward which we continue to
point our endeavors* We believe that its writing will
take a good three years on the part of a distinguished


- 12 scholar who has already shown the skill and judgment
•which the creation of such a histoiy demands.


task of exploration and recording of materials will
be carried further and the field of possible scholars
will continue to be canvassed*
Considering the high cost of subsidies for major
•works, we- would hesitate to name other volumes for
•which we are ambitious were it not for hopes that at
least some of these might find publication throigh commercial channels and would need from this CosMittee
little more help than can be provided through consultation, use of materials, perhaps a small subsicty for
stenographic aid. ¥e have fro® the beginning believed
that the play of personalities is an important factor in
&W governmental operation and that a volume of biographic essays on key figures could be written so as to
illumine various facets of the System • We also think
that a volume of essays on crises in the banking world,
following the volime by Oliver M» ¥. Sprague on History
of,Crises Under the National Banking System would be an
important contribution which might find publication
through regular channels• There would be others as the
project develops•

- 13 (3) Editing and Publishing of Docmentg
The Goraiittee^ staff has noted mtfc interest
the British example hereby documents basic to central
banking in Eiagland, includisag key speeches and memoranda as VBH as legislation, were edited and p o lished lander the title«Select Statutes, Documents
and Reports Relating to British Banking 18;32-192&»
by T* E* Sregoiy. Comparable material basic to central
banking practise in the United States is scattered,
and might w e U be gathered in Sdoae such volume. It has
also been suggested that a comprehensive annotated
bibliography covering both published and unpublished
mjrks bearing on the Federal Reserve System nould be a
most useful contribution to research activities. In
addition, it is not improbable that selected papers
frcsa the various collections unde^ survey may prove so
valuable as to deserve publication. Ho decisions have
been made in this field, but it is a phase of the overall study ^diich the Committee may to encourage*
Use of Materials
The Board and the Reserve Bank of Hew Xork have been particularly
interested in the ifork of this Committeej individuals from these institurtions, both officers and staff, have been actively participatisg in it*
Boiii Board and Bank msy face problems of participation ^hen more receat
events caste to be discussed; the availability of confidential materials
covering recent events may also present a problem.

The existence of this problem must be recognized, but the Cossmittee
is confident that a solution Kill be found which will neither hamper the
project nor strain either the •willingness or the ability of individuals or
institutions to continue their co-operation* It should be made clear, however, that neither the Federal Beserve Board nor any of the Reserve Banks
are committed to make available any material which in their judgment should
not be published*

0rgani2at3,ont Personnels and Budget
(a) Organization
The grant for the pilot project was made to the B r o o M ^ s

Institution! an infoimal working arrangement was established hereby the
President of Brookiings beetle a member of the Committee, work w&s done
under Coiraittee supervision, and Brookiiags acted as disbursing and bookkeeping agent* That institution also furnished office space in Washington
for the research director, as did the Federal leserve Board*
The Coiamittee's supervisory functions "were exercised in two
ways: first, specific problems were decided either in Committee meeting
or in special conferences with members particularly expert in those areas;
second, general supervision was assigned by the Committee to its Secretary,
Donald B* Woodward, at one time on the Board1 s staff, now Chairtaan of the
finance CosMittee of Yick Chemical Cosapaiy. The other members of the GOBImittee have also shown stea<^r and vigorous interest in the pilot project
and have been generous with time and advice when called on for consultation*
The daily work was carried on by a small staff headed by
Mildred Adams as research director, assisted by Katherine McHnstay ('who

- 15 shared her skill as research assistant and her time between the work of
this Committee and that of Dr. John H. Williams, consultant to the
Federal Reserve Bank of lew lork) and two young typists. All these
assistants were assigned by the Bank from its own staff, their salaries
paid by the Committee • The Bank also supplied working space and furniture.
This same plan of organisation, with some modifications, is
the one we would recommend for the comprehensive study. The association
between an ad hoc coaanittee and Brookings Institution is unusual; it has
values for both groups and we recommend that it continue» Certain problems
in that relationship will arise ^hen the publishing stage is reached.
These problems do not, however, call for immediate solution and their
resolvii^g will not disturb the work of this Committee.
The Goi2iiitteefs function, and its relation to the siaall staff,
would continue along established lines. The Committee is composed of men
experienced in the monetary field, and strongly interested in the development of economic studies. The Chairman, Mr. U l a n Sproul, has spent his
working life within the Federal Reserve System. Starting in 1920 in the
Federal Reserve Bank of San Francisco, he served there for ten years and
then moved to the Federal Reserve Bank of New Xork. He has been President
of the Hew lork Bank since 1941.
Mr. William McGhesney Martin, Jr. comes from St. Louis,
where his father was for a considerable period head of the Federal Reserve
Bank of St. Louis* To a brief experience in the Federal Reserve Bank of
St. Louis, he added ten years of activity in the investment business* He
was President of the lew lork Stock Exchange from 1938 to 1941; Chairman

- 16 and President of the Ixport-Import Bank in 1946j W* S, Executive Director
of ttoe International Bank for Reconstruction and Development} and Assistant
Secretajy of the Treasusy in 1949* Since 1951, he has been Chairman of
the Board of Governors of the Federal Reserve System*
Mr* W* Randolph Burgess has had a lifetime of experience
in central and cosmercial banking* He is now Deputy to the Secretary of
the Treasury. (For more complete details, please see page 17 under
"Personaelf •)
Dr. lobert D. Calkins is now President of the Brookiogs
Institution, Banking vas an early interest and the subject of his thesis
submitted for a master's degree* He got his doctorate in 1933 and went
at once into academic work, lecturing on economics both at Stanford and
at the University of California (Berkeley), where h$ became CbaiOTan of
the Department of Economics and then Dean of the Gollege of Commerce*
Between 1941 &&d 1947 he was Dean of the School of Business, at Columbia
WniTersity, and from 1947 on he was ?ice President and Director of the
General Education Board* Dr* Calkins served for seven years as Director
of the Federal Reserve Bank of Hew Xork,
Dr* Walter ¥• Stewart also has combined academic with banking and investment experience. Professor of Economics at imherst Gollege
from 1916 to 1922, he then went to the Federal Reserve Board as Director
of the Division of Research and Statistics* In 1928 he became Economic
Adviser to the Bank of England; in 1931 he m s appointed American Member
of a special committee of the Bank for International Settlements to look
into German reparation obligations tinder the Toting Plan* He "was for seme
time President of Case, Pdmeroy and Compaq, an investment house. Triastee

- 17of the Rockefeller Foundation* Chairman of the General Education Board,
Professor at the Institute for Advanced Stiady, he m s in 1953 called
to Washington to become a member of the Council of Economic Advisers.
Mr« Donald !• Woodward, Secretary of the Coraotittee, has
had a varied experience in moneta:cy affairs, including -work on the Board
staff and writing about System affairs for the Wall Street Journals Business
Week* and The Econoiaist (of London) • He developed the research division of
the Mutual Life Insurance Compaq and became First ¥ice President of that
institution* He is mm GhaiOTan of the Finance Gomaittee of the Vick
Chemical Conpaiay.
Thus far the Committee has been kept infomed of mxrk accomplished throt^gh progress reports put out by the research director,
through personal consultation, and by discussion in meetings• Meetings
•will be held vken needed, they tdl! be called by the Secretary Kith the
consent of the Chairman* The identification of interests between the
Gora&ttee members and the vork being done -will make for continuing siarveillance on the part of members•
(b) Personnel
The major project Kill be put in charge of a scholar of
experience and attainments **£ho ¥ill have general supervision over its
various parts and I*LO Kill himself undertake some of the writing assignments
iihich the Cow&ttee contemplates* Mr* W* landolph Burgess, presently
Deputy to the Secretary of the Treastcry, has indicated his willingness to
occupy this post Khen his present m*rk at the Treasury is completed. An
active member of this Goismittee, he can bring to the post an extraordinary

- 18 combination of practical experience in monetary affairs and scholarly
accomplishment. A graduate of Brosm University, he earned his doctorate
at Colombia in 1920 and ¥ent at once to the Federal Reserve Bank of New
Xork* He becafte Deputy Governor of that Bank in 1930. To this experience
in central banking he added foisrteen years1 experience in commercial bankiiig as Vice Chairman of the lational City Bank and then Chairsaan of its
Executive Committee. In Janmiy 1953 he retired from the Bank to go to the
Treasray as Deputy to the Secretary. The breadth of his scholarly interests is indicated by the fact that he has served as President of the imerican
Statistical Association and the Acadesjy of Political Science, as well as of
the American Bankers Association. Mr. Burgess is editor of a volume of
papers by Benjamin Strong, Interpretations of Federal Reserve Policy, and
author of Ike Reserve Banks and the Money System* ^fhich has for years held an
outstanding position as a textbook and reference book in this field. He is
a Felloe of Brcnm University, a Trustee of Teachers College (Coltmbia), and
of The Carnegie Corporation.
For obvious reasons this choice cannot yet be publicly announced. Mr* Btirgess has fro® the beginning of the pilot phase been an
active participant im Goaamittee discussions and Kill so continue during the
re&aainder of his service at the Treastaxy* During -feat interim he -will continue to be assisted in Committee matters by Mr* Donald B» Woodmrd, Secretaiy
of the Committee, vho has acted in a supervisory capacity during the pilot
phase (for other details see page 17) •
As research director, Mildred Adams i$io initiated and carried throiagh the m>rk of the pilot phase, ¥iil continue during at least the
early period of the main stti3y« Hiss Adsms (in private life Mrs* W*
Homston Ke^fon, idfe of a le^r lork attorney) is an economist by education

- 19 and a journalist by training* To experience in feature writing for the
Heir York Sunday Times* Barr0nfs Weekly and various other magazines
she added editorial raiting for Business Week and for The Economist (of
London) • She has recently been Baited lations correspondent for the
latter publication*
In order to do the amount of visiting of Reserve Banks
•which the study needs, Miss Adams must have an assistant capable of accepting more responsibility for administrative detail than can be
delegated to Miss McKinstiy if the part-time arrangement for the latter1 s
services prevailing under the pilot project is to continue • The Gora&ttee's
aim is to find a well-equipped and exceptionally able research assistant,
Kith the necessary academic training in monetary matters and some experience in administration, ^ho has the capacity to play a major role in the
project• Such a person w o l d , after a year or so as administrative
assistant, take charge and carry forward• Miss Adams would then be in a
unique position to embark upon a major m i ting part of the project*
In addition W B would need a secretary with research experience * (Miss Mclinstry is so exceptional that we would like to keep her,
&iren with the handicap of part-time service.) It may be necessary to
a€d secretarial help in Washington, and provision for this contingency will
be made in the budget.

There is reason to believe that offices and equipment

assigned for the pilot project by the Federal Reserve Board in Washington,
the Brookings Institution, and the Federal Reserve Bank in lew York will
continue to be available*

- 20 This provision of rent-free quarters and equipment (the
Federal Reserve Bank imposes a very nominal fee for furniture rental
^hich is more than counterbalanced by its ma^f operating services) is a
concrete instance of the interest -which the System is taking in the entire
project* Board and Banks are also making important contributions in the
form of material and of research assistance• Their continued co-operation
is of course a vital factor in the process*
(d) Budget
In the exploratory phase, personnel of Board and Banks have
been helpful and co-operative isith specialized knowledge and time for
discussion* The Committeef s debt to librarians, heads of research departments, purchasing agents, secretaries wko helped out is very real, and
financially substantial*
Significant parts of the cost of this project ^ill be provided by contributions from the System in the form of rent-free quarters*
use of equipment, consultations iriLth officers, hours of -work on the part of
librarians, research aides, purchasing agents, secretaries, and other staff
members* The Board and the twelve Reserve Banks have evidenced contimaigg
interest* The Treasury files are open to us, the Manuscript Division of
the Library of Congress and interested people in fniversity libraries are
renderii^g us all possible aid* The Goradttee members themselves are servlag without compensation, and uith no allowances except for occasional
travel expense*
In addition to these large contributions from the System
and other groups, contributions *shich in themselves attest to the importance
of this project, further funds "$dH be needed to carry on this stiady*

- 21 The costs i*hioh can be estimated are preponderantly for
staff salaries, travel expenses* siapplies (limited mostly to stationery
and archival materials), and stabventions to be used in three nays —
to be paid for the study and evalmtion of collections of papers, to
assist the writers of monographs, to defray the cost of major works*
Based on experience in the pilot project, we have made
estimates in two groups, one for an early period when research expenses
and travel costs will be relatively high, the other for a period yfa&n
the hea"?y costs will take the form of siabventions and other aids to
writing and publishing *«hich are the goals of this stiady• These btadgets
shotald be taken as estimates only, and we wouLd ask that a high degree
of flexibility be allowed the Com&ttee in allocating £ba ftands for which
it asks, There m®j be instances in which provision for salaries will be
transferred to grants~in~aid, and vice versa, depending on the sittaatioiu
Ho allowance was made by Brookings for the costs of handling the short-term
pilot project| they must, however, be reimbtirsed for their costs in
handlii^g the loiger operation, and dtie allowance is made in btadget
Budget Estimates, Jime 1, 1954, to Ifey 31, 1959
Earlier Period (Two Years)

Later Period (Three Years)

Annual Salaries and Research
Anniaal Salaries and Research
Annual Travel Costs
Anniaal Travel Costs
Annual Brookings Handling
Annml Brookings Handling
and Overfiead
and Overhead
Anniaal Other Expenses
Annttal Other Expenses
Total: for earlier period (2 years) ••••••.. #109,000.
Total for later period (3 years) ».*«««.«<«
Total for 5 years ••«•••
••••.,• |310,000*

- 22 The arithmetic in this table is worked out for two phases.
Actually we cannot tell at this moment exactly how fast the work will
proceed* how much overlap there will be, and when competent people
will be available to undertake wilting assignments. Therefore, we would
ask that the expenditure curve be left flexible •

In view of these estimates, the Goimittee respectfully requests

that for the purpose described in this proposal the Rockefeller Foundation grant |31Q,000 to be expended in the five years between June 1, 1954
and May 31, 1959.
The grant should go to the Brookings Institution with the understanding that its responsibilities and those of the Committee on the
Histey of the Federal Reserve System toward the project are mutual,
and that an informal relationship between the two bodies comparable to
that which proved so satisfactory during the pilot phase is to continue.
fhe report of the pilot project, which reveals the wealth of
materials found and siaggests the richness yet uncovered, is appended.
Walter Bagehot said, "Money will not manage itself." To
which the late Baanuel Goldenweiser added his plea for "an understanding
of this major force, of its causation and consequences*n We are convinced that the role which central banking plays in tiie management of
mon^y and in promoting economic stability will be even greater in the
future than it is now. It is the hope of this Goiamittee that the
proposed will contribute to the better understanding of that role.

April 20, 1954


on a

to explore materials and memories
for a
Study of the History of the Federal Reserve System

When the Committee to Study the History of the Federal Pteserve
System first proposed to the Rockefeller Foundation a pilot project* its
objective was preparatory work leading to a comprehensive study of the

"Papers which form the source material should be located, clas-

sified and roughly analyzed" said the proposal.

^Important characters in

the drama should be sorted out, their co-operation asked and their interest
enlisted. The dimensions and proportions of this comprehensive study should
be sketched and its possibilities bulked out. The exploratory study would at
least hope to answer the basic questions, fwhat?! fwhere?1 and 'whom?1*11
Toward the end thus described, the Foundation generously granted
$10,000 to the Brookings Institution and work started January 15* to end
May 1.

A few weeks of that period remain, but enough has been done so that

we can report on the result of the mapping and survey of papers and people.
The exploratory process, superficial though it has had to be, and
incomplete, has yielded a gratifying harvest. More collections of papers
have been located and surveyed than we thought possible.
The characters in the drama are more numerous and possessed of
better memories than we dared to hope. Even from the earliest years, a few
hardy operating men survive in each bank. To some of these men, work in the
Federal Reserve System has been a lifetime occupation. Their memories will,
of course, be checked with the records, but the sense of struggle and accomplishment which talks with them convey should be a valuable factor in any history of any institution. Their interest has been enlisted and their co-operation is generous•
As a method of recording people, papers and events pertinent to this
inquiry we have started four types of card files, one a ¥hofs Who file of persons}

one a time file which co-ordinates persons* pertinent events, legislation)
one a bibliographic file of published and unpublished material; one a subject file. These master files are arranged so that they could be photostatted for the benefit of students working on a later phase of the project. They
are by no means completed, but their pattern is set*
When we set forth the terms of the pilot project we said that nthe
papers which would be needed as source material in writing an adequate history
are scattered among Government, banking and private files. It is not even known
what exists, nor where some of what exists could be found.11
ation has been a first endeavox%

To remedy this situ-

We have n6t yet located everything we set out

to find, but we can now answer the question


¥here?tt in some detail. More remains

to be done^ but at least we have made a fruitful start•
Thanks to the co-operation of librarians at the Library of Congress,
in the Board and in the Reserve Banks, we have made progress in the search for
pertinent bibliographies of basic material which is printed, and in the more
difficult hunt for related material which is not printed•

We know, for example,

that material covering the Liberty Loans of World War I was sent from the Treasury to the National Archives, and that the records of the Capital Issues Committee are deposited in the same place. We have a listing of the indispensable
material which must underlie any study of the Board's work—the legislation, the
hearings, the minutes, the policy decisions, the reports and so on—and we have
a similar list for the Hew York Bank.
Of the other District Banks* the research director has visited Boston
and Philadelphia, and hopes to get to several of the other nine before this pilot
phase is finished. Meanwhile, we have been in correspondence with all of them,
and are receiving information as to their own stores of local historical material*

¥e have in preparation a master list of basic material which we hope to send
for their checking. If this deviee works* it will furnish the data for a bibliography of basic historical material for the entire System which will be of
primary use in the studies in prospect.
As for the papers of individuals concerned with the System's history*
we have located enough collections so that we are now facing problems of handling* indexing and permanent deposit. This search is by no means complete* but
it has already uncovered riches which will be of great use to scholars if they
can be m d e available and usable• The size of the collections makes it necessary
to postpone classification to a later date* but we have found an organization which
might handle such papers* and at our suggestion they propose to start a sample
study to determine time and costs of the necessary process*

Problems of a pla.ce

of deposit* and of permission to use* still remain but the fact that these have
arisen and must be left for a second phase is* in an oblique way* an earnest of
the accomplishments of this operation.
The following list of papers uncovered during this pilot phase includes
those of Board members* high officials of the Executive branch* Members of Congress*
Governors of Reserve Banks* men in academic life whose writings have been influential in the development of the System:
The papers of ¥oodrow Wilson, in whose administration the Federal Reserve System was first organised* are in the Library of Gongress. Permission to
consult them has been granted to this CoFimittee*
The papers of Colonel E> M. House» containing material about the early
creation of the System* are in the Yale University Library.
The papers of William G« McAfloo» first Secretary of the Treasury to
sit on the Board* are in the Library of Congress. Permission to consult them
has been granted to this Committee.
The papers of Senator Garter Glass are in the University of Virginia
in 216 boxes (perhaps 10 x 15 x 3 inches in sise). They have been rough-sorted
as to date| letters from outstanding personalities were isolated by an early
biographer. 1 quick sanaplixag shows that classifying and indexing will be needed

before these papers, so important in the early history of the Federal Eeserve
System, would be generally useful to students. (See main project proposal.)
The papers of the late Professor James L» Laughlin of the University
of Chicago, a widely recognized teacher of banking during the formative years
of the Reserve System, covering the period 1910-32, contained in 15 boxes of
material, are now on deposit with the Library of Congress.
Of the first Board of Governors, we have found the following papers;
The papers of Charles Hamlin, first Governor of the Federal Reserve
System, are in the Library of Congress. These consist of 245 volumes of which
28 are bound volumes of manuscript diaries covering the twenty-one years during
which Mr. Hamlin was a member of the Board, and almost as many are bound volumes
of newspaper clippings covering the years 1871 to 193S. Both sets of volumes
have been amply indexed and cross-indexed by Mr. Hamlin, The whole collection
constitutes a mine of information and comment which has neither been studied nor
evaluated* (See main project proposals.)
The papers of H. Parker Willisf member of the Organization Coinmittee
and the Board's first Secretary, are in the home of his widow on Staten Island,
They were willed to his son, Parker Willis, now in the Federal Reserve Bank of
Boston. How much of value remains in them which was not used by Mr. Willis in
his own books is a question which can only be answered by sorting and classifying.
(See main project proposals.)
The papers of Paul M. Warburg were mostly destroyed after 1930 when he
wrote his own two volumes on the Federal Eeserve System* The residue includes a
skeleton diary covering the years 1907 to 1914 inclusive and dealing mostly with
events leading up to his taking of the oath of office as a first Board member;
there is also a diary dated 1915 &&d covering "daily happenings bearing on the
work and policy of the Boardw from October 4- to 24> 1915• There are in all five
volumes of miscellaneous material dated 1912 to 1918, some of it highly interesting. This material is in the hands of Mr. James Warburg at Worth Greenwich,
Connecticut, and permission for its use must be sought from him. The collection
is not so extensive as to need further work for its use.
The papers of James Warburgt covering a later period, are in the same
building• These include a six-volume diary covering the months of 1933-34- which
covered the banking holiday and the London Economic Conference to which Mr. Warburg was a delegate.
A collection of the private papers of Mr. A. Barton Hepburn, a prominent lew York banker who served as Comptroller of the Currency (1892-93) and
later (1918) as a member of the Federal Advisory Council of the Federal Reserve
Board is on deposit with the School of Business Library, Columbia University*
The papers of John Skelton Williams are in the hands of his widow,
now Mrs. William Allen Willingham of Eichmond, Virginia.
The papers of Dr. Adolph C. Miller were thought to be embodied in
the files of the Federal Reserve Board, but a small collection has recently
been found in the home of his widow, and has been made available to this
Committee for sorting and evaluating.

-5The papers of Benjamin Strong, first Governor of the Federal Eeserve
Bank of New York and in that post until his death in 1923, are divided among
the Bank* the Firestone Library at Princeton University, and a New York storage -warehouse. The Bankfs collection occupies six file drawers and consists
of addresses, memos and correspondence with leading personalities in the United
States and Europe• In addition that portion of the filing system which was set
up during his lifetime is permeated with Strong material incorporated in the
subject files. Permission for study of this material must, of course, be sought
from the Bank*
The Princeton material which forms the nucleus of what is there called
the Strong Collection includes 1 % volumes of newspaper clippings of World War I
from July 27, 1914 to March 20, 1920, well-mounted and preserved. War posters,
war currency, and a folder of correspondence between tStrong and Kemmerer are also
there. The material in the Lincoln Warehouse, under the control of Mr, Benjamin
Strong, is believed to consist mostly of personal papers and correspondence; it
should be made available to a, qualified biographer*
The papers of George Harrison, second Governor of the Federal Reserve
Bank of New York, are also incorporated in the files of the New York Bank. In
addition, there are seven file drawers of reports? memoranda and correspondence
which Mr. Harrison took with him when he left the Bank to become President of
the New York Life Insurance Company. These, like the Strong Collection, have
the great merit of presenting material culled from the mass of daily workj they
are therefore easily handled as well as very valuable to the student. This Committee has permission to consult them.
The papers of Gharles DaweSt of the Bawes Plan, are in the Deering
Library at northwestern University, They include diaries, journals, serapbooks
.and memoranda., rough—sorted and put in chronological orderj these include material
relating to the currency question from 1900 to 1902, and to the lldrich-?reeland
Act of 1908, as well as later material on the German debt question.
In addition to the papers of fpodrow ¥11son> the Library of Congress
also has the papers of Calvin Goolidge, Charf^B^Evans^Hu^es, Ray Stannard Baker
who was Wilson' s biographer, .Senator jQeorg®.JI9ILQJL> a ^ °^ whom dealt in their
various ways with Federal Reserve matters. Permission to consult these has been
granted this Committee.
The papers of jDr._ JSdwin,JKennuerer are mostly in the Firestone Library
at Princeton University. Some memoranda are believed to be in the hands ox Mrs.
The papers of Ogd^njlills, Secretary of the Treasury a.nd Chairman of
the Federal Reserve Board in 19J3, &£*® in twenty-five boxes in a garage on Long
Island. A small attempt at sorting was made by Mrs. Mills, who got through some
five boxes and then decided the job called for expert advicej otherwise they are
intact, and just as they came from the Treasury. Word has just coxae that after
having consulted with this Committee as to the disposition of the papers Mrs,
Mills has decided to turn the boxes over to the Library of Congress. These
papers must be sorted, classified and indexed before they are useful for students.
The papers of .Eu,geneJfeger are still in Mr. Meyer's hands. A biographer,
Sidney Hyman, is at work on them.

The papers of Woman _H .m,r, Davis were given to the Council on Foreign
Relations, which recently sent them to the Library of Congress as a final place
of deposit* They include some five file drawers and a huge box of unsorted
material. The Library of Congress has promised to have it ready for students
in two years.
The papers of Dwi^tJ|orrow, who played an important part in the
international negotiations of the 192Q!s, are being prepared for deposit in
the library of Amherst College, where they are expected to be available for
use after June, 1954*
A small collection of the papers of LgogLjFraser has been handed to
this Committee, but little of value has been found in them*
The papers of Oliver W» M« Sprague, at various times consultant to
the Treasury and to the Board, are in the hands of his son in the Sprague
residence. Stimulated by inquiries from this Committee, Mr. Sprague is now
sorting and classifying the material his father left.
The papers of HgogcjJ^rgOTttiau including the famous stenotype
records of conversations, are said to be in the Eoosevelt Library at Hyde
The papers of ^itOT^ichtenstein, for two decades (1926-1948)
secretary of the Federal Advisory Council, Federal Reserve System, have
been given to Harvard University, where they are divided between the Baker
and the Widener Libraries.
The pampers of ^ ^ ^ ^ ^ G o M ^ w e i s e r , research officer of the Board
from 1922 to 1945 &nd author of various studies, are at present in a storage
warehouse in Princeton, Hew Jersey. Conversations with Mrs. Goldenweiser
indicate that they may be made available for study this summer* (See main
project proposals.)
Obviously this list of 30 pertinent collections which we have located is by no means exhaustive. It does, however, show what riches can be
uncovered by persistent search*

All this, and much more, must be studied by

anyone now aiming to review the System1 s work and its place in the American
Meanwhile, men still active in the System are known to have been
accumulating papers which, if they can be preserved, will add greatly to the
desirable material. The student of Federal Reserve banking may with reason
long for the time when the speeches, correspondence and memoranda of modern
leaders in Federal Eeserve theory and practise are made available• It is to

be hoped that this Committee may be active in persuading these men to leave
their papers to a responsible depository where future students may consult
The other chief object of inquiry in the pilot project was personsj

The men who have acted as architects and builders of the present Federal Re-

serve System are already beginning to disappear", we said in our first presentation.


Those living, whose memories form a most valuable supplement to

any papers which they may have, should be approached and asked to contribute
personal knowledge and access to papers before it is too late,11
The process of interviewing has been throughout this pilot study
one of the major occupations of the research director*

Starting from a list

on which Committee members indicated their own first choice, the interview
process has widened to include some sixty-odd persons, most of them officers
or staff members of the Board or banks. The long list includes:
Daniel W. Bell
Dr. Karl Bopp
Joseph Broderiek
J, Herbert Case
Jay E. Crane
Robert W. Fleming
George L. Harrison
1* A. linkaid
R. G. Leffingwell
Walter 3. Logan

Eugene Meyer
Carl E. Parry
Leslie Rounds
John Sinclair
Walter W. Stewart
Benjamin Strong* Jr.
Woodlief Thomas
John H. Williams
Walter Wyatt
Roy Young

and imny others.
In general these interviews served a purpose somewhat different
from that which was contemplated when they were started.

In the first place,

they struck sparks of interest and good will which are very valuable for the
success of this project. Benefits continue to flow from them* and further
opportunities to interview the same individuals at later dates have been

These meetings were of great help in establishing the human atmosphere of whatever period was under discussion. In some instances they also
brought forth valuable memories of key moments, and informs/fcion which was
unique in itself. But it quickly became clear that in order to evoke the
most vital detail in any disputed area it would be necessary to ask the carefully pointed question*

This can be done well only in later interviews, with

full confidence established aztd much more study accomplished than has bean
possible in three months1 time.
The interview technique has proved full of surprises. Far from
being less valuable than was anticipated it has been more so, but the values
have been of a different order. The most important of the memories, which is
to say those that lie at the deeper layers, are still to be gathered*


certain inquiries have been set in motion which will yield results after this
report has been written. The continuing interest which has been secured will
accrue to the benefit of the main phase of the proposal.
The eosiment of a former Reserve Bank Governor was wXoufre asking
me to open doors long ago shut*

They open hard11. Any historian going under

the auspices of this Committee to discuss a vital point with such a man will
find his way much easier because the preliminary door-opening has been done*
Card Files
As visible evidence of work done during this pilot project and as
preparation for the larger project, we undertook to build a "biographic index
of personalities11, a "bibliography of basic materials11 and a Bma.p of some papers11.
We now have in hand the early stages of what will be master card files, prepared
in such fashion that they could be photostatted and made available to students
working on various phases of the main project. These includes

A bibliographic file of unpublished material, put together in a form

suggested by the Manuscript Division of the Library of Congress, where
collections are described roughly on cards> and more exactly on larger
"registers11 of the material in the collection.
A bibliography of printed materials basic to any study of the
Federal Reserve System.
A bibliography of the works of the earlier Board members, Senior
Bank Officers and Directors.
A biographic file of persons active in the System, with data as
to their careers both in and out of the Federal Reserve.
A chronological file keying together persons, legislation, hearings,
policy changes and events affecting the operation of the System.
A list of scholars whose records indicate the type of interest in
the subject which suggests that they might be enlisted in the main project.
This work has been done under the Committee's research director,
Mildred Adams, in three offices - one assigned in Washington by the Federal
Reserve Board, one provided by the Federal Reserve Bank of Hew York with a
staff of three assigned to this work by the Bank from among its own personnel
(their salary costs paid by the Committee), one in the Brookings Institution*
The latter organization has been kind with expert advice, as well as with the
technical assistance needed for administering the Fund.
The cooperation of the Board has from the start been prompt and

All doors have been open, including library and files, and the

research staff has made a large and valuable contribution to the bibliography.
Cooperation, with the Banks was established when the Chairman of this Committee,
President Allan Sproul of the Federal Reserve Bank of New York, sent to the
Presidents of the other eleven Banks a personal letter explaining the Commit—

tee project and Inviting their interest. Since then* material bearing
on the local histories of the individual banks has been arriving in response to specific requests* Meanwhile the Hew York Bank, like the Board,
had opened all doors and created for the Committeefs staff an atmosphere
of cooperation which has both facilitated the work process and constituted
an important financial contribution to the project•

It is already apparent

that regional divergences and developments form a rich field for research
in any comprehensive study of the System*

ill this work has been pointed toward the larger design which
constitutes the reason for the pilot project and the grant making it possible. The siz;e and importance of that design has loomed larger and more
complex rath every day1 s work.
We said in January that any attempt to draw the limits of the
comprehensive design would have to be revised six months from then. At
this writing half that time has gonej the design still changes every time
a new corner is rounded and a new set of ideas uncovered. There are as many
ways to foimulate the major project as there are, people equipped to think
about it* This Coimaittee has developed within itself a lively and stimulating set of opinions on the subject, all different and all valuable.
Under these circumstances the proposal as herein submitted represents a consensus of the ideas of six men learned in the theory of central
banking and experienced in the practices of the System. The members of this
Committee see the System from many different angles. The proposal as submitted represents those aspects of the grand design on which the Committee
Is agreed.


2-5700, EXTENSION 286


With cooperation of

MILDRED ADAMS, Research Director


Dr* Betel* 9«
t l l l i w i t « . ItortlR

«*tt£h ««st toda^ to Cr# i U U t * mf Urn
a in»at ©f $300#000 fee th
thi* Corwlttcie* 1 f^art 0t Vm ^ l « t p r e s e t , ««nt to

d«i»d Ijgr DomO^ VMKIBUP^ «H3retarjr of thi» Ce«dtUe # sad which aoto
s «is*arUa* I»tt«r vrltUn lay ^r* i ^ e r i C«lkln» as Fmcl^nt of tht
i s to foUow*
i n r / i t t i * ! c u t | jo* find c<rp><tloii« whicfe
* i ! i : o» l e t its JcawF MI tla^t w* mmj ptmm