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May 17, The Federal Reserve System is interested in the war financing program and has some responsibility in the matter because of its Open Market and Central Banking unctions. The Federal ReserTe Biaak Presidents are willing, because of the positions they hold and their personal patriotism, to accept the Chairmanship of district war finance oomittees. Th© organisation plan is agreeable to them. The attached statement briefly summarises our understanding of th© organisation plan. W© believe that no publi*ity of th© new organisation should b© given until th© set up Is completed in a satisfactory manner in all the districts. Each President should, of course, be free to make his own decision as to whether he will serv* with th© personnel selected. Under your plan, however, we anticipate B O difficulty in your being able to get together on personnel, but some case might possibly develop where you cannot get together. It would be very unfortunate if some districts were under the Reserve Bank Presidents and others were not. Yfe feel that this should be treated as a System matter and unless satisfactory arrangements can be mad© in each district, we feel that the System should drop out entirely. I feel that I could not act as liasion with part of th© districts und«r the Reserve Bank Presidents and others under someone else, that would be an awkward situation. •»<•»•»«• Before we go ahead, however, the Presidents feel strongly mm as I do -• that th© record should be cleared on your remarks mad© at th© Friday afternoon m©< You expressed in stroag terms your complete lack of eonfideso© in their int©grlty, their motives, and their personal interests in th© war financing program. Tour charges are absolutely unfounded and unsupportable. They were made in the presence of your staff and not in an executive session where any remarks such as those should have been made* the Presidents realise that wo all say things on the spur of th© moment and in th© heat of discussion that upon xnore deliberate consideration w© know are not true and wish we had not said. They are willing to overlook this incident, which is decidedly a black mark on the relations of th© Treasury and th© Federal Reserve System, but they feel that you should expunge your remarks from th© record. Henry, I don't think you want that record to become part of th© permanent files of th© United States Treasury Department* The Fr©sidonts and th© Board are more than willing to cooperate with jm In every way in the financing job, as w© have don© in the past, I would suggest that for th© sake of harmony in th© ranks, and because your remarks were felt so deeply by th© Presidents who had just finished what every one considers as an excellent job, that you call each of them over the telephone or l©t me tell them for you that you hav© cut your remarks from the record and that you realise they are men of high character and integrity and that you hav© full confidence in them. That would do much to correct a bad situation* They expressed themselves as being asked to do an important job in the financing program in a tim© of war by a Secretary of th© Treasury who has stated that h© has absolutely no confidence in thorn* They just don't see how they can go into this thing with th© enthusiasm and seal necessary to accomplish their assignments and ~ 2 accept their share of responsibility for th© results is the pr©t«at This thing has had a terrible ©ffeet upon their moral©. t I think jou hare got to do something about t h i s . Allan Sproul said that he would like to talk to you personally about this*
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