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BOX 477

August 16, 1937

Governor Marriner S. Eccles
Federal Reserve System
Washington, D. C.
Dear Governor Eccles:
Thank you for your letter of the 13 th with its en closures •
I greatly appreciate the comments made by the members of the
staff who have reviewed the material* Some of them relate
to matters which others have brought to my attention, while
others will require a little further thought on my part*
I am particularly glad of Dr. Curriefs memorandum with its
table giving the history of the "V" factor since 1919.
In advance of further study of the comments, I believe I
should explain my use of the word "quality" which has not
been clear to a number of my critics and correspondents.
Possibly the idea is confused in my own mind, though it
seems clear enough.
Credit as a whole is first divided into categories depending
on the kind of transaction for which it was generated. A
number of these categories are given as, for instance, financing consumer purchases, financing security speculation, etc.
Next, the characteristics of these various categories are
examined with particular reference to the monetary aspects
of bank credit. For any given category the balance of characteristics may be favorable or unfavorable to reliance on
that category as a constituent of our total volume of bank
credit viewed from the monetary standpoint. This preponderance of favorable or unfavorable characteristics gives the
category its good or bad quality from the monetary aspect.
It is in this sense that I use the teim "quality of credit•"
I do not use it in the sense of the quality, considered from
the standpoint of safety or otherwise, of the individual
transactions themselves, except as this affects the whole
category in its monetary aspect. A little later, at your
convenience, I shall take advantage of the kind invitation
in your last paragraph.
Sincerely yours,