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COPY UNITED STATES SENATE November 2, 1935. (Personal) Dear Mr. Hsmlin: I have yours of October 30 concerning the appointment of David Stern as a Class C director of the Federal Reserve Bank of Philadelphia, which does not afford me one particle of information that I did not already possess, and not quite as much. The *confidential report* attached to your letter, as far as facts are concerned, may "be found in "Iho's Iho11; "but I venture to think that the commendatory parts of the report may not be found anywhere except in the imagination of Dr. Harr, who is a business associate of Stern, and in your conclusion that this report gives Mr. Stern a status of probity and of scientific accomplishments. It is not astonishing that you had never heard of any charges against the fitness of Stern to be a Class C director of the Federal Reserve Bank of Philadelphia, since it does not appear that you or anybody on your committee made the slightest effort to ascertain the judgment of the banking or business community of the Philadelphia district. I believe you will not find Mr. Stern's name in the list of twenty-four persons suggested to you by Governor Norris, nor do I think you could have induced any respectable number of backers in the Philadelphia Reserve district to suggest his name. My information is to the effect that the banking community of Pennsylvania, as of the entire East, was amazed at the selection, some of them saying, "It is the most shocking thing that has happened since the establishment of the federal Reserve System,11 It would be interesting to be told whether anybody in the entire banking system of Pennsylvania except Dr. Harr advocated the appointment of Stern; and, as I am told, Harr is a business associate of Stern and, as I know, is as rank a heretic concerning the principles and practices of orthodox banking as Stern himself. My committee records show that every banking grotip in Pennsylvania, including the State association, that every group of credit men in the State and every business group that passed on the question were utterly at variance with both Harr and Stern with respect to the banking legislation advocated by your Mr. Eccles* She circumstances, confirmed by such trustworthy information as I have, point to the fact that Harr suggested the name of Stern to the chairman of your board, and the chairman readily handed the name to you, and other members of the board did not concern themselves to find out anything about Stern* Stern deliberately and persistently lied about every member of the Banking and Currency Committee of the Senate who did not agree with his vagaries or with the shocking attempt to transform the Federal Reserve banking system into a central "bank, to be controlled by persons who are not bankers. I regard him as incapable of telling the truth when a falsehood would -3- better serve his purpose;and a man of this type should have no connection with the Federal Beserve banking system* You have undoubtedly gratified your desire to "infuse some new blood* into the system, but it frequently happens that blood infusions kill and do not cure. In this case the banking coraminity, as far as I have heen able to test its judgment, is bitterly disturbed by the fear that this specimen of transfusion, if often repeated, will literally wreck the federal Beserve banking system* I am not a little astonished that you should have misunderstood my criticism over the fphone as to the nintroduction of petty politics in federal reserve matters.11 Of coiarse, I had no reference to party politics, because I do not know the party affiliation of a single director of any one of the twelve federal reserve banks, with the exception of one individual* Besides party politics there are such things as church politics, banking politics, personal politics and various other kinds of politics, to convey the meaning of objectionable methods; but, if, as I infer from your letter, Mr# Stern was selected because you think he is a Democrat and supported the Administration, I would regard it as a sad commentary upon the character of the Democratic party in Pennsylvania if you would have experienced any difficulty i&atsoever in picking a member of it infinitely better qualified in every way to manage the affairs of the Philadelphia federal Beserve bank* I am equally astonished that you should assert that in the selection of Class C directors of federal Beserve banks the board in Washington is utterly indifferent to the opinions entertained by these men in the msfcber of banking economics* Obviously, if this is the method of selection, the appointment of Mr# Stern is explicable* Specifically, what I meant by the * introduction of petty politics in federal reserve matters11 was that the name of Mr. Stern was selected by the chaiiman of your board and handed in with the request that he be appointed for no better reason than that he alone of all the metropolitan newspaper editors in the country had grossly affronted and libeled those Senators tdio had ventured to disagree with the imorthodox barking views of Mr* Eccles* Very truly yours, (Signed) Carter GKLass, Charles S* Eamlin, Esquire, federal Beserve Board, Washington, D* C*
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