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For' Y. B. 131
BOARD DF GOVERNORS
DF THE

FEDERAL RESERVE SYSTEM

Office Correspondence
To

Chairman Eocles

From

j/

n ^ November 29,1938
Subject :
_

Mr. Goldenweiser/

There was a meeting at the Treasury on the question of sterling
at which there were present the Secretary, Mr. Hanes, Mr. Lochhead,
and Mr. White, of the Treasury, Walter Stewart, Robert Warren, Butterworth, who is Financial Attache in London, John Williams, and myself.
It appears that the Secretary has had a couple of meetings with
Mr.

Bewley at which some of the points suggested in the memorandum

prepared by the visiting advisers last time were called to the atten-*
tion of the British. Bewley promised to produce figures on the amount
of short money in London on Thursday or Friday of this week.
At today1s discussion there was nothing conclusive accomplished.
The general advice of the group was that it was not the timely thing
for the United States to do anything independently, which implies something of a hostile attitude. It was felt that continuous pressure for
more information and encouragement to the British to use their reserves
in supporting the pound was about all that could be done at this stage.
There was some discussion of establishing a joint fund for supporting
sterling, but the Secretary was very reluctant to undertake that, and
most of those present were not favorable to it on the ground that it
would be chiefly a gesture; might result in weakening sterling psychologically, and would be entirely inadequate against a fundamental movement.




Chairman Iccles, -

#2

The Secretary seems to be inclined to turn now to some means
of making it uncomfortable for foreign money to be in this country
and has asked that all the proposals about hot money be reviewed*
He expressed distrust of the 100 percent reserve against foreign
deposits, however, on the general ground that he thought it was not
a good time to bring up the problem of reserves, and also that this
was a way to penalize the banks and not the depositors.
Stewart made the statement that this sort of advisory meeting
was of no particular benefit because the advisers were not in close
touch with daily developments and were not sufficiently free to work
on the longer and more fundamental problems underlying the situation.
The Secretary said that he had unlimited funds and would be glad to
supply these people with staffs if they would prepare themselves to
give him advice on broader general trends in regard to the position
of the dollar, sterling, and other exchanges, and the general realignment of world currencies and tradeā€¢