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H!EARING BEFORE THE FEDERAL RESERVE BOARD OF MR. NA'fHAN MUSHER, IN SUPPORTl
OF HilS APPLIOATION J.'OH THE EXPORTATION OF $.1 1 250,000
GOLD TO SFAIN.
Washington, D.. C., llacrcll 2, 1918, Twelve o'clock noon•
PHESBN'l.,..t: Qcrvernor Harding (pres:i.ding), Mr. Warburg, Mr. Hamlin, Mrft :Jelano,
Ur,. M_;_ller and Mr,. Willis.
Mr. Secretary, have all the members of the B.oard been
of the hearing!':
Mr. Harding:
no"'~i:: ;i_ed
Mx-~
Willis:
Mr. Harding:
Yes, sir, a written notice was sent to each member.
Geni;J.emen, Mr., MvshfH' has requested that thA Hoard rAec,?nsidBr e.::1 appJicat:Lo::'l ~ade by h::m which !"ea~hod the Board
on t!1e f:'i.rst of last I:-er:ember.
:Lundersta.nd, Mr. Musher,
that you want youl:" l.Btter lat~d Nt.l'trember 28,,1917 r to serve
as a brlef as the basis fol~ this hearing!!
Mr. Musher:.
Yes, sir.;..
Mr. He.rding::
What is your full name!
Mr. Musher:.
Nathan Musher.
Mr. Harding:.
Your business!.
Mr.
!~sher:.
Xmporter of olive oil, President of Musher and Company,
Washington.
Mr. Harding:
What is your residence!
Mr. Muf:!her:.
Washington, D.
Mr. Harding:
Your place of business!
Mr. Musher:
Baltimore.
c.•
Mr. Harding:.
You live in Washington and your place of business is
Baltimore.
What is the name of your firm!
Mr. Nusher:.
Today it is Musher and Company, formerly the Pompeian
Company of Baltimore.
'l'he present company are not sur.cessors
to the former company, but just a change of the corporate name.
Mr. Harding:
I understand.
You are an .American citizen!:
'X-!-7781
- 2-
Mr .. Musper: .
Yes~ sir;
Mr. Harding:
Residence is Washington!
Mr~
Yes sii'•
Musher:-
Mr. Harding:.
How do you want to discuss at this time your supplementali
application of Decembe~22nd,,in which you ask to have until
the first of July,, I .. believe, to make thiS' shipment of gold-:
in case you. should find yourseJ..f unable to liquidate your indebtedness by purchasing exe.ha1'lge at approxiJr.ate1yy· the normal~
rate!?
Mr .. Musher:.
Of course Lwould like to get the quickest relief, but
if tbat is not possible to get the application to permit the
exportation of gold· on July first unless exchange is avail~
able before.
That would be very much of a relief if agreeab.le to the B..oard.
L. can say i..t is· really a .Jcase of life and
death to u~=beca~se it means a $~00,000 loss if we should have
to buy exchange a·t its present market price. · That would mean
almost death to us.
Mr. Harding:
How long has the Pompeian Company been in business!
Mr. Musber:
About nine or ten years.
Mr. Harding::
Always in Baltimore!
Mr. Musher:.
Yes sp-.
Mr. Harding::
About what proportion of the importing business in olive
oil did your company do in the year 1917!
Mr. Musher:.
We did quite a large proportion.
Of course·, our imports
for the year 1911 amounted to approximately 800,000 gallons
of olive oil.
Mr .. Harding:.
Eight hundred thousand gallons!·:
Mr. Musher::
Yes sir.
Mr. Harding::
What is the value of that amount of oil:ve oil!
Mr. Musher:
originally, on the other side about $1.,?50,000 •.
is my first cost that I.am trying to pay for now.
Mr. Harding:
That was your import·s in 1917 representing purchases·,
that.yoQ contracted for in 1916, is that so!
Mr. Musher::
That
Ilt is not reallJ contracted for in the full sense of the
word.
We contracted in 191&. to deliver to customers in" 1917.
~778
- 3
Mr. Harding:
About whatcpropo~ion of the import business does your
company do • twenty, to twenty-five pe·r ·cent!
Mr. Musher:
We really do more than that,:. considering the use of
oli.ve oil amongst the American trade was about·c. 3, 000,000
gallons, and we suppli-ed 800,000 for 1917·
The total importations were 7,000,000; out of 7,000,000 gallons"'_of olive
oil the bigger part went to the Italian trade to which we do not
cater a great deal.
We only sell the second quality to the
foreign trade.
We only cater largely to the American trade,. -that i~, selling our Pompeian first quality olive oil·
Mr. Harding:
You are doing then about
ing ol:i. ve oil!
27fo
of the business in import-
1
Mr. Musher:
To the American trade.
Mr. Harding:
What firms and corporations are your principal compeditors!
Mr. Musher:
We really have not any such thing as large competitors,
because there are so many other concerns engaged in the business but not specializing in oliYe oil as far as I. know.
7
Mr. Harding:
There is no other ·eoi'l:cern then, that does the b'lSiness
in olive oil that you do;· ·for example!
Mr. Musher:
No sir.
Mr. Harding:
Heinz. and Company are large importers of olive odl are
they not!
Mr. Musher:
Heinz and Company, as the name implies, manufacture 57
varieties, but they really handle about 80 or 90 different
articles.
Mr. Harding:
They do not do
c;1.
jobbing business in olive oil!:'
Mr. Musher:.
No sir. We import and do a jobbing business.
import about 75,000 or 100,000 gallons·of olive oil.
They
Mr. Harding:
In your business you make ~ontracts a year ahead; in
you make contracts and make deliveries in 1915, and in
1916 in like manner lou do likewise to sell at a certain ·price.
You bought in Spain based on these contracts, the only trouble
was that when you came to pay for your goods in Spain you found
that, peseta exchange had advanced!:
19~
Mr. Musher:
Mr. Harding:
Yes sir, about 151.When was it first brought to your attention, -- this rise
in Spanish exchange! .
·~·.
- 4-
X~778
In Decemb~, 1916. -- In Juneand July, 1916, we made bur
contracts for olive oiLfor 1917.
Mr. Musher::
Mr. P.arding: .
Mr. Musher:
Had you bought your olive oil in Spain at that time!
No sir,,we had note because we buy_ our oil in the three
producing months direct from the falLOers.
Mr. Harding:.
You had your commitments out for the delivery of the
oil.. and you fel.t obliged to buy your goods in Spain!:
Mr. Musher:
Yes sir.
Mr. Harding:
WhAn you first found that this exchange had gone against
you, what did you do to protect yourself!
How much was it
against you!
Mr .. Musher:
It started off and went right quick.
Mr. Harding:
Mr. Musher:.
What did the other importers do at that time?
There are so very many importers who are not established
on the other side and to them exchange was not as important to
begin with, be~ause it was of a: smaller nature.
There are any
number of large concerns in New York that import fror Norway,
Sweden, Italy and France a variety of commodities so that they
were not so interested to begin with in the Spanish exchange
situation.
The Armstrong Company and the Crown Cork and Seal
Company were really as much interested in this as I was.
I.~.
thought we were all working together to bring about a change in
tho pesetas.
The Crown Cork and Seal Company was buying gold
in New York and was buying gold sterling in New York and shipping it to Spain bec~use they found they could get more for
gold sterling than they could for American gold.
At that time
Lcame to the memb~s o! the Federal Reserve Board.
I think I
have had the courtesy of half a dozen interviews with the Governor, Mr. Warburg and Mr. Delano,---
Mr. Harding:
Can you tell me, in case the Board"should reconsider this
application of youxS, just how much of a precedent that would es~
tablish!
How ~any other importers would say 'we have got to
make shipments too"!
Mr. Musher:
not believe there is another one in my position,
they have not been able to obtain facilities from the
Spanish banks to carry this thing on.
The banking officials·in Spain have been extremely nice to me and have gone out of
their way to help.
The other importers went ahead and either
shipped gold or bought exchange.
I~do
bec~use
Mr. Harding:
buy
What reason was given to you when you f.irst went to
for this advance!:
e~change,
..
'\, '
~778
- 5 -
Mr. Musher::
The ret1son given to me was .because there were no balances
available in Spain.
Ir!!ports were larger than exports.
That
is the reason I was so instrumental in digging out what information I could a·c the time.
Mr. Harding:
It is very evident that our imports from Spain have always~
run along less than our exports.
For instance, :i.n 19lr1 .:~ur exports to Spain were $S2.000,000.and ou~ imports from Spain were
$33,000,000~
Don't you think that the rellitions of tt:a United
States with the allied governments had something to do with it!
Mr. Musher:
Of course, but Ldid not know it at the time.
Mr. Harding:
You posted yoursel:f pretty well on this whole businessoin
December, so that by the f:lrst of June and July you were pretty
well posted on exchange?
Mr. Musher:
Yes sir~
I was in hopes and was givAn to understand
that som':lthi.ng would be dor1e to equalize and to get the thing
strair;ht3ned out.
Our contracts were made on a basis of about
ten per cen·~ profit.
We would :1ave lost $150,000. so it was
really fighting for life that pronpted me not to take advantage
at that time of shipments of golde
Mr. Harding:
Will you please explain what the trouble was ab"ut making
shipments of gold!
Mr. Musher:
The cost of freight and insurance was so ~reat and therefore
the depreciation on the ll.merican dollar was 12io on the fare of it.
Mr .. Harding:
The discount on Americtin gold after it got to Spain was
about 3 per cent!'~
Mr~
Musher::
Yes sir.
Mr. Harding:
That preyailed how long!
Mr. Musher:
Right straight through until
Mr.• Harding:
Has that been
t~ken
off now!
Mr. l.ilsher:
Now I understand it is a little different, because the Spanish Government is inclined to take any kind of gold at almostcits
par value except that it aJ.way~ favors sterling.
Mr. Htirding:
You have your own connections in Spain:
favorably known there, are you not!
Mr. Musher:
Mr. Harding:
you are well and
Yes sir.
Did you hB.Ye the facilities for shipping this gold, paying
insurance and transportation costs?
Did anybody_ have a preference
or any advantage over you in the matter of gold shipments!
x..,..77e
"" 6 -
Mr. Musher:
Yes sir, in this way, because my import banking facilities
were furnished to me by the Balt~ore Trust Company of Baltimore
which was acting as syndicate manager for five institutions, the
District National Bank, the Commercial National Bank, the Conti•
nental Trust Company; the National Bank of Comrr~rce of Baltimore
and the Baltimore Trust Company, so that all my obligaticns abroad
were made to the Baltimore Trust Company and they in r:3turn opened
those cradits through the Guardnty Trust Company, Irvi~g National
Bank, and National City Bank of New York, and if shipmer:ts oi
gold were to be made the Baltimore Trust Company tad to make
shipments of gold for our account wbich Yr. Ing~e did not l9bk
with fi:lvor upon.
Mr. Harding:
How much of a disadvantage were you placed at in
shipments!
Mr. Musher:
I could not really make any shipments:
Mr. Harding:
How
~An
~aking
I was so tied up---
you make one now!
Mr. Musher:.
Bec~use the Baltimore Trust Company, and since, Mr. Ingle,
who is well known to you, has taken his time to study and to realize that it would be safe to ship gold.
Mr. Harding:
Then you were handicapped by doing business wit;_, a bank
which was not conversant with the foreign exchange business!
Mr. Musher:
Yes sir·
The Baltimore Trust Company became so excited
and so impatient they were afraid that pesetas would go up to
30¢ and would wipe out the Baltimore Trust Company that L biid
to go to the Equit~ble Trust Co. urd the Philadelphia National
Bankrand put up my cash deposits with them so as to release the
Baltimore Trust Company from ~ny obligations whatever.
Mr. Harding:
How long since you have been in a position to make gold
shipments!
Mr. Musher:
About a month or so ago.
Mr. Harding:
Yet, don't you say here in this letter that had you supposed
that,an embargo would be placed on the exportd.tion of gold, you
would have immediately exported to Spain from this country a sufficient amount of gold to liquidate your peseta indebtedness,
rather than have allowed the gold to accomulate here!
Mr. Musher:
I had Mr. Ingle, on November 30th go to Richmond and make
arrangements -~
Mr. Harding:
Mr. Musher:
The embargo was before
Yes sirMr. Ingle - -
It was only at that time th<:lt I could persuade_
- 7 Mr. Harding:
Suppose you h~d had notice about the embargo sometime in
could you h~ve gotten ready!
~dvance,
Mr. Musher:
I do not know.
I h~ first of all to persuade Mr. Ingle
to either make shipments for his own account or show him that
by taking the money ~d tr~nsferring it to another institution in
New York that institution ---
Mr. Harding:
Then this staten:ent ought to be qualified a little bit!
Mr. Musher:
I would have had to have consider~ble notice really.
I have been working under a very severe hardship in getting the
Baltimore Trust Company to handle the matter.
Mr. Harding:
In other words, by having local credits with banks" which
were not international bankers and did not understand the foreign
exchange business!:'
Mr. Musher:
Yes sir, that is correct.
I really did not realize, I
am frank to say thtL t· I W&.s under the impression that at any time
if I wanted to make a gold shipn:ent I would have no hardshiP in
getting a. permit.
Mr. Harding:
Mr.· Musher:
No permits were necessary then.
Furthermore you will rec~ll that in my inte-rvie\tSI
there was no need of any gold having gone to
Sp~in, th~t I was ~lways ag~inst shipments of gold because there
was no reason for it.
I think the gold em~rgo was an exceptionally good thing.
No..
have
Mr. Harding:
Mr. Musher:
re~rked th~t
How had the market varied since!
Are pesetas much higher!
Yes sir.
Because, while we were restricting gold shipments,
we were not at the wme time restricting credit operations.
In
other words, we put an embargo on gold but did not put one on
credit.
Mr. Harding:
How much higher now than on the first of September!
Mr. Musher:
About one cent.
Mr. Harding:
You think a full one centt
Mr. Musher:
Yes sir.
Mr. Harding:
Whdt are they now, about 23!
Mr. Musher:
More than that, about 24.40.
as 22-SOJ
At one time they were as low
X-778
- 8 -
When!
Mr. Harding:
Mr. Mushe:r:
They went down for one di.;\.y_.
! remember the Philadelphia
Bank was shortlof peset~s and they bought them on that
to cov-er themselves.
N~tion~l
d~;~.y
Mr. Harding:
Did you cover yourself all this time!
Mr. Musher:.
I did not cover, I ha·ve just been carx-ying
myself~
The Board understands how youvhandle the 1918 business,
how did you protect yourself!
Mr. Harding:
Mr. Musher:
We did not make any contracts.
Mr. Harding:
You
~re
just selling on the market!
Mr. Musher:
Not exactly.
When the next oil ~;~.rrives in the United,
Sti.;\.tes we will name a pr:i.ce only upon the quantity received
~;~.nd pro-rate the price i.;\.mong our customers.
If the government ~nd the State department will assist me in bringing
over olive oil from Sp:l.in, I ~m not in position to bring over
the oil thiit I .. need if I hiive to pay for it in todays rt:t.te of
exch~;~.nge.
Bec~;~.use if it comes down b~ck to normal it would
mea.n th~;~.t the people who buyj from hiind to mouth woul. be in a
better position ~;~.nd I would sta.nd ii loss on $2,000,000 importd.tion of about $500,000, should 1he dollar go back to its
gold parity.
Mr. Harding:
In other words, 1he exchange problem directly interferes
with i.;\.11 your rrercantile operations.
Are you bringing in any
olive oil from Spain now!
Mr. Musher:
None whta. teve r.
Mr. &rding:
How long
s~nce
Mr. Musher:
Our
importat~on
Mr. Harding:
You mean
Mr. Musher:
Yes sir, 1917.
Mr. Harding:
None since!:
Mr. Musher:
Not a
Mr. Harding:
How have you kept in business!
Mr. Musher:.
l~;~.st
.
'..
Cd.me in in May or June, 1916.
1~17!
gC:~.llon.
We always buy our supply of oil in the three producing
months to ca.rry us for the whole year.
Our entire 1917 supply
was bought before the 15th of April, and imported before June, 1917~
X-778
- 9 -
Mr. Harding:
Mr. Musher:
This is about the tin:e when you begin to buy again?
We have already bought olive oil on the other side. Our
warehouses on the other side are full of olive oil·
We have from
$150,000 to ~175,000 worth of olive oil on hdnd now.
Mr. Harding:
You hG<. ve
Mr.
I am just arrG<.nging now how to pay.
Musher~
Mr. Harding:
arrc;~.nged
to pay over there!
Has this application got anything to do with your current
business!
Mr. Musher:
No sir:
Mr. Harding:
You can bring in the oil when you get ready, regardless of the
war!.
Mr. Musher:
Mr. Harding:
Yes sir, i f embargo will be removed.
The action of the BoG<.rd does not interfere with your bringing in new olhre oil?
Mr. Musher:
No sir.
Mr. Harding:
What you WG<.nt is relief for your
Mr. Musher:
trc;~.nsc;~.ction
in 1916!
Yes sir· I have a telegram here from the Guaranty Trust
Comrany in which I think the Board will be interested.
(Reads
telegrcml as f.ollows):
New York~, N.arch 1, 1918.
Mus her and Co. ,
ReG<.l Estate Trust Building, Washington, D.C.
We are in receipt of the following Cdble from our London office
Banco de Barcelona Sucursal &..rcelona cable us Mus her Companyt s
Spanish representative states you will place their disposal ·here
quarter million pounds being <oi.dvance to Musher up to five million
pesetas.
Banco .,.gree. Musher Washington cable us enquiring
regarding this.
Are you remitting us quarter million sterling
cable.
GUARANTY TRUST;COMPANY•
Mr. Harding:
Have you arranged for the 250,000 pounds sterling?
Mr. Musher:
I have not, but I
Mr. Harding: .
Just
Mr· Musher:
'
whc;~.t
cc;~.n.
does that make the peseta cost you!
This arrangen:ent would mean that the Banco Barcelona/is
tG<.king from us 250,000 pounds sterling and giving us 5,000,000
pesetas which ~s 50,000 pounds for every million pesetas.
X-778
- 10 -
Mr. Harding:
Mr. Musher:
You get your pounds sterling at a discount!
Yes sir.
Furthermore, what they do is keep their sterling
balance in London undisturbed so that at any time within a year we
can repay the pl),seta and take back the sterling•
The bank in
Spain is only interested in pesetas as th~t is the currency of
their land.
Mr. Harding:
The only chance you fuke is the exchange
·
contract expires!
Mr. Musher:
Mr. Parding:
Mr. Musher:
r~te
when tbat
Yes sir.
I would like to get on our record now just exactly what
this exchange is costing you.
I am only putting down collateral sterling I can deliver.
Mr. Harding:
Just J.ike a.n arrangement I heard of the other day where a~
large aoount of pesetas would be available but it is impossible
to fix a price.
Mr. Musher:
That is just exactly wh~t is going on today in the exchange
market between London and Spain.
First of all London banks have
established bunks in Spain, and help their merehants :,hrough
credits.
Mr. Harding:
Is Great Britain permitting any shipments of gold to Spain?
Mr. Musher:
Not as far as I know. The only thing they are doing is
encouraging the Bank of F rc.nce to ro<:lke arrangements for them.
Mr. Parding:
In your appliC<:ltion here you ask to have payment made to you
in London of $1,250,000 out of a fund which the Federal Reserve
banks have over there, to be delivered to the branch of the Bank in
Spain·
Would that satisfy you!:
Mr. Musher:
Absolutely, with permission to the
the gold.
Mr. Harding:
That permission would be necessary!
Mr. Musher:
Yes sir.
~nk
of Spain to export
Mr. Harding:
How could the Feder~l Reserve Board give th~t permission!
Is not the British Government interested in that?
I thought you
said that they were restricting shipments of gold!
Mr. Musher:
I am working ur.der the assumption that the gold in London is
the property of the Federal Reserve banks.
- 11 Mr. Harding:
The Federal Reserve Board does not have the right to tell
the British government to ship this gold to Spain, any more than
they would have the same right here.
Mr. Musher:
I ~n only suggest that I am quite sure that a Federal
Reserv& B.oard order for $1,250,000 to be transferred from London
to Spain to settle this obligation, would be honored by the British government.
Mr. Harding:
We are not so certain about that.
Another thing, have you
any information that would lead you to think that the British
government is permitting the exportation of any gold to Spain:t
Mr. Musher:
Mr. Harding:
Mr. Musher:
.'
X-778
No sit ..
We ha-:e had other appJ.icatitms from importers who have asked
for permission to ship gold. · ~rhey stand their own charges and
make their own shipments.
Your application asks for $1,250,000
to be delivarAd to you in IJondon.
Do you propose to pay any
charges on t!'le cost of that.
0n what tbeory do you base your
appl:lcatio~1~
I thougJ:d; you seemed to be under s orne misapprehens:i..on that we had gold Jver there tnat we wanted to get back to
this country.
.As a matter of fi:l.ct, we want the gold jlASt where
it :ls and we think more of thi:it gold th:.in we do of gold here.
Would you be wHJ.i:r.g to modify your app,ication for permission
to get gold here and to ship it over yourself!
Yes sir:
I would be wilJ.ing to modify it, it would be a help.
Mr. Harding:.
Now to sum up.
I think we have brought out the fact that
.you IIJl;l.ke ;rour c'ontracts in advance - that is a custom of the trade and that or.d.in<;:.rily you do not bother your'self about exchange and
never had any trouble c:overing, and in 1916 you went ahead based
on your px-evious business.
.Along in December 2916 you f. ound exchange l~ad jUL.lped up suddenJ.y 151.·
You began to get interested
in the exchange situa·tion, made a study of it and studied it hard,
so by ~y or June .191'1 you were very welJ. posted on the general
foreign'e.x:change sit-uaf;ion.
You did not ship gold for two or
three reasons, tr.e principal rec.son being tho.t your credits on this
side were with banks that were not doing an international bank.:i.n~
b!.lsiness and had no p..rticular knowledge of the foreign exchange
situation, and it was on.ly recently that they undetstood it. It
was only in November tha·t; Mr. Ingle got to the point where he was
willing to help you.
His io.ea was that something would turn up
·and you could cover, some normal adjustment of exchange, perhaps.
But as far as current business is concerned now you have changed
it around so that you are not making any contracts ahead.
You
bought your olive oil in Spain, making your arriillgements there to
pay for it, and when it is brought to this country you will charge
the trade (protecting yourself).
If you get relief on this particular proposition which is past, you will take care of yourself
in the future.
Now what we want to know is this: Suppose the
.,.
Xt-7'18
Baard did gr~nt this applicat1.on4.. We ·walit to know bow lDU.ch of a
· precectent that would set .lor. ..a. lot o( appliceltions for $hipments to
Spiiin from other people. all· over the country.
Perhaps theY' will
ea.y, ''we a.re in the s~e fix", -- how much that will amount towe are lltu.~ so much, now you helve done this for Mr. Musher, etc.
All these things have . to be considered.
Jbo. Mu.sher:
I do not believe there is· or will be another case of this
kind, ~cause other ~onoerns were not able to make these arrange•.
menta; even we hwi a ha.rd. time to make the arrqemen't to continue the credits.
llr· Harding:
The BQard i:Lppreci~tes just what its powers are •
There
,
are a great many internationcal questions concerned, - relations
~~ the Board with the Tret\Sury De:r:;artment, State I8partment, War
T~e Bo;;a.rd, etc.
I don •t think we have the same idea of the
powers of the Board in this m:a.tter ~s you ha.ve.
We want to understand about the future.
This pending appli~tion has nothing
to clo with
current business!
Mr. Myeber:
No sir.
I would not feel justified for a minute to come
to ask the B.oard to permit me to export gold to pay for my present purchases.
llr. Birding:
The Presiclent, in his executive order puts this matter subject to the approvu.l of the Secretary of the Treasury •
The
&arci tiLkes these JD;L tters in band. after applica. tion is macle through
the appropriate Federal Beserv~bank •nd the order authoriJes the
B9lU'ci if, in its opinion the exportation i.e compatible with the
public interest. to grant same, otherwise it must refuse it.
That aoes not give the Boara much lee~y. · · It is necessary that
the Bo~rd must be convinced..
We ~;a.ll understand and sympathiSe with
fGu in your liifliculties, but we must a.bi4e by the Pre.si4ent's
oraer in the ma.tter.
I et.m trying to help you on this matter a.ncl
we ~re not here in i:Lf11 unt:tiendlt spirit t:t.t all·
Now we woul~
like to M.ve you talk to the Board and point ou.t just wht it is,
in your opinion, compatible with the public interest that this'
a.ppliCCiLtion of yours for this relief should be granted -- point
out to the Board why it would be compatible with the public in•
ten st.
Mr· tilsher:
as
I WD not so well versed
to be iia.ble to define "compatible
with the public interest". . It. is such a lcu·ge a.na bl'oa.d wori
, and bia-s euch meaning back of it th~:a.t I am not q\it:t.lified to analyze thiot.t one word onl,Y t rom my own angle.
Through our im•
portationa of olive oil ~;a.ncl tbrou.gh .our prices based upon tbe
then 1'10~1 rate of excha.nge '.when the prices were made, tbe
Ameri~n coesumere throughout the co·untry we.-e a.ble to get Pompe,ian oUve oil a.t a. much lower price· thioLn it was selling either
in ~nglu.nd. or in J'ranee, or even i~ I~ly itself. where it was
prociuceci.
They co1.1lc:l bU¥ olive oil ..obet&i.pe.;t" frD$11
JOU t~
uyone else t
x... 77s
- 13 ..
Yes sir.
Mr .. Musher:
Mr. P.arding:
Mr.
You had pr.;..ctice;..lly control of the whole field;
wordst you were the best IDdrket for olive oil!
1~sher:
Mr. Harding!
Yes sir.
They could buy much cheaper from you the;..n
1916!
Mr. Musher:
~nyone
else in
Yes Sir.
Mr. Harding:
You
oil
MR· Musher:
in other
no ~greement with
prices!.
h~ve
~bout
~ny
other importers of olive
No sir, none w~tever.
I h~ve here letters from about
700 olive oil jobbers throughout the country.
They are form
letters but ~re written by e~ch one se~r~tely.
Mr. Harding:.
Just one minute, I overlooked ~sking you why it is th~t
you must get your olive oil from Spain!
Would Italian olive
oil do!
Mr. Musher:
The It~lian govermaent long ~go placed an embdrgo upon it.·
Here I have letters from Anniston, Al~bama, Birmingham, Alabama,
etc., etc.
Mr. Harding:
Just one minute, in 1916 you made these contracts for delivery during 1917 ttt a gu<:Lranteed price!
Mr. Musher:
Yes sir.
Mr. Barding:
You took care of that, although you lost money!
Mr. Musher:.
Yes sir.
We had a profit sharing guarcA.ntee to our customers which ran five cents a gallon.
In January 1916 every
customer received ""' refund check.
We took c... re of our contracts regardless of what happened to us.
Mr. Harding:
You were the cheapest
Mr. Musher:
Yes sir.
Mr.
~rding:
m~rket
for oil!
I! you had figured on all these gymnastics of the exchange
you would he;..ve had to put your price up!
m~rket
Mr. Musher:
Mr.
~rding:
Mr. Musher:
Yes sir.
If you
price up!
h~
anticipated this you would have put your
I would have
~d
to. ·
X-778
- 14 -
Mr. Harding:
You
Mr. Musher:
Only in
price.
Mr. Harding:
Mr. Musher:.
s~y
no one else imported
~
smuller
Did you not run
~
w~y.
~s
much oil as you!
We were the people who fixed the
little risk in ignoring exchange conditions!
Th~t never entered my mind becuuse I had my m~n over here
we spent c1. few nights tc..lking the thing over very carefully
~nd we were sure our prices covered our cost for the ~ll itself.
We entirely ignored the exch~nge situc..tion --c~.nd
Mr. Hcl.rding:
Let me usk you c..nother question.
Do you think the export""tion from this country of $1,250,000 of gold is compatible v1ith the public interest or not!
Mr. Musher:
I s~y that ~')J.,250,000 of gold going to Spc~.in to settle
an honest obligation of commi~ments made before the law under
which the embc~.::.~go wGa.s declared is compatible with public interest.
Mr. Harding:
LeQ.ve tha.t out.
v~~t
effect would
thc~.t
have!
Mr. wlusher:
It would have a good effect to show thc~.t the Americeo.n government is standing by the commitments of its merchants.
Mr. P.tA.rding:
Wha.t do you think of the exportation of $25,000,000 of
gold to Spuin!
Is there any danger of that gold getting into
Ge riJ"Jany!
Mr. Musher:
Never, because the Bank of Spain h~s accounted for every
dollur's worth of gold thc~.t hc..s come into Spc~.in since the outbreak of. the war.
Mr. Harding:
Suppose you go ahead and discuss this question of "compatible wi1;h the public interest", -- the right of the Board
to grc..nt this permit under the embargo order of the President.
I am bringing this out all very clearly so tha. t in cu.se the
BoGa.rd could not grant this application you ·;1ould like to have
this record if you should wish to go higher up.
We have the
order and we have to go by it.
Mr. Musher:
The public interest to my mind would be to do everything
that would benefit the public.
In this pci.rticula.r case it
has a.lre<.~.dy oenefitted the public for they have received the
olive oil ~t this price.
Mr. Harding:
What proportion of the public are jobbers of olive oil!
Mr. Ivlusher:
We sold last year ten million tins of oil.
Mr. Harding:.
I mean what proportion of the public are interested in
olive oil?
- 15 ,.,.
X..778
I think everyone is interested.
example. Every grocery store sells
Mr. Musher:
Th~t
Mr. Harding:
l~rge
Washington as an
quanties of Qil.
gives you some idea of the public interest in olive oil.
It is not quite
Mr. Musher:
T~ke
~s
common
c:~.s
wheat!
It is a food, c~.nd Dr. Frc;;.nklin Il..irtin of the Council of
Defense a.ppointed Mr. Smith Jlio get together G~.~l the
a.bout the medicinb.L V<:~.J.ue of olive oil·
1-Jd..tion<:~.l
dt~.t~
Mr. Harding:
We a.re digressing.
You a.dm.i tted "chat the importG~.tion of
olive oil could continue regt<.rdJ.eaa of the exchange rc:a.te •
It
is not c:a. question of being un~ble to continue the importation
·or oliYe oil·
If your i;;i.pplication is not gri;;l.nted whi;;l.t will
hi;;i.ppen?
Mr. Musher:.
Instead of the CJnsumers, jobbers and retG~.ilers being
:i..t ha.s gotten clown to c:~. point 111here it will fa.ll on
us ~s they have gotten ;a.ll. their benefits.
Our three hundred
employes, we ure the ones to be harmed.
ht~.rtoed
Mr. H:l. rding:
Mr.
Just how serious is it?
It is serious enough to tell you 1 do not know what I
would doa
A loss of ~300,000 with a corporation of$500,000,
~400,000, of which is tied up in plant and equipment, is a very
serious a.ffair.
~bsher:
Mr. Harding:
We gr~nt th~t it is ~ very serious affuir•
From the
standpoint of the public interest how can we reconcile ourselves in gr~nting the application!
Mr. Musher:
Public interests are served best by releasing $1?250,000 of
gold to save $300,000.
If I should not get the export permit
from here or the trG~.nsfer from London I might try. to see what
I can do with the Sp"'"nish bti.l1kS to have this gold earmarked for
them here or in London ~nd to ad va.nce me c:a. credit against it.•
Mr. Harding:
In order to at<.ve freight rates.
of buying Spanish bonds in London!:
Mr. MUsher:
Have you ever thought
You cc:~.n buy them only ut the current rate of
,exchi:i.nge.
Mr. &.rding:
care
Mr. Musher:
Sp~nish
I:t seems to me thc...t if I hi:i.d some Sp.:...nish bonds L would not
the current rate of Sp~nish exch~nge w~s.
wh~t
Oh yes, you would, Governor·
Here is the e""siest thing to
do.
Our Government is borrowing funds every dc:~.y from our own
people paying 41o·
Inste~d of borrowing from our own people
·
the government could ec:a.sily borrow from Spi:i.nish priv~te bi;;i.nkers,
say 200,000,000 peseti:l.S•
Mr .. lhrding:
The trouble
~bout
th-...t is that there is difficulty in
- 16 -
X.-778
opening these credits.
The burden is shifted from one pair of
shoulders to another.
Th~t proposition is something that does
not concern the Boc..rd·
The foreign exchange situation has been
put by executive order in the hQnds of the Secretary of the Treasury and the Board has nothing to do with it except to pass upon
applications for gold exports.
I would like to have you ~iplain
to us how we can reconc·ile the granting of this order.
We all do
realize that you are in a _hard place in the matter.
Mr. Musher:
I S<;J.y thut i t is to the public interest to permit the gold
exportation in this p;1-rticular case: f:i.rst because suppose I had
exported thetc$1,:::50,000 before the embarga:; went into effects
our go"Ternment a.nd. rmr goJ.d would t.~av0 been in the same position
c;~.S today.
I had the right before September, 7th to do it.
It
w~:~.s on.ly tor the f.,..ct that I was tied up with the Baltimore bankers tho.t I did not ship gold before.
Mr. Harding:
I know thC;J.t is :r;urt of the whole story.
How is it thc;~.t we
can t""ke a11 appli(;dtion C":)ming in ninety days after the embargo
goes into eifect and g1ant it?
We are talking sympathetically.
Mr. Musher:.
It is to the public interest to guard the interest of every
individual and every corporation and to guard our interest today would be to grant i;he permit i also thut the gold exported
todQ.y would lea.ve our country in the same position that it would
have been :i.n had L tuken thut g\)ld out before the gold embargo
went into effedt.
Mre Harding:
Mr. Musher:
It would not be right for the Board to show favoritism?:
No sir, certainly not.
exactly the same position.
tha.t s...me positiono
Mr. Harding:
bca.d~y
There is nobody else who is in
I know there is no one else in
On the other hand, is there anybody that would be very
c&.ffected by ------ I .. won vt get into tl1a. t; tl1ough.
Mr. Musher:
I ""m only trying to liquidate a peseta obligation which would
not have any effect on excha.ngas.
Mr. Harding:
You said "" while ago thut Sp....nish banks curried balances in
LondonCould you get your Spanish correspondent8 to establish
balances in New York!
Mr. Musher:
They want deposits in London.
From the cables I haye had
on this subject banks in Sp:;i.in ~ke sterling balances and do not
want to take dollar balc;~.nces.
Mr. Harding:
Well, you can get sterling very easily.
Would your Spanish exporter accept London exchange in payment!
Mr. Musher:.
They would accept ~s payment anything thut I would give
them ut today's rate of.exchange.
I am trying to get the gold
•
- 17 -
X-778
to se:..ve myself whC:~.t I can in the way of exchange.
If the Government should plc:t.ce me in C:l. position where I cJluld get the
6,000,000 pesetas at nortniil rates there would be no reason for
the exportation of gold·
Our imports ought to be the basis for
our exports --Mr. Harding:
I do not Wdnt to interrupt you, but before we get bff of it,
I want to know just what your point is about the public interest!
Mr. Musher:
It is not only possible to help us, but it is helping the
public interest to grt~.nt this permit in this particular case-,
bec;;~.use, by hf}lping us it is helping the public generally •
We
are a pC:!.rt of the public.
Mr. Ha.rding:
You have i;l.lready said tht~.t the importation of olive oil
would continue whether the application is granted or not. It
won't J:IlQ.ke the consumer :i.n this country get olive oil any
cheaper.
The only mi:l.tter is that it affects your company,,
three hundr8d stockholders out of one hundred million people
in the United States.
It is a question whether any special
act or fi:l.vor to one corporation would not hold the Board up to
severe criticism as to favori-tism.
Mr. Musher:
To put us out of business today would hurt others.
Mr. Harding:
This gold emhrgo does not apply only to Spain.
Every
country is affected.
We are not shipping gold anywhere. That
is the gret~.t trouble ;;~.bout this thingt -- jus~ where we get off
in IDi:i.king a special exception in your case.
Mr. Musher:
This is a matter where the commitments were ~de blore
the gold embargo went into effect t~.nd long before the li:l.w was
working.
To put us out of business today would really hurt and
hurt effectively, the jobbers and consumers throughout the entire
country in their olive oil business.
To put us out of commission would hurt the AmBrican public.
Mr. Barding.
!~understood you a moment i:l.go to say th~t you could
still bring in the oil.
Now you say it is life and death.
Do you mean thc.o.t yoU-. would really have to go out of business z·
Mr. Musher:
It all depends on what attitude my bankers would take
Mr. Harding:
Don't you think your bankers will take the attitude that
they are in a way responsible for you getting in this position
by not shipping your gold! . Don't you think they would see
you through!.
Mr. Musher:
I he:a.ve no right to hold them for any responsibility in the
matter.
Mr. Harding:
Oh, I know, it is merely a moral responsibility.
'
.
X.-778
- 18-
Now the Phila.delphi~:~. Na.tio r.u.l Ba.nk hc..s ca.lled upon me to li~
quida.te 3,000,000 peseta.s on ~hrch 7th. We are really fa.cing
dist:l.ster.
Harding:
Just suppose tha.t the worst should happen. Would your business be continued or wound up!
Musher:
I do not know. Th~t is going too far, I could cnly rr~ke
suggestions.
The business is in such a sha.pe now that I might
step out of it.
If I st.ep out of it the business wiJ1 be abolished~
Harding.
1J you had had the knowledge of the foreign exchange busi-·
ness tha.t you now have a few years ago, you would be in t1. very
much better 3ha.pe!
Musher;
Deddedly, yt:Js sir:
But now, no ma.ttor how expert a Il'.dn
is thare is no telli,.,. what will happen wit!. tbis war g.:>ing on. I
think p:r.obci.b.l.y one w~n is a.bout cl.S v.-eJ.l off as a.nother.
Not one
ban.'ker in d. thousc;~.n;i knows the roe.l meaning of foreign excha."lge.
In Eur0pe it is altogether dif:?e.rcnt.
Mr. Musher:
Mr.
Mr.
Mr.
Mr.
Mr. Harding:
I don 1 t see how anybody can guard himself a.guinst present
conditions.
Sura, normal conditions a.re altogether different.
Mr. Musher:
Mr. Harding:
I do not k.>1ow of anything else we Wc;..nt to u.sk you Mr. Mus her,
unless some ot."ler nember of the Board wa.nts to bring out a point.
I h<:~.vo asked you if you h<1d any cnmpBi:.i tors in thEl United States
who impod. .>J.Lre o;..l to sell_, <ind you s"'l.it~.. ted tht.~.t you were the
l<:~.rgest. importer and t,he others used it almost t.~.s incidentc~.ls.
Are there <:~.ny other impor·ters who sell to jobbers'!:
Mr. Musher:
There dre, on a sma.ll scale.
Mr. Harding:
Now there
Mr. Mus her:
None ..
Mr. H:a.rciing:
W<:~.s
Mr. Musher:
Yes, considering quality.
Mr. Harding:
W<:~.s
w~:~.sonly
one price.
There
Wt.~.s
~re
c..ny number.
there d.rly combinution!
yours the lowest!
there much
Vd.rit.~.tion
in price, others
considert.~.bly
higher!
Mr. Musher:
There was not very much variation in price; soms did sell
considera.bly highor a.l though hardly anyone sold any lower.
Mr. Harding:
You do not know whether or not they have been in the habit
of selling higher, O" ,..hether they· were afraid of the exchange
situation!
Mr. Musher:
Not necessarily th<:~.t.
They ~ere buying from merchants
abroad in a small w<:~.y.
They did not IDd.ke any contracts~as far
d.S I know, in 1916 for 1917 delivery.
x...778
Mr. Harding:
Mr. Musher:
Your company is the only comp~ny which has lost because
of this exchange prendum on imports?
I believe we are the QhlY concern of its kind.
Mr. Harding:
Mr. Uusher:
The others sold from
went along?
t~nd
to mouth and covered as they
Yes sir 1 that is correct.
Mr. Harding:
Do you know what the Crown Cork people did? We heard
from them for a while and then they suddenly stopped.
Mr. Mlsher:
They d~.d n.ot cover. They h;J.Ve a going business.
shipped g·:>ld a.s long as they conldo
Mr. Harding-:
Mr. :V.usher:
They
How a.n.t·h of a permit vri.lJ. they ask us for?
ThAy have no g:rm.md.s to ask for permits for past perfonm.nceso
Mr. Harding:
If we gx·ant this appl:i..c:::.tion there will be no comeback on it?
Mr. Musher:
No sir.
Mr. Harding:
Mr.
Mlsher:
Mr.
~rding:
Yoll did not ship gold because you were tied up with a. lot
of bankers who d1d nc·t undel·stand the situation?
We
h~d
credit arrangements over there.
You could at one tirrs have covered it at less than.half
the loss now confronting you?
Mr. Musher:
Yes sir. Ollly the IW.rket was so delicate that the minute
I stepped out and bought a m.i.J.liC'In peset.as the rate would go up
on me. I could not have covered my exchange at the begi~ming of the
year in this way. My oil started to con:e in and did not all
come in until about the first of .rune 1917. ! had to use it as
collateral to borrow freely or sell it in order to have money to
buy exchange. So in February and March after exchange welt down
l ... could not buy any exchange at this t:i.me because I did not have
any money to buy it with ncr any t,a.nk to bu.y it for me. I have to
buy a whole year's supply of olive oil in three months. vVhen I bring
the oil here I put it in glass lined tanks
Mr. Harding:
Mr.
~sher:
We have been over all that. You have studied the whole exchange situation. Have you gone back over a period of 30 years?
Is there any seasonal fluctuation!
No sir. The normal fluctuation is so small no one ever
paid any attention to it.
X-778
20-
Mr. Harding:
>
'
•
As far ~s sterling exchange is concerned there is a
in it when large shipments of cotton are going east.
What are the fluctuations in Spain?
dro~
Mr • Mus he r:
It has never
v~ried
more beyond the gold
shi~~ing ~oint.
Mr. Harding:
You said a few rrdnutas ago that you brought in 800.,000
g~lons of olive oil, the value of which in Spain was $1,250,000.
Tha tot~ value of our imports of olive oil according to figures
compiled by the Department of Co~rce is
You say
you are the largest exclusive jobber?
Mr. JAlsher:
Yes, we are the largest importer of olive oil. The Guaranty
Trust Comp.:..ny of New York in 1917,. February, -Mr. May at that
time was the manager - tried to get a credit from llbe Banca
Hispano for 2.,000,000 pesetas to carry us over for a year and
they replied "No., we will not extend you a credit".
Mr. Harding:
What did Mr. May advise you to do when you first went to
see him?
Mr. Musher:
They never offered me any advie&.
Mr. Harding:
Did not you see Mr. ~y a year ago when this thing first
got bad, to talk. with him? Do you know him well enough to
have him advise you?
Mr. :V.Usher:
I have known him for a few years.
Mr. &rding:
I thought you knew him
Mr. JAlsher:
:t.!r:
I opened 90 day credits.
~retty
well now.
I only know him through his connection with the Guaranty
Trust Compa.ny.
W::!.ftcrg:
That telegram that you have there - what interest do you
· ·
get in London on the 250,000 pounds and what interest do they
ch<l.rge you?
Mr • .V.Usher:
This was rrade on an ar;rangerr.ent whe·reby the a.nk in Spain
sells 5,000.,000 pesetas. They get 2501 000 ~ounds sterling, and
keep the sterling invested in London and are prepared to returnto us
when we return the pesetas to them. In other words, it is a buying and selling
operil.tion, which I am sure some other merchant would avail himself of.
lilr, lbrding:
Mr. Musher:
In.order to do that you bought exchange on London?
ln effect it means that we give them 50i1 000 pound. sterling
ani for it
they give us ~ udllion ~esetas.
X-778
- 21-
Mr. Harding:
Do ycru cover that right away?
Mr. Musher:
We could not give thern sterl~.ng Unless I had sterling
balances.
Mr. &rding:
Do you cover that exchange?
Mr. MAsher:
I have to pay with sterling.
Mr. Warbu;rg:
Anybody having money in the United States before the
embargo,; -aent into effect could ship gold.
Mr. Musher:
Yes si:r.
Mr. W<.~.rb-org:
So if you had had your money you could have shipped the
gold?
Mr. Musher:
Our money was tied up.
X-778
-22r
Mr•. Harding;
M~r. Musher explained that he was not in a position
to ship' gold until the first of December.
The whole
thing is as to whether or nor tlble shipment in question is
compatible with the public interest.
(Mr. Warburg then made a feVT remarks as to fluctuat:ilons in
exchange, winding u.p by saying thA-t "anybody who v.rould say
that Spanish exchange is regulated like English exchange is
mistaken. ' 1 )
M r.Musher:
bough~
Mr. Harding:
I never before speculated in exchange. First we
a great deai before this war from Italy.
You did not always take the precaution to cover!
Mr. Musher:
We never took a chance of any kind on covering.
always paid for our oil with sight exchange.
We
Mr. Harding:
I underst~nd you never took a chance you were not
obliged to take!
.- ..
Mr. Musher:
Our business has been built up by supplying the
American consumer with the best olive oil to be had for
the least money.
Mr. liarding:
Did you ever buy any olive oil in Italy!
Mr. Musher:
Yes sir, we have a place in Italy.
Mr. Miller:
Why didn't you cover vrhen exchange was going against
you in 191 '1!
Mr. Musher:
I could not at t mt time because I would have had a
loss of 15fc.
Mr. Miller:
You mean you could not have covered profitably!
Vihy didn't you take a loss!
Mr. Musher:
First because it looked as though the American
dollar had to come back to its value.
Mr. Miller:
Then you 'll'Tere waiting for the American dollar to come
back to its face value!
Mr. Musher:
There is alwa)s a speculation when you buy commodities.
'
On that proposition, others did not think it was
their duty to delay. They went ahead and covered. Your
difficulty at that point would appear to arise from the fact
that your credit facilitie.s were so good in Spain that you
did not need to be impatient about covering!
Mr. Miller:
.
• "1'-
x,-778
-23Mr. Musher:
Not our credit facilities exactly. The banks in
Spain extending us facilities did so because v1e .viere
there; th<:tt other houses were not established there.
I.
Mr. Harding:
I would like to ask you one more question here,
and you need not answer if you do not want to.. At any
rate, it can be stricken from the record i f you wish.
I v1ould like to know, say 8. y9ar ago, just what the financial position of. your company vms. What vias the capital stock!
Mr. Musher:
$500,'JOO prefered stock represented by actual assets, and
$l,OC0,000:. cormnon stock represented by good vlill which actually
cost one rnill::i.on dollars to aei:abl:l.!:'lh in development work.
Mr. Harding :
How much surplus and profits!
Mr. Musher:
None.
We used up ev.ery dollar.
Mr. Harding:
Do you remember what, approximately, was your position as to assets in the shape of accounts receiv~ble,
and cash in bank, resources, etc.
·
Mr. Musher:
We always carried a large plant equipment of about
from $350$000 to $375 1 000.
Mr. Harding:
Mr. Musher:
How much accounts receivable!
The rest of it was altogether in accounts receivable,
and oil on hand.
Mr • Harding:
How much?
Mr. Musher:
The difference between our assets and liabilities.
Mr. Harding:
~ere
You had, then working capital of·about
doing a business of about Cl,250,000!
~225,000
and
Mr •• Mus her:
Cur business for 1916 was $1,900,000.
Mr. Harding:
You are doing a business of about 5 times your capital!
Mr. Musher:
We were selling goods to our customers on sight draft.
We elimina-pe entirely accounts receivable and our losses
have been less than 1/100 of one percent.
Mr. Harding:
What I want to bring out is you are doing a business
annually of about 5 times your liquid capital!
Mr. Musber:
Yes sir.
We also have a $200,000 bonded indebtedness
which of course gives us more working capital.
x-778
-24-
Mr. Hamlin:
How many jobbers do you sell to!
Mr. Musher:
We have about 2400 accounts.
Mr. Hamlin:
Vlere your sales all uncondition':ll!
Was there no
estim<tte as to payment c.if prices! Was there any stipulation
that ir~ the event of any exch&nge trouble they sho"..l.ld pay
you a.nythir.g wore?
No sir.
Mr. Musher;
They were absolutely fixed f)eles.
MI'. Hamlin:
A<3 a rnv:~te~~ of: fact, did not the jobbers put up their
prices ver-y moteria lly in 1917!
Mr. Musher:
(Ai; req,l~l:if. r:>f Mr.> Milsher his ansv.ter to t.b~.e. qurtetion
is ·':: cnt~J.c:~~d H1 his J e·tt.er to Mr, :Jelan.o e.tia0hed
here'i.;c R~'lli rr.ade a part of the rec,ot·d a.s e~hibi·li l. ..
N:>v; we have +. o t.::>ke all of our prices off the tins and
rearre.nge the wtwle thing.
Jr. Hamlin:
oil?
Did net the retailers in food increase prices for olive
· Wh'lt i:.ime in 1917 was the price rn.isedZ
Olive
Rei;qilers were !l.ot permit·t:xt t.o raise prices on Pompeian
o:n, ·tne pr.i.ces c,n t-he t:J.na regulated that.
Mr. Musher:
.' ~
Mr. Harding:
Mr. Musher:
Are there any substitutes for Spanish oli-.re O:'il?
That is the o.11y oil todo.y4
·~he laqrest quantity.
Sp<1in and Italy both
produ~e
llr. Harding:·
Mr. Mus her :·
Suppose oli-.·e oil could not be obtained at all s.nd a
man vm.nted something to put on his greeus, whe.t would he do!
Ther~
are no sub::;titutes f
Of'
it as far as ed:'.tle ·oils are
c one e:~.·ned •
Mr. Harding:
What imitations!
Mr. Musher:
Cotton .seen oil, peanut· cil, sunflower oil, etc.
There are .mar..y j.rrd.tations but no subst.itutes.
Mr. Hamlin:
Did :the consumers of the· country, tr..r·otl.gh the ret':liler-s get the benef-it of lowsr p:<'ices in 1917?
Mr. Musher:
I -wo·ud r_bs safe in sayir1g tha:t, 9Sfo cf the c onsUiner:;J
got the· ben,afi{ of our old· priee J b:acause we made that
our business.
Mr. Hamlin:
How about your
compet~tors!
x-778
Mr. Musher:
They handle different brands. ConsUmers paid them
a much higher price in 1917 than in 1916. (See Exhibit l)
Mr. Harding:
Mr~ Musher, is there anything else that you want to
brfttg ~tit!
Mr. Mus her:
No sir, thank you. I want to thank you for your
courtesy and kindness in gran•~Jing me this polite hearing.
Mr. Harding:
Vie will let you know next week of our action in the
matter :~f vre C8.nv
('I'he hearing then adjout•ned 11 at 1:30 P. M.
At the request of Mr, iiii'lSher his letter addressed to
Goverr1or Harding on Iv!a:r-ch o, 1918 is attached here·i;o and
made A part of this rec;orJ. as Exhibit 2.
Atiac~.ed al3o nnd made a part. of this record as Exhibits J, 4 and 5 '1.:--e ~ Mr: ~ Muf' her~s letter ace ompanying
his original appl:L~<J.t~t()n dated Hovember 28, 1£117, his
supplemerr1ial let-cer of Dec.ember 22, 191'7 and his letter
of February Z7, 1918.
X.-778
.Q_OPY
MUSHER AND COMPANY
WASHINGTON.
Jllarch 5 1 1918.
Hon. Freder~.c A. Delano.,
Federal Eeserve Boarc. 1
Washington., D. C,
My dear Mr •. Lelano:
Perro~.t me to reply to your& of Mlrch 4th., Which is going to be
sorr.ewhat lengthy, but the shc,rt.e:Jt I can possibly rr.ake it.
l.
The averege wholesale price as given in the statistics for the
years 1916-191'/ are very hard to ana1yza. There are so rra.ny different
qu.ali ties of oliv;; oil that to take an average price would r.ot be fai:r for
the reason that t~:erfJ are largew quantities of cheaper oil soJd, and in
tha.t way the average price wcw.d not be a fair re_flresentation of the cost
of high qualHy g:.l?ds.
~here are jv.st as Ir.any different qualities of olive oils as
there are diffel'ent qualities of grapes., al)Ples., etc.
The figures as submitted by you .. however, would be a fair average of the cost for ordinary grades of olive oil imported and sold for
consumption amongst foreigners coming fx-om Mediter·ranean countries where
the price is more essential than the oil quality., for the rea$D that they
are all accustorred to the use of low quality olive oil and because there
are no . j9b'bers.' a.nd retailers' profits to consider. Most of the olive
oil is retailed by t~aders who act in the capacity of importers., jobbers
and retailers.
We ouFselves sold about 150,000 gallons of our second
quality
ROMANZA BLEND olive oil to the Italian trade at an average price of $1.60
per gallon. These goods were delivered through the year 191'1 to fulfill
contracts xrade by us in the sumr.er of 1916.
Our POMPEIAN BRAND olive on was soJ.d in the su.rr.mer of 1916 for
delivery in 1917 1 at a net price ~o tbc jobber of $2.15 per gallon,frpf~lY
prepaid, to any city in the United States. A::i.l these. deliveries were rrad~ >/
regardless of the rr.arket advance as shown by the labor etatis+.ics that the
price of
olive oil had risen from $1.60 in January 1917, to $3.26 in
December 1917.
2.
Eighty per cent of our total sales for the year 1917 were against
contracts rr.ade in 19].6 !or 1917 de1ivery. We advanced. our price somewhat
for goods s.old over and above contract., but even then. we had a rrul tiplicity
.of complications to contend with., the most important one being that our tins
were all printed with prices thereon. Our half-pints were decorated with
the words "Twenty-five· Cents". Our pints were. de.c.orated with the words
"Fifty Cents 11 1 our quarts with the words ••One Dollar".
EXHIBIT 1.
X-7'78
... 2 -
These prices ware intended to be the naxim.un that the consumer woufd pay
for these various sizes~ an~ the jobbers 1 and retailers' profits had to
coma between our prices and the retailers' selling
_ price 1 so that
with a few months! supply of tins on hand, as we always carry~ and ano~her
few months of decorated tin ready for manufacture into cans~ it was ~
possible for us to make any real advance in our price. Then the very next
reason for not advanr.ing our price was that so many jobbe~s having c0ntracted for a supply of olive oil to be delivered through the yeGJ.r 1917~
it was useless to name an advanced price and have the j ob"bers pay the !lew
price and try to sell the olive oil in competition with the jobbers who
had contracts and were able to supply the trade at the old list pr-1ces1
furthermore we considered it a duty not to distu::-b the trade by n:ald.ng a.ny
strong advances because the jobbers who had contracts with ua would have
advanced their prices to the retailer and the retailer would in turn ha.ve
to advance his prices to the consumer above the price named on the tins •.
In other words we were strug~1ing with the situation as best we
knew how to save the cabbage. and feed the goat at th& same time.
Our
prices to the jobber, the jobber's pr·~.ce to the retailer, and the retailer's price to the consumer has peen standard.ized by us., together with the
quality of our goods~ so that it was :i.mpossible to have made any move that
would have better·eo.. our con.O.it:ton., and there was nothing left for us to
do but endeavor to·.bri.ng about a saving by bring:i..r!g the dollar back to its
gold par value, or by arranging with the foreign l>anks to carry us until
the parity of the American dollar was reestablished.
The average cost for olive oil in the years 1916-1917 was only
about lo% higher than the average cost for olive oil in the years 1915-16.
I am referring only to the production months of 1915-16 and the production
months of 1916-17 1 - that o:f course does not take into consideration the
rise in exchange, and is only the basis of cost in Spanish pesetas.
Until our peseta obligations are entirely liquidated, our cost
and balance sheet for the year 1917 is in suspense, and it is therefore
that we so earnestly await the decision of the Federal Reserve Board in
the gold export natter.
Very truly yoursJ
(Signed)
MUSHER and COMPANY.
N. MOSHER
NM/qo
President ..
x-778
EXHIBIT lS,
COPY
ltarch 4, 1918.
Mr. Nathan UUsher,
Presiient, Pompeian Oil Company,
R~al Estate Trust Building,
Washington, D. C.
My dear Sir:
Here are some statistics which we have recently ~thered togeth~
have you got to say in relation to the fi~res quotedl. Also what ~ro
portion of mil sold by you in the ye~r 1917 was contract ~rice, and what
proportion were ·you free to u.xra ~ higher ~rice? ~n you give us the ~rice
of oil in Spain during the years 1916 and 1917?
.~hat
Very truly yours,
(Signed)
F. A. DELANO.
SPANISH OLIVE Qlk.
AVERAGE RETAIL P(t CE.
AVERAGE WHOLESALE PRICE.
ill..§.
ill1.
ill.§.
Jan. $1.55
$1.60
Feb.
1.55
1.64
Ml.r.
1.55
1.86
Apr.
1.55
1.98
May.
1.55
2.13
June
1 .. 55
2.25
July 1.55
2.38
Aug.
1.55
2.68
Se.pt. 1.55
2.68
Oct.
1.55
2.92
Nov. 1.56
3.05
Dec. · 1-20
3.i§
$18.66 $28.43
$3.30
O'Donnell's Drug Store.
Increase.
1916 - $2.76 Gallon
1917- 3.16
"
14.4%
Now - 3.92
"
42% over
1916
Cornwell's Grocery Store.
1916 - $3.00 Gallon Increase.
1916 - 3.50
n
'
1916
1917 - 4.50
II
28%
Now .... 5.00
"
66%
(Bureau of Labor Statistics)
Average increase 1917 over 1916 -
53%
Average increase 1918 over 1916 -
112%
Ml.rch 4, 1.918.
MUSHER and COMPANY
Real Estate Trust Bldg.
Vlashingtcn, D. C.
Exhibit 2.
March 5th, 1918.
Honorable
W. P. G. Harding, Governor,
Federal Reserve Beard,
Washington, D. C.
Dear Sir:
May I not be permitted to attach hereto, a letter
from Mr. Willinm Ingle, President of the Baltimore Trust
Company, which I would li:k!e to have as part of the record
in the hearing granted me.
I also want to state th~t in reply to the question
put to me by Honorable Paul M. VJ~rburg as to whether or not
I would h~ve brought to the United Stqtes Treqsury the difference in exchange if the exchange would have been in our
favor, I did not offer the proper explqnation, which should
have been as follows:
First, that every collar earned by an American
should be looked upon as anotherdollar added to the wealth
of the United States, and seconct, that every dollar earned
by an American pays an income tax direct into the United
States Treasury.
May I not' also ask that our letter of March 5th,
addressed to Honorable Frederic A. Delano, of the Federal
Reserve Board, also be made part of the record in our hearing.
In conclusion may I also state that England has
adopted the policy of carefully safeguarding invested capital
and in some cases the Government has actually paid losses to
private firms or corporations where such losses were sustained
by unforseen war conditions.
Quotinr Honorable Basil P.
Blackett, Financial Advisor to the British Embassy, from his
memorandum submitted to the Federal Reserve Bank of New York,
"The Voluntary Capit:J.l Issues Committee of England rules are
that permission to issue securities is always granted where
if to refuse permission would involve the complete loss of
capit~l already expended, or at any rate would involve a very
heavy loss of previously expended capit~l."
Respectfully submitted,
MUS HER and COMPANY.
President.
'
.
THE BALTIMORE TRUST COMPANY
BALTIMORE, MD.
Exhibit 2a
March l, 1918.
Mr. Nathan Mushet~ President,
Musher & Co., inc.-formerly
The Pompeian Compant,
Baltimore; Mtl.
My d.eat Sir:
*
This is to advise whom it may concern that in the
months beginning with and followinr February, 1917, through the
instrumentality of this Company, there was opened for account of t.he
Pompeian Company to be available in Spain for the purchase and
exportation to this country· of olive oil, credits aggregating a
total of somethinr over 6,000,000 Spanish pe~etas.
Conditions
under which the credits were opened required that before honoring
drafts drawn against them, ocean documents evid~ncing shipments of
···the·~oil6·should accompany drafts respectively drawn: in the premises.
Such drafts in due course, were drawn, presented and honored by
the Pompeian Company.
I very much hope that your efforts· t~. obtain such
satisfactory settlement of your exchange account as would seem to be
due one who in such a large way has imported a valuable foodstuff
into this country, will meet with the success which they merit.
Yours very truly,
President.
WI-ETH
'
..
X-779
'
.....
.;
Baltimore, Maryland.
Exhibit 3.,
November 28th, 1919.
To the Honorable, the ·f.lem\1eTs: of
The Federal Reserve Board,
Washington, D. C.
Gentlemen:
We, THE POMPEIAN
m~ny
co~~ANY,
I
respectfully represent that for
years we have been extensively engaged in the
import~tion
of olive
oil, and its sale to the American jobber and retailer; and through the
jobber and retailer to the American consumer.
In the ordinary course of business it was necessary to anticipate our
customers• requirements several months in advance; and it has been our
custom for the past eight years to solicit contracts during the summer
for delivery of olive oil during the following calendar year.
This plan
was adopted because, in order to obtain olive oil of the highest quality
at a fair price, it is necessary that it be purchased and exported from
the
pri~ry
markets of production within the three harvesting months.
In pursuance of this necessary business custom, in the summer of
1916 we accepted contracts from hundreds of American jobbers for the
delivery of several hundred thousand rallons of olive oil during the
calendar year 1917.
The contract price of the olive oil to the jobbers
was based upon the then existing basis of exchange·-19.3 cents for each
Spanish peseta •.
These contracts enabled the jobbers to sell to retailers,,and the
retailers re-sell to ultimate consumers, at the price
b~sed
upon the
normal rate of exchange.
The olive oil, to be delivered under these contracts, was purchased
(.
.~··
'
.
x-779
Exhibit 3.
-2in Spain during the latter part of 1916, and arrived in the United States in
the early part of 1917.
Through unforeseen conditions, the American dollar commenced to depreciate
to the extent of fifteen to twenty per cent (the peseta having risen to about
22 cents), and in order to protect ourselves against an enormous loss in
exchange, aggregating about $150;000.00, i t was necessary to arrange through
bankers letters of credit to defer payment for the olive oil imported until
such time as we had r·eason to believe that the American dollar would again
e ommand its full value.
These obligations in Spain, to cover the importa-
tions of olive oil, aggregate six min;.on (6,000,000) pesetas.
As is well known to the Board: sometime in September, 1917, the American
Government placed an absolute embargo on the exportation of gold from this
country, and owing to this emtargo the rate of exchange since then has· further
depreciated the value of the American dollar. until today it is at a discount
in Spain of about thirty per cent-·the peseta having risen to about twenty
three and one-half cents.
Had we supposed that an embargo would be placed on the exportation of
gold, we would have immediately exported to Spain from the
United States a
sufficient amount of gold to liquidate our peseta indebtedness, rather than
have allowed the gold to accumulate here.
Since the contracts for the delivery of this oil to the American jobbers,
and the purchase of this olive oil in Spain with v1hich to make deliveries under
such contracts, were made prior to the date of the gold embargo; we petition
your Honorable Board to protect us from an exchange loss approximating
$200,000.00 by issuing a permit to transfer from the gold ear-marked in
London for the Federal Reserve Bank, Richmond,
Virgin~a,
the sum of
$1,250 1 000.00 to the Bank of Spain (London branch), with permission to the
Bank of Spain to export the gold to its main bank in Madrid,
Spain~
·'
'
x-779
Exhibit 3.
-3-
We will deposit with the Federal Reserve I3artk, Richmond, Virginia,
through the Baltimore Trust Company, the sum of $1,250,000.00 to cover the
above named transfer.
Your Honorable Board will ·see from the Slb'ove statements that the
actualhy
American jobber, retailer and consume!/received the benefit of the low price
for this olive oil, based'upon
no~al
exchange rates that existed in the
summer of 1916; and that we have faithfully lived up to the letter of our
contracts by delivering every gallon of olive oil at the price made in the
summer of 1916.
In view of the fact that the American public--the consumers of the
several thous9.nd gallons of olive oil--benefited from the co .:.tracts made
in the summer of 1916--before the violent abnormal exchange depreciation
of the American dollar--we believe your Honorable Board will, as a simple
act of justice, permit
tb~
transfer of
~1,250,000.00
in gold to liquidate
a legitimRte obligation, made at a time before the gold embargo became effective.
Respectfully submitted,
THE POMPE!AN COMPANY
By
N, Musher
Presfarn:lt. "':.
·'
.
x-779
CONTINENTAL TRUST COMPANY
WASHINGTON 1 D. C.
Exhibit 3a.
30th
November~
IN RE PERMIT TRANSFER OF GOLD LONDON TO
1917.
Sf_,g~
Hon. Federal Reserve Board,
Washington, D. C.
Gentlemen:We have carefully read the petition of Pompeian
Company, of date 28th November, asking perm:l.t of you for
transfer of $1, 250,00C.OO of gold f rom London to Spain, to
liquidate obligations amoun·hng to 6, 000,000 pesetas, in
payment of olive oil imported during the early months of
present year.
The Pcm:peian Company are valued clients of Ol.lrs
and we know the statements· contained in thdir requsst of
28th instant to 'be correct, a11d we earnestly ask that their
petition be gran·~ed.
With great respect; we beg to remain,
Very truly yours,
(Signed)
C. W. WARDEN
Vice President.
x-779
THE COMMERCIAL NATIONAL BANK
WASHINGTON, D. C.
.illovember 30th, 1917.
Exhibit 3b.
To the Honorable, the Members·of
The Federal Reserve Board,
Washington, D. C.
Gentlemen:-
The Pompeian Company have shown us their letter of
N~vember
28th, addressed to you, relative to export permit for
gold to cover six million pesetas obligation in payment for
olive oil imported by them.
We have read the letter over carefully and are thoroughly
conversant with the
situation~
and beg to request th"lt your
Hbnorable Board will give this the very best consideration.
It is our hope that you will see the justice of their position
and allow the
permi·~.
The matter is so thoroughly covered in the letter of the
Pompeian Company that v1e think it needless to add mbre.
We beg,to assure you that the Company needs this assistance and,
in our opinion, is entitled to it.
Very truly yours,
(Signed)
T. K. SANDS
Vice-President.
'
. .; '
x-779
THE POMPEIAN CCMPANY
BAL'l'IMORE, U. S. A.
December 22d, 1917o
Exhibit 4.
To the Honorable
The Members of the Federal Reserve Board,
Washington, D. C •
Gentlemen:
Referring ·to our recent application for the
immediate exportation to Spain of Cl,250,000o00 of gold to
cover our obligation of 6,000,000 pesetas (due for the
purchase of olive oil imported to the United States in
the early part of 1917); we desire to amend the application
as follows:
Instead of granting permission for the immediate
exportation of the gold, as above indicated, we respectfully
petition your Honorable Board to agree to the exportation
on July lst, 1918, if, in the :meantime, we are unable to
I.
obtain foreign exchange to liquidate our indebtedness at
approximately the normal rate.
Your ruling, at an early date, on this supplemental
petition, will be greatly appreciated.
Respectfully submitted:
THE POMPEI AN COMPANY,
By
N. Musher,
President.
X-779
)lTTSHER and COMPANY
WASHHJGTON, D. C.
Febru~ry
Exhibit 5.
27th, 1918.
Honorable W. P. G. Harding, Governor,
The Federal Reserve Board,
Washington, D. C.
Dear Sir;
I have your letter of February 26th,
and th~nk you for the statement that your
Honorable Board wi.ll gr<tnt me the opportuni t.y
at a hearing, to make an oral argument regarding
the a.pplic'ltion of The Pompeian CompFmy for the
Exportation of $1,250 1 000 in gold to Spain.
The letter of November 28th, 1917, addressed
by The Pompeian Company to your Honorable Board,
sets out the facts upon VJhich the applic~tion is
based.
It is for the purpose of explaining those
facts that I respectfully ask for ~ heari~g, at
a time convenient to the members of your Board.
Yours very truly,
N.. Musher,
Presiden·t ..
@FedFRASER