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FEDERAL RESERVE BOARD
WASHINGTON
X-3116
Mly 13, 1921..
Dear SiX'":
The enclosed letter and enclosure are
self explanatory and. are f onvarded to you for your
information.
Very truly yours,
G o v e r n o r.
TO ALL FEDERAL RESERVE AGENTS
(two copies of enclosure to each)
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.r::: (' ··""-!
'uJ0i 't
X-3116a.
c 0 p y
W. V. Howland
E. F~ Holrnes
GULF COMPENSATION EXCHANGE
OF
HOME LIFE AND ACCIDENT CO~
BANKSI HOLMES & HOWLAND
MANAGERS
Ca.ral - Commercial
Building.
NEW ORLEANS·
May lOth,
1 92 l
W. P. G. Harding~ Esq*, Governor,
Federal Reserve B•)ard
1
Washingt~m,
D. C.
Dear Sir:
The enclosed copy of letter to Mr. Richard
H. Edmonds, Editor, The Manufacturers Record, may be
o! interest§ and we are therefore glad to furnish you
a copy.
Yours respectfully,
Banks, Holmes
&
Howland, Managers,
(Signed) By E. F. Holmes.
EFH:L
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'P
y
X-3116b
May 10th1
1921.
Mr, Richard H4 Edmonds, Editor,
THE MANUFACTURERS RECORD1
Bal timore 1 Maryland ..
Dear Sir:.
Your favor of the )rd inst., is at hand, and with
regard to stating facts to back up the writer 1 s position toward
your criticisms of the Resarve Board, it seems to us:.that the
whole history of the human race, economically speaking, is full
of such facts ..
In the panic of '73 there was no Reserve Board and
speculation prior to that panic went on uncontrolled until the
smash.
That depression lasted some six or eight years. The
present depression is just about over; it has lasted about one
year. Europe then had ample funds to aid this country,-~today
Europe is flat. We have had to work out our own salvation and
that of Europe as well. The boom was controlled and we have
been brought down with less actual suffering than any equal
period of time brought us in the 173 depression. The causes of
the previous boom and depression were insignificant, speaking in
a world sense, compared to the war we have gone through, resulting, as all wars do, in a boom.
Deflation had to come, Reserve Bank or no Bank at
all, and. we cannot think you deny that. As to picking out any
particular class to be deflated.1 such as "speculators" or
•profiteers", no hunan intelligence was able to do that.
We
were all potentially profiteers or speculators. The farmer who
wanted to hold his cotton for 50 cents, in the face of no demand
on the other side., and. then plant another crop which presunably
was also to be held. for 50 cents, was a. speculator as well a.s
an economic ignoramus, but his local banker could not tell him
S0 --he would have· resented it.
Therefore, the "Buck" was
passed to the only agency that was doing anything at all to
handle the situation,--The Reserve Boa.rdj (just as Woodrow
Wilson was blamed because they peeled the potataes too thick
in the Army).
Only by raising interest rates to where specula·
tionwas unprofitable could speculation be checked. The isolated
cases, such as the poor little Bank in Alabama that had to pay
87% for money, have a good reason back of them, ~lse all banks
would. ha.ve been penalized in the same way.. I cannot believe that
the Reserve Board deliberately picked on the little Alabama Bank.
1
X-3116b
R.. H.E. -#2-
Mr. Williams'· speech would have been more convincing if
he ha.d anywhere in it used one phrase or sentence that betokened a.
study or knowledge of economic histor-y or !acts. We dug through his
tirade and found no constructive suggE'Istion. Why was this? He
wanted the interes-t. :ra to cutJ but did he wa.x:.t specula t:l.o~i to continuer
Hs says not. Then hew coUld he stop specu.l.ation1 Possibly by going
around finding out who the apeculators were and putting them in jail.
Everybody would have denied that they were speculators.
Incidentally I have never found in any of your criticisms
'any complete constructive suggestion) that is) a suggestion tl~t took
into account all the facts in the ca~e. Apparently you wanted the
boom to continue, but dhi. not want to pay $25 .. 00 for shoes. Had the
boom continued$ if it could have .cont:tm~ed,~ you would have had to pay
$50.00 for shoes~ becau~e i t is forever true that as long a.s business
is good prices go up. !t is equally true that they come down when
the st~in gets too heavy.
The Reserve Board. is compogad 6f rather int~lligent men who
have devoted their lives to the study of a very intricate subject, an~
who ean hardly be accused of ha.vi..ng an &.;r;e to grind.. I do not knew . ·
what time you have devoted to the study of the M.story of panics~ It
is plain to rood what happenerl in the pC~.st.,. and human mi,'dre acts and·
reacts according to the same Jews ·~mt it diti in the beglnning. You
spoke of facts, and tr.a.t is the, Qne fact that a.nswers all your questions.
The Reserve Bo&.rd merely took conditions as they found them, and de;..
flated them as best they could. ThP.y ba.ve done it in one year. New
that reserves have reached a safe poi.nt .. they ha•1e cut the interest rate.
Mr. Williams will of course figure that they cut the ra.tes to meet a.
atorm of public opinion trat was aroused by his speech. The storm,
however 1 is not visible in this nei~lborhood,--immediate business
prospects are too good.
Mr. Frank A. Vanderlip said that the Amer.ica,n pe.ople a.re
a nation of economic illiterates and some times it looks like he is
right. I believe he worked up from a fireman on a railroad, so the
condlusion is not that of a "silk-stocking".
in
detail~
We eould answer each of your and Mr~ Williams 1 statements
but hesitate to encroach further on your time.
Wa would, however, be deeply interested in some plan that
you evolve as to how to deflate without deflati.ng, and would be glad
to be referred to some article of yours that provided a complete~
constructive program for ha.ndling the past year's troubles.
Yours very truly 1
Banks1 Holmes & Howland}
EFH:L
(Signed) By
E. F. Holmes
Managers~
@FedFRASER